$158,085,000 city of long beach, california harbor revenue …cdiacdocs.sto.ca.gov/2010-0226.pdf ·...

NEW ISSUE—BOOK-ENTRY ONLY RATINGS: See “RATINGS” herein.

In the opinion of Kutak Rock LLP, Bond Counsel, under existing laws, regulations, rulings and judicial decisions and assuming the accuracy of certain representations and continuing compliance with certain covenants, interest on the Series 2010B Bonds is excluded from gross income for federal income tax purposes, except for interest on any Series 2010B Bond for any period during which such Series 2010B Bond is held by a “substantial user” of the facilities financed or refinanced by the Series 2010B Bonds or a “related person” within the meaning of Section 147(a) of the Internal Revenue Code of 1986, as amended. Bond Counsel is further of the opinion that interest on the Series 2010B Bonds is not a specific preference item for purposes of the federal alternative minimum tax. Bond Counsel is further of the opinion that interest on the Series 2010B Bonds is exempt from State of California personal income taxes. See “TAX MATTERS” herein.

$158,085,000 City of Long Beach, California Harbor Revenue Refunding Bonds

Series 2010B

Dated: Date of Delivery Due: May 15, as shown on the inside cover

The City of Long Beach, California, Harbor Revenue Refunding Bonds, Series 2010B (the “Series 2010B Bonds”) are being issued by the City of Long Beach, California (the “City”), acting by and through its Board of Harbor Commissioners (the “Board”), to (a) purchase $63,060,000 aggregate principal amount of the City’s Harbor Revenue Bonds, Series 2002B, $12,105,000 aggregate principal amount of the City’s Harbor Revenue Refunding Bonds, Series 2004A, and $78,410,000 aggregate principal amount of the City’s Harbor Revenue Refunding Bonds, Series 2005A, from the holders thereof, (b) fund a reserve fund for the Series 2010B Bonds and (c) pay the costs of issuing the Series 2010B Bonds, as described herein. See “PLAN OF FINANCE” and “APPLICATION OF SERIES 2010B BOND PROCEEDS.”

The Series 2010B Bonds will be issued as fully registered bonds in the name of Cede & Co., as registered owner and nominee of The Depository Trust Company (“DTC”), New York, New York. Individual purchases and sales of the Series 2010B Bonds may be made in book-entry form only in denominations of $5,000 and integral multiplies thereof. Purchasers will not receive certificates representing their interest in the Series 2010B Bonds. Interest on the Series 2010B Bonds will be payable on May 15 and November 15 of each year, commencing on November 15, 2010. So long as the Series 2010B Bonds are held by DTC, the principal of and interest on the Series 2010B Bonds will be payable by wire transfer to DTC, which in turn will be required to remit such principal and interest to the DTC participants for subsequent disbursement to the beneficial owners of the Series 2010B Bonds, as more fully described herein.

The Series 2010B Bonds are subject to optional redemption prior to maturity as more fully described herein. See “DESCRIPTION OF THE SERIES 2010B BONDS—Redemption.”

The Series 2010B Bonds are special, limited obligations of the City and are secured by a pledge of and lien upon and will be a charge upon and will be payable from the Revenues on parity with the Parity Debt. The Series 2010B Bonds are not a debt of the City, nor a legal or equitable pledge, charge, lien or encumbrance upon any of its property or upon any of its income, receipts or revenues, except the revenues of the Harbor Department of the City. The general fund of the City is not liable for the payment of the Series 2010B Bonds or interest thereon, nor is the credit or the taxing power of the City pledged therefor. An Owner of Series 2010B Bonds may not compel the exercise of the taxing power of the City or the forfeiture of any of its property. The Series 2010B Bonds will be issued on a parity with certain other outstanding indebtedness of the City pursuant to the Resolution. See “SECURITY AND SOURCES OF PAYMENT FOR THE SERIES 2010B BONDS.”

This cover page is not intended to be a summary of the Series 2010B Bonds or the security thereof. Investors are advised to read the Official Statement in its entirety to obtain information essential to the making of an informed investment decision. Capitalized terms used on this cover page and not otherwise defined have the meanings set forth herein.

The Series 2010B Bonds are offered, when, as and if issued by the City, subject to the approval of legality by Kutak Rock LLP, Bond Counsel, and to certain other conditions. Certain matters will be passed upon for the City by the City Attorney of the City of Long Beach, and certain legal matters will be passed upon for the City by Kutak Rock LLP, as Disclosure Counsel. Certain legal matters will be passed upon for the Underwriter by its counsel, Orrick, Herrington & Sutcliffe LLP. Public Resources Advisory Group has served as Financial Advisor to the City. It is expected that the Series 2010B Bonds will be available for delivery through the facilities of DTC on or about May 12, 2010.

De La Rosa & Co. Date of Official Statement: April 29, 2010

MATURITY SCHEDULE

$158,085,000City of Long Beach, California

Harbor Revenue Refunding BondsSeries 2010B

DueMay 15

PrincipalAmount

InterestRate Yield CUSIP No.1

2011 $ 130,000 3.00% 0.49% 542424SC12012 195,000 3.00 0.89 542424SD92013 7,495,000 4.00 1.27 542424SE72013 11,765,000 5.00 1.27 542424SF42014 1,000,000 4.00 1.67 542424SG22014 1,135,000 5.00 1.67 542424SH02015 2,230,000 5.00 2.06 542424SJ62016 6,475,000 5.00 2.47 542424SK32017 130,000 5.00 2.81 542424SL12018 2,675,000 5.00 3.04 542424SM92019 1,810,000 4.00 3.26 542424SN72019 13,845,000 5.00 3.26 542424SP22020 1,075,000 4.00 3.41 542424SQ02020 15,020,000 5.00 3.41 542424SR82021 19,235,000 5.00 3.60C 542424SS62022 10,880,000 5.00 3.74C 542424ST42023 1,260,000 5.00 3.83C 542424SU12024 340,000 4.00 3.96C 542424SV92024 18,710,000 5.00 3.96C 542424SW72025 2,500,000 4.50 4.04C 542424SX52025 21,500,000 5.00 4.04C 542424SY32026 7,900,000 5.00 4.12C 542424SZ02027 5,250,000 4.00 4.20 542424TA42027 5,530,000 5.00 4.20C 542424TB2

C Priced to the par call date of May 15, 2020.1 Copyright 2010, American Bankers Association. CUSIP data was provided by Standard & Poor’s, CUSIP Service Bureau, a division of The

McGraw-Hill Companies Inc. CUSIP numbers are provided only for the convenience of the reader. None of the Harbor Department, theBoard, the City or the Underwriter take any responsibility for any changes to or errors in this list of CUSIP numbers.

[PAGE INTENTIONALLY LEFT BLANK]

HARBOR DEPARTMENT OF THE CITY OF LONG BEACH

BOARD OF HARBOR COMMISSIONERS

Nick SramekPresident

Mario CorderoVice President

Dr. Mike WalterSecretary

Susan E. Anderson WiseCommissioner

Thomas FieldsCommissioner

PORT MANAGEMENT

Richard D. SteinkeExecutive Director

J. Christopher LytleDeputy Executive Director and Chief Operating Officer

Steven B. RubinManaging Director, Finance &

Administration

Douglas A. ThiessenManaging Director, Engineering

Dr. Robert G. KanterManaging Director,

Environmental Affairs & Planning

Vacant1

Managing Director, Trade Relations& Port Operations

Sam JoumblatChief Financial Officer

CITY OF LONG BEACH, CALIFORNIA

CITY COUNCIL

Bob FosterMayor

Val LerchVice Mayor

Robert Garcia Gerrie SchipskeSuja Lowenthal Dee AndrewsGary DeLong Tonia Reyes Uranga

Patrick O’Donnell Rae Gabelich

CITY OFFICIALS AND STAFF

Patrick WestCity Manager

Suzanne M. FrickAssistant City Manager

Lori Ann FarrellDirector of

Financial Management, CFO

David S. NakamotoCity Treasurer

Robert E. ShannonCity Attorney

Thomas M. ReevesCity Prosecutor

Laura L. DoudCity Auditor

Larry HerreraCity Clerk

Dominic T. HolzhausPrincipal Deputy City Attorney

PROFESSIONAL SERVICES

FINANCIAL ADVISORPublic Resources Advisory Group

Los Angeles, California

FISCAL AGENTU.S. Bank National Association

Los Angeles, California

BOND COUNSEL ANDDISCLOSURE COUNSEL

Kutak Rock LLP

1 The position of Managing Director, Trade Relations & Port Operations became vacant in early March 2010. The Board has begun a search tofill this position.

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No dealer, broker, salesperson or other person has been authorized by the City or the Board togive any information or to make any representations other than as set forth herein and, if given or made,such other information or representation must not be relied upon as having been authorized by the City orthe Board. This Official Statement does not constitute an offer to sell or the solicitation of an offer to buynor shall there be any sale of the Series 2010B Bonds by a person in any jurisdiction in which it isunlawful 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 of the Series2010B Bonds. Statements contained in this Official Statement which involve estimates, forecasts ormatters of opinion, whether or not expressly so described herein, are intended solely as such and are notto be construed as representations of facts. See “INTRODUCTION—Forward-Looking Statements”herein.

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 partof, its responsibilities to investors under the federal securities laws as applied to the facts andcircumstances of this transaction, but the Underwriter does not guarantee the accuracy or completeness ofsuch information.

The information and expressions of opinion herein are subject to change without notice, andneither the delivery of this Official Statement nor any sale made hereunder shall under any circumstancescreate any implication that there has been no change in the affairs of the City, the Board, the HarborDepartment or the Port since the date hereof. This Official Statement is submitted in connection with thesale of the Series 2010B Bonds referred to herein and may not be reproduced or used, in whole or in part,for any other purpose.

THE SERIES 2010B BONDS HAVE NOT BEEN REGISTERED UNDER THE SECURITIESACT OF 1933, AS AMENDED, IN RELIANCE UPON AN EXEMPTION CONTAINED THEREIN,AND HAVE NOT BEEN REGISTERED OR QUALIFIED UNDER THE SECURITIES LAWS OFANY STATE. THE RESOLUTION HAS NOT BEEN QUALIFIED UNDER THE TRUSTINDENTURE ACT OF 1939, AS AMENDED, IN RELIANCE UPON AN EXEMPTION CONTAINEDTHEREIN. THE SERIES 2010B BONDS HAVE NOT BEEN RECOMMENDED BY ANY FEDERALOR STATE SECURITIES COMMISSION OR REGULATORY COMMISSION. FURTHERMORE,THE FOREGOING AUTHORITIES HAVE NOT CONFIRMED THE ACCURACY ORDETERMINED THE ADEQUACY OF THIS OFFICIAL STATEMENT.

IN CONNECTION WITH THIS OFFERING, THE UNDERWRITER MAY OVERALLOT OREFFECT TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THESERIES 2010B BONDS AT A LEVEL ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL INTHE OPEN MARKET. SUCH STABILIZING TRANSACTIONS, IF COMMENCED, MAY BEDISCONTINUED AT ANY TIME. THE UNDERWRITER MAY OFFER AND SELL THE SERIES2010B BONDS TO CERTAIN DEALERS AND OTHERS AT PRICES LOWER THAN THE PUBLICOFFERING PRICES STATED ON THE INSIDE COVER PAGE OF THIS OFFICIAL STATEMENT,AND SUCH PUBLIC OFFERING PRICES MAY BE CHANGED FROM TIME TO TIME BY THEUNDERWRITER.

TABLE OF CONTENTS

Page Page

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INTRODUCTION................................................................... 1General ............................................................................ 1The City, the Harbor Department and the Board............. 1The Port of Long Beach .................................................. 1The Series 2010B Bonds ................................................. 1Security for Series 2010B Bonds..................................... 2Rate Covenant ................................................................. 2Series 2010B Reserve Fund............................................. 3Outstanding Revenue Bonds and Parity Debt.................. 3Capital Development Program ........................................ 4Property Agreements....................................................... 4Forward-Looking Statements .......................................... 5Continuing Disclosure..................................................... 5Additional Information.................................................... 5

PLAN OF FINANCE .............................................................. 5Purchase of Purchased Bonds.......................................... 5Series 2010A Bonds ........................................................ 6Redemption of Series 2000A Bonds ............................... 7

APPLICATION OF SERIES 2010B BONDPROCEEDS .................................................................... 7

DESCRIPTION OF THE SERIES 2010B BONDS................ 7General ............................................................................ 7Redemption ..................................................................... 8

SECURITY AND SOURCES OF PAYMENT FORTHE SERIES 2010B BONDS......................................... 9Pledge of Revenues ......................................................... 9Rate Covenant ............................................................... 10Flow of Funds ............................................................... 11Series 2010B Reserve Fund; Reserve Funds forPrior Bonds and Series 2010A Bonds ........................... 11Funds Held by Third Parties.......................................... 12Additional Bonds and Parity Debt................................. 13Investments ................................................................... 14

OUTSTANDING OBLIGATIONS AND DEBTSERVICE SCHEDULE ................................................ 14Outstanding Revenue Bonds and Parity Debt................ 14Debt Service Requirements ........................................... 16Debt Service Coverage on Revenue Bonds andParity Debt .................................................................... 17Future Financings.......................................................... 17Other Obligations .......................................................... 17

THE PORT OF LONG BEACH ........................................... 20General .......................................................................... 20Power and Authority of the Board................................. 21Management and Administration .................................. 21Employee Relations....................................................... 24Current Port Facilities ................................................... 25Marine Commerce and Cargoes .................................... 29Property Agreements..................................................... 33Port Tariffs .................................................................... 34Operating Performance.................................................. 35Stevedoring and Cargo Handling .................................. 36Environmental Compliance ........................................... 37

CAPITAL DEVELOPMENT PROGRAM ........................... 41Master Plan.................................................................... 412010-19 Capital Plan ..................................................... 41Funding Sources of 2010-19 Capital Plan ..................... 45

FINANCIAL DATA ............................................................. 46Financial Statements...................................................... 49Accounting and Annual Budget .................................... 50Pension and Post-Retirement Health Care Benefits....... 50Risk Management and Insurance................................... 52Investment Policy.......................................................... 53

CERTAIN INVESTMENT CONSIDERATIONS................ 54Ability To Meet Rate Covenant..................................... 54Factors Affecting Demand for Port Facilities................ 55Port Competition ........................................................... 55Factors Affecting 2010-19 Capital Plan ........................ 58Unavailability of, or Delays in, AnticipatedFunding Sources............................................................ 58Security at the Port ........................................................ 58Environmental Compliance and Impacts....................... 59Seismic Risks ................................................................ 60Termination or Expiration of Property Agreements ...... 61Effect of Tenant Bankruptcy ......................................... 61Effect of City Bankruptcy ............................................. 62Forward-Looking Statements ........................................ 63

LITIGATION........................................................................ 63No Litigation Relating to the Series 2010B Bonds........ 63Litigation Relating to the Harbor Department andthe Port .......................................................................... 63

TAX MATTERS................................................................... 64General .......................................................................... 64Backup Withholding...................................................... 64Changes in Federal and State Tax Law ......................... 65Tax Treatment of Original Issue Discount .................... 65Tax Treatment of Original Issue Premium .................... 66

LEGAL MATTERS .............................................................. 66RATINGS ............................................................................. 66UNDERWRITING................................................................ 67FINANCIAL ADVISOR....................................................... 67CONTINUING DISCLOSURE ............................................ 67MISCELLANEOUS.............................................................. 68

APPENDIX A HARBOR DEPARTMENT OF THE CITY OFLONG BEACH AUDITED FINANCIALSTATEMENTS FOR THE FISCAL YEARSENDED SEPTEMBER 30, 2009 AND 2008

APPENDIX B SUMMARY OF CERTAIN PROVISIONS OFTHE RESOLUTION

APPENDIX C FORM OF OPINION OF BOND COUNSELAPPENDIX D BOOK-ENTRY-ONLY SYSTEMAPPENDIX E FORM OF CONTINUING DISCLOSURE

CERTIFICATE

OFFICIAL STATEMENT



INTRODUCTION

General

The purpose of this Official Statement, which includes the cover page, inside cover pages, tableof contents and appendices hereto, is to provide certain information concerning the sale and delivery bythe City of Long Beach, California (the “City”), acting by and through the Board of HarborCommissioners of the City (the “Board”), of $158,085,000 aggregate principal amount of City of LongBeach, California, Harbor Revenue Refunding Bonds Series 2010B (the “Series 2010B Bonds”).Capitalized terms used but not otherwise defined herein will have the respective meaning assigned tothem in Appendix B hereto.

The City, the Harbor Department and the Board

The City is a municipal corporation and chartered city organized and existing under the Charterof the City of Long Beach, California (the “Charter”) and the Constitution and the laws of the State ofCalifornia (the “State”). The Harbor Department of the City (the “Harbor Department”) was created in1931 by an amendment to the Charter to promote, develop and operate the Port of Long Beach (the“Port”). The Charter confers on the Board exclusive control and management of the Harbor Departmentand control and jurisdiction over the Harbor District (as defined herein) other than the tide and submergedlands granted to the City and the State used for, or in connection with the drilling for, developing,producing, extracting, processing, taking or removing, storing and disposing of oil, gas and otherhydrocarbon substances. See “THE PORT OF LONG BEACH” for additional information about theHarbor Department, the Port and the Board.

The Port of Long Beach

The Port is a harbor complex that covers approximately 12 square miles of which approximately7.1 square miles is water. The Port has approximately 22 miles of waterfront with 65 deep-water berths,several of which are and will be capable of servicing the largest commercial ships currently afloat and thelargest commercial ships currently being designed, with equipment and facilities for handling all types ofcargo. According to the American Association of Port Authorities, the Port was the number two-rankedcontainer port in the nation in terms of container cargo for the year ended December 31, 2009. Thefacilities at the Port moved approximately 5.07 million Twenty-Foot Equivalent Units (“TEUs”) duringthe calendar year ended December 31, 2009. See “THE PORT OF LONG BEACH” for additionalinformation about the Port.

The Series 2010B Bonds

The Series 2010B Bonds are authorized and being issued pursuant to Article XII of the Charter,Title 3, Chapter 3.52, Division I of the Municipal Code of the City, certain provisions of the RevenueBond Law of 1941, Section 54300, et seq., of the Government Code of the State of California, ResolutionNo. HD-2549, adopted by the Board on March 8, 2010 (“Resolution No. HD-2549”), Resolution

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No. HD-1475, adopted by the Board on November 8, 1989, as amended and supplemented (the “MasterResolution”), and the Thirteenth Supplemental Resolution, which, as provided for in Resolution No.HD-2549, will be adopted by the Board after the execution and delivery of the Bond Purchase Agreement(as defined herein) (the “Thirteenth Supplemental Resolution,” and together with the Master Resolution,the “Resolution”). The Thirteenth Supplemental Resolution is currently scheduled to be adopted by theBoard on May 10, 2010.

The Series 2010B Bonds are being issued to (a) purchase $63,060,000 aggregate principalamount of the outstanding City of Long Beach, California, Harbor Revenue Bonds, Series 2002B,$12,105,000 aggregate principal amount of the outstanding City of Long Beach, California, HarborRevenue Refunding Bonds, Series 2004A, and $78,410,000 aggregate principal amount of theoutstanding City of Long Beach, California, Harbor Revenue Refunding Bonds, Series 2005A(collectively, the “Purchased Bonds”) from the holders thereof, (b) fund a reserve fund for the Series2010B Bonds and (c) pay the costs of issuing the Series 2010B Bonds, all as further described herein.The Purchased Bonds will be purchased and cancelled on May 13, 2010. See “PLAN OF FINANCE”and “APPLICATION OF SERIES 2010B BOND PROCEEDS.”

The Series 2010B Bonds will be dated their initial date of delivery, will mature as shown on theinside cover page hereof, will be subject to redemption prior to maturity, as described herein, and willbear interest at the rates shown on the inside cover page hereof, calculated on the basis of a 360-day yearconsisting of twelve 30-day months. Interest will be payable semiannually on May 15 and November 15of each year commencing November 15, 2010.

The Series 2010B Bonds will be issued as fully registered bonds and, when issued, will beregistered 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 Series 2010B Bonds. Upon receipt ofpayments of principal and interest DTC is to remit such principal and interest to the Direct Participants(as defined herein) for subsequent disbursement by the Direct Participants and the Indirect Participants (asdefined herein) to the Beneficial Owners (as defined herein) of the Series 2010B Bonds. See“APPENDIX D—BOOK-ENTRY-ONLY SYSTEM.”

Security for Series 2010B Bonds

The Series 2010B Bonds are special, limited obligations of the City and are secured by a pledgeof and lien upon and will be a charge upon and will be payable from the Revenues (as defined herein) onparity with all other Revenue Bonds (as defined herein) and all other debt issued or incurred and payablefrom Revenues on a parity with the Revenue Bonds (the “Parity Debt”). The Series 2010B Bonds are nota debt of the City, nor a legal or equitable pledge, charge, lien or encumbrance upon any of its property orupon any of its income, receipts or revenues, except the Revenues and the funds and accounts specificallypledged to the payment thereof. The general fund of the City is not liable for the payment of the Series2010B Bonds or any interest thereon, nor is the credit or the taxing power of the City pledged therefor.An Owner of the Series 2010B Bonds may not compel the exercise of the taxing power of the City or theforfeiture of any of its property. See “SECURITY AND SOURCES OF PAYMENT FOR THE SERIES2010B BONDS.”

Rate Covenant

Rates, charges, rentals and fees for the use of the Port are established by the Board. The Boardhas covenanted in the Master Resolution to establish and collect rates, charges, rentals and fees that willproduce Revenues in each fiscal year equal to 1.25 times Maximum Annual Debt Service, and that,together with other moneys available or reasonably expected to be available, will be sufficient to pay debt

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service on all Revenue Bonds and Parity Debt and to pay the expenses of operating and maintaining thePort. See “SECURITY AND SOURCES OF PAYMENTS FOR THE SERIES 2010B BONDS—RateCovenant.”

Series 2010B Reserve Fund

The Thirteenth Supplemental Resolution will provide for the establishment and maintenance ofthe Series 2010B Reserve Fund. Amounts in the Series 2010B Reserve Fund will be withdrawn for thepurpose of paying the principal of and interest on the Series 2010B Bonds in the event moneys in thePrincipal Account and/or Interest Account of the Bond Service Fund are insufficient. At the time ofdelivery of the Series 2010B Bonds, the Series 2010B Reserve Fund will be funded in an amount equal tothe Bond Reserve Requirement (as defined herein). See “PLAN OF FINANCE,” “APPLICATION OFSERIES 2010B BOND PROCEEDS” and “SECURITY AND SOURCES OF PAYMENT FOR THESERIES 2010B BONDS—Series 2010B Reserve Fund; Reserve Funds for Prior Bonds and Series 2010ABonds.”

Outstanding Revenue Bonds and Parity Debt

Pursuant to the Master Resolution, the City, acting by and through the Board, has previouslyissued and as of March 1, 2010 there was outstanding $785,205,000 aggregate principal amount of theCity of Long Beach, California Harbor Revenue Refunding Bonds Series 1998A (the “Series 1998ABonds”), the City of Long Beach, California, Harbor Revenue Bonds, Series 2000A (the “Series 2000ABonds”), the City of Long Beach, California, Harbor Revenue Bonds, Series 2002B (the “Series 2002BBonds”), the City of Long Beach, California, Harbor Revenue Refunding Bonds, Series 2004A (the“Series 2004A Bonds”), the City of Long Beach, California Harbor Revenue Refunding Bonds Series2004B (the “Series 2004B Bonds”), the City of Long Beach, California, Harbor Revenue RefundingBonds, Series 2005A (the “Series 2005A Bonds”), and the City of Long Beach, California HarborRevenue Refunding Bonds Series 2005B (the “Series 2005B Bonds,” and collectively with the Series1998A Bonds, the Series 2000A Bonds, the Series 2002B Bonds, the Series 2004A Bonds, the Series2004B Bonds and the Series 2005A Bonds, the “Prior Bonds”). See “PLAN OF FINANCE” forinformation about the Board’s plans to redeem, on May 15, 2010, all of the Series 2000A Bonds maturingon and after May 15, 2011. The Board is also authorized to issue not to exceed $383,500,000 of City ofLong Beach, Harbor Department, Commercial Paper Notes (the “Notes”) of which $31,400,000 aggregateprincipal amount was outstanding as of March 1, 2010. The Notes constitute Parity Debt under theMaster Resolution.

As described under “PLAN OF FINANCE,” the Board issued, on April 22, 2010, $200,835,000aggregate principal amount of City of Long Beach, California Harbor Revenue Bonds Series 2010A (the“Series 2010A Bonds”), the proceeds of which will be used, among other things, to finance certain capitalimprovements at the Port.

The Prior Bonds, the Series 2010A Bonds, the Series 2010B Bonds, and any additional Bondsissued pursuant to the terms of the Master Resolution are collectively referred to herein as “RevenueBonds.” The Revenue Bonds and any Parity Debt (including the Notes) incurred by the Board aresecured by a pledge of and lien upon and will be a charge upon and will be payable from Revenues. See“SECURITY AND SOURCES OF PAYMENT FOR THE SERIES 2010B BONDS” and“OUTSTANDING OBLIGATIONS AND DEBT SERVICE SCHEDULE.”

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Capital Development Program

The Harbor Department maintains a master plan of capital projects and improvements to beundertaken at the Port. The most recent version of the Port of Long Beach Master Plan, as amended (the“Port Master Plan”) sets forth certain capital projects and improvements to the Port that the HarborDepartment anticipates undertaking through 2020. The purpose of the Port Master Plan is to provide theHarbor Department with a planning tool to guide future Port development and to ensure that projects anddevelopments in the Harbor District are consistent with the requirements of the California Coastal Act of1976, as amended (the “California Coastal Act”).

In addition to the Port Master Plan, the Harbor Department maintains a 10-year capital plan thatsets forth the specific projects the Harbor Department expects to develop and construct over the next tenyears. The Harbor Department’s current 10-year capital plan (the “2010-19 Capital Plan”) includescapital projects and improvements to be undertaken at the Port between fiscal years 2010 and 2019. TheCity’s and the Harbor Department’s fiscal year currently begins on October 1 and ends on September 30of the immediately following year. The 2010-19 Capital Plan includes, but is not limited to, theexpansion and modernization of the shipping terminals on Piers D, E, F and G, the expansion of on-dockrail facilities, the construction of a new bridge to replace the existing Gerald Desmond Bridge, theconstruction of a new Port administration building, the dredging of the Long Beach Harbor, theinstallation of various security improvements, and the construction of a new container terminal on Pier S.Currently, the 2010-19 Capital Plan has an aggregate estimated cost of approximately $4.658 billion. TheHarbor Department expects to finance approximately $3.268 billion of the costs of the 2010-19 CapitalPlan with revenues of the Harbor Department, proceeds of the Series 2010A Bonds and proceeds ofadditional Revenue Bonds. The Harbor Department expects the remaining approximately $1.390 billionof costs of the 2010-19 Capital Plan will be financed with federal and State grants and other sources offunds. In the event any of the expected federal and State grants are not received by the HarborDepartment, the projects to be financed with such grants will be delayed and/or reduced in scope, or theHarbor Department will seek other sources of funding to complete these projects. See “PLAN OFFINANCE” and “CAPITAL DEVELOPMENT PROGRAM.”

Property Agreements

The Harbor Department operates the Port as a landlord through various property agreementsentered into with tenants of the Port. The property agreements entered into by the Board, which conveythe right to use, rent or lease Port assets, include leases, preferential assignment agreements, revocablepermits, area assignments and pipeline licenses. Pursuant to the property agreements, the tenants of thePort pay tariff charges (including, but not limited to, wharfage (the charge assessed when cargo crossesthe wharf), dockage (the charge assessed for docking a vessel at a berth), storage and demurrage (chargesrelated to the duration that cargo may be stored at the terminal)) and other fees to the Harbor Departmentfor the right to use, rent or lease Port facilities. Most of the Port’s long-term property agreements containguaranteed annual minimum payments. For fiscal year 2009, the long-term property agreements with thePort’s major tenants contained guaranteed annual minimum payments of approximately $223 million.Over the last five fiscal years, property agreements covering waterfront property and facilities generatedin excess of 90% of the Harbor Department’s operating revenues. The Board has property agreementswith approximately 280 private companies and approximately 40 public agencies. See “THE PORT OFLONG BEACH—Property Agreements” for additional information on the property agreements enteredinto by the Board.

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Forward-Looking Statements

This Official Statement, including the appendices hereto, contains statements relating to futureresults that are “forward-looking statements.” When used in this Official Statement, the words“estimate,” “anticipate,” “forecast,” “project,” “intend,” “propose,” “plan,” “expect” and similarexpressions identify forward-looking statements. Such statements are subject to risks and uncertaintiesthat could cause actual results to differ materially from those contemplated in such forward-lookingstatements. Any forecast is subject to such uncertainties. Inevitably, some assumptions used to developthe forecasts will not be realized and unanticipated events and circumstances may occur. Therefore, thereare likely to be differences between forecasts and actual results, and those differences may be material.

Continuing Disclosure

The City, acting by and through the Board, will covenant to provide, or to cause to be provided,to the Municipal Securities Rulemaking Board (the “MSRB”) through its Electronic Municipal MarketAccess system (“EMMA”), for purposes of Rule 15c2-12(b)(5) (“Rule 15c2-12”) adopted by the U.S.Securities and Exchange Commission (the “SEC”) under the Securities Exchange Act of 1934, asamended, certain annual financial information and operating data relating to the Harbor Department andthe Port, and, in a timely manner, notice of certain material events. These covenants are made in order toassist the Underwriter (as defined herein) in complying with Rule 15c2-12. See “CONTINUINGDISCLOSURE” and “APPENDIX E—FORM OF CONTINUING DISCLOSURE CERTIFICATE.”

Additional Information

Brief descriptions of the Series 2010B Bonds, the Resolution, the Fiscal Agent Agreement andcertain other documents are included in this Official Statement. Such descriptions do not purport to becomprehensive or definitive. All references herein to such documents and any other documents, statutes,reports or other instruments described herein are qualified in their entirety by reference to each suchdocument, statute, report or other instrument. The information herein is subject to change without notice,and neither the delivery of this Official Statement nor any sale made hereunder will under anycircumstances, create any implication that there has been no change in the affairs of the Board, the HarborDepartment or the Port since the date hereof. This Official Statement is not to be construed as a contractor agreement between the City and/or the Board and purchasers or Owners of any of the Series 2010BBonds. The City, the Harbor Department and the Port maintain certain websites, the information onwhich is not part of this Official Statement, is not incorporated by reference herein and should not berelied upon in deciding whether to invest in the Series 2010B Bonds.

PLAN OF FINANCE

Proceeds from the sale of the Series 2010B Bonds, together with other available moneys, will beused to (a) purchase the Purchased Bonds, (b) fund a reserve for the Series 2010B Bonds and (c) pay thecosts of issuing the Series 2010B Bonds, all as further described herein.

Purchase of Purchased Bonds

Pursuant to a formal tender solicitation, the Board offered to purchase certain of the outstandingSeries 2002B Bonds, Series 2004A Bonds and Series 2005A Bonds (the “Tender Bond Candidates”) forcash at prices determined through the tender process. The owners of the Tender Bond Candidates had theopportunity to submit offers to the Board for it to purchase all or a portion of the owners’ Tender BondCandidates. Pursuant to the tender solicitation, the Board agreed to purchase $63,060,000 aggregateprincipal amount of the Series 2002B Bonds, $12,105,000 aggregate principal amount of the Series

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2004A Bonds and $67,355,000 aggregate principal amount of the Series 2005A Bonds. In addition to thePurchased Bonds the Board has agreed to purchase pursuant to the tender solicitation, the Board also hasagreed to purchase an additional $11,055,000 aggregate principal amount of the Series 2005A Bondspursuant to an open-market purchase.

On May 13, 2010, the Fiscal Agent will use a portion of the proceeds of the Series 2010B Bonds,together with certain other available moneys, to pay the purchase price of the Purchased Bonds and theaccrued interest on the Purchased Bonds to the date of purchase. The Purchased Bonds will be purchasedand cancelled on May 13, 2010. The Board intends to use a portion of the net proceeds of the Series2010B Bonds to pay fees associated with the purchase of the Purchased Bonds (including $614,300.00 tobe paid to E. J. De La Rosa & Co., Inc., as dealer manager with respect to the tender solicitation and theopen market purchase). See “APPLICATION OF SERIES 2010B BOND PROCEEDS.”

