HomeMy WebLinkAboutItem 9 Preliminary Official Statment Dated February 25, 1994 az PRELIMINARY OFFICIAL STATEMENT DATED FEBRUARY 25, 1994
.0 ; NEW ISSUE—BOOK-ENTRY ONLY
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$105,000,000*
A3 R a Santa Ana Financing Authority
......... Police Administration and Holding Facility Lease Revenue Bonds, Series 1994A
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E� c-.- The Bonds will be issued in book-entry form,initially registered in the name of Cede&Co.,New York,New York,as nominee of The Depository Trust Company,New
o c a�i York,New York.Interest on the Current Interest Bonds will be payable on January 1 and July 1 of each year,commencing January 1,1995.Interest on the Capital
a,C.,a�'., w Appreciation Bonds maturing will be payable on the maturity dates thereof as a portion of the accreted value thereof.Purchasers will not receive certificates
.oU' representing their interest in the Bonds.Individual purchases of Current Interest Bonds will be in principal amounts of$5,000 or in any integral
0 0, multiples of$5,000 and individual purchases of Capital Appreciation Bonds will be in denominations such that the accreted value of each
,,,,,ccr.— Capital Appreciation Bond on the maturity thereof will be$5,000 or any integral multiple thereof.Payments of principal and interest
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gc of Current Interest Certificates and the accreted value of Capital Appreciation Bonds will be paid by the Trustee to DTC for
subsequent disbursement to DTC Participants who will remit such payments to the beneficial owners of the Bonds.
0 1°v The Bonds are being issued pursuant to an Indenture between the Santa Ana Financing Authority and Meridian Trust Company of California, San
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s c'ao Francisco,California,as trustee,and will be secured as described herein.The Bonds are being issued to provide funds for the construction and equipping of a
pc_ E.R police administration and holding facility,to fund a reserve account and to pay certain costs of issuance.
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EE `o All or a portion of the Current Interest Bonds may be issued as fixed rate bonds,and,either in addition to or as a replacement for the fixed rate
a; 2 bonds,the Authority may issue a portion of the Current Interest Bonds as Auction Rate Series(ARS)s"'or Inverse Rate Securities(IRS)s°', as more
tea,+0 ea fully described herein under"DESCRIPTION OF THE BONDS—Possible Derivative Structures."
.7;•`73- R , The Bonds are payable from Revenues of the Authority,consisting principally of Base Rental payments by the City of Santa Ana pursuant to a Lease
go g.-Ebetween the City and the Authority.The City will agree in the Lease to make all Base Rental payments provided for therein,to include all such payments
Z', u, in its annual budgets, and to make the necessary annual appropriations for such rental payments, which are calculated to be sufficient to permit the
TA" c-o Authority to pay principal of and interest on the Current Interest Bonds and the accreted value of the Capital Appreciation Bonds when due and payable.
cco•E 0 The obligation of the City to make Base Rental payments is not a debt of the City and is payable only from funds legally available therefor,including
w.y amounts on deposit in the general fund of the City.The City's obligation to make Base Rental payments is subject to abatement in the event of damage to,
EEt `u destruction or condemnation of,or title defects relating to,the Leased Property described herein.
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dCO c e� Payments of the principal of and interest on the Bonds when due will be insured by a municipal bond insurance policy to be issued simultaneously
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• a with the delivery of the Bonds by:
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ng« H = The Current Interest Bonds are subject to optional and mandatory redemption prior to maturity.The Capital Appreciation Bonds are not subject
E m r to redemption prior to maturity.
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E.�_ THE BONDS ARE LIMITED OBLIGATIONS OF THE AUTHORITY PAYABLE SOLELY FROM AND SECURED SOLELY BY THE
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0 0 g ea REVENUES PLEDGED THEREFOR IN THE INDENTURE.THE BONDS ARE NOT A DEBT OF THE CITY,THE STATE OF CALIFORNIA
.r c U w OR ANY OF ITS POLITICAL SUBDIVISIONS (OTHER THAN THE AUTHORITY)AND NEITHER THE FAITH AND CREDIT OF THE
a) u.2 CITY,THE STATE OR ANY OF ITS POLITICAL SUBDIVISIONS ARE PLEDGED TO THE PAYMENT OF THE BONDS,
,�3„=3 THE CITY, THE STATE NOR ANY OF ITS POLITICAL SUBDIVISIONS IS LIABLE THEREFOR. NEITHER THE BONDSN NEITHER
NOR THE
1.12 .E 0 OBLIGATION OF THE CITY TO MAKE BASE RENTAL PAYMENTS CONSTITUTES AN INDEBTEDNESS OF THE CITY,THE STATE OR
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o c E ANY POLITICAL SUBDIVISION THEREOF IN CONTRAVENTION OF ANY CONSTITUTIONAL OR STATUTORY DEBT LIMITATION
'CZ is 43 a OR RESTRICTION.
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c•CU _= In the opinion of Orrick,Herrington&Sutcliffe,Bond Counsel,based on existing laws,regulations,rulings,and court decisions and assuming,among other matters,
c-0'CD a E compliance with certain covenants, interest on the Bonds is excluded from gross income for federal income tax purposes and is exempt from State of
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3� California personal income taxes.In the opinion of Bond Counsel,interest on the Bonds is not a specific preference item for purposes of the federal
g. .E."-. individual or corporate alternative minimum taxes, although Bond Counsel observes that it is included in adjusted current earnings in
EH 3 calculating corporate alternative minimum taxable income. Bond Counsel express no opinion regarding other federal income tax
m c consequences relating to the accrual or receipt of interest on the Bonds. See "CERTAIN TAX MATTERS" herein.
o E.2 ii THIS COVER PAGE CONTAINS CERTAIN INFORMATION FOR REFERENCE ONLY,IT IS NOT A SUMMARY OF THE ISSUE,
E' INVESTORS MUST READ THE ENTIRE OFFICIAL STATEMENT TO OBTAIN INFORMATION ESSENTIAL TO THE MAKING OF
s_5 o•0 AN INFORMED INVESTMENT DECISION.
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ac1:1•" VI The Bonds are offered when, as and if delivered and received by the Underwriters, subject to the approval as to their legality by Orrick,Herrington&
co O R Sutcliffe,Los Angeles, California,Bond Counsel,and certain other conditions. Certain legal matters will be passed upon for the Underwriters by
vE d L their counsel,Brown& Wood,Los Angeles, California,for Meridian Trust Company of California, as Trustee,by its counsel,for the City
E d H and the Authority by Edward J. Cooper, Esq., City Attorney,Santa Ana, California and for the Insurer by its counsel. Kelling,
.. a c Northcross&Nobriga, Oakland, California is serving as Financial Advisor to the Authority in connection with the issuance
s_ R of the Bonds.It is anticipated that the Bonds,in book-entry*-;a form, will be available for delivery through the facilities
Cy c of The Depository Trust Company in New York New York on or about March 23, 1994.
o Smith Barney Shearson Inc.
Prudential Securities Incorporated Rauscher Pierce
Refsnes Inc.
co co a`) E Dated:March 1994
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~'.o 0 H *Preliminary,subject to change.
SANTA ANA FINANCING AUTHORITY
Daniel H. Young, Chairman
Miguel Pulido, Vice Chairman
Ted R Moreno, Director
Lisa Mills, Director
Thomas E. Lutz, Director
Patricia A. McGuigan, Director
Robert L. Richardson, Director
CITY OF SANTA ANA
Daniel H. Young, Mayor
Miguel Pulido, Mayor Pro-Tern
Ted R. Moreno, Council Member
Lisa Mills, Council Member
Thomas E. Lutz, Council Member
Patricia A. McGuigan, Council Member
Robert L. Richardson, Council Member
CITY OFFICIALS
David N. Ream, City Manager
Janice C. Guy, Clerk of the Council
Edward J. Cooper, City Attorney
Debra Kurita, Assistant City Manager
Rod Coloma, Executive Director, Finance and Management Services Agency
John Reekstin, Administrative Services Manager, Community Development Agency
SPECIAL SERVICES
Orrick, Herrington & Sutcliffe
Los Angeles, California
Bond Counsel
Kelling, Northcross & Nobriga
Oakland, California
Financial Advisor
Meridian Trust Company of California
San Francisco, California
Trustee
TABLE OF CONTENTS
Page
INTRODUCTION
1
THE PROJECT AND THE LEASED PROPERTY 2
The Project
Status of Environmental Approvals 2
Status of Bids and Estimated Start and Completion Dates 3
The Leased Property 3
3
THE BONDS
Description of the Bonds 4
Redemption of the Bonds 4
Exchange of Bonds 5
Book-Entry System 7
Transfer and Payment of Bonds 7
Possible Derivative Structures 8
8
ESTIMATED SOURCES AND USES OF BOND PROCEEDS 9
DEBT SERVICE
9
SECURITY FOR THE BONDS
General 10
The Lease 10
Base Rental 11
Abatement 11
Insurance 11
Limited Recourse on Default 12
Release of Leased Property 12
Reserve Account 12
Issuance of Additional Bonds 13
13
BOND INSURANCE
General 13
Payment Pursuant to Municipal Bond Insurance Policy 13
MBIA Corporation 13
14
THE AUTHORITY 15
THE CITY
General 15
Appointed Positions 15
Demographic Statistics 17
Employment 17
Construction Activity 17
Transportation 18
Utilities 19
Education 19
Community Facilities 19
Recreation 20
21
CITY FINANCES
Annual Reports 21
Certificate of Achievement 21
General Fund Balance Sheet 21
Revenues, Expenses and Changes in Fund Balances 22
23
1
OFFICIAL STATEMENT
$105,000,000*
SANTA ANA FINANCING AUTHORITY
POLICE ADMINISTRATION AND HOLDING FACILITY LEASE REVENUE BONDS, SERIES 1994A
INTRODUCTION
The purpose of this Official Statement of the Santa Ma Financing Authority (the "Authority") is to
furnish information regarding the issuance and sale of$105,000,000*principal amount of Santa Ma Financing
Authority Police Administration and Holding Facility Lease Revenue Bonds, Series 1994A (the 'Bonds")
pursuant to the provisions of an Indenture, dated as of March 1, 1994 (the "Indenture") between the Authority
and Meridian Trust Company of California (the "Trustee"). The Bonds will be issued pursuant to the
Marks-Roos Local Bond Pooling Act of 1985 (Article 4, Chapter 5, Division 7, Title 1 of the California
Government Code) (the "Bond Law").
The Bonds are being issued to finance the acquisition, construction and equipping of a police
administrative and holding facility (the "Project") for the City of Santa Ma (the "City"), to fund a reserve
account and to pay certain costs of issuance. See "THE PROJECT AND THE LEASED PROPERTY" herein.
The Authority will initially lease 38 parcels of real property owned by the City (the "Leased
Property"), including the parcel on which the Project will be constructed (the "Site"), pursuant to a Ground
Lease, dated as of March 1, 1994, between the City and the Authority (the "Ground Lease") and will lease-back
the Leased Premises to the City pursuant to a Lease, dated as of March 1, 1994, between the Authority and the
City (the "Lease"). Pursuant to the Lease, the City has been appointed to act as the agent responsible for the
acquisition, construction and installation of the Project. Upon completion of the Project and issuance of a
certificate of occupancy with respect thereto, the City expects to release all parcels of real property, other than
the Site, from Ground Lease and the Lease. See the caption "SECURITY FOR THE BONDS -- The Lease --
Release of Leased Property".
The City is obligated to pay rental payments under the Lease from any legally available moneys,
including its general fund. The City will covenant in the Lease that, so long as the City has the use and
occupancy of the Leased Property, it will make rental payments ("Base Rental") to the Authority. Pursuant to
an Assignment Agreement dated as of March 1, 1994 (the Assignment Agreement"), the Authority has assigned
to the Trustee, among other things, its right to receive Base Rental. The Base Rental is calculated to be an
amount sufficient to permit the Authority to pay all debt service on the Bonds when due. The obligation of the
City to make Base Rental payments is not a debt of the City and is payable only from funds legally available
therefor, including amounts on deposit in the general fund of the City. The obligation of the City to make Base
Rental payments may be abated in whole or in pan in the event of damage to, condemnation or destruction of
or title defects relating to, the Leased Property.
Municipal Bond Investors Assurance Corporation (the "Insurer"), has issued a commitment to issue,
simultaneously with the delivery of the Bonds, a municipal bond insurance policy (the "Municipal Bond
Insurance Policy") relating to the Bonds, effective as of the date of delivery of the Bonds. By the terms of the
Municipal Bond Insurance Policy, the Insurer agrees to pay the principal of and interest evidenced by the
Current Interest Bonds and the accreted value of the Capital Appreciation Bonds(all as defined below) which
shall become due for payment but shall be unpaid to the extent that the Trustee has not received sufficient funds
from the Authority to make such payment.
* Preliminary, subject to change.
1
Funding for design development, land acquisition, and off-site Improvements has been provided by the
Asset Seizure Fund ($1.5 million), the Capital Outlay Fund ($3.0 million), and a loan from the Workers'
Compensation Fund ($5.1 million). The City does not anticipate reimbursing any of these funds from bond
proceeds other than the Workers' Compensation Fund. The value of the Site is $3.62 million. The City does
not intend to reimburse itself from bond proceeds for the value of the Site.
It is estimated that the costs of the Project will be as follows:
Construction $87,806,000
Furniture, Fixtures
and Equipment 6,100,000
Design and Engineering 4,712,000
Land and other
City Contributions 8,520,000
Total $107,138,000
Status of Environmental Approvals
The Project has been approved by the City of Santa Ana following a planning review. A mitigated
negative declaration (the "MND") was prepared by the City in compliance with the California Environmental
Quality Act ("CEQA"). The MND was certified by the City Council on July 18, 1991. The time for
challenging the MND has passed.
Status of Bids and Estimated Start and Completion Dates
Construction bids were received by the City on January 27, 1994. The winning bid was awarded at the
February 22, 1994 City Council meeting to Perini Building Company, Inc.
Construction of the.Project is anticipated by the City to begin March, 1994 and is anticipated to be
completed in March, 1996. The City currently expects to occupy the Project in March, 1996.
The Leased Property
The Leased Property includes 38 parcels of land currently owned by the City, including the Site on
which the Project will be constructed, as described below. According to an appraisal by Parkcenter Realty
Advisors dated January 3, 1994, the Leased Property has an appraised value of$93,983,000, including
$3,620,000 as the appraised value of the Site of the Project. The Leased Property will have a fair rental value
which is greater than or equal to the Base Rental. The City expects to release all of the Leased Property, other
than the Site, from the Lease and Ground Lease upon completion of the Project and the issuance of a certificate
of occupancy therefor. See "SECURITY FOR THE BONDS -- The Lease-- Release of Leased Property."
3
Principal of, and redemption premium, if any, on the Current Interest Bonds will be payable at the
principal corporate trust office of the Trustee in Los Angeles, California. Principal of and redemption
premiums, if any, and interest on the Current Interest Bonds shall be paid in lawful money of the United States
of America
Capital Appreciation Bonds.
The Bonds maturing July 1, 1996 through 20 , inclusive (the "Capital Appreciation Bonds"), will be
issued in the aggregate principal amount of$ , will be dated the date of original delivery thereof
and will mature, subject to the redemption provisions set forth below, on the dates and in the principal amounts,
all as set forth on the cover page hereof.
The Capital Appreciation Bonds will be issued in the form of fully registered bonds in denominations of
$5,000 accreted value (as defined in the Indenture, the "Accreted Value") at maturity, or any integral multiple
thereof. No payments of principal or interest will be made with respect to the Capital Appreciation Bonds prior
to the maturity or earlier redemption thereof. Accreted interest with respect to the Capital Appreciation Bonds
shall be compounded at the approximate yield to maturity set forth on the cover page, on Janua
of each year until payable, from the date of initial execution and delivery, gnD' 1 and July 1
period that the Accreted Value of such Capital Appreciation Bonds increases in equal dailygamou isany semiannual
on e
of a year of 360 days comprised of twelve 30-day months and will be payable only at maturity or the eal ebasis
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redemption thereof. A Table of Accreted Values (as of each January 1 and July 1, through July 1, 1999) of the
Capital Appreciation Bonds of each maturity per $5,000 Accreted Value at stated maturity is attached hereto as
Appendix E. Such table is presented for illustrative purposes only. Any Accreted Value determined by
computing interest in accordance with the terms of the Indenture will control over any different value
determined by reference to such table.
Redemption of the Bonds
Optional Redemption of Current Interest Bonds*
The Current Interest Bonds maturing on or after July 1, 2004*, shall be subject to redemption, at the
option of the Authority, on or after July 1, 2003*, in whole at any time or in part (by lot within any maturity),
on any Interest Payment Date, at the following redemption prices, plus accrued interest to the date fixed for
redemption:
Redemption Price
Redemption Period (percentage of
(dates inclusive) principal amount)
July 1, 2003 to June 30, 2004 102%
July 1, 2004 to June 30, 2005 101
July 1, 2005 and thereafter 100
* Preliminary, subject to change.
