Item 12 - Adopt a Reso Approving a Preliminary Official Statement in Connection with the Sale of Taxable Pension Obligation BondsDATE:
TO:
FROM:
CONTACT:
SUBJECT:
Summary:
AGENDA RE PQ RT City of Poway
November 16, 2021
Honorable Mayor and Members of the City Council
Aaron Beanan, Director of Finance�
Aaron Beanan, Director of Finance
(858)668-4411 or abeanan@poway.org
CITY COUNCIL
Adopt a Resolution Approving a Preliminary Official Statement in Connection
with the Sale of Taxable Pension Obligation Bonds
Due to historically low interest rates, the City has an opportunity to potentially generate future savings
by refinancing certain pension obligations with the California Public Employees Retirement System
(CalPERS) using pension obligation bonds (POBs). On August 3, 2021 the City Council approved the
issuance of POBs to refinance all or a portion of its Unfunded Accrued Liability (UAL) to primarily and
potentially:
1.Increase financial sustainability,
2.Achieve savings, and
3.Increase the City's funding ratio with Cal PERS.
While the approval to issue POBs was necessary to commence the judicial validation process, Council
did not approve all documents necessary for a public debt issuance. As such, this staff report
recommends the approval of a Preliminary Official Statement to finalize the requirements for a public
sale of taxable City of Poway Pension Obligation Bonds, Series 2021 to refinance the City's UAL with
CalPERS.
Recommended Action:
It is recommended that the City Council adopt the Resolution reaffirming the approval of the sale of
taxable pension obligation bonds to refinance the City's obligation to the California Public
Employees' Retirement System, approving the form of a preliminary official statement and a
continuing disclosure agreement, and approving additional actions related thereto.
IMPORTANT
These recommendations authorize staff to proceed with the issuance of debt. Council
approval of the recommendations will allow staff to issue Pension Obligation Bonds, Series
2021 in an amount not to exceed $65,000,000. This issuance will increase the City's financial
sustainability, achieve savings to help maintain services, and increase the funding ratio of
the City's CalPERS pension lans.
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becoming familiar with the Preliminary Official Statement and questioning staff and consultants about
the disclosure of such facts.
Debt Management Policy
On October 6, 2015 City Council approved the Debt Management Policy to create a formal
approach/practices for issuing and managing debt. This policy expanded upon the City's general
Financial Policy and included the following objectives:
1. To help maintain the financial stability of the City by ensuring that its long-term financing
commitments are affordable and do not create undue risk or burden.
2. To protect the City' high credit rating and minimize the City's borrowing costs.
3. To meet the requirements of state and federal law and regulation, including federal
requirements regarding disclosure.
4. To incorporate best practices into the City's issuance and administration of its indebtedness.
The Bonds are consistent with the City's Debt Management Policy and its objectives.
Pension Reserve and Funding Policy
Issuing POBs to refinance the City's current UAL is only one tactic in a broader strategy to manage the
City's retirement costs. As such, staff is proposing a new Pension Reserve and Funding Policy ("Policy'')
(Attachment D). The purpose of the policy is to help increase the City's financial sustainability, achieve
savings to help maintain services, and increase the funding ratio for the City's Cal PERS pension plans.
Approval of this policy will allow the City Manager or designee to make pension reserve management
decisions while following City Council approved guidelines.
The Policy seeks to achieve the following goals:
• Support the City's financial sustainability and position,
• Ensure the City has flexibility to respond to changes in future service priorities, revenue levels,
and operating expenditures,
• Support the City's creditworthiness, and
• Ensure that pension funding decisions are structured to protect the City's service to residents
The Policy creates a Pension Reserve Fund. This concept has been used previously, most recently in
Fiscal Year 2008-09 when a Pension Stabilization Fund was created to address potential future
employee pension rate increases when impacted by volatile markets. Funds accumulated in it were
used in January 2010 to pay down the City's unfunded Safety pension liability with Cal PERS. For this
currently proposed Pension Reserve Fund, annual transfers are made when General Fund Unassigned
Fund Balance increases. Amounts in the Pension Reserve Fund may be used to provide additional
discretionary payments to help reduce or eliminate any UAL that exists or arises after issuance of
POBs, remitted to a Section 115 Trust, held in reserve to be used as a supplemental funding source
for unanticipated increases to annual pension costs resulting from actuarial assumption impacts,
market volatility, and/or other factors, or to call bonds related to an outstanding POB issuance.
As previously discussed with Council during the September 18, 2018 Council meeting, Council was
interested in pursuing a Section 115 Trust for pension related costs. While it was not possible prior to
the November 16, 2021 Council meeting, staff will analyze the benefits of establishing a Section 115
Trust for pensions. Funds placed in a Section 115 Trust are irrevocable and may only be used on
pension related costs. However, a Section 115 Trust has the possibility to realize greater investment
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returns than are possible through the City's investments given the laws governing the City's allowable
investments under California Government code. This could generate additional assets for managing
the City's pension costs. Staff will return to Council for their consideration of a Section 115 Trust.
Standard & Poor's Credit Rating
As part of the City's efforts to reduce the cost of debt the City is obtaining an underlying credit rating
for the Bonds from Standard & Poor's ("S&P"). S&P is one of the big three credit rating agencies that
provides financial research and analysis on stocks, bonds, and commodities. Moody's Investors
Service and Fitch Ratings are the other two main credit rating agencies. S&P's credit rating represents
their opinion about credit risk which can influence an investor's decision on whether to buy the Bonds.
Additionally, the higher the credit rating, the lower the cost of debt, all else being equal, as less of a
"risk premium" (i.e. higher rate of interest) is required by investors for holding the debt.
The City and its financing team will make a credit presentation to S&P on November 14, 2021. Typically,
S&P takes one to two weeks to return their rating. Staff will provide the City Council and City Manager
information on the final rating once received.
iudicial Validation Process
As discussed in August, the judicial validation process gives the City the legal mechanism to refinance
its pension debt by issuing bonds. Under normal circumstances, the validation proceedings take
approximately 90 -120 days. The proceedings typical include the following:
1. File Validation Action with San Diego County Superior Court
2. Receive Order for Publication of Summons from the Court
3. Legal publication for 21 consecutive days
4. Waiting period for ex parte (a decision decided by a judge that doesn't require all parties to
the dispute to be present) application to file default judgment
5. Clerk enters default judgement and schedules a hearing (hearing for default judgement and
entry of judgment
6. Appeal Period (30 days)
The City is currently waiting for the court clerk to enter the default judgement. Once that occurs, the
City will move for a judgement. Once the judgement is entered the 30-day appeal period will begin.
Assuming there are no appeals, the judicial validation process will be complete and the City can legally
issue POBs.
Next Steps
If Council adopts the resolution, the staff and its financing team will proceed with the marketing and
sale of POBs. The table below provides a detailed overview of the POB issuance process since the
August 3, 2021 Council meeting. Estimated dates have been italicized.
JUDICIAL VALIDATION AND POB ISSUANCE Tl MELINE
Document/Event Date Comment
Adoption of Bond Resolution 08/03/21 Resolution adopted prior to validation
action
Complaint Filed 08/12/21
Summons Issued 08/19/21 Beginning of validation proceedings to
occur within 60 days of the adoption
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Document/Event Date Comment
of the Resolution
Application for Order of 08/19/21 Filed same day as summons and
Publication complaint
Court will grant after review of
Order of Publication 08/19/21 summons, complaint, application for
order of publication, and clerk
declaration in suooort
Publication to begin once order of
publication is received. Publication
1st Publication 08/26/21 must occur once a week for three
successive weeks pursuant to GC
§6063
2nd publication 09/02/21 Week two
3rd publication 09/09/21 Week three
Declaration of Publication 09/14/21 Filed once jurisdiction is complete
Jurisdiction is complete 17 days after
Final day to answer complaint 10/14/21 the completion of publication of the
summons pursuant to GC §6063
Request for Entry of Default Filed 10/15/21
Default entered Pending
Attorney Declarations of No Pending Filed once jurisdiction is complete Opposition
Memorandum of Points and
Authorities in Support of Entry of Pending Filed once jurisdiction is complete
Default Judgment
Proposed Judgment Pending Filed once jurisdiction is complete
Court grants Judgment after review of
Signed Judgment Pending memorandum of points and
authorities and a hearing
City Council considers and The Council meeting when the
11 /16/21 decision to issue debt or not issue approves POB debt issuance debt is made
Passive Validation Pending 30 days after Judgment is entered
Mail/Print Preliminary Official 11/18/21 Bond prospectus sent to prospective
Statement investors
POB Sale Nov. 2021/Dec. 2021 POB interest rates locked in
POB Closing Dec. 2021 Funds delivered to CalPERS
Environmental Review:
This action is not subject to review under the California Environmental Quality Act (CEQA).
Fiscal Impact:
The projected financial benefit to the City from issuing taxable City of Poway Pension Obligation
Bonds, Series 2021 to refinance the City's unfunded accrued liability (UAL) with Cal PERS is expected to
be $17.4 million, or $14.1 million in present value savings over the life of the bonds. Over the next five
fiscal years, the potential annual budgetary savings ranges between $1 .1 million and $1 .6 million.
These savings assume CalPERS earns 6.80% each year going forward. Actual savings will depend on
whether CalPERS earns more or less than 6.80%. Savings will be used to fund the proposed Pension
Reserve Fund helping mitigate future financial impacts resulting from actuarial assumption changes,
PERF investment losses, etc. and help ensure the continued provision of City services at the levels
residents have come to enjoy.
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RESOLUTION NO. 21-
A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF
POWAY, CALIFORNIA AUTHORIZING THE SALE OF
TAXABLE PENSION OBLIGATION BONDS TO REFINANCE
THE CITY'S OBLIGATION TO THE CALIFORNIA PUBLIC
EMPLOYEES' RETIREMENT SYSTEM, APPROVING THE
FORM OF A PRELIMINARY OFFICIAL STATEMENT AND A
CONTINUING DISCLOSURE AGREEMENT, AND
APPROVING ADDITIONAL ACTIONS RELATED THERETO
WHEREAS, the City of Poway (the "City") has previously adopted a retirement plan
pursuant to the Public Employees' Retirement Law, commencing with Section 20000 of the
Government Code of the State of California, as amended (the "Retirement Law") and
elected to become a contracting member of the California Public Employees' Retirement
System ("PERS");
WHEREAS, the Retirement Law and the contract (the "PERS Contract") effective
February 1, 1981 between the Board of Administration of PERS and the City Council of the
City (the "City Council") obligates the City: (i) to make contributions to PERS to fund
pension benefits for certain City employees; (ii) to amortize the unfunded accrued actuarial
liability with respect to such pension benefits; and (iii) to appropriate funds for the foregoing
purposes;
WHEREAS, pursuant to Resolution No. 2021-069 adopted by the City Council on
August 3, 2021 (the "Prior Resolution"), the City previously authorized the issuance of its
City of Poway Pension Obligation Bonds, Series 2021 (Federally Taxable) (the "Bonds")
pursuant to the provisions of Articles 10 and 11 of Chapter 3 of Part 1 of Division 2 of Title 5
of the California Government Code, commencing with Section 53570 of said Code (the
"Bond Law"), in a maximum principal amount not to exceed that required for the purposes
of refunding all or a portion of the City's current obligation to PERS for fiscal year 2021-22,
pursuant to the PERS Contract, to pay all or a portion of the unfunded accrued actuarial
liability of the City (the "Unfunded Liability") with respect to pension benefits under the
Retirement Law and the PERS Contract, to pay capitalized interest on the Bonds and to pay
the costs of issuance of such Bonds, including the underwriter's discount and any original
issue discount on such Bonds;
WHEREAS, pursuant to the Prior Resolution, the City Council also approved the
forms of certain legal documents in connection with the issuance of the Bonds, including a
Trust Agreement and a Bond Purchase Agreement;
WHEREAS, pursuant to the Prior Resolution, the City Council also authorized the
institution of a proceeding for judicial validation of the Bonds and the Trust Agreement in the
Superior Court of San Diego County, under and pursuant to the provisions of Sections 860
et seq. of the California Code of Civil Procedure (the "Validation Proceeding"); and
WHEREAS, a default was entered in the Validation Proceeding on November 4,
2021, and a judgment is expected to be entered shortly in the Validation Proceeding
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Resolution No. 21-
Page 2
determining that the Bonds and the Trust Agreement will be valid and legal obligations of
the City; and
WHEREAS, the City Council has determined that it is in the best interests of the City
and its residents to proceed with the issuance of the Bonds and the sale thereof to the
underwriter named in the Bond Purchase Agreement; and
WHEREAS, Rule 15c2-12 promulgated under the Securities Exchange Act of 1934
("Rule 15c2-12") requires that, in order to be able to purchase or sell the Bonds, the
underwriter thereof must have reasonably determined that the City has undertaken in a
written agreement or contract for the benefit of the holders of the Bonds to provide
disclosure of certain financial information and certain events on an ongoing basis; and
WHEREAS, in order to cause such requirement to be satisfied, the City desires to
execute and deliver a Continuing Disclosure Agreement (the "Continuing Disclosure
Agreement") in connection with the issuance of the Bonds; and
WHEREAS, Rule 15c2-12 also requires that, in order to offer the Bonds for sale to
the public, the underwriter must receive a disclosure document with respect to the Bonds
and the City; and
WHEREAS, in order to cause such requirement to be satisfied, the City has
prepared a Preliminary Official Statement (the "Preliminary Official Statement") in
connection with the issuance of the Bonds; and
WHEREAS, all acts, conditions and things required by the laws of the State of
California to exist, to have happened and to have been performed precedent to and in
connection with the consummation of the financing authorized hereby do exist, have
happened and have been performed in regular and due time, form and manner as required
by law, and the City is now duly authorized and empowered, pursuant to each and every
requirement of law, to consummate such financing for the purpose, in the manner and upon
the terms herein provided; and
WHEREAS, the City Council recognizes that issuance of the Bonds is one tactic in a
broader strategy to manages the City's pension costs and, as such, recognizes the benefits
of adopting a Pension Reserve and Funding Policy so that the City Manager or designee
can make pension reserve management decisions while following City Council approved
guidelines.
NOW, THEREFORE, BE IT RESOLVED by the City Council of the City of Poway as
follows:
SECTION 1: The City Council does hereby find and declare that the above recitals
are true and correct.
SECTION 2: The City Council hereby reaffirms its approval of the issuance of the
Bonds upon the terms and conditions set forth in the Prior Resolution and authorizes staff to
proceed with a public sale of the Bonds.
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Resolution No. 21-
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SECTION 3: The form of Preliminary Official Statement presented at this meeting,
with such changes, insertions and omissions therein as may be approved by the Mayor, the
Deputy Mayor, the City Manager or the Director of Finance, and their authorized designees
(the "Designated Officers"), is hereby approved, and the use of the Preliminary Official
Statement in connection with the offering and sale of the Bonds is hereby authorized and
approved. Each Designated Officer is hereby authorized to certify on behalf of the City that
the Preliminary Official Statement is deemed final as of its date within the meaning of Rule
15c2-12 (except for the omission of certain final pricing, rating and related information as
permitted by Rule 15c2-12). The Designated Officers are each hereby authorized and
directed to furnish, or cause to be furnished, to prospective bidders for the Bonds a
reasonable number of copies of the Preliminary Official Statements.
SECTION 4: The preparation and delivery of an Official Statement, and its use in
connection with the offering and sale of the Bonds, is hereby authorized and approved. The
Official Statement shall be in substantially the form of the Preliminary Official Statement,
with such changes, insertions and omissions as may be approved by an Designated Officer
(including changes to reflect the entry into of a municipal bond insurance policy and/or debt
service reserve surety policy, as approved pursuant to the Prior Resolution), such approval
to be conclusively evidenced by the execution and delivery thereof. The Designated
Officers are each hereby authorized and directed, for and in the name of and on behalf of
the City, to execute the final Official Statement and any amendment or supplement thereto
for and in the name and on behalf of the City.
SECTION 5: The form of Continuing Disclosure Agreement presented at this
meeting is hereby approved , and the Designated Officers are each hereby authorized and
directed, for and in the name and on behalf of the City, to execute and deliver the
Continuing Disclosure Agreement in substantially said form, with such changes, insertions
and omissions therein as the Designated Officer executing the same may require or
approve, such approval to be conclusively evidenced to the execution and delivery thereof.
SECTION 6: U.S. Bank National Association is hereby appointed to act as Trustee
under the Trust Agreement.
SECTION 7: Stifel, Nicolaus & Company, Incorporated (the "Underwriter") is hereby
appointed to act as Underwriter under the Bond Purchase Agreement.
SECTION 8: The Designated Officers are, and each of them hereby is, authorized
and directed to execute and deliver any and all documents and instruments and to do and
cause to be done any and all acts and things necessary or proper for carrying out the
transactions contemplated hereby, including, but not limited to, the execution and delivery of
any documents required by PERS in order to complete the issuance of the Bonds and the
refunding of the Unfunded Liability. All actions heretofore taken by the Designated Officers
and by any other officers, employees or agents of the City with respect to the issuance of
the Bonds, or in connection with or related to any of the agreements or documents
referenced herein, are hereby approved, confirmed and ratified.
SECTION 9: The City Council hereby approves the execution and delivery of any
and all agreements, documents, certificates and instruments referred to herein with digital
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Resolution No. 21-
Page 4
signatures as may be permitted under Section 16.5 of the Government Code using
DocuSign.
SECTION 10: The City Council hereby approves a Pension and Reserve Funding
Policy, Policy No. 66, as it may be amended from time to time, and adds a Pension Reserve
Fund to existing General Fund Assigned Fund Balance classifications consistent with and in
compliance of the requirements of Governmental Accounting Standards Board Statement
No. 54.
SECTION 11 : The City Council hereby authorizes the City Manager or designee to
make transfers, and related transfer appropriations, from the General Fund unassigned fund
balance to the Pension Reserve Fund consistent with the Pension and Reserve Funding
Policy as may be necessary from time to time.
SECTION 12: This Resolution shall take effect from and after the date of its passage
and adoption.
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Resolution No. 21-
Page 5
SECTION 13: The City Clerk shall certify to the passage and adoption thereof.
PASSED, ADOPTED AND APPROVED at a Regular Meeting of the City Council of
the City of Poway, California on the 16th day of November, 2021 by the following vote, to
wit:
AYES:
NOES:
ABSENT:
DISQUALIFIED:
ATTEST:
Carrie Gallagher, City Clerk
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Steve Vaus, Mayor
November 16, 2021, Item #12
Stradling Yocca Carlson & Rauth
Draft of I I /9/2 I
CONTINUING DISCLOSURE AGREEMENT
This Continuing Disclosure Agreement (the "Disclosure Agreement") is executed and
delivered by and between the City of Poway (the "City") and U.S. Bank National Association, in its
capacity as dissemination agent (the "Dissemination Agent"), in connection with the issuance of the
City's Pension Obligation Bonds, Series 2021 (Federally Taxable) in an aggregate principal amount of
$ __ (the "Bonds"). The Bonds are being issued by the City pursuant to the provisions of that certain
Trust Agreement, dated as of December I, 2021 (the "Trust Agreement"), by and between the City
and U.S. Bank National Association, as trustee (the "Trustee"). The City and the Dissemination Agent
hereby certify, covenant and agree as follows:
Section I. Purpose of the Disclosure Agreement. This Disclosure Agreement is being
executed and delivered by the parties hereto for the benefit of the holders and Beneficial Owners of
the Bonds and in order to assist the Participating Underwriter in complying with the Rule.
Section 2. Definitions. In addition to the definitions set forth in the Trust Agreement,
which apply to any capitalized terms used in this Disclosure Agreement, 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 City pursuant to, and as
described in, Sections 3 and 4 of this Disclosure Agreement.
"Annual Report Date" shall mean each April I after the end of the City's fiscal year, the end
of which, as of the date of this Disclosure Agreement, is June 30.
"Beneficial Owner" shall mean any person which: (a) has the power, directly or indirectly, to
vote or consent with respect to, or to dispose of ownership of, any Bonds (including persons holding
Bonds through nominees, depositories or other intermediaries); or (b) is treated as the owner of any
Bonds for federal income tax purposes.
"Dissemination Agent" shall mean, initially, U.S. Bank National Association, acting in its
capacity as Dissemination Agent hereunder, or any successor Dissemination Agent that is so
designated in writing by the City and has filed with the then-current Dissemination Agent a written
acceptance of such designation.
"Financial Obligation" shall mean a: (A) debt obligation; (B) derivative instrument entered
into in connection with, or pledged as security or a source of payment for, an existing or planned debt
obligation; or (C) guarantee of (A) or (B). The term "Financial Obligation" shall not include municipal
securities as to which a final official statement has been provided to the Municipal Securities
Rulemaking Board consistent with the Rule.
"Listed Events " shall mean any of the events listed in Sections 5(a) and (b) of this Disclosure
Agreement.
"MSRB" shall mean the Municipal Securities Rulemaking Board.
"Official Statement " shall mean the Official Statement dated November_, 2021 , relating to
the Bonds.
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"Participating Underwriter " shall mean Stifel, Nicolaus & Company, Incorporated, the
original underwriter of the Bonds required to comply with the Rule in connection with offering of the
Bonds.
"Rufe" shall mean Rule I 5c2-I 2 adopted by the SEC under the Securities Exchange Act of
1934, as the same may be amended from time to time.
"SEC " shall mean the Securities and Exchange Commission.
Section 3. Provision of Annual Reports.
(a) The City shall, or shall cause the Dissemination Agent to, not later than the Annual
Report Date, commencing April I, 2022 with the Annual Report for fiscal year 2020-21 , provide to
the MSRB an Annual Report that is consistent with the requirements of Section 4 of this Disclosure
Agreement; provided that the first Annual Report to be filed by April I, 2022 shall be satisfied by the
submission of the Official Statement to the MSRB. Not later than 15 calendar days prior to such date,
the City shall provide its Annual Report to the Dissemination Agent, if the Dissemination Agent is a
different entity than the City. The Annual Report must be submitted in an electronic format as
prescribed by the MSRB, accompanied by such identifying information as is prescribed by the MSRB,
and may include by reference other information as provided in Section 4 of this Disclosure Agreement;
provided that any audited financial statements of the City may be submitted separately from the balance
of the Annual Report, and not later than the date required above for the filings of the Annual Report.
If the City's fiscal year changes, it shall give notice of such change in the same manner as for a Listed
Event under Section 5(a). The City shall provide a written certification with each Annual Report
furnished to the Dissemination Agent to the effect that such Annual Report constitutes the Annual
Report required to be furnished hereunder. The Dissemination Agent may conclusively rely upon such
certification of the City and shall have no duty or obligation to review such Annual Report.
(b) If the City is unable to provide to the MSRB an Annual Report by the date required in
subsection (a), the City in a timely manner shall send to the MSRB a notice in an electronic format as
prescribed by the MSRB, accompanied by such identifying information as prescribed by the MSRB.
(c) The Dissemination Agent shall:
I. provide any Annual Report received by it to the MSRB by the date required in
subsection (a);
2. file a report with the City and the Trustee (if the Dissemination Agent is other
than the Trustee) certifying that the Annual Report has been provided to the
MSRB pursuant to this Disclosure Agreement and stating the date it was
provided; and
3. take any other actions as are mutually agreed upon between the Dissemination
Agent and the City.
Section 4. Content of Annual Reports. The Annual Report shall contain or incorporate by
reference the following:
(a) Audited financial statements of the City for the prior fiscal year prepared in accordance
with generally accepted accounting principles as promulgated to apply to governmental entities from
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November 16, 2021, Item #12
time to time by the Governmental Accounting Standards Board. If such audited financial statements
are not available at the time that the Annual Report is required to be filed pursuant to Section 3(a), the
Annual Report shall contain unaudited financial statements, and the audited financial statements shall
be filed in the same manner as the Annual Report when they become available.
(b) Principal amount of the Bonds outstanding.
(c) To the extent not included within the City's financial statements, updates of
information for the last completed Fiscal Year substantially in the form of the following tables under
the caption "CITY FINANCIAL INFORMA TrON" in the Official Statement: (i) "Assessed Valuation
History;" (ii) "Ten Largest Secured and Unsecured Property Taxpayers;" and (iii) "General Fund
Major Tax Revenues by Source."
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 City or related public entities, that are available to
the public on the MSRB's Internet website or filed with the SEC. If the document included by
reference is a final official statement, it must be available from the MSRB. The City shall clearly
identify each such other document so included by reference.
Section 5. Reporting of Significant Events.
(a) Pursuant to the provisions of this Section 5, the City shall give, or shall cause the
Dissemination Agent to give, notice of the occurrence of any of the following events with respect to
the Bonds in a timely manner not more than ten (10) Business Days after the event:
1. Principal and interest payment delinquencies.
2. Unscheduled draws on debt service reserves reflecting financial difficulties.
3. Unscheduled draws on credit enhancements reflecting financial difficulties.
4. Substitution of credit or liquidity providers, or their failure to perform.
5. Adverse tax opinions, the issuance by the Internal Revenue Service of proposed
or final determinations of taxability or Notices of Proposed Issue (IRS Form
5701 TEB).
6. Tender offers.
7. Defeasances.
8. Rating changes.
9. Bankruptcy, insolvency, receivership or similar proceedings.
Note: For the purposes of the event identified in subparagraph (9), the event is considered to
occur when any of the following occur: the appointment of a receiver, fiscal agent or similar officer
for an obligated person in a proceeding under the U.S . Bankruptcy Code or in any other proceeding
under state or federal law in which a court or governmental authority has assumed jurisdiction over
substantially all of the assets or business of the obligated person, or if such jurisdiction has been
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November 16, 2021, Item #12
assumed by leaving the existing governmental body and officials or officers in possession but subject
to the supervision and orders of a court or governmental authority, or the entry of an order confirming
a plan of reorganization, arrangement or liquidation by a court or governmental authority having
supervision or jurisdiction over substantially all of the assets or business of the obligated person.
I 0. Default, event of acceleration, termination event, modification of terms or other
similar events under the terms of a Financial Obligation of the City, any of
which reflect financial difficulties.
(b) Pursuant to the provisions of this Section 5, the City shall give, or shall cause the
Dissemination Agent to give, notice of the occurrence of any of the following events with respect to
the Bonds, if material, in a timely manner not more than ten ( I 0) Business Days after occurrence:
I. Unless described in Section 5(a)(5), other notices or determinations by the
Internal Revenue Service with respect to the tax status of the Bonds or other
events affecting the tax status of the Bonds.
2. Modifications to the rights of Bondholders.
3. Bond calls.
4. Release, substitution or sale of property securing repayment of the Bonds.
5. Non-payment related defaults.
6. The consummation of a merger, consolidation or acquisition involving the City
or the sale of all or substantially all of the assets of the City, 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 its terms.
7. Appointment of a successor or additional trustee or the change of the name of
a trustee.
8. Incurrence of a Financial Obligation of the City, or agreement to covenants,
events of default, remedies, priority rights, or other similar terms of a Financial
Obligation of the City, any of which affect security holders.
(c) If the City determines that knowledge of the occurrence of a Listed Event under
subsection (b) would be material under applicable federal securities laws, and if the Dissemination
Agent is other than the City, the City shall promptly notify the Dissemination Agent in writing. Such
notice shall instruct the Dissemination Agent to file a notice of such occurrence with the MSRB in an
electronic format as prescribed by the MSRB in a timely manner not more than ten ( I 0) Business Days
after the event.
(d) If the City determines that a Listed Event under subsection (b) would not be material
under applicable federal securities laws and if the Dissemination Agent is other than the City, the City
shall so notify the Dissemination Agent in writing and instruct the Dissemination Agent not to report
the occurrence.
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4
November 16, 2021, Item #12
( e) The City hereby agrees that the undertaking set forth in this Disclosure Agreement is
the responsibility of the City and, if the Dissemination Agent is other than the City, the Dissemination
Agent shall not be responsible for determining whether the City's instructions to the Dissemination
Agent under this Section 5 comply with the requirements of the Rule.
Section 6. Termination of Reporting Obligation. The obligations of the City and the
Dissemination Agent specified in this Disclosure Agreement shall terminate upon the legal defeasance,
prior redemption or payment in full of all of the Bonds. If such termination occurs prior to the final
maturity of the Bonds, the City shall give notice of such termination in the same manner as for a Listed
Event under Section 5(a).
Section 7. Dissemination Agent. The City may from time to time appoint or engage a
Dissemination Agent to assist it in carrying out its obligations under this Disclosure Agreement, and
may discharge any such Dissemination Agent, with or without appointing a successor Dissemination
Agent. If at any time there is not any other designated Dissemination Agent, the City shall act as
Dissemination Agent. The initial Dissemination Agent shall be U.S. Bank National Association.
Section 8. Amendment; Waiver. Notwithstanding any other provision of this Disclosure
Agreement, the City may amend this Disclosure Agreement, and any provision of this Disclosure
Agreement may be waived, provided that the following conditions are satisfied:
(a) if the amendment or waiver relates to annual or event information to be provided
hereunder, it may only be made in connection with a change in circumstances that arises from a change
in legal requirements, change in law, or change in the identity, nature, or status of the City or type of
business conducted;
(b) the undertakings herein, as proposed to be amended or waived, would, in the opinion
of nationally recognized bond counsel have complied with the requirements of the Rule at the time of
the primary offering of the Bonds, after taking into account any amendments or interpretations of the
Rule, as well as any change in circumstances; and
(c) the proposed amendment or waiver: (i) is approved by holders of the Bonds in the
manner provided in the Trust Agreement for amendments to the Trust Agreement with the consent of
holders; or (ii) does not, in the opinion of nationally recognized bond counsel, materially impair the
interest of Bond owners.
The City shall describe any amendment to this Disclosure Agreement in the next Annual Report
filed after such amendment takes effect.
If the annual financial information or operating data to be provided in the Annual Report is
amended pursuant to the provisions hereof, the annual financial information containing the amended
operating data or financial information shall explain, in narrative form, the reasons for the amendment
and the impact of the change in the type of operating data or financial information being provided.
If an amendment is made to the undertaking specifying the accounting principles to be followed
in preparing financial statements, the annual financial information for the year in which the change is
made shall present a comparison between the financial statements or information prepared on the basis
of the new accounting principles and those prepared on the basis of the former accounting principles.
The comparison shall include a qualitative discussion of the differences in the accounting principles
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November 16, 2021, Item #12
and the impact of the change in the accounting principles on the presentation of the financial
information, in order to provide information to investors to enable them to evaluate the ability of the
City to meet its obligations. To the extent reasonably feasible, the comparison shall be quantitative.
A notice of the change in the accounting principles shall be sent to the MSRB.
Section 9. Additional Information. Nothing in this Disclosure Agreement shall be
deemed to prevent the City from disseminating any other information, using the means of
dissemination set forth in this Disclosure Agreement or any other means of communication, or
including any other information in any Annual Report or notice of occurrence of a Listed Event, in
addition to that which is required by this Disclosure Agreement. If the City chooses to include any
information in any Annual Report or notice of occurrence of a Listed Event in addition to that which
is specifically required by this Disclosure Agreement, the City shall have no obligation under this
Disclosure Agreement to update such information or include it in any future Annual Report or notice
of occurrence of a Listed Event.
Section l 0. Default. In the event of a failure of the City to comply with any provisions of
this Disclosure Agreement, any Participating Underwriter or any holder or Beneficial Owner of the
Bonds, or the Trustee on behalf of the holders of the Bonds (after receiving indemnification to its
satisfaction), may take such actions as may be necessary and appropriate, including seeking mandate
or specific performance by court order, to cause the City to comply with its obligations under this
Disclosure Agreement. A default under this Disclosure Agreement shall not be deemed to be a default
under the Trust Agreement, and the sole remedy under this Disclosure Agreement in the event of any
failure of the City to comply with this Disclosure Agreement shall be an action to compel performance.
Section I l. Duties, Immunities and Liabilities of Dissemination Agent. The Dissemination
Agent shall have only such duties as are specifically set forth in this Disclosure Agreement, and the
City agrees to indemnify and save the Dissemination Agent, its officers, directors, employees and
agents, harmless against any loss, expense and liabilities that it may incur arising out of or in the
exercise or performance of its duties as described hereunder, if any, including the costs and expenses
(including attorneys' fees) of defending against any claim of liability, but excluding liabilities due to
the Dissemination Agent's negligence or willful misconduct. The obligations of the City under this
Section shall survive resignation or removal of the Dissemination Agent and payment of the Bonds.
The Dissemination Agent shall not be responsible in any manner for the format or content of any notice
or Annual Report prepared by the City pursuant to this Disclosure Agreement. The City shall pay the
reasonable fees and expenses of the Dissemination Agent for its duties as described hereunder.
Section l 2. Notices. Any notices or communications to or among any of the parties to this
Disclosure Agreement may be given to the Dissemination Agent (if other than the City) and to the City
as follows:
City:
Dissemination Agent:
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City of Poway
13325 Civic Center Drive
Poway, California 92064
Attention: City Manager
U.S. Bank National Association
633 West Fifth Street, 24th Floor
Los Angeles, California 9007 l
6
November 16, 2021, Item #12
Attention: Corporate Trust
Reference: Poway 2021 Pension Obligation Bonds
Section 13. Beneficiaries. This Disclosure Agreement shall inure solely to the benefit of
the City, the Dissemination Agent, the Trustee, the Participating Underwriter and holders and
Beneficial Owners from time to time of the Bonds, and shall create no rights in any other person or
entity.
Section 14. Counterparts. This Disclosure Agreement may be executed in multiple
counterparts, all of which shall constitute one and the same instrument, and each of which shall be
deemed to be an original.
Date: December _, 2021
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CITY OF POWAY
By:
City Manager
U.S. BANK NATIONAL ASSOCIATION
as Dissemination Agent
By:
Authorized Signatory
7
November 16, 2021, Item #12
CITY OF POWAY
COUNTY OF SAN DIEGO, CALIFORNIA
CITY COUNCIL
Steve Vaus, Mayor
Barry Leonard, Deputy Mayor, Councilmember, District 2
Dave Grosch, Councilmember, District 1
John Mullin, Councilmember, District 3
Cay I in Frank, Councilmember, District 4
STAFF
Chris Hazeltine, City Manager
Aaron Beanan, Director of Finance
SPECIAL SERVICES
City Attorney
Rutan & Tucker LLP
Irvine, California
Bond Counsel and Disclosure Counsel
Stradling Yocca Carlson & Rauth,
a Professional Corporation
Newport Beach, California
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Municipal Advisor
Fieldman, Rolapp & Associates, Inc.
Irvine, California
Trustee
U.S. Bank National Association
Los Angeles, California
November 16, 2021, Item #12
No dealer, broker, salesperson or other person has been authorized by the City to give any information
or to make any representations in connection with the offer or sale of the Bonds other than those contained
herein and, if given or made, such other information or representations must not be relied upon as having been
authorized by the City. This Official Statement does not constitute an offer to sell or the solicitation of an offer
to buy, nor shall there be any sale of the Bonds by a person in any jurisdiction in which it is unlawful for such
person to make such an offer, solicitation or sale.
This Official Statement is not to be construed as a contract with the purchasers or Owners of the
Bonds. Statements contained in this Official Statement which involve estimates, forecasts or matters of
opinion, whether or not expressly so described herein, are intended solely as such and are not to be construed
as representations of fact.
The Underwriter has provided the following sentence for inclusion in this Official Statement:
The Underwriter has reviewed the information in this Official Statement in
accordance with, and as a part of, its responsibilities to investors under the
federal securities laws as applied to the facts and circumstances of this
transaction, but the Underwriter does not guarantee the accuracy or
completeness of such information.
This Official Statement and the information that is contained herein are subject to completion or
amendment without notice, and neither delivery of this Official Statement nor any sale made hereunder shall,
under any circumstances, create any implication that there has been no change in the affairs of the City or any
other parties that are described herein since the date hereof. These securities may not be sold, nor may an offer
to buy them be accepted, prior to the time that the Official Statement is delivered in final form. This Official
Statement is being submitted in connection with the sale of the Bonds referred to herein and may not be
reproduced or used, in whole or in part, for any other purpose, unless authorized in writing by the City. All
summaries of documents and laws are made subject to the provisions thereof and do not purport to be complete
statements of any or all such provisions.
Certain statements which are included or incorporated by reference in this Official Statement
constitute "forward-looking statements" within the meaning of the United States Private Securities Litigation
Reform Act of 1995, Section 21 E of the United States Securities Exchange Act of 1934, as amended, and
Section 27 A of the United States Securities Act of 1933, as amended. Such statements are generally
identifiable by the terminology used, such as "plan," "expect," "estimate," "project," "budget," "intend" or
similar words. Such forward-looking statements include, but are not limited to, certain statements contained
under the captions "THE CITY" and "CITY FINANCIAL INFORMATION" and in Appendix B. As
described under the caption "THE CITY---COVID-19 Outbreak" the COVID-19 pandemic has impacted the
City's financial condition. Historical information set forth in the Official Statement is not intended to be
predictive of future results.
THE ACHIEVEMENT OF CERTAIN RESULTS OR OTHER EXPECTATIONS
CONTAINED IN SUCH FORWARD-LOOKING STATEMENTS INVOLVE KNOWN AND
UNKNOWN RISKS, UNCERTAINTIES AND OTHER FACTORS WHICH MAY CAUSE ACTUAL
RESULTS, PERFORMANCE OR ACHIEVEMENTS DESCRIBED TO BE MATERIALLY
DIFFERENT FROM ANY FUTURE RESULTS, PERFORMANCE OR ACHIEVEMENTS
EXPRESSED OR IMPLIED BY SUCH FORWARD-LOOKING STATEMENTS. THE CITY DOES
NOT PLAN TO ISSUE ANY UPDATES OR REVISIONS TO THE FORWARD-LOOKING
STATEMENTS SET FORTH IN THIS OFFICIAL ST A TEMENT. IN EVALUATING SUCH
STATEMENTS, POTENTIAL INVESTORS SHOULD SPECIFICALLY CONSIDER THE VARIO US
FACTORS WHICH COULD CAUSE ACTUAL EVENTS OR RESULTS TO DIFFER MATERIALLY
FROM THOSE INDICATED BY SUCH FORWARD-LOOKING STATEMENTS.
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IN CONNECTION WITH THE OFFERING OF THE BONDS, THE UNDERWRITER MAY
OVERALLOT OR EFFECT TRANSACTIONS THAT STABILIZE OR MAINTAIN THE MARKET
PRICE OF THE BONDS AT A LEVEL ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN
THE OPEN MARKET. SUCH STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT
ANY TIME. THE UNDERWRITER MAY OFFER AND SELL THE BONDS TO CERTAIN
DEALERS, DEALER BANKS, BANKS ACTING AS AGENT AND OTHERS AT PRICES LOWER
THAN THE PUBLIC OFFERING PRICE STATED ON THE COVER PAGE HEREOF, AND SAID
PUBLIC OFFERING PRICES MAY BE CHANGED FROM TIME TO TIME BY THE
UNDERWRITER.