The following table summarize the Purchased Bonds the Board will purchase and cancel onMay 13, 2010,

SeriesMaturity Date

(May 15)

OriginalPrincipalAmount

InterestRate CUSIP No.1

PrincipalAmount to be

Purchased

PrincipalAmount to beOutstanding

AfterPurchase

2002B 2016 $ 5,915,000 5.50% 542424LK0 $ 2,500,000 $3,415,0002002B 2019 6,915,000 5.25 542424LN4 6,915,000 02002B 2020 7,280,000 5.25 542424LP9 7,280,000 02002B 2021 7,660,000 5.10 542424LQ7 7,660,000 02002B 2022 8,050,000 5.10 542424LR5 8,050,000 02002B 2027 38,445,000 5.20 542424LT1 30,655,000 7,790,000

2004A 2013 8,505,000 5.00 542424KJ4 8,005,000 500,0002004A 2014 8,930,000 5.00 542424KK1 2,000,000 6,930,0002004A 2015 8,310,000 5.00 542424KL9 2,100,000 6,210,000

2005A 2013 11,055,000 5.00 542424MH6 11,055,000 02005A 2016 12,795,000 5.00 542424ML7 3,835,000 8,960,0002005A 2018 2,560,000 5.00 542424MM5 2,535,000 25,0002005A 2019 14,800,000 5.00 542424MN3 8,590,000 6,210,0002005A 2020 15,545,000 5.00 542424MP8 8,695,000 6,850,0002005A 2021 16,315,000 5.00 542424MQ6 11,480,000 4,835,0002005A 2022 17,125,000 5.00 542424MR4 2,735,000 14,390,0002005A 2023 17,985,000 5.00 542424MS2 1,170,000 16,815,0002005A 2024 18,885,000 5.00 542424MT0 11,860,000 7,025,0002005A 2025 19,785,000 5.00 542424MU7 16,455,000 3,330,000

1 CUSIP numbers are provided only for the convenience of the reader. None of the City, the Board or the Underwriter undertake anyresponsibility for the accuracy of such CUSIP numbers or for any changes or errors in the list of CUSIP numbers.

Series 2010A Bonds

On April 22, 2010, the City, acting by and through the Board, issued $200,835,000 aggregateprincipal amount of the Series 2010A Bonds. The proceeds of the Series 2010A Bonds are expected to beused, among other things, to finance certain capital improvements at the Port. See “CAPITALDEVELOPMENT PROGRAM.” The Series 2010A Bonds are not being offered pursuant to this OfficialStatement.

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Redemption of Series 2000A Bonds

On May 15, 2010, the Board intends to redeem, with available moneys of the Harbor Department,$214,770,000 aggregate principal amount of the Series 2000A Bonds maturing on May 15, 2011 throughand including May 15, 2025, at a redemption price equal to 101% of the principal amount thereof, plusaccrued interest thereon.

APPLICATION OF SERIES 2010B BOND PROCEEDS

The following table sets forth the estimated sources and uses of funds in connection with theissuance of the Series 2010B Bonds.

SourcesPrincipal Amount of Series 2010B Bonds $158,085,000.00Net Original Issue Premium 15,459,113.80Contribution from Harbor Department 5,275,000.00Funds Released from Interest Account 3,901,878.75Fund Released from Series 2005 Reserve Fund 3,889,137.25

Total Sources $186,610,129.80

UsesPurchase of Purchased Bonds $169,131,595.19Deposit to Series 2010B Reserve Fund 15,808,500.00Costs of Issuance1 1,670,034.61

Total Uses $186,610,129.80

1 Includes underwriter’s discount, fees of the Dealer Manager and the Information and Tender Agent, legal costsand expenses and other costs of issuance.

DESCRIPTION OF THE SERIES 2010B BONDS

General

The Series 2010B Bonds will be dated their date of delivery, and will bear interest (calculated onthe basis of a 360-day year consisting of twelve 30-day months) from such date at the rates per annum setforth on the inside cover of this Official Statement, payable semiannually on May 15 and November 15 ofeach year commencing November 15, 2010 (each an “Interest Payment Date”). Each Series 2010B Bondwill bear interest from the Interest Payment Date next preceding the date of authentication thereof unlesssuch date of authentication is an Interest Payment Date, in which event such Series 2010B Bond will bearinterest from such date of authentication, or unless such date of authentication is after a Record Date andbefore the next succeeding Interest Payment Date, in which event such Series 2010B Bond will bearinterest from such succeeding Interest Payment Date, or unless such date of authentication is prior toNovember 1, 2010, in which event such Series 2010B Bond will bear interest from their date of delivery.If interest on the Series 2010B Bonds is in default, Series 2010B Bonds issued in exchange for Series2010B Bonds surrendered for transfer or exchange will bear interest from the Interest Payment Date towhich interest has been paid in full on the Series 2010B Bonds surrendered. The Series 2010B Bondswill mature, subject to prior redemption, on May 15 in the years and in the principal amounts set forth onthe inside cover of this Official Statement. The principal of and interest on the Series 2010B Bonds willbe payable in lawful money of the United States of America.

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The Series 2010B Bonds will be issued in denominations of $5,000 and integral multiples thereof.The Series 2010B Bonds will be issued in fully registered form and, when issued, will be registered in thename of Cede & Co., as registered owner and nominee of DTC. DTC will act as securities depository forthe Series 2010B Bonds. Individual purchases may be made in book-entry form only. Purchasers willnot receive certificates representing their interest in the Series 2010B Bonds purchased. So long asCede & Co., as nominee of DTC, is the registered owner of the Series 2010B Bonds, references herein tothe Owners or registered owners will mean Cede & Co. and will not mean the Beneficial Owners of theSeries 2010B Bonds.

So long as Cede & Co. is the registered owner of the Series 2010B Bonds, principal of andinterest on the Series 2010B Bonds are payable by wire transfer by U.S. Bank National Association, asfiscal agent (the “Fiscal Agent”) to Cede & Co., as nominee for DTC, which is required, in turn, to remitsuch amounts to the DTC participants for subsequent disbursement to the Beneficial Owners. See“APPENDIX D—BOOK-ENTRY-ONLY SYSTEM.”

See Appendix B for a summary of certain provisions of the Resolution, including, withoutlimitation, certain covenants of the Board, provisions relating to amendments of the Resolution andprocedures for defeasance of the Series 2010B Bonds.

Redemption

Optional Redemption. The Series 2010B Bonds maturing on or before May 15, 2020 are notsubject to redemption prior to maturity. The Series 2010B Bonds maturing on or after May 15, 2021 aresubject to redemption prior to maturity, at the option of the Board, as a whole or in part on any date, on orafter May 15, 2020, at a redemption price equal to 100% of the principal amount of the Series 2010BBonds to be redeemed, plus accrued interest thereon to the date fixed for redemption, without premium.

Selection of Series 2010B Bonds to be Redeemed. Redemption of the Series 2010B Bonds willonly be in Authorized Denominations. The Series 2010B Bonds are subject to redemption in such orderof maturity and interest rate as the Board may direct and by lot within such maturity and interest rateselected in such manner as the Fiscal Agent (or DTC, as long as DTC is the securities depository for theSeries 2010B Bonds), deems appropriate.

Notice of Redemption; Conditional Notice of Optional Redemption. Each notice of redemptionwill be mailed by the Fiscal Agent, not less than 30 nor more than 60 days prior to each redemption date,to each Owner (DTC, so long as the book-entry system with DTC is in effect) of the Series 2010B Bondsselected for redemption. Each notice of redemption will state the date of such notice, the date of issue ofthe Series 2010B Bonds, the date fixed for redemption, the redemption price, the place or places ofredemption (including the name and appropriate address or addresses of the Fiscal Agent), the maturitydate, the interest rate and CUSIP number of the Series 2010B Bonds to be redeemed, if less than all Series2010B Bonds of a maturity and interest rate are to be redeemed, the distinctive certificate numbers of theSeries 2010B Bonds of such maturity and interest rate to be redeemed, and the principal amount of theSeries 2010B Bonds to be redeemed. Except as described in the following paragraph with respect to anoptional redemption of the Series 2010B Bonds, each such notice will also state that on said date therewill become due and payable on each of said Series 2010B Bonds called for redemption the redemptionprice thereof, or of said specified portion of the principal amount thereof in the case of a Series 2010BBond to be redeemed in part only, together with interest accrued thereon to the date fixed for redemption,and that from and after such redemption date interest thereon will cease to accrue, and will require thatsuch Series 2010B Bonds be then surrendered at the address or addresses of the Fiscal Agent specified inthe redemption notice. Neither the failure of any Owner of Series 2010B Bonds to receive notice or anydefect in any such notice will affect the sufficiency of the proceedings for redemption.

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The Board may cause the Fiscal Agent to provide that, if at the time of mailing of notice of anoptional redemption there has not been deposited with the Treasurer of the City (the “Treasurer”), theFiscal Agent, an escrow agent or other fiduciary, in trust, moneys sufficient to redeem all the applicableSeries 2010B Bonds called for redemption, such notice may state that it is conditional, that is, subject tothe deposit of the redemption moneys with the Treasurer, the Fiscal Agent, an escrow agent or otherfiduciary not later than the opening of business one Business Day prior to the scheduled redemption date,and that such notice will be of no effect unless such moneys are so deposited. In the event sufficientmoneys are not on deposit on the required date, then the redemption will be canceled and on suchcancellation date notice will be mailed to the Owners of such Series 2010B Bonds.

Effect of Notice of Redemption. Notice having been given in the manner described above underthe caption “Notice of Redemption; Conditional Notice of Optional Redemption,” if on the redemptiondate, moneys for the redemption of all the Series 2010B Bonds or portions thereof to be redeemed onsuch date, together with interest to the redemption date, will be available therefor on said date then, fromand after the redemption date such Series 2010B Bonds so called for redemption will cease to accrue andbecome payable.

SECURITY AND SOURCES OF PAYMENT FOR THE SERIES 2010B BONDS

Following is a summary of certain provisions of the Resolution, including but not limited tosections of the Resolution detailing the pledge of Revenues, the rate covenant, the flow of funds, theSeries 2010B Reserve Fund, the issuance of additional Revenue Bonds and Parity Debt, and theInvestments. These summaries do not purport to be comprehensive or definitive. See Appendix B for amore complete description of these provisions of the Resolution.

Pledge of Revenues

The Series 2010B Bonds are special, limited obligations of the City and are secured by a pledgeof and lien upon and will be a charge upon and will be payable, as to principal thereof, interest thereonand premiums, if any, solely from the Revenues and other funds pledged under the Resolution.

Under the Resolution, the Board has pledged, placed a charge upon and assigned all Revenues tosecure the payment of all principal of, premium, if any, and interest on the Revenue Bonds and ParityDebt in accordance with their respective terms, without priority or distinction of one over the other,subject only to the provisions of the Resolution permitting the application thereof for the purposes and onthe terms and conditions provided therein. “Revenues” means all revenues and all money secured orcollected for the benefit of and received by the Board from or arising out of the use or operation of thePort, including, without limitation, all tolls, charges, rentals, compensations or fees required to be paid forservices, franchises or licenses, as permitted or required by the Charter or otherwise by law, ordinance ororder, to the City for the operation of any public service utility upon lands and waters under the controland management of the Harbor Department and all investment earnings credited to the Harbor RevenueFund and not required to be credited to a sub-fund, excepting therefrom any revenues arising from anylease, contract or other agreement providing for the drilling for, developing, producing, extracting, takingor removing, storing and disposing of oil, gas or other hydrocarbon substances from the tide andsubmerged lands granted to the City by the State.

As used in this Official Statement, “Port of Long Beach” or “Port” means the entire harborsystem subject to and under the jurisdiction of the Board as defined in the Charter, and including, withoutlimitation, all harbor or port improvements, works, utilities, appliances, facilities and water craft, owned,controlled or operated by the City in or upon or pertaining to the waterfront or navigable waters of theCity as such system now exists together with all additions acquired, constructed or financed with surplus

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revenues or funds derived from the sale of indebtedness authorized by the Master Resolution or anysubsequent resolution of the Board, together with all improvements and extensions to said system laterconstructed or acquired.

The Board also has pledged all amounts on deposit in the Principal Account and the InterestAccount of the Bond Service Fund, to secure payment of the Revenue Bonds without priority ordistinction of one over the other. Additionally, the Board has pledged all amounts on deposit in the Series2010B Reserve Fund to secure the payment of the Series 2010B Bonds. See “—Series 2010B ReserveFund; Reserve Funds for Prior Bonds and Series 2010A Bonds” below. In all cases, such pledges aresubject only to the provisions of the Resolution permitting the application thereof for the purposes and onthe terms and conditions provided in the Resolution. See “—Flow of Funds” below.

The principal of and interest on any Series 2010B Bonds are not a debt of the City nor alegal or equitable pledge, charge, lien or encumbrance upon any of its property or upon any of itsincome, receipts or revenues, except the Revenues and the funds which are pledged to the paymentof the Series 2010B Bonds and interest thereon. The general fund of the City is not liable for thepayment of any Series 2010B Bonds or interest thereon, nor is the credit or taxing power of the Citypledged for the payment of any Series 2010B Bonds or interest thereon. An Owner of any Series2010B Bond may not compel the exercise of the taxing power by the City or the forfeiture of any ofits property.

Rate Covenant

The Master Resolution provides that the City, acting by and through the Board, shall prescribe,revise and collect such charges, rentals, compensation or fees required to be paid for services, franchises,leases or licenses, as permitted or required by the Charter or otherwise by law, ordinance or order, to theCity for operation upon lands and waters under the control and management of the Board, which, aftermaking allowances for contingencies and error in the estimates, produce Revenues in each fiscal yearequal to 1.25 times Maximum Annual Debt Service and which are sufficient, taking into account all othermoneys available or reasonably expected to be available to the Harbor Department, to pay the followingamounts:

(a) the interest on and principal of all Outstanding Revenue Bonds and alloutstanding Parity Debt as the same becomes due and payable;

(b) all payments required for compliance with the Resolution including paymentsrequired to be made into any reserve fund required to be maintained pursuant to anySupplemental Resolution or with respect to any Parity Debt;

(c) all Maintenance Costs; and

(d) all payments required to meet any other obligations of the City, such as theHarbor Department’s Shortfall Advances (as described herein), which are charges, liens andencumbrances upon or payable from the Revenues.

See “OUTSTANDING OBLIGATIONS AND DEBT SERVICE SCHEDULE” for additionalinformation on the Harbor Department’s Outstanding Revenue Bonds and Parity Debt.

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Flow of Funds

The Charter and the Master Resolution require all Revenues of the Harbor Department to bedeposited with the Treasurer and placed in the Harbor Revenue Fund established by the Charter. FromRevenues on deposit in the Harbor Revenue Fund, the Treasurer is required to transfer to the BondService Fund established under the Master Resolution and maintained by the Treasurer and any reservefund (including the Series 2010B Reserve Fund) established under a Supplemental Resolution adopted inconnection with the issuance of Revenue Bonds, amounts sufficient to pay the principal, premium, if any,and interest on the Revenue Bonds and to maintain in such funds the balances required by the MasterResolution and any Supplemental Resolution adopted in accordance therewith, and is required to transferto the debt service funds and reserve funds established in respect of any Parity Debt, amounts sufficient topay principal, premium, if any, and interest on such Parity Debt and to maintain in such funds thebalances required by the terms of the Parity Debt. The Master Resolution requires that all Revenuesremaining in the Harbor Revenue Fund after making such transfers will be used first to pay the reasonableexpenses of management and other expenses necessary to operate, maintain and preserve the Port in goodrepair and working order (“Maintenance Costs”). After the payment of Maintenance Costs, remainingRevenues constitute surplus revenues and may be used for any lawful purpose. The Board’s obligation tomake the Shortfall Advances in connection with the Alameda Corridor (as defined herein) is payable fromsurplus revenues. For a description of the Shortfall Advances and the Alameda Corridor, see“OUTSTANDING OBLIGATIONS AND DEBT SERVICE SCHEDULE—Other Obligations—ACTAShortfall Advances” herein. The pledge of Revenues to secure the payment of principal of, premium, ifany, and interest on the Revenue Bonds and any Parity Debt is irrevocable until all such obligations areno longer deemed outstanding. For a further description of the flow of funds and a description of thefunds and accounts established and maintained under the Resolution, see “APPENDIX B—SUMMARYOF CERTAIN PROVISIONS OF THE RESOLUTION—THE MASTER RESOLUTION—Applicationof Funds and Accounts.”

Series 2010B Reserve Fund; Reserve Funds for Prior Bonds and Series 2010A Bonds

Series 2010B Reserve Fund. The Thirteenth Supplemental Resolution will provide for theestablishment and maintenance of the Series 2010B Reserve Fund with the Treasurer in an amount equalto the Bond Reserve Requirement. The Bond Reserve Requirement means as of any date ofdetermination, an amount equal to the least of (a) Maximum Annual Debt Service on the Series 2010BBonds then Outstanding, (b) 125% of average annual debt service on the Series 2010B Bonds thenOutstanding, or (c) 10% of the initial principal amount of the Series 2010B Bonds (less any original issuediscount on the Series 2010B Bonds, if such discount exceeded 2% of the initial principal amount of theSeries 2010B Bonds). At the time of issuance of the Series 2010B Bonds, the Bond Reserve Requirementwill equal $15,808,500.00, which will be funded with a portion of the proceeds of the Series 2010BBonds and certain available moneys of the Harbor Department. The Board will covenant to maintain inthe Series 2010B Reserve Fund an amount equal to the Bond Reserve Requirement until such time as theSeries 2010B Bonds are paid or defeased.

Moneys in the Series 2010B Reserve Fund will be withdrawn for the purpose of (a) paying theprincipal of and interest on the Series 2010B Bonds in the event moneys in the Principal Account or theInterest Account of the Bond Service Fund are insufficient therefor, and (b) making the final payment ofprincipal and interest on the Series 2010B Bonds. The Series 2010B Reserve Fund will not secure thepayment of the principal of or interest on the Prior Bonds, the Series 2010A Bonds, any additionalRevenue Bonds issued in the future or any Parity Debt (including the Notes). In the event amounts in theSeries 2010B Reserve Fund exceed the Bond Reserve Requirement, such excess will be transferred orcaused to be transferred by the Treasurer to the Interest Account of the Bond Service Fund and used topay interest on the Series 2010B Bonds.

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Pursuant to the Thirteenth Supplemental Resolution, the Board may fund all or a portion of theBond Reserve Requirement with a Reserve Fund Insurance Policy. A Reserve Fund Insurance Policymay be an insurance policy or surety bond provided by a bond insurer, or a letter of credit deposited in theSeries 2010B Reserve Fund in lieu of or in partial substitution for cash or securities. The entity providingsuch Reserve Fund Insurance Policy must be rated, at the time such Reserve Fund Insurance Policy isdelivered, in one of the two highest rating categories by Moody’s Investors Service Inc. (“Moody’s”) andStandard & Poor’s Ratings Services, a Standard & Poor’s Financial Services LLC business (“S&P”).Any such Reserve Fund Insurance Policy must either extend to the final maturity of the Series 2010BBonds or the Board must agree that it will replace such Reserve Fund Insurance Policy prior to itsexpiration with another Reserve Fund Insurance Policy, or with cash or securities, and the face amount ofthe Reserve Fund Insurance Policy, together with amounts on deposit in the Series 2010B Reserve Fund,including the face amount of any other Reserve Fund Insurance Policy, must be at least equal to the BondReserve Requirement.

Whenever moneys are withdrawn from the Series 2010B Reserve Fund for the purpose of payingthe principal of and interest on the Series 2010B Bonds in the event moneys in the Principal Account orthe Interest Account of the Bond Service Fund are insufficient therefor, the amount in such fund will berestored as described herein in “APPENDIX B—SUMMARY OF CERTAIN PROVISIONS OF THERESOLUTION—THE MASTER RESOLUTION—Application of Funds and Accounts.” In the event ofany deficiency in the Series 2010B Reserve Fund, the Treasurer will deposit to the Series 2010B ReserveFund, as soon as possible in each month, Revenues equal to 1/12th of the aggregate amount of suchunreplenished prior withdrawal from the Series 2010B Reserve Fund and Revenues equal to the fullamount of any deficiency due to any required valuations of the investments in the Series 2010B ReserveFund until the balance in the Series 2010B Reserve Fund is at least equal to the Bond ReserveRequirement. In the event of a cancellation of a Reserve Fund Insurance Policy, the Treasurer willdeposit to the Series 2010B Reserve Fund, as soon as possible in each month, Revenues equal to 1/12th ofthe face amount of the Reserve Fund Insurance Policy until the balance in the Series 2010B Reserve Fundis at least equal to the Bond Reserve Requirement.

Reserve Funds for Prior Bonds and Series 2010A Bonds. At the time of issuance of the PriorBonds and the Series 2010A Bonds the Board established separate reserve funds for each series of PriorBonds and the Series 2010A Bonds. Each of these reserve funds only secures the Prior Bonds and theSeries 2010A Bonds for which they were or will be established. The Series 2010B Bonds will not besecured by the reserve funds established and maintained for the Prior Bonds or the Series 2010A Bonds.The reserve funds established and maintained for the Series 1998A Bonds, the Series 2000A Bonds, theSeries 2004A Bonds and the Series 2004B Bonds, the Series 2005A Bonds and the Series 2005B Bonds,and the Series 2010A Bonds, respectively, are funded with cash and investments. The reserve fundestablished and maintained for the Series 2002B Bonds is funded with a reserve fund surety bond, whichwas issued by MBIA Insurance Corporation and assigned to National Public Finance GuaranteeCorporation.

Funds Held by Third Parties

Pursuant to Resolution No. HD-1940 (the “Sixth Supplemental Resolution”) adopted by theBoard on November 2, 1998, the Treasurer is authorized to appoint and engage agents as may beappropriate to perform the duties and obligations of the Treasurer to establish and maintain certain fundsand accounts (except the Harbor Revenue Fund). In connection with the issuance of the Series 2010BBonds, the Treasurer will enter into a trustee services agreement with U.S. Bank National Association toestablish and maintain the Series 2010B Costs of Issuance Fund, the Series 2010B Reserve Fund and theSeries 2010B Rebate Fund. All such funds will be held in trust, disposed of and invested in accordancewith instructions given by the Treasurer.

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Additional Bonds and Parity Debt

Under the Master Resolution the City, acting by and through the Board, has covenanted that itwill not incur any indebtedness having any priority in payment from Revenues over the Revenue Bonds(including the Series 2010B Bonds) or the Parity Debt (including the Notes).

Under the Master Resolution, the Board, on behalf of the City, has covenanted not to issueadditional Revenue Bonds or incur Parity Debt payable from and secured by Revenues on a parity withthe Prior Bonds, the Series 2010B Bonds and the Series 2010A Bonds unless (a) such additional RevenueBonds are issued or such Parity Debt is incurred to pay or discharge outstanding Revenue Bonds or ParityDebt (“Refunding Bonds”), or (b) at the time such additional Revenue Bonds are issued or such ParityDebt is incurred (i) the City is not in default under the terms of the Master Resolution and (ii) either (A)the Net Revenues for the last completed Fiscal Year or the 12-month period ended not more than onemonth before the issuance or incurrence of such additional Revenue Bonds or Parity Debt as set forth in acertificate of the Board or (B) the estimated Net Revenues for the 12-month period when theimprovements or extensions to the Port financed with the proceeds of the additional Revenue Bonds orParity Debt will be in operation as estimated by and set forth in a certificate of an independent certifiedpublic accountant or an independent engineer appointed by the Board, amount to at least 1.25 timesMaximum Annual Debt Service on all Revenue Bonds or Parity Debt outstanding immediatelysubsequent to the issuance of such additional Revenue Bonds or the incurrence of such Parity Debt.

“Net Revenues” means, for any period, Revenues for such period less Maintenance Costs for suchperiod.

The Series 2010B Bonds will be issued as Refunding Bonds as described in (a) above.

For purposes of determining compliance with clauses (b)(ii)(A) and (B) in the above paragraph,there may be included in Net Revenues either or both of the following: (1) an allowance for any increasein Net Revenues (including, without limitation, a reduction in Maintenance Costs) which may arise fromany additions to and extensions and improvements to the Port to be made or acquired with the proceeds ofsuch additional Revenue Bonds or Parity Debt or with the proceeds of Revenue Bonds or Parity Debtpreviously issued or incurred and also for increases in Net Revenues from any additions, extensions orimprovements which have been made or acquired with moneys from any source but which, during theFiscal Year or 12-month period used for the calculation, were not in service, all in an amount equal to theestimated additional average annual Net Revenues to be derived from such additions, extensions andimprovements for the first 36-month period in which each addition, extension or improvement isrespectively to be in operation, all as shown by the certificate or opinion of a qualified independentengineer employed by the Board; and/or (2) an allowance for earnings arising from any increase in thecharges made for the use of the Port which has become effective prior to the issuance of such additionalRevenue Bonds or the incurrence of such Parity Debt but which, during the last completed Fiscal Year or12-month period, was not in effect, in an amount equal to the amount by which the Net Revenues wouldhave been increased if such increase in charges had been in effect during the whole of such Fiscal Year orlast completed 12-month period, as shown by the certificate or opinion of a qualified independentengineer employed by the Board.

The Master Resolution does not restrict the City from issuing or incurring indebtedness having alien upon Revenues which is subordinate to that of the Revenue Bonds and the Parity Debt.

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Investments

All moneys in any of the funds and accounts held by the Treasurer and its agents and establishedpursuant to the Resolution will be invested solely in Investment Securities maturing or available ondemand not later than the date on which it is estimated that such moneys will be required by theTreasurer. See “FINANCIAL DATA—Investment Policy” for further information on the City’sinvestment policy.

OUTSTANDING OBLIGATIONS AND DEBT SERVICE SCHEDULE

Outstanding Revenue Bonds and Parity Debt

Pursuant to the Master Resolution, the City, acting by and through the Board, issued the PriorBonds, which as of March 1, 2010, were outstanding in the aggregate principal amount of $785,205,000.See “PLAN OF FINANCE” with respect to the Board’s issuance of the Series 2010A Bonds and theBoard’s plans to redeem $214,770,000 aggregate principal amount of the Series 2000A Bonds on May15, 2010. The Prior Bonds are secured by the Revenues on parity with the Series 2010B Bonds, theSeries 2010A Bonds and the Notes.

The Board is authorized to issue Notes in an aggregate principal amount not to exceed$383,500,000 outstanding at any one time, $31,400,000 of which were outstanding as of March 1, 2010.The Notes are issuable in maturities of 1 to 270 days, the proceeds of which the Board utilizes to financeportions of its capital improvement program and to pay maturing Notes. The Notes are payable from andsecured by a pledge of and a lien and charge upon Revenues on a parity with the other Revenue Bonds(including the Series 2010B Bonds) and constitute Parity Debt. Pursuant to a Line of Credit Agreementdated as of July 1, 2001, (the “Line of Credit Agreement”) by and among the City, acting by and throughthe Board, and Dexia Credit Local, acting through its New York Agency, as Agent, and Dexia CreditLocal, acting through its New York Agency, and California State Teachers’ Retirement System(collectively, the “Line of Credit Banks”), the Line of Credit Banks have extended for the benefit of theholders of the Notes a revolving line of credit in the amount of $175,000,000 (the “Line of Credit”). TheLine of Credit is available to be drawn on to provide funds for the payment of the principal of the Notesas and when the same become due and payable. The Line of Credit is not available to pay the principal ofor interest on any other Revenue Bonds, including the Series 2010B Bonds. The Line of Credit currentlyexpires on July 26, 2011 and may be terminated earlier upon the occurrence of certain events, including,but not limited to, any event in which S&P and Moody’s have assigned a rating to any Revenue Bonds orany Parity Debt below “BBB-” or “Baa3,” respectively, or to the Notes or any short term Parity Debtbelow “A-3,” with respect to S&P, or “MIG 4” or “Prime 3” with respect to Moody’s. So long as aliquidity facility, such as the Line of Credit, is in effect as to any Notes, the Board has covenanted not toissue any Notes maturing after the scheduled expiration date of such liquidity facility unless the Board hasreceived prior written confirmation from each rating agency then rating such Notes that such action, inand of itself, will not adversely affect its then current rating of such Notes. See “—Other Obligations—Repayment Obligations” below for information with respect to any repayment obligations incurred underthe Line of Credit.

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The following table sets forth the Prior Bonds and Notes which have been issued and wereoutstanding as of March 1, 2010.

TABLE 1Harbor Department of the City of Long Beach

Outstanding Prior Bonds and Notes(as of March 1, 2010)

Prior Bonds and Notes

OriginalPrincipalAmount

PrincipalAmount

Outstanding Final Maturity Date

Prior Bonds- Series 1998A $ 206,330,000 $129,485,000 5/15/2019- Series 2000A1 275,000,000 223,780,000 5/15/2025- Series 2002B2 150,000,000 125,220,000 5/15/2027- Series 2004A2 81,365,000 48,940,000 5/15/2015- Series 2004B 32,045,000 32,045,000 5/15/2018- Series 2005A2 233,005,000 200,765,000 5/15/2025- Series 2005B 24,970,000 24,970,000 5/15/2018

Total Prior Bonds $1,002,715,000 $785,205,000

Commercial Paper Notes3

- Series A —3 $31,400,000 Various4

Total Commercial Paper Notes $31,400,000

Total Prior Bonds and Notes $816,605,000 5

1 On May 15, 2010, the Board intends to redeem $214,770,000 aggregate principal amount of the Series 2000ABonds maturing on May 15, 2011 through and including May 15, 2025. On May 15, 2010, following the paymentof the Series 2000A Bonds maturing on May 15, 2010 and the redemption of the Series 2000A maturing on May15, 2011 through and including May 15, 2025, all of the Series 2000A Bonds will be paid and will no longer beOutstanding.

2 See “PLAN OF FINANCE—Purchase of Purchased Bonds” for a discussion of the purchase of the PurchasedBonds.

3 The Board is authorized to issue and have outstanding, from time to time, a maximum of $383,500,000 aggregateprincipal amount of the Notes. The Notes can be issued as tax-exempt or taxable and in various series designatedSeries A, B and C.

4 The Notes have rolling maturities of 270 days or less.5 On April 22, 2010, the City, acting by and through the Board, issued $200,835,000 aggregate principal amount of

the Series 2010A Bonds.Source: Harbor Department.


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Debt Service Requirements

The following table sets forth the debt service requirements of the Prior Bonds, the Notes, theSeries 2010A Bonds and the Series 2010B Bonds.


Debt Service Requirements1

Bond YearEndingMay 15

Total DebtService

Requirementsfor PriorBonds2

Total DebtService

Requirementsfor Notes3

Total DebtService

Requirementsfor Series

2010A Bonds4

PrincipalRequirements

of Series2010B Bonds

InterestRequirements

of Series2010B Bonds

Total DebtService

Requirementsof Series

2010B BondsTotal Debt

Service

2010 $51,262,301 $ 507,415 — — — — $51,769,7172011 52,892,203 2,680,500 $ 19,213,911 $ 130,000 $ 7,779,846 $ 7,909,846 82,696,4602012 52,885,703 2,676,550 19,215,650 195,000 7,711,650 7,906,650 82,684,5522013 33,825,103 2,675,975 19,200,300 19,260,000 7,705,800 26,965,800 82,667,1772014 51,837,978 2,678,613 18,947,550 2,135,000 6,817,750 8,952,750 82,416,8902015 51,839,603 2,679,300 19,212,800 2,230,000 6,721,000 8,951,000 82,682,7032016 47,704,803 2,678,038 19,215,000 6,475,000 6,609,500 13,084,500 82,682,3402017 54,370,628 2,679,825 19,212,500 130,000 6,285,750 6,415,750 82,678,7032018 51,829,315 2,679,500 19,200,750 2,675,000 6,279,250 8,954,250 82,663,8152019 27,615,290 2,677,063 19,219,650 15,655,000 6,145,500 21,800,500 71,312,5032020 10,348,790 2,677,513 19,214,150 16,095,000 5,380,850 21,475,850 53,716,3032021 7,991,290 2,675,688 19,196,000 19,235,000 4,586,850 23,821,850 53,684,8282022 17,304,540 2,676,588 19,199,000 10,880,000 3,625,100 14,505,100 53,685,2282023 27,470,040 2,680,050 19,199,250 1,260,000 3,081,100 4,341,100 53,690,4402024 9,747,830 2,675,912 19,200,000 19,050,000 3,018,100 22,068,100 53,691,8422025 5,702,980 2,679,338 19,199,250 24,000,000 2,069,000 26,069,000 53,650,5682026 2,207,940 — — 7,900,000 881,500 8,781,500 10,989,4402027 2,209,200 — — 10,780,000 486,500 11,266,500 13,475,700Total $559,045,534 $40,677,865 $287,845,761 $158,085,000 $85,185,046 $243,270,046 $1,130,839,207

1 Numbers may not sum due to rounding.2 Total debt service after giving effect to the purchase and defeasance of the Purchased Bonds, and the redemption, on May 15, 2010, of the Series 2000A

Bonds maturing on May 15, 2011 through and including May 15, 2025.3 Assumes $31,400,000 of Notes Outstanding, amortized over a 15-year period beginning in fiscal year 2011 at an assumed interest rate of 3.25% per

annum. The actual average interest rate of the Notes for the year ended December 31, 2009 was approximately 1.82%.4 The Series 2010A Bonds were issued on April 22, 2010.Source: Harbor Department and Public Resources Advisory Group.