5
the extent possible, results in approximately equal Annual Debt Service on the Bonds Outstanding following
such redemption. For purposes of selecting Bonds for redemption, Current Interest Bonds shall be deemed to
be composed of portions of$5,000 principal and Capital Appreciation Bonds shall be deemed to be composed of
$5,000 maturity amount and any such portion may be separately redeemed.
If notice of redemption has been duly given as aforesaid and money for the payment of the redemption
price of the Bonds called for redemption is held by the Trustee, then on the redemption date designated in such
notice Bonds shall become due and payable, and from and after the date so designated interest on the Bonds so
called for redemption shall cease to accrue, and the Owners of such Bonds shall have no rights in respect
thereof except to receive payment of the redemption price thereof.
Failure by the Trustee to give notice pursuant to the Indenture to any one or more of the Information
Services or the Securities Depositories, or the insufficiency of any such notice, shall not affect the sufficiency of
the proceedings for redemption and shall not result in any liability to the Trustee. Failure by the Trustee to
mail notice of redemption pursuant to the Indenture to any one or more of the respective Owners of any Bonds
designated for redemption will not affect the sufficiency of the proceedings for redemption with respect to the
Owners to whom such notice was mailed and shall not result in any liability to the Trustee.
All Bonds redeemed pursuant to the provisions of the Indenture shall be cancelled by the Trustee and
shall be destroyed and shall not be reissued.
Exchange of Bonds
Bonds may be exchanged at the Corporate Trust Office of the Trustee for a like aggregate principal
amount of fully registered Bonds of the same series and maturity of other Authorized Denominations. The
Trustee will require the payment by the Owner requesting such exchange of any tax or other governmental
charge required to be paid with respect to such exchange as a condition precedent to the exercise of such
privilege. The Trustee shall not be required to register the transfer of the exchange of any Bond (i) during any
period commencing the day five (5) Business Days before the date on which Bonds are to be selected for
redemption and ending on such date of selection, or(ii) which has been selected for redemption in whole or in
part.
Book-Entry System
General
The Bonds will be executed and delivered in the form of one global bond for each maturity, registered
in the name of Cede & Co. and will be deposited with The Depository Trust Company ("DTC"). The
Authority cannot and does not give any assurances that DTC Participants or others will distribute payments with
respect to the Bonds received by DTC or its nominee as the registered owner, or any redemption or other
notices, to the Beneficial Owners, or that they will do so on a timely basis, or that DTC will serve and act in
the manner described in this Official Statement. See Appendix D hereto for additional information concerning
DTC.
The Authority may decide to discontinue use of the system of book-entry transfers through DTC (or a
successor securities depository). In that event, Bonds will be printed and delivered and will be governed by the
provisions of the Indenture with respect to payment of principal and interest and rights of exchange and transfer.
THE TRUSTEE, AS LONG AS A BOOK-ENTRY ONLY SYSTEM IS USED FOR THE BONDS,
WILL SEND ANY NOTICE OF REDEMPTION OR OTHER NOTICES TO OWNERS ONLY TO DTC.
ANY FAILURE OF DTC TO ADVISE ANY DTC PARTICIPANT, OR OF ANY DTC PARTICIPANT TO
NOTIFY ANY BENEFICIAL OWNER, OF ANY NOTICE AND ITS CONTENT OR EFFECT WILL NOT
AFFECT THE VALIDITY OR SUFFICIENCY OF THE PROCEEDINGS RELATING TO THE
7
Auction Rate increases, and increase when such rate decreases. In the event the Auction Rate is equal to a
maximum rate determined prior to issuance of the Bonds, the Inverse Rate will equal zero. An owner of a like
principal amount of ARS and IRS may combine such securities to form AIRS bearing interest at the Fixed Rate
("Fixed ARS"). An owner of IRS may cause a mandatory tender of ARS for purposes of creating Fixed AIRS.
An owner of Fixed AIRS may separate such securities into a like principal amount of ARS and IRS, Such ARS
and IRS will no longer bear interest at the Fixed Rate, but will bear interest at the Auction Rate or the Inverse
Rate, as the case may be.
ESTIMATED SOURCES AND USES OF BOND PROCEEDS
The proceeds received from the sale of the Bonds (excluding accrued interest on the Current Interest
Bonds which will be deposited into the Interest Account of the Revenue Fund) are estimated to be applied as
follows:
SOURCES OF FUNDS
Principal Amount of Bonds $
Underwriters' Discount
Original Issue Discount
Total Sources: $
USES OF FUNDS
Interest Account(1) $
Reserve Account (2)
Cost of Issuance Fund
Acquisition Fund $
Total Uses: $
(1) Represents interest on Current Interest Bonds capitalized to , 199 .
(2) Equals the Reserve Requirement.
DEBT SERVICE
The
ase
s City to
e Base
on January 1,,11995, and co continuing until l the end eof ttheal ayments on term of the Lease. Each Base Rental I and July 1 of each payment
beginning
payable by wire transfer on the last Business Day immediately preceding its due date. The interest componentsco be
of the Base Rental payable by the City under the Lease shall be paid by the City as, and shall constitute interest
paid on the principal components of the Base Rental payable by the City under the Lease. Base Rental
payments have been calculated to be at least sufficient to meet debt service on the Bonds due on each Interest
Payment Date.
9
Authority has covenanted to apply Revenues in accordance with provisions of the Indenture Summary in
Appendix A under the caption "DEFINITIONS AND SUMMARY OF PRINCIPAL LEGAL DOCUMENTS --
SUMMARY OF CERTAIN PROVISIONS OF THE INDENTURE -- Allocation of Revenues".
THE BONDS ARE LIMITED OBLIGATIONS OF THE AUTHORITY PAYABLE SOLELY FROM
AND SECURED SOLELY BY THE REVENUES PLEDGED THEREFOR IN THE INDENTURE. THE
BONDS ARE NOT A DEBT OF THE CITY, THE STATE OF CALIFORNIA OR ANY OF ITS POLITICAL
SUBDIVISIONS AND NEITHER THE FAITH AND CREDIT OF THE CITY, THE STATE OR ANY OF
ITS POLITICAL SUBDIVISIONS (OTHER THAN THE AUTHORITY) ARE PLEDGED TO THE
PAYMENT OF PRINCIPAL OR INTEREST ON THE BONDS, AND NEITHER THE CITY, THE STATE
NOR ANY OF ITS POLITICAL SUBDIVISIONS IS LIABLE THEREFOR. NEITHER THE BONDS NOR
THE OBLIGATION OF THE CITY TO MAKE BASE RENTAL PAYMENTS CONSTITUTES AN
INDEBTEDNESS OF THE CITY, THE STATE OR ANY POLITICAL SUBDIVISION THEREOF IN
CONTRAVENTION OF ANY CONSTITUTIONAL OR STATUTORY DEBT LIMITATION OR
RESTRICTION.
The Lease
Base Rental
The City has covenanted in the Lease that it will make Base Rental payments which are calculated to be
at least sufficient to meet debt service requirements on the Bonds due on each Interest Payment Date payable on
the fifteenth day of the month immediately preceding each Interest Payment Date. The City has covenanted in
the Lease to take such action as may be necessary to include in its annual budgets, and to make the necessary
annual appropriation to meet, all Base Rental payments under the Lease during each City Fiscal Year.
The obligation of the City to make Base Rental Payments is not a debt of the City and is payable only
from funds legally available therefor, including amounts on deposit in the general fund of the City. Under
California law, the obligation of the City to make Base Rental payments is contingent upon the availability of
the Leased Property for use and occupancy by the City. Accordingly, the Base Rental payments will be abated
proportionately during any period in which, by reason of damage, destruction or condemnation, there is
substantial interference with the use and occupancy of the Leased Property by the City, and such abatement
shall continue for the period commencing with such damage or destruction and ending with completion by the
City, as agent of the Authority, of the work of repair or reconstruction. See the caption "SECURITY FOR
THE BONDS -- The Lease--Abatement". Any abatement of Base Rental payments could affect the
Authority's ability to pay debt service on the Bonds. The Lease requires the City to maintain a variety of
insurance more fully described under the caption "SECURITY FOR THE BONDS -- The Lease -- Insurance",
including use and occupancy insurance with respect to certain insured risks, in an amount equal to twenty-four
(24) months of Base Rental (but such risks may not include lost use and occupancy resulting from an
earthquake). See the caption "SECURITY FOR THE BONDS -- The Lease --Insurance" and APPENDIX A
under the caption 'DEFINITIONS AND SUMMARY OF PRINCIPAL LEGAL DOCUMENTS -- SUMMARY
OF CERTAIN PROVISIONS OF THE LEASE -- Insurance".
Abatement
Except to the extent of amounts legally available to the City for payments under the Lease and except
as otherwise specifically provided in the Lease with respect to use and occupancy insurance proceeds and
amounts on deposit in the Revenue Fund, during any period in which, by reason of material damage,
destruction, title defect or condemnation there is substantial interference with the use and possession by the City
of any portion of the Ipased Property, rental payments due under the Lease will be abated proportionately by an
amount such that the portion of Base Rental remaining unabated represents the fair rental value of the re
portion of the Leased Property, as calculated by the City and set forth in writing to the Authority and the
Trustee. Any abatement of rental payments pursuant to the Lease will not be considered an event of default as
g
11
Removal, the part of the Leased Property for which the substitution or removal has been effected shall be
released from the leasehold created by the Lease and all right, title and interest in and to such Leased Property
shall vest in the City. In connection with such release of part of the Leased Property, the Authority shall
execute such conveyances, deeds, and other documents, and shall take or cause to be taken all actions that are
necessary to provide that such released Leased Property constitutes a valid legal parcel, the ownership of which
is recordable in the real property records of the County of Orange for which a title insurance policy may legally
be obtained, as may be necessary to effect such vesting of record.
Upon completion of the Project and issuance of a certificate of occupancy therefor, the City expects to
release all of the Leased Property, other than the Site and the Project, from the Ground Lease and the Lease.
There can be no assurance, however, that the City will undertake such release. Whether or not such release
occurs, the City remains obligated to make Base Rental payments in accordance with the Lease.
Reserve Account
The Authority shall initially deposit in the Reserve Account $
(as fully died in
APPENDIX A, the "Reserve Requirement") from the proceeds of the Bonds. Moneys no the ReserveCAccount
shall be applied solely for the purpose of paying the principal of, interest on, Accreted Value or redemption
premium, if any, on the Bonds in the event that no other money of the Authority is lawfully available therefor
or for retirement of all Bonds then Outstanding. Under certain circumstances, all or any portion of the Reserve
Requirement for the Bonds may be satisfied by the provision of a policy of insurance, a surety bond, a letter of
credit or other comparable credit facility, or a combination thereof, which are rated in one of the two highest
rating categories by Moody's or S&P at the time of the issuance thereof, which, together with moneys on
deposit in the Reserve Account, equal to the Reserve Requirement.
Issuance of Additional Bonds
The Indenture provides that the Authority may, at any time, issue Additional Bonds payable from
Revenues as provided therein and secured by Revenues as provided therein equal to the pledge securing the
Bonds thereafter issued, but only subject to the conditions described in Appendix A hereto under the caption
"SUMMARY OF CERTAIN PROVISIONS OF THE INDENTURE --Issuance of Additional Bonds".
BOND INSURANCE
General
The information contained under the caption "BOND INSURANCE" has been furnished by the
Insurer for use in this Official Statement. Reference is made to Appendix F for a specimen of the Policy.
No representation is made by the Authority as to the accuracy or completeness of this information, or the
absence of any material adverse changes subsequent to the date hereof, and the Authority assumes no
responsibility therefor.
Payment Pursuant to Municipal Bond Insurance Policy
The Insurer's policy unconditionally and irrevocably guarantees the full and complete payment required
to be made by or on behalf of the Authority to the Trustee or its successor of an amount equal to (i) the
principal of(either at the stated maturity or by an advancement of maturity pursuant to a mandatory sinking
fund payment) and interest on the Current Interest Bonds and the Accreted Value of the Capital Appreciation
Bonds as such payments shall become due but shall not be so paid, (except that in the event of any acceleration
of the due date of such principal by reason of mandatory or optional redemption, other than any advancement of
maturity pursuant to a mandatory sinking fund payment, the payments guaranteed by the Insurer's Policy shall
be made in such amounts and at such times as such payments of principal would have been due had there not
been any such acceleration); and (ii) the reimbursement of any such payment which is subsequently recovered
13
the creditworthiness of the Insurer and its ability to pay claims on its policies of insurance. Any further
explanation as to the significance of the above ratings may be obtained only from the applicable rating agency.
The above ratings are not recommendations to buy, sell or hold any of the Bonds and such ratings may
be subject to revision or withdrawal at any time by the rating agencies. Any downward revision or withdrawal
of either or both ratings may have an adverse effect on the market price of the Bonds.
In the event the Insurer were to become insolvent, any claims arising under a policy of financial
guaranty insurance are excluded from coverage by the California Insurance Guaranty Association, established
pursuant to Article 14.2 (commencing with Section 1063) of Chapter 1 of Part 2 of Division 1 of the California
Insurance Code.
There can be no assurances that payments made by the Insurer representing interest on the Bonds will
be excluded from gross income, for federal tax purposes, in the event of nonappropriation by the Authority.
THE AUTHORITY
The Authority is a joint powers authority, organized pursuant to a Joint Exercise of Powers Agreement,
dated as of August 1, 1993, by and between the City and the Community Redevelopment Agency of the City of
Santa Ma (the "Joint Powers Agreement"). The Joint Powers Agreement was entered into pursuant to he
Government Code of the State of California, commencing with Section 6500. The Authority is a separate entity
constituting a public instrumentality of the State of California and was formed for the public purpose of assisting
in financing of projects pursuant to the Bond Law for the benefit of the City.
The Authority is governed by a board of seven directors. The City Council of the City constitutes the
Board of Directors of the Authority. The Authority is specifically granted all of the powers specified in the
Bond Law, including but not limited to the power to issue bonds and to sell such bonds to public or private
purchasers at public or by negotiated sale. The Authority is entitled to exercise the powers common to its
members and necessary to accomplish the purposes for which it was formed. These powers include the power
to make and enter into contracts; to employ agents and employees; to acquire, construct, manage, maintain and
operate buildings, works or improvements; to acquire, hold or dispose of property within the City; and to incur
debts, liabilities or obligations.
THE CITY
General
The City of Santa Ana, county seat of Orange County and one of the oldest communities in Southern
California, is located 33 miles southeast of Los Angeles, 20 miles east of the Port of Los Angeles and Long
Beach, ten miles inland from the Pacific Ocean and 90 miles north of San Diego. The City encompasses an
area of approximately 27 square miles and lies on generally level land at an elevation approximately 135 feet
above sea level.
The City was established by William H. Spurgeon in 1869. The City was incorporated on June 1,
1886 and reorganized under a City Charter in 1888. In 1952 the Voters approved a charter which established a
council-manager form of government. The charter was modified by an election in 1986 to provide for the
mayor to be elected by the voters for a two year term. A 1988 redistricting resulted in a six-member City
Council which is elected at large for four year terms.
The City provides traditional city services including fire protection (254 employees with ten stations)
and police protection (406 police officers and seven stations). The City has approximately 1,600 classified
employees and 13 exempt employees. The City provides water service through the municipal water department
15
Demographic Statistics
Set forth below are the estimated population, per capita income, median age, school enrollment and
unemployment rate for the City for the years indicated.
CITY OF SANTA ANA
CERTAIN DEMOGRAPHIC STATISTICS
Median Household
Effective
Fiscal Buying
Population
School
Year Income MedianUnemployment
_figp_ Enrollment Rate
19901985 221,800 $26,809
292,077 28.1 35,265 4.6%
33 320 28.9
1991 300,256 36,425 25.9 42,260 3.3
45,964 5.4
1992 304,900 37,294 - 25.0
1993 308,379 N/A 48,406 8.0
' 25.0 48,406 8.0
Source: State Department of Finance, U.S. Bureau of the Census, City of Santa Ana Planning&Building Agency, Santa
Ana Unified School District, State of California Employment Development Department of Sales &Marketing Management-
Survey of Buying Power.
Employment
The following table shows a list of major employers in the City.
MAJOR EMPLOYERS IN THE CITY OF SANTA ANA
Firm Description
1,000 or more employees
Baxter Healthcare Corporation
City of Santa Ana Medical Hospital
County of Orange Government
ITT Electromechanical Components Government
Electronics
Rancho Santiago College
The Register Education Services
Santa Ana Unified School District Newspaper
U.S. Federal GovernmentG Public School System
Western Medical Center Hospital nt
Hospital
(continued on next page)
17
CITY OF SANTA ANA
BUILDING PERMIT VALUATION
1991 1992 1993
Number Value Number Value Number Value
Single Family Houses -Detached 29 $4,053,797 33 $4,160,530
Single Family Houses- Attached 43 $5,412,771
(Condos and Townhouses) 0 0 2 384,200 0
Multi-Family Apartments 7 1,195,200 2 515,800 2 0
Multi-Family Condos 0 0 0 518,R00
Residential Alterations and Additions 2,766 16,994,963 727 6,883,771 6998
Industrial Buildings 3 1,034,000 12 9,558,540 17 6,824,398
Industrial Alterations and Additions 340 4,078,350 154 4,899,970 9,594,540
1
Commercial Buildings 20 74,824,150 10 12,293,779
19 6,308,708
Commercial Alterations and Additions 1,044 41,566,161 668 30,764,467 556 32,171,001
All Other Building Permits 441 2.346.970 22 772 22.144.751 3 207 24,217 ,923
$91
TOTAL BUILDING PERMITS 4,650 $146,995,801 4,380 -,— 17, ,61,605,808 4,689 $117,764,619
Source: City of Santa Ana Permits and Plan Check Division
Transportation
The City is well served by freeways with the Santa Ana Freeway (1-5) bisecting the City, the Garden
Grove Freeway forming its northern boundary and the Costa Mesa Freeway forming its eastern boundary.