THE BONDS HA VE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933,
AS AMENDED, IN RELIANCE UPON AN EXEMPTION CONTAINED IN SUCH ACT, AND HAVE
NOT BEEN REGISTERED OR QUALIFIED UNDER THE SECURITIES LAWS OF ANY STATE.
The City maintains a website; however, information presented there is not a part of this Official
Statement and should not be relied upon in making an investment decision with respect to the Bonds.
__ ("_") makes no representation regarding the Bonds or the advisability of investing in the
Bonds. In addition,_ has not independently verified, makes no representation regarding and does not accept
any responsibility for the accuracy or completeness of this Official Statement or any information or disclosure
contained herein, or omitted herefrom, other than with respect to the accuracy of the information regarding
_, supplied by _ and presented under the caption "BOND INSURANCE" and in Appendix G-
"SPECIMEN MUNICIPAL BOND INSURANCE POLICY."
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TABLE OF CONTENTS
INTRODUCTION .................................................... I
General .................................................................. I
The Bonds ............................................................. 1
Validation .............................................................. 2
Continuing Disclosure ........................................... 2
Bond Insurance ...................................................... 2
Miscellaneous ........................................................ 2
THE BONDS ............................................................ 3
General .................................................................. 3
Optional Redemption of the Bonds ....................... 3
Mandatory Sinking Fund Redemption of the
Bonds ..................................................................... 4
Notice of Redemption .......................................... .4
SECURITY AND SOURCE OF PAYMENT
FOR THE BONDS ................................................... 5
Bond Payments ...................................................... 5
Revenue Fund ........................................................ 5
Limited Obligations ............................................... 6
Additional Bonds ................................................... 6
CITY PENSION PLANS .......................................... 6
PLAN OF REFINANCING .................................... 11
ESTIMATED SOURCES AND USES OF
FUNDS ................................................................... 12
ANNUAL DEBT SERVICE REQUJREMENTS ... 13
BOND INSURANCE ............................................. 13
THE CITY .............................................................. 14
General ................................................................ 14
Government and Administration ......................... 14
Risk Management. ............................................... 15
COVID-19 Outbreak ........................................... 16
CITY FINANCIAL INFORMATION .................... 18
Accounting and Financial Reporting ................... 18
General Economic Condition and Outlook of the
City ...................................................................... 20
Budget Procedure, Current Budget and
Historical Budget Information ............................. 21
Change in Fund Balance of the City General
Fund .................................................................... 26
General Fund Balance Sheets of the City ............ 27
Tax Revenues of the City .................................... 28
Property Taxes .................................................... 28
Sales Taxes .......................................................... 31
Other Taxes and Fees .......................................... 31
Charges for Services ............................................ 32
State of California Motor Vehicle In-Lieu
Payments ............................................................. 32
Other Indebtedness .............................................. 3 2
City Investment Policy ........................................ 33
No Other Post-Employment Benefits .................. 34
PARS Retirement Enhancement Plan ................. 34
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City Financial Statements ................................... 36
STATE OF CALIFORNIA BUDGET
INFORMATION .................................................... 37
General ................................................................ 37
Budget for State Fiscal Year 2021-22 ................. 37
Potential Impact of State Financial Condition on
the City ................................................................ 38
Redevelopment Dissolution ................................ 39
Future State Budgets ........................................... 40
RISK FACTORS .................................................... 40
City Obligations .................................................. 41
Certain Risks Associated with Sales Tax and
Other Local Tax Revenues ................................. 41
Assessed Value of Taxable Property .................. 42
Increasing Retirement-Related Costs .................. 42
Dependence on State for Certain Revenues ........ 43
Litigation ............................................................. 43
Natural Disasters ................................................. 43
Climate Change .................................................. 44
Hazardous Substances ......................................... 44
Cybersecurity ...................................................... 44
Limitation on Sources of Revenues .................... 45
Economy of City and State ................................. 45
Limitation on Remedies; Bankruptcy ................. 46
Limitation on Trustee's Obligations ................... 47
Limited Secondary Market ................................. 48
Changes in Law .................................................. 48
Risks Associated with Bond Insurance ............... 48
CONSTITUTIONAL AND STATUTORY
LIMITATIONS ON TAXES AND
APPROPRIATIONS .............................................. 49
Article XIIIA of the State Constitution ............... 49
Article XIIIB of the State Constitution ............... 49
Proposition 62 ..................................................... 50
Proposition 218 ................................................... 51
Unitary Property ................................................. 51
Proposition 22 ..................................................... 52
Proposition 26 ..................................................... 52
Future Initiatives ................................................. 52
TAX MATTERS .................................................... 52
VALIDATION ....................................................... 53
CERTAIN LEGAL MATTERS ............................. 54
LITIGATION ......................................................... 54
RATINGS ............................................................... 55
CONTINUING DISCLOSURE ............................. 56
UNDER WRITING ................................................. 56
MUNICIPAL ADVISOR ....................................... 56
MISCELLANEOUS ............................................... 56
November 16, 2021, Item #12
TABLE OF CONTENTS
(continued)
APPENDIX A-AUDITED FINANCIAL
STATEMENTS .............................................. A-I
APPENDIX 8 -ECONOMIC AND
DEMOGRAPHIC INFORMATION
REGARDING THE CITY OF POWAY ........ 8-1
APPENDIX C-SUMMARY OF CERTAIN
PROVISIONS OF THE TRUST
AGREEMENT ............................................... C-1
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ii
APPENDIX D-FORM OF BOND COUNSEL
OPINION ....................................................... D-1
APPENDIX E-FORM OF CONTINUING
DISCLOSURE AGREEMENT ..................... E-1
APPENDIX F-BOOK-ENTRY SYSTEM ......... F-1
APPENDIX G-SPECIMEN MUNICIPAL
BOND INSURANCE POLICY ..................... G-1
November 16, 2021, Item #12
$ __
CITY OF POWAY
PENSION OBLIGATION BONDS, SERIES 2021
(FEDERALLY TAXABLE)
INTRODUCTION
This Introduction contains only a brief summary of certain terms of the Bonds and a brief description
of the Official Statement. All statements in this Introduction are qualified in their entirety by reference to the
entire Official Statement. References to, and summaries of. provisions of the Constitution and laws of the State
of California (the "State'') and any documents that are ref erred to herein do not purport to be complete, and
such references are qualified in their entirety by the complete documents. This Official Statement speaks only
as of its date, and the information contained herein is subject to change.
General
This Official Statement provides certain information concerning the issuance, sale and delivery of the
City of Poway Pension Obligation Bonds, Series 2021 (Federally Taxable) (the "Bonds"), in the aggregate
principal amount of $ __ . The Bonds are being issued pursuant to the Trust Agreement, dated as of
December I, 2021 (the "Trust Agreement"), by and between the City of Poway (the "City") and U.S. Bank
National Association, Los Angeles, California, as trustee (the "Trustee"). For definitions of certain words and
terms which are used herein but not otherwise defined, see Appendix C.
The Bonds are being issued: (i) to pay all or a portion of the City's currently unamortized, unfunded
accrued actuarial liability (the "Pension Liability") to the California Public Employees' Retirement System
("CalPERS") with respect to the City's defined benefit retirement plans for City employees; and (ii) to pay
costs of issuance of the Bonds, including but not limited to the premium for a municipal bond insurance policy
(the "Policy") to be issued by __ ("_" or the "Insurer") insuring the payment of principal of and interest
on the Bonds maturing on __ I, 20_ (the "Insured Bonds"). See the caption "PLAN OF
REFINANCING."
The obligation of the City to make all payments of interest on and principal of the Bonds when due is
absolute and unconditional, without any right of set-off or counterclaim. The Bonds are not limited as to
payment to any special source of funds of the City.
THE BONDS DO NOT CONSTITUTE AN OBLIGATION OF THE CITY FOR WHICH THE CITY
IS OBLIGATED TO LEVY OR PLEDGE ANY FORM OF TAXATION OR FOR WHICH THE CITY HAS
LEVIED OR PLEDGED ANY FORM OF TAXATION. NEITHER THE BONDS NOR THE OBLIGATION
OF THE CITY TO MAKE PAYMENTS ON THE BONDS CONSTITUTES AN INDEBTEDNESS OF THE
CITY, THE STATE OR ANY OF ITS POLITICAL SUBDIVISIONS WITHIN THE MEANING OF ANY
CONSTITUTIONAL OR STATUTORY DEBT LIMITATION OR RESTRICTION .
The Bonds
The City is a member of CalPERS, an agent multiple-employer public employee defined benefit
pension plan. CalPERS provides retirement and disability benefits, annual cost-of-living adjustments and
death benefits to plan members and beneficiaries. CalPERS acts as a common investment and administrative
agent for participating public entities within the State of California (the "State"), including the City. As such,
the City is obligated by the Public Employees' Retirement Law, constituting Part 3 of Division 5 of Title 2 of
the California Government Code (the "Retirement Law"), and the contract, dated February I, 1981 (as
amended, the "CaIPERS Contract"), by and between the City Council of the City (the "City Council") and
' Preliminary, subject to change.
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the Board of Administration of Cal PERS, to make contributions to Cal PERS: (a) to fund pension benefits for
City employees who are members ofCalPERS; (b) to amortize the unfunded actuarial liability with respect to
such pension benefits; and (c) to appropriate funds for such purposes.
The City is authorized pursuant to Articles 10 and 11 (commencing with Section 53570) of Chapter 3
of Division 2 of Title 5 of the California Government Code (the "Refunding Bond Law"), to issue bonds for
the purpose of refunding obligations evidenced by the CalPERS Contract. The Bonds are authorized and
issued pursuant to the Trust Agreement and a resolution adopted by the City Council on August 3, 2021 (the
"Resolution"). The proceeds of the sale of the Bonds ( exclusive of amounts applied to pay costs of issuance)
will be used to refund all or a portion of the City's obligations evidenced by the CalPERS Contract,
representing the Pension Liability with respect to certain pension benefits under the Retirement Law.
Validation
On August 12, 2021 , the City filed a complaint in the Superior Court of the State of California for the
County of San Diego (the "Court") in a matter entitled City of Poway v. All Persons Interested et al., (Case
No. 37-2021-00034586-CU-MC-CTL) (the "Validation Petition"). The City filed the Validation Petition in
order to seek judicial validation of the issuance of the Bonds and any future bonds issued to refund the Bonds.
On November_, 2021 , the Court entered a default judgment (the "Validation Judgment") in favor of the
City with respect to the Validation Petition. See the caption "VALIDATION."
Continuing Disclosure
The City has covenanted for the benefit of the Holders of the Bonds to provide, or to cause to be
provided, to the Municipal Securities Rulemaking Board's Electronic Municipal Market Access System certain
annual financial information and operating data and, in a timely manner, notice of certain enumerated events.
These covenants have been made in order to assist the Underwriter in complying with Rule l 5c2-l 2
promulgated by the Securities and Exchange Commission under the Securities Exchange Act of 1934, as the
same may be amended from time to time ("Rule 15c2-12"). See the caption "CONTlNUING DISCLOSURE"
and Appendix E for a description of the specific nature of the annual report and notices of enumerated events.
Bond Insurance
Concurrently with the issuance of the Bonds, the Insurer will issue the Policy for the Insured Bonds
maturing on __ I, 20 _. The Policy guarantees the scheduled payment of principal of and interest on the
Insured Bonds when due as set forth in the form of the Policy that is included as Appendix G to this Official
Statement. See the caption "BOND INSURANCE."
The Policy is available solely to make payments on the Insured Bonds and is not available to
make payments on the Bonds maturing on __ l, 20_ through __ 1, 20_, inclusive.
Miscellaneous
The information and expressions of opinion herein speak only as of their date and are subject to
change without notice. Neither the delivery of this Official Statement nor any sale made hereunder nor any
future use of this Official Statement will, under any circumstances, create any implication that there has been
no change in the affairs of the City since the date hereof.
Included herein are brief summaries of the Trust Agreement and certain documents and reports, which
summaries do not purport to be complete or definitive, and reference is made to such documents and reports
for full and complete statements of the contents thereof. See Appendix C. Any statements in this Official
Statement involving matters of opinion, whether or not expressly so stated, are intended as such and not as
representations of fact. This Official Statement is not to be construed as a contract or agreement between the
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2
November 16, 2021, Item #12
City and the purchasers or Holders of the Bonds. Copies of the documents are on file and available for
inspection at the corporate trust office of the Trustee in Los Angeles, California. All capitalized terms used in
this Official Statement and not otherwise defined have the meanings given to such terms in the Trust
Agreement.
THE BONDS
General
The Bonds will be issued in fully registered form only and, when delivered, will be registered in the
name of Cede & Co., as nominee of The Depository Trust Company, New York, New York ("DTC"). DTC
will act as Securities Depository for the Bonds. Ownership interests in the Bonds may be purchased in book-
entry form only, in the denominations hereinafter set forth . Principal, premium, if any, and interest on the
Bonds will be payable by the Trustee to DTC, which is obligated in turn to remit such principal and interest to
DTC Participants for subsequent disbursement to Beneficial Owners of the Bonds. See Appendix F.
The Bonds will be dated the date of delivery, mature on the dates and in the principal amounts and
bear interest at the rates set forth on the inside front cover page of this Official Statement. The Bonds will be
delivered in denominations equal to $5 ,000 or any integral multiple thereof. Interest on the Bonds will be
payable on each __ I and __ I, commencing __ I, 202 _ ( each, an "Interest Payment Date").
Interest on each Bond will accrue from the Interest Payment Date for the Bonds next preceding the
date of authentication and delivery thereof, unless: (i) such date of authentication is an Interest Payment Date,
in which event interest will be payable from such date of authentication; (ii) it is authenticated after a Record
Date and before the close of business on the immediately following Interest Payment Date, in which event
interest thereon will be payable from such Interest Payment Date; or (iii) it is authenticated prior to the close of
business on the first Record Date, in which event interest thereon will be payable from the Closing Date;
provided, however, that if at the time of authentication of any Bond interest thereon is in default, interest
thereon will be payable from the Interest Payment Date to which interest has previously been paid or made
available for payment or, if no interest has been paid or made available for payment, from the Closing Date.
Principal, premium, if any, and interest on the Bonds will be payable in currency of the United States
of America which at the time of payment is legal tender for the payment of pub I ic and private debts. Payments
of interest on any of the Bonds will be made on each Interest Payment Date by check of the Trustee sent by
Mail, or by wire transfer to an account maintained in the United States of any Holder of $1,000,000 or more of
Bonds, to the account specified by such Holder in a written request delivered to the Trustee on or prior to the
Record Date for such Interest Payment Date, to the Holder thereof on the Record Date; provided, however, that
payments of defaulted interest will be payable to the person in whose name such Bond is registered at the close
of business on a special record date fixed therefor by the Trustee which will not be more than 15 days and not
less than ten days prior to the date of the proposed payment of defaulted interest. Payment of the principal of
the Bonds upon redemption or maturity will be made upon presentation and surrender of each such Bond, at
the Principal Office of the Trustee.
Optional Redemption of the Bonds•
The Bonds maturing on or after __ I, 20 _ may be redeemed at the option of the City from any
source of funds on __ I, 20 _ or any date thereafter, in whole or in part from such maturities as are
selected by the City and within a maturity in accordance with DTC procedures (as discussed in Appendix C
under the caption "REDEMPTION OF BONDS-Selection of Bonds for Redemption; Bonds Redeemed in
Part"), at a redemption price equal to the principal amount to be redeemed, together with accrued interest to the
date of redemption, without premium.
• Preliminary, subjec/ lo change.
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November 16, 2021, Item #12
Mandatory Sinking Fund Redemption of the Bonds•
The Bonds maturing __ I, 20 _ (the "Term Bonds") are subject to mandatory sinking fund
redemption at a redemption price equal to the principal amount thereof, plus accrued interest to the redemption
date, without premium. The Term Bonds will be so redeemed on the following dates and in the following
amounts:
* Final Maturity.
TERM BONDS MA TURING ON
Redemption Date
C_I)
2037
2038
2039
2040
2041*
1,20_
Principal
Amount
$6,395,000
6,580,000
6,770,000
6,965,000
7,165,000
On or before each __ 15 next preceding any mandatory sinking fund redemption date, the Trustee
will proceed to select for redemption, pro-rata from all Term Bonds subject to mandatory sinking fund
redemption at that time, an aggregate principal amount of such Term Bonds equal to the amount for such year
as set forth in the table above, and will call such Term Bonds or portions thereof for redemption and give
notice of such redemption in accordance with the terms of the Trust Agreement. At the option of the City, to
be exercised by delivery of a written certificate to the Trustee on or before __ I next preceding any
mandatory sinking fund redemption date, it may: (a) deliver to the Trustee for cancellation Term Bonds or
portions thereof (in the amount of an Authorized Denomination) of the stated maturity subject to such
redemption; or (b) specify a principal amount of such Term Bonds or portions thereof (in the amount of an
Authorized Denomination) which prior to said date have been purchased or redeemed (otherwise than under
the mandatory sinking fund redemption provisions of the Trust Agreement) and cancelled by the Trustee at the
request of the City and not theretofore applied as a credit against any mandatory sinking fund redemption
requirement. Each such Term Bonds or portion thereof so delivered or previously redeemed will be credited
by the Trustee at I 00% of the principal amount of the Term Bonds so delivered to the Trustee by the City
against the obligation of the City on such mandatory sinking fund redemption date.
If any Term Bonds are redeemed under the optional redemption provisions of the Trust Agreement, the
City will provide the Trustee with new schedules of mandatory sinking fund redemptions.
Notice of Redemption
Notice of redemption will be given by the Trustee, not less than 20 nor more than 60 days prior to the
redemption date: (i) in the case of Bonds not registered in the name of a Securities Depository or its nominee,
to the respective Holders of the Bonds designated for redemption at their addresses appearing on the
registration books of the Trustee; (ii) in the case of Bonds registered in the name of a Securities Depository or
its nominee, to such Securities Depository for such Bonds; and (iii) to the Information Services. Notice of
redemption to the Holders pursuant to clause (i) above will be given by mail at their addresses appearing on the
registration books of the Trustee, or any other method agreed upon by such Holder and the Trustee. Notice of
redemption to the Securities Depositories pursuant to clause (ii) above and the Information Services pursuant
to clause (iii) above will be given by electronically secure means, or any other method agreed upon by such
entities and the Trustee.
• Preliminary, subject to change.
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Each notice of redemption will state the Bonds or designated portions thereof to be redeemed, the date
of redemption, the place of redemption, the redemption price, the CUSIP number (if any) of the Bonds to be
redeemed, the distinctive numbers of the Bonds of such maturity to be redeemed, in the case of Bonds to be
redeemed in part only, the respective portions of the principal amount thereof to be redeemed, the original
issue date, the interest rate and the stated maturity date of each Bond to be redeemed in whole or part. Each
such notice will also state that on said date there will become due and payable on each of the Bonds to be
redeemed the redemption price, and redemption premium, if any, thereof, and that from and after such
redemption date interest thereon will cease to accrue.
Failure to give the notices described above or any defect therein will not in any manner affect the
redemption of any Bonds. Any notice sent as provided in the Trust Agreement will be conclusively presumed
to have been given whether or not actually received by the addressee.
Any notice of redemption may condition redemption of the Bonds on the availability of sufficient
funds to effect the redemption, and the City has the right to rescind any notice of redemption previously sent
pursuant to the Trust Agreement. Any such notice of rescission will be sent in the same manner as the notice of
redemption. Neither the City nor the Trustee will incur any liability, to Bondholders, DTC, or otherwise, as a
result of a rescission of a notice of redemption.
SECURITY AND SOURCE OF PAYMENT FOR THE BONDS
Bond Payments
The City will provide for payment of principal or redemption price of and interest on the Bonds from
any source of legally available funds of the City. If any Bonds are Outstanding, the, City will, no later than
three Business Days preceding each Interest Payment Date, beginning __ 1, 20 _, deliver funds to the
Trustee for deposit to the Revenue Fund in an aggregate amount equal to the principal (if applicable) and
interest payments coming due with respect to the Bonds on such Interest Payment Date (less amounts on
deposit in the Revenue Fund).
The obligations of the City under the Bonds, including the obligation to make all payments of
principal, premium, if any, and interest when due, are absolute and unconditional, without any right of set-off
or counterclaim.
The Bonds are obligations of the City payable from any lawfully available funds, are not limited as to
payment to any special source of funds of the City and the payment thereof is not subject to appropriation. The
Bonds do not constitute an obligation of the City for which the City is obligated to levy or pledge any form of
taxation or for which the City has levied or pledged any form of taxation.
Revenue Fund
There has been created pursuant to the Trust Agreement a fund to be held by the Trustee designated
"Revenue Fund" (the "Revenue Fund"). There are hereby created in the Revenue Fund two separate
Accounts designated the "Bond Interest Account" and the "Bond Principal Account."
All amounts received by the Trustee from the City in respect of interest payments on the Bonds will
be deposited in the Bond Interest Account and will be disbursed to Bondholders to pay interest on the Bonds
pursuant to the Trust Agreement. If at any time funds on deposit in the Bond Interest Account are insufficient
to provide for the payment of such interest, the City will promptly deposit funds to such Account to cure such
deficiency. On _ 2 of each year, so long as no Event of Default has occurred and is continuing, the Trustee
will transfer all amounts on deposit in the Bond Interest Account to the Revenue Fund to be used for any
lawful purpose.
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November 16, 2021, Item #12
All amounts received by the Trustee from the City in respect of principal payments on the Bonds will
be deposited in the Bond Principal Account and all amounts in the Bond Principal Account will be disbursed to
pay principal on the Bonds pursuant to the Trust Agreement. If at any time funds on deposit in the Bond
Principal Account are insufficient to provide for the payment of such principal, the City will promptly deposit
funds to such Account to cure such deficiency.
The moneys in such Fund and Accounts will be held by the Trustee in trust and applied as provided in
the Trust Agreement and, pending such application, will be subject to a lien and charge in favor of the holders
of the Bonds issued and Outstanding under the Trust Agreement and for the further security of such holders
until paid out or transferred as provided in the Trust Agreement.
Limited Obligations
THE BONDS ARE GENERAL OBLIGATIONS OF THE CITY PAY ABLE FROM ANY
LAWFULLY AVAILABLE FUNDS OF THE CITY AND ARE NOT LIMITED AS TO PAYMENT TO
ANY SPECIAL SOURCE OF FUNDS OF THE CITY. THE BONDS DO NOT CONSTITUTE AN
OBLIGA TlON OF THE CITY FOR WHICH THE CITY IS OBLIGATED TO LEVY OR PLEDGE ANY
FORM OF TAXATION OR FOR WHICH THE CITY HAS LEVIED OR PLEDGED ANY FORM OF
TAXATION. NEITHER THE BONDS NOR THE OBLIGATION OF THE CITY TO MAKE PAYMENTS
WITH RESPECT TO THE BONDS CONSTITUTES AN INDEBTEDNESS OF THE CITY, THE ST A TE
OR ANY OF ITS POLITICAL SUBDIVISIONS WITHIN THE MEANING OF ANY CONSTITUTIONAL
OR STATUTORY DEBT LIMITATION OR RESTRICTION.
Additional Bonds
From time to time, the City may enter into: (a) one or more other trust agreements or indentures;
and/or (b) one or more agreements supplementing and/or amending the Trust Agreement, for the purpose of
providing for the issuance of Additional Bonds: (i) to refund the Bonds; or (ii) to refund any Pension Liability
under the Cal PERS Contract arising subsequent to the issuance of the Bonds or any other obligations due to
CalPERS. Such Additional Bonds may be issued solely on a parity with the Bonds.
CITY PENSION PLANS
Accounting and financial reporting by state and local government employers for defined benefit
pension plans is governed by Governmental Accounting Standards Board ("GASB") Statement No. 68
("GASB 68"). GASB 68 includes the following components: (i) unfunded pension liabilities are included on
the employer's balance sheet; (ii) pension expense incorporates rapid recognition of actuarial experience and
investment returns and is not based on the employer's actual contribution amounts; (iii) lower actuarial
discount rates are required to be used for underfunded plans in certain cases for purposes of the financial
statements; (iv) closed amortization periods for unfunded liabilities are required to be used for certain purposes
of the financial statements; and (v) the difference between expected and actual investment returns will be
recognized over a closed five-year smoothing period. GASB 68 affects the City's accounting and reporting
requirements, but it does not change the City's pension plan funding obligations.
The City participates in a Miscellaneous plan and a Safety Plan to fund pension benefits for
employees. The City's pension plans are administered by CalPERS. CalPERS administers an agent multiple-
employer public employee defined benefit pension plan for all of the City's full-time and certain part-time
employees. CalPERS provides retirement, disability and death benefits to plan members and beneficiaries and
acts as a common investment and administrative agent for participating public entities within the State,
including the City. CalPERS plan benefit provisions and all other requirements are established by State statute
and the City Council.
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City employees are subject to different benefit levels based on their hire date. Current benefit
provisions for City employees are set forth below.
City of Poway
CalPERS Pension Plans -Summary of Benefit Provisions
Benefit Formula
Benefit Vesting
Benefit Payments
Minimum Retirement Age
Monthly Benefits as % of
Eligible Compensation
Employee Normal Cost
Employer Normal Cost Rate
Benefit Formula
Benefit Vesting
Benefit Payments
Minimum Retirement Age
Monthly Benefits as % of
Eligible Compensation
Employee Normal Cost
Employer Normal Cost Rate
Miscellaneous Plans
Employees
Hired Before
January 1, 2011
2.0%@ age 55
5 years of
service
Monthly for life
50-63
3.0%
7.0¾(I)
8.74%<2>
Employees Hired On
or After January 1,
2011 and Before
January 1, 2013
2.0%@ age 60
5 years of service
Monthly for life
50-63
1.092%-2.418%
7.0¾(I)
8.74%<2>
Safety Plan
3.0%@ age 50 3.0%@ age 55
5 years of 5 years of service
service
Monthly for life Monthly for life
50 50-55
3.0% 2.4%-3.0%
9.0%<1> 9.0¾(I)
19.62%(2) 19.62%<2>
Employees Hired On or
After January 1, 2013 (Not
Prior Ca/PERS Members)
2.0%@ age 62
5 years of service
Monthly for life
52-67
1.0%-2.5%
7.0%(1)
8.74%<2>
2.7%@ age 57
5 years of service
Monthly for life
50-57
2.0%-2.7%
13.0¾(I)
19.62%<2>
<1> Employees are required to make the full employee contribution themselves. The City does not make any portion of the
employee contribution.
<2> The Employer Normal Cost Rate shown is a blended rate for all benefit groups in the plan. For a breakout of the normal
cost by benefit group, refer to the most recent actuarial valuation.
Source: City.
Contributions to the City's pension plans consist of: (a) contributions from plan participants (i.e.,
employees); and (b) contributions by the City.
City employees who were hired on and after January I, 2013 and who were not previously Cal PERS
members receive benefits based on the following formulas: (i) 2.0% at age 62 formula for Miscellaneous
employees; and (ii) 2.7% at age 57 formula for Safety employees. Such employees are required to make the
full amount of required employee contributions themselves under the California Public Employees' Pension
Reform Act of 20 I 3 ("AB 340"), which was signed by the State Governor on September 12, 2012. AB 340
established a new pension tier for such employees. Benefits for such participants are calculated on the highest
average annual compensation over a consecutive 36-month period. Employees are required to pay at least 50%
of the total normal cost rate. AB 340 also capped pensionable income as noted below. Amounts are set
annually, subject to Consumer Price Index increases, and retroactive benefits increases are prohibited, as are
contribution holidays and purchases of additional non-qualified service credit.
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November 16, 2021, Item #12
City of Poway
Pensionable Income Caps for Calendar Year 2021 (AB 340 and Non-AB 340 Employees)
Maximum Pensionable Income
Maximum Pensionable Income if
also Participating in Social Security
Source: City.
Employees Hired Before
January 1, 2013
(Non-AB 340 Employees)
$290,000
NIA
Employees Hired After
January 1, 2013
(AB 340 Employees)
$153,671
$128,059
Additional employee contributions, limits on pensionable compensation and higher retirement ages for
new members as a result of the passage of AB 340 were implemented to reduce the City's unfunded pension
)ability and potentially reduce contribution levels in the long term.
The City is also required to contribute the actuarially determined remaining amounts necessary to fund
benefits for its members. Employer contribution rates for all public employers are determined on an annual
basis by the Cal PERS actuary and are effective on the July I following notice of a change in the rate. Total
plan contributions are determined through the CalPERS annual actuarial valuation process. The total
minimum required employer contribution is the sum of: (i) the plan's employer normal cost rate, which funds
pension benefits for current employees for the upcoming Fiscal Year (expressed as a percentage of payroll);
plus (ii) the employer unfunded accrued liability contribution amount, which funds pension benefits that were
previously earned by current and former employees (billed monthly).
For Fiscal Year 2021, required employer normal cost rates as a percentage of payrol I were 9 .24 I% for
Miscellaneous Plan employees. For Fiscal Year 2022, required employer normal cost rates as a percentage of
payroll are 8.74% for Miscellaneous Plan employees.
For Fiscal Year 2021, the total required employer payment of the unfunded accrued liability for the
City's Miscellaneous Plan was $2,643,161. For Fiscal Year 2022, the total required employer payment of the
unfunded accrued liability for the City's Miscellaneous Plan is $2,890,493.
For Fiscal Year 2021 , required employer normal cost rates as a percentage of payroll were 19.62% for
Safety Plan employees. For Fiscal Year 2022, required employer normal cost rates as a percentage of payroll
are 19.58% for Safety Plan employees.
For Fiscal Year 2021, the total required employer payment of the unfunded accrued liability for the
City's Safety Plan was $1,179,349. For Fiscal Year 2022, the total required employer payment of the
unfunded accrued liability for the City's Safety Plan is $1 ,394,617.
Beginning in Fiscal Year 2018, CalPERS began collecting employer contributions toward a pension
plan's unfunded liability as dollar amounts instead of the prior method of a percentage of payroll. According
to CalPERS, this change was intended to address potential funding issues that could arise from a declining
payroll or a reduction in the number of active members in the plan. Funding the unfunded liability as a
percentage of payroll could lead to underfunding of pension plans. Due to stakeholder feedback regarding
internal needs for total contributions expressed as an estimated percentage of payroll, the CalPERS reports
include such results in the contribution projection for informational purposes only. Contributions toward a
pension plan's unfunded liability will continue to be collected as set dollar amounts.
The City's required contributions to CalPERS fluctuate each year and, as noted, include a normal cost
component and a component equal to an amortized amount of the unfunded liability. Many assumptions are
used to estimate the ultimate liability of pensions and the contributions that will be required to meet those
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November 16, 2021, Item #12
obligations. The CalPERS Board of Administration has adjusted and may in the future further adjust certain
assumptions used in the CalPERS actuarial valuations, which adjustments may increase the City's required
contributions to CalPERS in future years. Accordingly, the City cannot provide any assurances that the City's
required contributions to CalPERS in future years will not significantly increase (or otherwise vary) from any
past or current projected levels of contributions. Cal PERS earnings reports for Fiscal Years 2011 through
2021 report investment gains of approximately 21.7%, 0.1 %, 13.2%, 18.4%, 2.4%, 0.6%, 11.2%, 8.6%, 6.7%,
4. 7% and 21.3%, respectively. Future earnings performance may increase or decrease future contribution rates
for plan participants, including the City. The City notes CalPERS' earnings in Fiscal Year 2020 were below
its investment targets as a result of stock market declines in the wake of the COVID-19 outbreak, which could
increase future contribution rates for plan participants, including the City. See the caption "THE CITY-
COVID-19 Outbreak."
On December 21, 2016, the Cal PERS Board of Administration voted to lower its discount rate from
7.50% to 7.00% over a three period. For public agencies such as the City, the new discount rate took effect
July 1, 2017. Lowering the discount rate means that employers which contract with CalPERS to administer
their pension plans will see increases in their normal costs and unfunded actuarial liabilities. Active members
hired after January I, 2013 will also see their contribution rates rise under AB 340. The reduction of the
discount rate will result in average employer rate increases of approximately I% to 3% of normal cost as a
percentage of payroll for most retirement plans such as the City's plans. Additionally, many employers will
see a 30% to 40% increase in their current unfunded accrued liability payments (relative to the unfunded
accrued liability payments projected in the June 30, 2015 valuation report) for pension plans. These payments
are made to amortize unfunded liabilities over 20 years to bring pension funds to a fully funded status over the
long-term.
The announcement on July 12, 2021 that Cal PERS achieved preliminary investment returns of 21.3%
could cause the CalPERS Board of Administration to lower CalPERS' discount rate from 7.00% to 6.80% in
accordance with a risk mitigation policy that was adopted in 2015, which calls for the discount rate to be
lowered if returns exceed the then-current discount rate by two or more percentage points. There can be no
assurance as to whether or when the CalPERS Board of Administration will consider lowering the discount
rate.
Portions of the above information are primarily derived from information that has been produced by
Ca/PERS, its independent accountants and its actuaries. The City has not independently verified such
information and neither makes any representations nor expresses any opinion as to the accuracy of the
information that has been provided by Ca/PERS.
The comprehensive annual financial reports of Ca/PERS are available on Ca/PERS' Internet website
at www.calpers.ca.gov. The Ca/PERS website also contains Ca/PERS' most recent actuarial valuation reports
and other information that concerns benefits and other matters. The textual reference to such Internet website
is provided for convenience only. None of the information on such Internet website is incorporated by
reference herein. The City cannot guarantee the accuracy of such information. Actuarial assessments are
"forward-looking" statements that reflect the judgment of the fiduciaries of the pension plans, and are based
upon a variety of assumptions, one or more of which may not materialize or be changed in the future.
The net pension liability is the difference between the total pension liability and the fair market value
of pension assets. The City's total pension assets include funds that are held by Cal PERS, and its net pension
asset or liability is based on such amounts.
The City's Miscellaneous Plan had a total net pension liability of $37,937,485 for Fiscal Year 2021
(as of the measurement date of June 30, 2020). For Fiscal Year 2020, the City incurred Miscellaneous Plan
pension expenses of$5,035,167.
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November 16, 2021, Item #12
The City's Safety Plan had a total net pension liability of$18,758,072 for Fiscal Year 2021 (as of the
measurement date of June 30, 2020). For Fiscal Year 2020, the City incurred Safety Plan pension expenses of
$3,292,650.
A summary of principal assumptions and methods used to determine the total pension liability for
Fiscal Year 2021 is shown below.
City of Poway
Actuarial Assumptions for CalPERS Pension Plans
Actuarial Cost Method
Asset Valuation Method
Actuarial Assumptions:
Entry Age Normal in accordance with the requirements ofGASB 68
Market Value of Assets
Discount Rate
Inflation
7.15%
2.625%
Varies by entry age and service Salary Increases
Investment Rate of Return 7.25% net of pension plan investment and administrative expenses; includes
projected inflation rate of2.625%
Mortality Rate Table<1> Derived using CalPERS' membership data for all funds
<1> The mortality table used was developed based on Cal PERS-specific data from a 2017 actuarial experience study for the
period from 1997-2015.
Source: City.
Changes in the net pension liability for the City's pension plans in the most recent Fiscal Year for
which information is available were as follows:
City of Poway
Changes in CalPERS Pension Plans Net Pension Liability
Balance at June 30, 2019
Balance at June 30, 2020
Net Changes for period from July I, 2019
through June 30, 2020
Balance at June 30, 2019
Balance at June 30, 2020
Net Changes for period from July I, 2019
through June 30, 2020
Source: City.
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Miscellaneous Plan
Total
Pension Liability
$ 121 ,097,015
123,709,519
$ 2,612,504
Safety Plan
Total
Pension Liability
$ 64,264,626
67,450,512
$ 3,185,886
Increase I (Decrease)
Plan Fiduciary
Net Position
$ 84, 198,605
85,772,034
$ 1,573,429
Increase I (Decrease)
Plan Fiduciary
Net Position
$ 47,247,650
48,692,441
$ 1,444,791
Net Pension
Liability I (Asset)
$ 36,898,410
37,937,485
$ 1,039,075
Net Pension
Liability I (Asset)
$ 17,016,976
18,758,072
$ 1,741 ,096
November 16, 2021, Item #12
The table below presents the net pension liability of the City 's pension plans, calculated using the
discount rate applicable to Fiscal Year 2020 (7.15%), as well as what the net pension liability would be if it
were calculated using a discount rate that is I percentage point lower (6.15%) or I percentage point higher
(8.15%) than the Fiscal Year 2020 rate:
City of Poway
Sensitivity of the CalPERS Pension Plans Net Pension Liability to Changes in the Discount Rate
Plan's Net Pension Liabilityl(Asset)
Miscellaneous Plan
Safety Plan
Source: City.
Discount Rate -1%
(6.15%)
$53 ,469,914
27,918,101
Applicable Discount
Rate (7.15%)
$37,937,485
18,758,072
Discount Rate+ 1%
(8.15%)
$25,029,869
11 ,241 ,401
For additional information relating to the City's CalPERS pension plans, see Note 8 to the City's
audited financial statements set forth in Appendix A.
For information relating to the City's Pension Reserve and Funding Policy, see the caption "CITY
FINANCIAL INFORMATION-General Economic Condition and Outlook of the City-Pension Reserve and
Funding Policy."
PLAN OF REFINANCING
On November_, 2021, the Court entered the Validation Judgment to the effect, among other things,
that: (i) the Trust Agreement is a valid, legal and binding obligation of the City and the approval thereof was in
conformity with applicable provisions of law; and (ii) the City has the authority under State law to provide for
the refunding of its Pension Liability and its normal annual contributions for the current fiscal year by issuing
the Bonds and applying the proceeds of the Bonds to the retirement of its Pension Liability and payment of its
current year normal annual contributions. On November _, 2021 , applicable appeals periods expired and the
Validation Judgment became binding and conclusive in accordance with State law. See the caption
"VALIDATION."
Cal PERS has notified the City as to the amount of the Pension Liability based on the June 30, 2020
actuarial valuation, which is the date of most recent actuarial valuations performed by Cal PERS for the City's
Miscellaneous Plan and Safety Plan.
City of Poway
Unfunded Accrued Liability of CalPERS Pension Plans
Accrued Liability
Market Value of Assets
Unfunded Accrued Liability
Percentage of Accrued Liability Funded
Miscellaneous Plan
$ 126,987,569
85,515,245
$ 41 ,472,324
67.3%
Source: CalPERS Actuarial Valuations as of June 30, 2020.