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Debt Service Coverage on Revenue Bonds and Parity Debt

A summary of Revenues, Maintenance Costs, Net Revenues, Parity Debt Service and debt servicecoverage for fiscal years 2005 through 2009 is presented below.


Debt Service Coverage of Revenue Bonds and Parity Debt($000’s)

Debt ServiceCoverage

FiscalYears Revenues1

MaintenanceCosts2

NetRevenues3

Parity DebtService4 Gross5 Net6

2005 $347,172 $ 62,015 $285,157 $92,524 4.0 3.12006 381,596 75,541 306,055 90,126 4.2 3.42007 414,206 96,964 317,242 92,543 4.5 3.42008 392,691 116,166 7 276,525 89,986 4.4 3.12009 329,931 8 97,880 232,051 81,993 4.0 2.8

1 Calculated in accordance with the provisions of the Master Resolution. Includes Total Port Operating Revenue andInterest Income as shown in “Table 13, Harbor Department of the City of Long Beach, Comparative Summary ofStatements of Revenues and Expenses” set forth below.

2 Calculated in accordance with the provisions of the Master Resolution. Includes all Port Operating Expensesexcluding Depreciation and Amortization as shown in “Table 13, Harbor Department of the City of Long Beach,Comparative Summary of Statements Revenues and Expenses” set forth below.

3 Revenues less Maintenance Costs.4 Includes debt service on all Revenue Bonds and Parity Debt.5 Revenues divided by Parity Debt Service.6 Net Revenues divided by Parity Debt Service.7 Includes recognition of a one-time environmental remediation cost of $20 million relating to cleaning up waste at

Pier A.8 See “FINANCIAL DATA” for a discussion of the Harbor Department’s fiscal year 2009 financial results.Source: Revenues and Maintenance Costs are derived from the Harbor Department’s audited financial statements for

fiscal years 2005-2009. Harbor Department.

Future Financings

See “CAPITAL DEVELOPMENT PROGRAM—Funding Sources of 2010-19 Capital Plan” fora discussion of the Board’s plans to issue additional Revenue Bonds in the future to finance a portion ofthe costs of the 2010-19 Capital Plan.

Other Obligations

ACTA Shortfall Advances. In 1999, the Alameda Corridor Transportation Authority (“ACTA”)issued and entered into obligations to finance a portion of the cost of the design and construction of a20-mile long, multiple-track rail system linking the railyards and tracks at the Port and the Port of LosAngeles (together, the “San Pedro Bay Ports”) with the Railroads’ (as defined in the following paragraph)transcontinental mainlines originating near downtown Los Angeles (the “Alameda Corridor”). TheAlameda Corridor was financed with contributions from the Harbor Department and the Port of LosAngeles, proceeds of taxable and tax-exempt bonds issued by ACTA, a federal loan (which was prepaidin May 2004 with the proceeds of subordinate taxable and tax-exempt bonds issued by ACTA), a grantfrom the Los Angeles County Metropolitan Transportation Authority (“LACMTA”), and various other

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grant moneys. As of March 1, 2010, ACTA had outstanding approximately $1.7 billion aggregateprincipal and initial amount of taxable and tax-exempt bonds (collectively, the “ACTA Obligations”).

On October 12, 1998, the City, acting by and through the Board, the City of Los Angeles, actingby and through its Board of Harbor Commissioners, ACTA, the Union Pacific Railroad Company(“Union Pacific”), and BNSF Railway Company (formerly known as The Burlington Northern and SantaFe Railway Company) (“BNSF” and together with the Union Pacific, the “Railroads”) entered into theAlameda Corridor Use and Operating Agreement (the “ACTA Operating Agreement”). The ACTAOperating Agreement governs the administration, operation and maintenance of the Alameda Corridorand the collection and application of use fees, container charges, maintenance and operation charges andShortfall Advances. The ACTA Obligations are payable from the use fees and container charges, payableby the Railroads, and from Shortfall Advances.

The ACTA Operating Agreement requires the Harbor Department and the Port of Los Angeles,severally and not jointly, to make payments (the “Shortfall Advances”) in the event the amount of usefees and container charges collected from the Railroads are not sufficient to make the debt servicepayments on the ACTA Obligations. Pursuant to the ACTA Operating Agreement, the HarborDepartment and the Port of Los Angeles are each obligated to make up one-half of any deficiency in thepayment of debt service on the ACTA Obligations. However, the Harbor Department and the Port of LosAngeles are liable only for a maximum of 40% (20% each) of the total amount of debt service due in eachyear on the ACTA Obligations. Additionally, neither the Harbor Department nor the Port of Los Angelesis required to make Shortfall Advances that should have been paid by the other party. Based upon thecurrent outstanding amount of the ACTA Obligations, the Harbor Department and the Port of LosAngeles are potentially liable for a maximum of approximately $1.754 billion (the Harbor Departmentand the Port of Los Angeles each being liable for approximately $877 million) of debt service paymentson the ACTA Obligations through 2037. Pursuant to the ACTA Operating Agreement, the HarborDepartment is obligated to include any forecasted Shortfall Advances in its budget for each fiscal year.ACTA estimates that the Harbor Department and the Port of Los Angeles will be required to makeShortfall Advances totaling approximately $88 million (the Harbor Department and the Port of LosAngeles each being liable for approximately $44 million) through 2037, and that the Harbor Department’sgreatest Shortfall Advance in any one year would be approximately $9.5 million. To date, the HarborDepartment and the Port of Los Angeles have not been required to make any Shortfall Advances.ACTA’s financial estimates, which were developed in January 2010, are dependent upon the accuracy ofthe assumptions used in their formulation. Therefore, there are likely to be differences between theforecasts and actual results, and those differences may be material. ACTA has advised the HarborDepartment that it is currently undertaking a restructuring of its debt that would reduce debt service overthe next 5 to 10 years and increase debt service after ten years when ACTA expects higher projectedrevenues would be available. See “THE PORT OF LONG BEACH—Marine Commerce and Cargoes—Container Forecast.”

The Harbor Department is obligated to make the Shortfall Advances from any legally availablesource of excess revenues after making all payments due with respect to the Revenue Bonds (includingthe Series 2010B Bonds), the Parity Debt (including the Notes), the payment of all Maintenance Costsand any Repayment Obligation (as defined below) incurred pursuant to the Line of Credit Agreement.The Harbor Department has funded a restricted reserve account in the amount of $46 million to payShortfall Advances that it currently estimates it may be required to pay. The Harbor Department’sobligation to make Shortfall Advances is to continue even though use fees may be abated as a result ofcomplete blockage of the rail corridor for more than five days. Shortfall Advances are to be reimbursedto the Harbor Department and the Port of Los Angeles from use fees and container charges to the extentavailable, after payment of debt service on the ACTA Obligations, the funding of any reserves associated

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with the ACTA Obligations, the payment of maintenance and operating expenses of the AlamedaCorridor, and the payment of administrative and other amounts.

Clean Trucks Program - Lease Subsidy Obligations. In 2006, the Harbor Department togetherwith the Port of Los Angeles, developed the San Pedro Bay Ports Clean Air Action Plan (“CAAP”). TheCAAP is the Harbor Department’s five-year comprehensive plan to address air pollution emissions fromPort related sources. Emission sources targeted by CAAP include ships, trains, cargo handlingequipment, harbor craft and heavy duty trucks. Pursuant to the CAAP, the Harbor Department hasundertaken several programs to lower air pollution levels at the Port, including a Clean Trucks Program(“CTP”), which requires progressively cleaner engine standards for trucks operating at the Port so that byJanuary 2012, all trucks operating at the Port must either be replaced or retrofitted with emission controlsto meet the United States Environmental Protection Agency’s (“EPA”) 2007 On-Road Heavy Dutyemissions standards. See “THE PORT OF LONG BEACH—Environmental Compliance—Air PollutionReduction Programs—Clean Trucks Program.”

The Harbor Department offered financial incentives, including a subsidized lease program toassist current truck operators that needed financial assistance to buy a cleaner truck. The HarborDepartment agreed to provide an 80% subsidy towards the monthly lease obligations, the preventativemaintenance requirements of participants in the lease program of the CTP, and the payment of theresidual value of the leased truck upon purchase of such truck by the participants in the lease program ofthe CTP. The Harbor Department’s lease subsidy obligations are collectively referred to herein as the“Lease Subsidy Obligations.” Additionally, as part of the Port’s subsidized lease program, the HarborDepartment agreed to guarantee pursuant to a Continuing Guaranty, dated October 8, 2008 (the“Guaranty”), to DCFS USA LLC and Daimler Trust (collectively, “Daimler”), the lease obligations ofeach of the participants in the lease program of the CTP.

The Harbor Department’s Lease Subsidy Obligations and its obligations under the Guaranty arepayable from any legally available source of funds after the payment of debt service and reserve fundobligations on the Revenue Bonds (including the Series 2010B Bonds) and any Parity Debt (including theNotes). As of January 27, 2010, there were 129 lessee participants in the Port’s CTP, and as of such datethe Harbor Department had paid approximately $6,322,000 in lease subsidies. The Harbor Departmentexpects that its total Lease Subsidy Obligations and its total obligations under the Guaranty will beapproximately $25 million through 2017.

Transfers to City. Pursuant to Chapter XII, Section 1209(c)(4) of the Charter, at the beginning ofeach fiscal year, the City Council may determine that an amount not to exceed 10% of the net income ofthe Harbor Department for the previous fiscal year shall be transferred from the Harbor Revenue Fund tothe City’s Tideland’s Operating Fund. Any amounts transferred to the City’s Tideland’s Operating Fundmust be approved by a majority of all members of the Board. When approving any transfer, the Boardmust determine that the amount to be transferred will not be needed for Harbor Department operations,including, without limitation, operating expenses and capital projects, and that such transfer will not resultin insufficient funds to pay the principal and interest on the Revenue Bonds or the Parity Debt, orotherwise impair the ability to meet covenants with respect to the Revenue Bonds and the Parity Debt.The Harbor Department transferred approximately $16.1 million (10% of the Harbor Department’s fiscalyear 2008 net income) from the Harbor Revenue Fund to the City’s Tideland’s Operating Fund for thefiscal year ended September 30, 2009. The Board expects that for the foreseeable future transfers willcontinue to be made each fiscal year from the Harbor Revenue Fund to the City’s Tideland’s OperatingFund.

Repayment Obligations. Under certain circumstances the obligation of the Board, pursuant to awritten agreement, to reimburse the provider of a credit facility or a liquidity facility (a “Repayment

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Obligation”) may be secured by a pledge of and lien on Revenues on a parity with the Revenue Bondsand any Parity Debt. If a credit provider or liquidity provider advances funds to pay principal or thepurchase price of or the interest on Revenue Bonds or Parity Debt, all or a portion of the Board’sRepayment Obligation may be afforded the status of a Revenue Bond under the Resolution. AnyRepayment Obligation incurred pursuant to the Line of Credit Agreement will be subordinate to thepledge and lien on Revenues granted to the Revenue Bonds and the Parity Debt. The Board currentlydoes not have any Repayment Obligations outstanding.

THE PORT OF LONG BEACH

General

According to the American Association of Port Authorities, the Port was the number two-rankedcontainer port in the nation in terms of container cargo for the year ended December 31, 2009. Thefacilities at the Port moved approximately 5.07 million TEUs for the year ended December 31, 2009. See“—Marine Commerce and Cargoes—Container Forecast” below. Also see “CERTAIN INVESTMENTCONSIDERATIONS—Port Competition” for additional information about the Port’s competitors. ThePort is a harbor complex located two miles from open sea in an 11.9-square mile area (the “HarborDistrict”) within the City and on 359 acres of the City of Los Angeles adjacent to the City. The Port isheld in trust by the City pursuant to certain tideland and submerged land grants from the State to the Cityand is operated by the Harbor Department. The Harbor Department was created in 1931 by anamendment to the Charter. See “—Power and Authority of the Board” below.

Development of a harbor in the City began in 1905 when private interests acquired 800 acres ofproperty for port purposes. An ocean entrance to this area was completed in 1909, and in the same yearvoters of the City approved a $245,000 bond issue for the purchase of water frontage and construction ofthe first pier. In 1911, the wharf was opened, and the Port was established. General obligation bondissues were authorized in 1916, 1924 and 1928 for channel work and construction of additional terminalfacilities. With the discovery of oil in 1936, Port development was financed with petroleum revenues,and the general obligation bond issues were fully retired. Since 1965, Port development has beenfinanced primarily with surplus revenues and the proceeds of revenue bonds. No general obligationbonds have been issued for Port development since the 1920’s.

In 1990, the U.S. Congress enacted the Defense Base Closure and Realignment Act of 1990(“DBCRA”), which established a decision making process for the closure of U.S. military basesthroughout the world. Pursuant to DBCRA, the Long Beach Naval Station (the “Naval Station”) and theLong Beach Naval Shipyard (the “Naval Shipyard,” and together with the Naval Station, the “NavalComplex”) were included in the base closures announced during 1991 and 1995, respectively. The NavalComplex consists of 1,140 acres (602 acres of water and 538 acres of land) located on the west side of theHarbor District. The City owns 966 acres of the Naval Complex and leases the remaining 174 acres fromthe United States pursuant to the Lease in Furtherance of Conveyance dated as of August 11, 1998 (the“Naval Complex Lease”). The Naval Complex Lease terminates in 2048 unless terminated earlier by theconveyance of the leased property in fee from the United States to the City. The Board anticipates thatthe remaining 174 acres will be transferred to the City in the future.

The Port currently has 65 deep-water berths (several of which are and will be capable of servicingthe largest commercial ships currently afloat and the largest commercial ships currently being designed)with equipment and facilities to handle all types of cargo. See “—Current Port Facilities” below. As ofSeptember 30, 2009, the total investment in land, structures and facilities at the Port was in excess of$3.3 billion, including the value of work in progress, but before allowance for depreciation.

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The Harbor Department operates the Port as a landlord through various property agreementsentered into with tenants of the Port. The property agreements entered into by the Board, which conveythe right to use, rent or lease Port assets, include leases, preferential assignment agreements, revocablepermits, area assignments and pipeline licenses. The Harbor Department leases and/or assigns docks,wharves, transit sheds, terminals and other facilities to shipping or terminal companies and other privatefirms for operation of such facilities. Pursuant to the property agreements, the tenants of the Port paytariff charges (including, but not limited to, wharfage (the charge assessed when cargo crosses the wharf),dockage (the charge assessed for docking a vessel at a berth), storage and demurrage (charges related tothe duration that cargo may be stored at the terminal)) and other fees to the Harbor Department for theright to use, rent or lease Port facilities. See “—Property Agreements” and “—Port Tariffs.”Comparative operating statistics for the Harbor Department are presented under the caption “—OperatingPerformance” below. See also “FINANCIAL DATA.”

Power and Authority of the Board

Pursuant to Chapter 676, Statutes of 1911, Chapter 102, Statutes of 1925, and Chapter 158,Statutes of 1935, the State conveyed to the City certain tide and submerged lands in trust, for theestablishment, improvement and conduct of a harbor to accommodate and promote commerce, navigationand fishing. Consistent with this grant, the Charter confers on the Board exclusive control andmanagement of the Harbor Department and control and jurisdiction over the Harbor District other thanthe lands used for or in connection with the drilling for, developing production, extracting, processing,taking or removing, storing and disposing of oil, gas and other hydrocarbon substances previouslytransferred by the State from the Harbor Department’s control to the control of the City. Pursuant to theCharter, the Board is authorized, on behalf of the City, to make provisions for the needs of commerce,navigation, recreation and fishery in the Harbor District; to promote, develop, construct, reconstruct, alter,repair, maintain, equip and operate all waterfront properties including piers, wharves, sea walls, docks,basins, channels, slips, landings, warehouses, floating and other plants or works; dredge and reclaim land;construct, equip and operate terminal rail trackage; and to establish, equip and operate all other facilitiesor aids incident to the development, protection and operation of the Port both inside and outside theHarbor District.

The Charter grants the Board the exclusive power and duty for and on behalf of the City to enterinto contracts, leases and agreements, to take legal actions in any matter within its jurisdiction, to exercisethe right of eminent domain and to make and enforce general rules and regulations throughout the HarborDistrict, including the regulation of public service, public utilities and private construction; to fix andcollect all rates, tolls and other charges, including tariffs, for the use and occupation of the public facilitiesand appliances of the Port; to take charge of, control and supervise the Port and to perform any and allother acts and things which are necessary and proper to carry out the general powers of the City. TheBoard’s actions are not subject to review by the Mayor or the City Council of the City, except that theCity Council must approve the issuance of revenue bonds, the annual budget and appeals of CaliforniaEnvironmental Quality Act determinations regarding the environmental impacts of capital projects at thePort. The City Council has approved the issuance of the Series 2010B Bonds and the Series 2010ABonds.

Management and Administration

The Board. The Board is composed of five members (“Commissioners”) appointed by theMayor of the City subject to confirmation by the City Council. Commissioners must be qualified electorsof the City. To assure continuity, the Commissioners serve overlapping six-year terms. Every year theBoard selects a President, Vice President and Secretary from among its members. The currentCommissioners are as follows:

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Nick Sramek.–President. Mr. Sramek was appointed to the Board in 2007 and his six-year term ends on June 30, 2013. He served on the City of Long Beach Planning Commission forseven years prior to his appointment to the Board. He is a senior project leader at The AerospaceCorporation in El Segundo, where he has worked for 25 years. He is a senior member of theAmerican Institute of Aeronautics and Astronautics and a member of the Institute of Electricaland Electronics Engineers, Inc. He graduated from Long Beach Poly High School, served in theU.S. Army, and has bachelor’s and master’s degrees in electrical engineering from CaliforniaState University, Long Beach.

Mario Cordero–Vice President. Mr. Cordero was appointed to the Board in 2003 andreappointed in 2009. His second six-year term ends on June 30, 2015. As a Commissioner, Mr.Cordero spearheaded the Port’s pioneering Green Port Policy and promoted the expansion of Portcommunity outreach initiatives. He has more than two decades of legal experience and is apracticing lawyer specializing in workers’ compensation law. Mr. Cordero is a member of theFederal Bar Association’s Central District, the Long Beach Bar Association and the Mexican-American Bar Association. He teaches political science at Long Beach City College and was vice-chair of the Long Beach Ethics Review Task Force. Mr. Cordero holds a law degree from theUniversity of Santa Clara and a bachelor of science degree in political science from California StateUniversity, Long Beach.

Dr. Mike Walter–Secretary. Dr. Walter was appointed to the Board in 2005 and his six-year term ends on June 30, 2011. He is assistant to the president for community relations atCalifornia State University, Long Beach, and previously served as the school’s dean of the Collegeof Business Administration. Dr. Walter also has held senior executive positions with Levi Strauss,DuPont and Rockwell International. He is a leader on many professional and community boards,and for his business and community involvement, President George W. Bush’s Business AdvisoryCouncil selected Dr. Walter as a 2005 Businessman of the Year. Dr. Walter holds bachelor’s,master’s and Ph.D. degrees from the University of Iowa, and he is a veteran of the U.S. Army.

Susan E. Anderson Wise–Commissioner. Ms. Wise was appointed to the Board in 2008and her six-year term ends on June 30, 2014. After practicing business and insurance litigationfor 35 years, she now is in private practice handling employment and corporate governancematters for various individuals and businesses. Ms. Wise has served as a mediator for the LosAngeles Superior Court since 2004 and as a hearing officer for the Long Beach Civil ServiceCommission since 2006. She has served in leadership roles with the Long Beach Bar Association,Women Lawyers of Long Beach, the Legal Aid Foundation of Los Angeles, the Long Beach LegalAid Foundation, the Long Beach Bar Foundation, the Long Beach Children’s Clinic, YMCA ofGreater Long Beach and the Long Beach Nonprofit Partnership. Ms. Wise graduated cum laudefrom Lawrence University in Wisconsin in 1970 and from the University of Chicago Law School in1974.

Thomas Fields–Commissioner. Mr. Fields was appointed to the Board in 2009 and his six-year term ends on June 30, 2015. He is the founder and owner of Thomas Fields Associates, aLong Beach marketing and advertising agency whose clients include, among numerous others,20th Century Fox, Hyundai and the Long Beach Housing Development Company. Mr. Fields is aformer City Planning Commissioner and Chair of the City’s Redevelopment Agency Board. Hecreates advertising for non-profit organizations including the Greater Long Beach School-to-CareerConsortium, the Long Beach Museum of Art, Watts Health Foundation, Andy Street and Fred JordanMissions. He also serves as vice president on the inaugural board of directors for the Long BeachRonald McDonald House.

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The Staff. The Charter provides that the Board appoint and employ an Executive Director, whoacts as the chief executive of the Harbor Department and who exercises the management of all affairs ofthe Harbor Department. The Board has divided the management and administration of the HarborDepartment into four bureaus (the Finance and Administration Bureau, Trade Relations and PortOperations Bureau, the Environmental Affairs and Planning Bureau, and the Engineering Bureau)reporting to the Deputy Executive Director who in turn reports to the Executive Director. The Financeand Administration Bureau, headed by the Managing Director, Finance and Administration, consists offive divisions, including the Finance Division, the Human Resources Division, the InformationManagement Division, the Real Estate Division and the Risk Management Division. The Trade Relationsand Port Operations Bureau, headed by the Managing Director, of Trade Relations and Port Operationsconsists of four divisions, including the Trade Relations Division, the Communications and CommunityRelations Division, the Maintenance Division and the Security Division. The Environmental Affairs andPlanning Bureau, headed by the Managing Director, Environmental Affairs and Planning, consists ofthree divisions, including the Environmental Planning Division, the Master Planning Division and theTransportation Planning Division. The Engineering Bureau, headed by the Managing Director,Engineering, consists of four divisions, including the Engineering Administration Division, the DesignDivision, the Construction Management Division and the Program Management Division. In addition tothe four bureaus discussed above, the Director of Governmental Affairs reports directly to the ExecutiveDirector. The Director of Governmental Affairs is responsible for keeping the City Council andcommunity partners involved and informed about Port affairs and managing county, state and federaladvocacy efforts, including developing, tracking and providing position recommendations on keylegislation to the Executive Director and the Board.

The Executive Director, the Deputy Executive Director, the Managing Directors and the HarborDepartment’s management staff serve at the pleasure of the Board. The executive management of theHarbor Department includes the following individuals:

Richard D. Steinke–Executive Director. Mr. Steinke joined the Harbor Department in1990 and was appointed to his current post as Executive Director in 1997. Prior to joining theHarbor Department, he served five years as Airport Property Officer at Stapleton InternationalAirport in Denver, Colorado. Mr. Steinke has been Chairman of the American Association of PortAuthorities and on the Boards of the Alameda Corridor Transportation Authority, the IntermodalContainer Transfer Facility Joint Powers Authority, and St. Mary Medical Center. He is a graduateof Chadron State College in Nebraska, with post-graduate work at the University of Colorado.

J. Christopher Lytle–Deputy Executive Director and Chief Operating Officer. Mr. Lytlewas appointed in 2008 to serve as Deputy Executive Director and Chief Operating Officer of theHarbor Department. Mr. Lytle, who served as an infantry officer in the U.S. Army, holds a master’sdegree in business administration from the University of Puget Sound and a bachelor’s degree inbusiness administration from Central Washington University. Before joining the Harbor Departmentin 2006, he was vice president of CMA CGM, responsible for all west coast operations, and heldexecutive positions with P&O Ports North America, Denmark-based APM (Maersk) Terminals andSea-Land Service, Inc. Mr. Lytle has provided volunteer leadership with the Pacific MaritimeAssociation, the Pacific Merchant Shipping Association, the Steamship Association of SouthernCalifornia, the Propeller Club, the Marine Exchange of Southern California and the Center forInternational Trade and Transportation.

Steven B. Rubin–Managing Director, Finance and Administration. Mr. Rubin wasappointed to the position of Managing Director, Finance and Administration in 2003. Before joiningthe Harbor Department, he was the Assistant Finance Director for the City of Los Angeles for nearlya year and a half, and a member of Mayor Richard Riordan’s senior staff, as Budget Director and the

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Assistant Deputy Mayor for budget and policy, for six years. Before joining the City of Los AngelesMr. Rubin held several positions in the private sector with companies including AAI Corp, UnisysCorp. and TRW Inc. Mr. Rubin has an MBA in finance and marketing from the University ofCalifornia at Los Angeles, Anderson School of Management, and bachelors’ degrees from theUniversity of Pennsylvania, including a Bachelor of Sciences from its Wharton School.

Douglas A. Thiessen–Managing Director, Engineering. Mr. Thiessen was appointed to theposition of Managing Director, Engineering in February 2007. He oversees the Port’s design,construction management and program management divisions, and heading all Port engineering andconstruction projects. He joined the Harbor Department in 2000 as assistant chief harbor engineerand was later promoted to chief harbor engineer. He is past chairman of the Ports and HarborsCommittee for the American Society of Civil Engineers, a board member of the California MarineAffairs and Navigation Conference and a member of the Alameda Corridor Operating Committee.Mr. Thiessen received a bachelor’s degree and did graduate work in civil engineering at theUniversity of Southern California.

Robert G. Kanter, Ph.D - Managing Director, Environmental Affairs and Planning. Dr.Kanter was appointed to the position of Managing Director, Environmental Affairs and Planning inMarch 2007. He joined the Harbor Department in 1990. Dr. Kanter was named Assistant PlanningDirector in 1994 and promoted to Director of Planning and Environmental Affairs in 1999. Beforejoining the Harbor Department, he was a research associate with the Allan Hancock Foundation atthe University of Southern California, a senior scientist with MBC Applied Environmental Sciencesand corporate vice president with MEC Analytical Systems. Dr. Kanter serves as the Californiaports’ representative on federal, state and local advisory committees and has served as a member ofnumerous environmental committees. He received his master’s degree and Ph.D. in biology, with afocus on marine environments, from the University of Southern California.

Vacant–Managing Director, Trade Relations and Port Operations. The position ofManaging Director, Trade Relations and Port Operations became vacant in early March 2010. TheBoard has begun a search to fill this position.

Sam Joumblat–Chief Financial Officer. Mr. Joumblat was appointed to the position ofChief Financial Officer in 2006. Before joining the Harbor Department, he was Deputy City Auditorfor the City of Long Beach. Prior to joining the City of Long Beach, Mr. Joumblat was a SeniorManager with Arthur Andersen. He also worked 15 years with Atlantic Richfield Company wherehe held a number of managerial positions that included supervising: internal audit, generalaccounting, contracting, information technology, and environmental, health and safety. Mr.Joumblat began his career as an engineer at Rockwell International where he worked on the SpaceShuttle and other space programs. He received his bachelor of science degree in mechanicalengineering. Mr. Joumblat also holds a master’s degree in business administration and master ofscience degrees in mechanical engineering and industrial engineering, all from the University ofSouthern California. Mr. Joumblat is a Certified Public Accountant, licensed to practice in the Stateof California, and a Certified Internal Auditor.

Employee Relations

The Harbor Department currently employs approximately 415 people. With the exception ofsome management positions, all employees are hired through the City Civil Service system and arerepresented by the International Association of Machinists and Aerospace Workers (“IAM”) or theEngineering Employees Association (“Engineer’s Association”) under the terms of separate Memorandaof Understanding. The Memorandum of Understanding with the IAM became effective October 1, 2007

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and will expire on September 30, 2012. The Memorandum of Understanding with the Engineer’sAssociation expired on September 30, 2008. The City is currently negotiating a new Memorandum ofUnderstanding with the Engineer’s Association. Until a new Memorandum of Understanding is enteredinto, the terms of the expired Memorandum of Understanding will continue to govern. The employees ofthe Harbor Department do not work for the tenants of the Port and therefore any work stoppage related tothe negotiations of a new Memorandum of Understanding would not affect the collection of Revenues.See “—Stevedoring and Cargo Handling.” There never has been a work stoppage by the employees ofthe Harbor Department.

Current Port Facilities

General. The Port covers 11.9 square miles, of which 7.1 square miles is water and includes allharbor facilities of the City. The Port has 22 miles of waterfront with 65 deep-water cargo berths.Container terminals occupy 1,356 acres, auto terminals occupy 182 acres, breakbulk and general cargoterminals occupy 108 acres, dry bulk terminals occupy 100 acres and petroleum and liquid bulk terminalsoccupy 52 acres. The Port has seven container terminals with 70 cranes (14 of which are owned by theHarbor Department and 56 of which are owned by tenants of the Port) and three container freight stations.Five container terminals are served by on-dock railyards. Additional cargo handling facilities include fivetransit sheds and 12 warehouses. Transit sheds are of concrete and steel construction. Wharves areconstructed of reinforced concrete supported by reinforced concrete pilings or sheet pile bulkhead. Wharfaprons at all transit shed berths average 50 feet in width. Rail tracks serve all major marine facilities.The Harbor Department owns a total of 82 miles of rail trackage. Current Harbor Department plansinclude enlarging and consolidating several of the container terminals due to the demand for largerfacilities. See “CAPITAL DEVELOPMENT PROGRAM” for information on the expansion of the Port.

The Port is protected by a federally financed breakwater over nine miles in length. Water depthsthroughout the Port range from 76 feet at the entrance channel to 45 feet in the inner harbor and 55 feet inpart of the middle harbor. Depth alongside wharves ranges from 32 to 50 feet, except that the bulkpetroleum terminal provides berthing depths of over 70 feet. This facility, at maximum depth, is capableof handling supertankers of up to 265,000 dead weight tons. See “CAPITAL DEVELOPMENTPROGRAM—2010-19 Capital Plan—Long Beach Harbor Dredging.”

Shipments to and from the Port can be received or dispatched by water, rail or truck. Two majorrail lines, BNSF and Union Pacific, serve the Port. These rail carriers have connections with the Port’srail system and offer reciprocal switching arrangements. Rail service to and from the Port increased afterthe opening in 2002 of the Alameda Corridor. The Alameda Corridor consists of a 20-mile long,multiple-track rail system that links the railyards and tracks at the Port and the Port of Los Angeles withthe Railroads’ transcontinental mainlines originating near downtown Los Angeles, California. TheAlameda Corridor consolidated 90 miles of pre-existing rail lines on four separate routes, into anintegrated system that is separated from non-rail traffic along Alameda Street. The consolidated rail routeeliminated more than 200 at-grade points of conflict between east-west streets and highways and north-south railroad traffic. ACTA was responsible for administering the overall design and construction of theAlameda Corridor (with the exception of specific work that was completed by the Railroads, certainutility owners and local agencies), and ACTA is now responsible for the operation of the AlamedaCorridor, including all activities related thereto.

In addition, the Port is located at the end of Interstate 710 (the “Long Beach Freeway”), whichprovides access to the interstate highway system. Major highway carriers serve the Port and providetransportation to all parts of the United States. Some of the containers leaving and entering the Port arealso handled at the Intermodal Container Transfer Facility (the “ICTF”), a specialized rail yard locatedfour miles from the Port for the transfer of containers between trucks and railcars, and to the switchyards

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of BNSF and Union Pacific. Truck travel to such switchyards takes approximately 30 to 60 minutes. TheICTF was financed and constructed by Southern Pacific Transportation Company and the IntermodalContainer Transfer Facility Joint Powers Authority, a joint powers authority organized by the San PedroBay Ports. The ICTF is operated by Union Pacific (successor to the Southern Pacific TransportationCompany). It was placed in service in 1987 and currently is operating at approximately 453,000 lifts peryear.

Container Terminals. Containerized cargo represents the largest source of revenue for theHarbor Department. For the 12 months ended September 30, 2009, containerized cargo accounted forapproximately 79.8% of the Harbor Department’s total operating revenue, primarily through thecollection of wharfage. See “—Property Agreements” and “—Port Tariffs.” Containerization service atthe Port began in 1962 when Sea-Land Service, Inc. opened a container freight station at the Port. See“CAPITAL DEVELOPMENT PROGRAM—2010-19 Capital Plan” for information on the constructionand improvement of the container terminals at the Port. The following is a summary of the majorcontainer facilities at the Port.

