SAN DIEGO COUNTY HEALTH FACILITIES FINANCING AUTHORITY ... Center/Agendas/2010-12-17 … · SAN...

Asterisks “*” indicate anticipated action Action is not limited to those designated items

SAN DIEGO COUNTY HEALTH FACILITIES FINANCING AUTHORITY BOARD OF DIRECTORS

NOTICE AND MEETING AGENDA Grossmont Healthcare DistrictFriday, December 17, 2010 9001 Wakarusa Street, La Mesa, CA12:00 noon Administrative Conference Room

Time Page Target I. CALL TO ORDER and ROLL CALL........................................................................................... ............... 2 ............ 12:02P

II. PUBLIC COMMENTS ................................................................................................................. ................5 ............ 12:07P

(5 minutes allowed per speaker, with a cumulative total of 15 minutes per group – for further details & policy, see Request for Public Comments notices, available in the meeting room)

III. APPROVAL OF MINUTES

A. * October 22, 1010 (Addendum A) ........................................................................................... ................2 .......2-5 12:09P IV. INFORMATION ITEM(S) ............................................................................................................. ................5 ............ 12:14P

V. DISCUSSION AGENDA

A. * Adoption of Resolution No. 12.17.10 (04) – 01: Authorizing the Purchase and Sale of Grossmont Healthcare District (San Diego County, California) General Obligation Bonds, 2006 Election, 2011 Series B; Approving the Form of a Purchase Contract and Authorizing the Execution and Delivery Thereof; and Authorizing the Taking of All Necessary Actions in Connection Therewith (Addendum B)................................................ ................6 .....6-81 12:20P

VI. BOARD MEMBER COMMENTS................................................................................................. ................5 ............ 12:25P

VI. FINAL ADJOURNMENT ............................................................................................................. .................. ............ 12:25P

NEXT MEETING: Friday, October 28, 2011 – Location TBD

NOTE: If you have a disability, please notify us 72 hours prior to the event at 760-740-6383 so that we may provide reasonable accommodations

ADDENDUM A

2

draft

SAN DIEGO COUNTY HEALTH FACILITIES FINANCING AUTHORITY BOARD OF DIRECTORS MEETING

Grossmont Healthcare District, 9001 Wakarusa Street, La Mesa, California Administrative Conference Room 1

Friday, October 22, 2010 – Meeting Minutes

AGENDA ITEM DISCUSSION CONCLUSION/ACTION FOLLOW UP

MEETING CALLED TO ORDER 12:03 p.m. by PPH Bond Counsel Kathleen Leak, Orrick, Herrington & Sutcliffe, LLP, acting as meeting facilitator

ROLL CALL The roll was called by Secretary Tanya Howell

ATTENDANCE Board Members: Michael H. Covert, FACHE, Robert A. Hemker, Barry Jantz, Thomas J. Saiz, CPA, and secretary Tanya Howell

Also in attendance were Kathleen Leak of Orrick, Herrington & Sutcliffe LLP; Janine Sarti, Legal Counsel PPH; Jeff Scott, Legal Counsel Grossmont; and guest Michael Emerson, a member of the Grossmont Board of Directors

NOTICE OF MEETING The notice of meeting was mailed on October 15, 2010, which is consistent with legal requirements.

INFORMATION ITEM(S) There were no information items.

OATH OF OFFICE The Oath of Office was presented to the members of the Board, who each read the oath. After reading, each member stated they so swore and signed their respective Oath of Office forms and returned them to Ms. Leak.

PUBLIC COMMENTS There were no public comments

DISCUSSION AGENDA A. ADOPTION OF BYLAWS B. ELECTION OF CHAIR C. ELECTION OF VICE-CHAIR D. APPOINTMENT OF SECRETARY E. CONFIRMATION OF APPOINTMENT OF TREASURER/CONTROLLER F. ESTABLISHMENT OF TIME & PLACE FOR REGULAR BOARD MEETINGS G. ADOPTION OF CONFLICT OF INTEREST CODE H. APPOINTMENT OF SPECIAL COUNSEL FOR AUTHORITY

A. Ms. Leak stated that she had copies of the Bylaws (also published on pages 6-10 of the agenda packet) available for review

a. There were no questions b. Discussion of what constitutes a quorum, which on this Board is a

majority of those in attendance i. Only change from the North SD County JPA Board’s Bylaws ii. Also retained the concept of appointing a designate should a

member of the Board be unable to attend B. Nominations were accepted by Ms. Leak, followed by a motion by Director Covert to close nominations C. Nominations were accepted by Ms. Leak D. Nominations were accepted by Ms. Leak, with comment that the Secretary is typically contemplated to be the Executive Assistant to the CFO of the issuing District E. Nominations were accepted by Ms. Leak, with comment that the JPA Agreement designates the CFO of PPH as the initial Treasurer/Controller,

A. MOTION: By Director Jantz, seconded by Director Hemker and carried by unanimous vote to approve the Bylaws of the San Diego County Health Facilities Financing Authority [“The Authority”] as presented

B. MOTION: By Director Hemker, seconded by Director Saiz and carried by unanimous vote to elect Barry Jantz Chair of The Authority

C. MOTION: By Director Hemker, seconded by Director Jantz and carried by unanimous vote to elect Tom Saiz Vice-Chair of The Authority

D. MOTION: By Director Jantz, seconded by Director Covert and carried by unanimous vote to appoint Tanya Howell Secretary of The Authority

• Ms. Leak is to do research on whether Form 700’s should be filed for Authority Boards and report back

3

draft


I. RESOLUTION NO. 10.22.10 (01) – 01 J. RESOLUTION 10.22.10 (02) – 02 K. RESOLUTION 10.22.10 (03) – 03

so motion would be to confirm that appointment rather than to elect F. No discussion G. JPA Agreement states that members shall be bound by the Conflict of Interest Codes of their respective Districts

a. Discussion regarding IRS Form 700’s i. When Board members complete Form 700’s, should they be

listing the Authority Boards as well as their own agencies? ii. Should they be filing a separate Form 700 for each Authority

Board? iii. Director Hemker stated that the other Boards on which he sits

merely re-forward the Form 700 he has already completed for the PPH District, but he has never listed the Authority Board

iv. Ms. Leak will research the issue and report back but proposed that the Board consider approving the Code as currently stated in the JPA Agreement

H. Ms. Leak stated that she – as a representative of the law firm of Orrick, Herrington & Sutcliffe LLP – has served as Special Counsel to the original JPA Board, then requested discussion and comment

a. Prior to vote, Ms. Leak was asked if she had done a good job in her capacity as Special Counsel, and she responded in the affirmative

I. This is the organizational Resolution that memorializes the decisions reached in Items A-H above

a. The copy of the Resolution in the packet has blanks in §§3 & 5 that will be filled in as voted above

J. This Resolution relates to the GO Bonds for which PPH is requesting The Authority’s participation in issuance

a. Authorizes execution and delivery by The Authority of documents to which The Authority is a party in connection with the issuance i. Documents included in the agenda packet are the Bond

Purchase Agreement and the General Obligation (GO) Bond Official Statement, which provides information on the GO Bond issuance

1. Director Hemker stated that this is the final tranche of funds pursuant to the authority given the District in Measure BB

2. Has confirmed that the $64,916,681 does not exceed the Measure BB authority

3. PPH has completed all due diligence with the financing team in review and preparation of all documents, and the issuance of the Preliminary Official Statement, the Bond Purchase Agreement and the financing documents have been through significant financial and legal reviews

a). The primary members of the financing team are staff from the PPH District (Bob Hemker, CFO; Janine Sarti, General Counsel); Bond Counsel Orrick, Herrington & Sutcliffe LLP (Kathleen Leak,

E. MOTION: By Director Jantz, seconded by Director Covert and carried by unanimous vote to confirm appointment of Robert Hemker Treasurer/Controller of The Authority.

F. MOTION: By Director Covert, seconded by Director Jantz and carried by unanimous vote to hold the regular meeting of The Authority at 456 E. Grand Avenue, Escondido, CA 92025; 555 E. Valley Parkway, Escondido, CA 92025; 9001 Wakarusa Street, La Mesa, CA 91942; 15615 Pomerado Road, Poway, CA 92064; 15255 Innovation Drive, San Diego, CA 92128, or such other location as the Board may designate from time to time by Resolution, at 12:00 p.m. on the fourth Friday in October of each year, commencing Friday, October 22, 2010, or such other time and/or date as the Board may designate from time to time by Resolution of the Board; provided, however, that a second regular meeting shall be held on Friday, December 17, 2010.

G. MOTION: By Director Saiz, seconded by Director Hemker and carried by unanimous vote that each member of The Authority shall be bound by the Conflict of Interest Code of their respective healthcare districts

H. MOTION: By Director Jantz, seconded by Director Hemker and carried by unanimous vote that the law firm of Orrick, Herrington & Sutcliffe LLP be appointed Special Counsel to The Authority.

I. MOTION: By Director Covert, seconded by Director Saiz and carried by unanimous vote to adopt Resolution No. 10.22.10 (01) – 01

J. MOTION: By Director Hemker, seconded by Director Jantz and carried by unanimous vote to adopt Resolution No. 10.22.10 (02) – 02

K. MOTION: By Director Hemker, seconded by Director Jantz and carried by unanimous vote to adopt Resolution No. 10.22.10 (03) – 03

4

draft


2010-10-22 Authority Board Minutes.doc Page 3

Of Counsel; Roma Shupe, Project Manager); Financial Advisor Kaufman Hall (Ellen Riley, Senior VP; Carlos Bohorquez, Asst VP); Underwriter Citi (Chad Kenan, Director; Andy Pines, Managing Director; Victor Andrade, VP); Underwriter’s Counsel Squire, Sanders & Dempsey LLP (Robert H. Olson, Partner; Stephanie Shepherd, Associate); and Auditor Deloitte & Touche (Mark Kawauchi, Director; Shibani Dogra, Manager)

K. This Resolution relates to the Revenue Bond-supported piece for which PPH is requesting The Authority’s participation in issuance

a. Documentation is in the agenda packet for the Certificates of Participation financing

b. Additional documents to which The Authority is a party (Installment Sale Agreement, Purchase Agreement, Trust Agreement, and a Certificate Purchase Agreement, as well as the Certificates of Participation Official Statement

c. At this point, anticipate execution of up to $175M, with an anticipated funding of $125M in project funds i. Final decision on pricing and issuance amount will be done

based on the market on the pricing date

BOARD MEMBER COMMENTS A. Director Covert thanked the members from Grossmont for their willingness to create a new Authority Board, stating that the PPH Board is confident these bond issues are the right direction for the District, and he looks forward to working with the Authority Board in the future

• In the first resolution, a second regular meeting was scheduled on December 17, 2010, and the Secretary will be in touch with each Board member to confirm scheduled location

ADJOURNMENT There being no further business, the meeting was adjourned at 12:25 p.m.

SIGNATURES:

• CHAIRMAN

Barry Jantz

• SECRETARY Tanya Howell

5

ADDENDUM B

6

San Diego County Health Facilities Financing Authority

Resolution No. 12.17.10 (04) – 01

A RESOLUTION AUTHORIZING THE PURCHASE AND SALE OF GROSSMONT HEALTHCARE DISTRICT (SAN DIEGO COUNTY, CALIFORNIA) GENERAL OBLIGATION BONDS, 2006 ELECTION, 2011 SERIES B; APPROVING THE FORM OF A PURCHASE CONTRACT AND AUTHORIZING THE EXECUTION AND DELIVERY THEREOF; AND AUTHORIZING THE TAKING OF ALL NECESSARY ACTIONS IN CONNECTION THEREWITH

WHEREAS, pursuant to the provisions of the Joint Exercise of Powers Act, comprising Articles 1, 2, 3 and 4 of Chapter 5 of Division 7 of Title 1 (commencing with Section 6500) of the Government Code of the State of California (the “Act”), Palomar Pomerado Health (“Palomar”), a local health care district duly organized and existing under the laws of the State of California, and Grossmont Healthcare District (“Grossmont”), a local health care district duly organized and existing under the laws of the State of California, entered into that certain Joint Exercise of Powers Agreement, dated October 22, 2010 (the “JPA Agreement”), pursuant to which the San Diego County Health Facilities Financing Authority (the “Authority”) was established and created;

WHEREAS, Palomar and Grossmont are each a “local agency” as such term is defined in the Act;

WHEREAS, Article 4 of the Act authorizes a local agency to sell bonds to an authority created pursuant to the Act without compliance with any public sale requirement included in the statutes under which such bonds are issued;

WHEREAS, Article 4 of the Act also authorizes and empowers an authority created pursuant to the Act to enter into a purchase contract with a local agency to purchase bonds issued by a local agency and to sell bonds so purchased to public or private purchasers at public or negotiated sale;

WHEREAS, Grossmont is a local agency which is preparing to issue general obligation bonds, being its 2011 Series B Bonds (hereinafter referred to as the “Grossmont GO Bonds”) authorized by a ballot measure (“Proposition G”) approved by more than two-thirds of the votes cast on Proposition G at an election held in Grossmont on June 6, 2006;

WHEREAS, such Grossmont GO Bonds will be issued to finance all or portions of the health care projects as referenced and described in Proposition G;

WHEREAS, to provide for development of the most favorable debt structure for Grossmont and to ensure the most favorable reception in the market place for the Grossmont GO Bonds, Grossmont proposes to sell the Grossmont GO Bonds by negotiated sale;

7

WHEREAS, to provide for such negotiated sale, Grossmont proposes to sell the Grossmont GO Bonds to the Authority and has requested that the Authority agree to purchase the Grossmont GO Bonds from Grossmont and simultaneously resell the Grossmont GO Bonds to Goldman Sachs & Co. (hereinafter referred to as the “Purchaser”);

WHEREAS, the Authority desires to assist Grossmont to provide for the negotiated sale of the Grossmont GO Bonds;

WHEREAS, Grossmont has caused to be prepared a proposed form of purchase contract (the “Purchase Contract”), such Purchase Contract to be executed and delivered by the Purchaser and to be accepted by Grossmont and the Authority;

WHEREAS, a proposed form of Purchase Contract is on file with the Secretary of the Authority; and

WHEREAS, a proposed form of official statement in preliminary form (the “Official Statement”), to be used in connection with the offering and sale of the Grossmont GO Bonds, is also on file with the Secretary of the Authority;

NOW THEREFORE, BE IT RESOLVED by the Board of Directors of the Authority, as follows:

Section 1. The foregoing recitals are true and correct and the Board of Directors of the Authority hereby so finds and determines.

Section 2. Pursuant to the Act, the Authority is hereby authorized to purchase the Grossmont GO Bonds from Grossmont and to sell the Grossmont GO Bonds to the Purchaser.

Section 3. The proposed form of the Purchase Contract, on file with the Secretary of the Authority, is hereby approved. The Chair of the Authority, the Vice-Chair of the Authority, the Treasurer/Controller of the Authority, or a designee of any such officer (each, an “Authorized Officer”), acting singly, is hereby authorized and directed, for and on behalf of the Authority, to execute and deliver the Purchase Contract in substantially such form, with such changes and insertions therein as such Authorized Officer, with the advice of counsel to the Authority, may require or approve, such approval to be conclusively evidenced by the execution and delivery thereof, and pursuant thereto to purchase the Grossmont GO Bonds from Grossmont and to simultaneously sell the Grossmont GO Bonds to the Purchaser at the purchase price set forth in the Purchase Contract, which purchase price shall be approved by Grossmont.

Section 4. Pursuant to Section 10 of the JPA Agreement, any expenses incurred by the Authority in connection with the execution and delivery of the Purchase Contract shall be paid by Grossmont.

Section 5. The Authorized Officers and their respective designees, acting singly, are hereby authorized and directed, for and in the name and on behalf of the Authority, to execute and deliver any and all documents and certificates, including, without limitation,

8

SF1 1611932v.5 33982/30020 3

any certificate required to be delivered pursuant to the Purchase Contract and any certificate concerning the information regarding the Authority set forth in the Official Statement in preliminary form and in the Official Statement in final form, and to do any and all things and take any and all actions which may be necessary or advisable, in their discretion, to effectuate performance of the Authority’s covenants, agreements and obligations under the Purchase Contract authorized by this Resolution and the actions approved by this Resolution.

Section 6. All approvals, consents, directions, notices, orders, requests and other actions, including, without limitation, the delivery of certificates, permitted or required by the Purchase Contract or by the purchase and sale of the Grossmont GO Bonds authorized pursuant to this Resolution, may be taken by any Authorized Officer without further authorization by the Board of Directors of the Authority, and each Authorized Officer is hereby authorized and directed to give or deliver any such approval, consent, direction, notice, order or request and to take any such other action which such Authorized Officer, with the advice of counsel to the Authority, may deem necessary or desirable to further the purposes of this Resolution.

Section 7. Notwithstanding anything to the contrary in this Resolution, no documents referenced in this Resolution may be executed and delivered by the Authority until the Board of Directors of Grossmont has adopted a resolution authorizing the issuance of the Grossmont GO Bonds, including the execution and delivery of the Purchase Contract in connection therewith.

Section 8. This Resolution shall take effect from and after its adoption.

Passed and Adopted by the Board of Directors of the San Diego County Health Facilities Financing Authority this 17th day of December, 2010

___________________________________ Chair

9

I hereby certify that the foregoing is a full, true and correct copy of a resolution duly passed and adopted by the Board of Directors of the San Diego County Health Facilities Financing Authority at a meeting thereof held in accordance with law on December 17, 2010, by the following vote of the members thereof:

AYES:

NOES:

ABSENT:

ABSTENTIONS:

Tanya Howell, Secretary

10

-

$__________ Grossmont Healthcare District

(COUNTY OF SAN DIEGO, CALIFORNIA) GENERAL OBLIGATION BONDS, 2006 ELECTION, 2011 SERIES B

___________________________________

PURCHASE CONTRACT ___________________________________

January __, 2011 Board of Directors Grossmont Healthcare District

Board of Directors San Diego County Health Facilities Financing Authority

Ladies and Gentlemen:

The undersigned, Goldman, Sachs & Co., as underwriter (the “Underwriter”), hereby offers to enter into this Purchase Contract (the “Purchase Contract”) with you, the Grossmont Healthcare District (the “District”) and the San Diego County Health Facilities Financing Authority (the “Authority”), for the purchase by the Underwriter of $_________ aggregate principal amount of the Grossmont Healthcare District (County of San Diego, California) General Obligation Bonds, 2006 Election, 2011 Series B (the “Bonds”), which will be issued pursuant to a resolution (the “Bond Resolution”) adopted by the Board of Directors of the District (the “District Board”) on December 17, 2010 and Section 32300 et seq. of the Health and Safety Code of the State of California (the “Act”). Capitalized terms used herein and not otherwise defined herein shall have the meanings set forth in the Official Statement (hereinafter defined).

This offer is made subject to acceptance by the District and the Authority prior to 11:59 p.m., California time, on the date hereof. If this offer is not so accepted, this offer will be subject to withdrawal by the Underwriter upon notice delivered to the District and the Authority at any time prior to acceptance. Upon acceptance, this Purchase Contract shall be in full force and effect in accordance with its terms and shall be binding upon the District, the Authority and the Underwriter.

SECTION 1. PURCHASE, SALE AND DELIVERY OF THE BONDS.

(a) Subject to the terms and conditions and in reliance upon the representations, warranties and agreements set forth herein, the District hereby agrees to sell to the Authority and the Authority hereby agrees to purchase from the District for resale to the Underwriter, and the

11

Authority hereby agrees to sell to the Underwriter for offering to the public and the Underwriter agrees to purchase from the Authority all (but not less than all) of the Bonds, in the aggregate principal amount of $___________, consisting of $__________ in aggregate principal amount of Current Interest Bonds and $_________ in aggregate principal amount of Capital Appreciation Bonds.

The Bonds are general obligations of the District payable from ad valorem taxes.

The Bonds are being sold to the Authority for the immediate resale to the Underwriter pursuant to a resolution adopted by the Authority on December 17, 2010 (the “Authority Resolution”).

The Bonds shall be substantially in the form described in, and shall be issued and secured under and pursuant to, the Bond Resolution. The Bonds shall mature and shall be subject to redemption on the dates and in the amounts as set forth in Exhibit A hereto and as otherwise described in the Official Statement. Interest on the Current Interest Bonds shall be payable on each January 15 and July 15, commencing on _______ 15, 20__, at the per annum rates and on the dates set forth in Exhibit A hereto and as otherwise described in the Official Statement. Interest on the Capital Appreciation Bonds will accrue from the date of delivery, will be compounded semiannually on January 15 and July 15 of each year, commencing on _______ 15, 20__, at the per annum rates set forth in Exhibit A hereto and as otherwise described in the Official Statement, and will be payable only upon maturity or prior redemption thereof.

The Bonds shall be in book-entry form, shall bear CUSIP numbers, shall be in fully registered form, registered in the name of Cede & Co., as nominee of The Depository Trust Company (“DTC”) in New York, New York. The Current Interest Bonds shall be issued in authorized denominations of $5,000 or any integral multiple thereof. The Capital Appreciation Bonds shall be issued in authorized denominations corresponding to $5,000 maturity value or any integral multiple thereof; provided that one Capital Appreciation Bond may be issued in an odd denomination.

The Bonds are being issued to provide funds to (i) finance and/or refinance the construction, expansion, improvement or acquisition of certain healthcare facilities owned by the District, and (ii) pay costs of issuance of the Bonds.

The District will undertake, pursuant to a Continuing Disclosure Certificate (the “Continuing Disclosure Certificate”), to be executed and delivered by the District on the Closing Date (as defined herein), to provide certain annual financial information and notices of the occurrence of certain events, if material. A form of the Continuing Disclosure Certificate is set forth in the Preliminary Official Statement and will also be set forth in the Official Statement.