Safety Plan
$ 68,547,145
48,221,209
$ 20,325,936
70.3%
Combined
$ 195,534,714
133,736,454
$ 61 ,798,260
68.4%
The Bonds are being issued to finance a portion of the rolled forward Pension Liability as of June 30,
2020 as projected by CalPERS and to prepay the Fiscal Year 2023 unfunded actuarial liability (reflecting new
amortization bases for the June 30, 2021 actuarial valuation, the estimated Fiscal Year 2021 CalPERS
investment return of 21.3% and an assumed reduction in the discount rate (to 6.80% rather than 7.00%), all as
described under the caption "CITY PENSION PLANS"). Upon the issuance of the Bonds, the City will pay
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November 16, 2021, Item #12
$ ___ to CalPERS for deposit to the CalPERS Payment Fund. With this deposit, the City will not be
required to make any further payments to CalPERS with respect to the portion of the Pension Liability
refinanced by the Bonds. It is possible that CalPERS will determine at a future date that an additional Pension
Liability exists if actual pension plan experience differs from current actuarial estimates. The City will
continue to make payments towards the remaining Pension Liability. The City may choose to pay such
remaining or additional Pension Liability consistent with current procedures, or the City could choose to issue
Additional Bonds at some time in the future and apply the proceeds to pay the remaining Pension Liability.
ESTIMATED SOURCES AND USES OF FUNDS
The proceeds to be received from the sale of the Bonds are estimated to be applied as set forth below.
Sources<')
Principal Amount of Bonds
Total Sources
Uses<1>
Funding of Pension Liability and Annual Contribution<2>
Costs of Issuance<3>
Total Uses
<1> Amounts rounded to the nearest dollar. Totals may not add due to rounding.
<2> Deposit to CalPERS Payment Fund. See the caption ·'PLAN OF REFINANCING."
$
$
$
$
<3> Includes Underwriter's discount, fees of rating agencies, Municipal Advisor, Bond Counsel, Disclosure Counsel and
Trustee, printing costs, premium for the Policy and other costs of issuance.
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November 16, 2021, Item #12
ANNUAL DEBT SERVICE REQUIREMENTS
The following table sets forth scheduled debt service on the Bonds, assuming no optional redemptions
prior to maturity.
Source: Underwriter.
Year Ending
June30
2022
2023
2024
2025
2026
2027
2028
2029
2030
2031
2032
2033
2034
2035
2036
2037
2038
2039
2040
2041
2042
2043
2044
2045
2046
Total
City of Poway
Pension Obligation Bonds, Series 2021
(Federally Taxable)
Debt Service Schedule
Principal Interest
$
$
BOND INSURANCE
Total
$ $
$
The information under this caption has been prepared by the Insurer for inclusion in this Official
Statement. None of the City or the Underwriter has reviewed this information, nor do the City or the
Underwriter make any representation with respect to the accuracy or completeness thereof The following
information is not a complete summary of the terms of the Policy and reference is made to Appendix G for a
specimen of the Policy.
[TO COME FROM BOND INSURER]
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November 16, 2021, Item #12
THE CITY
General
The City is located in central San Diego County (the "County"), approximately 23 miles northeast of
downtown San Diego. The City had a population of approximately 48,936 as of January I, 2021 and covers
approximately 39 square miles. The City was incorporated in 1980 and is a general law city operating under a
council/manager form of government. Land use in the City is primarily residential, with areas of commercial
and industrial development. See the caption "-Land Use and Service Area."
The City provides fire protection, street construction and maintenance and planning and building
services, as well as parks and recreational programs and water service. The City also provides arts, cultural
and social programs, including at the City-owned Poway Center for the Performing Arts, an 809-seat theater
and events center, and the Mickey Cafagna Community Center, which opened in spring 2021 and includes a
community swimming pool, skate park, picnic areas, athletic fields, playgrounds and a dog park. The City
contracts with the San Diego County Sheriffs Department for police services and with the City of San Diego
for wastewater services.
The City operates under a council-manager form of government. Councilmembers are elected by
division for alternating four-year terms and the Mayor is elected at large for a four-year term. The City
Council appoints the City Attorney and the City Manager, who is responsible for day-to-day administration of
the City under the policy direction of the City Council.
The City is known as "the city in the country" and maintains a semi-rural, predominantly residential
character, with many large residential parcels and neighborhoods of relatively low density. The City
topography varies in elevation from 420 feet to 1,420 feet above sea level. Over 30% of the City's territory
(approximately 7,000 acres) has been dedicated as preserved natural open space. The City has over 232 acres
of parkland and 78 miles of hiking, biking and horseback riding trails. The City has the lowest crime rate of
any incorporated city in the County.
Commercial and light industrial development has increased significantly in the City since the
mid-I 990s, primarily due to development of the South Poway Business Park (the "Business Park"), a 900 acre
complex that offers tenants high-quality infrastructure, numerous amenities and open space in keeping with the
City's rural surroundings. The Business Park has over 9 million square feet of available leasing space and
currently houses nearly 500 businesses that collectively employ over 18,000 people. Major tenants include
General Atomics Aeronautical Systems (a defense contractor), Delkin Devices (a manufacturer of flash storage
solutions for industrial applications) and Geico (an insurance provider). Recent development at the Business
Park includes two industrial buildings with a total footprint of 535,000 square feet which were leased to a
major tenant, Amazon.com, for a logistics and distribution center upon their completion in 2020. A small
number of parcels remain available for development within the Business Park, but significant additional
development is not expected in the future.
The City is largely built out and San Diego Association of Governments projections reflect an increase
of approximately 2,100 residents (or 4% based on the City's current population) by 2045.
Government and Administration
As of June 30, 2021 , the City had 228.37 full-time equivalent employees, of which 13 worked in
general government services, including finance. City employees are represented by the Teamsters Local 911
union ("Local 911"), which represents approximately I 04 non-safety employees Citywide, and the Poway
Firefighters Association (the "PFA"), which represents approximately 48 fire safety employees Citywide.
Relations between the City and Local 911 are governed by a memorandum of understanding (an "MOU") that
expires on June 30, 2027. Relations between the City and the PFA are governed by an MOU that expires on
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June 30, 2027. The terms of the expired City-PF A MOU govern relations with employees who are represented
by the PFA while the City and the PFA negotiate a new MOU. A total of approximately 84 management and
confidential employees are exempt from collective bargaining. Salaries for exempt employees are set by the
City Council. The City has never experienced a strike, slowdown or work stoppage.
The City operates under a council-manager form of government. Councilmembers are elected by
district and the Mayor is elected at large for four-year alternating terms. The City Manager, appointed by the
City Council, serves as the City's chief administrative officer and is responsible for overseeing the daily
operations of City departments and efficient management of all City business. Functions of the City
Manager's Office include coordination of the implementation of City Council policies and programs;
providing overall direction to the departments that administer City programs and services; coordinating
intergovernmental relations and legislative advocacy; and administration of the City's communications, media
relations and public information programs.
Chris Hazeltine has over 30 years of local government experience and has served as the City Manager
since May 2019. In this capacity he leads the daily operation of City government. Prior to coming to the City,
Mr. Hazeltine served as the Parks and Recreation Director of Carlsbad, California and Encinitas,
California. Mr. Hazeltine has a Bachelor's degree in Recreation Administration from San Diego State
University and a Master's degree in Organizational Leadership from Point Loma Nazarene University.
Aaron Beanan has over 15 years of local government experience and has served as the City's Director
of Finance since July 2019. Prior to coming to the City, Mr. Beanan served as the Finance Manager for the
City of Carlsbad, California. He has a Bachelor's degree in Business Administration from California State
University, San Marcos, and is a member of the California Society of Municipal Finance Officers.
Alan Fenstennacher, Esq., of the law firm of Rutan & Tucker LLP, has over a decade of local
government experience and has been City Attorney since January I, 2018. Mr. Fenstermacher has been an
attorney for over a decade in private practice specializing in municipal law. He has a Bachelor's degree from
the University of Southern California and a Juris Doctorate degree from Washington University. Rutan &
Tucker has continuously represented government agencies since its founding in 1940, with dozens of attorneys
specializing in all areas of government and regulatory law.
Risk Management
The City is exposed to various risks of loss related to torts, theft of, damage to and destruction of
assets, errors and omissions, injuries to employees and natural disasters. The City is a member of the
California Joint Powers Insurance Authority (the "JPIA"), a joint powers authority that is comprised of over
I 00 California agencies to arrange and administer programs for the pooling of self-insured losses and to
purchase excess insurance from commercial insurers. Through the JPIA, the City maintains the following
coverages:
• Liability (general, automobile and professional: $50,000,000 of first dollar coverage, with a limit
of $50,000,000 per occurrence);
• Workers Compensation (statutory limits, including employer's liability of $10,000,000 per
occurrence);
• Property (replacement costs coverage, $500,000,000 pooled limit, with a $10,000 deductible for
scheduled City assets);
• Pollution Legal Liability ($5,000,000 limit per incident and coverage up to $20,000,000 in
aggregate, with a $250,000 deductible); and
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• Crime (coverage up to $1,000,000, with a $2,500 deductible).
The City has not settled any claims that exceeded its insurance coverage in the past three years.
The City can provide no assurance that it will maintain the above insurance coverage amounts while
the Bonds are outstanding. The Trust Agreement does not require the City to maintain insurance coverage in
any particular amount or with respect to any particular risks. No assurance can be given as to the adequacy of
the insurance that is maintained now or in the future by the City to fund necessary repairs or replacement of
any portion of City facilities. Significant damage to City facilities or liability imposed upon the City could
negatively affect City operations. See the caption "RISK FACTORS-Natural Disasters."
COVID-19 Outbreak
The spread of the novel strains of coronavirus collectively called SARS-CoV-2, which cause the
disease known as COVID-19 ("COVID-19"), and local, State and federal actions in response to COVID-19,
have impacted the City's operations and finances. In response to the increasing number of COVID-19
infections and fatalities, health officials and experts recommended, and some governments mandated, a variety
of responses ranging from travel bans and social distancing practices to complete shutdowns of certain services
and facilities. The World Health Organization has declared the COVID-19 outbreak to be a pandemic and, on
March 4, 2020, as part of the State's response to address the outbreak, the Governor declared a state of
emergency. On March 13, 2020, the President declared a national emergency, freeing up funding for federal
assistance to state and local governments. The City also declared a local emergency on March 18, 2020 in
response to the COVID-19 outbreak. Many school districts across the State temporarily closed some or all
school campuses (including schools within the City) in response to local and State directives or guidance.
On March 19, 2020, the Governor issued Executive Order N-33-20, a mandatory Statewide shelter-in-
place order applicable to all non-essential services. Certain aspects of the shelter-in-place directives were
extended indefinitely until indicators for modifying the stay-at-home order were met. The County also
declared a state of emergency in response to the COVID-19 outbreak. On May 4, 2020, the Governor issued
an executive order informing local health jurisdictions and industry sectors that they could gradually re-open
under new modifications and guidance provided by the State. A phased re-opening of various sectors was
underway since mid-2020 in accordance with a four-stage re-opening plan that ended with a full reopening of
the economy on June 15, 2021. Although pursuant to the re-opening plan certain restrictions on activities were
eased, restrictions were also re-imposed in various jurisdictions (including Los Angeles County to the north of
the City) as local conditions warranted, and such restrictions may be renewed as the pandemic continues.
In addition, the Governor extended the deadline to file and pay spring 2020 property taxes for
residential and certain commercial property owners and first quarter 2020 sales and use tax returns by 90 days
for all but the very largest taxpayers. As a result of the extended deadline to file sales and use tax returns, it is
estimated that up to 361 ,000 California businesses with less than $5 million in taxable annual sales were
permitted to defer up to $50,000 in sales tax and enter into 12-month payment plans at zero interest. These
actions have resulted in delays in the receipt by the City of its portion of such tax payments.
On March 27, 2020, the President signed the $2.2 trillion Coronavirus Aid, Relief, and Economic
Stabilization Act (the "CARES Act") which provides, among other measures, $ 150 billion in financial aid to
states, tribal governments and local governments to provide emergency assistance to those most significantly
impacted by COVID-19. Under the CARES Act, local governments are eligible for reimbursement of certain
costs which were expended to address the impacts of the pandemic. The City received a total reimbursement
of $1,495,251 under the CARES Act. The funds received by the City under the CARES Act are not available
for payment of the Bonds and cannot be used to backfill any City revenue losses related to COVID-19.
On December 27, 2020, the President signed the $900 billion Coronavirus Response and Relief
Supplemental Appropriations Act. Although the act did not provide additional financial assistance to state and
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local governments, it did extend the deadline (to October 2021) for them to use unspent funds that were
previously approved under the CARES Act.
On March 11 , 2021 , the President signed the American Rescue Plan Act of 2021 (the "ARP Act"), a
$1.9 trillion economic stimulus package designed to help the United States' economy recover from the adverse
impacts of the COYID-19 pandemic. The ARP Act includes approximately $350 billion in aid to state and
local governments such as the City, consisting of both direct funding from the United States Department of
Treasury and program moneys that will flow from other federal agencies. Half of the aid to state and local
governments was distributed in spring 2021 , with the other half following in 2022. The City has been
allocated a total of approximately $6.1 million under the ARP Act, of which approximately half was received
in spring 2021. This funding is available for a broad range of uses, including responding directly to the health
emergency, addressing its negative economic impacts with assistance to households and small businesses,
restoring government services that were reduced in response to pandemic-related revenue losses and making
certain necessary infrastructure improvements. The City has not yet determined how the ARP Act funds that it
has received and expects to receive will ultimately be spent, but planning efforts are underway.
The effects of the COYID-19 outbreak and governmental actions responsive to it have altered the
behavior of businesses and people in a manner that has had significant negative impacts on global and local
economies. In addition, financial markets in the United States and globally have experienced significant
volatility attributed to COYID-19 concerns. Volatility in the financial markets caused the California Public
Employees Retirement System's ("CalPERS") earnings to fall below its investment targets in Fiscal Year
2020, which could result in increases in the City's unfunded pension liability and future pension costs
commencing in Fiscal Year 2023. See the caption "WATER SYSTEM FINANCIAL INFORMATION-
Employee Benefits-Pension Obligations." The outbreak resulted in increased pressure on State finances as
budgetary resources were directed towards containing the pandemic and tax revenues sharply declined in early
2020. Identified cases of COYID-19 and deaths attributable to the COVID-19 outbreak continue to occur
throughout the United States, including the County.
Potential impacts to the City associated with the COVID-19 outbreak include, but are not limited to,
increasing costs and challenges to the public health system in and around the City, cancellations of public
events and disruption of the regional and local economy with corresponding decreases in General Fund
revenues, including as a result of reduced sales which are subject to sales taxes, reduced hotel occupancy,
which is subject to transient occupancy taxes, fewer business license applications and potential declines in
property values. See the captions "CITY FINANCIAL INFORMATION-Sales Taxes," "CITY FINANCIAL
INFORMATION-Property Taxes" and "CITY FINANCIAL INFORMATION-Other Taxes and Fees."
In response to the COVID-19 outbreak, the City proclaimed a local state of emergency on March 13,
2020, modified its operations to implement remote work opportunities for employees and provide City services
online, closed many City facilities to the public, cancelled many programs, rentals and community events and
deferred several non-essential capital improvement projects. In order to transition City employees to working
from home, the City procured additional hardware, established secure access to City computer systems and
remote access to City telephone systems and deployed tele-conferencing applications. With improvements in
local case rates, the City has phased in the resumption of normal operations and activities while complying
with public health orders and California Occupational Safety and Health Administration COYID-19
Prevention Plan mandates. Large gatherings of City personnel at any one time were prohibited for much of
2020 and early 2021 per health officer orders. City Council and other board meetings occurred via
teleconference, and public comment and participation for City Council meetings was also conducted via
teleconference and electronic means.
The City also established the Poway Emergency Assistance Recovery Loan Program, a $2,000,000
million program to complement State and federal assistance programs for local small businesses.
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The City has not experienced and does not at this time foresee a future negative impact on the
execution of City services as a result ofthe COVID-19 outbreak. The City has worked diligently to provide its
employees with personal protective equipment and voluntary access to screening and vaccinations. However,
there can be no assurance that absences of employees or City leadership due to COYID-19 will not adversely
impact City operations.
The City also moved employees to multiple locations in order to prevent large gatherings of personnel
at any one time and maintain their health and City operations. In addition, on-site personnel are wearing
masks and practicing social distancing while working.
The City reports that although Fiscal Year 2020 General Fund expenditures were higher than
originally budgeted by approximately $3.2 million (6.25%) as the City responded to the COVID-19 pandemic
and undertook capital improvements in the last quarter of the Fiscal Year. Fiscal Year 2020 General Fund
revenues came in higher than budgeted by approximately $779,000 (1.59%). The City applied General Fund
reserves to cover the larger-than-budgeted deficiency in revenues as a result of the COYID-19 outbreak. See
the caption "CITY FINANCIAL INFORMATION-Budget Procedure, Current Budget and Historical Budget
Information-Budget History."
The Fiscal Year 2021 budget was developed conservatively, taking the COVID-19 outbreak into
consideration, and reflected: (i) a decrease in expenditures of approximately $3.2 million (5 .87%) below
audited Fiscal Year 2020 expenditures; and (ii) a decrease in revenues of approximately $1.8 million (3.54%)
below audited Fiscal Year 2020 revenues. Based on available information to date, the City is currently
estimating that Fiscal Year 2021 General Fund expenditures will be approximately $6.1 million higher than
budgeted (and approximately $2.9 million higher than audited Fiscal Year 2020 expenditures), while Fiscal
Year 2021 General Fund revenues will be approximately $2.5 million higher than budgeted (and
approximately $706,000 higher than Fiscal Year 2020 audited revenues). See the captions "CITY
FINANCIAL INFORMATION-General Economic Condition and Outlook of the City" and "CITY
FINANCIAL INFORMATION-Budget Procedure, Current Budget and Historical Budget Information-
Fiscal Year 2021 Budget."
The COYID-19 outbreak is ongoing, and the duration and severity of the outbreak and the economic
and other actions that may be taken by governmental authorities to contain the outbreak or to treat its impact
are uncertain. The ultimate impact of COYID-19 on the operations and finances of the City and the General
Fund is unknown. The City continues to actively monitor General Fund revenues and expenditures so that any
further impacts of the COYID-19 pandemic can be anticipated. The City does not currently expect that the
COYID-19 outbreak will have a material adverse effect on the City's ability to repay the Bonds.
CITY FINANCIAL INFORMATION
Accounting and Financial Reporting
The City maintains its accounting records in accordance with Generally Accepted Accounting
Principles ("GAAP") and the standards established by GASB. The City Council and City staff review the
City's fiscal performance against the budget at the end of the second quarter and at year-end during the budget
process for the subsequent Fiscal Year. Combined financial statements of the City and its component units are
produced following the close of each Fiscal Year.
The City Council employs an independent certified public accountant who examines at least annually
the financial statements of the City in accordance with GAAP, including tests of the accounting records and
other auditing procedures as such accountant considers necessary. As soon as practicable, after the end of the
Fiscal Year, a final audit and report is submitted by the independent certified public accountant to the City
Council.
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The accounts of the City are organized on the basis of funds, each of which is considered a separate
accounting entity. The operations of each fund are accounted for with a separate set of self-balancing accounts
that comprise its assets, liabilities, fund equity, revenues and expenditures or expenses, as appropriate.
The government-wide financial statements are reported using the economic resources measurement
focus and the accrual basis of accounting. Revenues are recorded when earned and expenses are recorded
when the liability is incurred, regardless of the timing of the related cash flows. Grants and similar items are
recognized as revenue as soon as all eligibility requirements imposed by the provider have been met.
Governmental fund financial statements are reported using the current financial resources
measurement focus and the modified accrual basis of accounting, with a focus on near-term inflows and
outflows of spendable resources, as well as the balances of spendable resources available at the end of the
fiscal period. Revenues are recognized as soon as they are both measurable and available. Revenues are
considered to be available when they are collectible within the current period. For this purpose, the
government considers revenues to be available if they are collected within 60 days of the end of the current
fiscal period. Expenditures generally are recorded when the liability is incurred, as under accrual accounting.
However, debt service expenditures, as well as expenditures related to compensated absences and claims and
judgments, are recorded only when payment is due. Only assets that are expected to be used and liabilities that
come due during the year or soon thereafter are reported on the balance sheet. No capital assets are included.
Property taxes, franchise taxes, licenses and interest associated with the current fiscal period are all
considered to be susceptible to accrual; therefore, they are recognized as revenues of the current fiscal period.
Only the portion of special assessments receivable due within the current fiscal period is considered to be
susceptible to accrual as revenue of the current period. All other revenue items are considered to be
measurable and available only when cash is received by the City.
The funds of the City can be divided into three categories: governmental funds, proprietary funds and
fiduciary funds. The General Fund constitutes one of the City's governmental funds.
Proprietary funds distinguish operating revenues and expenses from non-operating items. Proprietary
funds include activities that the City operates similar to a private business. Operating revenues and expenses
generally result from providing services and producing and delivering goods in connection with a proprietary
fund's principal ongoing operations. The principal operating revenues of the City's proprietary funds are
charges to customers for sales and services. Operating expenses for the City proprietary funds include the cost
of sales and services, administrative expenses and depreciation on capital assets. All revenues and expenses
not meeting this definition are reported as non-operating revenues and expenses. When both restricted and
unrestricted resources are available for use, it is the government's policy to use restricted resources first, then
unrestricted resources as they are needed.
Internal service funds are used to account for those operations which provide benefits to other funds,
departments or agencies of the City and its component units. Although the City's internal service fund is
reported as a proprietary fund in the fund financial statements, it is incorporated into governmental activities in
the government-wide financial statements.
See the caption "-City Financial Statements" for a discussion of the City's audited financial
statements for Fiscal Year 2020.
The General Fund is the general operating fund of the City. It is used to account for all financial
resources except those that are required to be accounted for in another fund . The tables below set forth certain
historical and budget information for the General Fund. Information on the remaining governmental funds of
the City as of June 30, 2020 is set forth in Appendix A.
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General Economic Condition and Outlook of the City
The City has adopted several policies which are designed to ensure the prudent and effective
management of City operations, including a Debt Management Policy, an Investment Policy, a General Fund
Reserve Policy and a Financial Policy. Further information about these policies is set forth below.
Debt Management Policy. The City has adopted a Debt Management Policy in accordance with
California Government Code Section 8855 to establish guidelines and parameters for the effective governance,
management and administration of debt issued by the City and its related entities and to ensure compliance
with legislation, statutes and laws that place regulations on local agency debt. The following elements have
been incorporated into this policy:
• The purposes for which debt may be incurred;
• The types of debt that may be issued;
• The relationship of the debt to, and integration with, the City's capital improvement program
or budget;
• Policy goals related to the City's planning goals and objectives; and
• Debt management practices, including the investment of proceeds, continuing disclosure
procedures and post-issuance compliance.
Investment Policy. The City's Investment Policy and a summary of City investments are described
under the caption "-City Investment Policy" below.
General Fund Reserve Policy. The City Council has adopted a General Fund Reserve Policy that is
intended to ensure consistent, uninterrupted municipal services and facilities in the wake of potential risk
events, such as a major economic downturn or natural disaster (e.g., wildfires, winter storms or earthquakes)
and to protect the City's credit quality and reduce its cost of borrowing.
Under the General Fund Reserve Policy, the City seeks to maintain reserves in an amount that is
equivalent to 45% of budgeted annual General Fund operating expenditures, including: (i) a I 0% reserve for
revenue volatility (designed to serve as a hedge against swings in revenue from economic conditions, State
actions and other adverse conditions, particularly changes in sales tax, property tax and other fee-based
revenue); (ii) a 5% reserve for expenditure volatility (designed to serve as a hedge against unanticipated costs
such as major litigation, a spike in pension contributions resulting from market volatility or unplanned capital
expenditures); and (iii) a 30% reserve for extreme events and public safety (designed to serve as a hedge
against natural disasters, other public safety emergencies and unexpected infrastructure repairs and
replacements).
The 45% General Fund Reserve Policy target will be adjusted annually as part of the City's budget
process, with excess funds programmed to specific uses at the City Council 's direction or (if funds do not meet
the 45% target) a plan developed to increases reserves to the target amount within a 5-year period. Moneys in
the General Fund reserve can be used only at City Council direction, or by the City Manager upon a
declaration of an emergency by the City Council. The City must develop a plan to replenish moneys that are
withdrawn from the reserve within 60 days of withdrawal.
Financial Policy. The City's Financial Policy sets forth the City's commitment to the following fiscal
policies and practices: (i) maintenance of a balanced operating budget, including ongoing tracking of revenues
and expenditures and achieving ending fund balances that meet City needs; (ii) the establishment of a citizen's
budget committee (the Budget Review Committee) to advise City leaders on budget recommendations and
offer citizen input; (iii) review of the City's fiscal condition at the midpoint of each Fiscal Year; (iv)
maintenance of a diversified and stable revenue base to protect the City from short-term fluctuations in any one
source of revenue, with one-time and non-sustainable revenues excluded as funding sources for ongoing
programs, debt service or other long-term obligations and City fees reviewed and updated annually in a master
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fee schedule; and (v) maintenance of a competitive procurement policy, including reviewing the benefits of
outsourcing where appropriate. See the caption "-Budget Procedure, Current Budget and Historical Budget
Information-General" for a discussion of the City's budget development process.
Pension Reserve and Funding Policy. Under the City's Pension Reserve and Funding Policy, which
was approved in November 2021: (i) the City will seek to prepay its pension obligations whenever possible;
(ii) the target funding level for the City's unfunded pension liability is between 90% and 100%; and (iii) the
City will establish a Pension Reserve Fund (the "PRF"), consisting of moneys transferred from the General
Fund Unassigned fund balance after satisfaction of the General Fund Reserve Policy (as discussed above under
the subcaption "-General Fund Reserve Policy"). Moneys held in the PRF will not exceed the total of the
City's normal cost, any unfunded pension liability and maximum annual debt service for outstanding pension
obligation bonds. Moneys held in the PRF will be applied to provide additional discretionary payments to help
reduce or eliminate any unfunded pension liability, remitted to any pension trust established under Section 115
of the Internal Revenue Code, held in reserve to be used as a supplemental funding source for unanticipated
increases to annual pension costs or applied to redeem outstanding pension obligation bonds prior to maturity.
The City is currently exploring the costs and benefits of establishing a pension trust.
Summary of General Fund Results and Budgets. As of June 30, 2020, the General Fund had a year-
end deficit (expenditures in excess of revenues) of approximately $5.2 million, which was larger than the
anticipated year-end deficit of approximately $2.8 million that was set forth in the Fiscal Year 2020 budget
prior to the outbreak of COVID-19. The larger deficit was primarily due to expenditures made by the City in
the last quarter of Fiscal Year 2020 to respond to the COVID-19 outbreak and to undertake capital projects.
For Fiscal Year 2021 , the adopted General Fund budget projected revenues of approximately $48.1
million, which was approximately $1.8 million (3 .54%) below Fiscal Year 2020 revenues. In addition, the
adopted Fiscal Year 2021 General Fund budget projected expenditures of approximately $51.8 million, a
decrease of approximately $3.2 million (5.87%) below Fiscal Year 2020 expenditures.
Despite the continuing COVID-19 outbreak that is di scussed under the caption "THE CITY-
COVID-19 Outbreak," Fiscal Year 2021 General Fund revenues (based on unaudited actual Fiscal Year 2021
results) came in approximately $2.5 million over budget as a result of renewed economic activity during the
second half of Fiscal Year 2021. The City budgeted for the application of reserves to achieve a balanced
budget in Fiscal Year 2021 , although (based on unaudited actual Fiscal Year 2021 results) reserves were not
ultimately needed to balance the Fiscal Year 2021 budget.
The City's adopted Fiscal Year 2022 General Fund operating budget projects an operating deficit of
approximately $887,000, with operating revenues anticipated to total $53.7 million and operating expenditures
expected to total $54.6 million. This small operating deficit does not include the application of the City's
indirect cost allocation, which is anticipated to eliminate the operating deficit.
See the caption "-Budget Procedure, Current Budget and Historical Budget Information" for
additional information relating to recent City budgets.
Budget Procedure, Current Budget and Historical Budget Information
General. The City prepares and adopts a balanced budget for each Fiscal Year which includes
proposed expenditures and the means of financing such expenditures. See the caption "-General Economic
Condition and Outlook of the City-Financial Policy." The City's budget cycle begins in or about December
of each year with an inter-departmental meeting of City departments to discuss guidelines, assumptions and
priorities for the next Fiscal Year. Departments develop and submit their budget requests for the next Fiscal
Year in February of each and meet with Finance Department staff to discuss such requests. In or about March
of each year, the budget is drafted, incorporating projections into the forecast, followed by the compilation of
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the full budget and continued review. In or about May of each year, a proposed budget is submitted to the City
Council-appointed Budget Review Committee, a citizen's advisory committee. See the caption "-
Governance and Management-Management Policies-Financial Policy." In or about June of each year, the
budget is submitted to the City Council for review and approval. Prior to June 30 of each year, public hearings
are conducted to obtain public comments and the budget is legally enacted through the passage of a resolution.
The City Manager is authorized to transfer budgeted amounts between line items within a department
or activity provided that the total appropriation does not exceed the budgeted amount. Most other budget
amendments require authorization by the City Council. The City Manager and affected department heads are
mutually responsible for controlling expenditures within budgeted appropriations.
The City Council adopted the budget for Fiscal Year 2022 on June 15, 2021.
A summary of the actions taken during the City's budgetary process is set forth below:
December
Inter-Departmental
Meeting
_I' Discussion of budget
guidelines and priorities
May
Submission to Citizen
Committee
f---+
➔ Budget submitted to
Budget Review
Committee.
Source: City.
City of Poway
Budget Process
February February -March
Development of Budget Meetings
Requests f---+ Meetings are held with
Departments develop Finance Department to
their budget requests. review budget requests.
June June
Submission to City Public Hearing
Council _.. One or more public
Budget submitted to hearings are held to
City Council. solicit citizen input.
March
Drafting
f---t, Department budgets
drafted, incorporating
projections; full budget
compiled.
By June 30
Adoption
-Budget adopted by . resolution of City
Council.
Fiscal Year 2021 Budget. The City Council adopted a balanced budget for Fiscal Year 2021 which
took into account the effects of the COY ID-I 9 outbreak and assumed that reserves would need to be applied to
balance the budget. Budgeted expenditures for the General Fund totaled approximately $51.8 million for
Fiscal Year 2021, or approximately equal to audited Fiscal Year 2020 expenditures. Actual Fiscal Year 2021
expenditures for the General Fund totaled approximately $57 .9 million, or approximately $6.1 million more
than the adopted Fiscal Year 2021 budgeted amount. The largest driver in this variance was $8.9 million in
capital improvement projects that had been budgeted for in prior years.
Budgeted revenues for the General Fund totaled approximately $48.1 million for Fiscal Year 2021
(based on unaudited actual results), a decrease of approximately $986,000 (2.01%) below Fiscal Year 2020
budgeted revenues, reflecting the anticipated impact of the COVID-19 pandemic. Actual Fiscal Year 2021
revenues for the General Fund totaled approximately $50.5 million (based on unaudited actual results), or
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-
approximately $2 .5 million (5.14%) more than the adopted Fiscal Year 2021 budgeted amount, primarily as a
result of better than anticipated sales tax receipts.
Fiscal Year 2022 Budget. The City Council adopted a balanced budget for Fiscal Year 2022 on June
15, 2021. Budgeted expenditures for the General Fund total approximately $54.6 million for Fiscal Year 2022,
an increase of approximately $2.8 million (5.39%) above Fiscal Year 2021 budgeted expenditures.
Budgeted revenues for the General Fund total approximately $53.7 million for Fiscal Year 2022, an
increase of approximately $5 .7 million (11.84%) above Fiscal Year 2021 budgeted revenues. The City's
Fiscal Year 2022 General Fund budget reflects increases in sales tax receipts and other revenues and the
anticipated receipt of approximately $3.1 million in ARP Act funds.
The Fiscal Year 2022 General Fund budget reflects the following significant assumptions: (i) property
tax revenues will increase by $823,495 (4.80%) compared to the Fiscal Year 2021 budgeted amount of
$17,951 ,495 as a result of increases in assessed valuations; (ii) sales tax revenue will increase by $2,143,877
(16.36%) compared to the conservatively projected Fiscal Year 2021 budgeted amount of $13, I 05,318; (iii)
property taxes in lieu of vehicle license fee ("VLF") revenues will increase by $498,369 (9.72%) compared to
the Fiscal Year 2021 budgeted amount of $5,126,450; and (iii) the City will not hire any additional employees.
The Fiscal Year 2022 General Fund budget reflects the receipt of approximately $3.1 million in ARP
Act funds which were received in spring 2021.
Budget History. Set forth in the table below are the General Fund budgets for Fiscal Years 2018
through 2022 (as originally adopted and not reflecting any mid-Fiscal Year budget adjustments), the audited
General Fund results for Fiscal Years 2018 through 2020 and unaudited actual General Fund results for Fiscal
Year 2021.
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City of Poway
General Fund Budgets and Results
Adopted Audited Adopted Audited Adopted Audited Adopted Unaudited Adopted
Fiscal Year Fiscal Year Fiscal Year Fiscal Year Fiscal Year Fiscal Year Fiscal Year Fiscal Year Fiscal Year
2018 Budget 2018 Results 2019 Budget 2019 Results 2020 Budget 2020 Results'-6> 2021 Budget 2021 Results 2022 Budget
Revenues
Taxesl1> $ 35,828,350 $ 38,620,527 $ 38,216,120 $ 39,050,341 $ 37,429,3 I 0l5l $ 37,102,662 $ 36,294,768 $ 41 ,108,411 $39,811,259
Licenses and Permits 693,050 698,848 699,860 636,007 2,262,696 2,078,662 2,268,512 680,465 2,152,768
Intergovernmental 371 ,930 783,241 346,400 740,726 434,850 441 ,111 320,850 816,104 290,738
Charges for Servicesl2l 2,458,410 2,623,079 4,510,400 4,346,688 4,622,057 4,026,954 4,828,229 3,862,657 4,271 ,168
Fines and Forfeitures 130,000 150,968 100,000 174,431 100,000 170,527 161,000 109,335 140,000
Use of Money and Property 863,920 881 ,797 892,140 1,652,609 1,131 ,000 2,482,009 1,267,725 576,945 1,367,494
Developer Fees 3,932,440 4,458,832 3,007,000 3,031 ,986 2,871 ,917 3,115,557 2,793,037 3,265,968 2,542,884
Other Revenues 741 230 2,875.390 193 610 212,951 186 240 399 538 118.240 102 957 3 164 619
Total Revenues $ 45,019,330 $ 51 ,092,682 $ 47,965,530 $ 49,845,739 $ 49,038,070 $ 49,817,020 $ 48,052,361 $ 50,522,842 $ 53 ,740,930
Expenditures
General Government $ 7,133,486 $ 4,348,184 $ 8,567,130 $ 6,157,824 $ 8,525,150 $ 4,173,401 $ 8,236,418 $ 5,236,762 $ 8,848,798
Public Safety 23,555,220 24,203,074 25,232,610 25,092,171 26,397,488 26,686,874 27,488,540 27,409,974 28,386,406
Public Works 4,163,335 5,443,423 4,656,280 4,401 ,878 4,720,269 5,667,791 4,948,247 5,212,881 5,381,596
Development Services 5,289,871 4,468,523 5,678,440 4,977,009 5,713,516 7,868,513 5,622,848 6,151 ,786 5,834,729
Community Services 6,059,515 5,837,896 6,205,480 5,834,051 6,150,127 5,719,232 5,529,749 4,976,933 6,176,777
Capital Outlay 21,024,284 7,292,310 1,631,230 4 148 024 319 480 4 951 196 10 500 8,928,751
Total Expenditures $ 67,225,711 $ 51,593,410 $ 51,971 ,170 $ 50,610,957 $ 51 ,826,030 $ 55,067,007 $ 51 ,836,302 $ 57,917,087 $ 54,628,306
Excess (Deficiency) of Revenues
Over (Under) Expenditures()) $(22,206,381) $ (500,728) $ (4,005,640) $ (765,218) $ (2,787,960) $ (5,249,987) $ (3,783 ,941) $ (7,394,245) $ (887,376)
Other Financing Sources (Uses)
Proceeds from Sale of Property $ $ $ $ $ $ 3,364,021 $ $ $
Transfers In $ 4,404,529 $ 1,679,384 988,110 $ 2,808,242 988,110 2,827,727 2,294,754 2,789,719 795,977
Transfers Outl4l (2,326,720) (1 ,105,779) (I, 13 I, 190) (1,323,909) (I, 13 I, 190) (2,515,042) (1,597,658) (1,600,698) (2,510,265)
Total Other Financing Sources
(Uses) $ 2,077,809 $ 573,605 $ (143,080) $ 1,484,333 $ (143,080) $ 3,676,706 $ 697,096 $ 1,189,021 $ (1 ,714,288)
Net Change in Fund Balances $(20, 128,572) $ 72,877 $ (4,148,720) $ 719,115 $ (2,931,040) $ (1 ,573,281) $ (3,086,845) $ (6,205,224) $ (2,601 ,664)
Fund Balances -Beginning $ 65,565,440 $ 65,565,440 $ 65,638,317 $ 65,638,317 $ 66,357,432 $ 66,357,432 $ 64,784,151 $ 64,784,151 $ 58,578,927
Fund Balances -Ending $ 45,436,868 $ 65,638,317 $ 61 ,489,597 $ 66,357,432 $ 63,426,392 $ 64,784,151 $ 61 ,697,306 $ 58,578,927 $ 55,977,263
(I} See the caption ·'-Tax Revenues of the City" for a breakdown of major tax revenue sources for the past five Fiscal Years.
(2) Includes lease revenue, recreation fees and ambulance fees.
(J) Budgeted and actual deficiencies generally reflect the application of the assigned General Fund balance.
(4) Transfers out from the General Fund primarily reflect debt service payments on the 2005 Certificates and the 2012 Certificates (as discussed under the caption "-Other Indebtedness-
General Fund Supported Obligations"), general benefit contributions for special districts, capital replacement charges and reserve transfers to comply with the City's General Fund
Reserve Policy (as discussed under the caption ·'-General Economic Condition and Outlook of the City-General Fund Reserve Policy."
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November 16, 2021, Item #12
<5> Decrease in amended budgeted amount reflects projected decrease in sales tax revenues as a result of the COYID-19 outbreak. See the caption ·'THE CITY---COVID-1 9 Outbreak."
<6> Variations from budgeted amounts primarily reflect effects of COVID-I 9 outbreak. See the caption "THE CITY---COYID-I 9 Outbreak."
Sources: Adopted budgets of the City for Fiscal Years 2018 through 2022; audited financial statements of the City for Fiscal Years 2018 through 2020; City of Fiscal Year 2021.
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November 16, 2021, Item #12
Change in Fund Balance of the City General Fund
Set forth in the table below are the City's audited General Fund statements of revenues, expenditures
and changes in fund balance for Fiscal Years 2017 through 2020, and actual unaudited results for Fiscal Year
2021.