Pier A. SSA Terminals (Long Beach), LLC (a joint venture between Stevedoring Services ofAmerica Terminals, L.L.C. (“SSAT”) and Terminals Investment Limited) operates the container terminalon Pier A (the “Pier A Container Terminal”). The Pier A Container Terminal is an approximately 200-acre facility, that includes three berths, a 3,600 foot-long wharf with a water depth of 50 feet, a storagearea for approximately 24,000 on-ground containers, power outlets for 650 refrigerated containers, twogate facilities with a total of 28 truck lanes and an on-site railyard capable of handling two double-stacktrains simultaneously. The Pier A Container Terminal has ten gantry cranes, with capacities ranging from40-tons to 60-tons.

Pier C. SSA Terminals, LLC operates a container terminal on Pier C (the “Pier C ContainerTerminal”). The Pier C Container Terminal is an approximately 68-acre facility, which includes twoberths, a 3,600 foot-long wharf with a water depth of 42 feet, a storage area for approximately 4,000 on-ground containers, and power outlets for 114 refrigerated containers. The Pier C Container Terminal hasthree gantry cranes, with capacities ranging from 40-tons to 60-tons.

Piers D and E. California United Terminals (“C.U.T.”) operates an omni-terminal encompassingportions of Piers D and E, which handles container and break-bulk cargo. The terminal encompassesapproximately 154-acres (108 acres of dockside land with 46 acres of service area for container, rollon/roll off, steel slab and other breakbulk operations), three berths for container cargo and six berths forbreak-bulk cargo, a 6,190 foot-long wharf with water depths ranging from 33 feet to 43 feet, a storagearea for approximately 14,400 on-ground containers, and power outlets for 400 refrigerated containers.Five gantry cranes, with capacities ranging from 40-tons to 60-tons, are located at the terminal. Theterminal is located in the middle of the Port, close to the Long Beach Freeway and is served by a networkof rail lines. See “CAPITAL DEVELOPMENT PROGRAM—2010-19 Capital Plan—Middle HarborRedevelopment (Piers D, E and F)” for information on the improvements being made to Piers D and E.

Pier F. Long Beach Container Terminal, Inc. (“LBCT”) conducts its ground and chassisoperation at Pier F (the “Pier F Container Terminal”). The Pier F Container Terminal is an approximately102-acre facility, which includes five berths, a 2,700 foot-long wharf with a water depth of 50 feet, astorage area for approximately 10,000 on-ground containers, power outlets for 240 refrigeratedcontainers, and an on-dock railyard. The Pier F Container Terminal has seven gantry cranes, withcapacities ranging from 40-tons to 60-tons. See “CAPITAL DEVELOPMENT PROGRAM—2010-19Capital Plan—Middle Harbor Redevelopment (Piers D, E and F)” for information on the improvementsbeing made to Pier F.

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Pier G. International Transportation Service Inc. (“ITS”) operates a container terminal at Pier G(the “Pier G Container Terminal”). The Pier G Container Terminal is an approximately 246-acre facility,which includes five berths, a 6,100 foot-long wharf with a water depths ranging from 36 feet to 50 feet, astorage area for approximately 12,800 on-ground containers, power outlets for 384 refrigeratedcontainers, and an on-dock railyard. The Pier G Container Terminal has seven gantry cranes, withcapacities ranging from 30-tons to 60-tons. See “CAPITAL DEVELOPMENT PROGRAM—2010-19Capital Plan—Pier G Modernization” for information on the improvements being made to Pier G.

Pier J. Pacific Maritime Services LLC (a joint venture between SSA Terminals, LLC and ChinaOverseas Shipping Company) operates from Pier J (the “Pier J Container Terminal”). The Pier JContainer Terminal is an approximately 256-acre facility, which includes five berths, a 5,900 foot-longwharf with water depths ranging from 42 feet to 48 feet, a storage area for approximately 12,320 on-ground containers, power outlets for 685 refrigerated containers, and an on-dock railyard. The Pier JContainer Terminal has sixteen gantry cranes, with capacities ranging from 40-tons to 60-tons.

Pier T. Total Terminals International, LLC (a joint venture between Hanjin Shipping Company,Ltd. (“Hanjin”) and Marine Terminals Inc.) operates the Port’s largest container terminal on Pier T (the“Pier T Container Terminal”). The Pier T Container Terminal is an approximately 380-acre facility,which includes five berths, a 5,000 foot-long wharf with a water depth of 55 feet, a storage area forapproximately 8,300 on-ground containers, power outlets for 1,850 refrigerated containers, and an on-dock railyard. The Pier T Container Terminal has fourteen 65-ton gantry cranes.

Dry Bulk. For the 12 months ending September 30, 2009, dry bulk accounted for approximately7.0% of the Harbor Department’s total operating revenue, primarily through the collection of wharfage.The following is a summary of the major dry bulk facilities at the Port.

Petroleum Coke. Approximately 5.0 million metric tons of petroleum coke was exported throughthe Port in fiscal years 2009 and 2008. This product is handled at dry bulk terminals on Piers F and G.

The Pier G bulkloader consists of two conveyor system shiploaders operated by MetropolitanStevedore Company. Dry bulk products are stored temporarily in seven specifically designed sheds thathave a total capacity of 586,000 tons, and are subsequently moved automatically to dockside where shipsare loaded at approximately 3,900 tons per hour. An eighth storage shed, previously used as a coal shedand now used to store petroleum coke, has a capacity of 150,000 tons of petroleum coke and includes tworotary plow feeders with a capacity of 3,000 metric tons per hour, which are connected via conveyor tothe Pier G shiploaders. The storage sheds are leased to industrial firms that transport their products to thePort for sale abroad. The current storage shed tenants include Oxbow Carbon & Minerals, LLC, BPAmoco and Ultramar. The entire facility is automated and capable of high-speed handling of cargo bytruck or rail. A rotary railroad car dumper is capable of emptying an entire 100-car train in less than fourhours, while bottom dumpers on two different track systems also operate at high capacity.

The Pier F bulkloader consists of an automated conveyor shiploader and a ten acre silo complexoperated by Koch Carbon Inc. for the storage and exporting of petroleum coke. The petroleum coke isdelivered by rail or truck to the silos, screened, sorted and stored for shipment throughout the Pacific Rim.

Cement Facilities. CEMEX Pacific Coast Cement Corporation operates a 50,000-ton capacitybulk cement terminal from Pier D. This terminal has six silos and a pollution-free enclosed unloader thatcan unload directly into the silos. The screw type unloader has capacity to handle up to 800 tons ofcement per hour. A second cement terminal is located on Pier F and utilizes a vacuum type unloader.Operated by MMC Terminal, Inc., this facility can handle 800 tons per hour and utilizes a warehouse(with a capacity of 58,000 tons), instead of a silo system, to house and transfer product.

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Salt. At Pier F, Morton Salt Co. handles bulk solar salt shipped from Baja, California. This saltis used primarily in water softeners and by chemical companies. Conveyor belts, cranes and otherequipment are used for unloading and stockpiling the crude salt, which is then graded and bagged ordelivered in bulk to customers throughout the Western United States.

General Cargo. For the 12 months ending September 30, 2009, general cargo accounted forapproximately 6.9% of the Harbor Department’s total operating revenue, primarily through the collectionof wharfage and facilities rentals. The following is a summary of the major general cargo facilities at thePort.

Vehicles. The Toyota Motor Sales automobile terminal occupies a total of 144 acres in thenorthern area of the Port on Pier B. Vehicles are unloaded at this terminal, cleaned, processed andtransported to destinations from Southern California to the Midwest. Approximately 130,400 vehicleswere shipped through this terminal during fiscal year 2009 as compared to approximately 253,150vehicles during fiscal year 2008. A majority of all Lexus cars imported into the United States passthrough this terminal. Toyota Motor Sales also exports vehicles manufactured at its factories in theUnited States through this terminal. Toyota Motor Sales’ property agreement with the Board expired inDecember 2008. The Harbor Department and Toyota Motor Sales are currently negotiating a newproperty agreement.

Mercedes Benz vehicles arrive and are unloaded at Pier F, Berths 206 and 207 and are stored onan 11-acre parcel of land in the Port’s North Harbor. Crescent Terminals, Inc. (“Crescent Terminals”)operates Berths 206 and 207. Mercedes receives approximately 60,000 vehicles per year through thesefacilities.

Forest Products. Weyerhaeuser Company, located at Pier T, transports framing lumber by bargeto the Port from Coos Bay, Oregon, and Longview and Aberdeen, Washington. At this facility,approximately 200 million board feet of lumber are handled annually.

Steel. SA Recycling, LLC, operates a recycled steel facility on Pier T, which includes an 850foot wharf with a steel reinforced concrete storage area and two loading cranes. The facility is served byrail and truck and has the capacity to handle 650,000 tons per year. Cooper/T. Smith Stevedoring Co.,Inc. occupies Berths 204-205 on Pier F, which mainly handles steel products imported from the Far East.In addition to handling Mercedes Benz vehicles, Crescent Terminals’ operations at Pier F, Berths 206 and207, handle other products, including, among others, steel products imported from the Far East. Thesethree terminals handled approximately 954,711 metric tons of steel products during fiscal year 2009 ascompared to approximately 1.3 million metric tons of steel products during fiscal year 2008.

Petroleum/Liquid Bulk. For the 12 months ending September 30, 2009, petroleum/liquid bulkaccounted for approximately 6.2% of the Harbor Department’s total operating revenue, primarily throughthe collection of wharfage per barrel. The following is a summary of the major petroleum/liquid bulkfacilities at the Port.

Petroleum Bulk. The Port maintains five municipal bulk oil terminals; two are leased to BP WestCoast Products LLC (“BP”), one is leased to Tesoro Refining and Marketing Company (“Tesoro”), one isleased to Petro Diamond Terminal Co. (“Petro Diamond”), and one is leased to Chemoil Marine Terminal(“Chemoil”). Each terminal is connected directly to the storage and tank farms of the respective lessee.The total movement of crude and refined petroleum products over municipally owned berths during fiscalyear 2009 was approximately 32.9 million metric tons as compared to approximately 31.7 million metrictons during fiscal year 2008.

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Liquid Bulk (Chemical and Oils). Liquid bulk is handled by Vopak North America at Pier S,Berth S101. Large heavy duty pumps handle a variety of bulk liquids such as chemicals. Additional tankstorage capacity is nearby at locations linked by direct pipeline to the berth facilities.

Marine Commerce and Cargoes

The Harbor Department derives the majority of its revenue from containerized cargo operations.The Port handles “local cargo” that “naturally” moves through Southern California (e.g. cargo consumedwithin the locally defined region) and “discretionary cargo” (cargo that is not consumed within the locallydefined region but moves through Southern California for other reasons (e.g. inland distributioncapability)). Currently, approximately 50% of the cargo handled by the Port is discretionary cargo. Mostdiscretionary cargo is moved via rail to inland destinations both within and outside California. Theamount of discretionary cargo handled by the Port varies on a month-to month basis and on a year-to-yearbasis because ocean carriers and cargo owners can choose between various ports to get their cargoes toinland destinations. See “CERTAIN INVESTMENT CONSIDERATIONS—Port Competition.”

Tonnage. The Harbor Department tracks the volume of marine commerce by Metric RevenueTons (“MRTs”) at municipal berths and at private berths. Municipal cargo is cargo that enters the Portthrough City-owned berths. Private cargo is cargo that enters the Port through privately owned berths.Private berths were established prior to the formation of the Harbor Department and remain independent.Private facilities have their own agreements with customers who load and unload cargo through thoseberths and facilities. No Harbor Department tariffs are assessed at the private berths and facilities. Thepercentage of volume of cargo at private berths has diminished over recent years and now represents lessthan 1% of total tonnage as of September 30, 2009.


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Marine commerce passing through the Port by MRTs during the last five fiscal years issummarized in the following table:


Revenue Tonnage Summary(Fiscal Year Ended September 30)

(MRTs)1

2005 2006 2007 2008 2009

Municipal BerthsInbound Cargo

Foreign 102,144,682 114,723,789 116,834,397 103,777,099 82,621,355Coastwise/InterCoastal 21,023,918 17,367,762 16,088,293 14,785,341 17,214,108Total Inbound Cargo 123,168,600 132,091,551 132,922,690 118,562,440 99,835,463

Outbound CargoForeign 26,753,401 28,648,207 32,233,158 37,529,273 29,557,368Coastwise/InterCoastal 5,974,166 4,649,824 5,059,516 4,075,297 3,519,427Bunkers 2,010,674 2,624,618 2,459,654 2,088,496 2,109,610Total Outbound Cargo 34,738,241 35,922,649 39,752,328 43,693,066 35,186,405

Total Municipal Cargo 157,906,841 168,014,200 172,675,018 162,255,506 135,021,868

Private BerthsInbound 229,142 401,575 361,503 654,434 233,208Outbound 0 0 0 0 0Total Private Cargo 229,142 401,575 361,503 654,434 233,208

Grand Total 158,135,983 168,415,775 173,036,521 162,909,940 135,255,076

Inbound/OutboundSummaryTotal Inbound Cargo 123,397,742 132,493,126 133,284,193 119,216,874 100,068,671Total Outbound Cargo 34,738,241 35,922,649 39,752,328 43,693,066 35,186,405

Container Count in TEUs2 6,644,080 7,166,771 7,361,881 6,736,756 5,282,385

1 Metric Revenue Tons is equal to either 1,000 kilograms or one cubic meter.2 A TEU represents a twenty-foot equivalent unit.Source: Harbor Department

Cargo volumes as measured by MRTs and by TEUs decreased by approximately 5.8% and 8.5%,respectively, in fiscal year 2008 as compared to fiscal year 2007, and decreased by an additionalapproximately 17.0% and 21.6%, respectively, in fiscal year 2009. These decreases were a direct resultof the worldwide recession that began in fiscal year 2007, the decrease in consumer demand for importedgoods and the tightening credit markets. See “FINANCIAL DATA” for a discussion of the HarborDepartment’s fiscal year 2009 financial results.

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The following table sets forth the number of TEUs handled by the Port in the first five months(October through February) of fiscal years 2009 and 2010.


TEUs Handled by Port(First Five Months of Fiscal Years 2009 and 2010)

MonthFirst Five MonthsFiscal Year 2009

First Five MonthsFiscal Year 2010

PercentageChange

October 595,189 452,418 -24.0%November 557,459 448,151 -19.6December 429,946 467,237 8.7January 399,295 428,805 7.4February 318,042 413,134 29.9Total 2,299,931 2,209,745 -3.9

Source: Harbor Department

Cargo Summary. The Harbor Department’s leading inbound cargoes include petroleum bulk,electronics, plastics, furniture, clothing, machinery, rubber products, various foods, hardware andmiscellaneous chemicals. Principal outbound shipments are petroleum coke, petroleum bulk, wastepaper,chemicals, various food products, scrap metals, plastics, electronics, various feeds and machinery andparts.

The following is a breakdown of cargo handled by the Harbor Department at municipal berthsduring the past two fiscal years in tonnage and revenue:


Cargo Summary(Fiscal Years Ended September 30, 2008 and 2009)

2008 2009Metric

RevenueTons

(000’s)

Percentof Total

TonsRevenue(000’s)1

Percentof

Revenue1

MetricRevenue

Tons(000’s)

Percentof Total

TonsRevenue(000’s)1

Percentof

Revenue1

Containerized 121,633 74.7% $280,149 82.3% 94,154 69.6% $232,568 79.8%Petroleum/Liquid Bulk 31,649 19.5 17,787 5.2 32,887 24.3 18,213 6.2Dry Bulk 6,786 4.5 18,388 5.4 6,468 4.9 20,455 7.0General Cargo 2,188 1.3 24,200 7.1 1,513 1.1 20,216 6.9

Totals 162,256 100.0 340,525 100.0 135,022 100.0 291,452 100.0

1 Revenue includes operating revenues from wharfage, dockage, storage/demurrage, rentals, bunkers, special facilities rentals, cranerentals and other.


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Trading Countries. The top five trading countries with the Harbor Department for the past fivefiscal years, ranked based upon fiscal year 2009 results, are summarized in the following table:


Five Leading Trading Countries(Fiscal Year Ended September 30)

(Ranked on Fiscal Year 2009 Results)(000’s MRTs)

Countries 2005 2006 2007 2008 2009

InboundChina 48,998 59,900 60,517 51,709 42,502South Korea 5,869 6,809 5,361 4,504 3,489Hong Kong 5,694 5,649 5,303 4,773 3,227Ecuador 2,549 3,087 2,261 2,845 2,505Japan 4,441 5,286 4,794 3,809 2,225

OutboundChina 7,834 8,811 9,771 9,165 10,615Japan 3,357 4,366 4,874 5,779 3,936South Korea 3,013 3,180 3,476 3,898 3,003Taiwan 990 967 1,958 3,164 1,730Hong Kong 1,746 1,934 2,448 3,013 1,694


In addition to the trading countries listed above, the other major inbound trading countries includeIraq, Mexico, Vietnam, Canada and Panama, and the other major outbound trading countries includeAustralia, Indonesia, Vietnam, Singapore, and Mexico.

Container Forecast. Approximately 80% of the Harbor Department’s operating revenues forfiscal year 2009 were generated from containerized cargoes. In July 2009, The Tioga Group, Inc. andIHS Global Insight (together the “Consultants”) authored the “San Pedro Bay Container Forecast Update”(the “2009 Container Forecast”). The Harbor Department and the Port of Los Angeles contracted withthe Consultants to update the Consultant’s December 2007 forecast (the “2007 Container Forecast”) ofthe volume of TEUs to be handled by the San Pedro Bay Ports through 2030.

The Consultants considered various factors when developing the 2009 Container Forecastincluding, but not limited to, population, monetary policy, U.S. and world inflation, food and fuel prices,federal spending and deficits, wages, productively, unemployment, savings and spending rates, anddiversion of container cargoes to other East and West Coast ports.

The 2009 Container Forecast was based upon a number of conclusions and assumptions,including, but not limited to, the following assumptions: after the economy recovers from the currentrecession, it will suffer no major mishaps between 2010 and 2030; there will be no significant changes inthe U.S. tax structure; the value of the U.S. dollar will on average depreciate between 2010 and 2030; theConsumer Price Index inflation rate will spike in the early years of the forecast because of rebounding oilprices, average 2.6% per year, and eventually will settle down to approximately 2.0% per year; the priceof oil will be above $75 per barrel during the forecast period; wholesale farm prices will increase 0.3%per year; unemployment in the U.S. will average 5.9% during the forecast period; the rate of growth of

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discretionary spending by U.S. consumers will average 2.5% per year; 3% of container traffic will bediverted through the Panama Canal once the widening improvements to the Canal are completed (see“CERTAIN INVESTMENT CONSIDERATIONS—Port Competition”); and provided the San PedroPorts do not suffer any major congestion problems, diversions to other West Coast ports will be minimal.

The following table shows the forecasted inbound loads, outbound loads and empties in the 2009Container Forecast. No assurances can be given that the forecasted volume of TEUs will be achieved orthat the assumptions on which the 2009 Container Forecast is based will materialize. Inevitably, someassumptions used to develop the 2009 Container Forecast will not be realized and unanticipated eventsand circumstances will occur. Therefore, actual results will vary from those set forth in the table belowand the variations may be material. See “CERTAIN INVESTMENT CONSIDERATIONS—Forward-Looking Statements.”

TABLE 8Container Forecast for the San Pedro Bay Ports

2010-2030TEUs (000’s)1,2

2010 2015 2020 2025 2030

CompoundedAnnual

Growth Rate2010-2030

Inbound Loads 6,620 8,780 11,333 14,417 18,039 5.14%Outbound Loads 3,071 3,768 4,343 4,897 5,415 2.88Empties 3,123 4,410 6,151 8,377 11,109 6.55

Total TEUs 12,814 16,959 21,827 27,691 34,563 5.09

1 Over the last five calendar years the Port handled 45.8% of the average total TEUs that were handled by both of the San Pedro Bay Ports.2 The San Pedro Bay Ports handled approximately 11.8 million TEUs in 2009.Source: San Pedro Bay Container Forecast Update, July 2009, The Tioga Group, Inc. and IHS Global Insight.

Property Agreements

The Harbor Department operates the Port as a landlord through various property agreementsentered into with the tenants of the Port. The property agreements, which convey the right to use, rent orlease Port assets, include leases, preferential assignment agreements, revocable permits, area assignmentsand pipeline licenses. Pursuant to the property agreements, the tenants of the Port pay the HarborDepartment tariff charges (including, but not limited to, wharfage, dockage, storage and demurrage) andother fees, including crane and land rentals. See “—Port Tariffs” below.

Property agreements for industrial and commercial use constitute one of the Harbor Department’slargest and most stable sources of income. The City, acting by and through the Board, has propertyagreements with approximately 280 private companies and approximately 40 public agencies. Over thelast five fiscal years, property agreements covering waterfront property and facilities have generated inexcess of 90% of the Harbor Department’s operating revenues. Under these property agreements, theBoard assigns or leases property and facilities to terminal operators for terms of up to 30 years. Theproperty agreements with the Port’s top ten revenue producers have expiration dates ranging from 2009through 2027, with seven of these agreements expiring between 2022 and 2027. C.U.T.’s propertyagreement with respect to Piers D and E expired in 2009. C.U.T. and LBCT (whose property agreementexpires in 2011) are exploring the possibility of forming a joint venture and entering into a new propertyagreement with the Board for operation of the new facilities being constructed as part of the Middle

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Harbor Redevelopment. See “CAPITAL DEVELOPMENT PROGRAM—2010-19 Capital Plan—Middle Harbor Redevelopment (Piers D, E and F).” Until a new property agreement is entered into,C.U.T. continues to operate under the terms of its expired property agreement.

Most of the property agreements entered into by the cargo terminal operators are in the form ofpreferential assignment agreements. Under the preferential assignment agreements, the terminaloperators primarily pay the Harbor Department tariff charges, mainly wharfage (the charge assessed whencargo crosses the wharf), dockage (the charge assessed for docking a vessel at a berth), storage, anddemurrage (charges related to the duration that cargo may be stored at the terminal), for the use of thePort facilities. Most of the preferential assignment agreements with the cargo terminal operators contain aGuaranteed Annual Minimum (“GAM”) payment. For fiscal year 2009, the long-term preferentialassignment agreements with the Port’s major tenants contained GAM payments of approximately $223million. The preferential assignment agreements require that the compensation payable to the HarborDepartment be renegotiated every five years, and if the parties cannot agree, compensation is to be setthrough arbitration.

Under most of the current property agreements, the terminal operators are responsible for theoperation and maintenance of the property and facilities, but the Harbor Department retains responsibilityfor maintaining the structural integrity of the piers, wharves, bulkheads, retaining walls and fendersystems. The Harbor Department expects that future property agreements also will make the terminaloperators responsible for maintaining the structural integrity of the piers, wharves, bulkheads, retainingwalls and fender systems. Under the property agreements, Port tenants are required to comply with allapplicable environmental standards set by federal, state or local laws. Port tenants are liable for all costs,expenses, losses, damages, claims, cleanup costs and penalties arising from such tenant’s failure tocomply with applicable environmental standards. Additionally, Port tenants are required to carrycommercial general liability insurance, including bodily injury and property damage liability on theleased premises and to name the City, the Board and the officers and employees of the HarborDepartment as additional insureds. The property agreements also provide that if the property or facilitiescovered thereby are damaged by acts of God such as fire, flood or earthquake, or if work stoppages orstrikes prevent operation of the property or facilities, compensation payable to the Harbor Departmentwill be reduced in proportion to the interference with operations. See “—Stevedoring and CargoHandling” below. See also “CERTAIN INVESTMENT CONSIDERATIONS—Security at the Port” and“—Seismic Risks.”

During the last five fiscal years, revenues from non-waterfront properties and miscellaneoussources have accounted for approximately 4.4-6.4% of the Harbor Department’s operating revenues.These agreements generally provide for flat rentals or require payment of a percentage of gross revenues,subject to a fixed minimum rental.

Port Tariffs

The Board sets tariff charges for wharfage, dockage, pilotage, land usage, storage and demurrageapplicable to all ships and cargo at municipal berths and wharves or otherwise using City owned propertyin the Harbor District. The current tariffs are published in the Port of Long Beach Tariff No. 4 (the “PortTariff”). Under the terms of the various property agreements, the terminal operators, as permittees orlessees are responsible for collecting tariff charges and for remitting to the Harbor Department, all or anyportion of such tariff charges required to be paid to the Harbor Department. The Harbor Departmentcharges wharfage on a per container load of freight basis for container cargoes and a commodity rate perton of cargo basis for bulk and break-bulk cargoes. Dockage is also charged on a per vessel, per daybasis. See “—Property Agreements” above.

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The Harbor Department and all other California public ports control and determine their ownindividual tariff structures. However, the ports cooperate in setting tariff rates through membership in theCalifornia Association of Port Authorities (“CAPA”). One of CAPA’s goals is to establish and maintainreasonable and, as far as practicable, uniform terminal rates, charges, classifications, rules and regulationsfor the handling and movement of domestic and foreign waterborne cargo. These tariff provisions coverassignment of marine terminal facilities, as well as rates and provisions for vessel dockage, wharfage,wharf storage, wharf demurrage and other miscellaneous terminal charges necessary for the orderlymovement of cargo. The goal is to permit California ports to obtain an adequate return on investment inorder to facilitate the necessary maintenance, expansion and improvement of marine facilities. CAPAenjoys an exemption from federal antitrust laws which permits this cooperative rate setting. See“CERTAIN INVESTMENT CONSIDERATIONS—Factors Affecting Demand for Port Facilities.”

The Harbor Department may increase tariff charges without amending the property agreements orreceiving the consent of the tenants of the Port. See “CERTAIN INVESTMENT CONSIDERATIONS—Factors Affecting Demand for Port Facilities” and “—Port Competition.”

Operating Performance

Sources of Operating Revenues. As discussed under “—Property Agreements” and “—PortTariffs” above, the Harbor Department derives income from tariffs assessed on shipping activity(primarily wharfage and dockage) and from leases, rentals and utility services. The following tablesummarizes the sources of the Harbor Department’s operating revenues for the past five fiscal years.


Sources of Operating Revenues(Fiscal Year Ended September 30)

(000’s)

2005 2006 2007 2008 20091

Operating RevenuesBerths & Special Facilities

Wharfage $264,125 $283,020 $298,416 $289,381 $243,418Dockage 17,358 18,250 16,244 14,499 12,605Bunkers 1,876 2,417 2,335 2,012 2,159Special Facilities Rentals 18,611 21,017 21,710 21,589 20,317Crane Rentals 12,402 12,804 12,789 12,789 12,789Other 191 167 398 255 164Total Berths & Special Facilities 314,563 337,676 351,891 340,525 291,452

Rental Properties 10,926 11,458 14,633 14,496 15,957Utilities/Miscellaneous 3,718 4,160 4,308 4,324 3,942Total Operating Revenues $329,207 $353,294 $370,832 $359,344 $311,352

1 See “FINANCIAL DATA” for a discussion of the Harbor Department’s fiscal year 2009 financial results. See also“CERTAIN INVESTMENT CONSIDERATIONS—Factors Affecting Demand for Port Facilities” for a description of certainamendments that were made to the Port Tariff in fiscal years 2009 and 2010 as part of an incentive program established by theBoard.


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Wharfage is the Harbor Department’s primary source of operating revenue, generatingapproximately 80% of the Harbor Department’s operating revenues. The following table comparesrevenues generated from wharfage charges at municipal berths to tonnage during the last five fiscal years:


Wharfage Revenues(Fiscal Year Ended September 30)

2005 2006 2007 2008 2009

Total Metric Revenue Tons (000’s)(Municipal Only) 157,907 168,014 172,675 162,256 135,022

Wharfage Revenue (000’s) $264,125 $283,020 $298,416 $289,381 $243,418Average Wharfage Revenues Per Ton $1.67 $1.68 $1.73 $1.78 $1.80


Leading Revenue Producers. The following companies represent the Harbor Department’stwenty-four largest customers in terms of revenues, listed alphabetically. These customers accounted forapproximately 96% of the Harbor Department’s operating revenue in fiscal year 2009. The largest singlecustomer accounted for approximately 25% of the Harbor Department’s operating revenues in fiscal year2009.


Leading Revenue ProducersFiscal Year 2009

BP West Coast Products LLC Oxbow Carbon & Minerals, LLCCalifornia United Terminals Pacific Container Terminal/PacificCEMEX Pacific Coast Cement Corporation Maritime Services, Inc.Chemoil Corp. SA Recycling, LLCCooper/T. Smith Stevedoring Co., Inc. Sea Launch Company, LLC1

Crescent Terminals, Inc. SSA Terminals, LLCInternational Transportation Service, Inc. SSA Terminals (Long Beach), LLCJacobsen Pilot Service, Inc. Tesoro Refining and Marketing CompanyKoch Carbon, LLC Thums Long Beach CompanyLong Beach Container Terminal, Inc. Total Terminals International, LLCMercedes Benz U.S.A. LLC Toyota Motor Sales, USA, Inc.Metropolitan Stevedore Company Weyerhauser CompanyMMC Terminal, Inc.

1 Sea Launch Company, LLC filed for Chapter 11 bankruptcy protection on June 22, 2009.Source: Harbor Department

Stevedoring and Cargo Handling

Arranging for stevedoring and cargo handling services is the responsibility of each marineterminal operator. Stevedoring and cargo handling at the Port are provided pursuant to a contract betweenthe Pacific Maritime Association (the “Association”) and the International Longshore and WarehouseUnion (“ILWU”). The Association represents most of the steamship lines, marine terminal operators, carloading bureaus and stevedore companies on the Pacific Coast. The major providers of stevedoring and

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terminal services are Cooper/T. Smith Stevedoring, Metropolitan Stevedore Company (doing business asMetro Ports), Stevedoring Services of America, and Ports America Inc. The current contract between theAssociation and ILWU expires on June 30, 2014. There has been no prolonged work stoppage sinceOctober 2002. In October 2002, after the Association and the ILWU failed to agree upon a new contract,the shipping lines and terminal operators instituted a lock-out of the stevedoring companies, therebyshutting down all West Coast ports, including the Port, for 10 days. Work resumed when President Bushordered the ports to re-open pursuant to the Taft-Hartley Act. Prior to the 2002 lock-out, there had notbeen a prolonged work stoppage since 1971. Other than the work stoppages in 1971 and 2002, there hasgenerally been a history of excellent working relationships between the ILWU and the employer grouprepresented by the Association. Prolonged work slowdowns or stoppages, if they occur, could adverselyaffect Revenues. The employees of the Harbor Department do not work for the tenants of the Port or thestevedoring companies.

Environmental Compliance

General. The Harbor Department is required to comply with the provisions of a number offederal and state laws designed to protect or enhance the environment. The two basic laws are the FederalNational Environmental Policy Act (“NEPA”) and the State of California Environmental QualityAct (“CEQA”). Other federal environmental laws applicable to the Port include the ResourcesConservation and Recovery Act, which governs the cleanup, treatment and disposal of hazardous waste;the Clean Air Act, which governs the release of air pollutants; the Toxic Substances Control Act, whichgoverns the handling and disposition of polychlorinated biphenyls (PCBs) and other toxic substances; theMarine Protection, Research and Sanctuary Act, which governs the ocean dumping of dredged materials;the Rivers and Harbors Act, which governs navigable waterways; and the Clean Water Act, whichgoverns discharge of surface waters. Enforcement agencies include the U.S. and CaliforniaEnvironmental Protection Agencies and the U.S. Army Corps of Engineers, which rely on consultationand advice from various federal resource agencies.

The Harbor Department is also required to conform to provisions of a number of other stateenvironmental laws, including the Hazardous Waste Control Act, which governs hazardous wastetreatment and disposal, and the Porter-Cologne Act, which governs surface and ground water quality.State enforcement agencies include the Department of Toxic Substances Control, the State WaterResources Control Board and the local Regional Water Quality Control Board. The Air Resources Board,and the regional Air Quality Management District administer the federal Clean Air Act.

In conforming to these laws and their implementing regulations, the Harbor Department hasinstituted a number of compliance programs and procedures. Some of these are ongoing, including thesampling and analysis of harbor sediments to comply with dredging permit requirements; monitoring ofwater quality at stormwater outfalls; and oversight of the Harbor Department and tenant housekeepingpractices.

