cdiacdocs.sto.ca.govcdiacdocs.sto.ca.gov/2017-2938.pdf · NEW ISSUE-BOOK-ENTRY RATINGS: Insured: S&...

NEW ISSUE-BOOK-ENTRY RATINGS: Insured: S& P: "AA"

Underlying: S& P: "A-t'' See"Ratings" herein

In the opinion of Norton Rose Fulbright US LLP, under existing law, interest on the Bonds is exerrpt from personal income taxes of the State of California. The Successor Agency has taken no action to cause, and does not intend, interest on the Bonds to be excluded pursuant to Section 103(a) of the Internal Revenue Code of 1986 from the gross incon-e of the OM1ers thereof for federal income tax purposes. See "TAX MATTERS" herein.

Dated: Delivery Date

$4,<ul,(XX) Successcr AgencytotheGuadalupe Canmunity Redevelopment Agency

Tax Allocation Refunding Bonds, Series 2017 (Taxable)

Due: August 1, as sho.vn on the inside co;er

The $4,900,000aggregate principal amount of Successor Agency to the Guadalupe Community Reda,elopmentAgency Tax Allocation Refunding Bonds, Series 2017 (Taxable) (the "Bonds'') are being issued 0y the Successor Agency to the Guadalupe Community Reda,elopment Agency (the "Successor Agency") pursuant to an Indenture, dated as of No;ember 1, 2017 (the "Indenture"), 0y and between the Successor Agency and U.S. Bank National Association, as trustee (the "Trustee'').

The Bonds are being issued to (i) refund, on a current basis, the $6,455,000 Guadalupe Reda,elopment Agency Guadalupe Redevelopment Project Tax Allocation Refunding Bonds, Series 2003 (the"Refunded Bonds"), currently outstanding in the aggregate principal amount of $4,840,000; (ii) pay the premium for a surety for the Reserve Fund for the Bonds; (iii) pay the premium for a municipal bond insurance policy for the Bonds; and (iv) pay costs of issuance of the Bonds. See "ESTIMATED SOURCES AND USES OF FUNDS" and"PLAN OF REFUNDING" herein.

The Bonds will be delivered as fully registered bonds, registered in the name of Cede & Co. as norrinee of The Depository Trust Company, NEW York, NEW York ("DTC"), and will be available to ultirrate purchasers ("Beneficial Owners") in the denorri nation of $5,000 or any integral multiple thereof, underthe book-€ntry system rrai ntai ned 0y DTC. Beneficial Owners wi II not be entitled to receive delivery of bonds representing their o.vnership interest in the Bonds. Principal on the Bonds is due annually on August 1 of each year, commencing August 1, 2018, and interest on the Bonds is due serriannually on February 1 and August 1 of each year, commencing February 1, 2018, payable o, the Trustee, to DTC for subsequent disbursement to DTC participants, so long as DTC or its norrinee rerrains the registered o.vner of the Bonds. See 'THE BONDS-Book-Entry System" herein.

The Bonds are subject to redemption prior to rraturity as described herein. See 'THE BONDS-Rederrption" herein.

The Bonds shall be and are special obligations of the Successor Agency and are secured by an irrevocable pledge of, and are payable as to principal, interest and premium, if any, from Pledged Tax Ra,enues, and other funds as pro;ided in the Indenture. The Bonds, interest and premium, if any, thereon are not a debt of thee ity of Guadalupe (the"City"), the County of Santa Barbara (the "County"), the State of California (the "State") or any of its political subdivisions (except the Successor Agency), and none of the City, the County, the State nor any of its political subdivisions (except the Successor Agency) is liable thereon.

The scheduled payment of principal of and interest on the Bonds when due will be guaranteed under an insurance policy to be issued concurrently with the delivery of the Bonds 0y ASSURED GUARANTY MUNICIPAL CORP. See "BOND INSURANCE" herein.

This CO/er page contains certain information for general reference only. It is not a summary of the security or terms of this issue. Investors must read this entire Official Statement to obtain information essential to making an informed investment decision with respect to the Bonds.

The Bonds are offered, when, as and if issued and accepted o, the Underwriter, subject to the appro;al of validity o, Norton Rose Fulbright US LLP, Los Angeles, California, Bond Counsel to the Successor Agency. Certain legal rratters will be passed on for the Successor Agency 0y Norton Rose Fulbright US LLP, Los Angeles, California, as Disclosure Counsel and o, Casso & Sparks, LLP, City of Industry, California, as Counsel to the Successor Agency. Certain legal rratters will be passed on for the Underwriter O,' Nossarran LLP, Irvine, California, as Underwriter's Counsel It is anticipated that the Bonds will be available for delivery through the book-€ntryfacilities of DTC on or about NO/ember 29, 2017.

Dated: No;ember 16, 2017

Maturity Date (August 1)

2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028

MATURITY SCHEDULE

$4,900,(XX) Successor Agency to the Guadalupe Community Redevelopment Agency Tax Allocation Refunding Bonds,

Series 2017 (Taxable)

Principal Amount $260,000 215,000 220,000 225,000 230,000 240,000 245,000 250,000 260,000 265,000 275,000

Interest Rate 1.50036 2.000 2.000 2.250 2.500 2.750 3.000 3.000 3.000 3.000 3.125

Yield 1.700% 2.000 2.200 2.400 2.650 2.800 3.000 3.150 3.250 3.350 3.450

Price 99.866 100.000 99.482 99.474 99.343 99.737

100.000 98.982 98.121 97.125 97.115

CUSI pt (Base 400559)

AAS AB6 AC4 AD2 AE0 AF7 ACS AH3 AJ9 AK6 AL4

$2,215,000 3.500% Term Bond maturing August 1, 2035; Yield 3.750% ; Price 96.787; CUSI Pt400559AM 2

1 CUSIP is a registered traderrark of the Am,rican Bankers Association. CUSIP data herein is provided by CUSIP Global Services, managed by Standard & Poor's Financial Services LLC on behalf of The American Bankers Association. This data is not intended to create a database and does not serve in any W'"f as a substitute for the CUSIP Services. CUSIP nurruers have been assigned by an independent corrpany not affiliated with the Successor Agency and are included solely for the convenience of investors. None of the Successor Agency, the Underwriter, or the Municipal Advisor, is responsible for the selection or uses of these CUSI P number~ and no representation is made as to their correctness on the Bonds or as included herein. The CUSI P nurruer for a specific maturity is subject to being changed after the issuance of the Bonds as a result of various subsequent actions including, but not limited to, refunding in whole or in part or as a result of the procurement of secondary rrarket portfolio insurance or other sirrilar enhanc:errent by investors that is applicable to all or a portion of certain rm.turities of the Bonds.

SUCCESSOR AGENCY TO THE GUADALUPE COMMUNITY REDEVELOPMENT AGENCY

BOARD OF DI RECTORS

John Lizalde, Chair AristonJ ulian, Vice Chair Virginia Ponce, Mentier Tony Ramirez, Mentier

Gina Rubalcaba, Mentier

SUCCESSOR AGENCY ;CITY STAFF

Cruz Ram)S, Executive Director ;City Adninistrator Annette Munoz, Finance Director

Joice Earleen Raguz, Secretary;CityClerk

SPECIAL SERVICES

Municipal Advisor and Fiscal Consultant

Urban Futures, Inc. Tustin, California

Bond and Disclosure Counsel

Norton Rose Fulbright US LLP Los Angeles, California

Counsel to the Successor Agency

Casso& Sparks, LLP City of Industry, California

Trustee

U.S. Bank National Association Los Angeles, California

•

Redevelopment Project Aret1 Bouridalies

•

L

(i' ~rll<! -......

' ,_ !.

] .,

'-·-· ··-t 1• """""""""""""''""""""""""""'·····"""""

• •• -OJ!•- J!-_ I

\ '\ -, ' ................... ____ _

TABLE OF CONTENTS

Page

INTRODUCTION ............................................................................................................................................... 1

General ................................................................................................................................................... 1 Authority for I ssuance ............................................................................................................................ 1 Purpose and Application of Proceeds ..................................................................................................... 2 The City and the Successor Agency ....................................................................................................... 2 The Rede.telopment Plan ........................................................................................................................ 3 Security and Sources of Payment for the Bands .................................................................................. .3 Special Obi igations ................................................................................................................................ .4 Reserve Fund ......................................................................................................................................... .4 Further Information ............................................................................................................................... .4

PLAN OF REFUNDING .................................................................................................................................... .4

ESTIMATED SOURCES AND USES OF FUNDS ........................................................................................... 5

DEBT SERVICE SCHEDULE ........................................................................................................................... 6

THEBONDS ....................................................................................................................................................... 7

Authority for I ssuance ............................................................................................................................ 7 Description of the Bands ........................................................................................................................ 7 Book-Entry System ................................................................................................................................ 7 Redemption ............................................................................................................................................. 8

BOND INSURANCE .......................................................................................................................................... 9

Bond Insurance Policy ............................................................................................................................ 9 Assured Guaranty Municipal Corp ......................................................................................................... 9

THE DISSOLUTIONACT ............................................................................................................................... 11

SECURITY AND SOURCES OF PAYMENT FOR THE BONDS ................................................................. 13

Background. .......................................................................................................................................... 1 3 The DissolutionAct .............................................................................................................................. 13 Security and Sources of Payment for the Bands .................................................................................. 13 No Priority; No Additional Parity Bonds; Refunding Bonds; Other Obligations ................................ 14 Recognized Obligation Payment Schedule ........................................................................................... 15 Re..renue Fund; Reserve Fund ............................................................................................................... 16 Elimination of Housing Set-Aside ........................................................................................................ 19 Santa Barbara County Auditor--Controller ............................................................................................ 19 Certain Co.tenants of the Successor Agency ........................................................................................ 19 Statutory Pass-Through Payments ........................................................................................................ 21

THE SUCCESSOR AGENCY TOTHE GUADALUPE COMMUNITY REDEVELOPMENT AGENCY .......................................................................................................................................... 22

General ................................................................................................................................................. 22 Members, Officers and Staff ................................................................................................................ 23 Successor Agency Po.vers .................................................................................................................... 23 Rede..relopment Plan ............................................................................................................................. 24 No Plan Lirritations .............................................................................................................................. 24

THE PROJECT AREA ...................................................................................................................................... 25

TABLE OF CONTENTS (continued)

Page

Historical Tax Revenues for the PrqjectArea ...................................................................................... 25 Historical Redevelopment Property Tax Trust Fund Revenues ........................................................... 26 Prqjected Pledged Tax Revenues for the PrqjectArea ......................................................................... 27 Estimated Debt Service C0.terage ........................................................................................................ 30 Top Ten Taxable Property owners in the PrqjectArea ...................................................................... .32 Land Uses Within the PrqjectArea ..................................................................................................... .35 Development Activities ........................................................................................................................ 35 AssessrrentAppeals in the PrqjectArea ............................................................................................. .35 Residential Real Estate Values ............................................................................................................ .36

RISK FACTORS ............................................................................................................................................... 37

Reduction in Taxable Value ................................................................................................................. 37 Linited Po.vers and Resources ............................................................................................................. 38 Risks to Real Estate Market. ................................................................................................................. 38 Reduction in Inflationary Rate ............................................................................................................. 38 Levy and Collection ofTaxes ............................................................................................................... 39 Recognized Obligation Payrrent Schedule ........................................................................................... 39 Future I mplerrentation of Dissolution Act ........................................................................................... 40 Li ni tati ans on Remedies .................................................................................................................... ..41 Bankruptcy and Foreclosure ............................................................................................................... ..41 Concentration of OWnershi p ............................................................................................................... ..42 Estimated Revenues ............................................................................................................................ ..42 No Validation Proceeding Undertaken ............................................................................................... ..42 Assurrptions and Prqjections .............................................................................................................. ..43 Hazardous Substances ........................................................................................................................ ..43 Natural Disasters .................................................................................................................................. 44 Changes in Law .................................................................................................................................... 44 Econonic Risk ...................................................................................................................................... 44 I nvestrrent Risk .................................................................................................................................... 44 Secondary M arket ................................................................................................................................. 44

PROPERTY TAXATION IN CALIFORNIA ................................................................................................. ..45

Property Tax Collection Procedures ................................................................................................... ..45 Unitary Property ................................................................................................................................. ..47 ArticleX I I IA of the State Constitution .............................................................................................. ..47 Appropriations Limitation-ArticleX 111 B ......................................................................................... ..48 Articles XI I IC andX 111 D of the State Constitution ............................................................................ ..49 Proposition 87 ..................................................................................................................................... ..49 Appeals of Assessed Values ............................................................................................................... ..49 Proposition 8 ......................................................................................................................................... 50 Propositions 218 and 26 ....................................................................................................................... 50 Future I nitiatives ................................................................................................................................... 50

TAX MATTERS ............................................................................................................................................... 50

State I ncorre Tax .................................................................................................................................. 50 Federal I ncorne Tax Consi derati ans ..................................................................................................... 51 U.S. Holders ......................................................................................................................................... 52 N on--U .S. Holders ................................................................................................................................. 54

ii

TABLE OF CONTENTS (continued)

Page

ERISA CONSIDERATIONS ............................................................................................................................ 55

UNDERWRITING ............................................................................................................................................ 56

MUNICIPAL ADVISOR .................................................................................................................................. 57

LITIGATION .................................................................................................................................................... 57

LEGALITY FOR INVESTMENT IN CALIFORNIA ...................................................................................... 57

RATINGS .......................................................................................................................................................... 57

CONTINUING DISCLOSURE ........................................................................................................................ 57

FINANCIAL STATEMENTS ........................................................................................................................... 58

APPROVAL OF LEGAL PROCEEDINGS ..................................................................................................... 58

EXECUTION AND DELIVERY ...................................................................................................................... 59

APPENDIX A-SUMMARY OF CERTAIN PROVISIONS OF THE INDENTURE ................................. A-1 APPENDIX B-FORM OF BOND COUNSEL OPINION ........................................................................... B-1 APPENDIX C-BOOK-£NTRY SYSTEM ................................................................................................... C-1 APPENDIX D- FORM OF CONTINUING DISCLOSURE AGREEMENT ............................................... D-1 APPENDIX E -AUDITED FINANCIAL STATEMENTS FOR THE CITY OF GUADALUPE FOR THE

YEAR ENDEDJ UNE 30, 2016 .......................................................................................... E-1 APPENDIX F -STATE DEPARTMENT OF FINANCE APPROVAL LETTER ........................................ F-1 APPENDIX G-SUPPLEMENTAL INFORMATION-CITY OF GUADALUPE ..................................... G-1 APPENDIX H-FISCAL CONSULTANT'S REPORT ................................................................................ H-1 APPENDIX I -SPECIMEN MUNICIPAL BOND INSURANCE POLICY .................................................. 1-1

iii

GENERAL INFORMATION ABOUT THIS OFFICIAL STATEMENT

The information set forth herein has been obtained from the Successor Agency and other sources believed to be reliable. This Official Staterrent is not to be construed as a contract with the purchasers of the Bands. Estimates and opi ni ons are i ncl uded and should not be i nterpreted as staterrents of fact. Summaries of docurrents do not purport to be compiete staterrents of their prcwisions. No dealer, broker, salesperson or any other person has been authorized b,I the Successor Agency, the Municipal Ad.tisor or the Underwriter to give any information or to make any representations other than those contained in this Official Staterrent in connection with the offering contained herein and, if given or made, such information or representations must not be relied upon as having been authorized b,I the Successor Agency or the Underwriter.

This Official Staterrent does not constitute an offer to sell or solicitation of an offer to buy, nor shall there be any offer or solicitation of such offer or any sale of the Bonds b,I any person in any jurisdiction in which it is unlawful for such person to make such offer, solicitation or sale. The information and expressions of opinion herein are suqject to change without notice, and neither delivery of this Official Staterrent nor any sale of the Bands made thereafter shal I under any circumstances create any i mpl i cation that there has been no change i n the affairs of the Successor Agency or in any other information contained herei n, si nee the date hereof.

The Underwriter has pro.tided the follo.ving sentence for inclusion in this Official Staterrent. The Underwriter has reviewed the information in this Official Staterrent in accordance with, and as part of, its responsibilities to investors under the federal securities I.M's as applied to the facts and circumstances of this transaction, but the U nderwriter does not guarantee the accuracy or completeness of such information.

IN CONNECTION WITH THIS OFFERING, THE UNDERWRITER MAY OVER-ALLOT OR EFFECT TRANSACTIONS THAT STABILIZE OR MAINTAIN THE MARKET PRICES OF THE BONDS AT A LEVEL ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN MARKET. SUCH STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME. THE UNDERWRITER MAY OFFER AND SELL THE BONDS TO CERTAIN DEALERS, INSTITUTIONAL INVESTORS AND OTHERS AT PRICES LOWER THAN THE PUBLIC OFFERING PRICES STATED ON THE INSIDE COVER PAGES,AND SUCH PUBLIC OFFERING PRICES MAY BE CHANGED FROM TIME TOTI ME BY THE UNDERWRITER.

Assured Guaranty Municipal Corp. ("ACM") makes no representation regarding the Bonds or the ad.tisability of investing in the Bonds. In addition, ACM has not independently verified, makes no representation regarding, and does not accept any responsi bi I ity for the accuracy or completeness of this Official Staterrent or any information or disclosure contained herein, or omitted herefrom, other than with respect to the accuracy of the i nformati on regarding AG M suppl i eel b,I AG M and presented under the headi ng "BOND INSURANCE" and"APPENDIX I -SPECIMEN MUNICIPAL BOND INSURANCE POLICY."

This Official Staterrent, including any supplerrent or arrendrrent hereto, is intended to be deposited with the Municipal Securities Rulemaking Board through the Electronic Municipal Market Access ("EMMA") website.

The City of Guadalupe maintains a website with information pertaining to the Successor Agency. Ho.vever, the information presented therein is not incorporated into this Official Staterrent and should not be relied upon in making investrrent decisions with respect to the Bonds.

FORWARD-LOOKING STATEMENTS

Certain statements included or incorporated b,I reference in this Official Statement constitute "forward-I ooki ng statements." Such statements are general ly i denti fi able b,I the terminology used, such as "plan" "prg· ect" "expect" "anticipate" "intend" "believe" "estimate" "budget" or other si ni lar words ' ' ' ' ' ' ' . The achievement of certain results or other expectations contained in such forward-looking statements involve kno.vn and unkno.vn risks, uncertainties and other factors that may cause actual results, performance or achievements described to be materially different from any future results, performance or achievements expressed or implied b,I such forward-looking statements. The Successor Agency does not plan to issue any updates or revisions to those forward-looking statements if or when its expectations or events, conditions or circumstances on which such statements are based occur.

[THIS PAGE INTENTIONALLY LEFT BLANK]

OFFICIAL STATEMENT

$4,900,CXX) Successor Agency to the Guadalupe Community Redevelopment Agency Tax Allocation Refunding Bonds,


INTRODUCTION

This Introduction is not a sumrary of this Official Statement, and is qualified b,I more complete and detailed inforrration contained in the entire Official Statement. A full re..riewshould be rrade of the entire Official Statement, including the ccwer page and attached appendices. The offering of Bonds to potential investors is rrade only b,I means of the entire Official Statement. Capitali:zed term; used and not defined herein can be found in APPENDIX A - "SUMMARY OF CERTAIN PROVISIONS OF THE INDENTURE."

General

This Official Statement, including the ccwer page and appendices hereto, sets forth certain i nforrrati on i n connection with the sale of $4, 900,CXXl aggregate pri nci pal amount of Successor Agency to the Guadalupe Community Rede..relopment Agency Tax Allocation Refunding Bonds, Series 2017 (Taxable) (the "Bonds") that are being issued b,I the Successor Agency to the Guadalupe Community Rede..relopmentAgency (the "Successor Agency").

Authority for Issuance

The Bonds are being issued pursuant to the Constitution and laws of the State of California (the "State"), including Article 11 (commencing with Section 53580) of Chapter 3 of Part 1 of Division 2 of Title 5 of the Gcwernment Code of the State of California (the "Bond Law") and the Community Rede..relopment Law, Part 1 of Division 24 (commencing with Section 33CXXl) of the Health and Safety Code of the State of California (the "Redevelopment LiM'") and Parts 1.8 and 1.85 of Division 24 of the Health and Safety Code (the "Dissolution Act"). The Bonds are also being issued pursuant to an Indenture, dated as of Ncwember 1, 2017 (the "Indenture"), b,I and between the Successor Agency and U.S. Bank National Association, as trustee (the "Trustee"). The issuance of the Bonds and the Indenture were authorized b,I the Successor Agency pursuant to Resolution No. 2017-05 adopted on August 14, 2017 and Resolution No. 2017-0i adopted on October 10, 2017 (collectively the "Resolutions") and b,I the oversight Board of the Successor Agency pursuantto Resolution No. 2017-05, adopted on August 16, 2017 (the "OVersight Board Resolution"). The California Department of Finance (the "Department of Finance") pro.tided a letter to the Successor Agency dated October 6, 2017 stating that based on the Department of Finance's review and application of the law, the Oversight Board Resolution approving the Bonds is apprcwed.

All capitalized terms used and not otherwise defined herein shall have the meanings assigned to such terms in APPENDIX A - "SUMMARY OF CERTAIN PROVISIONS OF THE INDENTURE" or, if not defined therein, shall have the meanings assigned to such terms in the Indenture.

Purpose and Application of Proceeds

The Bonds are being issued to (i) refund, on a current basis, the $6,455,CXXl Guadalupe Redevelopment Agency Guadalupe Redevelopment Prqject Tax Allocation Refunding Bonds, Series 2003 (the "Refunded Bonds"), currently outstanding in the aggregate principal amount of $4,840,CXXl; (ii) pay the premium for a surety for the Reserve Fund for the Bonds; (iii) pay the premium for a municipal bond insurance policy for the Bonds; and (iv) pay costs of issuance of the Bonds. See "ESTIMATED SOURCES AND USES OF FUNDS" and "PLAN OF REFUNDING." Other than the Refunded Bonds, the Successor Agency has no other bonds outstanding.

The City and the Successor Agency

The City was incorporated on August 3, 1946, as a general law city which pr0.tides for a CouncilAdninistrator form of g0.ternment. The City encompasses an area of approximately 800 acres located in the northwestern corner of the County of Santa Barbara (the "County") and as of January 1, 2017 had a population of approximately 7,300. The City is located at the western end of the Santa Maria Valley (the "Santa Maria Valley") which is the alluvial plain of the Santa Maria River. The topography of the City is virtually flat. There is a difference of only a fe.v feet between the highest and lo.vest points in the City. For certain information with respect to the City, see APPENDIX G - "SUPPLEMENTAL INFORMATION-CITY OF GUADALUPE."

The G uadal upe Community Rede.tel opment Agency ( the "Predecessor Agency") was establ i shed pursuant to the Redevelopment Law b,I the City Counci I on J uly 23, 1985. On J une 29, 2011, Asserrbly Bill No. 26 ("AB xl 26") was enacted as Chapter 5, Statutes of 2011, together with a companion bill, Assembly Bill No. 27 ("AB xl 27"). The pr0.tisions of AB xl 26 pr0.tided for the dissolution of all redevelopment agencies. The pr0.tisions of AB xl 27 pernitted redevelopment agencies to avoid dissolution b,I the payment of certain amounts. A lawsuit was brought in the California Supreme Court, California Rede.telopmentAssociation, et al., v. Matosantos, et al., 53 Cal. 4th 231 (Cal. Dec. 29, 2011), challenging the constitutionality of AB xl 26 and AB xl 27. The California Supreme Court largely upheld AB xl 26, invalidated AB xl 27, and held that AB xl 26 may be severed from AB xl 27 and enforced independently. As a result of AB xl 26 and the decision of the California Supreme Court in the California Rede.telopment Association case, as of February 1, 2012, all redevelopment agencies in the State were dissolved, including the Predecessor Agency, and successor agencies were designated as successor entities to the former redevelopment agencies to expeditiously wind do.vn the affairs of the former rede.telopment agencies.

The primary pr0.ti si ons enacted b,I AB X 1 26 rel ati ng to the di ssol uti on and wi ndi ng dONn of former rede.telopment agency affairs are Parts 1.8 (commencing with Section 34161) and 1.85 (commencing with Section 34170) of Division 24 of the Health & Safety Code of the State, as amended onJ une 27, 2012 b,I Assembly Bill No. 1484 ("AB 1484"), enacted as Chapter 26, Statutes of 2012 and as further amended on September 22, 2015 b,I Senate Bill 107 ("SB 107"), enacted as Chapter 325, Statutes of 2015 (collectively, as amended from time to time, the "Dissolution Act").

The Predecessor Agency was activated b,I the City Council of the City with the adoption of Ordinance No. 85-246 on February 4, 1985. Under the pr0.tisions of ABxl 26, the City became the Successor Agency to the Predecessor Agency for the purpose of paying certain enforceable obligations, including the Refunded Bonds, and winding up the affairs of the Predecessor Agency pursuant to ABxl 26. Subdivision (g) of Section 34173 of the Health and Safety Code of the State of California (the "Health and Safety Code"), added b,I AB 1484, expressly affirms that the Successor Agency is a separate public entity from the City, that the two entities shall not merge, and that the liabilities of the Predecessor

2

Agency will not be transferred to the City nor will the assets of the Predecessor Agency become assets of the City.

The Redevelopment Plan

The Guadalupe Redevelopment Prqject Area (the "Prqject Area") was formally established with the adoption by the City Council of a redevelopment plan for the Prqject Area (the "Redevelopment Plan") by Ordinance No. 85-263 enacted by the City Council on December 19, 1985. The Prqject Area encompasses approximately 850 acres constituting the majority of the City. The Redevelopment Plan, as set forth under the terms of the Redevelopment Law, pro.tided for the ternination of the Redevelopment Plan activities on December 19, 2025. The Redevelopment Plan was amended by Ordinance No. 2007-388, adopted on Ncweniber 13, 2007, which elininated the time limit to incur debt and by Ordinance No. 09-398, which was adopted on May 26, 2009, which increased the annual tax increment Ii nit. SB 107, which became effective September 22, 2015, amended the Dissolution Act to pro.tide that the time limits for receiving property tax revenues and the limitation on the amount of property tax revenues that may be received by the Predecessor Agency and the Successor Agency set forth in the Redevelopment Plan are not effective for purposes of paying the Successor Agency's enforceable obligations. Accordingly, the prqjections set forth in this Official Statement and in the Fiscal Consultant's Report were prepared without regard to the time and financial linitations set forth in the Redevelopment Plan for the Prqject Area.

Security and Sources of Payment for the Bonds

The Dissolution Act authorizes the issuance of refunding bonds, including the Bonds, to be secured by a pledge of, and lien on, the Pledged Tax Revenues created by the Indenture. The Dissolution A ct pro.ti des that bonds authorized thereunder to be issued by the Successor Agency wi 11 be secured by a pledge of, and lien on, and will be repaid from moneys deposited from time to time in the Redevelopment Property Tax Trust Fund for the Successor Agency established and held by the County Auditor-Controller (the "Redevelopment Property Tax Trust Fund"), and that property tax revenues pledged to any bonds authorized under the Dissolution Act, such as the Bonds, are taxes allocated to the Successor Agency pursuant to the prcwisions of the Redevelopment Law and the State Constitution which pro.tided for the allocation of tax increment revenues underthe Redevelopment Law.

The Dissolution Act further pro.tides that any bonds authorized thereunder to be issued by the Successor Agency will be considered indebtedness incurred by the dissolved Predecessor Agency, with the same lien priority and legal effect as if the bonds had been issued prior to the effective date of ABX 1 26, in full confornity with the applicable prcwision of the Redevelopment Law that existed prior to that date, and will be included in the Successor Agency's Recognized Obligation Payment Schedule. See "SECURITY AND SOURCES OF PAYMENT FOR THE BONDS - Recognized Obligation Payment Schedule."

Taxes levied on the property within the Prqject Area on that portion of the taxable valuation ewer and alx:we the taxable valuation of the applicable base year property tax roll with respect to the various territories within the Prqject Area, to the extent they constitute Pledged Tax Revenues, as described herein, will be deposited in the Redevelopment Property Tax Trust Fund for transfer by the Santa Barbara County Auditor-Controller (the "County Auditor-Controller") to the Successor Agency's Redevelopment Obligation Retirement Fund on January 2 and June 1 of each year to the extent required for payments listed in the Successor Agency's Recognized Obligation Payment Schedule in accordance with the requirements of the Dissolution Act. See "SECURITY AND SOURCES OF PAYMENT FOR THE BONDS - Recognized Obligation Payment Schedule." Monies deposited by the County AuditorController into the Successor Agency's Redevelopment Obligation Retirement Fund will be transferred

3

b,I the Successor Agency to the Trustee for deposit in the Revenue Fund established under the Indenture and administered b,I the Trustee in accordance with the I ndenture

Special Obligations

The Bands shal I be and are special obi i gati ons of the Successor Agency and are secured b,I an irrevocable pledge of, and are payable as to principal, interest and premium, if any, from Pledged Tax Revenues, and other funds as pro.tided in the Indenture. The Bonds, interest and prenium, if any, thereon are not a debt of the City, the County, the State or any of its political subdivisions (except the Successor Agency), and none of the City, the County, the State or any of its political subdivisions (except the Successor Agency) is liable thereon.

Reserve Fund

To secure the payment of the principal of and interest on the Bonds a Reserve Fund is established in the Indenture in an amount equal to the Reserve Requirement. "Reserve Requirement" means, for the Bonds, as of each calculation date, an amount equal to the least of (i) Maximum Annual Debt Service on all Outstanding Bonds, (ii) 1036 of the initial offering price to the public of the Bonds as determined underthe Code, or (iii) 125% of the average Annual Debt Service as of the date of issuance of the Bonds. The initial Reserve Requirement is $365,525.00. The Reserve Requirement with respect to the Bonds will initially be satisfied b,I the deposit into the Reserve Fund of a municipal bond debt service reserve insurance policy (the "Reserve Policy") issued b,I Assured Guaranty Municipal Corp. ("ACM").

Further Information

Descriptions of the Redevelopment Law, the Bond Law, the Dissolution Act, the Bonds, the Indenture, the Successor Agency, the Predecessor Agency, the City, the County Auditor-Controller and the Department of Finance are included in this Official Statement. Such descriptions and information do not purport to be comprehensive or definitive. All references herein to the Redevelopment Law, the Bond Law, the Dissolution Act, the Bonds, the Indenture, the Constitution and the I.M's of the State or the proceedings of the Predecessor Agency, the Successor Agency, the City, the County Auditor-Controller and the Department of Finance are qual i fi ed i n their enti rety b,I reference to such documents and I aws. References herein to the Bonds are qualified in their entirety b,I the form thereof included in the Indenture and the information with respect thereto included herein, copies of which are all available for inspection at the offices of the Successor Agency.

PLAN OF REFUNDING

A portion of the proceeds of the Bonds, together with other available funds, will be deposited into an escro.v fund (the "Escro.v Fund") held under an Escro.v Deposit Agreement, dated as of Ncwember 1, 2017 (the "Escro.v Agreement"), b,I and between the Successor Agency and U.S. Bank National Association, as escro.v agent (the "Escro.v Bank"), and applied to refund the Refunded Bonds. Amounts so deposited will be held uninvested in cash b,I the Escro.v Agent and will be sufficient to redeem on December 18, 2017 (the "Redemption Date") the Refunded Bonds at a redemption price equal to the principal amount of the Refunded Bonds to be redeemed (the "Redemption Price") on the Redemption Date, plus accrued and unpaid interesttothe Redemption Date.

4

The Refunded Bonds are rmre fully identified in the table belo.v.

Refunded Bonds

Maturity Date Principal Interest CUSIP (August 1) Amount Rate (Base: 400577)

2018 $ 170,000 4.CXXJ% 2027 1,970,000 5.125 2035 2,700,000 5.125

ESTIMATED SOURCES AND USES OF FUNDS

The estimated sources and uses of funds are summarized as folio.vs.

Sources:

Principal Amount of Bonds Less Original Issue Discount Other Available Funds Total Sources

Uses:

E scro.v Fund Costs of Issuance Fund 11

Total Uses

$4,900,000.00 (98,964.65) 415,533.03

$5,216,568.38

$4,933,668.99 282,899.39

$5,216,568.38

BP6 BY7 CG5

(l) Costs of Issuance include Underwriter's discount, fees and expenses for Bond Counsel, Disclosure Counsel, Municipal Advisor, Fiscal Consultant, Escro.v Agent and Trustee, bond insurance and surety prerriums, rating fee and other costs related to the issuance of the B onds.

5

DEBT SERVICE SCHEDULE

The follcwing table shews the annual debt service requirements on the Bonds, assuming no opti anal rederrpti ons.

Bond Year Ending

(August 1) Principal Interest Total

2018 $ 260,000 $ 98,636.01 $ 358,636.01 2019 215,000 142,831.26 357,831.26 2020 220,000 138,531.26 358,531.26 2021 225,000 134,131.26 359,131.26 2022 230,000 129,068.76 359,068.76 2023 240,000 123,318.76 363,318.76 2024 245,000 116,718.76 361,718.76 2025 250,000 109,368.76 359,368.76 2026 260,000 101,868.76 361,868.76 2027 265,000 94,068.76 359,068.76 2028 275,000 86,118.76 361,118.76 2029 285,000 77,525.00 362,525.00 2030 295,000 67,550.00 362,550.00 2031 305,000 57,225.00 362,225.00 2032 315,000 46,550.00 361,550.00 2033 330,000 35,525.00 365,525.00 2034 340,000 23,975.00 363,975.00 2035 345,000 12,075.00 357,075.00

TOTAL $4,900,000 $1,595,086.11 $6,495,086.11

[Remainder of page intentionally left blank.]

6

THE BONDS

Authority for Issuance

The Bonds were authorized for issuance pursuant to the Indenture, the Redeveloprrent Law, the Bond LiM', and the Dissolution Act. The issuance of the Bonds and the Indenture were authorized by the Resolutions and by the oversight Board for the Successor Agency pursuant to the oversight Board Resolution.

Written notice of the oversight Board Resolution was pro.tided to the Departrrent of Finance, pursuant to the Dissolution Act, on August 22, 2017. On October 6, 2017, the Departrrent of Finance pro.tided a letter to the Successor Agency stating that based on the Department of Finance's review and application of the liM', the oversight Board Resolution apprcwing the Bonds was apprcwed by the Departrrent of Finance. See APPENDIX F - "STATE DEPARTMENT OF FINANCE APPROVAL LETTER."

Description of the Bonds

The Bonds will be issued and delivered as one fully,egistered Bond in the denomination of $5,CXXl and any integral multiple thereof (each an "Authorized Denonination") for each maturity of Bonds, initially in the narre of Cede & Co., as noninee for The Depository Trust Company, New York, New Yark ("DTC"), as registered cwner. The Bonds will be dated the date of their delivery (the "Delivery Date") and mature on August 1 in the years and in the amounts shewn on the inside ccwer pages of this Official Staterrent. Interest on the Bonds will be payable on each February 1 and August 1, comrrenci ng February 1, 2018 ( each an "Interest Payrrent Date") to the person whose narre appears on the Registration Books as the owner thereof as of the Record Date imrrediately preceding each such Interest Payrrent Date, such interest to be paid by check or draft of the Trustee mailed on the Interest Payrrent Date by first class mail to such owner at the address of such owner as it appears on the Registration Books; pro.tided, hcwe..rer, that upon the written request of any owner of at least $1,CXXl,CXXl in principal amount of Bonds received by the Trustee at least fifteen (15) days prior to such Record Date, payrrent shall be made by wire transfer in imrrediately available funds to an account in the United States designated by such owner. Principal of and redemption prenium (if any) on any Bond shall be paid only upon presentation and surrender thereof, at maturity or redemption, at the Corporate Trust Office of the Trustee. Both the principal of and interest and premium (if any) on the Bonds shall be payable in lawful money of the United States of Arrerica. Interest shall be calculated based upon a 360--day year of twelve thi rty--day months. "Record Date" in respect of any Interest Payrrent Date rreans the fifteenth calendar day of the month preceding such I nterest Payrrent Date whether or not such day is a Business Day.

Boak-£ ntry System

DTC will act as securities depository for the Bonds. The Bonds will be issued as fully,egistered securities registered in the name of Cede & Co. (DTC's partnership nominee) or such other name as may be requested by an authorized representative of DTC. One fully,egistered certificate will be issued for each maturity of the Bonds, each in the aggregate principal amount of such maturity, and will be deposited with DTC. See APPENDIX C- "BOOK-ENTRY SYSTEM."

7

Redemption'

Optional Redemption. The Bonds maturing on or before August 1, 2027 are not suqject to redemption prior to maturity. The Bonds maturing on and after August 1, 2028 are suqject to redemption prior to maturity in whole, or in part among maturities as determined b,I the Successor Agency on any date on or after August 1, 2027, from any avai I able source of funds, at 10036 of the principal amount of the Bands to be redeemed, together with accrued interest thereon to the redemption date.

Mandatory Sinking Account Redemption. The Bonds maturing on August 1, 2035 are suqject to redemption in part b,l lot on August 1, 2029 and on August 1 in each year sho.vn belo.v until maturity, from Sinking Account Payments made b,I the Successor Agency, at a redemption price equal to the pri nci pal amount thereof to be redeemed together with accrued interest thereon to the redemption date, without premium, in the aggregate respective principal amounts and on the respective dates as set forth in the belo.v table; except, that if some but not all of the Bonds have been redeemed the total amount of all future Sinking Account Payments will be reduced b,I an amount corresponding to the aggregate principal amount of Bonds so redeemed, to be allocated among such sinking account payments on a pro rata basis in integral multiples of $5,000 as determined b,I the Successor Agency (notice of which deternination will be given b,I the Successor Agency to the Trustee):

Sinking Account Redemption Date

(August 1)

2029 2030 2031 2032 2033 2034 2035

Principal A mount to be Redeemed

$285,000 295,000 305,000 315,000 330,000 340,000 345,000

Partial Redemption of Bonds. If only a portion of any Bond is called for redemption, then upon surrender of such Bond the Successor Agency shall execute and the Trustee shall authenticate and deliver to the owner thereof, at the expense of the Successor Agency, a mw B and or B ands of the same interest rate and maturity, of authorized denoninations in an aggregate principal amount equal to the unredeemed portion of the B and to be redeemed.

Effect of Redemption. From and after the date fixed for redemption, if funds available for the payment of the redemption price of and interest on the Bonds so called for redemption shall have been duly deposited with the Trustee, such Bonds so called such cease to be entitled to any benefit under the Indenture other than the right to receive payment of the redemption price and accrued interest to the redemption date, and no interest shal I accrue thereon from and after the redemption date specified in such notice.

Manner of Redemption. Whenever any Bonds or portions thereof are to be selected for redemption b,I lot, the Trustee shall make such selection, in such manner as the Trustee shall deem appropriate.

• Prelininary, subject to change.

8

Notice of R ederrpti on. The Trustee on behalf of and at the expense of the Successor Agency wi 11 mai I ( by first cl ass mai I, postage prepaid or other rreans acceptable to the recipient thereof) notice of any redemption at least twenty (20) days but not more than sixty (60) days prior to the redemption date, to (i) the owners of any Bonds designated for redemption at their respective addresses appearing on the Registration Books, and (ii) to the Securities Depositories and to the Information Services designated in a Written Request of the Successor Agency fi I ed with the Trustee at the ti rre the Successor Agency notifies the Trustee of its intention to redeem Bonds; ho.vever, such mailing will not be a condition precedent to such redemption and neither failure to receive any such notice nor any defect therein will affect the validity of the proceedings for the redemption of such Bonds or the cessation of the accrual of interest thereon. Such notice will state the redemption date and the redemption price, will designate the CUSIP number of the Bands to be redeerred, state the individual number of each Bond to be redeerred or state that all Bonds between two stated numbers (l:x:Jth inclusive) or all of the Bonds Outstanding (or all Bonds of a maturity) are to be redeemed, and wi 11 require that such Bands be then surrendered at the Corporate Trust Office of the Trustee for rederrption at the said redemption price, giving notice also that further interest on such Bonds will not accrue from and after the rederrption date. Neitherthe Successor Agency nor the Trustee shall have any responsibility for any defect in the CUSIP number that appears on any Bond or in any redemption notice with respect thereto, and any such redemption notice may contain a staterrent to the effect that CUSI P numbers have been assigned by an independent service for convenience of reference and that neither the Successor Agency nor the Trustee shall be liable for arty inaccuracy in such numbers.

Rescission of Rederrption Notice. Any notice of redemption may be rescinded by written notice given to the Trustee by the Successor Agency and the Trustee shall pro.tide notice of such rescission as soon thereafter as practicable in the sarre manner, and to the sarre recipients, as notice of such redemption was given pursuant to the Indenture, but in no event later than the date set for redemption.

BOND INSURANCE

Bond Insurance Policy

Concurrently with the issuance of the B ands, AG M wi 11 issue its M uni ci pal Band I nsurance Policy for the Bonds (the "Policy"). The Policy guarantees the scheduled payrrent of principal of and interest on the Bonds when due as set forth in the form of the Policy included as APPENDIX I to this Official Staterrent.

The Policy is not ccwered by any insurance security or guaranty fund established under Ne.v York, California, Connecticut or Florida insurance law.

Assured Guaranty Municipal Corp.

AG M is a N e.v Y ork doni ci I ed fi nanci al guaranty insurance company and an indirect subsidiary of Assured Guaranty Ltd. ("AGL"), a Bermuda-based holding company whose shares are publicly traded and are listed on the Ne.v York Stock Exchange under the symbol "AGO." AGL, through its operating subsidiaries, pro.tides credit enhancerrent products to the U.S. and global public finance, infrastructure and structured finance markets. Neither AGL nor any of its shareholders or affiliates, otherthan ACM, is obi i gated to pay any debts of AG M or any cl ai m, under any i nsurance pol icy issued by AG M .

AGM's financial strength is rated "AA" (stable outlook) by S&P Global Ratings, a business unit of Standard & Poor's Financial Services LLC ("S&P"), "AA-+'' (stable outloolk) by Kroll Bond Rating Agency, Inc. ("KBRA") and "A2" (stable outlook) by Moody's Investors Service, Inc. ("Moody's"). Each rating of ACM should be evaluated independently. An explanation of the significance of the abcwe

9

ratings may be obtained from the applicable rating agency. The alx:we ratings are not recomrrendations to buy, sell or hold any security, and such ratings are suqject to revision orwithdr.M'al at any tirre b,I the rating agencies, including withdr.M'al initiated at the request of ACM in its sole discretion. In addition, the rating agencies may at any time change AGM's long-term rating outlooks or place such ratings on a watch I i st for possi bl e do.vngrade i n the near term Any dONnward revision or withdrawal of any of the alx:we ratings, the assignrrent of a negative outlook to such ratings or the placerrent of such ratings on a negative watch list may have an adverse effect on the market price of any security guaranteed b,I ACM. ACM only guarantees scheduled principal and scheduled interest payrrents payable b,I the issuer of bonds insured b,I ACM on the date(s) when such amounts were initially scheduled to become due and payable (suqject to and in accordance with the terms of the relevant insurance policy), and does not guarantee the market price or liquidity of the securities it insures, nor does it guarantee that the ratings on such securities will not be revised orwithdriM'n.

Current Financial Strength Ratings. OnJ une 26, 2017, S& P issued a research update report in which it affirmed AGM's fmancial strength rating of "AA" (stable outlook). ACM can give no assurance as to any further ratings action that S& P may take.

On December 14, 2016, KBRA issued a financial guaranty surveillance report in which it affirmed AGM's insurance fmancial strength rating of "AA+' (stable outlook). ACM can give no assurance as to any further ratings action that KB RA may take.

On August 8, 2016, Moody's published a credit opinion affmning its existing insurance financial strength rating of "AZ' (stable outlook) on ACM. ACM can give no assurance as to any further ratings action that Moody's may take.

For more information regarding AGM's financial strength ratings and the risks relating thereto, see AGL's Annual Report on Form 10-K for the fiscal year ended December 31, 2016.

Capitalization of ACM. At September 30, 2017:

1. The policyholders' surplus of AGMwas approximately $2,322 nillion.

2. The contingency reserves of ACM and its indirect subsidiary Municipal Assurance Corp. ("MAC") (as described belo.v) were approximately $1,371 million. Such amount includes 10036 of AGM's contingency reserve and 60.7% ofMAC's contingency reserve.

3. The net unearned prenium reserves of ACM and its subsidiaries (as described belo.v) were approximately $1,681 million. Such amount includes (i) 10036 of the net unearned prenium reserves of AGM and AG M's wholly owned subsidiaries Assured Guaranty (Europe) pie, Assured Guaranty (UK) pie, Cl FG Europe S.A. and Assured Guaranty (London) pie (together, the "ACM European Subsidiaries") and (ii) 60.7% of the net unearned prenium reserve of MAC.

The policyholders' surplus of ACM and the contingency reserves and net unearned premium reserves of ACM and MAC were determined in accordance with statutory accounting principles. The net unearned premium reserves of the ACM European Subsidiaries were deternined in accordance with accounting principles generally accepted in the United States of Arrerica

Incorporation of Certain Docurrents b,I Reference. Portions of the follo.ving docurrents filed b,I AGL with the Securities and Exchange Commission (the "SEC") that relate to ACM are incorporated b,I reference into this Official Staterrent and shall be deerred to be a part hereof:

10

(i) the Annual Report on Form 10-K for the fiscal year ended Decerrber 31, 2016 (filed by AGL with the SEC on February 24, 2017);

(ii) the Quarterly Report on Form lo-Q for the quarterly period ended March 31, 2017 (filed by AGL with the SEC on May 5, 2017);

(iii) the Quarterly Report on Form lo-Q for the quarterly period endedJ une 30, 2017 (filed by AGL with the SEC on August 3, 2017); and

(iv) the Quarterly Report on Form lo-Q for the quarterly period ended Septerrber 30, 2017 (filed by AGL with the SEC on Noverrber 3, 2017).

All consolidated financial statements of ACM and all other information relating to ACM included in, or as exhibits to, documents filed by AGL with the SEC pursuantto Section 13(a) or 1 S(d) of the Securities Exchange Act of 1934, as amended, excluding Current Reports or portions thereof "furnished'' under Item 2.02 or Item 7.01 of Form 8-K, after the filing of the last document referred to al:x::we and before the termination of the offering of the Bands shal I be deemed incorporated by reference into this Official Statement and to be a part hereof from the respective dates of filing such documents. Copies of materials incorporated by reference are available over the internet at the SEC's website at http:(MMW.sec.qcw, at AGL's website at http:(MMW.assuredguaranty.com, or will be provided upon request to Assured Guaranty Municipal Corp.: 1633 B road.vay, NewY ork, New York 10019, Attention: Communications Department (telephone (212) 974-0100). Except for the information referred to aro..re, no information available on or through AGL's website shall be deemed to be part of or incorporated in this Official Statement.

Any information regarding ACM included herein under the caption "BOND INSURANCE -Assured Guaranty Municipal Corp." or included in a document incorporated by reference herein (collectively, the "ACM Information") shall be modified or superseded to the extent that any subsequently included AG M Information ( either directly or through incorporation by reference) modifies or supersedes such previously included ACM Information. Any ACM Information so modified or superseded shall not constitute a part of this Official Statement, except as so modified or superseded.

Miscellaneous Matters. ACM makes no representation regarding the Bonds or the ad.tisability of investing in the Bonds. In addition, ACM has not independently verified, makes no representation regarding, and does not accept any responsibility for the accuracy or completeness of this Official Statement or any information or disclosure contained herein, or onitted herefrom, other than with respect to the accuracy of the information regarding AG M supplied by AG M and presented under the headi ng "BOND INSURANCE."

THE DISSOLUTION ACT

The Dissolution Act requires the County Auditor-Controller to deternine the amount of property taxes that would have been al I ocated to the Predecessor Agency ( pursuantto subdivision ( b) of Section 16 of Article XVI of the State Constitution) had the Predecessor Agency not been dissolved pursuant to the operation of AB xl 26, using current assessed values on the last equalized roll on August 20, and to deposit that amount in the Redevelopment Property Tax Trust Fund for the Successor Agency estabiished and held by the County Auditor-Controller pursuanttothe Dissolution Act. The Dissolution Act provides that any bonds authorized thereunder to be issued by the Successor Agency wi 11 be considered indebtedness incurred by the dissolved Predecessor Agency, with the same legal effect as if the bonds had been issued prior to effective date of AB xl 26, in full conformity with the applicable provision of the

11

http://Vwwv.assuredquaranty.com

Redevelopment Law that existed prior to that date, and will be included in the Successor Agency's Recognized Obligation Payrrent Schedules.

The Dissolution Act further pr0.tides that bonds authorized thereunder to be issued b,I the Successor Agency will be secured b,I a pledge of, and lien on, and will be repaid from moneys deposited from tirre totirre in the Redeveloprrent Property Tax Trust Fund, and that property tax revenues pledged to any bonds authorized to be issued b,I the Successor Agency under the Dissolution Act, including the Bonds, are taxes allocated to the Successor Agency pursuant to subdivision (b) of Section 33670 of the Redevelopment Law and Section 16 of Article XVI of the State Constitution.

Pursuant to subdivision (b) of Section 33670 of the Redeveloprrent Law and Section 16 of Article XVI of the State Constitution and as pr0.tided in a Redeveloprrent Plan, taxes levied upon taxable property in the Prqject Area each year b,I or for the benefit of the State, any city, county, city and county, district, or other public corporation (herein sornetirres collectively called "taxing agencies") after the effective date of the ordinance appr0.ting such Redeveloprrent Plan, or the respective effective dates of ordinances appr0.ting arrendrrents to the Redevelopment Plan that added territory to the applicable Prqj ect Area are to be divided as fol I o,vs:

(a) To Taxing Agencies: That portion of the taxes which would be produced b,I the rate upon which the tax is levied each year b,I or for each of the taxing agencies upon the total sum of the assessed value of the taxable property in the applicable prqject area as sho,vn upon the assessrrent roll used in connection with the taxation of such property b,I such taxing agency last equalized prior to the effective date of the ordinance adopting the applicable Redevelopment Plan, or the respective effective dates of ordinances appr0.ting arnendrrents to the R edevel oprrent Pl an that added territory to the appl i cable prqj ect area (each, a "base year valuation"), will be allocated to, and when collected will be paid into, the funds of the respective taxing agencies as taxes b,I or for the taxing agencies on all other property are paid; and

(b) To the Predecessor Agency;Successor Agency: Except for that portion of the taxes in excess of the amount identified in (a) abOJe that is attributable to a tax rate levied b,I a taxing agency forthe purpose of producing revenues in an amount sufficientto make annual repayrrents of the principal of, and the interest on, any bonded indebtedness appr0.ted b,I the voters of the taxing agency on or after January 1, 1989 for the acquisition or impr0.terrent of real property, which portion shall be allocated to, and when collected shall be paid into, the fund of that taxing agency, that portion of the levied taxes each year follo,ving the Delivery Date, when collected will be paid into a special fund of the Successor Agency. Section 34172 of the Dissolution Act pro.tides that, for purposes of Section 16 of Article XVI of the State Constitution, the Redeveloprrent Property Tax Trust Fund shall be deemed to be a special fund of the Successor Agency to pay the debt service on indebtedness incurred b,I the Predecessor Agency or the Successor Agency to finance or refinance the redeveloprrent prqjects of the Predecessor Agency.

That portion of the levied taxes described in paragraph (b) abOJe, less amounts deducted pursuant to Section 34183(a) of the Dissolution Act for permitted adninistrative costs of the County AuditorController, constitutes the amount required under the Dissolution Act to be deposited b,I the County Auditor-Controller into the Redeveloprrent Property Tax Trust Fund. In addition, Section 34183 of the Dissolution Act effectively elininates theJ anuary 1, 1989 date from paragraph (b) abOJe.

12

SECURITY AND SOURCES OF PAYMENT FOR THE BONDS

Background

Prior to the enactrrent of the Dissolution Act, the Redeveloprrent LiM' authorized the financing of redeveloprrent prqjects through the use of tax increrrent revenues. This rrethod pro.tided that the taxable valuation of the property within a redeveloprrent prqject area on the property tax roll last equalized prior to the effective date of the ordinance which adopts the redevelopment plan becomes the base year valuation. Assuming the taxable valuation never dropped belcw the base year level, the taxing agencies receiving property taxes thereafter would receive only that portion of the taxes produced b,I applying then current tax rates to the base year valuation; the redeveloprrent agency was allocated the remaining portion of property taxes (i.e., the portion rreasured b,I applying then current tax rates to the increase in valuation ewer the base year valuation). Such "increrrental tax revenues" allocated to a redevelopment agency were authorized to be pledged to the payrrent of redeveloprrent agency obligations, including the Refunded Bonds.

The Dissolution Act

The Dissolution Act requires the County Auditor-Controller to deternine the amount of property taxes that would have been al I ocated to the Predecessor Agency ( pursuantto subdivision ( b) of Section 16 of Article XVI of the State Constitution) had the Predecessor Agency not been dissolved pursuant to the operation of AB xl 26, using current assessed values on the last equalized roll on August 20, and to deposit that amount in the Redeveloprrent Property Tax Trust Fund for the Successor Agency established and held b,I the County Auditor-Controller pursuanttothe Dissolution Act. The Dissolution Act pro.tides that any bonds authorized thereunder to be issued b,I the Successor Agency wi 11 be considered indebtedness incurred b,I the dissolved Predecessor Agency, with the sarre legal effect as if the bonds had been issued prior to effective date of AB xl 26, in full conformity with the applicable prcwision of the Redevelopment Law that existed prior to that date, and will be included in the Successor Agency's Recognized Obligation Payrrent Schedule.

The Dissolution Act further pro.tides that bonds authorized thereunder to be issued b,I the Successor Agency will be secured b,I a pledge of, and lien on, and will be repaid from moneys deposited from tirre to tirre in the Redeveloprrent Property Tax Trust Fund, and that tax revenues pledged to any bonds authorized to be issued b,I the Successor Agency under the Dissolution Act, including the Bonds, are taxes allocated to the Successor Agency pursuant to subdivision (b) of Section 33670 of the Redevelopment LiM' and Section 16 of Article XVI of the State Constitution.

Security and Sources of Payment for the Bonds

The Bands shal I be equally secured b,I a pl edge of, security interest in and a first and exclusive lien on all of the Pledged Tax Revenues, whether held in the Redevelopment Property Tax Trust Fund or b,I the Successor Agency or the Trustee, and a first and exclusive pledge of, security interest in and lien upon all of the moneys in the Revenue Fund (including the Interest Account, the Principal Account, the Sinking Account and the Redemption Account and all subaccounts in the foregoing) and in the Reserve Fund to the Trustee for the benefit of the applicable owners of the Outstanding Bonds. The principal of and interest or redemption prenium (if any) on the Bonds shall be payable from Pledged Tax Revenues. In addition, pursuant to Health and Safety Code section 34177.S(g), the Bonds shall be specifically secured b,I a pledge of, and lien on, and shall be repaid from moneys deposited from tirre to tirre in the Redevelopment Property Tax Trust Fund. Under the Health and Safety Code the County administrative fee is not deposited into the R edevel oprrent Property Tax Trust Fund.

13

"Pledged Tax Revenues" means (a) means that portion of taxes levied (including all payments, reirrbursements and sul:wentions, if any, specifically attributable to ad valorem taxes lost b,I reason of business inventory tax or other exemptions and tax rate linitations) upon taxable property in the Redevelopment Prqject Area which is allocated to and paid into a special fund of the Successor Agency pursuant to Article 6 of Chapter 6 of the Health and Safety Code, Section 16 of Article XVI of the Constitution of the State and the Redevelopment Plan, as such portion of taxes may be modified b,I deductions and limitations irrposed pursuant to the Health and Safety Code (including Section 33333.4 thereof), (b) investment earnings, and (c) reimbursements, sul:wentions, including payments to the Successor Agency with respect to personal property generated from property located within the Redevelopment Prqject Area pursuant to Section 16110, et seq., of the Gcwernment Code of the State of California, or other payments made b,I the State to the Successor Agency with respect to any property taxes that would otherwise be due on real or personal property but for an exemption of such property from such taxes. Pledged Tax Revenues shall not include amounts payable b,I the Successor Agency under agreements heretofore entered into pursuant to Section 33401 of the Health and Safety Code, as such Section authorized such agreements prior to January 1, 1995, unless such agreements have been made subordinate to the Bands.

Except for the Pledged Tax Revenues and moneys in the Revenue Fund (including the Interest Account, the Principal Account, the Sinking Account and the Redemption Account and all subaccounts in the foregoing) and the Reserve Fund (and all Accounts therein), no funds or properties of the Successor Agency shall be pledged to, or otherwise liable for, the payment of principai of or interest or redemption prenium (if any) on the Bonds. Notwithstanding anything in the Indenture to the contrary, ho.vever, if Pledged Tax Revenues are insufficient for the deposits required under the Indenture or the payment of the principal of and interest or redemption premium (if any) on the Bonds, the Successor Agency may, but shall not be obligated, to make such deposits or pay such principai of and interest or redemption premium (if any) on the Bonds from other legally available funds.

The Indenture will constitute a contract between the Successor Agency and the Trustee for the benefit of the owners, and the co.tenants and agreements therein set forth to be performed on behalf of the Successor Agency and the Trustee are for the equal and proportionate benefit, security and protection of all owners without preference, priority or distinction as to security or otherwise of any of the Bonds ewer any of the others b,I reason of the number or date thereof or the ti me of sale, execution and delivery thereof, or otherwise for any cause whatsoever, except as expressly pro.tided therein or in the Indenture. Other than the Refunded Bonds, neither the Predecessor Agency nor the Successor Agency have any other bonds outstandi ng.

No Priority; No Additional Parity Bonds; Refunding Bonds; Other Obligations

The Successor Agency co.tenants that it will not issue any Obligations payable, either as to principal or interest, from the Pledged Tax Revenues which have any lien upon the Pledged Tax Revenues on a parity with or superior to the lien under the Indenture for the Bonds; pro.tided, that the Successor Agency may issue and sell refunding bonds payable from Pledged Tax Revenues on a parity with Outstanding Bonds, if (a) annual debt service on such refunding bonds is lo.ver than annual debt service on the Bands being refunded during every year the Bands or such other outstanding bonds of the Successor Agency, as applicable, will be outstanding, (b) the debt service payment dates with respect to such refunding bonds are the same as for the Bands being refunded and ( c) the final maturity of any such refunding bonds does not exceed the final maturity of the Bands being refunded.

14

Recognized Obligation Payment Schedule

By February P' of each year, the Dissolution Act requires successor agencies to prepare, and submit to the successor agency's oversight board and the Department of Finance for approval, a Recognized Obligation Payment Schedule (the "Recognized Obligation Payment Schedule") pursuant to which enforceable obligations (as defined in the Dissolution Act) of the successor agency are listed, together with the source of funds to be used to pay for each enforceable obligation. As defined in the Di ssol uti on A ct, "enforceabl e obi i gati on" i ncl udes bonds, incl udi ng the required debt service, reserve set -asides, and any other payments required under the indenture or sinilar documents g0.terning the issuance of the outstanding bonds of the Predecessor Agency, as well as other obligations such as loans.judgments or settlements against the former rede.telopment agency, any legally binding and enforceable agreement that is not otherwise void as violating the debt limit or public policy, contracts necessary for the administration or operation of the successor agency, and amounts borrcwed from a lcw and moderate i ncorne housing fund.

Under the Dissolution Act, the categories of sources of payments for enforceable obligations listed on a Recognized Obligation Payment Schedule are the follcwing: (i) bond proceeds, (ii) reserve balances, (iii) administrative cost allcwance, (iv) the Rede.telopment Property Tax Trust Fund (but only to the extent no other funding source is available or when payment from property tax revenues is required b,I an enforceable obligation or otherwise required under the Dissolution Act), or (v) other revenue sources (including rents, concessions, asset sale proceeds, interest earnings, and any other revenues derived from the Predecessor Agency, as appr0.ted b,I the oversight Board). A reserve may be included on the Recognized Obligation Payment Schedule and held b,I a successor agency when required b,I the bond i ndenture or when the next property tax al I ocati on wi 11 be i nsuffi ci ent to pay al I obi i gati ons due underthe pr0.tisions of the bond for the next payment due in the follcwing six-month period.

The Dissolution Act pr0.tides that only those payments listed in the Recognized Obligation Payment Schedule may be made b,I the Successor Agency from the funds specified in the Recognized Obligation Payment Schedule. Each annual Recognized Obligation Payment Schedule may be amended once, pr0.tided that (i) the Successor Agency subnits the amendment to the Department of Finance no later than October 1, (ii) the oversight Board makes a finding that the amendment is necessary for the payment of appr0.ted enforceable obligations during the second half of the Recognized Obligation Payment Schedule period (fromJ anuary 1 toJ une 30, inclusive), and (iii) the Successor Agency may only amend the amount requested for payment of appr0.ted enforceable obligations. The Department of Finance is required to notify the Successor Agency and the County Auditor-Controller as to whether the Successor Agency's requested amendment is approved at least 15 days before theJ anuary 2 property tax distribution.

The Recognized Obligation Payment Schedule must be submitted b,I the Agency, after appr0.tal b,I the oversight Board, to the County Administrative Officer, the County Auditor-Controller, the Department of Finance and the State Controller b,I February 1 in each year. If the Successor Agency does not submit an oversight Board---appr0.ted Recognized Obligation Payment Schedule b,I such deadline, the City will be suqject to a civil penalty equal to $10,000 per day for every day that the schedule is not submitted. Additionally, the Successor Agency's administrative cost allowance will be reduced by 25% for any fiscal year for which the Successor Agency does not subnit an oversight Board-appr0.ted Recognized Obligation Payment Schedule within 10 days of the February 1 deadline. If the Successor Agency fails to subnit a Recognized Obligation Payment Schedule b,I the February 1 deadline, any creditor of the Successor Agency or the department or any affected taxing entity shall have standing to, and may request a writ of mandate to, require the Successor Agency to immediately perform this duty. For additional information regarding procedures under the Dissolution Act relating to late Recognized

15

Obligation Payment Schedules and irrplications thereof on the Bonds, see "RISK FACTORS -Recognized Obligation Payment Schedule."

With respect to each Recognized Obligation Payment Schedule subnitted b,I the Successor Agency, the Dissolution Act requires the Department of Finance to make a determination of the enforceable obligations and the amounts and funding sources available to pay appr0.ted enforceable obligations no later than April 15. Within five business days of the determination b,I the Department of Finance, the Successor Agency may request additional revie.v b,I the Department of Finance and an opportunity to meet and confer on disputed item,, if any. The Department of Finance will notify the Successor Agency and the County Auditor-Controller as to the outcome of its re..rie.v at least 15 days before theJ une 1 property tax distribution date preceding the applicable Recognized Obligation Payment Schedule period. Additionally, the County Auditor-Controller may revie.v a subnitted Recognized Obligation Payment Schedule and oqject to the inclusion of any item, that are not demonstrated to be enforceable obligations and may oqject to the funding source proposed for any item,, pr0.tided that the County Auditor-Controller must pr0.tide notice of any such oqjections to the Successor Agency, the OVersi ght B oard and the Department of Finance at I east 60 days prior to the next J une 1 property tax distribution date.