The District hereby ratifies, confirms and approves the use and distribution by the Underwriter prior to the date hereof of the Preliminary Official Statement of the District dated January __, 2011 relating to the Bonds (which, together with the cover page and all appendices thereto, is referred to herein as the “Preliminary Official Statement”), which delivery may be made in electronic format. The District has deemed final the Preliminary Official Statement as

12

of its date for purposes of Rule 15c2-12 promulgated under the Securities Exchange Act of 1934 (“Rule 15c2-12”), except for information permitted to be omitted therefrom by Rule 15c2-12. The District hereby acknowledges that the Preliminary Official Statement has been made available to investors on the Internet at www.munios.com. The District hereby agrees to deliver or cause to be delivered to the Underwriter, within seven Business Days of the date hereof and not later than three Business Days prior to Closing, copies of the final official statement (including all information permitted to be omitted by Rule 15c2-12 and any amendments or supplements to such official statement as have been approved by the District, in consultation with the Underwriter) (the “Official Statement”) in designated electronic format (as defined in Municipal Securities Rulemaking Board (“MSRB”) Rule G-32) and in sufficient hard copy quantity to enable the Underwriter to comply with the rules of the Securities and Exchange Commission and the MSRB. The District hereby approves of the use and distribution by the Underwriter of the Official Statement in connection with the offer and sale of the Bonds. At the time of or prior to the Closing Date (as hereinafter defined), the Underwriter shall file a copy of the Official Statement with the MSRB through EMMA (Electronic Municipal Market Access).

As used in this Purchase Contract, the term “End of the Underwriting Period” for the Bonds shall mean the earlier of (i) the Closing Date or (ii) the date on which the End of the Underwriting Period for the Bonds has occurred under Rule 15c2-12, as specified as such in a written notice from the Underwriter stating the date which is the End of the Underwriting Period.

(b) The Underwriter shall purchase the Bonds at a price of $__________, which represents the par amount of the Bonds of $___________, less an underwriting discount with respect to the Bonds of $__________, [plus] [less] a[n] [net] original issue [premium] [discount] of $_________.

(c) At 8:00 a.m., California time, on February __, 2011, or at such other time or on such other date as the District, the Authority and the Underwriter mutually agree upon (the “Closing Date”), the District will deliver or cause to be delivered to the Authority and the Authority will deliver or cause to be delivered to the Underwriter the Bonds (delivered through the book-entry system of DTC), duly executed, and at the offices of Sidley Austin LLP, 555 California Street, San Francisco, California 94104 or at such other place as the District, the Authority and the Underwriter shall have mutually agreed upon, the other documents mentioned herein. The Underwriter will accept such delivery and pay the purchase price of the Bonds as set forth in subparagraph (b) above in immediately available funds (such delivery and payment being herein referred to as the “Closing”).

(d) The Underwriter agrees to make a bona fide public offering of the Bonds at the initial offering prices set forth in the Official Statement, which prices may be changed from time to time by the Underwriter after such offering. The District hereby authorizes the Underwriter to use the forms or copies of the Official Statement, the Bond Resolution, the Continuing Disclosure Certificate and all other documents referred to in the Official Statement and the information contained in each of the foregoing in connection with the public offering and sale of the Bonds.

13

SECTION 2. REPRESENTATIONS, WARRANTIES AND AGREEMENTS OF THE DISTRICT.

The District hereby represents, warrants and agrees as follows:

(a) The District is and will be on the Closing Date a political subdivision of the State of California duly organized and validly operating pursuant to the Constitution and laws of the State of California with full power and authority to issue the Bonds pursuant to the Act for the purposes described in the Official Statement, to adopt the Bond Resolution, to execute and deliver the Official Statement and the Continuing Disclosure Certificate and to enter into this Purchase Contract, to sell the Bonds to the Authority as provided in this Purchase Contract, and to consummate the transactions contemplated hereby and thereby;

(b) The Bond Resolution authorizing the issuance of the Bonds and the execution and delivery of the Continuing Disclosure Certificate, the Official Statement and this Purchase Contract has been duly adopted at a meeting of the District Board which was called and held pursuant to law and with all public notice required by law and at which a quorum was present and acting throughout, and has not been amended, modified or rescinded;

(c) By official action of the District prior to or concurrently with the acceptance hereof, the District has duly authorized, ratified and approved the issuance of the Bonds, the execution and delivery of the Official Statement, the execution and delivery of and the performance by the District of the obligations on its part contained in the Continuing Disclosure Certificate and this Purchase Contract, and the consummation by it of all other transactions of the District contemplated by the Official Statement and this Purchase Contract;

(d) The Bonds, when executed and delivered, will have been duly authorized and issued and, together with this Purchase Contract, the Continuing Disclosure Certificate and the other documents contemplated hereby and by the Official Statement, when executed and delivered, will constitute the valid and binding obligations of the District enforceable in accordance with their respective terms except as the enforceability may be subject to applicable limitations of bankruptcy, insolvency, reorganization, arrangement, fraudulent conveyance, moratorium or equitable principles affecting the enforcement of creditors’ rights. The enforcement of this Purchase Contract, the Continuing Disclosure Certificate and the Bonds are subject to the effect of the general principles of equity, including, without limitation, concepts of materiality, reasonableness, good faith and fair dealing, and the possible unavailability of specific performance or injunctive relief, regardless of whether considered in a proceeding in equity or at law, and to the exercise of judicial discretion in appropriate cases and to the limitations on legal remedies against public entities in the State of California;

(e) The issuance of the Bonds, the adoption of the Bond Resolution, the execution and delivery by the District of the Continuing Disclosure Certificate, this Purchase Contract and the Official Statement, and compliance with the provisions on the

14

District’s part contained herein and therein, will not, as of the date hereof or as of the Closing Date, conflict with or constitute a material breach of or material default under any California or federal law, administrative regulation, judgment, decree, loan agreement, indenture, bond, note, resolution, agreement or other instrument to which the District is a party, nor will any such execution, delivery or compliance result in the creation or imposition of any lien, charge or other security interest or encumbrance of any nature whatsoever upon any of the properties or assets of the District under the terms of any such law, administrative regulation, judgment, decree, loan agreement, indenture, bond, note resolution, agreement or other instrument, except as provided in the Bond Resolution;

(f) The District is not in material breach of or in material default under any existing law or administrative regulation of the State of California or the United States or any applicable judgment or decree or any loan agreement, indenture, bond, note, resolution, agreement or other instrument to which the District is a party or is otherwise subject, and no event has occurred and is continuing which, with the passage of time or the giving of notice or both, would constitute a material default under any such instrument;

(g) There is no action, suit, proceeding, inquiry or investigation at law or in equity or before or by any California or federal court, public board or body pending or, to the knowledge of the District, threatened against or affecting the District (or, to the knowledge of the District, any meritorious basis for such an action, suit, proceeding inquiry or investigation) (i) to restrain or enjoin the issuance, sale or delivery of any of the Bonds or the levy or collection of any tax contemplated by the Bond Resolution, or (ii) in any way contesting or affecting (a) the validity or enforceability of the Bonds, the Bond Resolution, this Purchase Contract, or the Continuing Disclosure Certificate, (b) the existence or powers of the District, (c) the transactions contemplated by the Bonds, the Bond Resolution, this Purchase Contract, the Continuing Disclosure Certificate or the Official Statement, or any agreement or instrument to which the District is a party or that is used or contemplated for use in the consummation of the transactions contemplated hereby or thereby, or (d) the federal tax-exempt status of the interest on the Bonds;

(h) The District will furnish such information, execute such instruments and take such other action in cooperation with the Underwriter as the Underwriter may request in order to qualify the Bonds for offer and sale under the blue sky or other securities laws and regulations of such states and other jurisdictions of the United States as the Underwriter may designate and will use its best efforts to continue such qualification in effect so long as required for distribution of the Bonds, and consents to and ratifies the use of the Official Statement by the Underwriter in obtaining such qualifications; provided, however, that in no event shall the District be required to take any action which would subject it to general or unlimited service of process in any jurisdiction in which it is not now so subject;

(i) As of the date thereof, the information and statements contained in the Preliminary Official Statement under the captions “INTRODUCTORY STATEMENT,”

15

“PROPERTY TAX INFORMATION,” “THE DISTRICT” and “LEGAL MATTERS-General” were true and correct, and the Preliminary Official Statement (excluding therefrom information relating to DTC, the book-entry system, and the information under the caption “UNDERWRITING,” as to which no representation is made) did not contain any untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading;

(j) As of the date hereof and at all times subsequent hereto to and including the date which is 25 days following the End of the Underwriting Period (as such term is hereinafter defined) for the Bonds, the information and statements contained in the Official Statement under the captions “INTRODUCTORY STATEMENT,” “PROPERTY TAX INFORMATION,” “THE DISTRICT” and “LEGAL MATTERS-General” are and will be true and correct, and the Official Statement (excluding therefrom information relating to DTC, the book-entry system, and the information under the caption “UNDERWRITING,” as to which no representation is made) does not and will not contain any untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading;

(k) If between the date hereof and the date which is 25 days after the End of the Underwriting Period for the Bonds, an event occurs which might or would cause the information contained in the Official Statement (excluding therefrom information relating to DTC, the book-entry system, and the information under the caption “UNDERWRITING,” as to which no representation is made), as then supplemented or amended, to contain any untrue statement of a material fact or to omit to state a material fact required to be stated therein or necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading, the District will notify the Underwriter, and, if in the opinion of the District, in consultation with the Underwriter and its counsel, such event requires the preparation and publication of a supplement or amendment to the Official Statement, the District will forthwith prepare and furnish to the Underwriter (at the expense of the District) (i) a reasonable number of copies of an amendment of or supplement to the Official Statement (in form and substance satisfactory to counsel for the Underwriter) which will amend or supplement the Official Statement so that it will not contain any untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading; and (ii) if such event takes place subsequent to the Closing, such legal opinions, certificates, instruments and other documents as the Underwriter may deem necessary to evidence the truth and accuracy of such supplement or amendment to the Official Statement. For the purposes of this subsection, between the date hereof and the date which is 25 days after the End of the Underwriting Period for the Bonds, the District will furnish such information with respect to itself as the Underwriter may from time to time reasonably request;

16

(l) If the information contained in the Official Statement is amended or supplemented pursuant to paragraph (j) hereof, at the time of each supplement or amendment thereto and (unless subsequently again supplemented or amended pursuant to such subparagraph) at all times subsequent thereto up to and including the date which is 25 days after the End of the Underwriting Period for the Bonds, the portions of the Official Statement (excluding therefrom information relating to DTC and the book-entry system, and the information under the caption “UNDERWRITING,” as to which no representation is made) so supplemented or amended (including any financial and statistical data contained therein) will not contain any untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading;

(m) At the Closing Date, each of the representations and certifications of the District in this Purchase Contract is and will be true, accurate and complete;

(n) Any certificate signed by an authorized officer of the District delivered to the Underwriter shall be deemed a representation and warranty by the District to the Underwriter as to the statements made therein;

(o) Between the date of this Purchase Contract and the Closing Date, the District will not, without the prior written consent of the Underwriter, offer or issue any bonds, notes or other obligations for borrowed money;

(p) The District has not failed to comply, in any respect, with any previous undertaking in any agreement required pursuant to Rule 15c2-12;

(q) The District maintains an ongoing process of controls and procedures that makes available to the District officers charged with responsibility for the completeness and accuracy of the District’s disclosure materials all information material to an investor’s decision to purchase the District’s debt obligations; and

(r) Between the date hereof and the End of the Underwriting Period, the District will not, without the prior written consent of the Underwriter, supplement or amend the Official Statement, the Continuing Disclosure Certificate, the Bond Resolution or any other document contemplated by this Purchase Contract.

SECTION 3. REPRESENTATIONS AND WARRANTIES OF THE AUTHORITY.

The Authority represents and warrants as follows:

(a) The Authority is a joint exercise of powers authority, duly organized and validly existing under Sections 6500 et seq. of the Government Code of the State of California (the “JPA Act”) and under a Joint Exercise of Powers Agreement, dated October 22, 2010 (the “JPA Agreement”), between Palomar Pomerado Health and the District;

17

(b) The Authority is duly authorized and has requisite legal right, power and authority to purchase the Bonds from the District, and to sell and to redeliver the Bonds to the Underwriter as provided in this Purchase Contract;

(c) The Authority has requisite legal right, power and authority to adopt the Authority Resolution, to enter into this Purchase Contract, and to observe, perform and consummate the covenants and agreements made in this Purchase Contract to be observed, performed and consummated by the Authority;

(d) The Authority has duly adopted the Authority Resolution in accordance with the JPA Agreement, its bylaws and applicable law;

(e) When duly executed and delivered by all parties hereto, this Purchase Contract will constitute the legal, valid and binding obligation of the Authority, enforceable in accordance with its terms;

(f) The Authority has complied, and will at Closing be in compliance in all respects, with the terms of this Purchase Contract;

(g) There is no action, suit, proceeding, inquiry or investigation, at law or in equity, before or by any court, governmental agency, public board or body pending or known to the Authority to be threatened against the Authority in any way contesting the validity or enforceability of this Purchase Contract or the existence or powers of the Authority relating to the transactions contemplated by this Purchase Contract;

(h) The execution and delivery by the Authority of this Purchase Contract and compliance with the provisions on the Authority’s part contained herein, will not, as of the date hereof or as of the Closing Date, conflict with or constitute a material breach of or material default under any California or federal law, administrative regulation, judgment, decree, loan agreement, indenture, bond, note, resolution, agreement or other instrument to which the Authority is a party, nor will any such execution, delivery or compliance result in the creation or imposition of any lien, charge or other security interest or encumbrance of any nature whatsoever upon any of the properties or assets of the Authority under the terms of any such law, administrative regulation, judgment, decree, loan agreement, indenture, bond, note resolution, agreement or other instrument;

(i) As of the date thereof, the statements contained in the Preliminary Official Statement under the caption “THE AUTHORITY” were true and correct, and did not contain any untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading; and as of the date hereof and at all times subsequent hereto to and including the date which is 25 days following the End of the Underwriting Period for the Bonds, the statements contained in the Official Statement under the caption “THE AUTHORITY” are and will be true and correct, and do not and will not contain any untrue statement of a material fact or omit to state a material

18

fact required to be stated therein or necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading;

(j) If between the date hereof and the date which is 25 days after the End of the Underwriting Period for the Bonds, an event occurs which might or would cause the information contained in the Official Statement under the caption “THE AUTHORITY” as then supplemented or amended, to contain any untrue statement of a material fact or to omit to state a material fact required to be stated therein or necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading, the Authority will notify the Underwriter, and, if in the opinion of the Authority, in consultation with the Underwriter and its counsel, such event requires the preparation and publication of a supplement or amendment to the Official Statement, the Authority will forthwith prepare and furnish to the Underwriter (at the expense of the Authority) (i) a reasonable number of copies of an amendment of or supplement to the Official Statement (in form and substance satisfactory to counsel for the Underwriter) which will amend or supplement the Official Statement so that it will not contain any untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading; and (ii) if such event takes place subsequent to the Closing, such certificates, instruments and other documents as the Underwriter may deem necessary to evidence the truth and accuracy of such supplement or amendment to the Official Statement. For the purposes of this subsection, between the date hereof and the date which is 25 days after the End of the Underwriting Period for the Bonds, the Authority will furnish such information with respect to itself as the Underwriter may from time to time reasonably request;

(k) At the Closing Date, each of the representations and certifications of the Authority in this Purchase Contract is and will be true, accurate and complete;

(l) Any certificate signed by an authorized officer of the Authority delivered to the Underwriter shall be deemed a representation and warranty by the Authority to the Underwriter as to the statements made therein; and

(m) Between the date hereof and the End of the Underwriting Period, the Authority will not, without the prior written consent of the Underwriter, supplement or amend the Official Statement, the JPA Agreement, the Authority Resolution or any other document contemplated by this Purchase Contract.

SECTION 4. CONDITIONS TO THE OBLIGATIONS OF THE UNDERWRITER.

The Underwriter hereby enters into this Purchase Contract in reliance upon the representations and warranties of the District and the Authority contained herein and the representations and warranties of the District and the Authority to be contained in the documents and instruments to be delivered at the Closing and upon the performance by the District and the Authority of their obligations both on and as of the date hereof and as of the Closing Date. Accordingly, the Underwriter’s obligations under this Purchase Contract to purchase, to accept

19

delivery of and to pay for the Bonds shall be subject, at the option of the Underwriter, to the accuracy of the representations and warranties of the District and the Authority contained herein as of the date hereof and as of the Closing Date, to the accuracy of the statements of the officers and other officials of the District and the Authority made in any certificate or other document furnished pursuant to the provisions hereof, to the performance by the District and the Authority of their respective obligations to be performed hereunder and under the Bond Resolution at or prior to the Closing Date, and also shall be subject to the following additional conditions:

(a) The Underwriter shall receive, within seven Business Days of the date hereof and not later than three Business Days before the Closing, copies of the Official Statement (including all information previously permitted to have been omitted by Rule 15c2-12 and any amendments or supplements as have been approved by the Underwriter), in such reasonable quantity as the Underwriter shall have requested;

(b) At the Closing, the Bonds, the Bond Resolution, the Continuing Disclosure Certificate and the Official Statement shall have been duly authorized, executed and delivered by the respective parties thereto, all in substantially the forms heretofore submitted to the Underwriter, with only such changes as shall have been agreed to in writing by the Underwriter, and shall be in full force and effect; and there shall be in full force and effect the Bond Resolution and such resolution or resolutions of the Governing Board of the Authority as, in the opinion of Sidley Austin LLP (“Bond Counsel”), shall be necessary or appropriate in connection with the transactions contemplated hereby;

(c) The Underwriter may terminate this Purchase Contract by notification to the District and the Authority if at any time subsequent to the date hereof and at or prior to the Closing (1) legislation shall be enacted by the Congress or adopted by either House thereof or favorably reported for passage to either House of the Congress by any committee of such House to which such legislation has been referred for consideration or a decision by a court of the United States, including the United States Tax Court, shall be rendered or a ruling, regulation, temporary regulation or official release or statement by or on behalf of the Treasury Department of the United States, the Internal Revenue Service or other governmental agency shall be made with respect to federal taxation upon revenues or other income of the general character expected to be derived by the District or upon interest received on obligations of the general character of the Bonds or other actions or events shall have transpired that may have the effect of changing, directly or indirectly, the federal income tax consequences of interest on obligations of the general character of the Bonds in the hands of the holders thereof, and that would materially adversely affect the market price or the marketability of the Bonds, in the opinion of the Underwriter; or (2) legislation shall be enacted by the legislature of the State or adopted by or favorably reported for passage to either House thereof by any committee of such House to which such legislation has been referred for consideration or a decision by a court of the State shall be rendered or a ruling, regulation, temporary regulation or official release or statement by or on behalf of any governmental agency of the State shall be made with respect to taxation upon revenues or other income of the general character expected to be derived by the District or upon interest received on obligations of the

20

general character of the Bonds or other actions or events shall have transpired that may have the effect of changing, directly or indirectly, the State income tax consequences of interest on obligations of the general character of the Bonds in the hands of the holders thereof, and that would materially adversely affect the market price or the marketability of the Bonds in the opinion of the Underwriter; or (3) legislation shall be enacted or any action shall be taken by the Securities and Exchange Commission that, in the opinion of Counsel for the Underwriter, has the effect of requiring the contemplated distribution of the Bonds to be registered under the Securities Act of 1933, as amended (the “Securities Act”), or the Bond Resolution to be qualified under the Trust Indenture Act of 1939, as amended (the “Trust Indenture Act”); or (4) there shall exist any event, which in the judgment of the Underwriter, either might or would cause the Official Statement to contain any untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading; or (5) there shall have occurred any outbreak of hostilities or other national or international calamity or crisis, or escalation thereof, the effect of which on the financial markets of the United States in the judgment of the Underwriter, is to materially adversely affect the market price or the marketability of the Bonds or to make it impracticable for the Underwriter to market the Bonds; or (6) there shall be in force a general suspension of trading on the New York Stock Exchange or minimum or maximum prices for trading shall have been fixed and be in force, or maximum ranges for prices for securities shall have been required and be in force on the New York Stock Exchange, whether by virtue of a determination by that Exchange or by order of the Securities and Exchange Commission or any other governmental authority having jurisdiction; or (7) there shall have occurred a financial crisis or a default with respect to the debt obligations of, or the institution of proceedings under the federal or bankruptcy laws by or against, any agency or instrumentality of the State, the effect of which being such, in the judgment of the Underwriter, as to make it impracticable for the Underwriter to market the Bonds; or (8) a general banking moratorium shall have been declared by federal, New York or State authorities having jurisdiction and shall be in force or a material disruption in commercial banking or securities settlement or clearance services shall have occurred; or (9) a stop order, ruling, regulation or official statement by or on behalf of the Securities and Exchange Commission shall be issued or made to the effect that the issuance, offering, or sale of the Bonds, or of obligations of the general character of the Bonds as contemplated hereby, is in violation of any provision of the Securities Act, the Securities Exchange Act of 1934, as amended, or the Trust Indenture Act, which in the judgment of the Underwriter, materially adversely affects the marketability of the Bonds or the market price thereof; or (10) any state “Blue Sky” or securities commission shall have withheld or revoked registration, exception, or clearance of the offering, and, in the judgment of the Underwriter, the market for the Bonds is materially adversely affected thereby; or (11) a supplement or amendment shall have been made to the Official Statement subsequent to the date hereof that, in the judgment of the Underwriter, materially adversely affects the marketability of the Bonds or the market price thereof; or (12) there is a withdrawal or downgrading of any rating on the District’s debt obligations that are substantially similar to the Bonds; or (13) the New York Stock Exchange or other national securities exchange, or any governmental agency shall have: (i) imposed additional material

21

restrictions not in force as of the date hereof with respect to trading in securities, generally, or to Bonds or similar obligations; (ii) materially increased restrictions now in force with respect to the extension of credit by or the charge to the net capital requirements of underwriters or broker-dealers; or (14) any action, suit, proceeding, inquiry, litigation or investigation, at law or equity, before or by any court or public body, shall be instituted, pending or threatened that has any of the effects described in Section 2(g) or Section 3(g) hereof, or affects any issuer of securities similar to the Bonds, or threatens the existence or powers of the District or, in any way, contests the completeness or accuracy of the Official Statement; and

(d) At or prior to the Closing Date, the Underwriter shall have received the following documents, in each case satisfactory in form and substance to the Underwriter:

(1) Two copies of the Continuing Disclosure Certificate, duly executed and delivered by the District;

(2) The unqualified approving opinion, dated the Closing Date and addressed to the District, of Bond Counsel in substantially the form attached to the Official Statement as Appendix C, and a letter of such counsel, dated the Closing Date and addressed to the Underwriter to the effect that such opinion may be relied upon by the Underwriter to the same extent as if such opinion were addressed to them;