There is easy access to the San Diego Freeway (1-405) which is approximately one mile from the southern
bother. Air transportation is readily available from nearby John Wayne Airport, two miles south of the City.
Utilities
Southern California Edison provides electrical service within the City, Southern California Gas
Company provides natural gas with the City and COMCAST Cable Company provides cable television service
within the City. The City operates a water system within the City relying on a combination of local
groundwater and water imported from Northern California and the Colorado River and purchased from the
Metropolitan Water District of Southern California. The Orange County Sanitation Districts are responsible for
sewer service within the City.
Education
Santa Ma is served by various school districts. Approximately 75 percent of the City is in the Santa
Ana Unified School District and approximately 25 percent is within the Garden Grove Unified School District.
Portions of the City are also located in the Orange Unified School District, Tustin Elementary and Tustin High
School Districts. There are 26 public elementary schools, 7 intermediate and junior high schools, 4 high
schools and 3 special schools for the handicapped and 1 continuation high school.
Enrollment in the Santa Ma Unified School District for the ten year period ending in 1993 is presented
below:
19
One AM radio station and two FM stations are located in the City. Residents of the City receive radio
and television broadcasting serving the metropolitan Los Angeles area. The City owns and operates a cable
television station KCTY.
Recreation
The mild climate of Orange County makes possible a wide range of recreational opportunities for
residents and visitors. Along the County's Pacific Coast shoreline are five state beaches and parks, five
municipal beaches and five county beaches. There are two small craft facilities in Newport Harbor. A third
small craft facility is located in Sunset Harbor in Huntington Beach, and a fourth is at Dana Point. Nearby
recreational facilities include the world famous Disneyland, Knott's Berry Farm and Mission San Juan
Capistrano.
Within the City, there are three golf courses, numerous parks, the Santa Ma Zoo and the Bowers
Museum. Anaheim Stadium, home of the California Angels baseball team and the Rams foot
ball team
Anaheim Arena, home of the Mighty Ducks hockey team, are six miles north of the City. , and the
Camping facilities are available in the Cleveland National Forest and at the County's O'Neill and
Featherly Parks, all close to the City.
CITY FINANCES
Annual Reports
The Executive Director of the Department of Finance and Management Services prepares a
comprehensive annual financial report setting forth the financial condition of the City as of June 30 of each
fiscal year. The latest completed report is for the year ended June 30, 1993. See APPENDIX B -- GENERAL
PURPOSE FINANCIAL STATEMENTS (COMBINED STATEMENTS -- OVERVIEW) OF CITY OF
SANTA ANA. The comprehensive annual financial report is the official financial report of the City and is
prepared following generally accepted accounting principles.
The General Purpose Financial Statements (Combined Statements - Overview) of the City for the fiscal
year ended June 30, 1993 (the "Audited Financial Statement"), have been examined by Deloitte & Touche,
Santa Ma, California, independent certified public accountants, whose report thereon appears in Appendix B.
The auditor's letter concludes that the audited financial statements present fairly, in all material
respects, the financial position of the City and the results of its operations and cash flows of its proprietary fund
types for the year then ended, in conformity with generally accepted accounting principles. A complete copy of
the Comprehensive Annual Financial Report of the City for the year ended June 30, 1993, which includes the
Audited Financial Statements as well as certain other supplemental and statistical information, is available upon
written request from the City, Department of Finance and Management Services, 20 Civic Center Plaza, Santa
Ma, California, 92702 Attention: Executive Director.
Certificate of Achievement
The Government Finance Officer's Association of the United States and Canada (GFOA) awarded a
Certificate of Achievement for Excellence in Financial Reporting to the City for its comprehensive annual
financial report for the fiscal year ended June 30, 1993. This is the seventeenth consecutive year that the City
has received this recognition.
In order to be awarded a Certificate of Achievement, a governmental unit must publish an easily
readable and efficiently organized comprehensive annual financial report with contents conforming to program
21
Revenues, Expenses and Changes in Fund Balances
The following table shows the City's general fund revenues, expenses and changes in fund balance for
the Fiscal Years ending June 30, 1991 through 1993.
CITY OF SANTA ANA GENERAL FUND
COMPARATIVE STATEMENTS OF REVENUES,
EXPENDITURES AND CHANGES IN FUND BALANCE
FOR THE FISCAL YEARS ENDED JUNE 30, 1993, 1992 AND 1991
1993 1992
1991
Revenues:
Taxes
License and permits $ 75,547,804 $73,826,617 $ 67,799,340
Intergovernmental 1,995,338 1,911,262 2,123,776
Charges for services 11,312,149 11,335,444 11,061,240
Fines and forfeits 6,826,477 5,647,221 4,907,490
Use of money &tproperty1,951,036 2,199,547 2,886,501
Miscellaneous
3,201,653 llaneoua 3,436,419 3,282621
Total revenues 7877 4.868.215 8.682 722
$108,456,334 $103,224,725 100 743 690
Expenditures:
Current:
General Government $ 3,818,854 Human Resources $ 3,617,850 $ 4,110,295
Finance and Management Services 1,486,559 1,494,529 1,413,972
Museum 3,754,701 3,789,506 3,412,763
Library 1,398,202 1,349,393 1,270,751
Recreation &Community Services 3,834,518 4,191,223 3,609,900
Fire Department 9,672,682 9,226,418 6,815,623
Police Department 25,666,937 24,611,174 23,156,891
Planning&Building 58,471,397 51,993,281 45,228,515
Public Works 9,622,188 9,478 650
Total current expenditures 9,664,101 10,995,787 8,630,508
127 390 139 10.458.640
$---+ —.+—_ $120.747.811 108 107 858
Capital outlay
9,478,043 2,036,450 4,366,283
Debt Service:
Principal retirement
$ 1,363,307 $ 1,008,482 $ 932,788
Interest and fiscal charges
Total expenditures 194,137 238,759 266.052
$138,425,626 $124,031,502 113 672 981
Deficiency of revenues
over expenditures (29,969,292) (20,806 777)
Other financing sources (uses): (12,929,291)
Capital lease arrangement
Operating transfers in $ 2,836,210 $ 147,015 $ 480,644
Operating transfers out
(16 913,664 20,867,24625,655,819
Total other 10.670 941) (6,955,890), (13,189.578)
financing sources (uses)
$ 9,078,933 $ 14,058,371 12 946 885
Excess of revenues and
other sources
over(under) expenditures and
other uses $(20,890,359) $
Fund balance- beginning (6,748,406) $ 17,594
Equity transfer in 22,519,005 20,924,140 20,886,142
Fund balance- ending 7,400.000 8,343,271 20.404
$ 9,028,646 122,11101 005 20 924 14)
23
CITY OF SANTA ANA
1994 GENERAL FUND BUDGET
SCHEDULE OF REVENUES AND EXPENDITURES
(NON-GAAP
FOR THE FISCAL YEAR ENDED)JUNE 30, 1994 1
The following table does not include discretionary capital expenditures (i.e., the City's Capital
Improvement Plan) for the years shown.
Revenues: 1994 Budget
Taxes
License and Permits $ 79,674,545
Intergovernmental 2,450,285
Charges for services 13,923,675
Fines and forfeits 9,869,910
Use of money and property 3,456,870
Miscellaneous 3,623,330
Total revenues 4,69
$117,696,250
,895
Expenditures:
General government:
City Council
Clerk of the Council $ 661,553
City Attorney 509,700
464 1 Manager
City
r 8 68
Non-departmental 568,117
Total general government 867,420
$ 4,071,658
Human Resources
Finance and Management Services 1,368,420
Museum 3,970,222
Library 1,442,350
Recreation &Community Services 4,574,974
Fire Department 9,317,311
Police Department 26,563,954
Planning&Building 58,242,885
Public Works 10,655,742
Community Development 9,706,707
Total operating expenditures $129,914,223
Deficiency of revenues
over operating expenditures - $(12,217,328)
Other financing source (uses):
Operating transfers in.(Recurring)
From Special Gas Tax $ 3,550,415
From Redevelopment Agency
3,327,470
Others:
From Retirement System
From Workers' Compensation Fund -0-
From Revenue Sharing -0-
From Sanitation and Refuse Funds -0-
From Various Internal Service Funds 843,595
Total transfers in 71,855
$ 7,793,335
Operating transfers out:
To Redevelopment Agency $ (503,985)
To Centennial Park (266,055)
To Regional Transportation Center (99,975)
To UPARR Grant Program
Total transfers out $ (870,015)
Total other financing sources
Deficiency of revenues 6,923,320
and other sources over
operating expenditures
and other financing uses $ (5,294,008)
Other Expenditures:
Capital Outlay
Deficiency of revenues and $ 13,469,101
other financing sources
over total expenditures
and other financing uses $(18,763,109)
Fund Balance- beginning
Equity transfer in 18,763,109
Fund Balance- ending
$ -0-
25
Outstanding General Fund Obligations
The City currently has outstanding General Fund obligations as follows:
Name Principal Amount Maturity Date
Certificates of Participation,
(Parking Facilities Refunding
Project), Series 1993A $16,625,000 June 1, 2016
Certificates of Participations,
(Commercial Facilities Refunding
Project), Series 1993B 1,945,000 June 1, 2008
Certificates of Participation,
(Mass Commuting Facilities Refunding
Project), Series 1993C 5,005,000 June 1, 2008
Other Capitalized Leases 2,800,267
Total $26,375,267
The City's maximum annual rental obligation relating to the certificate of participation obligations is
$2,886,309 in 1994. The City has entered into a loan agreement with the Redevelopment Agency pursuant to
which the Redevelopment Agency is obligated to make payments to the City sufficient to make all payments
with respect to the Certificates of Participation (Parking Facilities Refunding Project), Series 1993A. Current
Redevelopment Agency practice is to make all payments with respect to the other Certificate of Participation
issues described above directly to the Trustees on behalf of the City. There can be no assurance, however, that
the Redevelopment Agency can or will continue to make such payments in the future.
The City currently has outstanding a variety of other long-term obligations but which are not payable
from the general fund. For information regarding these other long-term obligations of the City see the notes to
the City Audited Financial Statements set forth in Appendix B.
Insurance and Risk Management
Property Risks. The City is one of 17 cities that formed the Public Entity Property Insurance Program
(PEPIP) in May, 1993. PEPIP is a joint-purchase arrangement whose members currently number 63, and
whose collective insurable values exceed $4.5 billion. The renewal date is May 15 of each year. The program
has a $250,000,000 per occurrence shared-loss limit except for earthquake and flood coverage of$50,000,000,
which applies to the City only. The coverage is "All Risk" and includes earthquake and flood. The deductibles
are $10,000 except 5% of the location value for earthquake with a $100,000 minimum, $500,000 for flood and
$25,000 for vehicles, except $50,000 for fire trucks. The coverage is replacement cost with no co-insurance.
Rents coverage is provided on an "Actual Loss Sustained" basis. Library inventory has a separate value
formula.
Currently, RLI Insurance Company and Lexington Insurance Company provide the first layer of
$5,000,000 coverage. The second ($5,000,000,000) is insured by Industrial Indemnity Company and Royal
Indemnity Company. The third layer ($15,000,000) is insured by six insurance companies. The fourth layer
($25,000,000) is insured by eleven insurance companies. The fifth layer ($50,000,000) is insured by Industrial
Indemnity Company and does not include earthquake or flood. The sixth layer ($100,000,000) is insured by
three insurance companies and does not include earthquake or flood. The seventh layer ($50,000,000) is
insured by Travelers Insurance Companies. The City has a Boiler& Machinery Policy with a$10,000,000
27
Property Tax Collections and Assessed Valuations
The table below sets forth property tax levies and collections within the City for the fiscal years ended
June 30, 1984 through 1993.
PROPERTY TAX LEVIES AND COLLECTIONS
FISCAL YEARS ENDING JUNE 30, 1984 THROUGH 1993
Ratio
Percentage Delinquent Total
Fiscal Tax Current Collected Tax Total
Collection
Year Levied Collections Currently Collection Collection') To Levy,
1984 $12,363,644 $11,753,178 95.1% $464,598 $12,217,776 98.8%
1985 13,197,581 12,709,215 96.3 558,169 13,267,384 100.5
1986 14,399,736 13,817,709 96.0 345,391 14,163,100 98.4
1987 15,957,490 15,101,451 94.6 450,551 15,552,002
97.5
1988 16,887,343 16,411,151 97.2 741,785 17,152,936 101.6
1989 18,563,060 17,521,630 94.4 916,506 18,438,136
99.3
1990 20,341,732 19,012,022 93.4 725,869 19,737,891 97.3
1991 21,649,324 19,819,687 91.5 782,162 20,601,849 95.2
1992 22,144,193 21,092,648 95.2 807,428 21,900,076
1993 22,909,717 21,067,597 90.9 95.8
976,850 22,044,447 95.8
(1) Excludes Business Inventories and Homeowner's Exemptions, and Redevelopment Tax Increment.
The County of Orange has recently elected to participate in a program known as the "Teeter Plan" under
which the City and certain other local agencies will receive 100% of the City's share of the County 1% property
tax levy, regardless of the countywide delinquency rate. See "The City -- 1993 Budget Results and City
Management Discussion of 1994 Budget" for a discussion of the impact of this County action on the City.
29
Property Tax Rates -- Overlapping Governments
The table below sets forth A SELECTED property tax rate in the City for all governmental agencies
overlapping the City. The City had 117 tax code areas during the year ended June 30, 1993. The tax rates in
these areas varied from 1.00168% to 1.02789% of assessed valuation. Tax Rate Area 11-003, which is
presented in the table, is the largest representing about 25% of the total assessed valuation.
PROPERTY TAX RATES CITY OF SANTA ANA - ALL OVERLAPPING GOVERNMENT
FISCAL YEARS ENDING NNE 30, 1984 THROUGH 1993
(CODE AREA 11-03)
Metropolitan County
Fiscal Water Orange Sanitation & School
Year District County Water District Services Othero
Total
1984 $.0237 $1.00 $.00201 $.03397 $.00249
1.06217
1985 .0156 1,00 .00198 .03106 .00209 $1.05073
1986 .0164 1.00 .00154 .03109 .00193 1.05096
1987 .0148 1.00 .00199 .02322 .00169 1.04170
1988 .0112 1.00 .00138 .01754 .00139 1.03151
1989 .0110 1.00 .00121 .01342 .00133 1.02695
1990 .0121 1.00 .00024 .01505 .00110 1.02849
1991 .0097 1.00 -- .01163 .00098 1.02231
1992 .0089 1.00 -- .00809 .00086
1993 .0089 1.00 -- 1.01785
.01695 .00087 1.02672
(1) Includes County Improvement Bonds & Orange County Flood Control District Bonds.
Taxes on the secured rolls are payable in two installments on November 1 and March 1 of each fiscal year and
become delinquent on December 10 and April 10, respectively. Taxes on unsecured property are assessed and
payable on March 1 and become delinquent the following August 31 in the next fiscal year. The penalty for
delinquent payment is 10% of the property tax due plus 11% interest per month until paid.
All property taxes are collected by the County of Orange Tax Collector and are apportioned to participating
agencies in accordance with a prearranged schedule of apportionment dates and amounts either as a percentage
of the levy or in amounts actually collected. Interest is paid on undistributed taxes in subsequent
apportionments. The Tax Collector charges the agencies 1/4 of 1 percent of the amounts collected for his services.
31
Several court decisions have held parts of Proposition 62 (a statute) to be in conflict with the State
Constitution, substantially undermining its effectiveness. The City cannot predict what the effect of a similar
constitutional amendment wou
ld be on the fiscal flexibility
bility of the City.
Article XIIIB of the California Constitution
The State and most entities of local government are subject to an annual "appropriations limit" imposed
by Article XIIIB of the State Constitution (the "Gann Limit"). Article XIIIB prohibits an entity of government
from spending "appropriations subject to limitation" in excess of the appropriations limit imposed. Article
XIIIB, originally adopted in 1979, was modified substantially by Propositions 98 and 111 in 1988 and 1990,
respectively. "Appropriations subject to limitation" are authorizations to spend "proceeds of taxes," which
consist of tax revenues, State subventions and certain other funds, including proceeds from regulatory licenses,
user charges or other fees to the extent that such proceeds exceed "the cost reasonably home by such entity in
providing the regulation, product or service," but "proceeds of taxes" excludes tax refunds and some benefit
payments such as unemployment insurance. No limit is imposed on appropriations of funds which are not
"proceeds of taxes," such as reasonable user charges or fees, and certain other non-tax funds.