The Successor Agency co.tenants that it will duly and punctually pay or cause to be paid the principal of and interest on the Bonds on the date, at the place and in the manner pro.tided in the Bonds, and that it will take all actions required under the Health and Safety Code to include debt service on the Bonds on the Recognized Obligation Payment Schedule, including any amounts required to replenish the Reserve Fund to the full amount of the Reserve Requirement. In addition, the Successor Agency has c0.tenanted in the Indenture to annually prepare and submit a Recognized Obligation Payment Schedule that pr0.tides for the inclusion on the June 1 disbursement from the Redevelopment Property Tax Trust Fund, all scheduled interest and principal payments on the Bonds that are due and payable on February 1 and August 1 of the Bond Year ending on August 1 of the next ensuing calendar year, together with any amount required to replenish the Reserve Fund or to pay amounts due to the Insurer in connection with the Insurance Policy or the Reserve Policy. See "SECURITY AND SOURCES OF PAYMENT FOR THE BONDS- Certain CO.tenants of the Successor Agency" belo.v.

Re..renue Fund; Reserve Fund

There are established under the Indenture special funds kno.vn as the "Re..renue Fund" and the "Reserve Fund," which Funds will be held b,I the Trustee for the owners. The Trustee will send the Successor Agency on each December 30 and September 1 a Written Request specifying the amount of Pledged Tax Re..renues required to be deposited in the Re..renue Fund and;br the Reserve Fund, as applicable, including any amounts required to replenish the Reserve Fund to the full amount of the Reserve Requirement or reimburse for draws on any reserve surety for the Bonds. The Successor Agency will renit the amount requested pursuant to such Written Request to the Trustee within two (2) Business Days of receipt of distributions of Pledged Tax Re..renues. If the Trustee fails to pr0.tide the written request described abOJe, the Successor Agency shall transfer within two (2) Business Days of receipt of the distributions of Pledged Tax Revenues onJ une 1 and, to the extent necessary,J anuary 2 all scheduled pri nci pal of and interest on the B ands that are due and payable on February 1 and August 1 of the B and Year ending on August 1 of the next ensuing calendar year, together with any amount required to replenish the Reserve Fund.

Under the Indenture there are also created separate Accounts within the Re..renue Fund as set forth belo.v, to be kno.vn respectively as the Interest Account, the Principal Account, the Sinking Account, and the Redemption Account. Upon receiving Pledged Tax Revenues from the Successor Agency, the Trustee shall deposit all amounts received into the Revenue Fund or the Reserve Fund, as

16

applicable, until such time during each Bond Year as the amounts so deposited equal the aggregate amounts required to be transferred to the Trustee in such Bond Year (i) for deposit into the Interest Account, the Principal Account and the Rederrption Account of the Revenue Fund and (ii) for deposit into the Reserve Fund, if necessary. Such deposits shall be in the follcwing order of priority:

First Interest Account. On or before each Interest Payment Date, the Trustee shall set aside from the Revenue Fund and deposit in the Interest Account an amount of money which, together with any money contained therein, is equal to the aggregate amount of the interest becoming due and payable on the Outstanding Bonds on such Interest Payment Date. No deposit need be made into the Interest Account if the amount contained therein is at least equal to the interest to become due and payable on al I Outstanding Bands on the I nterest Payment Dates in such Bond Year. Suqject to the prcwisions of the Indenture, all moneys in the Interest Account will be used and withdriM'n by the Trustee solely for the purpose of paying the interest on the Bonds as it becomes due and payable (including accrued interest on any Bonds redeemed prior to maturity pursuant to the Indenture).

Second Principal Account. On or before each Principal Payment Date, the Trustee shall set aside from the Revenue Fund and deposit in the Principal Account an amount of money which, together with any money contai ned therei n, is equal to the aggregate amount of the principal becoming due and payable on the Outstanding Bands on such Principal Payment Date. No deposit need be made into the Principal Account if the amount contained therein is at least equal to the principal to become due and payable on all Outstanding Bonds on the upconing Principal Payment Date. Suqject to the Indenture, all moneys in the Principal Account will be used and withdriM'n by the Trustee solely for the purpose of paying the principal payments due on the Outstandi ng Bands as they become due and payable.

On or before each Principal Payment Date, the Trustee shall set aside from the Revenue Fund and deposit in the Sinking Account an amount of money equal to the Sinking Account Installment, if any, payable on the Sinking Account Payment Date in such Bond Year. The Trustee shall use moneys in the SinkingAccountto redeem Bonds pursuanttothe Indenture.

If there shall be insufficient money in the Revenue Fund to make in full all such principal payments and Sinking Account payments required to be made in such BondY ear, then the money available in the Revenue Fund shall be applied pro rata with respect to such principal payments and Sinking Account payments in the proportion that all such principal payments and Sinking Account Payments bear to each other.

Third Reserve Fund. Suqject to the Indenture, all money in the Reserve Fund or draws on a Qualified Reserve Fund Credit Instrument will be used and withdriM'n by the Trustee solely for the purpose of (i) making transfers to the related Interest Account, the Principal Account and the Sinking Account, in such order of priority, in the event of any deficiency at any time in any of such Accounts or (ii) for the reti rement of al I the B ands then Outstanding. Any amount in the Reserve Fund in excess of the Reserve Requirement for the Bonds shall be withdrawn from the Reserve Fund on or before the Interest Payment Date by the Trustee and deposited in the Interest Account. All amounts in any Account in the Reserve Fund five (5) Business Days before the final Interest Payment Date shall be withdrawn therefrom by the Trustee and transferred either (i) to the Interest Account and then Principal Account and the Sinking Account (and subaccounts therein, as the case may be), to the extent required to make the deposits then required to be made under the Indenture, or (ii) if sufficient deposits have been made under the Indenture, then, as directed by the Successor Agency in any manner permitted by law pursuant to a Written Request of the Successor Agency.

17

The Reserve Requirerrent may be satisfied b,I crediting to the Reserve Fund moneys or a Qualified Reserve Fund Credit lnstrurrent or any combination thereof, which in the aggregate make funds available in the Reserve Fund in an amount equal to the applicable Reserve Requirerrent. Upon deposit of such Qualified Reserve Fund Credit I nstrurrent, the Trustee shall transfer any excess amounts then on deposit in the Reserve Fund in excess of the Reserve Requirerrent into a segregated account of the Bond Fund, which monies shall be applied upon written direction of the Successor Agency either (i) to the payrrentwithin one year of the date of transfer of capital expenditures of the Successor Agency pernitted b,I law, or (ii) to the redemption of B ands on the earl i est succeedi ng date on which such rederrpti on is perni tted hereb,I, and pending such application shall be held either not invested in investrrent property (as defined in section 148(b) of the Code), or invested in such property to produce a yield that is not in excess of the yield on the Bonds; pro.tided, hONeJer, that the Successor Agency may b,I written direction to the Trustee cause an alternative use of such amounts if the Successor Agency shall first have obtained a written opinion of nationally recognized bond counsel substantially to the effect that such alternative use will not adversely affect the exclusion pursuant to section 103 of the Code of interest on the Bands from the gross i ncorre of the cwners thereof for federal income tax purposes. The Reserve Policy is a Qualified Reserve Fund Credit I nstrurrent and is issued in an amountto satisfy the Reserve Requirerrent as of the date of issuance of the Bonds.

In any case where the Reserve Fund is funded with a combination of cash and a Qualified Reserve Fund Credit I nstrurrent, the Trustee shall deplete all cash balances before drawing on the Qualified Reserve Fund Credit lnstrurrent. With regard to replenishrrent, any available moneys pro.tided b,I the Successor Agency shall be used first to reinstate the Qualified Reserve Fund Credit I nstrurrent and second, to replenish the cash in the Reserve Fund. If the Qualified Reserve Fund Credit lnstrurrent is drawn upon, the Successor Agency shall make payrrent of interest on amounts advanced under the Qualified Reserve Fund Credit lnstrurrent after making any payrrents pursuant to this subsection. If a Qualified Reserve Fund Credit lnstrurrent prcwider is dcwngraded for any reason, there shal I be no obi i gati on to replace or secure the Qual i fi ed Reserve Fund Credit I nstrurrent.

The Trustee will value the balance in the Reserve Fund on each August 2, comrrencing August 2, 2018. If the balance in an Account in the Reserve Fund is less than the Reserve R equi rerrent, the Trustee shal I i ndi cate the amount of such deficiency in a W ri tten Request to the Successor Agency. U pon receipt of such W ri tten Request, the Successor Agency shal I imrrediately take all necessary action to cure such deficiency in such Account, including using best efforts to place the amount of such deficiency on a Recognized Obligation Payrrent Schedule. No transfers or deposits need be made to the Reserve Fund so long as there is on deposittherei n a sum at I east equal to the Reserve Requi rerrent.

Redemption Account. The Successor Agency will deliver or cause to be delivered funds to the Trustee for deposit in the Redemption Account an amount required to pay the principal of, interest and premium, if any, on the Bonds (other than Bonds redeerred from Sinking Account Payrrents) to be redeerred on such date. Suqject to the Indenture, all moneys in the Redemption Account will be used and withdriM'n b,I the Trustee solely for the purpose of paying the principal of and interest or redemption premium (if any) on the Bonds to be redeerred on the date set for such rederrpti on.

A Surplus Fund is established under the Indenture. Follo.ving the deposits described abcwe, the Trustee will deposit any remaining Pledged Tax Revenues into the Surplus Fund. Follo.ving such deposit, the Trustee will transfer any Pledged Tax Revenues to the Successor Agency for the payrrent of any enforceable obligations of the Successor Agency, or, if no such

18

payrrent is required, such amounts shall be distributed in accordance with the Dissolution Act and other applicable I aw as di rected in wri ti ng b,I the Successor Agency.

E Ii mi nation of Housing Set-Aside

Pursuant to Sections 33334.2 and 33334.3 of the Redevelopment LiM', rede.telopment agencies were required to set aside not less than twenty percent of all tax increrrent revenues allocated to redevelopment agencies from rede.telopment prqject areas adopted after December 31, 1976, in a IONand moderate--i ncome housing fund to be expended for authorized housing purp:ises. Amounts on dep:isit in the ION-and moderate-income housing fund could be applied to pay debt service on bonds, loans, or acwances of rede.tel oprrent agencies to fi nance I ON-and moderate--i ncome housing prqj ects.

The Dissolution Act elininated the requirerrent that twenty percent of tax increrrent revenue be set aside and used exclusively for purp:ises of pr0.tiding ION and moderate income housing. The Bonds are payable from amounts of tax increrrent revenue that prior to the Dissolution Act were required to be set aside for I ON and moderate i ncorre housing.

Santa Barbara County Auditor-Controller

The County Auditor-Controller is responsible for establishing County fiscal and internal control policies and procedures; adninistering the County payroll; conducting audits and fraud investigations; monitoring social services contracts; perforning mandated property tax functions; disbursing warrants to vendors, child support recipients, judgrrent and damages to claimants; and managing the County's enterprise financial and payrol I systems.

The Dissolution Act assigns county auditors nurrerous responsibilities, including the responsi bi I ity to dep:isit tax i ncrerrent revenues attributable to each successor agency into a Redevelopment Property Tax Trust Fund held in the county treasury in the narre of each successor agency. Pursuant to the Dissolution Act, county auditors disburse funds from each Rede.telopment Property Tax Trust Fund twice annually, on January 2 andJ une 1. Such amounts include payrrents to affected taxing entities, payrrents that are required to be paid from tax increrrent as appr0.ted on a Recognized Obligation Payrrent Schedule, and various administrative fees and allONances. Remaining Redevelopment Property Tax Trust Fund balances are distributed to affected taxing entities under a prescribed rrethod that accounts for pass-through payrrents. County auditors are also responsible for distributing other moneys received from successor agencies (from sale of assets etc.) to the affected taxing entities.

Certain CO.tenants of the Successor Agency

As long as the Bonds are outstanding, the Successor Agency will (through its proper rrembers, officers, agents or emplO{ees) faithfully perform and abide b,I all of the c0.tenants, undertakings and pr0.tisions contained in the Indenture or in any Bond issued under the Indenture, including the follONing c0.tenants and agreerrents for the benefit of the owners which are necessary, convenient, and desirable to secure the Bands:

Compliance with Health and Safety Code. The Successor Agency c0.tenants that it will comply with all applicable requirerrents of the Health and Safety Code.

Recognized Obligation Payrrent Schedule. Pursuant to Section 34177 of the Health and Safety Code, b,I each February 1, comrrenci ng on February 1 , 2018 ( or such other dates as are specified i n the Health and Safety Code or other applicable liM'), the Successor Agency shall prepare and subnit an

19

OVersi ght B oard---apprcwed Recognized Obi i gati on Payrrent Schedule to the Departrrent of Finance and to the County Auditor-Controller, pursuant to which enforceable obligations of the Successor Agency are listed, including debt service with respect to the Bonds and any arrounts required to replenish the Reserve Fund or to pay arrounts due to the Insurer in connection with the Insurance Policy or the Reserve Policy. Such Recognized Obligation Payrrent Schedule must include all scheduled interest and principal payrrents on the Bonds that are due and payable on February 1 and August 1 of the Bond Year ending on August 1 of the next ensuing calendar year, together with any amount required to replenish the Reserve Fund and must pro.tide that such amounts be included in the June 1 disburserrent from the Redevelopment Property Tax Trust Fund.

If the prcwisions set forth in the Dissolution Act as of the delivery date of the Bonds that relate to the filing of the Recognized Obligation Payrrent Schedule are further arrended or modified in any manner, the Successor Agency agrees to take all such actions as are necessary to corrply with such amended or modified prcwisions to ensure the tirrely payrrent of debt service on the Bonds that are not inconsistent with the terms of the I ndenture.

The Successor Agency further agrees (i) to include all amounts payable to the Insurer on each Recognized Obligation Payrrent Schedule submission, (ii) that if any arrounts payable to the Insurer (with respect to the Insurance Policy or the Reserve Policy) are not included on any current Recognized Obligation Payrrent Schedule and the Successor Agency is then legally pernitted to arrend such Recognized Obligation Payrrent Schedule, the Successor Agency will amend its current Recognized Obligation Payrrent Schedule to include such amounts payable to the Insurer, and (iii) that the Successor Agency will not subnit the final arrendrrent pernitted for its Last and Final Recognized Obligation Payrrent Schedule withoutthe prior written consent of the Insurer.

Punctual Payrrent. The Successor Agency co.tenants that it will duly and punctually pay or cause to be paid the pri nci pal of and interest on the B ands on the date, at the pl ace and in the manner pro.tided in the Bonds, and that it will take all actions required under the Health and Safety Code to include debt service on the Bonds on the applicable Recognized Obligation Payrrent Schedule, including any arrounts required to replenish the Reserve Fund to the full amount of the Reserve Requirerrent.

No Priority; No Additional Parity Bonds; Refunding Bonds; Other Obligations. The Successor co.tenants that it will not issue any parity obligations, other than refunding bonds. See "THE BONDS -No Priority; No Additional Parity Bonds; Refunding Bonds; Other Obligations."

Use of Proceeds: Managerrent and Operation of Properties. The Successor Agency co.tenants that the proceeds of the sale of the Bands wi 11 be deposited and used as pro.tided in the I ndenture and that it will manage and operate all properties cwned b,I it corrprising any part of the Prqject Area in a sound and proper manner and in accordance with applicable law.

Payrrent of Taxes and Other Charges. The Successor Agency co.tenants that it wi II from ti rre to tirre pay and discharge, or cause to be paid and discharged, all payrrents in lieu of taxes, service charges, assessrrents or other gcwernrrental charges which may liMifully be imposed upon the Successor Agency or any of the properties then cwned b,I it in any PrqjectArea, or upon the revenues and incorre therefrom, and will pay all lawful claims for labor, materials and supplies which if unpaid might become a lien or charge upon any of the properties, revenues or income or which might impairthe security of the Bonds or the use of Pledged Tax Revenues or other legally available funds to pay the principal of and interest and redemption premium (if any) on the Bonds, all to the end that the priority and security of the Bonds shall be preserved; pro.tided, hcwever, that nothing in this co.tenant shall require the Successor Agency to make any such payrrent so long as the Successor Agency in good faith shall contest the validity of the payrrent.

20

Books and Accounts; Financial Staterrents. The Successor Agency co.tenants that it will at all ti rres keep, or cause to be kept, proper and current oooks and accounts in which corrpl ete and accurate entries are made of the financial transactions and records of the Successor Agency. Within two hundred seventy (270) days after the close of each Fiscal Year an Independent Certified Public Accountant shall prepare an audit of the financial transactions and records of the Successor Agency for such Fiscal Year. To the extent permitted b,I law, such audit may be included within the annual audited financial staterrents of the City. Upon written request, the Successor Agency shall, as soon practicable, furnish a cop,1 of each audit to any owner.

Protection of Security and Rights of owners. The Successor Agency co.tenants to preserve and protect the security of the Bonds and the rights of the owners and to contest b,I court action or otherwise (a) the assertion b,I any officer of any gcwernrrent unit or any other person whatsoe.ter against the Successor Agency that the Pledged Tax Revenues pledged under the Indenture cannot be used to pay debt service on the Bonds or (b) any other action affecting the validity of the Bonds or diluting the security therefor.

Continuing Disclosure. The Successor Agency co.tenants that it will comply with and carry out all of the prcwisions of its Continuing DisclosureAgreerrent. Notwithstanding any other prcwision of the I ndenture, fai I ure b,I the Successor Agency to comply with its Continuing Di sci osure A greerrent shal I not be considered an Event of Default; ho.vever, any participating underwriter, owner or beneficial o.vner of any Bands may take such actions as may be necessary and appropriate to compel performance, including seeking mandate or specific performance b,I court order.

Statutory Pass-Through Payments

The Redeveloprrent Plan was established b,I the apprcwal of Ordinance No. 85-263 on December 19, 1985. The Predecessor Agency arrended the Redeveloprrent Plan on Ncwember 13, 2007 pursuant to Ordinance No. 2007-388. As a result of such arrendrrent, the Successor Agency is required to make payrrents (the "Statutory Pass-Through Payrrents") under Section 34183(a)(l) of the Health and Safety Code (the "Tax Sharing Statute"). Payrrents pursuant to the Tax Sharing Statute are inapplicable if the Successor Agency and an affected taxing entity have a tax sharing agreerrent which gcwerns tax sharing in connection with an arrendrrent. The Successor Agency has not entered into any such tax sharing agreerrents.

The Tax Sharing Statute set forth a requirerrent for payrrents of tax increrrent revenues to be made in prescribed amounts to taxing entities in the event certain arrendrrents are made to a prqject area, such as arrendrrents to a redevelopment plan to extend the tirre during which a redeveloprrent agency may incur debt with respect to a prqject area. Sinilar prcwisions apply to arrendrrents that add territory to a prqj ect area, arnendrrents to i ncrease the number of dol I ars which may be al I ocated to a redevelopment agency, or arnendrrents which extend the tirre during which a redevelopment plan is effective where the redevelopment plan being amended contains the prcwisions required b,I subdivision (b) of Section 33670 of the Health and Safety Code. In general, the amounts to be paid pursuant to Tax Sharing Statute are as fol Io.vs:

(a) comrrencing in the first fiscal year after territory is added or one or more of the limitations has been reached, as applicable, an amount equal to 25% of tax increrrent revenues generated b,I the i ncrerrental increase of the current year assessed valuation cwerthe assessed valuation in the fiscal year that the limitation had been reached, after the amount required to be deposited in the lo.v and moderate i ncorne housi ng fund has been deducted;

21

(b) in addition to amounts payable as described in (a) alx:we, comrrencing in the 11th fiscal year after territory is added or the limitation has been reached, as applicable, an amount equal to 21% of tax i ncrerrent revenues generated b,I the i ncrerrental increase of the current year assessed valuation ewer the assessed valuation in the preceding (10th) fiscal year that the linitation had been reached, after the amount required to be deposited i n the I ON and moderate i ncorre housi ng fund has been deducted; and

(c) in addition to amounts payable as described in (a) and (b) alx:we, comrrencing in the 31st fiscal year after territory is added or the linitation has been reached, as applicable, an amount equal to 14% of tax i ncrerrent revenues generated b,I the i ncrerrental increase of the current year assessed valuation ewer the assessed valuation in the preceding (30th) fiscal year that the limitation had been reached, after the amount required to be deposited in the I ON and moderate i ncorne housing fund has been deducted.

The Dissolution Act eliminated the requirerrent under the Redeveloprrent LiM' that redevelopment agencies set aside not less than twenty percent of al I tax i ncrerrent revenues al located to the redeveloprrent agencies from redeveloprrent prqjects in a ION and moderate incorre housing fund to be expended only on authorized housing purposes. See "SECURITY AND SOURCES OF PAYMENT FOR THE BONDS- Elimination of Housing Set-Aside" herein. Notwithstanding the elinination of the ION to moderate incorre housing set aside requirerrent, the Dissolution Act requires that the amount that would have been set aside for deposit in a ION and moderate income housing fund prior to the enactrrent of the Dissolution Act must still be deducted when calculating the amount of Statutory Pass-Through Payrrents payable b,I successor agencies.

The Dissolution Act establishes procedures whereb,I the Successor Agency may make Statutory Pass-Through Payrrents subordinate to the payrrent of debt service on the Bonds. The Successor Agency has not satisfied the requirements of the Dissolution Act to subordinate the Statutory Pass-Through Payments to the payment of debt service on the Bonds.

The Dissolution Act also required that the calculation and payrrent of tax sharing amounts be taken ewer b,I the County Auditor-Controller. Since February, 2012, the tax sharing obligations outlined alx:we have been adni nistered b,I the County Auditor-Controller's office.

General

THE SUCCESSOR AGENCY TO THE GUADALUPE COMMUNITY REDEVELOPMENT AGENCY

The Predecessor Agency was established b,I the City Council of the City with the adoption of Ordinance No. 85-246 on February 4, 1985 as a public body, corporate and politic, existing under and b,I virtue of the Redeveloprrent LiM'. On June 29, 2011, AB xl 26 was enacted as Chapter 5, Statutes of 2011, together with a companion bill, AB xl 27. AB xl 26 pro.tided for the dissolution of all redevelopment agencies, but also permitted redeveloprrent agencies to avoid such dissolution b,I the payrrent of certain amounts. A lawsuit was brought in the California Suprerre Court, California Redeveloprrent Association, et al., v. Matosantos, et al., 53 Cal. 4th 231 (Cal. 2011), challenging the constitutionality of AB xl 26 and AB xl 27. In its December 29, 2011 decision, the California Suprerre Court largely upheld AB xl 26, invalidated AB xl 27, and held that AB xl 26 may be severed from AB xl 27 and enforced independently. As a result of AB xl 26 and the decision of the California Suprerre Court in the California Redeveloprrent Association case, as of February 1, 2012, all redeveloprrent agencies in the State were dissolved, including the Predecessor Agency, and successor agencies were designated as successor entities to the forrrer redeveloprrent agencies to expeditiously wind dONn the

22

affairs of the former redevelopment agencies. The Department of Finance conducted a review of the Successor Agency's documentation and issued its Finding of Completion on March 18, 2013.

The City Council, pursuant to Resolution No. 2012-08, adopted on January 24, 2012, elected to serve as Successor Agency. Subdivision (g) of Section 34173 of the Dissolution Act, added by AB 1484, expressly affirm, that the Successor Agency is a separate public entity from the City, that the two entities shall not merge, and that the liabilities of the Predecessor Agency will not be transferred to the City nor will the assets of the Predecessor Agency become assets of the City.

Members, Officers and Staff

The members of the Successor Agency Board of Directors (the "Board") and the expiration dates of thei rterm, are as fol Io.vs:

Name and Office

John Lizalde, Chair AristonJ ul ian, Member Virginia Ponce, Member Tony Ramirez, Member Gina Rubalcaba, Member

Expiration of Term

N0.tember 2018 N0.tember 2018 N0.tember 2018 N0.tember 2020 N0.tember 2020

The professional staff of the Successor Agency presently consists of the follo.ving members:

Name

Cruz Ramos Annette Munoz

Joice Earleen Raguz

Successor Agency Po.vers

Title

Executive Di rector Finance Di rector

Clerk

All po.vers of the Successor Agency are vested in the Board. Pursuant to the Dissolution Act, the Successor Agency is a separate public body from the City and succeeds to the organizational status of the Predecessor Agency but without any legal authority to participate in redevelopment activities, except to complete any work related to an apprcwed enforceable obligation. The Successor Agency is tasked with expeditiously winding dONn the affairs of the Predecessor Agency, pursuant to the procedures and pr0.tisions of the Dissolution Act. Under the Dissolution Act, many Successor Agency actions are suqject to appr0.tal by the oversight Board, as well as review by the Department of Finance. California has strict laws regarding public meetings (kno.vn as the Ralph M. Bro.vnAct) which generally make all Successor Agency and oversight Board meetings open to the public in similar manner as City Council meetings.

Previously, Section 33675 of the Redevelopment Law required the Predecessor Agency to file not later than the first day of October of each year with the County Auditor-Controller a statement of indebtedness certified by the chief fiscal officer of the Predecessor Agency for each redevelopment plan which pr0.tides for the allocation of taxes (i.e., the Redevelopment Plans). The statement of indebtedness was required to contain the date on which the bonds were delivered, the principal amount, term, purposes and interest rate of the bonds and the outstanding balance and amount due on the bonds. Similar information was required to be given for each loan, advance or indebtedness that the Predecessor Agency had incurred or entered into which is payable from tax increment. Section 33675 also pr0.tided that payments of tax increment revenues from the County Audi tor -Control I erto the Predecessor Agency could

23

not exceed the amounts shown on the Predecessor Agency's statement of indebtedness. The Dissolution Act eliminated this requirement and pr0.tides that, commencing on the date the first Recognized Obligation Payment Schedule is valid thereunder, the Recognized Obligation Payment Schedule supersedes the statement of indebtedness previously required under the Redevelopment LiM', and commencing from such date, the statement of indebtedness will no longer be prepared nor have any effect under the Redevelopment Law. See "SECURITY AND SOURCES OF PAYMENT FOR THE BONDS -Recognized Obligation Payment Schedule."

Redevelopment Plan

Under the Redevelopment Law, the City Council was required to adopt, b,I ordinance, a redevelopment plan for each redevelopment prqject. A redevelopment agency may only undertake those activities within a redevelopment prqject specifically authorized in the adopted redevelopment plan. A redevelopment plan was a legal document, the content of which is largely prescribed in the Redevelopment Law rather than a "plan" in the customary sense of the word. The Redevelopment Plan was appr0.ted b,I Ordinance No. 85-263 adopted b,I the City Council of the City on December 19, 1985 and amended b,I Ordinance No. 2007-388 adopted b,I the City Counci I on N0.tember 13, 2007, and b,I Ordinance 09-398 adopted b,I the City Council on May 26, 2009.

No Plan Limitations

SB 107, which became effective September 22, 2015, amended the Dissolution Act to pr0.tide that the time limits for receiving property tax revenues and the linitation on the amount of property tax revenues that may be received b,I the Predecessor Agency and the Successor Agency set forth in the Redevelopment Plan are not effective for purposes of paying the Successor Agency's enforceable obligations. Accordingly, the projections set forth in this Official Statement and in the Fiscal Consultant's Report were prepared without regard to the time and financial limitations set forth in the Redevelopment Plan for the PrqjectArea.

24

THE PROJECT AREA

Historical Tax Revenues for the Prqj ect Area

Between Fiscal Year 2013-14 and Fiscal Year 2017-18 the taxable value within the Prqject Area increased b,I $52,576,846 (26.2%). During this span, secured values grew b,I approximately $45.9 nillion (25.1%) and unsecured values grew b,I approximately $6.6 nillion (36.7%). The follo.ving table pro.tides a summary of the historical taxable valuation and resulting tax revenues in the Prqject Area for the fiscal years sho.vn. This summary of historical assessed valuations and tax receipts is not intended to may not be indicative of future Pledged Tax Revenues.

PROJECT AREA ASSESSED VALUE HISTORY

(In Dollars)

2013-14 2014-15 2015-16

Assessed Values Secured $182,599,655 $191,784,467 $202,789,175

Unsecured 18,054,684 21,202,091 21,615,604

Total Assessed Value $200,654,339 $212,986,558 $224,404,779

Less: Base Y ear Assessed Value 43,017,393 43,017,393 43,017,393

Incremental Assessed Value $157,636,946 $169,969,165 $181,387,386

Tax Revenues Gross Tax Increment Revenue $1,627,489 $1,736,849 $1,864,709 (1)

Less: County Admin. Fees Ill 21,855 41,846 28,848 Less: Pass Through Pmts. Ill 215,203 241 817 271 971

Pledged Tax Revenues 111 $1,390,431 $1,453,186 $1,563,890

-----------------Ill Projected arrounts for Fiscal Year 2017-18, based on actual Fiscal Year 2017-1 SAssessed Valuation. Source: Urban Futures, Inc.

25

2016-17

$212,798,400

24,642,997 $237,441,397

43,017,393

$194,424,004

$2,027,346

34,196

325,860

1,667,290

2017-18

$228,537,837

24,693,348 $253,231,185

43,017,393

$210,213,792

$2,102,138

35,526

344,639

1,721,973

Historical Redevelopment Property Tax Trust Fund Revenues

The follo.ving table pr0.tides a summary of the Redevelopment Property Tax Trust Fund Revenues derived from the Prqject Area for the years sho.vn.

PROJECT AREA REDEVELOPMENT PROPERTY TAX TRUST FUND REVENUES

Enforceable Property Tax Obligations

Recognized Obligation (Redevelopment County Pass Available for Appr0.ted by Residual Revenue Fiscal Payment Schedule Property Tax Administrative Through Enforceable Department for Distribution to Year ("ROPS") Filed Trust Fund) Distribution Payments Obligations of Finance111 Taxing Entitiesi'i

$ $ 2012-13 $ 892,626 $ 1,611,863 $ 48,058 205,880 1,357,925 $ 547,035 $ 810,890

2013-14 641,118 1,627,489 21,855 215,202 1,390,432 640,838 749,594

2014-15 577,652 1,736,850 41,846 241,816 1,453,188 458,973 994,215

2015-16 918,202 1,864,709 28,848 271,972 1,563,889 852,688 711,201

2016-17 551,778 2,027,346 34,196 325,860 1,667,290 510,324 1,156,966

Source: Urban Futures, Inc. 111 I ncl udes debt service payments on outstanding Refunded B onds, Successor Agency adrri nistrative al I o.vance and any other enforceable obi igati ons. 121 Residual Ra,enue annunts are net of any prior period adjustments.

26

Prqjected Pledged Tax Revenues for the Prqj ect Area

The follo.ving tables pr0.tide a sumnary of the prqjected taxable valuation and resulting prqjected tax revenues in the Prqject Area for the fiscal years sho.vn based on the Fiscal Consultant's prqjections of tax revenues for the Prqject Area as set forth in the Fiscal Consultant's Report. See APPENDIX H - "FISCAL CONSULTANT'S REPORT" for more detailed information on prqjected tax revenues for the Prqject Area, including an explanation of the assumptions on which such prqjections are based. The first table assumes no inflationary grONth in the tax base and the second table incorporates i nfl ati onary grONth at 2% .

Receipt of prqjected tax revenues in the amounts and at the time prqjected b,I the Successor Agency's Fiscal Consultant depends on the realization of certain assumptions relating to the tax revenues. The prqjections of tax revenues shown in the Fiscal Consultant's Report are based on the assumptions described therein. Based upon the prqjected tax revenues, the Successor Agency expects sufficient funds should be available to the Successor Agency to pay principal of and interest on the Bonds. Although the Successor Agency believes that the assumptions upon which the prqjected tax revenues are based are reasonable, the Successor Agency pr0.tides no assurance that the prqjected tax revenues will be realized. To the extent that the assumptions are not actually realized, the Successor Agency's ability to timely pay principal and interest on the Bonds may be materially adversely affected. See "RI SK FACTORS."


27

PROJECT AREA PROJECTION OF INCREMENTAL VALUE

ANDPLEDGEDTAX REVENUES ASSUMES NO GROWTH

(In Thousands)

County Pass Prqjected Fiscal Assessed Gross Tax Administration Through Pledged Tax Year Valuationc•i Re.tenues<'1 FeesC 3I P aymentsC4I Re.tenues< 51

2017-18 $253,231, 185 $2,102,138 $35,526 $344,639 $1,721,973 2018-19 253,231,185 2,102,138 35,526 344,639 1,721,973 2019-20 253,231,185 2,102,138 35,526 344,639 1,721,973 2020-21 253,231,185 2,102,138 35,526 344,639 1,721,973 2021-22 253,231,185 2,102,138 35,526 344,639 1,721,973 2022-23 253,231,185 2,102,138 35,526 344,639 1,721,973 2023-24 253,231,185 2,102,138 35,526 344,639 1,721,973 2024-25 253,231,185 2,102,138 35,526 344,639 1,721,973 2025-26 253,231,185 2,102,138 35,526 344,639 1,721,973 2026-27 253,231,185 2,102,138 35,526 344,639 1,721,973 2027-28 253,231,185 2,102,138 35,526 344,639 1,721,973 2028-29 253,231,185 2,102,138 35,526 344,639 1,721,973 2029-30 253,231,185 2,102,138 35,526 344,639 1,721,973 2030-31 253,231,185 2,102,138 35,526 344,639 1,721,973 2031-32 253,231,185 2,102,138 35,526 344,639 1,721,973 2032-33 253,231,185 2,102,138 35,526 344,639 1,721,973 2033-34 253,231,185 2,102,138 35,526 344,639 1,721,973 2034-35 253,231,185 2,102,138 35,526 344,639 1,721,973

Source: Urban Futures, Inc. 111 Assumes no gro.vth in Fiscal Year 2017-lSassessedvaluation. 1,1 Gross Tax Ra,enues based on 1.00!6 tax rate applied to incremental assessed valuation (CNer base year assessed

valuation of $43,017,393). 131 County Adrrinistration Fees estirrated at 1.69!6 of Gross Tax Revenues, based on historical adrrinistration fee

amounts. 141 Statutory pass through payments. 151 Pledged Tax Ra,enuesavailable for debt service on the Bonds.

28

PROJECT AREA PROJECTION OF INCREMENTAL VALUE

ANDPLEDGEDTAX REVENUES ASSUMES 'ZYc INFLATIONARY GROWTH

(In Thousands)

County Pass Prqjected Fiscal Assessed Gross Tax Administration Through Pledged Tax Year Valuationc•i Re.tenues<'1 FeesC 3I P aymentsC4I Re.tenues< 51

2017-18 $253,231, 185 $2,102,138 $35,526 $344,639 $1,721,973 2018-19 258,295,809 2,152,784 36,382 360,001 1,756,401 2019-20 263,461,725 2,204,443 37,255 376,013 1,791,175 2020-21 268,730,959 2,257,136 38,146 392,701 1,826,289 2021-22 274,105,579 2,310,882 39,054 410,093 1,861,735 2022-23 279,587,690 2,365,703 39,980 428,218 1,897,505 2023-24 285, 179,444 2,421,621 40,925 447,106 1,933,589 2024-25 290,883,033 2,478,656 41,889 466,789 1,969,978 2025-26 296,700,693 2,536,833 42,872 487,300 2,006,660 2026-27 302,634,707 2,596,173 43,875 508,673 2,043,625 2027-28 308,687,401 2,656,700 44,898 530,943 2,080,859 2028-29 314,861,150 2,718,438 45,942 554,147 2,118,349 2029-30 321,158,373 2,781,410 47,006 578,323 2,156,081 2030-31 327,581,540 2,845,641 48,091 603,512 2,194,038 2031-32 334, 133, 171 2,911,158 49,199 629,755 2,232,204 2032-33 340, 81 5,834 2,977,984 50,328 657,095 2,270,561 2033-34 347,632, 151 3,046,148 51,480 685,578 2,309,089 2034-35 354,584,794 3,115,674 52,655 715,251 2,347,768

Source: Urban Futures, Inc. 111 Based on assumed Z¥, annual assessed valuation grONth CNer actual Fiscal Year 17-18 assessed valuation. 1,1 Gross Tax Ra,enues based on 1.00!6 tax rate applied to incremental assessed valuation (CNer base year assessed

valuation of $43,017,393). 131 County Adrrinistration Fees estirrated at 1.69!6 of Gross Tax Revenues, based on historical adrrinistration fee

amounts. 141 Statutory pass through payments. 151 Pledged Tax Ra,enuesavailable for debt service on the Bonds.

29

Estimated Debt Service C0.terage

The follo.ving table sets forth the estimated debt service ccwerage for the Bonds based on estimated tax revenues from the Prqject Area. Although the Successor Agency believes that the assumptions upon which the prqjected tax revenues are based are reasonable, the Successor Agency pr0.tides noassurancethatthe prqjectedtax revenues will be realized. See"RISK FACTORS."

Estimated Debt Service Coverage for the Bonds Assnming No Growth

Fiscal Years 2017-18 throngh 2034-35 (In thonsands)

Fiscal Available Bonds Remaining Year Tax Revenue111 Debt Service1' 1 Ccwerage Tax Revenue

2018 $1,721,973 $358,636 48036 $1,363,337

2019 1,721,973 357,831 481 1,364,141

2020 1,721,973 358,531 480 1,363,441

2021 1,721,973 359,131 479 1,362,841

2022 1,721,973 359,069 480 1,362,904

2023 1,721,973 363,319 474 1,358,654

2024 1,721,973 361,719 476 1,360,254

2025 1,721,973 359,369 479 1,362,604

2026 1,721,973 361,869 476 1,360,104

2027 1,721,973 359,069 480 1,362,904

2028 1,721,973 361,119 477 1,360,854

2029 1,721,973 362,525 475 1,359,448

2030 1,721,973 362,550 475 1,359,423

2031 1,721,973 362,225 475 1,359,748

2032 1,721,973 361,550 476 1,360,423

2033 1,721,973 365,525 471 1,356,448 2034 1,721,973 363,975 473 1,357,998

2035 1,721,973 357,075 482 1,364,898

111 Source: Urban Futures, Inc. 1,1 Debt Service Represented in Bond Years (August 1); Source: Stifel, Nicolaus & Corrpany,

Incorporated.

30

Estimated Debt Service Coverage for the Bonds Assnming 2% Inflationary Growth

Fiscal Years 2017-18 throngh 2034-35 (In thonsands)

Fiscal Available Bonds Remaining Year Tax Revenuelll Debt Service121 Ccwerage Tax Revenue 2018 $1,721,973 $358,636 48036 $1,363,337

2019 1,756,401 357,831 491 1,398,569

2020 1,791,175 358,531 500 1,432,644

2021 1,826,289 359,131 509 1,467,158

2022 1,861,735 359,069 518 1,502,667

2023 1,897,505 363,319 522 1,534,186

2024 1,933,589 361,719 535 1,571,870

2025 1,969,978 359,369 548 1,610,609

2026 2,006,660 361,869 555 1,644,791

2027 2,043,625 359,069 569 1,684,556

2028 2,080,859 361,119 576 1,719,740

2029 2,118,349 362,525 584 1,755,824

2030 2,156,081 362,550 595 1,793,531

2031 2,194,038 362,225 606 1,831,813

2032 2,232,204 361,550 617 1,870,654

2033 2,270,561 365,525 621 1,905,036

2034 2,309,089 363,975 634 1,945,114

2035 2,347,768 357,075 658 1,990,693

111 Source: Urban Futures, Inc. 1,1 Debt Service Represented in Bond Years (August 1); Source Stifel, Nicolaus & Corrpany,

Incorporated.

31

Top Ten Taxable Property Owners in the Prqject Area

Within the Prqject Area, for Fiscal Year 2017-18, the aggregate total taxable value for the ten largest taxpayers is $73,607,977. This an'Dunt is 32.22% of the $228,470,375 secured assessed value for the Prqject Area. The top taxpayer in the Prqject Area is Apia Inc. and it o.vns 6 secured parcels with a valuation of $30,908,377. The value of these 6 secured parcels o.vned b,I Apia Inc. is 13.53% of the Project Area's total secured value. The second largest taxpayer within the Prqject Area is Bg.t Olivera LLC that controls a total of $9,9654,665 in secured assessed value. This am)Unt is 4.23% of the Prqject Area's secured assessed value. The top five largest taxpayers within the Prqject Area account for ewer 27% of the secured assessed value within the Prqject Area. See "RISK FACTORS - Concentration of ownership."

Among the top ten taxpayers, one, Wallerseed Flo.verseed Co., has filed an assessrrent appeal that is currently pending. See "Assessrrent Appeals in the Prqject Area" belo.v for a discussion of pending assessrrent appeals within the Prqject Area The follo.ving table illustrates the percentage of secured assessed value for the top ten taxpayers in the Prqject Area and their relative importance to the secured assessed value of the Prqject Area. Descriptions of the top five taxpayers fol Io.vs the table.


32

Set forth in the table belo.v are the ten largest property taxpayers in the PrqjectArea forthe Fiscal Year 2017-18.

PROJECT AREA Largest Local Secured Taxpayers;Property Owners

Fiscal Year 2017-18 Percent of Percent of

Taxable Secured Primary Secured Incremental Property Owner Assessed Value Land Use Assessed Valuelll Assessed Val ue121

1. Apia Inc $30,908,377 Industrial 13.53% 14.70% M ulti--Family

2. Bg.t Olivera LLC 9,654,665 R esi denti al 4.23% 4.59% M ulti--Family

3. AlvarezJ ose Guadalupe Separate Property 9,449,764 R esi denti al 4.14% 4.50% 4. Apia Cooling 7,529,000 Industrial 3.30% 3.5836 5. Wal I er FI o.verseed Co 6,259,517 Commercial 2.74% 2.9836

M ulti--Family 6. RuizJ oseph L Sr Separate Property Trust 2,892,056 R esi denti al 1.27% 1.3836 7. Beachside Produce LLC 2,159,841 Industrial 0.95% 1.03%

Single Fanily 8. De La TorreJ uan 1,746,360 R esi denti al 0.76% 0.83% 9. Alvarez Gustavo Revocable Trust 1,591,058 Commercial 0.7036 0.76%

10. Zepeda F ani ly Trust 1,417,339 Industrial 0.62% 0.67% Total $73,607,977 32.2236 35.02%

111 Based on Fiscal Year 2017-18 secured assessed value of $228,470,375. 121 Based on Fiscal Year 2017-18 incremental assessed value of $210,213,792.

Source: Urban Futures, Inc. with information from the Santa Barbara County 2017-18 Secured Property Tax Roll.

33

Descriptions of the top five taxpayers in the Prqject Area are presented belcw:

1. Apia Inc. cwns six parcels in the Prqject Area. The parcels are impr0.ted with processing, packing and storage facilities for Apio Inc. 's produce business. Apia Inc. is a year-rnund suppiier of high-quality vegetables to the fresh-cut produce industry. Apia Inc. specializes in fresh-cut branded bag and tray sales and its produce is marketed through the Greenline® and Eat Smart® retail brands. Apia Inc. has been located in the Prqject Area since 1979 and is a subsidiary of Landec Corporation.

2. Bq.t Olivera LLC is the taxpayer of seventy-four residentially zoned parcels within the PrqjectArea. The parcels are impr0.tedwith multi-family rental dwellings

3. Alvarez Jose Guadalupe Separate Property is the taxpayer of thirty-three residentially zoned parcels within the Prqject Area. The parcels are irnpr0.ted with a mix of multi-family rental dwel Ii ngs, single fani ly rental dwel I i ngs and commercial rentals.

4. Apia Cooling cwns one parcel in the Prqject Area. The parcel is associated with Apia Inc. and also harvests and processes fresh cut vegetables under the Eat Smart® brand. The parcel is impr0.tedwith facilities that support Apio Inc.'s produce processing and storage operations.

5. Waller Flcwerseed Co. is the cwner of one commercially zoned property. The parcel is impr0.ted with a facility that is used b,I Waller Flcwerseed Co. for scientific research of flcwer seeds. Wallerseed Flcwerseed Co. has filed an assessment appeal that is currently pending. See "Assessment Appeals in the Prqject Area" belcw for a discussion of pending assessment appeals within the Prqject Area.


34

Land Uses Within the PrqjectArea

Set forth in the table belo.v are the land uses within the PrqjectArea

PROJECT AREA Land Use Summary Fiscal Year 2017-18

Number of Secured Assessed Percent of Secured Land Use Parcels Valuation Assessed Valuelll Single Family Residential 1,052 $135,036, 1 CXi 59.10% Industrial 23 40,876,146 17.89% Commercial 68 22,463,086 9.83% M ul ti-f ani ly R esi den ti al lCXi 19,445,765 8.51% Va cant I ndustri al 24 5,360,854 2.35% Vacant Commercial 26 2,267,394 0.99% Vacant Residential 54 2,241,656 0.98% Va cant G cwernmental ~ nsti tuti anal ;Other 25 321,100 0.14% Gcwernmental ~ nstitutional ;Other 34 283,997 0.12% Agricultural 3 174,271 0.08% R ecreati anal 3 0 0.00%

Totals 1,418 $228,470,375 100.0036

111 Based on Fiscal Year 2017-18 secured assessed valuation of $228,470,375. Source: Urban Futures, Inc. with information from the Santa Barbara County 2017-1 SSecured Property Tax Roll.

De..relopment Activities

Since January 1, 2017 within the Prqject Area, there have been 17 transfers of real property o.vnershipwhere the sales price can be confirmed b,I the Fiscal Consultant. These transfers of o.vnership represent a combined increase of $2,357,600 in assessed value that is expected to be added to the tax rolls for 2018-19. Ne.v development continues to occur within the Prqject Area but no additional value has been included in the Fiscal Consultant's prqjections for ne.v construction.

Assessment Appeals in the Prqject Area

There are presently appeals pending in the Prqject Area representing real property with a total assessed value of $8,946,391. The fifth largest taxpayer in the Prqject Area for Fiscal Year 2017-18, Waller Flo.verseed Co, has filed an assessment appeal that is currently pending. The Santa Barbara County Assessment Appeals B oard ( the "Appeals Board") adni ni sters the assessment appeals process for the County. The table belo.v pro.tides a summary of the appeals that were filed from January 1, 2012 through September 21, 2017, as well as the appeals that are presently outstanding. Based on the actual valuation reductions allo.ved b,I the Appeals Board during the past five years, the Fiscal Consultant does not anticipate thatthe resolution of the presently pending appeals will result in any valuation reductions in the PrqjectArea. See APPENDIX H - "FISCAL CONSULTANT'S REPORT.

35

PROJECT AREA Historical Assessment Appeals Re..riewedJ anuary 1, 2012Through September 21, 2017

Total

Number of Appeals

Filed

Number of Successful Appeals

Assessed Value of Property

Owner's Opinion of

Value $11,934,000

Requested Assessed

Value Reduction $7,913,488

Reduction Allo.ved by

Appeals Board

$0

Allo.ved Reductions

as% of Requested

0.00% 6 0 $19,847,488

Outstanding Assessment Appeals

(Estimated) Number of Assessed Owner's Potential Loss Historical Assessed

Roll Year Appeals Value of Opinion of of Assessed Success Value Appealed Filed Propertv Value Value Rate Reduction

2016 3 $1,665,762 $ 960,000 $ 705,762 0.00% 2017 2 7,280,629 4,369,000 2,911,629 0.00%

Source: U rain Futures, Inc. with data obtained from Santa Barbara County.

Residential Real Estate Values

In response to the dONn-turn in real estate values state-wide that generally began in fiscal year 2009-10, the Assessors throughout the State re..riewed the values of residential parcels within their counties. In 1978, California voters passed Proposition 8. This constitutional amendment allo.vs a temporary reduction in assessed value when a property suffers a "decline in value." A decline in value occurs when the current market value of a property is I ess than the current assessed value as of the Ii en date. Under the terms of Proposition 8, it is the Assessor's obligation to assess all properties at the lesser of current market value or at the property's base value as adjusted for inflation and for any changes that have occurred to the property si nee it was last purchased.

Properties that have their values reduced to the current market value are annually reviewed b,I the Assessor to deternine the new market value of the property. The value that is enrolled each year is the lesser of the current market value or the property's base adjusted base value. Adjusting the property's val ue to the current market value may entai I a further decrease i n val ue or an increase i n value that is not limited b,I constitutional restriction on annual value increases. Once the property has once again reached its adjusted base value, it may be increased in value only b,I the rate of inflation to a maximum annual rate of two percent as required b,I the Constitution. Residential properties make up approximately 82% of all parcels within the Prqject Area and account for approximately 6836 of the secured value of all properties in the Prqject Area.

Most of the decline in residential value was the result of Proposition 8 revisions of value and a smaller portion of the decline is the result of foreclosures and resale of properties at amounts that were less than the assessed value. The residential market dONnturn created significant residential value losses within the Prqject Areas but have been reccwering. Residential properties within the Prqject Areas are no.v at their highest historical value. Reccwery of values reduced under Proposition 8 are partially responsible for the increases in value ewer the past three years but this value increase was augmented b,I the sale of homes at values much greater than the property's prior assessed values.

36

0 0

Based on information provided by the Assessor's Office, the Assessor reccwered $539,828,799 in Proposition 8 value reducti ans wi thi n the tax rol Is for Fi seal Y ear 2016-17 on a countywi de basis. After a period of annual countywide Prop:isition 8 value reductions from Fiscal Year 2007-08 through Fiscal Year 2012-13, the Assessor has reccwered Prop:isition 8 value reductions on a countywide basis every year since Fiscal Year 2013-14.

RISK FACTORS

The fol lo.vi ng i nforrrati on should be considered b,I prospective investors in evaluating the Bonds. Hcwever, the follCMing does not purport to be an exhaustive listing of risks and other considerations which rray be relevant to investing in the Bonds. In addition, the order in which the follCMing inforrration is presented is not intended to reflect the relative i rnportance of any such risks.

The various legal opinions to be delivered concurrently with the issuance of the Bonds will be qualified as to the enforceability of the various legal instrurrents b,l limitations imp:ised b,I State and federal laws, rulings and decisions affecting remedies, and b,I bankruptcy, reorganization or other laws of general application affecting the enforcement of creditors' rights, including equitable princi pies.

Reduction in Taxable Value

Pledged Tax Revenues available to pay principal and interest on the Bonds are deternined b,I the amount of increrrental taxable value in the Prqject Area and the current rate or rates at which property in the Prqject Area is taxed. The reduction of taxable values of property in the Prqject Area caused b,I economic factors beyond the Successor Agency's control, such as relocation out of the Prqject Area b,I one or more major property o.vners, sale of property to a non-profit corporation exempt from property taxation, or the complete or partial destruction of such property caused b,I, among other eventualities, earthquake or other natural disaster, could cause a reduction in the Pledged Tax Revenues that pro.tide for the repayrrent of and security for the Bonds. Such reduction of Pledged Tax Revenues could have an adverse effect on the Successor Agency's ability to make timely payments of principal of and interest on the Bonds.

As described in greater detail under the heading "PROPERTY TAXATION IN CALIFORNIA -Article XIIIA of the State Constitution," Article XIIIA pro.tides that the full cash value base of real property used in deternining taxable value may be adjusted from year to year to reflect the inflation rate, not to exceed a two percent increase for any given year, or rray be reduced to reflect a reduction in the consurrer price index, comparable I ocal data or any reduction in the event of declining property value caused b,I damage, destruction or other factors (as described abcwe). Such measure is computed on a calendar year basis. Any resulting reduction in the full cash value base ewer the term of the Bonds could reduce Pledged Tax Revenues available to pay principal and interest on the Bonds.

In addition to the other limitations on, and required application under the Dissolution Act of Pledged Tax Revenues on dep:isit in the Redevelopment Property Tax Trust Fund, described herein under the heading "RISK FACTORS," the State electorate or Legislature could adopt a constitutional or legislative property tax reduction with the effect of reducing Pledged Tax Revenues allocated to the Redevelopment Property Tax Trust Fund and available to the Successor Agency. Although the federal and State Constitutions include clauses generally prohibiting the Legislature's impairment of contracts, there are also recognized exceptions to these prohibitions. There is no assurance that the State electorate or Legislature will not at sorre future tirre apprcwe additional limitations that could reduce the Pledged Tax Revenues and ad.tersely affect the source of repayrrent and security of the Bands.

37

Limited Po.vers and Resources

The Successor Agency was created pursuant to the Dissolution Act to wind dONn the affairs of the Predecessor Agency. The Successor Agency's powers are limited to those granted under the Dissolution Act. The Successor Agency does not have the po.ver to levy property taxes nor does it have the po.ver to participate in redevelopment activities, except as pro.tided in the Dissolution Act. Many actions b,I the Successor Agency are suqject to the revie.v or apprcwal of the oversight Board and the Department of Finance, and, in some cases, the State Control I er.

Prior to the Dissolution Act, former redevelopment agencies had the ability to retain funds on hand, accumulated from prior years that were available for use to ccwer short-term cash flo.v deficits. In the event of a delay in the receipt of tax increment in any given year, the former redevelopment agency had the option to use such accumulated funds to make payments on bonds when due. Under the Dissolution Act, the Successor Agency.just like each successor agency formed underthe Dissolution Act, is required to obtain prior apprcwal from its oversight Board, and the Department of Finance, in order to pay an enforceable obi i gati on from a source of funds that is different than the one i den ti fi ed on the R OPS. Except for the Pledged Tax Revenues, the Successor Agency has no alternative resources available to make payments on enforceable obligations if there is a delay with respect to scheduled Redevelopment Property Tax Trust Fund disbursements or if the amount from Redevelopment Property Tax Trust Fund disbursements is not sufficient for the requi red payment of the enforceable obi i gati ons.

Risks to Real Estate Market

The Successor Agency's ability to make payments on the Bonds will be dependent upon the economic strength of the Prqject Area. The general econOITiy' of the Prqject Area will be suqject to all of the risks generally associated with urban real estate markets. Real estate prices and development may be ad.tersely affected b,I changes in general econonic conditions, fluctuations in the real estate market and interest rates, unexpected increases in development costs and b,I other similar factors. Further, real estate development within the Prqject Area could be ad.tersely affected b,11 imitations of infrastructure or future gcwernmental policies, including gcwernmental policies to restrict or control development. In addition, if there is a decline in the general econoITTy' of the Prqject Area, the o.vners of property within such Prqject Area may be less able or less willing to make timely payments of property taxes or may petition for reduced assessed valuation causing a delay or interruption in the receipt of Pledged Tax Revenues b,I the Successor Agency from the Prqject Area. In addition, the insolvency or bankruptcy of one or more large o.vners of property within the PrqjectArea could delay or impairthe receipt of Pledged Tax Revenues b,I the Successor Agency.

Reduction in Inflationary Rate

As described in greater detail belo.v, Article XI I IA of the State Constitution pro.tides thatthe full cash value of real property used in deternining taxable value may be acjjusted from year to year to reflect the inflationary rate, not to exceed a 2% increase for any given year, or may be reduced to reflect a reduction in the consumer price index or comparable local data. Such measure is computed on a calendar year basis. BecauseArticleX I I IA limits inflationary assessed value acjjustments to the lesser of the actual inflationary rate or 2%, there have been years in which the assessed values were acjjusted b,I actual inflationary rates, which were less than 2%. The Successor Agency is unable to predict if any acjjustments to the full cash value of real property within the Prqject Area, whether an increase or a reduction, will be realized in the future.

38

Le.;y and Collection ofTaxes

The Successor Agency has no independent po.ver to I evy or col I ect property taxes. Any reduction in the tax rate or the implementation of any constitutional or legislative property tax decrease could reduce the Pledged Tax Revenues, and accordingly, could have an ad.terse impact on the security for and the abi Ii ty of the Successor Agency to repay the Bands.

Likewise, delinquencies in the payment of property taxes b,I the cwners of land in the Prqject Area, and the impact of bankruptcy proceedings on the ability of taxing agencies to collect property taxes, could have an adverse effect on the Successor Agency's ability to make timely payments on the Bonds. The County has adopted the Teeter Plan. Under the Teeter Plan, the County allocates to the Successor Agency 100 percent of its proportionate share of property taxes when collected within the Prqject Area, regardless of deli nquenci es. N otwi thstandi ng the foregoing, the Board of Supervisors of the County may discontinue the Teeter Plan at any time and there is no assurance that the County will continue to maintain the Teeter Plan. See "PROPERTY TAXATION IN CALIFORNIA-Property Tax Collection ProceduresTeeter Plan."

Any reduction in Pledged Tax Revenues, whether for any of the reasons stated al:x::we or any other reasons, could have an adverse effect on the Successor Agency's ability to pay the principal of and interest on the Bands.

Recognized Obligation Payment Schedule

The Dissolution Act pro.tides that, commencing on the date that the first Recognized Obligation Payment Schedule is valid thereunder, only those obligations listed in the Recognized Obligation Payment Schedule may be paid b,I the Successor Agency from the funds specified in the Recognized Obligation Payment Schedule. By February P' of each year, the Dissolution Act requires successor agencies to prepare and approve, and submit to the successor agency's oversight board and the Department of Finance for apprcwal, a Recognized Obligation Payment Schedule pursuant to which enforceable obligations of the successor agency are listed, together with the source of funds to be used to pay for each enforceable obligation. Pledged Tax Revenues will not be distributed from the Redevelopment Property Tax Trust Fund b,I the County Auditor-Controller to the Successor Agency's Redevelopment Obligation Retirement Fund without a duly apprcwed and effective Recognized Obligation Payment Schedule. See"SECURITY AND SOURCES OF PAYMENT FOR THE BONDSRecognized Obligation Payment Schedule" and "PROPERTY TAXATION IN CALIFORNIA - Property Tax Collection Procedures- Recognized Obligation Payment Schedule." If the Successor Agency was to fail to file a Recognized Obligation Payment Schedule with respect to a period, the availability of Pledged Tax Revenues to the Successor Agency could be ad.tersely affected for such period.

If a successor agency fails to submit to the Department of Finance an cwersight board-apprcwed Recognized Obligation Payment Schedule complying with the prcwisions of the Dissolution Act within five business days of the date upon which the Recognized Obligation Payment Schedule is to be used to deterni ne the amount of property tax al I ocati ons, the Department of Finance may determine if any amount should be withheld b,I the applicable county auditor-controller for payments for enforceable obligations from distribution to taxing entities pursuant to clause (iv) in the follcwing paragraph, pending apprcwal of a Recognized Obligation Payment Schedule. Upon notice pro.tided b,I the Department of Finance to the county auditor-controller of an amount to be withheld from allocations to taxing entities, the county auditor -control I er must di stri bute to taxi ng entities any monies i n the Redevelopment Property Tax Trust Fund in excess of the withholding amount set forth in the notice, and the county auditorcontroller must distribute withheld funds to the successor agency only in accordance with a Recognized Obligation Payment Schedule when and as apprcwed b,I the Department of Finance.

39

Typically, under the Redevelopment Property Tax Trust Fund distribution prcwisions of the Dissolution Act, the county auditor-controller is to distribute funds for each six--rmnth period in the follo.ving order specified in Section 34183 of the Dissolution Act: (i) first, suqject to certain acjjustments for subordinations to the extent permitted under the Dissolution Act and no later than eachJ anuary 2 and June 1, to each local Successor Agency and school entity, to the extent applicable, amounts required for pass-through payments such entity would have received under prcwisions of the Redevelopment LiM', as those prcwisions read on January 1, 2011, including pursuant to the Statutory Pass-Through Amounts; (ii) second, on eachJ anuary 2 andJ une 1, to the Successor Agency for payments listed in its Recognized Obligation Payment Schedule, with debt service payments scheduled to be made for tax allocation bonds having the highest priority ewer payments scheduled for other debts and obligations listed on the Recognized Obi igation Payment Schedule; (iii) third, on each January 2 and June 1, to the Successor Agency for the administrative cost allo.vance, as defined in the Dissolution Act; and (iv) fourth, on each January 2 andJ une 1, to taxing entities any moneys remaining in the Redevelopment Property Tax Trust Fund after the payments and transfers authorized by clauses (i) through (iii), in an amount proportionate to such taxing entity's share of property tax revenues in the tax rate area in that fiscal year (without giving effect to any pass-through obi i gati ons that were established under the Redevelopment Law).

If the successor agency does not submit an oversight Board--apprcwed Recognized Obligation Payment Schedule within five business days of the date upon which the Recognized Obligation Payment Schedule is to be used to deternine the amount of property tax allocations and the Department of Finance does not pro.tide a notice to the county auditor-controller to withhold funds from distribution to taxing entities, amounts in the Redevelopment Property Tax Trust Fund for such six--rmnth period would be distributed to taxing entities pursuant to clause (iv) abcwe. Ho.vever, the Successor Agency has co.tenanted to take all actions required underthe Dissolution Act to include scheduled debt service on the Bonds as well as any amount required under the Indenture to replenish the Reserve Fund, in the Recognized Obligation Payment Schedule to enable the County Auditor-Controller to distribute from the Redevelopment Property Tax Trust Fund to the Successor Agency's Redevelopment Obligation Retirement Fund as required under the I ndenture.

AB 1484 also added mw prcwisions to the Dissolution Act implementing certain penalties in the event that the Successor Agency does not timely submit a Recognized Obligation Payment Schedule by the deadline specified in the Dissolution Act. Specifically, a Recognized Obligation Payment Schedule must be subnitted by the Successor Agency, after apprcwal by the oversight Board, to the County Adninistrative Officer, the County Auditor-Controller, the Department of Finance and the State Controller no later than each February 1, commencing February 1, 2016 with respect to each subsequent fiscal year. If the Successor Agency does not subnit an oversight Board apprcwed Recognized Obligation Payment Schedule by such deadline, the City will be suqject to a civil penalty equal to $10,000 per day for every day the schedule is not submitted to the Department of Finance. Additionally, the Successor Agency's administrative cost allowance is reduced by 25% for any fiscal year for which the Successor Agency does not subnit an oversight Board apprcwed Recognized Obligation Payment Schedule within 10 days of the February 1 deadline. If the Successor Agency fails to submit a Recognized Obligation Payment Schedule by the February 1 deadline, any creditor of the successor agency or the department or any affected taxing entity will have standing to, and may request a writ of mandate to, require the Successor Agency to immediately perform this duty. For additional information regarding procedures under the Dissolution Act relating to late Recognized Obligation Payment Schedules and i mpl i cations thereof on the Bands.

Future Implementation of Dissolution Act

Several successor agencies, cities and other entities have filed judicial actions challenging the legality of various prcwisions of the Dissolution Act. One such challenge is an action filed on August 1,

40

2012, b,I Syncora Guarantee Inc. and Syncora Capital Assurance Inc. (collectively, "Syncora") against the State, the State Controller, the State Director of Finance, and the Auditor-Controller of San Bernardino County on his o.vn behalf and as the representative of all other County Auditors in the State (Superior Court of the State of California, County of Sacramento, Case No. 34-2012--80001215). Syncora are rnonoline financial guaranty insurers doniciled in the State of New Yark, and as such, pro.tide credit enhancement on bonds issued b,I state and I ocal gcwernments and do not sel I other kinds of insurance such as life, health, or property insurance. Syncora pro.tided bond insurance and other related insurance policies for bonds issued b,I former California redevelopment agencies.