City of Poway
General Fund Statement of Revenues, Expenditures and Changes in Fund Balances
Revenues
Taxes<1>
Licenses and Penn its
Intergovernmental
Charges for Services<2>
Fines and Forfeitures
Use of Money and Property
Developer Fees
Other Revenues
Total Revenues
Expenditures
General Government
Public Safety
Public Works
Development Services
Community Services
Capital Outlay
Total Expenditures
2017
$ 36,313,969
691 ,524
612,748
2,812,729
137,772
752,842
4,069,700
1,282,491
$ 46,673,775
$ 4,915,612
22,632,799
4,566,107
4,290,321
6,074,057
6 413 903
$ 48,892,799
2018
$ 38,620,527
698,898
783 ,241
2,623,079
150,968
881 ,797
4,458,832
2,875,390
$ 51,092,682
$ 4,348,184
24,203,074
5,443,423
4,468,523
5,837,896
7,292,310
$ 51 ,593,410
Fiscal Year Ended June 30,
2019
$ 39,050,341
636,007
740,726
4,346,688
174,431
1,652,609
3,031 ,986
212,951
$ 49,845,739
$ 6,157,824
25,092,171
4,401 ,878
4,977,009
5,834,051
4 148 024
$ 50,610,957
2020
$ 37,102,662
2,078,662
441 ,111
4,026,954
170,527
2,482,009
3,115,557
399 538
$ 49,817,020
$ 4,173,401
26,686,874
5,667,791
7,868,513
5,719,232
4 951 196
$ 55,067,007
2021
$ 41 ,108,411
680,465
816,104
3,862,657
109,335
576,945
3,265,968
102 957
$ 50,522,842
$ 5,236,762
27,409,974
5,212,881
6,151,786
4,976,933
8,928,751
$ 57,917,087
Excess (Deficiency) of Revenues Over
(Under) Expenditures $ (2,219,024) $ (500,728) $ (765,218) $ (5,249,987) $ (7,394,245)
Other Financing Sources (Uses)
Proceeds from Sale of Property
Transfers In
Transfers Out<3>
Total Other Financing Sources (Uses)
Net Change in Fund Balances
Fund Balances -Beginning
Fund Balances -Ending
$
2,167,127
( 1,047,28 I)
$ 1,119,846
$ (1,099,178)
$ 66,664,618
$ 65,565,440
$
1,679,384
(I, I 05, 779)
$ 573,605
$ 72,877
$ 65,565,440
$ 65,638,317
$
2,808,242
(1,323,909)
$ 1,484,333
$ 719,115
$ 65,638,317
$ 66,357,432
$ 3,364,021
2,827,727
(2.515,042)
$ 3,676,706
$ (1 ,573,281)
$ 66,357,432
$ 64,784, 151
<11 See the caption "-Tax Revenues of the City" for a breakdown of major tax revenue sources for the past five Fiscal Years.
<21 Includes lease revenue, recreation fees and ambulance fees.
$ 0
2,789,719
(1,600,698)
$ 1,189,021
$ (6,205,224)
$ 64,784, 15 I
$ 58,578,927
<3> Transfers out from the General Fund primarily reflect debt service payments on the 2005 Certificates and the 2012 Certificates (as discussed
under the caption "--Other Indebtedness-General Fund Supported Obligations"), general benefit contributions for special districts, capital
replacement charges and reserve transfers to comply with the City's General Fund Reserve Policy (as discussed under the caption "-
General Economic Condition and Outlook of the City-General Fund Reserve Policy."
Source: Audited financial statements of the City for Fiscal Years 2017 through 2020; City for Fiscal Year 2021 .
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General Fund Balance Sheets of the City
Set forth in the table below are the City's audited General Fund balance sheets for Fiscal Years 2017
through 2021 .
City of Poway
General Fund Balance Sheet Summary
Fiscal Year Ended June 30,
2017 2018 2019 2020 2021
Assets
Cash and Investments $ 52,639,850 $ 48,470,359 $ 50,495,097 $ 53,22 I ,507 $ 50,089,960
Cash and Investments with Fiscal Agents 133,980
Taxes Receivable 3,460,397 3,040,775 3,540,647 2,843,783 3,371,895
Notes Receivable(ll 10,006,990 10,010,396 10,005,226 12,934,143 12,933,685
Accounts Receivable 646,444 646,478 646,603 1,277,241 1,435,017
Interest Receivable 740,165 855,387 992,359 1,000,106 937,258
Other Receivable 517,659
Due from Other Funds 303,764 274,747 182,241 436,291 97,961
Advances to Other Funds 1,737,171 1,335,921
Due from Other Governments 111 ,553 73,753 220,390 13,533 16,202
Prepaid Items 340,874 121 ,433 51 ,342 4,330 8,156
Land Held for Resale 5,367,000 5,367,000 177,000 177,000
Inventories, at Cost 130 051 140 207 127 080 155 450 148 159
Total Assets $ 70, 117,259 $ 70,336,456 $ 71,627,985 $ 72,197,364 $ 69,732,952
Liabilities
Accounts Payable $ 3,280,915 $ 3,317,151 $ 3,334,195 $ 5,504,083 $ 5,756,583
Accrued Liabilities 885,448 1,017,536 1,459,242 1,346,078 1,448,786
Due to Other Funds 312,433 288,400 264,367
Advances from Other Funds 360,500 360,500
Deposits<2l 3,582,478
Unearned Revenues 24 956 225,785
Total Liabilities $ 4,551 ,819 $ 4,695,187 $ 5,105,870 $ 7,364,346 $11,052,214
Deferred Inflows of Resources $ $ 2,952 $ 164,683 $ 48,867 $ 101 ,810
Fund Balances
Nonspendable<3l $10,477,915 $ 15,639,036 $ 15,550,648 $12,042,735 $ 13,267,000
Restricted<4l
Committed<5l 19,321 ,583 20,961,853 21 ,233,004 20,393,896
Assigned<6l 40,438,366 16,613,992 22,536,818 24,780,312 16,246,338
Unassigned 14,649,159 14,063,706 7 308 113 6,728,100 8,671,694
Total Fund Balances $ 65,565,440 $ 65,638,317 $ 66,357,432 $64,784,151 $ 58,578,928
Total Liabilities, Deferred Inflows of
Resources and Fund Balances $ 70,117,259 $ 70,336,456 $71,627,985 $ 72,197,364 $_69,732,952
(1)
(2)
See Note (3) to the City's audited financial statements set forth in Appendix A for a description of Notes Receivable.
(3)
(4)
(5)
The City begin recording developer deposits in the General Fund beginning in Fiscal Year 2021 as a result of the
implementation of Governmental Accounting Standards Board Statement No. 84.
This classification includes amounts that cannot be spent because they are either not in a spendable form or are legally or
contractually required to be maintained intact.
This classification includes amounts that are constrained by external creditors, grantors, contributors or laws or regulations
of other governments or by law through constitutional provisions or enabling legislation.
Pursuant to constraints imposed by formal action of the City Council, committed funds can only be used for specific
purposes.
<5> Assigned funds are intended to be used for specific purposes but are not formally constrained by City Council action.
Source: Audited financial statements of the City for Fiscal Years 2017 through 2020; City for Fiscal Year 2021.
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November 16, 2021, Item #12
Tax Revenues of the City
A summary of major tax revenue sources received by the City in the last five Fiscal Years (shown
under the accrual basis of accounting) is set forth in the table below. Certain general taxes currently imposed
by the City are affected by various State Constitutional provisions. See the caption "CONSTITUTIONAL
AND STATUTORY LIMITATIONS ON TAXES AND APPROPRIATIONS."
City of Poway
General Fund Major Tax Revenues by Source
% of Total Fiscal Year 2021
Fiscal Year Ended June 30, General Fund Revenues
2017 2018 2019 2020 2021
Property Taxes $ 14,964,861 $ 16,156,010 $ I 6,665,476 $ 16,905,793 $ 17,234,236 34.11%
Sales Taxes 13,774,763 13,981 ,478 14,774,047 14, I 85,047 15,952,859 31.58
Transient Occupancy Taxes 609 306 654 235 674 230 515 633 403 071 0.80
TOTAL $ 29,348,930 $ 30,791 ,723 $ 32,113,753 $ 3 I ,606,4 73 $ 33,590,166 66.49%
Source: Audited financial statements of the City for Fi scal Years 2017 through 2020; City for Fiscal Year 2021.
Property Taxes
Property tax receipts of$ I 7,234,236 (excluding VLF in-lieu payments, which are discussed under the
caption "-State of California Motor Vehicle In-Lieu Payments," and property transfer taxes), provided the
largest tax revenue source of the City in Fiscal Year 2021 , contributing approximately 34.11 % of total General
Fund revenues during Fiscal Year 2021, based on unaudited actual results.
Property in the State which is subject to ad valorem taxes is classified as "secured" or "unsecured."
The secured classification includes property on which any property tax levied by a county becomes a lien on
that property. A tax that is levied on unsecured property may become a lien on certain other property owned
by the taxpayer. Every tax which becomes a lien on secured property has priority over all other liens arising
pursuant to State law on the secured property, regardless of the time of the creation of other liens.
The exclusive means of compelling the payment of delinquent taxes with respect to secured property
is the sale of the property securing the taxes for the amount of taxes that are delinquent. The taxing authority
has three methods of collecting unsecured personal property taxes: (I) filing a civil action against the taxpayer;
(2) obtaining a judgment lien on certain property of the taxpayer from the county clerk or county recorder; and
(3) seizing and selling personal property, improvements or possessory interests belonging or taxable to the
assessee.
A I 0% penalty is added to delinquent taxes which have been levied with respect to property on the
secured roll. In addition, beginning on the July I following a delinquency, interest begins accruing at the rate
of 1.5% per month on the amount delinquent. If taxes are unpaid for a period of five years or more, the
property is deeded to the State and then is subject to sale by the county tax collector. A I 0% penalty also
applies to the delinquent taxes or property on the unsecured roll, and further, an additional penalty of 1.5% per
month accrues with respect to such taxes beginning on the varying dates related to the tax billing date.
In an attempt to mitigate the effects of the COVID-19 pandemic on State property taxpayers, on May
6, 2020, the Governor signed Executive Order N-61-20 ("Order N-61-20"). Under Order N-61-20, certain
provisions of the State Revenue and Taxation Code were suspended until May 6, 2021 to the extent that they
required a tax collector to impose penalties, costs or interest for the failure to pay secured or unsecured
property taxes, or to pay a supplemental bill, before the date that such taxes become delinquent. Such
penalties, costs and interest were cancelled under the conditions that were provided for in Order N-61-20,
including if the property was residential real property which was occupied by the taxpayer or qualified as a
small business under certain State laws, the taxes were not delinquent prior to March 4, 2020, the taxpayer
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filed a claim for relief with the tax collector and the taxpayer demonstrated economic hardship or other
circumstances that have arisen due to the COVID-19 pandemic or due to a local, state, or federal governmental
response thereto. See the caption "THE CITY-COVID-19 Outbreak." These actions prevented the City from
receiving penalties and interest on delinquent property tax payments in 2020 and 2021, but did not have a
material impact on total property tax revenues received by the City during such period.
State law also provides for the supplemental assignment and taxation of property as of the occurrence
of a change in ownership or completion of new construction. Collection of taxes based on supplemental
assessments occurs throughout the year. Taxes due are prorated according to the amount of time remaining in
the tax year.
For a number of years, the State Legislature shifted property taxes from cities, counties and special
districts to the Educational Revenue Augmentation Fund ("ERAF"). In Fiscal Years 1993 and 1994, in
response to serious budgetary shortfalls, the State Legislature and administration permanently redirected over
$3 billion of property taxes from cities, counties, and special districts to schools and community college
districts pursuant to ERAF shifts. The Fiscal Year 2005 State Budget included an additional $1.3 billion shift
of property taxes from certain local agencies, including the City, in Fiscal Years 2005 and 2006.
On July 27, 2009, the Governor signed a revised Fiscal Year 2010 State budget that included an ERAF
shift of approximately 8% of I% ad valorem property tax revenues from certain local agencies, including the
City.
On November 2, 20 I 0, State voters approved Proposition 22, which: (i) prohibits the State of
California from shifting or delaying the distribution of funds from special districts to schools and community
colleges; (ii) eliminates the authority to shift property taxes temporarily during a severe financial hardship of
the State; and (iii) restricts the State's authority to use fuel tax revenues to pay debt service on transportation
bonds, to borrow or change the distribution of fuel tax revenues or to use vehicle license fee revenues to
reimburse local governments for state-mandated costs. See the caption "CONSTITUTIONAL AND
STATUTORY LIMITATIONS ON TAXES AND APPROPRIATIONS-Proposition 22."
Despite the passage of Proposition 22, there can be no assurance that I% ad valorem property tax
revenues which the City currently expects to receive will not be temporarily shifted from the City or reduced
pursuant to State legislation enacted in the future, including in response to State budget deficits in the wake of
the COVID-19 pandemic. See the caption "STA TE OF CALIFORNIA BUDGET INFORMATION." If the
property tax formula is permanently changed in the future, it could have a material adverse effect on the receipt
of its share of I% property tax revenues by the City.
Set forth in the table below are the secured and unsecured assessed valuations for property in the City
for the last five Fiscal Years, excluding valuations attributed to the City's redevelopment successor agency.
Fiscal
Year Land Value
2017 $4,360,984
2018 4,572,607
2019 4,827,930
2020 5,024,173
2021 5,232,189
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City of Poway
Assessed Valuation History<1>
Percentage
Net Taxable Change in
Improvement Personal (Less Assessed Taxable
Value Property Exemptions) Value Assessed Value
$5,372,307 $303,568 $(321 ,086) $ 9,715 ,773 NIA%
5,547,678 299,989 (328,005) 10,092,269 3.88
5,779,677 326,996 (342,114) 10,592,488 4.96
5,972,444 331 ,806 (341 ,340) 10,987,082 3.73
6,226,365 360,730 (323,295) 11 ,495,989 4.63
29
November 16, 2021, Item #12
<1> Figures are in thousands of dollars.
Source: Comprehensive Annual Financial Report of the City for Fiscal Year Ended June 30, 2020 for Fiscal Years 2017 through
2020; City for Fiscal Year 2021 .
Set forth in the table below are property tax collections and delinquencies in the City as of June 30 for
the last five Fiscal Years. Although the County has adopted the Alternative Method of Distribution of Tax
Levies and Collections and of Tax Sale Proceeds (known as the Teeter Plan), as provided for in Section 4701
et seq. of the Revenue and Taxation Code of the State, the City does not participate in such plan. As a result,
the City is exposed to the risk of property tax payment delinquencies but receives penalties and interest on
delinquent collections. The City also receives supplemental taxes throughout the year.
City of Poway
Property Tax Levies and Collections
Collections
within the Percent of Levy
Total Fiscal Year Collected within the
Fiscal Year Tax Levy ofLevy(ll Fiscal Year of Levy
2017 $13,390,895 $13 ,279,054 99.16%
2018 13,802,364 13,694,433 99.22
2019 14,345,375 14,229,865 99.19
2020 14,928,965 14,729,661 98.66
2021 15,453,800 15 ,277,726 98.86
<1> The amounts shown in this column do not reflect property tax revenues that are attributable to the City's redevelopment
successor agency.
Source: Comprehensive Annual Financial Report of the City for Fiscal Year Ended June 30, 2020 for Fi scal Years 2017 through
2020; City for Fiscal Year 2021.
Information with respect to the ten largest property taxpayers in the City as shown on the Fiscal Year
2021 tax roll is set forth in the table below.
City of Poway
Ten Largest Property Taxpayers
Taxpayer
Sorrento West Properties Inc
RREEF CPIF Kirkham Way JV LLC
HCPLS Poway I LLC
Ventas Inc
San Miguel Valley Corporation
Hometown Poway Royal Estates LLC
PM! Summerlyn LLC
Cycle Express LLC
Costco Wholesale Corporation
Harsch Investment Properties
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2021 Taxable
Assessed Valuation
$ 418,871 , 169
161 ,982,531
137,276,319
86,516,411
71 ,869,405
45,184,341
45,003,538
44,612,288
43,138,906
42,444,190
% of Total
Assessed
Valuation<1l
3.64%
1.41
1.19
0.75
0.63
0.39
0.39
0.39
0.38
0.37
November 16, 2021, Item #12
TOTAL $1,096,899,098 9.54%
<1J Fiscal Year 2021 total taxable assessed value is approximately $11,495,988,584.
<2J This taxpayer has a pending property tax appeal. See the caption ·'RISK FACTORS-Assessed Value of Taxable
Property."
Source: San Diego County Assessor 2020/21 Combined Tax Rolls.
Sales Taxes
Sales tax receipts of $15,952,859 provided the second largest tax revenue source for the City in Fiscal
Year 2021 , based on unaudited actual results. Sales taxes contributed approximately 31.58% of total General
Fund revenues in Fiscal Year 2021, based on unaudited actual results.
A sales tax is imposed on retail sales or consumption of personal property and collected and
distributed by the California Department of Tax and Fee Administration (the "CDTFA"). The basic sales tax
rate is established by the State Legislature, and local overrides may be approved by voters. The current sales
tax rate in the City is 7.75%.
As discussed under the caption "THE CITY-COVID-19 Outbreak," the Governor extended the
deadline to file and pay first quarter sales and use tax returns by 90 days for all but the very largest taxpayers,
and up to 361,000 California businesses with less than $5 million in taxable annual sales will be allowed to
defer up to $50,000 in sales tax and enter into 12-month payment plans at zero interest. These actions have
resulted in delays in the receipt by the City of its portion of such tax payments.
The top sales tax generators within the City in Fiscal Year 2021, listed in alphabetical order, are as
follows. These businesses collectively generated approximately 39.8% of the City's total sales tax revenues in
Fiscal Year 2021 :
City of Poway
Largest Sales Tax Generators
Source: City.
Business Name
Costco
Ferguson Enterprises
General Atomics Aeronautical
Home Depot
Perry Ford of Poway
Poway Chrysler Dodge Jeep Ram
Poway Honda
Scion of Poway Toyota of Poway
Target
Walmart Supercenter
Other Taxes and Fees
Type of Business
Discount Department Store
Plumbing/Electrical Supplies
Electrical Equipment
Building Materials
New Motor Vehicle Dealers
New Motor Vehicle Dealers
New Motor Vehicle Dealers
New Motor Vehicle Dealers
Discount Department Store
Discount Department Store
Fiscal Year 2021 revenues from property transfer taxes, franchise fees and business license fees
collectively totaled $2,225,927, based on unaudited actual results. Such amount collectively provided
approximately 4.41 % of total General Fund revenues during Fiscal Year 2021 , based on unaudited actual
results.
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November 16, 2021, Item #12
Fiscal Year 2021 revenues from transient occupancy taxes totaled $403,071 , based on unaudited
actual results. Transient occupancy taxes, which are levied on users of lodging establishments in the City and
remitted to the City quarterly, are currently imposed at the rate of I 0%.
Charges for Services
Fiscal Year 2021 revenues from charges for services totaled $3 ,862,657, based on unaudited actual
results. Such amount collectively provided approximately 7.65% of total General Fund revenues during Fiscal
Year 2021 , based on unaudited actual results. Charges for services include recreation fees, ambulance fees and
lease revenue, among others.
State of California Motor Vehicle In-Lieu Payments
The State imposes the VLF, which is the portion of the fees paid in lieu of personal property taxes on
a vehicle. The VLF is based on vehicle value and declines as the vehicle ages. Prior to the adoption of the
Fiscal Year 2005 State Budget, the VLF was 2% of the value ofa vehicle. Through legislation in prior Fiscal
Years, the State enacted VLF reductions under which the State was required to "backfill" local governments
for their revenue losses resulting from the lowered fee.
The Fiscal Year 2005 State Budget permanently reduced the VLF from 2% to 0.65% of the value of a
vehicle and deleted the requirement for backfill payments, providing instead that the amount of the backfill
requirement will be met by an increase in the property tax allocation to cities and counties. See the caption
"STATE OF CALIFORNIA BUDGET INFORMATION."
Revenues from the VLF and property taxes allocated to the City in lieu of the VLF for the last five
Fiscal Years, all of which were distributed from property tax receipts, are shown in the below table.
City of Poway
State of California Motor Vehicle In-Lieu and Property Tax In-Lieu Revenues
Source
VLF Revenues
Property Tax In-Lieu Revenues
Source: City.
Other Indebtedness
2017
$ 22,445
4,543,031
General Fund-Supported Obligations.
Fiscal Year Ended June 30,
2018 2019 2020 2021
$ 26,452 $ 24,100 $ 39,826 $ 36,186
4,717,509 4,949,640 5,133,910 5,369,650
2005 Certificates. In 2005, the City caused the execution and delivery of 2005 Refunding
Certificates of Participation (the "2005 Certificates") to refinance certain capital improvements of the City.
The 2005 Certificates mature on August I, 2026 and bear interest at rates varying from 3.0% to 4.5% per
annum. The 2005 Certificates are payable from rental payments payable by the City to its redevelopment
successor agency (the "Successor Agency") under an Amended and Restated Lease Agreement, dated as of
April I, 2005 (the "2005 Lease"), by and between the City and the Successor Agency. As of June 30, 2021 ,
the 2005 Certificates were outstanding in the aggregate principal amount of $1 ,415,000.
The City has covenanted in the 2005 Lease to budget and appropriate moneys annually for the lease
payments payable thereunder from legally available funds, including the General Fund, which is expected to be
the source of funds to repay the Bonds.
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2012 Certificates. In 2012, the City caused the execution and delivery of 2012 Refunding
Certificates of Participation (the "2012 Certificates") to refinance certain capital improvements of the City.
The 2012 Certificates mature on January I, 2033 and bear interest at rates varying from 2.0% to 3.25% per
annum. The 2012 Certificates are payable from rental payments payable by the City to the Poway Public
Financing Authority (the "Authority") under a 2012 amendment to a Lease Agreement, dated as of January I,
2003 (the "2012 Lease"), by and between the City and the Authority. As of June 30, 2021, the 2012
Certificates were outstanding in the aggregate principal amount of $9,175,000.
The City has covenanted in the 2012 Lease to budget and appropriate moneys annually for the lease
payments payable thereunder from legally available funds, including the General Fund, which is expected to be
the source of funds to repay the Bonds.
Although there are no current plans to do so, the City may issue additional obligations payable from
its general revenues at any time. See the caption "RISK FACTORS-City Obligations."
Other Long-Term Obligations. In November 2021 , the Authority issued Water Revenue Bonds,
Series 2021 A (the "2021A Bonds") to finance certain capital improvements of the City's municipal water
system. The 2021 A Bonds mature on June I, (2051] and bear interest at rates varying from [_]% to [_]%
per annum. The 2021 A Bonds are payable from installment payments payable by the City to the Authority
under an Installment Purchase Agreement, dated as ofNovember I, 2021 (the "2021A IPA"), by and between
the City and the Authority. The 2021 A Bonds are currently outstanding in the aggregate principal amount of
$[_]. The City's obligation to make payments under the 2021 A is payable solely from net revenues of the
City's municipal water system.
No Short-Term Debt. The City currently has no short-term debt outstanding.
See Note 6 to the City's audited financial statements set forth in Appendix A for further information
with respect to the City's liabilities.
City Investment Policy
The City invests its funds in accordance with the City's investment policy (the "Investment Policy"),
which was most recently reviewed and revised by the City Council on August 4, 2020. The Investment Policy:
(a) describes the policies and procedures to be utilized in the City's investment management system; (b)
establishes guidelines for the prudent investment of the City's funds, and (c) lists and describes suitable
investments. The goals of the City's investment policy and investment management function are compliance
with law, enhancement of the economic status of the City and protection of the City's funds by limiting credit
and market risks.
In accordance with Section 53600 et seq. of the California Government Code, idle cash management
and investment transactions are the responsibility of the Director of Finance, who serves as the City Treasurer.
Eligible investments are generally limited to the Local Agency Investment Fund which is operated by the
California State Treasurer, the County Investment Pool, the Investment Trust of California (also known as
CalTrust), mortgage-backed securities and asset-backed securities (each limited to 5-year maximum maturities
and 20% of the portfolio), local agency bonds (limited to 5-year maximum maturities and 30% of the
portfolio), money market mutual funds (limited to 20% of the portfolio), medium-term corporate notes (limited
to 5-year maximum maturities and 30% of the portfolio), United States Treasury bills, notes and bonds (limited
to 5-year maximum maturities), obligations issued by United States Government agencies (limited to 5-year
maximum maturities and 75% of the portfolio), FDIC-insured or negotiable certificates of deposit (limited to
5-year maximum maturities and 30% of the portfolio), banker's acceptances (limited to 180-day maximum
maturities and 40% of the portfolio) and commercial paper (limited to 270-day maximum maturities and 25%
of the portfolio). Funds are invested in the following order of priority:
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• Safety of Principal;
• Liquidity; and
• Return on Investment.
The Director of Finance is required to provide a quarterly report to the City Council showing the type
of investment, date of maturity, amount invested, current market value, rate of interest and other such
information as may be requested by the City Council.
Summary of Investments. A summary of the City's investments as of June 30, 2021 is set forth in
the below table. General Fund cash and investments (based on market values) were equal to approximately
$50,089,960 (38.49%) of the total cash and investment portfolio as of June 30, 2021.
City of Poway
Summary of Investments and Cash as of June 30, 2021 (I l
Investment Type
United States Treasury Notes
Federal Agency Securities
Certificates of Deposit
Medium-Term Notes
Held by Fiscal Agent
United States Treasury Bills
Federal Agency Securities
Subtotal
Local Agency Investment Fund
CalTRUST Investment Pools
San Diego County Investment Pool
Held by Fiscal Agent
Money Market Funds
Subtotal
Total Investment Portfolio
<1> Totals may not add due to rounding.
Source: City.
Fair Value
$ 11 ,712,717
35,038,689
0
21 ,515,934
0
0
$ 68,267,340
Not Subject to Fair
Value Hierarchy
$ 34,976,189
26,261 ,565
10,514
$ 606,671
$ 61 ,854.939
$ 130.122.279
See Note 2 in Appendix A for further information with respect to City investments.
No Other Post-Employment Benefits
The City does not currently provide post-retirement health benefits to any of its employees.
PARS Retirement Enhancement Plan
The City provides a supplemental retirement benefit plan that is administered by Public Agency
Retirement Services (the "PARS Plan") to employees who began working for the City prior to January I 0,
2012. The PARS Plan is an agent, single-employer supplemental defined benefit plan that provides a benefit
which is equal to the difference between the Public Agency Retirement Services 2.7% at age 55 plan benefit
and the CalPERS 2.0% at age 55 plan benefit, multiplied by each employee's final compensation for all years
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of covered service. Should an eligible employee die before receiving benefits, the PARS Plan benefits are
payable to surviving spouses as an annuity as if the employee had retired.
Employees are not required to contribute to the PARS Plan. For Fiscal Years 2020 and 2021 , the City
incurred pension expenses of $913,514 and $1 , I 04,660 (not including GASB 68 adjustments) for the PARS
Plan.
Current benefit provisions for under the PARS Plan are set forth below.
City of Poway
PARS Plan -Summary of Benefit Provisions
Benefit Formula
Benefit Vesting
Benefit Payments
Minimum Retirement Age
Monthly Benefits as % of
Eligible Compensation
Employee Normal Cost
Source: City.
Employees Hired Before January 10, 2012
2.7%@age 55 less CalPERS 2.0% at age 55
From date of hire
Life only Annuity
55
13.54%
None
A summary of principal assumptions and methods used to determine the total pension liability for
Fiscal Year 2021 is shown below.
Actuarial Cost Method
Asset Valuation Method
Actuarial Assumptions:
Discount Rate
Inflation
Salary Increases
Investment Rate of Return
Mortality Rate Tabie<'l
Source: City.
City of Poway
Actuarial Assumptions for PARS Plan
Entry Age Normal in accordance with the requirements of GASB 68
NIA
6.50%
2.50%
3.40% -9.10%
6.50%
Derived using CalPERS' Miscellaneous Non-Industrial Rates
Changes in the net pension liability for the City's pension plans in Fiscal Year 2021 were as follows:
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City of Poway
Changes in PARS Plan Net Pension Liability
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November 16, 2021, Item #12
Increase I (Decrease)
Total
Pension Liability
Plan Fiduciary
Net Position
Net Pension
Liability I (Asset)
Balance at June 30, 2019
Balance at June 30, 2020
Net Changes for period from July I, 2019
through June 30, 2020
Source: City.
$ 19,523 ,219
20,223,866
$ 700,647
$ 16,946,740
17,220,704
$ 273,964
$ 2,576,479
3,003,162
$ 426,683
The table below presents the net pension liability of the City's pension plans, calculated using the
discount rate applicable to Fiscal Year 2020 (6.50%), as well as what the net pension liability would be if it
were calculated using a discount rate that is I percentage point lower (5.50%) or I percentage point higher
(7.50%) than the Fiscal Year 2020 rate:
City of Poway
Sensitivity of PARS Plan Net Pension Liability to Changes in the Discount Rate
Discount Rate -1 %
Plan's Net Pension Liabilityl(Asset) (5.50%)
Miscellaneous Plan $4,934,041
Source: City.
Applicable Discount
Rate (6.50%)
$3 ,003,162
Discount Rate + 1 %
(7.50%)
$984,894
For additional information relating to the City's PARS Plan, see Note 9 to the City's audited financial
statements set forth in Appendix A.
City Financial Statements
A copy of the most recent audited financial statements of the City (the "Financial Statements") for
the Fiscal Year ended June 30, 2020, prepared by Davis Farr LLP, Irvine, California (the "Auditor"), are
included as Appendix A to this Official Statement. The Auditor's letter dated December 23, 2020 is set forth
therein. The Financial Statements are public documents and are included within this Official Statement
without the prior approval of the Auditor. Accordingly, the Auditor has not performed any post-audit analysis
of the financial condition of the City, nor has the Auditor reviewed or audited this Official Statement.
Certain financial information that is set forth in this Official Statement is derived from the Financial
Statements and the City's audited financial statements for prior years (excluding certain non-cash items and
after certain other adjustments) and is qualified in its entirety by reference to such statements, including the
notes thereto. The Auditor has not reviewed or audited such financial information or any other portion of this
Official Statement.
In the Financial Statements, data relating to governmental funds such as the General Fund focus on
current financial resources. Under the current financial resources measurement focus, only current assets and
current liabilities are generally included on the City's balance sheets. The Statement of Revenues,
Expenditures and Changes in Fund Balances (which is set forth under the caption "-Change in Fund Balance
of the City General Fund"), presents increases (revenues and other financing sources) and decreases
(expenditures and other financing uses) in net current assets. Under the modified accrual basis of accounting,
revenues are recognized in the accounting period in which they become both measurable and available to
finance expenditures of the current period. See the caption "-Accounting and Financial Reporting" for a
description of when revenues are considered to be available.
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ST ATE OF CALIFORNIA BUDGET INFORMATION
Although the State is not a significant source of City revenues, there can be no assurance that the
State's annual budget or other legislation will not materially adversely affect the financial condition of the
City, in particular given that the City receives certain revenues such as sales tax proceeds and VLF from the
State. The following information describes the State budget process and the current and upcoming State
budgets.
General
Information about the State budget is regularly available at various State-maintained websites. Text of
proposed and adopted budgets may be found at the website of the State Department of Finance (the "DOF"),
http://www.dof.ca.gov, under the heading "California Budget." An impartial analysis of the budget is posted
by the Legislative Analyst's Office (the "LAO") at http://www.lao.ca.gov. In addition, various State Official
Statements, many of which contain a summary of the current and past State budgets and the impact of those
budgets on cities in the State, may be found at the website of the State Treasurer, http://www.treasurer.ca.gov.
The information referred to is prepared by the respective State agency maintaining each website and not by the
City, and the City takes no responsibility for the continued accuracy of these Internet addresses or for the
accuracy, completeness or timeliness of information posted there, and such information is not incorporated
herein by these references.
Budget for State Fiscal Year 2021-22
On July I 6, 2021, the Governor signed a series of bills representing the State budget for State fiscal
year 2021-22 (the "2021-22 Budget"). The Governor's signing followed negotiations between the Governor
and the State Legislature regarding the final provisions of the 2021-22 Budget, including the expenditure of a
large projected State general fund surplus. The State Legislature passed temporary budgetary legislation in
June 2021 to meet the required State Constitutional budget deadline. The following is drawn from the DOF
summary of the 2021-22 Budget.
The 2021-22 Budget indicates that revenues are up significantly from the forecast included in the
Governor's proposed State budget for State fiscal year 2021-22, resulting in a large budgetary surplus. This is
a result of strong cash trends, two major federal relief bills since the beginning of 2021 (as discussed under the
caption "THE CITY-COVID-19 Outbreak"), continued stock market appreciation and a significantly
upgraded economic forecast from the prior State fiscal year. The 2021-22 Budget also reports that the State
has received approximately $285 billion in federal COVID-19 stimulus funding for State programs. Although
the 2021-22 Budget acknowledges that building reserves and paying down debts are critical, the 2021-22
Budget allocates approximately 85% of discretionary funds to one-time spending. The multi-year forecast
reflects a budget roughly in balance, although the 2021-22 Budget assumes that risks remain to the economic
forecast, including a stock market decline that could reduce State revenues.
For State fiscal year 2020-21 , the 2021-22 Budget projects total general fund revenues and transfers of
$188.8 billion and authorizes expenditures of $166.1 billion. The State is projected to end State fiscal year
2020-21 with total available reserves of $39.8 billion, including $25.1 billion in the traditional general fund
reserve, $12.3 billion in the State's basic reserve fund, known as the Budget Stabilization Account (the
"BSA"), $1.9 billion in the Public School System Stabilization Account and $450 million in the Safety Net
Reserve Fund. For State fiscal year 2021-22, the 2021-22 Budget projects total general fund revenues and
transfers of $175.3 billion and authorizes expenditures of $196.4 billion. The State is projected to end State
fiscal year 2021-22 with total available reserves of $25.2 billion, including $4 billion in the traditional general
fund reserve, $15.8 billion in the BSA, $4.5 billion in the Public School System Stabilization Account and
$900 million in the Safety Net Reserve Fund.
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The 2021-22 Budget sets the Proposition 98 minimum funding guarantee for State fiscal year 2021-22
at $93.7 billion. This results in per-pupil funding of$l3,976 from Proposition 98 funding, growing to $21 ,555
when accounting for all funding sources. The 2021-22 Budget also makes retroactive increases to the
minimum school funding guarantee in fiscal years 2019-20 and 2020-21, setting them at $79.3 billion and
$93.4 billion, respectively. Collectively, this represents a three-year increase in the minimum funding
guarantee of$47 billion from the level projected by the 2020-21 Budget.
Other significant features of the 2021-22 Budget include the following:
• General Apportionments -An increase of $395 million in ongoing Proposition 98 funding for
general apportionments, comprised of: (i) $371.2 million to fund a 5.07% cost of living adjustment; and (ii)
$23.8 million to fund 0.50% enrollment growth.
• Deferrals -$1.453 billion in Proposition 98 funding to repay apportionment deferrals, of
which $144.6 million is from State fiscal year 2019-20, $1 .1 billion is from State fiscal year 2020-21 and
$229.8 million is from State fiscal year 2021-22.
• Student Assistance -$250 million in one-time ARP Act funds to support emergency student
financial assistance grants. The 2021-22 Budget also provides $160 million in Proposition 98 funding for
student assistance, comprised of $100 million in one-time funding available over three years to address student
basic needs including food and housing insecurity, $30 million in ongoing funding to support student mental
health services and $30 million in ongoing funding for colleges to establish basic needs centers and hire basic
needs coordinators.
• Workforce Programs -$42.4 million in ongoing Proposition 98 funding to increase program
funding and enable community college districts to support work-based learning opportunities. The 2021-22
Budget also provides $20 million in one-time Proposition 98 funding to support community college
participation in High Road Training Partnerships and regional partnerships developed by the California
Workforce Development Board.
• Facilities -$581.4 million in State general obligation bond funding, including $8.2 million to
start nine new capital outlay projects and $573.2 million for the construction phase of 32 projects anticipated to
complete design by the spring 2022. In addition, the 2021-22 Budget provides $511 million in one-time
Proposition 98 funding to address deferred maintenance.
For additional information regarding the 2021-22 Budget, see the DOF and LAO websites. The
information presented on such websites is not incorporated herein by reference.
None of the websites or webpages that are referenced above is in any way incorporated into this
Official Statement. They are cited for informational purposes only. The City, the Authority and the
Underwriters make no representation whatsoever as to the accuracy or completeness of any of the information
on such websites.
There can be no assurance that additional legislation will not be enacted in the future to implement
provisions relating to the State budget, address the COVID-19 outbreak or otherwise that may affect the City
or its General Fund revenues.
Potential Impact of State Financial Condition on the City
The State has experienced significant financial stress in recent years, with budget shortfalls in the
several billions of dollars. The COVID-19 outbreak materially adversely impacted the financial condition of
the State and the waning of the infection crisis is expected to be followed by increases in unfunded liabilities of
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the two main retirement systems managed by State entities, CalPERS and CalSTRS. The State also has a
significant unfunded liability with respect to other post-employment benefits.
Current and future State budgets will be significantly affected by the COVID-19 outbreak and other
factors over which the City has no control. The City cannot determine what actions will be taken in the future
by the State Legislature and the Governor to deal with the COVID-19 outbreak, future recessions and resulting
changing State revenues and expenditures. There can be no assurance that, as a result of the COVID-19
outbreak or otherwise, the State will not significantly reduce revenues to local governments (including the
City) or shift financial responsibility for programs to local governments as part of its efforts to address State
financial conditions. Although the State is not a significant source of City revenues, there can be no assurance
that State actions to respond to the COVID-19 outbreak will not materially adversely affect the financial
condition of the City. The State's ability to undertake such revenue reductions or shifting has been limited by
provisions of the State Constitution. See the caption "CONSTITUTIONAL AND STATUTORY
LIMITATIONS ON TAXES AND APPROPRIATIONS-Proposition 22."
Redevelopment Dissolution
General. On December 29, 2011 , the State Supreme Court upheld Assembly Bill I x26 ("AB lx26"),
which dissolved redevelopment agencies in the State. The effect of AB I x26 upon the City is the termination
of the redevelopment functions of the Poway Redevelopment Agency (the "Former Agency") and the transfer
of such functions to a successor agency (the City, referred to in this context as the "Successor Agency"),
which was tasked with winding down the Former Agency's redevelopment activities. Under AB lx26, the
Successor Agency cannot enter into new redevelopment projects or obligations and its assets can be used only
to pay enforceable obligations, which enforceable obligations are generally limited to obligations in existence
in mid-2011, when AB lx26 was signed by the Governor. In addition, the Successor Agency will receive tax
increment revenues in amounts that are sufficient to pay I 00% (but no greater amount) of such enforceable
obligations until such obligations (including accrued interest, as applicable) are paid in full, at which time the
Successor Agency will be dissolved. Certain tax revenues formerly allocable to the Former Agency will
continue to be available to the Successor Agency to pay certain obligations, and a portion of such revenues
may be redirected to other taxing agencies, such as the County, the local school districts and the City. The
Successor Agency's activities are subject to review by an oversight board established under AB lx26. Under
AB lx26, liabilities of the Successor Agency are not liabilities of the City.