Not included in the Article XIIIB limit for the City are appropriations for the debt service costs of
bonds existing or authorized by January 1, 1979, or subsequently authorized by the voters, appropriations
required to comply with mandates of courts or the federal government and appropriations for qualified capital
outlay projects. The appropriations limit may also be exceeded in cases of emergency. However, unless the
emergency arises from civil disturbance or natural disaster declared by the Governor of the State, and the
expenditure is approved by two-thirds of the appropriate legislative body, the appropriations limit for the entity
for the Debt three years must be reduced by the amount of the excess.
The appropriations limit for the City in each year is based on the limit for the prior year, adjusted
annually for changes in the cost of living and changes in population, and adjusted, where applicable, for transfer
of financial responsibility of providing services to or from another unit of government. The change in the cos
t
of livingis, at
the option of the City,
(2) the percentage change in the local assessment theroll on nonresidential ercentage e 1pro State
y.perEitherr tes capita st is likely to be
rsonal income, or
greater than the change in the cost of living index, which was used prior to Proposition 111. For the City,
change in population is to be measured either within the jurisdiction of the City or the County as a whole.
As amended by Proposition 111, the appropriations limit is tested over consecutive two-year periods.
Any excess of the aggregate "proceeds of taxes" received by the City over such two-year period above the
combined appropriations limits for those two years is to be returned to taxpayers by reductions in tax rates or
fee schedules over the subsequent two years.
Section 4 of Article XIIIB provides that the appropriations limit imposed on any entity of government
may be changed by the electors of such entity, provided that the duration of any such change shall not exceed
four years from the most recent vote of the electors.
As originally enacted in 1979, the appropriations limit for the City was based on 1978-79 fiscal year
authorizations to expend proceeds of taxes and was adjusted annually to reflect changes in cost of living and
population (using different definitions, which were modified by Proposition 111). Starting in the 1990-91 fiscal
year, the City's appropriations limit was recalculated by taking the actual 1986-87 limit, and applying the annual
adjustments as if Proposition 111 had been in effect.
33
RATING
Standard &Poor's Ratings Group ("S&P") has assigned the Bonds a rating of AAA, and Moody's
Investors Service, Inc. ("Moody's") has assigned the Bonds the rating of Aaa, with the understanding that, upon
delivery of the Bonds, the Municipal Bond Insurance Policy will be issued by the Insurer. Such ratings reflect
only the views of S&P and Moody's, and does not constitute a recommendation to buy, sell or hold the Bonds.
Explanation of the significance of the rating may be obtained from the S&P and Moody's. A rating is subject to
revision or withdrawal at any time by the particular rating agency, and there is no assurance that a rating will
continue for any period of time or that it will be revised or withdrawn. Any revision or withdrawal of either or
both of the ratings could have an adverse effect on the market price of the Bonds.
LITIGATION
There is no action, suit, proceeding, inquiry or investigation, at law or in equity, before or by any
court, regulatory agency, public board or body, pending or, to the knowledge of the Authority, threatened
against the Authority or the City affecting the existence thereof or the titles of its members or officers to their
respective offices or seeking to restrain or to enjoin the sale of the Bonds, the application of the proceeds
thereof in accordance with the Indenture, or in any way contesting or affecting the validity or enforceability of
the Joint Powers Agreement, the Bonds, the Indenture, the Ground Lease, the Lease, the Assignment
Agreement or any action of the Authority or the City contemplated by any of said documents, or in any way
contesting the completeness or accuracy of this Official Statement or any amendment or supplement thereto, or
contesting the powers of the Authority or the City or their authority with respect to the Joint Powers
Agreement, the Bonds, the Indenture, the Ground Lease, the Lease, the Assignment Agreement or any action of
the Authority or the City contemplated by any of said documents, nor to the knowledge of the Authority, is
there any basis therefor.
Although the City is subject to occasional lawsuits in the ordinary conduct of its affairs, in the opinion
of the City, there are no claims or actions threatened or pending which, if determined adversely against the
City, either individually or in the aggregate, would have a material adverse effect on the financial condition of
the City or on the ability of the City to make Base Rental payments under the Lease.
UNDERWRITING
The underwriters set forth on the cover page hereof(the "Underwriters") have jointly and severally
agreed, subject to certain conditions set forth in the Purchase Contract, dated March 1994 (the "Purchase
Contract"), to purchase all of the Bonds for an aggregate purchase price of$ (constituting the
aggregate principal amount of the Bonds less underwriters' discount of$
sco
of$ ) plus the interest on the Current Interest Bonds accrued from March 1,i1994 tod thedelil issue very ant
date thereof.
The initial public offering prices stated on the inside cover of this Official Statement may be changed
from time to time by the Underwriters. The Underwriters may offer and sell the Bonds to certain dealers
(including dealers depositing Bonds into investment trusts), dealer banks, banks acting as agents and others at
prices lower than said public offering prices.
35
APPENDIX A
DEFINITIONS AND SUMMARY OF
PRINCIPAL J FOAL DOCUMENTS
APPENDIX A
DEFINITIONS AND SUMMARY OF
PRINCIPAL LEGAL DOCUMENTS
The following is a summary of certain provisions of the Assignment Agreement, the Indenture
and the Lease which are not described elsewhere in the Official Statement. These summaries do not
purport to be comprehensive and reference should be made to the Assignment Agreement, the Indenture
and the Lease for a full and complete statement of its provisions. All capitalized terms not defined in the
Official Statement have the meanings set forth in the Lease or the Indenture.
DEFINITIONS
Unless the context otherwise requires, the terms defined under this caption will, for all purposes of the
Official Statement, have the meanings herein specified.
"Accreted Value" means, with respect to any Capital Appreciation Bond, an amount equal to the
principal amount of such Bond, plus interest accrued thereon from its dated date compounded on each January 1
and July 1, commencing January 1, 1995 (through and including the maturity date of such Bond) at the "original
issue yield" for such Bond; provided, that the Accreted Value on any date other than January 1 and July 1 shall
be calculated by straight line interpolation of the Accreted Values as of the immediately preceding and
succeeding January 1 and July 1. The term "original issue yield"means, with respect to any particular Bond,
the yield to maturity of such Bond from the initial date of delivery thereof calculated on the basis of semiannual
compounding on each January 1 and July 1.
"Additional Bonds" means all lease revenue bonds of the Authority authorized by and at any time
Outstanding pursuant to the Indenture and executed, issued and delivered in accordance with the Indenture.
"Annual Debt Service" means, for any Authority Fiscal Year or Bond Year, the sum of(1) the interest
payable on all Outstanding Bonds in such Authority Fiscal Year or Bond Year, assuming that all Outstanding
Serial Bonds are retired as scheduled and that all Outstanding Term Bonds are redeemed or paid from sinking
fund payments as scheduled (except to the extent that such interest is to be paid from the proceeds of the sale of
any Bonds), (2) the principal amount of all Outstanding Serial Bonds maturing by their terms in such Authority
Fiscal Year or Bond Year, and (3) the principal amount or Accreted Value of all Outstanding Serial Bonds
required to be redeemed or paid in such Authority Fiscal Year or Bond Year (together with the redemption
premiums, if any, thereon).
"Assignment Agreement" means the Assignment Agreement, dated as of March 1, 1994, between the
Authority and the Trustee, as originally executed and as it may from time to time be amended or supplemented.
"Authority" means Santa Ma Financing Authority, a joint powers authority duly created and lawfully
existing under the Constitution and laws of the State.
"Authority Fiscal Year" means the fiscal year of the Authority which, as of the date hereof, is the
period from July 1 to and including the following June 30.
"Authorized Denominations" means, with respect to Current Interest Bonds, $5,000 and any integral
multiple of$5,000 and, with respect to Capital Appreciation Bonds, $5,000 maturity amount, being
denominations of initial principal amount, (as set forth in the Indenture for 1994 Bonds) for Capital
Appreciation Bonds of the corresponding maturity, or any integral multiple thereof.
"Average Annual Debt Service" means the average Annual Debt Service over all Bond Years.
A-1
"Dated Date" means March 1, 1994
the date of initial issuance and delivery thereof lwith respect to 1994 94 Bonds 4 Bonds which are ch are Current nA rpreciation t Bonds and Bonds. Capitalpp
"Event of Default" shall have the meaning given to such term under the caption "Events of Default".
"Federal Securities" means any direct 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 of the United States of
America) or obligations the principal of and interest on which are unconditionally guaranteed by the United
States of America.
"Financial Newspaper" means The Wall Street Journal or The Bond Buyer or, if neither is then in
print, any other newspaper or journal printed in the English language publishing financial news and selected by
the Trustee, whose decision shall be final and conclusive.
"Indenture" means the Indenture, dated as of March 1, 1994, between the Authority and the Trustee, as
originally executed and as it may from time to time be amended or supplemented by all Supplemental Indentures
executed pursuant to the provisions thereof.
"Information Services" means Financial Information, Inc.'s "Daily Called Bond Service," 30
Montgomery Street, 10th Floor, Jersey City, New Jersey 17302, Attention: Editor; Kenny Information Services'
"Called Bond Service," 55 Broad Street, 28th Floor, New York, New York 10004; Moody's Investors Service's
"Municipal and Government," 99 Church Street, 8th Floor, New York, New York 10007, Attention; Municipal
News Reports; and Standard and Poor's Corporation's "Called Bond Record," 25 Broadway, 3rd Floor, New
York, New York 10004; or, in accordance with then current guidelines of the Securities and Exchange
Commission, to such other addresses and/or such other services providing information with respect to called
bonds, or to such services as the Authority may designate in a Certificate of the Authority delivered to the
Trustee.
"Interest Payment Date" means each January 1 and July 1, commencing January 1, 1995.
"Investment Agreement" means an investment agreement or guaranteed investment contract by and
between the Trustee and a national or state chartered bank or savings and loan institution (including the Trustee)
or other financial institution the long-term debt obligations of which are rated at the time of execution thereof
"AA" or higher by Standard & Poor's Corporation and "Aa" or higher by Moody's Investors Service. Each
Investment Agreement shall provide, among other matters, that the Trustee may immediately withdraw all funds
or other collateral that are the subject thereof upon any downgrading of such ratings and that such agreement
shall have been reviewed prior to the execution thereof by Standard &Poor's Corporation and Moody's
Investors Service. Any such Investment Agreement must be approved in writing by the Bond Insurer.
"Lease" means the Lease, dated as of March 1, 1994, entered into between the Authority, as lessor,
and the City, as lessee, as originally executed and as it may from time to time be amended or supplemented
pursuant to the provisions thereof and of the Indenture.
"Maximum Annual Debt Service" means, as of the date of calculation, the greatest total Annual Debt
Service payable in any Bond Year during the period commencing with the then current Bond Year and
terminating with the last Bond Year in which the Bonds are Outstanding.
"Net Proceeds" means any insurance proceeds or condenmation award paid with respect to the Leased
Property remaining after payment therefrom of all expenses incurred in the collection thereof.
"Opinion of Counsel" means a written opinion of counsel of recognized national standing in the field of
law relating to municipal bonds, appointed and paid by the City or the Authority.
A-3
debt obligations of the Student Loan Marketing Association; (v) obligations of the Resolution Funding
Corporation and (vi) consolidated systemwide bonds and notes of the Farm Credit System;
(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", or
"AAAm-G", or "AAm";
(e) certificates of deposit secured at all times by the following collateral: senior debt obligations
(consolidated debt obligations) of the Federal Home Loan Bank System and/or participation certificates
(mortgage-backed securities) or senior debt obligations of the Federal Home Loan Mortgage Corporation.
Certificates of deposit must have a one year or less maturity. Such certificates of deposit must be issued by
commercial banks(including the Trustee), savings and loan associations or mutual savings banks) whose short
term obligations are rated A-1+ or better by S&P;
(t) certificates of deposit, savings account, deposit accounts or money market deposits (including those
of the Trustee) which are fully insured by the Federal Deposit Insurance Corporation including BIF and SAIF;
(g) commercial paper rated, at the time of purchase, "Prime-1" by Moody's and "A-1" or better by
S&P;
(h) bonds or notes issued by any state or municipality which are rated by Moody's or S&P in one of
the two highest long-term rating categories assigned by such agencies;
(i) federal funds or bankers acceptances with a maximum term of one year of any bank with an
unsecured, uninsured and unguaranteed obligation rating of "Prime-1" or "A-3" or better by Moody's and
"A+" or "A" or better by S&P;
(j) repurchase agreements which provide for the transfer of securities from a dealer bank or securities
firm(seller/borrower)to the Trustee and the transfer of cash from the Trustee 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 Trustee in
exchange for the securities at a specified date, which satisfy the following criteria;
(i) repurchase agreements must be between the Trustee and (A) a primary dealer
on the Federal Reserve reporting dealer list which falls under the jurisdiction of the Securities
Investors Protection Corporation and which are rated "A" or better by Moody's and S&P, or
(B) a bank rated "A" or better by Moody's and S&P;
(ii) the written repurchase agreement contract must include the following: (A)
securities acceptable for transfer, which may be direct U.S. government obligations, or federal
agency obligations backed by the full faith and credit of the U.S. government; (B) the term of
the repurchase agreement may be up to 30 days; (C) the securities must be delivered to the
Authority, Trustee (if Trustee is not supplying the securities) or third party acting as agent for
the Trustee (if the Trustee is supplying the securities) before/simultaneous with payment
(perfection by possession of certificated securities); (D) the Trustee must have a perfected first
priority security interest in the collateral; (B) the collateral must be free and clear of
third-party liens and, in the case of a broker which falls under the jurisdiction of the Securities
Investors Protection Corporation, are not subject to a repurchase agreement or a reverse
repurchase agreement; (F) failure to maintain the requisite collateral percentage, after a two
day restoration period, will require the Trustee to liquidate the collateral; (G) the securities
must be valued no less frequently than once every two weeks,marked-to-market at current
market price plus accrued interest and the value of collateral must be equal to 104% of the
amount of cash transferred by the Trustee to the dealer bank or securities firm under the
repurchase agreement plus accrued interest (unless the securities used as collateral are
A-5
SUMMARY OF CERTAIN PROVISIONS OF THE ASSIGNMENT AGREEMENT
The Assignment Agreement is entered into between the Authority and the Trustee, and in it the
Authority assigns and transfers to the Trustee, for the benefit of the Owners, certain of its rights under the
Lease, including its right to receive Base Rental payments under the Lease, its right to receive proceeds of
condemnation of, and insurance on, the Leased Property, and its right to enforce payment of Base Rental
payments when due and to otherwise protect its interests and enforce its rights under the Lease in the event of a
default by the City. The Trustee accepts such assignments for the purpose of securing such payments and rights
to the Owners subject to the provisions of the Indenture.
SUMMARY OF CERTAIN PROVISIONS OF THE INDENTURE
Allocation of Revenues
The Authority has assigned all of its interest in the payments (including, without limitation, Base Rental
payments) under the Lease to the Trustee. Pursuant to the Indenture, the Trustee has established within the
Revenue Fund an Interest Account, a Principal Account, a Reserve Account and a Redemption Account. The
Trustee will deposit all Revenues in the Revenue Fund and will allocate all Revenues in the Revenue Fund as
follows:
(a) Interest Account. On or before each Interest Payment Date, the Trustee shall set
aside from the Revenue Fund and deposit in the Interest Account that amount of money which, together
with any money contained in the Interest Account, is equal to the aggregate amount of interest
becoming due and payable on all Outstanding Bonds on such Interest Payment Date. No deposit need
be made in the Interest Account if the amount contained in the Interest Account is at least equal to the
aggregate amount of interest becoming due and payable on all Outstanding Bonds on such interest
payment date. All money in the Interest Account shall be used and withdrawn by the Trustee solely for
the purpose of paying the interest on the Bonds as it shall become due and payable (including accrued
interest on any Bonds purchased or redeemed prior to maturity).
(b) Principal Account. On or before July 1 of each year, beginning on July 1, , the
Trustee shall set aside from the Revenue Fund and deposit in the Principal Account an amount of
money equal to the aggregate principal amount or Accredited Value of all Outstanding Serial Bonds
maturing on such July 1 plus the aggregate amount or Accredited Value of all sinking fund payments
required to be made with respect to the Term Bonds on such July 1. No deposit need be made in the
Principal Account if the amount contained therein is at least equal to the aggregate amount of the
principal or Accreted Value of all Outstanding Serial Bonds maturing by their terms on such July 1 plus
the aggregate principal amount or Accreted Value of all sinking fund payments required to be made on
such July 1 for all Outstanding Term Bonds.