The complaint alleged that the Dissolution Act, and specifically the "Redistribution Prcwisions" thereof (i.e., Health and Safety Code Sections 34172(d), 34174, 34177(d), 34183(a)(4), and 34188) violate the "contract clauses" of the United States and California Constitutions (U.S. Const. art. 1, § 10, cl.1; Cal. Const. art. 1, § 9) because they unconstitutionally impair the contracts among the former redevelopment agencies, bondholders and Syncora. The corrplaint also alleged that the Redistribution Prcwisions violate the "Takings Clauses" of the United States and California Constitutions (U.S. Const. amend. V; Cal Const. art. 1 § 19) because they unconstitutionally take and appropriate bondholders' and Syncora's contractual right to critical security mechanisms without just compensation.

After hearing b,I the Sacramento County Superior Court on May 3, 2013, the Superior Court ruled that Syncora's constitutional claims based on contractual impairment were premature. The Superior Court also held that Syncora's takings claims, to the extent based on the same arguments, were also premature. Pursuant to aJ udgment stipulated to b,I the parties, the Superior Court on October 3, 2013, entered its order disnissing the action. TheJ udgment, ho.vever, pro.tides that Syncora preserves its rights to reassert its challenges to the Dissolution Act in the future. The Successor Agency does not guarantee that any reassertion of challenges b,I Syncora or thatthe final results of any of the judicial actions brought b,I others challenging the Dissolution Act will not result in an outcome that may have a material ad.terse effect on the Successor Agency's ability to timely pay debt service on the Bonds.

Limitations on Remedies

The enforceability of the rights and remedies of the Holders of the Bonds and the Trustee and the obi i gati ans i ncurred b,I the Successor Agency may be suqj ect to the federal Bankruptcy Code and applicable bankruptcy, insolvency, reorganization, moratorium or sinilar laws relating to or affecting the enforcement of creditors' rights.

Bankruptcy and Foreclosure

The payment of the property taxes from which Pledged Tax Revenues are derived and the ability of the County to foreclose the lien of a delinquent unpaid tax may be limited b,I bankruptcy, insolvency, reorganization, moratorium or other laws generally affecting creditors' rights generally, now or hereafter in effect; equity principles which may Ii nit the specific enforcement under State law of certain remedies; the exercise of the United States of America of the po.vers delegated to it b,I the federal Constitution; and the reasonable and necessary exercise, in certain exceptional situations, of the police po.ver inherent in the scwereignty of the State and its gcwernment bodies in the interest of serving a significant and legitimate public purpose. The various legal opinions to be delivered concurrently with the delivery of the Bonds (including Bond Counsel's approving legal opinion) will be qualified as to the enforceability of the various legal instruments b,I bankruptcy, insolvency, reorganization, moratorium, or other similar laws affecting creditors' rights, by the application of equitable principles and by the exercise of judicial discretion in appropriate cases.

41

Although bankruptcy proceedings would likely not cause the liens to become extinguished, bankruptcy of a property o.vner could result in a delay in prosecuting superior court foreclosure proceedings. Such delay would increase the possibility of delinquent tax installments not being paid in ful I and thereb{ increase the Ii kel i hood of a delay or default in payment of the principal of and interest on the Bonds.

Concentration of Ownership

The risk of reduction in assessed value as a result of factors described herein may generally increase where the assessed value within Prqj ect Area is concentrated among a relatively srnal I number of property o.vners. OWnershi p of property in Prqject Area has a relatively high concentration among the top ten property o.vners, with such top ten property o.vners accounting for 32.22% of the Fiscal Year 2017-18 secured assessed valuation. The largest taxpayer, Apia Inc., accounts for 13.53% of the total secured assessed value within the PrqjectArea Significant reduction in the secured assessed values of the top ten property o.vners could, b{ itself or in corrbination with other factors, have a material ad.terse effect on the Successor Agency's ability to pay debt service on the Bonds as such payments become due and payable. See "THE PROJECT AREA -Top Ten Taxable Property Owners in the PrqjectArea" herein.

Estimated Revenues

In estimating that Pledged Tax Revenues will be sufficient to pay debt service on the Bonds, the Successor Agency has made certain assumptions with regard to present and future assessed valuation in the Prqject Area, future tax rates and percentage of taxes collected. The Successor Agency believes these assumptions to be reasonable, but there is no assurance these assurnpti ons wi 11 be realized and to the extent that the assessed valuation and the tax rates are less than expected, the Pledged Tax Revenues available to pay debt service on the Bonds will be less than those prqjected and such reduced Pledged Tax Revenues may be insufficient to pro.tide forthe payment of principal of, prenium (if any) and interest on the Bonds.

No Validation Proceeding Undertaken

Code of Civil Procedure Section 860 authorizes public agencies to institute a process, otherwise kno.vn as a "validation proceeding," for purposes of deterni ni ng the validity of a resolution or any action taken pursuantthereto. Section 860 authorizes a publ i c agency to i nstitute val i dati on proceedings in cases where another statute authorizes its use. Relevant to the Bonds, Gcwernment Code Section 53511 authorizes a local agency to "bring an action to deternine the validity of its bonds, warrants, contracts, obligations or evidences of indebtedness." Pursuant to Code of Civil Procedure Section 870, a final favorable judgment issued in a validation proceeding shall, notwithstanding any other prcwision of law, be forever binding and conclusive, as to al I matters therein aqj udi cated or which could have been aqjudicated, against all persons: "The judgment shall permanently enjoin the institution b{ any person of any action or proceeding raising any issue as to which the judgment is binding and conclusive."

The Successor Agency has not undertaken or endeavored to undertake any validation proceeding in connection with the issuance of the Bonds. The Successor Agency and Bond Counsel have relied on the prcwisions of AB 1484 authorizing the issuance of the Bonds and specifying the related deadline for any challenge to the Bonds to be brought. Specifically, Section 34177.5(e) of the Dissolution Act pro.tides that notwithstanding any other law, an action to challenge the issuance of bonds (such as the Bonds), the incurrence of indebtedness, the amendment of an enforceable obligation, or the execution of a financing agreement authorized under Section 34177.5, must be brought within 30 days after the date on which the cwersight board apprcwes the resolution of the successor agency apprcwing such financing.

42

Such challenge period expired with respect to the Bonds and the oversight Board Resolution on October 21, 2015.

It is possible that the definition of Pledged Tax Revenues could be affected b,I changes in law or judicial decisions relating to the dissolution of redevelopment agencies. Any action b,I a court to invalidate prcwisions of the Dissolution Act required for the timely payment of principal of, and interest on, the Bonds could be suqject to issues regarding unconstitutional impairment of contracts and unconstitutional taking without just compensation. The Successor Agency believes that the aforementioned considerations would pro.tide some protections against the ad.terse consequences upon the Successor Agency and the availability of Pledged Tax Revenues for the payment of debt service on the Bonds in the event of successful challenges to the Dissolution Act or portions thereof. Ho.ve..rer, the Successor Agency pro.tides no assurance that any other lawsuit challenging the Dissolution Act or portions thereof will not result in an outcome that may have a detrimental effect on the Successor Agency's ability to timely pay debt service on the Bonds.

Assumptions and Prqjections

To estimate the Pledged Tax Revenues available to pay debt service on the Bonds, the Fiscal Consultant has made certain assurrptions with regard to present and future assessed valuation in the Prqject Area, future tax rates and percentage of taxes collected. The Successor Agency believes these assumptions to be reasonable, but to the extent that the assessed valuation, the tax rates or the percentage of taxes collected are less than such assumptions, the Pledged Tax Revenues available to pay debt service on the Bonds may be less than those prqjected. No assurance can be made that the aggregate ccwerage prqj ecti ons with respect to the Bands wi 11 be met.

Certain statements included or incorporated b,I reference in this Official Statement constitute "forward-I ooki ng statements." Such statements are general ly i denti fi able b,I the terminology used, such as "plan" "prg·ect" "expect" "anticipate" "intend" "belie..re" "estimate" "budget" or other similar

' ' ' ' ' ' ' words. The achievement of certain results or other expectations contained in such forward-looking statements involve kno.vn and unkno.vn risks, uncertainties and other factors that may cause actual results, performance or achievements described to be materially different from any future results, performance or achievements expressed or implied b,I such forward-looking statements. The Successor Agency does not plan to issue any updates or re..risions to those forward-looking statements if or when its expectations or e..rents, conditions or circumstances on which such statements are based occur. Such forward-I ooki ng statements include, but are not Ii mited to, certain statements contained in the information in "INTRODUCTION," "THE PROJECT AREA," and"TAX REVENUES."

Hazardous Substances

An additional environmental condition that may result in the reduction in the assessed value of property would be the disccwery of a hazardous substance that would Ii nit the beneficial use of taxable property within the Prqject Area In general, the o.vners and operators of property may be required b,I law to remedy conditions of the property relating to releases or threatened releases of hazardous substances. The o.vner or operator may be required to remedy a hazardous substance condition of property whether or not the o.vner or operator has anything to do with creating or handling the hazardous substance. The effect, therefore, should any of the property within the Prqject Area be affected b,I a hazardous substance, could be to reduce the marketability and value of the property b,I the costs of remedying the condition.

43

Natural Disasters

The value of the property in the Prqject Area in the future can be ad.tersely affected b,I a variety of additional factors, particularly those which may affect infrastructure and other public irnprcwerrents and private irnprcwerrents on property and the continued habitability and enjO{rrent of such private imprcwerrents. Such additional factors include, without limitation, geologic conditions such as earthquakes, topographic conditions such as earth mcwerrents, landslides and floods and climatic conditions such as droughts. In the event that one or more of such conditions occur, such occurrence could cause damages of varying seriousness to the land and imprcwerrents and the value of property in the PrqjectArea could be dininished in the aftermath of such events. A substantial reduction of the value of such properties and could affect the ability or willingness of the property o.vners to pay the property taxes.

The Prqject Area is located in a seismically active region of Southern California In the event of property damage caused b,I an earthquake, the assessed valuation of affected property could be reduced. Such a reduction of assessed valuations could result in a reduction of the Pledged Tax Revenues that secure the Bonds, which in turn could impair the ability of the Successor Agency to make payrrents of pri nci pal of and i nterest on the Bands when due.

Changes in Law

There can be no assurance thatthe State electorate will not at some future tirre adopt initiatives or that the Legislature will not enact legislation that will amend the Dissolution Act, the Redeveloprrent Law or other laws or the Constitution of the State resulting in a reduction of Pledged Tax Revenues, which could have an adverse effect on the Successor Agency's ability to pay debt service on the Bonds and such an effect could be material.

Economic Risk

The Successor Agency's ability to make payrrent on the Bonds will be partially dependent upon the economic strength of the Prqject Area If there is a decline in the general econOITiy' of the Prqject Area, the o.vners of property may be less able or less willing to make tirrely payrrents of property taxes causing a delay or stoppage of Pledged Tax Revenues. Furthermore, general economic declines are likely to result in additional reductions of assessed values. In the event of decreased values, Pledged Tax Revenues may decline even if property o.vners make ti rrely payrrent of property taxes.

Investment Risk

Funds held under the Indenture are required to be invested in Permitted I nvestrrents as pro.tided under the Indenture. See APPENDIX A attached hereto for a summary of the definition of Pernitted lnvestrrents. The funds and accounts of the Successor Agency, into which a portion of the proceeds of the Bonds will be deposited and into which Pledged Tax Revenues are deposited, may be invested b,I the Successor Agency in any investrrent authorized b,I law. All investrrents, including the Permitted I nvestrrents and those authorized b,l law from tirre to tirre for investrrents b,I municipalities, contain a certain degree of risk. Such risks i ncl ude, but are not Ii ni ted to, a I o.ver rate of return than expected and loss or delayed receipt of principal.

Secondary Market

There can be no guarantee that there wi 11 be a secondary market for the Bands, or, if a secondary market exists, that the Bands can be sold for any particular price. Occasi anal ly, because of general

44

market conditions or because of ad.terse history or econonic prospects connected with a particular issue, secondary marketing practices in connection with a particular issue are suspended or terninated. Additionally, prices of issues for which a market is being made will depend upon the then prevailing ci rcum;tances.

PROPERTY TAXATION IN CALIFORNIA

Property Tax Collection Procedures

Classification. In the State, property which is suqject to ad valorem taxes is classified as "secured" or "unsecured." Secured and unsecured properties are entered on separate parts of the assessment rol I mai ntai ned b,I the County assessor. The secured cl assi fi cation i ncl udes property on which any property tax levied b,I a county becomes a lien on that property. A tax levied on unsecured property does not become a lien against the taxed unsecured property, but may become a lien on certain other property o.vned b,I the taxpayer. Every tax which becomes a lien on secured property has priority ewer all other liens on the secured property arising pursuant to State law, regardless of the time of the creation of other Ii ens.

Generally, ad valoremtaxes are collected b,I a county (the "Taxing Authority") for the benefit of the various entities (cities, schools and special districts) that share in the ad valorem tax (each a taxing entity) and successor agencies eligible to receive distributions from the respective Redevelopment Property Tax Trust Fund.

Collections. Secured and unsecured property are entered separately on the assessment rol I maintained b,I the county assessor. The method of collecting delinquent taxes is substantially different for the two classifications of property. The taxing authority has four ways of collecting unsecured personal property taxes: (i) initiating a civil action against the taxpayer, (ii) filing a certificate in the office of the county clerk specifying certain facts in orderto obtain a judgment lien on certain property of the taxpayer, (iii) filing a certificate of delinquency for record in the county recorder's office to obtain a lien on certain property of the taxpayer, and (iv) seizing and selling personal property, imprcwements or possessory interests belonging or assessed to the assessee. The exclusive means of enforcing the payment of delinquent taxes with respect to property on the secured rol I is the sale of the property securing the taxes to the State for the amount of taxes which are delinquent.

Penalty. A 1036 penalty is added to delinquent taxes which have been levied with respect to property on the secured roll. In addition, property on the secured roll on which taxes are delinquent is declared i n default b,I operation of I aw and declaration of the tax col I ector on or about J une 30 of each fiscal year. Such property may thereafter be redeemed b,I payment of the delinquent taxes and a delinquency penalty, plus a redemption penalty of 1.5% per month to the time ofredemption. If taxes are unpaid for a period of five years or more, the property is deeded to the State and then is suqject to sale b,I the county tax collector. A 1036 penalty also applies to delinquent taxes with respect to property on the unsecured roll, and further, an additional penalty of 1.5% per month accrues with respect to such taxes beginning on varying dates related to the tax bi 11 mai Ii ng date.

Delinquencies. The valuation of property is determined as of theJ anuary 1 lien date as equalized in August of each year and equal installments of taxes levied upon secured property become delinquent on the follo.ving December 10 and April 10. Taxes on unsecured property are dueJ anuary 1 and become delinquent August 31. The Successor Agency's tax increments are paid under the Teeter Plan and are consequently not affected b,I tax deli nquenci es.

45

Teeter Plan. The Board of Supervisors of the County has ack:Jpted the Alternative Method of Distribution of Tax Levies and Collections and of Tax Sale Proceeds (the "Teeter Plan"), as pr0.tided for in Section 4701 et seq. of the California Revenue and Taxation Code. Generally, the Teeter plan pr0.tides for a tax distribution procedure in which secured roll taxes are distributed to taxing agencies within the County on the basis of the tax levy, rather than on the basis of actual tax collections. The County then receives all future delinquent tax payments, penalties and interest. Pursuant to the Teeter Plan, the County establishes a tax losses reserve fund and a tax resources account and each entity levying or entitled to receipt of property taxes in the County rnay draw on the amount of uncollected taxes and assessments credited to that entity's fund, in the same manner as if the amount credited had been collected.

The County is responsible for determining the amount of the tax levy on each parcel which is entered onto the secured real property tax rol I. U pon corrpl eti on of the secured real property tax rol I, the County's Auditor-Controller deternines the total amount of taxes and assessments actually extended on the roll for each fund for which a tax levy has been included, and apportions 100 percent of the tax and assessment levies to that fund's credit. Such moneys rnay thereafter be drawn against b,I the taxing agency in the sarne manner as if the amount credited had been collected. The County determines which moneys in the County treasury (including those credited to tax losses reserve fund) will be available to be drawn on to the extent of the amount of uncol I ected taxes credited to each fund for which a I evy has been included. When amounts are received on the secured tax roll for the current year, or for redemption of tax defaulted property, Teeter Pl an moneys are distributed to the apportioned tax resources accounts.

So long as the Teeter Plan is in place, the Successor Agency is expected to be credited with 100 percent of its annual apportionment of tax increment allocable to the secured roll, regardless of any delinquencies in payment of secured taxes. Ho.vever, the Board of Supervisors of the County rnay discontinue the Teeter Plan at any time and there is no assurance that the County will continue to maintain the Teeter Plan.

Supplemental Assessments. California Revenue and Taxation Code Section 75.70 pro.tides for the supplemental assessment and taxation of property as of the occurrence of a change of o.vnershi p or completion of new construction. Prior to the enactment of this law, the assessment of such changes was pernitted only as of the next tax lien date follo.ving the change, and this delayed the realization of increased property taxes frorn the new assessments for up to 14 months. This statute pr0.tides increased revenue to the Redevelopment Property Tax Trust Fund to the extent that supplemental assessments of new construction or changes of o.vnership occur within the boundaries of redevelopment prqjects subsequent to the January 1 lien date. To the extent such supplemental assessments occur within the PrqjectArea, Pledged Tax Revenues rnay increase.

Property Tax Adninistrative Costs. In 1990, the Legislature enacted SB 2557 (Chapter 466, Statutes of 1990) which allo.vs counties to charge for the cost of assessing, collecting and allocating property tax revenues to local g0.ternment jurisdictions in proportion to the tax-derived revenues allocated to each. SB 1559 (Chapter 697, Statutes of 1992) explicitly includes redevelopment agencies arnong the jurisdictions which are suqject to such charges. In addition, Sections 34182(e) and 34183(a) of the Dissolution Act allo.v administrative costs of the County Auditor-Controller for the cost of administering the pr0.tisions of the Dissolution Act, as well as the foregoing SB 1559 amounts, to be deducted frorn property tax revenues before monies are deposited into the Redevelopment Property Tax Trust Fund. For Fiscal Year 2016-17, the County collection charges were 1.69% of Gross Tax Revenue within the Prqject Area Based on the historical collection charges, the Fiscal Consultant prqjected the charge for Fiscal Year 2017-18 and future years as a percentage of Gross Tax Revenue to remain at 1.69%. For purposes of these prqjections, the Fiscal Consultant assumed that the County will continue to

46

charge the Agency for property tax adrrinistration and that such charge will increase proportionally with any increases in revenue.

Statutory Pass-Through Amounts. The payrrent of Statutory Pass-Through Amounts results from (i) plan arrendrrents which add territory in existing Prqject Area on or after January 1, 1994 and (ii) from plan arnendrrents which elirrinates one or more I irritations within a redeveloprrent plan (such as the remcwal of the tirre limit on the establishrrent of loans, acwances and indebtedness). The calculation of the amount due affected taxing entities is described in Sections 33607.5 and 33607.7 of the Redevelopment Law. See "SECURITY AND SOURCES OF PAYMENT FOR THE BONDS -Statutory Pass-Through Payrrents" for further information regarding the applicability of the statutory pass-through prcwisions of the Redeveloprrent Law and the Dissolution Act to the PrqjectArea

Recogni:zed Obligation Payrrent Schedule. The Dissolution Act pro.tides that, comrrencing on the date the first Recognized Obi i gation Payrrent Schedule is valid thereunder, only those payrrents Ii sted in the Recognized Obligation Payrrent Schedule may be made b,I the Successor Agency from the funds specified in the Recognized Obligation Payrrent Schedule. The Dissolution Act requires successor agencies annually to prepare and approve, and submit to the Successor Agency's oversight board and the Departrrent of Finance for apprcwal, a Recognized Obligation Payrrent Schedule pursuant to which enforceable obligations (as defined in the Dissolution Act) of the Successor Agency are listed, together with the source of funds to be used to pay for each enforceable obligation. Pledged Tax Revenues will not be distributed from the Redevelopment Property Tax Trust Fund b,I the County Auditor-Controller to the Successor Agency's Redevelopment Obligation Retirement Fund without a duly approved and effective Recognized Obligation Payrrent Schedule obtained in sufficient tirre prior to theJ anuary 2 or June 1 distribution dates, as applicable.

Unitary Property

Assembly Bill ("AB") 2890 (Statutes of 1986, Chapter 1457) pro.tides that, comrrencing with fiscal year 1988--89, assessed value derived from State-assessed unitary property (consisting mostly of operati anal property o.vned b,I uti Ii ty companies) is to be al I ocated county-wide as fol Io.vs: ( i) each tax rate area wi 11 receive that same amount from each assessed uti I ity received in the previous fi seal year unless the applicable county-wide values are insufficient to do so, in which case values will be allocated to each tax rate area on a pro--rata basis; and (ii) if values to be al I ocated are greater than in the previous fiscal year, each tax rate area will receive a pro--rata share of the increase from each assessed utility according to a specified formula Additionally, the lien date on State-assessed property is changed from March 1 to J anuary 1.

AB 454 (Statutes of 1987, Chapter 921) further modifies chapter 1457 regarding the distribution of tax revenues derived from property assessed b,I the State Board of Equalization. Chapter 921 pro.ti des for the consolidation of all State-assessed property, except for regulated railroad property, into a single tax rate area in each county. Chapter 921 further pro.tides for a new rrethod of establishing tax rates on State-assessed property and distribution of property tax revenue derived from State-assessed property to taxingjurisdictions within each county in accordance with a new formula. Railroads will continue to be assessed and revenues allocated to all tax rate areas where railroad property is sited.

ArticleX I I IA of the State Constitution

ArticleX I I IA limits the amount of advaloremtaxes on real property to 1% of "full cash value" of such property, as determined b,I the county assessor. Article X 111 A defines "ful I cash val ue" to rrean "the County Assessor's valuation ofreal property as shown on the 1975-76 tax bill under 'full cash value,' or, thereafter, the appraised value of real property when purchased, newly constructed, or a change in

47

o.vnership has occurred after the 1975 assessrrent." Furthermore, the "full cash value" of all real property may be increased to reflect the rate of inflation, as sho.vn b,I the consurrer price index, not to exceed ZYo per year, or may be reduced.

ArticleX I I IA has subsequently been arrended to pernit reduction of the "full cash value" base in the event of declining property values caused b,I substantial damage, destruction or other factors, and to pr0.tide that there would be no increase in the "full cash value" base in the event of reconstruction of property damaged or destrO{ed in a disaster and in other special circumstances.

ArticleX I I IA (i) exerrpts from the 1% tax limitation taxes to pay debt service on (a) indebtedness appr0.ted b,I the voters prior to July 1, 1978 or (b) bonded indebtedness for the acquisition or i mpr0.terrent of real property apprcwed on or after July 1, 1978, b,I two-thirds of the votes cast b,I the voters voting on the proposition; (ii) requires a vote of two-thirds of the qualified electorate to impose special taxes, or certain additional ad valorem taxes; and (iii) requires the apprcwal of two-thirds of all rrenibers of the State Legislature to change any State tax laws resulting in increased tax revenues.

The validity of Article XIIIA has been upheld b,I both the California Suprerre Court and the United States Suprerre Court.

In the general election held Ncweniber4, 1986, voters of the State apprcwed two rreasures, Propositions 58 and 60, which further arrended Article XI I IA. Proposition 58 arrended Article XI I IA to pr0.tide that the terms "purchase" and "change of o.vnership," for the purposes of deternining full cash value of property under ArticleX I I IA, do not include the purchase or transfer of (1) real property between spouses and (2) the principal residence and the first $1,000,000 of other property between parents and children. This arrendrrenttoArticleX I I IA may reduce the rate of grONth of local property tax revenues.

Proposition 60 arrended Article XI I IA to pernit the Legislature to allo.v persons ewer the age of 55 who sell their residence and buy or build another of equal or lesser value within two years in the sarre county, to transfer the old residence assessed value to the new residence. As a result of the Legislature's action, the grONth of property tax revenues may decline.

Legislation enacted b,I the Legislature to implerrent Article XI I IA pr0.tides that all taxable property is sho.vn at full assessed value as described abo.te. In conformity with this procedure, all taxable property value included in this Official Staterrent is sho.vn at 10036 of assessed value and all general tax rates reflect the $1 per $100 of taxable value (except as noted). Tax rates for voter-appr0.ted bonded indebtedness and pension liabilities are also applied to 10036 of assessed value.

Appropriations Limitation -ArticleX 111 B

Article XIIIB limits the annual appropriations of the State and its political subdivisions to the level of appropriations for the prior fiscal year, as acjjusted for changes in the cost of living, population and services rendered b,I the gcwernrrent entity. The "base year" for establishing such appropriations limit is the 1978-79 fiscal year, and the limit is to be acjjusted annually to reflect changes in population, consurrer prices and certain increases in the cost of services pr0.tided b,I these public agencies.

Section 33678 of the Redeveloprrent LiM' pro.tides that the allocation of taxes to a redeveloprrent Successor Agency for the purpose of paying principal of, or interest on, loans, advances, or indebtedness shal I not be deerred the recei pt b,I an Successor Agency of proceeds of taxes I evi ed b,I or on behalf of an Successor Agency within the meaning of ArticleX 111 B, nor shall such portion of taxes be deerred receipt of proceeds of taxes b,I, or an appropriation suqject to the limitation of, any other public body within the rreaning or for the purpose of the Constitution and I.M's of the State, including Section 33678 of the

48

Redevelopment Law. The constitutionality of Section 33678 has been upheld in two California appellate court decisions. On the basis of these decisions, the Successor Agency has not adopted an appropriations limit.

Articles X 111 C and X 111 D of the State Constitution

At the election held on N0.tember 5, 1996, Proposition 218 was passed b,I the voters of California The initiative added Articles XI I IC andX 111 D to the State Constitution. Pr0.tisions in the two articles affect the ability of local gcwernment to raise revenues. The Bonds are secured b,I sources of revenues that are not suqject to linitation b,I Proposition 218. See also"- Prop:isitions 218 and 26" belo.v.

Proposition 87

On Ncwember 8, 1988, the voters of the State apprcwed Proposition 87, which amended Article XVI, Section 16 of the State Constitution to pr0.tide that property tax revenue attributable to the imp:isition of taxes on property within a redevelopment prqject area for the purp:ise of paying debt service on certain bonded indebtedness issued b,I a taxing entity (not the Predecessor Agency or the Successor Agency) and apprcwed b,I the voters of the taxing entity after January 1, 1989will be allocated solely to the payment of such indebtedness and not to redevelopment agencies.

Appeals of Assessed Values

Pursuant to California liM', a property o.vner may apply for a reduction of the property tax assessment for such owner's property by filing a written application, in a form prescribed by the State Board of Equalization, with the appropriate county board of equal i zati on or assessment appeals board.

In the County, a property owner desiring to reduce the assessed value of such owner's property in any one year must submit an application to the County Assessment Appeals Board (the "Appeals Board"). Applications for any tax year must be subnitted b,I September 15 of such tax year. Follo.ving a review of each application by the staff of the County Assessor's Office, the staff makes a recommendation to the Appeals Board on each appl i cation which has not been rejected for incompleteness or untimeliness or withdrawn. The Appeals Board holds a hearing and either reduces the assessment or confirms the assessment. The Appeals Board generally is required to determine the outcome of appeals within two years of each appeal's filing date. Any reduction in the assessment ultimately granted applies only to the year for which application is made and during which the written application is filed. The assessed value increases to its pre,eduction level for fiscal years follo.ving the year for which the reduction application is filed. Ho.vever, if the taxpayer establishes through proof of comparable values that the property continues to be cwervalued (kno.vn as "ongoing hardship"), the Assessor has the po.ver to grant a reduction not only for the year for which application was originally made, but also for the then current year as well. Appeals for reduction in the "base year" value of an assessment, which generally must be made within three years of the date of change in o.vnership or completion of ne.v construction that determined the base year, if successful, reduce the assessment for the year in which the appeal is taken and prospectively thereafter. More0.ter, in the case of any reduction in any one year of assessed value granted for "ongoing hardship" in the then current year, and al so in any cases involving stipulated appeals for prior years relating to base year and personal property assessments, the property tax revenues from which Pledged Tax Revenues are derived attributable to such properties wi 11 be reduced in the then current year. I n practice, such a reduced assessment may remain in effect beyond the year in which it is granted. See "THE PROJECT AREA" for information regarding the assessed val uati ons of the I argest taxpayers within the Prqj ect Area.

49

Proposition 8

Proposition 8, appr0.ted in 1978 (California Revenue and Taxation Code Section 51 (b)), pr0.tides for the assessment of real property at the lesser of its originally deternined (base year) full cash value compounded annually b,I the inflation factor, or its full cash value as of the lien date, taking into account reductions in value due to damage, destruction, obsolescence or other factors causing a decl i ne in market value. Reductions under this code section may be initiated b,I the County Assessor or requested b,I the property o.vner.

After a roll reduction is granted under this code section, the property is reviewed on an annual basis to determine its full cash value and the valuation is acjjusted accordingly. This may result in further reductions or in value increases. Such increases must be in accordance with the full cash value of the property and may exceed the maximum annual inflationary grONth rate allo.ved on other properties under Article XIIIA of the State Constitution. Once the property has regained its prior value, acjjusted for inflation, it once again is suqject to the annual inflationary factor grONth rate allo.ved under ArticleXIIIA.

The Successor Agency cannot guarantee that reductions undertaken b,I the County Assessor or requested b,I a property o.vner pursuant to Proposition 8 will not in the future reduce the assessed valuation of property in the PrqjectArea and, therefore, Pledged Tax Revenues that secure the Bonds.

Propositions 218 and 26

On Ncweniber 5, 1996, California voters appr0.ted Proposition 218----Voter Appr0.tal for Local G0.ternment Taxes-Limitation on Fees, Assessments, and Charges-Initiative Constitutional Amendment. Proposition 218 added Articles XI I IC and X 111 D to the State Constitution, imposing certain vote requirements and other limitations on the imposition of new or increased taxes, assessments and property,elated fees and charges. On N0.teniber 2, 2010, California voters apprcwed Proposition 26, the "Supermajority Vote to Pass New Taxes and Fees Act." Proposition 26 amended Article XIIIC of the California Constitution b,I adding an expansive definition for the term "tax," which previously was not defined under the California Constitution. Pledged Tax Revenues securing the Bonds are derived from property taxes which are outside the scope of taxes, assessments and property ,elated fees and charges which are limited b,I Proposition 218 and outside of the scope of taxes which are limited b,I Proposition 26.

Future Initiatives

Article XIIIA, Article XIIIB, Article XIIIC and Article XIIID and certain other propositions affecting property tax levies were each adopted as measures which qualified for the ballot pursuant to California's initiative process. From time to time other initiative measures could be adopted, further affecting Successor Agency revenues or the Successor Agency's ability to expend revenues.

TAX MATTERS

State I ncome Tax

In the opinion of Norton Rose Fulbright US LLP ("Bond Counsel"), under existing law interest on the Bonds is exerrpt from personal income taxes of the State of California Except as set forth in the preceding sentence, Bond Counsel will pr0.tide no opinion in connection with the issuance or offering of the Bonds with regard to any federal, state or local tax consequence of the o.vnership or disposition of or

50

the receipt of interest on any Bond. A copy of the form of opinion of Bond Counsel relating to the Bonds is included in Appendix B.

Federal Income Tax Considerations

The follcwing is a general summary of certain United States federal income tax consequences of the purchase and cwnership of the Bonds. The discussion is based upon the Internal Revenue Code of 1986 (the "Code"), United States Treasury Regulations, rulings and decisions new in effect, all of which are suqject to change (possibly, with retroactive effect) or possibly differing interpretations. The discussion belcw is based upon laws, regulations, rulings, and decisions in effect and available on the date hereof, all of which are suqject to change, possibly with retroactive effect. No assurance can be given that future changes in the law will not alterthe conclusions reached herein.

Prospective investors should note that no rulings have been or are expected to be sought from the Internal Revenue Service (the "I RS") with respect to any of the U.S. federal tax considerations discussed belcw, and no assurance can be given that the I RS will not take contrary positions. Further, the follcwing discussion does not deal with U.S. tax consequences appi icable to any given investor, nor does it address the U.S. tax considerations applicable to all categories of investors, some of which may be suqject to special taxing rules (regardless of whether or not such investors constitute U.S. Holders), such as certain U.S. expatriates, banks, REITs, RI Cs, insurance companies, tax-exempt organizations, dealers or traders in securities or currencies, partnerships, S corporations, estates and trusts, investors that hold their Bonds as part of a hedge, straddle or an integrated or conversion transaction, or investors whose "functi anal currency" is not the U.S. dollar. Furthermore, it does not address (i) alternative minimum tax consequences, or (ii) the indirect effects on persons who hold equity interests in a holder. This summary also does not consider the taxation of the Bonds under local or non-U.S. tax laws. In addition, this summary generally is limited to U.S. tax considerations applicable to investors that acquire their Bonds pursuant to this offering for the issue price that is applicable to such Bonds (i.e., the price at which a substantial amount of the Bonds is sold to the public) and who will hold their Bonds as "capital assets" within the meaning of Section 1221 of the Code.

As used herein, "U.S. Holder" means a beneficial cwner of a Bond that for U.S. federal income tax purposes is an individual citizen or resident of the United States, a corporation or other entity taxable as a corporation created or organized in or under the I aws of the United States or any state thereof (including the District of Columbia), an estate the income of which is suqject to U.S. federal income taxation regardless of its source or a trust where a court within the United States is able to exercise primary supervision cwerthe administration of the trust and one or more United States persons (as defined in the Code) have the authority to control all substantial decisions of the trust (or a trust that has made a valid election under U.S. Treasury Regulations to be treated as a domestic trust). As used herein, "NonU.S. Holder" generally means a beneficial cwner of a Bond (other than a partnership) that is not a U.S. Holder. If a partnership holds Bonds, the tax treatment of such partnership or a partner in such partnership generally will depend upon the status of the partner and upon the activities of the partnership. Partnerships holding Bonds, and partners in such partnerships, should consult their cwn tax advisors regarding the tax consequences of an investment in the Bonds (including their status as U.S. Holders or N on-U .S. Holders).

ALL PROSPECTIVE INVESTORS SHOULD CONSULT THEIR OWN TAX ADVISORS IN DETERMINING THE FEDERAL, STATE, LOCAL, FOREIGN AND ANY OTHER TAX CONSEQUENCES TO THEM FROM THE PURCHASE, OWNERSHIP AND DISPOSITION OF THE BONDS.

51

U.S. Holders

I nterest on the Bands. Band Counsel has rendered no opinion regarding the exclusion pursuant to section 103(a) of the Code of interest on the Bonds from gross income for federal income tax purposes. The Successor Agency has taken no action to cause, and does not intend, i nterest on the Bands to be excluded pursuant to section 103(a) of the Code from the gross i ncorre of the o.vners thereof for federal income tax purposes. The Successor Agency intends totreatthe Bonds as debt instrurrents for all federal income tax purposes, including any applicable reporting requirerrents under the Code. THE SUCCESSOR AGENCY EXPECTS THAT THE INTEREST PAID ON A BOND GENERALLY WILL BE INCLUDED IN THE GROSS INCOME OF THE OWNER THEREOF FOR FEDERAL INCOME TAX PURPOSES WHEN RECEIVED OR ACCRUED, DEPENDING UPON THE TAX ACCOUNTING METHOD OF THAT OWNER.

Disposition of Bonds, Inclusion of Acquisition Discount and Treatrrent of Market Discount. To the extent that the issue price of any maturity of the Bonds is less than the amount to be paid at maturity of such Bands by more than a de ni ni ni s amount ( excluding amounts stated to be interest and payable at least annually ewer the term of such Bonds), the difference may constitute original issue discount ("OID"). U.S. Holders of Bonds will be required to include OID in incorre for U.S. federal income tax purposes as it accrues, in accordance with a constant yield rrethod based on a compounding of interest (which may be before the receipt of cash payrrents attributable to such income). Under this rrethod, U.S. Holders generally will be required to include in incorre increasingly greater amounts of 01 D in successive accrual periods.

Arnortizable Bond Prenium. A holder of a Bond that purchased that bond for an amount that was greater than its stated redemption price at maturity will be considered to have purchased the Bond with "amortizable bond prenium" equal in amount to such excess. A U.S. Holder of a Bond purchased with amortizable bond prenium may elect to amortize such premium using a constant yield rrethod ewer the remaining term of the Bond and may offset interest otherwise required to be included in respect of the Taxable Bond during any taxable year by the amortized amount of such excess for the taxable year. Bond prenium on a Bond held by a U.S. Holder that does not make such an election will decrease the amount of gain or increase the amount of loss otherwise recognized on the sale, exchange, redemption or retirerrent of a Bond. Ho.vever, if the Bond may be optionally redeerred after the beneficial o.vner acquires it at a price in excess of its stated redemption price at maturity, special rules would apply under the Treasury Regulations which could result in a deferral of the amortization of some bond prenium until I ater in the term of the Band. Any election to amortize bond preni um appl i es to al I taxable debt instrurrents held by the beneficial o.vner on or after the first day of the first taxable year to which such election applies and may be revoked only with the consent of the Service. That a Bond was purchased by the holder with amorti zabl e bond preni um may affect the computation of i ncl udabl e ori gi nal issue discount for that holder.

Sale or other Taxable Disposition of a Bond; Market Discount. Unless a nonrecognition prewision of the Code applies, the sale, exchange, redemption, retirerrent or other taxable disposition of a Bond will be a taxable event for U.S. federal income tax purposes. In such event, in general, a U.S. Holder of a Bond will recognize gain or loss equal to the difference between (i) the amount of cash plus the fair market value of property received (except to the extent attributable to accrued but unpaid interest on the Bond, which will be taxed in the manner described above) and (ii) the U.S. Holder's adjusted U.S. federal i ncorre tax basis i n the B and ( general ly, the purchase price paid by the U .S. Holder for the Band, decreased by any amortized premium, and increased by the amount of any OID previously included in income by such U .S. Halder with respect to such B and) . Any such gain or I oss general ly wi 11 be capital gain or loss. In the case of a non-corporate U.S. Holder of the Bonds, the maximum marginal U.S. federal i ncorre tax rate appl i cable to any such gain wi 11 be I o.ver than the maxi mum marginal U .S. federal

52

income tax rate applicable to ordinary income if such U.S. Holder's holding period for the Bonds exceeds one year. The deductibility of capital losses is suqject to limitations.

Under current law, a U.S. Holder of a Bond who did not purchase that Bond in the initial public offering (a "subsequent purchaser") generally will be required, on the disposition (or earlier partial pri nci pal payment) of such Band, to recognize as ordi nary i ncome a portion of the gai n ( or partial principal payment), if any, to the extent of the accrued "market discount." In general, market discount is the amount b,I which the price paid for such Bond b,I such a subsequent purchaser is less than the stated redemption price at maturity of that Bond (or, in the case of a Bond bearing original issue discount, is less than the "revised issue price" of that Bond (as defined belcw) upon such purchase), except that market discount is considered to be zero if it is less than one quarter of one percent of the principal amount times the number of complete remaining years to maturity. The Code also Ii nits the deductibility of interest incurred b,I a subsequent purchaser on funds borrcwed to acquire Bonds with market discount. As an alternative to the inclusion of market discount in income upon disposition, a subsequent purchaser may elect to include market discount in income currently as it accrues on all market discount instruments acquired b,I the subsequent purchaser in that taxable year or thereafter, in which case the interest deferral rule will not apply. The recharacterization of gain as ordinary income on a subsequent disposition of such Bands could have a material effect on the market value of such Bands.

Medicare Tax. Certain non-corporate U.S. Holders of Bonds are suqject to a 3.8% tax on the lesser of (1) the U.S. Holder's "net investment income" (in the case of individuals) or "undistributed net investment income" (in the case of estates and certain trusts) for the relevant taxable year and (2) the excess of the U.S. Holder's "modified aqjusted gross income" (in the case of individuals) or "aqjusted gross income" (in the case of estates and certain trusts) for the taxable year ewer a certain threshold (which in the case of individuals is between $200,000 and $250,000, depending on the individual's circumstances). A U.S. Holder's calculation of net investment income generally will include its interest income on the Bands and its net gai ns from the di sposi ti on of the Bands, uni ess such i nterest income or net gains are derived in the ordinary course of the conduct of a trade or business ( other than a trade or business that consists of certain passive or trading activities). If you are an individual, estate, or trust, you are urged to consult your tax ad.tisors regarding the applicability of this tax to your income and gains in respect of your investment in the Bands.

Information Reporting and Backup Withholding. Payments on the Bonds generally will be suqject to U.S. information reporting and possibly to "backup withholding." Under Section 3406 of the Code and applicable U.S. Treasury Regulations issued thereunder, a non-corporate U.S. Holder of the Bonds may be suqject to backup withholding at the current rate of 2836 with respect to "reportable payments," which include interest paid on the Bonds and the gross proceeds of a sale, exchange, redemption, retirement or other disposition of the Bonds. The payor will be required to deduct and withhold the prescribed amounts if (i) the payee fails to furnish a U.S. taxpayer identification number ("Tl N") to the payor in the manner required, (ii) the I RS notifies the payor that the Tl N furnished b,I the payee is incorrect, (iii) there has been a "notified payee underreporting" described in Section 3406(c) of the Code or (iv) the payee fails to certify under penalty of peoury that the payee is not suqject to withholding under Section 3406(a)(l)(C) of the Code. Amounts withheld under the backup withholding rules may be refunded or credited against the U.S. Holder's federal income tax liability, if any, provided that the required information is timely furnished to the I RS. Certain U.S. holders (including among others, corporations and certain tax-exempt organi zati ans) are not suqj ect to backup wi thhol ding. A holder's failure to comply with the backup withholding rules may result in the imposition of penalties by the I RS.

53

Non--U.S. Holders

Under sections 1441 and 1442 of the Code, nonresident alien individuals and foreign corporations are generally suqject to withholding at the current rate of 3036 (suqject to change) on periodic income items arising from sources within the United States, pro.tided such incorre is not effectively connected with the conduct of a United States trade or business.

The foregoing notwithstanding, but suqject to the discussions belo.v under the headings "Information Reporting and Backup Withholding" and "Foreign Account Tax Compliance Act ("FATCA")-U.S. Holders and Non--U .S. Holders," and assuming the interest income of Non-US Holder on the Bonds is not treated as effectively connected income within the meaning of section 864 of the Code, such interest will not be suqject to 3036 withholding, or any lo.ver rate specified in an income tax treaty, if such i ncorre is treated as portfolio interest. Interest wil I be treated as portfolio interest if: (i) the Non--U.S. Holder pro.tides a staterrent to the payor certifying, under penalties of peoury, that the NonU.S. Holder is not a United States person and pro.tiding the narre and address of such Non--U.S. Holder; (ii) such interest is treated as not effectively connected with a United States trade or business of the NonU.S. Holder; (iii) such interest payrrents are not made to a person within a foreign country that the Service has included on a list of countries having prcwisions inadequate to prevent United States tax evasion; (iv) interest payable with respect to the Bonds is not deerred contingent interest within the rreaning of the portfolio debt prcwision; (v) the Non--U.S. Holder is not a controlled foreign corporation, within the rreaning of section 957 of the Code; and (vi) the Non--U.S. Holder is not a bank receiving interest on the Bonds pursuant to a loan agreerrent entered into in the ordinary course of the Non--U.S. Holder's banking trade or business.

Assuning payrrents on the Bonds are treated as portfolio interest within the meaning of sections 871 and 881 of the Code, then no withholding under section 1441 and 1442 of the Code and no backup withholding under section 3406 of the Code is required with respect to an o.vner or intermediary who has pro.tided a certification completed in compliance with applicable statutory and regulatory requirerrents, which requirerrents are discussed belo.v under the heading "Information Reporting and Backup Withholding," or an exemption is otherwise established.

Suqject to the discussions belo.v under the headings "Information Reporting and Backup Withholding' and "Foreign Account Tax Compliance Act ("FATCA")-U.S. Holders and Non--U.S. Holders," any capital gain realized b,I a Non--U.S. Holder upon the sale, exchange, redemption, retirerrent or other taxable disposition of a Bond generally will not be suqject to U.S. federal income tax, unless (i) such gain is effectively connected with the conduct b,I such Non--U.S. Holder of a trade or business within the United States; or (ii) in the case of any gain realized b,I an individual Non--U.S. Holder, such holder is present in the United States for 183 days or more in the taxable year of such sale, exchange, redemption, retirerrent or other disposition and certain other conditions are rret.

Information Reporting and Backup Withholding. Suqject to the discussion belo.v under the heading "Foreign Account Tax Compliance Act ("FATCA")-U.S. Holders and Non--U.S. Holders," under current U.S. Treasury Regulations, payrrents of principal and interest on any Bonds to a Non--U.S. Holder will not be suqject to any backup withholding tax requirerrents if the Non--U.S. Holder of the Bond or a financial institution holding the Bond on behalf of the Non--U.S. Holder in the ordinary course of its trade or business pro.tides an appropriate certification to the payor and the payor does not have actual kno.vledge that the certification is false. If a Non--U.S. Holder pro.tides the certification, the certification must give the name and address of such Non--U .S. Holder, state that such Non--U .S. Holder is not a United States person, or, in the case of an individual, that such Non--U.S. Holder is neither a citizen nor a resident of the United States, and the Non--U.S. Holder must sign the certificate under penalties of peoury. The current backup withholding tax rate is 2836.

54

Foreign Account Tax Corrpliance Act ("FATCA")-U.S. Holders and Non--U.S. Holders. Sections 1471 through 1474 of the Code imp:ise a 3036 withholding tax on certain types of payments made to foreign financial i nsti tuti ons, uni ess the foreign fi nanci al institution enters into an agreement with the U.S. Treasury to, among other things, undertake to identify accounts held b,I certain U.S. persons or U.S.-o.vned entities, annually report certain information about such accounts, and withhold 3036 on payments to account holders whose actions prevent it from complying with these and other reporting requirements, or unless the foreign financial institution is otherwise exempt from those requirements. In addition, FATCA irrposes a 3036 withholding tax on the same types of payments to a non-financial foreign entity unless the entity certifies that it does not have any substantial U.S. cwners or the entity furnishes identifying information regarding each substantial U.S. cwner. Failure to comply with the additional certification, information reporting and other specified requirements imp:ised under FATCA could result in the 3036 withholding tax being imp:ised on payments of interest and principal under the Bonds and sales proceeds of Bonds held b,I or through a foreign entity. In general, withholding under FATCA currently applies to payments of U.S. source interest (including OID) and, under current guidance, will apply to (i) gross proceeds from the sale, exchange or retirement of debt obligations paid after December 31, 2018 and (ii) certain "passthru" payments no earlier than January 1, 2019. Prospective investors should consultthei r cwn tax ad.ti sors regarding FA TCA and its effect on them.

The foregoing summary is included herein for general information only and does not discuss al I aspects of U .S. federal taxation that may be relevant to a particular holder of Bands i n I i ght of the holder's particular circumstances and income tax situation. Prospective investors are urged to consult their cwn tax ad.ti sors as to any tax consequences to them from the purchase, cwnershi p and di sp:isi ti on of Bands, incl udi ng the application and effect of state, I ocal , non--U .S., and othertax I aws.

Effect of Defeasance. Pursuant to the Trust Agreement, the Bonds are suqject to legal defeasance without the consent of the holders of the Bands. Defeasance of any of the Bands may be treated as a taxable constructive exchange of that Bond for the defeased Bond, in which event, the holder will recognize gain or loss for federal income tax purp:ises equal to the difference between the amount realized from the sale, exchange or retirement (less any accrued qualified stated interest, which will be taxable as described above) and the holder's adjusted tax basis in the Bonds (described above).

ERISA CONSIDERATIONS

The Employee Retirement I ncorne Security Act of 1974, as amended ("ERISA"), imp:ises certain restrictions on employee pension and welfare benefit plans suqject to ERISA ("ERISA Plans") regarding prohibited transactions, and also imp:ises certain obligations on those persons who are fiduciaries with respect to ERISA Plans. Section 4975 of the Code imp:ises similar prohibited transaction restrictions on (i) tax-qualified retirement plans described in Section 401(a) and 403(a) of the Code, which are exerrpt from tax under section 501 (a) of the Code and which are not g0.ternmental and church plans as defined herein ("Qualified Retirement Plans"), and (ii) Individual Retirement Accounts described in Section 408(b) of the Code ("Tax-favored Plans"). Certain errployee benefit plans, such as g0.ternmental plans (as defined in Section 3(32) of ERISA), and, if no election has been made under Section 41CXd) of the Code, church plans (as defined in Section 3(33) of ERISA), are not suqject to ERISA requirements. Additionally, such g0.ternmental and non-electing church plans are not suqject to the requirements of Section 4975 of the Code. Although assets of such g0.ternmental or non-electing church plans may be invested in the Bonds without regard to the ERISA and Code considerations described belcw, any such investment may be suqject to prcwisions of applicable federal and state law that are, to a material extent, sinilartothe requirements of ERi SA and Section 4975 of the Code ("Sinilar Law").

In addition to the imp:isition of general fiduciary obligations, including those of investment prudence and diversification and the requirement that a plan's investment be made in accordance with the

55

ck:x:urrents gcweming the plan, Section 4ili of ERISA and Section 4975 of the Code prohibit a broad range of transactions involving assets of ERISA Plans and Tax-favored Plans and entities whose underlying assets include plan assets b,I reason of ERISA Plans or Tax-favored Plans investing in such entities (collectively, "Benefit Plans") and persons who have certain specified relationships to the Benefit Plans (such persons are referred to as "Parties in Interest" or "Disqualified Persons"), unless a statutory or administrative exemption is available. Certain Parties in Interest (or Disqualified Persons) that participate in a prohibited transaction rnay be suqject to a penalty (or an excise tax) imposed pursuant to Section 502(i) of ERISA (or Section 4975 of the Code) unless a statutory or administrative exemption is available.

Certain exemptions from the prohibited transaction rules could be applicable depending on the type and ci rcumstances of the pl an fiduciary making the decision to acquire a Band. I ncl uded arnong these exemptions are: Prohibited Transaction Class Exemption ("PTCE") 75-1, relating to certain brokerdeal er transactions, PT CE 96-23, regarding transacti ans effected b,I "i n--house asset managers"; PT CE 90-1, regarding investrrents b,I insurance corrpany pooled separate accounts; PTCE 95--60, regarding transactions effected b,l "insurance corrpany general accounts"; PTCE 91-38, regarding investrrents b,I bank collective investrrent funds; and PTCE 84-14, regarding transactions effected b,I "qualified professional asset managers." In addition, Section 408(b)(17) of ERISA and Section 4975(d)(20) of the Code generally pro.tide for a statutory exemption from the prohibitions of Section 4ai(a) of ERISA and Section 4975 of the Code for certain transactions between Benefit Plans and persons who are Parties in Interest solely b,I reason of pro.tiding services to such Benefit Plans or who are persons affiliated with such service prcwiders, pro.tided generally that such persons are not fiduciaries with respect to "plan assets" of any Benefit Plan involved in the transaction and that certain other conditions are satisfied.

Any Benefit Plan fiduciary considering whether to purchase Bonds on behalf of an ERISA Plan should consult with its counsel regarding the applicability of the fiduciary responsibility and prohibited transaction prcwisions of ERISA and the Code to such investrrent and the availability of any of the exerrptions referred to abcwe. In addition, persons responsible for considering the purchase of Bonds b,I a gcwemrrental plan or non-electing church plan should consult with its counsel regarding the applicability of any Similar Law to such an investrrent.

UNDERWRITING

The Bonds are being purchased b,I Stifel, Nicolaus & Company, Incorporated (the "Underwriter"). The Underwriter has agreed to purchase the Bands at a price of $4,727,535.35 (being the principal amount of the Bonds less original issue discount of $98,964.65 and less an underwriter's discount of $73,500.00). The purchase contract for the Bands pro.tides thatthe Underwriter wi 11 purchase all of the Bonds, if any are purchased, the obligation to rnake such purchase being suqject to certain terms and conditions set forth in such purchase contract, the apprcwal of certain legal matters b,I counsel and certain other conditions.

The Underwriter rnay ewer-allot or effect transactions that stabilize or maintain the market prices of the Bonds at a level abcwe that which rnay otherwise prevail in the open market. Such stabilizing, if cornrrenced, rnay be discontinued at any tirre. The Underwriter may offer and sell the Bonds to certain dealers, institutional investors and others at prices lcwer than the public offering prices stated on the inside ccwer page hereto, and such public offering prices rnay be changed frorn ti rre to ti rre b,I the Underwriter.

56

MUNICIPAL ADVISOR

The Successor Agency has retained the Municipal Ad.tisor in connection with the authorization, issuance, sale and delivery of the Bonds. The Municipal Ad.tisor is not obligated to undertake, and has not undertaken to make, an independent verification or assurre responsibility for the accuracy, completeness or fairness of the information contained in this Official Staterrent. The Municipal Ad.tisor is a registered municipal ad.tisory firrn. The fees of the Municipal Ad.tisor are contingent upon the issuance and delivery of the Bonds.

LITIGATION

There is no action, suit or proceeding kno.vn to the Successor Agency to be pending and notice of which has been served upon and received b,I the Successor Agency, or threatened, restraining or enjoining the execution or delivery of the Bands or the Indenture or in any way contesting or affecting the validity of the foregoing or any proceedings of the Successor Agency taken with respect to any of the foregoing.

LEGALITY FOR INVESTMENT IN CALIFORNIA

The Redevelopment LiM' pro.tides that obligations authorized and issued under the Redevelopment LiM'will be legal investrrents for all banks, trust companies and savings banks, insurance companies, and various other financial institutions, as well as for trust funds. The Bonds are also authorized security for public deposits underthe Redevelopment Law.

RATINGS

S&P Global Ratings, a Standard & Poor's Financial Services LLC business ("S& P"), is expected to assign a rating of "AA" to the Bonds with the understanding that upon delivery of the Bonds, the Policy insuring the payrrent of principal of and interest on the Bonds when due will be issued b,I ACM. See "BOND INSURANCE." In addition, S&P has assigned its underlying rating of "A+' to the Bonds. Such ratings reflect only the vie.v of S& P and any desired explanation of the significance of such rating should be obtained from S&P. Generally, a rating agency bases its rating on the information and materials furnished to it and on investigations, studies and assumptions of its o.vn. There is no assurance such ratings wi 11 continue for any given period of ti rre or that such ratings wi 11 not be revised dONrward or withdriM'n entirely b,I S&P, if in the judgrrent of S&P, circumstances so warrant. Any such dONrward revision or withdr.M'al of such ratings rnay have an ad.terse effect on the market price of the Bands. I nvestors should not make an i nvestrrent decision based solely on the ratings of S& P. Investors rnust read this entire Official Staterrent to obtain information essential to making an inforrred investrrent decision with respect to the Bonds.

CONTINUING DISCLOSURE

The Successor Agency has co.tenanted for the benefit of the holders and beneficial o.vners of the Bonds pursuant to a Continuing Disclosure Agreerrent, dated the date of issuance of the Bonds (the "Continuing DisclosureAgreerrent"), b,I and between the Successor Agency and Urban Futures, Inc. (the "Dissenination Agent"), to pro.tide certain financial information and operating data relating to the Successor Agency (the "Annual Report") no later than March 31 follo.ving the end of each fiscal year, comrrencing with the report for Fiscal Year 2016-17, and to pro.tide notices of the occurrence of certain enurrerated events through the EMMA System The specific nature of the information to be contained in the Annual Report and the enurrerated events is set forth in APPENDIX D - "FORM OF CONTINUING DISCLOSURE AGREEMENT." These co.tenants have been made in order to assist the Underwriter in

57

complying with Rule 15c2-12, as arrended (the "Rule") promulgated b,I the United States Securities and Exchange Commission underthe Securities Exchange Act of 1934, as arrended.

The Predecessor Agency was obligated to file financial information and operating data under the Rule pursuant to a continuing disclosure agreerrent delivered in connection with the Refunded Bonds. In the last five years, the Successor Agency did not tirrely file audited financial staterrents for Fiscal Years 2014 and 2015. Such audited financial staterrents have since been filed. In addition, filings of certain operating data for Fiscal Years 2011-12 through 2014-15 were not completed until March 2017. The Successor Agency also did not file tirrely notices with respect to changes in the ratings of the Refunded Bonds resulting from changes in ratings to the bond insurer insuring the Refunded Bonds. The Successor Agency has retained Urban Futures, Inc., as Dissemination Agent, to assist the Successor Agency with respect to cornpl i ance with the Rule for the Bands.

FINANCIAL STATEMENTS

Section 34177(n) of Dissolution Act requires that a post-audit of the financial transactions and records of the Successor Agency be made at least annually b,I a certified public accountant. The State Departrrent of Finance has stated that successor agency activities may be reported as a trust fund that is included in the financial staterrents of the sponsoring gcwernrrent. For the reporting related to fiscal year ending June 30, 2016, the City decided not to have separate financial staterrents prepared for the Successor Agency. Instead, the financial transactions for the Successor Agency were reported as part of the City's audited financial statements (the "City CAFR") which were prepared b,I Glenn Burdette, certified public accountants (the "Auditors"). The City CAFR that includes the Successor Agency's private-purpose trust fund is attached as Appendix E to this Official Staterrent. The Successor Agency has not requested nor obtained pernission from the Auditors to include the City CAFR in this Official Staterrent. The Auditors have not perforrred any post-audit review of the financial condition or operation of the Successor Agency for purposes of this Official Staterrent.

Under the Dissolution Act the Successor Agency is a separate legal entity from the City. The assets and liabilities of the Successor Agency are not assets or liabilities of the City. The Bonds are payable from and secured b,I a pledge of Pledged Tax Revenues and the Bonds are not an obligation of the City. The City CAFR is attached as Appendix E to this Official Staterrent only because it includes the Successor Agency's post-audit. The City included the financial transactions of the Successor Agency as part of its audited financial staterrents for fiscal year ended June 30, 2016. As of the date of this Official Staterrent, the City plans to include future financial transactions of the Successor Agency as part of the City's audited financial statements.

APPROVAL OF LEGAL PROCEEDINGS

The issuance of the Bonds is suqject to the appr0.ting opinion of Bond Counsel, to be delivered in substantially the form set forth in APPENDIX B herein. Norton Rose Fulbright US LLP has undertaken no responsibility to the owners for the accuracy, completeness or fairness of this Official Staterrent or any other offering material related to the Bonds, and expresses no opinion to the owners with respect thereto.

58

EXECUTION AND DELIVERY

The execution and delivery of this Official Staterrent b,I its Executive Director has been duly authorized b,I the Successor Agency.


By: ;S/Cruz Ramos -----='"-~~~------Executive Director

59

APPENDIX A

SUMMARY OF CERTAIN PROVISIONS OF THE INDENTURE

The follOMng is a sumrary of certain prcwisions of the Indenture, and is supplerrental to the sumrary of other prcwisions of the Indenture described in the body of this Official Staterrent. This sumrary does not purport to be comprehensive or definitive, and reference should be rrade to the Indenture for a full and complete staterrent of its prcwisions. All capitali:zed term; used herein but not otherwse defined in this Appendix A shall have the rreanings ascribed to such term; in the Indenture.

DEFINITIONS

"Act" means Article 11 ( commencing with Section 53580) of Chapter 3 of Part 1 of Division 2 of Title 5 of the California Government Code.

"Annual Debt Service" means, for any Bond Year, the principal and interest payable on the Outstanding Bonds in such Bond Year.

"Authorized Denomination" means $5,000 and any integral multiple thereof.

"Bond Counsel" means Norton Rose Fulbright US LLP or a successor thereto or a firm of attorneys acceptable to the Successor Agency of nationally recognized standing in matters pertaining to the exclusion of interest on bonds from the gross income of the holders thereof issued by states and political subdivisions.

"Bond Year" means the twelve ( 12) month period commencing on August 2 of each year, provided that the first Bond Year shall extend from the Delivery Date to and including August 1, 2018.

"Business Day" means any day other than (i) a Saturday or Sunday or legal holiday or a day on which banking institutions in the city in which the Corporate Trust Office of the Trustee is located are authorized to close, or (ii) a day on which the New York Stock Exchange is closed.

"Certificate" or "Certificate of the Successor Agency" means a Written Certificate of the Successor Agency.

"Chairperson" means the Chairperson of the Successor Agency or other duly appointed officer of the Successor Agency authorized by the Successor Agency by resolution or by law to perform the functions of the Chairperson in the event of the Chairperson's absence or disqualification.

"City" means City of Guadalupe, California.

"Code" means the Internal Revenue Code of 1986.

"Continuing Disclosure Agreement" means the Continuing Disclosure Agreement, dated the Delivery Date, by and between the Successor Agency and the dissemination agent named therein, as originally executed and as it may be amended from time to time in accordance with the terms thereof.

"Corporate Trust Office" means the Corporate Trust Office of the Trustee, or such other or additional offices as may be specified to the Successor Agency by the Trustee in writing.

A-1

"Costs of Issuance" means the costs and expenses incurred in connection with the issuance and sale of the Bonds including the initial fees and expenses of the Trustee, rating agency fees, verification agent fees, fees and expenses of Bond Counsel and Disclosure Counsel, other legal fees and expenses relating to the approval of the Bonds, the Indenture, other related documents and certificates and matters related thereto, costs of preparing the Bonds and printing the Official Statement, fees of fmancial consultants, redevelopment consultants, bond insurance or surety premium, if any, and other fees and expenses set forth in a Written Certificate of the Successor Agency.

"Costs oflssuance Funds" means the Fund established in the Indenture.

"County" means the County of Santa Barbara, California.

"Debt Service Coverage" means, for each Bond Year, Pledged Tax Revenues divided by Annual Debt Service.

"Defeasance Securities" means, subject to other provisions of the Indenture:

I. Cash

2. Obligations of, or obligations guaranteed as to principal and interest by, the United States of America or any agency or instrumentality thereof, when such obligations are backed by the full faith and credit of the United States of America including:

• U.S. treasury obligations

• All direct or fully guaranteed obligations

• Farmers Home Administration

• General Services Administration

• Guaranteed Title XI financing

• Government National Mortgage Association (GNMA)

• State and Local Government Series

Any security used for defeasance must provide for the timely payment of principal and interest and cannot be callable or prepayable prior to maturity or earlier redemption of the rated debt ( excluding securities that do not have a fixed par value and/or whose terms do not promise a fixed dollar amount at maturity or call date).

"Delivery Date" means the date on which the Bonds are delivered to the initial purchaser or purchasers thereof.