On June 27, 2012, the Governor signed Assembly Bill 1484 ("AB 1484"), which made certain
amendments to AB I x26. Under AB 1484, the County Auditor-Controller, the DOF and the State Controller
may require the return of funds that were improperly spent or transferred to a public entity in conflict with the
provisions of the Community Redevelopment Law, as amended by AB I x26 and AB 1484, and if such funds
are not returned within 60 days, they may be recovered through an offset of sales and use tax or property tax
allocations to the relevant local agency, which, in the case of the Successor Agency, is the City.
On September 22, 2015, the following amendments to AB I x26 and AB 1484 were enacted as Senate
Bill I 07 ("SB 107''): (I) redevelopment successor agencies that enter into a written agreement with the DOF to
remit unencumbered cash to the county auditor-controller will receive a finding of completion, which provides
successor agencies with additional fiscal tools and reduced State oversight; (2) successor agencies that that
have a "Last and Final" ROPS (as discussed below) may expend a portion of proceeds of bonds issued in 2011 ,
which proceeds are currently frozen; (3) pension or State Water Project override revenues that are not pledged
to or not needed for redevelopment bond debt service will be returned to the entity that levies the override; (4)
agreements relating to State highway improvements and money loaned to successor agencies to pay costs
associated with redevelopment dissolution litigation will be considered enforceable obligations; and (5)
reentered agreements entered into after the passage of AB 1484 are unenforceable unless entered into for the
purpose of providing administrative support.
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SB 107 also: (a) requires the preparation of a Recognized Obligation Payment Schedule with respect
to enforceable obligations (a "ROPS"), which are required to be submitted to the oversight board and the DOF
in accordance with AB 1 x26, once a year beginning with the ROPS period that commenced on July 1, 2016
(rather than twice a year under prior law); (b) establishes an optional "Last and Final" ROPS process beginning
in September 2015; under this process, a successor agency that elected to submit a "Last and Final ROPS
would no longer submit a periodic ROPS and the enforceable obligations set forth in the "Last and Final"
ROPS would be binding on all parties; and (c) clarifies that former tax increment caps and plan limits do not
apply for the purposes of paying approved enforceable obligations.
Impact on the City. Significant provisions of AB 1 x26, AB 1484, SB 107 and implementing actions
of affected parties, including the Successor Agency, the oversight board, the County and the DOF, may be
subject to legal challenge, statutory or administrative changes and other clarifications which could affect the
impact of the dissolution of redevelopment on the City and its General Fund. The DOF has periodically
proposed additional legislation which would modify statutes affecting redevelopment dissolution; it is not
known whether additional legislation will be enacted. The full extent of the impact of the implementation of
AB lx26, AB 1484 and SB 107 or potential future legislation on the City's General Fund is unknown at this
time. While certain administrative costs previously charged to the Former Agency by the General Fund will
no longer be supported by the Successor Agency, certain property tax revenues formerly allocated to the
Former Agency will now be received by the City's General Fund.
The City does not believe that it has received material amounts from the Fonner Agency or the
Successor Agency which may be asserted to be in violation of AB 1 x26 or AB 1484, and the City is not
currently engaged in any disputes with the DOF with respect to amounts received from the Former Agency.
Successor Agency Obligations to the General Fund. Although AB lx26 generally invalidates
agreements between host cities and their former redevelopment agencies, provision is made for the
enforcement of agreements entered into with respect to obligations which meet certain specified criteria. The
City did not loan or advance any funds to the Fonner Agency or the Successor Agency which are currently
unpaid and does not believe that the Successor Agency has any enforceable obligations that are payable to the
City.
To the extent that the Successor Agency's assets are liquidated for distribution of proceeds to the
affected taxing entities, the City currently expects that the City's General Fund will receive approximately
0.211 % of such assets.
Future State Budgets
No prediction can be made by the City as to whether the State will continue to encounter budgetary
problems in future years, and if it were to do so, it is not clear what measures would be taken by the State to
balance its budget, as required by law. In addition, the City cannot predict the final outcome of future State
budget negotiations, the impact that such budgets will have on City finances and operations or what actions
will be taken in the future by the State Legislature and the Governor to deal with changing State revenues and
expenditures. There can be no assurance that actions taken by the State to address its financial condition will
not materially adversely affect the financial condition of the City. Current and future State budgets will be
affected by national and State economic conditions and other factors, including the current economic
downturn, over which the City has no control.
RISK FACTORS
Prospective purchasers of the Bonds should carefully consider all possible factors that may affect the
ability of the City to pay principal of and interest on the Bonds. The Bonds may not be a suitable investment
for all prospective purchasers.
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The following factors, along with the other information in this Official Statement, should be
considered by potential investors in evaluating the purchase of the Bonds. However, the following does not
purport to be an exhaustive listing of risks and other considerations which may be relevant to an investment in
the Bonds and there can be no assurance that other risk factors will not become material in the future. In
addition, the order in which the following factors are presented is not intended to reflect the relative
importance of any such risks.
City Obligations
The City has other obligations payable from its General Fund and other lawfully available funds of the
City. See the caption "CITY FINANCIAL INFORMATION-Other Indebtedness" for a description of the
City's currently outstanding obligations. The Trust Agreement does not prohibit the County from incurring
debt or additional lease or other obligations payable from the City's General Fund and other lawfully available
funds in the future (including Additional Bonds to finance Pension Liability), which may reduce City moneys
available to pay the Bonds. In addition, although the Bonds are payable from all lawfully available funds of
the City, the City has no obligation to levy taxes in order to raise sufficient revenues to pay the Bonds.
To the extent that additional obligations are incurred by the City, the funds available to pay the Bonds
may be decreased. In the event that the City's revenue sources are less than its total obligations, the City could
choose to fund other activities before paying the Bonds. The same result could occur if, because of State
Constitutional limits on expenditures, the City is not permitted to appropriate and spend all of its available
revenues. However, to the best of the City's knowledge, the City's appropriations have never exceeded the
limitation on appropriations under Article XIIIB of the State Constitution. See the caption
"CONSTITUTIONAL AND STATUTORY LIMITATIONS ON TAXES AND APPROPRIATIONS-
Article XIIIB of the State Constitution."
Certain Risks Associated with Sales Tax and Other Local Tax Revenues
Sales tax revenues are among the largest sources of General Fund revenues of the City. Sales and use
tax revenues are based upon the gross receipts of retail sales of tangible goods and products by retailers with
taxable transactions in the City, which could be impacted by a variety of factors. For example, in times of
economic recession, the gross receipts of retailers often decline, and such a decline would cause the sales tax
revenues received by the City to decline. An economic recession would also be expected to affect hotel
occupancy within the City, and consequently, the City's receipt of transient occupancy taxes. See the caption
"THE CITY----COVID-19 Outbreak," "CITY FINANCIAL INFORMA Tl ON-Sales Taxes" and "CITY
FINANCIAL INFORMATION-Other Taxes and Fees."
In addition, changes or amendments in the laws applicable to the City's receipt of sales tax revenues
or other local taxes, whether implemented by State legislative action or voter initiative, including any initiative
by City voters under Article XIIIC of the California Constitution, could have an adverse effect on sales tax
revenues received by the City. See the caption "CONSTITUTIONAL AND STATUTORY LIMITATIONS
ON TAXES AND APPROPRJA TIONS."
Finally, many categories of transactions are exempt from the Statewide sales tax, and additional
categories could be added in the future. Currently, most sales of food products for human consumption are
exempt; this exemption, however, does not apply to liquor or to restaurant meals. The rate of sales tax levied
on taxable transactions in the City or the fee charged by the CDFTA for administering the City's sales tax
could also be changed.
As discussed under the caption "THE CITY----COVID-19 Outbreak," the Governor extended the
deadline to file and pay first quarter 2020 sales and use tax returns by 90 days for all but the very largest
taxpayers, and up to 361 ,000 California businesses with less than $5 million in taxable annual sales were
allowed to defer up to $50,000 in sales tax and enter into 12-month payment plans at zero interest. The
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extension resulted in a delay in the receipt by the City of its portion of sales tax payments for 2020. There can
be no assurance that additional extensions of payment deadlines will not be ordered should the COVID-19
outbreak continue or other economic recessions occur in the future.
Assessed Value of Taxable Property
Property taxes are among the largest sources of General Fund revenues of the City. See the caption
"CITY FINANCIAL INFORMA Tl ON-Property Taxes." Natural and economic forces can affect the
assessed value of taxable property within the City. The City is located in a seismically active region, and
damage from an earthquake in or near the area could cause extensive damage to taxable property. Other
natural or manmade disasters, such as flood , fire, wildfire, ongoing drought, toxic dumping, erosion, civil
unrest or acts of terrorism, could cause a reduction in the assessed value of taxable property within the City.
See the captions "-Natural Disasters" and "-Hazardous Substances."
In addition, economic and market forces, such as a downturn in the regional economy, could affect
assessed values, particularly as these forces might reverberate in the residential housing and commercial
property markets as has been experienced in the past. Total assessed value could also be reduced through the
reclassification of taxable property to a class that is exempt from taxation, whether by ownership or use (such
as exemptions for property owned by State and local agencies and property used for qualified educational,
hospital, charitable or religious purposes).
Reductions in the market values of taxable property may cause property owners to appeal assessed
values and may also be associated with an increase in delinquency rates for property taxes. Section 2(b) of
Article XIIIA of the State Constitution and Section 51 of the State Revenue and Taxation Code, which were
adopted pursuant to Proposition 8 in 1978, require the County assessor to annually enroll either a property's
adjusted base year value (the "Proposition 13 Value") or its current market value, whichever is less. When
the current market value replaces the higher Proposition 13 Value on the assessor's roll, such lower value is
referred to as the "Proposition 8 Value."
Although the annual increase for a Proposition 13 Value is limited to no more than 2%, the same
restriction does not apply to a Proposition 8 Value. The Proposition 8 Value of a property is reviewed
annually as of January I; the current market value must be enrolled as long as the Proposition 8 Value falls
below the Proposition 13 Value. Thus, any subsequent increase or decrease in market value is enrolled
regardless of any percentage increase or decrease. Only when a current Proposition 8 Value exceeds the
Proposition 13 Value attributable to a piece of property (adjusted for inflation) does a county assessor reinstate
the Proposition 13 Value.
Decreases in the assessed value of taxable property within the City resulting from a natural disaster or
other calamity, economic recession, reclassification by ownership or use or as a result of the implementation of
Proposition 8 all may have an adverse impact on property tax collections by the City, and consequently, the
General Fund revenues that are available to make debt service payments on the Bonds.
Increasing Retirement-Related Costs
The City is required to make contributions to CalPERS for City employees and retirees. Such
obligations are a significant financial obligation of the City and could increase in the future. Actual
contribution rates will depend on a variety of factors, including but not limited to actual investment returns and
future changes to benefits or actuarial assumptions. The City notes that pension contributions in future years
may increase as a result of losses in CalPERS' investment portfolio. There can be no assurances that actual
increases in required contributions will not be higher than the amounts which are currently projected by the
City. See the caption "CITY PENSION PLANS."
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Dependence on State for Certain Revenues
A number of the City's revenues are collected and dispersed by the State (such as sales taxes and the
VLF) or allocated in accordance with State law (most importantly, property taxes). Therefore, State budget
decisions can have an impact on City finances. In the event of a material economic downturn in the State,
including as a result of the COVID-19 outbreak that is discussed under the caption "THE CITY--COVID-19
Outbreak," there can be no assurance that any resulting revenue shortfalls to the State will not reduce revenues
to local governments (including the City) or shift financial responsibility for programs to local governments as
part of the State's efforts to address any such related State financial difficulties. See the caption "STATE OF
CALIFORNIA BUDGET INFORMATION." The State's ability to undertake such revenue reductions or
shifting has been limited by provisions of the State Constitution. See the caption "CONSTITUTIONAL AND
STATUTORY LIMITATIONS ON TAXES AND APPROPRIATIONS-Proposition 22."
Litigation
The City may be or become a party to litigation that has an impact on the General Fund. Although the
City maintains certain insurance policies that provide liability coverage under certain circumstances and with
respect to certain types of incidents (as discussed under the caption "THE CITY-Risk Management"), the
City cannot predict what types of liabilities may arise in the future. See the caption "LITIGATION."
Natural Disasters
The occurrence of any natural disaster in the City, including, without limitation, earthquake, wildfire,
drought, high winds, landslide or flood, which results in significant damage within the City or otherwise
significantly impacts the economy of the City could materially adversely affect the financial condition of the
City. See the caption "THE CITY-Risk Management." The City maintains a General Fund Reserve Policy
in an effort to ensure that it can continue to provide services in the event of a natural disaster. See the caption
"--CITY FINANCIAL INFORMATION-General Economic Condition and Outlook of the City-General
Fund Reserve Policy."
Earthquakes are considered a threat to the City due to the City's highly active seismic region and the
proximity of fault zones, including the Newport-Inglewood and Rose Canyon fault zones. These and other
fault zones could influence the entire coastal portion of the State. In addition, there are several local faults
located within the City that are considered potentially active and there are likely to be unmapped faults in or
near the City. The City does not currently maintain earthquake insurance for City facilities, and it is not
required to do so under the Trust Agreement.
An earthquake along one of the faults in the vicinity of the City, either known or unknown, could
cause a number of casualties and extensive property damage, particularly to residential buildings, older
wooden or unreinforced masonry buildings and mobile homes. The effects of such an earthquake could be
aggravated by aftershocks and secondary effects such as fires, landslides, dam failure, liquefaction, floods and
other threats to public health, safety and welfare. In particular, seismic activity could subject areas of the City
to widespread flooding in the event of a failure of Lake Poway Dam, which serves as a storage reservoir for the
City's water utility. The potential direct and indirect consequences of a major earthquake could easily exceed
the resources of the City and would require a high level of self-help, coordination and cooperation.
The State, including the City, is periodically subject to wildfires. When wildfires scorch land, they
destroy all vegetation on mountains and hillsides. As a result, when heavy rain falls in the winter, there is
nothing to stop the rain from penetrating directly into the soil. In addition, waxy compounds in plants and soil
that are released during fires create a natural barrier in the soil that prevents rain water from seeping deep into
the ground. The result is erosion, mudslides, and excess water running off the hillsides often causing flash
flooding.
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The occurrence of natural disasters in the City could result in substantial damage to the City which, in
turn, could substantially affect the City's economy and reduce General Fund revenues, which could impact the
City's ability to pay the principal of and interest on the Bonds. In particular, if a natural disaster were to result
in reduced assessed valuations of property within the City, the amount of property tax revenues could be
reduced. See the caption "CITY FINANCIAL INFORMATION-Property Taxes."
The City maintains liability insurance and property casualty insurance for City infrastructure, although
certain City assets such as underground pipelines are not insured. See the caption "THE CITY-Risk
Management." However, there can be no assurance that specific losses will be covered by insurance or, if
covered, that claims will be paid in full by the applicable insurers.
Climate Change
The State has historically been susceptible to wildfires and hydrologic variability. As greenhouse gas
emissions continue to accumulate in the atmosphere as a result of economic activity, climate change is
expected to intensify, increasing the frequency, severity and timing of extreme weather events such as coastal
storm surges, drought, wildfires, floods and heat waves, and raising sea levels. The future fiscal impact of
climate change on the City is difficult to predict, but it could be significant and it could have a material adverse
effect on the General Fund by requiring greater expenditures to counteract the effects of climate change or by
changing the operations and activities of City residents and business establishments.
Hazardous Substances
The discovery of any hazardous substance that would limit the beneficial use of a property within the
City could result in a reduction in the assessed value of affected parcels. In general, the owners and operators
of a property may be required by law to remedy conditions of the property relating to releases or threatened
releases of hazardous substances. The Federal Comprehensive Environmental Response, Compensation and
Liability Act of 1980, sometimes referred to as "CERCLA" or the "Superfund Act," is the most well-known
and widely applicable of these laws, but California laws with regard to hazardous substances are also stringent
and similar. Under many of these laws, the owner (or operator) is obligated to remedy a hazardous substance
condition of property whether or not the owner or operator had anything to do with creating or handling the
hazardous substance. The effect, therefore, should any substantial amount of property within the City be
affected by a hazardous substance, would be to reduce the marketability and value of the property by the costs
of, and any liability incurred by, remedying the condition, because a purchaser, upon becoming an owner, will
become obligated to remedy the condition just as is the seller. Such reduction could adversely impact the
property tax revenues received by the City, which could significantly and adversely affect the operations and
finances of the City and the City's ability to pay the Bonds. See the caption "-Assessed Valued of Taxable
Property."
The City has not independently verified, but is not aware of, the presence of any hazardous substances
in the City except in connection with everyday business activities such as gas stations and dry cleaning
establishments. Hazardous substance liabilities may arise in the future with respect to any of the property in
the City resulting from the existence, currently, of a substance presently classified as hazardous but which has
not been released or the release of which is not presently threatened, or may arise in the future resulting from
the existence, currently, on the parcel of a substance not presently classified as hazardous but which may in the
future be so classified. Additionally, such liabilities may arise from the method of handling such substance.
These possibilities could significantly affect the value of a parcel.
Cybersecurity
The City relies on computers and technology to conduct its operations. The City and its departments
face cyber threats from time to time including, but not limited to, hacking, viruses, malware and other forms of
technology attacks. Recently, there have been significant cyber security incidents affecting municipal
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agencies, including a freeze affecting computer systems of the City of Atlanta, an attack on the City of
Baltimore's 911 system, an attack on the Colorado Department of Transportation's computers, an attack that
resulted in the temporary closure of the Port of Los Angeles' largest terminal and an attack on a water
treatment facility in Oldsmar, Florida.
The City 's Information Technology Department employs a multi-level cyber protection scheme that
includes firewalls, anti-virus software, anti-spam/malware software, intrusion protection, intrusion detection,
log monitoring and other security measures. The City contracts with third party vendors to perform external
audits of its network and to perform similar internal audits. The City also contracts with third party vendors to
monitor and augment internal and external monitoring of the City's computer systems. The City's network
topology employs firewalls at the core of its network to inspect, categorize and accept or reject all traffic
between its internal and external virtual local area networks and networks. The City also contracts with a
third-party vendor for cybersecurity training for all staff as well as conducting regular simulated phishing
campaigns. In 2017, the City implemented redundant, machine learning, next generation firewalls that
perform deep packet inspection of Transport Layer Security/Secure Socket Layer encrypted traffic both
inbound and outbound. All traffic must also pass through devices managed by a third party security vendor to
further inspect all inbound and outbound traffic. Email is inspected inbound and outbound by a cloud email
filtering service, and there are measures in place to protect against spoofing internal addresses. These
measures prevent most malicious email traffic from ever traversing the City's Internet links. To further protect
against the specific threat of file/Server Message Blocking-based attacks such as crypto viruses, the City
employs numerous file screens and filtering on its servers and desktops to catch and prevent this class of attack
before it is able to cause damage. The City also practices the principle of least privilege across all of its
systems and maintains regular, redundant, on and offline backups to minimize damage and allow for quick
recovery in the event of an attack.
The City has not experienced a successful attack against its network and servers since the above
security measure have been put in place. Over six years ago, the City experienced a successful ransomware
attack that affected a small number of files. The City was able to immediately isolate the issue and recover.
However, there can be no assurance that a future attack or attempted attack would not result in disruption of
City operations. The City expects that any such disruptions would be temporary in nature due to its
backup/restore procedures and disaster recovery planning.
Limitation on Sources of Revenues
Although the Bonds are payable from all lawfully available funds of the City, the City has no
obligation to levy taxes, assessments, fees or charges in order to raise sufficient revenues to pay the Bonds. In
the event that the City were to choose to do so, the State Constitution contains significant limitations and
imposes significant procedural requirements which affect the City's ability to increase City revenues. See the
caption "CONSTITUTIONAL AND STATUTORY LIMITATIONS ON TAXES AND
APPROPRIATIONS."
In addition, under the State Constitution, voters of the State have the ability to initiate legislation and
require a public vote on legislation passed by the State Legislature through the powers of initiative and
referendum, respectively. The City is unable to predict whether any such initiatives or referenda might be
submitted to or approved by the voters, the nature of such initiatives or referenda or their potential impact on
the City and its operations.
Economy of City and State
A deterioration in the level of economic activity in the City, the County, the State or the United States,
including as a result of the COVID-19 outbreak that is discussed under the caption "THE CITY-COVID-19
Outbreak," could have a material adverse effect on the City's general revenues and on the ability of the City to
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pay principal of and interest on the Bonds. See the caption "STATE OF CALIFORNIA BUDGET
INFORMATION" for information about the State's economy and State budget.
In addition, City expenses could also rise as a result of unforeseen events, including but not limited to
a determination that the City is obligated to disgorge money or property that was previously received from the
City's redevelopment successor agency as part of the redevelopment dissolution process. See the caption
"STA TE OF CALIFORNIA BUDGET INFORMATION-Redevelopment Dissolution."
Limitation on Remedies; Bankruptcy
General. The enforcement of any remedies that are provided for in the Trust Agreement could prove
both expensive and time consuming. The rights and remedies that are provided in the Trust Agreement may be
limited by and are subject to: (i) the limitations on legal remedies against cities in the State, including State
Constitutional limits on expenditures and limitations on the enforcement of judgments against funds that are
needed to serve the public welfare and interest; (ii) federal bankruptcy laws, as now or later enacted, as
discussed in detail under the caption "-Bankruptcy" below; (iii) applicable bankruptcy, insolvency,
reorganization, moratorium, or similar laws relating to or affecting the enforcement of creditors' rights
generally, now or later in effect; (iv) equity principles which may limit the specific enforcement under State
law of certain remedies; (v) the exercise by the United States of America of the powers delegated to it by the
Constitution; and (vi) the reasonable and necessary exercise, in certain exceptional situations, of the police
powers that are inherent in the sovereignty of the State and its governmental bodies in the interest of serving a
significant and legitimate public purpose. Bankruptcy proceedings, or the exercise of powers by the federal or
State government, if initiated, could subject the Owners of the Bonds to judicial discretion and interpretation of
their rights in bankruptcy or otherwise, and consequently may entail risks of delay, limitation or modification
of their rights.
The legal opinions that will be delivered concurrently with the delivery of the Bonds will be qualified,
as to the enforceability of the Bonds, the Trust Agreement and other related documents, by bankruptcy,
insolvency, reorganization, moratorium, arrangement, fraudulent conveyance and other laws relating to or
affecting creditors' rights, to the application of equitable principles, to the exercise of judicial discretion in
appropriate cases, and to the limitations on legal remedies against cities in the State.
Failure by the City to pay principal of or interest on the Bonds or failure to observe and perform any
other terms, covenants or conditions of the Trust Agreement for a period of 60 days after written notice of such
failure and request that it be remedied has been given to the City by the Trustee constitute events of default
under the Trust Agreement and permit the Trustee to pursue the remedies that are described in the Trust
Agreement. In the event of a default, there is no right under any circumstances to accelerate payment of the
Bonds or otherwise declare any Bonds that are not then in default to be immediately due and payable.
Any suit for money damages against the City would be subject to limitations on legal remedies against
cities in the State, including a limitation on enforcement of judgments against funds needed to serve the public
welfare and interest.
Bankruptcy. Enforceability of the rights and remedies of the Owners of the Bonds, and the
obligations incurred by the City, may become subject to the provisions of Title 11 of the United States Code
(the "Bankruptcy Code") and applicable bankruptcy, insolvency, reorganization, moratorium or similar laws
relating to or affecting the enforcement of creditors' rights generally, now or later in effect, equity principles
which may limit the specific enforcement under State law of certain remedies, the exercise by the United
States of America of the powers delegated to it by the federal Constitution, the reasonable and necessary
exercise, in certain exceptional situations, of the police powers inherent in the sovereignty of the State and its
governmental bodies in the interest of serving a significant and legitimate public purpose and the limitations on
remedies against cities in the State. Bankruptcy proceedings, or the exercise of powers by the federal or State
government, if initiated, could subject the Owners of the Bonds to judicial discretion and interpretation of their
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rights in bankruptcy or otherwise, and consequently may entail risks of delay, limitation or modification of
their rights. Under Chapter 9 of the Bankruptcy Code, which governs the bankruptcy proceedings of public
agencies such as the City, involuntary petitions are not permitted. If the City were to file a petition under
Chapter 9 of the Bankruptcy Code, the Owners of the Bonds and the Trustee could be prohibited from taking
any steps to enforce their rights under the Trust Agreement or from taking any steps to collect amounts due
from the City on the Bonds.
In particular, if the City were to become a debtor under the Bankruptcy Code, the City would be
entitled to all of the protective provisions of the Bankruptcy Code as applicable in a Chapter 9 case. Among
the adverse effects of such a bankruptcy might be: (i) the application of the automatic stay provisions of the
Bankruptcy Code, which, until relief is granted, would prevent collection of payments from the City or the
commencement of any judicial or other action for the purpose of recovering or collecting a claim against the
City, and which could prevent the Trustee from making payments from funds in its possession; (ii) the
avoidance of preferential transfers occurring during the relevant period prior to the filing of a bankruptcy
petition; (iii) the existence of unsecured or secured debt which may have a priority of payment that is superior
to that of Owners of the Bonds; and (iv) the possibility of the adoption of a plan (an "Adjustment Plan") for
the adjustment of the City's various obligations over the objections of the Trustee or all of the Owners of the
Bonds and without their consent, which Adjustment Plan may restructure, delay, compromise or reduce the
amount of any claim of the Owners if the Bankruptcy Court finds that such Adjustment Plan is "fair and
equitable" and in the best interests of creditors.
The Bonds are not secured by any property other than the funds that the City has actually deposited
with the Trustee. If the City is in bankruptcy, it may not be obligated to make any further deposits with the
Trustee, it may not be obligated to make any further allocations to the Bonds and it may not be obligated to
turn over to the Trustee any moneys that have been allocated to the Bonds in the City treasury. As a result, the
Bonds would likely be treated as unsecured obligations of the City in the bankruptcy case. Under such
circumstances, the Owners of the Bonds could suffer substantial losses.
The Adjustment Plans approved by the bankruptcy courts in connection with the bankruptcies of the
cities of Stockton and San Bernardino, among others, resulted in significant reductions in the amounts payable
by such cities under pension obligation bonds that were substantially identical or similar to the Bonds.
Specifically, in the Stockton bankruptcy, the court held that CalPERS was an unsecured creditor of the city
with a claim on parity with those of other unsecured creditors. Additionally, in the San Bernardino
bankruptcy, the court held that in the event of a municipal bankruptcy, payments on pension obligation bonds,
such as the Bonds, were unsecured obligations and not entitled to the same priority of payments made to
CalPERS. The City can provide no assurances about the outcome of the bankruptcy cases of other
municipalities or the nature of any Adjustment Plan if it were to file for bankruptcy.
The City may be able, without the consent and over the objection of the Trustee or the Owners of the
Bonds, to alter the priority, interest rate, payment terms, maturity dates, payment sources, covenants and other
terms or provisions of the Trust Agreement and the Bonds, as long as the bankruptcy court determines that the
alterations are fair and equitable.
There may be delays in payments on the Bonds while the court considers any of these issues. There
may be other possible effects of a bankruptcy of the City that could result in delays or reductions in payments
on the Bonds, or result in losses to the Owners of the Bonds. Regardless of any specific adverse
determinations in a City bankruptcy proceeding, the fact that a City bankruptcy proceeding has occurred could
have an adverse effect on the liquidity and value of the Bonds.
Limitation on Trustee's Obligations
The Trustee has no obligation to advance its own funds to pursue any remedies. As a consequence,
the Trustee's willingness and ability to pursue any of the remedies provided in the Trust Agreement may be
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dependent upon the availability of funds from an interested party. There can be no assurance that the Trustee
will be willing and able to perform its duties under the Trust Agreement.
Limited Secondary Market
Investment in the Bonds poses certain economic risks which may not be appropriate for certain
investors, and only persons with substantial financial resources who understand the risks of investment in the
Bonds should consider such investment. There can be no guarantee that there will be a secondary market for
purchase or sale of the Bonds or, if a secondary market exists, that the Bonds can or could be sold for any
particular price.
Occasionally, because of general market conditions or because of adverse history or economic
prospects connected with a particular issue, secondary marketing in connection with a particular issue is
suspended or terminated. Additionally, prices of issues for which a market is being made will depend upon the
then prevailing circumstances. Such prices could be substantially different from the original purchase price.
In addition, the City will enter into a continuing disclosure undertaking pursuant to Rule I 5c2-I 2 in
connection with the issuance of the Bonds. Any material failure to comply with such undertaking and Rule
I 5c2-I 2 in the future may adversely affect the liquidity of the affected Bonds and their market price in the
secondary market. See the caption "CONTINUING DISCLOSURE."
Changes in Law
There can be no assurance that the electorate of the State will not adopt additional initiatives or that
the State Legislature will not enact legislation that will amend the laws or the Constitution of the State in a
manner that results in a reduction of General Fund revenues of the City and consequently, has an adverse effect
on the security for the Bonds. The City is unable to predict whether any such initiatives might be submitted to
or approved by the voters or any such legislation might be considered by the State Legislature, the nature of
such initiatives or legislation, or their potential impact on the City and its operations. See the caption
"CONSTITUTIONAL AND STATUTORY LIMITATIONS ON TAXES AND APPROPRIATIONS-Future
Initiatives."
Risks Associated with Bond Insurance
In the event that the City defaults in the payment of principal of or interest on the Insured Bonds when
due, the Owners of the Insured Bonds will have a claim under the Policy for such payments. See the caption
"BOND INSURANCE." In the event that the Insurer becomes obligated to make payments with respect to the
Insured Bonds, no assurance can be given that such event will not adversely affect the market for the Insured
Bonds. In the event that the Insurer is unable to make payments of principal or interest on the Insured Bonds
when due under the Policy, the Insured Bonds will be payable solely from available revenues of the City and
amounts held in certain funds and accounts established under the Trust Agreement, as described under the
caption "SECURITY AND SOURCE OF PAYMENT FOR THE BONDS."
The insured long-term rating on the Insured Bonds is dependent in part on the financial strength of the
Insurer and its claims-paying ability. The Insurer's financial strength and claims-paying ability are predicated
upon a number of factors which could change over time. If the long-term ratings of the Insurer are lowered,
such event could adversely affect the market for the Insured Bonds. See the caption "RA TINGS."
Neither the City nor the Underwriter has made an independent investigation of the ability of the
Insurer to pay claims, and no assurance or representation regarding the financial strength or projected financial
strength of the Insurer is being made by the City or the Underwriter in this Official Statement. Therefore,
when making an investment decision with respect to the Insured Bonds, potential investors should carefully
consider the ability of the City to pay principal of and interest on the Insured Bonds, assuming that the Policy
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is not available to pay principal of and interest on the Insured Bonds, and the claims-paying ability of the
Insurer through maturity of the Insured Bonds.
So long as the Policy remains in effect and the Insurer is not in default of its obligations thereunder,
the Insurer has certain notice, consent and other rights under the Trust Agreement and will have the right to
control all remedies in the event of a default under the Trust Agreement. The Insurer is not required to obtain
the consent of the Owners of the Bonds with respect to the exercise of remedies. See Appendix C.
CONSTITUTIONAL AND STATUTORY LIMIT A TIO NS ONT AXES AND APPROPRIATIONS
Article XIIIA of the State Constitution
On June 6, 1978, State voters approved an amendment (commonly known as both Proposition 13 and
the Jarvis-Gann Initiative) to the State Constitution. The amendment, which added Article XIIIA to the State
Constitution, among other things affects the valuation of real property for the purpose of taxation in that it
defines the full cash property value to mean "the county assessor's valuation of real property as shown on the
1975/76 tax bill under 'full cash value', or thereafter, the appraised value of real property newly constructed,
or when a change in ownership has occurred after the 1975 assessment." The full cash value may be adjusted
annually to reflect inflation at a rate not to exceed 2% per year, or a reduction in the consumer price index or
comparable local data at a rate not to exceed 2% per year, or reduced in the event of declining property value
caused by damage, destruction or other factors including a general economic downturn. The amendment
further limits the amount of any ad valorem tax on real property to I% of the full cash value, except that
additional taxes may be levied to pay debt service on indebtedness approved by the voters prior to December I,
1978 and bonded indebtedness for the acquisition or improvement of real property approved on or after
December I, 1978 by two-thirds of the votes cast by the voters voting on the proposition (55% in the case of
certain school facilities). Property taxes that are subject to Proposition 13 are a significant source of the City's
General Fund revenues. See the caption "CITY FINANCIAL INFORMATION-Property Taxes."
Legislation enacted by the State Legislature to implement Article XIIIA provides that all taxable
property is shown at full assessed value as described above. Tax rates for voter approved bonded indebtedness
are also applied to I 00% of assessed value.
Future assessed valuation growth allowed under Article XIIIA (for new construction, change of
ownership or 2% annual value growth) is allocated on the basis of "situs" among the jurisdictions that serve
the tax rate area within which the growth occurs. Local agencies and school districts share the growth of
"base" revenue from the tax rate area. Each year's growth allocation becomes part of each agency's allocation
the following year. Article XIIIA effectively prohibits the levying of any other ad valorem property tax above
the I% limit except for taxes to support indebtedness approved by the voters as described above.
Article XIIIA has subsequently been amended to permit reduction of the "full cash value" base in the
event of declining property values caused by damage, destruction or other factors, and to provide that there
would be no increase in the "full cash value" base in the event of reconstruction of property damaged or
destroyed in a disaster and in certain other limited circumstances.
Article XIIIB of the State Constitution
On November 6, 1979, State voters approved an initiative entitled "Limitation on Government
Appropriations," which added Article XIIIB to the State Constitution. Under Article XIIIB, State and local
government entities have an annual "appropriations limit" which limits the ability to spend certain moneys
which are called "appropriations subject to limitation" (consisting of tax revenues and investment proceeds
thereof, certain State subventions and regulatory license fees, user charges and user fees to the extent that the
proceeds thereof exceed the costs of providing such services, together called "proceeds of taxes," and certain
other funds) in an amount higher than the "appropriations limit." Article XIIIB does not affect the
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appropriation of moneys which are excluded from the definition of "appropriations limit," including debt
service on indebtedness existing or authorized as of October I, 1979 or bonded indebtedness subsequently
approved by the voters. In general terms, the "appropriations limit" is to be based on certain 1978-79
expenditures and is to be adjusted annually to reflect changes in the consumer price index, population and
services provided by these entities. Among other provisions of Article XII 18, if those entities' revenues in any
year exceed the amounts permitted to be spent, the excess would have to be returned by revising tax rates or
fee schedules over the subsequent two years. Increases in appropriations by a governmental entity are
permitted: (i) if financial responsibility for providing services is transferred to a governmental entity; or (ii) for
emergencies so long as the appropriations limits for the three years following the emergency are reduced
accordingly to prevent any aggregate increase above the Constitutional limit. Decreases are required where
responsibility for providing services is transferred from the government entity.
Article XIIIB permits any government entity to change the appropriations limit by vote of the
electorate in conformity with statutory and Constitutional voting requirements, but any such voter-approved
change can only be effective for a maximum of four years.
The City's appropriations have never exceeded the limitation on appropriations under Article XIIIB of
the State Constitution.
Proposition 62
On November 4, 1986, State voters approved an initiative ("Proposition 62") which: (a) requires that
any tax for general governmental purposes imposed by local governmental entities be approved by resolution
or ordinance adopted by two-thirds vote of the governmental agency's legislative body and by a majority of the
electorate of the governmental entity; (b) requires that any special tax (defined as taxes levied for other than
general governmental purposes) imposed by a local governmental entity be approved by a two-thirds vote of
the voters within the jurisdiction; ( c) restricts the use of revenues from a special tax to the purposes or for the
service for which the special tax is imposed; (d) prohibits the imposition of ad valorem taxes on real property
by local governmental entities except as permitted by Article XIIIA; (e) prohibits the imposition of transaction
taxes and sales taxes on the sale of real property by local governmental entities; and (t) requires that any tax
that is imposed by a local governmental entity on or after August I, 1985 be ratified by a majority vote of the
electorate within two years of the adoption of the initiative or be terminated by November 15, 1988. The
requirements imposed by Proposition 62 were upheld by the State Supreme Court in Santa Clara County Local
Transportation Authority v. Guardino, 11 Cal.4th 220 ( 1995).
Following the Guardino decision upholding Proposition 62, several actions were filed challenging
taxes imposed by public agencies since the adoption of Proposition 62. In 200 I, the State Supreme Court
released its decision in one of these cases, Howard Jarvis Taxpayers Association v. City of La Habra, et al., 25
Cal.4th 809 (200 I). In La Habra, the court held that a public agency's continued imposition and collection of
a tax is an ongoing violation upon which the statute of limitations period begins anew with each collection.
The court also held that, unless another statute or constitutional rule provided differently, the statute of
limitations for challenges to taxes subject to Proposition 62 is three years. Accordingly, a challenge to a tax
subject to Proposition 62 may only be made for those taxes received within three years of the date the action is
brought.
The City believes that all of the taxes that the City currently collects comply with the requirements of
Proposition 62. However, the requirements of Proposition 62 are largely subsumed by the requirements of
Proposition 218 for the imposition of any taxes or the effecting of any tax increases after November 5, 1996.
See the caption "-Proposition 218" below.
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Proposition 218
On November 5, 1996, State voters approved Proposition 218, an initiative measure entitled the
"Right to Vote on Taxes Act." Proposition 218 added Articles XIIIC and XIIID to the State Constitution,
imposing certain vote requirements and other limitations on the imposition of new or increased taxes,
assessments (meaning any levy or charge upon real property for a special benefit conferred upon the real
property) and property-related fees and charges. Proposition 218 states that all taxes which are imposed by
local governments are deemed to be either general taxes or special taxes. Special purpose districts, including
school districts, have no power to levy general taxes. No local government may impose, extend or increase
any general tax unless and until such tax is submitted to the electorate and approved by a majority vote. No
local government may impose, extend or increase any special tax unless and until such tax is submitted to the
electorate and approved by a two-thirds vote.
Proposition 218 also provides that no tax, assessment, fee or charge may be assessed by any agency
upon any parcel of property or upon any person as an incident of property ownership except: (a) the ad
valorem property tax imposed pursuant to Articles XIII and XIIIA of the State Constitution; (b) any special tax
receiving a two-thirds vote pursuant to the State Constitution; and (c) assessments, fees and charges for
property-related services as provided in Proposition 218. Proposition 218 then goes on to add voter
requirements for assessments and fees and charges imposed as an incident of property ownership, other than
fees and charges for sewer, water, and refuse collection services. In addition, all assessments and fees and
charges imposed as an incident of property ownership, including sewer, water and refuse collection services,
are subjected to various additional procedures, such as hearings and stricter and more individualized benefit
requirements and findings. The effect of such provisions is to increase the procedures that a local agency must
follow in order to impose, increase or extend such assessments, fees and charges.