(3) The supplemental opinion, dated the Closing Date and addressed to the Underwriter, of Bond Counsel, substantially to the effect that (i) this Purchase Contract has been duly executed and delivered by the District and is the valid and binding agreement of the District; (ii) the Bonds are not subject to the registration requirements of the Securities Act of 1933, as amended, and the Bond Resolution is exempt from qualification pursuant to the Trust Indenture Act of 1939, as amended; and (iii) the statements contained in the Official Statement under the captions “THE BONDS” (excluding information relating to The Depository Trust Company and the book-entry system), “SECURITY FOR THE BONDS,” “TAX MATTERS,” APPENDIX C - “PROPOSED FORM OF OPINION OF BOND COUNSEL,” and APPENDIX B - “FORM OF CONTINUING DISCLOSURE CERTIFICATE,” insofar as such statements purport to summarize certain provisions of the Bonds, the Bond Resolution, the Continuing Disclosure Certificate or Bond Counsel’s opinion concerning certain federal tax matters relating to the Bonds, are accurate and complete;

(4) The opinion of counsel for the District, dated the Closing Date and addressed to the Underwriter, the Authority and Bond Counsel to the effect that (i) the District is a political subdivision of the State of California, validly existing under the laws of the State of California; (ii) the Bond Resolution authorizing the issuance of the Bonds and the execution and delivery of the Continuing Disclosure Certificate, the Official Statement and this Purchase Contract has been duly adopted at a meeting of the District Board which was called and held

22

pursuant to law and with all public notice required by law and at which a quorum was present and acting throughout, and has not been amended, modified or rescinded; (iii) the District had full legal right, power and authority to adopt the Bond Resolution and has full legal right, power and authority to issue the Bonds and to enter into and carry out the transactions contemplated by the Bond Resolution, the Continuing Disclosure Certificate, the Official Statement and this Purchase Contract; (iv) the Continuing Disclosure Certificate, the Official Statement and this Purchase Contract have been duly authorized, executed and delivered by the District, and assuming due authorization, execution and delivery of the Purchase Contract by the other parties thereto, the Continuing Disclosure Certificate and this Purchase Contract constitute legally binding agreements of the District enforceable against the District in accordance with their respective terms (except as limited herein); (v) the District has obtained all California governmental, legislative, administrative and judicial authorizations, approvals, consents and orders that are required to be obtained in connection with the District’s performance of its obligations under the Bonds, the Bond Resolution, the Continuing Disclosure Certificate and this Purchase Contract, unless the failure to obtain such authorizations, approvals, consents or orders would not have a material adverse effect on the due performance by the District of such obligations, provided that no opinion is rendered as to any approvals, consents and orders as may be required under Federal law or the Blue Sky laws or securities laws of any other state in connection with such performance; (vi) the issuance of the Bonds, the adoption of the Bond Resolution and the execution and delivery of the Continuing Disclosure Certificate, the Official Statement and this Purchase Contract do not materially conflict or constitute a material breach or default under any California law, administrative regulation or other agreement to which the District is a party or to which it is bound; (vii) no litigation is pending or, to the best of such counsel’s knowledge, threatened in any court (1) challenging the titles of the officials of the District signatory to the Bonds, the Continuing Disclosure Certificate, the Official Statement or this Purchase Contract to their respective offices; (2) contesting or affecting the validity of the Bonds, the Bond Resolution, the Continuing Disclosure Certificate, the Official Statement or this Purchase Contract; (3) in any way contesting the power of the District to issue the Bonds, adopt the Bond Resolution or approve, execute and deliver the Continuing Disclosure Certificate, the Official Statement or this Purchase Contract; (4) to restrain or enjoin the levy or collection of the tax contemplated by the Bond Resolution; or (5) asserting that the Official Statement contained or contains any untrue statement of a material fact or omitted or omits to state any material fact required to be stated therein or necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading; and (viii) the information contained in the Official Statement under the caption “LEGAL MATTERS-General” is true and correct in all material respects and, as of its date and as of the date of such opinion, the Official Statement did not and does not contain any untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary in order to

23

make the statements therein, in the light of the circumstances under which they were made, not misleading;

(5) The opinion of counsel to Union Bank of California, N.A., as Paying Agent and Bond Registrar (“Union Bank”), dated the Closing Date and addressed to the Underwriter, the District and the Authority to the effect that: (i) Union Bank has been duly organized and is validly existing in good standing as a national banking association under the laws of the United States of America with full corporate power to enter into and undertake its obligations set forth in the Paying Agent Agreement, by and between the Union Bank and the District with respect to the Bonds (the “Paying Agent Agreement”); (ii) Union Bank has duly authorized, executed and delivered the Paying Agent Agreement and by all proper corporate action has authorized the acceptance of the duties and obligations of Union Bank under the Paying Agent Agreement; (iii) the Paying Agent Agreement constitutes the legally valid and binding agreement of Union Bank, enforceable against Union Bank in accordance with its terms; (iv) there is no litigation pending against Union Bank arising from its fiduciary activities to restrain or enjoin Union Bank’s participation in, or in any way contesting the powers of Union Bank with respect to the transactions contemplated by the Paying Agent Agreement; and (v) Union Bank’s actions in executing and delivering the Paying Agent Agreement do not conflict with or constitute a breach of or default under any law or governmental regulation applicable to Union Bank;

(6) The opinion of counsel to the Authority, addressed to the Underwriter, dated the date of Closing, in customary form acceptable to the Underwriter to the effect that (i) the Authority is a joint powers agency organized and existing under the laws of the State of California; (ii) the Authority Resolution was duly adopted at a meeting of the governing body of the Authority which was called and held pursuant to law and with all public notice required by law and at which a quorum was present and acting throughout; the Authority Resolution is in full force and effect and has not been amended, modified or rescinded; and (iii) the Purchase Contract has been duly executed and delivered by the Authority and is a valid and binding agreement of the Authority;

(7) The opinion, dated the Closing Date and addressed to the Underwriter, of Chapman and Cutler LLP, San Francisco, California, counsel for the Underwriter (“Underwriter’s Counsel”) to the effect that (a) the Bonds are exempt from registration under the Securities Act of 1933, as amended, and the Bond Resolution is exempt from qualification under the Trust Indenture Act of 1939, as amended; (b) without passing upon or assuming any responsibility for the accuracy, completeness or fairness of the statements contained in the Preliminary Official Statement or the Official Statement and making no representation that they have independently verified the accuracy, completeness or fairness of any such statements, based upon the information made available to them in the course of their participation in the preparation of the Preliminary Official Statement and the Official Statement as counsel for the Underwriter,

24

nothing has come to their attention which would lead them to believe that the Preliminary Official Statement or the Official Statement (excluding therefrom financial statements and statistical data and the information concerning DTC and the book-entry system and the Appendices thereto, as to which no opinion need be expressed) as of its date and as of the date of such opinion contained or contains any untrue statement of a material fact or omitted or omits to state a material fact required to be stated therein or necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading; and (c) the Continuing Disclosure Certificate satisfies the requirements contained in S.E.C. rule 15c2-12(b)(5) for an undertaking for the benefit of the holders of the Bonds to provide the information at the times and in the manner required by said Rule;

(8) A certificate or certificates, dated the Closing Date, signed by a duly authorized official of the District, in form and substance satisfactory to the Underwriter, to the effect that the representations and warranties of the District contained in this Purchase Contract are true and correct on and as of the Closing Date with the same effect as if made on the Closing Date;

(9) A certificate or certificates, dated the Closing Date, signed by a duly authorized official of the Authority, in form and substance satisfactory to the Underwriter, to the effect that the representations and warranties of the Authority contained in this Purchase Contract are true and correct on and as of the Closing Date with the same effect as if made on the Closing Date;

(10) A certificate, dated the Closing Date, signed by a duly authorized official of Union Bank, satisfactory in form and substance to the Underwriter, to the effect that:

a. Union Bank is a national banking association organized and existing under and by virtue of the laws of the United States of America, having the full power and being qualified to enter into and perform its duties under the Paying Agent Agreement;

b. Union Bank is duly authorized to enter into the Paying Agent Agreement and Union Bank has duly executed and delivered the Paying Agent Agreement;

c. the execution and delivery of the Paying Agent Agreement and compliance with the provisions on Union Bank’s part contained therein, will not conflict with or constitute a breach of or default under any law, administrative regulation, judgment, decree, loan agreement, indenture, bond, note, resolution, agreement or other instrument to which Union Bank is a party or is otherwise subject (except that no representation, warranty or agreement is made with respect to any federal or state securities or blue sky laws or regulations), nor will any such

25

execution, delivery, adoption or compliance result in the creation or imposition of any lien, charge or other security interest or encumbrance of any nature whatsoever upon any of the properties or assets held by Union Bank pursuant to the Paying Agent Agreement under the terms of any such law, administrative regulation, judgment, decree, loan agreement, indenture, bond, note, resolution, agreement or other instrument, except as provided by the Paying Agent Agreement; and

d. it has not been served with any action, suit, proceeding, inquiry or investigation, at law or in equity, before or by any court, governmental agency, public board or body, nor, to the best of the knowledge of Union Bank, is any such action or other proceeding threatened against Union Bank, as such but not in its individual capacity, affecting the existence of Union Bank, or the titles of its officers to their respective offices or affecting the validity or enforceability of the Paying Agent Agreement, or contesting the powers of Union Bank or its authority to enter into, adopt or perform its obligations under the Paying Agent Agreement, wherein an unfavorable decision, ruling or finding would adversely affect the validity or enforceability of the Paying Agent Agreement;

(11) Two copies of the Official Statement, executed on behalf of the District by authorized representatives thereof;

(12) Two certified copies of the general resolution or bylaws of Union Bank authorizing the execution and delivery of the Paying Agent Agreement;

(13) Two certified copies of the Bond Resolution authorizing the issuance of the Bonds and the execution and delivery of the Continuing Disclosure Certificate, the Official Statement and this Purchase Contract;

(14) Two certified copies of the resolution of the Authority authorizing the execution and delivery of this Purchase Contract;

(15) Evidence that any ratings described in the Official Statement are in full force and effect as of the Closing Date;

(16) A copy of the Blanket Letter of Representation to DTC relating to the Bonds signed by DTC and the District;

(17) Arbitrage and tax certifications by the District in form and substance acceptable to Bond Counsel;

(18) An opinion, dated the Closing Date and addressed to the District, the Authority and the Underwriter, of Sidley Austin LLP, Disclosure Counsel to the District, to the effect that based upon information made available to such

26

counsel in the course of such counsel’s participation in the transaction as Disclosure Counsel to the District and without having undertaken to determine independently or assuming any responsibility for the accuracy, completeness or fairness of the statements contained in the Preliminary Official Statement or the Official Statement, nothing has come to the attention of the lawyers in such firm rendering professional services in connection with the issuance or sale of the Bonds that has caused them to believe that the Preliminary Official Statement or the Official Statement (excluding therefrom any financial, statistical, economic or demographic data, forecasts, numbers, charts, tables, graphs, estimates, projections, assumptions or expressions of opinion, Appendices A, D [and E], and any information regarding DTC and the book-entry system included in the Preliminary Official Statement or the Official Statement, as to which no opinion need be expressed), as of the date thereof or the Closing Date, contained or contains any untrue statement of a material fact or omitted or omits to state a material fact necessary in order to make the statements made, in the light of the circumstances under which they were made, not misleading;

(19) A certified copy of the Authority’s Joint Exercise of Powers Agreement; and

(20) Such additional legal opinions, certificates, proceedings, instruments, title insurance, other insurance policies or evidences thereof and other documents as the Underwriter, Underwriter’s Counsel or Bond Counsel may reasonably request to evidence the truth and accuracy, as of the date hereof and as of the Closing Date, of the representations of the District and the Authority herein and of the statements and information contained in the Official Statement, and the due performance or satisfaction by Union Bank, the District and the Authority at or prior to the Closing of all agreements then to be performed and all conditions then to be satisfied by any of them in connection with the transactions contemplated hereby and by the Bonds, the Bond Resolution, the Continuing Disclosure Certificate and the Official Statement.

If the District or the Authority shall be unable to satisfy the conditions to the Underwriter’s obligations contained in this Purchase Contract or if the Underwriter’s obligations shall be terminated for any reason permitted herein, all obligations of the Underwriter hereunder may be terminated by the Underwriter at, or at any time prior to, the Closing Date by written notice to the District and the Authority and none of the Underwriter, the District or the Authority shall have any further obligations hereunder.

SECTION 5. EXPENSES.

All expenses and costs incident to the authorization, execution, delivery and sale of the Bonds to the Underwriter, including the costs of printing of the Preliminary Official Statement, the Official Statement, the cost of preparing the Bonds and of duplicating the Continuing Disclosure Certificate and this Purchase Contract, the fees of accountants, consultants and rating agencies, the initial fee of Union Bank and its counsel in connection with the execution and

27

delivery of the Bonds and the fees and expenses of Bond Counsel, shall be paid from the proceeds of the Bonds. In the event that the Bonds for any reason are not issued, or to the extent proceeds of the Bonds are insufficient or unavailable therefor, any fees, costs and expenses owed by the District to Union Bank, which otherwise would have been paid from the proceeds of the Bonds, shall be paid by the District. All out of pocket expenses of the Underwriter, including traveling and other expenses, including those associated with the California Debt and Investment Advisory Commission fee, the costs of preparation of any blue sky and legal investment surveys prepared by Underwriter’s Counsel and the fees and expenses of Underwriter’s Counsel, shall be paid by the Underwriter. The District shall pay for expenses (included in the expense component of the Underwriter’s spread) incurred on behalf of the District’s employees which are incidental to implementing this agreement, including, but not limited to, meals, transportation, lodging, and entertainment of those employees.

SECTION 6. NOTICES.

Any notice or other communication to be given to the parties to this Purchase Contract may be given by delivering the same in writing to the respective party at the following address:

Underwriter: Goldman, Sachs & Co. 2121 Avenue of the Stars, Suite 2600 Los Angeles, California 90067 Attention: Ruth Pan

Authority: San Diego County Health Facilities Financing Authority c/o Palomar Pomerado Health 15255 Innovation Drive San Diego, California 92128 Attention: Robert Hemker

District: Grossmont Healthcare District 9001 Wakarusa Street La Mesa, California 91742 Attention: Barry M. Jantz

SECTION 7. SURVIVAL OF REPRESENTATIONS AND WARRANTIES.

The representations and warranties of the District and the Authority dated as of their date set forth in or made pursuant to this Purchase Contract shall not be deemed to have been discharged, satisfied or otherwise rendered void by reason of the Closing or termination of this Purchase Contract and regardless of any investigations or statements as to the results thereof made by or on behalf of the Underwriter and regardless of delivery of and payment for the Bonds.

28

SECTION 8. EFFECTIVENESS.

This Purchase Contract shall become effective and binding upon the respective parties hereto upon the execution of the acceptance hereof by a duly authorized officer of the District and the Authority and shall be valid and enforceable as of the time of such acceptance.

SECTION 9. EXECUTION IN COUNTERPARTS.

This Purchase Contract may be executed in counterparts, all of which shall constitute one and the same instrument, and each of which shall be deemed to be an original.

SECTION 10. INDEMNIFICATION OF THE AUTHORITY.

(a) The District, to the fullest extent permitted by law, agrees to indemnify and hold harmless the Authority and the members of the Authority and their officers, employees and agents and each person, if any, who controls the Authority within the meaning of Section 15 of the Securities Act of 1933, as amended, or Section 20 of the Securities Exchange Act of 1934, as amended (each, an “Indemnified Party”), against any and all losses, claims, damages, liabilities to which any Indemnified Party may become subject under any statute or at law or in equity or otherwise, and shall promptly reimburse any such Indemnified Party for any reasonable legal or other expenses incurred by it in connection with investigating any claims against it and defending any actions whatsoever caused by (i) any untrue statement or misleading statement or alleged untrue statement or alleged misleading statement of a material fact contained in the Official Statement or any supplement or amendment thereto or (ii) any omission or alleged omission from the Official Statement of any material fact required to be stated therein or necessary in order to make the statements made therein, in the light of the circumstances under which they were made, not misleading, insofar as such losses, claims, damages, liabilities or expenses are caused by any such untrue or misleading statement or omission or alleged untrue or misleading statement or omission in the information contained in the Official Statement; provided, however, that the District shall not be liable to an Indemnified Party in any such case to the extent that any such loss, claim, damage, liability or action arises out of, or is based upon, any untrue statement or alleged untrue statement or omission or alleged omission made in any of such documents in reliance upon and in conformity with written information furnished to the District by the Authority specifically for use therein. No Indemnified Party shall be indemnified for any losses, claims, damages or liabilities resulting from the gross negligence of such Indemnified Party.

(b) The District, to the fullest extent permitted by law, further agrees to indemnify and hold harmless the Authority and the members of the Authority, their officers, employees and agents, from and against any and all losses, claims, damages, liabilities or expenses, of every conceivable kind, character and nature whatsoever, including, but not limited to, losses, claims, damages, liabilities or expenses (including reasonable fees of attorneys, accountants, consultants and other experts) arising out of, resulting from or in any way connected with this Purchase Contract; provided, however, that no Indemnified Party shall be indemnified for any losses, claims, damages or liabilities resulting from the gross negligence of such Indemnified Party.

29

(c) In case any action shall be brought against any Indemnified Party and in respect of which the District is required to indemnify such Indemnified Party pursuant to the provisions of paragraph (a) or (b) above, such Indemnified Party shall promptly notify the District in writing and the District shall assume the defense thereof, including the employment of counsel and the payment of all expenses. Any such Indemnified Party shall have the right to employ separate counsel in any such action and participate in the defense thereof, but the fees and expenses of such counsel shall be at the expense of such Indemnified Party, unless (i) the employment of such counsel has been specifically authorized by the District or (ii) the Indemnified Party shall have been advised by counsel that one or more legal defenses may be available to such Indemnified Party which may not be available to the District, in which case the District shall not be entitled to assume the defense of such suit on behalf of such Indemnified Party and such Indemnified Party shall have the right to retain legal counsel of its own choosing, notwithstanding the obligation of the District to bear the fees and expenses of such counsel. The District shall not be liable for any settlement of any such action effected without its consent, but if settled with the consent of the District, or if there be a final judgment for the plaintiff in any such action, the District agrees to indemnify and hold harmless any such Indemnified Party from and against any loss or liability by reason of such settlement or judgment.

The provisions of this Section 10 shall remain in full force and effect notwithstanding repayment of the Bonds or termination of this Purchase Contract.

SECTION 11. GOLDMAN SACHS NOT ADVISOR.

Goldman, Sachs & Co. is not acting as a Municipal Advisor (as defined in Section 15B of the Exchange Act of 1934, as amended), and shall not have a fiduciary duty to the District or the Authority in connection with the matters contemplated by this Purchase Contract. Each of the District and the Authority has consulted its own financial advisors to the extent it deems appropriate in connection with matters contemplated by this Purchase Contract.

SECTION 12. ENTIRE AGREEMENT.

This Purchase Contract constitutes the entire agreement between the parties hereto with respect to the matters covered hereby, and supersedes all prior agreements and understandings between the parties. This Purchase Contract shall only be amended, supplemented or modified in a writing signed by all of the parties hereto.

SECTION 13. PARTIES IN INTEREST.

This Purchase Contract when executed by the District and the Authority shall constitute the entire agreement among the District, the Authority and the Underwriters and is made solely for the benefit of the District, the Authority and the Underwriters (including the successors or permitted assigns of any of the Underwriters but does not include any purchasers of the Bonds from the Underwriters). No other person shall acquire or have any right hereunder or by virtue hereof. All of the representations (as of the date such representations were made) of the District and the Authority contained in this Purchase Contract shall remain operative and in full force

30

and effect regardless of any investigation made by or on behalf of any of the Underwriters. This Purchase Contract may not be assigned by any party without the written consent of the other parties.

31

- 22 -

If the above terms are acceptable, please cause a duly authorized officer of the District and the Authority to execute the acceptance below.

Very truly yours, ______________________________________ GOLDMAN, SACHS & CO., as Underwriter

ACCEPTED: GROSSMONT HEALTHCARE DISTRICT By:_______________________________

Title:__________________________ SAN DIEGO COUNTY HEALTH FACILITIES FINANCING AUTHORITY By:_______________________________

Title:__________________________

32

- MATURITY SCHEDULE

$__________ Current Interest Bonds MATURITY (JULY 15) PRINCIPAL AMOUNT INTEREST RATE PRICE

$

%

%

$__________ Capital Appreciation Bonds

MATURITY (JULY 15)

INITIAL PRINCIPAL AMOUNT

PRINCIPAL PER $5,000 AT MATURITY

APPROXIMATE YIELD TO

MATURITY

FINAL MATURITY AMOUNT

$

$

%

$

33

A-2

REDEMPTION PROVISIONS

Optional Redemption. The Current Interest Bonds maturing on or before July 15, 20__ are not subject to redemption prior to their respective stated maturity dates. The Current Interest Bonds maturing on or after July 15, 20__ are subject to redemption prior to their respective stated maturity dates, at the option of the District, from any source of funds, in whole, or in part, on July 15, 20__, or on any date thereafter at the par amount thereof, without premium, together with interest accrued thereon to the date of redemption.

The Capital Appreciation Bonds are not subject to optional redemption prior to their respective stated maturity dates.

Mandatory Sinking Fund Redemption. The Bonds maturing on July 15, 20__, are subject to redemption prior to maturity from mandatory sinking fund payments on July 15 of each year, beginning July 15, 20__, at a redemption price equal to the principal amount thereof, together with accrued interest to the date fixed for redemption, without premium. The principal amount represented by such Bonds to be so redeemed and the dates therefor and the final principal payment date is as indicated in the following table:

REDEMPTION DATE (JULY 15)

MANDATORY SINKING FUND

PAYMENT

$

34

Board Draft

PRELIMINARY OFFICIAL STATEMENT, DATED

____

, 2011

NEW ISSt E BOOK-ENTRY ONLY RATINGS

In the opinion qf hidley Austin / i p, San Francisco, California, Bond Counsel under existing law and assuming compliance withcertain covenants in the documents pertaining to the Bonds and requirements of the Internal 1?evenue Code of 1986, as amended, asdescrihed herein, interest on the Bonds is not includable in the grocs income of the osi’ners rtIthe Bonds for federal income tax purposes.in the further opinion of Bond Counsel, interest on the Bonds is not treats d as an item of tax preference in calculating the federalalternative minimum taxable income of individuals and corporations, and is not included in the calculation offederal corporate alternativeminimum tasable income for purposes of the corporate alternative minimum tax. In the further opinion of Bond Counsel, interest on theBonds is exempt from personal incotne taxes imposed by the State of California. Bond Counsel expresses no opinion regarding any otherconsequences related to the ownership or disposition 0/; or the accrual or receipt of interest on the Bonds. See “[AA MATTERS” herein

S*

GROSSMONT IIEALT11CARE DISTRICT(San Diego County, California)

General Obligation Bonds, 2006 Election, 2011 Series B

Dated: Date of Delivery Due: July 15, as set forth on the inside cover

- ihe Grossmont I ieaithcare District (San Diego County, California) General Obligation Bonds, 2006 Election, 2011 Series B (the“Bonds”) are being issued by Grossmont Ilealthcare District (the “District”), a local health care district located in San Diego County,California. ‘1 he Bonds will he issued as current interest bonds (the “Current Interest Bonds”) and capital appreciation bonds (the “Capital

- Appreciation Bonds”). The I3onds were authorized at an election held in the District on June 6, 2006. at which the requisite two-thirds of0 0 the qualified electors voting on the proposition voted to authorize the issuance and sale of $247,000,000 principal amount of general

obligation bonds of the District (“Proposition G”). The Bonds are the second series of bonds being issued pursuant to Proposition G andare being issued for the purpose of financing health care facilities of the District authorized in Proposition G, as more fully described

.0 herein.