"Dissolution Act" means, Parts 1.8 (commencing with Section 34161) and 1.85 (commencing with Section 34170) of Division 24 of the Health and Safety Code of the State, as amended on June 27, 2012 by Assembly Bill No. 1484, enacted as Chapter 26, Statutes of 2012 and as further amended on September 22, 2015 by Senate Bill 107, enacted as Chapter 325, Statutes of 2015 (collectively as amended from time to time).

A-2

"DTC" means The Depository Trust Company, New York, New York, and its successors and assigns.

"EMMA" means the Electronic Municipal Market Access System, a facility of the Municipal Securities Rulemaking Board, at www.emra.m;rb.org

"Escrow Agent" means U.S. Bank National Association, and its successors and assigns.

"Fair Market Value" means the price at which a willing buyer would purchase the investment from a willing seller in a bona fide, arm's length transaction (determined as of the date the contract to purchase or sell the investment becomes binding) if the investment is traded on an established securities market (within the meaning of section 1273 of the Code) and, otherwise, the term "fair market value" means the acquisition price in a bona fide arm's length transaction (as referenced above) if (i) the investment is a certificate of deposit the value of which is determined in accordance with applicable regulations under the Code, (ii) the investment is an agreement with specifically negotiated withdrawal or reinvestment provisions and a specifically negotiated interest rate (for example, a guaranteed investment contract, a forward supply contract or other investment agreement) the value of which is determined in accordance with applicable regulations under the Code, (iii) the investment is a United States Treasury Security-State and Local Govermnent Series that is acquired in accordance with applicable regulations of the United States Bureau of Public Debt, or (iv) the investment is the Local Agency Investment Fund of the State, but only if at all times during which the investment is held its yield is reasonably expected to be equal to or greater than the yield on a reasonably comparable direct obligation of the United States of America.

"Fitch" means Fitch Ratings, Inc. and its successors and assigns, or, if such corporation shall be dissolved or liquidated or shall no longer perform the functions of a securities rating agency, any other nationally recognized securities rating agency designated by the Successor Agency.

"Fiscal Year" means any twelve (12) month period beginning on July 1st and ending on the next following June 30th.

"Fund or Account" means any of the funds or accounts referred to in the Indenture.

"Health and Safety Code" means the Health and Safety Code of the State of California.

"Independent Financial Consultant," "Independent Certified Public Accountant" or "Independent Redevelopment Consultant" means any individual or firm engaged in the profession involved, appointed by the Successor Agency, and who, or each of whom, has a favorable reputation in the field in which his/her opinion or certificate will be given, and:

(I) is in fact independent and not under domination of the Successor Agency;

(2) does not have any substantial interest, direct or indirect, with the Successor Agency, other than as original purchaser of the Bonds or as financial advisor for fiscal consultant with respect to the Bonds; and

(3) is not connected with the Successor Agency as an officer or employee of the Successor Agency, but who may be regularly retained to make reports to the Successor Agency.

"Information Services" means the Electronic Municipal Market Access System (referred to as "EMMA"), a facility of the Municipal Securities Rulernaking Board, at http://emma.msrb.org; provided,

A-3

http://emma.msrb.org

however, in accordance with then current guidelines of the Securities and Exchange Conunission, Information Services shall mean such other organizations providing information with respect to called Bonds as the Successor Agency may designate in writing to the Trustee.

"Insurance Policy" means the municipal bond insurance policy issued by the Insurer guaranteeing the scheduled payment of principal of and interest on the Bonds when due.

"Insurer" means Assured Guaranty Municipal Corp., a New York stock insurance company, or any successor or assignee thereof, as issuer of the Insurance Policy and the Reserve Policy.

"Interest Account" means the Account by that name established in the Indenture.

"Investment Agreement" means investment agreements when collateralized by United States of America guaranteed and direct obligation securities and such collateral is held by a third party institution and marked to market on a weekly basis to a minimum of the value of the outstanding balance of the agreement. Investment Agreements must be limited to the final maturity of the Bonds and shall be subject to the requirements therefor set forth in the definition of Permitted Investments.

"Maximum Annual Debt Service" means, as of the date of calculation, the largest amount obtained by totaling, for the current or any future Bond Year, the sum of (a) the amount of interest payable on the Bonds to be Outstanding in such Bond Year, assuming that principal thereof is paid as scheduled and that any mandatory sinking fund payments are made as scheduled, and (b) the amount of principal payable on the Bonds to be Outstanding in such Bond Year, including any principal required to be prepaid by operation of mandatory sinking fund payments. For purposes of such calculation, there shall be excluded the principal of and interest on any debt payable from tax revenues to the extent the proceeds thereof are then deposited in a fully self-supporting escrow fund (by irrevocably depositing with the Trustee or escrow agent, Defeasance Securities in such amount as an Independent Certified Public Accountant shall determine will, together with the interest to accrue thereon and available moneys then on deposit in the funds and accounts established pursuant to the Indenture, be fully sufficient to pay and discharge the indebtedness on all Bonds ( including all principal, interest and redemption premiums, if any) at or before maturity).

"Moody's" means Moody's Investors Service and its successors and assigns, or, if such corporation shall be dissolved or liquidated or shall no longer perform the functions of a securities rating agency, any other nationally recognized securities rating agency designated by the Successor Agency.

"Obligations" means obligations of the Successor Agency and includes, without limitation, bonds, notes, interim certificates, debentures or other obligations.

"Opinion of Counsel" means a written opinion of an attorney or firm of attorneys of favorable reputation in the field of municipal bond law. Any opinion of such counsel may be based upon, insofar as it is related to factual matters, information which is in the possession of the Successor Agency as shown by a certificate or opinion of, or representation by, an officer or officers of the Successor Agency, unless such counsel knows, or in the exercise of reasonable care should have known, that the certificate, opinion or representation with respect to the matters upon which his or her opinion may be based is erroneous.

"Outstanding" means, when used as of any particular time with reference to Bonds, subject to the provisions of the Indenture, all Bonds theretofore issued and authenticated under the Indenture except:

(a) Bonds theretofore canceled by the Trustee or surrendered to the Trustee for cancellation;

A-4

(b) Bonds paid or deemed to have been paid; and

( c) Bonds in lieu of or in substitution for which other Bonds shall have been authorized, executed, issued and authenticated pursuant to the Indenture.

"Oversight Board" means the oversight board duly constituted from time to time pursuant to Section 34179 of the Health and Safety Code.

"Owner" shall mean either the registered owners of the Bonds, or, if the Bonds are registered in the name of The Depository Trust Company or another recognized depository, any applicable participant in such depository system.

"Permitted Investments" means any of the following which at the time of investment are legal investments under the laws of the State for the moneys proposed to be invested therein (the Trustee is entitled to conclusively rely on a Written Request of the Successor Agency directing investment in such Permitted Investment as a certification by the Successor Agency to the Trustee that such Permitted Investment is a legal investment under the laws of the State), but only to the extent that the same are acquired at Fair Market Value:

(a) Direct obligations of the United States of America (including obligations issued or held in book-entry form on the books of the Department of the Treasury of the United States of America) or obligations the timely payment of the principal of and interest on which are fully guaranteed by the United States of America, including instruments evidencing a direct ownership interest in securities described in this clause such as Stripped Treasury Coupons rated the same rating as direct obligations of the United States of America by S&P and Moody's and held by a custodian for safekeeping on behalf of holders of such securities.

(b) Bonds or notes which are exempt from federal income taxes and for the payment of which cash or obligations described in clause (a) of this definition in an amount sufficient to pay the principal of, premium, if any, and interest on when due have been irrevocably deposited with a trustee or other fiscal depositary and which are rated the same rating as direct obligations of the United States of America by S&P and Moody's.

( c) Obligations, debentures, notes or other evidence of indebtedness issued or guaranteed by any of the following: Federal Home Loan Bank System, Government National Mortgage Association, Farmer's Home Administration, Federal Home Loan Mortgage Corporation, Federal National Mortgage Association or Federal Housing Administration.

(d) Deposit accounts, certificates of deposit, bank deposit products or savings accounts (i) fully insured by the Federal Deposit Insurance Corporation or (ii) with banks whose short term obligations are rated no lower than A-1 by S&P and P-1 by Moody's including those of the Trustee and its affiliates at the time of purchase.

(e) Federal funds or banker's acceptances with a maximum term of one year of any bank that has an unsecured, uninsured and unguaranteed obligation rating of "Prime-I" or "A3" by Moody's and "A-I" or "A" or better by S&P (including the Trustee and its affiliates).

(f) Repurchase obligations with a term not exceeding 30 days pursuant to a written agreement between the Trustee and either a primary dealer on the Federal Reserve reporting dealer list which falls under the jurisdiction of the Securities Investor Protection Corporation ("SIPC") or a federally chartered commercial bank whose long-term debt obligations are rated A or better by S&P and Moody's,

A-5

with respect to any security described in clause (l); provided that the securities which are the subject of such repurchase obligation (i) are free and clear of all liens, (ii) in the case of a SIPC dealer, were not acquired pursuant to a repurchase or reverse repurchase agreement, and (iii) are deposited with the Trustee and maintained through weekly market valuations in an amount equal to 104% of the invested funds plus accrued interest. The Trustee must have a valid first perfected security interest in such securities.

(g) Taxable govermnent money market portfolios that have a rating by S&P of Am-G or Am or better and rated in one of the three highest rating categories of Moody's, subject to a maximum permissible limit equal to six months of principal and interest on the Bonds, including such funds for which the Trustee or an affiliate receives and retains a fee for services provided to the fund, whether as a custodian, transfer agent, investment advisor or otherwise.

(h) Tax-exempt government money market portfolios that have a rating by S&P of Am-G or Am or better and rated in one of the three highest rating categories of Moody's consisting of securities which are rated in one of the two highest Rating Categories of S&P and Moody's subject to a maximum permissible limit equal to six months of principal and interest on the Bonds, including such portfolios for which the Trustee or an affiliate receives and retains a fee for services provided to the portfolio, whether as a custodian, transfer agent, investment advisor or otherwise.

(i) Money market funds registered under the Investment Company Act of 1940, the shares in which are registered under the Securities Act of 1933 and that have a rating by S&P of AAAm-G or AAAm and rated in one of the two highest Rating Categories of Moody's, including such funds for which the Trustee or an affiliate receives and retains a fee for services provided to the fund, whether as a custodian, transfer agent, investment advisor or otherwise.

(j) Any other investments which meet the criteria established by applicable published investment guidelines issued by each rating agency then rating the Bonds.

(k) The Local Agency Investment Fund of the State, created pursuant to Section 16429.1 of the California Govermnent Code, to the extent the Trustee is authorized to register such investment in its name.

"Pledged Tax Revenues" means (a) that portion of taxes levied (including all payments, reimbursements and subventions, if any, specifically attributable to ad valorem taxes lost by reason of business inventory tax or other exemptions and tax rate limitations) upon taxable property in the Redevelopment Project Area which is allocated to and paid into a special fund of the Successor Agency pursuant to Article 6 of Chapter 6 of the Health and Safety Code, Section 16 of Article XVI of the Constitution of the State and the Redevelopment Plan, as such portion of taxes may be modified by deductions and limitations imposed pursuant to the Health and Safety Code (including Section 33333.4 thereof), (b) investment earnings, and ( c) reimbursements, subventions, including payments to the Successor Agency with respect to personal property generated from property located within the Redevelopment Project Area pursuant to Section 16110, et seq, of the Government Code of the State of California, or other payments made by the State to the Successor Agency with respect to any property taxes that would otherwise be due on real or personal property but for an exemption of such property from such taxes. Pledged Tax Revenues shall not include amounts payable by the Successor Agency under agreements heretofore entered into pursuant to Section 33401 of the Health and Safety Code, as such Section authorized such agreements prior to January 1, 1995, unless such agreements have been made subordinate to the Bonds.

"Predecessor Agency" means the Community Redevelopment Agency of the City of Guadalupe.

A-6

"Principal Account" means the Account by that name established in the Indenture.

"Principal Payment Date" means August 1, commencing August 1, 2018 so long as any of the Bonds remain Outstanding under the Indenture.

"Qualified Reserve Fund Credit Instrument" means the Reserve Policy and an irrevocable standby or direct-pay letter of credit or surety bond issued by a commercial bank or insurance company, deposited with the Trustee pursuant to the Indenture, provided that all of the following requirements are met: ( i) at the time of delivery of such letter of credit or surety bond, the long-term credit rating of such bank is within the two highest rating categories of Moody's or S&P, or the claims paying ability of such insurance company is rated within the highest rating category of A.M. Best & Company and S&P; (ii) such letter of credit or surety bond has a term which ends no earlier than the last Interest Payment Date of the Bonds; (iii) such letter of credit or surety bond has a stated amount at least equal to the portion of the Reserve Requirement with respect to which funds are proposed to be released pursuant to the Indenture; and (iv) the Trustee is authorized pursuant to the terms of such letter of credit or surety bond to draw thereunder amounts necessary to carry out the purposes specified in the Indenture, including the replenishment of the Interest Account or the Principal Account.

"Rating Agency" means Fitch, Moody's or S&P.

"Recognized Obligation Payment Schedule" means a Recognized Obligation Payment Schedule, prepared and approved from time to time pursuant to subdivision ( 1) of Section 34177 of the Health and Safety Code.

"Record Date" means the fifteenth day of the month preceding any Interest Payment Date whether or not such day is a Business Day.

"Redemption Account" means the Account by that name established in the Indenture.

"Redevelopment Obligation Retirement Fund" means the fund created within the treasury of the Successor Agency pursuant to Section 34170.5 of the Health and Safety Code.

"Redevelopment Plan" means the Redevelopment Plan for the City of Guadalupe Redevelopment Project that was approved by Ordinance No. 85-263 adopted by the City Council of the City on December 19, 1985.

"Redevelopment Project Area" means the project area described and defined m the Redevelopment Plan.

"Redevelopment Property Tax Trust Fund" means the Redevelopment Property Tax Trust Fund established pursuant to subdivision (c) of Section 34172 of the Health and Safety Code.

"Reserve Fund" means the Fund by that name established in the Indenture.

"Reserve Policy" means the debt service reserve insurance policy issued by the Insurer and deposited into the Reserve Fund.

"Reserve Requirement" means, as of each calculation date, an amount equal to the least of (i) Maximum Annual Debt Service on all Outstanding Bonds, (ii) 10% of the initial offering price to the public of the Bonds as determined under the Code, or ( iii) 125% of the average Annual Debt Service as of the date of issuance of the Bonds.

A-7

"Revenue Fund" means that fund established in the Indenture.

"Securities Depositories" means The Depository Trust Company, New York, New York and its successors and assigns or if ( i) the then Securities Depository resigns from its functions as depository of the Bonds or (ii) the Successor Agency discontinues use of the then Securities Depository, any other securities depository which agrees to follow the procedures required to be followed by a securities depository in connection with the Bonds and which is selected by the Successor Agency.

"Sinking Account" means, the Sinking Account created in the Revenue Fund held by the Trustee pursuant to the Indenture.

"Sinking Account Payment Date" means any date on which Sinking Account Payments are scheduled to be paid with respect to the Bonds.

"Sinking Account Payments" means the amount of money required by the Indenture to be paid by the Successor Agency on any single date toward the retirement of any particular term bonds on or prior to their respective stated maturity dates.

"Sinking Account Payment Date" means any date on which Sinking Account Instalhnents are scheduled to be paid with respect to the Bonds.

"S&P" means S&P Global Ratings and its successors and assigns, or, if such corporation shall be dissolved or liquidated or shall no longer perform the functions of a securities rating agency, any other nationally recognized securities rating agency designated by the Successor Agency.

"State" means the State of California.

"Statutory Pass-Through Amounts" means amounts payable to affected taxing agencies pursuant to Sections 33607.5 and/or 33607.7 of the Health and Safety Code and Section 34183 of the Health and Safety Code.

"Supplemental Indenture" means any indenture then in full force and effect which has been duly adopted by the Successor Agency under the Health and Safety Code, or any act supplementary thereto or amendatory thereof, at a meeting of the Successor Agency duly convened and held, of which a quorum was present and acted thereon, amendatory of or supplemental to the Indenture; but only if and to the extent that such supplemental indenture is specifically authorized under the Indenture.

"Tax Certificate" means that certain tax certificate executed by the Successor Agency with respect to the Bonds.

"Trustee" means U.S. Bank National Association, a national banking association, its successors and assigns, and any other banking corporation or association which may at any time be substituted in its place, as provided in the Indenture.

"Written Request of the Successor Agency" or "Written Certificate of the Successor Agency" means a request or certificate, in writing signed by the Chairperson, Secretary or Executive Director of the Successor Agency or by any other officer of the Successor Agency duly authorized by the Successor Agency for that purpose, including the Finance Director of the City of Guadalupe.

A-8

CERTAIN BOND TERMS

Transfer of Bonds. Any Bond may, in accordance with its terms, be transferred, upon the Registration Books, by the person in whose name it is registered, in person or by a duly authorized attorney of such person, upon surrender of such Bond to the Trustee at its Corporate Trust Office for cancellation, accompanied by delivery of a written instrument of transfer in a form acceptable to the Trustee, duly executed. Whenever any Bond or Bonds shall be surrendered for registration of transfer, the Successor Agency shall execute and the Trustee shall authenticate and deliver a new Bond or Bonds, of like series, interest rate, maturity and principal amount of Authorized Denominations. The Trustee shall collect any tax or other governmental charge on the transfer of any Bonds pursuant to the Indenture.

The Trustee may refuse to transfer, under the provisions of the Indenture, either (a) any Bonds during the period established by the Trustee for the selection of Bonds for redemption, or (b) any Bonds selected by the Successor Agency for redemption pursuant to the provisions of the Indenture.

Exchange of Bonds. Bonds may be exchanged at the Corporate Trust Office of the Trustee for a like aggregate principal amount of Bonds of other Authorized Denominations of the same Series, interest rate and maturity. The Trustee shall collect any tax or other govermnental charge on the exchange of any Bonds pursuant to the Indenture. The cost of printing any Bonds and any services rendered or any expenses incurred by the Trustee in connection with any exchange or transfer shall be paid by the Successor Agency.

The Trustee may refuse to exchange, under the provisions of the Indenture, either (a) any Bonds during the period established by the Trustee for the selection of Bonds for redemption or (b) any Bonds selected by the Successor Agency for redemption pursuant to the provisions of the Indenture.

Registration Books. The Trustee will keep or cause to be kept, at its Corporate Trust Office, sufficient records for the registration and registration of transfer of the Bonds, which shall at all times during normal business hours be open to inspection by the Successor Agency with reasonable prior notice; and, upon presentation for such purpose, the Trustee shall, under such reasonable regulations as it may prescribe, register or transfer or cause to be registered or transferred, on the Registration Books, Bonds as provided in the Indenture.

Temporary Bonds. The Bonds may be initially issued in temporary form exchangeable for definitive Bonds when ready for delivery. The temporary Bonds may be printed or typewritten, shall be of such denominations as may be determined by the Successor Agency, and may contain such reference to any of the provisions of the Indenture as may be appropriate. Every temporary Bond shall be executed by the Successor Agency upon the same conditions and in substantially the same manner as the definitive Bonds. If the Successor Agency issues temporary Bonds it will execute and furnish definitive Bonds without delay, and thereupon the temporary Bonds shall be surrendered, for cancellation, in exchange therefor at the Corporate Trust Office of the Trustee, and the Trustee shall deliver in exchange for such temporary Bonds an equal aggregate principal amount of definitive Bonds of Authorized Denominations. Until so exchanged, the temporary Bonds shall be entitled to the same benefits pursuant to the Indenture as definitive Bonds authenticated and delivered under the Indenture.

Bonds Mutilated, Lost, Destroyed or Stolen. If any Bond shall become mutilated, the Successor Agency, at the expense of the Owner of such Bond, shall execute, and the Trustee shall thereupon deliver, a new Bond of like amount and maturity in exchange and substitution for the Bond so mutilated, but only upon surrender to the Trustee of the Bond so mutilated. Every mutilated Bond so surrendered to the Trustee shall be canceled by it. If any Bond shall be lost, destroyed or stolen, evidence of such loss, destruction or theft may be submitted to the Successor Agency and the Trustee and, if such evidence is

A-9

satisfactory to both and indemnity satisfactory to them shall be given, the Successor Agency, at the expense of the Owner, shall execute, and the Trustee shall thereupon authenticate and deliver, a new Bond of like amount and maturity in lieu of and in substitution for the Bond so lost, destroyed or stolen. The Successor Agency may require payment of a sum not exceeding the actual cost of preparing each new Bond issued under the Indenture and of the expenses which may be incurred by the Successor Agency and the Trustee in the premises. Any Bond issued under the provisions of the Indenture in lieu of any Bond alleged to be lost, destroyed or stolen shall constitute an original additional contractual obligation on the part of the Successor Agency whether or not the Bond so alleged to be lost, destroyed or stolen shall be at any time enforceable by anyone, and shall be equally and proportionately entitled to the benefits of the Indenture with all other Bonds issued pursuant to the Indenture.

Book-Entry Only System. It is intended by the Successor Agency that the Bonds, be registered so as to participate in a securities depository system with DTC (the "DTC System"), as set forth in the Indenture. The Bonds shall be initially issued in the form of a separate single fully registered Bond for each of the maturities and be registered in the name of Cede & Co., as nominee of DTC. The Successor Agency and the Trustee are authorized to execute and deliver such letters to or agreements with DTC as shall be necessary to effectuate the DTC System, including a representation letter in the form required by DTC (the "Representation Letter"). In the event of any conflict between the terms of any such letter or agreement, including the Representation Letter, and the terms of the Indenture, the terms of the Indenture shall control. DTC may exercise the rights of an Owner only in accordance with the terms of the Indenture applicable to the exercise of such rights.

With respect to the Bonds registered in the books of the Trustee in the name of Cede & Co., as nominee of DTC, the Successor Agency and the Trustee, shall have no responsibility or obligation to any broker-dealer, bank or other financial institution for which DTC holds Bonds from time to time as securities depository ( each such broker-dealer, bank or other financial institution being referred to in the Indenture as a "DTC Participant") or to any person on behalf of whom such a DTC Participant directly or indirectly holds an interest in the Bonds ( each such person being in the Indenture referred to as an "Indirect Participant"). Without limiting the immediately preceding sentence, Successor Agency and the Trustee shall have no responsibility or obligation with respect to (a) the accuracy of the records ofDTC, Cede & Co. or any DTC Participant with respect to any ownership interest in the Bonds, (b) the delivery to any DTC Participant or any Indirect Participant or any other person, other than an Owner, as shown in the Register, of any notice with respect to the Bonds, including any notice of redemption, ( c) the payment to any DTC Participant or Indirect Participant or any other Person, other than an Owner, as shown in the Register, of any amount with respect to principal of, premium, if any, or interest on, the Bonds or (d) any consent given by DTC as registered owner. So long as certificates for the Bonds are not issued pursuant to the Indenture and the Bonds are registered to DTC, the Successor Agency, and the Trustee shall treat DTC or any successor securities depository as, and deem DTC or any successor securities depository to be, the absolute owner of the Bonds for all purposes whatsoever, including without limitation (i) the payment of principal and interest on the Bonds, (ii) giving notice of redemption and other matters with respect to the Bonds, (iii) registering transfers with respect to the Bonds and (iv) the selection of Bonds for redemption. While in the DTC System, no person other than Cede & Co., or any successor thereto, as nominee for DTC, shall receive a Bond certificate with respect to any Bond. Notwithstanding any other provision of the Indenture to the contrary, so long as any of the Bonds are registered in the name of Cede & Co., as nominee of DTC, all payments with respect to principal of, premium, if any, and interest on such Bonds and all notices with respect to such Bonds shall be made and given, respectively, in the manner provided in the Representation Letter.

Upon delivery by DTC to the Trustee of written notice to the effect that DTC has determined to substitute a new nominee in place of Cede & Co., and subject to the provisions in the Indenture with respect to interest checks being mailed to the registered owner at the close of business on the Record Date

A-10

applicable to any Interest Payment Date, the name "Cede & Co." in the Indenture shall refer to such new nominee ofDTC.

Successor Securities Depository; Transfers Outside Book-Entry Only System. DTC may determine to discontinue providing its services with respect to the Bonds at any time by giving written notice to the Successor Agency and the Trustee and discharging its responsibilities with respect thereto under applicable law. The Successor Agency, without the consent of any other person, but following written notice to the Successor Agency and the Trustee, may terminate the services of DTC with respect to the Bonds. Upon the discontinuance or termination of the services of DTC with respect to the Bonds pursuant to the foregoing provisions, unless a substitute securities depository is appointed to undertake the functions ofDTC under the Indenture, the Successor Agency, at the expense of the Successor Agency, is obligated to deliver Bond certificates to the beneficial owners of the Bonds, as described in the Indenture, and the Bonds shall no longer be restricted to being registered in the books of the Trustee in the name of Cede & Co. as nominee of DTC, but may be registered in whatever name or name Owner transferring or exchanging Bonds shall designate to the Trustee in writing, in accordance with the provisions of the Indenture. The Successor Agency may determine that the Bonds shall be registered in the name of and deposited with a successor depository operating a securities depository system, qualified to act as such under Section 17(a) of the Securities Exchange Act of 1934, as amended, as may be acceptable to the Successor Agency, or such depository's agent or designee.

SECURITY OF BONDS; FLOW OF FUNDS; FUNDS AND ACCOUNTS

Security of Bonds; Equal Security. The Bonds shall be equally secured by a pledge of, security interest in and a first and exclusive lien on all of the Pledged Tax Revenues, whether held in the Redevelopment Property Tax Trust Fund or by the Successor Agency or the Trustee, and a first and exclusive pledge of, security interest in and lien upon all of the moneys in the Revenue Fund (including the Interest Account, the Principal Account, the Sinking Account and the Redemption Account and all subaccounts in the foregoing) and in the Reserve Fund to the Trustee for the benefit of the Owners of the Outstanding Bonds. The principal of and interest or redemption premium (if any) on the Bonds shall be payable from Pledged Tax Revenues. In addition, pursuant to Health and Safety Code Section 34177.S(g), the Bonds shall be specifically secured by a pledge of, and lien on, and shall be repaid from moneys deposited from time to time in the Redevelopment Property Tax Trust Fund.

Except for the Pledged Tax Revenues and moneys in the Revenue Fund (including the Interest Account, the Principal Account, the Sinking Account and the Redemption Account and all subaccounts in the foregoing) and the Reserve Fund (and all Accounts therein), no funds or properties of the Successor Agency shall be pledged to, or otherwise liable for, the payment of principal of or interest or redemption premium (if any) on the Bonds. Notwithstanding anything in the Indenture to the contrary, however, if Pledged Tax Revenues are insufficient for the deposits required under the Indenture or the payment of the principal of and interest or redemption premium (if any) on the Bonds, the Successor Agency may, but shall not be obligated, to make such deposits or pay such principal of and interest or redemption premium (if any) on the Bonds from other legally available funds.

The Indenture shall constitute a contract between the Successor Agency and the Trustee for the benefit of the Owners, and the covenants and agreements in the Indenture set forth to be performed on behalf of the Successor Agency and the Trustee shall be for the equal and proportionate benefit, security and protection of all Owners without preference, priority or distinction as to security or otherwise of any of the Bonds over any of the others by reason of the number or date thereof or the time of sale, execution and delivery thereof, or otherwise for any cause whatsoever, except as expressly provided therein or in the Indenture.

A-11

Revenue Fund; Reserve Fund. There are established under the Indenture special funds known as the "Revenue Fund" and the "Reserve Fund," which Funds shall be held by the Trustee for the Owners. The Trustee shall send the Successor Agency on each December 30 and September 1 a written request specifying the amount of Pledged Tax Revenues required to be deposited in the Revenue Fund and/or the Reserve Fund, as applicable. The Successor Agency shall remit the amount requested pursuant to such written request to the Trustee within two (2) Business Days of receipt of distributions of Pledged Tax Revenues. If the Trustee fails to provide the written request described above, the Successor Agency shall transfer within two (2) Business Days of receipt of the distributions of Pledged Tax Revenues on June 1 and, to the extent necessary, January 2 all scheduled principal of and interest on the Bonds that are due and payable on February 1 and August 1 of the Bond Year ending on August 1 of the next ensuing calendar year, together with any amount required to replenish the Reserve Fund.

Transfer of Amounts. There are hereby created separate Accounts within the Revenue Fund as set forth below, to be known respectively as the Interest Account, the Principal Account, the Sinking Account, and the Redemption Account. Upon receiving Pledged Tax Revenues from the Successor Agency, the Trustee shall deposit all amounts received into the Revenue Fund or the Reserve Fund, as applicable, until such time as the amounts so deposited equal the aggregate amounts required to be transferred to the Trustee in such Bond Year (i) for deposit into the Interest Account, the Principal Account and the Redemption Account of the Revenue Fund and (ii) for deposit into the Reserve Fund, if necessary.

Such deposits shall be made in the following order of priority:

First Interest Account On or before each Interest Payment Date, the Trustee shall set aside from the Revenue Fund and deposit in the Interest Account an amount of money which, together with any money contained therein, is equal to the aggregate amount of the interest becoming due and payable on the Outstanding on such Interest Payment Date. No deposit need be made into the Interest Account if the amount contained therein is at least equal to the interest to become due and payable on all Outstanding Bonds on the Interest Payment Dates in such Bond Year. Subject to the provisions of the Indenture, all moneys in the Interest Account will be used and withdrawn by the Trustee solely for the purpose of paying the interest due on the Bonds as it becomes due and payable (including accrued interest on any Bonds redeemed prior to maturity pursuant to the Indenture).

Second Principal Account. On or before each Principal Payment Date, the Trustee shall set aside from the Revenue Fund and deposit in the Principal Account an amount of money which, together with any money contained therein, is equal to the aggregate amount of the principal becoming due and payable on the Outstanding Bonds on such Principal Payment Date. No deposit need be made into the Principal Account if the amount contained therein is at least equal to the principal to become due and payable on all Outstanding Bonds on the upcoming Principal Payment Date. Subject to the Indenture, all moneys in the Principal Account will be used and withdrawn by the Trustee solely for the purpose of paying the principal payments on the Outstanding Bonds as they become due and payable.

On or before each Principal Payment Date, the Trustee shall set aside from the Revenue Fund and deposit in the Sinking Account an amount of money equal to the Sinking Account Prepayment, if any, payable on the Sinking Account Payment Date in such Bond Year. The Trustee shall use moneys in the applicable Sinking Account to redeem Bonds pursuant to the Indenture. If there shall be insufficient money in the Revenue Fund to make in full all such principal payments and Sinking Account payments required to be made in such Bond Year, then the money available in the Revenue Fund shall be applied pro rata with respect to such principal payments and Sinking Account payments in the proportion that all such principal payments and sinking account payments bear to each other.

A-12

Third Reserve Fund. The Reserve Policy is a Qualified Reserve Fund Credit Instrument and satisfies the Reserve Requirement. Subject to the Indenture, all money in the Reserve Fund or draws on a Qualified Reserve Fund Credit Instrument will be used and withdrawn by the Trustee solely for the purpose of (i) making transfers to the Interest Account, the Principal Account and the Sinking Account (and subaccounts therein, as the case may be), in such order of priority, in the event of any deficiency at any time in any of such Accounts or (ii) for the retirement of all the Bonds then Outstanding. Any amount in the Reserve Fund in excess of the Reserve Requirement shall be withdrawn from the Reserve Fund on or before the Interest Payment Date by the Trustee and deposited in the Interest Account. All amounts in the Reserve Fund five (5) Business Days before the final Interest Payment Date shall be withdrawn therefrom by the Trustee and transferred either (i) to the Interest Account and then Principal Account and the Sinking Account, to the extent required to make the deposits then required to be made under the Indenture, or (ii) if sufficient deposits have been made under the Indenture, then, as directed by the Successor Agency in any manner permitted by law pursuant to a Written Request of the Successor Agency.

The Reserve Requirement may be satisfied by crediting to the Reserve Fund moneys and/ or a Qualified Reserve Fund Credit Instrument or any combination thereof, which in the aggregate make funds available in the Reserve Fund in an amount equal to the Reserve Requirement. Upon deposit of such Qualified Reserve Fund Credit Instrument, the Trustee shall transfer any excess amounts then on deposit in the Reserve Fund in excess of the applicable Reserve Requirement into a segregated account of the Revenue Fund, which monies shall be applied upon written direction of the Successor Agency either (i) to the payment within one year of the date of transfer of capital expenditures of the Successor Agency permitted by law, or (ii) to the redemption of Bonds on the earliest succeeding date on which such redemption is permitted hereby, and pending such application shall be, as determined in writing by the Successor Agency, held either not invested in investment property ( as defined in section 148(b) of the Code), or invested in such property to produce a yield that is not in excess of the yield on the Bonds; pro.tided, hcwever, that the Successor Agency may by written direction to the Trustee cause an alternative use of such amounts if the Successor Agency shall first have obtained a written opinion of nationally recognized bond counsel substantially to the effect that such alternative use will not adversely affect the exclusion pursuant to section 103 of the Code of interest on the Bonds from the gross income of the owners thereof for federal income tax purposes. In any case where the Reserve Fund is funded with a combination of cash and a Qualified Reserve Fund Credit Instrument, the Trustee shall deplete all cash balances before drawing on the Qualified Reserve Fund Credit Instrument. With regard to replenishment, any available moneys provided by the Successor Agency shall be used first to reinstate the Qualified Reserve Fund Credit Instrument and second, to replenish the cash in the Reserve Fund. If the Qualified Reserve Fund Credit Instrument is drawn upon, the Successor Agency shall make payment of interest on amounts advanced under the Qualified Reserve Fund Credit Instrument after making any payments pursuant to this subsection. If a Qualified Reserve Fund Credit Instrument provider is downgraded for any reason, there shall be no obligation to replace or secure the Qualified Reserve Fund Credit Instrument.

Replenishrrent of Reserve Fund. The Trustee shall value the balance in the Reserve Fund on each August 2, commencing August 2, 2018. If the balance in the Reserve Fund is less than the Reserve Requirement, the Trustee shall indicate the amount of such deficiency in a Written Request to the Successor Agency. Upon receipt of such Written Request, the Successor Agency shall immediately take all necessary action to cure such deficiency in the Reserve Fund, including using best efforts to place the amount of such deficiency on a Recognized Obligation Payment Schedule. No transfers or deposits need be made to the Reserve Fund so long as there is on deposit therein a sum at least equal to the Reserve Requirement.

A-13

Rederl1)1:i on Account The Successor Agency will deliver or cause to be delivered funds to the Trustee for deposit in the Redemption Account an amount required to pay the principal of, interest and premium, if any, on the Bonds (other than Bonds redeemed from Sinking Account Payments) to be redeemed on such date. Subject to the Indenture, all moneys in the Redemption Account will be used and withdrawn by the Trustee solely for the purpose of paying the principal of and interest or redemption premium (if any) on the Bonds to be redeemed on the date set for such redemption.

Costs oflssuance Fund. There is hereby established a separate fund to be known as the "Costs of Issuance Fund" which shall be held by the Trustee. Moneys in the Costs of Issuance Fund shall be used and withdrawn by the Trustee from time to time to pay the Costs of Issuance upon submission of a Written Request of the Successor Agency stating the person to whom payment is to be made, the amount to be paid, the purpose for which the obligation was incurred and that such payment is a proper charge against such Fund. Each such Written Request of the Successor Agency shall be sufficient evidence to the Trustee of the facts stated therein and the Trustee shall have no duty to confirm the accuracy of such facts. Six (6) months following the Delivery Date, or upon the earlier Written Request of the Successor Agency, all amounts (if any) remaining in either Costs oflssuance Fund shall be withdrawn therefrom by the Trustee and transferred to the Revenue Fund and the Trustee shall close the Costs oflssuance Fund.

Surplus Fund. There is hereby established the "Surplus Fund." Following the deposits described above, the Trustee shall deposit any remaining Pledged Tax Revenues into the Surplus Fund. Following such deposit, the Trustee will transfer any Pledged Tax Revenues in the Surplus Fund to the Successor Agency to be applied in accordance with the Dissolution Act and other applicable law.

COVENANTS OF THE SUCCESSOR AGENCY

Covenants of the Successor Agency. As long as the Bonds are Outstanding, the Successor Agency shall (through its proper members, officers, agents or employees) faithfully perform and abide by all of the covenants, undertakings and provisions contained in the Indenture or in any Bond issued under the Indenture, including the following covenants and agreements for the benefit of the Owners which are necessary, convenient and desirable to secure the Bonds:

Covenant 1. Compliance with Health and Safety Code. The Successor Agency covenants that it will comply with all applicable requirements of the Health and Safety Code.

Covenant 2. Recognized Obligation Payment Schedule. Pursuant to Section 34177 of the Health and Safety Code, not later than February 1 following the Delivery Date ( or such other dates as are specified in the Health and Safety Code or other applicable law), for so long as the Bonds are Outstanding, the Successor Agency shall prepare and submit to the Successor Agency Oversight Board and the State Department of Finance, a Recognized Obligation Payment Schedule pursuant to which enforceable obligations of the Successor Agency are listed, including debt service with respect to the Bonds and any amounts required to replenish the Reserve Fund or to pay amounts due to the Insurer in connection with the Insurance Policy or the Reserve Policy. Such Recognized Obligation Payment Schedule shall include all scheduled principal of and interest on the Bonds that are due and payable on February 1 and August 1 of the Bond Year ending on August 1 of the next ensuing calendar year, together with any amount required to replenish the Reserve Fund, and shall provide that such amounts be included in the June 1 disbursement from the Redevelopment Property Tax Trust Fund; provided, however, that in addition to the amounts previously identified in this paragraph, the Successor Agency shall include on its Recognized Obligation Payment Schedule for the Fiscal Year 2018-19 the scheduled principal of and interest on the Bonds coming due on August 1, 2018, which such Recognized Obligation Payment Schedule shall provide that such amount shall be included in the June 1 disbursement from the Redevelopment Property Tax Trust Fund.

A-14

If the provisions set forth in the Dissolution Act as of the Delivery Date of the Bonds that relate to the filing of Recognized Obligation Payment Schedules are further amended or modified in any manner, the Successor Agency agrees to take all such actions as are necessary to comply with such amended or modified provisions so as to ensure the timely payment of debt service on the Bonds that are not inconsistent herewith.

The Successor Agency further agrees (i) to include all amounts payable to the Insurer on each Recognized Obligation Payment Schedule submission, (ii) that if any amounts payable to the Insurer (with respect to the Insurance Policy or the Reserve Policy) are not included on any current Recognized Obligation Payment Schedules and the Successor Agency is then legally permitted to amend such Recognized Obligation Payment Schedules, the Successor Agency will amend its current Recognized Obligation Payment Schedule to include such amounts payable to the Insurer, and (iii) that the Successor Agency will not submit the final amendment permitted for its Last and Final Recognized Obligation without the prior written consent of the Insurer.

Covenant 3. Punctual Payment. The Successor Agency covenants that it will duly and punctually pay or cause to be paid the principal of and interest on the Bonds on the date, at the place and in the manner provided in the Bonds, and that it will take all actions required under the Health and Safety Code to include debt service on the Bonds on the applicable Recognized Obligation Payment Schedule, including any amounts required to replenish the Reserve Fund to the full amount of the Reserve Requirement.

Covenant 4. No Priority; No Additional Parity Bonds; Refunding Bonds; Other Obligations. The Successor Agency covenants that it will not issue any Obligations payable, either as to principal or interest, from the Pledged Tax Revenues which have any lien upon the Pledged Tax Revenues on a parity with or superior to the lien under the Indenture for the Bonds; provided, that the Successor Agency may issue and sell refunding bonds payable from Pledged Tax Revenues on a parity with Outstanding Bonds, if (a) annual debt service on such refunding bonds is lower than annual debt service on the Bonds being refunded during every year the Bonds will be outstanding, (b) the debt service payment dates with respect to such refunding bonds are the same as for the Bonds being refunded and ( c) the final maturity of any such refunding bonds does not exceed the final maturity of the Bonds being refunded.

Covenant 5. Use of Proceeds: Management and Operation of Properties. The Successor Agency covenants that the proceeds of the sale of the Bonds will be deposited and used as provided in the Indenture and that it will manage and operate all properties owned by it comprising any part of the Redevelopment Project Area in a sound and proper manner and in accordance with applicable law.

Covenant 6. Payment of Taxes and Other Charges. The Successor Agency covenants that it will from time to time pay and discharge, or cause to be paid and discharged, all payments in lieu of taxes, service charges, assessments or other governmental charges which may lawfully be imposed upon the Successor Agency or any of the properties then owned by it in the Redevelopment Project Area, or upon the revenues and income therefrom, and will pay all lawful claims for labor, materials and supplies which if unpaid might become a lien or charge upon any of the properties, revenues or income or which might impair the security of the Bonds or the use of Pledged Tax Revenues or other legally available funds to pay the principal of and interest and redemption premium (if any) on the Bonds, all to the end that the priority and security of the Bonds shall be preserved; provided, however, that nothing in this covenant shall require the Successor Agency to make any such payment so long as the Successor Agency in good faith shall contest the validity of the payment.

Covenant 7. Books and Accounts: Financial Transactions and Records. The Successor Agency covenants that it will at all times keep, or cause to be kept, proper and current books and accounts

A-15

in which complete and accurate entries are made of the financial transactions and records of the Successor Agency. Within two hundred seventy (270) days after the close of each Fiscal Year an Independent Certified Public Accountant shall prepare an audit of the financial transactions and records of the Successor Agency for such Fiscal Year. To the extent permitted by law, such audit may be included within the annual audited financial statements of the City. Upon written request, the Successor Agency shall, as soon practicable, furnish a copy of each audit to any Owner. The Trustee shall have no duty to review such audits.

Covenant 8. Protection of Security and Rights of Owners. The Successor Agency covenants to preserve and protect the security of the Bonds and the rights of the Owners and to contest by court action or otherwise (a) the assertion by any officer of any government unit or any other person whatsoever against the Successor Agency that the Pledged Tax Revenues pledged under the Indenture cannot be used to pay debt service on the Bonds or (b) any other action affecting the validity of the Bonds or diluting the security therefor.

Covenant 9. Continuing Disclosure. The Successor Agency covenants that it will comply with and carry out all of the provisions of its Continuing Disclosure Agreement. Notwithstanding any other provision of the Indenture, failure by the Successor Agency to comply with its Continuing Disclosure Agreement shall not be considered an Event of Default; however, any participating underwriter, Owner or beneficial owner of any Bonds may take such actions as may be necessary and appropriate to compel performance, including seeking mandate or specific performance by court order.

Covenant 10. Further Assurances. The Successor Agency covenants to adopt, make, execute and deliver any and all such further resolutions, instruments and assurances as may be reasonably necessary or proper to carry out the intention or to facilitate the performance of the Indenture, and for the better assuring and confirming unto the Owners of the rights and benefits provided in the Indenture.

THE TRUSTEE

Duties, Immunities and Liabilities of Trustee.

(a) The Trustee shall, prior to the occurrence of an Event of Default, and after the curing or waiver of all Events of Default which may have occurred, perform such duties and only such duties as are specifically set forth in the Indenture and no implied covenants shall be read into the Indenture against the Trustee. The Trustee shall, during the existence of any Event of Default (which has not been cured or waived), exercise such of the rights and powers vested in it by the Indenture, and use the same degree of care and skill in their exercise, as a prudent person would exercise or use under the circumstances in the conduct of such person's affairs.

(b) Upon thirty (30) days written notice, the Successor Agency may remove the Trustee, unless an Event of Default shall have occurred and then be continuing, and shall remove the Trustee (i) if at any time requested to do so by an instrument or concurrent instruments in writing signed by the Owners of not less than a majority in aggregate principal amount of the Bonds then Outstanding ( or their attorneys duly authorized in writing) or (ii) if at any time the Successor Agency has knowledge that the Trustee has ceased to be eligible in accordance with subsection (e) of below, or has become incapable of acting, or has been adjudged as bankrupt or insolvent, or a receiver of the Trustee or its property has been appointed, or any public officer shall have taken control or charge of the Trustee or of its property or affairs for the purpose of rehabilitation, conservation or liquidation. In each case such removal shall be accomplished by the giving of written notice of such removal by the Successor Agency to the Trustee, whereupon the Successor Agency shall appoint a successor Trustee by an instrument in writing.

A-16

(c) The Trustee may at any time resign by giving prior written notice of such resignation to the Successor Agency, and by giving the Owners notice of such resignation by first class mail, postage prepaid, at their respective addresses shown on the Registration Books. Upon receiving such notice of resignation, the Successor Agency shall promptly appoint a successor Trustee by an instrument in writing.

(d) Any removal or resignation of the Trustee and appointment of a successor Trustee shall become effective upon acceptance of appointment by the successor Trustee. If no successor Trustee shall have been appointed and have accepted appointment within 45 days of giving notice of removal or notice of resignation as aforesaid, the resigning Trustee or any Owner ( on behalf of such Owner and all other Owners) may petition any court of competent jurisdiction for the appointment of a successor Trustee, and such court may thereupon, after such notice (if any) as it may deem proper, appoint such successor Trustee. Any successor Trustee appointed under the Indenture shall signify its acceptance of such appointment by executing and delivering to the Successor Agency and to its predecessor Trustee a written acceptance thereof, and thereupon such successor Trustee, without any further act, deed or conveyance, shall become vested with all the moneys, estates, properties, rights, powers, trusts, duties and obligations of such predecessor Trustee, with like effect as if originally named Trustee in the Indenture; but, nevertheless at the Written Request of the Successor Agency or the request of the successor Trustee, such predecessor Trustee shall execute and deliver any and all instruments of conveyance or further assurance and do such other things as may reasonably be required for more fully and certainly vesting in and confinning to such successor Trustee all the right, title and interest of such predecessor Trustee in and to any property held by it under the Indenture and shall pay over, transfer, assign and deliver to the successor Trustee any money or other property subject to the trusts and conditions in the Indenture set forth. Upon request of the successor Trustee, the Successor Agency shall execute and deliver any and all instruments as may be reasonably required for more fully and certainly vesting in and confirming to such successor Trustee all such moneys, estates, properties, rights, powers, trusts, duties and obligations. Upon acceptance of appointment by a successor Trustee as provided in this subsection, the Successor Agency shall mail, with a copy to the Successor Trustee, a notice of the succession of such Trustee to the trusts under the Indenture to each rating agency which then has a current rating on the Bonds and to the Owners at their respective addresses shown on the Registration Books. If the Successor Agency fails to mail such notice within 15 days after acceptance of appointment by the successor Trustee, the successor Trustee shall cause such notice to be mailed at the expense of the Successor Agency. Notwithstanding any other provisions of the Indenture, no removal, resignation or termination of the Trustee shall take effect until a successor shall be appointed.

(e) Every successor Trustee appointed under the provisions of the Indenture shall be a trust company, national banking association, or bank in good standing authorized to exercise trust powers or having the powers of a trust company and duly authorized to exercise trust powers within the State having a combined capital and surplus of at least $75,000,000, and subject to supervision or examination by federal or state authority. If such bank or trust company publishes a report of condition at least annually, pursuant to law or to the requirements of any supervising or examining authority above referred to, then for the purpose of this subsection the combined capital and surplus of such bank, national banking association, or trust company shall be deemed to be its combined capital and surplus as set forth in its most recent report of condition so published. In case at any time the Trustee shall cease to be eligible in accordance with the provisions of this subsection (e), the Trustee shall resign immediately in the manner and with the effect specified in this Section.

(f) The Trustee shall have no responsibility or liability with respect to any information, statement or recital in any offering memorandum or other disclosure material prepared or distributed with respect to the issuance of these Bonds.

A-17

(g) Before taking any action under the Indenture at the request or direction of the Owners, the Trustee may require that an indemnity bond satisfactory to the Trustee be furnished by the Owners for the reimbursement of all expenses to which it may be put and to protect it against all liability, except liability which is adjudicated to have resulted from its negligence or its willful misconduct in connection with any action so taken.

Merger or Consolidation. Any bank, national banking association, or trust company into which the Trustee may be merged or converted or with which either of them may be consolidated or any bank, national banking association, or trust company resulting from any merger, conversion or consolidation to which it shall be a party or any bank, national banking association, or trust company to which the Trustee may sell or transfer all or substantially all of its corporate trust business, provided such bank, national banking association, or trust company shall be eligible under the Indenture, shall be the successor to such Trustee without the execution or filing of any paper or any further act, anything in the Indenture to the contrary notwithstanding.

Liability of Trustee.

(a) The recitals of facts in the Indenture and in the Bonds contained shall be taken as statements of the Successor Agency, and the Trustee shall not assume responsibility for the correctness of the same, nor make any representations as to the validity or sufficiency of the Indenture or of the Bonds nor shall incur any responsibility in respect thereof, other than as expressly stated in the Indenture. The Trustee shall, however, be responsible for its representations contained in its certificate of authentication on the Bonds. The Trustee shall not be liable in connection with the performance of its duties under the Indenture, except for its own negligence or willful misconduct. The Trustee may become the Owner of any Bonds with the same rights it would have if they were not Trustee and, to the extent permitted by law, may act as depository for and permit any of its officers or directors to act as a member of, or in any other capacity with respect to, any committee formed to protect the rights of the Owners, whether or not such committee shall represent the Owners of a majority in principal amount of the Bonds then Outstanding.

(b) The Trustee shall not be liable for any error of judgment made in good faith by a responsible officer, unless the Trustee shall have been negligent in ascertaining the pertinent facts.

(c) The Trustee shall not be liable with respect to any action taken or omitted to be taken by it in good faith in accordance with the direction of the Owners of not less than a majority in aggregate principal amount of the Bonds at the time Outstanding relating to the time, method and place of conducting any proceeding for any remedy available to the Trustee, or exercising any trust or power conferred upon the Trustee under the Indenture.

( d) The Trustee shall not be liable for any action taken by it in good faith and believed by it to be authorized or within the discretion or rights or powers conferred upon it by the Indenture, except for actions arising from the negligence or willful misconduct of the Trustee. The permissive right of the Trustee to do things enumerated under the Indenture shall not be construed as a mandatory duty.

(e) The Trustee shall not be deemed to have knowledge of any Event of Default under the Indenture unless and until it shall have actual knowledge thereof, or shall have received written notice thereof at its Corporate Trust Office. Except as otherwise expressly provided in the Indenture, the Trustee shall not be bound to ascertain or inquire as to the performance or observance of any of the terms, conditions, covenants or agreements in the Indenture or of any of the documents executed in connection with the Bonds, or as to the existence of an Event of Default thereunder.

A-18

(f) No provision in the Indenture shall require the Trustee to risk or expend its own funds or otherwise incur any financial liability under the Indenture.

(g) The Trustee may execute any of the trust or powers of the Indenture and perform any of its duties through attorneys, agents and receivers and shall not be answerable for the conduct of the same if appointed by it with reasonable care.

(h) The permissive right of the Trustee to do things enumerated in the Indenture shall not be construed as a duty.

(i) and agents.

The immunities extended to the Trustee also extend to its directors, officers, employees

(j) The Trustee shall have the right to accept and act upon instructions, including funds transfer instructions ("Instructions") given pursuant to the Indenture and delivered using Electronic Means ("Electronic Means" shall mean the following communications methods: e-mail, facsimile transmission, secure electronic transmission containing applicable authorization codes, passwords and/or authentication keys issued by the Trustee, or another method or system specified by the Trustee as available for use in connection with its services under the Indenture); provided, however, that the Successor Agency shall provide to the Trustee an incumbency certificate listing officers with the authority to provide such Instructions ("Authorized Officers") and containing specimen signatures of such Authorized Officers, which incumbency certificate shall be amended by the Successor Agency whenever a person is to be added or deleted from the listing. If the Successor Agency elects to give the Trustee Instructions using Electronic Means and the Trustee in its discretion elects to act upon such Instructions, the Trustee's understanding of such Instructions shall be deemed controlling. The Successor Agency understands and agrees that the Trustee cannot determine the identity of the actual sender of such Instructions and that the Trustee shall conclusively presume that directions that purport to have been sent by an Authorized Officer listed on the incumbency certificate provided to the Trustee have been sent by such Authorized Officer. The Successor Agency shall be responsible for ensuring that only Authorized Officers transmit such Instructions to the Trustee and that the Successor Agency and all Authorized Officers are solely responsible to safeguard the use and confidentiality of applicable user and authorization codes, passwords and/or authentication keys upon receipt by the Successor Agency. The Trustee shall not be liable for any losses, costs or expenses arising directly or indirectly from the Trustee's reliance upon and compliance with such Instructions notwithstanding such directions conflict or are inconsistent with a subsequent written instruction. The Successor Agency agrees: (i) to assume all risks arising out of the use of Electronic Means to submit Instructions to the Trustee, including without limitation the risk of the Trustee acting on unauthorized Instructions, and the risk of interception and misuse by third parties; (ii) that it is fully informed of the protections and risks associated with the various methods of transmitting Instructions to the Trustee and that there may be more secure methods of transmitting Instructions than the method(s) selected by the Successor Agency; (iii) that the security procedures (if any) to be followed in connection with its transmission of Instructions provide to it a commercially reasonable degree of protection in light of its particular needs and circumstances; and (iv) to notify the Trustee immediately upon learning of any compromise or unauthorized use of the security procedures.

(k) The Trustee shall not be responsible for or accountable to anyone for the subsequent use or application of any moneys which shall be released or withdrawn in accordance with the provisions of the Indenture.

Right to Rely on Documents. The Trustee shall be protected in acting upon any notice, resolution, request, consent, order, certificate, report, opinion or other paper or document believed by it to

A-19

be genuine and to have been signed or presented by the proper party or parties, in the absence of negligence or willful misconduct by the Trustee. The Trustee may consult with counsel, including, without limitation, counsel of or to the Successor Agency, with regard to legal questions, and, in the absence of negligence or willful misconduct by the Trustee, the opinion of such counsel shall be full and complete authorization and protection in respect of any action taken or suffered by the Trustee under the Indenture in accordance therewith.

The Trustee shall not be bound to recognize any person as the Owner of a Bond unless and until such Bond is submitted for inspection, ifrequired, and his title thereto is established to the satisfaction of the Trustee.

Whenever in the administration of the trusts imposed upon it by the Indenture the Trustee shall deem it necessary or desirable that a matter be proved or established prior to taking or suffering any action under the Indenture, such matter (unless other evidence in respect thereof be in the Indenture specifically prescribed) may be deemed to be conclusively proved and established by a Written Certificate of the Successor Agency, which shall be full warrant to the Trustee for any action taken or suffered in good faith under the provisions of the Indenture in reliance upon such Written Certificate, but in its discretion the Trustee may, in lieu thereof, accept other evidence of such matter or may require such additional evidence as to it may deem reasonable. The Trustee may conclusively rely on any certificate of report of any Independent Accountant or Independent Redevelopment Consultant appointed by the Successor Agency.

Preservation and Inspection of Documents. All documents received by the Trustee under the provisions of the Indenture shall be retained in its possession and shall be subject at all reasonable times during regular business hours upon reasonable notice to the inspection of the Successor Agency and any Owner, and their agents and representatives duly authorized in writing, at reasonable hours and under reasonable conditions.

Compensation and Indemnification. The Successor Agency shall pay to the Trustee from time to time reasonable compensation for all services rendered under the Indenture and also all reasonable expenses, charges, legal and consulting fees and other disbursements and those of its attorneys, agents and employees, incurred in and about the performance of its powers and duties under the Indenture. Upon the occurrence of an Event of Default, the Trustee shall have a first lien on the Pledged Tax Revenues and all funds and accounts held by the Trustee under the Indenture to secure the payment to the Trustee of all fees, costs and expenses, including reasonable compensation to its experts, attorneys and counsel incurred in declaring such Event of Default and in exercising the rights and remedies set forth in the Indenture.

The Successor Agency further covenants and agrees to indemnify and hold the Trustee and its officers, directors, agents and employees, harmless against any loss, expense (including legal fees and expenses), and liabilities which it may incur arising out of or in the exercise and performance of its powers and duties under the Indenture, including the costs and expenses and those of its attorneys and advisors of defending against any claim of liability, but excluding any and all losses, expenses and liabilities which are due to the negligence or willful misconduct of the Trustee, its officers, directors, agents or employees. The obligations of the Successor Agency under this section shall survive resignation or removal of the Trustee under the Indenture and payment of the Bonds and discharge of the Indenture.

A-20

Investment of Moneys in Funds and Accounts. Subject to the provisions of in the Indenture, all moneys held by the Trustee in a Fund or Account, shall, at the written direction of the Successor Agency, be invested only in Permitted Investments. If the Trustee receives no written directions from the Successor Agency as to the investment of moneys held in any Fund or Account, the Trustee shall request such written direction from the Successor Agency and, pending receipt of instructions, shall invest such moneys solely in Permitted Investments described in subsection (i) of the definition thereof if the Successor Agency has previously so directed the Trustee in writing or shall be held by the Trustee uninvested.

(a) Moneys in the Redevelopment Obligation Retirement Fund shall be invested by the Successor Agency only in obligations permitted by the Health and Safety Code which will by their terms mature not later than the date the Successor Agency estimates the moneys represented by the particular investment will be needed for withdrawal from the Redevelopment Obligation Retirement Fund.

(b) Moneys in the Interest Account, the Principal Account, the Sinking Account and the Redemption Account of the Revenue Fund shall be invested by the Trustee only in obligations which will by their terms mature on such dates as to ensure that before each Interest Payment Date and Principal Payment Date, there will be in such account, from matured obligations and other moneys already in such account, cash equal to the interest and principal payable on such payment date.

(c) Moneys in the Reserve Fund shall be invested by the Trustee in (i) obligations which will by their terms mature on or before the date of the fmal maturity of the Bonds or five ( 5) years from the date of investment, whichever is earlier or (ii) an Investment Agreement which permits withdrawals or deposits without penalty at such time as such moneys will be needed or to replenish the Reserve Fund.

Obligations purchased as an investment of moneys in any of the Funds or Accounts shall be deemed at all times to be a part of such respective Fund or Account and the interest accruing thereon and any gain realized from an investment shall be credited to such Fund or Account and any loss resulting from any authorized investment shall be charged to such Fund or Account without liability to the Trustee. The Successor Agency or the Trustee, as the case may be, shall sell or present for redemption any obligation purchased whenever it shall be necessary to do so in order to provide moneys to meet any payment or transfer from such Fund or Account as required by the Indenture and shall incur no liability for any loss realized upon such a sale. All interest earnings received on any monies invested in the Interest Account, the Principal Account, the Sinking Account, the Redemption Account or the Reserve Fund, to the extent they exceed the amount required to be in such Account, shall be transferred on each Interest Payment Date to the Revenue Fund. The Trustee may purchase or sell to itself or any affiliate, as principal or agent, investments authorized by the Indenture. The Trustee shall not be responsible or liable for any loss suffered in connection with any investment of funds made by it in accordance with the Indenture. The Successor Agency acknowledges that to the extent regulations of the Comptroller of the Currency or other applicable regulatory entity grant the Successor Agency the right to receive brokerage confinnations of security transactions as they occur, the Successor Agency specifically waives receipt of such confirmations to the extent permitted by law. The Trustee will furnish the Successor Agency periodic cash transaction statements which include detail for all investment transactions made by the Trustee under the Indenture.

The Trustee or any of its affiliates may act as sponsor, advisor or manager in connection with any investments made by the Trustee under the Indenture.

The value of Permitted Investments shall be determined as follows: (i) as to investments the bid and asked prices of which are published on a regular basis in The Wal I Street J ournal ( or, if not there, then in The New York Tirres): the Fair Market Value; (ii) as to investments the bid and asked prices of

A-21

which are not published on a regular basis in The Wall StreetJ ournal or The New York Tirres: the Fair Market Value; (iii) as to certificates of deposit and bankers acceptances: the face amount thereof; and (iv) as to any investment not specified above: the value thereof established by prior agreement between the Successor Agency and the Trustee. Notwithstanding (i) through (iv) above, the Trustee shall have no duty in connection with the determination of Fair Market Value other than to follow its normal practice in determining the value of Permitted Investments, which may include utilizing computerized securities pncmg services that may be available to it, including those available through its regular accounting system.

Accounting Records and Financial Statements. The Trustee shall at all times keep, or cause to be kept, proper books of record and account, prepared in accordance with corporate trust industry standards, in which complete and accurate entries shall be made of all transactions made by it relating to the proceeds of the Bonds and all funds and accounts held by it established pursuant to the Indenture. Such books of record and account shall be available for inspection by the Successor Agency and the Insurer at reasonable hours and under reasonable circumstances with reasonable prior notice. The Trustee shall furnish to the Successor Agency, at least quarterly, an accounting of all transactions in the form of its regular account statements relating to the proceeds of the Bonds and all funds and accounts held by the Trustee pursuant to the Indenture.

Appointment of Co-Trustee or Agent. It is the purpose of the Indenture that there shall be no violation of any law of any jurisdiction (including particularly the law of the State) denying or restricting the right of banking corporations or associations to transact business as Trustee in such jurisdiction. It is recognized that in the case of litigation under the Indenture, and in particular in case of the enforcement of the rights of the Trustee on default, or in the case the Trustee deems that by reason of any present or future law of any jurisdiction it may not exercise any of the powers, rights or remedies in the Indenture granted to the Trustee or hold title to the properties, as in the Indenture granted, or take any other action which may be desirable or necessary in connection therewith, it may be necessary that the Trustee or Successor Agency appoint an additional individual or institution as a separate co-trustee. The following provisions of the Indenture are adopted to these ends.

In the event that the Trustee or Successor Agency appoint an additional individual or institution as a separate or co-trustee, each and every remedy, power, right, claim, demand, cause of action, immunity, estate, title, interest and lien expressed or intended by the Indenture to be exercised by or vested in or conveyed to the Trustee with respect thereto shall be exercisable by and vest in such separate or co-trustee to exercise such powers, rights and remedies, and every covenant an obligation necessary to the exercise thereof by such separate or co-trustee shall run to and be enforceable by either of them.

Should any instrument in writing from the Successor Agency be required by the separate trustee or co-trustee so appointed by the Trustee or Successor Agency for more fully and certainly vesting in and confinning to it such properties, rights, powers, trusts, duties and obligations, any and all such instruments in writing shall, on request, be executed, acknowledged and delivered by the Successor Agency. In case any separate trustee or co-trustee, or a successor to either, shall become incapable of acting, resign or be removed, all the estates, properties, rights, powers, trusts, duties and obligations of such separate trustee or co-trustee, so far as permitted by law, shall vest in and be exercised by the Trustee until the appointment of a new trustee or successor to such separate trustee or co-trustee.

In addition to the appointment of a co-trustee under the Indenture, the Trustee may, at the expense and with the prior written consent of the Successor Agency, appoint any agent of the Trustee in New York, New York, for the purpose of administering the transfers or exchanges of Bonds or for the performance of any other responsibilities of the Trustee under the Indenture.