Hazardous Materials/Waste Management. The Harbor Department administers a number ofhazardous materials and waste management programs designed to ensure compliance with applicablefederal, State, and local regulations. These programs include facility audits to identify the presence ofhazardous materials, including asbestos and lead-based paint; assessment and remediation investigationsfor the cleanup of soil and groundwater contaminated by the long history of industrial development withinthe Harbor District; and hazardous material spill response. The Harbor Department has adopted a numberof contingency plans, some of which are mandated by law, regarding potential spills of fuel, oil and otherhazardous substances for the Port’s marine terminal facilities. The Harbor Department’s agreements withits tenants, require the tenants to take on the responsibility for financing the cost associated with cleaningup spills of fuels, oils and other hazardous substances.

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CEQA Document Preparation Protocol. In January 2006, the Harbor Department completed its“CEQA Document Preparation Protocol” (the “CEQA Protocol”). The CEQA Protocol includes, amongother elements, (a) the establishment of a documents preparation protocol for the project description andall key analyses and (b) the establishment of a quality assurance review team, consisting of outsideexperts in various specialties, that will monitor the process of preparing environmental impact reports(“EIR”) and environmental impact statements (“EIS”) and make technical, regulatory and otherrecommendations.

On May 13, 2009, the Middle Harbor Redevelopment Project EIS/EIR was the first majorterminal redevelopment EIS/EIR, using the CEQA Protocol, to be certified by the Board. Severaladditional environmental documents are currently in preparation using the CEQA Protocol including: theGerald Desmond Bridge Replacement Project EIR/Environmental Assessment, the Pier S TerminalRedevelopment EIS/EIR, the Pier B On-Dock Rail Support Facility EIR, and the Terminal Island RailProjects EIR. Establishing the CEQA Protocol has helped to ensure consistency and technical accuracyfor each of the upcoming documents. In addition, the Harbor Department expects that the CEQAProtocol may reduce the potential for disagreement and challenges from federal, State and local agenciesand environmental groups.

Air Pollution Reduction Programs. In 2006, the Harbor Department, together with the Port ofLos Angeles, developed the CAAP with input from the EPA, the California Air Resources Board, and theSouth Coast Air Quality Management District. The CAAP is the Harbor Department’s five-yearcomprehensive plan to address air pollution emissions from Port-related sources. Emission sourcestargeted by the CAAP include ships, trains, cargo handling equipment, harbor craft and heavy duty trucks.Through implementation of the CAAP, the Harbor Department expects to achieve at least a 45%reduction in air emissions over the five-year planning period, compared to what would have occurredwithout the CAAP. The CAAP will require a significant investment by the Harbor Department, the Portof Los Angeles and private sector businesses and will expedite the introduction of new and innovativemethods of reducing emissions prior to any federal or State requirements being imposed on the San PedroBay Ports.

The CAAP addresses every category of Port-related emission sources (ships, trucks, trains, cargo-handling equipment and harbor craft) and outlines specific, detailed strategies to reduce emissions fromeach category. Pursuant to the CAAP, the Harbor Department has undertaken several programs to lowerair pollution levels at the Port, including, but not limited to: (a) an incentive-based program thatencourages vessels entering the San Pedro Bay Ports to lower their speeds (faster speeds produce higheremissions) (the “Green Flag Incentive Program”); (b) accelerated replacement of cargo handlingequipment with equipment that meets the cleanest engine standards; (c) use of shore-side electrical powerfor ships calling at the Port (also known as “cold ironing”); (d) a Technology Advancement Programwhich seeks to accelerate the verification or commercial availability of new, clean technologies, throughevaluation and demonstration in port operations; (e) replacement of the entire fleet of 16 switcherlocomotives operated by Pacific Harbor Line with less polluting locomotives and the purchase of sixgenerator set locomotives which meet the cleanest engine standards; and (f) the CTP, which requiresprogressively cleaner engine standards for trucks operating at the Port, so that by January 2012, all trucksoperating at the Port will meet the EPA’s 2007 On-Road Heavy Duty emissions standards.

Green Flag Incentive Program. The Green Flag Incentive Program was approved by the Board in2005 to boost compliance with the Voluntary Vessel Speed Reduction Program, which was then around60 percent. The Green Flag Incentive Program provides financial incentives and recognition to the Port’svessel operators who consistently participate in a voluntary speed-reduction program designed to reduceair pollution.

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Under the original Green Flag Incentive Program, ocean vessels that observed a 12-knot speedlimit within 20 nautical miles of the Port during an entire year of voyages to and from the Port wereawarded a Green Flag environmental achievement award to recognize their contributions to improved airquality. The ocean carriers who operated the individual ships qualified for a 15% discounted dockagerate during the following 12 months if 90% of their vessels complied with the 12-knot speed limit for theprevious year. In 2009, the program was expanded to 40 nautical miles offshore. Ships observing thespeed limit 40 nautical miles offshore qualify for a larger discount.

For 2009, the Green Flag Incentive Program had participation rates of 93% and 70% for 20nautical miles and 40 nautical miles, respectively. Estimated air pollution reductions for 2009 includeavoided emissions of more than 2,000 tons of smog-forming compounds and diesel particulates. In fiscalyear 2009, the Harbor Department provided discounts to qualified participants in the Green Flag IncentiveProgram of approximately $1.5 million. The Harbor Department estimates that it will provideapproximately $4.0 million of discounts to qualified participants in the Green Flag Incentive Program infiscal year 2010.

Shore-Side Electrical Power. Exhaust emissions from auxiliary engines operated by vesselswhile at berth represent a significant source of air pollution at the Port. A docked cargo ship operatesauxiliary engines to power onboard operations which emits several types of air contaminants. The HarborDepartment is moving forward with the implementation of shore-side electric power, rather than usinginternal combustion power (diesel), to power ships while at berth. When shore-side electricity is providedto the vessel, the auxiliary engines can be turned off. Shore-side electrical power will significantly reducediesel emissions, the major source of air pollution, from large ships while at berth. In November 2007,the Port’s first shore-side electrical powered container berth was commissioned at the InternationalTransportation Service terminal on Pier G. Under a lease agreement with the Harbor Department, at least50 vessel calls per year must use shore-side electrical power. In June 2009, the world’s first shore-sideelectrical powered tanker berth was commissioned at the BP terminal on Pier T. This project is beingimplemented under an agreement between the Harbor Department and BP, whereby two retrofitted shipsmust call at the Port at least 120 times over the next 10 years. In addition, bulk vessels have been usingshore-side electrical power at the Mitsubishi Cement terminal on Pier F since 2007. All remainingcontainer terminal berths will be equipped with shore-side electrical power by the end of 2013. TheHarbor Department estimates that its remaining costs of equipping all container terminal berths withshore-side electrical power will be approximately $138 million.

Clean Trucks Program. The CTP is a landmark program that has successfully reduced airemissions and health risks by modernizing the Port’s trucking fleet. The CTP targets emissions fromheavy duty trucks that move cargo in and out of the marine terminals at the Port.

A key feature of the CTP is a series of progressive bans adopted by the San Pedro Bay Portsdesigned to gradually restrict older, more polluting trucks from operating at marine terminals at the SanPedro Bay Ports until eventually all trucks operating at San Pedro Bay Port terminals will be required tomeet the EPA’s 2007 On-Road Heavy Duty emissions standards. In recent years, more than 16,000drayage trucks were regularly operating at the San Pedro Bay Ports. Reduction of emissions from thesedrayage trucks is the main focus of the CTP, because their regular operations generate the largest amountof truck emissions.

Beginning on October 1, 2008, the Port began a progressive ban on older, dirtier trucks. As ofthat date all trucks with engine model years older than 1989 were banned from Port service. OnJanuary 1, 2010, all trucks with engine model years 1989 to 2003 were also banned from Port service,except trucks with engine model years between 1994 and 2003 that have undergone emission retrofits.Additionally, on January 1, 2012, all pre-2007 trucks will be banned from Port service. Phasing out older

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vehicles produces clean-air benefits because the EPA is requiring manufacturers to build cleaner engines.The CTP puts in place progressive bans so that the fleet will eventually achieve a CTP standard consistentwith the EPA’s 2007 On-Road Heavy Duty emissions standards. Through these efforts, over 5,000 newerdiesel and alternative fuel trucks meeting the EPA’s 2007 On-Road Heavy Duty emissions standards areserving the Port on a daily basis. The CTP is expected to reduce emissions by 80% after theJanuary 1, 2010 ban date.

Administration of the CTP, which commenced with the October 1, 2008 truck ban, is beingcarried out at the Port through a registration program, where Licensed Motor Carriers (“LMCs”) arerequired to enter into a registration agreement with the Harbor Department to allow entry into terminals atthe Port. The registration agreement requires LMCs to demonstrate that each truck operating under itsauthority has proper insurance, is adequately maintained, and is fit for operation at Port terminalsincluding compliance with Port safety and security measures. The trucks are also required to beregistered in a special truck registry (the “Drayage Truck Registry”). The Drayage Truck Registry allowsthe Port to keep track of pertinent information about each truck, including its make, model year andoperating history.

To assist LMCs with the replacement of trucks as the bans go into effect, the Harbor Departmentdeveloped special grant and subsidized-leasing programs. Under its “Grant Program,” the HarborDepartment offered to provide one-time grant assistance for the purchase of trucks that comply with theEPA 2007 On-Road Heavy Duty emissions standards or an up-front grant to enable LMCs to retrofitcertain pre-2003 trucks. Under its “Subsidized Leasing Program,” the Harbor Department providessubsidies to LMCs (a subsidy of up to 80% of the LMCs’ monthly lease payments, preventativemaintenance costs and payment of the residual value of the leased truck upon purchase of such truck bythe LMCs) that have entered into a lease/purchase agreement for a truck that complies with the EPA 2007On-Road Heavy Duty emissions standards. The Subsidized Leasing Program is administered for the SanPedro Bay Ports by Daimler Truck Financial.

The Grant Program and the Subsidized Leasing Program have been and will be funded withHarbor Department revenues, California Proposition 1B (“Prop 1B”) proceeds (approximately $3.5million) and a Clean Truck Fee. See also “OUTSTANDING OBLIGATIONS AND DEBT SERVICESCHEDULE—Other Obligations—Clean Trucks Program-Lease Subsidy Obligations.”

On December 17, 2007, the Board approved a tariff implementing a Clean Truck Fee (“CTF”) tohelp subsidize the financing of retrofits and replacements of banned trucks. The CTF was implementedon February 1, 2009 and imposes a tariff, to be paid by the beneficial cargo owners, of $35 per TEU and$70 for any container larger than twenty feet on merchandise that passes through the Port by truck. TheCTF is collected through PortCheck, an organization created specifically to collect the CTF from cargoowners. The CTF is expected to generate approximately $40 million in fees. The CTF will expire in2012 when all trucks have been replaced by 2007 or newer models.

Originally, the CTP was projected to cost more than $2 billion between the two San Pedro BayPorts. This projected cost was based upon the assumption that the San Pedro Bay Ports would have toassist trucking companies with the replacement of more than 16,000 trucks that regularly operate at theSan Pedro Bay Ports. However, because only 9,000 trucks needed to be replaced and because ofsubstantial private investment in trucks, the overall cost of the CTP to the San Pedro Bay Ports has beengreatly reduced. The Harbor Department estimates that the cost of the CTP to the Port will beapproximately $78 million (including administrative costs); $40 million of which will be funded from theCTF.

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Water Quality Improvement. The Harbor Department faces water quality issues that include notonly stormwater runoff from Port lands, but also the on-water activities of industrial harbors, legacysediment contamination, and inputs from intensely developed urban watersheds upstream. Recognizingthe advantages of addressing these issues on a port-wide basis, in 2009, the Harbor Department and thePort of Los Angeles worked cooperatively with regulatory agencies and the public to develop a WaterResources Action Plan (the “WRAP”). The WRAP is a joint plan for managing water and sedimentquality at the San Pedro Bay Ports. The WRAP identifies the key issues in the port complex; identifiescontrol measures to address those issues; and assembles existing, as well as proposed, water and sedimentprograms into those measures. The WRAP describes the implementation tools available to the San PedroBay Ports (lease and tariff provisions, incentives, and port-sponsored initiatives) and establishes aschedule for implementing the control measures. A key aspect of the WRAP is its dynamic nature: theWRAP will be revisited periodically to add detail and to add or modify measures where appropriate. Thecontrol measures described in the WRAP consist largely of plan formulation and the expansion andreorganization of activities that the San Pedro Bay Ports are already engaged in. Accordingly, the cost ofimplementing the control measures will consist predominately of staff and consultant time. Several of thecontrol measures set forth in the WRAP will likely involve capital costs at the implementation phase.Costs of the WRAP will be paid with Harbor Department revenues, federal, state and local grant fundingand other sources of funds. The Board does not expect these costs to be material to the HarborDepartment.

CAPITAL DEVELOPMENT PROGRAM

Master Plan

On October 17, 1978 the California Coastal Commission (the “CCC”) certified the Port MasterPlan as being in conformance with the policies of Chapters 8 and 3 of the California Coastal Act. ThePort Master Plan has been amended on numerous occasions since 1978. All amendments to the PortMaster Plan that required the approval of CCC were approved by CCC. The purpose of the Port MasterPlan is to provide the Harbor Department with a planning tool to guide future Port development and toensure that projects and developments in the Harbor District are consistent with the requirements of theCalifornia Coastal Act. The Port Master Plan establishes a flexible framework allowing for planneddevelopment of the Port. The current version of the Port Master Plan identifies conceptual capitalprojects and improvements to the Port through 2020.

2010-19 Capital Plan

In addition to the Port Master Plan, the Harbor Department maintains a 10-year capital planwhich sets forth the specific projects the Harbor Department expects to develop and construct over thenext ten years. The 2010-19 Capital Plan is the Harbor Department’s current 10-year capital plan. The2010-19 Capital Plan includes, but is not limited to, the following capital projects and improvements:expansion and modernization at the shipping terminals on Piers D, E, F and G, expansion of on-dock railfacilities, construction of new bridge to replace the existing Gerald Desmond Bridge, construction of anew Port administration building, dredging of the Long Beach Harbor, installation of various securityimprovements, and construction of a new container terminal on Pier S. Currently, the 2010-19 CapitalPlan has an aggregate estimated cost of approximately $4.658 billion. The Harbor Department expects tofinance approximately $3.268 billion of the costs of the 2010-19 Capital Plan with revenues of the HarborDepartment, proceeds of the Series 2010A Bonds and proceeds of additional Revenue Bonds. TheHarbor Department expects the remaining approximately $1.390 billion of costs of the 2010-19 CapitalPlan will be financed with federal and State grants and other sources of funds. See also “THE PORT OFLONG BEACH—Environmental Compliance.”

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Many of the improvements to the piers set forth in the Port Master Plan and the 2010-19 CapitalPlan, include, but are not limited to, longer wharves, deeper berths, larger gantry cranes and larger storageareas necessary to accommodate the docking and loading/unloading requirements of the current andfuture designed ships. Current container cargo ships have the capacity to transport 4,000 to 8,000 TEUs.The ships of the future are being designed and constructed to carry upwards of 10,000 TEUs.

Following is a brief description of some of the major projects included in the 2010-19 CapitalPlan and their funding sources:

Middle Harbor Redevelopment (Piers D, E and F). The Middle Harbor Redevelopment Projectis a 10-year approximately $1.266 billion modernization of the shipping terminals on Piers D, E and F.The project will consolidate the Pier E terminal (170 acres), the Pier F terminal (101 acres), 18 acres ofunderutilized land north of the Gerald Desmond Bridge and Ocean Boulevard, and the Berth E24subsided oil area (five acres), into a single, modern, 345-acre container terminal. The project will add on-dock rail capacity, shore-side electrical power, and deeper channels to accommodate the newest containerships. Phase I is scheduled to begin in 2010. The new terminal has been designed to move twice theamount of cargo that is moved through the current facilities. C.U.T. (which currently operates the Pier Eterminal) and LBCT (which currently operates the Pier F terminal) are exploring the possibility offorming a joint venture and entering into a new property agreement with the Board for operation of thenew facilities being constructed as part of the Middle Harbor Redevelopment. The costs of the MiddleHarbor Redevelopment Project are expected to be financed with proceeds of the Series 2010A Bonds,proceeds of additional Revenue Bonds and revenues of the Harbor Department.

See “LITIGATION—Litigation Relating to the Harbor Department and the Port—City ofRiverside – Challenge to Middle Harbor Redevelopment EIR” for information about a lawsuit that hasbeen brought against the City and the Harbor Department in connection with the Middle HarborRedevelopment Project.

Pier G Modernization. The Pier G Modernization Project is a multi-year, approximately $970million renovation of the container terminal on Pier G. The Pier G Modernization Project includes thefilling of the slip that exists between the old Piers G and J and other portions of the southeast basin, thecombining of various terminal areas, landfills, and facilities into an integrated terminal, withapproximately 270-acres and 4,000 feet of new deep-water berths (capable of being dredged to 55 feet,and thus able to handle the next generation of large container ships), installation of 100-foot gauge cranes,and shore-side electrical power. The project also includes the addition of two multi-lane trucking gatesequipped with optical character recognition capability and radiation monitoring, a new working andstorage railyard, renovation of the existing rail yard, addition of approximately 175,000 square feet ofnew state of the industry green buildings with remote container yard management capabilities, a stormdrain catchment and trash reparation system, new pavement, new high mast lighting poles and lighting.An EIR for the Pier G Modernization Project was certified by the Board in 2000. In 2001, the U.S. ArmyCorps of Engineers’ approved a dredge and fill permit, authorizing the dredging, fill of open waters, andconstruction of quarry-run rock dike and pile-supported concrete wharf.

The Pier G Modernization Project is being constructed in several phases to maintain theoperations of ITS, the current tenant of Pier G. To date, the completed projects include the constructionof a trucking gate and storage rail (completed in 2003), a ten-acre landfill and approximately 1,295 feetwharf at berth G236 (completed in 2003), an approximately 1,345 feet wharf retrofitted with shore-sideelectrical power (completed in 2008), and the installation of approximately 400 refrigerated containerreceptacles (completed in 2009). Currently under construction are the administration and operationsbuildings complex, the maintenance and repair buildings complex, the demolition of the wharves and thefilling of the northern half of the slip, which will create approximately 11 additional rentable acres. In

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March 2010, construction commenced on a new railyard designed to increase Pier G’s rail capacity byapproximately 85%.

To date, approximately $419 million has been authorized by the Board, and approximately $200million has been expended. The remaining $219 million is expected to be expended by mid-2012. Thetotal cost for the program is estimated at $970 million, with completion expected in 2019 if all portions ofthe program are undertaken. If automation of the container yard is undertaken, the cost of the Pier GModernization Project may increase by an additional $100 to $200 million. The completed phases of thePier G Modernization Project were financed with revenues of the Harbor Department and the remainingphases of the Pier G Modernization Project are expected to be financed with proceeds of the Series 2010ABonds, proceeds of additional Revenue Bonds and revenues of the Harbor Department.

On-Dock Rail Support Facility. A major transportation element of the 2010-19 Capital Plan is tomove more cargo by rail instead of by truck. The Port has a significant railroad infrastructureimprovement program that includes nine rail-related projects with an approximate cost of $860 million.The Port’s major rail infrastructure project is “the on-dock rail support facility” to be located at Pier B.The Pier B railyard is a multi-phased project which is anticipated to begin by the end of 2012 (pendingEIR certification). An EIR is currently being completed for the project and is expected to be approved bythe Board by the end of 2010. The final phase of the Pier B on-dock rail support facility is expected to becompleted by the end of 2017. The expansion entails increasing the capacity to load and unload trains onthe docks thereby maximizing the number of containers moved directly via rail and reducing truck tripson streets and freeways within the region, including the Long Beach freeway. The Pier B on-dock railsupport facility is expected to be financed with State grants, revenues of the Harbor Department andproceeds of additional Revenue Bonds.

Gerald Desmond Bridge Replacement. The project to replace the Gerald Desmond Bridgeincludes the replacement of the existing four-lane Gerald Desmond Bridge, which spans the Port’s MainChannel, with a new six-lane (or eight-lane) bridge. Currently, the Gerald Desmond Bridge is only twolanes in each direction with no shoulder and, depending on tide conditions, is too low to accommodatepassage of the largest ships. The new bridge would be higher to allow additional clearance for ships andwider to ease the flow of cars and trucks using the bridge daily. Architectural studies and preliminarydesign work for the replacement of the Gerald Desmond Bridge have been started and are currently inprocess of being completed. In February 2010, an EIR with respect to the replacement of the GeraldDesmond Bridge was released by the Harbor Department for public comment. The total cost to replacethe Gerald Desmond Bridge is estimated to be approximately $1.1 billion. The Harbor Departmentanticipates that funding of the project will come from numerous sources, including, federal and Stategrants, revenues of the Harbor Department and a grant from the LACMTA. As of September 30, 2009,the Harbor Department had set aside approximately $52 million to pay a portion of the HarborDepartment’s costs of constructing the new bridge.

Port Administration Building. The Port Administration Building Project includes theconstruction of a new Port headquarters building that will increase space for operations, relocatemaintenance adjacent to administration, and provide certain public amenities. The current Portheadquarters building lacks adequate space for current operations and requires more than $80 million ofseismic upgrades. The new complex is being designed to achieve gold-level certification of the U.S.Green Building Council’s Leadership in Energy and Environmental Design. Construction is scheduled tobegin in spring 2010 and is expected to be completed in 2013. The total cost of the Port AdministrationBuilding Project is estimated to be approximately $306 million and is expected to be financed withrevenues of the Harbor Department and proceeds of additional Revenue Bonds.

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Long Beach Harbor Dredging. The Harbor Department is undertaking an approximately $54million dredging project to improve navigation in harbor waters. The project is scheduled to begin in2010. Although there are four separate locations involved in the dredging project, the primary focus isdeepening the inner turning basin south of the BP oil terminal to 76 feet, the same depth as the mainchannel. The deeper inner basin means large tankers will no longer need to unload part of their oiloutside the breakwater to safely reach berth. The new depth also will allow ships to turn more easily inthe inner basin. The dredge materials will be used to fill about 12 acres at Pier G. The project will befunded with approximately $5.9 million of federal stimulus moneys and approximately $48.1 million ofrevenues of the Harbor Department.

Security. The Harbor Department is in the process of installing a $12 million fiber-optic networkthroughout the Harbor District which will enable multiple security agencies to share data. In addition tosurveillance cameras and computers that monitor data throughout the Port, the first phase of a new fiber-optic communications network was installed in 2009 and continues to be expanded. When completed, thenetwork will enable the Harbor Department’s Security Division to share data with other local, state andfederal security agencies, including the Port of Los Angeles. Funded by a grant from the Department ofHomeland Security, the network will be a regional asset, as security stakeholders will share data includingfeeds from surveillance cameras, sensors, radar, and sonar units.

Pier S. Pier S is an approximately 170-acre site located on the west side of the Port directly northof Pier T. Prior to its purchase by the Harbor Department in 1994, Pier S was owned by the Union PacificResources Corporation (“UPRC”) and was used as an active oil and gas production field. During the1950’s and 1960’s, a portion of Pier S was leased by UPRC to the now-defunct TLC Corporation for theshallow impoundment disposal of oil and gas drilling waste. Testing conducted in the early 1980’sindicated that TLC Corporation disposed of materials other than those permitted under the lease withUPRC. The Harbor Department has completed remediating the site and is currently preparing an EIR/EIS(the “Pier S EIR/EIS”) for full development of Pier S into container and breakbulk cargo facilities. See“THE PORT OF LONG BEACH—Environmental Compliance.” Once the Harbor Department receives afinal record of decision with respect to the development of Pier S and approval from the U.S. Army Corpsof Engineers, the Harbor Department can begin construction of facilities on Pier S.

The container and breakbulk facilities to be constructed on Pier S are expected to consist ofapproximately 150 acres of land and to include approximately 3,200 feet of deep draft wharf (water depthof approximately 52 feet), a multi-lane gate complex, approximately 12 terminal buildings, up to 12dockside gantry cranes, outlets for refrigerated containers, paved and lighted yard for the storage andhandling of containerized cargo and the capability to install dockside rail service in the future. TheHarbor Department also is planning to widen Cerritos Channel as part of the Pier S wharf construction toaccommodate the next generation of large container vessels. The Harbor Department has relocatedcertain pipelines and utilities and has brought the site to grade by filling the area with more than 5 millioncubic yards of clean imported soil. The Harbor Department does not plan to improve Pier S beyond whathas been completed to date, until such time as the Pier S EIR/EIS has been certified, approval from theU.S. Army Corps of Engineers has been received by the Harbor Department and a tenant has signed along-term lease to operate from Pier S. Total costs of improving Pier S, including the environmentalremediation and the construction of the facilities, are estimated to be approximately $700 million, ofwhich approximately $200 million has already been expended. The costs that have already been incurredby the Harbor Department in connection with the development of Pier S were paid with revenues of theHarbor Department, and the remaining costs of developing Pier S are expected to be financed withrevenues of the Harbor Department and proceeds of additional Revenue Bonds.

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Funding Sources of 2010-19 Capital Plan

The Harbor Department plans to finance the 2010-19 Capital Plan with the following sources offunding:


Funding Sources of 2010-19 Capital Plan(000’s)

Funding Source Amount

Revenue Bonds1 $1,215,000Harbor Department Revenues 2,053,000Federal and State Grants 1,142,000Other Sources 248,000

Total $4,658,000

1 Includes the Series 2010A Bonds.Source: Harbor Department.

In the event any of the expected federal or State grants are not received by the HarborDepartment, the projects to be financed with such grants may be delayed and/or reduced in scope or theHarbor Department will need to obtain alternative sources of funding (including, but not limited to,public-private partnerships). See also “CERTAIN INVESTMENT CONSIDERATIONS—Unavailabilityof, or Delays in, Anticipated Funding Sources.”


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FINANCIAL DATA

The following tables present the Harbor Department’s Statements of Revenues and Expenses andBalance Sheet for fiscal years 2005-2009.


Comparative Summary of Statements of Revenues and ExpensesFiscal Years Ended September 30, 2005-2009

(000’s)

2005 2006 2007 2008 2009

Port Operating Revenues:Berths/Special Facilities $314,563 $337,676 $351,891 $340,525 $291,452Rental Properties 10,926 11,458 14,633 14,496 15,957Miscellaneous 3,718 4,160 4,308 4,323 3,942Total Port Operating Revenues 329,207 353,294 370,832 359,344 311,352

Port Operating Expenses:Operating/Administrative 62,016 75,541 96,964 116,166 1 97,880Depreciation/Amortization 86,754 85,465 83,067 79,497 85,858Total Port Operating Expenses 148,770 161,006 180,031 195,663 183,738

Income from Port Operations 180,437 192,288 190,801 163,681 127,614

Non-Operating Income (Expense):Clean Air Action Plan 0 0 0 (13,867) 13,323Gain/Loss from Harbor Oil Operations 13,541 6,126 (21,070) 31,153 923Gain/Loss on Sale of Property (400) (1,392) 0 (255) 8Income from Equity in Joint Ventures 3,535 4,302 4,675 4,441 2,994Interest Expense, Net of Capitalized Interest (57,449) (54,110) (53,073) (46,391) (40,830)Interest Income, Net of Capitalized Interest 17,964 28,302 43,374 33,347 18,579Other, Income (Expense) Net (8,118) (9,596) 1,267 1,047 8,773Total Non-Operating Income (Expense) (30,927) (26,369) (24,827) 9,476 3,771

Income Before Operating Transfers and CapitalGrants 149,514 165,919 165,974 173,156 131,385

Net Operating Transfers (9,500) (14,222) (15,400) (16,059) (18,587)Capital Grants and Contributions and Depreciation 2,208 2,298 10,020 3,742 11,440

Change in Net Assets (Deficit) $ 142,222 $ 153,995 $ 160,595 $ 160,839 $ 124,237

Net Assets (beginning of fiscal year) $1,685,929 $1,828,151 $1,982,146 $2,142,741 $2,303,580Net Assets (end of fiscal year) $1,828,151 $1,982,146 $2,142,741 $2,303,580 $2,427,817

1 Includes recognition of a one-time environmental remediation cost of $20 million relating to cleaning up waste at Pier A.Source: The Harbor Department’s audited financial statements for fiscal years 2005-2009. Harbor Department

Fiscal year 2009 operating revenues were $311,352,000, a decrease of 13.4% from fiscal year2008. All of the revenue categories, except petroleum/liquid bulk, dry bulk and rentals (2.4%, 11.2% and10.0% increases, respectively) decreased in fiscal year 2009. Cargo volume for fiscal year 2009 was135,021,868 MRTs, a decrease of 16.8% from fiscal year 2008. Petroleum/liquid bulk was the only cargocategory that increased in volume between fiscal year 2008 and fiscal year 2009. The decreases in

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operating revenues and cargo volumes were a direct result of the worldwide recession, the decrease inconsumer demand for imported goods and the tightening credit markets. Fiscal year 2009 operating andadministrative expenses were $97,880,000, a decrease of 15.7% from fiscal year 2008. In fiscal year2009, cargo facility maintenance expenses decreased by $2,170,000, infrastructure maintenance (whichincludes maintenance to bridges and freeways and expenses related to environmental controls) decreasedby $23,257,000 (mainly as a result of the Harbor Department incurring a one-time environmentalremediation cost of $20 million in fiscal year 2008), fire and safety expenses increased by $2,684,000 andgeneral and administrative expenses increased by $4,738,000. Investment income was lower by$14,768,000 in fiscal year 2009 due to lower interest rates. The implementation of CAAP and its relatedprojects generated a net revenue of $13,323,000 in fiscal year 2009 (as compared to a net expense of$13,867,000 in fiscal year 2008), primarily as a result of the collection of the CTF.


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Comparative Balance Sheet—AssetsFiscal Years Ended September 30, 2005-2009

(000’s)

2005 2006 2007 2008 2009

Current Assets:Pooled Cash and Cash Equivalents $394,399 $603,717 $681,822 $725,689 $664,793Accounts Receivable (Trade) 42,548 42,340 47,463 50,672 47,692Due from Other Governmental Agencies 2,458 2,961 5,931 2,268 4,917Inventories of Supplies 1,007 928 734 742 627Other Current Assets 0 0 0 2,229 45,735

Total Current Assets 440,413 649,947 735,950 781,600 763,764

Harbor Revenue Bond Funds & OtherFunds Restricted as to Use:Pooled Cash and Cash Equivalents 247,692 219,299 280,702 232,529 241,696Other Investments 54,184 54,153 32,228 0 0

Total Restricted Assets 301,876 273,452 312,931 232,529 241,696

Capital Assets:Land:

Land Purchased 439,493 439,813 439,913 439,913 440,902Constructed 397,319 409,091 410,791 418,900 418,932

Net Land 836,812 848,904 850,704 858,814 859,834

Structure/Facilities 1,767,712 1,782,557 1,818,157 1,947,976 2,011,292Less Accumulated Depreciation (723,278) (796,973) (861,237) (939,736 (1,020,821)

Net Structures and Facilities 1,044,434 985,584 956,920 1,008,240 990,471

Furniture/Fixtures/Equipment 15,190 15,439 16,684 17,499 28,194Less Accumulated Depreciation (11,696) (11,873) (12,676) (13,296) (17,254)

Net Furniture/Fixtures/Equipment 3,493 3,566 4,007 4,203 10,940

Construction in Progress 130,633 145,554 225,837 164,536 180,700Right-of-Way 207,823 207,823 207,823 207,823 207,823

Net Capital Assets 2,223,195 2,191,431 2,245,292 2,243,616 2,249,768

Other AssetsAssets Constructed for Others 31,552 0 0 0 0Long-Term Receivables 25,670 27,435 27,435 27,435 27,000Oil Facilities 81,136 81,136 81,136 81,136 81,136

Less Accumulated Depletion (OilFacilities)

(68,529) (69,192) (70,053) (70,233) (65,133)

Environmental Mitigation Bank 32,878 44,278 44,278 44,278 44,278Investment in Joint Ventures 5,986 6,788 7,462 7,903 10,898Restricted nonpooled cash and cash

equivalents 0 0 0 21,474 363Restricted nonpooled investments 0 0 0 32,228 53,261Other Non-Current Assets 27,695 17,501 3,300 2,400 1,900

Total Other Assets 136,389 107,945 93,559 146,621 153,702

Total Assets $3,101,873 $3,222,776 $3,387,731 $3,404,366 $3,408,929

Source: The Harbor Department’s audited financial statements for fiscal years 2005-2009. Harbor Department

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Comparative Balance SheetLiabilities and Equity/Net Assets

Fiscal Years Ended September 30, 2005-2009(000’s)

2005 2006 2007 2008 2009

Current LiabilitiesPayable from Current Assets:

Accounts Payable and AccruedExpenses $25,162 $56,603 $53,196 $53,972 $48,312

Commercial Paper plus Accrued Interest 0 0 60,433 60,336 31,400Contingent Liability 0 0 0 0 5,000Deferred Credits and Unearned Revenue 17,083 17,227 15,921 14,587 14,912Due to City of Long Beach 9,500 14,572 15,606 16,275 16,084Current Portion of Environmental

Remediation Obligations 0 0 9,600 60,412 19,074Notes Payable Due Within One Year 55 41 41 0 0Total Current Liabilities Payable

from Current Assets 51,799 88,443 154,796 205,581 134,782

Current Liabilities Payable fromRestricted Assets:

Accrued Interest – Bonds 20,105 17,746 17,130 16,443 15,704Current Portion of Bonded

Indebtedness 34,935 38,335 40,170 38,145 40,120Total Current Liabilities Payable

from Restricted Assets 55,040 56,081 57,300 54,588 55,824

Total Current Liabilities 106,839 144,524 212,096 260,169 190,605

Long-Term Obligations (Net ofCurrent Portion:

Oil Well Abandonment Costs 17,700 18,300 18,800 19,900 26,700Environmental Remediation

Obligations 0 0 38,100 16,458 1,000Commercial Paper Outstanding 60,150 60,150 0 0 0Notes Payable 83 41 0 0 0

Deferred Liability 31,552 0 0 0 0Bond Indebtedness 1,057,398 1,017,615 975,994 804,259 762,807Total Long Term Obligations 1,166,883 1,096,106 1,032,894 840,616 790,507

Total Liabilities $1,273,722 $1,240,630 $1,244,990 $1,100,785 $ 981,112

Net Assets $1,828,151 $1,982,146 $2,142,740 $2,303,580 $2,427,817

Total Liabilities and Net Assets $3,101,873 $3,222,776 $3,387,731 $3,404,366 $3,408,929

Source: The Harbor Department’s audited financial statements for fiscal years 2005-2009. Harbor Department

Financial Statements

The audited financial statements of the Harbor Department for the fiscal year endedSeptember 30, 2009 (the “2009 Audited Financial Statements”) are included as Appendix A attachedhereto. The 2009 Audited Financial Statements were audited by KPMG LLP, Long Beach, California,

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independent certified public accountants, whose report with respect thereto also appears in Appendix Ahereto. The Harbor Department has not requested, nor did the Harbor Department obtain, permissionfrom KPMG LLP to include the 2009 Audited Financial Statements as an appendix to this OfficialStatement. In addition, KPMG LLP has not performed any post-audit review of the financial condition oroperations of the Harbor Department and has not reviewed this Official Statement.