In the case of assessments, fees and charges, in most instances, in the event that the City is unable to
collect revenues relating to specific programs as a consequence of Proposition 218, the City will curtail such
services rather than use amounts in the General Fund to finance such programs. However, no assurance can be
given that the City may or will be able to reduce or eliminate such services to avoid new costs for the General
Fund in the event that the assessments, fees or charges which presently finance them are reduced or repealed.
Proposition 218 also extends the initiative power to reducing or repealing any local taxes,
assessments, fees and charges. This extension of the initiative power is not limited to taxes imposed on or
after November 6, 1996, the effective date of Proposition 218, and is not limited to property-related taxes or
other charges, and could result in retroactive repeal or reduction in any existing taxes, assessments, fees and
charges, subject to overriding federal constitutional principles relating to the impairments of contracts.
Legislation implementing Proposition 218 provides that the initiative power provided for in Proposition 218
"shall not be construed to mean that any owner or beneficial owner of a municipal security, purchased before
or after (the effective date of Proposition 218) assumes the risk of, or in any way consents to, any action by
initiative measure that constitutes an impairment of contractual rights" protected by the United States
Constitution. However, no assurance can be given that the voters of the City will not, in the future, approve an
initiative which reduces or repeals local taxes, assessments, fees or charges that currently are deposited into the
City's General Fund.
Although a portion of the City's General Fund revenues are derived from general taxes purported to
be governed by Proposition 218, as discussed under the caption "CITY FINANCIAL INFORMATION," the
City believes that all of such taxes were imposed in accordance with the requirements of Proposition 218.
Unitary Property
Some amount of property tax revenue of the City is derived from utility property which is considered
part of a utility system with components located in many taxing jurisdictions ("unitary property"). Under the
State Constitution, such property is assessed by the CDTF A as part of a "going concern" rather than as
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individual pieces of real or personal property. State-assessed unitary and certain other property is allocated to
the counties by the CDTF A, taxed at special county-wide rates, and the tax revenues distributed to taxing
jurisdictions (including the City) according to a statutory formula that is generally based on the distribution of
taxes in the prior year. Changes in the allocation of unitary property taxes could result in lower revenues to the
City from this source.
Proposition 22
On November 2, 2010, State voters approved Proposition 22, which eliminates the State's ability to
borrow or shift local revenues and certain State revenues that fund transportation programs. It restricts the
State's authority over a broad range of tax revenues, including property taxes allocated to cities (including the
City), counties and special districts, the VLF, State excise taxes on gasoline and diesel fuel, the State sales tax
on diesel fuel and the former State sales tax on gasoline. It also makes a number of significant other changes,
including restricting the State's ability to use motor vehicle fuel tax revenues to pay debt service on voter-
approved transportation bonds. See the caption "CITY FINANCIAL INFORMATION-Property Taxes."
Proposition 26
On November 2, 20 I 0, State voters approved Proposition 26. Proposition 26 amended Article XIIIC
of the State Constitution to expand the definition of "tax" to include "any levy, charge, or exaction of any kind
imposed by a local government" except the following: (a) a charge imposed for a specific benefit conferred or
privilege granted directly to the payor that is not provided to those not charged, and which does not exceed the
reasonable costs to the local government of conferring the benefit or granting the privilege; (b) a charge
imposed for a specific government service or product provided directly to the payor that is not provided to
those not charged, and which does not exceed the reasonable costs to the local government of providing the
service or product; (c) a charge imposed for the reasonable regulatory costs of a local government for issuing
licenses and permits, performing investigations, inspections and audits, enforcing agricultural marketing orders
and the administrative enforcement and adjudication thereof; (d) a charge imposed for entrance to or use of
local government property, or the purchase, rental or lease of local government property; (e) a fine, penalty or
other monetary charge imposed by the judicial branch of government or a local government as a result of a
violation of law; (t) a charge imposed as a condition of property development; and (g) assessments and
property-related fees imposed in accordance with the provisions of Article XIIID. Proposition 26 provides that
the local government bears the burden of proving by a preponderance of the evidence that a levy, charge, or
other exaction is not a tax, that the amount is no more than necessary to cover the reasonable costs of the
governmental activity, and that the manner in which those costs are allocated to a payor bear a fair or
reasonable relationship to the payor's burdens on, or benefits received from, the governmental activity. The
City does not believe that Proposition 26 will adversely affect its General Fund revenues.
Future Initiatives
Articles XIIIA and XIIIB and Propositions 62, 218, 22 and 26 were each adopted as measures that
qualified for the ballot pursuant to the State's initiative process. The limitations imposed upon the City by
these provisions hinder the City's ability to raise revenues through taxes or otherwise and may therefore
prevent the City from meeting increased expenditure requirements. From time to time other initiative
measures could be adopted, further affecting the City's current revenues or its ability to raise and expend
revenues. Any such future initiatives could have a material adverse effect on the City's financial condition.
TAX MATTERS
In the opinion of Stradling Yocca Carlson & Rauth, a Professional Corporation, Newport Beach,
California ("Bond Counsel"), under existing statutes, regulations, rulings and judicial decisions, and assuming
the accuracy of certain representations and compliance with certain covenants and requirements described
herein, interest on the Bonds is not excluded from gross income for federal income tax purposes under Section
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I 03 of the Internal Revenue Code of 1986, as amended (the "Code"), but is exempt from State of California
personal income tax.
With certain exceptions, the difference between the issue price of a Bond (the first price at which a
substantial amount of the Bonds of the same maturity is to be sold to the public) and the stated redemption
price at maturity with respect to such Bond (to the extent the redemption price at maturity is greater than the
issue price) constitutes original issue discount. Original issue discount accrues under a constant yield method.
The amount of original issue discount deemed received by the Beneficial Owner of a Bond will increase the
Beneficial Owner's basis in the Bond. Beneficial Owners of the Bonds should consult their own tax advisors
with respect to taking into account any original issue discount on the Bonds.
The amount by which a Beneficial Owner's original basis for determining loss on sale or exchange in
the applicable Bond (generally, the purchase price) exceeds the amount payable on maturity (or on an earlier
call date) constitutes amortizable bond premium, which the Beneficial Owner of a Bond may elect to amortize
under Section 171 ofthe Code; such amortizable bond premium reduces the Bond Beneficial Owner's basis in
the applicable Bond (and the amount of taxable interest received with respect to the Bonds), and is deductible
for federal income tax purposes. The basis reduction as a result of the amortization of bond premium may
result in a Bond Beneficial Owner realizing a taxable gain when a Bond is sold by the Beneficial Owner for an
amount equal to or less (under certain circumstances) than the original cost of the Bond to the Beneficial
Owner. The Beneficial Owners of the Bonds that have a basis in the Bonds that is greater than the principal
amount of the Bonds should consult their own tax advisors with respect to whether or not they should elect
such premium under Section 171 of the Code.
In the event of a legal defeasance of the Bonds, such Bonds might be treated as retired and "reissued"
for federal tax purposes as of the date of the defeasance, potentially resulting in recognition of taxable gain or
loss to the applicable Beneficial Owner generally equal to the difference between the amount deemed realized
from the deemed prepayment and reissuance and the Beneficial Owner's adjusted tax basis in such Bond.
The tax discussion set forth above is included for general information only and may not be applicable
depending upon a Bond Owner's particular situation. The ownership and disposal of the Bonds and the
accrual or receipt of interest on the Bonds may otherwise affect the tax liability of certain persons. Bond
Counsel expresses no opinion regarding any such tax consequences. BEFORE PURCHASING ANY OF THE
BONDS, ALL POTENTIAL PURCHASERS SHOULD CONSULT THEIR INDEPENDENT TAX
ADVISORS WITH RESPECT TO THE TAX CONSEQUENCES RELATING TO THE BONDS AND THE
TAXPAYER'S PARTICULAR CIRCUMSTANCES.
A copy of the proposed form of opinion of Bond Counsel with respect to the Bonds is set forth in
Appendix D.
VALIDATION
On August 12, 2021 , the City, acting pursuant to the provisions of Section 860 et seq. of the California
Code of Civil Procedure, filed the Validation Petition in the Court seeking judicial validation of the
transactions relating to the CalPERS Contract and the Bonds and certain other matters. On November _,
2021, the court entered the Validation Judgment to the effect, among other things that: (i) the Trust Agreement
will be a valid, legal and binding obligation of the City and the approval thereof was in conformity with
applicable provisions of law; and (ii) the City has the authority under State law to provide for the refunding of
its Pension Liability by issuing the Bonds and applying the proceeds of the Bonds to the retirement of its
Pension Liability. Pursuant to Section 870 of the California Code of Civil Procedure, the last day to timely file
a notice of appeal to the Validation Judgment was November _, 2021. No such notice was filed and the
judgment became binding and conclusive in accordance with State law on November_, 2021. The City is
unaware of any threatened challenge to the Validation Judgment. In issuing its approving opinion, Bond
Counsel will rely, among other things, upon the Validation Judgment.
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CERTAIN LEGAL MATTERS
The validity of the Bonds and certain other legal matters are subject to the approving opinion of Bond
Counsel. A complete copy of the proposed form of Bond Counsel opinion is set forth in Appendix D. Certain
additional matters will be passed upon by Stradling Yocca Carlson & Rauth, a Professional Corporation, as
Disclosure Counsel to the City. Certain legal matters will be passed upon for the City by the City Attorney, for
the Underwriter by its counsel, Jones Hall, A Professional Law Corporation, for the Insurer by its counsel and
for the Trustee by its counsel. Bond Counsel has not undertaken any responsibility to the owners of the Bonds
for the accuracy, completeness or fairness of this Official Statement or other offering materials relating to the
Bonds, and expresses no opinion relating thereto.
LITIGATION
To the best knowledge of the City there is no action, suit or proceeding known to be pending or
threatened, restraining or enjoining the execution and delivery or the issuance of the Bonds or the execution
and delivery of the Trust Agreement, or in any way contesting or affecting the validity of any of the foregoing
or any proceedings of the City taken with respect to any of the foregoing.
There are a number of lawsuits and claims pending against the City. In the opinion of the City
Attorney, such lawsuits and claims which are presently pending will not have a material adverse effect on the
ability of the City to pay the principal of and interest on the Bonds. A brief recitation of certain notable
lawsuits is set forth below.
The City has been served with a complaint by a contractor in the matter of Blue Pacific Engineering v.
City of Poway, San Diego Superior Court, Case No. 37-2021-0003376 I. The complaint alleges that the City
caused the contractor to undertake approximately $81 ,000 in work that the plaintiff asserts was not disclosed in
the bid documents, and the contractor is seeking to be reimbursed for such work as well as contractual delay
damages. The City believes that it has meritorious legal arguments against the plaintiffs claims, but liability
and attorneys' fees in the event that the plaintiff prevails could total several hundred thousand dollars. There is
no insurance coverage for this case, which is in the initial stages.
In 2019, at the State's direction, the City issued a precautionary "boil water" advisory for seven days
following a heavy rain event that caused stormwater overflow into the City's water system, which resulted in
discoloration of the water and complaints from customers. The advisory was purely precautionary, as
contamination was at no time ever detected in the water system despite the stormwater overflow.
Two lawsuits were filed in connection with the advisory, one a class action seeking damages for lost
profits on behalf of local restaurants that closed during the period that the advisory was in effect (Pina
Smoothies, LLC, et al. v. City of Poway, Superior Court of San Diego, Case No. 37-2020-00018626) and one
asserting that contaminants in the City's water caused personal injury to an individual and damages to
approximately 20 local restaurants (DCVE CORP., et. al. v. City of Poway, Superior Court of San Diego, Case
No. 37-2020-00042487). These cases have been consolidated for the purposes of setting a trial date, with the
DVCE CORP. case as the lead case The City believes that it has meritorious legal arguments against the
plaintiffs' claims, but can provide no assurance as to as to how the court will ultimately rule on the claims or as
to the timing thereof. The City estimates that the potential liability could be up to several million dollars, plus
attorneys' fees. Both cases are currently in discovery, with no trial date set, nor dispositive motion yet filed.
The City's prior pollution insurance carrier, Tokio Marine Specialty Insurance Company, is defending the City
in these matters, with a full reservation of rights. The City expects that any damages that are required to be
paid as a result of adverse rulings on these matters would be an obligation of the City's water system rather
than the General Fund.
In addition, three complaints have been filed in federal court against the City in the matter of Kelly v.
City of Poway, District Court for the Southern District of California, Case Nos. 3: I 8-cv-02615, 3: 19-cv-1803
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& 3 :2 l-cv-00611. Two of the complaints have been consolidated, with the third currently subject to a pending
motion to stay. The plaintiff, an individual property owner in the City, has alleged violations of the Clean
Water Act and Endangered Species Act, as well as a supplemental state trespass claim, relating to damage to
the plaintiffs property and alleged discharges into Lake Poway. The plaintiff seeks an order compelling the
City to buy his property for $2,850,000 and undertake a wetlands improvement project, as well as civil
penalties and attorneys' fees. Although the litigation could become costly and discovery-intensive if not
disposed of during the initial pleading stage, the City believes that the plaintiffs claims are without merit and
has filed a motion to dismiss the actions. The motion has been fully briefed and pending for well over a year
and the City is unable to estimate when the court will issue a ruling thereon. In the event that the City does not
prevail, the plaintiff could be entitled to a large attorneys' fees award. The City's former pollution insurance
carrier, Tokio Marine Specialty Insurance Company, is defending the City in these matters, with a full
reservation of rights, and therefore the City is currently incurring very limited costs with respect thereto. The
City expects that any damages that are required to be paid as a result of adverse rulings on these matters would
be an obligation of the City's water system rather than the General Fund.
RATINGS
S&P has assigned the Bonds, including the Insured Bonds, the underlying rating of "[_]"
notwithstanding the delivery of the Policy. S&P has also assigned the Insured Bonds the rating of "[_]"
based upon the delivery of the Pol icy by the Insurer at the time of issuance of the Insured Bonds.
A rating is not a recommendation to buy, sell or hold securities. Future events, including the impacts
of the COVID-19 pandemic that is described under the caption "THE CITY-COVID-19 Outbreak," could
have an adverse impact on the ratings of the Bonds. There is no assurance that any credit rating that is given to
the Bonds will be maintained for any period of time or that a rating may not be qualified, downgraded, lowered
or withdrawn entirely by S&P if, in the judgment of S&P, circumstances so warrant, nor can there be any
assurance that the criteria required to achieve a rating on the Bonds will not change during the period that the
Bonds remain outstanding.
Any qualification, downward revision, lowering or withdrawal of a rating on the Bonds may have an
adverse effect on the market price of the Bonds. The ratings reflect only the current views of S&P (which
could change at any time), and an explanation of the significance of such ratings may be obtained from S&P.
Generally, rating agencies base their ratings on information and materials furni shed to them (which may
include information and material from the City that is not included in this Official Statement) and on
investigations, studies and assumptions by the rating agencies.
The City has covenanted in the Continuing Disclosure Agreement to file notices of any rating changes
on the Bonds with the Municipal Securities Rulemaking Board's Electronic Municipal Market Access System.
See the caption "CONTINUING DISCLOSURE" and Appendix E. Notwithstanding such covenant,
information relating to rating changes on the Bonds may be publicly available from S&P prior to such
information being provided to the City and prior to the date by which the City is obligated to file a notice of
rating change. Purchasers of the Bonds are directed to S&P and its website and official media outlets for the
most current rating with respect to the Bonds after the initial issuance of the Bonds.
Neither the City nor the Underwriter makes any representation as to the Insurer's creditworthiness or
any representation that the Insurer's credit rating will be maintained in the future. The rating agencies have
published various releases outlining the processes that they intend to follow in evaluating the ratings of
financial guarantors. For some financial guarantors, the result of such evaluations could be a rating
affirmation, a change in rating outlook, a review for downgrade or a downgrade. Potential investors are
directed to the rating agencies for additional information on the applicable rating agencies' evaluations of the
financial guaranty industry and individual financial guarantors, including the Insurer. See the caption "BOND
INSURANCE" for further information relating to the Insurer.
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CONTINUING DISCLOSURE
The City has covenanted in a Continuing Disclosure Agreement, dated the date of issuance of the
Bonds (the "Continuing Disclosure Agreement"), by and between the City and U.S. Bank National
Association, as dissemination agent, for the benefit of the Owners and Beneficial Owners of the Bonds to
provide certain financial information and operating data relating to the City by not later than each April I
following the end of the City's Fiscal Year (currently its Fiscal Year ends on June 30) (the "Annual Report"),
and to provide notices of the occurrence of certain enumerated events. The Annual Report and the notices of
enumerated events will be filed by the City with the Municipal Securities Rulemaking Board's Electronic
Municipal Market Access System. The specific nature of the information to be contained in the Annual Report
and the notice of enumerated events is set forth in Appendix E. These covenants have been made in order to
assist the Underwriter in complying with Section (b )(5) of Rule I 5c2-I 2.
The City and the Successor Agency have not failed to comply in all material respects with their
respective continuing disclosure undertakings in the past five years. In order to assure compliance with its
continuing disclosure obligations going forward, the City has appointed U.S. Bank National Association as its
dissemination agent to assist it with the submission of continuing disclosure filings under the Continuing
Disclosure Agreement. In addition, the City's debt management policy includes continuing disclosure
compliance policies and procedures. See the caption "CITY FINANCIAL INFORMATION-General
Economic Condition and Outlook of the City-Debt Management Policy."
UNDERWRITING
The Bonds are being purchased by Stifel, Nicolaus & Company, Incorporated (the "Underwriter"),
pursuant to a purchase agreement, dated the date hereof, by and between the City and the Underwriter. The
Underwriter will purchase all (but not less than all) of the Bonds from the City at an aggregate purchase price
of$ __ , representing the principal amount of the Bonds, less $ __ of Underwriter's discount.
The Underwriter has entered into an agreement with its affiliate Vining-Sparks IBG, LLC ("V-S"), for
the distribution of certain municipal securities offerings at the original issue price. Pursuant to that distribution
agreement, V-S may purchase Bonds from the Underwriter at the original issue price less a negotiated portion
of the selling concession applicable to any Bonds that V-S sells.
The initial public offering prices stated on the inside front cover of this Official Statement may be
changed from time to time by the Underwriter. The Underwriter may offer and sell the Bonds to certain
dealers (including dealers depositing Bonds into investment trusts), dealer banks, banks acting as agents and
others at prices lower than said public offering prices.
MUNICIPAL ADVISOR
The City has retained Fieldman, Rolapp & Associates, Inc., Irvine, California (the "Municipal
Advisor") as its municipal advisor in connection with the sale of the Bonds. The Municipal Advisor is not
obligated to undertake, and has not undertaken to make, an independent verification or to assume any
responsibility for the accuracy, completeness or fairness of the information contained herein.
The Municipal Advisor is an independent advisory firm and is not engaged in the business of
underwriting, trading or distributing municipal or other public securities.
MISCELLANEOUS
The foregoing and subsequent summaries or descriptions of provisions of the Bonds and the Trust
Agreement and all references to other materials not purporting to be quoted in full are only brief outlines of
some of the provisions thereof. Reference is made to said documents for full and complete statements of the
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provisions of such documents. The appendices attached hereto are a part of this Official Statement. Copies of
the Trust Agreement, in reasonable quantities, may be obtained during the offering period from the
Underwriter and thereafter upon request to the principal corporate trust office of the Trustee. Any statements
made in this Official Statement involving matters of opinion or estimates, whether or not so expressly stated,
are set forth as such and not as representations of fact, and no representation is made that any of the estimates
will be realized.
The execution and delivery of this Official Statement has been duly authorized by the City. This
Official Statement is not to be construed as a contract or an agreement between the City and the purchasers or
owners of any of the Bonds.
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CITY OF POWAY
By: _______________ _
City Manager
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APPENDIX A
AUDITED FINANCIAL STATEMENTS
A-I
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APPENDIX B
ECONOMIC AND DEMOGRAPHIC INFORMATION REGARDING THE CITY OF POWAY
The information in this section of the Official Statement is presented as general background data. The
Bonds are payable solely from general revenues of the City of Poway (the "City") and other sources as
described in the Official Statement. The taxing power of the City, the County of San Diego (the "County''),
the State of California, or any political subdivision thereof is not pledged to the payment of the Bonds.
Although reasonable efforts have been made to include up-to-date information in this Appendix, some
of the information is not current due to delays in reporting of information by various sources. It should not be
assumed that the trends indicated by the following data would continue beyond the specific periods reflected
herein. In particular, certain of the tables in this Appendix include data for periods prior to the outbreak of
COVID-19 and may not reflect current information.
Introduction
City of Poway. The City is located in central San Diego County (the "County"), approximately 23
miles northeast of downtown San Diego. The City had a population of approximately 48,936 as of January I,
2021 and covers approximately 39 square miles. The City was incorporated in 1980 and is a general law city
operating under a council/manager form of government. Land use in the City is primarily residential, with
areas of commercial and industrial development.
The City provides fire protection, street construction and maintenance and planning and building
services, as well as parks and recreational programs and water service. The City also provides arts, cultural
and social programs, including at the City-owned Poway Center for the Performing Arts, an 809-seat theater
and events center, and the Mickey Cafagna Community Center, which opened in spring 2021 and includes a
community swimming pool, skate park, picnic areas, athletic fields, playgrounds and a dog park. The City
contracts with the San Diego County Sheriffs Department for police services and with the City of San Diego
for wastewater services.
The City is known as "the city in the country" and maintains a semi-rural, predominantly residential
character, with many large residential parcels and neighborhoods of relatively low density. The City
topography varies in elevation from 420 feet to 1,420 feet above sea level. Over 30% of the City's territory
(approximately 7,000 acres) has been dedicated as preserved natural open space. The City has over 232 acres
of parkland and 78 miles of hiking, biking and horseback riding trails. The City has the lowest crime rate of
any incorporated city in the County.
Commercial and light industrial development has increased significantly in the City since the
mid-I 990s, primarily due to development of the South Poway Business Park (the "Business Park"), a 900 acre
complex that offers tenants high-quality infrastructure, numerous amenities and open space in keeping with the
City's rural surroundings. The Business Park has over 9 million square feet of available leasing space and
currently houses nearly 500 businesses that collectively employ over 18,000 people. Major tenants include
General Atomics Aeronautical Systems (a defense contractor), Delkin Devices (a manufacturer of flash storage
solutions for industrial applications) and Geico (an insurance provider). Recent development at the Business
Park includes two industrial buildings with a total footprint of 535,000 square feet which were leased to a
major tenant, Amazon.com, for a logistics and distribution center upon their completion in 2020. A small
number of parcels remain available for development within the Business Park, but significant additional
development is not expected in the future.
San Diego County. The County was established by an act of the State Legislature on February 18,
1850 as one of California's original 27 counties. Located in the southwestern portion of the State, the County
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covers 4,526 square miles and is the most southwesterly county in the continental United States. With a
population of over 3 million, the County is the second most populous county in California and the fifth most
populous county in the United States. The County includes several United States military bases and is a
principal location for west coast and Pacific Ocean operations of the United States Navy.
Governance and Management
The City operates under a council-manager form of government. Councilmembers are elected by
district and the Mayor is elected at large for four-year alternating terms. The City Manager, appointed by the
City Council, serves as the City's chief administrative officer and is responsible for overseeing the daily
operations of City departments and efficient management of all City business. Functions of the City
Manager's Office include coordination of the implementation of City Council policies and programs;
providing overall direction to the departments that administer City programs and services; coordinating
intergovernmental relations and legislative advocacy; and administration of the City's communications, media
relations and public information programs.
The current mayor and city council members are set forth below:
Name
Steve Vaus
Barry Leonard
Dave Grosch
John Mullin
Caylin Frank
Population
CITY COUNCIL OF THE CITY OF POWAY
Position
Mayor
Deputy Mayor,
Councilmember District 2
Councilmember, District I
Councilmember, District 3
Councilmember, District 4
Term Expires
November 2022
November 2024
November 2022
November 2022
November 2024
The table below summarizes population of the City, the County, and the State of California for the last
five years.
CITY OF POWAY, SAN DIEGO COUNTY AND CALIFORNIA
Population
Year City of Poway San Diego County State of California
2017 49,539 3,303,366 39,352,398
2018 49,518 3,321 ,118 39,519,535
2019 49,343 3,333,319 39,605,361
2020 49,096 3,331 ,279 39,648,938
2021 48,936 3,315,404 39,466,855
Source: California Department of Finance, E-4 Population Estimate for Cities, Counties, and the State, 2011-2021, with 20 I 0
Census Benchmark.
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Employment
The following table summarizes historical employment and unemployment for the County, the State
of California and the United States:
Year
2016
2017
2018
2019
2020<2)
SAN DIEGO COUNTY, CALIFORNIA AND UNITED ST ATES
Civilian Labor Force, Employment, and Unemployment
(Annual Averages)
Area Labor Force Employment Unemployment
San Diego County 1,563,200 1,489,100 74,100
California 19,012,000 17,965,400 1,046,600
United States 159,187,000 I 51 ,436,000 7,751 ,000
San Diego County 1,571 ,900 1,508,200 63,600
California 19,173,800 18,246,800 927,000
United States 160,320,000 I 53,337,000 6,982,000
San Diego County I ,579,700 1,526,300 53 ,400
California 19,263,900 18,442,400 821 ,500
United States 162,075,000 I 55,761 ,000 6,314,000
San Diego County 1,580,100 1,528,300 51 ,800
California 19,353,700 18,550,500 803,200
United States I 63 ,539,000 I 57,538,000 6,001 ,000
San Diego County 1,538,400 1,396,500 141 ,800
California 18,821 ,200 16,913,100 1,908,100
United States 160,742,000 147,795,000 12,947,000
Unemployment
Rate<'l
4.7%
5.5
4.9
4.0%
4.8
4.4
3.4%
4.3
3.9
3.3%
4.2
3.7
9.2%
IO.I
8.1
<1> The unemployment rate is computed from unrounded data; therefore, it may differ from rates computed from rounded
figures available in this table.
<2> Latest available full-year data.
Source: U.S. Department of Labor -Bureau of Labor Statistics, Cali fornia Employment Development Department. 2020
Benchmark.
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Largest Employers in the County
The table below sets forth the ten largest employers in San Diego County in 2020.
SAN DIEGO COUNTY
Largest Employers
Rank Employer
I. Federal Government
2. State of California
3. University of California, San Diego
4. Sharp HealthCare
5. County of San Diego
6. Scripps Health
7. San Diego Unified School District
8. Qualcomm Inc.
9. City of San Diego
I O. Kaiser Permanente
Employees
48,500
45,200
35,802
18,770
18,025
15,334
13,559
13,000
11 ,820
9,630
Source: County of San Diego Comprehensive Annual Financial Report for the Fiscal Year Ended June 30, 2020.
Construction Activity
The following table reflects the history of building permit valuation for the City and the County for
the most recent five-year period for which information is available:
CITY OF POWAY
Building Permits and Valuation
(Dollars in Thousands)
2016
Valuation
Residential $ 10,254
Non-Residential 21 871
Total $ 32,125
Units
Single Family 19
Multi Family _Q
Total 19
Note: Totals may not add to sum due to rounding.
Source: Construction Industry Research Board.
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2017 2018
$ 10,911 $ 9,599
30,068 22,922
$ 40,979 $ 32,521
20 15
_Q _Q
20 15
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2019 2020
$ 4,673 $ 15,673
63 084 29,262
$ 67,757 $ 44,935
17 38
_Q 65
17 103
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SAN DIEGO COUNTY
Building Permits and Valuation
(Dollars in Thousands)
2016 2017 2018
Valuation
Residential $2,472,237 $2,632,826 $2,673,873
Non-Residential 1,782,421 2,371,303 1,901,844
Total $4,254,658 $5,004,129 $4,575,717
Units
Single Family 2,420 3,960 3,438
Multi Family 7,680 6,056 6,132
Total 10,100 10,016 9,570
Note: Columns may not sum to totals due to independent rounding.
Source: Construction Industry Research Board: "Building Permit Summary."
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2019 2020
$2,084,655 $2,647,919
2,359,54 1 1,973,800
$4,444,196 $4,621,719
3,045 3,160
4,405 6,326
7,450 9,486
November 16, 2021, Item #12
APPENDIX C
SUMMARY OF CERTAIN PROVISIONS OF THE TRUST AGREEMENT
The following is a summary of certain provisions of the Trust Agreement that are not described
elsewhere. This summary does not purport to be comprehensive and reference should be made to the Trust
Agreement for a full and complete statement of the provisions thereof
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[TO COME FROM BOND COUNSEL]
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APPENDIX D
FORM OF BOND COUNSEL OPINION
Upon the issuance of the Bonds, Stradling Yocca Carlson & Rauth, a Professional Corporation, Bond
Counsel, proposes to render its final approving opinion in substantially the following form:
City Council
City of Poway
Poway, California
December_, 2021
Re: $ __ City of Poway Pension Obligation Bonds, Series 2021 (Federally Taxable)
Ladies and Gentlemen:
We have examined certified copies of proceedings of the City of Poway (the "City") relative to the
issuance and sale by the City of its Pension Obligation Bonds, Series 2021 (Federally Taxable) in the
aggregate principal amount of $ __ (the "Bonds"), and such other information and documents as we
consider necessary to render this opinion.
The Bonds have been issued pursuant to the authority contained in Articles 1 0 and I I of Chapter 3 of
Division 2 of Title 5 of the Government Code of the State of California, as now in effect and as it may from
time to time hereafter be amended or supplemented, and the Trust Agreement, dated as of December I, 2021
(the "Trust Agreement"), by and between the City and U.S. Bank National Association, as trustee (the
"Trustee").
The Bonds have been issued for the purpose of refunding the City's obligations to the California
Public Employees Retirement System ("CalPERS") evidenced by the contract between the Board of
Administration of Cal PERS and the City Council of the City, effective February 1, 1981, as such contract has
been amended from time to time, to pay unamortized, unfunded accrued liability with respect to pension
benefits under the Public Employees' Retirement Law, constituting Part 3 of Division 5 of Title 2 of the
California Government Code.
In connection with the issuance of the Bonds, we have reviewed the Trust Agreement, certificates of
the City, the Trustee, and others, opinions of the City Attorney and counsel to the Trustee, and such other
documents, opinions and matters to the extent that we deemed necessary to render the opinions which are set
forth herein. In rendering this opinion, we have relied upon certain representations of fact and certifications
made by the City, the initial purchasers of the Bonds and others. We have not undertaken to verify through
independent investigation the accuracy of the representations and certifications relied upon by us.
The opinions that are expressed herein are based upon our analysis and interpretation of existing
statutes, regulations, rulings and judicial decisions, including the default judgment entered on November_,
2021 by the Superior Court of California, County of San Diego, in the action entitled City of Poway v. All
Persons Interested et al., Case No. 37-2021-00034586-CU-MC-CTL, and cover certain matters that are not
directly addressed by such authorities. The opinions that are expressed herein may be affected by actions
taken (or not taken) or events occurring (or not occurring) after the date hereof. We have not undertaken to
determine, or to inform any person, whether any such actions or events are taken or do occur. Our engagement
as to the Bonds terminates as of the date of issuance of the Bonds.
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The Bonds are dated the date hereof, and mature on the dates and bear interest at the rates per annum
set forth in the Trust Agreement. The Bonds are registered bonds in the forms set forth in the Trust
Agreement, redeemable in the amounts, at the times and in the manner provided for in the Trust Agreement.
All terms which are not defined herein have the meanings ascribed to those terms in the Trust Agreement.
Based upon our examination of all of the foregoing, and in reliance thereon and on all matters of fact
as we deem relevant under the circumstances, and upon consideration of applicable laws, we are of the opinion
that:
I. The Trust Agreement has been duly authorized, executed and delivered by the City and,
assuming due authorization, execution and delivery by the Trustee, constitutes the valid and binding obligation
of the City enforceable in accordance with its terms.
2. The Bonds have been duly authorized and issued by the City and are valid and binding
obligations of the City enforceable in accordance with their terms. The Bonds do not constitute a debt of the
City, the State of California or any political subdivision thereof within the meaning of any constitutional or
statutory debt limit or restriction, and do not constitute an obligation for which the City, the State of California
or any political subdivision thereof is obligated to levy or pledge any form of taxation or for which the City,
the State of California or any political subdivision thereof has levied or pledged any form of taxation.
3. Upon issuance and authentication of the Bonds in accordance with the Trust Agreement, the
Bonds will be entitled to the benefits of the Trust Agreement.
4. Interest on the Bonds is exempt from State of California personal income tax.
The opinions that are expressed herein may be affected by actions taken (or not taken) or events
occurring (or not occurring) after the date hereof. We have not undertaken to determine, or to inform any
person, whether any such actions or events are taken or do occur. Our engagement with respect to the Bonds
terminates on the date of their issuance. The Trust Agreement permits certain actions to be taken or to be
omitted if a favorable opinion of Bond Counsel is provided with respect thereto. Other than expressly stated
herein, we express no other opinion regarding tax consequences with respect to the Bonds.
Our opinion is limited to matters governed by the laws of the State of California. We assume no
responsibility with respect to the applicability or the effect of the laws of any other jurisdiction.
The opinions that are expressed herein are based upon our analysis and interpretation of existing
statutes, regulations, rulings and judicial decisions and cover certain matters not directly addressed by such
authorities. We call attention to the fact that the rights and obligations under the Trust Agreement and the
Bonds are subject to bankruptcy, insolvency, reorganization, moratorium, fraudulent conveyance and other
similar laws affecting creditors' rights, to the application of equitable principles if equitable remedies are
sought, to the exercise of judicial discretion in appropriate cases and to limitations on legal remedies against
public agencies in the State.
We express no opinion herein as to the accuracy, completeness or sufficiency of the Official
Statement or other offering material relating to the Bonds and expressly disclaim any duty to advise the
Owners of the Bonds with respect to matters contained in the Official Statement.
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Respectfully submitted,
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APPENDIXE
FORM OF CONTINUING DISCLOSURE AGREEMENT
Upon issuance of the Bonds, the City proposes to enter into a Continuing Disclosure Agreement in
substantially the following form :
This Continuing Disclosure Agreement (the "Disclosure Agreement") is executed and delivered by and
between the City of Poway (the "City") and U.S. Bank National Association, in its capacity as dissemination agent
(the "Dissemination Agent"), in connection with the issuance of the City's Pension Obligation Bonds, Series 202 I
(Federally Taxable) in an aggregate principal amount of$ __ (the "Bonds"). The Bonds are being issued by the
City pursuant to the provisions of that certain Trust Agreement, dated as of December I, 2021 (the "Trust
Agreement"), by and between the City and U.S. Bank National Association, as trustee (the "Trustee"). The City
and the Dissemination Agent hereby certify, covenant and agree as follows:
Section I. Purpose of the Disclosure Agreement. This Disclosure Agreement is being executed and
delivered by the parties hereto for the benefit of the holders and Beneficial Owners of the Bonds and in order to
assist the Participating Underwriter in complying with the Rule.
Section 2. Definitions. In addition to the definitions set forth in the Trust Agreement, which apply
to any capitalized terms used in this Disclosure Agreement, 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 City pursuant to, and as described in,
Sections 3 and 4 of this Disclosure Agreement.
"Annual Report Date" shall mean each April I after the end of the City's fiscal year, the end of which, as
of the date of this Disclosure Agreement, is June 30.
"Beneficial Owner" shall mean any person which: (a) has the power, directly or indirectly, to vote or
consent with respect to, or to dispose of ownership of, any Bonds (including persons holding Bonds through
nominees, depositories or other intermediaries); or (b) is treated as the owner of any Bonds for federal income tax
purposes.
"Dissemination Agent " shall mean, initially, U.S. Bank National Association, acting in its capacity as
Dissemination Agent hereunder, or any successor Dissemination Agent that is so designated in writing by the City
and has filed with the then-current Dissemination Agent a written acceptance of such designation.
"Financial Obligation" shall mean a: (A) debt obligation; (B) derivative instrument entered into in
connection with, or pledged as security or a source of payment for, an existing or planned debt obligation; or (C)
guarantee of (A) or (B). The term "Financial Obligation" shall not include municipal securities as to which a final
official statement has been provided to the Municipal Securities Rulemaking Board consistent with the Rule.
"listed Events " shall mean any of the events listed in Sections 5(a) and (b) of this Disclosure Agreement.
"MSRB " shall mean the Municipal Securities Rulemaking Board.
"Official Statement " shall mean the Official Statement dated November _, 2021 , relating to the Bonds.
"Participating Underwriter " shall mean Stifel, Nicolaus & Company, Incorporated, the original
underwriter of the Bonds required to comply with the Rule in connection with offering of the Bonds.
"Rule" shall mean Rule 15c2-12 adopted by the SEC under the Securities Exchange Act of 1934, as the
same may be amended from time to time.
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"SEC" shall mean the Securities and Exchange Commission.
Section 3. Provision of Annual Reports.
(a) The City shall, or shall cause the Dissemination Agent to, not later than the Annual Report Date,
commencing April I, 2022 with the Annual Report for fiscal year 2020-21 , provide to the MSRB an Annual Report
that is consistent with the requirements of Section 4 of this Disclosure Agreement; provided that the first Annual
Report to be filed by April I, 2022 shall be satisfied by the submission of the Official Statement to the MSRB. Not
later than 15 calendar days prior to such date, the City shall provide its Annual Report to the Dissemination Agent, if
the Dissemination Agent is a different entity than the City. The Annual Report must be submitted in an electronic
format as prescribed by the MSRB, accompanied by such identifying information as is prescribed by the MSRB, and
may include by reference other information as provided in Section 4 of this Disclosure Agreement; provided that
any audited financial statements of the City may be submitted separately from the balance of the Annual Report, and
not later than the date required above for the filings of the Annual Report. If the City's fiscal year changes, it shall
give notice of such change in the same manner as for a Listed Event under Section 5(a). The City shall provide a
written certification with each Annual Report furnished to the Dissemination Agent to the effect that such Annual
Report constitutes the Annual Report required to be furnished hereunder. The Dissemination Agent may
conclusively rely upon such certification of the City and shall have no duty or obligation to review such Annual
Report.
(b) If the City is unable to provide to the MSRB an Annual Report by the date required in subsection
(a), the City in a timely manner shall send to the MSRB a notice in an electronic format as prescribed by the MSRB,
accompanied by such identifying information as prescribed by the MSRB.
(c) The Dissemination Agent shall :
I.
2.
3.