A-22

MODIFICATION OR AMENDMENT OF THE INDENTURE

Amendment Without Consent of Owners. The Indenture and the rights and obligations of the Successor Agency and of the Owners may be modified or amended at any time by a Supplemental Indenture which shall become binding upon adoption, without consent of any Owners, to the extent permitted by law and any for one or more of the following purposes:

(a) to add to the covenants and agreements of the Successor Agency in the Indenture contained, other covenants and agreements thereafter to be observed or to limit or surrender any rights or power in the Indenture reserved to or conferred upon the Successor Agency; or

(b) to make such provisions for the purpose of curing any ambiguity, inconsistency or omission, or of curing or correcting any defective provision contained in the Indenture, or as to any other provisions of the Indenture as the Successor Agency may deem necessary or desirable, in any case which do not have a material and adverse effect on the security for the Bonds granted under the Indenture; or

( c) to modify, amend or supplement the Indenture in such manner as to permit the qualification of the Indenture under the Trust Indenture Act of 1939, as amended, or any similar federal statute hereafter in effect, and to add such other terms, conditions and provisions as may be permitted by said act or similar federal statute; or

( d) to modify or amend any provision of the Indenture with any effect and to any extent whatsoever permissible by law, provided that any such modification or amendment shall apply only to the Bonds issued and delivered subsequent to the execution and delivery of the applicable Supplemental Indenture.

The Trustee may, but shall not be obligated to, enter into any such Supplemental Indenture which affects the Trustee's own rights, duties or immunities under the Indenture or otherwise.

Amendment With Consent of Owners. Except as set forth in the Indenture, the Indenture and the rights and obligations of the Successor Agency and of the Owners may be modified or amended at any time by a Supplemental Indenture which shall become binding when the written consent of the Owners of a majority in aggregate principal amount of the Bonds then Outstanding are filed with the Trustee. No such modification or amendment shall (i) extend the fixed maturity of any Bonds, or reduce the amount of principal thereof, or extend the time of payment, without the consent of the Owner of each Bond so affected, or ( ii) reduce the aforesaid percentage of Bonds the consent of the Owners of which is required to effect any such modification or amendment, or (iii) permit the creation of any lien on the Revenues and other assets pledged under the Indenture prior to or on a parity with the lien created by the Indenture or deprive the Owners of the Bonds of the lien created by the Indenture on such Pledged Tax Revenues and other assets ( except as expressly provided in the Indenture), without the consent of the Owners of all of the Bonds then Outstanding. It shall not be necessary for the consent of the Bond Owners to approve the particular form of any Supplemental Indenture, but it shall be sufficient if such consent shall approve the substance thereof. Promptly after the execution by the Successor Agency and the Trustee of any Supplemental Indenture pursuant to the Indenture, the Trustee shall cause to be mailed a notice (the form of which shall be furnished to the Trustee by the Successor Agency), by first class mail postage prepaid, setting forth in general terms the substance of such Supplemental Indenture, to the Owners of the Bonds at the respective addresses shown on the Registration Books. Any failure to give such notice, or any defect therein, shall not, however, in any way impair or affect the validity of any such Supplemental Indenture.

A-23

The Trustee may, but shall not be obligated to, enter into any such Supplemental Indenture which affects the Trustee's own rights, duties or immunities under the Indenture or otherwise.

Effect of Supplemental Indenture. From and after the time any Supplemental Indenture becomes effective pursuant to the Indenture, the Indenture shall be deemed to be modified and amended in accordance therewith, the respective rights, duties and obligations of the parties to the Indenture or thereto and all Owners, as the case may be, shall thereafter be determined, exercised and enforced under the Indenture subject in all respects to such modification and amendment, and all the terms and conditions of any Supplemental Indenture shall be deemed to be part of the terms and conditions of the Indenture for any and all purposes.

Endorsement or Replacement of Bonds After Amendment. After the effective date of any amendment or modification of the Indenture pursuant to the Indenture, the Successor Agency may determine that any or all of the Bonds shall bear a notation, by endorsement in form approved by the Successor Agency, as to such amendment or modification and in that case upon demand of the Successor Agency, the Owners of such Bonds shall present such Bonds for that purpose at the Corporate Trust Office of the Trustee, and thereupon a suitable notation as to such action shall be made on such Bonds. In lieu of such notation, the Successor Agency may determine that new Bonds shall be prepared and executed in exchange for any or all of the Bonds and, in that case upon demand of the Successor Agency, the Owners of the Bonds shall present such Bonds for exchange at the Corporate Trust Office of the Trustee, without cost to such Owners.

Amendment by Mutual Consent. The provisions of the Indenture shall not prevent any Owner from accepting any amendment as to the particular Bond held by such Owner, provided that due notation thereof is made on such Bond.

EVENTS OF DEFAULT AND REMEDIES OF OWNERS

Events of Default and Acceleration of Maturities. The following events shall constitute Events of Default under the Indenture:

(a) if default shall be made in the due and punctual payment of the principal of or interest or redemption premium (if any) on any Bond when and as the same shall become due and payable, whether at maturity as therein expressed, by declaration or otherwise;

(b) if default shall be made by the Successor Agency in the observance of any of the covenants, agreements or conditions on its part in the Indenture or in the Bonds contained, other than a default described in the preceding clause (a), and such default shall have continued for a period of thirty (30) days following receipt by the Successor Agency of written notice from the Trustee, the Insurer or any Owner of not less than 50% in aggregate principal amount of the Outstanding Bonds (with the prior written consent of the Insurer); provided, that if such default is such that it cannot be corrected within the applicable period, it shall not constitute an Event of Default if corrective action is instituted by the Successor Agency within the applicable period and diligently pursued until the default is corrected, which period shall not be longer than sixty (60) days from the date of written notice specifying the failure; or

( c) if the Successor Agency shall commence a voluntary action under Title 11 of the United States Code or any substitute or successor statute.

If an Event of Default has occurred and is continuing, the Trustee may, or if requested in writing by the Owners of the majority in aggregate principal amount of the Bonds then Outstanding, the Trustee shall, by written notice to the Successor Agency, (a) only in the event of a default under subparagraph (a)

A-24

above, declare the principal of the Bonds, together with the accrued interest thereon, to be due and payable immediately, and upon any such declaration the same shall become immediately due and payable, and (b) upon any Event of Default (with receipt of indemnity to its satisfaction) exercise any remedies available to the Trustee and the Owners in law or at equity.

Immediately upon becoming aware of the occurrence of an Event of Default, the Trustee shall give notice of such Event of Default to the Successor Agency in writing. Such notice shall also state whether the principal of the Bonds shall have been declared to be or have immediately become due and payable. With respect to any Event of Default described in clauses (a) or (c) above the Trustee shall, and with respect to any Event of Default described in clause (b) above the Trustee in its sole discretion may, also give such notice to the Successor Agency, and the Owners in the same manner as provided herein for notices of redemption of the Bonds, which shall include the statement that interest on the Bonds shall cease to accrue from and after the date, if any, on which the Trustee shall have declared the Bonds to become due and payable pursuant to the preceding paragraph (but only to the extent that principal and any accrued, but unpaid interest on the Bonds is actually paid on such date.)

This provision, however, is subject to the condition that if, at any time after the principal of the Bonds shall have been so declared due and payable, and before any judgment or decree for the payment of the moneys due shall have been obtained or entered, the Successor Agency shall deposit with the Trustee a sum sufficient to pay all principal on the Bonds matured prior to such declaration and all matured installments of interest (if any) upon all the Bonds, with interest on such overdue installments of principal and interest (to the extent permitted by law) at the net effective rate then borne by the Outstanding Bonds, and the reasonable fees and expenses of the Trustee, including but not limited to attorneys' fees, and any and all other defaults known to the Trustee ( other than in the payment of principal of and interest on the Bonds due and payable solely by reason of such declaration) shall have been made good or cured to the satisfaction of the Trustee or provision deemed by the Trustee to be adequate shall have been made therefor, then, and in every such case, the Owners of at least a majority in aggregate principal amount of the Bonds then Outstanding, by written notice to the Successor Agency and to the Trustee, may, on behalf of the Owners of all of the Bonds, rescind and annul such declaration and its consequences. However, no such rescission and annulment shall extend to or shall affect any subsequent default, or shall impair or exhaust any right or power consequent thereon.

Upon the occurrence of an event of default, the Trustee may, with the consent of a majority of the Owners, by written notice to the Successor Agency, declare the principal of the Bonds to be immediately due and payable, whereupon that portion of the principal of the Bonds thereby coming due and the interest thereon accrued to the date of payment shall, without further action, become and be immediately due and payable, anything in the Indenture in the Bonds to the contrary notwithstanding.

Application of Funds Upon Acceleration. All of the Pledged Tax Revenues and all sums in the funds and accounts established and held by the Trustee under the Indenture upon the date of the declaration of acceleration as provided in the Indenture, and all sums thereafter received by the Trustee under the Indenture, shall be applied by the Trustee in the order following, upon presentation of the several Bonds, and the stamping thereon of the payment if only partially paid, or upon the surrender thereof if fully paid:

First, to the payment of the fees, costs and expenses of the Trustee in declaring such Event of Default and in exercising the rights and remedies set forth in the Indenture, including reasonable compensation to its agents, advisors and attorneys including all sums owed the Trustee pursuant to the Indenture;

A-25

Second, to the payment pro rata of the whole amount then owing and on the Bonds ( and any refunding bonds payable from Pledged Tax Revenues on a parity with Outstanding Bonds) for principal and interest, with interest on the overdue principal and installments of interest at the net effective rate then borne by the Outstanding Bonds (to the extent that such interest on overdue instalhnents of principal and interest shall have been collected), and in case such moneys shall be insufficient to pay in full the whole amount so owing and unpaid upon the Bonds, then to the payment of such principal and interest without preference or priority of principal over interest, or interest over principal, or of any instalhnent of interest over any other installment of interest, ratably to the aggregate of such principal and interest or any Bond over any other Bond; and

Third, to the payment of amounts due to the Insurer not paid pursuant to First and Second above.

Power of Trustee to Control Proceedings. If the Trustee, upon the happening of an Event of Default, shall have taken any action, by judicial proceedings or otherwise, pursuant to its duties under the Indenture, whether upon its own discretion or upon the request of the Owners of a majority in principal amount of the Bonds then Outstanding, it shall have full power, in the exercise of its discretion for the best interests of the Owners of the Bonds, with respect to the continuance, discontinuance, withdrawal, compromise, settlement or other disposal of such action; provided, however, that the Trustee shall not, unless there no longer continues an Event of Default, discontinue, withdraw, compromise or settle, or otherwise dispose of any litigation pending at law or in equity, if at the time there has been filed with it a written request signed by the Owners of a majority in principal amount of the Outstanding Bonds under the Indenture opposing such discontinuance, withdrawal, compromise, settlement or other disposal of such litigation.

Limitation on Owner's Right to Sue. No Owner of any Bond issued under the Indenture nor the Insurer shall have the right to institute any suit, action or proceeding at law or in equity, for any remedy under or upon the Indenture, unless (a) such Owner or the Insurer shall have previously given to the Trustee written notice of the occurrence of an Event of Default; (b) the Insurer or the Owners of a majority in aggregate principal amount of all the Bonds then Outstanding shall have made written request upon the Trustee to exercise the powers hereinbefore granted or to institute such action, suit or proceeding in its own name; ( c) the Insurer or such Owners shall have tendered to the Trustee indemnity reasonably acceptable to the Trustee against the costs, expenses and liabilities to be incurred in compliance with such request; and (d) the Trustee shall have refused or omitted to comply with such request for a period of sixty (60) days after such written request shall have been received by, and such tender of indemnity shall have been made to, the Trustee.

Such notification, request, tender of indemnity and refusal or omission are hereby declared, in every case, to be conditions precedent to the exercise by the Insurer and any Owner of any remedy under the Indenture; it being understood and intended that no one or more Owners shall have any right in any manner whatever by his or their action to enforce any right under the Indenture, except in the manner in the Indenture provided, and that all proceedings at law or in equity to enforce any provisions of the Indenture shall be instituted, had and maintained in the manner in the Indenture provided and for the equal benefit of all Owners of the Outstanding Bonds and the Insurer.

The right of any Owner of any Bond to receive payment of the principal of and interest and redemption premium (if any) on such Bond as in the Indenture provided, shall not be impaired or affected without the written consent of such Owner, notwithstanding the foregoing provisions of the Indenture.

Non-waiver. Nothing in the Indenture or in any other provision of the Indenture or in the Bonds, shall affect or impair the obligation of the Successor Agency, which is absolute and unconditional, to pay

A-26

from the Pledged Tax Revenues and other amounts pledged under the Indenture, the principal of and interest and redemption premium (if any) on the Bonds to the respective Owners on the respective Interest Payment Dates, as in the Indenture provided, or affect or impair the right of action, which is also absolute and unconditional, of the Owners to institute suit to enforce such payment by virtue of the contract embodied in the Bonds.

A waiver of any default by any Owner shall not affect any subsequent default or impair any rights or remedies on the subsequent default. No delay or omission of any Owner to exercise any right or power accruing upon any default shall impair any such right or power or shall be construed to be a waiver of any such default or an acquiescence therein, and every power and remedy conferred upon the Owners by the Health and Safety Code or by the Indenture may be enforced and exercised from time to time and as often as shall be deemed expedient by the Owners.

If a suit, action or proceeding to enforce any right or exercise any remedy shall be abandoned or determined adversely to the Owners, the Successor Agency and the Owners shall be restored to their former positions, rights and remedies as if such suit, action or proceeding had not been brought or taken.

Actions by Trustee as Attorney-in-Fact. Any suit, action or proceeding which any Owner shall have the right to bring to enforce any right or remedy under the Indenture may be brought by the Trustee for the equal benefit and protection of all Owners similarly situated and the Trustee is hereby appointed ( and the successive respective Owners by taking and holding the Bonds shall be conclusively deemed so to have appointed it) the true and lawful attorney-in-fact of the respective Owners for the purpose of bringing any such suit, action or proceeding and to do and perform any and all acts and things for and on behalf of the respective Owners as a class or classes, as may be necessary or advisable in the opinion of the Trustee as such attorney-in-fact, provided the Trustee shall have no duty or obligation to enforce any such right or remedy if it has not been indemnified to its satisfaction from loss, liability or any expense including, but not limited to reasonable fees and expenses of its attorneys.

Remedies Not Exclusive. No remedy in the Indenture conferred upon or reserved to the Owners is intended to be exclusive of any other remedy. Every such remedy shall be cumulative and shall be in addition to every other remedy given under the Indenture or now or hereafter existing, at law or in equity by statute or otherwise, and may be exercised without exhausting and without regard to any other remedy conferred by the Health and Safety Code or any other law.

MISCELLANEOUS

Benefits Limited to Parties. Nothing in the Indenture expressed or implied is intended or shall be construed to confer upon, or to give or grant to, any person or entity, other than the Successor Agency, the Trustee, the Insurer and the registered Owners of the Bonds, any right, remedy or claim under or by reason of the Indenture or any covenant, condition or stipulation of the Indenture, and all covenants, stipulations, promises and agreements in the Indenture contained by and on behalf of the Successor Agency shall be for the sole and exclusive benefit of the Successor Agency, the Trustee, the Insurer and the registered Owners of the Bonds.

Successor is Deemed Included in All References to Predecessor. Whenever in the Indenture or any Supplemental Indenture either the Successor Agency or the Trustee is named or referred to, such reference shall be deemed to include the successors or assigns thereof, and all the covenants and agreements in the Indenture contained by or on behalf of the Successor Agency or the Trustee shall bind and inure to the benefit of the respective successors and assigns thereof whether so expressed or not.

A-27

Discharge of Indenture. If the Successor Agency shall pay and discharge the entire indebtedness on all Bonds or any portion thereof in any one or more of the following ways:

( i) by well and truly paying or causing to be paid the principal of and interest and premium (if any) on all Outstanding Bonds, including all principal, interest and redemption premiums, (if any), or;

(ii) by irrevocably depositing with the Trustee or escrow agent at or before maturity, money which, together with the available amounts then on deposit in the funds and accounts established pursuant to the Indenture, is fully sufficient to pay all Outstanding Bonds, including all principal, interest and redemption premiums (if any), or,

(iii) by irrevocably depositing with the Trustee or escrow agent, Defeasance Securities in such amount as an Independent Certified Public Accountant shall determine will, together with the interest to accrue thereon and available moneys then on deposit in the funds and accounts established pursuant to the Indenture, be fully sufficient to pay and discharge the indebtedness on all Bonds (including all principal, interest and redemption premiums, if any) at or before maturity, and if such Bonds are to be redeemed prior to the maturity thereof notice of such redemption shall have been given pursuant to the Indenture or provision satisfactory to the Trustee shall have been made for the giving of such notice then, at the election of the Successor Agency, and notwithstanding that any Bonds shall not have been surrendered for payment, the pledge of the Pledged Tax Revenues and other funds provided for in the Indenture and all other obligations of the Trustee and the Successor Agency under the Indenture with respect to all Outstanding Bonds shall cease and terminate, except only (a) the obligation of the Trustee to transfer and exchange Bonds under the Indenture and (b) the obligation of the Successor Agency to pay or cause to be paid to the Owners, from the amounts so deposited with the Trustee, all sums due thereon and to pay the Trustee all fees, expenses and costs of the Trustee. Notice of such election shall be filed with the Trustee. Any funds thereafter held by the Trustee, which are not required for said purpose, shall be paid over to the Successor Agency.

Execution of Documents and Proof of Ownership by Owners. Any request, declaration or other instrument which the Indenture may require or permit to be executed by any Owner may be in one or more instruments of similar tenor, and shall be executed by such Owner in person or by their attorneys appointed in writing.

Except as otherwise in the Indenture expressly provided, the fact and date of the execution by any Owner or his attorney of such request, declaration or other instrument, or of such writing appointing such attorney, may be proved by the certificate of any notary public or other officer authorized to take acknowledgments of deeds to be recorded in the state in which he purports to act, that the person signing such request, declaration or other instrument or writing acknowledged to him the execution thereof, or by an affidavit of a witness of such execution, duly sworn to before such notary public or other officer.

The ownership of Bonds and the amount, maturity, number and date of ownership thereof shall be provided by the Registration Books.

Any request, declaration or other instrument or writing of the Owner of any Bond shall bind all future Owners of such Bond in respect of anything done or suffered to be done by the Successor Agency or the Trustee in good faith and in accordance therewith.

Disqualified Bonds. In determining whether the Owners of the requisite aggregate principal amount of Bonds have concurred in any demand, request, direction, consent or waiver under the

A-28

Indenture, Bonds which are owned or held by or for the account of the Successor Agency or the City (but excluding Bonds held in any employees' retirement fund) shall be disregarded and deemed not to be Outstanding for the purpose of any such determination, provided, however, that for the purpose of determining whether the Trustee shall be protected in relying on any such demand, request, direction, consent or waiver, only Bonds which the Trustee knows to be so owned or held shall be disregarded. Upon request of the Trustee, the Successor Agency shall specify in a certificate to the Trustee those Bonds disqualified pursuant to the Indenture and the Trustee may conclusively rely on such certificate.

Waiver of Personal Liability. No member, office, agent or employee of the Successor Agency shall be individually or personal liable for the payment of the principal of or interest or redemption premium (if any) on the Bonds; but nothing in the Indenture contained shall relieve any such member, officer, agent or employee from the performance of any official duty provided by law.

Payments Due on Other Than a Business Day. If the date for making any payment or the last date for performance of any act or the exercising of any right, as provided in the Indenture, is not a Business Day, such payment, with no interest accruing for the period from and after such nominal date, may be made or act performed or right exercised on the next succeeding Business Day with the same force and effect as if done on the nominal date provided therefore in the Indenture.

BOND INSURANCE

Insurance Policy Requirements. So long as the Insurance Policy is in effect or amounts are owed to the Insurer, the following provisions shall govern, notwithstanding anything to the contrary set forth in the Indenture:

(a) Insurer Consents. The prior written consent of the Insurer shall be a condition precedent to the deposit of any Qualified Reserve Fund Credit Instrument provided in lieu of a cash deposit into the Reserve Fund. Notwithstanding anything to the contrary set forth in the Indenture, amounts on deposit in the Reserve Fund shall be applied solely to the payment of debt service due on the Bonds.

(b) Insurer as Sole Holder of Bonds. The Insurer shall be deemed to be the sole Owner of the Bonds for the purpose of exercising any voting right or privilege or giving any consent or direction or taking any other action that the Owners of the Bonds are entitled to take pursuant to the Indenture pertaining to (i) defaults and remedies and (ii) the duties and obligations of the Trustee. In furtherance thereof and as a term of the Indenture and each Bond, the Trustee and each Owner of the Bonds appoint the Insurer as their agent and attorney-in-fact with respect to the Bonds and agree that the Insurer may at any time during the continuation of any proceeding by or against the Successor Agency under the United States Bankruptcy Code or any other applicable bankruptcy, insolvency, receivership, rehabilitation or similar law ( an "Insolvency Proceeding") direct all matters relating to such Insolvency Proceeding, including without limitation, (A) all matters relating to any claim or enforcement proceeding in connection with an Insolvency Proceeding (a "Claim"), (B) the direction of any appeal of any order relating to any Claim, (C) the posting of any surety, supersedeas or performance bond pending any such appeal, and (D) the right to vote to accept or reject any plan of adjustment. In addition, the Trustee and each Owner of the Bonds delegate and assign to the Insurer, to the fullest extent permitted by law, the rights of the Trustee and each Owner of the Bonds with respect to the Bonds in the conduct of any Insolvency Proceeding, including, without limitation, all rights of any party to an adversary proceeding or action with respect to any court order issued in connection with any such Insolvency Proceeding. Remedies grated to Bondholders shall expressly include mandamus.

The maturity of Bonds shall not be accelerated without the consent of the Insurer and in the event the maturity of the Bonds is accelerated, the Insurer may elect, in its sole discretion, to pay accelerated

A-29

principal and interest accrued, on such principal to the date of acceleration (to the extent unpaid by the Successor Agency) and the Trustee shall be required to accept such amounts. Upon payment of such accelerated principal and interest accrued to the acceleration date as provided above, the Insurer's obligations under the Insurance Policy with respect to such Bonds shall be fully discharged.

(c) Covenant Default Period. Notwithstanding anything to the contrary stated in the Indenture, no grace period for a covenant default under the Indenture shall exceed thirty (30) days or be extended for more than sixty (60) days, without the prior written consent of the Insurer. No grace period shall be permitted for payment defaults under the Indenture.

( d) Insurer as Third Party Beneficiary. The Insurer is explicitly recognized as being a third party beneficiary under the Indenture and may enforce any such right, remedy or claim conferred, given or granted under the Indenture.

( e) Selection of Bonds for Redemption. Upon the occurrence of an extraordinary optional, special or extraordinary mandatory redemption in part, the selection of the Bonds to be redeemed shall be subject to the approval of the Insurer. The exercise of any provision of the Indenture which permits the purchase of the Bonds in lieu of redemption shall require the prior written approval of the Insurer if any Bond so purchased is not cancelled upon purchase.

(f) Insurer Consent to Amendments. Any amendment, supplement, modification to, or waiver of, the Indenture, or any other transaction document, including any underlying security agreement ( each a "Related Document"), shall be subject to the prior written consent of the Insurer.

(g) Insurer's Right to Direct Actions. The rights granted to the Insurer under the Indenture to request, consent to or direct any action are rights granted to the Insurer in consideration of its issuance of the Insurance Policy. Any exercise by the Insurer of such rights is merely an exercise of the Insurer's contractual rights and shall not be construed or deemed to be taken for the benefit, or on behalf, of the Owners and such action does not evidence any position of the Insurer, affirmative or negative, as to whether the consent of the Owners or any other person is required in addition to the consent of the Insurer.

(h) Defeasance Securities. So long as the Insurance Policy is in effect, Defeasance Obligations shall mean only (1) cash, (2) non-callable direct obligations of the United States of America ("Treasuries"), (3) evidences of ownership of proportionate interests in future interest and principal payments on Treasuries held by a bank or trust company as custodian, under which the owner of the investment is the real party in interest and has the right to proceed directly and individually against the obligor and the underlying Treasuries are not available to any person claiming through the custodian or to whom the custodian may be obligated, (4) subject to the prior written consent of the Insurer, pre-refunded municipal obligations rated "AAA" and "Aaa" by S&P and Moody's, respectively, or (5) subject to the prior written consent of the Insurer, securities eligible for "AAA" defeasance under then-existing criteria of S&P or any combination thereof, shall be used to effect defeasance of the Bonds unless the Insurer otherwise approves. To accomplish defeasance of the Bonds, the Successor Agency shall cause to be delivered to the Insurer (i) a report of an independent firm of nationally recognized certified public accountants or such other accountant as shall be acceptable to the Insurer ("Accountant") verifying the sufficiency of the escrow established to pay the in full on the maturity or redemption date ("Verification"), (ii) an escrow deposit agreement or other written instructions to the Trustee (which shall be acceptable in form and substance to the Insurer) (iii) an opinion of nationally recognized bond counsel to the effect that the Bonds are no longer "Outstanding" under the Indenture and (iv) a certificate of discharge of the Trustee with respect to the Bonds; each Verification and defeasance opinion shall be acceptable in form and substance, and addressed, to the Successor Agency, Trustee and Insurer. The

A-30

Insurer shall be provided with final drafts of the above-referenced documentation not less than five Business Days prior to the funding of the escrow. Bonds shall be deemed "Outstanding" under the Indenture unless and until they are in fact paid and retired or the above criteria are met.

(i) Amounts Paid by Insurer. Amounts paid by the Insurer under the Insurance Policy shall not be deemed paid for purposes of the Indenture and the Bonds relating to such payments shall remain Outstanding and continue to be due and owing until paid by the Successor Agency in accordance with the Indenture. The Indenture shall not be discharged unless all amounts due or to become due to the Insurer have been paid in full or duly provided for.

(j) Action to Preserve Pledge. Each of the Successor Agency and Trustee (to the extent directed in writing) covenant and agree to take such action (including, as applicable, filing of UCC fmancing statements with regard to the Successor Agency and continuations thereof) as is necessary from time to time to preserve the priority of the pledge of Pledged Tax Revenues pursuant to applicable law.

(k) Claims Upon the Insurance Policy and Payments by and to Insurer. If, on the third Business Day prior to the related scheduled interest payment date or principal payment date ("Payment Date") there is not on deposit with the Trustee, after making all transfers and deposits required under the Indenture, moneys sufficient to pay the principal of and interest on the Bonds due on such Payment Date, the Trustee shall give notice to the Insurer and to its designated agent (if any) (the "Insurer's Fiscal Agent") by telephone or telecopy of the amount of such deficiency by 12:00 noon, New York City time, on such Business Day. If, on the second Business Day prior to the related Payment Date, there continues to be a deficiency in the amount available to pay the principal of and interest on the Bonds due on such Payment Date, the Trustee shall make a claim under the Insurance Policy and give notice to the Insurer and the Insurer's Fiscal Agent (if any) by telephone of the amount of such deficiency, and the allocation of such deficiency between the amount required to pay interest on the Bonds and the amount required to pay principal of the Bonds, confirmed in writing to the Insurer and the Insurer's Fiscal Agent by 12:00 noon, New York City time, on such second Business Day by filling in the form of Notice of Claim and Certificate delivered with the Insurance Policy.

The Trustee shall designate any portion of payment of principal on the Bonds paid by the Insurer, whether by virtue of mandatory sinking fund redemption, maturity or other advancement of maturity, on its books as a reduction in the principal amount of Bonds registered to the then current Owner, whether DTC or its nominee or otherwise, and shall issue a replacement Bond to the Insurer, registered in the name of Assured Guaranty Municipal Corp., in a principal amount equal to the amount of principal so paid (without regard to authorized denominations); provided that the Trustee's failure to so designate any payment or issue any replacement Bond shall have no effect on the amount of principal or interest payable by the Successor Agency on any Bond or the subrogation rights of the Insurer.

The Trustee shall keep a complete and accurate record of all funds deposited by the Insurer into the Policy Payments Account (defmed below) and the allocation of such funds to payment of interest on and principal of any Bond. The Insurer shall have the right to inspect such records at reasonable times upon reasonable notice to the Trustee.

Upon payment of a claim under the Insurance Policy, the Trustee shall establish a separate special purpose trust account for the benefit of Owners referred to in the Indenture as the "Policy Payments Account" and over which the Trustee shall have exclusive control and sole right of withdrawal. The Trustee shall receive any amount paid under the Insurance Policy in trust on behalf of Owners and shall deposit any such amount in the Policy Payments Account and distribute such amount only for purposes of making the payments for which a claim was made. Such amounts shall be disbursed by the Trustee to Owners in the same manner as principal and interest payments are to be made with respect to the Bonds

A-31

under the sections hereof regarding payment of Bonds. It shall not be necessary for such payments to be made by checks or wire transfers separate from the check or wire transfer used to pay debt service with other funds available to make such payments. Notwithstanding anything in the Indenture to the contrary, the Successor Agency agrees to pay to the Insurer solely from Pledged Tax Revenues, (i) an amount equal to the total of all amounts paid by the Insurer under the Insurance Policy (the "Insurer Advances"); and (ii) an amount equal to the interest on such Insurer Advances from the date paid by the Insurer until payment thereof in full, payable to the Insurer at the Late Payment Rate per annum ( collectively, the "Insurer Reimbursement Amounts"). "Late Payment Rate" means the lesser of (a) the greater of (i) the per annum rate of interest, publicly announced from time to time by JPMorgan Chase Bank at its principal office in The City of New York, as its prime or base lending rate (any change in such rate of interest to be effective on the date such change is announced by JPMorgan Chase Bank) plus 3%, and (ii) the then applicable highest rate of interest on the Bonds and (b) the maximum rate permissible under applicable usury or similar laws limiting interest rates. The Late Payment Rate shall be computed on the basis of the actual number of days elapsed over a year of 360 days. The Successor Agency hereby covenants and agrees that the Insurer Reimbursement Amounts are secured by a lien on and pledge of the Pledged Tax Revenues and payable from such Pledged Tax Revenues on a parity with debt service due on the Bonds.

Funds held in the Policy Payments Account shall not be invested by the Trustee and may not be applied to satisfy any costs, expenses or liabilities of the Trustee. Any funds remaining in the Policy Payments Account following a Bond Payment Date shall promptly be remitted to the Insurer.

The Successor Agency shall take all actions required by the Dissolution Act to ensure that all Insurer Reimbursement Amounts (including any amounts due the Insurer pursuant to items (m) or (n) below) are paid to the Insurer when due, including the submission of Recognized Obligation Payment Schedules providing for Insurer Reimbursement Amounts and such other amounts.

(I) Subrogation of Rights. The Insurer shall, to the extent it makes any payment of principal of or interest on the Bonds, become subrogated to the rights of the recipients of such payments in accordance with the terms of the Insurance Policy ( which subrogation rights shall also include the rights of any such recipients in connection with any Insolvency Proceeding). Each obligation of the Successor Agency to the Insurer under the Indenture shall survive discharge or termination of such Indenture.

(m) Reimbursement of Insurer. The Successor Agency shall pay or reimburse the Insurer any and all charges, fees, costs and expenses that the Insurer may reasonably pay or incur in connection with (i) the administration, enforcement, defense or preservation of any rights or security in the Indenture; (ii) the pursuit of any remedies under the Indenture or otherwise afforded by law or equity, (iii) any amendment, waiver or other action with respect to, or related to, the Indenture or any other Related Document whether or not executed or completed, or (iv) any litigation or other dispute in connection with the Indenture or the transactions contemplated thereby, other than costs resulting from the failure of the Insurer to honor its obligations under the Insurance Policy. The Insurer reserves the right to charge a reasonable fee as a condition to executing any amendment, waiver or consent proposed in respect of the Indenture.

(n) Application of Funds Upon Default. After payment of reasonable expenses of the Trustee, the application of funds realized upon default shall be applied to the payment of expenses of the Successor Agency or rebate only after the payment of past due and current debt service on the Bonds and amounts required to restore the Reserve Fund to the Reserve Requirement.

( o) Payment on the Bonds. The Insurer shall be entitled to pay principal or interest on the Bonds that shall become Due for Payment but shall be unpaid by reason of Nonpayment by the Successor Agency (as such terms are defined in the Insurance Policy), and any amounts due on the Bonds as a result

A-32

of acceleration of the maturity thereof in accordance with the Indenture, whether or not the Insurer has received a Notice of Nonpayment (as such terms are defined in the Insurance Policy) or a claim upon the Insurance Policy.

(p) Additional Bonds. Notwithstanding satisfaction of the other conditions to the issuance of additional bonds set forth in the Indenture, no such issuance may occur ( 1) if an Event of Default ( or any event which, once all notice or grace periods have passed, would constitute an Event of Default) exists unless such default shall be cured upon such issuance and (2) unless the Reserve Fund is fully funded at the Reserve Requirement (including the proposed issue) upon the issuance of such additional bonds, in either case unless otherwise permitted by the Insurer.

(q) Amendments. In determining whether any amendment, consent, waiver or other action to be taken, or any failure to take action, under the Indenture would adversely affect the security for the Bonds or the rights of the Owners, the Trustee shall consider the effect of any such amendment, consent, waiver, action or inaction as if there were no Insurance Policy.

(r) No Contract. No contract shall be entered into or any action taken by which the rights of the Insurer or security for or sources of payment of the Bonds may be impaired or prejudiced in any material respect except upon obtaining the prior written consent of the Insurer.

(s) Investment Agreements. The Insurer's prior written consent shall be required for Investment Agreements under the definition of Permitted Investments.

Reserve Policy Requirements. So long as the Reserve Policy is in effect, the following provisions shall govern, notwithstanding anything to the contrary set forth in the Indenture:

(a) The Successor Agency shall repay solely from Pledged Tax Revenues any draws under the Reserve Policy and pay all related reasonable expenses incurred by the Insurer and shall pay interest thereon from the date of payment by the Insurer at the Late Payment Rate. "Late Payment Rate" means the lesser of (x) the greater of (i) the per annum rate of interest, publicly announced from time to time by JPMorgan Chase Bank at its principal office in the City of New York, as its prime or base lending rate ("Prime Rate") ( any change in such Prime Rate to be effective on the date such change is announced by JPMorgan Chase Bank) plus 3%, and (ii) the then applicable highest rate of interest on the Bonds and (y) the maximum rate permissible under applicable usury or similar laws limiting interest rates. The Late Payment Rate shall be computed on the basis of the actual number of days elapsed over a year of 360 days. In the event JPMorgan Chase Bank ceases to announce its Prime Rate publicly, Prime Rate shall be the publicly announced prime or base lending rate of such national bank as the Insurer shall specify. If the interest provisions of this subparagraph (a) shall result in an effective rate of interest which, for any period, exceeds the limit of the usury or any other laws applicable to the indebtedness created in the Indenture, then all sums in excess of those lawfully collectible as interest for the period in question shall, without further agreement or notice between or by any party hereto, be applied as additional interest for any later periods of time when amounts are outstanding under the Indenture to the extent that interest otherwise due under the Indenture for such periods plus such additional interest would not exceed the limit of the usury or such other laws, and any excess shall be applied upon principal immediately upon receipt of such moneys by the Insurer, with the same force and effect as if the Successor Agency had specifically designated such extra sums to be so applied and the Insurer had agreed to accept such extra payment(s) as additional interest for such later periods. In no event shall any agreed-to or actual exaction as consideration for the indebtedness created in the Indenture exceed the limits imposed or provided by the law applicable to this transaction for the use or detention of money or for forbearance in seeking its collection.

A-33

Repayment of draws and payment of expenses and accrued interest thereon at the Late Payment Rate ( collectively, "Reserve Policy Costs") from Pledged Tax Revenues shall commence in the first month following each draw, and each such monthly payment shall be in an amount at least equal to 1/12 of the aggregate of Policy Costs related to such draw.

The Successor Agency shall take all actions required by the Dissolution Act to ensure that Policy Costs are paid to the Insurer when due, including the submittal of Recognized Obligation Payment Schedules providing for Policy Costs that are payable to the Insurer.

Amounts in respect of Reserve Policy Costs paid to the Insurer shall be credited first to interest due, then to the expenses due and then to principal due. As and to the extent that payments are made to the Insurer on account of principal due, the coverage under the Reserve Policy will be increased by a like amount, subject to the terms of the Reserve Policy. The obligation to pay Reserve Policy Costs shall be secured by a valid lien on all Pledged Tax Revenues (subject only to the priority of payment provisions set forth under the Indenture).

All cash and investments in the Reserve Fund shall be transferred to the Interest Account, the Principal Account, and the Sinking Account for payment of debt service on the Bonds before any drawing may be made on the Reserve Policy or any other Qualified Reserve Fund Credit Instrument credited to the Reserve Fund in lieu of cash ("Credit Facility"). Payment of any Reserve Policy Costs shall be made prior to replenishment of any such cash amounts. Draws on all Credit Facilities (including the Reserve Policy) on which there is available coverage shall be made on a pro-rata basis ( calculated by reference to the coverage then available thereunder) after applying all available cash and investments in the Reserve Fund. Payment of Reserve Policy Costs and reimbursement of amounts with respect to other Credit Facilities shall be made on a pro-rata basis prior to replenishment of any cash drawn from the Reserve Fund. For the avoidance of doubt, "available coverage" means the coverage then available for disbursement pursuant to the terms of the applicable alternative credit instrument without regard to the legal or fmancial ability or willingness of the provider of such instrument to honor a claim or draw thereon or the failure of such provider to honor any such claim or draw.

(b) If the Successor Agency shall fail to pay any Reserve Policy Costs in accordance with the requirements of subparagraph (a) hereof, the Insurer shall be entitled to exercise any and all legal and equitable remedies available to it, including those provided under the Indenture other than (i) acceleration of the maturity of the Bonds or (ii) remedies which would adversely affect owners of the Bonds.

( c) The Indenture shall not be discharged until all Reserve Policy Costs owing to the Insurer shall have been paid in full. The Successor Agency's obligation to pay such amounts shall expressly survive payment in full of the Bonds.

(d) The Trustee shall ascertain the necessity for a claim upon the Reserve Policy in accordance with the provisions of subparagraph (a) of this Section and provide notice to the Insurer in accordance with the terms of the Reserve Policy at least five Business Days prior to each date upon which interest or principal is due on the Bonds. Where deposits are required to be made by the Successor Agency with the Trustee to the Interest Account, the Principal Account and the Sinking Account for the Bonds more often than semi-annually, the Trustee shall be instructed to give notice to the Insurer of any failure of the Successor Agency to make timely payment in full of such deposits within two Business Days of the date due.]

A-34

APPENDIX B

FORMS OF BOND COUNSEL OPINION

[Delivery Date]

Successor Agency to the Guadalupe Community Redevelopment Agency

G uadal upe, California

Ladies and G entl erren:

$4,900,CXX) Successor Agency to the Guadalupe Community Redevelopment Agency Tax Allocation Refunding Bonds,


We have acted as bond counsel to the Successor Agency to the Guadalupe Community Redevelopment Agency (the "Successor Agency") in connection with the issuance of its $4,900,CXXl Tax Allocation Refunding Bonds, Series 2017 (Taxable) (the "Bonds"). The issuance of the Bonds and the Indenture were authorized b,I the Successor Agency pursuant to Resolution No. 2017-05 adopted on August 14, 2017 and Resolution No. 2017-0i adopted on October 10, 2017 (collectively, the "Resolutions") and b,I the oversight Board of the Successor Agency pursuant to Resolution No. 2017-05, adopted on August 16, 2017 (the "OVersight Board Resolution"). The Bonds will be issued pursuant to the Constitution and laws of the State of California, including Article 11 (comrrencing with Section 53580) of Chapter 3 of Part 1 of Division 2 of Title 5 of the Gcwernrrent Code of the State of California (the "Bond LiM'") and the Community Redeveloprrent Law, Part 1 of Division 24 (comrrencing with Section 33CXXl) of the Health and Safety Code of the State of California (the "Redevelopment Law"). The Bonds are also being issued pursuantto an Indenture, dated as of Ncwember 1, 2017 (the "Indenture"), b,I and between the Successor Agency and U.S. Bank National Association, as trustee (the "Trustee").

As bond counsel, we have examined applicable prcwisions of the Bond Law and copies certified to us as being true and complete copies of the proceedings of the Successor Agency and the oversight Board for the authorization and issuance of the Bonds, including the Resolutions, the oversight Board Resolution and the Indenture. Our services as bond counsel were linited to an examination of such proceedings and to the rendering of the opinions set forth belo.v. In this connection we have also exanined such certificates of public officials and officers of the Successor Agency as we have considered necessary for the purposes of this opinion.

We have assumed the genuineness of al I docurrents and signatures presented to us. We have not undertaken to verify independently, and have assurred, the accuracy of the factual matters represented, warranted or certified in the docurrents. Furthermore, we have assurred compliance with all co.tenants and agreerrents contai ned i n the I ndenture and the Tax Certificate.

Based on and suqj ect to the foregoing, and in reliance thereon, as of the date hereof, we are of the fol Io.vi ng opinions:

B-1

1. The B ands constitute valid and binding obi i gati ans of the Successor Agency, payable as to principal and interest from Pledged Tax Revenues as pro.tided in the Indenture.

2. The Indenture has been duly and validly authorized, executed and delivered by the Successor Agency and, assuming the Indenture constitutes a legal valid and binding obiigation of the Trustee, constitutes a legal, valid and binding obiigation of the Successor Agency, enforceable agai nstthe Successor Agency i n accordance with its terms.

3. Under existing law, interest on the Bonds is exempt from personal income taxes of the State of California

The opinions expressed in paragraphs 1 and 2 abcwe are qualified to the extent the enforceability of the Bonds and the Indenture may be lirrited by applicable bankruptcy, insolvency, debt aqjustment, reorganization, moratorium or similar laws or equitable principles relating to or limiting creditors' rights generally or as to the availability of any particular remedy. The enforceability of the Bonds and the Indenture is suqject to the effect of general principles of equity, including, without limitation, concepts of materiality, reasonableness, good faith and fair dealing, to the possible unavailability of specific performance or injunctive relief, regardless of whether considered in a proceeding in equity or at law, and to the I irritations on legal remedies against gcwernmental entities in California.

No opinion is expressed herein on the accuracy, completeness or fairness of the Official Statement or other offering material relating to the Bands.

Our opinions are based on existing law, which is suqject to change. Such opinions are further based on our kno.vledge of facts as of the date hereof. We assume no duty to update or supplement our opi ni ons to reflect any facts or circumstances that may thereafter come to our attention or to reflect any changes in any liM' that may thereafter occur or become effective. Morecwer, our opinions are not a guarantee of result and are not binding on the Internal Revenue Service; rather, such opinions represent our legal judgment based upon our review of existing law that we deem relevant to such opinions and in reliance upon the representations and co.tenants referenced abcwe.

This opinion is lirrited to the I.M's of the State of California and the federal I.M's of the United States.

Respectfully submitted,

B-2

APPENDIX C

BOOK-ENTRY SYSTEM

The information in this APPENDIX C concerning The Depository Trust Company ("DTC"), Ne.v York, New York, and DTC's book-entry system has been obtained frorn DTC and the Successor Agency takes no responsibility for the completeness or accuracy thereof. The Successor Agency cannot and does not give any assurances that DTC, DTC Participants or Indirect Participants will distribute to the Beneficial owners (a) payments of interest, principal or preniurn, if any, with respect to the Bonds, (b) certificates representing o.vnership interest in or other confirmation or o.vnership interest in the Bonds, or (c) rederrption or other notices sent to DTC or Cede & Co., its noninee, as the registered o.vner of the Bonds, or that they will so do on a timely basis, or that DTC, DTC Participants or DTC Indirect Participants will act in the manner described in this Appendix. The current "Rules" applicable to DTC are on file with the Securities and Exchange Cornrnission and the current "Procedures" of DTC to be follo.ved in dealing with DTC Participants are on file with DTC.

The Depository Trust Company ("DTC"), Ne.v Yark, NY, wil I act as securities depository for the Bonds. The Bonds will be issued as fully,egistered securities registered in the name of Cede & Co. (DTC's partnership nominee) or such other name as may be requested by an authorized representative of DTC. One fully,egistered certificate will be issued for each maturity of the Bonds, each in the aggregate principal amount of such maturity, and will be deposited with DTC.

DTC, the world's largest securities depository, is a limited-purpose trust company organized under the Ne.v Yark Banking Law, a "banking organization" within the meaning of the Ne.v Yark Banking Law, a member of the Federal Reserve System, a "clearing corporation" within the meaning of the Ne.v York Uniform Commercial Code, and a "clearing Successor Agency" registered pursuant to the prcwisions of Section 17A of the Securities Exchange Act of 1934. DTC holds and pro.tides asset servicing for ewer 3.5 nillion issues of U.S. and non-U.S. equity issues, corporate and municipal debt issues, and money market instruments (from over 100 countries) that DTC's participants ("Direct Participants") deposit with DTC. DTC also facilitates the post-trade settlement arnong Direct Participants of sales and other securities transactions in deposited securities, through electronic computerized bookentry transfers and pledges between Direct Participants' accounts. This eliminates the need for physical rncwement of securities certificates. Direct Participants include both U.S. and non-U.S. securities brokers and dealers, banks, trust companies, clearing corporations, and certain other organizations. DTC is a wholly-o.vned subsidiary of The Depository Trust & Clearing Corporation ("DTCC"). DTCC is the holding company for DTC, National Securities Clearing Corporation and Fixed Income Clearing Corporation, all of which are registered clearing agencies. DTCC is o.vned by the users of its regulated subsidiaries. Access to the DTC system is also available to others such as both U.S. and non-U.S. securities brokers and dealers, banks, trust companies, and clearing corporations that clear through or maintain a custodial relationship with a Direct Participant, either directly or indirectly ("Indirect Participants"). DTC has a Standard & Poor's rating of AA+. The DTC Rules applicable to its Participants are on file with the Securities and Exchange Comnission. More information about DTC can be found at www.dtcc.com The information set forth on such website is not incorporated herein by reference.

Purchases of Bonds under the DTC system rnust be made by or through Direct Participants, which will receive a credit for the Bonds on DTC's records. The ownership interest of each actual purchaser of each Bond ("Beneficial Owner") is in turn to be recorded on the Direct and Indirect Participants' records. Beneficial Owners will not receive written confirmation from DTC of their purchase. B enefi ci al owners are, ho.vever, expected to receive written confi rmati ons pro.ti di ng detai Is of the transaction, as well as periodic statements of their holdings, from the Direct or Indirect Participant through which the Beneficial owner entered into the transaction. Transfers of o.vnership interests in the

C-1

Bands are to be accorrpl i shed b,I entries made on the oooks of Direct and Indirect Participants acting on behalf of B enefi ci al owners. B enefi ci al owners wi 11 not receive certificates representi ng their cwnershi p interests in Bonds, except in the eventthat use of the oook--entry system forthe Bonds is discontinued.

To facilitate subsequent transfers, all Bonds deposited b,I Direct Participants with DTC are registered in the name of DTC's partnership nominee, Cede & Co., or such other name as may be requested b,I an authorized representative of DTC. The deposit of Bonds with DTC and their registration in the name of Cede & Co. or such other DTC nominee do not affect any change in beneficial cwnership. DTC has no kncwledge of the actual Beneficial owners of the Bonds; DTC's records reflect only the identity of the Direct Participants to whose accounts such Bonds are credited, which may or may not be the Beneficial owners. The Direct and Indirect Participants will remain responsible for keeping account of their holdings on behalf of their customers.

Conveyance of notices and other communications b,I DTC to Direct Participants, b,I Direct Participants to Indirect Participants, and b,I Direct Participants and Indirect Participants to Beneficial owners will be gcwerned b,I arrangements among them, suqject to any statutory or regulatory requirements as may be in effect from time to time. Beneficial Owners of Bonds may wish to take certain steps to augment the transmission to them of notices of significant events with respect to the Bonds, such as redemptions, tenders, defaults, and proposed amendments to the Bond documents. For exarrple, B enefi ci al owners of B ands may wish to ascertain that the nominee holding the Bands for their benefit has agreed to obtain and transmit notices to Beneficial owners. In the alternative, Beneficial owners may wish to pro.ti de their names and addresses to the registrar and request that copies of notices be pro.tided directly to them.

Redemption notices shall be sentto DTC. If less than all of the Bonds within a maturity are being redeemed, DTC's practice is to determine by lot the amount of the interest of each Direct Participant in such maturity to be redeemed.

Neither DTC nor Cede & Co. (nor any other DTC noni nee) wi II consent or vote with respect to Bonds unless authorized by a Direct Participant in accordance with DTC's MMI Procedures. Under its usual procedures, DTC mails an Omnibus Proxy to the Successor Agency as soon as possible after the record date. The Omnibus Proxy assigns Cede & Co.'s consenting or voting rights to those Direct Participants to whose accounts Bonds are credited on the record date (identified in a listing attached to the Omnibus Proxy).

Principal, premium (if any), and interest payments on the Bonds will be made to Cede & Co., or such other nominee as may be requested by an authorized representative of DTC. DTC's practice is to credit Direct Participants' accounts upon DTC's receipt of funds and corresponding detail information from the Successor Agency or the Trustee, on payable date in accordance with their respective holdings shown on DTC's records. Payments by Participants to Beneficial Owners will be governed by standing instructions and customary practices, as is the case with securities held for the accounts of customers in bearer form or registered in "street name," and wi 11 be the responsi bi I ity of such Participant and not of DTC, the Trustee, or the Successor Agency, suqject to any statutory or regulatory requirements as may be in effect from time to time. Principal, premium (if any), and interest payments with respect to the Bonds to Cede & Co. (or such other noninee as may be requested b,I an authorized representative of DTC) is the responsibility of the Successor Agency or the Trustee, disbursement of such payments to Direct Participants will be the responsibility of DTC, and disbursement of such payments to the Beneficial owners will be the responsibility of Direct and Indirect Participants.

C-2

DTC may discontinue pr0.tiding its services as depository with respect to the Bonds at any time b,I giving reasonable notice to the Successor Agency or the Trustee. Under such circumstances, in the event that a successor depository is not obtained, certificates representing the Bonds are required to be printed and delivered.

The Successor Agency may decide to discontinue use of the system of oook--entry--only transfers through DTC (or a successor securities depository). In that event, representing the Bonds will be printed and delivered to DTC in accordance with the prcwisions of the Indenture.

The information in this section concerning DTC and DTC's book-entry system has been obtained from sources that the Successor Agency believes to be reliable, but the Successor Agency takes no responsi bi I ity for the accuracy thereof.

C-3

APPENDIX D

FORM OF CONTINUING DISCLOSURE AGREEMENT

111is Continuing Disclosure Agreement (the "Disclosure Agreement") is executed and delivered by the Successor Agency to the Guadalupe Community Redevelopment Agency (the "Successor Agency") and Urban Futures, Inc., as dissemination agent (the "Dissemination Agent"), in connection with the issuance of $4,900,000 aggregate principal amount of Successor Agency to the Guadalupe Community Redevelopment Agency Tax Allocation Refunding Bonds, Series 2017 (Taxable) (the "Bonds"). The Bonds are being issued pursuant to an Indenture, dated as of November 1, 2017, by the Successor Agency and U.S. Bank National Association, as trustee (the "Trustee"). The Successor Agency and the Dissemination Agent covenant and agree as follows:

SECTION l. Purpose of the Disclosure Agreement. This Disclosure Agreement is being executed and delivered by the Successor Agency for the benefit of the Owners and Beneficial Owners of the Bonds.

SECTION 2. Definitions. In addition to the definitions set forth in the Indenture, which apply to any capitalized term used in this Disclosure Agreement unless othe1wise defined in this Section 2. the following capitalized tem1s shall have the following meanings:

"Annual Report" shall mean any Annual Report provided by the Successor Agency pursuant to, and as described in, Section 3 of this Disclosure Agreement.

"Beneficial Owner" shall mean any person that (a) has the power, directly or indirectly, to vote or consent with respect to, or to dispose of ownership of any Bonds (including persons holding Bonds through nominees, depositories or other intermediaries), or (b) is treated as the owner of any Bonds for federal income tax purposes.

"Business Day" means any day other than (i) a Saturday or Sunday or legal holiday or a day on which banking institutions in the city in which the corporate trust office of the Trustee is located are authorized to close, or (ii) a day on which the New York Stock Exchange is closed.

"Dissemination Agent" shall mean initially, Urban Futures, Inc., acting in its capacity as Dissemination Agent hereunder, or any successor Dissemination Agent designated in writing by the Successor Agency, and which has filed with the Successor Agency a written acceptance of such designation, with a copy to the Trustee.

"EIVIMA" shall mean the Municipal Securities Rulemaking Board's Electronic Municipal Market Access System for Municipal Securities disclosures, maintained on the internet at http:/ emma.msrb.org.

"Fiscal Year" shall mean the period beginning on July l of each year and ending on the next succeeding June 30, or any twelve-month or fifty-two week period hereafter selected by the Successor Agency, with notice of such selection or change in fiscal year to be provided as set forth herein.

D-1

"Listed Events" shall mean any of the events listed m Section 5 of this Disclosure Agreement.

"MSRB" shall mean the Municipal Securities Rulemaking Board established pursuant to Section 15B(b)(l) of the Securities Exchange Act of 1934, as amended. or any other entity designated or authorized by the United States Securities and Exchange Commission to receive reports pursuant to the Rule. Until otherwise designated by the MSRB or the United States Securities and Exchange Commission, filings with the MSRB are to be made through the EMMA website of the MSRB, currently located at http: /;errrra.msrb.org.

"Official Statement" shall mean the Official Statement, dated November 16. 2017, relating to the Bonds.

"Owner" shall mean either the registered owners of the Bonds, or, if the Bonds are registered in the name of The Depository Tmst Company or another recognized depository, any applicable participant in such depository system.

"Participating Underwriter" shall mean any of the original underwriters of the Bonds required to comply with the Rule in connection with offering of the Bonds.

"Rule·· shall mean Rule 15c2-12 adopted by the SEC under the Securities Exchange Act of 1934, as the same may be amended from time to time.

SECTION 3. Provision and contents of Annual Reports

(a) Not later than March 31 of each year. commencing with March 31, 2018, the Successor Agency shall cause the Dissemination Agent to provide the MSRB, through EMMA, with a written report that shall include the following infonnation:

• The assessed values of the Project Area included in the Official Statement in a similar format as provided in the Official Statement under "THE PROJECT AREA - Historical Tax Revenues for the Project Area";

• The list of top ten largest taxpayers in the Project Area included in a similar fonnat as provided in the Otlicial Statement;

• For the current Fiscal Year, the information regarding Pledged Tax Revenues in a similar fonnat as the information provided in the Official Statement under "THE PROJECT AREA - Projected Pledged Tax Revenues for the Project Area";

• TI1e Debt Service Coverage on the Bonds for the cutrent Fiscal Year;

• The total amount of Pledged Tax Revenues deposited into the Redevelopment Property Tax Trust Fund by the County Auditor-Controller since the previous December I.

D-2

(b) So long as any Bonds remain outstanding, the Successor Agency shall, or shall cause the Dissemination Agent to, not later than March 3 l of each year, commencing with March 3 l, 20 l8 provide to the MSRB. through EMMA, a postaudit of the financial transactions and records of the Successor Agency for the Fiscal Year. If the Successor Agency's postaudit is not available by the time such postaudit is required to be filed pursuant to this Section 3(b ), an unaudited statement of financial transactions and records of the Successor Agency in a fonnat required by Section 34177(n) of the Health and Safety Code shall be provided to the Dissemination Agent, and the postaudit shall be filed in the same manner as the Annual Report when they become available. The postaudit may be included in the annual financial statements of the City of Guadalupe or may be a separate document

(c) Not later than March 15 of each year, the Successor Agency shall provide the Dissemination Agent with the portion of the Arnrnal Report identified in Section 3(a) of this Disclosure Agreement Not later than 15 Business Days prior to the date specified in Section 3(b) for providing the postaudit to the MSRB. through EMMA, the Successor Agency shall provide the Dissemination Agent with the postaudit identified in Section 3(b ). If by either such date, the Dissemination Agent has not received a copy of the relevant portion of the Annual Report, the Dissemination Agent shall contact the Successor Agency to detennine if the Successor Agency is in compliance with Section 3(a) or Section 3(b), as applicable. The Successor Agency shall provide a written certification with each portion of the Annual Report furnished to the Dissemination Agent with a copy to the Trustee (if not the Dissemination Agent) to the effect that such portion of the Annual Report constitutes the relevant portion of Annual Report required to be furnished by it hereunder. The Dissemination Agent and the Trustee may conclusively rely upon such certification of the Successor Agency and shall have no duty or obligation to review such Annual Report.

( d) The Annual Report must be submitted in electronic fonnat, accompanied by such identifying information as provided by the MSRB. The Arnrnal Report may be submitted as a single document or as separate documents comprising a package, and may include by reference other information as provided in Section 3( e) of this Disclosure Agreement If the Fiscal Year changes for the Successor Agency, the Successor Agency shall give notice of such change in the manner provided under Section 5( e) hereof

( e) Any or all of the items listed above may be included by specific reference to other documents, including official statements or other disclosure documents of debt issues of the Successor Agency or related public entities, available to the public on EMMA or filed with the SEC. The Successor Agency shall clearly identil:V each such other document so included by reference.

(t) The contents, presentation and format of the Arnrnal Reports may be modified from time to time as determined in the judgment of the Successor Agency to conform to changes in accounting or disclosure principles or practices and legal requirements followed by or applicable to the Successor Agency or to reflect changes in the business, structure, operations, legal form of the Successor Agency; provided that any such modifications shall comply with the requirements of the Rule.

D-3

(g) If the Dissemination Agent is unable to verify that an Annual Report has been provided to the IVISRB by the date required in subsection (a) or (b), the Dissemination Agent in a timely manner shall send a notice to the MSRB in substantially the form attached as Exhibit A.

(h) The Dissemination Agent shall:

(i) detennine the electronic filing address ot: and then-current procedures for submitting Annual Reports to, the MSRB prior to the date for providing the Annual Reports; and

(ii) to the extent known to the Dissemination Agent file a report with the Successor Agency and (if the Dissemination Agent is not the Trustee) the Tmstee certifying that the Annual Report has been provided pursuant to this Disclosure Agreement, and stating the date it was provided.

SECTION 4. Reserved.

SECTION 5. Repmting ofSignificant Events.

( a) Pursuant to the provisions of this Section 5. the Successor Agency shall give, or cause to be given, notice of the occurrence of any of the following events with respect to the Bonds, in a timely manner not more than ten (10) Business Days after the event:

(i) principal and interest payment delinquencies;

(ii) defeasances;

(iii) tender offers;

(iv) rating changes;

(v) adverse tax opinions or the issuance by the Internal Revenue Service of proposed or final determinations of taxabil ity or Notices of Proposed Issue (IRS Form 5701-TEB);

(vi) unscheduled draws on the debt service reserves reflecting financial difficulties;

(vii) unscheduled draws on credit enhancements reflecting financial difficulties;

(viii) substitution of credit or liquidity providers or their failure to perform; or

(ix) bankruptcy, insolvency, receivership or similar proceedings.

D-4

For these purposes, any event described in the immediately preceding clause (ix) is considered to occur when any of the following occur: the appointment of a receiver, fiscal agent, or similar otlicer for the Successor Agency in a proceeding under the United States Bankruptcy Code or in any other proceeding under state or federal law in which a court or governmental authority has assumed jurisdiction over substantially all of the assets or business of the Successor Agency, or if such jurisdiction has been assumed by leaving the existing governing body and officials or officers in possession but subject to the supervision and orders of a court or governmental authority, or the entry of an order confirn1ing a plan of reorganization. arrangement, or liquidation by a court or governmental authority having supervision or jurisdiction over substantially all of the assets or business of the Successor Agency.

(b) Pursuant to the provisions of this Section 5, the Successor Agency shall give. or cause to be given, notice of the occutrence of any of the following events with respect to the Bonds. if material:

(i) the consummation of a merger, consolidation or acquisition involving the Successor Agency or the sale of all or substantially all of the assets of the Successor Agency, other than in the ordinary course of business, the entry into a definitive agreement to undertake such an action or the termination of a definitive agreement relating to any such actions;

(ii) appointment of a successor or additional Trustee or the change of the name of a Trustee;

(iii) non-payment related defaults;

(iv) modifications to the rights of Owners;

(v) Bond calls;

(vi) release, substitution or sale of property securing repayment of the Bonds; or

(vii) in addition to the adverse tax opinions or detern1inations of taxability described in Section 5(a)(v) above, any other notices or determinations with respect to the tax status of the Bonds.

( c) Vihenever the Successor Agency obtains knowledge of the occurrence of a Listed Event described in subsection (b) of this Section 5. the Successor Agency shall as soon as possible determine if such event would be material under applicable federal securities law.

( d) If the Successor Agency detennines that know ledge of the occmTence of a Listed Event described in subsection (b) of this Section 5 would be material under applicable federal securities law. the Successor Agency shall promptly notify the Dissemination Agent in writing and instruct the Dissemination Agent to report the occurrence to EMMA in a timely manner not more than ten (l 0) Business Days after the event.

D-5

( e) If the Dissemination Agent has been instructed by the Successor Agency to report the occurrence of a Listed Event, the Dissemination Agent shall file a notice of such occurrence with the MSRB.

SECTION 6. Filings with the MSRB. All information, operating data, financial statements, notices and other documents provided to the MSRB in accordance with this Disclosure Agreement shall be provided in an electronic fonnat prescribed by the MSRB and shall be accompanied by identifying infomiation as prescribed by the MSRB.

SECTION 7. Tennination of Reporting Obligation. The Successor Agency's obligations under this Disclosure Agreement with respect to the Bonds shall terminate upon the legal defeasance, prior redemption or payment in full of all Outstanding Bonds. If such tennination occurs prior to the final maturity of the Bonds, the Successor Agency shall give notice of such tem1ination in the same manner as for a Listed Event under Section 5.

SECTION 8. Dissemination Agent The Successor Agency may, from time to time, appoint or engage a Dissemination Agent to assist it in carrying out its obligations under this Disclosure Agreement and may discharge any such Dissemination Agent with or without appointing a successor Dissemination Agent The initial Dissemination Agent shall be Urban Futures, Inc.

SECTION 9. Amendment Notwithstanding any other provision of this Disclosure Agreement, the Successor Agency may amend this Disclosure Agreement, provided no amendment increasing or affecting the obligations or duties of the Dissemination Agent shall be made without the consent of such party, and any provision of this Disclosure Agreement may be waived if such amendment or waiver is supported by an opinion of counsel expert in federal securities laws acceptable to the Successor Agency to the effect that such amendment or waiver would not, in and of itself, cause the undertakings herein to violate the Rule if such amendment or waiver had been effective on the date hereof but taking into account any subsequent change in or official interpretation of the Rule.