1 he Bonds represent general ohligauons of the District payable from certain ad valorem taxes lesied and collected by the County ofSan Diego (the “County”). Fhc Bonds are not obligations of the County. the San Diego County health Facilities Financing Authority (the“Authority”), the State of California (the “State”) or any of their political subdivisions, other than the District. The Board of Supervisors of

— the County is empowered and is obligated to lev ad valorem taxes upon all property within the District subject to taxation by the Districtwithout limitation as to rate or amount (except certain personal property, which is taxable at limited rates) for the payment of principal andaccreted salue of and interest on the Bonds when due.

Interest on the Current interest Bonds will accrue from the date of delivery and is payable on January’ 15 and July 15 of each year,0 — commencing July 15, 2011. Principal of the Current Interest Bonds will he paid on July 15 in the years set forth on the inside cover page

hereof. The Current Interest Bonds will be issued in denominations ol $5,000 or integral multiples thereof and are payable as to principalamount or redemption price at the office of Union Bank, NA., as Bond Registrar for the Bonds (the “Bond Registrar”). Interest on the

‘, Capital Appreciation Bonds will not be payable currently hut will accrete from the date of delivery and will he compounded on eachJanuary 15 and July 15, commencing on July 15, 2011, through and including the respective maturity dates. The Capital Appreciation

.‘/ Bonds will be issued in denominations of $5,000 maturity value or any integral multiple thereof and are payable as to acereted value at the0 ‘ ,-‘ othce of the Bond Registrar.

0 ‘lhe Bonds are issued in fully registered form and, when delivered, will be registered in the name of Cede& Co., as nominee of’I’he0 Depository Frust Company, New York, New York (“Dl’C”). DTC will act as securities depository of the Bonds as described herein under

2 the caption “TIlE l301’sDS General.”

Phe t3onds are being sold by the District to the Authority and will simultaneously be resold to the Underwriter identified below.

0 , The Current interest Bonds are subject to optional redemption. The Capital Appreciation Bonds are not subject to optionalredemption. The Bonds are subject to mandatory sinking fund redemption, as described herein.

0 This cover page contains certain information for quick reference only. It is not intended to be a summary of this issue. Ins estorsmust read the entire Official Statement to obtain information essential to the making of an informed investment decision.

8 0 Maturity’ Schedule2 (See inside cover)

The Bonds are offered when, as and i/received by the ( nderwriter, subject to prior sale and to the approval as to their legality byI Sidley Austin iii’, San Francisco, CalijOrnia, Bond Counsel. Certain legal matters will be passed upon for the District by Jeffrey G. Scott,

0 Esq., its General Counsel, andfor the Underwriter by Chapman and Cutler LLP, San Francisco, Cali/ornia. It is expected that the Bonds0 - — in definitive book-entryform will be available for delivery at the facilities of DTC in New York, Sew York, on or about , 2011.

- Goldman, Sachs & Co.Date: ,2011

o : Preliminary, subject to change.I l’or an explanation of the ratings, see “RA FINGS” herein

SF1 i6i3509v.5 33982 30020

35

MATURITY SCHEDULE*

GROSSMONT IIEALTHCARE DISTRICT(San Diego County, California)


$*

Current Interest Bonds

Maturity Bate l’rincipal Interest Price or Maturity Dale Principal Interest Price orJuly 5 Amount Rate Yield CUSlP July 15 Amount Rate Yield CUS1P

$ $

$ % Term Bonds due July 15,20 Yield % CUSIP

_______

% Term Bonds due July 15, 20 Yield % — CUSIP

$*

Capital Appreciation Bonds

Original Final Original FinalMaturity 1)ate Principal Yield to Acereted Maturity Date Principal Yield to Aeereted

July 15 Amount Maturity Value CUSIPt July 15 Amount Maturity Value CUSIPt

$ $

Preliminary, subject to change.

CUSIP is a registered trademark of American Bankers Association. CUSIP data herein is provided by Standard & Poor’s,CUSIP Service Bureau, a division of The McGrawHili Companies, mc, CUSP data herein is provided for convenience ofreference only. The District and the Underwriter take no responsibility for the accuracy of such data.

SF1 l6l3509v.5 33982/30020

36

This Official Statement does not constitute an offer to sell the Bonds or the solicitation of an offtrto buy’, nor shall there he an’ sale of the I3onds by any person in any state or other jurisdiction to anyperson to whom it is unlawful to make such offer, solicitation or sale in such state or jurisdiction. Nodealer, salesman or any other person has been authorized to give any information or to make anyrepresentation other than those contained herein in connection with the offering of the Bonds, and, i1given or made. such information or representation must not be relied upon.

The information relating to DTC and the book—entry S stem set forth herein under the captionTHE BONI)S GeneraF’ and in APPENDIX D hereto has been furnished by DTC. Such information isbelieved to be reliable but is not guaranteed as to accuracy or completeness and is not to be construed as arepresentation by the Underwriter or the District. All other information set forth herein has been obtainedfront the District and other sources that are believed to be reliable. The information and expressions ofopinion herein are subject to change without notice, and neither the delivery of this Official Statement norany sale of the Bonds made hereunder shall create under any circumstances any indication that there hasbeen no change in the affairs of the District or DTC since the date hereof. The Underwriter has providedthe following sentence for inclusion in this Official Statement. The Underwriter has reviewed theinformation in this Official Statement in accordance with and as part of its responsibilities to investorsunder the federal securities laws as applied to the facts and circumstances of this transaction, but theUnderwriter does not guarantee the accuracy or completeness of such information.

IN CONNECTION WITH THE OFFERING 0 FTHE BONDS, TI-lE UNDERWRITER MAYOVERALLOT OR EFFECT TRANSACTIONS THAT STABILIZE OR MAINTAiN THE MARKETPRICE OF THE BONDS OFFERED HEREBY AT LEVELS ABOVE THAT WHICH OTHERWISEMIGHT PREVAIL IN TilE OPEN MARKET. SUCH STABILIZING, IF COMMENCED. MAY BEDISCONTINUED AT ANY TIME.

CAUTIONARY STATEMENTS REGARDINGFORWARD-LOOKING STATEMENTS IN

THIS OFFICIAL STATEMENT

Certain statements included or incorporated by reference in this Official Statement constitute“forward-looking statements.” Such statements generally are identifiable by the terminology used, suchas “plan,” “expect,” “estimate,” “budget” or other similar words.

The achievement of certain results or other expectations contained in such forward-lookingstatements involve known and unknown risks, uncertainties and other factors that may cause actualresults, performance or achievements described to be materially different from any future results,performance or achievements expressed or implied by such forward-looking statements. The Districtdoes not plan to issue any updates or revisions to those forward-looking statements if or when itsexpectations or events. conditions or circumstances on which such statements are based occur.

This Preliminary Official Statement is in a form deemed final as of its date by the District for thepurposes of Rule 15c2-l2 of the Securities and Exchange Commission (except for the omission of certaininformation permitted to be omitted under Rule I 5c2- I 2(b)( I )).

SF 6135O9v 5 33982/30020

37

GROSSMONT HEALTHCARE DISTRICT

District Board of Directors

Director Term Expires December

Deborah McElravy, R.Ph., President 2012

Michael T. Long, M.D., Vice President 2014

Michael Emerson, RDO, FNAO, Secretary 2012

Gloria A. Chadwick, R.N. 2014

___________________ 2012

Chief Executive Officer Barry M. Jantz

Bond Counsel Sidley Austin LLP

District Counsel Jeffrey G. Scott, Esq.

Bond Registrar and Paying Agent Union Bank, N.A.

38

TABLE OF CONTENTS

INTRODUCTORY STATEMENT .1Purpose of this Official StatementThe District 1Authority for Issuance of the BondsSecurity for the Bonds 2Bond Registrar and Paying Agent 2Purpose of the Proposition G Authorization 2

ESTIMATED SOURCES AND USES OF FUNDS 3

THE BONDS 3General 3Redemption 4Defeasance 6Bond Registrar and Paying Agent 7Registration, Transfer and Exchange of Bonds 7

SECURITY FOR THE BONDS 7

ANNUAL DEBT SERVICE REQUIREMENTS 8

PROPERTY TAX INFORMATION 9Ad Valorern Property Taxation 9Certain Risks Related to Ad Valoren’i Property Taxation 9Assessed Valuations 10Tax Collection Procedure 12Tax Rate and Collection Record 13Major Taxpayers 14Direct and Overlapping Debt 14

CONSTITUTIONAL AND STATUTORY PROVISIONS AFFECTING DISTRICTRLVENUFS AND APPROPRIATIONS 16

Article XIIIA of the State Constitution 16Legislation Implementing Article XIIIA 16Article XIIIB of the State Constitution 17Article X1IIC and Article XIIiD of the State Constitution 17Unitary Property 18Future Initiatives 18

THE DISTRICT 19History 19Governance and Management 19Financial Information 20

THE AUTHORITY 20

CONTINUING DISCLOSURE 20

SF1 1613509v.5 33982/30020

39

TAX MATTS . 21Tax Exemption .21Original Issue Discount 22Premium Bonds 22Information Reporting and Backup Withholding 22State Tax Exemption 23Future Developments 23

LEGAL MATTERS 23General 23Limitation on Remedies 23Approval of Legality 23

UNDERWRITING 24

RATINGS 24

MISCELLANEOUS 24

APPENDIX A — Economic and Demographic Profile of San Diego County A-iAPPENDIX B — Form of Continuing Disclosure Certificate B-iAPPENDIX C — Proposed Form of Opinion of Bond Counsel C-IAPPENDIX D — Book-Entry System D-IAPPENDIX E — Table of Accreted VaIues of Capital Appreciation Bonds E-i

SFJ l635O9v.5 33982/30020

40

OFFICIAL STATEMENT

$*

GROSSMONT HEALTHCARE DISTRICT(San Diego County, California)


INTRODUCTORY STATEMENT

The following introductory statement is subject in all respects to the more complete informationset forth in this Official Statement. The descriptions and summaries of various documents hereinafter setforth do not purport to be comprehensive or definitive and are qualified in their entirety by reference toeach document. All capitalized terms used in this Official Statement and not otherwise defined hereinhave the same meaning as in the Bond Resolution (as defined below).

Purpose of this Official Statement

This Official Statement, including the cover page, the inside cover page and the appendiceshereto, is provided to furnish information in connection with the sale and delivery of

$______________

aggregate principal amount of Grossmont Healthcare District (San Diego County, California) GeneralObligation Bonds, 2006 Election, 201 1 Series B (the “Bonds”).

The District

Grossmont Healthcare District (the “District”) is a local health care district, formed in 1952, andorganized pursuant to Division 23 of the Health and Safety Code (the “Local Health Care District Law”)of the State of California (the “State”). The District’s boundaries encompass an area of approximately750 square miles in eastern San Diego County (the “County”). included within the District boundariesare the cities of La Mesa, Lemon Grove, Santee, and El Cajon, the San Carios/Del Cerro communitieswithin the City of San Diego, and certain unincorporated areas of the County. The total 20101 1 nettaxable assessed valuation of property within the District is $40,094,695,319.

The District owns Sharp Grossmont Hospital, located in La Mesa, California. Sharp GrossmontHospital currently has 481 licensed acute care beds, 667 physicians on staff, 21 operating rooms andI heliport. [Confirmi On May 29, 1991, the District entered into an Affiliation Agreement (as amendedto date, the “Affiliation Agreement”) with Sharp HealthCare (formerly San Diego Hospital Association)(“Sharp”), a nonprofit public benefit corporation, under which the District agreed to transfer the operationand maintenance of Sharp Grossmont Hospital to Grossmont Hospital Corporation (the “Corporation”), anonprofit public benefit corporation wholly controlled by Sharp. For more information on the Districtand the management and operation of Sharp Grossmont Hospital, see “THE DISTRICT” herein.

Authority for Issuance of the Bonds

At an election held on June 6, 2006, more than twothirds of the votes cast by eligible voterswithin the District authorized the District to issue up to $247,000,000 of general obligation bonds(“Proposition G”). The District issued the first series of its general obligation bonds under Proposition G,in the amount of $85,627,075.50, in 2007. The Bonds constitute the second series of bonds issued underProposition G. The Bonds are issued pursuant to certain provisions of the Local Health Care District Law

*

Preliminary, subject to change.

SF1 613509v.5 33982/30020

41

and other applicable laws and pursuant to a resolution (the “Bond Resolution”) adopted by the Board ofI)irectors of the District (the District Board”) on I)ecemher 17, 2010. The I3onds will be sold by theDistrict to the San Diego County Health Facilities Financing Authority (the “Authority”) pursuant to theMarks-Roos Local Bond Pooling Act of 1985. constituting Article 4 of Chapter 5 of Division 7 of Title I(commencing with Section 6584) of the Government Code of the State. The Authority will resell theBonds immediately to Goldman, Sachs & Co. (the i.Jnderwriter”), as described under‘UNDERWRiTiNG’ herein.

Seen ritv for the Bonds

The Bonds represent general obligations of the District payable from certain ad valorein taxes.The Board of Supervisors of the County will levy and collect annually ad va/ore,,, taxes upon all propertysubject to taxation by the District for the payment of the principal or accreted value of and interest on thel3onds. The Bonds are not obligations of the County, the Authority, the Slate or any of their politicalsubdivisions, other than the District.

Bond Registrar and Paying Agent

Union Bank, NA., will serve as the initial Bond Registrar and the initial Paying Agent withrespect to the Bonds.

Purpose of the Proposition G Authorization

Proceeds from the sale of bonds issued pursuant to Proposition G are authorized to be used atSharp Grossmont liospital to (i) complete the Emergency and Critical Care Center, (ii) expand criticalcare. (iii) add patient beds. (iv) modernize medical technology. (v).repair or replace major buildingsystems, and (vi) improve seismic safety. Proceeds from the sale of bonds issued pursuant Proposition Galso are authorized to be used to acquire land and construct thereon a health care training andoccupational center.

The District expects to use the proceeds from the sale of the Bonds, which constitute the secondissuance of bonds authorized pursuant to Proposition G, to finance and/or refinance (a) with respect toSharp Grossmont Hospital, the (1) construction, expansion and improvement of an approximately three-story surgical link diagnostic and treatment building that will include operating rooms and/orinterventional suites, catheterization labs and interventional radiology labs, (ii) the construction,expansion and improvement of a central plant, (iii) expansion and improvement of a patient tower, and(iv) utility and loading dock improvements, and (b) the construction of a health care training andoccupation center to be operated by the District.

Sf1 I613509v5 33982/30020

42

ESTIMATED SOURCES ANI) USES OF FUNDS

l’he District expects to apply the proceeds from the sale of the Bonds as follows:

Sources of FundsPrincipal Amount of the Bonds $Original Issue Premium

_______________

Total $

Uses of FundsDeposit to Building Fund $Deposit to [)ebt Service FundCosts of lssuanc&

________________

Total $

Includes underwriters discount, legal. financial advisory and printino ixs and other miscellaneousissuance costs.

THE BONDS

General

The Bonds will be issued in book-entry form only and will be initially issued and registered in thename of Cede & Co. as nominee for The Depository Trust Company (“DTC”). Purchasers will notreceive bond certitcates representing their interest in the Bonds, One fully-registered Bond will be issuedfor each maturity of the Bonds, each in the aggregate principal amount of such maturity, and will bedeposited with I)TC.

Interest with respect to the Current Interest Bonds accrues from their date of delivery and ispayable semiannually on January 1 5 and July 1 5 of each year (each, a “Bond Payment Date”),commencing July 15, 2011. Interest on the Current Interest Bonds will be computed on the basis of a360-day year of twelve 30-day months. Each Current Interest Bond will bear interest from the BondPayment Date next preceding the date of authentication thereof unless it is authenticated as of a dayduring the period from the Record Date next preceding any Bond Payment Date to that Bond PaymentDate, inclusive, in which event it will bear interest from such Bond Payment Date, or unless it isauthenticated on or before July 1, 2011, in which event it will bear interest from the date of delivery of theI3onds. The Current Interest Bonds are issuable in denominations of $5,000 principal amount or anyintegral multiple thereof, The Current Interest Bonds mature on July 15, in the years and amounts setIorth on the inside cover page hereof.

Interest with respect to the Capital Appreciation Bonds will not be payable currently but willaccrete from the date of delivery to their respective maturity dates. Each Capital Appreciation Bond willincrease in value by the accumulation of earned interest from its initial principal amount on the date ofissuance to its stated accreted value at maturity, as set forth in APPENDIX E — “TABLE OF ACCRETEDVALUES OF CAPITAL APPRECIATION BONDS” hereto. Interest with respect to each CapitalAppreciation Bond will be compounded on each January15 and July 15, commencing July 15, 20I1.Interest on the Capital Appreciation Bonds will accrete on the basis of a 360-day year of twelve 30-daymonths. The Capital Appreciation Bonds are issuable in denominations corresponding to $5,000 of thestated accreted value at maturity or any integral multiple thereof (provided that one Capital AppreciationBond may be issued in an odd denomination), and will mature on the dates and in the accreted values atmaturity set forth on the inside cover page hereof.

3SF1 l6tS5OSv.S 3398230020

43

So long as Cede & Co. is the registered Owner of the Bonds, principal or accreted value of andinterest and premium, if any, on the Bonds are payable by wire transfer by the Paying Agent to Cede &Co., as nominee for DTC, which, in turn, will remit such amounts to DTC Participants (as defined inAppendix D) for subsequent disbursement to the Beneficial Owners. See APPENDIX D— “Book-EntrySystem.” In addition, so long as Cede & Co. is the registered Owner of the Bonds, references in thisOfficial Statement to “Owner” or registered owner of the Bonds (other than under the caption “TAXMATTERS” and the statement on the cover of this Official Statement regarding interest on the Bondsbeing excludable from gross income) means Cede & Co. and does not mean the Beneficial Owners ofsuch Bonds, The District and the Bond Registrar will treat the registered owner of the Bonds (which willbe DTC so long as the book-entry system is in effect) as the absolute owner of the Bonds for the purposesof payment of debt service, giving all notices of redemption, and all other matters with respect to theBonds.

For a description of the method of payment of principal and accreted value of and interest on theBonds and matters pertaining to their exchange while the book-entry system is in place, seeAPPENDIX D — “Book-Entry System.”

If the book-entry system for the Bonds is ever discontinued, payment of interest on any Currentinterest Bond on any Bond Payment Date will be made to the person appearing on the registration booksof the Bond Registrar as the Owner thereof as of the l day of the calendar month in which such BondPayment Date occurs (the “Record Date”), such interest to be paid by check mailed to such Owner on theBond Payment Date, at such Owner’s address as it appears on such registration books or at such otheraddress as such Owner may have filed with the Bond Registrar for that purpose on or before the RecordDate. The Owner of Current Interest Bonds in an aggregate principal amount of $1 ,000,000 or more mayrequest in writing to the Bond Registrar that such Owner be paid interest by wire transfer to the bank andaccount number on file with the Bond Registrar as of the Record Date. The principal or accreted value ofthe Bonds will be payable upon maturity or earlier redemption upon surrender at the principal office ofthe Paying Agent, in lawful money of the United States of America. The Paying Agent is authorized topay the Bonds when duly presented for payment at maturity or upon earlier redemption and to cancel allBonds upon payment thereof.

Redemption

Optional Redemption. The Current Interest Bonds maturing on or before July 1 5, 20 are notsubject to redemption prior to their respective stated maturity dates. The Current Interest Bonds maturingon or after July 15, 20 are subject to redemption prior to their respective stated maturity dates, at theoption of the District, from any source of funds, in whole or in part, on July 1 5, 20_, or on any datethereafter at the par amount thereof, without premium, together with interest accrued thereon to the dateof redemption.

The Capital Appreciation Bonds are not subject to optional redemption prior to their respectivestated maturity dates.

Mandatory Sinking Fund Redemption. The Bonds maturing on July 15, 20, are subject toredemption prior to maturity from mandatory sinking fund payments on July 15 of each year, beginningJuly 1 5, 20, at a redemption price equal to the principal amount thereof together with accrued interestto the date fixed for redemption, without premium. The principal amount represented by such Bonds tobe so redeemed and the dates therefore and the final principal payment date is as indicated in thefollowing table:

SR 16I35O9 533982 30020

44

MandatoryRedemption Date Sinking Fund

(July 15) Payment

20 $2020

Final Maturity.

Selection of Bonds for Redemption. If less than all the Outstanding Bonds are to be optionallyredeemed on any one date, the Bond Registrar, upon written instructions from the District, will selectBonds for redemption from such maturity dates as are selected by the District and by lot within each suchmaturity in any manner as the Bond Registrar shall determine; provided, however, that the portion of anyCurrent Interest Bond to be redeemed in part will be in the principal amount of $5,000 or any integralmultiple thereof and the portion of any Capital Appreciation Bond to be redeemed in part will be inintegral multiples of the accreted value per $5,000 maturity value. In the event no direction is given, theBond Registrar will select Bonds for redemption in inverse order of maturity, and, if less than all theBonds of any one maturity date are to be redeemed on any one date, the Bond Registrar will select theBonds or the portions thereof of such maturity date by lot.

Notice of Redemption. Notice of redemption of any Bonds will be mailed, postage prepaid, notless than 20 nor more than 45 days prior to the redemption date by first class mail to the respectiveOwners thereof at the addresses appearing on the bond registration books maintained by the BondRegistrar.