Section 4.
the following:
provide any Annual Report received by it to the MSRB by the date required in subsection
(a);
file a report with the City and the Trustee (if the Dissemination Agent is other than the
Trustee) certifying that the Annual Report has been provided to the MSRB pursuant to
this Disclosure Agreement and stating the date it was provided; and
take any other actions as are mutually agreed upon between the Dissemination Agent and
the City.
Content of Annual Reports. The Annual Report shall contain or incorporate by reference
(a) Audited financial statements of the City for the prior fiscal year prepared in accordance with
generally accepted accounting principles as promulgated to apply to governmental entities from time to time by the
Governmental Accounting Standards Board. If such audited financial statements are not available at the time that
the Annual Report is required to be filed pursuant to Section 3(a), the Annual Report shall contain unaudited
financial statements, and the audited financial statements shall be filed in the same manner as the Annual Report
when they become available.
(b) Principal amount of the Bonds outstanding.
(c) To the extent not included within the City's financial statements, updates of information for the
last completed Fiscal Year substantially in the form of the following tables under the caption "CITY FINANCIAL
INFORMATION" in the Official Statement: (i) "Assessed Valuation History;" (ii) "Ten Largest Secured and
Unsecured Property Taxpayers;" and (iii) "General Fund Major Tax Revenues by Source."
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 City or related public entities, that are available to the public on the MSRB's
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Internet website or filed with the SEC. If the document included by reference is a final official statement, it must be
available from the MSRB. The City shall clearly identify each such other document so included by reference.
Section 5. Reporting of Significant Events.
(a) Pursuant to the provisions of this Section 5, the City shall give, or shall cause the Dissemination
Agent to give, notice of the occurrence of any of the following events with respect to the Bonds in a timely manner
not more than ten ( I 0) Business Days after the event:
I. Principal and interest payment delinquencies.
2. Unscheduled draws on debt service reserves reflecting financial difficulties.
3. Unscheduled draws on credit enhancements reflecting financial difficulties.
4. Substitution of credit or liquidity providers, or their failure to perform.
5. Adverse tax opinions, the issuance by the internal Revenue Service of proposed or final
determinations of taxability or Notices of Proposed Issue (IRS Form 570 I TEB).
6. Tender offers.
7. Defeasances.
8. Rating changes.
9. Bankruptcy, insolvency, receivership or similar proceedings.
Note: For the purposes of the event identified in subparagraph (9), the event is considered to occur when
any of the following occur: the appointment of a receiver, fiscal agent or similar officer for an obligated person in a
proceeding under the U.S. Bankruptcy Code or in any other proceeding under state or federal law in which a court or
governmental authority has assumed jurisdiction over substantially all of the assets or business of the obligated
person, or if such jurisdiction has been assumed by leaving the existing governmental body and officials or officers
in possession but subject to the supervision and orders of a court or governmental authority, or the entry of an order
confirming a plan of reorganization, arrangement or liquidation by a court or governmental authority having
supervision or jurisdiction over substantially all of the assets or business of the obligated person.
I 0. Default, event of acceleration, termination event, modification of terms or other similar
events under the terms of a Financial Obligation of the City, any of which reflect
financial difficulties.
(b) Pursuant to the provisions of this Section 5, the City shall give, or shall cause the Dissemination
Agent to give, notice of the occurrence of any of the following events with respect to the Bonds, if material, in a
timely manner not more than ten ( 10) Business Days after occurrence:
1. Unless described in Section 5(a)(5), other notices or determinations by the Internal
Revenue Service with respect to the tax status of the Bonds or other events affecting the
tax status of the Bonds.
2. Modifications to the rights of Bondholders.
3. Bond calls.
4. Release, substitution or sale of property securing repayment of the Bonds.
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5. Non-payment related defaults.
6. The consummation of a merger, consolidation or acquisition involving the City or the
sale of all or substantially all of the assets of the City, 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
its terms.
7. Appointment of a successor or additional trustee or the change of the name of a trustee.
8. lncurrence of a Financial Obligation of the City, or agreement to covenants, events of
default, remedies, priority rights, or other similar terms of a Financial Obligation of the
City, any of which affect security holders.
(c) If the City determines that knowledge of the occurrence of a Listed Event under subsection (b)
would be material under applicable federal securities laws, and if the Dissemination Agent is other than the City, the
City shall promptly notify the Dissemination Agent in writing. Such notice shall instruct the Dissemination Agent
to file a notice of such occurrence with the MSRB in an electronic format as prescribed by the MSRB in a timely
manner not more than ten ( I 0) Business Days after the event.
(d) If the City determines that a Listed Event under subsection (b) would not be material under
applicable federal securities laws and if the Dissemination Agent is other than the City, the City shall so notify the
Dissemination Agent in writing and instruct the Dissemination Agent not to report the occurrence.
(e) The City hereby agrees that the undertaking set forth in this Disclosure Agreement is the
responsibility of the City and, if the Dissemination Agent is other than the City, the Dissemination Agent shall not
be responsible for determining whether the City's instructions to the Dissemination Agent under this Section 5
comply with the requirements of the Rule.
Section 6. Termination of Reporting Obligation. The obligations of the City and the Dissemination
Agent specified in this Disclosure Agreement shall terminate upon the legal defeasance, prior redemption or
payment in full of all of the Bonds. If such termination occurs prior to the final maturity of the Bonds, the City shall
give notice of such termination in the same manner as for a Listed Event under Section 5(a).
Section 7. Dissemination Agent. The City may from time to time appoint or engage a
Dissemination Agent to assist it in carrying out its obligations under this Disclosure Agreement, and may discharge
any such Dissemination Agent, with or without appointing a successor Dissemination Agent. If at any time there is
not any other designated Dissemination Agent, the City shall act as Dissemination Agent. The initial Dissemination
Agent shall be U.S. Bank National Association.
Section 8. Amendment; Waiver. Notwithstanding any other prov1s1on of this Disclosure
Agreement, the City may amend this Disclosure Agreement, and any provision of this Disclosure Agreement may be
waived, provided that the following conditions are satisfied:
(a) if the amendment or waiver relates to annual or event information to be provided hereunder, it
may only be made in connection with a change in circumstances that arises from a change in legal requirements,
change in law, or change in the identity, nature, or status of the City or type of business conducted;
(b) the undertakings herein, as proposed to be amended or waived, would, in the opinion of nationally
recognized bond counsel have complied with the requirements of the Rule at the time of the primary offering of the
Bonds, after taking into account any amendments or interpretations of the Rule, as well as any change in
circumstances; and
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(c) the proposed amendment or waiver: (i) is approved by holders of the Bonds in the manner
provided in the Trust Agreement for amendments to the Trust Agreement with the consent of holders; or (ii) does
not, in the opinion of nationally recognized bond counsel, materially impair the interest of Bond owners.
The City shall describe any amendment to this Disclosure Agreement in the next Annual Report filed after
such amendment takes effect.
If the annual financial information or operating data to be provided in the Annual Report is amended
pursuant to the provisions hereof, the annual financial information containing the amended operating data or
financial information shall explain, in narrative form, the reasons for the amendment and the impact of the change in
the type of operating data or financial information being provided.
If an amendment is made to the undertaking specifying the accounting principles to be followed in
preparing financial statements, the annual financial information for the year in which the change is made shall
present a comparison between the financial statements or information prepared on the basis of the new accounting
principles and those prepared on the basis of the former accounting principles. The comparison shall include a
qualitative discussion of the differences in the accounting principles and the impact of the change in the accounting
principles on the presentation of the financial information, in order to provide information to investors to enable
them to evaluate the ability of the City to meet its obligations. To the extent reasonably feasible, the comparison
shall be quantitative. A notice of the change in the accounting principles shall be sent to the MSRB.
Section 9. Additional Information. Nothing in this Disclosure Agreement shall be deemed to
prevent the City from disseminating any other information, using the means of dissemination set forth in this
Disclosure Agreement or any other means of communication, or including any other information in any Annual
Report or notice of occurrence of a Listed Event, in addition to that which is required by this Disclosure Agreement.
If the City chooses to include any information in any Annual Report or notice of occurrence of a Listed Event in
addition to that which is specifically required by this Disclosure Agreement, the City shall have no obligation under
this Disclosure Agreement to update such information or include it in any future Annual Report or notice of
occurrence of a Listed Event.
Section 10. Default. In the event of a failure of the City to comply with any provisions of this
Disclosure Agreement, any Participating Underwriter or any holder or Beneficial Owner of the Bonds, or the
Trustee on behalf of the holders of the Bonds (after receiving indemnification to its satisfaction), may take such
actions as may be necessary and appropriate, including seeking mandate or specific performance by court order, to
cause the City to comply with its obligations under this Disclosure Agreement. A default under this Disclosure
Agreement shall not be deemed to be a default under the Trust Agreement, and the sole remedy under this
Disclosure Agreement in the event of any failure of the City to comply with this Disclosure Agreement shall be an
action to compel performance.
Section 11 . Duties, Immunities and Liabilities of Dissemination Agent. The Dissemination Agent
shall have only such duties as are specifically set forth in this Disclosure Agreement, and the City agrees to
indemnify and save the Dissemination Agent, its officers, directors, employees and agents, harmless against any
loss, expense and liabilities that it may incur arising out of or in the exercise or performance of its duties as
described hereunder, if any, including the costs and expenses (including attorneys' fees) of defending against any
claim of liability, but excluding liabilities due to the Dissemination Agent's negligence or willful misconduct. The
obligations of the City under this Section shall survive resignation or removal of the Dissemination Agent and
payment of the Bonds. The Dissemination Agent shall not be responsible in any manner for the format or content of
any notice or Annual Report prepared by the City pursuant to this Disclosure Agreement. The City shall pay the
reasonable fees and expenses of the Dissemination Agent for its duties as described hereunder.
Section 12. Notices. Any notices or communications to or among any of the parties to this
Disclosure Agreement may be given to the Dissemination Agent (if other than the City) and to the City as follows:
City:
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City of Poway
13325 Civic Center Drive
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Dissemination Agent:
Poway, California 92064
Attention: City Manager
U.S. Bank National Association
633 West Fifth Street, 24th Floor
Los Angeles, California 90071
Attention: Corporate Trust
Reference: Poway 2021 Pension Obligation Bonds
Section 13. Beneficiaries. This Disclosure Agreement shall inure solely to the benefit of the City, the
Dissemination Agent, the Trustee, the Participating Underwriter and holders and Beneficial Owners from time to
time of the Bonds, and shall create no rights in any other person or entity.
Section 14. Counterparts. This Disclosure Agreement may be executed in multiple counterparts, all
of which shall constitute one and the same instrument, and each of which shall be deemed to be an original.
Date: December , 2021
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CITY OF POWAY
By:
City Manager
U.S. BANK NATIONAL ASSOCIATION
as Dissemination Agent
By:
Authorized Signatory
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APPENDIX F
BOOK-ENTRY SYSTEM
The information in this section concerning DTC and DTC 's book-entry only system has been obtained
from sources that the City and the Underwriter believe to be reliable, but neither the City nor the Underwriter
takes any responsibility for the completeness or accuracy thereof The following description of the procedures
and record keeping with respect to beneficial ownership interests in the Bonds, payment of principal, premium,
if any, accreted value, if any, and interest on the Bonds to DTC Participants or Beneficial Owners,
confirmation and transfers of beneficial ownership interests in the Bonds and other related transactions by
and between DTC, the DTC Participants and the Beneficial Owners is based solely on information provided by
DTC.
The Depository Trust Company ("OTC"), New York, NY, will act as securities depository for the Bonds.
The Bonds will be issued as fully-registered securities registered in the name of Cede & Co. (DTC's partnership
nominee) or such other name as may be requested by an authorized representative of OTC. One fully registered
bond will be issued for each annual maturity of the Bonds, each in the aggregate principal amount of such annual
maturity, and will be deposited with OTC.
OTC, the world's largest securities depository, is a limited-purpose trust company organized under the New
York Banking Law, a "banking organization" within the meaning of the New York Banking Law, a member of the
Federal Reserve System, a "clearing corporation" within the meaning of the New York Uniform Commercial Code,
and a "clearing agency" registered pursuant to the provisions of Section 17 A of the Securities Exchange Act of
1934. OTC holds and provides asset servicing for over 3.5 million issues of U.S. and non-U.S. equity issues,
corporate and municipal debt issues, and money market instruments (from over I 00 countries) that DTC's
participants ("Direct Participants") deposit with OTC. OTC also facilitates the post-trade settlement among Direct
Participants of sales and other securities transactions in deposited securities, through electronic computerized
book-entry transfers and pledges between Direct Participants' accounts. This eliminates the need for physical
movement of securities certificates. Direct Participants include both U.S. and non-U.S. securities brokers and
dealers, banks, trust companies, clearing corporations, and certain other organizations. OTC is a wholly-owned
subsidiary of The Depository Trust & Clearing Corporation ("DTCC"). DTCC is the holding company for OTC,
National Securities Clearing Corporation and Fixed Income Clearing Corporation, all of which are registered
clearing agencies. DTCC is owned by the users of its regulated subsidiaries. Access to the OTC system is also
available to others such as both U.S. and non-U.S. securities brokers and dealers, banks, trust companies, and
clearing corporations that clear through or maintain a custodial relationship with a Direct Participant, either directly
or indirectly ("Indirect Participants"). OTC has a Standard & Poor's rating of AA+. The OTC Rules applicable to
its Participants are on file with the Securities and Exchange Commission. More information about OTC can be
found at www.dtcc.com.
Purchases of Bonds under the OTC system must be made by or through Direct Participants, which will
receive a credit for the Bonds on DTC's records. The ownership interest of each actual purchaser of each Bond
("Beneficial Owner") is in tum to be recorded on the Direct and Indirect Participants' records. Beneficial Owners
will not receive written confirmation from OTC of their purchase. Beneficial Owners are, however, expected to
receive written confirmations providing details of the transaction, as well as periodic statements of their holdings,
from the Direct or Indirect Participant through which the Beneficial Owner entered into the transaction. Transfers of
ownership interests in the Bonds are to be accomplished by entries made on the books of Direct and Indirect
Participants acting on behalf of Beneficial Owners. Beneficial Owners will not receive certificates representing
their ownership interests in the Bonds, except in the event that use of the book-entry system for the Bonds is
discontinued.
To facilitate subsequent transfers, all Bonds deposited by Direct Participants with OTC are registered in the
name of DTC's partnership nominee, Cede & Co., or such other name as may be requested by an authorized
representative of OTC. The deposit of Bonds with OTC and their registration in the name of Cede & Co. or such
other OTC nominee do not effect any change in beneficial ownership. OTC has no knowledge of the actual
Beneficial Owners of the Bonds; DTC's records reflect only the identity of the Direct Participants to whose accounts
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such Bonds are credited, which may or may not be the Beneficial Owners. The Direct and Indirect Participants will
remain responsible for keeping account of their holdings on behalf of their customers.
Conveyance of notices and other communications by OTC to Direct Participants, by Direct Participants to
Indirect Participants, and by Direct Participants and Indirect Participants to Beneficial Owners will be governed by
arrangements among them, subject to any statutory or regulatory requirements as may be in effect from time to time.
Beneficial Owners of Bonds may wish to take certain steps to augment the transmission to them of notices of
significant events with respect to the Bonds, such as redemptions, tenders, defaults, and proposed amendments to the
Bond documents. For example, Beneficial Owners of 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 notices be
provided directly to them.
Redemption notices shall be sent to OTC. If less than all of the Bonds within a maturity are being
redeemed, DTC's practice is to determine by lot the amount of the interest of each Direct Participant in such
maturity to be redeemed.
Neither OTC nor Cede & Co. (nor any other OTC nominee) will consent or vote with respect to Bonds
unless authorized by a Direct Participant in accordance with DTC's MMI Procedures. Under its usual procedures,
OTC mails an Omnibus Proxy to the City as soon as possible after the record date. The Omnibus Proxy assigns
Cede & Co. 's consenting or voting rights to those Direct Participants to whose accounts Bonds are credited on the
record date (identified in a listing attached to the Omnibus Proxy).
Redemption proceeds, distributions, and dividend payments on the Bonds will be made to Cede & Co., or
such other nominee as may be requested by an authorized representative of OTC. DTC's practice is to credit Direct
Participants' accounts upon DTC's receipt of funds and corresponding detail information from the City or the
Trustee, on payable date in accordance with their respective holdings shown on DTC's records. Payments by
Participants to Beneficial Owners will be governed by standing instructions and customary practices, as is the case
with securities held for the accounts of customers in bearer form or registered in "street name," and will be the
responsibility of such Participant and not of OTC, the Trustee or the City, 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 OTC) is the
responsibility of the City or the Trustee, disbursement of such payments to Direct Participants will be the
responsibility of OTC, and disbursement of such payments to the Beneficial Owners will be the responsibility of
Direct and Indirect Participants.
A Bond Owner shall give notice to elect to have its Bonds purchased or tendered, through its Participant, to
the Trustee, and shall effect delivery of such Bonds by causing the Direct Participant to transfer the Participant's
interest in the Bonds, on DTC's records, to the Trustee. The requirement for physical delivery of Bonds in
connection with an optional tender or a mandatory purchase will be deemed satisfied when the ownership rights in
the Bonds are transferred by Direct Participants on DTC's records and followed by a book-entry credit of tendered
Bonds to the Trustee's OTC account. OTC may discontinue providing its services as depository with respect to the
Bonds at any time by giving reasonable notice to the City or the Trustee. Under such circumstances, in the event
that a successor depository is not obtained, physical certificates are required to be printed and delivered.
The City may decide to discontinue use of the system of book-entry only transfers through OTC (or a
successor securities depository). In that event, bonds will be printed and delivered to OTC.
THE TRUSTEE, AS LONG AS A BOOK-ENTRY ONLY SYSTEM IS USED FOR THE BONDS, WILL
SEND ANY NOTICE OF REDEMPTION OR OTHER NOTICES TO OWNERS ONLY TO OTC. ANY
FAILURE OF OTC TO ADVISE ANY OTC PARTICIPANT, OR OF ANY OTC PARTICIPANT TO NOTIFY
ANY BENEFICIAL OWNER, OF ANY NOTICE AND ITS CONTENT OR EFFECT WILL NOT AFFECT THE
VALIDITY OF SUFFICIENCY OF THE PROCEEDINGS RELATING TO THE REDEMPTION OF THE
BONDS CALLED FOR REDEMPTION OR OF ANY OTHER ACTION PREMISED ON SUCH NOTICE.
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November 16, 2021, Item #12
APPENDIXG
SPECIMEN MUNICIPAL BOND INSURANCE POLICY
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will strive to achieve this funding level through POB financing, allocation of reserves, or cost
containment measures. For purposes of this Policy, the funding level will be a combination of
amounts held at CalPERS, amounts in a Section 115 Trust, and/or reserves held by the City
designated for pension obligations.
Pension Reserve Fund:
Funds held in the Pension Reserve Fund (PRF) will be used to help mitigate costs associated
with pension, including any unfunded obligations that arise in the future. The funds may be used
to provide additional discretionary payments to help reduce or eliminate any UAL that exists or
arises after issuance of POBs, remitted to a Section 115 Trust, held in reserve to be used as a
supplemental funding source for unanticipated increases to annual pension costs resulting from
actuarial assumption impacts, market volatility, and/or other factors, or to pay POB debt service
and call bonds related to an outstanding POB issuance.
Section 115 Trust:
Funds placed in a Section 115 Trust for pensions are irrevocable and may only be used on
pension related costs. However, a Section 115 Trust has the possibility to realize greater
investment returns than are possible through the City's investments given the laws governing
the City's allowable investments under California Government code. This could generate
additional assets for managing the City's pension costs. While not possible prior to the creation
of this Policy, staff will analyze the benefits of establishing a Section 115 Trust for pensions. If a
Section 115 Trust is established, funds held in trust may be used to provide additional
discretionary payments to help reduce or eliminate any UAL that exists or arises after issuance
of POBs, as a supplemental funding source for unanticipated increases to annual pension costs
resulting from actuarial assumption impacts, market volatility, and/or other factors, to pay the
required annual normal costs should the CalPERS plan become over funded , or to pay POB
debt service and call bonds related to an outstanding POB issuance
Pension Benefits:
Issuance of POBs refinances the City's pension obligation with CalPERS into obligations to
investors. While this increases the City's funding level with CalPERS, the City is still obligated to
make annual debt service payments to POB investors. These payments are in lieu of the annual
UAL payments to CalPERS. To the extent the City has outstanding POB obligations, it is
prudent financial management to avoid providing enhanced pension benefits to City staff. This
will allow the City to focus its financial resources on managing its current pension obligations
and/or the provision of City services.
Procedures:
Allocations from General Fund Unassigned Fund Balance will only occur after full compliance
with the City's General Fund Reserve Policy (Policy No. 61 ). Actual transfers to the PRF will
vary year-to-year based on the actual fiscal year end audited performance of the General
Fund's Unassigned Fund Balance.
In January each year, or as soon as reasonably possible after the Annual Comprehensive
Financial Report has been prepared, General Fund Unassigned Fund Balance for the prior audit
year will be reviewed to determine whether it increased or decreased. In the event General
Fund Unassigned Fund Balance increases, up to 50 percent of the increase will be transferred
107 of 142 November 16, 2021, Item #12
to the PRF under the authority provided in the budget resolution. In the event the amount in the
PRF plus the amount in the City's Section 115 Trust equals the total of the City's normal cost,
any UAL that exists or arises after the issuance of POBs, and maximum annual debt service for
an outstanding POB issuance, a transfer is not needed. The amount transferred to the PRF in a
year, if applicable, may be transferred to the City's Section 115 Trust, if established, as soon as
practical thereafter. Any funding used to help stabilize pension costs will be included in the
following budget for Council's consideration.
Reviewed/Approved By :
Wendy Kaserman
Assistant City Manager
108 of 142
Reviewed By:
Alan Fenstermacher
City Attorney
Approved By:
Chris Hazeltine
City Manager
November 16, 2021, Item #12
5. Confidential Relationship.
City may from time to time communicate to Consultant certain information to
enable Consultant to effectively perform the services. Consultant shall treat all such information
as confidential, whether or not so identified, and shall not disclose any part thereof without the
prior written consent of the City. Consultant shall limit the use and circulation of such information,
even within its own organization, to the extent necessary to perform the services. The foregoing
obligation of this Paragraph 5, however, shall not apply to any part of the information that (i) has
been disclosed in publicly available sources of information; (ii) is, through no fault of Consultant,
hereafter disclosed in publicly available sources of information; (iii) is now in the possession of
Consultant without any obligation of confidentiality; or (iv) has been or is hereafter rightfully
disclosed to Consultant by a third party, but only to the extent that the use or disclosure thereof
has been or is rightfully authorized by that third party.
Consultant shall not disclose any reports, recommendations, conclusions or other
results of the services or the existence of the subject matter of this contract without the prior
written consent of the City. In its performance hereunder, Consultant shall comply with all legal
obligations it may now or hereafter have respecting the information or other property of any other
person , firm or corporation.
6. Office Space and Clerical Support.
Consultant shall provide its own office space and clerical support at its sole cost
and expense.
7. Covenant Against Contingent Fees.
Consultant declares that it has not employed or retained any company or person,
other than a bona fide employee working for Consultant, to solicit or secure this Agreement, that
it has not paid or agreed to pay any company or person , other than a bona fide employee, any
fee , commission, percentage, brokerage fee, gift or any other consideration, contingent upon or
resulting from the award or making of the Agreement. For breach of violation of this warranty,
City shall have the right to annul this Agreement without liability, or, at its sole discretion, to deduct
from the Agreement price or consideration, or otherwise recover the full amount of such fee,
commission, percentage, brokerage fee, gift or contingent fee.
8. Ownership of Documents.
All memoranda, reports, plans, specifications, maps and other documents
prepared or obtained under the terms of this Agreement shall be the property of City and shall be
delivered to City by Consultant upon demand.
9. Conflict of Interest and Political Reform Act Obligations.
During the term of this Agreement Consultant shall not act as consultant or perform
services of any kind for any person or entity whose interests conflict in any way with those of the
City of Poway. Consultant shall at all times comply with the terms of the Political Reform Act and
the local conflict of interest code. Consultant shall immediately disqualify itself and shall not use
its official position to influence in any way any matter coming before the City in which the
Consultant has a financial interest as defined in Government Code Section 87103. Consultant
represents that it has no knowledge of any financial interests which would require it to disqualify
itself from any matter on which it might perform services for the City.
110of142 2 November 16, 2021, Item #12
"Consultant" means an individual who, pursuant to a contract with a state or local
agency:
(A) Makes a governmental decision whether to:
1. Approve a rate, rule or regulation;
2. Adopt or enforce a law;
3. Issue, deny, suspend, or revoke any permit, license, application,
certificate, approval, order, or similar authorization or entitlement;
4. Authorize the City to enter into, modify, or renew a contract provided
it is the type of contract that requires City approval;
5. Grant City approval to a contract that requires City approval and to
which the City is a party, or to the specifications for such a contract;
6. Grant City approval to a plan, design, report, study, or similar item ;
7. Adopt, or grant City approval of, policies, standards, or guidelines
for the City, or for any subdivision thereof; or
(B) Serves in a staff capacity with the City and in that capacity participates in making
a governmental decision as defined in the Political Reform Act and/or
implementing regulations promulgated by the Fair Political Practices Commission,
or performs the same or substantially all the same duties for the City that would
otherwise be performed by an individual holding a position specified in the City's
Conflict of Interest Code.
DISCLOSURE DETERMINATION:
~ 1. Consultant/Contractor will not be "making a government decision" or
"serving in a staff capacity" as defined in Sections A and B above.
No disclosure required.
D 2. Consultant/Contractor will be "making a government decision" or "serving
in a staff capacity" as defined in Sections A and B above. As a result,
Consultant/Contractor shall be required to file a Statement of Economic Interest
with the City Clerk of the City of Poway in a timely manner as required by law.
Department Director
10. No Assignments.
Neither any part nor all of this Agreement may be assigned or subcontracted,
except as otherwise specifically provided herein, or to which City, in its sole discretion, consents
to in advance thereof in writing. Any assignment or subcontracting in violation of this provision
shall be void.
11. Maintenance of Records.
Consultant shall maintain all books, documents, papers, employee time sheets,
accounting records, and other evidence pertaining to costs incurred and shall make such
materials available at its office at all reasonable times during the contract period and for three (3)
111 of 142 3 November 16, 2021, Item #12
years from the date of final payment under this Agreement, for inspection by City and copies
thereof shall be furnished , if requested.
12. Independent Contractor.
At all times during the term of this Agreement, Consultant shall be an independent
contractor and shall not be an employee of the City of Poway. City shall have the right to control
Consultant only insofar as the results of Consultant's services rendered pursuant to this
Agreement; however, City shall not have the right to control the means by which Consultant
accomplishes such services.
13. Licenses, Permits, Etc.
Consultant represents and declares to City that it has all licenses, permits,
qualifications, and approvals of whatever nature that are legally required to practice its profession.
Consultant represents and warrants to City that Consultant shall, at its sole cost and expense,
keep in effect at all times during the term of this Agreement, any license, permit, or approval which
is legally required for Consultant to practice its profession.
14. Consultant's Insurance.
Consultant shall provide insurance as set forth in Exhibit "A" entitled "Special
Provisions" attached hereto and made a part hereof.
15. Indemnification.
(a) For Claims (as defined herein) other than those alleged to arise from Consultant's
negligent performance of professional services, City and its respective elected and appointed
boards, officials, officers, agents, employees and volunteers (individually and collectively,
"lndemnitees") shall have no liability to Consultant or any other person for, and Consultant shall
indemnify, protect and hold harmless lndemnitees from and against, any and all liabilities, claims,
actions, causes of action, proceedings, suits, damages, judgments, liens, levies, costs and
expenses, including reasonable attorneys' fees and disbursements (collectively "Claims"), which
lndemnitees may suffer or incur or to which lndemnitees may become subject by reason of or
arising out of any injury to or death of any person(s), damage to property, loss of use of property,
economic loss or otherwise occurring as a result of Consultant's negligent performance under this
Agreement, or by the negligent or willful acts or omissions of Consultant, its agents, officers,
directors, sub-consultants or employees.
(b) For Claims alleged to arise from Consultant's negligent performance of
professional services, lndemnitees shall have no liability to Consultant or any other person for,
and Consultant shall indemnify and hold harmless lndemnitees from and against, any and all
Claims that lndemnitees may suffer or incur or to which lndemnitees may become subject by
reason of or arising out of any injury to or death of any person(s), damage to property, loss of use
of property, economic loss or otherwise to the extent occurring as a result of Consultant's
negligent performance of any professional services under this Agreement, or by the negligent or
willful acts or omissions of Consultant, its agents, officers, directors, sub-consultants or
employees, committed in performing any of professional services under this Agreement. For
Claims alleged to arise from Consultant's professional services, Consultant's defense obligation
to lndemnitees shall include only the reimbursement of reasonable defense costs and attorneys'
fees to the extent caused by Consultant's negligence.
112 of 142 4 November 16, 2021, Item #12
(c) The foregoing obligations of Consultant shall not apply to the extent that the Claims
arise from the sole negligence or willful misconduct of City or its elected and appointed boards,
officials, officers, agents, employees and volunteers.
(d) In any and all Claims against City by any employees of the Consultant, anyone
directly or indirectly employed by it or anyone for whose acts it may be liable, the indemnification
obligation under this Section 15 shall not be limited in any way by any limitation on the amount or
type of damages, compensation or benefits payable by or for the Consultant under worker's
compensation acts, disability benefit acts or other employee benefit acts.
(e) Consultant shall, upon receipt of written notice of any Claim, promptly take all
action necessary to make a claim under any applicable insurance policy or policies Consultant is
carrying and maintaining; however, if Consultant fails to take such action as is necessary to make
a claim under any such insurance policy, Consultant shall reimburse City for any and all costs,
charges, expenses, damages and liabilities incurred by City in making any claim on behalf of
Consultant under any insurance policy or policies required pursuant to this Agreement.
(f) The obligations described in Section 15(a) through (e) above shall not be
construed to negate, abridge or otherwise reduce any other right or obligation of indemnity which
would otherwise exist as to any party or person indemnified pursuant to this Section 15.
(g) The rights and obligations of the parties described in this Section 15 shall survive
the termination of this Agreement.
16. Assumption of Risk.
Except for injuries to persons caused by the willful misconduct of any lndemnitee and not
covered by insurance maintained, or required by this Agreement to be maintained, by Consultant:
(a) Consultant hereby assumes the risk of any and all injury and damage to the personnel
(including death) and property of Consultant that occurs in the course of, or in connection with ,
the performance of Consultant's obligations under this Agreement, including but not limited to
Consultant's Scope of Services; and (b) it is hereby agreed that the lndemnitees are not to be
liable for injury or damage which may be sustained by the person, goods or property of Consultant
or its employees in connection with Consultant's performance its obligations under this
Agreement, including but not limited to Consultant's Scope of Services.
17. Consultant Not an Agent.
Except as City may specify in writing, Consultant shall have no authority,
expressed or implied, to act on behalf of City in any capacity whatsoever as an agent. Consultant
shall have no authority, expressed or implied, pursuant to this Agreement to bind City to any
obligation whatsoever.
18. Personnel.
Consultant shall assign qualified and certified personnel to perform requested
services. The City shall have the right to review and disapprove personnel for assignment to
Poway projects.
City shall have the unrestricted right to order the removal of any person(s)
assigned by Consultant by giving oral or written notice to Consultant to such effect.
113 of 142 5 November 16, 2021, Item #12
Consultant's personnel shall at all times comply with City's drug and alcohol
policies then in effect.
19. Notices.
Notices shall be given as described on Exhibit "A" entitled "Special Provisions"
attached hereto and made a part hereof.
20. Governing Law, Forum Selection and Attorneys' Fees.
This Agreement shall be governed by, and construed in accordance with, the laws
of the State of California. Each party to this Agreement consents to personal jurisdiction in San
Diego County, California, and hereby authorizes and accepts service of process sufficient for
personal jurisdiction by first class mail, registered or certified, postage prepaid, to its address for
giving notice as set forth in Exhibit "A" hereto. Any action to enforce or interpret the terms or
conditions of this Agreement shall be brought in the Superior Court in San Diego County, Central
Division, unless the parties mutually agree to submit their dispute to arbitration. Consultant
hereby waives any right to remove any such action from San Diego County as is otherwise
permitted by California Code of Civil Procedure section 394. The prevailing party in any such
action or proceeding shall be entitled to recover all of its reasonable litigation expenses, including
its expert fees, attorneys' fees, courts costs, arbitration costs, and any other fees.
Notwithstanding the foregoing, in the event that the subject of such an action is compensation
claimed by Consultant in the event of termination, Consultant's damages shall be limited to
compensation for the 60-day period for which Consultant would have been entitled to receive
compensation if terminated without cause , and neither party shall be entitled to recover their
litigation expenses.
21. Gender.
Whether referred to in the masculine, feminine, or as "it," "Consultant" shall mean
the individual or corporate consultant and any and all employees of consultant providing services
hereunder.
22. Counterparts.
This Agreement (and any amendments) may be executed in multiple counterparts,
each of which shall be deemed an original, but all of which, together, shall constitute one and the
same instrument. Documents delivered by telephonic facsimile transmission shall be valid and
binding.
23. Entire Agreement.
This Agreement shall constitute the entire understanding between Consultant and
City relating to the terms and conditions of the services to be performed by Consultant. No
agreements, representations or promises made by either party, whether oral or in writing, shall
be of any force or effect unless it is in writing and executed by the party to be bound thereby.
114 of 142 6 November 16, 2021, Item #12
24. Certification and Indemnification Regarding Public Employees'
Retirement Law/Pension Reform Act of 2013.
Contractor hereby certifies that all persons providing services to City by Contractor
are not current members of the California Public Employees' Retirement System (CalPERS) and
shall not become members of CalPERS while providing services to City.
Contractor further provides that in the event Contractor assigns a retired annuitant
receiving a pension benefit from CalPERS to perform services for City, the retired annuitant is in
full compliance with Government Code section 7522.56 . A copy of Government Code section
7522.56 is attached hereto as Exhibit "B."
Further, Contractor hereby fully and unconditionally indemnifies City from all
penalties, fees, employer and employee contributions, or any other assessments imposed by
CalPERS in the event CalPERS determines the person assigned by Contractor to provide
services to City has been misclassified.
25. Severability.
If any provision of this Agreement is determined by any court of competent jurisdiction or
arbitrator to be invalid, illegal, or unenforceable to any extent, that provision shall, if possible, be
construed as though more narrowly drawn, if a narrower construction would avoid such invalidity,
illegality, or unenforceability or, if that is not possible, such provision shall, to the extent of such
invalidity, illegality, or unenforceability, be severed, and the remaining provisions of this
Agreement shall remain in effect.
(Remainder of page intentionally left blank)
115 of 142 7 November 16, 2021, Item #12
IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement on the
date first above written.
CITY OF POWAY CONSULTANT
By:-------------By :--------------
Chris Hazeltine, City Manager James V. Fabian, Principal
Date: Date: ------------------------
ATTEST:
Carrie Gallagher, CMC, City Clerk
APPROVED AS TO FORM:
By: al+-«Lt--
Alan Fenstermacher, City Attorney
116of142 8 November 16, 2021, Item #12
A.
"SPECIAL PROVISIONS"
EXHIBIT "A"
Scope of Services.
Consultant agrees to perform consulting services as requ ired by City, which shall
consist of the independent municipal advisory services further described in the Scope of Services
submitted with the proposal, included in this document as Attachment 1, and incorporated by
reference, as if its contents were fully set forth herein. Consultant shall provide the necessary
qualified personnel to perform the services.
B. Compensation and Reimbursement.
City shall pay Consultant a fee in accordance with the Compensation and
Expenses submitted with the proposal, which is included in this document as Attachment 1. Total
fee is not to exceed $59,500. Consultant's fee shall include and Consultant shall be responsible
for the payment of all federal, state, and local taxes of any kind which are attributable to the
compensation received.
In addition to said consulting fee, Consultant shall be reimbursed for all reasonable
expenses, including lodging, telephone, and travel (air, auto, rail) necessarily incurred in
performance of the services. Consultant shall bill City for such expenses as incurred, referencing
this Agreement. All expenses shall be itemized and supported by receipts for amounts in excess
of Twenty-Five Dollars ($25.00). Statements for reimbursement of expenses shall be paid within
ten (10) days of approval by City. All air travel shall be billed at coach or special fare rates.
Reimbursement for lodging is limited to travel from outside of San Diego County. Consultant shall
receive prior authorization for air travel and lodging expenses. All other expenses shall be
reimbursed in accordance with City's cash disbursement policies in effect at the time incurred.
C. Term of Agreement.
This Agreement shall be effective from the period commencing November 16,
2021 and ending November 15, 2022, unless sooner terminated by City as provided in the section
of this Agreement entitled "Termination." This Agreement may be extended for up to two additional
one-year periods upon approval in writing of the City Manager and Consultant. Upon expiration
or termination of this Agreement, Consultant shall return to City any and all equipment, documents
or materials and all copies made thereof which Consultant received from City or produced for City
for the purposes of this Agreement.
D. Consultant's Insurance.
1. Coverages:
Consultant shall obtain and maintain during the life of this Agreement all of
the following insurance coverages:
(a) Comprehensive General Liability, including premises-operations,
products/completed, broad form property damage, and blanket contractual liability with the
following coverages: General Liability $1 ,000,000 Bodily Injury and Property Damage combined
each occurrence and $2,000,000 aggregate.
117 of 142 1 November 16, 2021, Item #12
(b) Automobile Liability, including owned, hired, and non-owned
vehicles: $1,000,000 combined single limit.
(c) Consultant shall obtain and maintain, during the life of the
Agreement, a policy of Professional Errors and Omissions Liability Insurance with policy limits of
not less than $1 ,000,000 combined single limits, per claim and annual aggregate.
(d) Workers' Compensation insurance in statutory amount. All of the
endorsements which are required above shall be obtained for the policy of Workers'
Compensation insurance.
2. Endorsements:
Endorsements shall be obtained so that each policy contains the following
three provisions:
(a) Additional Insured. (Not required for Professional Errors and
Omissions Liability Insurance or Workers' Compensation.)
"City of Poway and its elected and appointed boards, officers, agents, and
employees are additional insureds with respect to this subject project and contract with City."
(b) Notice.
"Said policy shall not terminate, nor shall it be canceled, until thirty (30)
days after written notice is given to City."
(c) Primary Coverage.
"The policy provides primary coverage to City and its elected and appointed
boards, officers, agents, and employees. It is not secondary or in any way subordinate to any
other insurance or coverage maintained by City."
3. Insurance Certificates:
Consultant shall provide City certificates of insurance showing the insurance
coverages described in the paragraphs above, in a form and content approved by City, prior to
beginning work under this Agreement.
E. Notices.
All notices, billings and payments hereunder shall be in writing and sent to the
following addresses:
To City:
To Consultant:
118 of 142 2
City of Poway
P.O. Box 789
Poway, CA 9207 4
Fieldman, Rolapp & Associates, Inc.