SECTION 10. Additional Infonnation. Nothing in this Disclosure Agreement shall be deemed to prevent the Successor Agency from disseminating any other information, using the means of dissemination set forth in this Disclosure Agreement or any other means of communication, or including any other information in any Annual Report or notice of occmTence of a Listed Event, in addition to that which is required by this Disclosure Agreement If the Successor Agency chooses to include any information in any Annual Report or notice of occurrence of a Listed Event in addition to that which is specifically required by this Disclosure Agreement, the Successor Agency shall have no obligation under this Agreement to update such information or include it in any future Annual Report or notice of occurrence of a Listed Event

SECTION 11. Default In the event of a failure of the Successor Agency or the Dissemination Agent (if the Dissemination Agent is other than the Successor Agency) to comply with any provision of this Disclosure Agreement, the Trustee may ( and, at the request of any Participating Underwriter or the Owners of at least 25% aggregate principal amount of outstanding Bonds with indemnification satisfactory to it shall), or any Owner or Beneficial Owner of the Bonds may take such actions as may be necessary and appropriate, including

D-6

seeking mandate or specific perfomiance by court order, to cause the Successor Agency or the Dissemination Agent (if the Dissemination Agent is other than the Successor Agency). as the case may be. to comply with its obligations under this Disclosure Agreement. 111e sole remedy under this Disclosure Agreement in the event of any failure of the Successor Agency or the Dissemination Agent (if the Dissemination Agent is other than the Successor Agency) to comply with this Disclosure Agreement shall be an action to compel performance. The Tmstee shall not owe any fiduciary duty to the Participating Underwriter nor shall its failure to comply with the request of any Participating Underwriter result in a breach of any of its fiduciary duties owed to the Owners.

SECTION 12. Duties, Immunities and Liabilities of Trustee and Dissemination Agent. 111e Dissemination Agent (if other than the Trustee or the Trustee in its capacity as Dissemination Agent) shall have only such duties as are specifically set forth in this Disclosure Agreement, and the Successor Agency agrees to indemnify and save the Dissemination Agent, its officers, directors, employees aud agents, harmless against any loss, expense and liabilities which it may incur arising out of or in the exercise or performance of its powers and duties hereunder, including the costs and expenses (including attorneys' fees and expenses) of defending against auy claim of liability, but excluding liabilities due to the Dissemination Agent's negligence or willful misconduct. 111e obligations of the Successor Agency under this Section shall survive resignation or removal of the Dissemination Agent and payment of the Bonds. If the Tmstee performs the duties assigned to it hereunder_ the Dissemination Agent shall not be responsible to any person for any failure by the Successor Agency or the Dissemination Agent (if other than the Trustee) to perform duties or obligations imposed hereby. The Dissemination Agent shall have the same rights and protections hereunder as accorded to the Trustee under the Indenture. It is understood and agreed that any infonnation that the Dissemination Agent may be instmcted to file with the MSRB shall be prepared aud provided to it by the Successor Agency. The Dissemination Agent has undertaken no responsibility with respect to any reports, notices or disclosures provided to it under this Disclosure Agreement. and has no liability to any person, including any owner of Bonds, with respect to any such reports, notices or disclosures. The fact that the Dissemination Agent or any affiliate thereof may have auy fiduciary or banking relationship with the Successor Agency shall not be construed to mean that the Dissemination Agent has actual knowledge of any event or condition except as may be provided by written notice from the Successor Agency.

SECTION 13. Beneficiaries. This Disclosure Agreement shall inure solely to the benefit of the Successor Agency, the Tmstee, the Dissemination Agent, the Participating Underwriter aud Owners and Beneficial Owners from time to time of the Bonds, and shall create no rights in any other person or entity. No person shall have any right to commence any action against the Trustee or the Dissemination Agent seeking any remedy other than to compel specific performance of this Disclosure Agreement. Neither the Trustee nor the Dissemination Agent shall be liable under any circumstances for monetary damages to any person for any breach of this Disclosure Agreement.

SECTION 14. GoverningLaw. This Disclosure Agreement shall be governed and constmed in accordance with the laws of the State.

D-7

SECTION 15. Counterpmts. This Disclosure Agreement may be executed in several counterparts, each of which shall be an original and all of which shall constitute but one and the same instrument

Dated: November 29. 2017


By-----------------Authorized Representative

URBAN FUTURES, INC., as Dissemination Agent

By-----------------Authorized Representative

D-8

EXHIBIT A

NOTICE TO MSRB OF FAILURE TO FILE ANNUAL REPORT

Name of Obligated Party: Successor Agency to the Guadalupe Community Redevelopment "Successor Agency")

Name of Bond Issue: $4,900,000 aggregate principal amount of Successor Agency to Guadalupe Community Redevelopment Agency Tax Allocation Refunding Bonds, Series 2017 (Taxable) (the "Bonds")

Date of Issuance: November 29, 2017

NOTICE IS HEREBY GIVEN that the Successor Agency has not provided an Annual Report with respect to the above-named Bonds as required by the Continuing Disclosure Agreement, dated November 29, 2017, with respect to the Bonds. ["I1ie Successor Agency anticipates that the Annual Report will be filed by ______ ]

Dated: 20 -----~

Urban Futures, Inc., as Dissemination, on behalf of the Successor Agency

D-9

APPENDIX E

AUDITED FINANCIAL STATEMENTS FOR THE CITY OF GUADALUPE FOR THE YEAR ENDED JUNE 30, 2016

E-1

City of Guadalupe

Financial Statements

Year Ended June 30, 2016

Independent Auditors' Report

Management's Discussion and Analysis

Basic Financial Statements

Government-Wide Financial Statements:

Statement of Net Position

Statement of Activities

Fund Financial Statements:

Governmental Funds:

Balance Sheet

City of Guadalupe



Table of Contents

Reconciliation of Governmental Funds Balance Sheet to the Statement of Net Position

Statement of Revenues, Expenditures, and Changes in Fund Balance

Reconciliation of the Governmental Funds Statement of Revenues, Expenditures, and

Changes in Fund Balances (Deficiency) to the Statement of Activities

Proprietary Funds:

Statement of Net Position (Deficiency)

Statement of Revenues, Expenses, and Changes in Fund Net Position (Deficiency)

Statement of Cash Flows

Fiduciary Fund:

Statement of Fiduciary Net Deficiency

Statement of Changes in Fiduciary Net Deficiency

2

Page

4-6

7-21

22

23-24

25

26

27

28-29

30-33

34-35

36-39

40

41

City of Guadalupe



Table of Contents

Page 2

Notes to Financial Statements

Required Supplementary Information

Budgetary Comparison Schedule -General Fund

Budgetary Comparison Schedule - Measure A Fund

Schedule of Funding Progress for OPEB Obligation

Schedule of City's Proportionate Share of the Net Pension Liability

Schedule of City's Contributions

Other Information and Combining Fund Statements

Combining Balance Sheet-Other Governmental Funds

Combining Statement of Revenues, Expenditures, and Changes in Fund Balance (Deficiency) -

Other Governmental Funds

Organization

Other Independent Auditors' Report

Independent Auditors' Report on Internal Control over Financial Reporting on Compliance and Other Matters

Page

42-85

87

88

89

90

91

93-94

95-96

97

Based on an Audit of Financial Statements Performed in Accordance with Government Auditing Standards 99-100

Audit Findings and Recommendations Section

Schedule of Audit Findings and Recommendations 102-104

Summary Schedule of Prior Year Audit Findings and Recommendations 105

3

GLENN BURDETTE CER- I, 'ED PU Bl 1C ACC0UN'!A\15

Honorable Mayor and City Council

City of Guadalupe

Guadalup.,, California

Raport on the Financial Statements

Independents Audlton' Rapon

We have audited the accompanying financial statements of the governmental activities, the business-type activities,

each major fund, and the aggregate remaining fund information of the City of Guadalupe, California, (the City) as of

and for the year ended June 30, 2016, and the related notes to the financial statements, which collectively comprise

the City's basic financial statements as listed in the table of contents.

M1n1111ml!lllt's Responsibility for the financial Statements

Manag .. ment is responsible for the preparation and fair presentation of these financial statements in accordance with

accounting principles g"nerally accepted in the United States of America; this includes the design, implementation, and

maintenance of internal control relevant to the preparation and fair presentation of financial statements that are free

from material misstatement, whether due to fraud or error.

Auditors' Responsibility

Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit

in accordance with auditing standards g,.n,.rally accepted in the United States of America and the standards applicable

to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United

States. Those standards requir., that we plan and perform the audit to obtain reasonable assurance about whether

the financial statements are free of material misstatement

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial

statements. The procedures selected d.,pend on the auditor's judgment, including the assessment of the risks of

material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments,

the auditor considers internal control relevant to the entity's preparation and fair presentation of the financial

statements in order to desi1n audit procedures that are appropriate in the circumstances, but not for the purpose of

expressing an opinion on the effectiveness of the entity's internal control. Accordingly, we express no such opinion.

An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of

significant accounting estimates made by management, as well as evaluating the overall presentation of the financial

statements.

GLENNBURDETTE.COM

4

SAN LUIS OBIS~O 115'.lf;,:-ns:-ec;

San Luis Cb spo, [A 93!J01

;, 8'.El 544 1441

J 3J5 54'1 ,13'.)1

PASO ROBLES 1D2 South Vine S:rect, Ste, A

F'aso flobles, CA '.)311,15

p 805 23? 3995

r sos 239 9332

SANTAMARIA 2222 South Broadwuy, Sta, A

Santa Maria, CA 931'J-Sl'J

fa 805 9?? 40HJ

J 8Ll5 022 4286


City of Guadalupe

Page 2

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit

opinions.

Opinions

In our opinion, the financial statements referred to above present fairly, in all material respects, the respective

financial position of the governmental activities, the business-type activities, each major fund, and the aggregate

remaining fund information of the City of Guadalupe as of June 30, 2016, and the changes in financial position and,

where applicable, cash flows thereof for the year then ended, in conformity with accounting principles generally

accepted in the United States of America.

Emphasis of Matter Regarding Going Concern

The accompanying financial statements have been prepared assuming that the City will continue as a going concern. As

discussed in Note 19 to the financial statements, the City has experienced decreased revenues and key budgeted revenue

sources are unknown. Management projects continued budget shortfalls unless significant cost reduction or other

measures are taken. The City has borrowed from other funds to reduce the negative cash balance and sustain its basic

operations. These conditions raise substantial doubt about the City's ability to continue as a going concern.

Management's plans regarding those matters are described in Note 19. The financial statements do not include any

adjustments that might result from the outcome of this uncertainty. Our opinion is not modified with respect to this

matter.

Other Matters


Accounting principles generally accepted in the United States of America require that management's discussion and

analysis and budgetary comparison information as listed in the table of contents, be presented to supplement the

basic financial statements. Such information, although not a part of the basic financial statements, is required by the

Governmental Accounting Standards Board, who considers it to be an essential part of the financial reporting for

placing the basic financial statements in an appropriate operational, economic, or historical context. We have applied

certain limited procedures to the required supplementary information in accordance with auditing standards generally

accepted in the United States of America, which consisted of inquiries of management about the methods of

preparing the information and comparing the information for consistency with management's responses to our

inquiries, the basic financial statements, and other knowledge we obtained during our audit of the basic financial

statements. We do not express an opinion or provide any assurance on the information because the limited

procedures do not provide us with sufficient evidence to express an opinion or provide any assurance.

Other Information

Our audit was conducted for the purpose of forming opinions on the financial statements that collectively comprise the

City of Guadalupe's basic financial statements. The combining and individual nonmajor fund financial statements are

presented for purposes of additional analysis and are not a required part of the basic financial statements.

5


City of Guadalupe

Pa1e3

The combining and individual nonmajor fund financial statements are the responsibility of management and were

derived from and relate directly to the underlying accounting and other records used to prepare the basic financial

statements, Such information has been subjected to the auditing procedures applied in the audit of the basic financial

statements and certain additional procedures, including comparing and reconciling such information directly to the

underlying accounting am! other records used to prepare the basic financial statements or to the basic financial

statements themselves, and other additional procedures in accordance with auditing standards generally accepted in the

United States of America, In our opinion, the combining and individual nonmajor fund financial statements are fairly

stated in all material respects in relation to the basic financial statements as a whole,

Other Raportin11 Required by Govl!fflml!nt Auditing Stondlll'dJ

In accordance with Govrmment Auditing Stnndords, we have also issued our report dated February 28, 2017, on our

consideration of the aty of Guadalupe's internal control over financial reporting and on our tests of its compliance

with certain pro.,;sioni of laws, regulations, contracts and grant agreements and other matters, The purpose of that

report is to describe the scope of our testing of internal control over financial reporting and compliance and the

results of that testing, and not to provide an opinion on the internal control over financial reports or compliance, That

report is an integral part of an audit performed in accordance with Government Auditing Standards in considering the a~:~~z;:·~ rom''"""

Glenn Burdette Attest Corporation

San Luis Obispo, California

February 28, 2017

6

INTRODUCTION

MANAGEMENT'S DISCUSSION AND ANALYSIS

Fiscal Year Ended June 30, 2016

This discussion and analysis of the City of Guadalupe financial performance provides an overview of the City's financial

activities for the fiscal year ended June 30, 2016. For the most complete picture of the City, please read this

document in conjunction with the City's basic financial statements, and the accompanying notes to the basic financial

statements. Comparisons between this year and the prior year are presented showing percentage changes.

FINANCIAL HIGHLIGHTS

• In FY 2015-16 construction commenced for five model homes and sixteen residential homes for the Pasadera

development within the City. The "Pasadera Development" will include approximately 800 homes and

approximately 250,000 square feet of commercial space. Project build out is estimated to occur within 10 to

15 years.

• In FY 2015-16 the City received grant funding through Prop 1B and FTA 5311 to purchase a new transit bus for

residents that travel between Santa Maria and Guadalupe. In addition, in August 2015, through the support

of the Santa Barbara County Association of Governments, the City's transit provider, SMOOTH, and other

North County Cities, Guadalupe received a grant from the Low Carbon Transit Operations Program. This

grant enabled the City to expand Saturday transit service and initiate Sunday service to its residents.

• In FY 2015-16 the City began work on the Tognazzini Inter-tie Project funded by a USDA grant. This project

will enable the City to have an additional well online to provide water extraction from the Santa Maria Valley

Groundwater Basin. This project will also ensure a back-up water source in the event State water is not

available.

• The City's total net position increased by $607 thousand in 2016. The net position of governmental activities

increased $203 thousand and the net position of business-type activities increased $404 thousand.

• As of the close of the current fiscal year, the City's governmental funds reported combined ending fund

balances of $2 million.

7

City of Guadalupe Management's Discussion and Analysis Fiscal Year Ended June 30, 2016

OVERVIEW OF THE FINANCIAL STATEMENTS

The City's Annual Financial Report consists of four main components: (1) management's discussion and analysis,

(2) the basic financial statements, (3) required supplementary information, and (4) combining fund financial

statements. The basic financial statements include two kinds of statements that present different views of the City,

the government-wide and the fund financial statements.

• The government-wide financial statements provide both long-term and short-term information about the

City's overall financial status.

• The fund financial statements focus on individual parts of the City government, reporting the City's

operations in more detail than the government-wide statements.

The basic financial statements also include notes that provide additional information essential to understanding the

data contained in the government-wide and fund financial statements.

Government-Wide Financial Statements

The government-wide statements report information about the City as a whole using accounting methods similar to

those used by private sector companies. The statement of net position includes all of the City's assets and liabilities,

as well as any deferred outflows or inflows of resources. The statement of activities includes all current year revenues

and expenses regardless of when cash is received or paid. Over time, increases or decreases in net position may serve

as a useful indicator of whether the financial health of the City is improving or declining.

The government-wide financial statements of the City are divided as follows:

• Governmental activities - Most of the City's basic services are included here, such as police, fire, public works,

community development, parks and recreation and general government.

• Business-type activities-Certain services provided by the City are funded by customer fees. Among these are

water and sewer services, solid waste and transit services.

Fund Financial Statements

A fund is a group of related accounts that is used to maintain control over resources that have been segregated for

specific activities or objectives. Fund financial statements provide more detailed information about the City's largest

funds, not the City as a whole. The City has 30 funds that are considered governmental, four funds that are

considered proprietary, and one fund that is considered fiduciary.

8


OVERVIEW OF THE FINANCIAL STATEMENTS - continued

The City has three types of fund financial statements:

Governmental funds - Governmental funds tell how general government services such as police, fire and public works

were financed in the short-term as well as what remains for future spending. Most of the City's basic services are

included in governmental funds, which focus on (1) short-term inflows and outflows of spendable resources, and

(2) the remaining year-end balances available for spending. Because this information does not encompass the

additional long-term focus of the government-wide statements, reconciliations that explain the relationship (or

differences) between governmental funds and governmental activities follow the governmental funds statements.

Additional information regarding the City's ability to continue as a going concern is available in Note 19 of the

Financial Statements.

Proprietary Funds - Services for which customer fees are intended to finance the costs of operations are generally

reported in proprietary funds. Proprietary fund statements, like the government wide statements, provide short-term

and long term financial information about the activities of the City that operate as businesses, such as water and

sewer services.

Fiduciary Funds- Fiduciary Fund statements provide information about the financial relationships in which the City

acts solely as a trustee or agent for the benefit of others, to whom the resources belong. The City elected to serve as

the successor agency for its former redevelopment agency which was dissolved by state law. The successor agency

activity is accounted for in a private purpose trust fund.

The City is responsible for ensuring that the assets reported in these funds are used for their intended purposes. All of

the City's fiduciary activities are reported in a separate statement of fiduciary net position and a statement of changes

in fiduciary net position. We exclude these activities from the City's government-wide financial statements because

the City cannot use these resources to finance operations.

Notes to the Basic Financial Statements

The notes provide additional information that is essential to a full understanding of the data provided in the

government-wide and fund financial statements.

9


FINANCIAL ANALYSIS OF THE GOVERNMENT WIDE STATEMENTS

This section provides analysis of the government-wide financial statements including long-term and short-term

information about the City's overall financial condition. The following tables address the financial results of the City as

a whole.

Governmental

Activities

2016 2015

City of Guadalupe

Summary of Net Position

Business-Type

Activities

2016 2015

Total Primary

Government

2016 2015

Total

Percent

Change

Assets Current Assets $ 2,905,171 $ 2,751,271 $ 2,117,994 $ 2,300,283 $ 5,023,165 $ 5,051,554 -0.6%

Noncurrent Assets 8,725,056 9,362,214 9,529,956 9,294,723 18,255,012 18,656,937 -2.2% -----'--'------'-----'----'---'-------'--'-------'--'-----'-----'------

Tot a I Assets 11,630,227 12,113,485 11,647,950 11,595,006 23,278,177 23,708,491 -1.8%

Deferred Outflows of Resources

Deferred pensions 319,345 312,333 37,384 18,167 356,729 330,500 7.9% ----'----------'------'-------'-------'--------'------Liabilities

Current Liabilities

Noncurrent Liabilities Total Liabilities

Deferred Inflows of Resources Deferred pensions

Net Position

929,322

2,142,869

3,072,191

585,352

1,570,391

2,286,089

3,856,480

479,982

1,219,813

2,400,951

3,620,764

53,832

1,500,958

2,469,644

3,970,602

35,785

2,149,135

4,543,820

6,692,955

639,184

3,071,349

4,755,733

7,827,082

515,767

-30.0%

-4.5%

-14.5%

23.9%

Net investment in capital assets Restricted Unrestricted

8,851,496

2,325,227

(2,884,694)

9,246,082

808,756

(1,965,482)

6,818,931

147,100

1,044,707

6,846,219 15,670,427 16,092,301 -2.6%

147,100 2,472,327 955,856 158. 7%

613,467 (1,839,987) (1,352,015) 36.1%

$ 8,292,029 $ 8,089,356 $ 8,010,738 $ 7,606,786 $ 16,302,767 $ 15,696,142 3.9%

Analysis of net position

Total net position of the primary government increased $607 thousand this year. Total assets decreased $430

thousand, deferred outflows of resources increased $26 thousand, total liabilities decreased $1.1 million and deferred

inflows of resources increased $123 thousand. The following analysis of governmental and business-type activities

provides more detailed information for these changes.

Governmental activities:

Current assets increased $154 thousand mainly due to an account receivable for $250 thousand for a short term loan

between the transit fund and measure A for the purchase of a transit bus.

10


FINANCIAL ANALYSIS OF THE GOVERNMENT WIDE STATEMENTS - continued

Non-current assets decreased by $637 thousand due to current year asset additions of $224 thousand, consisting

mainly of police vehicle purchases, offset by depreciation of $457 thousand and a $400 thousand inter-fund loan

between the general fund and the water fund.

Deferred outflows of resources for deferred pensions increased $7 thousand. More detailed Pension Plan information

is located in Note 8 to the financials.

Current liabilities decreased $641 thousand due to a decrease of $766 thousand in accounts payable primarily due to a

loan from the water fund of $400 thousand and a loan from the lighting district of $300 thousand in the general fund

offset by an increase of $46 thousand in unearned revenue and a $79 thousand increase in liabilities due in one year

primarily due to capital lease purchases.

Non-current liabilities decreased $143 thousand due to a decrease of $215 thousand of the City's net pension liability

offset by a $72 thousand increase in liabilities due after one year primarily due to capital lease purchases.

Deferred inflows of resources for deferred pensions increased $105 thousand. More detailed Pension Plan

information is located in Note 8 to the financials.

Business-type activities:

Current assets decreased $182 thousand due primarily to a loan to the general fund of $400 thousand offset by an

increase to accounts receivable of $266 thousand for funds due from the Federal Transportation Administration

Section 5311 for a bus purchase and a reduction to prepaid expense of $49 thousand.

Non-current assets increased $235 thousand due to current year asset additions of $534 thousand, consisting mainly

of public works vehicle purchases, offset by depreciation of $700 thousand and an addition of $400 thousand for a

non-current loan to the general fund.

Deferred outflows of resources for deferred pensions increased $19 thousand. More detailed Pension Plan

information is located in Note 8 to the financials.

Current liabilities decreased $281 thousand mainly due to the decrease in the deficient cash balance in the

wastewater funds of $201 thousand from prior year and the decrease in the deficient cash balance in the solid waste

fund of $23 thousand from prior year.

Non-current liabilities decreased $69 thousand mainly due to a decrease of $157 thousand for the pay-off of the loan

between the wastewater fund to the successor agency offset by an increase in net pension liability of $106 thousand.

More detailed Pension Plan information is located in Note 8 to the financial statements.

Deferred inflows of resources for deferred pensions increased $18 thousand. More detailed Pension Plan information

is located in Note 8 to the financials.

11



The City's change in net position was $450 thousand during the current fiscal year. Information about changes in net position is summarized below.

Revenues

Program revenues:

Charges for services

Operating grants and contributions

Capital grants and contributions

General revenue:

Sales tax

Property tax

Utility users tax

Gas tax

Franchise fees

State of California in-lieu

Property transfer tax

Licenses and permits

Rents

Interest income

Other revenues

Total revenues

Program Expenses

Public safety

Transportation

Leisure, culture and social services

Community development

General government

Business-type activities

Interest on long-term debt

Total expenses

Transfers

Change in net position

Net position - beginning of year

Prior year restatement

Net Position - beginning of year, restated

Net position - end of year

$

$

City of Guadalupe Changes in Net Position

For the Fiscal Years Ended June 30, 2016 and 2015 (In thousands)

Governmental

Activities

2016

65,305 $ 725,560

434,892

1,065,842

374,295

262,258

186,804

9,898

465,239

64,569

4,154

229,455

3,888,271

2,113,608

392,463

154,404

727,081

872,239

3,050

4,262,845

436,304

61,730

8,089,356

140,943

8,230,299

2015

94,004 $ 783,644

8,958

260,783

973,140

299,249

311,438

185,710

2,928

6,730

114,441

72,311

2,279

500,137

3,615,752

1,864,794

283,099

173,403

875,960

999,453

3,700

4,200,409

428,293

{156,364)

10,407,090

{2,161,370)

8,245,720

Business-type

Activities

2016

3,513,015 $ 860,443

2,465

107,460

4,483,383

3,658,399

3,658,399

{436,304)

388,680

7,606,786

15,272

7,622,058

2015

3,370,785 $ 348,752

244

39,681

3,759,462

3,611,774

3,611,774

{428,293)

{280,605)

7,368,948

518,443

7,887,391

Total Primary

Government

2016

3,578,320 $ 1,586,003

434,892

1,065,842

374,295

262,258

186,804

9,898

465,239

64,569

6,619

336,915

8,371,654

2,113,608

392,463

154,404

727,081

872,239

3,658,399

3,050

7,921,244

450,410

15,696,142

156,215

15,852,357

2015

3,464,789

1,132,396

8,958

260,783

973,140

299,249

311,438

185,710

2,928

6,730

114,441

72,311

2,523

539,818

7,375,214

1,864,794

283,099

173,403

875,960

999,453

3,611,774

3,700

7,812,183

{436,969)

17,776,038

{1,642,927)

16,133,111

8,292,029 $ 8,089,356 $ 8,010,738 $ 7,606,786 $ 16,302,767 $ 15,696,142

12

Total

Percent

Change

3.3%

40.1%

-100.0%

66.8%

9.5%

25.1%

-15.8%

0.6%

-100.0%

47.1%

306.5%

-10.7%

162.3%

-37.6%

13.5%

13.3%

38.6%

-11.0%

-17.0%

-12.7%

1.3%

-17.6%

1.4%

-203.1%

-11.7%

-109.5%

-1.7%

3.9%



Analysis of the changes in net position:

Total government-wide revenues of the primary government increased $996 thousand, a 14% increase from the prior

year, and total expenses increased $109 thousand, a 1% increase. These changes are discussed in more detail below.

Governmental Activities:

Total revenues for governmental activities increased $273 thousand from the prior year. Total expenses increased

$62 thousand and transfers increased $8 thousand from the prior year. Transfers consist of indirect cost allocations

from the General Fund to the various funds that utilize indirect administrative services. Indirect cost allocations are

based on operating budget, full-time equivalent staffing and assigned space.

Revenue

Sales tax increased $174 thousand primarily due to the local tax measure approved by the voters in November of

2014. The full effect of the measure took place in fiscal year 2015-16.

Utility user tax increased $75 thousand primarily due to the utility user tax measure approved by the voters in

November of 2014. The full effect of the measure took place in fiscal year 2015-16.

Licenses and permits increased $351 thousand; of which 78% of the increase was due to the business license tax

measure approved by voters in November of 2014. The remaining 22% increase was due to permit fees associated

with the Pasadera development that broke ground in February of 2015.

Other revenues decreased $271 thousand mainly due to the Legion Hall retrofit for $200,000 in the prior year and a

$50 thousand reduction of the Chevron contribution.

Expenses

Public safety increased $249 thousand of which 74% of the increase was due to capital lease purchases for police

vehicles. The remaining 26% increase was due to the increased costs for workers' compensation expense.

Community Development expenses decreased $149 thousand due primarily to the prior year grant work done for the

seismic retrofit completed at the Legion Hall and the prior year work done for the Safe Routes to School grant.

Business-Type Activities:

Total revenues for business-type activities increased $724 thousand from the prior year, a 19% increase. Total

expenses increased $47 thousand and transfers increased $8 thousand.

13



Business-Type Activities-continued

Revenue

Charges for services increased by $142 thousand primarily due to the increase in wastewater and solid waste rates

effective June 1, 2015. Operating grants and contributions increased $512 thousand mainly due to a bus purchase for

the Transit Fund. Other revenues increased $68 thousand mainly due to impact fees received from the Pasadera

development.

Expenses

Water fund expenses increased $107 thousand mainly due to a 6% increase in Central Coast Water Authority annual

payments over prior year of $52 thousand plus a GASB 68 pension entry of $53 thousand. Wastewater fund expenses

increased $37 thousand mainly due to a GASB 68 pension entry. Solid Waste expenses decreased $80 thousand

mainly due to the timing of solid waste contract services. Transit fund expenses decreased $16 thousand mainly due

to an asset that was fully depreciated in fiscal year 14-15.

FINANCIAL ANALYSIS OF THE FUND STATEMENTS

The City uses fund accounting to ensure and demonstrate compliance with finance-related legal requirements. The

fund financial statements focus on individual parts of City Government, reporting City operations in more detail than

the government-wide statements.

Governmental Funds:

The focus of the City's governmental funds is to provide information on near-term inflows, outflows and balances of

spendable resources. Total fund balance for governmental funds increased by $470 thousand during fiscal year 2016.

Total revenues for governmental funds increased $267 thousand, total expenditures for governmental funds increased

$382 thousand and net other financing sources increased $195 thousand. Reasons for these changes are discussed in

more detail below.

General Fund

Total General Fund revenues increased $565 thousand in the current year primarily due to the three tax measures

approved by voters in November 2014 that based business license fees on gross receipts, removed the cap on utility

user tax and added a .25% local sales tax. Business license revenues increased $273 thousand, local sales tax

increased $98 thousand and utility user tax increased $75 thousand. Property tax increased $82 thousand and sales

tax increased $75 thousand due to the Pasadera development and a recovering economy.

14


FINANCIAL ANALYSIS OF THE FUND STATEMENTS - continued

Total General Fund expenditures increased $449 thousand this year. This is mainly due to the reduction of furlough

days in 15-16 as well as increased consultant fees due to the Pasadera development and the establishment of capital

lease balances for police vehicles.

Total other financing sources for the General Fund increased $222 thousand primarily due to the establishment of

capital lease balances for police vehicles.

Measure A

Revenues for Measure A were in line with prior year. Expenditures increased $47 thousand mainly due to the

reduction of furlough days in 15-16 and street payroll re-classed to Measure A in FY 15-16.


Total other governmental funds revenues decreased $299 thousand. This is primarily due to prior year grants that

were not repeated in FY 15-16. Total other government fund expenditures decreased $114 thousand due to street

maintenance payroll re-classed to Measure A in FY 15-16.

Enterprise Funds:

The City's four enterprise funds provide the same type of information found in the government-wide financial

statements, but in more detail. Total operating revenues increased by $722 thousand. Total operating expenses

increased by $41 thousand or 1% over prior year. Total net non-operating revenues and expenses increased $11

thousand. The discussion below provides a detailed explanation for each business-type fund.

Water Fund

Water fund operating revenues decreased $82 thousand compared to the prior year. The decrease resulted from

decreased water usage due to water conservation efforts by city residents. Operating expenses in the current year

increased $104 thousand due to a reduction of furlough days as well as a 6% increase in Central Coast Water Authority

annual payments over prior year. Total net non-operating revenues and expenses increased $19 thousand due

primarily to the transfers for indirect costs to the general fund.

15


FINANCIAL ANALYSIS OF THE FUND STATEMENTS - continued

Wastewater Fund

Wastewater fund revenue increased $290 thousand compared to the prior year due to a 30% wastewater rate

increase effective June 1, 2015. Operating expenses decreased $20 thousand primarily due to the prior year Truss Pro

sewer line break, which cost $64 thousand to repair, offset by an increase to personnel services of $42 thousand due

to the reduction of furlough days. Total net non-operating revenues and expenses decreased $8 thousand due

primarily to the reduction of operating transfers out.

Solid Waste Fund

Solid Waste revenue increased $7 thousand. Operating expenses decreased $80 thousand due primarily to the timing

of solid waste contract services.

Transit Fund

Transit fund revenue increased $507 thousand compared to the prior year primarily due to grants received for the

purchase of a new bus and expanded weekend bus service. Operating expenses increased $38 thousand primarily due

to the expenditures for expanded weekend bus service.

Fiduciary Funds:

The City has one Fiduciary Fund which is used to account for resources held for the benefit of parties outside the

government and is not reflected in the government wide financials because the resources of those funds are not

available to support City programs. The accounting used for fiduciary funds is presented with the fund financials

statements in the supplemental information section.

16


GENERAL FUND BUDGETARY HIGHLIGHTS

A detailed budgetary comparison schedule for the year ended June 30, 2016 is presented as required supplementary

information following the notes to the financial statements. The final budget amounts (which are the focus of this

discussion and accompanying financial statements) are different from those presented in the 2015-16 Budget

Document. This is due to changes that occurred between when the Preliminary Budget was prepared and year-end

final budget approvals.

The following summarizes the original and final budget compared with actual results for 2015-16:

Original Final

General Fund Budget Budget Actual Variance

Revenues $ 3,123,710 $ 2,934,710 $ 2,881,545 $ (53,165) Expenditures (3,715,532) (3,556,034) (3,717,739) (161,705) Other Financing Sources 593,200 593,200 767,535 174,335

Change in fund balances 1,378 (28,124) (68,659) (40,535)

Fund balance -beginning of year (670,768) (670,768) (670,768)

Fund balance (deficit)-end of year $ (669,390) $ (698,892) $ (739,427) $ (40,535)

Overall, the ending actual fund balance is a deficit of $739 thousand, which is $41 thousand more than the final

budget estimate. The net increase results from a variety of adjustments; the key changes are summarized as follows:

• Revenues were $53 thousand lower than estimated primarily due to administrative overhead budgeted at

$24 thousand more than was actually received; and surplus sales of $15 thousand budgeted for but not

received.

• Expenditures were $162 thousand higher than estimated primarily due to capital lease purchases for police

vehicles.

• Other financing sources received were $174 thousand higher than estimated mainly due to capital lease

purchases for police vehicles.

CAPITAL ASSETS

Capital Assets Summary. The City of Guadalupe's investment in capital assets for its governmental and business type

activities as of June 30, 2016, amounts to $18.2 million (net of accumulated depreciation). The investment in capital

assets includes land, park improvements, buildings and building improvements, vehicles and equipment, streets,

bikeways and water, wastewater and storm drain systems.

17


CAPITAL ASSETS - continued

A summary of the City's capital assets at June 30, 2016 follows:

Capital Assets, Governmental Net of Accumulated Depreciation Activities

Land $ 343,131 Infrastructure 4,624,101 Buildings and Improvements 3,886,686 Vehicles 186,653 Equipment 33,276 Construction in Progress

$ 9,073,847

Major capital asset expenditures during the fiscal year include:

• Facilities Improvements

• Pavement upgrades

• Water system improvements

• Wastewater improvements

Business-type Activities Total

$ 248,425 $ 591,556 5,167,940 9,792,041 2,923,244 6,809,930

698,257 884,910 53,914 87,190 48,176 48,176

$ 9,139,956 $ 18,213,803

Property, plant and equipment of the City is depreciated using the straight line method over the following estimated

useful lives:

Assets

Infrastructure

Buildings and Structures

Improvements other than buildings

Equipment

18

Years

10-50

20-50

20-50

5-15


CAPITAL ASSETS - continued

Capital assets activity for the fiscal year ended June 30, 2016 was as follows:

Balance

June 30, 2015 Additions

Governmental Activities: Land $ 343,131 $ Infrastructure 6,998,887

Accumulated depreciation (2,098,450) (276,336) Buildings and improvements 5,213,510 30,998

Accumulated depreciation (1,215,474) (142,348) Vehicles 936,490 167,415

Accumulated depreciation (890,598) (26,654) Equipment 485,513 25,671

Accumulated depreciation (465,927) (11,981)

Total governmental capital assets, net $ 9,307,082 $ (233,235)

Business-Type Activities: Land $ 248,425 Construction in progress 37,084 11,092 Buildings and improvements 9,769,022

Accumulated depreciation (6,228,738) (617,040) Vehicles 1,003,725 505,536

Accumulated depreciation (739,723) (71,281) Equipment 476,530 28,896

Accumulated depreciation (444,554) (6,958) Infrastructure 6,998,888

Accumulated depreciation (1,825,936) (5,012)

Total governmental capital assets, net $ 9,294,723 $ (154,767)

Depreciation expense was charged to functions/programs as follows.


Public safety $ Leisure, cultural & social services


General government

Total governmental activities depreciation expense $


Water $ Waste water

Transit

Total business-type activities depreciation expense $

Deductions

$

$

$

28,697 32,310

361,165 35,147

457,319

174,930 457,127

68,234 700,291

Additional information on the City's capital assets can be found in Note 5 to the basic financial statements.

19

Balance

June 30, 2016

$ 343,131 6,998,887

(2,374,786) 5,244,508

(1,357,822) 1,103,905

(917,252) 511,184

(477,908)

$ 9,073,847

$ 248,425 48,176

9,769,022 (6,845,778) 1,509,261

(811,004) 505,426

(451,512) 6,998,888

(1,830,948)

$ 9,139,956


LONG-TERM DEBT

At June 30, 2016, the City of Guadalupe had $3.3 million in long-term debt outstanding as summarized below:

Long-Term Debt Governmental Business-type

Activities Activities Total

Sewer Bonds $ 47,000 $ $ 47,000 Other post-employment benefits 249,709 249,709 Certificates of participation 2,086,349 2,086,349 Compensated absences 241,088 241,088 Loans payable to successor agency

trust fund 156,910 156,910 Insurance claim payable 170,431 103,966 274,397

$ 883,579 $ 2,347,225 $ 3,230,804

Long-term debt governmental activity for the fiscal year ended June 30, 2016 was as follows:

Balance Balance

Governmental activities: June 30, 2015 Additions Deductions June 30, 2016

Sewer bonds $ 61,000 $ 14,000 $ 47,000

Other post-employment benefits 205,268 44,441 249,709

Compensated absences 203,133 37,955 241,088

Insurance claim payable 263,394 92,963 170,431

Capital leases obligations 187,086 11,735 175,351

Total $ 732,795 $ 269,482 $ 118,698 $ 883,579

Long-term debt business-type activity for the fiscal year ended June 30, 2016 was as follows:

Balance Balance

Business-Type Activities: June 30, 2015 Additions Deductions June 30, 2016

Certificates of participation $ 2,141,594 $ $ 55,245 $ 2,086,349

Loans payable to successor

agency trust fund 359,539 202,629 156,910


Capital lease obligations 80,305 2,539 77,766

Total $ 2,614,016 $ 80,305 $ 269,330 $ 2,424,991

Additional information about the City of Guadalupe's long-term debt can be found in Note 6 to the basic financial

statements.

20


On June 14, 2016 the Council adopted the fiscal year 2016-17 budget (Resolution No. 2016-34). The General Fund

portion of that budget contains a balanced budget.

Fiscal Outlook. In FY 2015-16 the City received the full impact of sustainable revenues for the three measures that

voters approved in November 2014. The measures included a quarter-cent sales tax increase, removal of the City's

utility users' tax cap, and a policy change to calculate annual business licenses based on gross receipts. The Pasadera

Development (formally DJ Farms) added twenty one homes during the fiscal year and is expected to add twenty five to

fifty homes annually over the next ten to fifteen years. During build-out, Pasadera will drive increased building permit

revenue for the General Fund. Pasadera will also increase the property tax base. Once built, the shopping center in

Pasadera will lead to increased sales tax receipts. The 2015-16 increase in fund deficit in the General Fund was $69

thousand for 2016 activity. In 2016-17 the General Fund current year activity is projected to be breakeven. The City

continues to look for sustainable revenue opportunities.

CITY OF GUADALUPE ACTIVITIES

The City of Guadalupe utilizes grants as much as possible to carry out capital projects. Significant success has been

achieved through this process. In conjunction with grants, the city seeks low interest loans when available.

Infrastructure improvements continue to be a high priority. A continued focus for the future is improvements to the

wastewater collection and water distribution systems. Measure A and Gas Tax funding is used for street maintenance

projects. In FY 2015-16 the City continued work on the Tognazzini inter-tie line to add a back-up water source for the

City.

CONTACTING THE CITY'S FINANCIAL MANAGEMENT TEAM

This financial report is designed to provide our citizens, taxpayers, customers and creditors with a general overview of

the City's finances and to demonstrate the City's accountability for the money it receives. Questions concerning any

of the information provided in this report or requests for additional financial information should be addressed to the

City of Guadalupe - Attn: Cruz Ramos, 918 Obispo Street, Guadalupe, CA 93434.

21

Assets

Cash and investments

Accounts receivable, net of allowance

Due from (to) other funds

Prepaid expenses

Loans receivable

lnterfund loans

Land

Construction in progress

City of Guadalupe

Statement of Net Position

June 30, 2016

Governmental

Activities

$ 1,962,878

450,329

250,000

241,964

41,209

(390,000)

343,131

Depreciable capital assets, net of accumulated depreciation 8,730,716

Total assets 11,630,227

Deferred Outflows of Resources

Deferred pensions 319,345

Liabilities

Accounts payable and accrued liabilities 505,920

Unearned revenue 92,358

Interest payable

Long-term liabilities:

Due within one year 331,044

Due after one year 552,535

Net pension liability 1,590,334

Total liabilities 3,072,191

Deferred Inflows of Resources

Deferred pensions 585,352

Net Position

Net investment in capital assets 8,851,496

Restricted for debt service 21,663

Restricted for other purposes 2,303,564

Unrestricted (2,884,694)

Total net position $ 8,292,029

Business-Type

Activities

$ 718,705

912,550

(250,000)

736,739

390,000

248,425

48,176

8,843,355

11,647,950

37,384

798,641

117,347

39,990

263,835

2,161,156

239,795

3,620,764

53,832

6,818,931

147,100

1,044,707

$ 8,010,738

The notes to the financial statements are an integral part of these financial statements.

22

Total

$ 2,681,583

1,362,879

978,703

41,209

591,556

48,176

17,574,071

23,278,177

356,729

1,304,561

209,705

39,990

594,879

2,713,691

1,830,129

6,692,955

639,184

15,670,427

168,763

2,303,564

(1,839,987)

$ 16,302,767

Functions/Programs


Public safety

Transportation

Leisure, cultural and social services


General government

Interest on long-term debt Total governmental activities

Business-type activities: Water Wastewater Solid waste

Transit Total business-type activities

General revenues:

Sales taxes Property taxes Utility users tax (UUT)

Gas tax Franchise fees

Property transfer tax Licenses and permits

Rental income

Interest income

Other revenues

Transfers

Total general revenues

Change in net position

Net position - beginning of year

Prior year restatement

Net position - beginning of year, restated

Net position - end of year

City of Guadalupe

Statement of Activities


Charges for

Expenses Services

$ 2,113,608 $ 54,745 392,463 154,404 54 727,081 10,071 872,239 435

3,050 4,262,845 65,305

1,539,625 1,710,456 1,178,450 1,150,118

492,458 568,606 447,866 83,835

3,658,399 3,513,015

Program Revenues

Operating

Grants and

Contributions

$ 91,901 462,459

171,200

725,560

860,443 860,443


23

Capital

Grants and

Contributions

$

Net Revenues {Expenses) and Changes in Net Position

Total Total Governmental Business-Type

Activities Activities Total

$ (1,966,962) $ $ (1,966,962) 69,996 69,996

(154,350) (154,350) (717,010) (717,010) (700,604) (700,604)

(3,050) (3,050) (3,471,980) (3,471,980)

170,831 170,831 (28,332) (28,332) 76,148 76,148

496,412 496,412 715,059 715,059

434,892 434,892 1,065,842 1,065,842

374,295 374,295 262,258 262,258 186,804 186,804

9,898 9,898 465,239 465,239

64,569 64,569 4,154 2,465 6,619

229,455 107,460 336,915 436,304 (436,304)

3,533,710 (326,379) 3,207,331

61,730 388,680 450,410

8,089,356 7,606,786 15,696,142

140,943 15,272 156,215

8,230,299 7,622,058 15,852,357

$ 8,292,029 $ 8,010,738 $ 16,302,767

24

City of Guadalupe

Balance Sheet- Governmental Funds

June 30, 2016

General Measure A

Assets Cash and investments $ 30,814 $ 634,996 Accounts receivable 254,931 74,175

Prepaid expenses 224,389 10,084 Due from other funds 250,000 lnterfund loan receivable

Loans receivable

Total assets $ 510,134 $ 969,255

Liabilities and Fund Balance

Liabilities:

Accounts payable $ 365,194 $ 1,452 Accrued wages and benefits 109,509 4,570 Unearned revenue 92,358 lnterfund loan payable 682,500

Total liabilities 1,249,561 6,022

Fund balance: Nonspendable:

Long-term loans receivable

Restricted for:

Street maintenance 963,233 Other capital projects Community development

Public safety Utility infrastructure

Debt service

Committed to:

Lighting and landscape

Assigned to:

Capital projects

Unassigned (739,427)

Total fund balance (deficiency) (739,427) 963,233

Total liabilities and fund balance (deficiency) $ 510,134 $ 969,255


25

Other Total Governmental Governmental

Funds Funds

$ 1,297,068 $ 1,962,878 121,223 450,329

7,491 241,964 250,000

352,500 352,500 41,209 41,209

$ 1,819,491 $ 3,298,880

$ 24,873 $ 391,519 322 114,401

92,358 60,000 742,500 85,195 1,340,778

41,209 41,209

174,678 1,137,911 889,931 889,931 136,894 136,894 134,561 134,561

4,267 4,267 21,663 21,663

384,519 384,519

6,574 6,574 (60,000) (799,427)

1,734,296 1,958,102

$ 1,819,491 $ 3,298,880

City of Guadalupe

Reconciliation of the Governmental Funds Balance Sheet

to the Statement of Net Position

June 30, 2016

Total fund balance - governmental funds

Amounts reported for governmental activities in the statement of

net position are different because:

Capital assets: In governmental funds, only current assets are reported. In

the statement of net position, all assets are reported, including capital

assets and accumulated depreciation. Net capital assets relating to

governmental activities consisted of:

Capital assets at estimated historical cost

Accumulated depreciation

Long-term liabilities: In governmental tunds, only current liabilities are

reported. In the statement of net position, all liabilities, including long

term liabilities, are reported. Long-term liabilities relating to governmental

activities consisted of:

Sewer bonds

OPEB

Compensated absences

Insurance claim payable

Capital lease obligations

Net pension liability

Deferred inflows and outflows: The deferred inflows and outflows are not

current assets or resources; and they are not due in the current period and

therefore are not reported in the governmental funds.

Deferred outflows

Deferred inflows

Total net position - governmental activities

$ 14,201,615

(5,127,768)

47,000

249,709

241,088

170,431

175,351

1,590,334


26

$ 1,958,102

9,073,847

(2,473,913)

319,345

(585,352)

$ 8,292,029

City of Guadalupe

Statement of Revenues, Expenditures and Changes in Fund Balance (Deficiency)

Governmental Funds


Other

Governmental

General Measure A Funds

Revenues:

Taxes $1,892,550 $ 456,834 $ 441,439

Licenses and permits 465,239 6,573

Fines and penalties 19,632

Revenues from other agencies 259,224 74,125

Charges for current services 10,279 1,255

Interest 715 271 2,061

Other revenues 233,906 18,168

Total revenues 2,881,545 457,105 543,621

Expenditures:

Personnel services 2,659,504 139,299 17,092

Maintenance and operations 950,032 59,423 219,118

Capital outlay 96,469 17,436 140,576

Debt service:

Principal 11,735 14,000

Interest and fiscal charges 3,050

Total expenditures 3,717,740 216,158 393,836

Excess (deficiency) of revenues over expenditures (836,195) 240,947 149,785

Other financing sources {uses):

Operating transfers in 580,450 40,000

Operating transfers out (87,996) (96,150)

Proceeds from capital leases 187,086

Total other financing sources (uses) 767,536 (87,996) (56,150)

Change in fund balance (68,659) 152,951 93,635

Fund balance (deficiency) - beginning of year (670,768) 768,523 1,390,435

Prior year restatement 41,759 250,226

Fund balance (deficiency) - beginning of year, restated (670,768) 810,282 1,640,661

Fund balance (deficiency) - end of year $ (739,427) $ 963,233 $ 1,734,296


27

Total

Governmental

Funds

$ 2,790,823

471,812

19,632

333,349

11,534

3,047

252,074

3,882,271

2,815,895

1,228,573

254,481

25,735

3,050

4,327,734

(445,463)

620,450

(184,146)

187,086

623,390

177,927

1,488,190

291,985

1,780,175

$ 1,958,102

City of Guadalupe

Reconciliation of the Governmental Funds Statement of

Revenues, Expenditures and Changes in Fund Balances

to the Statement of Activities


Total net change in fund balance - governmental funds

Amounts reported for governmental activities in the statement of activities are different because:

Capital outlay: In governmental funds, the costs of capital assets are reported as expenditures in the period when the assets are acquired. In the

statement of activities, costs of capital assets are allocated over their estimated useful lives as depreciation expense. The difference between capital outlay expenditures and depreciation expense for the year was:

Expenditures for capital outlay - governmental funds

Depreciation expense

Donated capital assets: In governmental funds, donated capital assets are

not recorded. In the statement of activities they are reported as program

revenue. The donated capital asset resulting in program revenue was:

Debt service: In governmental funds, repayments of long-term liabilities

are recognized as expenditures. In the statement of activities, repayments

of long-term liabilities are reported as reductions of liabilities. Expenditures

for repayment of the principal portion of long-term liabilities were:

Capital leases: The amount financed by new capital leases is reported as an

other financing source in the governmental funds, but the amount financed

constitutes long-term liabilities in the statement of net assets. Other

financing sources from proceeds from capital leases were:

Compensated absences: In governmental funds, compensated absences

are measured by the amounts paid during the period. In the statement of

activities, compensated absences are measured by the amounts earned.

The differences between compensated absences paid and compensated

absences earned was:

Insurance loan payable: In governmental funds, insurance expenses are

measured by the amounts paid during the period. In the statement of

activities, the long-term insurance loan payable activity is reported as

increases and decreases of the liability.

$ 218,084

(457,319)


28

$ 177,927

(239,235)

6,000

25,735

(187,086)

(37,955)

92,963

City of Guadalupe

Reconciliation of the Governmental Funds Statement of

Revenues, Expenditures and Changes in Fund Balances

to the Statement of Activities


Page 2

OPEB: In governmental funds, other post employment benefits are

measured by the amounts paid during the period. In the statement of

activities, other post employment benefits are measured by the amounts accrued. The differences between other post employment benefits paid and compensated absences accrued was:

Pension expense: In governmental funds, pension expenses are included in

the statement of activities, however they do not require the use of current financial resources and therefore are not reported as expenditures in the

governmental funds:

Total change in net position - governmental activities


29

$ (44,441)

267,822

$ 61,730

City of Guadalupe


Proprietary Funds

June 30, 2016

Assets Current assets:

Cash and investments $ Accounts receivable, net of allowance

Prepaid expenses

lnterfund loan receivable, current portion

Total current assets

Noncurrent assets:

lnterfund loan receivable, net of current portion

Land

Work in progress

Buildings, structures and improvements

Vehicles

Equipment

Infrastructure

Water

431,557

229,530

714,454

16,667

1,392,208

373,333

29,464

48,176

4,933,128

63,950

380,303

Less accumulated depreciation (2,627,751)

Total noncurrent assets 3,200,603

Total assets 4,592,811

Deferred Outflows of Resources Deferred pensions 16,098


30

Enterprise Funds

Wastewater Solid Treatment Waste

$ $ 177,739 136,538

22,285

200,024 136,538

218,961

4,818,550

28,085

114,513

6,998,888

(6,504,421)

5,674,576

5,874,600 136,538

21,286

Transit Total

$ 287,148 $ 718,705

368,743 912,550

736,739

16,667

655,891 2,384,661

373,333

248,425

48,176

17,344 9,769,022

1,417,226 1,509,261

10,610 505,426

6,998,888

(807,070) (9,939,242)

638,110 9,513,289

1,294,001 11,897,950

37,384

31

City of Guadalupe


Proprietary Funds

June 30, 2016

Page 2

Enterprise Funds

Wastewater Solid

Water Treatment Waste Liabilities

Current liabilities:

Accounts payable $ 22,915 $ 534,626 $ 179,708

Due to other funds

Deposits payable 19,536

Accrued wages and benefits 4,799 7,366


Interest payable 22,588 17,402

Current portion of insurance claim payable 4,529 16,056

Current portion of capital lease obligations 15,522 13,326

Current portion of certificates of participation 37,212 20,280

Current portion of loans payable to Successor

Agency Trust Fund 156,910

Total current liabilities 127,101 765,966 226,055

Noncurrent liabilities:

Insurance claim payable 50,624 32,757

Capital lease obligations, net of current portion 26,762 22,156

Certificates of participation, net of current portion 1,163,650 865,207

Net pension liability 103,258 136,537

Total noncurrent liabilities 1,344,294 1,056,657

Total liabilities 1,471,395 1,822,623 226,055

Deferred Inflows of Resources Deferred pensions 23,181 30,651

Net Position (Deficiency)

Net investment in capital assets 1,584,124 4,596,697

Restricted for debt service 88,522 58,578

Unrestricted 1,441,687 (612,663) (89,517)

Total net position (deficiency) $ 3,114,333 $ 4,042,612 $ (89,517)


32

$

$

Transit

29,691

250,000

71,000

350,691

350,691

638,110

305,200

943,310

$

Total

766,940

250,000

19,536

12,165

117,347

39,990

20,585

28,848

57,492

156,910

1,469,813

83,381

48,918

2,028,857

239,795

2,400,951

3,870,764

53,832

6,818,931

147,100

1,044,707

$ 8,010,738

33

City of Guadalupe

Statement of Revenues, Expenditures and Changes in Fund Net Position (Deficiency)

Proprietary Funds


Enterprise Funds

Wastewater Water Treatment

Operating revenues:

Water sales $ 1,624,652 $ Standby charges 39,332

Connection fees 49,155 6,896

Sewer service charges 1,143,222

Refuse service charges

Revenues from other agencies


Total operating revenues 1,729,167 1,228,868

Operating expenses:

Personnel services 194,939 243,441

Maintenance and operations 1,114,413 379,240

Depreciation 174,930 457,127

Total operating expenses 1,484,282 1,079,808

Operating income 244,885 149,060

Nonoperating revenues and expenses:

Interest (52,953) (44,513)

Operating transfers in

Operating transfers out (251,600) (177,700)

Total nonoperating revenues and expenses (304,553) (222,213)

Net income (loss) (59,668) (73,153)

Net position (deficiency) - beginning of year $ 3,177,859 4,122,152

Prior year restatements (3,858) (6,387)

Net position (deficiency) - beginning of year, restated 3,174,001 4,115,765

Net position (deficiency) - end of year $ 3,114,333 $ 4,042,612


34

Solid

Waste

$

568,606

10,000

578,606

492,458

492,458

86,148

27,996

27,996

114,144

(203,661)

(203,661)

$ (89,517)

Transit Total

$ $ 1,624,652

39,332

56,051

1,143,222

568,606

856,743 856,743

87,535 192,313

944,278 4,480,919

438,380

433,762 2,419,873

68,234 700,291

501,996 3,558,544

442,282 922,375

75 (97,391)

27,996

(35,000) (464,300)

(34,925) (533,695)

407,357 388,680

510,436 7,606,786

25,517 15,272

535,953 7,622,058

$ 943,310 $ 8,010,738

35

Cash flows from operating activities:

Cash received from customers

Cash received from connection fees

Cash received from standby charges

and other agencies

City of Guadalupe


Proprietary Funds


Internal activity - cash paid from (to) other funds

Cash paid to suppliers for goods and services

Cash paid to employees and related benefits

Net cash provided by operating activities

Cash flows from noncapital financing activities:

Net operating transfers

Net cash provided by (used in) noncapital financing activities

Cash flows from capital and related financing activities:

Proceeds from capital lease obligations

Increase of insurance payable, net of principal payments

Principal payments on capital lease obligations

Principal payments on certificates of participation

Interest payments on certificates of participation

Principal payments on loans payable to Successor

Agency Trust Fund

Acquisition of capital assets

Net cash used in capital and related

financing activities

Cash flows from investing activities:

Interest on investments

Net cash provided by investing activities

Net decrease in cash and investments

Cash and investments - beginning of year

Cash and investments - end of year

Water

$ 1,658,810

49,155

39,332

(390,000)

(1,074,884)

(144,597)

137,816

(251,600)

(251,600)

43,663

(5,052)

(1,379)

(35,745)

(55,343)

(54,756)

(108,612)

2,390

2,390

(220,006)

651,563

$ 431,557


36

Enterprise Funds

Wastewater Solid Treatment Waste

$ 1,212,176 $ 582,223

6,896

(613,868) (557,590)

(196,684)

408,520 24,633

(177,700) 27,996

(177,700) 27,996

36,642

(3,865)

(1,160)

(19,500)

(44,513)

(150,000) (52,629)

(48,424)

(230,820) (52,629)

$ $

Transit Total

$ (243,697) $ 3,209,512

56,051

856,743 896,075

250,000 (140,000)

(431,036) (2,677,378)

(341,281)

432,010 1,002,979

(35,000) (436,304)

(35,000) (436,304)

80,305

(8,917)

(2,539)

(55,245)

(99,856)

(202,629)

(442,344) (545,524)

(442,344) (834,405)

75 2,465

75 2,465

(45,259) (265,265)

332,407 983,970

$ 287,148 $ 718,705

37

City of Guadalupe


Proprietary Funds


Page 2

Wastewater Solid Water Treatment Waste

Reconciliation of operating income to net cash provided

by operating activities: Operating income $ 244,885 $ 149,060 $ 86,148

Adjustments to reconcile operating income to net cash

provided by operating activities:

Depreciation 174,930 457,127

Accounts receivable 18,130 (9,796) (42,730)

Due from other funds (390,000)

Prepaid expenses 50,357 (944)

Deferred outflows pensions (9,257) (9,960)

Accounts payable (7,779) (233,684) (65,132)


Due to other funds

Deposits payable (3,049)

Accrued wages and benefits 826 1,558

Net pension liability 52,925 53,205

Deferred inflows pensions 5,848 1,954

Total adjustments (107,069) 259,460 (61,515)

Net cash provided by operating activities $ 137,816 $ 408,520 $ 24,633


38

Transit Total

$ 442,282 $ 922,375

68,234 700,291

(322,476) (356,872)

(390,000)

49,413

(19,217)

2,726 (303,869)

(8,756) 37,591

250,000 250,000

(3,049)

2,384

106,130

7,802

(10,272) 80,604

$ 432,010 $ 1,002,979

39

City of Guadalupe

Statement of Fiduciary Net Deficiency

Fiduciary Fund

June 30, 2016

Assets


Cash with fiscal agent

Accounts receivable

Loans receivable from City of Guadalupe

Loans receivable

Property held for resale

Capital assets, net of accumulated depreciation

Total assets

Liabilities Accounts payable

Interest payable

Deferred revenue

Long-term liabilities:

Due within one year

Due after one year

Total liabilities

Net Deficiency Held in trust for other governments

Private-Purpose

Trust Fund

$ 1,227,269

414,750

234,387

156,910

459,391

222,482

183,160

2,898,349

71,251

113,000

424,746

158,222

5,018,882

5,786,101

$ (2,887,752)


40

City of Guadalupe

Statement of Changes in Fiduciary Net Deficiency

Fiduciary Fund


Private-Purpose

Trust Fund

Additions:

Property taxes $ 428,044

Revenue from other agencies 96,534

Other revenues 31,147

Total additions 555,725

Deductions:

Program expenses 806,338

Administrative expenses 59,770 Interest on long-term liabilities 263,048

Loss on sale of Lantern Hotel 49,993

Depreciation 9,900

Total deductions 1,189,049

Change in net position (633,324)

Net deficiency - beginning of year (2,391,742)

Prior year restatement 137,314

Net deficiency - beginning of year, restated (2,254,428)

Net deficiency - end of year $ (2,887,752)


41

Note 1: The Reporting Entity

City of Guadalupe


June 30, 2016

The City of Guadalupe (the City) was incorporated on August 3, 1946. The City is a general law city under the laws of

the State of California and operates under a Council-Administrator form of government. The City provides the

following services: public safety (police and fire), construction and maintenance of highways and streets, sanitation,

culture and recreation, public improvements, planning, zoning and general administration. Enterprise funds, operated

in a manner similar to a private business, include water, wastewater, solid waste, and transit.

The City has defined its reporting entity in accordance with the Governmental Accounting Standards Board (GASB)

Statement No. 14, amended by GASB Statements No. 39 and 61. These statements provide guidance for determining

which organizations, functions and activities of a government should be included in the general purpose financial

statements.

The criteria for inclusion in the basic financial statements are generally based upon the ability of the City to exercise

oversight responsibility over such organizations, functions and activities. Oversight responsibility is generally defined

as the existence of financial interdependency and/or the ability to appoint governing boards, to designate

management, to significantly influence operations, to approve operating budgets or to control day-to-day activities.

The accompanying financial statements include all activities and reporting entities over which the City exercises

oversight responsibility. Effective January 31, 2012, the Community Redevelopment Agency of the City of Guadalupe

(the Agency) was dissolved through the Supreme Court decision on Assembly Bill 1X26. This action impacted the

reporting entity of the City that previously had reported the Agency as a blended component unit. See Note 14 for

additional information on the dissolution and reporting of the Agency as a Private Purpose Trust Fund.

In determining the financial reporting entity for the City of Guadalupe, the following governmental unit has met the

criteria for inclusion in the City's financial statements.

Guadalupe Public Financing Authority

The Guadalupe Public Financing Authority (the Authority) was established in 2000, and is a separate government

entity under the laws of the State of California. The purpose of the Authority is to provide financing for the

construction and acquisition of selected City facilities. The City Council of the City of Guadalupe and the Board of

Directors of the Authority are legally separate boards; however, they share a common membership. Activities of the

Authority are accounted for in the applicable City governmental or enterprise funds. Separate financial statements

are not prepared for the Authority, as it is included in the accompanying financial statements as a blended component

unit.

Other Governmental Agencies

Other governmental agencies provide various levels of services to residents of the City, either entirely or partially. The

entities include, but are not limited to, the State of California, the County of Santa Barbara, as well as several school

42

City of Guadalupe


June 30, 2016

Page 2

Note 1: The Reporting Entity (Continued)

districts. Each of these agencies has an independently elected governing board or is dependent on an independently

elected governing board other than the City Council of the City of Guadalupe.

The City has no ability to appoint or control the management of any of these entities and is not responsible for any

operating losses or debts incurred. As a result of the above analysis, financial information for these agencies is not

included within the scope of this report.

Note 2: Summary of Significant Accounting Policies

The accounting policies of the City conform to accounting principles generally accepted in the United States of

America as applied to governmental agencies. The following summary of the City's more significant accounting

policies is presented to assist the reader in interpreting the financial statements and other data in this report. These

policies should be viewed as an integral part of the accompanying financial statements.

Basis of Presentation

The City's basic financial statements are prepared in conformity with accounting principles generally accepted in the

United States of America. The GASB is the acknowledged standard setting body for establishing accounting and

financial reporting standards followed by governmental entities in the United States of America.

Government-Wide and Fund Financial Statements

The government-wide financial statements (i.e., the statement of net position and the statement of activities) report

information on the primary government and its blended component units. The effect of interfund activity has been

removed from these statements. Governmental activities, which normally are supported by taxes and

intergovernmental revenues, are reported separately from business-type activities, which rely to a significant extent

on fees and charges for support.

The statement of activities demonstrates the degree to which the direct expenses of a given function or segment are

offset by program revenues. Direct expenses are those that are clearly identifiable with a specific function or

segment. Program revenues include 1) charges to customers or applicants who purchase, use, or directly benefit from

goods, services, or privileges provided by a given function or segment and 2) grants and contributions that are

restricted to meeting the operational or capital requirements of a particular function or segment. Taxes and other

items not properly included among program revenues are reported instead as general revenues.