Accounting and Annual Budget

The City’s and the Harbor Department’s fiscal year begins on October 1 and ends on thesubsequent September 30. All accounting functions for the Harbor Department are computerized. TheHarbor Department’s practice of establishing separate operating accounts for each berth, special facilityand leased property in the Port allows the Harbor Department to determine the relative profitability ofevery individual Port installation at any time. All operating records of the Harbor Department are, asprovided by the Charter, audited annually by the City Auditor of the City of Long Beach as well as by anindependent certified public accountant. See “—Financial Statements” above.

An annual operating budget is developed by Harbor Department staff and is reviewed andapproved by the Board. In accordance with the terms of the Charter, the Harbor Department’s budget isthen submitted to the City Manager for inclusion in the City budget. The City Council must approve theCity budget prior to the beginning of each fiscal year.

Pension and Post-Retirement Health Care Benefits

Pension Plan. The Harbor Department participates on a cost-sharing basis with the City in theCalifornia Public Employees’ Retirement System (“CalPERS”). The City contracts with CalPERS, anagent multiple-employer public employee defined benefit pension plan. CalPERS provides retirementand disability benefits, including annual cost of living adjustments (“COLA”), and death benefits to planmembers and beneficiaries. CalPERS acts as a common investment and administrative agent forparticipating public entities within the State. Benefit provisions and all other requirements are establishedby State statute and City ordinance. Copies of CalPERS’ annual financial report may be obtained fromtheir executive office: 400 P Street, Sacramento, CA 95814. Since CalPERS is on a fiscal year endingJune 30, all actuarial calculations for the City’s retirement plan are made on a fiscal year ending June 30,which differs from the City’s fiscal year end of September 30.

Under the terms of the contract between CalPERS and the City, all full-time employees areeligible to participate in CalPERS and become vested in the system after five years of service. The Cityhas a multiple tier retirement plan with benefits varying by plan. Vested first and second tiermiscellaneous employees (most of the Harbor Department’s employees are considered miscellaneousemployees) who retire at age 55 are entitled to receive an annual retirement benefit, payable monthly forlife, in an amount equal to 2.7% of their highest paid year of employment for each year of creditedservice. The City created a third tier for miscellaneous employees hired after October 1, 2006. Vestedthird tier miscellaneous employees who retire at age 55 are entitled to receive an annual retirementbenefit, payable monthly for life, in an amount equal to 2.5% of their highest paid year of employment foreach year of credited service.

Retirees under the first tier are eligible to receive a maximum annual 5% cost-of-living increasein their retirement benefit, while those under the second and third tier are eligible to receive a maximumannual 2% cost-of-living increase.

Contribution requirements of plan members and the City are established and may be amended byCalPERS. For fiscal year 2009, miscellaneous plan participants were required to contribute 8%.

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Miscellaneous employees paid 2% of the 8% employee rate, and the City paid the remaining 6%. Inaddition, the City is required to contribute at an actuarially determined rate applied to annual coveredpayroll. For fiscal year 2009, the employer contribution rates were 11.83% for miscellaneous employees.For fiscal year 2010, the employer contribution rates will be 12.30% for miscellaneous employees.

The Harbor Department is billed by the City for its share of pension costs based on ratesestablished by CalPERS. CalPERS does not calculate a separate pension obligation for the HarborDepartment. The Harbor Department paid $5,525,128 to the City, which was equal to its annual requiredcontribution for fiscal year 2009, and expects to pay $6,126,136 to the City in fiscal year 2010.

As of the most recent actuarial valuation date (June 30, 2008), the miscellaneous plan had anunfunded actuarial accrued liability of $91,615,510, with a funded ratio of 94.5%. The funded ratiocompares the actuarial value of assets to the actuarial accrued liabilities of the miscellaneous plan. Theratios change every valuation year, reflecting asset performance, demographic changes, actuarialassumption/method changes, benefit structure changes or a variety of other actuarial gains and losses.Generally, the gains and losses that occur in the operation of the miscellaneous plan are amortized over a30-year rolling period, which results in an amortization of about 6% of unamortized gains and losses eachyear. However, CalPERS determined that the market volatility occurring in fiscal year 2009 was unique,and therefore should be treated separately from past gains and losses. Therefore, CalPERS approved asmoothing methodology for fiscal year 2009 where the losses for such year are isolated and amortizedover a separate 30-year period and phased in over a three-year period. Such change will result in a secondlayer of contributions.

See “Note 8 – Retirement Programs” in “APPENDIX A—HARBOR DEPARTMENT OF THECITY OF LONG BEACH AUDITED FINANCIAL STATEMENTS FOR THE FISCAL YEARSENDED SEPTEMBER 30, 2009 AND 2008” for additional information about the pension plan.

Post-Retirement Health Care Benefits. Full-time City employees are entitled to receive up to 96hours of sick leave per year. Unused sick leave may be accumulated until termination or retirement. Nosick leave benefits are vested; however, under the provisions of the City’s Personnel Ordinance, uponretirement the City allows retirees, their spouses and eligible dependents to use the cash value of theretiring employee’s accumulated unused sick leave to pay for health, dental and long-term care insurancepremiums under the City’s Retired Employees Health Insurance Program. Once the cash value of theretired employee’s unused sick leave is exhausted, the retiree can terminate coverage or elect to continuepaying premiums at the retiree’s expense. The City has provided two one-time early retirement incentiveprograms. The first had a maximum value of $25,000 for employees, based on age, who retired duringcalendar year 1996, and a second incentive offered a 16-hour increase in sick leave per year of service formanagement employees who retired by June 30, 2004.

At September 30, 2008, there were 580 participants in the City’s Retired Employees HealthInsurance Program, and the non-interest bearing cash value equivalent of the remaining unused sick leavefor the current retirees totaled $17,517,000. Total premiums and actual claims paid by the City under theRetired Employees Health Insurance Program for fiscal year 2009 were $7,250,000, and are included inthe expenses of the Employee Benefits Internal Service Fund.

The most recent actuarial study of current and future actuarial accrued liabilities of the City’sRetired Employees Health Insurance Program, dated January 29, 2010, was performed in accordance withGovernmental Accounting Standards Boards Statement No. 16, “Accounting for CompensatedAbsences”. According to the actuarial study, as of September 30, 2008, the City’s Retired EmployeesHealth Insurance Program had an actuarial accrued liability of $82,895,000. Additionally, the actuarialstudy estimated that the City’s Retired Employees Health Insurance Program would have an actuarial

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accrued liability, as of September 30, 2009, of $87,342,000. The actuarial study takes into account anestimate of future usage, additional leave accumulation and wage increases for both current retirees andactive employees, and an additional amount relating to the sick leave incentive for employees who retiredduring calendar year 1996. The actuarial study assumes projected investment returns of 5.0%; wageincreases of 3.5% per year for miscellaneous, and insurance premium increases of 4.5%. The estimatedcurrent portion of such obligation of $6,250,000 has been fully funded and the long-term portion of theliability of $76,645,000 is being funded, over time, through burden rates charged to the various Cityfunds, applied as a percent of current productive salaries.

See “Note 8 – Retirement Programs” in “APPENDIX A—HARBOR DEPARTMENT OF THECITY OF LONG BEACH AUDITED FINANCIAL STATEMENTS FOR THE FISCAL YEARSENDED SEPTEMBER 30, 2009 AND 2008” for additional information about the post-retirement healthcare benefits provided to the employees of the City.

Risk Management and Insurance

The Master Resolution does not specify any minimum amount of insurance coverage. Instead,the Master Resolution requires the Board to maintain insurance or qualified self-insurance on the Port asis customarily maintained with respect to works and properties of like character against accident to, lossof or damage to the Port. The Master Resolution does not require the Board to carry insurance againstlosses due to seismic activity. The Harbor Department presently carries an all-risk property insuranceprogram covering physical loss or damage by fire and other risks (excluding earthquake and flood) with aloss limit of $1.33 billion, and a deductible of $500,000 per occurrence. Coverage for property damagecaused by foreign and domestic acts of sabotage and terrorism also is included in the all-risk propertyinsurance program. Excluded from the terrorism coverage, among other things, is property damagecaused by acts of sabotage and terrorism arising directly or indirectly from nuclear detonation andreaction, nuclear radiation, radioactive contamination or chemical release or exposure of any kind. Seealso “CERTAIN INVESTMENT CONSIDERATIONS—Security at the Port.”

A comprehensive excess liability insurance program is carried in the amount of $150 million,covering all of the Harbor Department’s operations, including acts of sabotage and domestic and foreignterrorism. Primary policies for liability and physical damage are in force covering the HarborDepartment’s fire and work boats, contractor type equipment, and liability for automobiles and fidelity ofemployees. Additionally, the Harbor Department has earmarked approximately $54.6 million of excesscash to be used to cover uninsured losses, including $32 million that has been earmarked to coveruninsured losses resulting from damage to the Port caused by earthquakes.

There can be no assurance as to the ability of an insurer to fulfill its obligations under anyinsurance policy and no assurance can be given as to the adequacy of such insurance to fund necessaryrepair or replacement of the damaged property. When renewing its insurance policies the Board makesno guarantee as to the ability to continue receiving the existing coverage or deductible amounts.

Port tenants are required to carry commercial general liability insurance coverage, includingbodily injury and property damage liability, on the leased premises and to name the City, the Board andthe officers and employees of the Harbor Department as additional insured parties. Risk of loss is alsotransferred from the Harbor Department through the use of insurance endorsements and indemnificationprovisions contained in the various lease documents.

To further mitigate the adverse effects of a business disruption, the Harbor Department hasdeveloped and implemented a business continuity plan. The plan responds to incidents that impact key

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facilities, personnel, systems, applications, and resources and is coordinated with key stakeholders andcivil authorities.

Investment Policy

The Harbor Department’s cash and investments, including restricted cash and investments, arepooled with the other City funds and maintained by the City Treasurer, except for the cash andinvestments that are held by U.S. Bank National Association, as trustee pursuant to the SixthSupplemental Resolution. See “SECURITY AND SOURCES OF PAYMENT FOR THE SERIES 2010BBONDS—Funds Held by Third Parties.” Interest income and gains and losses earned on pooled cash andinvestments are allocated monthly to the various pool participants based on their average daily cashbalances. The Harbor Department is required by the Charter to participate in the City Treasurer’s pool.

The City maintains an Investment Policy, which, pursuant to the provisions of Section 53646 ofthe California Government Code, is annually submitted to and reviewed by the Investment Committee ofthe City and approved by the City Council. Quarterly reports are also provided to the City Manager, CityAuditor, and the City Council which detail investment activity and portfolio balances. In addition, theInvestment Advisory Committee, comprised of the Offices of the City Manager, City Auditor, CityAttorney and Director of Financial Management/CFO, City Treasurer, City Controller, Budget andPerformance Bureau Manager, and the Chief Financial Officers of the Harbor, Water and DevelopmentServices Departments meets monthly, or as needed, with the City’s investment advisor to reviewinvestment policies and strategies and to make recommendations consistent with approved investmentpolicies.

The goal of the Investment Policy is to invest public funds in a prudent manner, maintainingmaximum security, meeting the daily cash flow demand of the City and conforming to all State and localstatutes governing the investment of public funds. The objectives of the Investment Policy are, in thefollowing order of priority:

(a) Safety of principal: through management of both credit risk and market risk aswell as the application of the “Prudent Investor Rule.” Credit risk is to be mitigated throughprudent investment choices and portfolio diversification. Market risk is to be mitigated bylimiting the weighted average maturity of the City’s portfolio to three years.

(b) Sufficient liquidity: to meet all operating requirements that might be reasonablyanticipated.

(c) Return on investment: to attain market average rates of return through economiccycles. The investment strategy is to seek above market average rates of return consistent withthe risk limitations and prudent investment principles of the City’s Investment Policy. The Cityhas established three benchmark measures for the pool funds portfolio: the 91-day U.S. TreasuryBill rate for the short-term portfolio, the 1-year Constant Maturity Treasury index for the mid-term portfolio, and the Merrill Lynch AAA U.S. Treasury/Agency Index for the long-termportfolio.

The City’s investment alternatives are specified in the California Government Code, Sections53600 et seq. Within this framework, the Investment Policy specifies authorized investments, subject tocertain limitations.

According to the City Treasurer’s Monthly Report for the quarter ending December 31, 2009, theCity’s invested funds totaled approximately $1.7 billion (of which approximately $885 million consisted

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of Harbor Department monies). The investment portfolio includes a variety of fixed income securitiesthat vary in maturity from one day to five years. On December 31, 2009, 87.0% of the total City Portfoliowas invested in U.S. Treasury and Agency Notes, 2.9% in FDIC-insured medium term notes, 1.3% in theState of California Local Agency Investment Pool (“LAIF”), and 8.8% in other types of fixed incomesecurities.

A summary of the City Treasurer’s Monthly Report for the quarter ending December 31, 2009, isset forth below:

TABLE 16City of Long Beach

Invested Funds(Quarter Ending December 31, 2009)

Pooled Fund

Invested Market Balance $1,693,916,378Portfolio Market Yield 0.77%Short-term Weighted Average Maturity in Days 195 daysIntermediate-term Weighted Average Maturity in Days 459 daysLong-term Weighted Average Maturity in Days 383 days

Source: The City

CERTAIN INVESTMENT CONSIDERATIONS

The purchase and ownership of the Series 2010B Bonds involve investment risk and may not besuitable for all investors. Prospective purchasers of the Series 2010B Bonds are urged to read thisOfficial Statement, including all Appendices, in its entirety. The factors set forth below, among others,may affect the security of the Series 2010B Bonds. However, the following does not purport to be anexhaustive listing of all considerations which may be relevant to investing in the Series 2010B Bonds. Inaddition, the order in which the following information is presented is not intended to reflect the relativeimportance of any such considerations.

Ability To Meet Rate Covenant

As discussed in “SECURITY AND SOURCES OF PAYMENT FOR THE SERIES 2010BBONDS—Rate Covenant,” the Master Resolution provides that the City, acting by and through theBoard, prescribe, revise and collect such charges, rentals, compensation or fees required to be paid forservices, franchises, leases or licenses, as permitted or required by the Charter or otherwise by law,ordinance or order, to the City for operation upon lands and waters under the control and management ofthe Board, which, after making allowances for contingencies and error in the estimates, produce Revenuesin each fiscal year equal to 1.25 times Maximum Annual Debt Service.

In California, marine terminal services and facilities are priced through leases, and preferential,management and user agreements with water carriers and/or terminal operators. These arrangementsgenerally provide for economic discounts from established tariffs in exchange for term commitmentsand/or minimum payment guarantees. A substantial majority of the Harbor Department’s maritimerevenues are generated by such agreements. As payments under those agreements are usually based oncurrent tariff rates, the Harbor Department can generally increase its revenues under those agreementseither by increasing its tariff rates or through increases in shipping line volume. However, there arecontractual, statutory, regulatory, practical, procedural and competitive limitations on the extent to which

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the Harbor Department can increase tariffs. Implementation of an increase in the schedule of rentals,rates, fees and charges for the use of the Port could have a detrimental impact on the operation of the Portby making the cost of operating at the Port unattractive to shipping lines and others in comparison toother locations, or by reducing the operating efficiency of the Port. See “THE PORT OF LONGBEACH—Property Agreements” above and “—Port Competition” below.

Factors Affecting Demand for Port Facilities

The demand for Port facilities and the Revenues of the Harbor Department are significantlyinfluenced by a variety of factors, including, among others, global and domestic economic conditions,fuel prices, construction activity, currency values, international trade, availability of effective laborsupport, the financial condition of maritime related industries, the proliferation of operational alliancesand other structural conditions affecting maritime carriers.

In 2008 and 2009, the global economic downturn resulted in a significant drop in global trade.This was exemplified by an approximately 21.6% decrease in the Port’s container volume in fiscal year2009 as compared to fiscal year 2008 and an approximately 8.5% decrease in the Port’s container volumein fiscal year 2008 as compared to fiscal year 2007. Terminal operators and ocean carriers were lookingaggressively at all aspects of their businesses for cost savings to mitigate dropping revenue levels. Inorder to maintain market share and to attract additional discretionary market share, the HarborDepartment decided to provide financial incentives to the customers who make port and rail routingdecisions. In April 2009, the Board approved two separate amendments to the Port Tariff. The firstamendment was an intermodal rail container cargo incentive program (the “Rail Incentive Program”) thatprovides a 10% rate reduction to terminal operators on wharfage fees for moving intermodal containersthrough the Port. The Rail Incentive Program was recently extended until December 31, 2010. Thesecond amendment, which expires on September 30, 2010, provides a $20 per TEU rebate for oceancarriers moving incremental intermodal container volume through the Port. Other North American portssuch as Los Angeles, New York/New Jersey and Savannah have also recently amended their respectiveincentive programs to attract incremental intermodal rail container cargo business. See “—PortCompetition” below.

Port Competition

The Revenues of the Harbor Department may be adversely impacted by increasing competitionfrom other port facilities; however the Harbor Department cannot predict the scope of any such impact atthis time. In addition, the imposition of fees that apply only to the Port or to a group of ports that includesthe Port, may increase the cost to ocean carriers of utilizing the Port. The Harbor Department may reducethe tariffs or other charges applicable to its ocean carriers to moderate some or all of the potential impact,which in turn would reduce Revenues. See “—Factors Affecting Demand for Port Facilities” above.

There is significant competition for container traffic among North American ports. Successdepends largely on the size of the local market and the efficiency of the port and inland transportationsystems for non-local destinations.

Primary competition for the Port comes from the U.S. West Coast Ports of Los Angeles, Oakland,Seattle and Tacoma and the Canadian Ports of Vancouver and Prince Rupert. All-water service from Asiato the Gulf of Mexico and East Coast ports through the Panama Canal and, to a much lesser extent,through the Suez Canal also compete for the same cargos. Improvements currently underway in thePanama Canal will allow larger ships to traverse the canal and the diversion of Asian imports to the U.S.East and Gulf Coast ports may increase. In addition, there may be longer-term competition from the westcoast ports of Mexico. The Port of Punta Colonet, for example, is planning to expand at an as-yet-

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undetermined future date. All of these ports compete with the Port for discretionary intermodal cargodestined for locations in the Central and Eastern United States and Canada. Currently, this discretionarycargo moves eastward primarily by rail, after being off loaded at West Coast ports in the United Statesand Canada. Discretionary cargo is highly elastic and is controlled largely by cargo owners and/or oceancarriers who can direct and redirect cargo to any port they choose. Currently, approximately 50% of thecargo handled by the Port is discretionary cargo. Each port has various competitive advantages anddisadvantages in attracting this cargo, but overall cost is the primary factor in routing decisions.Additionally, the Port and the Port of Los Angeles compete for cargo that “naturally” moves throughSouthern California. Such cargo includes both local cargo (e.g. cargo consumed within the locallydefined region) and cargo that prefers Southern California for other reasons (e.g. superior inlanddistribution capability). The greatest risk to the Port’s market share is with the intermodal discretionarycargo segment. Reduced market share translates into reduced revenue for the Harbor Department.

Southern California. The population base in Southern California has been a key driving forcefor the growth of container cargo moving through the San Pedro Bay Ports. The roughly 18 millionpeople living in Southern California are a lucrative market for imported goods which cargo owners andocean carriers need to service directly. Due to the local population, the development of large efficientcontainer terminals, and connections to intermodal rail links, the carriers benefit from the economies ofscale at the San Pedro Bay Ports by moving as many containers as possible through the San Pedro BayPorts. Most container services calling on the West Coast include stops in Southern California and ofthese stops, a majority utilize the San Pedro Bay Ports as their first port of call and primary intermodalgateway. Over the past ten calendar years the San Pedro Bay Ports have increased total containerthroughput from approximately 8.2 million TEUs in 1999 to approximately 11.8 million TEUs in 2009,reflecting total growth of approximately 43% between 1999 and 2009 (a compound average growth rateof approximately 3.7% per year). Between 1999 and 2009 the San Pedro Bay Ports’ share of total WestCoast TEU throughput grew from approximately 63% in 1999 to approximately 68% in 2009.

The Port of Los Angeles is effectively the Port’s only competition for the local market area ofSouthern California, Arizona, New Mexico, Southern Nevada and Utah because of its proximity to thePort and shared inland infrastructure. Other Southern California ports, such as San Diego and Hueneme,account for a very small percentage of total West Coast cargo volume and are not expected to increasetheir market shares significantly in the foreseeable future. The Port of Los Angeles was the number onecontainer port in the nation for the year ended December 31, 2009 moving an equivalent of approximately6.7 million TEUs, as compared to the Port (the second busiest container port in the nation) which movedapproximately 5.07 million TEUs in calendar year 2009. For the calendar year ended December 31,2009, the Port’s share of total West Coast containerized cargo was approximately 29% as compared toapproximately 39% for the Port of Los Angeles. Additionally, due to the continuing development of thenew “mega terminals” at the Port and the Port of Los Angeles, the competition between the Port and thePort of Los Angeles is expected to continue.

Oakland. The Port of Oakland is the primary container port for the San Francisco Bay area.Although the Port of San Francisco does have cargo handling facilities, its primary focus is waterfrontcommercial real estate. The Port of Oakland dominates container traffic through Northern California.

The Port of Oakland recently completed an extensive program to increase its container terminalcapacity with modernization and expansion of both the Oakland International Gateway Terminal and theHanjin Terminal. In addition, the Port of Oakland selected Ports America Outer Harbor LLC for a long-term concession agreement (50 years) for the Outer Harbor Terminal (Berths 20-24), which begins in2010. This contract will generate revenues for the Port of Oakland while capital improvements arefunded by the lessee. The Port of Oakland has nearly completed a dredging program to increase the depth

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of its channel waters from 42 feet to 50 feet, which will allow access by post-Panamax vessels to most ofits terminals.

The Port of Oakland handled approximately 2.2 million TEUs in calendar year 2008, accountingfor approximately 9.6% of the West Coast container market. The Port of Oakland handled approximately2.1 million TEUs in calendar year 2009, accounting for approximately 12% of the West Coast containermarket.

Pacific Northwest. Despite the relatively small population base of western Washington, the Portsof Seattle and Tacoma have some advantages over other ports. Located on Puget Sound, the Ports ofSeattle and Tacoma enjoy naturally deep harbors and are one day’s sailing time closer to the ports in thePacific Rim countries than the Port. Unlike the Port, the Ports of Seattle and Tacoma are subsidized bygeneral property tax revenues, which allows them to price their marine terminal facilities below thePort’s. The Ports of Seattle and Tacoma handled approximately 1.704 and 1.861 million TEUs,respectively in calendar year 2008, accounting for a total of approximately 16% of the West Coastcontainer market. The Ports of Seattle and Tacoma handled approximately 1.584 and 1.546 millionTEUs, respectively in calendar year 2009, accounting for a total of approximately 18% of the West Coastcontainer market.

From terminal development, rail yard expansion, and channel deepening, the Ports of Seattle andTacoma are continually working to improve and expand their facilities. In 2007, the Port of Tacomaannounced an agreement with NYK Line to build a $300 million, 168-acre container terminal on theindustrial east side of the Blair Waterway. The terminal, largely on the site of the existing TOTEterminal, was to be leased to a container terminal operator, Yusen Terminal Tacoma Inc. (“Yusen”), awholly-owned subsidiary of NYK Line. Design work for the reconfigured TOTE facility, theredeveloped terminal for Yusen and associated road, rail and utility infrastructure approached the 30%design level. Based on new cost estimates, and the downturn in the global economy, the Port of Tacomahas halted design efforts.

The recent development of additional container handling capacity at Port Metro Vancouver(“PMV”), which was formed by the merger of the Ports of Vancouver, Fraser River and North FraserRiver, has added a competitive threat to the Puget Sound ports and provides an alternative gateway forsome U.S. intermodal cargo. Like the Ports of Seattle and Tacoma, PMV is one day’s sailing time closerto the ports in the Pacific Rim countries than the Port. The Port of Vancouver developed Deltaport in1997, which is a 160-acre container facility located just north of the U.S.-Canadian border. PMV isnearing its container throughput capacity and is in the process of developing additional containerfacilities. Much of the expansion at PMV is located at Deltaport. In January 2010, PMV opened a thirdberth at Deltaport, which increased PMV’s capacity by up to 600,000 TEUs and added 50 acres ofcontainer storage facilities to the existing two berth container terminal (210 acres after expansion). Inaddition, PMV is planning the Terminal 2 Project at Deltaport, which will add a new, three-berthcontainer facility with 200 acres of upland container terminal. PMV handled approximately 2.5 millionTEUs in calendar year 2008, accounting for approximately 11% of the West Coast container market.PMV handled approximately 2.2 million TEUs in calendar year 2009, accounting for approximately 11%of the West Coast container market.

All-Water Routes. The use of all-water routes to the East and Gulf Coasts of the U.S. is analternative to Asian intermodal cargo moving through United States West Coast ports. Demand for theseall-water services increased substantially following the 2002 labor problems that occurred on the WestCoast. The primary appeal of the all-water routes is the expected reliability of the services. Constraintsto all-water routes include lack of channel depth at many Gulf and East Coast ports compared to WestCoast ports as well as the current vessel size limitations of the Panama Canal. The latter constraint is

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being addressed by an expansion of the Panama Canal, the completion of which (expected 2014) willallow the largest vessels currently in service or being designed to navigate the isthmus in order to reachGulf and East Coast ports. However, increased Panama Canal fees may impact routing decisions in thelong-term. The bigger challenge for many Gulf and East Coast ports is how to finance the large amountof dredging required to achieve necessary channel depths without increasing calling costs to the extentthat all-water services are no longer competitive with intermodal cargo moved inland from the WestCoast via rail.

Factors Affecting 2010-19 Capital Plan

The ability of the Harbor Department to complete the projects in the 2010-19 Capital Plan may beadversely affected by various factors including: (a) estimating errors; (b) design and engineering errors;(c) changes to the scope of the projects, including changes to federal security regulations; (d) delays incontract awards; (e) material and/or labor shortages; (f) unforeseen site conditions; (g) adverse weatherconditions and other force majeure events, such as earthquakes; (h) contractor defaults; (i) labor disputes;(j) unanticipated levels of inflation; (k) environmental issues; and (l) unavailability of, or delays in,anticipated funding sources. The Board can provide no assurance that the existing projects in the 2010-19Capital Plan will not cost more than the current budget for these projects. Any schedule delays or costincreases could result in the need to incur additional indebtedness.

Unavailability of, or Delays in, Anticipated Funding Sources

As described herein, the Harbor Department anticipates that funding for the 2010-19 Capital Planwill be provided through proceeds of Revenue Bonds (including the Series 2010A Bonds), revenues ofthe Harbor Department, federal and State grants and other sources. See “CAPITAL DEVELOPMENTPROGRAM” for a description of the financing plan for the 2010-19 Capital Plan. In the event that any ofsuch sources are unavailable for any reason, including unavailability of revenues of the HarborDepartment, reduction in the amount or delays in the receipt of federal and State grants available to theHarbor Department or any other reason, the completion of the 2010-19 Capital Plan could be substantiallydelayed and financing costs could be higher than projected. There can be no assurances that suchcircumstances will not materially adversely affect the financial condition or operations of the Port.

Security at the Port

As a result of the terrorists attacks of September 11, 2001, the Maritime Transportation SecurityAct (“MTSA”) was signed into law on November 25, 2002 to require sectors of the maritime industry toimplement measures designed to protect the ports and waterways of the U.S. from a terrorist attack.MTSA requires interagency teamwork within the Department of Homeland Security, including, the U.S.Coast Guard, the Transportation Security Administration (the “TSA”) and the Bureau of Customs andBorder Protection, and the Department of Transportation’s Maritime Administration to develop securityregulations. The security regulations focus on those sectors of maritime industry that have a higher riskof involvement in a transportation security incident, including various tank vessels, barges, largepassenger vessels, cargo vessels, towing vessels, offshore oil and gas platforms, and port facilities thathandle certain kinds of dangerous cargo or service the vessels listed above. Such regulations wereimplemented on July 1, 2003, and final rules became effective in November 2003. The regulationsprovide for port and vessel owners and operators to assess their vulnerabilities, and to then develop plansthat may include implementing vehicle, container and baggage screening procedures, designating securitypatrols, establishing restricted areas, implementing personnel identification procedures, accessing controlmeasures, and/or installing surveillance equipment. The Harbor Department and each of its applicabletenants have in place procedures for complying with MTSA.

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To comply with MTSA regulations and based on the Harbor Department’s own initiatives, theHarbor Department is implementing certain security measures. The Harbor Department, jointly with thePort of Los Angeles, participates in the federal program known as “Operation Safe Commerce” which isdesigned to insure the safety of the container ship supply chain from shipping points in Asia. In addition,the Harbor Department has installed and implemented a video camera surveillance system to monitoractivities throughout the Port complex. To address waterside threats, the Harbor Department is in theprocess of installing radar and sonar detection systems. The Harbor Department is working with marineterminal operators and other stakeholders within and outside the Port to share video camera feeds, therebyenhancing overall regional security monitoring capabilities. The Harbor Department has installed tools toassist in emergency management: programmable highway signs, an AM radio station, an automatedemergency notification system, a Port-wide public address system (in-progress) and shelter- in-placecapability (in-progress) throughout the Port. The Harbor Department continues to support efforts by theTSA to test and implement a transportation workers identification card. The Harbor Department hasimproved and continues to enhance physical security throughout the Port complex by installing securityfencing, lighting, barriers and access control systems. These improvements are being applied to allinfrastructure above and below ground. The Harbor Department has installed radiation portal monitors atall of the container terminals, which are managed by the U.S. Customs & Border Protection. Allcontainers originating at foreign ports will be tested for the presence of radioactive materials whenleaving the Port.