19900 MacArthur Boulevard, Suite 1100
Irvine, CA 92612
November 16, 2021, Item #12
ATTACHMENT 1
PROFESSIONAL SERVICES AGREEMENT
FOR MUNICIPAL ADVISOR
This agreement has been entered into this 16th day of November, 2021 by and between the City of
Poway (the "City") and Fieldman, Rolapp & Associates, Inc. (herein, the "Consultant").
WHEREAS, the City desires independent municipal advisory services to be performed m
connection with the issuance of the 2021 Pension Obligation Bonds (herein, the "Project"); and
WHEREAS, the City desires to retain the professional and technical services of the Consultant for
the purpose of debt issuance, (as more fully described in Exhibit A, the "Services");
WHEREAS, the Consultant is well qualified to provide professional financial advice to entities
such as the City;
WHEREAS, the Consultant is registered as a municipal advisor with both the United States
Securities and Exchange Commission and the Municipal Securities Rulemaking Board;
NOW, THEREFORE, in consideration of the above recitals and the mutual covenants and
conditions hereinafter set forth, it is agreed as follows:
Section 1
Section 2
Municipal Advisory Services.
Consultant will provide services in connection with the Project as such Services
are fully described in Exhibit A attached to this Agreement. Consultant is engaged
in an expert financial advisory capacity to the City only. It is expressly understood
that the Services rendered hereunder are rendered solely to the City. Consultant
does not undertake any responsibility to review disclosure documents on behalf of
owners or beneficial owners of bonds or debt which may arise from the
Consultant's work hereunder.
Additional Requested Services (Amendment of Services).
The City may request that Consultant provide additional services beyond the scope
of those referenced in Section I above and specifically listed in Exhibit A to this
Agreement. The Services to be provided under this Agreement may only be
amended by a modification as provided for in Section 6.
Section 3 Compensation
3.01 For Consultant's performance of Services as described in this Agreement, the
Consultant's compensation will be as provided in of Exhibit B attached to this
Agreement,
3.02 Payment of Consultant's expenses shall be made at the time and in the form as
provided for in Exhibit B to this Agreement.
3.03 Unless otherwise specified, payment of Consultant's compensation and expenses
is due thirty (30) days after submission of Consultant's invoice for Services.
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Page I
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3 .04 In the event City abandons the Services of the Consultant prior to completion of
Consultant's work, Consultant shall be compensated for Services performed to the
point of abandonment at the hourly rates specified in Exhibit B. An act of
abandonment shall be deemed to have occurred when no action has been taken by
the City relative to the services of the Consultant for a period of three (3) months
from the date of the initial performance of a service, and there has been a written
notification to the Consultant of an abandonment of the Project by the City.
3.05 The schedule of Consultant fees set forth in this Agreement and Exhibit B is
guaranteed by Consultant for a period of twelve ( 12) months from the date of this
Agreement.
Section 4 Personnel.
Section 5
Section 6
Section 7
Section 8
Consultant has, or will secure, all personnel required to perform the Services under
this Agreement. Consultant shall make available other qualified personnel of the
firm as may be required to complete Consultant's services. The City has the right
to approve or disapprove any proposed changes in Consultant's staff providing
service to the City. The City and Consultant agree that such personnel are
employees only of Consultant and shall not be considered to be employees of the
City in any way whatsoever.
Term of Agreement.
This Agreement shall continue in full force and effect unless terminated by either
party by not less than thirty (30) days written notice to the other party except that
the Agreement shall continue in full force and effect until completion of the
Services or until an abandonment shall have occurred as described in Section 3.04
hereof. This Agreement may be extended from time to time as agreed by the City
and the Consultant pursuant to Section 6.
Modification.
This Agreement contains the entire agreement of the parties. It may be amended
in whole or in part from time to time by mutual consent of the parties; provided
that the Disclosures (as defined herein) required by Section 16 will be updated by
the Consultant as required by law. This shall not prohibit the City and Consultant
from entering into separate agreements for other services.
Work Products.
All work products or any form of property developed by the Consultant in
providing the Services shall be provided to the City on request. Work products
developed by the Consultant shall be the property of the City, provided that
Consultant may use such work products developed for the City and may employ
those work products to develop refinements or additional work products in the
course of its business.
Assignment.
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Section 9
Section 10
Section 11
The rights and obligations of the City under this Agreement shall inure to the
benefit of and shall be binding upon the successors and assigns of the City. This
Agreement may not be assigned by the Consultant without the consent of the City
except for compensation due Consultant.
Disclosure.
Consultant does not assume the responsibilities of the City, nor the responsibilities
of the other professionals and vendors representing the City, in the provision of
services and the preparation of the financing documents, including initial and
secondary market disclosure, for financings undertaken by the City. Information
obtained by Consultant and included in any disclosure documents is, by reason of
experience, believed to be accurate; however, such information is not guaranteed
by Consultant.
Confidentiality.
The Consultant agrees that all financial, statistical, personal, technical and other
data and information designated by the City as confidential shall be protected by
the Consultant from unauthorized use or disclosure. The City acknowledges that
the Consultant is required to comply with applicable laws governing disclosure of
public information.
Indemnification.
The City and Consultant shall each indemnify and hold harmless the other from
and against any and all losses, claims, damages, expenses, including legal fees for
defense, or liabilities (collectively, "damages"), to which either may be subjected
by reason of the other's acts, errors or omissions, except however, neither will
indemnify the other from or against damages by reason of changed events and
conditions beyond the control of either or errors of judgment reasonably made.
Section 12 Insurance.
12.01 Consultant shall maintain workers' compensation and employer's liability
insurance during the term of this Agreement.
12.02 Consultant, at its own expense, shall obtain and maintain insurance at all times
during the term of this Agreement. Such insurance must be written with a Best
Guide "A''-rated or higher insurance carrier admitted to write insurance in the state
where the work is located.
12.03 Insurance coverages shall not be less than the following:
A. Workers' Compensation
I. State worker's compensation statutory benefits
2. Employer's Liability -policy limits of not less than $1 ,000,000
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B. Comprehensive General Liability coverage with policy limits of not less than
$1 ,000,000 combined single limit for bodily injury and property damage and
including coverage for the following:
I. Premises operations
2. Contractual liability
3. Products
4. Completed operation
C. Errors and omissions with policy limits of $2,000,000.
12.04 If requested, certificates of insurance naming the City as an additional insured shall
be submitted to the City evidencing the required coverages, limits and locations of
operations to which the insurance applies, and the policies of insurance shall
contain a 30 day notice of cancellation or non-renewal.
Section 13 Permits/Licenses.
The Consultant shall obtain any permits or licenses, as may be required for it to
complete the Services required under this Agreement.
Section 14 Binding Effect.
14.0 I A waiver or indulgence by the City of a Poway of any provision of this Agreement
by the Consultant shall not operate or be construed as a waiver of any subsequent
Poway by the Consultant.
14.02 All agreements contained herein are severable and in the event any of them shall
be held to be invalid by any competent court, this Agreement shall be interpreted
as if such invalid agreements or covenants were not contained herein, and the
remaining provisions of this Agreement shall not be affected by such determination
and shall remain in full force and effect. This Agreement shall not fail because
any part or any clause hereof shall be held indefinite or invalid.
14.03 Each party hereto represents and warrants that this Agreement has been duly
authorized and executed by it and constitutes its valid and binding agreement, and
that any governmental approvals necessary for the performance of this Agreement
have been obtained.
Section 15 Choice of Law.
The validity, interpretation and construction of this Agreement and of each part
hereof shall be governed by the laws of the State of California. Venue for any
lawsuit concerning this Agreement is Orange County, California.
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Page 4
November 16, 2021, Item #12
EXHIBIT A
TO
PROFESSIONAL SERVICES AGREEMENT FOR MUNICIPAL ADVISOR
BY AND BETWEEN
THE CITY OF POWAY
AND
FIELDMAN, ROLAPP & ASSOCIATES, INC.
Scope of Services
A. General Services.
The Consultant shall perform all the duties and services described in Section I of this Agreement
and shall provide such other services as it deems necessary or advisable to accomplish the Project,
consistent with the standards and practice of professional financial advisors prevailing at the time
such services are rendered to the City.
The City may, with the concurrence of Consultant, expand this Agreement to include Additional
Services not specifically identified within the terms of this Agreement. Any Additional Services
may be described in an addendum to this Exhibit A and are subject to compensation described in
Exhibit B to this Agreement.
B. Transaction Services.
The Consultant shall assume primary responsibility for assisting the City in coordinating the
planning and execution of each debt issue relating to the Project. Insofar as the Consultant is
providing Services which are rendered only to the City, the overall coordination of the financing
shall be such as to minimize the costs of the transaction coincident with maximizing the City's
financing flexibility and capital market access. The Consultant's proposed debt issuance Services
may include the following:
• Develop the Financing Schedule
• Monitor the Transaction Process
• Review the Official Statement, both preliminary and final
• Procure and Coordinate Additional Service Providers
• Provide Financial Advice to the City Related to Financing Documents
• Compute Sizing and Design Structure of the Debt Issue
• Plan and Schedule Rating Agency Presentation
• Conduct Credit Enhancement Procurement and Evaluation
• Conduct Market Analysis and Evaluate Timing of Market Entry
• Recommend Award of Debt Issuance
• Provide Pre-Closing and Closing Assistance
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Exhibit A, Page I
November 16, 2021, Item #12
Specifically, Consultant will:
I. Develop the Financing Timetable.
The Consultant shall take the lead role in preparing a schedule and detailed description of
the interconnected responsibilities of each team member and update this schedule, with
refinements, as necessary, as the work progresses.
2. Monitor the Transaction Process.
The Consultant shall have primary responsibility for the successful implementation of the
financing strategy and timetable that is adopted for each debt issue relating to the Project.
The Consultant shall coordinate (and assist, where appropriate) in the preparation of the
legal and disclosure documents and shall monitor the progress of all activities leading to
the sale of debt. The Consultant shall prepare the timetables and work schedules necessary
to achieve this end in a timely, efficient and cost-effective manner and will coordinate and
monitor the activities of all parties engaged in the financing transaction.
3. Review the Official Statement.
The Consultant shall review the official statement for each debt issue relating to the Project
to insure that the City's official statement is compiled in a manner consistent with industry
standards. Consultant does not undertake any responsibility to review disclosure
documents on behalf of owners or beneficial owners of bonds or debt which may arise from
the Consultant's work hereunder.
4. Procure and Coordinate Additional Service Providers.
The Consultant may act as City's representative in procuring the services of financial
printers for the official statement and related documents, and for the printing of any
securities. In addition, the Consultant may act as the City's representative in procuring the
services of trustees, paying agents, fiscal agents, feasibility consultants, redevelopment
consultants, or escrow verification agents or other professionals, if the City directs.
5. Provide Financial Advice to the City Relating to Financing Documents.
The Consultant shall assist the managing underwriters, bond counsel and/or other legal
advisors in the review of the respective financing resolutions, notices and other legal
documents. In this regard, the Consultant shall monitor document preparation for a
consistent and accurate presentation of the recommended business terms and financing
structure of each debt issue relating to the Project, it being specifically understood however
that the Consultant's services shall in no manner be construed as the Consultant engaging
in the practice of law.
6. Compute Sizing and Design Structure of Debt Issue.
The Consultant shall work with the City's staff bond counsel and other professionals of the
City to design a financing structure for each debt issue relating to the Project that is
consistent with the City's objectives, that coordinates each transaction with outstanding
issues and that reflects current conditions in the capital markets.
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Exhibit A, Page 2
November 16, 2021, Item #12
7. Plan and Schedule Rating Agency Presentation
The Consultant shall develop a plan for presenting the financing program to the rating
agencies. The Consultant shall schedule rating agency visits, if appropriate; to assure the
appropriate and most knowledgeable rating agency personnel are available for the
presentation and will develop presentation materials and assist the City officials in
preparing for the presentations.
8. Conduct Credit Enhancement Evaluation and Procurement.
Upon the City's direction, the Consultant will initiate discussions with bond insurers, letter
of credit providers and vendors of other forms of credit enhancements to determine the
availability of and cost benefit of securing financing credit support.
9. Conduct Market Analysis and Evaluate Timing of Market Entry.
The Consultant shall provide summaries of current municipal market conditions, trends in
the market and how these may favorably or unfavorably affect the City's proposed
financing.
a. Competitive Sales.
For all types of competitive sale of debt, the Consultant shall undertake such activities as
are generally required for sale of securities by competitive bid including, but not limited to
the following:
• Review and comment on terms of Notice of Sale Inviting Bids
• Provide advice on debt sale scheduling
• Provide advice on the use of electronic bidding systems
• Contact potential bidders
• Coordinate bid opening with the City officials
• Verify bids received and make recommendations for acceptance
• Provide confinnation of issue sizing, based upon actual bids received,
where appropriate
• Coordinate closing arrangements with the successful bidder(s)
b. Negotiated Sales.
In the case of a negotiated sale of debt, the Consultant shall perform an evaluation
of market conditions preceding the negotiation of the terms of the sale of debt and
will assist the City with the negotiation of final issue structure, interest rates,
interest cost, reoffering terms and gross underwriting spread and provide a
recommendation on acceptance or rejection of the offer to purchase the debt. This
assistance and evaluation will focus on the following areas as determinants of
interest cost:
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Exhibit A, Page 3
November 16, 2021, Item #12
• Size of financing
• Sources and uses of funds
• Terms and maturities of the debt issue
• Review of the rating in pricing of the debt issue
• Investment of debt issue proceeds
• Distribution mix among institutional and retail purchasers
• Interest rate, reoffering terms and underwriting discount with comparable
issues
• Redemption provisions
I 0. Recommend Award of Debt Issuance.
Based upon activities outlined in Task 10 (a) and (b) above, the Consultant will
recommend accepting or rejecting offers to purchase the debt issue. If the City elects
to award the debt issue, the Consultant will instruct all parties and help facilitate the
actions required to formally consummate the award.
11 . Provide Pre-Closing and Closing Activities.
The Consultant shall assist in arranging for the closing of each financing. The
Consultant shall assist counsel in assuming responsibility for such arrangements as
they are required, including arranging for or monitoring the progress of bond printing,
qualification of issues for book-entry status, signing and final delivery of the securities
and settlement of the costs of issuance.
CITY OF POWAY /FIELDMAN, RO LAPP & ASSOC IA TES, INC.
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Exhibit A, Page 4
November 16, 2021, Item #12
EXHIBIT B
TO
PROFESSIONAL SERVICES AGREEMENT FOR MUNICIPAL ADVISOR
BY AND BETWEEN
THE CITY OF POWAY
AND
FIELDMAN, ROLAPP & ASSOCIATES, INC.
Compensation and Expenses
Part 1 Transaction Based Compensation
For Services referenced in Section I of this Agreement, including Services performed after the
adoption by the City Council, the Consultant will be compensated a fee of $59,500.
Payment of compensation earned by Consultant pursuant to this Part 1 shall be contingent on, and
payable at the closing of the debt issue(s) undertaken to finance the Project.
Part 2 Hourly Compensation
For Services and Additional Services referenced in Section I and Section 2 of this Agreement,
including Services performed prior to the adoption by City Council, the Consultant will be
compensated at the then current hourly rates. The table below reflects the rates in effect as of the
date of execution of this Agreement.
Personnel Hourly Rate
Executive Officer .............................................................. $375.00
Principal ............................................................................ $345.00
Senior Vice President ........................................................ $330.00
Vice President ................................................................... $275.00
Assistant Vice President .................................................... $235.00
Senior Associate ................................................................ $200.00
Associate ........................................................................... $180.00
Analyst .............................................................................. $115.00
Administrative Assistant ..................................................... $90.00
Hourly Compensation will be billed on a monthly basis.
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Exhibit B, Page I
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Expenses
Expenses will be billed for separately and will cover, among other things, travel, lodging,
subsistence, overnight courier, conference calls, and computer charges. Advances made on behalf
of the City for costs of preparing, printing or distributing disclosure materials or related matter
whether by postal services or electronic means, may also be billed through to the City upon prior
authorization. Additionally, a surcharge of 6% of the compensation amount is added to verifiable
out-of-pocket costs for recovery of costs such as telephone, postage, document reproduction and
the like. Total out-of-pocket costs will be capped at $3 ,500.
Limiting Terms and Conditions
The above compensation is based on completion of work orders within six months of the City's
authorization to proceed, and assumes that the City will provide all necessary information in a
timely manner.
The fee referenced in Part I above, presumes attendance at up to 6 meetings in the City's offices or
such other location within a 25-mile radius of the City place of business as the City may designate.
Preparation for, and attendance at City Council meetings on any basis other than "by appointment"
may be charged at our normal hourly rates referenced in Part 2 above.
Abandonment
If, once commenced, the services of the Consultant are terminated prior to completion of our final
report for any reason, the Consultant will be compensated for professional services and reimbursed
for expenses incurred through the time of receive notification of such termination at the standard
hourly rates shown above.
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Exhibit B, Page 2
November 16, 2021, Item #12
EXHIBIT C
TO
PROFESSIONAL SERVICES AGREEMENT FOR MUNICIPAL ADVISOR
BY AND BETWEEN
THE CITY OF POWAY
AND
FIELDMAN, ROLAPP & ASSOCIATES, INC.
MSRB Rule G-42 requires that municipal advisors provide to their clients disclosures relating to
all material conflicts of interest, including certain categories of potential conflicts of interest
identified in Rule G-42, if applicable. With respect to all aspects of the relationship between
Consultant and the City, Consultant adheres to its fiduciary duty to the City, which includes a duty
of loyalty to the City in performing all municipal advisory activities for the City. The duty of
loyalty obligates Consultant to deal honestly and with the utmost good faith with the City and to
act in the City's best interest without regard to any interest Consultant has or may have. Consultant
has a wide range of clients so our success and profitability are not dependent on maximizing short-
term revenue generated from individual recommendations to our clients but is instead dependent
on long-term profitability based on a foundation of integrity, quality and adherence to our fiduciary
duty. Furthermore, Consultant's supervisory structure provides strong safeguards against
individual representatives of Consultant violating their duty due to personal interests.
Consultant makes the following representations to the City with regard to the Services:
A. Other than the compensation described in the Agreement, we have no other interest, direct
or indirect, that would interfere with or impair in any matter or degree the performance of
our obligations. During our work on the Services, we do not intend to acquire or obtain
any such interest, direct or indirect. If any such interest is acquired or obtained, we will
immediately advise the City.
B. We have not provided any gift or consideration to any officer, employee or agent of the
City to either obtain the Agreement or any assignment from the City, including the
Services. Neither our firm , nor its officers or employees will provide any such gift or
consideration to any officer, employee or agent of the City to influence decisions with
regard the Services or our obligations under the Agreement.
C. Our compensation for the Services is based on complexity of the Project and is contingent
on the completion of the Project. While this form of compensation is customary in the
market for financial services to municipal entities, this may present conflict of interest as
we would have an incentive to recommend to the City the Project even if it is unnecessary
or provides insufficient benefit or advise the City to increase the size of the Project. This
potential conflict is mitigated by Consultant's fiduciary duty to the City.
D. If no specific conflict conditions exist: At the present time, Consultant has determined,
after exercising reasonable diligence, that it has no known material conflicts of interest that
would impair its ability to provide advice in accordance with its fiduciary duty to municipal
entity clients such as the City. To the extent any such material conflicts of interest arise
after the date of this disclosure, Consultant will provide information with respect to such
conflicts ..
Information Regarding Legal Events and Disciplinary Actions
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Exhibit C, Page I
November 16, 2021, Item #12
MSRB Rule G-42 requires that municipal advisors provide their clients disclosures of legal or
disciplinary events material to the evaluation of the municipal advisor or the integrity of the
municipal advisor's management or advisory personnel. Consultant sets out required disclosures
and related information below:
A. There are no legal or disciplinary events material to the City's evaluation of Consultant or
the integrity of Consultant's management or advisory personnel disclosed, or that should
be disclosed, on any Form MA or Form MA-I with the Securities and Exchange
Commission (the "SEC").
Consultant's most recent Form MA and each most recent Form MA-I filed with the SEC are
available on the SEC's EDGAR system at http://www.sec.gov/cgi-bin/browse-
edgar?action=getcompany&CIK =0001612429
Contents of Client Brochure
The MSRB requires us to provide you with the following information: Consultant is registered as
a "Municipal Advisor" pursuant to Section 158 of the Securities Exchange Act and rules and
regulations adopted by the SEC and the MSRB.
The MSRB has made available on its website (www.msrb.org) a municipal advisory client brochure
that describes the protections that may be provided by MSRB rules and how to file a complaint
with the appropriate regulatory authority.
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Exhibit C, Page 2
November 16, 2021, Item #12
EXHIBIT "B"
Cal Gov Code§ 7522.56
Deering's California Codes are current through all 1016 chapters of the 2018 Regular
Session and the November 6, 2018 Ballot Measures.
Deering's California Codes Annotated> GOVERNMENT CODE> Title 1 General> Division 7
Miscellaneous > Chapter 21 Public Pension and Retirement Plans > Article 4 California Public
Employees' Pension Reform Act of 2013
§ 7522.56. Provisions applicable to person receiving pension benefit from public
retirement system; Section supersedes conflicting provisions
(a)This section shall apply to any person who is receiving a pension benefit from a public
retirement system and shall supersede any other provision in conflict with this section.
(b) A retired person shall not serve, be employed by, or be employed through a contract
directly by, a public employer in the same public retirement system from which the retiree
receives the benefit without reinstatement from retirement, except as permitted by this
section.
(c) A person who retires from a public employer may serve without reinstatement from
retirement or loss or interruption of benefits provided by the retirement system upon
appointment by the appointing power of a public employer either during an emergency to
prevent stoppage of public business or because the retired person has skills needed to
perform work of limited duration.
( d)Appointments of the person authorized under this section shall not exceed a total for all
employers in that public retirement system of 960 hours or other equivalent limit, in a
calendar or fiscal year, depending on the administrator of the system. The rate of pay for the
employment shall not be less than the minimum, nor exceed the maximum, paid by the
employer to other employees performing comparable duties, divided by 173.333 to equal an
hourly rate. A retired person whose employment without reinstatement is authorized by this
section shall acquire no service credit or retirement rights under this section with respect to
the employment unless he or she reinstates from retirement.
(e)
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(!)Notwithstanding subdivision (c), any retired person shall not be eligible to serve
or be employed by a public employer if, during the 12-month period prior to an
appointment described in this section, the retired person received any unemployment
insurance compensation arising out of prior employment subject to this section with
November 16, 2021, Item #12
1
Cal Gov Code§ 7522.56
a public employer. A retiree shall certify in writing to the employer upon accepting
an offer of employment that he or she is in compliance with this requirement.
(2)A retired person who accepts an appointment after receiving unemployment
insurance compensation as described in this subdivision shall terminate that
employment on the last day of the current pay period and shall not be eligible for
reappointment subject to this section for a period of 12 months following the last day
of employment.
(f)A retired person shall not be eligible to be employed pursuant to this section for a period
of 180 days following the date of retirement unless he or she meets one of the following
conditions:
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(l)The employer certifies the nature of the employment and that the appointment is
necessary to fill a critically needed position before 180 days have passed and the
appointment has been approved by the governing body of the employer in a public
meeting. The appointment may not be placed on a consent calendar.
(2)
(A)Except as otherwise provided in this paragraph, for state employees, the state
employer certifies the nature of the employment and that the appointment is
necessary to fill a critically needed state employment position before 180 days
have passed and the appointment has been approved by the Department of
Human Resources. The department may establish a process to delegate
appointing authority to individual state agencies, but shall audit the process to
determine if abuses of the system occur. If necessary, the department may assume
an agency's appointing authority for retired workers and may charge the
department an appropriate amount for administering that authority.
(B)For legislative employees, the Senate Committee on Rules or the Assembly
Rules Committee certifies the nature of the employment and that the
appointment is necessary to fill a critically needed position before 180 days have
passed and approves the appointment in a public meeting. The appointment may
not be placed on a consent calendar.
(C)For employees of the California State University, the Trustees of the California
State University certifies the nature of the employment and that the appointment is
necessary to fill a critically needed position before 180 days have passed and
approves the appointment in a public meeting. The appointment may not be placed
on a consent calendar.
(3)The retiree is eligible to participate in the Faculty Early Retirement Program
pursuant to a collective bargaining agreement with the California State University
that existed prior to January 1, 2013, or has been included in subsequent agreements.
( 4)The retiree is a public safety officer or firefighter hired to perform a function or
functions regularly performed by a public safety officer or firefighter.
2 November 16, 2021, Item #12
Cal Gov Code§ 7522.56
(g)A retired person who accepted a retirement incentive upon retirement shall not be eligible
to be employed pursuant to this section for a period of 180 days following the date of
retirement and subdivision (f) shall not apply.
(h)This section shall not apply to a person who is retired from the State Teachers'
Retirement System, and who is subject to Section 24214, 24214.5 or 26812 o(the
Education Code.
(i)This section shall not apply to (1) a subordinate judicial officer whose position, upon
retirement, is converted to a judgeship pursuant to Section 69615, and he or she returns to
work in the converted position, and the employer is a trial court, or (2) a retiree of the
Judges' Retirement System or the Judges' Retirement System II who is assigned to serve in a
court pursuant to Section 68543.5.
History
Added Stats 2012 ch 296 § 15 (AB 340), effective January 1, 2013. Amended Stats 2013 ch 528
§ 11 (SB 13), effective October 4, 2013 (ch 528 prevails); ch 76 § 75 (AB 383), effective January
1, 2013; Stats 2014 ch 238 § 1 (AB 2476), effective January 1, 2015.
Annotations
Notes
Amendments:
Note-
Amendments:
2013 Amendment:
Substituted (1) "have passed" for "has passed" in the first sentence of subds (f)(l) and (f)(2); (2)
"or firefighter hired to perform a function or functions regularly performed by a public safety
officer or firefighter" for "of firefighter" in subd (f)(4); and (3) "Judges' Retirement System" for
"Judges' Retirement System I" in subd (i).
134 of 142 3 November 16, 2021, Item #12
BOND COUNSEL AGREEMENT
CITY OF POWAY
(Pension Obligation Bonds, Series 2021 (Federally Taxable))
THIS BOND COUNSEL AGREEMENT (this "Agreement") is made as of this 16th day of
November, 2021, by and between the CITY OF POWAY, a municipal corporation that is organized
and existing under the laws of the State of California (the "City"), and STRADLING YOCCA
CARLSON & RAUTH, a Professional Corporation ("Bond Counsel").
RECITALS
A. The City desires to refund all or a portion of the City's obligations to the California
Public Employees' Retirement System and to pay unamortized, unfunded accrued actuarial liability
with respect to pension benefits and possibly a portion of the City's current normal contribution under
the Public Employees' Retirement Law, constituting Part 3 of Division 5 of Title 2 of the California
Government Code through the issuance of bonds (the "Bonds") by the City.
B. The Bonds will be payable from available City funds, including the General Fund.
C. Bond Counsel represents that it is ready, willing and able to perform the legal work
that is necessary to assist the City in connection with the issuance of the Bonds.
AGREEMENT
NOW, THEREFORE, in consideration of the premises, and the mutual covenants, terms and
conditions herein contained, the parties agree as follows:
l. SCOPE OF SERVICES
A. BOND COUNSEL SERVICES
The City retains Bond Counsel to provide, and Bond Counsel agrees to provide, legal services
in connection with the judicial validation of and issuance by the City of the Bonds. Such services shall
include the rendering of legal opinions (hereinafter called the "opinions") pertaining to the issuance of
the Bonds to the effect that:
I. The Bonds have been properly authorized and issued and are valid and
binding obligations;
2. The essential sources of security for the Bonds have been legally
provided; and
3. Interest on the Bonds 1s exempt from California personal income
taxation.
Bond Counsel's services will also include:
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i. Litigation services related to the judicial validation of the Bonds,
including filing a validation complaint and prosecuting a validation action in San Diego County
Superior Court (the "Validation");
11. Researching applicable laws and ordinances relating to the issuance of
the Bonds;
111. Attending conferences and consulting with City staff and the City
Attorney regarding such laws, and the need for amendments thereto, or additional legislation;
iv. Participating in meetings, conferences or discussions with any financial
advisors, underwriters or other experts retained by the City with respect to the issuance of Bonds; and
v. Supervising and preparing documentation of the steps to be taken with
respect to the issuance of the Bonds, including:
a. Drafting all resolutions, notices, rules and regulations and other
legal documents required for the issuance of the Bonds, and all other documents relating to the security
of the Bonds, in consultation with the City, the City Attorney, the City's financial advisor, underwriter
and other experts;
b. Preparing the record of proceedings for the authorization, sale
and issuance of Bonds;
c. Assisting in the preparation of the portions of the official
statement or placement memorandum for the sale of Bonds which relate to the terms of the Bonds and
Bond Counsel's legal opinion delivered with respect to the Bonds;
d. Reviewing the purchase contracts or the bidding documents
relating to the sale of Bonds and participating in the related negotiations;
e. Participating in meetings and other conferences scheduled by
the City, the City's financial advisor or the underwriter;
f. Consulting with prospective purchasers, their legal counsel and
rating agencies;
g. Consulting with counsel to the City concerning any legislation
or litigation which may affect the Bonds, the security for Bonds or any other matter related to the
issuance of Bonds;
h. Consulting with any trustee or fiscal agent for the Bonds and
their counsel;
i. Preparing the forms of the Bonds and supervising their
production or printing, signing, authentication and delivery;
j. Rendering a final approving opinion as to the validity of the
Bonds for use and distribution upon their issuance; and
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k. Rendering a legal opinion to the underwriter or purchaser of the
Bonds as to the applicability of the registration requirements of federal securities laws and the fair and
accurate nature of those portions of the Official Statement described in ( c) above.
B. DISCLOSURE COUNSEL SERVICES
In addition to the services set forth in Section A above, Bond Counsel agrees to prepare the
Official Statement for the Bonds and render a negative assurance letter for purposes of Rule I 0b-5 to
the purchase of the Bonds.
C. SPECIAL SERVICES
"Special Services" are defined for purposes of this Agreement as services in addition to the
services outlined in Sections A and B above. Special Services will include, but not be limited to, any
work after a bond closing related to the amendment of bond documents or agreements and special
studies or analyses. Special Services must be authorized in writing by the Director of Finance, or his
designee.
2. COMPENSATION
The City agrees to pay Bond Counsel, but only from the sources of funds specified below, the
following amounts as compensation for services rendered by Bond Counsel under this Agreement:
A. For the services to be rendered under Section 1.A(i), Bond Counsel will be paid
a fee of $25,000; provided, however, that if the Validation complaint is answered or the reliefrequested
by the City is otherwise contested, any fees incurred with respect to the challenged Validation will be
billed as Special Services and be paid in accordance with Section 2.B below. For the remainder of
services to be rendered under Sections I .A and 1.B above, Bond Counsel will be paid a fee of $75,000.
The fees referenced in this Section 2.A shall be paid to Bond Counsel on the closing date and
shall be payable solely from Bond proceeds; provided that, if the City does not elect to pursue the
issuance of the Bonds following the filing of the Validation, the City shall pay Bond Counsel the
$25,000 referenced above plus the expenses incurred pursuant to Section 2.C below.
The fees referenced in this Section 2.A assume that the Bonds will be issued within two years
from the date of this Agreement. In the event that the Bonds are not issued within that time, Bond
Counsel reserves the right to make such modifications to the foregoing fees as the City and Bond
Counsel agree, as justified by reason of increased cost to Bond Counsel and the then prevailing fees
for disclosure counsel and bond counsel services for bonds such as the Bonds.
B. In the event that Bond Counsel is requested to perform Special Services as set
forth in Section 1.C above, Bond Counsel will be paid fees at the hourly rates set forth in Exhibit A,
or in such other manner as is mutually acceptable to the City and Bond Counsel. Such fees will be
billed monthly and shall be payable exclusively from funds of the City within thirty (30) days following
the receipt of each invoice.
C. In addition to the fees set forth in paragraphs A and B above, Bond Counsel
shall be reimbursed for the actual cost of any out-of-pocket expenses reasonably incurred by Bond
Counsel in the course of its employment, such as document reproduction, telecommunications charges,
printing costs, filing fees, long-distance telephone calls, messenger services, overnight delivery
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services, travel and similar items of expense. Expenses related to the services described in Section 1.C
above will be billed monthly. All expenses incurred in connection with services rendered under
Sections I .A and 1.8 above will be billed upon the issuance of the Bonds; provided, however, that any
expenses related to a contested Validation shall be billed and paid monthly pursuant to Section 2.8
above.
3. PERSONNEL AND CONTRACT ADMINISTRATION
City agrees to accept and Bond Counsel agrees to provide the aforementioned services
primarily through Brian P. Forbath, Carol L. Lew, Allison Burns, Cyrus Torabi and Jennifer Toghian.
If any one of the above attorneys is unable to provide such services due to death, disability or similar
event, Bond Counsel reserves the right to substitute another of its attorneys, upon approval by the
Director of Finance, or his designee, to provide such services; and such substitution shall not alter or
affect in any way Bond Counsel's or the City's other obligations under this Agreement.
This Agreement will be administered by the Director of Finance, or his designee.
4. CONFLICTS OF INTEREST
Bond Counsel represents many of the underwriting firms active in the issuance of bonds for
cities and other municipal financings. The City hereby provides its informed written consent to Bond
Counsel's representation of such underwriting firms on matters unrelated to the Bonds.
5. TERMINATION
A. This Agreement may be terminated without cause by the City or Bond Counsel
upon thirty (30) days' advance written notice to the other party. Such notification shall state the
effective date of the termination of this Agreement.
B. Bond Counsel reserves the absolute right to withdraw from representing the
City if, among other things, the City fails to honor the terms of this Agreement, the City fails to
cooperate fully or follow Bond Counsel's advice on a material matter, or any fact or circumstance
occurs that would, in Bond Counsel's view, render its continuing representation unlawful or unethical.
If Bond Counsel elects to withdraw, the City will take all steps necessary to free Bond Counsel of any
obligation to perform further services, including the execution of any documents necessary to complete
such withdrawal, and Bond Counsel will be entitled to be paid at the time of withdrawal for all services
rendered and costs and expenses paid or incurred on the City's behalf in accordance with the payment
terms set forth in Section 2 above. If necessary in connection with litigation, Bond Counsel would
request leave of court to withdraw.
C. Bond Counsel's representation of the City will be considered terminated upon
the earlier of: (i) the City's termination of its representation; (ii) Bond Counsel's withdrawal from its
representation of the City; or (iii) the substantial completion by Bond Counsel of its substantive work
for the City. Unless Bond Counsel has been specifically engaged to perform Special Services related
to the Bonds after their issuance, Bond Counsel's representation of City with respect to the Bonds shall
terminate on the date of issuance of the last series of Bonds.
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6. ARBITRATION
[N THE EVENT OF A DISPUTE REGARDlNG FEES, COSTS, OR ANY OTHER MATTER
ARISING OUT OF OR RELATED lN ANY WAY WHATSOEVER TO BOND COUNSEL'S
RELATIONSHIP WITH THE CITY, OR BOND COUNSEL'S OR THE CITY'S PERFORMANCE
OF THIS AGREEMENT, lNCLUDlNG THE QUALITY OF THE SERVICES WHICH BOND
COUNSEL RENDERS, THE DISPUTE SHALL BE DETERMlNED, SETTLED AND RESOLVED
BY CONFIDENTlAL ARBITRATION lN THE COUNTY OF SAN DIEGO, CALIFORNlA. ANY
AWARD SHALL BE FlNAL, BlNDlNG AND CONCLUSIVE UPON THE PARTIES, AND A
JUDGMENT RENDERED THEREON MAY BE ENTERED lN ANY COURT HA VlNG
JURrSDICTION THEREOF. SHOULD YOU ELECT TO HA VE ANY FEE DISPUTE
ARBITRATED PURSUANT TO NONBlNDlNG ARBITRATlON UNDER STATUTORY OR
CASE LAW, THEN SUCH NONBlNDlNG ARBITRATION SHALL DETERMlNE ONLY THE
ISSUE OF THE AMOUNT OF FEES PROPERLY CHARGEABLE TO YOU. ANY OTHER
CLAIMS OR DISPUTES BETWEEN US, lNCLUDlNG CLAIMS FOR PROFESSIONAL
NEGLIGENCE, SHALL REMAlN SUBJECT TO BlNDlNG ARBITRATION PURSUANT TO
TH[S AGREEMENT.
Arbitration may be demanded by the sending of written notice to the other party. If arbitration
is demanded, within 20 days of the demand the City shall present a list of five qualified individuals
who would be willing to serve that the City would find acceptable to act as arbitrator. To serve as
arbitrator, the individual must be a retired judge having served on any federal court or the California
Superior Court or higher court in the State of California. Within 20 days of receiving the City's list,
Bond Counsel may at its sole discretion: (i) select any individual from that list and that individual shall
serve as the arbitrator; or (ii) propose its own list of five individuals for arbitrator. If Bond Counsel
chooses to present a separate list, the City may within 20 days select any individual from that list and
that person shall serve as arbitrator. If no arbitrator can be agreed upon at the end of this process, the
City and Bond Counsel each shall select one individual from its own list and those two persons shall
jointly select the arbitrator. The arbitration shall be conducted pursuant to the procedures set forth in
the California Code of Civil Procedure § 1280 et seq., and in that connection you and we agree that §
1283 .05 thereof is applicable to any such arbitration. Nothing herein shall limit the right of the parties
to stipulate and agree to conduct the arbitration pursuant to the then-current rules of the American
Arbitration Association, the Judicial Arbitration & Mediation Services, or any other agreed-upon
arbitration services provider.
Notwithstanding any of the foregoing, the City shall be entitled to opt out of the arbitration
provisions contained in this Section.
7. MISCELLANEOUS
A. Bond Counsel and the employees of Bond Counsel, in performance of the
Agreement, shall act in an independent capacity and not as officers or agents of the City.
B. Without the written consent of the City, this Agreement is not assignable by
Bond Counsel in whole or in part.
C. No alteration or variation of the terms of this Agreement shall be valid unless
in writing and signed by the parties hereto, and no oral understanding or agreement not incorporated
herein shall be binding on any of the parties hereto.
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D. In accordance with the requirements of California Business and Professions
Code § 6148, Bond Counsel advises you that Bond Counsel maintains professional errors and
omissions insurance coverage applicable to the services to be rendered to the City.
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140 of 142 November 16, 2021, Item #12
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CITY OF POWAY:
City Manager
STRADLING YOCCA CARLSON & RAUTH
By:
BRIAN FORBA TH
Title: President
141 of 142 November 16, 2021, Item #12
Brian Forbath/Carol Lew/Cyrus Torabi
Allison Bums
Associates
Paralegals
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EXHIBIT A
$600/Hour
$550/Hour
$325/Hour
$150/Hour
November 16, 2021, Item #12