Each notice of redemption will contain all of the following information: (a) the date of the noticeof redemption, (b) the name of the Bonds, (c) the Bonds or designated portions thereof (in the case ofredemption of the Bonds in part but not in whole) which are to be redeemed, (d) the date of redemption,(e) the place or places where the redemption will be made, including the name and address of the BondRegistrar, (0 the redemption price, (g) the CU SIP numbers of each maturity assigned to each maturity ofthe Bonds to be redeemed, (h) if less than all of the Bonds of any maturity are to be redeemed, the Bondnumbers of the Bonds of each maturity to be redeemed and, in the case of any Bond to be redeemed inpart only, the principal amount or accreted value of such Bond to be redeemed, (i) the original issue date,interest rate and stated maturity date of each Bond to be redeemed in whole or in part, and (j) in the caseof a conditional redemption, that such redemption is conditional upon certain circumstances. Such noticeof redemption will further state that on the specified date there will become due and payable upon eachBond or portion thereof being redeemed the redemption price thereof together with the interest accrued tothe redemption date, and that from and after such date, interest with respect thereto will cease to accrue.

The District may rescind any optional redemption and any notice thereof for any reason bycausing written notice of the rescission to be given to the Owners of those Current interest Bonds socalled for redemption at least four business days prior to the date fixed for redemption. Any optionalredemption and any notice thereof will be rescinded if for any reason on the date fixed for redemptionmoneys are not available in the Debt Service Fund or otherwise held in trust in an escrow fund establishedfor such purpose in an amount sufficient to pay in full on such date the principal of and interest due on theCurrent Interest Bonds called for redemption. Notice of rescission will be given in the same manner inwhich notice of redemption was originally given.

5SF1 1613509v,5 33982/30020

45

Neither failure to receive any redemption notice nor any defect in any such redemption noticewill affect the sufficiency of the proceedings for the redemption of the affected Bonds. Failure by theBond Registrar to give any redemption notice to any one or more of the respective Owners of Bondsdesignated for redemption shall not affect the sufficiency of the proceedings for redemption with respectto Owners to whom such redemption notice was mailed. Each check issued or other transfer of fundsmade by the Bond Registrar for the purpose of redeeming Bonds will bear the CUSIP number identifying,by issue and maturity, the Bonds being redeemed with the proceeds of such check or other transfer.

If, on such redemption date, money for the redemption of all the Bonds to be redeemed asprovided in the Bond Resolution, together with interest to such redemption date, is held by or on behalf ofthe Bond Registrar so as to be available therefore on such redemption date, and if notice of redemptionthereof shall has given as provided in the Bond Resolution, then from and after such redemption date,interest with respect to the Bonds to be redeemed will cease to accrue or accrete. All money held by or onbehalf of the Bond Registrar for the redemption of Bonds will be held for the account of the Owners ofthe Bonds so to be redeemed.

All Bonds paid at maturity or redeemed prior to maturity pursuant to the provisions of the BondResolution will be canceled upon surrender thereof and be delivered to or upon the order of the DistrictAll or any portion of a Bond purchased by the District will be canceled by the Bond Registrar.

Defeasance

The District may pay and discharge any or all of the Bonds by irrevocably depositing with thePaying Agent or an escrow agent selected by the District at or before maturity, money or noncailabieDefeasance Securities together with cash, if required, in an amount which will, together with the interestto accrue thereon and moneys then on deposit in the Debt Service Fund, together with the interest toaccrue thereon, be fully sufficient to pay and discharge the indebtedness on such Bonds (including allprincipal or accreted value, interest and redemption premium, if any) at or before their respective maturitydates.

“Defeasance Securities” means:

(i) Direct and general obligations of the United States of America (including state and localgovernment series), or obligations that are unconditionally guaranteed as to principal and interest by theUnited States of America, including (in the case of direct and general obligations of the United States ofAmerica) evidences of direct ownership of proportionate interests in future interest or principal paymentsof such obligations. Investments in such proportionate interests must be limited to circumstances wherein(a) a bank or trust company acts as custodian and holds the underlying United States obligations; (b) theowner of the investment is the real party in interest and has the right to proceed directly and individuallyagainst the obligor of the underlying United States obligations; and (c) the underlying United Statesobligations are held in a special account, segregated from the custodian’s general assets, and are notavailable to satisfy any claim of the custodian, any person claiming through the custodian, or any personto whom the custodian may be obligated; provided that such obligations are rated or assessed “AAA” byStandard & Poor’s or “Aaa” by Moody’s Investors Service; and

(ii) Obligations of government sponsored agencies of the United States that are rated “AAA,”by Standard & Poor’s or “Aaa” by Moody’s investors Service but are not backed by the full faith andcredit of the government of the United States.

6SF1 1613505v 5 339823OO2O

46

Bond Registrar and Paying Agent

As long as DTC’s book-entry system is used for the Bonds, the Bond Registrar will send anynotice of redemption or other notices to Owners only to DTC. Any failure of DTC to advise any DTCParticipant, or of any DTC Participant to notify any Beneficial Owner, of any such notice and its contentor effect will not affect the validity or sufficiency of the proceedings relating to the redemption of theBonds called for redemption or of any other action premised on such notice.

The Bond Registrar, the Paying Agent, the District and the Underwriter of the Bonds have noresponsibility or liability for any aspects of the records relating to or payments made on account ofbeneficial ownership, or for maintaining, supervising or reviewing any records relating to beneficialownership of interests in the Bonds. So long as the outstanding Bonds are registered in the name ofCede & Co. or its registered assigns, the Bond Registrar, the Paying Agent and the District will cooperatewith Cede & Co., as sole registered owner, or its registered assigns in effecting payment of the principalor accreted value of and interest on the Bonds by arranging for payment in such manner that funds forsuch payments are properly identified and are made immediately available on the date they are due.

Registration, Transfer and Exchange of Bonds

If the book-entry system described in Appendix D is no longer used with respect to the Bonds, theDistrict will cause the Bond Registrar to maintain and keep at its principal corporate trust office all booksand records necessary for the registration, exchange and transfer of the Bonds (the “Bond Register”). Theperson in whose name a Bond is registered on the Bond Register will be regarded as the absolute ownerof that Bond. Payment of or on account of the principal or accreted value of and interest on any Bondwill be made only to or upon the order of that person; neither the District nor the Bond Registrar will beaffected by any notice to the contrary. All such payments will be valid and effectual to satisfy anddischarge the District’s liability upon the Bonds, including interest, to the extent of the amount oramounts so paid.

Any Bond may be exchanged for Bonds of any authorized denomination upon presentation andsurrender at the principal corporate trust office of the Bond Registrar, together with a request forexchange signed by the Owner or by a person legally empowered to do so in a form satisfactory to theBond Registrar. In the event that the District determines to no longer maintain the book-entry only statusof the Bonds, DTC determines to discontinue providing such services and no successor securitiesdepository is named, or DTC requests the District to deliver Bond certificates to particular DTCParticipants, any Bond may, in accordance with its terms, be transferred upon the Bond Register by theperson in whose name it is registered, in person or by his duly authorized attorney, upon surrender of suchBond for cancellation at the office of the Bond Registrar, accompanied by delivery of a written instrumentof transfer in a form approved by the Bond Registrar, duly executed.

Neither the District nor the Bond Registrar will be required: to transfer or exchange any Bonds(a) during the period from the Record Date next preceding any Bond Payment Date to such BondPayment Date, (b) during the period beginning with the opening of business on the 15th business day nextpreceding any date of selection of Bonds to be redeemed and ending with the close of business on the dayon which the applicable notice of redemption is given, or (c) which have been selected or called forredemption in whole or in part.

SECURITY FOR THE BONDS

The Bonds represent general obligations of the District payable from certain ad valorem taxes.Pursuant to Section 32312 of the Local Health Care District Law, the County will levy and collect

7SF1 16I3509v.5 33982/30020

47

annually ad valorem taxes upon all property subject to taxation by the District for the payment of theprincipal or accreted value of and interest on the Bonds. Such taxes shall be collected by the County andtransftITed to the Paying Agent. The Paying Agent, pursuant to the Paying Agent Agreement, willdeposit all such taxes in the Debt Service Fund held by the Paying Agent, which is required to be used bythe Paying Agent solely For the payment of principal or accreted value of and redemption premium, ifany, and interest on the Bonds when due. All ad va/oreiiz taxes collected within the District for thepayment of Bonds are pledged to the payment of principal or accreted value of and redemption premium,if any, and interest on the Bonds when due. Although the County is obligated to levy an ad va/orem taxfor the payment of the Bonds, the Bonds are not obligations of the County, the State, the Authority or anyof their political subdivisions, other than the District.

The moneys in the I)ebt Service Fund, to the extent necessary to pay the principal or accretedvalue of and redemption premium, if any, and interest on the Bonds as the same become due and payable,shall be transferred by the Paying Agent on each Bond Payment Date to DTC for remittance by DTC toits Participants for subsequent disbursement to the Beneficial Owners of the Bonds.

Each year, the District calculates and submits to the County the levy rate that is expected topermit the County to collect ad va/orem taxes in an amount sufficient to pay principal or accreted valueand interest coming due on the Bonds in that year. In the event there is a shortfall in ad valorern taxes topay principal or accreted value of and interest on the Bonds, the District is required by Section 32127 ofthe Local Health Care District Law to use moneys in its general fund to make up any shortfall. Incalculating the levy rate, the District takes into account an estimated delinquency rate based uponhistorical delinquency rates within the County. In each of the past three fiscal years, the District hasestablished a levy rate that has yielded ad ra/ore,n tax revenues in excess of the amounts required to paydebt service due on bonds issued pursuant to Proposition G. but there can be no assurance that ad va/orenitax revenues collected in the future will continue to be in excess of debt service requirements.Nonetheless, the District anticipates that the ad ia/ore,,, taxes levied and collected by the County on theproperty subject to taxation by the District will he sufficient to pay the Bonds when due.

ANNUAL DEBT SERVICE REQUIREMENTS

The following table sets forth for each year ending July 15, the amounts required to be madeavailable for the payment of principal or accreted value due on the Bonds, including by mandatorysinking account redemption, interest on the Bonds and debt service on outstanding general obligationbonds issued by the District pursuant to Proposition G.

Current Interest Bonds Capital Appreciation BondsOutstanding Total

Year General AnnualEnding Principal Interest Paid Obligation Debt

(July 15) Principal Interest At Maturity At Maturity Bonds Service

8SF1 1613509v,5 33982/30020

48

PROPERTY TAX INFORMATION

Ad Valorem Property Taxation

As required by State law, the District utilizes the services of the County for the assessment andcollection of taxes for District purposes. District taxes are collected at the same time and on the same taxroll as are County, school district, city and other special district taxes. Taxes are levied by the County foreach fiscal year on taxable real and personal property that is located in the District as of the precedingJanuary 1 See “—Tax Collection Procedure” and “—Tax Rate and Collection Record” below.

The amount of the annual ad valorern tax levied by the County to repay the Bonds will be basedon the assessed valuation of taxable property in the District and the amount of debt service due on theBonds. The District will calculate the tax rate on an annual basis based on the assessed valuation oftaxable property in the District and the amount of debt service due on the Bonds. Subsequent tocalculation of the tax rate, the District Board, in accordance with County policy, will adopt a resolution onan annual basis notifying the County of the tax rate established. The County will, in turn, levy and collectthe ad valorein taxes and transfer such ad valorern taxes to the Paying Agent, as described above.

Certain Risks Related to Ad Valorem Property Taxation

A reduction in the assessed valuation of taxable property located in the District, such as may becaused by economic recession, deflation of land values, a relocation out of the District by one or moremajor property owners, reclassification of property to a class exempt from taxation or the complete orpartial destruction of such property caused by, among other events, an earthquake, flood or other naturaldisaster, could cause a reduction in the assessed value of the District and necessitate an unanticipatedincrease in the annual tax levy necessary to pay debt service on the Bonds. A significant decrease inassessed valuation, an unanticipated increase in the rate of tax delinquencies, or a declaration ofbankruptcy by the District could delay the payment of debt service on the Bonds. See “LEGALMATTERS—General Limitation on Remedies” herein. As stated above, the District calculates the taxrate on an annual basis, taking into account an assumed delinquency rate. Since issuing bonds pursuant toProposition G, the District has assumed an average delinquency rate of %, which is the actual historicten-year average rate of delinquencies in the County. In any given fiscal year, to the extent thedelinquency rate is less than that which was assumed for such fiscal year, any excess taxes collected willbe used to pay debt service in the following fiscal year. Conversely, if in any given fiscal year, thedelinquency rate is higher than that which was assumed for such fiscal year and to the extent there are notsufficient funds on deposit in the Interest and Sinking Fund to pay debt service on the Bonds for suchfiscal year, the District is required to provide funds from its general fund to make up any deficiencies inthe Interest and Sinking Fund to provide for payment of the Bonds. While the levy of ad valorern tax topay debt service of the Bonds and other bonds issued pursuant to Proposition G is not limited as to rate oramount, the risks discussed in this paragraph could affect a tax payor’s willingness or ability to payad valorern taxes.

Over the past several years, the real estate market has seen an increased rate of mortgagedelinquencies and foreclosures and, there has been a slowdown in new home and other construction. Inaddition, there has been a decline in the year over year rate of growth of assessed valuations in theDistrict. The total assessed valuation of real property in the District for the fiscal year 201 0-11 decreasedby 1.5% as compared to fiscal year 2009-10. The total assessed valuation for the fiscal year 2009-10decreased by 5.0% as compared to fiscal year 2008-09, Also, there has been an increase in propertyowner requests for temporary reductions in assessed valuation. [True?]

9SF1 613509v,5 33982/30020

49

Assessed Valuations

The assessed valuation of property in the District is established by the County Assessor, exceptfor public utility property which is assessed by the State Board of Equalization. Assessed valuations arereported at 100% of the “full value” of the property, as defined in Article XIIIA of the State Constitution.See “CONSTITUTIONAL AND STATUTORY PROVISIONS AFFECTING DISTRICT REVENUESAND APPROPRIATIONS” herein.

Certain classes of property, such as churches, nonprofit and public schools, colleges, universitiesand hospitals, charitable institutions and governmental property, are exempt from property taxation anddo not appear on the tax rolls.

Property located within the District has a total net taxable assessed valuation for fiscal year2010-11 of $40,094,695,319. The following table presents the ten-year history of assessed valuations inthe District.

Assessed ValuationsFiscal Years 2001-02 through 2010-11

Total BeforeRedevelopment

Local Secured Utility Unsecured Increment

2001-02 $23,702,128,007 $2,210,746 $798,443,002 $24,502,781,7552002-03 25,409,047,665 2,161,401 789,841,917 26,201,050,9832003-04 27,474,551,146 6,096,594 872,704,409 28,353,352,1492004-05 30,073,883,210 3,423,433 919,196,030 30,996,502,6732005-06 33,757,515,601 4,813,435 963,044,671 34,725,373,7072006-07 37,616,520,476 4,433,080 1,042,116,286 38,663,069,8422007-08 40,585,269,139 3,356,295 1,138,148,269 41,726,773,7032008-09 41,632,196,554 1,842,884 1,185,358,759 42,819,398,1972009-10 39,501,072,784 1,842,061 1,182,458,468 40,685,373,3132010-lI 38,971,531,401 1,848,330 1,121,315,588 40,094,695,319

Source: California Municipal Statistics, Inc.

The District’s debt limit is 2.5% of the value of taxable property in the District and is currentlyequal to $1,002,367,382, based upon fiscal year 2010-11 assessed valuation. The amount of outstandinggeneral obligation bonds issued pursuant to Proposition Gas of January 1, 2011 was $85,422,076. TheDistrict currently has no other outstanding indebtedness. The District currently expects to issue theremaining bonds authorized under Proposition G within the next five years. The District does notcurrently have plans to seek authorization for additional general obligation bonds.

10SF1 1613509v 5 33982/30020

50

The following table shows the assessed valuation of real property on the secured tax rolls withinthe District and the number of parcels by land uses for fiscal year 2010-11.

Assessed Valuation and Parcels by Land UseFiscal Year 2010-11

AssessedValuationt % of Total No. of Parcels % of Total

Non-Residential:Agricultural/Rural $ 378,479,868 097% 2,176 1.51%Commercial 3,813,524,562 9.79 3,153 2.19Vacant Commercial 178,560,210 0.46 512 0.36Industrial 1,403,056,457 3.60 1,343 0.93Vacant Industrial 64,567,096 0.17 191 0.13Recreational/Open Space 171,392,798 0.44 1,216 0.84Government/Social/Institutional 68,570,857 0.18 435 0.30Miscellaneous 10,724,489 0.03 143 0.10

Subtotal Non-Residential $6,088,876,337 15,62% 9,169 6.37%

Residential:Single Family Residence $24,529,391,815 62.94% 96,031 66.67%Condominium/Townhouse 2,834,559,406 7.27 18,995 13.19Mobile Home 554,742,929 1.42 6,583 4.57Mobile 1-lome Park 292,193,750 0.75 189 0.132-4 Residential Units 1,160,319,495 2.98 4,436 3.085-I- Residential Units 3,014,301,833 7.73 1,447 1.00Miscellaneous Residential 18,793,663 0.05 1,081 0.75Vacant Residential 478,352,173 1.23 6,103 4.24

Subtotal Residential $32,882,655,064 84.38% 134,865 93.63%

Total $38,971,531,401 100.00% 144,034 100.00%

W Local Secured Assessed Valuation; excluding tax-exempt propey.Source: California Municipal Statistics, Inc.

The table below shows the fiscal year 2010-11 aggregate, average and median assessed valuationsof single family homes within the District and a breakdown of single family homes by assessed valuationrange.

11SI-I i6i3509v 5 33982/30020

51

Per Parcel Assessed Valuation of Single Family lioniesFiscal Year 2010-11

Assessed Average Assessed Median AssessedNo. of Parcels Valuation Valuation Valuation

Single Family Residential 96,031 524,529,391.815 $255,432 $230,331

2010-2011 No. of % of Cumulative Total CumulativeAssessed Valuation Parcelsm Total 0/ of Total Valuation % of Total % of Total

$0-$99,999 234 0.244% 0.244% $4,353,089 0.018% 0.018%$lOO,000-$199,999 3.823 3.981 4.225 162,233,654 0.661 0.6795200,000-5299,999 7,347 7.651 11.875 451,886,433 1.842 2.5215300,000-5399,999 4,853 5.054 16.929 420,518,970 1.714 4.236$400,000-$499,999 4,265 4.441 21.370 481,775,926 1.964 6.2005500,000-5599,999 5,103 5.314 26.684 703,287,122 2.867 9.067$600,000-$699,999 5,843 6.084 32.769 951,590,347 3.879 12.946$700,000-$799,999 7,199 7.497 40.265 1,350,571,343 5.506 18.452$800,000-$899,999 7,578 7,89] 48. 156 1,606,732,629 6.550 25.0025900,000-5999,999 6,955 7.242 55.399 1,647,603,526 6.717 31.719

$I,000,000-$1,099,999 6.429 6.695 62.093 1,681,921,623 6.857 38.576$l,100,000-$1,199,999 5,742 5.979 68.073 1,645,745.515 6,709 45.285$1,200,000-SI ,29c,999 5,373 5.595 73.668 1.673,089,754 6.821 52.106$1 .300.000-51.399999 4,304 4.482 78.150 1,447,438,477 5.90 I 58.007SI,400,000-S1.499.999 3,770 3.926 82.076 1.359.477,000 5.542 63.549$l,500.000-$l.599.999 2,853 2.971 85.046 1,100,986,172 4.488 68,038$I,600,000-$1,699,999 2,546 2.651 87.698 1,045.280,552 4.261 72.299Sl,700,000-$l,799.999 1,900 1.979 89.676 827,630,673 3.374 75.673Si,800,000-SI,899,999 1,661 1.730 91.406 765,142,097 3.119 78.792Sl,900.000-S1,999,999 1,152 1.200 92.606 560,027,754 2.283 81.075S2,000.000andgreater 7,101 7.394 100.000 4.643,099,159 18.925 100.000

Total 96,031 100.000% $24,529,391,815 100.000%

improved single family residential parcels. Excludes condominiums and parcels with multiple family units.Source: California Municipal Statistics, Inc.

Tax Collection Procedure

Taxes are levied for each fiscal year on taxable real and personal property on the tax rolls as ofthe preceding January 1. Real property that changes ownership or is newly constructed is revalued at thetime the change occurs or the construction is completed. The current year property tax rate is applied tothe reassessed value, and the taxes are then adjusted by a proration factor that reflects the portion of theremaining tax year for which taxes are due.

For assessment and collection purposes, property is classified either as secured” or “unsecured”and is listed accordingly on separate parts of the assessment roll. The “secured roll” is that part of theassessment roll containing real property having a tax lien that is sufficient, in the opinion of the CountyAssessor, to secure payment of the taxes. Other property is assessed on the “unsecured roil.”

Property taxes on the secured roll are due in two installments, on November 1 and February 1 ofeach year. If unpaid, such taxes become delinquent on December 10 and April 10, respectively, and a10% penalty attaches to any delinquent payment. Property on the secured roll with respect to which taxesare delinquent becomes tax defaulted on June 30. Such property may thereafter be redeemed by payment

12SN 16i3509v.5 33982/30020

52

of the delinquent property taxes, plus a penalty of 1.5% per month to the time of redemption, plus costsand a redemption fee. If taxes are unpaid for a period of five years or more, the property is subject toauction sale by the County’s Treasurer—Tax Collector.

Property taxes on the unsecured roll are due as of the January 1 lien date and become delinquenton August 31. A 10% penalty attaches to delinquent unsecured taxes. If unsecured taxes are unpaid at5:00 p.m. on October 31, an additional penalty of 1.5% attaches to them on the first day of each monthuntil paid. The County has four ways of collecting delinquent unsecured personal property taxes:(1) bringing a civil action against the taxpayer; (2) filing a certificate in the office of the Clerk of Countyspecifying certain facts in order to obtain a lien on certain property of the taxpayer; (3) filing a certificateof delinquency for recordation in the County Recorder’s office in order to obtain a lien on certainproperty of the taxpayer; and (4) seizing and selling personal property, improvements, or possessoryinterests belonging or assessed to the taxpayer.

Tax Rate and Collection Record

The aggregate tax rate for properties within the District for fiscal year 2010-11 is 1.01315%.

The following table shows the District’s property tax collection record for the past four years andas of December 1, 2010 for the current year.