43

City of Guadalupe


June 30, 2016

Page 3

Note 2: Summary of Significant Accounting Policies (Continued)

Separate financial statements are provided for governmental funds and proprietary funds. Major individual

governmental funds and major individual proprietary funds are reported as separate columns in the fund financial

statements.

Major Funds

GASB Statement No. 34 defines major funds and requires that the City's major governmental funds are identified and

presented separately in the fund financial statements. All other funds, called non-major funds, are combined and

reported in a single column, regardless of their fund type.

Major funds are defined as funds that have either assets, liabilities, revenues, or expenditures/expenses equal to ten

percent of their fund-type total. The General Fund is always a major fund. The City may also select other funds it

believes should be presented as major funds.

The City reported the following major governmental funds in the accompanying financial statements:

General Fund: This fund accounts for all financial resources except those to be accounted for in another fund. It is the

general operating fund of the City.

Measure A Fund: This fund accounts for the activities associated with maintaining, improving or constructing

roadways, bridges and bicycle and pedestrian bridges, safe routes to school improvements, storm damage repair for

transportation facilities, roadway drainage facilities, and landscaping maintenance.

The City reported the following major proprietary funds in the accompanying financial statements:

Water Fund: This enterprise fund accounts for the operation of the City's water utility, a self-supporting activity,

which renders a service on a user charge basis to residents and businesses.

Wastewater Treatment Fund: This enterprise fund accounts for the operations of the City's wastewater treatment

plant. The fund accounts for the operation of the City's sewer utility, a self-supporting activity, which renders a

service on a user charge basis to residents and businesses.

Solid Waste Fund: This enterprise fund accounts for the operations of the City's solid waste collection and disposal

services, a self-supporting activity, which renders service on a user charge basis to residents and businesses.

44

City of Guadalupe


June 30, 2016

Page 4


Transit Fund: This enterprise fund accounts for the operations of the City's transit service within the City and

surrounding areas.

Basis of Accounting

The government-wide and proprietary fund financial statements are reported using the economic resources

measurement focus and the full accrual basis of accounting. Revenues are recorded when earned and expenses are

recorded at the time liabilities are incurred, regardless of when the related cash flows take place.

Governmental funds are reported using the current financial resources measurement focus and the modified accrual

basis of accounting. Under this method, revenues are recognized when measurable and available. The City considers

all revenues reported in the governmental funds to be available if the revenues are collected within sixty days after

fiscal year-end. Expenditures are recorded when the related fund liability is incurred, except for principal and interest

on long-term debt, claims and judgments, and compensated absences, which are recognized as expenditures to the

extent that they have matured. Capital asset acquisitions are reported as expenditures in governmental funds.

Proceeds of long-term debt and acquisitions under capital leases are reported as other financing sources.

Non-exchange transactions, in which the City gives or receives value without directly receiving or giving equal value in

exchange, include property taxes, grants, entitlements, and donations. On an accrual basis, revenues from property

taxes are recognized in the fiscal year for which the taxes are levied. Revenue from grants, entitlements, and

donations are recognized in the fiscal year in which all eligibility requirements have been satisfied.

Other revenues susceptible to accrual include other taxes, intergovernmental revenues, interest, and charges for

services.

Grant revenues are recognized in the fiscal year in which all eligibility requirements are met. Under the terms of grant

agreements, the City may fund certain programs with a combination of cost-reimbursement grants, categorical block

grants, and general revenues. Thus, both restricted and unrestricted net position may be available to finance program

expenditures/expenses. The City's policy is to first apply restricted grant resources to such programs, followed by

general revenues if necessary.

Proprietary funds distinguish operating revenues and expenses from nonoperating items. Operating revenues and

expenses generally result from providing services and producing and delivering goods in connection with a proprietary

fund's principal ongoing operations. The principal operating revenues of the enterprise funds are charges to

customers for sales and services, administrative expenses, and depreciation on capital assets. All revenues and

expenses not meeting this definition are reported as nonoperating revenues and expenses.

45

City of Guadalupe


June 30, 2016

Page 5


Fiduciary funds include a private purpose trust fund and an agency fund. The private purpose trust fund accounts for

the assets and liabilities of the former Redevelopment Agency. The agency fund is used to account for funds held by

the City for specified purpose that do not belong to the City. The fiduciary funds are accounted for on the accrual

basis of accounting.

Budgetary Information

Annual budgets are adopted on a basis consistent with accounting principles generally accepted in the United States

of America for all governmental funds. After adoption of the final budget, transfers of appropriations within a General

Fund department, or within other funds, can be made by the City Administrator. Budget modifications between funds

and increases or decreases to a fund's overall budget, must be approved by the City Council. Numerous properly

authorized amendments were made during the fiscal year.

Budgetary control is enhanced by integrating the budget into the general ledger accounts. Encumbrance accounting is

employed (e.g., purchase orders) to avoid expenditures over budget. Encumbrances outstanding at fiscal year-end are

automatically re-budgeted in the following fiscal year.

Cash and Cash Equivalents

For purposes of the statement of cash flows, the City considers all highly liquid investments with a maturity of three

months or less when purchased to be cash equivalents. The proprietary funds' "deposits" in the City-wide cash

management pool are, in substance, demand deposits and are, therefore, considered cash equivalents for purposes of

the statement of cash flows.

Receivables and Payables

Activity between funds that are representative of lending/borrowing arrangements outstanding at the end of the fiscal

year are referred to as "due to/from other funds".

All trade and property tax receivables are shown net of any allowance for uncollectible accounts. The allowance for

uncollectible accounts was $18,541 as of June 30, 2016.

Property Taxes

California Constitution Article XIII A limits the combined property tax rate to one percent of a property's assessed

valuation. Additional taxes may be imposed with voter approval. Assessed value is calculated at one hundred percent

46

City of Guadalupe


June 30, 2016

Page 6


of a property's fair value, as defined by Article XIII A, and may be increased no more than two percent per year unless

a change in ownership occurs. The state legislature has determined the method of distributing the one percent tax

levy among the various taxing jurisdictions.

Property tax revenues are recognized in the fiscal year for which taxes have been levied, and collected within sixty

days of fiscal year-end. Property tax assessment and collection is administered by the County of Santa Barbara.

Property taxes are billed and collected as follows:

Secured Unsecured

Valuation/Lien Date(s) January 1 January 1

Levy Date(s) September 1 January 1

Due Date(s) November 1 (50%) Upon Billing

February 1 (50%)

Delinquency Date(s) December 10 (Nov.) August 31

April 10 (Feb.)

Capital Assets

All capital assets are valued at historical cost or estimated historical cost if actual historical cost is not available.

Contributed capital assets are valued at their estimated fair value on the date contributed. The City's policy is to

capitalize all capital assets with costs exceeding $2,500 and with useful lives exceeding one year.

With the implementation of GASB Statement No. 34, the City has recorded all its public domain (infrastructure) capital

assets, which include roads, bridges, curbs and gutters, streets and sidewalks, drainage systems, and lighting systems.

The purpose of depreciation is to spread the cost of capital assets equitably among all users over the life of these

assets. The amount charged to depreciation expense each fiscal year represents that fiscal year's pro rata share of the

cost of capital assets. GASB Statement No. 34 requires that all capital assets with limited useful lives be depreciated

over their estimated useful lives. Depreciation is provided using the straight line method which means the cost of the

asset is divided by its expected useful life in years and the result is charged to expense each fiscal year until the asset is

fully depreciated. The City has assigned the useful lives listed below to capital assets.

Buildings and improvements

Vehicles

Equipment

Infrastructure

47

20-50 years

5-10 years

5-15 years

10-50 years

City of Guadalupe


June 30, 2016

Page 7


Compensated Absences

In compliance with GASB Statement No. 16, the City has established a liability for accrued sick leave and vacation in

relevant funds. For governmental funds, the current liability appears in the respective funds. All vacation paid is

accrued when incurred in the government-wide and proprietary funds financial statements. This liability is set up for

the current employees at the current rates of pay. If sick leave and vacation are not used by the employee during the

term of employment, compensation is payable to the employee at the time of retirement. Such compensation is

calculated at the employee's prevailing rate at the time of retirement or termination. Each fiscal year, an adjustment

to the liability is made based on pay rate changes and adjustments for the current portion. The General Fund is

primarily responsible for the repayment of the governmental portion of compensated absences.

Pensions and Net Pension Liability

The City recognizes a net pension liability, which represents the City's proportionate share of the excess of the total

pension liability over the fiduciary net position of the pension reflected in the actuarial reports provided by the

California Public Employees' Retirement System (Cal PERS) plans (Plans). The net pension liability is measured as of the

City's prior fiscal year-end. Changes in the net pension liability are recorded, in the period incurred, as pension

expense or as deferred inflows of resources or deferred outflows of resources depending on the nature of the change.

The changes in the net pension liability that are recorded as deferred inflows of resources or deferred outflows of

resources (that arise from changes in actuarial assumptions or other inputs and differences between expected or

actual experience) are amortized over the weighted average remaining service life of all participants in the respective

pension plan and are recorded as a component of pension expense beginning with the period in which they are

incurred.

For purposes of measuring the net pension liability and deferred outflows/inflows of resources related to pensions,

and pension expense, information about the fiduciary net position of the City's CalPERS Plans and additions

to/deductions from the Plans' fiduciary net position have been determined on the same basis as they are reported by

Cal PERS. For this purpose, benefit payments (including refunds of employee contributions) are recognized when due

and payable in accordance with the benefit terms. Investments are reported at fair value. Projected earnings on

pension investments are recognized as a component of pension expense.

Net Position

Net position is the excess of all the City's assets plus deferred outflows of resources, over all its liabilities and deferred

inflows of resources. Net position is divided into three captions under GASB Statement No. 34, amended by GASB

48

City of Guadalupe


June 30, 2016

Page 8


Statement No. 63. These captions apply only to net position, which is determined only at the government-wide level,

and are described below:

Net investment in capital assets: Describes the portion of net position which is represented by the current net book

value of the City's capital assets, less the outstanding balance of any debt issued to finance these assets.

Restricted net position: Describes the portion of net position which is restricted as to use by the terms and conditions

of agreements with outside parties, governmental regulations, laws, or other restrictions which the City cannot

unilaterally alter. These principally include developer fees received for use on capital projects and debt service

requirements.

Unrestricted net position: Describes the portion of net position which is not restricted to use.

Fund Equity

The City's fund financial statements report fund balance in classifications that compromise a hierarchy based primarily

on the extent to which the City is bound to honor constraints on the specific purpose for which amounts in the funds

can be spent. GASB Statement No. 54, Fund Balance Reporting and Governmental Fund Type Definitions, identifies

five components of fund balance- nonspendable, restricted, committed, assigned, and unassigned.

Nonspendab!e: This component consists of amounts that cannot be spent because they are either (a) not in spendable

form or (b) legally or contractually required to be maintained intact.

Restricted: This component consists of amounts that have constraints placed on them either externally by third

parties (creditors, granters, contributors, or laws or regulations of other governments) or by law through

constitutional provisions or enabling legislation. Enabling legislation authorizes the City to assess, levy, charge or

otherwise mandate payment of resources (from external resource providers) and includes legally enforceable

requirement (compelled by external parties) that those resources be used only for the specific purposes stipulated in

the legislation.

Committed: This component consists of amounts that can only be used for specific purposes pursuant to constraints

imposed by formal action of the City's highest level of decision making authority which includes the City Municipal

Code, Ordinances and Resolutions. Those committed amounts cannot be used for any other purpose unless the City

removes or changes the specified use by taking the same type of action (City Municipal Code, Ordinance and

Resolution) it employed previously to commit those amounts.

49

City of Guadalupe


June 30, 2016

Page 9


Assigned: This component consists of amounts that are constrained by the City's intent to be used for specific

purposes, but are neither restricted nor committed. Such intent should be expressed by the City Council or its

designated officials to assign amounts to be used. Constraints imposed on the use of assigned amounts can be

removed with no formal Council actions.

Unassigned: This component consists of amounts that have not been restricted, committed or assigned to specific

purposes.

Fund Balance Spending Policy

The City has formally adopted a spending policy regarding the order in which restricted, committed, assigned, and

unassigned fund balances are spent when more than one amount is available for a specific purpose. When both

restricted and unrestricted resources are available for use, it is the City's policy to use restricted resources first, then

unrestricted resources (committed, assigned and unassigned) as they are needed. When unrestricted resources

(committed, assigned and unassigned) are available for use it is the City's policy to use committed resources first, then

assigned, and then unassigned as they are needed.

Estimates

The preparation of financial statements in conformity with accounting principles generally accepted in the United

States of America, as prescribed by the GASB and the American Institute of Certified Public Accountants, requires

management to make estimates and assumptions that affect the reported amounts of assets and liabilities and

disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of

revenues and expenditures/expenses during the reporting period. Actual results could differ from those estimates.

Fair Value Measurements

As defined in GASB Statement No. 72, Fair Value Measurement and Application, fair value is the price that would be

received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the

measurement date. The City uses valuation techniques that are appropriate under the circumstances and for which

sufficient data are available to measure fair value. Valuation techniques maximize the use of relevant observable

inputs and minimize the use of unobservable inputs.

50

City of Guadalupe


June 30, 2016

Page 10


GASB Statement No. 72 establishes a hierarchy of inputs to valuation techniques used to measure fair value. That

hierarchy has three levels:

Level 1- Quoted prices (unadjusted) in active markets for identical assets or liabilities;

Level 2 - Observable inputs, other than Level 1 prices, for the asset or liability, either directly or indirectly;

Level 3 - Unobservable inputs for the asset or liability.

For fiscal year ended June 30, 2016, the application of valuation techniques applied to the City's financial statements

has been consistent.

Subsequent Events

Events subsequent to June 30, 2016, have been evaluated through February 28, 2017, which is the date the financial

statements were available to be issued. Management did not identify any subsequent events requiring disclosure.

Note 3: Cash and Investments

The City follow the practice of pooling cash and investments for all funds under its direct daily control. Interest earned

on pooled cash and investments is allocated quarterly to the various funds based on the respective fund's average

quarterly cash balance.

At June 30, 2016, cash and investments consisted of the following:

Deposits:

Cash and cash equivalents

State Local Agency Investment Fund (LAIF)

Common stock

Total

Investment Fair Value Measurements

$

$

2,346,019

305,800

29,764

2,681,583

The City categorizes its fair value measurements within the fair value hierarchy established by generally accepted

accounting principles. At June 30, 2016, common stock investments were classified within Level 1 of the fair value

hierarchy. Level 1 investment securities are valued using prices quoted in active markets for those securities. LAIF

investments are not subject to fair value hierarchy.

51

City of Guadalupe


June 30, 2016

Page 11

Note 3: Cash and Investments (Continued)

Custodial Credit Risk - Deposits

Custodial credit risk is the risk that in the event of a bank failure, the City's deposits may not be returned to it. The

City does not have a formal deposit policy for custodial credit risk in addition to the California Government Code

collateral requirements. All deposits held by financial institutions are fully insured or collateralized with securities,

held by the pledging financial institutions' trust departments in the City's name.

Investment Policy

Cash balances from all funds are combined and invested to the extent possible, pursuant to the City Council approved

Investment Policy and Guidelines, and State Government Code. The earnings from these investments are allocated

monthly to each fund, based on an average of monthly opening and closing balances of cash and investments.

Investments are stated at fair value.

Local Agency Investment Fund (LAIF)

The City maintained investments with the State of California Local Agency Investment Fund (LAIF). The LAIF is an

external investment pool sponsored by the State of California. These pooled funds approximate fair value. The

administration of the LAIF is provided by the California State Treasurer and regulatory oversight is provided by the

Pooled Money Investment Board and the Local Investment Advisory Board. State statutes, bond resolutions, and LAIF

investment policy resolutions allow investments in United States government securities, negotiable certificates of

deposit, bankers' acceptances, commercial paper, corporate bonds, bank notes, mortgage loans and notes, other debt

securities, repurchase agreements, reverse repurchase agreements, equity securities, real estate, mutual funds and

other investments. The LAIF's report discloses the required information in accordance with GASB Statements No. 3

and 40. Pooled investments are not required to be categorized by risk category.

Interest Rate Risk

The City's formal investment policy does not limit investment maturities as a means of managing its exposure to fair

value losses arising from increasing interest rates.

52

City of Guadalupe


June 30, 2016

Page 12

Note 3: Cash and Investments (Continued)

Credit Risk

State law limits investments in commercial paper, corporate bonds, and mutual bond funds to the top two ratings

issued by nationally recognized statistical rating organizations. The City has no investment policy that would further

limit its investment choices.

Concentration of Credit Risk

The City places no limit on the amount the City may invest in any one issuer. The City's investments in the LAIF

represented 11.2% of total cash and investments.

Note 4: Loans Receivable

The City has made various loans under Community Development Block Grants to qualified homeowners and

businesses. Under the terms of the business loans, repayments are due in monthly installments through 2021. Under

the terms of the homeowner agreements, repayments of the loans are only required upon the sale of the home. The

outstanding balance of the loans receivable was $41,209 at June 30, 2016.

At June 30, 2016, the aggregate maturities of loans receivable were as follows:

For the Year Ending June 30,

2017 2018 2019

2020 2021

Total

$

$

53

8,648 5,160 5,160

5,160 17,081

41,209

City of Guadalupe


June 30, 2016

Page 13

Note 5: Capital Assets

For the year ended June 30, 2016, governmental activities capital assets activity was as follows:

Balance Transfers and

June 30, 2015 Additions Deductions

Capital assets not being depreciated: Land $ 343,131 $ $

Total capital assets not being depreciated 343,131

Capital assets being depreciated: Buildings and improvements 5,213,510 30,998

Vehicles 936,490 167,415

Equipment 485,513 25,671

Infrastructure 6,998,887

Total capital assets being depreciated 13,634,400 224,084

Less accumulated depreciation for:

Buildings and improvements 1,215,474 142,348

Vehicles 890,598 26,654

Equipment 465,927 11,981

Infrastructure 2,098,450 276,336

Total accumulated depreciation 4,670,449 457,319

Total capital assets being depreciated, net 8,963,951 (233,235)

Governmental activities capital assets, net $ 9,307,082 $ (233,235) $

For the year ended June 30, 2016, depreciation expense was charged to functions as follows:


Public safety $ 28,697 Leisure, cultural & social services 32,310 Community development 361,165 General government 35,147

Total governmental activities depreciation expense $ 457,319

54

Balance

June 30, 2016

$ 343,131

343,131

5,244,508

1,103,905

511,184

6,998,887

13,858,484

1,357,822

917,252

477,908

2,374,786

5,127,768

8,730,716

$ 9,073,847

City of Guadalupe


June 30, 2016

Page 14

Note 5: Capital Assets (Continued)

For the year ended June 30, 2016, business-type capital assets activity was as follows:

Balance Transfers and

June 30, 2015 Additions Deductions

Capital assets not being depreciated:

Land $ 248,425 $ $ Construction in progress 37,084 11,092

Total capital assets not being depreciated 285,509 11,092

Capital assets being depreciated:

Buildings and improvements 9,769,022

Vehicles 1,003,725 505,536

Equipment 476,530 28,896

Infrastructure 6,998,888

Total capital assets being depreciated 18,248,165 534,432

Less accumulated depreciation for:

Buildings and improvements 6,228,738 617,040

Vehicles 739,723 71,281

Equipment 444,554 6,958

Infrastructure 1,825,936 5,012

Total accumulated depreciation 9,238,951 700,291

Total capital assets being depreciated, net 9,009,214 (165,859)

Business-type activities capital assets, net $ 9,294,723 $ (154,767) $

For the year ended June 30, 2016, depreciation expense was charged to functions as follows:


Water $ 174,930

Waste water 457,127

Transit 68,234

Total business-type activities depreciation expense $ 700,291

55

Balance

June 30, 2016

$ 248,425

48,176

296,601

9,769,022

1,509,261

505,426

6,998,888

18,782,597

6,845,778

811,004

451,512

1,830,948

9,939,242

8,843,355

$ 9,139,956

City of Guadalupe


June 30, 2016

Page 15

Note 6: Long-Term Liabilities

For the year ended June 30, 2016, governmental activities long-term liabilities activity was as follows:

Balance Balance

June 30, 2015 Additions Deductions June 30, 2016

Sewer bonds $ 61,000 $ $ 14,000 $ 47,000

OPEB 205,268 44,441 249,709 Compensated absences 203,133 37,955 241,088


Capital lease obligations 187,086 11,735 175,351

Total $ 732,795 $ 269,482 $ 118,698 $ 883,579

Due Within

One Vear

$ 15,000

203,133

48,031

64,880

$ 331,044

Compensated absences in the governmental funds are generally liquidated by the General Fund on a pay as you go

basis. Total interest incurred during the year ended June 30, 2016 was $3,050. See Note 12 for detail of insurance

claim payable.

Sewer Bonds

Principal payments on the 1971 Sewer Bonds Series Band the 1978 Sewer Bonds are due on April 1st each year with

interest due semi-annually at 5% per annum. The bonds mature in April 2019. These payments are made to the

Farmers Home Administration, the purchaser of the bonds. At June 30, 2016, the principal balance outstanding was

$47,000.

At June 30, 2016, the aggregate maturities of the sewer bonds were as follows:

For the Year

Ending June 30, Principal Interest Total

2017 $ 15,000 $ 1,650 $ 16,650

2018 16,000 850 16,850

2019 16,000 100 16,100

Total $ 47,000 $ 2,600 $ 49,600

56

City of Guadalupe


June 30, 2016

Page 16

Note 6: Long-Term Liabilities (Continued)

Capital Lease Obligations

The City leases vehicles and equipment under capital leases that expire through January 2021. At June 30, 2016,

future minimum payments for governmental capital lease obligations were as follows:

For the Year

Ending June 30,

2017 $ 64,880 2018 64,880 2019 64,880 2020 64,880 2021 29,531

Less interest (113,700) Present value of minimum lease payments 175,351

Less current portion (64,880)

Long-term principal obligations $ 110,471

For the year ended June 30, 2016, business-type activities long-term liabilities activity was as follows:

Balance Balance Due Within

June 30, 2015 Additions Deductions June 30, 2016 One Year

Certificates of participation $ 2,141,594 $ $ 55,245 $ 2,086,349 $ 57,492

Loans payable to Successor

Agency Trust Fund 359,539 202,629 156,910 156,910 Insurance claim payable 112,883 8,917 103,966 20,585

Capital lease obligations 80,305 2,539 77,766 28,848

Total $ 2,614,016 $ 80,305 $ 269,330 $ 2,424,991 $ 263,835

Total interest incurred for business-type activities during the year ended June 30, 2016 was $99,857. See Note 12 for

detail of insurance claim payable.

Certificates of Participation

On December 21, 2000, the City issued certificates of participation through the Guadalupe Financing Authority which

were purchased by the US Department of Agriculture (USDA) Rural Utilities Service (RUS), amounting to $1,429,800, in

an agreement which included a grant of $875,200 for water and sewer line replacement. Under the terms of the

agreement, the City has pledged tax increment revenues for the payment of debt service. Where tax increment

revenues are no longer available for the payment of debt service, the City has pledged net water revenues for the

payment of debt service. The certificates of participation bear interest at 4.5% per annum, with principal and interest

57

City of Guadalupe


June 30, 2016

Page 17


payments due semiannually through August 1, 2041. At June 30, 2016, the principal balance outstanding was

$1,127,800.

At June 30, 2016, the aggregate maturities of the certificates of participation were as follows:

For the Year


2017 $ 26,000 $ 51,297 $ 77,297

2018 28,000 50,094 78,094

2019 28,000 48,822 76,822

2020 30,000 47,527 77,527

2021 31,000 46,164 77,164

2022-2026 178,000 208,087 386,087

2027-2031 225,000 163,026 388,026 2032-2036 280,000 106,451 386,451

2037-2042 301,800 36,298 338,098

Total $ 1,127,800 $ 757,766 $ 1,885,566

On July 27, 2005, the City issued certificates of participation which were purchased by the US Department of

Agriculture (USDA) Rural Utilities Service (RUS), amounting to $1,203,900, in an agreement which included a grant for

water tank construction and upgrades. Under the terms of the agreement, the City has pledged tax increment

revenues for the payment of debt service. Where tax increment revenues are no longer available for the payment of

debt service, the City has pledged net water revenues for the payment of debt service. The certificates of

participation bear interest at 4.125% per annum, with principal and interest payments due semiannually through

July 28, 2035. At June 30, 2016, the principal balance outstanding was $958,549.

At June 30, 2016, the aggregate maturities of the certificates of participation were as follows:

For the Year


2017 $ 31,492 $ 39,939 $ 71,431 2018 32,792 38,615 71,407

2019 34,144 37,237 71,381 2020 35,553 35,801 71,354

2021 37,019 34,307 71,326 2022-2026 209,302 146,864 356,166 2027-2031 256,182 99,089 355,271 2032-2036 322,065 40,612 362,677

Total $ 958,549 $ 472,464 $ 1,431,013

58

City of Guadalupe


June 30, 2016

Page 18


Loans Payable to Successor Agency Trust Fund

In August 2006, the 2003 Bond Refinance Fund of the former Redevelopment Agency made a loan to the Wastewater

Treatment Fund in the amount of $1,011,901 for purposes of construction of the Wastewater Treatment Plant. The

loan bears no interest and payments are due annually through June 30, 2017. Due to the dissolution of the

Redevelopment Agency on February 1, 2012, this loan is payable now to the Successor Agency Trust Fund, a fiduciary

fund of the City. The outstanding balance of the loan as of June 30, 2016 was $156,910.

At June 30, 2016, the aggregate maturities of the loans payable to the successor agency trust fund were as follows:

For the Year

Ending June 30,

2017

Total

Capital Lease Obligations

Wastewater

Fund

$ 156,910

$ 156,910

The City leases vehicles and equipment under capital leases that expire through January 2021. At June 30, 2016,

future minimum payments for business-type capital lease obligations were as follows:

For the Year

Ending June 30,

2017 $ 28,848

2018 28,848

2019 28,848

2020 28,848

2021 18,609

Less interest (56,235)

Present value of minimum lease payments 77,766

Less current portion (28,848)

Long-term principal obligations $ 48,918

59

City of Guadalupe


June 30, 2016

Page 19

Note 7: Other Post-Employment Benefits

Plan Description

The City's other post-employment benefits (OPEB) cost obligation is for retiree health benefits under its election to

participate in the California Public Employees' Retirement System (PERS) Health Benefit Program, an agent multiple

employer defined benefit OPEB plan. The City entered the PERS medical insurance program in 1990 under the Public

Employees' Medical and Hospital Care Act (PEMHCA). The required employer contribution was $125 per employee

per month in 2016.

The City provides post-employment health care insurance to all employees who retire from the City on or after

attaining age SO with at least S years of PERS credited service. For employees first covered under PERS on or after

January 1, 2013, the eligibility requirement are attaining age 52 and S years of PERS credited service. Currently, four

retirees meet those eligibility requirements.

Funding Policy

The contribution requirements of the plan members and the City are established and may be amended by the City.

The City's annual OPEB cost (expense) is calculated based upon the annual required contribution (ARC), an amount

actuarially determined in accordance with the parameters of GASB Statement No. 45.

The City's ARC represents a level of funding that, if paid on an ongoing basis, is projected to cover the normal cost

each year and amortize the unfunded actuarial liability over a period of 30 years. The ARC for the fiscal year 2015-

2016 was $49,013. For the fiscal year 2015-2016, the City contributed $5,940 to the Plan.

Annual OPEB Cost and Net OPEB Obligation

The following table shows the components of the City's annual OPEB cost, the actual amount contributed to the plan,

and changes in the City's OPEB obligation:

Annual Required Contributions

Interest on Net OBEB obligation

Adjustment to Annual Required Contributions

Annual OPEB Cost

Contributions made

Change in net OPEB obligation

Net OPEB obligation - beginning of year

Net OPEB obligation - end of year

$

$

60

49,013

8,210

(6,842)

50,381

(5,940)

44,441

205,268

249,709

City of Guadalupe


June 30, 2016

Page 20

Note 7: Other Post-Employment Benefits (Continued)

The City Retiree Medical annual OPEB cost, the percentage of annual OPEB cost contributed to the plan, and the net

OPEB obligation was as follows:

Fiscal Year Annual OPEB Ended Cost

6/30/14 $ 49,013

6/30/15 $ 50,086

6/30/16 $ 50,381

Funded Status and Funding Progress

Actual Contribution

$ 5,810

$ 5,784

$ 5,940

Percentage of Annual OPEB

Cost Contributed

11.9%

11.5%

11.8%

Net OPEB Obligation

$ 43,203

$ 44,302

$ 44,441

The funded status of the plan of July 1, 2013, the plan's most recent actuarial valuation date, was as follows:

Actuarial accrued liability (AAL) $ 268,068

Actuarial value of plan assets

Unfunded actuarial accrued liability (UAAL) $ 268,068

Funded ratio (actuarial value of plan assets/AAL) 0.0%

Covered payroll (active plan members) $ 1,853,700

UAAL as a percentage of covered payroll 14.5%

Actuarial valuations of an ongoing plan involve estimates of the value of reported amounts and assumptions about the

probability of occurrence of events far into the future. Examples include assumptions about future employment,

mortality, and the healthcare cost trend. Amounts determined regarding the funded status of the plan and the annual

required contributions of the employer are subject to continual revision as actual results are compared with past

expectations and new estimates are made about the future.

The schedule of funding progress is presented as required supplementary information following the notes to the

financial statements. The schedule presents multiyear trend information about whether the actuarial value of Plan

assets is increasing or decreasing over time relative to the actuarial liability for benefits.

Actuarial Methods and Assumptions

Projections of benefits for financial reporting purposes are based on the substantive plan (the plan as understood by

the employer and the plan members) and include the types of benefits provided at the time of each valuation and the

historical pattern of sharing of benefit costs between the employer and plan members to that point. The actuarial

methods and assumptions used include techniques that are designed to reduce the effects of short-term volatility in

actuarial accrued liabilities and the actuarial value of assets, consistent with the long-term perspective of the

calculations.

61

City of Guadalupe


June 30, 2016

Page 21

Note 7: Other Post-Employment Benefits (Continued)

In the July 1, 2013 actuarial valuation, the projected unit cost actuarial cost method was used. The actuarial

assumptions included a 4.0% investment rate of return. The initial health care cost trend rates were 5.0 to 8.0%. The

method of determining the actuarial value of assets is not applicable as the plan has no assets. The unfunded

actuarial accrued liability (UAAL) is being amortized as a level percentage of projected payroll over 30 years on an

open basis. The remaining amortization period at June 30, 2016 was 28 years.

Note 8: Pension Plans

Cost-Sharing Employer Plans

Plan Descriptions

All qualified permanent and probationary employees are eligible to participate in the City's separate Safety (police and

fire) and Miscellaneous (all other) Employee Pension Plans (Plans), which are cost-sharing multiple employer defined

benefit pension plans administered by the California Public Employees' Retirement System (CalPERS). Benefit

provisions under the Plans are established by State statute and City resolution. Cal PERS issues publicly available

reports that include a full description of the pension plans regarding benefit provisions, assumptions and membership

information that can be found on the Cal PERS website.

Benefits Provided

CalPERS provides service retirement and disability benefits, annual cost of living adjustments and death benefits to

plan members, who must be public employees and beneficiaries. Benefits are based on years of credited service,

equal to one year of full time employment. Members with five years of total service are eligible to retire at age SO

with statutorily reduced benefits. All members are eligible for non-duty disability benefits after 10 years of service.

The death benefit is one of the following: the Basic Death Benefit, the 1957 Survivor Benefit, or the Optional

Settlement 2W Death Benefit. The cost of living adjustments for each plan are applied as specified by the Public

Employees' Retirement Law.

62

City of Guadalupe


June 30, 2016

Page 22

Note 8: Pension Plans (Continued)

The Plans' provisions and benefits in effect at June 30, 2016, are summarized as follows:

Miscellaneous Safety

PEPRA PEPRA


Prior to Prior to On or After On or After

Hire date January 1, 2013 January 1, 2013 January 1, 2013 January 1, 2013

Benefit formula 2.0%@ 55 2.0%@ 55 2.0%@ 62 2.0%@ 57

Benefit vesting schedule 5 years service 5 years service 5 years service 5 years service

Benefit payments monthly for life monthly for life monthly for life monthly for life

Retirement age 55 55 62 57

Monthly benefits, as a % of eligible compensation 2% 2% 2% 2%

Required employee contribution rates 6.891% 6.904% 6.25% 9.50%

Required employer contribution rates 9.00% 12.00% 6.237%

While the Miscellaneous and Safety Plans are not closed to new entrants, Classic Members as defined by Cal PERS

entering the City's Miscellaneous and Safety Plans would enter the 2%@ 55 Miscellaneous and Safety Plan pools,

while New Members as defined by Cal PERS would enter the City's PEPRA Miscellaneous and PEP RA Safety Plans.

Contributions

9.069%

Section 20814(c) of the California Public Employees' Retirement Law requires that the employer contribution rates for

all public employers be determined on an annual basis by the actuary and shall be effective on the July 1 following

notice of a change in the rate. Funding contributions for both Plans are determined annually on an actuarial basis as

of June 30 by Cal PERS. The actuarially determined rate is the estimated amount necessary to finance the costs of

benefits earned by employees during the year, with an additional amount to finance any unfunded accrued liability.

The City is required to contribute the difference between the actuarially determined rate and the contribution rate of

employees.

For the year ended June 30, 2016, the contributions recognized as part of pension expense for each Plan were as

follows:

Miscellaneous Safety Contributions - employer $ 154,628 $ 159,999

63

City of Guadalupe


June 30, 2016

Page 23


Pension Liabilities, Pension Expenses and Deferred Outflows/Inflows of Resources Related to Pensions

As of June 30, 2016, the City reported net pension liabilities for its proportionate shares of the net pension liability of

each Plan as follows:

Plan's Proportionate Share of the Net

Pension Liability

Proportionate Share of Net Pension Liability


$ 1,180,092 $ 650,037

The City's net pension liability for each Plan is measured as the proportionate share of the net pension liability. The

net pension liability of each of the Plans is measured as of June 30, 2015, and the total pension liability for each Plan

used to calculate the net pension liability was determined by an actuarial valuation as of June 30, 2014 rolled forward

to June 30, 2015 using standard update procedures. The City's proportion of the net pension liability was based on a

projection of the City's long-term share of contributions to the pension plans relative to the projected contributions of

all participating employers, actuarially determined. The City's proportionate share of the net pension liability for each

Plan as of June 30, 2014 and 2015 was as follows:

Proportionate share

Percentage share at 6/30/2014

Percentage share at 6/30/2015

Change - lncrease/(Decrease)

Proportionate Share of Net Pension Liability

Miscellaneous

0.04600%

0.04301% -0.00299%

64

Safety 0.02136%

0.01578% -0.00558%

City of Guadalupe


June 30, 2016

Page 24


Fort he year ended June 30, 2016, the City recognized pension expense of $176,723 fort he Plans. At June 30, 2016, the

City reported deferred outflows of resources and deferred inflows of resources related to pensions from the following

sources:

All Plans

Deferred Outflows Deferred Inflows

of Resources of Resources

Pension contributions subsequent to measurement date $ 349,829 $ Differences between actual and expected experience 6,900 (13,599)

Changes in assumptions (127,823) Change in employer's proportion and differences between

the employer's contributions and the employer's

proportionate share of (99,447)

Net differences between projected and actual earnings

on pension plan investments (64,423)

Adjustment due to difference in proportions (333,892)

Total $ 356,729 $ (639,184)

Pension contributions subsequent to the measurement date of $349,829 are reported as deferred outflows of

resources and will be recognized as a reduction of the net pension liability in the year ended June 30, 2017. Other

amounts reported as deferred outflows of resources and deferred inflows of resources related to pensions will be

recognized as pension income (expense) as follows:

All Plans

Measurement Period

Ended June 30

2016

2017

2018

2019

65

$

$

Amount

(256,180)

(253,391)

(203,457)

80,744

(632,284)

City of Guadalupe


June 30, 2016

Page 25


Actuarial Assumptions

The total pension liabilities in the June 30, 2014 actuarial valuations for all Plans were determined using the following

actuarial assumptions:

Valuation Date

Measurement Date

Actuarial Cost Method

Actuarial Assumptions:

Discount Rate

Inflation

Salary Increases

Post Retirement Benefit Increase

Mortality

All Plans June 30, 2014

June 30, 2015

Entry-Age Normal Cost Method

7.65%

2.75%

Varies by Entry Age and Service

(1) (2)

(1) Contract COLA up to 2.75% until Purchasing Power Protection

Allowance Floor on Purchasing Power applies, 2.75% thereafter

(2) Derived using CalPERS' Membership Data for all Funds

The mortality table used was developed based on Cal PERS' specific data. The table includes 20 years of mortality

improvements using Society of Actuaries Scale BB. For more details on this table, please refer to the 2014 experience

study report.

All other actuarial assumptions used in the June 30, 2014 valuation were based on the results of an actuarial

experience study for the period 1997 to 2011, including updates to salary increase, mortality and retirement dates.

Further details of the Experience Study can found on the CalPERS website under Forms and Publications.

Change in Assumptions. According to Paragraph 68 of GASB 68, the long-term expected rate of return should be

determined net of pension plan investment expense but without reduction for pension plan administrative expense.

The discount rate of 7 .50% used for the June 30, 2014 measurement date was net of administrative expenses. The

discount rate of 7.65% used for the June 30, 2015 measurement date is without reduction of pension plan

administrative expense.

Discount Rate. The discount rate used to measure the total pension liability was 7 .65% for each Plan. To determine

whether the municipal bond rate should be used in the calculation of a discount rate for each plan, Cal PERS stress

tested plans that would most likely result in a discount rate that would be different from the actuarially assumed

discount rate. Based on the testing, none of the tested plans run out of assets. Therefore, the current 7.65% discount

rate is adequate and the use of the municipal bond rate calculation is not necessary. The long term expected discount

rate 017.65% will be applied to all plans in the Public Employees Retirement Fund (PERF). The stress test results are

presented in a detailed report that can be obtained from the Cal PERS website.

66

City of Guadalupe


June 30, 2016

Page 26


The long-term expected rate of return on pension plan investments was determined using a building-block method in

which best-estimate ranges of expected future real rates of return (expected returns, net of pension plan investment

expense and inflation) are developed for each major asset class.

In determining the long-term expected rate of return, Cal PERS took into account both short-term and long-term

market return expectations as well as the expected pension fund cash flows. Using historical returns of all the funds'

asset classes, expected compound returns were calculated over the short-term (first 10 years) and the long-term (11-

60 years) using a building-block approach. Using the expected nominal returns for both short-term and long-term, the

present value of benefits was calculated for each fund. The expected rate of return was set by calculating the single

equivalent expected return that arrived at the same present value of benefits for cash flows as the one calculated

using both short-term and long-term returns. The expected rate of return was then set equivalent to the single

equivalent rate calculated above and rounded down to the nearest one quarter of one percent.

The table below reflects the long-term expected real rate of return by asset class. The rate of return was calculated

using the capital market assumptions applied to determine the discount rate and asset allocation. These rates of

return are net of administrative expenses.

Asset Class Global Equity

Global Fixed Income

Inflation Sensitive

Private Equity

Real Estate

Infrastructure and Forestland

Liquidity

(a) An expected inflation of 2.5% used for this period.

(b) An expected inflation of 3.0% used for this period.

New

Strategic Allocation

51.0%

19.0%

6.0%

10.0%

10.0%

2.0%

2.0%

67

All Plans

Real Return Real Return Years 1-10 (a) Years 11+ (b)

5.25% 5.71%

0.99% 2.43%

0.45% 3.36%

6.83% 6.95%

4.50% 5.13%

4.50% 5.09%

-0.55% -1.05%

City of Guadalupe


June 30, 2016

Page 27


Sensitivity of the Proportionate Share of the Net Pension Liability to Changes in the Discount Rate

The following presents the City's proportionate share of the net pension liability for each Plan, calculated using the

discount rate for each Plan, as well as what the City's proportionate share of the net pension liability would be if it

were calculated using a discount rate that is 1-percentage point lower or 1-percentage point higher than the current

rate:


1% Decrease 6.65% 6.65%

Net Pension Liability $ 1,979,096 $ 1,042,233

Current Discount Rate 7.65% 7.65%

Net Pension Liability $ 1,180,092 $ 650,037

1% Increase 8.65% 8.65%

Net Pension Liability $ 520,421 $ 328,444

Pension Plan Fiduciary Net Position

Detailed information about each safety plan's fiduciary net position is available in the separately issued Cal PERS

financial reports.

Payable to the Pension Plan

At June 30, 2016, the City reported a payable of $0 for the outstanding amount of contributions to the pension plan

required for the year ended June 30, 2016.

Note 9: lnterfund Transactions

lnterfund Receivables and Payables (Due to/Due From)

lnterfund receivables and payables include temporary negative cash balances that result from the timing of cash flows

at year end and the time lag between the dates that transactions are recorded in the accounting system and payment

between funds are made. Liquidation of interfund receivables and payables typically occurs in the first quarter of the

subsequent fiscal year. lnterfund balances between governmental funds are not included in the government-wide

statement of net position.

68

City of Guadalupe


June 30, 2016

Page 28

Note 9: lnterfund Transactions (Continued)

As of June 30, 2016, existing interfund receivables and payables were as follows:

Due From Due To

Other Funds Other Funds

Other Governmental Fund $ 250,000 $ Transit Fund 250,000

Total $ 250,000 $ 250,000

lnterfund Loans

lnterfund loans occur when one fund loans another fund amounts for a specific purpose. Unlike external loans, these

internal loans are interest-free. However, the City intends to pay amounts back to the appropriate loaning fund in a

manner similar to how an external loan would be paid, with a set payment schedule. The purpose of the interfund

loans to the General Fund were to reduce the existing negative cash balance and support continued operations. The

purpose of the Library Fund interfund loan was to pay the library lease payments, which will be supported through

development fees in future years.

As of June 30, 2016, existing interfund loans were as follows:

lnterfund lnterfund

Loan Receivable Loan Payable

General Fund $ $ 682,500

Library Fund 60,000

Lighting and Assessment Fund 292,500

Capital Facilities 60,000

Water Fund 390,000

Total $ 742,500 $ 742,500

As of June 30, 2016, future minimum payments on the above loans were as follows:

For the Year Ending June 30, General Fund Library Fund Total

2017 $ 29,167 $ 20,000 $ 49,167

2018 40,834 20,000 60,834

2019 52,500 20,000 72,500

2020 64,168 64,168

2021 75,834 75,834

2020-2024 419,997 419,997

Total $ 682,500 $ 60,000 $ 742,500

69

City of Guadalupe


June 30, 2016

Page 29

Note 9: lnterfund Transactions (Continued)

lnterfund Transfers

lnterfund transfers are used to move revenues from the fund with collection authorization to the debt service fund as

debt service principal and interest payments become due and to move unrestricted fund revenues to finance various

programs that the government must account for in other funds in accordance with budgetary authorizations, including

amounts provided as matching funds for various grant programs. lnterfund transfers to the General Fund are for the

variable cost allocation plan for services provided to other funds of the City.

For the year ended June 30, 2016, interfund transfers were as follows:

Transfer from Other Governmental Funds to the General Fund $ 56,150

Transfer from the Water Fund to the General Fund 251,600

Transfer from the Wastewater Treatment Fund to the General Fund 177,700

Transfer from the Transit Fund to the General Fund 35,000

Transfer from the Measure A Fund to the General Fund 60,000

Transfer from the Capital Facilities Fund to the Library Fund 40,000

Transfer from Measure A Fund to the Solid Waste Fund 27,996

Total $ 648,446

Note 10: Revenue Limitations Imposed By California Proposition 218

Proposition 218, which was approved by voters in November 1996, regulates the City's ability to impose, increase and

extend taxes, assessments, and fees. Any new, increase, or extended taxes, assessments, and fees subject to the

provisions of Proposition 218, require voter approval before they can be implemented. Additionally, Proposition 218

provides that these taxes, assessments, and fees are subject to the voter initiative process and may be rescinded in

the future years by the voters. Therefore, the City's ability to finance the services for which the taxes, assessments,

and fees were imposed may be significantly impaired.

70

City of Guadalupe


June 30, 2016

Page 30

Note 11: Excess of Expenditures over Appropriations

At June 30, 2016, expenditures exceeded appropriations in individual major funds as follows:

General Fund:

City council

Administration

City attorney

Finance and city treasurer

Police

General street improvements

Measure A:

Capital outlay

Note 12: Joint Ventures (Joint Power Agreements)

Excess

Expenditures

$ 368

128

13,589

6,435

199,983

900

17,436

The City of Guadalupe participates in two joint ventures under joint powers agreements.

Central Coast Water Authority

The Central Coast Water Authority (CCWA) is a joint powers authority organized in 1991 for the purpose of providing

the financing, construction, operation and maintenance of certain local (non-state owned) facilities required to deliver

water from the State Water Project to certain water purveyors and users in Santa Barbara County. CCWA is composed

of eight members, all of which are public agencies. The Board of Directors is made up of one representative from each

participating entity. Votes on the Board are apportioned between the entities based upon each entity's pro-rata share

of the water provided by the project.

Each participant is required to pay to CCWA an amount equal to its share of the total cost of "fixed project costs" and

certain other costs in the proportion established in the Water Supply Agreement. This includes the participant's share

of payments to the State Department of Water Resources (DWR) under the State Water Supply Contract (including

capital, operation, maintenance, power and replacement costs of the DWR facilities), debt service on CCWA bonds and

all CCWA operating and administrative costs. Each participant is required to make payments under its Water Supply

Agreement solely from the revenues of its water system. State water payments were $663,337 for the year ended

June 30, 2016. The City's allocation of CCWA's operating expenses for the year ended June 30, 2016 was $108,239.

Additional information and complete financial statements for the CCWA may be obtained by contacting The Central

Coast Water Authority at 255 Industrial Way, Buellton, CA 93427.

71

City of Guadalupe


June 30, 2016

Page 31

Note 12: Joint Ventures (Joint Power Agreements) (Continued)

California Joint Powers Insurance Authority

The City is a member of the California Joint Powers Insurance Authority (CJPIA). CJPIA is composed of 122 California

public entities and is organized under a joint powers agreement pursuant to California Government Code §6500 et

seq. The purpose of CJPIA is to arrange and administer programs for the pooling of self-insured losses, to purchase

excess insurance or reinsurance, and to arrange for group purchased insurance for property and other coverages. The

CJPIA's pool began covering claims of its members in 1978. Each member government has an elected official as its

representative on the Board of Directors. The Board operates through a nine-member Executive Committee.

Self-Insurance Program of CJPIA:

Each member pays an annual contribution (formerly called the primary deposit) to cover estimated losses for the

coverage period. This initial funding is paid at the beginning of the coverage period. After the close of the coverage

period, outstanding claims are valued. A retrospective deposit computation is then conducted annually thereafter

until all claims incurred during the coverage period are closed on a pool-wide basis. This subsequent cost re-allocation

among members based on actual claim development can result in adjustments of either refunds or additional deposits

required.

The total funding requirement for self-insurance programs is estimated using actuarial models and pre-funded

through the annual contribution. Costs are allocated to individual agencies based on exposure (payroll) and

experience (claims) relative to other members of the risk-sharing pool. Additional information regarding the cost

allocation methodology is provided below.

Liability: In the liability program claims are pooled separately between police and non-police exposures. (1) The

payroll of each member is evaluated relative to the payroll of the other members. A variable credibility factor is

determined for each member, which established the weight applied to payroll and the weight applied to losses within

the formula. (2) The first layer of losses includes incurred costs up to $30,000 for each occurrence and is evaluated as

a percentage of the pool's total incurred costs within the first layer. (3) The second layer of losses includes incurred

costs from the $30,000 to $750,000 for each occurrence and is evaluated as a percentage of the pool's total incurred

costs within the second layer. (4) Incurred costs in excess of $750,000 up to the reinsurance attachment point of $5

million are distributed based on the outcome of cost allocation within the first and second loss layers. (5) Costs of

covered claims from $5 million to $10 million are paid under a reinsurance contract subject to a $2.5 million annual

aggregate deductible. The $2.5 million annual aggregate deductible is fully covered under a separate policy; as no

such portion of it is retained by CJPIA. Costs of covered claims from $10 million to $15 million are paid under two

reinsurance contracts subject to a combined $3 million annual aggregate deductible. The $3.0 million annual

aggregate deductible is fully retained by CJPIA. (6) Costs of covered claims from $15 million up to $50 million are

72

City of Guadalupe


June 30, 2016

Page 32


covered through excess insurance policies. The overall coverage limit for each member including all layers of coverage

is $SO million per occurrence.

Costs covered claims for subsidence losses are paid by reinsurance and excess insurance with a pooled sub-limit of $25

million per occurrence. This $25 million subsidence sub-limit is composed of (a) $5 million retained with the pool's

SIR, (b) $10 million in reinsurance and (c) $10 million in excess insurance. The excess insurance layer has a $10 million

annual aggregate.

Workers' Compensation: The City also participates in the worker's compensation pool administered by CJIPA. In the

workers' compensation program claims are pooled separately between public safety (police and fire) and non-public

safety exposures. (1) The payroll of each member is evaluated relative to the payroll of the other members. A

variable credibility factor is determined for each member, which established the weight applied to payroll and the

weight applied to losses within the formula. (2) The first layer of losses includes incurred costs up to $50,000 for each

occurrence and is evaluated as a percentage of the pool's total incurred costs within the first layer. (3) The second

layer of losses includes incurred costs from $50,000 to $100,000 for each occurrence and is evaluated as a percentage

of the pool's total incurred costs within the second layer. (4) Incurred costs in excess of $100,000 up to reinsurance

attachment point of $2 million are distributed based on the outcome of cost allocation within the first and second loss

layers. (5) Costs of covered claims from $2 million up to statutory limits are paid under a reinsurance policy.

Protection is provided per statutory liability under California Workers' Compensation Law.

Employer's Liability losses are pooled among members to $2 million. Coverage from $2 million to $5 million is

purchased as part of a reinsurance policy, and Employer's Liability losses from $5 million to $10 million are pooled

among members.

Purchased Insurance under CJP/A:

Property Insurance: The City participates in the all-risk property protection program of CJPIA. This insurance

protection is underwritten by several insurance companies. City property is currently insured according to a schedule

of covered property submitted by the City to CJPIA. City property currently has all-risk property insurance protection

in the amount of $12,785,885. There is a $5,000 deductible per occurrence except for non-emergency vehicle

insurance which has a $1,000 deductible. Premiums for the coverage are paid annually and are not subject to

retroactive adjustments.

Adequacy of Protection under CJPIA:

During the past three fiscal years, the above programs of protection have had no settlements or judgments that

exceeded pooled or insured coverage. There have been no significant reductions in pooled or insured liability

coverage in 2015-16.

73

City of Guadalupe


June 30, 2016

Page 33


Insurance Claim Payable:

The Authority has assessed a retrospective claims liability balance to pool members. The City's share of the liability is

$274,397 at June 30, 2016. The long term liability applicable to governmental type and business-type activities have

been allocated accordingly. At June 30, 2016, the aggregate future maturities of the insurance claim payable were as

follows:

For the Year

Ending June 30, Governmental Business-Type Total 2017 $ 48,031 $ 20,585 $ 68,616 2018 49,034 21,014 70,048

2019 50,057 21,453 71,510

2020 23,309 14,682 37,991 2021 14,986 14,986

Thereafter 11,246 11,246

Total $ 170,431 $ 103,966 $ 274,397

Separate financial statements are available from the CJPIA at 8081 Moody Street, La Palma, CA 90623.

Note 13: Fund Balance and Net Position Deficiencies

At June 30, 2016, the City had ending fund and net deficiencies as follows:

General Fund

Library Fund

Solid Waste Fund

$ 739,427 60,000 89,517

The City intends to address the ending fund deficiencies and net deficiency with cost reductions, furloughs, solid waste

rate increases and new revenue sources. See information about going concern at Note 19.

Note 14: Successor Agency Trust for Assets of Former Redevelopment Agency

On December 29, 2011, the California Supreme Court upheld Assembly Bill lX 26 ("the Bill") that provides for the

dissolution of all redevelopment agencies in the State of California. This action impacted the reporting entity of the

City of Guadalupe that previously had reported a redevelopment agency within the reporting entity of the City as a

blended component unit.

74

City of Guadalupe


June 30, 2016

Page 34

Note 14: Successor Agency Trust for Assets of Former Redevelopment Agency (Continued)

The Bill provides that upon dissolution of a redevelopment agency, either the City or another unit of local government

will agree to serve as the "successor agency" to hold the assets until they are distributed to other units of state and

local government. On January 24, 2012, the City Council elected to become the Successor Agency for the former

redevelopment agency in accordance with the Bill as part of City resolution number 2012-08.

After enactment of the law, which occurred on June 28, 2011, redevelopment agencies in the State of California

cannot enter into new projects, obligations or commitments. Subject to the control of a newly established oversight

board, remaining assets can only be used to pay enforceable obligations in existence at the date of dissolution

(including the completion of any unfinished projects that were subject to legally enforceable contractual

commitments.)

In future fiscal years, successor agencies will only be allocated revenue in the amount that is necessary to pay the

estimated annual installment payments on enforceable obligations of the former redevelopment agency until all

enforceable obligations of the prior redevelopment agency have been paid in full and all assets have been liquidated.

The Bill directs the State Controller of the State of California to review the propriety of any transfers of assets between

redevelopment agencies and other public bodies that occurred after January 1, 2011. If the public body that received

such transfers is not contractually committed to a third party for the expenditure of encumbrance of those assets, the

State Controller is required to order the available assets to be transferred to the public body designated as the

successor agency of the Bill.

Management believes, in consultation with legal counsel, that the obligations of the former redevelopment agency

due to the City are valid enforceable obligations payable by the successor agency trust under the requirements of the

Bill. The City's position on this issue is not a position of settled law and there is a considerable legal uncertainty

regarding this issue. It is reasonably possible that a legal determination may be made at a later date by an appropriate

judicial authority that would resolve this issue unfavorably to the City.

In accordance with the timeline set forth in the Bill (as modified by the California Supreme Court on December 29,

2011) all redevelopment agencies in the State of California were dissolved and ceased to operate as a legal entity as of

February 1, 2012. After the date of dissolution, the assets and activities of the dissolved redevelopment agency were

transferred to and are reported in a fiduciary fund (private-purpose trust fund, the Trust Fund) in the financial

statements of the City.

75

City of Guadalupe


June 30, 2016

Page 35


Cash and Investments

The City maintained investments with the State of California Local Agency Investment Fund (LAIF) for all City activities,

including the Trust Fund. The Trust had $1,227,269 in cash and investments as of June 30, 2016, that was held in LAIF.

The City manages the Trust Fund's cash and investments in a consistent manner with the rest of its cash and

investment pool. Refer to Note 3 for additional information regarding LAIF.

Cash with Fiscal Agent

The Trust Fund had $414,750 in cash and investments as of June 30, 2016, held by fiscal agents pledged for the

payment or security of certain bonds. The California Government code provides that these monies, in the absence of

specific statutory provisions governing the issuance of bonds, certificates, or leases, may be invested in accordance

with the ordinance, resolutions, or indentures specifying the types of investments its fiscal agents may make. These

ordinances, resolutions, and indentures are generally more restrictive than the Trust's general investment policy. In

no instance have additional types of investments, not permitted by the Trust's general investment policy, been

authorized.

Loans Receivable from City of Guadalupe

The Trust Fund had $156,910 in loans receivable due from the City as of June 30, 2016. Refer to Note 6 for additional

information on the terms and the aggregate maturities of the loans receivable as of June 30, 2016.

Loans Receivable

During 2007, the former redevelopment agency made a loan to a nonprofit organization for land purchase and low

income housing construction within the City's project area. Subsequent to year end, the Housing Authority of the

County of Santa Barbara has become the successor agency on this project and the loan will be transferred. The

balance on the loan was $450,000 at June 30, 2016.

The former redevelopment agency has made various loans to businesses in the City's project area. The loans' interest

rates are 0%, with maturities through May 2018. The balance on the loans was $9,391 at June 30, 2016.

76

City of Guadalupe


June 30, 2016

Page 36


At June 30, 2016, the aggregate maturities of loans receivable were as follows:


2017

2018

2019

2020

2021

Thereafter

Total

Property Held for Resale

$ 4,900

4,491

450,000

$ 459,391

At June 30, 2016, the carrying value of property held for resale was as follows:

West side of Obispo Street

Next door to Royal Theatre

Royal Theatre

Total

Capital Assets

$ 105,507

75,308

41,667

$ 222,482

For the year ended June 30, 2016, capital assets activity was as follows:

Balance Transfers/

June 30, 2015 Additions Capital assets being depreciated:

Infrastructure $ 201,197 $ Structures and improvements 83,333

Less accumulated depredation (91,470) (9,900)

Net capital assets $ 193,060 $ (9,900)

77

Deductions

$

$

Balance

June 30, 2016

$ 201,197

83,333 (101,370)

$ 183,160

City of Guadalupe


June 30, 2016

Page 37


Long-term Liabilities

For the year ended June 30, 2016, long-term liabilities activity was as follows:

Balance Balance

June 30, 2015 Additions Deductions June 30, 2016

Note payable $ 20,267 $ $ 3,163 $ 17,104 Tax allocation bonds 5,310,000 150,000 5,160,000

Total $ 5,330,267 $ $ 153,163 $ 5,177,104

Note Payable

Due Within One Year

$ 3,222 155,000

$ 158,222

The Trust Fund had a note payable to a private party related to the purchase of property currently held for resale.

Principal and interest payments on the note payable are due on the 16th of each month and the note matures in

2021. Interest accrues at 9.0% per annum. At June 30, 2016, the principal balance outstanding was $17,104.

At June 30, 2016, the aggregate maturities of the note payable were as follows:

For the Year

Ending June 30, Principal Interest Total 2017 $ 3,222 $ 1,913 $ 5,135 2018 3,524 1,637 5,161 2019 3,854 1,335 5,189 2020 4,215 1,004 5,219 2021 2,289 892 3,181

Total $ 17,104 $ 6,781 $ 23,885

Tax Allocation Bonds

On April 3, 2003, the former redevelopment agency issued $6,455,000 of tax allocation bonds for a current refunding

of Series 1997 Tax Allocation Bonds. The refunding was undertaken to reduce total future debt service payments. The

former redevelopment agency determined that there was an economic gain on the refunding; however, the amount

was not material. The bonds mature through August 1, 2035, with interest rates from 2.0 to 5.125%. At June 30,

2016, the principal balance outstanding was $5,160,000.

78

City of Guadalupe


June 30, 2016

Page 38


For the year ended June 30, 2016, the aggregate maturities of the tax allocation bonds were as follows:

For the Vear


2017 $ 155,000 $ 255,556 $ 410,556 2018 165,000 249,355 414,355

2019 170,000 242,738 412,738

2020 175,000 234,853 409,853 2021 185,000 225,628 410,628

2022-2026 1,090,000 970,674 2,060,674 2027-2031 1,405,000 652,281 2,057,281 2032-2036 1,815,000 636,001 2,451,001

Total $ 5,160,000 $ 3,467,086 $8,627,086

Pollution Remediation

The Trust owns property designated by the Santa Barbara County Fire Department as a LUFT (Leaking Underground

Fuel Tank) site (#52010). The Agency has been accepted into the State Water Resources Cleanup of Underground

Storage Tanks Fund (USTCF), which approved a total Letter of Commitment (LOC) in the amount of $1.5 Million.

Between the fiscal years 2008/2009 through 2015/16, the former Agency expended a total of $579,000 towards the

cleanup costs. Cleanup costs incurred and paid for the 2014/15 SFY, but which the City has not yet been reimbursed

for by the State, total $137,314. Due to changes in processing claims at the State, reimbursement of these costs to the

City is expected by the end of March 2017. Cleanup costs incurred during the 2015/2016 SFY total approximately

$96,534. Reimbursement of all or the majority of these costs are expected sometime in 2017. Payments for tasks

performed are due within six months of invoice date or upon receipt of USTCF claim reimbursement.

Tasks in 2015/16 included: 1) remediation system operation, maintenance, monitoring and reporting; 2) conducting a

remediation progress groundwater monitoring event to evaluate the effectiveness of the remediation system: 3)

working with the LOP to conduct a thorough LTCP review of the site (which indicated the site did not meet L TCP

criteria); 4) identifying the next course of remedial actions to be taken until such time as groundwater levels returned

and the ozone sparge activities could be renewed; 5) assisting with waste profiling and disposal for the site; and 6)

assisting the Claimant (Client) with budgetary requests, documentation, evaluation and analysis activities.

79

City of Guadalupe


June 30, 2016

Page 39


In August 2015, the LOP directed that soil vapor extraction (SVE) activities be employed at the site due to groundwater

levels dropping and exposing areas of contamination that were previously under water. As such, the ozone sparge

system operations were ceased and the system was removed from the site. Between February 1, 2016 and

February 22, 2016, the SVE activities were conducted at the site. Results of the SVE activities were successful and

removed significant amounts of contaminants from the subsurface. The results of the SVE activities were provided in

a DMI-EMK "Limited Soil Vapor Extraction Report" dated July 18, 2016.

On January 18, 2017, the City received notice from the County Environmental Health Services Division with further

requirements for this site to include further clean-up as well as removal of the dispenser island and all UST

components. The estimated liability for work performed in 2016/17 is approximately $75,000-$100,000. Since

additional remediation is required, tasks will likely consist of: development and preparation of a work plan for County

approval; coordination and implementation of required SVE activities at the site; monitoring and sampling of the SVE

system; quarterly remediation system reporting; and annual re-evaluation of the site conditions for low-threat closure

under State guidelines.

Estimated future costs beyond June 30, 2017 are anticipated to be approximately $75,000 - $150,000, -depending on

whether the site is found to meet the low-threat closure criteria (and therefore just requires closure-related activities)

or requires additional remediation.

Based on the above, the total estimated costs for cleanup activities (approximately $800,000-$1,000,000) is expected

to fall below the $1.5 Million budget allotted this site by the State.

In November 2013, The Successor Agency sought an appraisal of the site. The appraisal determined the value of the

site to be $85,000 if un-remediated and $103,000 if remediated to the satisfaction of the regulatory agency and

provided with a closure letter. As part of the Long Range Property Management Plan required by the Department of

Finance, the Agency is required to dispose of the property. The Agency has engaged a commercial real estate broker

to facilitate that process.

Note 15: Operating Leases

The City leases equipment under operating leases with lease terms in excess of one year. The agreements contain a

termination clause providing for cancellation after a specified number of days written notice to lessors but it is unlikely

that the City will cancel the agreements prior to the expiration date. Rent expense under operating leases was

$34,217 for the year ended June 30, 2016.

80

City of Guadalupe


June 30, 2016

Page 40

Note 15: Operating Leases (Continued)

At June 30, 2016, future minimum lease payments under these operating leases were as follows:


2017

2018

2019

Total

Note 16: Contingencies and Commitments

Litigation

$

$

28,321

25,379

11,471

65,171

The City is a defendant in a matter that is being litigated in court. City management and their attorney plan to mount

a vigorous defense and believe that the outcome of the case will be in the City's favor. Should the outcome not be in

the City's favor, loss amounts could be material to the financial statements and to the City, and the resulting impact

on these financial statements is unknown.