In February 2009, the Harbor Department opened the Security Command & Control Center whichserves as the Security Division headquarters, housing about 80 personnel (which is double the level ofstaffing on September 11, 2001). The Command and Control Center functions as a “maritime domainawareness center” and combines and displays all the surveillance, detection and monitoring data fromthroughout the Port; this data is shared and communicated with facility security personnel and lawenforcement agencies that protect the harbor complex. The total cost of all of these completedimprovements is approximately $47 million. Although the Harbor Department has received federal andState grants to cover the majority of these costs, the Harbor Department uses its own funds for any costsnot paid for from federal and state grants. The Harbor Department has another $54 million in securityprojects underway or in the planning stages. The Harbor Department has significantly increased itsbudgeted security operating costs since 2002. Security Division operating expenses as well as serviceagreements with City of Long Beach Fire and Police Departments have grown from $6 million (2002) to$13 million (2010). In addition, the Harbor Department is working closely with local, regional, and stateagencies to develop integrated strategic plans and daily concept of operations plans.

There can be no assurance that MTSA requirements will not become more strict or that additionalrequirements may require the Harbor Department to incur additional security-related expenses.

National and local law enforcement officials have warned that additional terrorist attacks uponkey infrastructure and other targets in the United States are possible. The Port and the surroundingwaterways are particularly visible infrastructure assets that could be the subject of future attemptedterrorist attacks. It is estimated that a shutdown of the Port complex would cost the U.S. economy about$1 billion a day. A terrorist attack on the Port or the surrounding waterways or an attack somewhere elsein the country or the world could have a material adverse effect on the collection of Revenues at the Port.See “FINANCIAL DATA—Risk Management and Insurance.”

Environmental Compliance and Impacts

The Harbor Department is required to comply with the provisions of a number of federal andState laws designed to protect or enhance the environment. The two basic laws are NEPA and CEQA.Other federal environmental laws applicable to the Port include the Resources Conservation and

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Recovery Act, which governs the cleanup, treatment and disposal of hazardous waste; the Clean Air Act,which governs the release of air pollutants; the Toxic Substances Control Act, which governs the handlingand disposition of polychlorinated biphenyls (PCBs) and other toxic substances; the Marine Protection,Research and Sanctuary Act, which governs the ocean dumping of dredged materials; the Rivers andHarbors Act, which governs navigable waterways; and the Clean Water Act, which governs discharge ofsurface waters. Enforcement agencies include the U.S. and California Environmental ProtectionAgencies and the U.S. Army Corps of Engineers, which rely on consultation and advice from variousfederal resource agencies. See “THE PORT OF LONG BEACH—Environmental Compliance” above foradditional information on the environmental laws and regulations currently applicable to the HarborDepartment and the Port and the programs and procedures the Harbor Department has implemented or isin the process of implementing to comply with these environmental laws and regulations. Additionalenvironmental laws and regulations may be enacted and adopted in the future that could be applicable tothe Harbor Department and the Port. The Harbor Department is not able to predict what those laws andregulations may be or the costs to the Harbor Department to comply with such laws and regulations. Anyadditional environmental laws and regulations could significantly delay or limit the Harbor Department’splans to construct and develop new revenue generating facilities at the Port. See “CAPITALDEVELOPMENT PROGRAM” above.

In addition to the laws and regulations enacted and adopted by governmental entities, certainindividuals and organizations (e.g. the Sierra Club) could seek additional legal remedies to require theHarbor Department to take further actions to mitigate health hazards or seek damages from the HarborDepartment in connection with the environmental impact of its maritime activities. Any actions taken bythese individuals and organizations could be costly to defend, could result in substantial damage awardsagainst the Harbor Department or could significantly delay or limit the Harbor Department’s plans toconstruct and develop new revenue generating facilities at the Port.

In May 2009, the California Climate Change Center released a final paper entitled “The Impactsof Sea-Level Rise on the California Coast” that was funded by the California Energy Commission, theCalifornia Environmental Protection Agency, the Metropolitan Transportation Commission, theCalifornia Department of Transportation, and the California Ocean Protection Council. The paper positsthat increases in sea level will be a significant impact of climate change over the next century and thatfuture flood risk with sea-level rise could be significant at California’s major ports, including the Port.While noting that, among other things, sea-level rise can reduce bridge clearance, reduce efficiency ofport operations or flood transportation corridors to and from ports, the report states that impacts are highlysite-specific and somewhat speculative. The Harbor Department is unable to predict whether sea-levelrise or other impacts of climate change will occur while the Series 2010B Bonds are outstanding, and ifany such events occur, whether there will be an adverse impact, material or otherwise, on Revenues.

Seismic Risks

The Port is located in an area considered to be seismically active. The two faults closest to thePort are the Palos Verdes fault and the Newport-Inglewood fault. More distant faults with a history ofcausing earthquakes and damage include the San Andreas and San Jacinto faults. A significantearthquake is possible during the period the Series 2010B Bonds will be outstanding. Since 1975, theHarbor Department has designed wharves and other major facilities to withstand the effects of a8.0 Richter Scale earthquake on the San Andreas fault and a 7.5 Richter Scale earthquake on either theNewport-Inglewood fault or the Palos Verdes fault.

A forecast prepared by U.S. Geological Survey, Southern California Earthquake Center, andCalifornia Geological Survey and released in April 2008 indicates that there is a 67% chance that anearthquake measuring 6.7 or larger on the Richter Scale will occur in the greater Los Angeles area, and a

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97% chance that such an earthquake will occur in Southern California, by 2037. The Port could sustainextensive damage to its facilities in a major seismic event from ground motion and liquefaction ofunderlying soils, which damage could include slope failures along the shoreline, pavement displacement,distortions of pavement grades, breaks in utility, drainage and sewage lines, displacement or collapse ofbuildings, failure of bulkhead walls, and rupture of gas and fuel lines. A major seismic event in SouthernCalifornia, or elsewhere in the world, also could result in the creation of a tsunami that could causeflooding and other damage to the Port. Damage to Port facilities as a result of a seismic event couldmaterially adversely affect Revenues.

The Harbor Department has earmarked approximately $32 million of excess cash to be used tocover uninsured losses, including damages resulting from an earthquake. Other than the HarborDepartment’s self-funded reserve, neither the City nor the Harbor Department maintains insurance againstearthquake damage because of the high costs of premiums and the low levels of coverage currentlyavailable. To date, no earthquakes have caused structural damage to Port facilities. See “FINANCIALDATA—Risk Management and Insurance.”

Termination or Expiration of Property Agreements

The City, acting by and through the Board, has agreements with approximately 280 privatecompanies and approximately 40 public agencies. Over the last five fiscal years, property agreementscovering waterfront property and facilities have generated in excess of 90% of the Harbor Department’soperating revenues. Under these agreements, the City, by and through the Board, assigns or leasesproperty and facilities to terminal operators for terms of up to 30 years. The property agreements with thePort’s top ten revenue producers have expiration dates ranging from 2009 through 2027, with seven ofthese agreements expiring between 2022 and 2027.

Should a significant number of the parties to the property agreements default on their obligation,terminate their relationships with the Harbor Department or fail to renew their agreements uponexpiration, the amount of Revenues realized by the Harbor Department could be materially impaired andthis could have an adverse impact on the Harbor Department’s ability to pay debt service on the Series2010B Bonds. See “THE PORT OF LONG BEACH—Property Agreements.”

Effect of Tenant Bankruptcy

A bankruptcy of a tenant of the Port could result in delays and/or reductions in payments to theHarbor Department which could affect the Harbor Department’s ability to pay debt service on the Series2010B Bonds.

A tenant that has executed a preferential assignment agreement, lease or other executory contractwith the Board and seeks protection under the U.S. bankruptcy laws must assume or reject (a) itspreferential assignment agreement or lease within 120 days after the bankruptcy filing (subject to courtapproval, a one-time 90-day extension is allowed, and further extensions are allowed with the consent ofthe Board), and (b) its other executory contracts with the Board prior to the confirmation of a plan ofreorganization.

In the event of assumption and/or assignment of any agreement to a third party, the tenant wouldbe required to cure any pre- and post-petition monetary defaults and provide adequate assurance of futureperformance under the applicable preferential assignment agreement, lease or other agreements.

Rejection of a preferential assignment agreement, lease or other agreement or executory contractwill give rise to an unsecured claim of the Harbor Department for damages, the amount of which in the

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case of a preferential assignment agreement or lease is limited by the United States Bankruptcy Codegenerally to the amounts unpaid prior to bankruptcy plus the greater of (i) one year of rent or (ii) 15% ofthe total remaining lease payments, not to exceed three years. However, the amount ultimately receivedin the event of a rejection of a preferential assignment agreement or lease could be considerably less thanthe maximum amounts allowed under the United States Bankruptcy Code.

In addition, payments made by a tenant in bankruptcy within 90 days of filing a bankruptcy casecould be deemed to be an “avoidable preference” under the United States Bankruptcy Code and thussubject to recapture by the debtor or its trustee in bankruptcy.

During the pendency of a bankruptcy proceeding, a debtor tenant may not, absent a court order,make any payments to the Harbor Department on account of goods and services provided prior to thebankruptcy. Thus, the Harbor Department’s stream of payments from a debtor tenant would beinterrupted to the extent of pre-petition goods and services, including accrued tariffs and rents.

In general, risks associated with bankruptcy include risks of substantial delay in payment or ofnon-payment and the risk that the Board may not be able to enforce any of its remedies under theagreements with a bankrupt tenant.

With respect to a tenant in bankruptcy proceedings in a foreign country, the Board is unable topredict what types of orders and/or relief could be issued by foreign bankruptcy tribunals, or the extent towhich any such orders would be enforceable in the United States.

Should a significant number of the parties to the major revenue producing property agreementsfile for bankruptcy protection, Revenues received by the Harbor Department could be materiallyadversely impacted and this could have an adverse impact on the Harbor Department’s ability to pay debtservice on the Series 2010B Bonds. There may be other possible effects of a bankruptcy of a tenant thatcould result in delays or reductions in payments on the Series 2010B Bonds. Regardless of any specificadverse determinations in a tenant bankruptcy proceeding, the fact of a tenant bankruptcy proceedingcould have an adverse effect on the liquidity and value of the Series 2010B Bonds.

Effect of City Bankruptcy

The City is able to file for bankruptcy under Chapter 9 of the Bankruptcy Code. Should the Citybecome the debtor in a bankruptcy case, the holders of the Series 2010B Bonds will not have a lien onRevenues received by the City after the commencement of the bankruptcy case unless the bankruptcycourt determines that Revenues constitute “special revenues” within the meaning of the Bankruptcy Code.“Special revenues” are defined to include receipts from the ownership, operation, or disposition ofprojects or systems that are primarily used or intended to be used primarily to provide transportation,utility or other services, as well as other revenues or receipts derived from particular functions of thedebtor. While the Board believes that Revenues should be treated as “special revenues,” no assurance canbe given that a bankruptcy court would not find otherwise. If Revenues are not “special revenues,” therecould be delays or reductions in payments on the Series 2010B Bonds. Even if a court determines thatRevenues are not “special revenues,” the Harbor Department will be able to use Revenues to payoperation and maintenance costs of the Port, notwithstanding any provision of the Resolution or any otheragreement to the contrary.

There may be other possible effects of a bankruptcy of the City that could result in delays orreductions in payments on the Series 2010B Bonds. The Board cannot predict what types of ordersand/or relief may be granted by a bankruptcy court that could have a material adverse effect on the HarborDepartment’s receipt or application of Revenues. Regardless of any specific adverse determinations in a

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City bankruptcy proceeding, the fact of a City bankruptcy proceeding could have an adverse effect on theliquidity and market value of the Series 2010B Bonds.

Forward-Looking Statements

This Official Statement contains statements relating to future results that are “forward-lookingstatements.” When used in this Official Statement, the words “estimate,” “anticipate,” “forecast,”“project,” “intend,” “propose,” “plan,” “expect” and similar expressions identify forward-lookingstatements. Such statements are subject to risks and uncertainties that could cause actual results to differmaterially from those contemplated in such forward-looking statements. See “INTRODUCTION—Forward-Looking Statements.”

LITIGATION

No Litigation Relating to the Series 2010B Bonds

There is no controversy of any nature now pending against the City or the Board or to theknowledge of officers of the City or members of the Board threatened, seeking to restrain or enjoin thesale, issuance or delivery of the Series 2010B Bonds or in any way contesting or affecting the validity ofthe Series 2010B Bonds or any proceedings of the City or the Board taken with respect to the issuance orsale thereof, or the pledge or application of the Revenues, and any other monies or securities provided forthe payment of the Series 2010B Bonds or the use of the Series 2010B Bond proceeds.

Litigation Relating to the Harbor Department and the Port

From time to time, the Harbor Department is a party to litigation and is subject to claims arisingout of its normal course of business and its tenants’ operations. In actions brought against the HarborDepartment’s tenants whereby the Harbor Department is also named as a party to the action, the HarborDepartment usually requires the tenant to defend and indemnify the Harbor Department. Additionally, onthe advice of counsel, the Harbor Department generally establishes reserves against such lawsuits andclaims that are deemed to have merit. The Harbor Department has reserved $5 million to coveroutstanding litigation claims. At this time, the management of the Harbor Department is of the opinionthat if any lawsuits and claims, pursuant to which the Harbor Department is currently a named party, areconcluded adversely to the Harbor Department, they will not have material adverse effect on the HarborDepartment’s financial condition.

Ortiz Enterprises Litigation. Ortiz Enterprises Incorporated (“Ortiz”), a contractor retained bythe Harbor Department to construct certain site improvements to handle stormwater runoff on the Pier Ssite, has sued the City, acting through the Board, for unspecified damages caused by the HarborDepartment’s alleged breach of the construction contract between Ortiz and the City, acting through theBoard. In its answer to the Ortiz complaint, the City denied the allegations. The case is currently in theearly stages of discovery with no trial date set. The Harbor Department has been in settlementnegotiations with Ortiz. The Board cannot predict the ultimate outcome of this litigation.

City of Riverside – Challenge to Middle Harbor Redevelopment EIR. The City of Riverside(“Riverside”) has challenged the adequacy of the EIR certified by the Board in connection with theMiddle Harbor Redevelopment Project. Specifically, Riverside alleges that the EIR fails to addressimpacts at remote rail crossings in the City of Riverside and the County of Riverside. The action wasfiled in State court and is currently pending. Extended delays in the resolution of this challenge to theMiddle Harbor Redevelopment Project EIR may cause delays in the completion of the Middle HarborRedevelopment Project, reconsideration of the EIR and adoption of additional mitigation measures by the

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Harbor Department. A hearing on this matter has been set for July 15, 2010, with an expected decisionlikely in October 2010. The Board cannot reasonably estimate the extent of potential delays, if any, orcosts that may be associated with this challenge. See “CAPITAL DEVELOPMENT PROGRAM—2010-19 Capital Plan—Middle Harbor Redevelopment (Piers D, E and F).”

TAX MATTERS

General

In the opinion of Kutak Rock LLP, Bond Counsel, under existing laws, regulations, rulings andjudicial decisions, interest on the Series 2010B Bonds is excluded from gross income for federal incometax purposes, except for interest on any Series 2010B Bond for any period during which such Series2010B Bond is held by a “substantial user” of the facilities financed or refinanced by the Series 2010BBonds or by a “related person” within the meaning of Section 147(a) of the Internal Revenue Code of1986, as amended (the “Code”). Bond Counsel is further of the opinion that interest on the Series 2010BBonds is not a specific preference item nor included in adjusted current earnings for purposes of thefederal alternative minimum tax imposed on individuals and corporations. The opinions described in thepreceding sentences assume the accuracy of certain representations and compliance by the Board withcovenants designed to satisfy the requirements of the Code that must be met subsequent to the issuance ofthe Series 2010B Bonds. Failure to comply with such requirements could cause interest on the Series2010B Bonds to be included in gross income for federal income tax purposes retroactive to the date ofissuance of the Series 2010B Bonds. The Department will covenant to comply with such requirements.Bond Counsel has expressed no opinion regarding other federal tax consequences arising with respect tothe Series 2010B Bonds.

Bond Counsel is further of the opinion that under existing laws, regulations, rulings and judicialdecisions, interest on the Series 2010B Bonds is exempt from State of California personal income taxes.

The accrual or receipt of interest on the Series 2010B Bonds may otherwise affect the federalincome tax liability of the owners of the Series 2010B Bonds. The extent of these other tax consequenceswill depend upon such owner’s particular tax status and other items of income or deduction. BondCounsel has expressed no opinion regarding any such consequences. Purchasers of the Series 2010BBonds, particularly purchasers that are corporations (including S corporations and foreign corporationsoperating branches in the United States), property or casualty insurance companies, banks, thrifts or otherfinancial institutions, certain recipients of social security or railroad retirement benefits, taxpayersotherwise entitled to claim the earned income credit, or taxpayers who may be deemed to have incurred orcontinued indebtedness to purchase or carry tax-exempt obligations, should consult their tax advisors asto the tax consequences of purchasing or owning the Series 2010B Bonds.

Backup Withholding

As a result of the enactment of the Tax Increase Prevention and Reconciliation Act of 2005,interest on tax-exempt obligations such as the Series 2010B Bonds is subject to information reporting in amanner similar to interest paid on taxable obligations. Backup withholding may be imposed on paymentsmade after March 31, 2007 to any bondholder who fails to provide certain required information includingan accurate taxpayer identification number to any person required to collect such information pursuant toSection 6049 of the Code. The new reporting requirement does not in and of itself affect or alter theexcludability of interest on the Series 2010B Bonds from gross income for federal income tax purposes orany other federal tax consequence of purchasing, holding or selling tax-exempt obligations.

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Changes in Federal and State Tax Law

From time to time, there are legislative proposals in the Congress and in the various statelegislatures that, if enacted, could alter or amend federal and state tax matters referred to above oradversely affect the market value of the Series 2010B Bonds. It cannot be predicted whether or in whatform any such proposal might be enacted or whether if enacted it would apply to bonds issued prior toenactment. In addition, regulatory actions are from time to time announced or proposed and litigation isthreatened or commenced which, if implemented or concluded in a particular manner, could adverselyaffect the market value of the Series 2010B Bonds. It cannot be predicted whether any such regulatoryaction will be implemented, how any particular litigation or judicial action will be resolved, or whetherthe Series 2010B Bonds or the market value thereof would be impacted thereby. Purchasers of the Series2010B Bonds should consult their tax advisors regarding any pending or proposed legislation, regulatoryinitiatives or litigation. The opinions expressed by Bond Counsel are based upon existing legislation andregulations as interpreted by relevant judicial and regulatory authorities as of the date of issuance anddelivery of the Series 2010B Bonds and Bond Counsel has expressed no opinion as of any datesubsequent thereto or with respect to any pending legislation, regulatory initiatives or litigation.

Tax Treatment of Original Issue Discount

The Series 2010B Bonds maturing on May 15, 2027 and bearing interest at 4.00% (the “DiscountBonds”) are being sold at an original issue discount. The difference between the initial public offeringprices of such Discount Bonds and their stated amounts to be paid at maturity constitutes original issuediscount treated in the same manner for federal income tax purposes as interest, as described under “—General” above.

The amount of original issue discount which is treated as having accrued with respect to suchDiscount Bond is added to the cost basis of the owner in determining, for federal income tax purposes,gain or loss upon disposition of such Discount Bond (including its sale, redemption or payment atmaturity). Amounts received upon disposition of such Discount Bond which are attributable to accruedoriginal issue discount will be treated as tax-exempt interest, rather than as taxable gain, for federalincome tax purposes.

Original issue discount is treated as compounding semiannually, at a rate determined by referenceto the yield to maturity of each individual Discount Bond, on days which are determined by reference tothe maturity date of such Discount Bond. The amount treated as original issue discount on such DiscountBond for a particular semiannual accrual period is equal to the product of (i) the yield to maturity for suchDiscount Bond (determined by compounding at the close of each accrual period) and (ii) the amountwhich would have been the tax basis of such Discount Bond at the beginning of the particular accrualperiod if held by the original purchaser, less the amount of any interest payable for such Discount Bondduring the accrual period. The tax basis is determined by adding to the initial public offering price onsuch Discount Bond the sum of the amounts which have been treated as original issue discount for suchpurposes during all prior periods. If such Discount Bond is sold between semiannual compoundingdates, original issue discount which would have been accrued for that semiannual compounding periodfor federal income tax purposes is to be apportioned in equal amounts among the days in suchcompounding period.

Owners of Discount Bonds should consult their tax advisors with respect to the determinationand treatment of original issue discount accrued as of any date and with respect to the state and local taxconsequences of owning a Discount Bond.

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Tax Treatment of Original Issue Premium

The Series 2010B Bonds maturing on May 15, 2011 through, and including, May 15, 2026, andthe Series 2010B Bonds maturing on May 15, 2027 and bearing interest at 5.00% (collectively, the“Premium Bonds”) are being sold at a premium. An amount equal to the excess of the issue price of aPremium Bond over its stated redemption price at maturity constitutes premium on such Premium Bond.An initial purchaser of a Premium Bond must amortize any premium over such Premium Bond’s termusing constant yield principles, based on the purchaser’s yield to maturity (or, in the case of PremiumBonds callable prior to their maturity, by amortizing the premium to the call date, based on thepurchaser’s yield to the call date and giving effect to the call premium). As premium is amortized, theamount of the amortization offsets a corresponding amount of interest for the period and the purchaser’sbasis in such Premium Bond is reduced by a corresponding amount resulting in an increase in the gain(or decrease in the loss) to be recognized for federal income tax purposes upon a sale or disposition ofsuch Premium Bond prior to its maturity. Although the purchaser’s basis may be reduced, no federalincome tax deduction is allowed. Purchasers of the Premium Bonds should consult with their taxadvisors with respect to the determination and treatment of premium for federal income tax purposes andwith respect to the state and local tax consequences of owning a Premium Bond.

LEGAL MATTERS

The validity of the Series 2010B Bonds and certain other legal matters are subject to theapproving opinion of Kutak Rock LLP, Bond Counsel. A complete copy of the proposed form of BondCounsel’s opinion is contained in Appendix C hereto. As Bond Counsel, Kutak Rock LLP undertakes noresponsibility for the accuracy, completeness or fairness of this Official Statement. Certain matters willbe passed upon for the City by the City Attorney of the City of Long Beach. Certain legal matters inconnection with the Official Statement will be passed upon by Kutak Rock LLP, Disclosure Counsel.Certain legal matters will be passed upon for the Underwriter by its counsel, Orrick, Sutcliffe &Herrington LLP. All of the fees of Bond Counsel, Disclosure Counsel and Underwriter’s Counsel withregard to the issuance of the Series 2010B Bonds are contingent upon the issuance and delivery of theSeries 2010B Bonds.

RATINGS

Fitch Ratings (“Fitch”), Moody’s and S&P have assigned ratings of “AA” (stable outlook), “Aa2”(stable outlook), and “AA” (stable outlook), respectively, to the Series 2010B Bonds. Such ratings reflectonly the views of such organizations and any desired explanation of the significance of such ratingsshould be obtained from the rating agency furnishing the same, at the following addresses: Fitch Ratings,One State Street Plaza, New York, New York 10004; Moody’s Investor Services, 7 World Trade Center,250 Greenwich Street, New York, New York 10007; and S&P, 55 Water Street, New York, New York10041. Any explanation of the significance of such ratings may only be obtained from Fitch, Moody’sand S&P, respectively. The City and the Harbor Department furnished Fitch, Moody’s and S&P certaininformation and material concerning the Series 2010B Bonds, the Harbor Department and the Port.Generally, rating agencies base their ratings on such information and material, and on investigations,studies and assumptions made by the rating agencies themselves. There is no assurance that a ratinggiven will remain in effect for any given period of time or that it will not be lowered or withdrawnentirely by a rating agency, if in its judgment circumstances so warrant. Any such downward change inor withdrawal of the ratings might have an adverse effect on the market price or marketability of theSeries 2010B Bonds.

67

UNDERWRITING

The Series 2010B Bonds are being purchased by E. J. De La Rosa & Co., Inc. (the“Underwriter”) from the City, acting by and through the Board, at a price of $172,791,510.22 (which isthe principal amount of the Series 2010B Bonds, plus a net original issue premium of $15,459,113.80,less an underwriter’s discount of $752,603.58), subject to the terms of a bond purchase agreement, datedApril 29, 2010 (the “Bond Purchase Agreement”), between E. J. De La Rosa & Co., Inc., as Underwriter,and the City, acting by and through the Board. The Bond Purchase Agreement provides that theUnderwriter will purchase all of the Series 2010B Bonds if any are purchased, and that the obligation tomake such purchase is subject to certain terms and conditions set forth in the Bond Purchase Agreement,the approval of certain legal matters by counsel, and certain other conditions. The initial public offeringprices of the Series 2010B Bonds set forth on the inside front cover hereof may be changed from time totime by the Underwriter. The Underwriter may offer and sell the Series 2010B Bonds into unitinvestment trusts or money market funds at prices lower than the public offering prices stated on thecover and the inside of the cover hereof.

E. J. De La Rosa & Co., Inc. has entered into an agreement (the “De La Rosa DistributionAgreement”) with UnionBank Investment Services LLC for retail distribution of certain municipalsecurities offerings, including the Series 2010B Bonds, at the original issue prices. Pursuant to the De LaRosa Distribution Agreement, E. J. De La Rosa & Co., Inc. will share a portion of its underwritingcompensation with respect to the Series 2010B Bonds with UnionBank Investment Services LLC.

FINANCIAL ADVISOR

The Board has retained Public Resources Advisory Group, Los Angeles, California, as financialadvisor (the “Financial Advisor”) in connection with the issuance of the Series 2010B Bonds. Exceptwith respect to certain debt service numbers supplied by the Financial Advisor and included in thisOfficial Statement, the Financial Advisor is not obligated to undertake, and has not undertaken to make,an independent verification or to assume responsibility for the accuracy, completeness or fairness of theinformation contained in this Official Statement. Certain fees of the Financial Advisor are contingentupon the issuance and delivery of the Series 2010B Bonds.

CONTINUING DISCLOSURE

The Board, on behalf of the City, will covenant for the benefit of Owners to provide certainfinancial information and operation data relating to the Board, the Harbor Department and the Port by notlater than 210 days after the end of each fiscal year (the “Annual Report”) commencing with financialinformation and operating data for fiscal year 2010, and to provide notices of the occurrence of certainenumerated events, if such events would constitute material information for the Owners under federalsecurities laws. The Annual Report will be filed by or on behalf of the Harbor Department with theMSRB through the EMMA system. Currently the Harbor Department’s Annual Report is filed as part ofthe City’s required continuing disclosure filings. The notices of material events will be filed by or onbehalf of the Harbor Department with the MSRB through the EMMA system. The specific nature of theinformation to be contained in the Annual Report or the notices of material events is set forth in“APPENDIX E—FORM OF CONTINUING DISCLOSURE CERTIFICATE.” These covenants will bemade in order to assist the Underwriter in complying with Securities and Exchange Commission Rule15c2-12(b)(5). A failure by the Harbor Department to provide such information required under Rule15c2-12 does not constitute an event of default under the Resolution. The Harbor Department has notfailed in the last five years to comply in all material respects with any previous undertakings with regardto said Rule 15c2-12 to provide annual reports or notices of material events.

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MISCELLANEOUS

Any statements made in this Official Statement involving matters of opinion or of estimates,whether or not expressly stated, are set forth as such and not representation of fact. No representation ismade that any of the opinions of estimates will be realized. See “INTRODUCTION—Forward-LookingStatements” and “CERTAIN INVESTMENT CONSIDERATIONS—Forward-Looking Statements.”

The foregoing and subsequent summaries or descriptions of provisions of the Series 2010BBonds, the Master Resolution, the Thirteenth Supplemental Resolution, the Fiscal Agent Agreement andall references to other materials not purporting to be quoted in full are only brief outlines of some of theprovisions thereof and do not purport to summarize and describe all of the provisions thereof, andreference should be made to said documents for full and complete statements of their provisions. Copiesof such documents are available for review at the offices of the Harbor Department which are located atPort of Long Beach, 925 Harbor Plaza, Long Beach, California 90801, Attention: Chief Financial Officer.

The execution and delivery of this Official Statement has been duly authorized by the Board.

CITY OF LONG BEACH, CALIFORNIA, acting byand through its Board of Harbor Commissioners

By /s/ Nick SramekPresident of the Board of Harbor Commissionersof the City of Long Beach

APPENDIX A

HARBOR DEPARTMENT OF THE CITY OF LONG BEACHAUDITED FINANCIAL STATEMENTS

FOR THE FISCAL YEARS ENDED SEPTEMBER 30, 2009 AND 2008

THE HARBOR DEPARTMENT OF THE CITY OF LONG BEACH

Financial Statements

September 30, 2009 and 2008

(With Independent Auditors’ Report Thereon)


Table of Contents

Page(s)

Independent Auditors’ Report 1 – 2

Management’s Discussion and Analysis (Unaudited) 3 – 9

Financial Statements:

Statements of Net Assets 10 – 11

Statements of Revenues, Expenses, and Changes in Fund Net Assets 12

Statements of Cash Flows 13

Notes to Financial Statements 14 – 50

KPMG LLP Suite 700 20 Pacifica Irvine, CA 92618-3391

KPMG LLP, a U.S. limited liability partnership, is the U.S. member firm of KPMG International, a Swiss cooperative.

Independent Auditors’ Report

The Honorable Mayor and City Council The Honorable Members of the Board of Harbor Commissioners:

We have audited the accompanying financial statements of the Harbor Department of the City of Long Beach (the Department), an enterprise fund of the City of Long Beach, California, as of and for the years ended September 30, 2009 and 2008, as listed in the table of contents. These financial statements are the responsibility of the Department’s management. Our responsibility is to express an opinion on these financial statements based on our audits.

We conducted our audits in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Department’s internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

As discussed in note 1 to the financial statements, the financial statements of the Department are intended to present the financial position, and the changes in financial position and, where applicable, cash flows of only that portion of the governmental activities, the business-type activities, each major fund, and the aggregate remaining fund information of the City of Long Beach, California, that are attributable to the transactions of the Department. They do not purport to, and do not, present fairly the financial position of the City of Long Beach, California, as of September 30, 2009 and 2008, and the changes in its financial position, or where applicable, its cash flows for the year then ended, in conformity with U.S. generally accepted accounting principles.

In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of the Harbor Department of the City of Long Beach, California, as of September 30, 2009 and 2008, and the changes in its financial position and its cash flows for the years then ended, in conformity with U.S. generally accepted accounting principles.

2

Management’s discussion and analysis on pages 3 through 9 is not a required part of the basic financial statements but is supplementary information required by U.S. generally accepted accounting principles. We have applied certain limited procedures, which consisted principally of inquiries of management regarding the methods of measurement and presentation of the required supplementary information. However, we did not audit the information and express no opinion on it.

March 24, 2010


Management’s Discussion and Analysis (Unaudited)


3 (Continued)

The management of the Harbor Department of the City of Long Beach, California, (the Department) offers readers of the financial statements this discussion and analysis of the financial activities for the fiscal years ended September 30, 2009 and 2008.

Overview of the Financial Statements

The Department’s financial statements include the statements of net assets, the statements of revenues, expenses, and changes in fund net assets, the statements of cash flows, and the notes to the financial statements. This discussion is intended to serve as an introduction to the Department’s financial statements.

Condensed Financial Position Information

The Statements of Net Assets present information concerning the Department’s assets, liabilities, and net assets.

The following condensed financial information provides an overview of the Department’s financial position as of September 30 of 2009, 2008, and 2007.

Summary of Net Assets

September 30, 2009, 2008, and 2007

2009 2008 2007

Assets:Capital assets, net $ 2,249,767,809 2,243,615,808 2,245,291,679 Other assets 1,159,161,353 1,160,749,854 1,142,439,210

Total assets 3,408,929,162 3,404,365,662 3,387,730,889 Liabilities:

Long-term obligations, net of current portion 790,507,145 840,616,156 1,032,894,146 Current liabilities 190,604,744 260,169,291 212,096,250

Total liabilities 981,111,889 1,100,785,447 1,244,990,396 Net assets:

Invested in capital assets, net of related debt 1,410,740,241 1,335,522,370 1,162,931,088 Restricted 293,552,191 293,625,620 212,735,625 Unrestricted 723,524,841 674,432,225 767,073,780

Total net assets $ 2,427,817,273 2,303,580,215 2,142,740,493

Analysis of Fiscal Year 2009

At the end of fiscal year 2009, the assets of the Department exceeded its liabilities by $2,427,817,273 (net assets). Total net assets increased by $124,237,058. This change consists mainly of $127,613,644 current year operating income, $2,994,375 income from equity in the Intermodal Container Transfer Facility Joint Powers Authority (ICTF) joint venture, $11,439,537 income derived from grants received from federal and state governments, and $923,137 profit from oil operations; less $18,733,635 from other net nonoperating expenses, including financing costs, and transfers to the City, which includes the 10% of increase in net assets transfer to the Tidelands Operating Fund, totaling to $18,587,376.