The Trustee shall establish and maintain within the Principal Account a separate sinking
account for Term Bonds (the "Sinking Account"). On each mandatory sinking account payment date
established for such Sinking Account, the Trustee shall apply the mandatory sinking account payment
required on that date to the redemption (or payment at maturity, as the case may be) of Term Bonds
upon the notice and in the manner provided herein; provided that, at any time prior to giving such
notice of such redemption, the Trustee, upon Written Request of the Authority, may apply moneys in
such Sinking Account to the purchase of Term Bonds with respect to which such moneys were
deposited in the Sinking Account at public or private sale, as and when and at such prices (including
brokerage and other charges, but excluding accrued interest, which is payable from the Interest
Account) as shall be determined by the Authority, except that the purchase price (excluding accrued
interest) shall not exceed the redemption price that would be payable for such Bonds upon redemption
by application of such mandatory sinking account payment. If, during the twelve-month period
A-7
Prior to receiving a Certificate of Completion, on or prior to each of the following Interest
Payment Dates, the Trustee shall transfer money from the Capitalized Interest Account to the Interest
Account the amounts specified below:
Interest Payment
Date Amount
January 1, 1995 $
July 1, 1995
January 1, 1996
July 1, 1996
January 1, 1997
Notwithstanding anything herein to the contrary, amounts, if any, remaining in the Capitalized
Interest Account on the date the Trustee receives a Certificate of Completion shall be transferred first
to the Reserve Account to the extent necessary to make the amount on deposit therein equal to the
Reserve Requirement and thereafter any excess shall be transferred to the Revenue Fund. Following
the transfer of all amounts remaining in the Capitalized Interest Account, the Trustee shall close such
account.
(f) Any delinquent Base Rental payments and any proceeds of rental interruption
insurance with respect to the J eased Property shall be applied first to the Interest Account for the
immediate payment of interest payments past due and then to the Principal Account for immediate
payment of principal payments past due according to the tenor of any Bond, and then to the Reserve
Account to the extent necessary to make the amou
nt on de
posit therein equal to the Reserve
Requirement. My remaining money representing delinquent Base Rental payment and any proceeds of
rental interruption insurance shall be deposited in the Revenue Fund to be applied in the manner
provided herein.
Acquisition Fund
The moneys in the Acquisition Fund shall be disbursed from time to time to pay Acquisition Costs and,
to the extent described below, to pay Costs of Issuance. The Trustee shall disburse moneys in the Acquisition
Fund from time to time upon receipt by the Trustee of a Written Request of the Authority, containing the
information required by the Indenture. If at any time there are insufficient moneys in the Costs of Issuance
Fund to disburse moneys in accordance with a Written Request of the Authority, the Trustee shall disburse from
the Acquisition Fund such additional amounts as are necessary to comply with such Written Request.
The Trustee shall hold the moneys in the Acquisition Fund and disburse such moneys therefrom in
accordance with the Indenture. If at any time there are insufficient moneys in the Acquisition Fund to pay all
Acquisition Costs in full, the amount of such deficiency shall be deposited therein by the City, from and only to
the extent it has additional funds legally available to it for such purpose.
If, after payment by the Trustee of all Written Requests of the Authority theretofore tendered to the
Trustee under the provisions of the Indenture, and delivery to the Trustee of a Certificate of Completion, there
shall remain any balance of money in the Acquisition Fund, all money so remaining shall be transferred, first,
to the Reserve Account to the extent necessary to make the amount on deposit therein equal to the Reserve
Requirement and, second, the remainder to a separate account, which the Trustee shall establish and hold in
trust, and which shall be entitled the "Surplus Account." The moneys in the Surplus Account shall be applied
(unless some other application of such moneys would not, in the opinion of Bond Counsel adversely affect the
exclusion from gross income for federal income tax purposes of interest on the Bonds) at the direction of the
City, to one of the following purposes: (i) to the redemption of Outstanding Bonds, in which case amounts in
the Surplus Account shall be transferred to the Redemption Account, it to the construction of additional public
A-9
Issuance of Additional Bonds
The Authority may at any time issue Additional Bonds payable from the Revenues as provided in the
Indenture and secured by a pledge of the Revenues as provided in the Indenture equal to the pledge securing the
Outstanding Bonds theretofore issued thereunder, but only subject to the following specific conditions, which are
conditions precedent to the issuance of any such Additional Bonds:
(a) The Authority shall be in compliance with all agreements and covenants contained in the
Indenture.
(b) The issuance of such Additional Bonds shall have been authorized by the Authority and
shall have been provided for by Supplemental Indenture which shall specify the following:
(1) The purpose for which such Additional Bonds are to be issued;
(2) The authorized principal amount and designation of such Additional Bonds;
(3) The dated date and the maturity dates of, and the sinking fund payment dates, if any,
for such Additional Bonds; provided that (i) each maturity date shall fall upon July 1, (ii) the
final maturity date shall not exceed the remaining useful life of the leased property, (iii) all
such Additional Bonds of like maturity shall be identical in all respects, except as to number
and denomination and (iv) serial maturities for Serial Bonds or sinking fund payments for Term
Bonds, or any combination thereof, shall be established to provide for the retirement of such
Additional Bonds on or before their respective maturity dates;
(4) The interest payment dates for such Additional Bonds, which shall be Interest Payment
Dates;
(5) That such Additional Bonds shall be issued only in Authorized Denominations;
(6) The redemption premiums, if any, and the redemption terms, if any, for such
Additional Bonds;
(7) The amount, if any, to be deposited from the proceeds of sale of such Additional
Bonds in the Interest Account established pursuant to the Indenture;
(8) The amount, if any, to be deposited from the proceeds of sale of such Additional
Bonds in the Acquisition Fund established pursuant to the Indenture;
(9) The amount to be deposited from the proceeds of sale of such Additional Bonds in the
Reserve Account established pursuant to the Indenture, which amount shall be sufficient to
cause the amount on deposit in the Reserve Account to equal the Reserve Requirement upon
the issuance of such Additional Bonds;
(10) The forms of such Additional Bonds; and
(11) Such other provisions as are necessary or appropriate and not inconsistent with the
Indenture.
(c) The Lease shall have been amended so as to increase the Base Rental payable by the City
thereunder by an amount at least sufficient to pay the interest on and principal of such Additional Bonds
as the same become due.
A-11
1. Punctually pay the interest on and the principal of and redemption premiums, if any,
to become due on every Bond issued hereunder in strict conformity with the terms hereof and the
Bonds, and faithfully observe and perform all the agreements and covenants contained in the Indenture
and the Bonds;
2. Not make any pledge or place any charge or lien upon the Leased Property or any part
thereof or upon the Revenues, except as permitted by the Indenture, and will not issue any bonds, notes
or obligations payable from the Revenues or secured by a pledge or charge or lien upon the Revenues
except the Bonds;
3. Not sell, or otherwise dispose of, or cause or permit to be sold or otherwise disposed
of, any part of the Leased Property essential to its proper use or to the maintenance of Revenues, nor
enter into any agreement which impairs the use of the Leased Property or any part thereof necessary to
secure adequate Revenues for the me a.p y nt of interest on
and principal of and redemption premiums, if
any, on the Bonds, or which would otherwise impair the rights of Owners with respect to the Revenues
or the use of the IPased Property. es
Any real or personal property constituting
P tYpart
Property and the which hasLeased
become nonoperative or which is not needed for the efficient
Leased Property, or proper use ofe reof
the
p ty, which has become
if such sale will not reduce the Revenues and if the neut may t proceeds of such salee sold at not less are treea the rted as ket Revenues
and applied as provided in the Indenture;
4. Not use or permit the use of any proceeds of the Bonds or any funds of the Authority,
direct or indirectly, to acquire any securities or obligations, and shall not take any or permit to be taken
any other action or actions, which would cause any Bonds to be an "arbitrage bond" within the meaning
of Section 149(b) Code or "federally guaranteed" within the meaning of the Code and any such
applicable regulations promulgated from time to time thereunder and under Section 103(c)of the
Internal Revenue Code of 1954, as amended. The Authority shall observe and not violate the
requirements of Section 148 of the Code and any such applicable regulations. The Authority shall
comply with all requirements of Section 148 and 149(b)of the Code to the extent applicable to the
Bonds;
5. Comply with the provisions and procedures of the Tax Certificate;
6. Not use or permit the use of any proceeds of the Bonds or any funds of the Authority,
directly or indirectly, in any manner, and shall not take or omit to take any action, that would cause
any of the Bonds to be treated as the obligation not described in Section 103(a) of the Code.
7. Cause the City to, within fifteen (15) days of the receipt of any Net Proceeds, instruct
the Trustee, through a Written Request of the City, as to what portion, if any, of such proceeds are to
be used to redeem Bonds pursuant to the Indenture;
8. Keep proper books of record and account in which complete and correct entries shall
be made of all transactions relating to the receipts, disbursements, allocation and application of the
Revenues, and such books shall be available for inspection by the Trustee or the Bond Insurer, at
reasonable hours and under reasonable conditions. Not more than four months after the close of each
Authority Fiscal Year, the Authority shall furnish or caused to be furnished to the Trustee and the Bond
Insurer a complete financial statement covering receipts, disbursements, allocation and application of
Revenues for such Fiscal Year, including a profit and loss statement and balance sheet. The Authority
shall also keep or cause to be kept such other information as is required under the Tax Certificate;
9. Supply to the Trustee as soon as practicable after the beginning of each City Fiscal
Year, but in no event later than December 31 in each City Fiscal Year, a certificate of the City
certifying that the City has made adequate provision in its annual budget for such City Fiscal Year for
A-13
Default
The following are events of default under the Indenture:
(a) default in the due and punctual payment of the interest on any Bond when and as the
same shall become due and payable;
(b) default in the due and punctual payment of the principal of or redemption premium, if
any, on any Bond when and as the same shall become due and payable, whether at maturity as therein
expressed or by proceedings for redemption;
(c) default by the Authority in the performance of any of the other agreements or
covenants required herein to be performed by the Authority, and such default shall have continued for a
period of thirty (30) days after the Authority shall have been given notice in writing of such default by
the Trustee; or
(d) if the Authority shall file a petition or answer seeking arrangement or reorganization
under the federal bankruptcy laws or any other applicable law of the United States of America or any
state or if a court of competent ompetent jurisdiction shall approve
a
consent of the Authority seeking arrangement or reorganization under
federal filed with o lawsa the
g der the bankruptcy
any other applicable law of the United States of America or any state therein, or if under th provisions
of any other law for the relief or aid of debtors any court of competent jurisdiction shall assume
custody or control of the Authority or of the whole or any substantial part of its property.
Upon the happening and continuance of any Event of Default, the Trustee in its discretion may, and at
the written request of the Owners of not less than twenty-five percent (25%) in aggregate principal amount of
Bonds Outstanding shall, do the following:
(a) by mandamus, or other suit, action or proceeding at law or in equity, enforce all
rights of the Owners and require the Authority to enforce all rights of the Owners of Bonds, including
the right to require the Authority to receive and collect Revenues and to enforce its rights under the
Lease, and to require the Authority to carry out any other covenant or agreement with Owners of Bonds
and to perform its duties hereunder;
(b) bring suit upon the Bonds;
(c) by action or suit in equity enjoin any acts or things which may be unlawful or in
violation of the rights of the Owners; and
(d) as a matter of right, have a receiver or receivers appointed for the Revenues and the
issues, earnings, income, products and profits thereof, pending such proceedings, with such powers as
the court making such appointment shall confer.
Notwithstanding the above, subject to the limitations and restrictions to the right of the owners in the
Indenture, upon the happening and continuance of any Event of Default, the Owners of not less than twenty-five
percent (25%) in aggregate principal amount of the Bond Obligation shall have the right, upon providing the
Trustee security and indemnity reasonably satisfactory to it against the costs, expenses and liabilities to be
incurred therein or thereby, by an instrument in writing executed and delivered to the Trustee, to direct the
method and place of conducting all remedial proceedings taken by the Trustee under the Indenture. The Trustee
may refuse to follow any such direction that conflicts with law or the Indenture or that the Trustee determines is
prejudicial to rights of other Owners or would subject the Trustee to personal liability.
A-15
The Indenture and the rights and obligations of the Authority and of the Owners may also be amended
at any time by a Supplemental Indenture which shall become binding upon adoption without the consent of any
Owners, but only to the extent permitted by law and after receipt of an Approving Opinion Counsel and only for
any one or more of the following purposes -
(a) to make such provisions for the purpose of curing any ambiguity or of
correcting,curing or supplementing any defective provision contained in the Indenture or in regard to
questions arising under the Indenture which the Authority may deem desirable or necessary and not
inconsistent therewith and which shall not adversely affect the interests of the Owners or the Bond
Insurer;
(b) to make any other change or addition thereto which shall not materially adversely
affect the interests of the Owners or the Bond Insurer, or to surrender any right of power reserved
therein to or conferred therein on the Authority;
(c) to credit a Qualified Reserve Instrument to the Reserve Account; or
(d) to provide for the issuance of Additional Bonds.
Notwithstanding any other provision in the Indenture, any provision of the Indenture expressly
recognizing or granting rights in or to the Bond Insurer may not be amended in any manner which affects the
rights of the Bond Insurer hereunder without the prior written consent of the Bond Insurer. a copy of any
amendment of the Indenture which is consented to by the Bond Insurer shall be delivered by the Trustee to
Standard & Poor's Ratings Group as soon as practicable after the execution and delivery of such amendment.
Discharge of Liability on Bonds
If the Authority shall pay or cause to be paid or there shall otherwise be paid to the Owners of all
Outstanding Bonds the interest thereon and the principal thereof and the redemption premiums, if any, thereon
at the times and in the manner stipulated in the Indenture and in the Bonds, then the Owners of such Bonds shall
cease to be entitled to the pledge of the Revenues as provided in the Indenture, and all agreements, covenants
and other obligations of the Authority to the Owners of such Bonds thereunder shall thereupon cease, terminate
and become void and be discharged and satisfied. In such event, the Trustee shall execute and deliver to the
Authority all such instruments as may be necessary or desirable to evidence such discharge and satisfaction, and
the Trustee shall pay over or deliver to the Authority all money or securities held by it pursuant hereto which
are not required for the payment of the interest on and principal of and redemption premiums, if any, on such
Bonds, or for any remaining fees and expenses of the Trustee.
Subject to the provisions of the above paragraph, when any of the Bonds shall have been paid and if, at
the time of such payment, the Authority shall have kept, performed and observed all the covenants and promises
in such Bonds and in the Indenture required or contemplated to be kept, performed and observed by the
Authority or on its part on or prior to that time, then the Indenture shall be considered to have been discharged
in respect of such Bonds and such Bonds shall cease to be entitled to the lien of the Indenture and such lien and
all covenants, agreements and other obligations of the Authority hereunder shall cease,terminate become void
and be completely discharged as to such Bonds.
Notwithstanding the satisfaction and discharge of the Indenture or the discharge of the Indenture in
respect of any Bonds, those provisions of the Indenture relating to the maturity of the Bonds, interest payments
and dates thereof, tender and exchange provisions, exchange and transfer of Bonds, replacement of mutilated,
destroyed, lost or stolen Bonds, the safekeeping and cancellation of Bonds, nonpresentment of Bonds, and the
duties of the Trustee in connection with all of the foregoing, remain in effect and shall be binding upon the
Trustee and the Owners of the Bonds and the Trustee shall continue to be obligated to hold in trust any moneys
or investments then held by the Trustee for the payment of the principal of, redemption premium, if any, and
A-17
payment period for and in consideration of the right to the use and occupancy, and the continued quiet
enjoyment, of the Leased Property during the rental payment period for which such rental is paid.
The City shall provide written notice to the Trustee and the Authority at least five (5) Business Days
prior to any Interest Payment Date upon which the City expects to be unable to appropriate and pay the Base
Rental payment due on such Interest Payment Date, informing the Trustee and the Authority of such inability to
appropriate and pay.
If the term of the Lease shall have been extended, Base Rental payments shall continue to be due on
January 1 and July 1 in each year, and payable as described above, continuing to and including the date of
termination of the Lease, in an amount equal to the amount of Base Rental payable for the twelve-month period
commencing July 1, _ Upon such extension of the Lease, the principal and interest components of the Base
Rental shall be established so that the principal components will in the aggregate be sufficient to pay all unpaid
principal components with interest components sufficient to pay all unpaid interest components plus interest on
the extended principal components at a rate equal to the rate of interest on the principal component of the Base
Rental payable on July 1,
The City and the Authority have agreed and determined that the Base Rental payments shown in the
Base Rental Payment Schedule set forth in the Iease represent the fair rental value of the Leased Property. In
making such determination, consideration was given to the costs of the Leased Property, the fair market value
thereof, the other obligations of the parties under the Lease, the uses and purposes which may be served by the
Leased Property and the benefits therefrom which will accrue to the City, its residents and the general public.
Each installment of Base Rental and Additional Rent payable hereunder shall be paid in lawful money
of the United States of America to or upon the order of the Authority at the office of the Trustee. To the extent
permitted by law, any such installment of Base Rental or Additional Rental accruing hereunder which shall not
be paid when due shall bear interest at the rate of twelve per cent (12%) per annum, or such maximum lesser
rate of interest as may be permitted by law. All such delinquent installments of Base Rental and the interest
thereon shall be deposited in the Revenue Fund. All such delinquent installments of Additional Rental and
interest thereon shall be paid to the order of the Authority. Notwithstanding any dispute between the Authority,
or the Trustee and the City, the City shall make all rental payments when due hereunder without deduction or
offset of any kind and shall not withhold any rental payments pending the final resolution of such dispute.