Summary of Property Tax Levies and CollectionsFiscal Years 2006-07 through 2010-11

Percent ofCurrent Percent of Percent of

Tax Total Tax DelinquentAnnual Collections Delinquent Collections Outstanding Taxes to

Fiscal Current Current Tax to Annual Tax Total Tax to Annual Delinquent AnnualYear Tax Levy>2> Collections>2> Tax Levy Collections>3> Collections Tax Levy Taxes Tax Levy

2006-07 $5,591,068 $5,424,844 97.03% $141,178 $5,566,022 99.55% $ 25,046 0.45%2007-08 6,014,025 5,775,843 96.04 186,467 5,965,310 99.19 48,715 0.812008-09 6,148.813 5,905,440 96.04 155,526 6,060.966 98.57 87,847 1,432009-10 5,837,020 5,619,856 96.28 62,911 5,682.767 97.36 154,253 2,642010-i i 5,758,163 2,370,638 41.17 2.370,638 41.17 n/a n/a

Reflects property taxes collected as of December 1, 2010. which is the most current information available.Includes Secured, Unsecured and Unitary Tax.

(3) Estimated delinquent tax collections for the fiscal year being reported.Source: The County.

13SF! 16!3509v,5 33982/30020

53

Major Taxpayers

The following table lists the major real property taxpayers in the District based on their 2010-i Isecured assessed valuations.

Largest Local Secured Property TaxpayersFiscal Year 2010-11

Property Owner Primary Land Use Assessed Valuation % of TotaiW

1. Parkway Plaza LP Shopping Center $204,140,780 0.52%2. Conrad Prebys. Trust Apartments 113,639,590 0.293. JMS Acquisition LLC Apartments 110,407,747 0.284. Fairfield Grossmont Trolley LLC Apartments 99,660,886 0.265. San Diego Family Housing LLC Apartments 98,399,802 0.256. Rainbow Investment Co. Shopping Center 92,181,790 0.247. SP Lavida Real LLC Apartments 80,970,425 0.218. Wal-Mart Real Estate Business Trust Commercial 67,332,459 0.179. Conam San Diego Residential Properties Apartments 53,201,032 0.1410. Baltimore Owner LLC Apartments 53,188,639 0.14II VSCRE Holdings LLC Rest Home 51,080,894 0.1312. FW CA Rancho San Diego Village LLC Shopping Center 45,059,050 0.1213. Vestar Kimco Santee LP Shopping Center 44,219,328 0.1114. Home Depot USA Inc. Commercial 42,409,421 0.1115. GKN Aerospace Chem-Tronics Inc. Industrial 40,410,738 0.1016. Cumberland Club Apts. LP Apartments 39,664,092 0.1017. Fresh & Easy Neighborhood Market Inc. Commercial 37,526,410 0,1018. ASN La Mesa LLC Apartments 37,263,528 0.1019. Sears Roebuck & Co. Commercial 36,949,676 0.0920. Paul and Marilyn Green Family Trust Apartments 35,094,707 0.09

$1,382,800,994 3.55%

2010-11 Local Secured Assessed Valuation: $38,971,531,401.Source: California Municipal Statistics, Inc.

Direct and Overlapping Debt

Contained within the District are numerous local agencies whose boundaries overlap theboundaries of the District. These local agencies have outstanding debt issued in the form of generalobligation, lease revenue and special tax and assessment bonds. The direct and overlapping debt of suchagencies, as well as the District, as of January 1, 2011, is shown in the following table (the “DebtStatement”), which was prepared by California Municipal Statistics, Inc. The Debt Statement is includedfor general information purposes only. Neither the District nor the Underwriter has reviewed the DebtStatement for completeness or accuracy, and neither make any representation in connection therewith.

14SF1 1613509v 5 33982/30020

54


2010-11 Assessed Valuation:Redevelopment Incremental Valuation:Adjusted Assessed Valuation:

$40,094,695,3193,520,179,240

$36,574.5 16,079

0.21%2.47%

% Applicable1.946%

98.3472.345 & 2.334

99.32767.762

100.97.740

100.100.

0.002-10099.931

1.906100.100,

10.667%10,66710.66798.34799.327

100.100.100.various100.99.931

1.90699.994

lOO& 97.15724.311

Debt I/i/il

$ 4,963,760190,176,83054,249,296

377,187,7581,717,767

99,900,00038,426,33334,815,35840,358,05133,212,33824,093,364

42,69485,422,076

5,305,000

$ 989,870,625

$ 42,437,59387,500,138

2,246,2041,750,5771,204,340

14,055,0004,720,000

30,959,8491,056,472

25,195,0004,561,8509,852,4951,504,910

13,361,62714,609,695

$ 255,015,75014,609,69522,195,000

$ 218,211,055

$1 ,244,886,375(2)

$1,208,081,680

DIRECT AND OVERLAPPING TAX AND ASSESSMENT DEBT:Metropolitan Water DistrictGrossmont-Cuyamaca Community College DistrictSan Diego Community College and Unified School DistrictGrossmont Union High School DistrictMountain Empire Unified School DistrictCajon Valley Union School DistrictLa Mesa-Spring Valley Union School DistrictLakeside Union School DistrictSantee School DistrictOther School DistrictsCity of La MesaCity of San DiegoGrossmont Ilealthcare DistrictCity of La Mesa 1915 Act Bonds

TOTAL DIRECT AND OVERLAPPING TAX ANI) ASSESSMEN’I’ DEBT

OVERLAPPING GENERAL FUND DEBT:San Diego County General Fund ObligationsSan Diego County Pension ObligationsSan Diego County Superintendent of Schools ObligationsGrossmont-Cuyamaca Community College District General Fund ObligationsGrossmont Union High School District General Fund ObligationsCajon Valley Union School District Certificates of ParticipationAlpine Union School District Certificates of ParticipationSantee School District General Fund ObligationsOther School District General Fund ObligationsCity of El Cajon General Fund ObligationsCity of La Mesa General Fund ObligationsCity of San Diego General Fund ObligationsCity of Santee General Fund ObligationsLakeside and San Miguel Consolidated Fire Protection District Certificates of ParticipationOtay Municipal Water District Certificates of Participation

10 lAl GROSS OVi RI APPING Gi NI RAI I UND Dl B ILess: Otay Municipal Water District Certificates of Participation 100% supported

City of El Cajon supported obligationsTOTAL NET OVERLAPPING GENERAL FUND DEBT

GROSS COMBINED TOTAL DEB’l’NET COMBINE1) TOTAL i)EBT

Excludes issue to be sold.Excludes tax and revenue anticipation notes, enterprise revenue, mortgage revenue and tax allocation bonds and non-bondedcapital lease obligations.

Ratios to 2010-il Assessed Valuation:Direct Debt (85,422,076)Total Direct and Overlapping Tax and Assessment Debt

Ratios to Adjusted Assessed Valuation:Gross Combined Total DebtNet Combined Total Debt

STATE SCHOOL BUILDING Alt) REPAYABLE AS OF 6/30/10:

Source: California Municipal Statistics, Inc.

3,40%3.30%

$0

SFt 613509v,5 33982/3002015

55

CONSTITUTIONAL AND STATUTORY PROVISIONSAFFECTING DISTRICT REVENUES AND APPROPRIATIONS

Article XHIA of the State Constitution

Article XI1IA of the State Constitution (“Article XIIIA”), adopted and known as Proposition 13,limits the amount of ad valoreni taxes on real property to 1% of “full cash value” as determined by thecounty assessor. Article XJIIA defines “full cash value” to mean “the county assessor’s valuation of realproperty as shown on the I 975-76 bill under ‘full cash value,’ or thereafter, the appraised value of realproperty when purchased, newly constructed or a change in ownership has occurred after the 1975assessment,” subject to exemptions in certain circumstances of property transfer or reconstruction. The“full cash value” is subject to annual adjustment to reflect increases, not to exceed 2% for any year, ordecreases in the consumer price index or comparable local data, or to reflect reductions in property valuecaused by damage, destruction or other factors.

Article XIIIA requires a vote of two-thirds of the qualified electorate of a city, county, specialdistrict (such as the District) or other public agency to impose special taxes, while totally precluding theimposition of any additional ad valorem, sales or transaction tax on real property, Article XIIIA exemptsfrom the 1% tax limitation any taxes above that level required to pay debt service (a) on any indebtednessapproved by the voters prior to July 1, 1978, or(b), as a result of an amendment approved by State voterson July 3, 1986, on any bonded indebtedness approved by two-thirds of the votes cast by voters for theacquisition or improvement of real property, or (c) bonded indebtedness incurred by a school district orcommunity college district for the construction, reconstruction, rehabilitation or replacement of schoolfacilities or the acquisition or lease of real property for school facilities, approved by 55% or more of thevotes cast on the proposition, but only if certain accountability measures are included in the proposition.The tax for payment of the Bonds fails within the exception described in (b) of the immediately precedingsentence. In addition, Article XIllA requires the approval of two-thirds of all members of the statelegislature to change any state taxes for the purpose of increasing tax revenues.

Article XIIIA has subsequently been amended to permit reduction of the “full cash value” base inthe event of declining property values caused by damage, destruction or other factors, to provide thatthere would be no increase in the “full cash value” base in the event of reconstruction of propertydamaged or destroyed in a disaster, and in other minor or technical ways.

On June 1 8, 1992, the United States Supreme Court in Nordlinger v. Hahn issued a decisionupholding the constitutionality of Article XII IA.

Legislation Implementing Article XIIIA

Legislation has been enacted and amended a number of times since 1978 to implementArticle XlllA. Local agencies are no longer permitted to levy directly any property tax (except to payvoter-approved indebtedness). The 1% property tax is automatically levied by the county and distributedaccording to a formula among taxing agencies. The formula apportions the 1% property tax roughly inproportion to the relative shares of property taxes levied prior to 1979.

Increases of assessed valuation resulting from reappraisals of property due to new construction,change in ownership, or from the annual adjustment not to exceed 2%, are allocated among the variousjurisdictions in the “taxing area” based upon their respective “situs.” Any such allocation made to a localagency continues as part of its allocation in future years.

16SF 613509v.5 33982/30020

56

All taxable property is shown at full market value on the tax rolls. Consequently, the tax rate isexpressed as $1 per $100 of taxable value. All taxable property value included in this Official Statementis shown at 100 percent of market value (unless noted differently) and all tax rates reflect the $1 per $100of taxable value.

Article XIIIB of the State Constitution

Article XIIIB to the California Constitution (“Article XIIIB”) was added to the Constitution byinitiative in 1979. Under Article XIIIB state and local governmental entities have an annualappropriations limit” and are not permitted to spend certain moneys that are called “appropriationssubject to limitation” (consisting of tax revenues, state subventions and certain other funds) in an amounthigher than the “appropriations limit.” Article XII1B does not affect the appropriation of moneys that areexcluded from the definition of “appropriations subject to limitation,” including debt service onindebtedness existing or authorized as of January 1, 1979, or bonded indebtedness subsequently approvedby the voters. In general terms, the “appropriations limit” is to be based on certain I 97879 expendituresand is to be adjusted annually to reflect changes in consumer prices, populations, and services providedby these entities. Among other provisions of Article XIIIB, if these entities’ revenues in any year exceedthe amounts permitted to be spent, the excess would have to be returned by refunding taxes alreadycollected or revising tax rates or fee schedules over the subsequent two years.

The appropriations of a local governmental entity subject to Article XIIIB limitations include theproceeds of taxes levied by or for that entity and the proceeds of certain State subventions to that entity.“Proceeds of taxes” include, but are not limited to, all tax revenues and the proceeds to the entity from(a) regulatory licenses, user charges and user fees (but only to the extent that these proceeds exceed thereasonable costs in providing the regulation, product or service), and (b) the investment of tax revenues.Appropriations subject to limitation do not include (a) refunds of taxes, (b) appropriations for debtservice, such as the Bonds, (c) appropriations required to comply with certain mandates of the courts orthe federal government, (d) appropriations of certain special districts, (e) appropriations for all qualifiedcapital outlay projects as defined by the legislature, (f) appropriations derived from certain fuel andvehicle taxes and (g) appropriations derived from certain taxes on tobacco products.

Article X1I1B includes a requirement that all revenues received by an entity of government otherthan the State in a fiscal year and in the fiscal year immediately following it in excess of the amountpermitted to be appropriated during such respective fiscal years shall be, returned by a revision of tax ratesor fee schedules within the next two subsequent fiscal years.

The State and each local government entity has its own appropriation limit. Each year, the limitis adjusted to allow for changes, if any, in the cost of living, the population of the jurisdiction, and anytransfer to or from another governmental entity of financial responsibility for providing the services. TheDistrict is required to establish an appropriation limit each year. IThe District receives no moneys that areconsidered appropriations subject to limitations and, therefore, had an appropriation limit of $0 for fiscalyear 20101 1.1

Article XIHC and Article XIIID of the State Constitution

On November 5, 1996, the voters of the State approved Proposition 218, popularly known as the“Right to Vote on Taxes Act.” Proposition 218 added to the State Constitution Articles XIIIC and XIIID(respectively, “Article XIIIC” and “Article XIIID”), which contain a number of provisions affecting theability of local agencies to levy and collect both existing and future taxes, assessments, fees and charges.

17SF1 1613509v.5 33982/30020

57

According to the “Title and Summary” of Proposition 28 prepared by the California AttorneyGeneral, Proposition 218 limits “the authority of local governments to impose taxes and property-relatedassessments, fees and charges” Among other things, Article XIIIC establishes that every tax is either a“general tax” (imposed for general governmental purposes) or a “special tax” (imposed for specificpurposes), prohibits special purpose government agencies such as hospital districts from levying generaltaxes, and prohibits any local agency from imposing, extending or increasing any special tax beyond itsmaximum authorized rate without a two-thirds vote; and also provides that the initiative power will not belimited in matters of reducing or repealing local taxes, assessments, fees and charges. Article XI1ICfurther provides that no tax may be assessed on property other than ad valorern property taxes imposed inaccordance with Articles XIII and XIIIA of the State Constitution and special taxes approved by a two-thirds vote under Article XIIIA, Section 4, Article XIIID relates to assessments and property-related feesand charges, and explicitly provides that nothing in Article XIIIC or XII1D will be construed to affectexisting laws relating to the imposition of fees or charges as a condition of property development.

The District does not impose any taxes, assessments, or property-related fees or charges that aresubject to the provisions collected of Proposition 2 1 8. it does receive a portion of the basic one percentad va/oreni property tax levied and collected by the County pursuant to Article XI1IA of theState Constitution.

Unitary Property

Some amount of property tax revenue of the District is derived from utility property, which isconsidered part of a utility system with components located in many taxing jurisdictions. The StateConstitution provides that the State Board of Equalization (the “SBE”), rather than counties, assesscertain property owned or used by regulated utilities. Such property is grouped and assessed by the SBEas “going concern” operating units, which may cross local tax jurisdiction boundaries, rather than asindividual parcels of real or personal property separately assessed. Such utility property is known as“unitary property.” The SBE assesses property at “fair market value,” determined by various methodsand formulae depending on the nature of the property, except that assessed value of certain railroadproperty is limited to a percentage of the fair market value determined by the SBE, in conformity withfederal law. The SBE assesses values as of January 1 prior to the tax year of the related tax levy.Property tax on SBE-assessed property is then levied and collected by each county in the same manner ascounty assessed property, but at special county-wide tax rates, and distributed to each taxing agencywithin that county generally according to the approximate percentages as allocated to each taxing agencyin the prior year.

Changes in the California electric utility industry structure and in the way in which componentsof that industry are regulated and owned, including the sale of electric generation assets to largelyunregulated, non-utility companies, may convert the status of such assets from SBE-assessed unitaryproperty to locally assessed property or otherwise affect how those assets are assessed in the future andwhich local taxing agencies are to receive the property taxes on such assets. The District cannot predictwhether any changes that may occur will affect the unitary property within its boundaries or the taxrevenues relating to such property.

Future Initiatives

Articles XIIIA, XIIIB, XIIIC, and XIIID were each adopted as measures that qualified for theballot pursuant to the State’s initiative process. From time to time other initiative measures could beadopted, further affecting District revenues or the District’s ability to expend revenues. The nature andimpact of these measures cannot be anticipated by the District.

18SF1 1613509v.5 33982/30020

58

TIlE DISTRICT

Only ad valorern taxes levied on taxable property within the District are pledged to the paymentof debt service on the Bonds. The Bonds are payable from revenues of the District only in the event thereis a shortfall in ad valorem taxes, hut the Bonds are not secured by any ofsuch revenues. The Bonds arenot payable from, nor are they secured by, the revenues of Sharp Grossmont Hospital. Prospectiveinvestors, therefiwe, should base their investment decision on the proper/v tax injörmation relating to theDistrict. See “SECURITY FOR THE BONDS” herein. For a summary of certain demographic data forthe County, see APPENDIXA — “Economic And Demographic Profile Of San Diego County” hereto.The information in this section concerning the operations of the District is provided as backgroundinformation onlj

History

The District, formerly known as Grossmont Hospital District, was formed in 1952 for thepurposes of establishing a new hospital to accommodate the unmet health care needs of the residents ofeastern San Diego County. Grossmont Hospital commenced operations in 1955 and, now known asSharp Grossmont Hospital, currently employs [2,5851 full time employees, with j667j doctors on staffand 14811 licensed acute beds.

Governance and Management

The District is governed by the District Board, which consists of five publicly elected members,each serving four-year terms. The District Board is charged with the general oversight of the District’soperations. The current members of the District Board are set forth below:

Board of Directors of the District

Director Term Expires December Occupation

Deborah McElravy, R. Ph., President 2012 Pharmacist

Michael T. Long, M.D., Vice President 2014 Physician

Michael Emerson, RDO, FNAO, 2012

________________

Secretary

Gloria A. Chadwick, RN. 2014 Registered Nurse

__________________

2012

Pursuant to the Affiliation Agreement, the District agreed to transfer the management andoperation of Grossmont Hospital to Sharp in 1991. In connection with this affiliation, the District leasedGrossmont Hospital to the Corporation for a term ending May 29, 2021, unless such term is furtherextended, and transferred certain assets and liabilities of the District to the Corporation.

Sharp, the parent corporation of a multi-hospital health care system consisting of five nonprofithospitals and other health care facilities located in San Diego County and Riverside County, California, isthe sole member of the Corporation.

19SF] 1613509v,5 33982/3002()

59

Financial Information

The District prepares financial statements on an annual basis, and the financial statements areaudited by an independent accountant. As discussed above, oniy ad valorern taxes levied on taxableproperty within the District are pledged to the payment of debt service on the Bonds. The Bonds arepayable from revenues of the District only in the event there is a shortfall in ad valorern taxes, but theBonds are not secured by any of such revenues. The Bonds are not payable from, nor are they secured by,the revenues of Sharp Grossmont Hospital. Accordingly, the financial statements of the District have notbeen included in this Official Statement. The District’s financial statements for the fiscal year endedJune 30, 2010, however, may be obtained from the Municipal Securities Rulemaking Board through itsElectronic Municipal Market Access System. INeither the financial statements nor any other informationcontained or accessible on such website is incorporated herein by reference]

THE AUTHORITY

The Authority was created by a Joint Exercise of Powers Agreement, dated as of October 22,2010 the “JPA Agreement”), between Palomar Pomerado Health and the District. Pursuant to Chapter 5of Division 7 of Title 1 of the Government Code of the State (the ‘JPA Act”), the Authority has legalauthority to exercise any powers common to its members and to exercise additional powers granted to itunder the JPA Act. Under the JPA Act, the Authority is authorized to purchase bonds issued by theDistrict at negotiated sale and to sell such bonds at negotiated sale to the Underwriter. The Bonds arebeing issued by the District for sale to the Authority and will be simultaneously resold by the Authority tothe Underwriter.

Neither the Authority nor its independent contractors has furnished, reviewed, investigated orverified the information contained in this Official Statement other than the information contained in thissection. The Authority will not monitor payment of the Bonds or compliance with the documents relatingthereto.

CONTINUING DISCLOSURE

The District has covenanted for the benefit of Bondholders (including Beneficial Owners of theBonds) to provide (i) the audited financial statements of the District for the prior fiscal year and (ii) to theextent not contained in the audited financial statements: (a) assessed value of taxable property in theDistrict as shown on the recent equalized assessment role, (b) property tax levies, collections anddelinquencies for the District, for the prior fiscal year, and (c) a list of the top 20 property taxpayers in theDistrict for the then current fiscal year, as measured by secured assessed valuation and their percentage oftotal secured assessed value (collectively, such information is referred to as the “Annual Report”) by notlater than six months following the end of the District’s fiscal year (which currently ends June 30),commencing with the report for the 2010-1 1 Fiscal Year, and to provide notices of the occurrence ofcertain enumerated events. The Annual Report shall be filed by the District with the Municipal SecuritiesRulemaking Board through its Electronic Municipal Market Access System. The specific nature of theinformation to be contained in the Annual Report or any notices of material events is included inAPPENDIX B “Form of Continuing Disclosure Certificate.” These covenants have been made in orderto assist the Underwriter in complying with Rule 15c2-12(b)(5) (the “Rule”) promulgated by theSecurities and Exchange Commission. The District has never failed to comply in all material respectswith any previous continuing disclosure undertaking pursuant to the Rule within the last five years.IConfirmi

20SF1 1613509v,5 33982/30020

60

TAX MATTERS

Tax Exemption

In the opinion of Sidley Austin lip, San Francisco, California, Bond Counsel, under existing lawand assuming compliance by the District with certain covenants in the Resolution, the Tax Certificate andother documents pertaining to the Bonds, and by the Corporation with certain covenants in its Certificateattached to the Tax Certificate, and requirements of the Internal Revenue Code of 1986, as amended (the“Code”), regarding the organization and operation of the Corporation, the use, expenditure andinvestment of proceeds of the Bonds, and the timely payment of certain investment earnings to the UnitedStates, interest on the Bonds is not includable in the gross income of the owners of the Bonds for federalincome tax purposes. Failure to comply with such covenants and requirements may cause interest on theBonds to be included in gross income retroactively to the date of issuance of the Bonds.

In the further opinion of Bond Counsel, interest on the Bonds is not treated as an item of taxpreference in calculating the federal alternative minimum taxable income of individuals and corporations,and is not included in the calculation of federal corporate alternative minimum taxable income forpurposes of the corporate alternative minimum tax.