Grant Commitments

The City had received state and federal funds for specific purposes that are subject to review and audit by the granter

agencies. Although such audits could generate expenditure disallowances under terms of the grants, it is believed that

any required reimbursements will not be material.

Note 17: New Accounting Standards

Accounting Standards Adopted

In February 2015, GASB issued Statement No. 72, Fair Value Measurement and Application, which addresses

accounting and financial reporting issues related to fair value measurements. This Statement also provides guidance

for applying fair value to certain investments and disclosures related to all fair value measurements. The provisions of

Statement No. 72 are effective for fiscal years beginning after June 15, 2015. Implementation of this statement

resulted in additional fair value measurement disclosures. See Note 3 to the financial statements for further

discussion.

81

City of Guadalupe


June 30, 2016

Page 41

Note 17: New Accounting Standards (Continued)

In June 2015, GASB issued Statement No. 73, Accounting and Financial Reporting for Pensions and Related Assets That

Are Not within the Scope of GASB Statement 68, and Amendments to Certain Provisions of GASB Statements 67 and 68.

The requirements of this Statement extend the approach to accounting and financial reporting established in

Statement 68 to all pensions, with modifications as necessary to reflect that for accounting and financial reporting

purposes, any assets accumulated for pensions that are provided through pension plans that are not administered

through trusts that meet the criteria specified in Statement 68 should not be considered pension plan assets. The

provisions of Statement No. 73 are effective for fiscal years beginning after June 15, 2015. Implementation of this

statement did not have a material impact on the City's financial statements.

In June 2015, GASB issued Statement No. 76, The Hierarchy of Generally Accepted Accounting Principles for State and

Local Governments. The objective of this Statement is to identify-in the context of the current governmental

financial reporting environment-the hierarchy of generally accepted accounting principles (GAAP). The "GAAP

hierarchy" consists of the sources of accounting principles used to prepare financial statements of state and local

governmental entities in conformity with GAAP and the framework for selecting those principles. This Statement

reduces the GAAP hierarchy to two categories of authoritative GAAP and addresses the use of authoritative and

nonauthoritative literature in the event that the accounting treatment for a transaction or other event is not specified

within a source of authoritative GAAP. The provisions of Statement No. 76 are effective for fiscal years beginning after

June 15, 2015. Implementation of this statement did not have a material impact on the City's financial statements.

New Accounting Standards

In June 2015, GASB issued Statement No. 74, Financial Reporting for Postemployment Benefit Plans Other Than

Pension Plans, which establishes financial reporting standards for state and local governmental OPEB plans-defined

benefit OPEB plans and defined contribution OPEB plans-that are administered through trusts or equivalent

arrangements. The provisions of Statement No. 74 are effective for fiscal years beginning after June 15, 2016.

Management has not yet determined the impact of this Statement on its financial statements.

Additionally, in June 2015, GASB issued Statement No. 75, Accounting and Financial Reporting for Postemployment

Benefit Plans Other Than Pensions. Statement No. 75 establishes new accounting and financial reporting

requirements for governments whose employees are provided with OPEB, as well as for certain nonemployer

governments that have a legal obligation to provide financial support for OPEB provided to the employees of other

entities. The provisions of Statement No. 75 are effective for fiscal years beginning after June 15, 2017. Management

has not yet determined the impact of this Statement on its financial statements.

82

City of Guadalupe


June 30, 2016

Page 42


In August 2015, GASB issued Statement No. 77, Tax Abatement Disclosures. Statement No. 77 requires disclosure of

tax abatement information about (1) a reporting government's own tax abatement agreements and (2) those that are

entered into by other governments and that reduce the reporting government's tax revenues. The provisions of

Statement No. 77 are effective for fiscal years beginning after December 15, 2015. Management has not yet

determined the impact of this Statement on its financial statements.

In December 2015, GASB issued Statement No. 78, Pensions Provided through Certain Multiple-Employer Defined

Benefit Pension Plans. Statement No. 78 addresses a practice issue regarding the scope and applicability of Statement

No. 68 for pensions provided through certain multiple-employer defined benefit pension plans and to state or local

governmental employers whose employees are provided with such pensions. The provisions of Statement No. 78 are

effective for fiscal years beginning after December 15, 2015. Management has not yet determined the impact of this

Statement on its financial statements.

In December 2015, GASB issued Statement No. 79, Certain External Investment Pools and Pool Participants. Statement

No. 79 addresses accounting and financial reporting for certain external investment pools and pool participants. The

provisions of Statement No. 79 are effective for reporting periods beginning after June 15, 2016. Management has

not yet determined the impact of this Statement on its financial statements.

In January 2016, GASB issued Statement No. 80, Blending Requirements for Certain Component Units - an amendment

of GASB Statement No. 14. Statement No. 80 amends the blending requirements established in paragraph 53 of

Statement No. 14, The Financial Reporting Entity, as amended. The provisions of Statement No. 80 are effective for

fiscal years beginning after December 15, 2015. Management has not yet determined the impact of this Statement on

its financial statements.

In March 2016, GASB issued Statement No. 81, Irrevocable Split-Interest Agreements. Statement No. 81 requires that

a government that receives resources pursuant to an irrevocable split-interest agreement recognize assets, liabilities,

and deferred inflows of resources at the inception of the agreement. The Statement also provides additional

recognition and measurement guidance for situations in which a government is a beneficiary of the agreement. The

provisions of Statement No. 81 are effective for fiscal years beginning after December 15, 2016. Management has not

yet determined the impact of this Statement on its financial statements.

In March 2016, GASB issued Statement No. 82, Pension Issues-an amendment of GASB Statements No. 67, No. 68,

and No. 73. Statement No. 82 addresses issues regarding (1) the presentation of payroll-related measures in required

supplementary information, (2) the selection of assumptions and the treatment of deviations from the guidance in an

Actuarial Standard of Practice for financial reporting purposes, and (3) the classification of payments made by

83

City of Guadalupe


June 30, 2016

Page 43


employers to satisfy employee (plan member) contribution requirements. The provisions of Statement No. 82 are

effective for fiscal years beginning after June 15, 2016. Management has not yet determined the impact of this

Statement on its financial statements.

In November 2016, GASB issued Statement No. 83, Capital Asset Retirement Obligations. Statement No. 83 provides

financial statement users with information about asset retirement obligations that were not addressed in GASB

standards by establishing uniform accounting and financial reporting requirements for these obligations. The

provisions of Statement No. 83 are effective for reporting periods beginning after June 15, 2018. Management has

not yet determined the impact of this Statement on its financial statements.

Note 18: Prior Year Restatements

During 2016, a prior year restatement was recorded to properly restate deferred inflow of resources related to pensions

that had been amortized during the year ended June 30, 2015 rather than amortized during the measurement period

ending June 30, 2015. The effect was to increase deferred inflows of resources related to pensions and decreased

beginning net position by $151,042 for Governmental Activities and $10,245 for Business-Type Activities for the year

ended June 30, 2016.

During the current year, the City determined that the Capital Facilities Fund, previously classified as a fiduciary fund

and therefore not included in the government-wide financial statements, is more accurately classified as a capital

projects fund. A prior year restatement was recorded in order to correctly classify the Capital Facilities Fund's 2015

ending fund balance as part of governmental activities. The effect was to increase beginning fund balance in the

Capital Facilities Fund by $249,720.

Although the City has always recorded revenue on the accrual basis, the recorded monthly Measure A sales tax

revenue was delayed by one month each year. A prior year restatement was recorded in the Measure A Fund, Local

Transportation Fund and Transit Fund to increase beginning net position by $41,759, $506, and 25,517, respectively,

to properly record June 2015 revenue.

84

City of Guadalupe


June 30, 2016

Page 44

Note 19: Going Concern

In prior fiscal years, the City's focus was on decreasing costs. In May 2014, City Council placed three General Fund tax

measures on the November 2014 general election ballot to address the structural General Fund deficit.

The three measures were as follows:

1.) A measure to eliminate the $2,250 Utility Users Tax cap. It is estimated that doing so will result in $135,000

of additional General Fund revenue annually.

2.) A measure to convert the City's Business License fees to a Gross Receipts Tax. It is estimated that doing so

will result in $275,000 of additional General Fund revenue annually.

3.) A measure to adopt a local Sales Tax add-on of 0.25%. It is estimated that doing so will result in $75,000 of

additional General Fund revenue annually.

In 2015-16 the full impact of the additional revenues received due to the three tax measures exceeded $500

thousand. This helped to stabilize the general fund deficit as it only increased $70 thousand or 10% over the prior

year. As a comparison in 2014-15 the added deficit over the prior year was $406 thousand or 154%.

The City continues to analyze all additional potential cost saving measures: including postponing all but

essential purchases for which at least three quotes are required, vendor contracts are been reviewed and new

quotes will be sought. Volunteers currently help offset costs relating to parks/recreation maintenance. Plans

are also underway to offset costs associated from the management and operations of facilities used by the

public by instituting user fees. Potential new sources of revenue include grant funding (the City is eligible for

grant funding as a disadvantaged community). The Pasadera development continues to build out and is

expected to increase the City's residential property tax base. In the long term the City expects to see an

increase in sales tax revenue due to the planned commercial portion of the development. The City is aware of

its budgetary challenges and remains vigilant in seeking sustainable revenue sources as well as in continuing

its austerity practices.

85


(Unaudited)

86

City of Guadalupe

Budgetary Comparison Schedule - General Fund


General Fund

Actual

Budget Final {GAAP Basis)

Revenues:

Taxes $ 1,888,000 $ 1,883,000 $ 1,892,550

Licenses and permits 400,000 505,000 465,239

Fines and penalties 56,000 16,000 19,632

Revenues from other agencies 277,710 229,210 259,224

Charges for current services 38,000 15,500 10,279

Interest 1,000 1,000 715

Other revenues 463,000 285,000 233,906

Total revenues 3,123,710 2,934,710 2,881,545

Expenditures:

City council 10,667 10,667 11,035

Administration 499,796 320,190 320,318

City attorney 50,000 90,000 103,589

Finance and city treasurer 428,002 414,863 421,298

Planning 375,895 212,173 182,278

Non-departmental 154,035 134,966

Building inspections and maintenance 101,848 101,248 101,163

Police 1,575,301 1,550,494 1,750,477

Fire 540,189 538,979 535,632

Parks and recreation 133,835 133,385 126,084

General Street Improvements 30,000 30,900

Total expenditures 3,715,533 3,556,034 3,717,740

Deficiency of revenues over expenditures (591,823) (621,324) (836,195)


Operating transfers in 593,200 593,200 580,450

Proceeds from capital leases 187,086

Total other financing sources (uses) 593,200 593,200 767,536

Change in fund balance 1,377 (28,124) (68,659)

Fund balance (deficiency) - beginning of year (670,768) (670,768) (670,768)

Fund balance (deficiency) - end of year $ (669,391) $ (698,892) $ (739,427)

See independent auditors' report.

87

Variance with

Budget

Positive (Negative)

$ 9,550

(39,761)

3,632

30,014

(5,221)

(285)

(51,094)

(53,165)

(368)

(128)

(13,589)

(6,435)

29,895

19,069

85

(199,983)

3,347

7,301

(900)

(161,706)

(214,871)

(12,750)

187,086

174,336

(40,535)

$ (40,535)

City of Guadalupe

Budgetary Comparison Schedule - Measure A Fund


Measure A

Actual

Budget Final {GAAP Basis)

Revenues:

Taxes $ 454,000 $ 454,000 $ 456,834

Interest 100 271


Total revenues 458,000 457,900 457,105

Expenditures:

Personnel services 140,492 143,592 139,299

Maintenance and operations 100,500 102,600 59,423

Capital outlay 17,436

Total expenditures 240,992 246,192 216,158

Excess of revenues over expenditures 217,008 211,708 240,947


Operating transfers out (88,000) (88,000) (87,996)

Total other financing sources (uses) (88,000) (88,000) (87,996)

Change in fund balance 129,008 123,708 152,951

Fund balance - beginning of year 768,523 768,523 768,523

Prior year restatement 41,759

Fund balance - beginning of year 768,523 768,523 810,282

Fund balance- end of year $ 897,531 $ 892,231 $ 963,233


88

Variance with

Budget

Positive

{Negative)

$ 2,834

271

(3,900)

(795)

4,293

43,177

(17,436)

30,034

29,239

4

4

29,243

41,759

41,759

$ 71,002

Actuarial

Valuation Date

7/1/2013 $

City of Guadalupe

Schedule of Funding Progress for OPEB Obligation


Entry Age Unfunded

Actuarial Actuarial Actuarial

Value of Accrued Accrued Funded

Assets Liability Liability Ratio

Covered

Payroll

$ 268,068 $ 268,068 $ $ 1,853,700


89

UAALasa

Percentage

of Covered

Payroll

14.46%

City of Guadalupe

Schedule of City's Proportionate Share of the Net Pension Liability

As of June 30, 2016

Last 10 Years *

Miscellaneous

Fiscal Year

Measurement Date

Employer's Proportion of the Net Pension Liability

Employer's Proportionate Share of the Net Pension Liability

Employer's Covered-Employee Payroll

Employer's Proportionate Share of the Net Pension Liability as a

Percentage of its Covered-Employee Payroll

Plan's Share of Fiduciary Net Position as a Percentage of

the Plan's Total Pension Liability

$

$

6/30/2016

6/30/2015

0.04301%

1,180,092

1,004,271

117.51%

79.89%

6/30/2015

6/30/2014

0.04600%

$ 1,136,973

$ 981,313

115.86%

81.15%

Safety

6/30/2016 6/30/2015

6/30/2015 6/30/2014

0.01578% 0.02139%

$ 650,037 $ 802,164

$ 825,309 $ 871,951

78.76% 92.00%

77.27% 78.83%

* Fiscal year 2015 was the first year of implementation. Information is required only for measurement periods for which

GASB 68 ls applicable.


90

Fiscal Year

Actuarially determined contribution

Contributions in relation to the actuarially

determined contributions

Contribution deficiency (excess)

Covered-employee payroll

City of Guadalupe

Schedule of City's Contributions

As of June 30, 2016

Last 10 Years *

Miscellaneous

6/30/2016 6/30/2015 $ 135,602 $ 107,651

(135,602) (107,651)

$ $

1,004,271 981,313

Contributions as a percentage of covered-employee pay 13.50% 10.97%

Safety 6/30/2014 6/30/2016 6/30/2015 6/30/2014 $ 108,790 $ 115,570 $ 103,374 $ 109,929

(108,790) (115,570) (103,374) (109,929)

$ $ $ $

957,307 825,309 871,951 731,876

11.36% 14.00% 11.86% 15.02%

* Fiscal year 2015 was the first year of implementation. Information is required only for measurement periods for which GASB 68

is applicable.


91

Other Information and Combining Fund Statements

92

Assets


Accounts receivable

Prepaid expenses

Due from other funds

lnterfund loan receivable

Loans receivable

Total assets

Liabilities and Fund Balance

Liabilities: Accounts payable

Accrued wages and benefits

lnterfund loan payable

Total liabilities

Fund balance: Nonspendable

Long-term loans receivable

Restricted for:

Street maintenance

Other capital projects


Public safety

Utility infrastructure

Debt service

Committed to:

Lighting and landscape

Assigned to:

Capital projects

Unassigned

Total fund balance

Total liabilities and fund balance


City of Guadalupe

Combining Balance Sheet



Special Revenue Funds

Local

Gas Tax Transportation Library

$ 544,611 $ 173,728 $ $

109,301 950

5,000

$ 653,912 $ 174,678 $ 5,000 $

$ 8,120 $ $ 5,000 $

60,000

8,120 65,000

174,678

645,792

(60,000)

645,792 174,678 (60,000)

$ 653,912 $ 174,678 $ 5,000 $

93

Public Park

Facilities Development

4,267 $ 955

4,267 $ 955

$

955

4,267

4,267 955

4,267 $ 955


Guadalupe

Lighting and Public Community

Assessment Safety Development

$ 100,128 $125,818 $ 136,185 $

70 10,148 709

1,685 806

292,500

41,209

$ 394,383 $136,772 $ 178,103 $

$ 9,864 $ 1,889 $ $ 322

9,864 2,211

41,209

136,894

134,561

384,519

384,519 134,561 178,103

$ 394,383 $136,772 $ 178,103 $

Capital Projects Funds

Capital Traffic

Facilities City Hall Mitigation

181,484 $ 1,680 $ 6,574

20

60,000

241,504 $ 1,680 $ 6,574

$ $

241,504 1,680

6,574

241,504 1,680 6,574

241,504 $ 1,680 $ 6,574

94

Sewer Bond

Debt Service

$ 21,638

25

$ 21,663

$

21,663

21,663

$ 21,663

Total Other

Governmental

$

$

$

$

Funds

1,297,068

121,223

7,491

352,500

41,209

1,819,491

24,873

322

60,000

85,195

41,209

174,678

889,931

136,894

134,561

4,267

21,663

384,519

6,574

(60,000)

1,734,296

1,819,491

City of Guadalupe

Combining Statement of Revenues, Expenditures and

Changes in Fund Balance (Deficiency) -




Local

Gas Tax Transportation Library

Revenues:

Taxes $ 262,258 $ $ $ Licenses and permits

Revenues from other agencies 5,624

Charges for current services

Interest 176 59

Other revenues

Total revenues 262,434 5,683

Expenditures:

Personnel services

Maintenance and operations 27,808 524 20,000

Capital outlay 102,851 29,461

Debt service:

Principal

Interest and fiscal charges

Total expenditures 130,659 29,985 20,000

Excess of revenues over (under) expenditures 131,775 (24,302) (20,000)

Other financing sources (uses):

Operating transfers in

Operating transfers out (37,100) (700) (40,000)

Total other financing sources (uses) (37,100) (700) (40,000)

Change in fund balance 94,675 (25,002) (60,000)

Fund balance - beginning of year 551,117 199,174

Prior year restatements 506

Fund balance - beginning of year, restated 551,117 199,680

Fund balance (deficiency) - end of year $ 645,792 $ 174,678 $ (60,000) $


95

Public Park

Facilities Development

$

1,240 15

1 1

1,241 16

2,973

2,973

1,241 (2,957)

1,241 (2,957)

3,026 3,912

3,026 3,912

4,267 $ 955

Special Revenue Funds Capital Facilities Funds

Guadalupe Total Other

Lighting and Public Community Capital Traffic Sewer Bond Governmental

Assessment Safety Development Facilities City Hall Mitigation Debt Service Funds

$ 141,874 $ 19,788 $ $ $ $ $ 17,519 $ 441,439

6,573 6,573

68,501 74,125

1,255

1,667 39 41 68 1 8 2,061

16,488 1,680 18,168

143,541 104,816 41 68 1,680 6,574 17,527 543,621

17,092 17,092

70,295 49,234 48,284 219,118

8,264 140,576

14,000 14,000

3,050 3,050

70,295 74,590 48,284 17,050 393,836

73,246 30,226 41 (48,216) 1,680 6,574 477 149,785

40,000 40,000

(16,100) (2,250) (96,150)

(16,100) (2,250) 40,000 (56,150)

57,146 30,226 (2,209) (8,216) 1,680 6,574 477 93,635

327,373 104,335 180,312 21,186 1,390,435

249,720 250,226

327,373 104,335 180,312 249,720 21,186 1,640,661

$ 384,519 $134,561 $ 178,103 $ 241,504 $ 1,680 $ 6,574 $ 21,663 $ 1,734,296

96

City Council

John Lizalde

Mayor

Council Member

Ariston Julian

Council Member

Virginia Ponce

Council Member

Gina Rubalcaba

Council Member

Antonio Ramirez

Council Member

City of Guadalupe

Organization

June 30, 2016

97

Staff

Cruz Ramos

City Administrator

Annette Mufioz

Finance Director

Gary Hoving

Chief of Police

Director of Public Safety

Dave Fleishman

City Attorney

Michael Peria

Public Works Supervisor

Jasch Janowicz

City Planner

Petrona Amido

City Treasurer

Joice Earleen Raguz

City Clerk

Other Independent Auditors' Report

98

GLENN BURDETTE CERT'F\J D PURI C Ar.COUMTf,llTS

Independent Auditors' Report on Internal Control Over Financial Reporting

and on Compliance and Other Matters Based on an Audit of Financial Statements

Performed in Accordance with Government Auditing Standards


City of Guadalupe

Guadalupe, California

We have audited, in accordance with auditing standards generally accepted in the United States of America and the

standards applicable to financial statements contained in Government Auditing Standards issued by the Comptroller

General of the United States, the financial statements of the governmental activities, the business-type activities, each

major fund, and the aggregate remaining fund information of the City of Guadalupe {the City) as of and for the year

ended June 30, 2016, which collectively comprise the City's basic financial statements and have issued our report

thereon dated February 28, 2017.

Internal Control Over Financial Reporting

In planning and performing our audit of the financial statements, we considered the City's internal control over

financial reporting (internal control) to determine the audit procedures that are appropriate in the circumstances for

the purpose of expressing our opinion on the financial statements, but not for the purpose of expressing an opinion

on the effectiveness of the City's internal control. Accordingly, we do not express an opinion on the effectiveness of

the City's internal control.

Our consideration of the internal control was for the limited purpose described in the preceding paragraph and was

not designed to identify all deficiencies in internal control that mi@ht be material weaknesses or significant

deficiencies and therefore, material weaknesses or significant deficiencies may exist that were not identified.

However, as described in the accompanying Schedule of Audit Findings and Recommendations, we identified certain

deficiencies in internal control over financial reporting that we consider to be material weaknesses.

A deficiency in internal control exists when the design or operation of a control does not allow management or

employees, in the normal course of performing their assigned functions, to prevent or detect misstatements on a

timely basis. A significant deficiency is a deficiency, or a combination of deficiencies, in internal control that is less

severe than a material weakness, yet important enough to merit attention by those charged with governance.

GLINNBURDETTli.COM

99 SAN LUI! OBISPO

11 '.)() f\ilm Strct':

)an Luis Ubispc, ':.1\ 9340 l

P 8D5 54< 1 441

PASO R09L~S

rn.i Svulh Vwc SlE'CL Stc). A

P,;r,o Rni:1r1s, CA 9.144G

p 805 23? 3995

t 80S ?39 9332

SANTAMARIA 22 22 S:)uth 'Jrriad'o't.iU, S11:L A

Santa Mcicia, r/103~Sl1

p SC'.'1 92? 4fJHJ

J HCS S22 '1286


City of Guadalupe

Guadalupe, California

Pap2

A material weakness is a deficiency, or combination of deficiencies, in internal control such that here is a reasonable

possibility that a material misstatement of the entity's financial statements will not be prevented, or detected and

corrected on a timely basis. We consider the deficiencies described in the accompanying Schedule of Audit Findings

and Recommendations as findings 2016-001, 2016-002, and 2016-003 to be material weaknesses and finding 2016-

004 to be a significant deficiency.

Compliance and Other Matters

As part of obtaining reasonable assurance about whether the City's financial statements are free from material

misstatement, we performed tests of its compliance with certain provisions of laws, regulations, contracts, and grant

agreements, noncompliance with which could have a direct and material effect on the determination of financial

statement amounts. However, providing an opinion on compliance with those provisions was not an objective of our

audit, and accordingly, we do not express such an opinion. The results of our tests disclosed no instances of

noncompliance or other matters that are required to be reported under Government Auditing Standards.

City of Guadalupe's Responses to Findings

The City's response to the findings identified In our audit are described in the accompanying Schedule of Audit

Findings and Recommendations. The City's responses were not subjected to the auditing procedures applied in the

audit of the financial statements and, accordingly, we express no opinion on them.

Purpose of this Report

The purpose of this report is solely to describe the scope of our testing of internal control and compliance and the

results of that testing, and not to provide an opinion on the effectiveness of the entity's internal control or on

compliance. This report is an integral part of an audit performed in accordance with Government Auditing Standards

in considering the entity's internal control and compliance. Accordingly, this communication is not suitable for any

other purposes.

Glenn Burdette Attest Corporation

San Luis Obispo, California

February 28, 2017

100

Audit Findings and Recommendations Section

101

City of Guadalupe

Schedule of Audit Findings and Recommendations


2016-001 Full Recovery of General Fund Deficit Fund Balance and Balanced Budget (Material Weakness)

Criteria: General-purpose local governments, regardless of size, at a minimum should maintain a fund balance in the

general fund of either 1) no less than S to 15 percent of regular general fund operating revenues, or 2) no less than 1

to 2 months of regular general fund operating expenditures.

Condition: The General Fund had a negative fund balance as of June 30, 2016. The General Fund finished the year

with a deficit of $(739,427) compared to a negative fund balance of $(670,768) in the prior fiscal year. Overall, the

fund's liabilities exceeded assets, and the fund had a negative cash balance of $266,765 that is included in accounts

payable on the balance sheet. The General Fund's final budgeted expenditures exceeded budgeted revenues by

$28,124, and its final actual expenditures exceeded actual revenues by $68,659 for the year ended June 30, 2016.

Additionally, as of June 30, 2016 the General Fund owed internally to the Lighting and Assessment Fund and to the

Water Fund in the amounts of $292,500 and $390,000, respectively. These interfund loans were made so that the

General Fund could sustain its basic operations. The multiple afore-mentioned conditions have raised substantial

doubt about the City's ability to continue as a going concern, as described further in Note 19.

Effect: As discussed in Note 19, the General Fund's deficiency in fund balance and decrease in revenues have created

a budget shortfall that will require significant cost cutting measures to reach a budget that will recoup the negative

fund balance as well as provide the necessary revenues and financing for continued operations of the City.

Recommendation: We recommend the City continue to analyze all potential cost cutting measures and revenue

sources, and review options to establish a budget plan for the General Fund to recoup the deficit fund balance as well

as provide continued financing for City operations.

City Response: The City continues to analyze all potential cost cutting measures and revenue sources. Additional

revenues received in FY 2015-16 for the three tax measures exceeded $500 thousand. This helped to stabilize the

general fund deficit as it only increased $70 thousand or 10% over the prior year. As a comparison, in 2014-15 the

added deficit over the prior year was $406 thousand or 154%. As the Pasadera development continues build out the

City expects to see an increase in its residential property tax base. In the long term the City also expects an increase in

sales tax due to the planned commercial portion of the Pasadera development. The City also remains vigilant in

seeking sustainable revenue sources.

2016-002 Revenue Recognition and Timing (Material Weakness)

Criteria: Accounting principles generally accepted in the United States of America mandate that revenues be recorded

when earned, regardless of when payment is actually received.

102

City of Guadalupe



Page 2

Condition: Although the City has always recorded revenue on the accrual basis, the recorded monthly Measure A sales

tax revenue was delayed by one month each year. As monthly amounts are generally quite consistent and total

revenue is similar from year to year, this had not been corrected in previous years. However, in the current year a

prior year restatement of $41,759 was recorded in the Measure A Fund in order to properly capture the correct

months within each fiscal year going forward. See Note 17 for additional information on prior year restatements.

Effect: Incorrectly recording revenue in the wrong period violates the revenue-expense matching principle and may

cause the accounting records to be misstated.

Recommendation: We recommend that the amounts recorded in revenue accounts relate to the current fiscal period.

City Response: The Finance department has reviewed the issue and will properly record revenue accounts related to

the current fiscal period.

2016-003 Reconciliation and Billing for State and local Funding (Material Weakness)

Criteria: All State and local revenue for expenditure reimbursement should be monitored and billed timely to the

appropriate agency and recorded in the applicable fiscal year. Delays in this process will result in decreased revenues

and unreliable financial reports.

Condition: In the current year, State funding revenue and related receivable for pollution remediation expenditures of

the Private Purpose Trust Fund, a Fiduciary Fund of the City, were not recorded for fiscal year 2014-15 and 2015-16.

See Note 14 for additional information on pollution remediation.

Effect: A prior year restatement was recorded to correctly record the reimbursable expenditures of $137,314 for

2014-15 and $96,534 for 2015-16.

Recommendation: We recommend that management monitor all funding sources and requests for expenditure

reimbursements to ensure all available revenues are recorded and received on a timely basis.

City Response: The State was in the process of implementing electronic processing for claims submitted for

reimbursement. Typically the paper claim reimbursement occurs within six months but a glitch occurred and our

electronic claim was stalled way beyond the normal waiting period. The Finance department has put into place

guidelines to monitor all funding for the pollution remediation reimbursement from the State.

103

City of Guadalupe



Page 3

2016-004 Full Recovery of Deficiency in Net Position (Significant Deficiency)

Criteria: Accounting principles generally accepted in the United States of America mandate the use of an enterprise

fund when legal requirements or management policy require that the full cost of providing services (including capital

costs) be recovered through fees and charges.

Condition: The Solid Waste Fund has an ending net deficit of $(95,135) for the year ended June 30, 2016. Although

the fund had net income during the years ended June 30, 2016 and 2015, it has experienced net losses in previous

years and its total liabilities exceed total assets. Note that this is a repeat finding from the years ended June 30, 2005

through 2015.

Effect: Although the City has balanced the budget for the Solid Waste Fund by implementing fee increases, the Fund

has a negative net position that will need to be recouped with net income.

Recommendation: The City should continue to ensure that the Solid Waste fund remains solvent by requiring an

operating budget that plans to recoup the net deficiency.

City Response: The City's plan to decrease the net deficiency is evidenced by Resolution 2015-430, "Affirming Revising

and Setting Fees and Rates for Garbage Collection Services." This five year plan was implemented on June 1, 2015 for

the first 6% increase with subsequent 3% increases beginning August 1, 2015 and every year thereafter for the next

four years. With this plan in place the deficit will continue to decrease over time.

104

City of Guadalupe

Summary Schedule of Prior Year Audit Findings and Recommendations -June 30, 2015


Findings/Recommendation

We recommended the City analyze cost cutting

measures and revenue sources, and to review

these options to establish a budget plan for the

General Fund to recoup the deficit fund balance.

We recommended the City continue to ensure the

solvency of the Solid Waste Fund by requiring a

balanced operating budget and a plan to recoup

the net deficiency.

In relation to the Water Fund annual water

payments we recommended that the City record

expenses in the period in which they are incurred

rather than in the period in which they are paid.

Current Year City Explanation if Not Implemented

Not implemented See current year finding 2016-001.

Partially Implemented See current year finding 2016-004.

Implemented

105

APPENDIX F

STATE DEPARTMENT OF FINANCE APPROVAL LETTER

F-1

October 6, 2017

Ms. Annette Munaz, Finance Director City of Guadalupe 918 Obispo Street Guadalupe, CA 93434

Dear Ms. Munaz:

Subject: Determination of Oversight Board Action

The City of Guadalupe Successor Agency (Agency) notified the California Department of Finance (Finance) ofits August 16, 2017 Ove111ight Board (08} Resolution on August 22, 2017. Pursuant to Health and Safety Cade (HSC} section 34179 (h), Finance has completed its review of the OB action.

Based on our review and application of the law, OB Resolution Na. 2017-03, approving and authorizing the issuance of Tax Allocation Refunding Bands, Series 2017, is partially approved.

The Agency desires to refund the Tax Allocation Refunding Bonds, Series 2003 issued by the former Redevelopment Agency and anticipates achieving approximately $686,244 in savings over the remaining life of the bonds.

Finance ls approving the proposed refunding_ Finance'a approval is based on our understanding the Agency will not issue refunding bonds unless such bonds meet the requirements outlined in HSC section 34177.5 (a). Fallowing the issuance, the Agency should request funding for the refunding bonds on the next Recognized Obligation Payment Schedule (ROPS), subject to Finance's review and approval.

To the extent the indebtedness obligations approved for refunding per the 08 Rer;olution are refunded in accordance with HSC section 34177.5 and prior to the next ROPS submission, the Agency may use Redevelopment Property Tax Trust Funds reci,ived for payment of the currently listed obligations being refunded. Any indebtednesa for which refunding is finalized must be saparately identified as a new item on a sub8equent ROPS and will be subject lo Fimmce's review and approval. Further, pursuant to HSC section 34186 (a), the Agency is required to report estimated obligation! and actual payments Any unspent funda should be reported as prior period adjustments.

In addition, Section 2 of the OB Resolution states the OB approved the Agency Resolution and incorporated it in thi, OB Resolution. Section 6 (c) of the Agency Resolution No. 2017-05 states the Agency is antitled lo receive its full administrative cost allowance under HSC section 34181 (a) (3) without any deductions with re8pect to continuing costs related to the Bonds. However, HSC section 34181 (a) (3) does not exist While all costs related ta the issuance can be paid separately pursuant to HSC section 34177.5 (f), any administrative coats post-issuance of the

Ms. Annette Munoz October 6, 2017 Page2

bonds must be placed on a subsequent ROPS for Finance's review to determine if the costs should be paid out of the administrative allowance or whether the costs are separate enforceable obligations. To the extent this section seeks to have ongoing administration costs of bonds to be paid in addition to regular administrative costs, such action is denied.

In the event the OB desires to amend the portion of the Resolution not approved by Finance, Finance is returning it to the board for reconsideration. However, the Agency may move forward with the portion of the Re&olution appro11ed by Finance.

Please direct inquiries to Kylie Ollmann, Super11isor, or Daisy Rose. Lead Analyst, at (916) 322-2985.

Sincerely,

cc: Ms. Juana Merino-Escobar, Administrative Assistant, City of Guadalupe Mr. Ed Price, Division Chief Property Tax Division, Santa Barbara County

APPENDIXG

SUPPLEMENTAL INFORMATION- THE CITY OF GUADALUPE

The follc:M,ing inforrnation relating to the City of Guadalupe, California (the "City") is pr0.tided for inforrnational purp:ises only. The Bonds (as defined in the front part of this Official Statement) are payable solely as described in this Official Statement and are not payable or secured by a pledge of the faith and credit or taxing p::wer of the City.

General Information

The City is located on California's Pacific Coast Highway in norttwestern Santa Barmra County (the "County") in southern California. The City is situated approximately 85 miles north.vest of the City of Santa Barmra, southeast of Los Angeles, 167 miles norttwest of Los Angeles and 260 miles southeast of San Francisco.

Santa Barmra County was established lJy an act cf the State Legislature on February 18, 1850. It occupies an area cf 2,774 square miles, of which one-third is located in the Los Padres National Forest. There are eight incorporated cities located wholly or partially within Santa Barmra County: Santa Maria, Santa Barmra, Lompoc, Goleta, Carpinteria, Guadalupe, Solvang, and Buellton. The County is served lJy Amtrak trains and G reyhound Lines buses. The Santa B armra Metropolitan Trans it District serves the southern portion cf the county. In the North County, the cities cf Lompoc, Santa Maria, and Buellton;Solvang have their cwn bus services.

Municipal G0.ternment

The city was established in 1840 and incorporated on August 3, 1946. It is a general law city g0.terned by a Mayor and four City Council Members who are elected to alternating four year terms. The City has a Council/Administrator (City Adninistrator) form of municipal g0.ternment. The City Council appoints the City A dni ni st rat or who is responsible for the day-to-day adni ni strati on of City business, the coordination of all departments of the City and carrying outthe policies established by the City Council.

The current members of the City Council, term expiration and their principal occupations are as folio.vs:

Education

Name and Office

John Lizalde, Mayor AristonJ ulian, Mayor ProTem

Virginia Ponce, Member Antonio Ramirez, Member Gina Rubalcaba, Member

Expiration of Term

N0.tember 2018 N0.tember 2018 N0.tember 2018 N0.tember 2020 N0.tember 2020

Guadalupe has two schools, Mary Buren Elementary and Kernit McKenzieJunior High School. Mary Buren Elementary is kindergarten to fifth grade and Kernit McKenzieJ unior High School is sixth to eighth grade.

G-1

Population

The City had a population of 7,414 as of January 2017, as reported b,I the Departrrent of Finance. From the five years 2013 through 2017 the population of the City increased b,13.1%.

Year January 1

2013 2014 2015 2016 2017

TABLE 1 CITY,COUNTY,STATE POPULATION DATA

City of Guadalupe

7,185 7,248 7,303 7,358 7,414

Santa Barbara County

435,241 440,129 444,900 447,295 450,663

Source: State of California Departrrent of Finance.

E mpl O{ment and I ndustry

State of California

38,373,434 38,739,410 39,059,809 39,189,035 39,523,613

The follo.ving table pr0.tides a historical vie.v of ernplO(rrent within the City and the County of Santa Barbara for the period from 2012 through 2016.

TABLE 2 CITY AND COUNTY

LABOR FORCE, EMPLOYMENT AND UNEMPLOYMENT RATES Yearly Average for Years 2012 to 2016

2012 2013 2014 2015 Santa Barbara County U nernplO(rrent Rate &4% 7:ZYo 6.1% 5.3°/4 E rnplO(rrent 197,900 201,700 204,900 2(6,300

U nernplO(rrent 18,100 15,600 13,300 11,500 Civilian Labor Force 216,000 217,300 218,200 217,fill

City of Guadalupe U nernplO(rrent Rate 7.'Ylo 6.8Yo 5.8Yo 5.0'/4 E rnplO(rrent 3,000 3,000 3,100 3,100 U nernplO(rrent 300 200 200 200 Civilian Labor Force 3,200 3,300 3,300 3,300

-----------------------------Source: State of California Errplc,yrrent Developrrent Departrrent

G-2

2016

5.0'/4 205,800

10,800 216,600

4.7% 3,100

200 3,300

The follo.ving table sets forth the top twenty-five emplO{ers in the County as of Decerrber 2016.

E mplcyer

Alisal Guest Ranch& Resort

B acara Resort & Spa

C hum1sh Casi no Resort

CitrixSystems Inc

Cottage H ea Ith

DB Specialty Farms

Den Mat Holdings LLC

Da,ereux Foundation

Four S easons-5anta B arrara

Hacienda Harvesting Inc

J ordano's

J ordano's Foodservice

Lompoc Valley Medical Ctr

Marian Regional Medical Ctr

M i ssi on Linen Supply I nc

M i ssi on Linen Supply I nc

Montecito FM Inc

Pacific Diagnostic Lab

s anta B arrara City CI g

Santa Barrara Cottage Hospital

Santa Barrara County Coroner

Santa BarraraSheriffs Dept

Santa Y nez Tri ml Garring C mntt

University of Ca-5anta Barrara

Vandenberg Air Force Base

TABLE 3 SANTA BARBARA COUNTY

MAJOR EMPLOYERS 2016

Location

Solvang

Goleta

Santa Ynez

Goleta

Santa B arrara

Santa Maria

Lompoc

Goleta

Santa B arrara

Santa Maria

Santa B arrara

Santa B arrara

Lompoc

Santa Maria

Santa B arrara

Santa B arrara

Santa B arrara

Goleta

Santa B arrara

Santa B arrara

Santa B arrara

Santa B arrara

Santa Ynez

Santa B arrara

Vandenberg AFB

Industry

Resorts

Resorts

Casinos

Computer Software

Health Care Management

Farms

Dentists

Schools

Hotels & Motels

General Contractors

H um1n Resource Consultants

Food Products (whole sale)

Hospitals

Hospitals

Linen Supply Service

Linen Supply Service

Radio Stations & B roadcasti ng Companies

Laboratories-Medical

S chools-U niversiti es & Colleges Academic

Hospitals

G CNernment Offices-County

G CNernment Offices-County

G CNernment Ofcs-A uthorities,C ommissi ons

Schools-Universities & Colleges Academic

Military Bases

Source: America's Labor Market I nforrmtion System (ALMIS) Errplc,yer Da1abase.

G-3

Construction

The follo.ving table pro.tides building permit valuations for the fiscal years sho.vn. Figures for fiscal year 2016-17 are unavailable.

TABLE 4 CITY OF GUADALUPE

BUILDING PERMIT VALUATIONS Fiscal Years 2011-12 through 2015-16

Fiscal Year

2011-12 2012-13 2013-14 2014-15 2015-16

Residential Valuation

$ 26,000 0 0 0

8,464,200

Retail Valuation

$6,000 0 0 0

34,000

Source: Construction Industry Research Board.

Commercial Activity

The follo.ving table pro.tides information with respect to taxable transactions in the City for the years sho.vn. Annual figures for 2016 are not yet available.

Retail and Food Stores Total All Outlets

TABLE 5 CITY OF GUADALUPE

Taxable Transactions (In Thousands)

2011 2012

$13,349 $13,991 22,442 23,784

2013

$14,610 26,179

Source: California State Board of Equalization Statistical Research and Consulting Divi~on.

G-4

2014 2015

$14,688 $15,541 26,271 30,039

APPENDIXH

FISCAL CONSULTANT'S REPORT

H-1

November 7, 2017

Cruz Ramos City Administrator/ Agency Executive Director City of Guadalupe 918 Obispo Street Guadalupe, California 93434

RE: Successor Agency to the Guadalupe Community Redevelopment Agency Guadalupe Redevelopment Project Tax Increment Verification and Revenue Projections

Dear Ms. Ramos:

Urban Futures, Inc. (UFI) is pleased to present this report of projected tax increment revenues to the Successor Agency to the Guadalupe Community RedevelopmentAgency (the "Agency") forthe Guadalupe Redevelopment Project (the "ProjectArea"). The following information is included as exhibits to th is re port:

Exhibit A:

Exhibit B:

Exhibit C:

Exhibit D:

Exhibit E:

Tax Increment Projections

Historical Assessed Valuations and Revenues

Ten Largest Taxpayers

Project Area Land Uses

Assessment Appeals

Projected taxable valuations and tax revenues contained in this report are based on assumptions derived from the following information:

1. Historical growth trends;

2. Trended growth in valuation as permitted by Article XIIIAofthe California Constitution (Proposition 13);

3. Financial reports and information supplied or prepared by the Agency;

4. Information provided by the County of Santa Barbara, from the offices of the Auditor-Controller and Assessor; and

5. Data provided by Metroscan for property ownership information.

The purpose of the projections is to demonstrate the availability of property tax revenues expected to be generated from the Project Area, to secure debt service requirements of the Agency forthe Tax Allocation Refunding Bonds (Taxable), Series 2017 (the"2017 Bonds"). Tax revenues will be paid to the Agency pursuantto the procedures described in AB Xl 26, as amended by AB 1484 and SB 107 (the "Dissolution Act''), which include requirements that the Agency annually file a Recognized Obligation Payment Schedule (the "ROPS") with the County and the State, and that each such ROPS be approved by the Agency's oversight board (the "Oversight Board") and by the State Department of Finance ("DOF").

Revenue projections have been estimated based on assumed 2% annual assessed valuation increases.

Background

Prior to the enactment of the Dissolution Act, the California Community Redevelopment Law (the "Law'') togetherwithArticle 16, Section 16 of the California Constitution, authorized redevelopment agencies to receive that portion of property tax revenue generated by project area taxable values that are over and above the Base Year value. The Base Year value is defined as the amount of the taxable values within the project area boundaries on the last equalized tax roll prior to adoption of the project area. The amount of current year taxable value that is in excess of the Base Year value is referred to as incremental taxable value.

The Dissolution Act authorizes refunding bonds, including the 2017 Bonds, to be secured by a pledge of the same revenues pledged to the bonds being refunded, and to be payable from and secured by monies deposited from time to time in the Redevelopment Property Tax Trust Fund ("RPTTF") held by the County Auditor-Controller. Discussions of tax increment revenues in this report refertothose monies that will be deposited into the RPTTF by the County Auditor-Controller.

Redevelopment Project Area

Tables 1, 2 and 3 below illustrate general information regarding the P rojectArea.

TABLE l: PROJ ECTAREA ORDINANCES

PROJECT AREA DATE OF ADOPTION ORDINANCE NO. ACTION

Original Project Area December 19, 1985 85-263 Adopt and approve the Original

Redevelopment P Ian

Original Project Area November 13, 2007 07-388 Eliminate the debt incurrence deadline perSB2ll

Original Project Area May 26, 2009 09-398 Increase annual tax increment cap

amount

Source: The Agency

2

TABLE 2: PROJECT AREA ACREAGE

Original P rojectArea I

850 acres

S ource: The Agency

TABLE 3: REDEVELOP ME NT PLAN LIMITATION DATES AND AMOUNTS (eliminated per terms of HS C Section 34 l 89(a))

Time Limits Dollar Limits

SUB AREA Debt lncurrence

Plan Effectiveness Debt Repayment Annual Outstanding

(1) Tax Increment Bond Debt

Original Project Area (Eliminated) Dec. 19, 2025 Dec. 19, 2035 $5,000,000 (2) $10,000,000

(l) The debt mcurrence deadline was ehm,nated by the 2007 Redevelopment Plan Amendment per SB 21 l. (2) Per the 2009 Redevelopment Plan Amendment

Source: The Agency and Urban Futures, Inc.

With regards to the limitations in Table 3 above, it should be noted that SB 107, enacted September 22, 2015 and effective on the same date, has amended the Dissolution Act with new provisions stating that forthe purposes of the payment of enforceable obligations defined by Health and Safety Code 34171 (d)(l )(A) through (G) (which includes bonds), and for no other purpose whatsoever, a successor agency is not subject to the limitations relating to time, number of tax dollars, or any other mane rs set forth in Health and Safety Code Sections 33333.2, 33333.4, and 33333.6 (including plan limits on the receipt of property taxes and the repayment of indebtedness, and on the maximum amount of tax dollars that may be allocated to the agency underthe redevelopment plan). It is not known with certainty how the County and the DOF will actually implement this provision.

Project Tax Rate Areas

The FY 2017-18 tax rate area numbers used by the Santa Barbara County Auditor-Controller's Office to identify tax revenue apportionment forthe Project Area are summarized in the following table.

TABLE 4: PROJ ECTTAX RATE AREA ID NUMBERS

Original ProjectArea 004-000, 004-001, 004-002, 004-008, 004-009, 067-007, 067-010

Source: Santa Barbara County Audrtor--Controller

Low-and Moderate-Income Haus ing Set-Aside

Pursuantto the Dissolution Act, the Agency is no longer required to set aside 20 percent of annual tax increment allocated to the Agency, for use in projects benefiting low-and moderate-income

3

housing (the "Former LMI Housing Set-Aside"). Amounts equivalent to the Former LMI Housing Set-Aside amounts are included in the revenues shown in ExhibitA.

Pass Through Payments

Statutory Pass Through Payments:

The Agency is obligated to share tax increment revenues calculated pursuant to Health & Safety Code Section 33607.5 and 33607.7 (the "Statutory Pass Through Payments") generated in the Project Area, with all affected taxing entities. The obligation to make Statutory Pass Through Payments is attributable to the adoption of the 2009 Redevelopment P Ian Amendment, which increased the annual tax increment cap amount contained in the original Redevelopment Plan. The Statutory Pass Through Payments will be calculated annually as follows, using the FY 2009-1 O assessed valuation of the Project Area as the adjusted base year for the purpose of the calculations, with 'Year 1" of such payments being FY 2010-11:

Tier A (Years 1-45) Tier B (Years 11-45) Tier C (Years 31-45)

Pass Through1 11

25% 21% + Tier A 14% +TiersA&B

(l) Applied to the taxing entity's share of tax increment, reduced by a pro--rata share of Agency's Former LMI Housing Set-aside. Although the Former LMI Housing Set-aside is no longer required under the Dissolution Act, the Act requires any pass through calculations which formerly considered such set-aside amounts to continue adjusting for such set-aside amounts post-dissolution.

County Administration Charges

The Santa Barbara County Auditor-Controller will deduct administration charges from the tax increment distributed to the Agency's RPTTF for the Project Area. The estimated administration charges (1.69% of gross tax increment, based on the actual FY 16-17 administration charge amount of $34,196) have been deducted from the projected tax revenues (see Exhibit A).

Assessment Appeals

In Santa Barbara County, a property owner desiring to reduce the assessed value of such owner's property in any one year must submit an application to the Santa Barbara County Assessment Appeals Board (the "Appeals Board"). Applications for any tax year must be submitted by November 30th of such tax year. The Appeals Board, within two years of each applicant's filing date, will hold a hearing and then either reduce the assessment or confirm the assessment.

Current appeals pending in the ProjectArea represent real property with a total assessed valuation of $8,946,391. Based on the actual valuation reductions allcwed by the Appeals Board for property in the Project Area over the last five years, it is not anticipated that the resolution of the current appeals pending will result in any valuation reductions in the Project Area.

The projections of Tax Revenues in Exhibit A have not been adjusted for any potential negative resolution of the current outstanding assessment appeals, as the outcome of such appeals cannot be predicted with certainty.

4

***

While UFI has taken steps to assure the accuracy of the data used in the formulation of these projections, we cannot insure that projected valuations will, in fact, be realized because actual values will most likely be affected by future events and conditions that cannot be predicted with certainty.

We believe that this report provides the Agency with a reasonable basis for demonstrating the available tax increment revenues generated by Guadalupe Redevelopment Project. We are available to answer any questions that you may have regarding this information.

Sincerely,

URBAN FUTURES, INC.

Douglas P. Anderson Managing Principal

5

FY

17-18

18-19

19-20

20-21

21-22

22-23

23-24

24-25

25-26

26-27

27-28

28-29

29-30

30-31

31-32

32-33

33-34

34-35

Exhibit A Successor Agency to the Guadalupe Community Redevelopment Agency

Guadalupe Redevelopment Project

ITAX REVENUE PROJECTIONS

( 1) (2) (3) (4) (5)

Assessed

Valuation Gross Tax County Admin. Pass Through Tax

Growth Revenues Fees Payments Revenues

253,231,185 2,102,138 35,526 344,639 1,721,973

258,295,809 2,152,784 36,382 360,001 1,756,401

263,461,725 2,204,443 37,255 376,013 1,791,175

268,730,959 2,257,136 38,146 392,701 1,826,289

274,105,579 2,310,882 39,054 410,093 1,861,735

279,587,690 2,365,703 39,980 428,218 1,897,505

285,179,444 2,421,621 40,925 447,106 1,933,589

290,883,033 2,478,656 41,889 466,789 1,969,978

296,700,693 2,536,833 42,872 487,300 2,006,660

302,634,707 2,596,173 43,875 508,673 2,043,625

308,687,401 2,656,700 44,898 530,943 2,080,859

314,861,150 2,718,438 45,942 554,147 2,118,349

321,158,373 2,781,410 47,006 578,323 2,156,081

327,581,540 2,845,641 48,091 603,512 2,194,038

334,133,171 2,911,158 49,199 629,755 2,232,204

340,815,834 2,977,984 50,328 657,095 2,270,561

347,632,151 3,046,148 51,480 685,578 2,309,089

354,584,794 3,115,674 52,655 715,251 2,347,768

(1) Based on assumed 2% annual assessed valuation growth over actual FY 17-18 AV.

(2) Gross Tax Revenues based on 1.00% tax rate applied to incremental AV (over

Base Year AV of $43,017,393).

(3) County Admin. Fees estimated at 1.69% ofG ross Tax Revenues, based on

historical admin. fee amounts.

(4) Statutory pass through payments.

Successor Agency to the Guadalupe Community Redevelopment Agency

Guadalupe Redevelopment Project

Historical Assessed Valuation and Tax Increment

Assessed Values

Secured $182,599,655 $191,784,467

Unsecured 18,054,684 21,202,091

Total Assessed Value $200,654,339 $212,986,558

Less: Base Year Assessed Value 43,017,393 43,017,393

Incremental Assessed Value $157,636,946 $169,969,165

Tax Revenues

Gross Tax Increment Revenue (1) $1,627,489 $1,736,849

Less: County Admin. Fees (1) 21,855 41,846

Less: Pass Through Pmts. (1) 215,203 241,817

Pledged Tax Revenues ( 1) 1,390,431 1,453,186

(l) Projected amounts for FY 2017-18, based on actual FY 2017-18 Assessed Valuation.

Source: Urban Futures, Inc.

Exhibit B

$202,789,175 $212,798,400 $228,537,837

21,615,604 24,642,997 24,693,348

$224,404,779 $237,441,397 $253,231,185

43,017,393 43,017,393 43,017,393

$181,387,386 $194,424,004 $210,213,792

$1,864,709 $2,027,346 $2,102,138

28,848 34,196 35,526

271,971 325,860 344,639

1,563,890 1,667,290 1,721,973

Exhibit C

$ ltl(ID(ID !R$ $ OR AG IE N@N:l TIITO ITIITlfl IE !JJl ltlAIJJ)Allllilll lil IE @O MMUJ N IITIITN1 RE IJJ)!RMIR IITOlil MIR NIE A(Il IE NJ(ill:tfil

!JJl ualtlal upe Reltle\lelopment li1 roject

lllargest lllocal 5 ec urea ITJITaxpall,1ers ~ rope~ Owners Ff iual N:lear l101 l1!-l 8

ITIITaxa ale S ecu reel li1 rima[ll:1 li1 ere e11t of

fl rope~ @w11er Ass es s eltl Nlaluatio11 lllanlfl lilll s e S em red ANI" 1

1. Apio Inc $30,908,377 Industrial 13.53%

2. Bgv Olivera LLC 9,654,665 Single Family Residential 4.23%

3. AlvarezJ ose Guadalupe Separate Property 9,449,764 Multi-family Residential 4.14%

4. Apio Cooling 7,529,000 Industrial 3.30%

5. Waller Flowerseed Co 6,259,517 Commercial 2.74%

6. RuizJ oseph LS r Separate Property IErust 2,892,056 Multi-family Residential 1.27%

7. Beachside Produce LLC 2,159,841 Industrial 0.95%

R lill)e La IEorreJ uan 1,746,360 Single Family Residential 0.76%

9. Alvarez Gustavo Revocable IErust 1,591,058 Commercial 0.70%

10. Zepeda Family IErust 1,417,339 Industrial 0.62%

IEotal $73,607,977 32.22%

(l) Based on fiscal year 2017-l 8 secured assessed valuation of $228,470,375

Source: Urban Futures, Inc. with information from the Santa Barbara County 2017-l 8 Secured Property Tax Roll.

Exhibit D

~ lfill!:1!!:1! ES~ !IT.HRt A(Il E N!:1!l'if IE~ IElflE G lfillA!l)Alilllfill l!l E !ill:~MMlfill NIIE:!ltJ R IE ll)ltrJ MIR lill~l!l ME NITIIT A!ll lR N!:1!l'if

!:1l t1aiilalt1 !;le Rede11elol;lmernt l!l roject

lillaniil lfillse ~ umma!f!ll Fl is ca I l'ifear 201 l!!-H!

S enired l!!Jss es sed 1'1e rcent offi Sec LI red

Wan a Ills e N t1mller offi l'1 arcels Mal t1atio11 A.M. !l!

Single Family Residential 1,052 $135,036,106 59.1 0)6

Industrial 23 40,876,146 1 7.89!6

Commercial 68 22,463,086 9.83%

Multi-family Residential 106 19,445,765 8.51%

Macant Industrial 24 5,360,854 2.35%

Macant Commercial 26 2,267,394 0.99!6

Macant Residential 54 2,241,656 0.98%

Macant G overnmental~nstitutional,Other 25 321,100 0.14%

G overnmental~nstitutional,Other 34 283,997 0.12%

Agricultural 3 174,271 0.08%

Recreational 3 0 0.00!6

IEotals 1,418 $228,470,375 100.00)6

( l) Based on fiscal year 2017-l 8 secured assessed valuation of $228,470,375

5 ource: Urban Futures, Inc. with information from the 5 anta Barbara County 2017-l 8 5 ecured Property Tax Roll.

Exhibit E

$ !JI@@ HJ$$ ®l!J l!'!J!ll IE N(IDTh'TI ITIIT® ITIITIU !ll UJWltlTI)WltruJlilll F1 ffiJ (ID® Nillliil!Jl N ITIITTh'TI l!JE ITI)ffiJME W®l!l lliilffiJ NJlfil l!'!J!ll E N@Th'TI !:1l miiilal upe l!JeiileMelopme11t l!l roject

lflistorica I l!'!Js ses s ment l!'!Jppeals l!JeMieweiil J a11ua !1ll'f 1, l!l!JJ l!l Jlmlii roug hi 5 eptembe r l!l 1, l!l!JJ 111

Witllowea Number of l!'!Jss ess ea ®w11er's Jlfiloml l!Jeam:tio11 l!Jeiih.rntions

Nu mli\er off 5 uccess fu I Ma lue off ®pi 11io11 offi l!Je!!I ues teiil Witlloweiil Ii\¥ as !1fu offi WilF1peals ffi ilea l!'!Jppeals 11 rope !t(\\ii tv!al 11e Willi l!Jea 11ctio11 B oara RJ eguestea

6 !J $19,847,488 $11,934,!J!J!J $7,913,488 $ID !J.!J0!6

Potential Wltss ess ei:I ®w11er's Illas s offi

l!Joll Th'iear Nu miler offi 1\/a lue off ®pi 11io11 offi l!'!Js s es sea lilis tori ca I !IE st.) l!'!Jll WilF!l!l!!alea l!'!Jppeals ffiilea Prope!t(\\ii tv!al11e 1\/alue Success l!Jate l!Jeii111ctio11

2!Jl 6

2!Jl 7

3

2 1,665,762 7,28!J,629

96!J,!J!J!J 4,369,!J!J!J

Source: Urban Futures, Inc. with data obtained from Santa Barbara County.

7!J5,762 2,911,629

!J.!J0!6 !J.!J0!6

!J !J

APPENDIX I

SPECIMEN MUNICIPAL BOND INSURANCE POLICY

1-1

MUNICIPAL

ISSUER:

MUNICIPAL BOND INSURANCE POLICY

-N

BONDS: $ in aggregate principal amount of

ASSURED GUARANTY MUNICIPAL CORP. ('AGM"), UNCONDITIONALLY AND IRREVOCABLY agrees to pay to the tr "Paying Agent") (as set forth in the documentation providing for the Bonds, for the benefit of the Owners or, at the election of the terms of this Policy (which includes each endorsement intereston the Bonds that shall become Due for Payment buts the Issuer.

On the later of the day on which such Business Day next following the Business Da AG M will disburse to or for the benefit of ea on the Bond that is then Due for Payme only upon receipt by AGM, in a form r receive payment of the principal appropriate instruments of assign principal or inte:rest that is Due for deemed received on a given Busi

ue for Payment or the d Notice of Nonpaymen~

a t of principal of and inte:rest f Nonpayment by the Issuer, but

of (a evidence of the Owners right to t and (b) evidence, including any

er's hts with respect to payment of such ,n AGM. A Notice ofNonpaymentwill be

rior to l :00 p.m. (New York time) on such Business Day; otherwise, I eemed receiv the next Business Day. If any Notice of Nonpayment received purposes of the pre Owner, as approp · respect of a Bond, A to receipt of p Owner, incl AGM her thee

te, it shall e deemed not to have been received by AG M for M promptly so advise the Trustee, Paying Agent or

ed Notice of Nonpayment Upon disbursement in ner of the Bond, any appurtenant coupon to the Bond or right ton the Bond and shall be fully subrogated to the rights of the

payments under the Bond, to the exlEnt of any payment by Trustee or Paying Agent for the benefit of the Owners shall, to

n of AGM under this Policy.

x'ent expre sly modified by an endorsement hereto, the following terms shall have r all purposes of this Policy. "Business Day" means any day other than (a) a

ay on which banking institutions in the State: of New York or the Insurer's or required by law or executive order to remain closed. "Due for Payment''

to the principal of a Bond, payable on the stated maturity date thereofor the date all have been duly called for mandato,y sinking fund redemption and does not refer to ich payment is due by reason of call for redemption (other than by mandato,y sinking

fund rede , acceleration or other advancement of maturity unless AGM shall elect, in its sole discretion, to p y such principal due upon such acceleration together with any accrued interest to the date of acceleration and (b) when referring to interest on a Bond, payable on the stated date for payment of interest "Nonpayment'' means, in respect of a Bond, the failure of the Issuer to have provided sufficient funds to the Trustee or, if there is no Trustee, to the Paying Agent for payment in full of all principal and interest that is Due for Payment on such Bond. "Nonpayment'' shall also include, in respect of a Bond, any payment of principal or interest that is Due for Payment made to an Owner by or on behalf of the Issuer which has been recovered from such Owner pursuant to the

of2 Policy No. -N

Unied States Bankrup1I:y Code by a trus1ee in bankrup1I:y in accordance with a final, nonappealable order of a court having competent jurisdiction. "Notice" means telephonic or te:lecopied notice, subsequently confirmed in a signed writing, or written notice by registered or certified mail, from an Owner, the Truste:e or the Paying Agent to AG M which notice shall specify (a) the person or entity making the claim, (b) the Policy Number, (c) the claimed amount and (d) the date such claimed amount became Due for Payment "Owner" means, in respect of a Bond, the person or entity who, at the time of Nonpayment, is entitled under the terms of such Bond to payment thereof, exceptthat"Owne~· shall not include the Issuer rany person or entity whose direct or indirect obligation constitutes the underlying security for the Bonds.

AGM may appoint a fiscal agent (the "Insurer's Fiscal Agent') for purposes giving written notice to the Truste:e and the Paying Agent specifying the name and notic: Insurer's Fiscal Agent From and afte:r the date of receipt of such notice by Agent (a) copies of all notices required to be delivered to AGM pur simultaneously delivered to the Insurers Fiscal Agent and to AGM ands received by both and (b) all payments required to be made by AGM u byAGM or by the Insurer's FiscalAgenton behalfofAGM. The Ins only and the Insurers F iscalAgent shall in no event be liable to an Agent or any failure of AGM 1D depos~ or cause to be depos under this Policy.

To the fullest extent perm~d by applicable law, AG only for the benefit of each Owner, all rights (whether by coun1e (including, without lim~tion, the defense of fra ether a

d hereby waives, ise) and defenses

tion, assignment or to avoid payment of its otherwise, to the extent that such rights and d

obligations under this Policy in accordance wi

This Policy sets forth in full affe:cted by any other agreement or in the extent expressly modified by a nonrefundable for any reason wha Bonds prior to maturity and (b) COVERED BY THE PROPE lY,C OF THE NEW YORK INS E

A subsidiary of Assured Guaranty Municipal Holdings Inc. 1633 Broadway, New York, N.Y. 10019 (212) 974-0100

Form S0ONY (5;90)

hall not be modified, altered or ·on or amendment thereto. Except to

ium paid in respect of this Policy is ovision being made for payment, of the

d or revoked. THIS POLICY IS NOT CURllY FUND SPECIFIED IN ARTICLE 76

MUNICIPAL CORP. has caused this Policy to be

ASSURED GUARANTY MUNICIPAL CORP.

By---~~~~~=-----Authorized Officer

Successor Agency to the Guadalupe Community Redevelopment Agency Tax Allocation Refunding Bonds, Series 2017 (Taxable)

~

j ] :ii

1!' il "f

c:tll

cdiacdocs.sto.ca.govcdiacdocs.sto.ca.gov/2017-2938.pdf · NEW ISSUE-BOOK-ENTRY RATINGS: Insured: S&...

Documents

Transcript of cdiacdocs.sto.ca.govcdiacdocs.sto.ca.gov/2017-2938.pdf · NEW ISSUE-BOOK-ENTRY RATINGS: Insured: S&...