Additional Rental
The City will pay to the Authority as Additional Rental such amounts in each year as are required by
the Authority for the payment in full of all costs and expenses incurred by the Authority, and the Trustee in
connection with the execution, performance or enforcement of the Lease or any assignment of the Lease, of the
Indenture and of the lease of the Leased Property to the City, including but not limited to payment of all fees,
costs and expenses and all administrative costs of the Authority and the Trustee in connection with the Leased
Property, the Project, the Lease, the Ground I eoVe, and the Indenture and all taxes, assessments and
governmental charges of any nature whatsoever levied or imposed by any governmental authority against the
Authority, the Leased Property, the Project, or the rentals and the other payments required to be made by the
City. Such Additional Rental shall be billed to the City by the Authority, or the Trustee from time to time,
together with a statement certifying that the amount so billed has been paid by the Authority, or the Trustee for
one or more of the items above described, or that such amount is then payable by the Authority, or the Trustee
for one or more of such items, and all amounts so billed shall be due and payable by the City within thirty (30)
days after receipt of each bill therefor by the City.
Insurance
The City will procure and maintain or cause to be maintained throughout the term of the Lease for the
Leased Property insurance against the following risks in the following respective amounts:
A-19
company shall not cancel the policy or modify it materially and adversely to the interests of the Authority or the
Trustee without first giving written notice thereof to the Authority and the Trustee at lest sixty (60) days in
advance of such intended cancellation or modification; provided, that the Trustee shall not be responsible for the
sufficiency of any insurance required under the Lease and shall be fully protected in accepting payment on
account of such insurance or any adjustments, compromise or settlement of any loss agreed to by it.
The City shall file a certificate with the Trustee not later than July 1 of each year certifying that the
insurance required by the Lease is in full force and effect and that the Trustee is named as a loss payee on each
insurance policy which the Lease requires to be so endorsed. The City will also deliver annually the original
copies of each insurance policy required by the Lease to the Bond Insurer within thirty (30) days of purchase or
renewal.
In the event the City shall fail to maintain the MI insurance coverage required under the Lease or shall
fail to keep the Leased Property in good repair and operating condition, the Authority may (but shall be under
no obligation to) purchase the required policies of insurance and pay the premiums on the same or may make
such repairs or replacements as are necessary and provide for payment thereof; and all amounts so advanced
therefor by the Authority shall become Additional Rental, which amounts the City agrees to pay within thirty
(30) days of a written request therefor, together with interest thereon at the maximum rate allowed by law.
The City will deliver or cause to be delivered to the Trustee on the Closing Date a
CLTA leasehold owner's policy or policies, or a commitment for such policy or policies, with respect to the
Ieaced Property with liability in the aggregate amount equal to the principalamount of the Bonds. Such policy
or policies, when issued, shall name the Trustee as the insured and shall insure the leasehold estate of the City
in the T eaced Property subject only to such exceptions as do not materially affected the City's right to the use
and occupancy of the Leased Property.
Defaults and Remedies
The following events are "events of default" under the Lease:
(i) The City shall fail to deposit with the Trustee any Base Rental payment required to be
so deposited by the close of business on the day such deposit is required under the Tease, provided,
that any Base Rental payments abated pursuant to the Lease shall not constitute an event of default;
(ii) the City shall fail to pay any item of Additional Rental as and when the same shall
become due and payable pursuant to the Lease; or
(iii) the City shall breach any other terms, covenants or conditions contained in the Lease,
and shall fail to remedy any such breach with all reasonable dispatch within a period of thirty (30) days
after written notice thereof from the Authority to the City; provided, however, that if the failure stated
in the notice cannot be corrected within such period, then the Authority shall not unreasonably withhold
its consent to an extension of such time if corrective action is instituted by the City within such period
and is diligently pursued until the default is corrected.
In addition to any default resulting from breach by the City of any agreement, condition, covenant or
term of the Lease, if(1) the City's interest in the Lease or any part thereof be assigned, sublet or transferred
without the written consent of the Authority, either voluntarily or by operation of law; or(2) the City or any
assignee shall file any petition or institute any proceedings under any act or acts, state or federal, dealing with
or relating to the subject of bankruptcy or insolvency or under any amendment of such act or acts, either as a
bankrupt or as an insolvent or as a debtor or in any similar capacity, wherein or whereby the City asks or seeks
or prays to be adjudicated a bankrupt, or is to be discharged from any or all of its debts or obligations, or
offers to its creditors to effect a composition or extension of time to pay its debts, or asks, seeks or prays for a
reorganization or to effect a plan of reorganization or for a readjustment of its debts or for any other similar
A-21
Neither the City nor the Authority shall be in default in the performance of any of its obligations under
the Lease (except for the obligation to pay Base Rental pursuant to the Lease) unless and until it shall have
failed to perform such obligation within thirty (30) days after notice by the City or the Authority, as the case
may be, to the other party properly specifying wherein it has failed to perform such obligation.
Prepayment
The City may prepay, from Net Proceeds received by it pursuant to the Lease, all or any portion of the
components of Base Rental relating to any portion of the Leased Property then unpaid, in whole on any date, or
in part on any Interest Payment Date in integral multiples of five thousand dollars ($5,000) so that the aggregate
annual amounts of principal components of Base Rental payments which shall be payable after such prepayment
date shall each be in an integral multiple of five thousand dollars ($5,000)and shall be as nearly proportional as
practicable to the aggregate annual amounts of principal components of Base Rental Payments, with respect to
the portion of the Teased Property so prepaid.
The City may prepay, from any source of available funds, all or any portion of the principal
components of Base Rental then unpaid, in whole on any date on or after July 1, 2003, or in part in integral
multiples of five thousand dollars ($5,000) on any Interest Payment Date on or after July 1, 2003, in the order
of principal payment dates determined by the City at a prepayment price equal to the sum of the principal
components prepaid plus accrued interest thereon to the date of prepayment plus a prepayment premium equal to
a percentage of the equal principal amount thereof, in accordance with the following schedule:
Prepayment Dates Prepayment Premium
July 1, 2003 to June 30, 2004 102%
July 1, 2004 to June 30, 2005 101
July 1, 2005 and thereafter 100
Before making any prepayment pursuant to the Lease, at least forty-five(45) days before the
prepayment date the City shall give written notice to the Authority and the Trustee describing such event,
specifying the order of principal payment dates and specifying the date on which the prepayment will be made,
which date shall be not less than thirty (30) nor more than sixty (60) days from the date such written notice is
given to the Authority and the Trustee.
Miscellaneous Provisions
Maintenance. Throughout the term of the Lease, as part of the consideration for rental of the Teased
Property, all improvement, repair and maintenance of the Leased Property will be the responsibility of the City,
and the City will pay for or otherwise arrange for the payment of all utility services supplied to the Leased
Property, and will pay for or otherwise arrange for payment of the cost of the repair and replacement of the
Leased Property resulting from ordinary wear and tear or want of care on the part of the City or any assignee
or sublessee thereof.
The City agrees that, at all times during the term of the Lease, it will, at its own cost and expense,
maintain, preserve and keep the IPased Property and every portion thereof in good repair, working order and
condition and that it will from time to time make or cause to be made all necessary and proper repairs,
replacements and renewals. The Authority shall have no responsibility in any of these matters or for the
making of additions or improvements to the Leased Property.
Liens. In the event the City shall at any time during the term of the Lease cause any improvements,
including, without limitation, the Project, to the Lease Property to be constructed or materials to be supplied in
or upon or attached to the Leased Property, the City shall pay or cause to be paid when due all sums of money
that may become due or purporting to be due for any labor, services, materials, supplies or equipment furnished
A-23
(5) In the event of substitution, an opinion of the City Attorney of the City to the effect that
the exceptions, if any, contained in the title insurance policy referred to in (4) above do not interfere
with the beneficial use and occupancy of the Substituted Property described in such policy by the City
for the purposes of leasing or using the Substituted Property;
(6) An opinion of nationally recognized bond counsel that the substitution or removal does not
cause the interest on Bonds to be includable in gross income of the Owners thereof for federal income
tax purposes;
(7) Evidence that the City has complied with the insurance covenants contained in the Lease
with respect to the Substituted Property; and
(8) Evidence that the City has delivered to any rating agency then rating the Bonds copies of
the certificates and appraisal described in clauses (1) and (2) above.
(9) A Certificate of the City stating that the essentiality of the Substituted Property is
comparable to the Leased Property to be substituted or released, and that except for Permitted
Encumbrances, no prior liens exist on the Substituted Property.
(10) Evidence that the City has received the written consent of the Bond Insurer to any such
Substitution or Removal, except that such written consent of the Bond Insurer is not required in the
event of the release of Leased Property pursuant to the following paragraph.
So long as 95% or more of the proceeds of the 1994 Bonds deposited in the Acquisition Fund have
been spent with respect to the Project, upon delivery of a Certificate of Completion and the issuance by the City
of a certificate of occupancy with respect to the Project, all real property and improvements, other than Parcel
A and the Project, shall be released from the leasehold hereunder and all right, title and interest in and to such
Leased Property shall vest in the City.
Quiet Enjoyment. The City and the Authority mutually covenant that the City, so long as it observes
the agreements, conditions, covenants and terms required to be observed or performed by it contained in the
Lease and is not in default under the Lease, will at all times during the term of the Lease peaceably and quietly
have, hold and enjoy the Leased Property without suit, trouble or hindrance from the Authority.
Assignment by Authority. The City and the Authority understand that certain of the rights of the
Authority, as assignee under the Lease, will be assigned to the Trustee pursuant to the Indenture, and
accordingly the City agrees to make all payments due under the Lease to the Trustee, notwithstanding any
claim, defense, setoff or counterclaim whatsoever (whether arising from a breach hereof or otherwise) that the
City may from time to time have against the Authority or the Trustee. The City agrees to execute all
documents, including notices of assignment and chattel mortgages or financing statements which may be
reasonably requested by the Authority or the Trustee to protect their interests in the Leased Property during the
term of the Lease.
Assignment by City. The Lease and the interest of the City in the I eased Property may not be
assigned or encumbered by the City except as provided in the Lease.
Title to Property. During the term of the Lease, the Authority shall have a leasehold interest in the
Leased Property, and any and all additions which comprise fixtures, repairs, replacements or modifications
thereof, except for those fixtures, repairs, replacements or modifications which are added thereto by the City
and which may be removed without damaging the Leased Property. Upon the termination or expiration of the
Lease (other than as provided in the lease), all right, title and interest in and to the Leased Property will vest in
the City. Upon any such termination or expiration, the Authority will execute such conveyances, deeds and
other documents as may be necessary to effect such vesting of record.
A-25
APPENDIX B
GENERAL PURPOSE FINANCIAL STATEMENTS
(COMBINED STATEMENTS -- OVERVIEW)
OF THE CITY OF SANTA ANA FOR THE
FISCAL YEAR ENDING NNE 30, 1993
B-1
Deloitte
Touche
Suite 600 Telephone:(714)436-7500
3 Imperial Promenade Facsimile:(714)436-7699
P.O. Box 2511
Santa Ana,California 92707-0511
INDEPENDENT AUDITORS' REPORT
The Honorable Mayor and Members of
the City Council of the City of Santa Ana,California:
We have audited the accompanying general purpose financial statements of the City of Santa Ana,
California as of June 30, 1993 and for the year then ended, listed in the foregoing table of contents.
These general purpose financial statements are the responsibility of the management of the City of
Santa Ana, California. Our responsibility is to express an opinion on these general purpose financial
statements based on our audit.
We conducted our audit in accordance with generally accepted auditing standards. Those standards
require that we plan and perform the audit to obtain reasonable assurance about whether the general
purpose financial statements are free of material misstatement. An audit includes examining,on a
test basis,evidence supporting the amounts and disclosures in the general purpose financial
statements. An audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, such general purpose financial statements present fairly, in all material respects, the
financial position of the City of Santa Ana, California at June 30, 1993 and the results of its
operations and the cash flows of its proprietary fund types for the year then ended, in conformity
with generally accepted accounting principles.
Our audit was conducted for the purpose of forming an opinion on the general purpose financial
statements taken as a whole. The combining and individual fund and account group financial
statements and schedules listed in the foregoing table of contents, which are also the responsibility
of the management of the City of Santa Ana,California, are presented for purposes of additional
analysis and are not a required part of the general purpose financial statements of the City of
Santa Ana,California. Such additional information has been subjected to the auditing procedures
applied in our audit of the general purpose financial statements and, in our opinion, is fairly stated in
all material respects when considered in relation to the general purpose financial statements taken as
a whole.
The statistical data listed in the foregoing table of contents is presented for purposes of additional
analysis and is not a required part of the general purpose financial statements of the City of
Santa Ana, California. Such additional information has not been subjected to the auditing
procedures applied in the audit of the general purpose financial statements and, accordingly, we
express no opinion on it.
1•
October 29, 1993
DebttteTouche
Tohmatsu
International
9 t
vs
General Purpose
Financial Statements
(Combined Statements-Overview)
These basic finandal statements provide a summary overview
of the finandal position of all fund types and account groups
and of the operating results of all fund types. They also serve
as an introdudion to the more detailed statements and
schedules that follow.The General Purpose Financial
Statements include:
Combined Balance Sheet-All Fund Types and Account
Groups;
Combined Statement of Revenues, Expenditures and
Changes in Fund Balances-All Governmental Fund Types;
Combined Statement of Revenues, Expenditures and
Changes in Fund Balances-Budget and Actual-General and
Spedal Revenue Funds;
Combined Statement of Revenues, Expenses and Changes
in Retained Eamings•All Proprietary Funds Types;
Combined Statement of Cash Flows•All Proprietary Fund
Types;and
Notes to the Finandal Statements.
aIIIMMIIIIIIIIIIIIIIIIIIIaMMIIIMIIIIII
toocs0on Iq
Fiduciary Totals
Proprietary Fund Types Fund Type Account Groups (Memorandum Only)
Internal axed Long—lerm
Enterprise Service Agency Assets Debt 1993 1992
S 1,820,893 S 11,315,645 S 13,890,365 S S S 95,376,182 S 111,551,061
105,000 24287,348 40,077,232 40,073.296
3,367,269 5,106,253 5.031,105
3.525,176 3,088,489
388,014 15,741,771 15.903138
4,660,115 171,440 50,653 9,046,971 6,625,921
460,6% 5,191,500 363,444 9,763,515 6,068,318
320,488 320,488
3,102,568 4,923,457
586,750 586,750 586,684
152,629 152,629 101,861
1,013.257 993,210
4,884,291 4,992,129 8,939,386
8,752,139 10,879,771
113,633,635 113,633,635 101,069,589
61576,989 8,194,827 73,771,816 67,458,760
i
16,488,224 16,488,224 21,367,915
184,392,332 184,392,332 179,451156
S 80,770,253 S 25,717,791 S 38,979,824. S 113.633,635 S 200,580,556 S 585,843,067 S 584,435,005
S 2,625.718 S 457,977 S S S S 9,541,655 S 3,147,141
533,227 21,542,223 5,136,335 27,761,866 28.916,764
899,257
899,257 985,069
170,961 323,570 9,763,515 6,068,318
9,416,274 9,490,708 9,216,794
6,094,426 6,160.856
24,095,745 24,095,745 19,669.376
644,136 677,220 671,600
7,600 7,600 3,657
1,070,009 1,070,000 1,240,000
6,950,000 6,950,000 6.425,000
2,492,927 2.492.927
200,881,556 200,880,356 200,820,071
15,211265 22,171361 38,979.824 200,880,556 299,725,475 283,324,646
113,633,635 113,633,635 101,069,559
17,367,626 2.467,699 19,835,325 19,397,589
4,672,046 2.535,202 7,207,248 15,318,704
43,515,316 (1,456,271). 42,059,045 34,932,523
79,558,501 93,990,706
20,680,310 27.337.680
3,143.526 9,063,566
65,554,958 1546,630 113,633,635 286,117,592 301,110,359
S 80,770.253 S 25.717,791 S 38.979.824 S 113.633,635 S 200,881,556 S 585,843,067 S 584,435,035
eduuibn!�r
Totals
Capital Debt (Memorandum Only)Projects Service 1993 1992
$ . 109,233 $ 28,289,518 $ 103,946,555 $ 100,930,957
3,804,354 1,995,338 1,911,262
115,150 46,796,339 40,540,463
7,158,842 6,093,801
3,342,850 1,385,252 1,951,036 2,199,547
963,141 10,279,435 I1,278,990
9,238,500 5,569,302
8,334,728 29,674,770 181,366,045 168,524,322
3,875,767 3,617,850
1,616,880 1,595,466
3,754,701 3,789,506
1,398,202 1,349,393
3,874,468 4,454,510
12,271,741 11,431,057
25,666,937 24,611,174
59,249,345 51,993,281
9,780,214 9,624,163
9,664,101 10,995,787
39,541,914 18,915,304 15,263,175
50,360,527 29,443,440
4,812,359 6,175,666 4,661,264
13,030,109 13,224,246 13,577,498
39,541,914 17,842,468 219,828,099 186,407,564
(31,207,186) 11,832,302 (38,462,054) (17,883,242)
1,894,216 14,980,784 16,875,000
(279,739) (15,060,692) (15,060,692)
(521,911) (801,650)
(532,701) (532,701) (735,478)
2,651,243 2,651,243
(4,564,654) (4,564,654)
2,836,210 (6,905,128)
41,000,108 3,194,483147,015
61,401,455 46,564,279
(17,219,464)
(18,771,956) (58,751,770) (35,045,764)
23,481,710 (16,711,993) 4,052,441 4,024,924
(7,725,476) (4,879,691) (34,409,613) (13,858,318)
74,134,501 21,367,915 130,391,952 136,754,253
7,400,000 7,496,017
$ 66,409,025 $ 16,488,224 $ 103,382,339 $ 130,391,952
CITY OF SANTA ANA
Q.� ,atao,1.