Bond Counsel has relied on the opinion of jllooper, Lundy & Bookman, Inc.j, regarding thequalification of the Corporation as an organization described in Section 501(c)(3) of the Code. NeitherBond Counsel nor [looper, Luncly & Bookman, Inc.] can give or has given any opinion or assuranceabout the future activities of the Corporation or about the effect of future changes in the Code, applicableregulations, the interpretation thereof or the resulting changes in enforcement thereof by the InternalRevenue Service (the “IRS”). Failure to comply with the above-mentioned covenants and requirementsor failure of the Corporation to be organized and operated in accordance with the IRS’s requirements forthe maintenance of its status as an organization described in Section 501(c)(3) of the Code may causeinterest on the Bonds to be included in gross income retroactively to the date of issuance of the Bonds.

Ownership of, or the receipt of interest on, tax-exempt obligations may result in collateral taxconsequences to certain taxpayers, including, without limitation, financial institutions, property andcasualty insurance companies, certain foreign corporations doing business in the United States, certain Scorporations with excess passive income, individual recipients of Social Security or Railroad Retirementbenefits, taxpayers that may be deemed to have incurred or continued indebtedness to purchase or carrytax-exempt obligations, and taxpayers who may be eligible for the earned income credit. Bond Counselexpresses no opinion with respect to any collateral tax consequences and, accordingly, prospectivepurchasers of the Bonds should consult their tax advisors as to the applicability of any collateral taxconsequences.

Certain requirements and procedures contained or referred to in the Resolution or in otherdocuments pertaining to the Bonds may be changed, and certain actions may be taken, under thecircumstances and subject to the terms and conditions set forth in such documents, upon the advice orwith the approving opinion of counsel nationally recognized in the area of tax-exempt obligations. BondCounsel expresses no opinion as to the effect of any change to any document pertaining to the Bonds orof any action taken or not taken without the approval of Bond Counsel, or in reliance upon the advice ofcounsel other than Bond Counsel with respect to the exclusion from gross income of the interest on theBonds for fiscal income tax purposes.

21SF1 1613509v,5 33982/30020

61

Original Issue Discount

The initial public offering price of certain of the Bonds (collectively, the “Discount Bonds”) isless than the principal amount of the Discount Bonds. The difference between the principal amount of aDiscount Bond and its initial public offering price is original issue discount. Original issue discount on aDiscount Bond accrues over the term of such Discount Bond at a constant interest rate. To the extent ithas accrued, original issue discount on a Discount Bond is treated as interest excludable from grossincome for federal income tax purposes under the conditions and limitations described above. Further,the amount of original issue discount that accrues on a Discount Bond in each year is not an item of taxpreference for purposes of calculating federal alternative minimum taxable income of individuals andcorporations, and is not included in the calculation of federal corporate alternative minim taxable incomefor purposes of the corporate alternative minimum tax. Such accrued original issue discount, however, istaken into account in determining the distribution requirements of certain regulated investmentcompanies, and may result in some of the collateral federal tax consequences discussed above.Consequently, owners of Discount Bonds should be aware that the accrual of original issue discount ineach year may result in additional distribution requirements or other collateral federal income taxconsequences although the owner may not have received cash in such year.

The accrual of original issue discount on a Discount Bond will increase the owner’s adjustedbasis in such Discount Bond. This will affect the amount of taxable gain or loss realized by the owner ofthe Discount Bond upon the redemption, sale or other disposition of such Discount Bond. The effect ofthe accrual of original issue discount on the federal income tax consequences of a redemption, sale orother disposition of a Discount Bond that is not purchased at the initial public offering price may bedetermined according to rules that differ from those described above. Owners of Discount Bonds shouldconsult their tax advisors with respect to the precise determination for federal income tax purposes of theamount of original issue discount that properly accrues with respect to the Discount Bonds, other federalincome tax consequences of owning and disposing of the Discount Bonds and any state and local taxconsequences of owning and disposing of the Discount Bonds.

Premium Bonds

The excess, if any, of the tax adjusted basis of a Bond purchased as part of the initial publicoffering to a purchaser (other than a purchaser who holds such Bond as inventory, stock in trade or forsale to customers in the ordinary course of business) over the amount payable at maturity is “bondpremium,” Bond premium is amortized over the term of such Bond for federal income tax purposes (or,in the case of a bond with bond premium callable prior to its stated maturity, the amortization period andyield may be required to be determined on the basis of an earlier call date that results in the lowest yieldon such bond). Owners of Bonds with bond premium are required to decrease their adjusted basis in suchBonds by the amount of amortizable bond premium attributable to each taxable year such Bonds are held.The amortizable bond premium on such Bonds attributable to a taxable year is not deductible for federalincome tax purposes. Rather, bond premium is treated as an offset to the interest received on such Bonds.Owners of such Bonds should consult their tax advisors with respect to the determination for federalincome tax purposes of the treatment of bond premium upon sale or other disposition of such Bonds andwith respect to the state and local tax consequences of owning and disposing of such Bonds.

Information Reporting and Backup Withholding

Interest paid on the Bonds will be subject to information reporting in a manner similar to interestpaid on taxable obligations. Although such reporting requirement does not, by itself, affect theexcludability of such interest from gross income for federal income tax purposes, such reportingrequirement causes the payment of interest on the Bonds to be subject to backup withholding if such

SF1 1613509v.5 33982/30020

62

interest is paid to beneficial owners who (a) are not “exempt recipients,” and (b) either fail to providecertain identifying information (such as the beneficial owner’s taxpayer identification number) in therequired manner or have been identified by the Internal Revenue Service as having failed to report allinterest and dividends required to be shown on their income tax returns. Generally, individuals are notexempt recipients, whereas corporations and certain other entities are exempt recipients. Amountswithheld under the backup withholding rules from a payment to a beneficial owner are allowed as arefund or a credit against such beneficial owner’s federal income tax liability provided the requiredinformation is furnished to the internal Revenue Service.

State Tax Exemption

In the further opinion of Bond Counsel, interest on the Bonds is exempt from personal incometaxes imposed by the State of California.

Future Developments

Future legislative proposals, if enacted into law, regulations, rulings or court decisions may causeinterest on the Bonds to be subject, directly or indirectly, to federal income taxation or to State or localincome taxation, or may otherwise prevent beneficial owners from realizing the full current benefit of thetax status of such interest. Further, legislation or regulatory actions and proposals may affect theeconomic value of the federal or state tax exemption or the market value of the Bonds.

Prospective purchasers of the Bonds should consult their tax advisors regarding pending orproposed federal or state tax legislation, regulations, rulings or litigation, as to which Bond Counselexpresses no opinion.

A copy of the proposed form of opinion of Bond Counsel is attached hereto as Appendix C.

LEGAL MATTERS

General

There is no litigation pending or threatened against the District concerning the validity of theBonds or questioning the District’s ability to issue the Bonds, the District’s ability to receive ad valorerntaxes, the Bond Resolution or the organization, powers or authority of the District.

Limitation on Remedies

The opinion of Bond Counsel as to the rights of owners and the enforceability thereof, attachedhereto as Appendix C, is qualified by reference to bankruptcy, insolvency and other laws relating to oraffecting creditor’s rights. Bankruptcy proceedings, if initiated, could subject the owners of the Bonds tojudicial discretion and interpretation of their rights in bankruptcy or otherwise and, consequently, mayentail risks of delay, limitation, or modification of their rights.

Approval of Legality

The validity of the Bonds and certain other legal matters are subject to the approving opinion ofSidley Austin LLP, San Francisco, California, Bond Counsel. A copy of the proposed form of opinion ofBond Counsel is attached hereto as Appendix C. Sidley Austin LLP has also acted as Disclosure Counselto the District. Certain legal matters will be passed upon for the District by its General Counsel,

23SF1 1613509v.5 33982/30020

63

Jeffrey G. Scott, Esq,, and for the Underwriter by its counsel, Chapman and Cutler LLP, San Francisco,California.

UNDERWRITING

The Bonds are being purchased by the Authority for resale to the Underwriter pursuant to apurchase contract among the Underwriter, the District, and the Authority. The Underwriter has agreed,subject to certain conditions, to purchase the Bonds from the Authority at a price of $______ (representingthe principal amount of the Bonds of $, plus original issue premium of $ , less theUnderwriter’s discount of $ ). Under the terms of the purchase contract, the Underwriter will beobligated to purchase all of the Bonds if any are purchased, the obligation to make such purchase beingsubject to certain terms and conditions to be satisfied by the District and the Authority. The Underwritermay offer and sell the Bonds to certain dealers and others at prices lower than the offering prices stated onthe inside front cover page. The offering prices may be changed from time to time by the Underwriter.

The Underwriter and its respective affiliates are a full service financial institution engaged invarious activities, which may include securities trading, commercial and investment banking, financialadvisory, investment management, principal investment, hedging, financing and brokerage activities.Certain of the Underwriter and its respective affiliates have, from time to time, performed, and may in thefuture perform, various investment banking services for the District for which they received or willreceive customary fees and expenses.

In the ordinary course of their various business activities, the Underwriter and its respectiveaffiliates may make or hold a broad array of investments and actively trade debt and equity securities (orrelated derivative securities) and financial instruments (which may include bank loans and/or creditdefault swaps) for their own account and for the accounts of their customers and may at any time holdlong and short positions in such securities and instruments. Such investment and securities activities mayinvolve securities and instruments of the District.

RATINGS

Moody’s Investors Service Inc. (“Moody’s”) has assigned the rating of”” to the Bonds. Noapplication was made to any other rating agency for the purpose of obtaining additional ratings on theBonds. Such rating reflects only the views of such organization, and any explanation of the significanceof such rating may only be obtained from the rating agency furnishing the same. There is no assurancethat any such rating will remain in effect for any given period of time or that it will not be lowered orwithdrawn entirely by the rating agency, if, in the rating agency’s judgment, circumstances so warrant.The Underwriter has undertaken no responsibility either to bring to the attention of the Owners anyproposed change in or withdrawal of any rating or to oppose any such proposed revision or withdrawal.The District has not undertaken any responsibility, other than as described in the Continuing DisclosureCertificate, either to bring to the attention of the Owners any proposed change in or withdrawal of anyrating or to oppose any such proposed change or withdrawal. Any such downward change in orwithdrawal of any rating might have an adverse effect on the market price or marketability of the Bonds.

MISCELLANEOUS

The foregoing and subsequent summaries or descriptions of provisions of the Bonds and the BondResolution and all references to other materials not purporting to be quoted in full are only brief outlinesof some of the provisions thereof and do not purport to summarize or describe all of the provisionsthereof. Reference is made to said documents for full and complete statements of the provisions of suchdocuments. The appendices attached hereto are a part of this Official Statement. Copies, in reasonable

24SF 613509v.5 33982/30020

64

quantity, of the Bond Resolution may be obtained during the offering period upon request to theUnderwriter and thereafter upon request to the District.

This Official Statement has been authorized and issued by the District. This Official Statement isnot to be construed as a contract or agreement between the District and the purchasers or Owners of anyof the Bonds.

GROSSMONT 1-IEALTIICARE I)ISTRICT

By:

___________________________

Chief Executive Officer

25SF] ]613509v.5 33982/30020

65

APPENDIX A

Economic and Demographic Profile of San Diego County

The following information about San 1)/ego omiiv (‘tile ‘County ‘‘) is presented as generalbackground in/emotion because the District is located in the eastern part oJ the Countt’. As discussed

tinder SECU/?JIY FOR THE BONDS, “ the Bonds are payable from ad va/orem taxes upon taxable

property within the District and are neither a debt of nor payable b’i’ ihe County.

General

The County is the southernmost major metropolitan area in the State of California (the “State”)

and is approximately the size of the State of Connecticut. The County covers 4,526 square miles.

extending 70 miles along the Pacific Coast from the Mexican border to Orange County, and 75 miles

inland to Imperial County’. The counties of Riverside and Orange ibrm the northern boundary’ of the

County.

Topography of the County varies from broad coastal plains and fertile inland valleys to mountain

ranges in the east, which rise to an elevation of 6,500 feet. Eastern slopes of these mountains form the

rim of the Anza-Borrego I)esert and the Imperial Valley. The Cleveland National Forest occupies muchof the inienor portion of the County. ‘l’he climate is equable in the coastal and valley regions where most

of the population and resources are located. Average annual rainfall in the coastal areas is approximately

10 inches.

The County possesses a diverse economic base consisting of a significant manufacturing presence

in the fields of electronics and shipbuilding, a large tour•iSt industry attracted by the favorable climate of

the region, and a considerable defense-related presence.

In April 2004. PETCO Park opened in the City of San Diego, providing a 42,000 fixed seat

baseball stadium for the San Diego Padres. PETCO Park is located in a 26-block neighborhood that

contains existing and proposed hotels, office space, retail and housing units within walking distance from

the San 1)iego Convention Center and the Gaslamp Quarter. The baseball stadium is also within walking

distance of a San Diego Trolley station and nearby parking facilities.

The County is also a major center for culture and education. Over 30 recognized artorganizations, including the San Diego Opera, the Old Globe Theatre productions, the La Jolla Chamber

Orchestra, as well as museums and art galleries, are located in the County. Higher education is provided

through several two-year colleges as well as four-year colleges and universities.

In addition to the City of San Diego. other principal cities in the County include Carlsbad, Chula

Vista, Oceanside, El Cajon, Escondido, La Mesa and National City. Most County residents live within 20miles of the coast. Farther inland are agricultural areas. The top five crops for 2009 include ornamental

trees and shrubs, indoor flowering and foliage plants, bedding plants. avocados and tomatoes.

Approximately 28 miles northeast of San Diego, in the Ramona Valley, is a wine producing region and iscurrently home to 20 vineyards. The easternmost portion of the County has a dry’, desert-like topography.

Population

There are 1 8 incorporated cities in the County and a number of unincorporated communities.

Estimated population for the County as of January 1, 2009, was 3,185,462, making it the third largest

A-ISF] ]63513’v.2 3398230020

66

County by population in California. The County’s population in 2009 increased approximately 1.69%from 2008. The following table sets forth the County’s population growth relative to the population forthe State and the United States for the years 1997 through 2009.

POPULATION ESTIMATES1997 Through 2009

(In Thousands)

San Diego Percent State of Percent United PercentYear Countv Change CaliforniaO> Change States2 Change

1997 2,653 1.23% 32,207 1.16% 267,784 0,96%1998 2,703 1.83 32,657 1.39 270,248 0.921999 2,751 1.75 33,140 1,47 272,69! 0.902000 2,806 1.96 33,753 2.20 282,193 3.482001 2,864 2.04 34,442 1.68 285,108 1.032002 2,921 1.95 35,089 1.87 287,985 1.002003 2,973 1,73 35,691 1.71 290,850 0.992004 3,012 1.28 36,253 1.55 293,657 0.962005 3,039 0.89 36,743 1.33 296,410 0.942006 3,064 0.83 37,195 1.21 299,398 1.012007 3,100 1.17 37,559 0.98 301,580 0.732008 3,132 1.03 37,884 0.87 304.375 0.932009 3,185 1.69 38.256 0.98 307,007 0.86

As of Januar 1 01 the ear sho n.As of July 1 of the year Shown.

Sources: State of (alilornia Department of Finance: United States Bureau of the Census.

Employment

The table below sets forth information regarding the size of the labor force, as well asemployment and unemployment rates, for the County, the State and the United States for the years 2005through 2009.

LABOR FORCE, EMPLOYMENT AND UNEMPLOYMENTANNUAL AVERAGES

2005 2006 2007 2008 2009

County of San DiegoLabor Force 1,492,600 1,504,800 1,524,500 1,555,100 1,557,400Employment 1,427,900 1,445,100 1,455,400 1,462,300 1,406,100Unemployment Rate 4.3% 4.0% 4,5% 6.0% 9.7%

State of CaliforniaLaborForce 17,544,800 17,718,500 17,970,800 18,251,600 18,250,200Employment 16,592,200 16,851,600 17,011,000 16.938,300 16,163,900Unemployment Rate 5.4% 4.9% 5.3% 7.2% II .4%

United StatesLabor Force 149,320,000 151,428,000 153.124,000 154,287,000 154,142,000Employment 141,730,000 144,427,000 146,047,000 145,362,000 139,877,000Unemployment Rate 5.1% 4.6% 4.6% 5.8°/s 9.3%

Sources: California Data—California Employment Development Department. Labor Market Information Division.National i)ata—U.S. Department of Labor. Bureau of Labor Statistics.

A2SF1 1635137v2 33982/30020

67

The tbliowing table sets forth the annual average employment within the County, by employment

sector, ibr the years 2005 through 2009. In 2009, the service sector constituted the largest non-farm

employment sector in the County, representing approximately 52.8% of all non-farm employment.

COUNTY OF SAN DIEGONONAGRICULTURAL LABOR FORCE AND INDUSTRY EMPLOYMENT

ANNUAL AVERAGES(In Thousands)

2005 2006 2007 2008 2009

Natural Resources and Mining 0.4 0.5 0.4 0.4 .4Construction 90.8 92.7 87.0 76.1 61.!Manufacturing 104.5 103.9 102.5 102.8 95.4Trade, Transportation and Utilities 219.4 222.0 222.3 215.9 198.3Services

information 37.4 37.3 37.6 38.5 37.0Financial Activities 83.2 83.7 80.3 75.2 70.3Professional and Business Services 210,4 213.6 216.8 215.1 197.3Educational and Health Services 122.5 125.1 129.5 137.3 143.0Leisure and Hospitality 149.6 156.5 161.8 164.0 155.2Other Services 48.8 48.4 48.3 48.4 47.0

Government 215.1 217.9 222.4 225.1 224.7

Total. All Non-Farm lndustries’ 1,282.! 1,301.6 1,308.8 1,298.7 1,229.6

lotaL ma not add due to independent rounding.5Ojf Calitbrnia Employment Development Department.

In recent years, the County has enjoyed economic stability. out-pacing the State economy despite

a general recession in the State. Much of this strength was evidenced by and due to outstanding

employment gains, population growth, personal income increases and high levels of commercial and

industrial development.

Three basic industries of the region, manufacturing, the military and tourism, help sustain the

County’s economy. The U.S. Department of Defense contributes approximately $10 billion annually to

the local economy, through wages paid to uniformed military and civilian personnel and for equipment

and services purchased from local businesses. San Diego’s military presence is anticipated to remain

relatively stable and may even increase due to the consolidation of military operations and facilities from

elsewhere in California, the West and throughout the United States. Even though the U.S. Department of

Defense closed and vacated the Naval Training Center in 1997, three procurement agencies. the Naval

Space and Warfare Systems Command, the Naval Aviation Engineering Servicing Unit and the Naval

Aviation Technical Service Facility, have recently relocated to the County.

A-3SF1 1635137v2 339S2 30020

68

Building Activity

Building permit valuations for both residential and non-residential construction in the County in2009 decreased over 2008 levels by approximately 391%. The following table sets forth selectedinformation relating to building permits issued in the County in the years 2005 through 2009.

COUNTY OF SAN DIEGOBUILDING PERMIT ACTIVITY

(S In Thousands)

2005 2006 2007 2008 2009

Valuation:Residential $3,562,702 $2,470,688 $1,852,381 $1,339,245 $878,700Non-Residential 1,381,794 1,621,610 1,416,823 1,061,802 583,969

Total $4,944,496 $4,092,298 $3,269,204 $2,401,047 $1,462,669

New Housing Units:Single Family 7,904 4,753 3,503 2,352 1,786Multi-Family 7,354 6,024 3,942 2,802 1,204

Total 15,258 10,777 7,445 5,154 2,990

Source: Construction Industry Research Board.

A-4SF1 1635137v.2 33982/30020

69

Commercial Activity

Consumer spending in 2008 resulted in approximately $45.3 billion in taxable sales in theCounty.

COUNTY OF SAN DIEGOTAXABLE SALES

(In Thousands)

2004 2005 2006 2007

__________

Retail StoresApparel $1,644,428 $1,798,104 $1,909,011 $2,034,512 $2,205,568General Merchandise 5,204,962 5,406,091 5,594,621 5,673,538 5,305,252Specialty 4,541,225 4,728,028 4,926,656 2,802,522 2,257,229Food Stores and Packaged 1,736,610 1,858,152 1,928,274 1,994,237 1,868,466

LiquorsEating and Drinking 4,047,726 4,267,302 4,521,392 4,784,500 4,869,497Home Furnishings and 1,549,482 1,566,046 1,511,389 1,420,933 1,590,329

AppliancesBuilding Materials 3,341,105 3,376,009 3,331,161 2,768,385 2,183,006Automotive 9,318,277 9,739,136 9,819,932 10,077,108 9,164,549All other retail stores 961,645 1,045,927 1,076,631 2,482,810 2,271,777

Total Retail Stores 32,345,460 33,784,795 34,619,067 34,038,545 31,715,672

Business and Personal 2,146,781 2,239,304 2,302,057 2,298,265 2,255,309ServicesAll Other Outlets 9,978,097 10,655,372 10,914,390 11,149,178 11,358,155Total All Outlets $44,470,338 $46,679,471 $47,835,514 $47,485,988 $45,329,136

itcurrent information available.Source: “Taxable Sales in California.” California State Board of Equalization.

Median Household Income

The following table summarizes the median household income for the County, the State, and theUnited States for the years 2004 through 2008.

MEDIAN HOUSEHOLD INCOME

2004 2005 2006 2007 2008w

County of San Diego $51,939 $56,224 $59,279 $61,724 $62,820State of California 49,894 53,627 56,646 59,928 61,017United States 44,334 46,242 48,451 50,740 52,029

Most current information available.Source: United States Bureau of the Census.

Transportation

Surface, sea and air transportation facilities serve County residents and businesses. Interstate 5parallels the coast from Mexico to the Los Angeles area and points north. Interstate 15 runs inland,

A-SSF 1635137v2 33982130020

70

leading to Riverside-San Bernardino, Las Vegas, and Salt Lake City. interstate 8 runs eastward throughthe southern United States.

San Diego’s international Airport (Lindbergh Field) is located approximately three milesnorthwest of the downtown area at the edge of San Diego Bay. The San Diego County Regional AirportAuthority is the operator of the San Diego International Airport. The airport is the busiest, single-runwaycommercial service airport in the country served by 1 8 commercial airlines and four cargo carriers. AnAirport Master Plan was adopted in May 2008. Projects include construction of 10 additional gates atTerminal 2 West for a net airport total of 5 1 gates, airfield improvements, new general aviation facilities,relocation and reconfiguration of SAN Park Pacific 1-iighway, a second level roadway serving Terminal 2,a parking structure adjacent to Terminal 2 and improvements to vehicle circulation within the terminalarea. in addition to San Diego International Airport, there are two naval air stations, two private airportsand seven general aviation airports located in the County.