Combined Statement of Revenues, Expenses and Changes in Retained Earnings `7
All Proprietary Fund Types
For the fiscal year ended June 30, 1993
(With comparative totals for the fiscal year ended June 30, 1992)
Totals
(Memorandum Only)
Internal
Enterprise Service 1993 1992
Operating revenues:
Charges for services $ 30,154,744 $ 35,346,365 $ 65,501,109 $ 56,716,813
Miscellaneous 686,801 1,682,506 2,369,307 1,009,642
Total operating revenues 30,841,545 37,028,871 67,870,416 57,726,455
Operating expenses:
Cost of goods sold 2,427,264 2,427,264 2,009,707
Personal services 5,373,850 8,035,134 13,408,984 11,063,247
Contractual services 8,755,377 2,242,165 10,997,542 9,034,355
Materials and supplies 5,276,680 1,888,936 7,165,616 5,405,765
Other services&charges 8,900,707 1,087,182 9,987,889 7,713,412
Administration 2,367,893 2,367,893 2,284,294
Insurance 9,586,568 9,586,568 8,573,997
Provision for self-insured losses 3,301,229 3,301,229 7,839,499
Depreciation 1,511,723 2,250,179 3,761,902. 3,519,736
Total operating expenses 29,818,337 33,186,550 63,004,887 57,444,012
Operating income 1,023,208 3,842,321 4,865,529 282,443
Nonoperating revenues(expenses):
Interest income 542,702 760,280 1,302,982 2,149,475
Interest expense (477,701) (15,376) (493,077) - (793,053)
Bond discount and bond issue costs (269,636) (269,636)
Gain(loss)on disposal of assets (1,012) 95,087 94,075 (22,301)
Net nonoperating revenues(expenses) (205,647) 839,991 634,344 1,334,121
Income before operating transfers 817,561 4,682,312 5,499,873 1,616,564
Operating transfers in 90,000 90,000
Income before extraordinary loss 907,561 4,682,312 5,589,873 1,616,564
Extraordinary loss on refunding
certificates of participation (433,382) (433,382)
Net income 474,179 4,682,312 5,156,491 1,616,564
Add depreciation on feed assets
acquired by capital grant that
reduces contributed capital 828,336 520,203 1,348,539 989,980
Retained earnings-beginning of period 46,974,813 3,276,416 50,251,229 55,987,956
Equity transfers out (89,966) (7,400,000) (7,489,966) (8,343,271)
Retained earnings-end of period $ 48,187,362 $ 1,078,931 $ 49,266,293 $ 50,251,229
The notes to the financial statements are an integral part of this statement.
ppursibn is;
Page 2 of 2
Reconciliation of operating income to net cash provided by operating activities:
' Totals
Internal (Memorandum Only)
Enterprise Service 1993
1992
Operating income $ 1,023,208
$ 3,842,320 $ 4,865,528 $ 282,443
Adjustments to reconcile operating Income to net
cash provided by operating activities:
Depreciation expense 1,511,723 2,250,179 3,761,902
Change in assets and liabilities: 3,519,736
Decrease(increase)in customer accounts receivable (447,795) 51,920 395,875
Increase in accrued revenues receivable ( ) (666,685)
(1,947, 96) (1,947,862) (666,685)
Increase in due from other funds (1,196)
(1
96) (1,l96)
Decrease(increase)in inventory of supplies 66
Increase in prepaid expenses ( ) (66) 51,858
(50,768) (50,768) (39,274)
Increase(decrease)in accounts payable 1,805,081 12,741 1,817,822
Increase(decrease)in accrued liabilities (66,261)
24,328 (1,931,996) (1,907,668) 2,293,205
Increase(decrease)in due to other funds (107,715) (107,715) 107,342
Increase in customer refundable deposits 5,778 5,778
26,413
Net cash provided by operating activities $ 1,973,265 $ 4,066,615
$ 6,039,880 $ 4,673,157
Noncaah investing,capital,and financing activities:
On May 18, 1992,the Water Enterprise Fund entered into a five-year lease purchase arrangement to fmance the construction of the Bristol
Reservoir expansion Phase I, in an amount not to exceed$5,962,000 which was placed in escrow by the lender. On April 19, 1993, the
Water Enterprise Fund refinanced the original lease purchase to take advantage of lower interest rates in the remaining four years. As of
June 30, 1993, releases to the contractor by the escrow agent totaled$3,160,722, which is the amount recognized as lease payable at the
close of the fiscal year. In the same period the Water Enterprise Fund has paid $1,057,128 applicable to the principal. In November 1992,
the City authorized a five-year lease purchase arrangement for the acquisition of an automated utility billing software in an amount not to
exceed$626,118. The Water Enterprise Fund is responsible for 80% of the cost, and its 80% share of the down payment was$111,562.
The Building Maintenance Internal Service Fund retired equipment with a book value of$9,732 and related accumulated depreciation of
$9,279, resulting in a noncash loss of$454.
The notes to the financial statements are an integral part of this statement.
NOTES TO THE FINANCIAL, STATEMENTS
NNE 30, 1993
The Notes To The Financial Statements include a summary of significant
accounting policies and other notes considered essential to fully disclose
and fairly present the transactions and financial position of the City.
Note I — Summary of Significant Accounting Policies
Note 2 — Stewardship, Compliance and Accountability
Note 3 — Detailed Notes on All Funds and Account Groups
Note 4 — Segment Information
Note 5 — Related Party Transactions.
Note 6 — Summary Disclosure of Significant Contingencies
Note 7 — Significant Effects of Subsequent Events
Note 8 — Miscellaneous Notes to the Financial Statements
NOTES TO THE FINANCIAL STATEMENTS (Continued)
geographic boundaries of the City of Santa Ana. Each of the above related agencies has an independently-
elected board of directors, and maintains its own records and accounts. Since these agencies are substantially
self-governing and are not financially dependent on the City, financial statements of these agencies are not
included within the scope of this financial report.
Accounting and Reporting Policies. For reporting purposes, the City has adopted all effective Statements of
the Governmental Accounting Standards Board (GASB), one of which established the authoritative status of
the pronouncements of its predecessor - the National Council on Governmental Accounting (NCGA) and of
the accounting and financial reporting guidance contained in the Industry Audit Guide, Audits of State and
Local Governmental Units, issued by the American Institute of Certified Public Accountants. Through
widespread acceptance, pronouncements of the GASB, the NCGA, and the Industry Audit Guide have long
been acknowledged as the primary authoritative statements of Generally Accepted Accounting Principles
(GAAP) applicable to state and local governments.
Interagency Current Receivables. Pavables and Long-Term Debt. For reporting purposes, the City considers
interagency long-term loans to be operating transfers. Accordingly, "loans receivable" are classified as
"transfers out"while "loans payable" are classified as "transfers in". Interest on such loans are recorded only
when due. Loan amounts, including interest, are noted in the footnotes to this report. When these loans are
repaid, such transactions are also recorded as "transfers out" (typically from the Debt Service Fund) and
"transfers in,"and the loan balance is reduced in the footnotes. Interagency current receivables and payables
are classified as accounts "due from" and "due to" other funds. (See Note 3B.)
Total Columns. Total columns on the combined statements are captioned "Memorandum Only" to indicate
that they are presented only to facilitate financial analysis. Data in these columns do not present consolidated
financial information.
1B. Basis of Presentation - Fund Accounting
The accounts of the City of Santa Ana are organized on the basis of funds and account groups each of which
is considered a separate accounting entity with a self-balancing set of accounts. The types of funds and
account groups used are:
Governmental Fund Types
General Fund. The General Fund is used to account for all financial resources except those required to be
accounted for in another fund.
Special Revenue Funds. The Special Revenue Funds are used to account for the pp-west's of special revenue
sources that are restricted by law or administrative action to expenditures for specific purposes. The General
Fund of the Housing Authority is included among these funds.
NOTES TO THE FINANCIAL STATEMENTS (Continued)
1C. Basis of Accounting
Governmental Fund Types are accounted for using the modified accrual basis of accounting. Revenues are
recognized when they become measurable and available to finance expenditures of the current period. Accrued
revenues include property taxes, sales taxes, utility users tax, and transit occupancy tax received within sixty
days after the year end, and earnings on investments. (See Note 3A also.) Grant funds earned but not
received are recorded as receivables and revenues, and grant funds received before the revenue recognition
criteria have been met are reported as deferred revenues. Expenditures are recorded when the related fund
liability is incurred except that unmatured principal and interest on general long-term debt are recorded when
due.
The accrual basis of accounting is followed for the Proprietary Fund Types. Revenues are recognized when
they are earned and expenses are recognized when the liability is incurred. Unbilled water utility, refuse
collection, sanitation, and water utility user tax revenues are accrued at year end.
Fiduciary Fund Types are accounted for according to the nature of the fund. The City has only Agency Funds
which are purely custodial in nature (assets equal liabilities) and thus do not involve measurement of results
of operations. Agency assets and liabilities are accounted for on a modified accrual basis.
ID. Measurement Focus
All Governmental Fund Types are accounted for on a spending or"financial flow" measurement focus. This
means that(generally) only current assets and current liabilities are included on their balance sheets, with the
exception that land inventory held for resale is reported on their balance sheets offset by fund balance reserve
accounts. Statements of revenues, expenditures, and changes in fund balances for Governmental Fund Types
generally present increases (revenues and other financing sources) and decreases (expenditures and other
financing uses) in net current assets.
All Proprietary Fund Types are accounted for on a cost of services or "capital maintenance" measurement
focus. This means that all assets and liabilities (whether current or non-current) associated with the activity
are included on the balance sheets. Their reported fund equity(total net assets) is segregated into contributed
capital and retained earnings. Proprietary Fund Types operating statements present increases (revenues) and
decreases (expenses) in total net assets. Depreciation of assets attributable to contributions for that purpose
is treated as a reduction of contributed capital, rather than a charge against retained earnings, if the fixed
assets were acquired from grants,entitlements or shared revenues externally restricted for capital acquisition.
1E. General Budget Policies. Encumbrances, and Budgetary Basis of Accounting
The City and its component units' fiscal year begins on July 1 of each year and ends the thirtieth day of June
the following year. On or before the fifteenth of June of each year, the City Manager submits to the City
NOTES TO THE FINANCIAL STATEMENTS (Continued)
equity in the investment pool. Investment earnings are prorated to participating funds monthly on an average
equity basis. Cash and investments held by the fiscal agent for the City's Deferred Compensation fund are
recorded at market value. Investments held in the Treasurer's pool or by other fiscal agents are recorded at
cost. Losses are not recorded when market value declines below cost,since declines are considered temporary
and the City intends to hold the investments until maturity.
Inventories. Inventories of materials and supplies are valued at average cost.
Land Held for Resale. Land held for resale is carried at the lower of cost or market.
General Fixed Assets. General fixed assets are recorded as expenditures of the various City funds at the time
of purchase and are subsequently capitalized in the General Fixed Assets Account Group. Such assets include
land, buildings,building improvements, furniture and equipment. The costs of roads, streets and sidewalks,
bridges, curbs and gutters, drainage systems, lighting systems and similar assets are not capitalized. No
depreciation is provided on general fixed assets.
All fixed assets are valued at historical cost or estimated historical cost if actual historical cost is not available.
Donated fixed assets are valued at their estimated fair market value on the date donated. (See Note 3E.)
Proprietary Fund Types Fixed Assets. Fixed assets purchased for the Water and Regional Transportation
Center Enterprise Funds are capitalized at cost, while contributed assets are recorded
at fair market value at time received. Depreciation has been provided on a straight-line basis over the
following useful lives:
Buildings and Improvements 40-50 years
Water Meters 30 years
Water Mains and Hydrants 40-75 years
Other Equipment 5-15 years
The Refuse Collection and Sanitation Enterprise Funds have only a nominal amount of office equipment which
is being depreciated on a straight-line basis over 3 to 10 years. Machinery and equipment in the Internal
Service Funds are being depreciated over 3 to 20 years on a straight-line basis. (See Note 3F.)
Claims and Judgments. When it is probable that a claim liability has been incurred at year end and the
amount of the loss can be reasonably estimated, the City records in the Internal Service Funds the estimated
loss net of any insurance coverage, under its self-insurance program. (See Note 8D.) The Redevelopment
Agency is a defendant in various litigations arising from eminent domain proceedings. An estimated amount
of $150,000 has been recorded in the General Long-Term Debt Account Group. In the opinion of
Redevelopment Agency management, the ultimate outcome of these litigations will not have a material adverse
effect on the financial position of the Redevelopment Agency or of the City. (See Note 3G).
Long-Term I aces. Capitalized leases are recorded as liabilities in the Long-Term Debt Account Group and
in the Proprietary Fund Types at the present value of the remaining minimum lease payments. The related
fixed assets are recorded in the General Fixed Assets Account Group and in the Proprietary Fund Type. (See
Note 3G). For leases accounted for under the operating method (e.g., vehicle lease arrangements), lease
charges are expended/expensed as incurred. At June 30, 1993, the City has no non-cancellable operating lease
commitments.
Compensated Absences. In Governmental Fund Types, compensated absences (unpaid vacation and sick
leave) are recorded as expenditures in the year paid, as it is the City's policy to liquidate any unpaid vacation
or sick leave at June 30 from future resources rather than currently available expendable resources.
NOTES TO THE FINANCIAL STATEMENTS (Continued)
2B. Fund Deficits. At June 30, 1993, the Communications Services, Engineering Services and Self-Insurance
Internal Service Funds had retained earnings deficits of$1,429, $106,084 and$8,339,524 respectively, The
fund deficit in the Communications Services and Engineering Services Funds will be recovered in the next
fiscal year through increased service charges. The fund deficit in the Self-Insurance Fund is primarily
attributable to shortfalls in charges made to the City's operating departments. Management implemented a
12.5% increase in charges to the City's operating departments to reduce this shortfall during fiscal year 92-93.
Working capital iii the Self-Insurance Fund was sufficient to cover 70% of the present value of outstanding
losses at June 30, 1993. The City continues to generate sufficient annual revenue in the fund to cover
insurance premiums, benefit payments, and paid losses for the given fiscal year.
2C. Budgetary Compliance. All expenditures were within the legally prescribed limits as approved by the City
Council.
Note 3. DETAILED NOTES ON ALL FUNDS AND ACCOUNT GROUPS
3A. Pronerty Tax Calendar. Property taxes are assessed and collected each fiscal year based on the following
property tax calendar.
Lien date March 1
Levy date March 1
Due Dates November 1 - 1st Installment
March 1 - 2nd Installment
Collection dates December 10 - 1st Installment
April 10 - 2nd Installment
A State constitutional amendment Proposition 13 (now Article XIIIA to the Constitution) effective July 1,
1978, altered the method of property tax asses ment. This amendment essentially reduces the total property
tax levy to one percent of full cash value on the 1975-76 assessment, adjusted upward the lesser of the
increase in CPI or per capita income indices or two percent compounded for each succeeding year, except that
property changing ownership subsequent to July 1, 1978 and improvements are reassessed at the time of the
exchange or improvement and adjusted each year thereafter at the appropriate rate.
As previously explained in Note 1C, property taxes are reported on a modified accrual basis. Accordingly,
they are recognized as levied provided they meet this accrual criteria. Property taxes not meeting the accrual
criteria are deferred until received or otherwise meet the criteria. At June 30, 1993, $3,145,893 is included
under the caption "Taxes Receivable" of which $892,615 was accrued in revenue and $2,253,278 was
deferred.
NOTES TO THE FINANCIAL STATEMENTS (Continued)
Interfund Transfers are reconciled as follows:
Transfers Transfers
In Out
General Fund $ 16,913,664 $ 10,670,941
Special Revenue Funds - 293,200 12,089,409
Capital Project Funds 41,000,108 17,219,464
Debt Service Funds 3,194,483 18,771,956
Enterprise Funds 90,000
Agency Funds 2,739,685
Total $ 61,491,455 S 6I,491,455
Equity transfers are reconciled as follows:
Equity Equity
Transfer In Transfer Out
General Fund $ 7,400,000 $
Internal Service Fund 7,400,0
Total $ 7,400,000 S 7,400,000
The equity transfer out from the Water Utility Fund of$89,966 was recorded as Contributed Capital
in the Equipment Replacement Fund.