McClellan-Palomar Airport, also known as Palomar Airport or Carlsbad Airport, is located inCarlsbad, California, and can accommodate private and light commercial aircraft. Oceanside MunicipalAirport is located eight miles north in Oceanside, California.

Public transit in the metropolitan area is provided by the Metropolitan Transit DevelopmentBoard. The San Diego Trolley, developed by the Metropolitan Transit Development Board beginning in1 979, has been expanded and provides special, more direct special event service to PETCO Park, theGaslamp Quarter and the Convention Center. A total of 17.6 miles was added to the original 108 miles;construction was completed in 1990.

San Diego is the terminus of the Santa Fe Railway’s main line from Los Angeles. Amtrakpassenger service is available at San Diego, with stops at Del Mar and Oceanside in the northern part ofthe County.

San Diego’s harbor is one of the world’s largest natural harbors. The Port of San Diego isadministered by the San Diego Unified Port District, which includes the cities of San Diego, NationalCity, Chula Vista, Imperial Beach, and Coronado.

Visitor and Convention Activity

An excellent climate, proximity to Mexico, extensive maritime facilities, and such attractions asthe San Diego Wild Animal Park, Sea World of San Diego, Cabrillo National Monument, Mount LagunaObservatory, Legoland and Palomar Observatory allow San Diego to attract a high level of visitor andconvention business each year. Contributing to the growth of visitor business has been the developmentof the 4,600-acre Mission Bay Park at San Diego and the San Diego Convention Center.

San Diego’s visitor industry is a major sector of the region’s economy. The San DiegoConvention Center, containing 615,701 square feet of exhibit space and 204,114 square feet ofmeeting/banquet space, with total interior space of over 2.6 million gross square feet, opened inNovember 1989 and was expanded in 2001. In April 2010 a resolution [of the County Board ofSupervisors?I was passed which provides for a five acre water front park which will include a watertransportation center and land improvements. It is expected that approximately 165 events will be heldduring 2010 in the Convention Center, attracting over an estimated 786,403 attendees and contributingapproximately $1 .27 billion in revenues to the County.

A-6SH 1635 137v.2 33982/30020

71

Education

Fortytwo independent school districts provide educational programs for the elementary andsecondary public school children in the County. Each school system is governed by a locally electedboard of education and administered by a superintendent or other chief administrative officer appointedby the board, In the County there are three types of school districts: elementary, union high and unified.Elementary districts educate elementary students, union high districts educate primarily secondarystudents and unified districts educate both elementary and secondary students. There are currently1 8 unified, 28 elementary and 6 union high school districts in the County.

Community colleges in California are locally operated and administered. They offer theAssociate of Arts and Associate of Science degrees and have extensive vocational curricula. There arefive community college districts in the County at nine campuses.

Among the institutions of higher education offering bachelor and graduate programs inmetropolitan San Diego area are the University of California, San Diego, San Diego State University,National University, University of San Diego, California State University, San Marcos, AlliantInternational University and Point Loma Nazarene University.

A-7SF1 1635 137v.2 33982/30020

72

APPENI)IX B

Form of Continuing Disclosure Certificate

This Continuing Disclosure Certificate (the “Disclosure Certificate”) is executed and delivered bythe Grossmont l-lealthcare District (the “District”) in connection with the issuance of $[

_____________

Grossmont Ilealthcare l)istrict (San Diego County. California) General Obligation l3onds, 2006 Election.2() I I Series B (the “Bonds”). The Bonds are being issued pursuant to a resolution of the District adoptedon December 1 7. 201 0 (the “Resolution”). The District covenants and agrees as follows:

SECTiON 1 Purpose of the Disclosure Certificate. This [)isclosure Certificate is beingexecuted and delivered by the District for the benefit of the holders and Beneficial Owners of the Bondsand in order to assist the Participating Underwriter in complying with Securities and ExchangeCommission Rule 15c2-12(b)(5).

SECTION 2. Definitions. in addition to the definitions set forth in the Resolution, whichapply to any capitalized term used in this Disclosure Certificate unless otherwise defined in this Section,the following capitalized terms shall have the following meanings:

“Annual Report” shall mean any Annual Report provided by the District pursuant to, and asdescribed in, Sections 3 and 4 of this Disclosure Certificate.

“Beneficial Owner” shall mean any person which has the power. directly or indirectly, to vote orconsent with respect to. or to dispose of ownership of, any Bonds (including persons holding Bondsthrough nominees, depositories or other intermediaries).

“CUSIP Numbers” shall mean the Committee on Uniform Security Identification Procedure’sunique identification number for each public issue of a security.

“Dissemination Agent” shall mean initially the District, or any successor Dissemination Agentdesignated in writing by the District (which may be the District) and which has tiled with the District awritten acceptance of such designation.

“EMMA System” shall mean the MSRB’s Electronic Municipal Market Access system.

“Holder” or “Holders” shall mean registered owners of the Bonds.

“Listed Events” shall mean any of the events listed in Section 5(a) of this Disclosure Certificate.

“MSRB” means the Municipal Securities Rulemaking Board, or any other entity designated orauthorized by the Securities and Exchange Commission to receive reports pursuant to the Rule.

Participating Underwriter” shall mean Goldman, Sachs & Co. or any of the original underwritersof the Bonds required to comply with the Rule in connection with offering of the Bonds.

“Rule” shall mean Rule 15c2-12(b)(5) adopted by the Securities and Exchange Commissionunder the Securities Exchange Act of 1934, as the same may be amended from time to time.

B- ISF1 I6352]22

73

SECTiON 3.

(a) The District shall, or shall cause the Dissemination Agent to, not later than sixmonths after the end of the District’s fiscal year (which date would be January 1 following the current endof the District’s Fiscal Year on June 30), commencing with the report for the 2010201 I Fiscal Year,provide to the Participating Underwriter and to the MSRB through its EMMA System an Annual Reportwhich is consistent with the requirements of Section 4 of this Disclosure Certificate, The Annual Reportmay be submitted as a single document or as separate documents comprising a package, and may crossreference other information as provided in Section 4 of this Disclosure Certificate; provided that if theaudited financial statements of the District are not available by the date required above for the filing of theAnnual Report, the District shall submit unaudited financial statements and submit the audited financialstatements as soon as available. If the District’s fiscal year changes, it shall give notice of such change inthe same manner as for a Listed Event under Section 5.

(b) Not later than fifteen (15) business days prior to the date specified insubsection (a) above for providing the Annual Report to the MSRB, the District (if the DisseminationAgent is other than the District) shall provide the Annual Report to the Dissemination Agent. if by suchdate, the i)issemination Agent has not received a copy of the District’s Annual Report, the DisseminationAgent shall contact the District to determine if the District is in compliance with the first sentence of thissubsection.

(c) If the Dissemination Agent is unable to verify that an Annual Report has beenprovided to the MSRB through its EMMA System by the date required in subsection (a), theDissemination Agent shall send a notice to the MSRB through the EMMA System in substantially theform attached as Exhibit A.

(d) If the Dissemination Agent is other than the District, the Dissemination Agentshall file a report with the District certifying that the Annual Report has been provided to the MSRBthrough the EMMA System pursuant to this Disclosure Certificate.

SECTION 4. Content of Annual Reports. The District’s Annual Report shall contain orincorporate by reference the following: (i) the audited financial statements of the District for the priorfiscal year prepared in accordance with generally accepted accounting principles as promulgated to applyto governmental entities from time to time by the Governmental Accounting Standards Board; (ii) to theextent not contained in (i) above: (A) assessed value of taxable property in the District as shown on therecent equalized assessment role; (B) property tax levies, collections and delinquencies for the District,for the prior fiscal year; and (C) top twenty property owners in the District for the then current fiscalyear, as measured by secured assessed valuation and their percentage of total secured assessed value.

Any or all of the items listed above may be included by specific reference to other documents,including official statements of debt issues of the District or related public entities, which have beensubmitted to MSRB or the Securities and Exchange Commission. If the document included by referenceis a final official statement, it must be available from the MSRB through its EMMA System. The Districtshall clearly identify each such other document included by reference.

SECTION 5. Reporting of Significant Events.

(a) The District shall give or cause to be given notice of the occurrence of any of thefollowing Listed Events with respect to the Bonds:

I. principal and interest payment delinquencies;

B-2SF 63522u2

74

2. non-payment related defaults;

3. modifications to rights of Holders;

4. optional. contingent or unscheduled bond calls;

5. defeasances;

6. rating changes;

7. adverse tax opinions, the issuance by the Internal Revenue Service of

proposed or final determinations of taxability, Notices of Proposed issue (IRS Form 5701-TEB)

or other material notices or determinations with respect to the tax-exempt status of the Bonds, or

other material events affecting the tax-exempt status of the Bonds;

8. unscheduled draws on the debt service reserves, if any, reflecting

financial difficulties;

9. unscheduled draws on any credit enhancement facility reflecting

financial difficulties;

10. substitution of the provider of any credit enhancement facility or any

failure by said provider to perform on any credit enhancement facility;

I 1. release, substitution or sale of property securing repayment of the Bonds;

1 2. tender offers for the Bonds;

13. bankruptcy, insolvency, receivership, or similar proceedings involving

the District;

14. consummation of a merger, consolidation, or acquisition involving the

District or the sale of all or substantially all of the assets of the District (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, other than pursuant to the terms

of such agreement; and

15. appointment of a successor or additional paying agent, or the change of

name of a paying agent.

(b) Whenever the District obtains knowledge of the occurrence of a Listed Event,

but, in the case of a Listed Event described in Subsection 2, 3,4, 7, 11, 13, 14 and 15 of Section 5(a), only

in the event the District determines that knowledge of the occurrence of a Listed Event would be material

under applicable federal securities laws, the District shall or shall cause to be filed a notice of such

occurrence with the MSRB through its EMMA System, in an electronic format as prescribed by the

MSRB, in a timely manner but not in excess of 1 0 business days after the occurrence of such Listed

Event.

SECTION 6. CUSIP Numbers. Whenever providing information, including but not limited to

Annual Reports, documents incorporated by reference in the Annual Reports, audited financial

B-3SF1 l6352I22

75

statements and notices of Listed Events, the District shall indicate the full name of the Bonds and the 9-digit CU SIP numbers for the Bonds as to which the provided information relates.

SECTION 7. Ic mination of eortingObiigation. The District’s obligations under thisDisclosure Certificate shall terminate upon the defeasance, prior redemption or payment in full of all ofthe Bonds. If such termination occurs prior to the final maturity of the Bonds, the District shall givenotice of such termination in the same manner as for a Listed Event under Section 5(b).

SECTION 8. j minationAgçt. The District may, from time to time, appoint or engage aDissemination Agent to assist it in carrying out its obligations under this Disclosure Certificate, and maydischarge any such Agent, with or without appointing a successor Dissemination Agent.

SECTION 9. Amendment; Waiver. Notwithstanding any other provision of this DisclosureCertificate, the District may amend or waive any provision of this Disclosure Certificate only under thefollowing circumstances:

(a) If the amendment or waiver relates to the provisions of Sections 3(a), 4, or 5, itmay only be made in connection with a change in circumstances that arises from a change in legalrequirements, change in law, or change in the identity, nature or status of an obligated person with respectto the Bonds, or the type of business conducted;

(b) The undertaking, as amended or taking into account such waiver, would, in theopinion of nationally recognized bond counsel, have complied with the requirements of the Rule at thetime of the original issuance of the Bonds, after taking into account any amendments or interpretations ofthe Rule, as well as any change in circumstances; and

(c) The amendment or waiver either (i) is approved by the Owners of the Bonds inthe same manner as provided in the Resolution with the consent of Owners, or (ii) does not, in the opinionof nationally recognized bond counsel, materially impair the interests of the Owners or Beneficial Ownersof the Bonds.

In the event of any amendment or waiver of a provision of this Disclosure Certificate, the Districtshall describe such amendment in the next Annual Report, and shall include, as applicable, a narrativeexplanation of the reason for the amendment or waiver and its impact on the type (or in the case of achange of accounting principles, on the presentation) of financial information or operating data beingpresented by the District. In addition, if the amendment relates to the accounting principles to be followedin preparing financial statements, (i) notice of such change shall be given in the same manner as for aListed Event under Section 5(b), and (ii) the Annual Report for the year in which the change is madeshould present a comparison (in narrative form and also, if feasible, in quantitative form) between thefinancial statements as prepared on the basis of the new accounting principles and those prepared on thebasis of the former accounting principles.

SECTION 10. Additional Information. Nothing in this Disclosure Certificate shall be deemedto prevent the District from disseminating any other information, using the means of dissemination setforth in this Disclosure Certificate or any other means of communication, or including any otherinformation in any Annual Report or notice of occurrence of a Listed Event, in addition to that which isrequired by this Disclosure Certificate. If the District chooses to include any information in any AnnualReport or notice of occurrence of a Listed Event in addition to that which is specifically required by thisDisclosure Certificate, the District shall have no obligation under this Disclosure Certificate to updatesuch information or include it in any future Annual Report or notice of occurrence of a Listed Event.

B-4SF1 1635212v.2

76

SECTION 11. Default. In the event of a failure of the District to comply with any provision ofthis Disclosure Certificate, any Holder or Beneficial Owner of the Bonds may take such actions as maybe necessary and appropriate, including seeking mandate or specific performance by court order, tocause the District to comply with its obligations under this Disclosure Certificate; provided that any suchaction may be instituted only in Superior Court of the State of California in and for the County or in US.District Court in or nearest to the County. A default under this Disclosure Certificate shall not be deemedan Event of Default under the Resolution, and the sole remedy under this Disclosure Certificate in theevent of any failure of the District to comply with this Disclosure Certificate shall be an action to compelperformance.

SECTiON 12. Duties, Immunities and Liabilities of Dissemination Agent. TheDissemination Agent shall have only such duties as are specifically set forth in this DisclosureCertificate, and the District agrees to indemnify and save the Dissemination Agent, its officers, directors,employees and agents, harmless against any loss, expense and liabilities which it may incur arising outof or in the exercise or performance of its powers and duties hereunder, including the costs and expenses(including attorneys fees) of defending against any claim of liability, but excluding liabilities due to theDissemination Agent’s negligence or willful misconduct. The obligations of the District under thisSection shall survive resignation or removal of the Dissemination Agent and payment of the Bonds.

SECTION 13. Beneficiaries. This Disclosure Certificate shall inure solely to the benefit of theDistrict, the Dissemination Agent, the Participating Underwriter, the Holders and Beneficial Ownersfrom time to time of the Bonds, and shall create no rights in any other person or entity.

Date:

______,2010


By:

_________________________

Barry JantzChief Executive Officer

B-5SH 63522v2

77

EXHIBIT A

NOTICE TO REPOSITORIES OF FAILURE TO FILE ANNUAL REPORT

Name of District: Grossmont Healthcare District

Name of Bond Issue: General Obligation Bonds, 2006 Election, 2011 Series B

Date of Issuance:

NOTICE IS HEREBY GIVEN that the District has not provided an Annual Report with respectto the above-named Bonds as required by the Continuing Disclosure Certificate relating to the Bonds.The District anticipates that the Annual Report will be filed by

________

Dated:

______________,2011


By: [form only; no signature required]

B-6SFJ 63522v2

78

APPENDIX II

Book-Entry System

The Depository Trust Company (“DTC”). New York, New York, will act as securities depositoryfor the Bonds. The Bonds will be issued as fully-registered securities registered in the name of Cede &Co. (DTC’s partnership nominee) or such other name as may be requested by an authorized representativeof DTC. One fully-registered Bond certificate will be issued for each maturity of the Bonds, each in thetotal 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 organizedunder the New York Banking Law, a “banking organization” within the meaning of the New YorkBanking Law, a member of the Federal Reserve System, a “clearing corporation” within the meaning ofthe New York Uniform Commercial Code, and a “clearing agency” registered pursuant to the provisionsof Section 1 7A of the Securities Exchange Act of 1934, DTC holds and provides asset servicing for over3.5 million issues of U.S. and non-U.S. equity issues, corporate and municipal debt issues, and moneymarket instruments (from over 100 countries) that DTC’s participants (“Direct Participants”) deposit withDTC. DTC also facilitates the post-trade settlement among Direct Participants of sales and othersecurities transactions in deposited securities, through electronic computerized book-entry transfers andpledges between Direct Participants’ accounts. This eliminates the need for physical movement ofsecurities 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-ownedsubsidiary of The Depository Trust & Clearing Corporation (“DTCC”). DTCC is the holding companyfor DTC, National Securities Clearing Corporation and Fixed Income Clearing Corporation, all of whichare registered clearing agencies. DTCC is owned by the users of its regulated subsidiaries. Access to theDTC 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 relationshipwith a Direct Participant, either directly or indirectly (“Indirect Participants”). DTC has Standard &Poor’s highest rating: AAA. The DTC Rules applicable to its Participants are on file with the Securitiesand Exchange Commission. More information about DTC can be found at www.dtcc.com andwww.dtc.org.

Purchases of the Bonds under the DTC system must be made by or through Direct Participants,which will receive a credit for the Bonds on DTC’s records. The ownership interest of each actualpurchaser of each Bond (“Beneficial Owner”) is in turn to be recorded on the Direct and IndirectParticipants’ records. Beneficial Owners will not receive written confirmation from DTC of theirpurchase. Beneficial Owners are, however, expected to receive written confirmations providing details ofthe transaction, as well as periodic statements of their holdings, from the Direct or Indirect Participantthrough which the Beneficial Owner entered into the transaction. Transfers of ownership interests in theBonds are to be accomplished by entries made on the books of Direct and Indirect Participants acting onbehalf of Beneficial Owners. Beneficial Owners will not receive certificates representing their ownershipinterests in the Bonds, except in the event that use of the book-entry system for the Bonds is discontinued.

To facilitate subsequent transfers, all Bonds deposited by Direct Participants with DTC areregistered in the name of DTC’s partnership nominee, Cede & Co. or such other name as may berequested by an authorized representative of DTC. The deposit of Bonds with DTC and their registrationin the name of Cede & Co. or such other DTC nominee do not effect any change in beneficial ownership.DTC has no knowledge of the actual Beneficial Owners of the Bonds; DTC’s records reflect only theidentity of the Direct Participants to whose accounts such Bonds are credited, which may or may not be

D-1SF 163566v,2

79

the Beneficial Owners. The Direct and Indirect Participants will remain responsible for keeping account

of their holdings on behalf of their customers.

Conveyance of notices and other communications by [)TC to Direct Participants, by I)irect

Participants to Indirect Participants, and by Direct Participants and Indirect Participants to Beneficial

Owners will be governed by arrangements among them, subject to any statutory or regulatory

requirements as may be in effect from time to time. Beneficial Owners of the 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

example, Beneficial Owners of the Bonds may wish to ascertain that the nominee holding the Bonds for

their benefit has agreed to obtain and transmit notices to Beneficial Owners. In the alternative, Beneficial

Owners may wish to provide their names and addresses to the registrar and request that copies of the

notices be provided directly to them.

Redemption notices shall be sent to DTC. If less than all of the Bonds within an issue are being

redeemed, DTC’s practice is to determine by lot the amount of the interest of each Direct Participant in

such issue to be redeemed.

Neither DTC nor Cede & Co. (nor any other DTC nominee) will consent or vote with respect to

the 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 District 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 the Bonds are credited on the record date (identified in a listing attached to the Omnibus

Proxy).

Principal, premium, redemption proceeds, distributions, 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

Di’C. DTC’s practice is to credit Direct Participants’ accounts upon DTC’s receipt of funds and

corresponding detail information from the District or the Paying Agent, on the 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 will be the responsibility of

such Participant and not of DTC nor of its nominee, the Paying Agent, or the District, subject to any

statutory or regulatory requirements as may be in effect from time to time. Payment of redemption

proceeds, distributions, and dividend payments to Cede & Co. (or such other nominee as may be

requested by an authorized representative of DTC) is the responsibility of the District or the Paying

Agent, disbursement of such payments to Direct Participants will be the responsibility of DTC, and

disbursement of such payments to the Beneficial Owners will be the responsibility of Direct and Indirect

Participants.

DTC may discontinue providing its services as depository with respect to the Bonds at any time

by giving reasonable notice to the District or the Paying Agent. Under such circumstances, in the event

that a successor securities depository is not obtained, Bond certificates are required to be printed and

delivered.

The District may decide to discontinue use of the system of book-entry-only transfers through

DTC (or a successor securities depository). in that event, Bond certificates will be printed and delivered

to DTC.

D-2SF! 16356!6v,2

80

Ihe inFormation in this section concerning DTC and DTC’s hook—entry system has been obtainedFrom sources that the District believes to he reliable, but the District takes no responsibility br theaccuracy thereof.

The I)istrict cannot and does not give any assurances that 1)TC will distribute toParticipants or that Participants or others will distribute to the Beneficial Owners payments ofprincipal or aecreted value of and interest and premium, if any, on the Bonds paid or anyredemption or other notices or that they will do so on a timely basis or will serve and act in themanner described in this Official Statement. The District is not responsible or liable for the failureof l)TC or any Participant or Indirect Participant to make any )aymei1ts or give any notice to aBeneficial Owner with respect to the Bonds or any error or delay relating thereto.

Ncithcr thc Dista act not tht P tying Agent ill h n e any rtsponsibilit’ or obligation toParticipants, to Indirect Participants or to any Beneficial Owner with respect to (I) the accuracy ofan tecoids maintained by DTC, any Participant, oa any India ect Participant, (ii) th pay et byDTC or any Participant or Indirect Participant of any amount with respect to the principal oraccreted value of or premium, if any, or interest on the Bonds; (iii) any notice that is permitted orrequired to be given to Holders under the Resolution; (iv) the selection by DTC, any Participant orany Indirect Participant of any person to receive payment in the event of a partial redemption oftht Bonds, () tn tonstnt gntn oa other tion taktn by DTC s Bondholder, oi (vi) an otherprocedures or obligations of I)TC, Participants or Indirect Participants under the book-entry’system.

D-3SF1 6356 lôv.2

81

SAN DIEGO COUNTY HEALTH FACILITIES FINANCING AUTHORITY ... Center/Agendas/2010-12-17 … · SAN...

Documents

Transcript of SAN DIEGO COUNTY HEALTH FACILITIES FINANCING AUTHORITY ... Center/Agendas/2010-12-17 … · SAN...