3C. Interagency Lone-Term Debt. As explained in Note 1A, the long-term debt between the City
and its component units has been eliminated in this report. During the year the Redevelopment
Agency has repaid $8,778,107 principal and $1,948,857 interest to the City and the City has
advanced $19,837,527 to the Redevelopment Agency. Interest at 6.5953 percent totalling
$3,745,446 was added to the amount owing for the year. At June 30, 1993, interagency loans
(including interest)were as follows:
Loans Loans
Receivable Payable
City of Santa Ana $ 73,967,738 S
Redevelopment Agency:
Downtown Project 38,345,920
Intercity Project 19,409,017
North Harbor Project 2,710,206
South Harbor Project 1,345,952
South Main Project 1,032,637
Bristol Corridor 11,124,006
Total $ 73,967,738 S 73,967,738
The debt of the Redevelopment Agency owing the City has been subordinated to all other
Redevelopment Agency long-term debt and is payable principally from tax increment
revenues to be generated within the project areas.
NOTES TO THE FINANCIAL STATEMENTS (Continued)
The Agreement specifies a term of existence of 50 years; however, the Agreement cannot be terminated until
all revenue bonds issued and interest thereon have been paid oh full or adequately provided for. Upon
termination of the Agreement, title to all properties of the Authority shall be conveyed to the State, the County
and the City, as applicable.
On September 23, 1988, the Big Independent Cities Excess Pool (BICEP) was created under a Joint Powers
Agreement between the cities of Huntington Beach, Oxnard, Pomona, San Bernardino and Santa Ana with
participating interests of 21.43%, 15.62%, 13.59%, 19.09% and 30.27% respectively. The purpose of this
agreement is to jointly develop and fund excess insurance for comprehensive liability, the purchase of
reinsurance, and the provision of nerecsary administrative services. Such administrative services may include,
but shall not be limited to,risk management consulting,loss prevention and control,centralized loss reporting,
actuarial consulting, claims adjusting and legal defense service. BICEP is governed by a five-member Board
of Directors representing each member city, appointed by the member's City Council and serving at the
pleasure of such City Council. The City of Santa Ana does not have oversight responsibility over BICEP.
Summary unaudited financial information of BICEP for the year ended June 30, 1993, is as follows:
City of
Total Santa Ma's
Description Joint Venture Share
Total Assets $ 17,988,490 $ 5,445,116
Total Liabilities 17,988,490 5,445,116
Total Revenues 4,010,361 1,216,936
Total Expenditures 4,010,361 1,213,936
This agreement may be terminated at any time provided that no bonds or other obligations of BICEP are
outstanding. Upon termination of this Agreement all assets of BICEP shall(after payment of all unpaid costs,
expenses and charges incurred under this Agreement), be distributed among the parties in accordance with
the respective contributions of each.
8B. Deferred Compensation Plan. The City offers its employees a deferred compensation plan created in
accordance with Internal Revenue Code Section 457. The plan, available to all full-time City employees,
permits them to defer a portion of their salary until future years.
Also, in compliance with Section 3121(6)(7)(F)of the Internal Revenue Code, the City has set-up a deferred
compensation plan for all its part-time employees. Each eligible employee shall contribute 3.75% of his
earned compensation and the City contributes an equal amount to the plan. Contributions made on behalf of
the participant for the taxable year shall not exceed the lesser of$7,500 or 33-1/2% of the participant's
compensation for that taxable year.
The deferred compensation is not available to employees until termination, retirement, death,or unforeseeable
emergency.
All amounts of compensation deferred under the plan, all property and rights purchased with those amounts,
and all income attributable to those amounts, property, or rights are until paid or made available to the
employee or other beneficiary, solely the property and right of the City, without being restricted to the
provisions of benefits under the plan, subject only to the claim of the City's general creditors. Participants'
NOTES TO THE FINANCIAL STATEMENTS (Continued)
determine employer•eontributions. The PBO is the portion of the actuarial present value of projected pension
benefits (including projected future salary increases) estimated to be payable in the future as a result of
employees' service to date.
The pension benefit obligation was computed as part of an actuarial valuation performed as of June 30, 1992.
Significant assumptions used in the valuation include (1) a rate of return on the investment of present and
future assets of 8.75% a year compounded annually, (2)projected salary increases of 4.50% compounded
annually attributable to inflation, (3) additional salary increases of 0.75% attributable to across the board
salary increases, (4) 1.75% and 2% a year for the miscellaneous and safety categories respectively,
attributable to merit raises, and (5) no post retirement benefit increases.
The total unfunded pension benefit obligation applicable to the employees was$19,229,680 at June 30, 1992,
as follows:
Pension benefit obligation:
Retirees and beneficiaries currently receiving benefits and
terminated employees not yet receiving benefits. $ 113,639,723
Current employees:
Accumulated employee contributions including
allocated investment earnings 72,475,710
Employer-finance vested 119,796,919
Employer-finance non-vested 4.486.503
Total pension benefit obligation 310,398,855
Net assets available for benefits, at cost
(market value: $328,438,829) 291.169.175
Unfunded pension benefit obligation $ 19,229,680
From June 30, 1991, no changes were made on benefit provisions and actuarial assumptions.
(D) Actuarially Determined Contribution Requirements and Contribution made: PERS uses the Entry Age
Normal Actuarial Cost Method which is a projected benefit cost method. That is,it takes into account those
benefits that are expected to be earned in the future as well as those already accrued.
According to this method, the normal cost for an employee pension benefit obligation is the level amount
which would fund the projected benefit if it were paid annually from date of employment until retirement.
PERS uses a modification of Entry Age Cost Method in which the employer's total normal cost is expressed
as a level percentage of payroll. PERS also uses the level percentage of payroll method to amortize any
unfunded actuarial liabilities. The amortization period of the unfunded actuarial liability ends by June 30,
2000.
The significant actuarial assumptions used to compute the actuarially determined contribution requirement are
the same as those used to compute the pension benefit obligation, as previously described.
NOTES TO THE FINANCIAL STATEMENTS (Continued)
8D. Self-Insurance Program. In July, 1975, the City elected to operate a self-insurance program: (1) for any
liability to City employees pursuant to the Workers' Compensation Laws of the State of California, (2) for
employee's group dental insurance, and (3)in July, 1976, for liabilities which may arise out of claims filed
against the City for datnages caused by City employees, equipment, or property. The City has entered into
contract with Pacific Coast Administrators who supervise and administer the self-funded dental program and
act as representatives of the City. The City's Liability and Workers' Compensation programs are self-
administered (staffed by City employees). City claims staff estimate total losses for each claim and determine
reserve requirements for the Liability and Workers' Compensation claims programs. This Program was
audited in June 1993 by an independent claims auditor.
The risks self-insured under these programs are: workers'compensation and employer's liability losses under
the state law up to $350,000 each occurrence. From July 1, 1986 to October 1, 1988, the City was self-
insured for all liability claims. On September 23, 1988, Santa Ana became one of five forming members of
the Big Independent Cities Excess Pool(BICEP), a joint powers authority. BICEP's excess liability program
began on October 1, 1988. Each BICEP city assumes the first$1 million of each occurrence. The BICEP
cities risk share amounts between$1 million and$2 million and from$20 million to$25 million. Reinsurance
covers amounts from$2 million to$20 million. Also,under the employee group dental self-funded program,
the City pays $1,000 limit per participant. The City also carries paid insurance to cover the claims and pay
benefits to employees participating in the "HMO"plans.
At June 30, 1993 accrued self-insured liabilities for workers' compensation, general liability and employee
health claims were $12,973,524, $7,636,145 and $100,000 respectively. These accruals meet GAAP loss
contingency criteria.
8E. Retirement Health Benefits. Article XIV,Section 6,of the Memorandum of Understanding between the City
and the Santa Ana Firemen's Benevolent Association (FBA) for the period July 1, 1992 through June 30,
1994 provides that the City shall administer a "flat rate' retiree Health Insurance Premium Reduction
Program, available to retirees of the FBA. Employees who are members of the FBA retiring on or after
July 1, 1989 are eligible to participate regardless of whether or not they are participating in a City sponsored
medical plan on their date of retirement. If the retiree does not elect coverage on their date of retirement
they will not be eligible for coverage at any other time in the future. In addition, to be eligible, an employee
must have at least ten years of service on the date they retire. This requirement will be waived for any
employee retiring due to disability.
The City's monthly contribution is based on a flat dollar amount per year of service. Beginning in 1989, the
flat dollar levels were$2.20 for single coverage and$5.50 for family coverage. These amounts increase by
5% each year. When the employee dies, the City's contribution ceases regardless of whether or not the
dependents are still living. Currently, their are eleven retirees participating in the program.
The program is advance funded and the City has made available in the fund beginning October 1, 1990 which
was the start of the health insurance benefit year, an amount equal to one percent of the unit's current salary
base. Balance available in the fund through June 30, 1993 totalled $314,090. This is reported as part of our
Self-Insurance Internal Service Fund.
NOTES TO THE FINANCIAL STATEMENTS (Continued)
The bank balance by type of credit risk and in total, and the carrying amount of pooled deposits are
summarized as followso-
r 2 3
Bank Balance Carrying Amount
Pooled deposits:
Demand deposits $ 1,767,809 $ $ $ 1,767,809 $ (1,705,872)
Cash on hand
Totalpooled deposits270,079
and cash on hand $ (1,435,793)
Pooled Investments/Credit Risk. Statutes authorize the City to invest in obligations of the U.S. Treasury
agencies and instrumentalities; commercial paper rated A-1 by Standard and Poor's Corporation or P-I
by Moody's Commercial Paper Record; bankers' acceptances; repurchase agreements; negotiable certificates
of deposits; medium term corporate notes of the highest quality; the State Treasurer's Pool; and the Orange
County Investment Pool.
The investments that are presented by specific identifiable investment securities are classified as to credit risk
by three categories as follows:
Category I: Insured or registered, or securities held by the City or by its agent
in the City's name
Category 2: Uninsured and unregistered with securities held by the counterparty's
trust department or agent in the City's name
Category 3: Uninsured and unregistered with securities held by the counterparty,
or by its trust department or agent but not in the City's name
Credit risk, carrying amount, and market value of pooled deposits and investments are summarized as follows
2 3 Guying Amount Market value
Pooled investments:
Bankers' Acceptances $ 986,087 $ $ $ 986,087 $ 986,087
Securities of
government agencies 11,731,487 10,715,778 22,447,265 22,420,912
U.S.Government
Securities 2,003,281 5,463,957 7,467,238 7,907,687
Medium term
corporate notes 498,610
Commercial paper 498,610 498,610
City of Santa Ma water
revenue bonds 48,245 48,245 55,000
Total pooled investments $ 15,267,710 $ 16,179,735 $ 31,447,445 31,868,296
Deferred compensation deposits 24,095,745 24,095,745
Mutual Funds 132,951 132,951
Local Agency Investment Fund 30,000,000 30,000,000
Orange County Investment Pool 56,097,357 56,097,357
Total pooled investments $ 141,773,498 $ 142,194.349
APPENDIX C
PROPOSED FORM OF OPINION OF BOND COUNSEL
APPENDIX C
PROPOSED FORM OF OPINION OF BOND COUNSEL
Upon issuance of the Bonds, Orrick, Herrington & Sutcliffe, Los Angeles, California, Bond Counsel,
proposes to render its final approving opinion with respect to the Bonds in substantially the following form:
[Date of Closing]
Santa Ana Financing Authority
20 Civic Center Plaza
Santa Ana, California 92710
Santa Ana Financing Authority Police Administration and
Holding Facility Lease Revenue Bonds. Series 1994A
(Final Opinion)
Ladies and Gentlemen:
We have acted as bond counsel in connection with the issuance by the Santa Ana
Financing Authority (the "Issuer") of $ aggregate principal amount of Santa Ana
Financing Authority Police Administration and Holding Facility Lease Revenue Bonds,Series 1994A(the
"Bonds"), issued pursuant to the provisions of the Marks-Roos Local Bond Pooling Act of 1985
(constituting Article 4 of Division 7 of Tide 1 of the California Government Code) and an Indenture,
dated as of March 1, 1994 (the "Indenture"), between the Issuer and Meridian Trust Company of
California, as trustee (the "Trustee"). The Bonds are issued for the purpose of enabling the Issuer to
finance certain capital improvements. Capitalized terms not otherwise defined herein shall have the
meanings ascribed thereto in the Indenture.
In such connection, we have reviewed the Indenture, the Tax Certificate of the Issuer and
the City of Santa Ana (the "City") dated the date hereof (the "Tax Certificate"), certifications of the
Issuer, the Trustee,the City, and others,opinions of counsel to the Issuer,the City, the Trustee and such
other documents, opinions and matters to the extent we deemed necessary to render the opinions set forth
herein.
Certain agreements, requirements and procedures contained or referred to in the
Indenture, the Tax Certificate and other relevant documents may be changed, and certain actions
(including, without limitation,defeasance of the Bonds)may be taken or omitted under the circumstances
and subject to the terms and conditions set forth in such documents. No opinion is expressed herein as
to any Bond or the interest thereon if any such change occurs or action is taken or omitted to be taken
upon the advice or approval of counsel other than ourselves.
The opinions expressed herein are based on an analysis of existing laws, regulations,
rulings and court decisions and cover certain matters not directly addressed by such authorities. Such
opinions may be affected by actions taken or omitted to be taken or events occurring after the date hereof.
We have not undertaken to determine, or to inform any person, whether any such actions or events are
taken or do occur. We have assumed the genuineness of all documents and signatures presented to us.
C-1
Santa Ana Financing Authority
[Date of Closing]
Page 3
current earnings when calculating corporate alternative minimum taxable income. We express no opinion
regarding other tax consequences related to the ownership or disposition of, or the accrual or receipt of
interest on, the Bonds.
Faithfully yours,
ORRICK, HERRINGTON & SUTCLIFFE
per
L11-68714.1
APPENDIX D
DTC AND BOOK-ENTRY ONLY SYSTEM
APPENDIX D
DTC AND BOOK-ENTRY ONLY SYSTEM
The information in this appendix concerning DTC and DTC's book-entry system has been obtained from
DTC, and the Authority, the City and the Trustee take no responsibility for the accuracy thereof
DTC will act as securities depository for the Bonds. The Bonds will be executed and delivered as
fully-registered securities registered in the name of Cede& Co. (DTC's partnership nominee). One fully-
registered bond will be executed and delivered for each year in which the Bonds mature in denominations equal
to the aggregate principal amount of the Bonds maturing in that year, and will be deposited with DTC. So long
as Cede & Co. is the registered owner of the Bonds, as nominee of DTC, references herein to the owners of the
Bonds, shall mean Cede& Co. and shall not mean the actual purchasers of the Bonds (the "Beneficial
Owners").
DTC is a limited-purpose trust company organized under the New York Banking Law, a "banking
organization" within the meaning of the New York Banking Law, a member of the Federal Reserve System, a
"clearing corporation" within the meaning of the New York Uniform Commercial Code and a "clearing agency"
registered pursuant to the provisions of Section 17A of the Securities Exchange Act of 1934, as amended. DTC
holds securities that its participants ("DTC Participants") deposit with DTC. DTC also facilitates the settlement
among DTC Participants of securities transactions, such as transfers and pledges, in deposited securities through
electronic computerized book-entry changes in DTC Participants' accounts, thereby eliminating the need for
physical movement of securities certificates. DTC Direct Participants include securities brokers and dealers,
banks, trust companies, clearing corporations, and certain other organizations. DTC is owned by a number of
its DTC Direct Participants and by the New York Stock Exchange, Inc., the American Stock Exchange, Inc.,
and the National Association of Securities Dealers, Inc. Access to the DTC system is also available to others
such as securities brokers and dealers, banks and trust companies that clear through or maintain a custodial
relationship with a DTC Direct Participant, either directly or indirectly ("DTC Indirect Participants"). The
Rules applicable to DTC and the DTC Participants are on file with the Securities and Exchange Commission.
To facilitate subsequent transfers, all Bonds deposited by DTC Participants with DTC are registered in
the name of DTC's partnership nominee, Cede & Co. The deposit of Bonds with DTC and their registration in
the name of Cede & Co. effect no 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 DTC Direct Participants to
whose accounts such Bonds are credited, which may or may not be the Beneficial Owners. The DTC
Participants will remain responsible for keeping account of their holdings on behalf of their customers.
Purchases of Bonds under the DTC system must be made by or through DTC Direct Participants,
which will receive a credit for the Bonds on DTC's records. The ownership interest of each Beneficial Owner
is in turn to be recorded on the DTC Direct and DTC Indirect Participants' records. Beneficial Owners will not
receive written confirmation from DTC of their purchase, but Beneficial Owners are expected to receive written
confirmations providing details of the transaction, as well as periodic statements of their holdings, from the
DTC Direct or DTC 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 DTC
Participants acting on behalf of Beneficial Owners. Beneficial Owners will not receive certificates representing
their ownership interests in the Bonds, except in the event that use of the book-entry system for the Bonds is
discontinued.
Conveyance of notices and other communications by DTC to DTC Direct Participants, by DTC Direct
Participants to DTC Indirect Participants and by DTC Direct Participants and DTC Indirect Participants to the
Beneficial Owners will be governed by arrangements among them, subject to any statutory and regulatory
requirements as may be in effect from time to time. •
D-1
AFFECT THE VALIDITY OR SUFFICIENCY OF THE PROCEEDINGS RELATING TO THE
PREPAYMENT OF THE BONDS CALLED FOR REDEMPTION OR OF ANY OTHER ACTION
PREMISED ON SUCH NOTICE.
D-3