4 (Continued)

The Department’s investment in capital assets (land; structures and facilities; furniture, fixtures, and equipment; construction in progress; and rights of way) less any related debt is $1,410,740,241 or 58% of the aggregate net assets. Capital assets facilitate tenants’ cargo operations and the Department does not intend to liquidate them to fund ongoing port operations.

The Department holds $293,552,191 of net assets subject to restrictions, an increase of $73,429 from last year. The increase is the result of interest earnings related to funds restricted for federally funded projects. Restricted net assets are thus identified in the Statements of Net Assets and represent 12% of the Department’s total net assets.

At the end of fiscal year 2009, the Department reported unrestricted net assets of $723,524,841, an increase of $49,092,616 when compared to 2008. This change is mainly the result of $43,059,351 increase in current assets, plus $2,994,375 increase in the ICTF joint venture plus increase in oil facilities of $5,100,097 and $500,000 decrease in other noncurrent assets, plus reductions of $712,369 in current liabilities, plus reductions of $56,795,417 in environmental remediation liabilities; minus $6,800,000 increase in the Oil Wells Abandonment Liability and $60,896,105 reduction in operating pooled cash and cash equivalents. Unrestricted net assets represented 30% of the Department’s aggregate net assets and were not subject to external restrictions. Unrestricted net assets were available to fund the Department’s continuing operations.


At the end of fiscal year 2008, the assets of the Department exceeded its liabilities by $2,303,580,215 (net assets). Total net assets increased by $160,839,722. This change consists mainly of $163,681,269 operating income, $4,440,935 income from equity in the ICTF joint venture, $3,742,240 income derived from grants received from federal and state governments, $31,153,305 profit from oil operations; less $42,178,027 from other net nonoperating expenses, including financing costs and 10% of increase in net assets transfer to the City’s Tidelands Operating Fund, which amounts to $16,059,464.

The Department’s investment in capital assets (land; structures and facilities; furniture, fixtures, and equipment; construction in progress; and rights of way) less any related debt is $1,335,522,370 or 58% of the aggregate net assets. Capital assets facilitate tenants’ cargo operations and the Department does not intend to liquidate them to fund ongoing port operations.

The Department holds $293,625,620 of net assets subject to restrictions, an increase of $80,889,995 from last year. The increase consists of matching contribution for future federal and state grants for projects such as bridges, rail, roadway, and port security paired with reductions on the bonded debt service requirements, rail and roadway fund, and full utilization of the Long Beach Redevelopment Agency (RDA) Westside restricted funds. Restricted net assets are thus identified in the Statements of Net Assets and represent 13% of the Department’s total net assets.

At the end of fiscal year 2008, the Department reported unrestricted net assets of $674,432,225, a decrease of $92,641,555 when compared to 2007. This change included an increase in net assets of $160,839,722, less $172,591,282 used to finance capital assets, net of related liabilities, and the net effect of setting reserves for the Gerald Desmond Bridge, the rail and roadway fund, rail projects, and security projects (a net reduction of $80.88 million). Unrestricted net assets represented 29% of the Department’s aggregate net assets and were not subject to external restrictions. Unrestricted net assets were available to fund the Department’s continuing obligations and designated projects.




5 (Continued)

Summary of Operations and Changes in Net Assets

The Statements of Revenues, Expenses, and Changes in Fund Net Assets illustrate the Department’s change in net assets from prior to current fiscal year. These changes are reported as soon as the underlying event giving rise to the change occurs, regardless of the timing of related cash flows. Thus, some revenues and expenses reported in this statement will only affect future period cash flows; for example: uncollected receivables and earned, but unused, vacation leave.

The table below summarizes the operations for fiscal years 2009, 2008, and 2007.

Changes in Fund Net Assets

Years ended September 30, 2009, 2008, and 2007

2009 2008 2007

Operating revenues:Berth and special facilities $ 291,451,794 340,524,798 351,891,119 Miscellaneous 19,899,788 18,819,335 18,940,814

Total operating revenues 311,351,582 359,344,133 370,831,933

Operating expenses:Facility and infrastructure (58,416,295) (81,440,115) (69,959,326) General and administrative (39,463,931) (34,725,802) (27,004,526) Depreciation and amortization (85,857,712) (79,496,947) (83,067,090)

Total operating expenses (183,737,938) (195,662,864) (180,030,942)

Operating income 127,613,644 163,681,269 190,800,991

Nonoperating revenues (expenses):Intergovernmental expense (18,587,376) (16,059,464) (15,399,535) Investment expense, net of income (22,250,685) (13,044,028) (9,698,643) Income (loss) from oil operations 923,137 31,153,305 (21,070,305) Gain (loss) on sale of capital assets 8,248 (254,540) 179 Income from equity in joint venture 2,994,375 4,440,935 4,674,546 Income (loss) from Clean Air Action Plan 13,323,357 (13,866,798) — Other income, net 8,772,821 1,046,803 1,267,487

Net nonoperating expenses (14,816,123) (6,583,787) (40,226,271)

Income before capital grants 112,797,521 157,097,482 150,574,720

Capital grants 11,439,537 3,742,240 10,019,920

Change in net assets 124,237,058 160,839,722 160,594,640

Total net assets – beginning 2,303,580,215 2,142,740,493 1,982,145,853 Total net assets – ending $ 2,427,817,273 2,303,580,215 2,142,740,493




6 (Continued)


A comparison of the operating revenues for fiscal years 2009 and 2008 shows a decrease of 13%. All the revenue categories, except dry bulk, liquid bulk, and rentals (11%, 2%, and 10% increases, respectively), decreased: containerized cargo 17%, steel 22%, vehicles 2%, lumber 32%, other terminals 39%, and miscellaneous income 9%.

In terms of volume (measured in metric revenue tons) liquid bulk is the only category showing an increase of 4%; the following types of cargo decreased during fiscal year 2009: containerized cargo 23%, dry bulk 10%, vehicles 50%, steel 26%, and lumber 30%.

Operating expenses (excluding depreciation and amortization) decreased $18,285,691. Cargo facilities incurred lower maintenance expenses to the tune of $2,169,706; Infrastructure Maintenance that includes bridges and freeways maintenance and expenses related to environmental control decreased $23,257,222; Fire and Safety increased by $2,683,629; and general and administrative expenses increased by $4,738,128.

Depreciation expense is affected by acquisition/retirement of long-term assets, their useful lives, and the dates when such assets are placed in service. Depreciation expense for fiscal year 2009 was higher than that of 2008. The reason for this change is the increase in assets placed into service during 2009. Investment income was lower due to lower earning rates resulting from the overall downturn in the economy. Interest expense was lower because of reduced bond and commercial paper principal balances, and the implementation of the capitalization of interest policy that entails the allocation of interest expense to capital projects.

Oil operations net revenues decreased to $923,137 from $31,153,305 in the previous year due to lower crude oil prices prevailing during the fiscal year. The implementation of the Clean Air Action Plan (CAAP) and its related projects generated a net revenue of $13,323,357, which is a reversal of a $13,866,798 net expense during fiscal year 2008. The change in direction is attributed to the container fees collected from trucks operating in the Port of Long Beach (the Port) that are not complying with the Clean Truck Program guidelines to clean up air pollution at the Port; the portion of the capital grant project expenses subsidized with grant revenues increased from $3,742,240 in fiscal year 2008 to $11,439,537 million in fiscal year 2009; the increase was attributed to the faster pace of spending on projects funded by grants.


A comparison of the operating revenues for fiscal years 2008 and 2007 shows a decrease of 3%. All the revenue categories, except dry bulk (2% increase), decreased: containerized cargo 3%, liquid bulk 6%, steel 1%, vehicles 1%, lumber 4%, other terminals 20%, and rentals 1%.

In terms of volume (measured in metric revenue tons), all types of cargo decreased during fiscal year 2008: containerized cargo 5%, dry bulk 7%, vehicles 19%, steel 13%, lumber 17%, and liquid bulk 8%.

Operating expenses increased due to higher maintenance costs on the Gerald Desmond Bridge, increased levels of service provided by the Long Beach Police and Fire Departments; revamping and modernization of the Port’s Security Division; and additional costs incurred to patrol and secure water areas around the Port complex. Upgrades and maintenance of access roads, sanitation systems, and far reaching efforts to promote community awareness were also factors causing the increase in operating expenses.




7 (Continued)

Depreciation expense is affected by acquisition/retirement of operating assets, their useful lives, and the dates when such assets are placed in service. Depreciation expense for fiscal year 2008 was lower than that of 2007 because many of the capital assets owned by the Port have maximized their allowable depreciation. Investment income was lower due to the recording of the loss on Lehman Brothers commercial paper investment. Interest expense was lower because of the full payment of the 2002A bonds and the reduction, due to regular debt servicing, on the principal balances of the other debt carried by the Department.

Oil operations net revenues increased to $31.2 million from a $21.1 million loss in previous year due to favorable crude oil prices prevailing during the fiscal year. Fiscal year 2008 is the first year in which expenses were incurred on the Clean Trucks Program, which is an important component of the CAAP; net expenses for the year were $13.9 million; the portion of the capital grant project expenses subsidized with grant revenues decreased from $10 million in fiscal year 2007 to $3.7 million in fiscal year 2008 because these projects were delayed.

Capital Assets and Debt Administration

Capital Assets

The Department’s investments in capital assets, net of accumulated depreciation, as of September 30, 2009, 2008, and 2007 are as follows:

Capital Assets, Net

September 30, 2009, 2008, and 2007

2009 2008 2007

Nondepreciable capital assets:Land $ 859,833,899 858,813,707 850,704,021 Construction in progress 180,699,622 164,535,655 225,836,752 Rights of way 207,823,264 207,823,264 207,823,264

Total nondepreciable capitalassets 1,248,356,785 1,231,172,626 1,284,364,037

Depreciable capital assets (net):Structures and facilities 990,471,192 1,008,240,275 956,920,248 Furniture, fixtures, and equipment 10,939,832 4,202,907 4,007,394

Total depreciable capital assets 1,001,411,024 1,012,443,182 960,927,642 Total capital assets, net $ 2,249,767,809 2,243,615,808 2,245,291,679


The Department’s investments in capital assets include land; structures and facilities; furniture, fixtures, and equipment; construction in progress; and rights of way. The net effect on the capital asset accounts was an increase of $6,152,001 from 2008. In order to accomplish a more efficient use of their space, many divisions continued to remodel their areas. Information regarding the Department’s capital assets can be found in note 6 to the financial statements.




8 (Continued)


The Department’s investments in capital assets include land; structures and facilities; furniture, fixtures, and equipment; construction in progress; and rights of way. Capital assets decreased by less than 1% when compared to fiscal year 2007. Additions/transfer to capital asset accounts were offset by reductions, either by transfers to capital asset accounts or by closing projects to operating expenses, in construction in progress. Information regarding the Department’s capital assets can be found in note 6 to the financial statements.

Debt Administration

The following table summarizes the Department’s debt, originally incurred as long-term, as of September 30, 2009, 2008, and 2007. For consistency purposes, this schedule includes the current portion.

Debt Originally Incurred as Long-Term Debt

September 30, 2009, 2008, and 2007

2009 2008 2007

Bond debt (principal and net premiums) $ 802,927,145 842,403,531 1,016,164,146 Commercial paper outstanding 31,400,000 60,150,000 60,150,000 Notes payable — — 41,333

Total long-term debt $ 834,327,145 902,553,531 1,076,355,479


The Department’s total long-term debt decreased by $68,226,386, or 8%. The decrease was the result of scheduled principal reductions on the bond debt and the retirement of $28,750,000 of the outstanding commercial paper.

The underlying ratings assigned to the Department’s bond issues are as follows: Standard & Poor’s: AA, stable outlook; Moody’s Investors Services: Aa2, stable outlook; and Fitch Ratings: AA, stable outlook. During 2009, Fitch Ratings affirmed the AA rating on the $803 million Port debt. The Fitch report states, “‘AA’ rating reflects the Port’s geographic advantage, proximity to a very large population base, and excellent intermodal access to large rail networks and highways that result in the Port’s dominant position as the nation’s second largest container port. The Port has a very healthy balance sheet with a superior liquidity position, very stable revenue sources through long-term lease agreements that ensure solid operating margins and largely mitigate downside financial risk, modern and contiguous facilities, and a good diversity of terminal operators and shippers.”

In December 2009, Moody’s Investors Service affirmed its Aa2 rating on the Port’s debt. The Moody’s report states, “The Port of Long Beach’s strategic advantages include a deep harbor, advantageous location for capturing Pacific Rim trade, large local service area, and excellent intermodal transportation links to regional and inland markets. The outlook for the Port of Long Beach is stable despite the current economic downturn, based on Moody’s expectation that the port’s competitive market position will continue to support operations, that the strong financial position will provide healthy margins against decreasing cargo levels, and future borrowing plans will maintain the targeted 2.0x debt service coverage and one-year’s cash on hand.”




9

The debt service coverage ratios for fiscal years ended 2009 and 2008 are 2.8 and 3.1, respectively. The minimum rate required by the Department’s various bond indenture documents is 1.25. Additional information on the Department’s long-term debt can be found in notes 7 and 8, on pages 29 – 36 of this report.


The Department’s total long-term debt decreased by $173,801,948, or 16%. The decrease was the result of scheduled bond debt service payments and the retirement of the 2002A variable rate debt obligation (VRDO) bonds ($133.8 million).

The underlying ratings assigned to the Department’s bond issues are as follows: Standard & Poor’s: AA, stable outlook; Moody’s Investors Services: Aa2, stable outlook; and Fitch Ratings: AA, stable outlook. The ratings are the result of factors such as: the Port’s significant size and strength among the West Coast container ports; its status as a world-class facility; its prime location to attract Pacific Rim trade; convenient links to intermodal connections; its healthy financial condition and high liquidity; the proactive approach to secure and protect its facilities and to make them as safe as possible; the continued implementation of an environmentally responsible capital program supported by the Board of Harbor Commissioners; and management’s commitment to efficiency, sustainability, environmental protection, and customer service.

The debt service coverage ratios for fiscal years ended 2008 and 2007 are 3.1 and 3.5, respectively. The minimum rate required by the Department’s various bond indenture documents is 1.25. Additional information on the Department’s long-term debt can be found in notes 7 and 8, on pages 29 – 36 of this report.

Notes to Financial Statements

The notes to the Department’s financial statements can be found on pages 14 – 50 of this report. These notes provide additional information that is essential to a full understanding of the financial statements.

Requests for Information

This financial report is designed to provide a general overview of the Department’s finances for people or entities interested in the financial aspects of the Port. Questions concerning any of the information provided in this report or requests for additional financial information should be addressed to the Chief Financial Officer, 925 Harbor Plaza, Long Beach, CA 90802.


Statements of Net Assets


Assets 2009 2008

Current assets:Pooled cash and cash equivalents (note 2) $ 664,793,199 725,689,304 Trade accounts receivable, net of allowance (note 3) 47,491,843 50,090,855 Interest receivable 199,926 581,213 Nonperforming investments (note 3) 2,228,927 2,228,927 Due from other governmental agencies (note 3) 4,916,764 2,267,630 Prepaid – dredging services (note 4) 43,500,000 — Inventories of supplies 626,716 742,222 Other current assets 6,022 —

Subtotal 763,763,397 781,600,151

Harbor Revenue Bond Funds and other funds restricted as touse (notes 2 and 8):

Pooled cash and cash equivalents (note 2) 241,695,780 232,528,585

Total current assets 1,005,459,177 1,014,128,736

Noncurrent assets:Capital assets (notes 6 and 10):

Land:Purchased 440,901,947 439,913,481 Constructed 418,931,952 418,900,226

Net land 859,833,899 858,813,707

Structures and facilities 2,011,291,995 1,947,975,911 Less accumulated depreciation (1,020,820,803) (939,735,636)

Net structures and facilities 990,471,192 1,008,240,275

Furniture, fixtures, and equipment 28,193,907 17,499,336 Less accumulated depreciation (17,254,075) (13,296,429)

Net furniture, fixtures, and equipment 10,939,832 4,202,907

Construction in progress 180,699,622 164,535,655 Right of way (note 5) 207,823,264 207,823,264

Net capital assets 2,249,767,809 2,243,615,808

Other assets:Long-term receivables (note 3) 27,000,000 27,435,000 Oil facilities (net of accumulated depletion of $65,132,743 and

$70,232,840, respectively) 16,003,112 10,903,015 Environmental mitigation credits (note 15) 44,278,068 44,278,068 Investment in joint venture (note 11) 10,897,651 7,903,276 Restricted nonpooled cash and cash equivalents (note 2) 362,691 21,473,654 Restricted nonpooled investments (note 2) 53,260,654 32,228,105 Other noncurrent assets 1,900,000 2,400,000

Total other assets 153,702,176 146,621,118

Total noncurrent assets 2,403,469,985 2,390,236,926

Total assets $ 3,408,929,162 3,404,365,662

(Continued)10


Statements of Net Assets


Liabilities 2009 2008

Current liabilities payable from current assets:Accounts payable and accrued expenses $ 48,311,508 53,972,310 Accrued interest – commercial paper (note 7) — 185,725 Commercial paper outstanding (note 7) 31,400,000 60,150,000 Liability claims (note 12) 5,000,000 — Deferred credits and unearned revenue 14,911,718 14,586,669 Due to City of Long Beach (note 14) 16,083,972 16,274,861 Current portion of environmental remediation (note 13) 19,074,012 60,411,804

Total current liabilities payable from current assets 134,781,210 205,581,369

Current liabilities payable from restricted assets:Current portion of bonds indebtedness (note 8) 40,120,000 38,145,000 Accrued interest – bonds 15,703,534 16,442,922

Total current liabilities payable from restricted assets 55,823,534 54,587,922

Total current liabilities 190,604,744 260,169,291

Long-term obligations net of current portion:Bonded indebtedness (note 8) 762,807,145 804,258,531 Environmental remediation (note 13) 1,000,000 16,457,625 Oil wells abandonment (note 12) 26,700,000 19,900,000

Total noncurrent liabilities 790,507,145 840,616,156

Total liabilities 981,111,889 1,100,785,447

Net Assets (Note 16)

Invested in capital assets, net of related debt 1,410,740,241 1,335,522,370 Restricted – nonrelated-party debt service contingency and

matching contribution for federally funded projects (note 12) 147,301,520 147,301,520 Restricted – capital projects 44,278,068 44,278,068 Restricted – debt service 101,972,603 102,046,032 Unrestricted 723,524,841 674,432,225

Total net assets $ 2,427,817,273 2,303,580,215

See accompanying notes to financial statements.

11


Statements of Revenues, Expenses, and Changes in Fund Net Assets

Years ended September 30, 2009 and 2008

2009 2008

Port operating revenues (note 10):Berths and special facilities $ 291,451,794 340,524,798 Rental properties 15,957,437 14,495,795 Miscellaneous 3,942,351 4,323,540

Total Port operating revenues 311,351,582 359,344,133

Port operating expenses:Facility maintenance 5,700,685 7,870,391 Infrastructure maintenance 22,299,190 45,556,412 Fire and safety 24,036,675 21,353,046 Other indirect operating 6,379,745 6,660,266 General and administrative 39,463,931 34,725,802

Total Port operating expenses before depreciationand amortization 97,880,226 116,165,917

Depreciation and amortization 85,857,712 79,496,947

Total Port operating expenses 183,737,938 195,662,864

Income from Port operations 127,613,644 163,681,269

Nonoperating revenues (expenses):Investment income, net 18,579,306 33,346,928 Interest expense (40,829,991) (46,390,956) Income from oil operations 923,137 31,153,305 Gain (loss) on disposition of capital assets 8,248 (254,540) Income from equity in joint ventures 2,994,375 4,440,935 Clean Air Action Plan (net) 13,323,357 (13,866,798) Other income 8,772,821 1,046,803

Total nonoperating revenues 3,771,253 9,475,677

Income before capital grants and transfers 131,384,897 173,156,946

Capital grants 11,439,537 3,742,240 Operating transfers to City (note 14) (18,587,376) (16,059,464)

Increase in net assets 124,237,058 160,839,722

Total net assets – beginning of year 2,303,580,215 2,142,740,493 Total net assets – end of year $ 2,427,817,273 2,303,580,215


12


Statements of Cash Flows

Years ended September 30, 2009 and 2008

2009 2008

Cash flows from operating activities:Cash received from customers $ 309,308,092 359,339,856 Cash paid to employees net of capitalized labor of $4,286,063 and $4,786,307

in 2009 and 2008, respectively (37,480,770) (32,679,627) Cash paid to suppliers (122,463,488) (51,260,792)

Net cash provided by operating activities 149,363,834 275,399,437

Cash flows from investing activities:Harbor oil operations 12,842,740 29,727,236 Interest received 18,960,593 31,072,311 Return on investment in joint venture — 8,000,000 Purchase of investments (20,912,327) —

Net cash provided by investing activities 10,891,006 68,799,547

Cash flows from noncapital/financing activities:Clean Air Action Plan 3,987,302 (1,147,823) Harbor Cogeneration Payment 8,800,400 — Operating transfers to Tidelands and other funds (16,274,862) (15,399,535)

Net cash used in noncapital financing activities (3,487,160) (16,547,358)

Cash flows from capital and related financing activities:Grants provided (used) (9,991,732) 7,046,639 Interest paid, net of capitalized interest (45,161,004) (50,787,577) Payments for capital acquisitions (67,770,450) (97,517,285) Prepayment for dredging services (43,500,000) — Principal payment – commercial paper (28,750,000) — Principal payment – notes — (41,333) Principal payments – bond (38,145,000) (170,130,000) Excess reserve 2005 Bonds 3,644,605 — Proceeds from sales of capital assets 66,027 945,460

Net cash used in capital and related financing activities (229,607,554) (310,484,096)

Net increase (decrease) in cash and cash equivalents (72,839,874) 17,167,530

Cash and cash equivalents, October 1 979,691,544 962,524,013 Cash and cash equivalents, September 30 $ 906,851,670 979,691,543

Reconciliation of operating income to net cash provided by operating activities:Operating income $ 127,613,644 163,681,269 Adjustments to reconcile operating income to net cash provided by operating activities

Depreciation and amortization 85,857,712 79,496,947 Bad debt expense 272,068 26,954 Decrease (increase) in accounts receivable (2,277,680) 587,025 Decrease (increase) in other assets (6,022) — Decrease (increase) in inventory 115,506 (8,120) Increase (decrease) in accounts payable (6,642,213) 7,939,727 Increase (decrease) in deferred revenues 1,164,234 (814,410) Increase in customer deposits 62,002 21,333 Increase (decrease) in environmental remediation (56,795,417) 24,459,654 Increase in due to other funds — 9,058

Net cash provided by operating activities $ 149,363,834 275,399,437

Reconciliation of cash and cash equivalents:Unrestricted pooled cash and cash equivalents $ 664,793,199 725,689,304 Restricted pooled cash and cash equivalents 241,695,780 232,528,585 2000 bond reserve held by the City Treasurer 362,691 21,473,654

$ 906,851,670 979,691,543


13




14 (Continued)

(1) Summary of Significant Accounting Policies

(a) The Reporting Entity

Article XII of the City Charter of the City of Long Beach, California (the City) created the Harbor Department of the City of Long Beach (the Department) to promote and develop the Port of Long Beach (the Port). The Department’s operations are included in the City’s reporting entity as an enterprise fund; its activities are conducted in the Tidelands Trust area of the City and are subject to coastal area laws of the State of California and to the terms of the trust agreement between the City and the State of California.

The Harbor Facilities Corporation (the Corporation), a nonprofit public benefit corporation, has been inactive since 1995 and did not have any activity during the 2009 and 2008 fiscal years. If the Corporation would have any transactions with financial implications, they would be included in the Department’s financial statements.

The Department, together with the Harbor Department of the City of Los Angeles, formed a joint venture to finance the construction of the Intermodal Container Transfer Facility (ICTF). The ICTF venture has been recorded as an investment under the equity method of accounting in the accompanying financial statements (see note 11).

In 1989, the cities of Los Angeles and Long Beach entered into a Joint Exercise of Powers Agreement to create the Alameda Corridor Transportation Authority (ACTA). This agreement was amended and restated in 1996. The purpose of ACTA was to acquire, construct, finance, and operate the Alameda Corridor. The Alameda Corridor consists of a 20-mile-long rail cargo expressway connecting the ports in San Pedro Bay to the transcontinental rail yards near downtown Los Angeles and it began operating in April 2004. ACTA prepares its own financial statements, and its transactions are not included as part of the Department’s financial statements.

(b) Basis of Accounting and Measurement Focus

Disbursement of funds derived from the Department’s operations is restricted to Harbor Trust Agreement purposes. The costs of providing port services are recovered entirely through leases, tariffs, and other charges assessed to Department’s tenants. Consistent with U.S. generally accepted accounting principles for enterprise funds, the accounting policies of the Department conform to the accrual basis of accounting. The measurement focus of the accompanying financial statements is on the determination of changes in net assets and changes in financial position. Operating revenues and expenses are generated and incurred through cargo activities performed by port tenants; operating expenses include maintenance of facilities and infrastructure, security, and payments to other City departments for services provided to the Port. Administration and depreciation expenses are also considered operating expenses. Other revenues and expenses not included in the above categories are reported as nonoperating income (expense). The Department applies all applicable Governmental Accounting Standards Board (GASB) pronouncements and all Financial Accounting Standards Board (FASB) statements and interpretations issued on or before November 30, 1989, except for those that conflict with or contradict GASB pronouncements.




15 (Continued)

The Department recognizes operating revenues when they are earned. Proceeds from federal or state grants are considered as nonoperating revenues, recognized as such when reimbursable expenses are incurred, and are identified as capital grants in the statements of revenues, expenses, and changes in fund net assets. Operating revenues or capital grant funds that have either been billed or received but not earned are identified as deferred credits and unearned revenue in the statements of net assets.

(c) New Accounting Pronouncements

Effective October 1, 2008, the Department adopted GASB Statement No. 49, Accounting and Financial Reporting for Pollution Remediation Obligations. The statement provides governments with better accounting guidance and consistency, and it identifies the circumstances under which a government entity would be required to report a liability related to pollution remediation. The adoption of the statement did not have a material impact on the Department’s financial statements. Disclosures related to the adoption of GASB Statement No. 49 are presented in note 13.

(d) Pooled Cash and Cash Equivalents

In accordance with City Charter requirements, the Department pools its available cash with that of the City. The City’s cash management pool is used essentially as a demand deposit account by the participating City organizational units. For purposes of the statements of cash flows, the Department defines cash and cash equivalents as pooled cash and investments, including restricted pooled cash and investments and short-term, easily convertible to cash, nonpooled investments. Investment decisions are made by the City Treasurer and approved by an investment committee whose membership includes members of the Department’s management ranks.

Investment income and gains/losses arising from such pooled cash and investments are apportioned to each participating unit based on the relationship of the unit’s average daily cash balances to the aggregate pooled cash and investments. The Department’s share of pooled cash and investments, as of September 30, 2009 and 2008, is stated at fair value (see note 2).

(e) Nonpooled Cash and Cash Equivalents

The Department considers all highly liquid investments with an original maturity date of three months or less to be cash and cash equivalents.

(f) Investments

Investments are reflected at fair value using quoted market prices. Realized and unrealized gains and losses are included in the accompanying statements of revenues, expenses, and changes in net assets as investment income, net.

(g) Inventories

Inventories of supplies are valued at the lower of average cost or market.




16 (Continued)

(h) Capital Assets

An asset is classified as a capital asset if it is a nonconsumable, tangible item, valued at a single amount greater than $5,000, and with a useful life of more than one year. Capital assets are valued at historical costs. The historical cost of acquiring an asset includes the cost necessarily incurred to bring it to the condition and location necessary for its intended use. If an asset requires a period of time in which to carry out the activities necessary to bring it to that condition and location, the interest cost incurred during that period as a result of expenditures is a part of the historical cost of acquiring the asset. Depreciation is determined using the straight-line method with no allowance for salvage values. Identifiable intangible assets are recognized as such if they are separable or when they arise from contractual or other legal right, regardless of whether those rights are transferable or separable from the entity, or from other rights and obligations. An intangible asset will be capitalized if the asset has a useful life of more than one year and an acquisition cost exceeding the capitalization threshold of $100,000. Amortization of intangible assets will follow the policies set for tangible assets with the following additional considerations: there is no mandated maximum amortization period; intangible assets with indefinite useful life should not be amortized; and the carrying value of the intangible asset, if any, following the recognition of any impairment loss should be amortized in subsequent reporting periods over the remaining estimated useful life of the asset. When appropriate, provision for obsolescence is recognized by charging depreciation at an accelerated rate on specific assets. The estimated economic lives used to determine annual rates of depreciation are subject to periodic review and revision, if appropriate, to assure that the cost of the respective assets will be written off over their economic lives. Estimated useful lives used in the computation of depreciation of capital assets are as follows:

Structures and facilities:Bridges and overpasses 50 – 75 yearsWharves and bulkheads 40 yearsTransit sheds and buildings 20 – 50 yearsState highway connections 10 – 50 yearsOthers 5 – 50 years

Intangible assets 3 – 30 yearsFurniture, fixtures, and equipment 2 – 30 years

The Harbor Department incurred interest cost in fiscal year 2009 of $42,898,000 of which $2,068,000 was capitalized.

(i) Oil Operation

Oil facilities are valued at historical cost plus estimated future oil well abandonment costs. Abandonment costs are separately recorded as a liability. Oil field depletion is determined using the estimated economic life of the oil field divided by future unit production of the oil field. Donated assets are valued at their estimated fair value on the donation date.

(j) Investments in Joint Ventures

Investments in joint power authorities are accounted for by the equity method.




17 (Continued)

(k) Compensated Absences

The Department records all accrued employee benefits, including accumulated vacation and sick leave, as a liability in the period when the benefits are earned. Accrued employee benefits are treated as a current liability for financial statement presentation.

(l) Pension Plan and Postretirement Benefits

All full-time Department employees are members of the State of California Public Employees’ Retirement System (CalPERS). The Department’s policy is to fund all accrued pension costs. These costs are determined annually as of October 1 by CalPERS and are incorporated into the payroll burden rate reimbursable to the City’s Employee Benefits Internal Service Fund. The Department participates in the City’s Retired Employee Health Insurance Program. This program is a single-employer defined benefit healthcare plan.

(m) Allowance for Doubtful Accounts Receivable

The allowance for doubtful accounts (allowance) is estimated at a level to absorb expected accounts receivable losses. Allowance is established to reflect the amount of the Port’s receivables that Management estimates will be uncollectible ensuring that Port’s receivables will not be overstated for financial reporting purposes. The allowance is set at the greater of: (1) one half of one percent (0.5%) of estimated annual operating revenues or (2) the sum of 75% of aged receivable amounts over 120 days delinquent, plus 50% of amounts over 90 days delinquent, plus 25% of amounts over 60 days delinquent, plus 10% of amounts over 30 days delinquent. In addition, Management reviews the adequacy of the allowance on a monthly basis by reviewing the aging report and assesses whether any further action is necessary.

To determine uncollectibility, the Department’s Finance Division reviews all delinquent accounts around August of each year. Amounts deemed uncollectible are proposed to be written off. The balances of the allowance for uncollectible Accounts Receivable for the fiscal years 2009 and 2008 were $1,556,758 and $1,796,604, respectively (see note 3).

(n) Use of Estimates

The preparation of financial statements in conformity with U.S. generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amount of assets and liabilities and the disclosure of contingent assets and liabilities as of the date of the financial statements. Actual results could differ from those estimates.

(o) Reclassifications

Certain amounts reported in fiscal year 2008 have been reclassified to conform to the fiscal year 2009 presentation. Such reclassifications have no effect on the previously reported change in net assets.

(p) Net Assets

The Department has adopted a policy of generally utilizing restricted funds, prior to unrestricted funds, when an expense is incurred for purposes for which both are available.




18 (Continued)

The Department’s net assets are classified into the following net asset categories:

Invested in Capital Assets, Net of Related Debt – Capital assets, net of accumulated depreciation and outstanding principal balances of debt attributable to the acquisition, construction, or improvement of those assets.

Restricted – Expendable – Net assets subject to externally imposed conditions or constraints that can be fulfilled by the actions of the Department or by the passage of time. The restrictions are externally imposed by creditors, grantors, contributors, laws or regulations of other governments, or by law through constitutional provisions or enabling legislation.

Unrestricted – All other categories of net assets. Additionally, unrestricted net assets may be designated for use by management of the Department. These requirements limit the area of operations for which expenditures of net assets may be made and require that unrestricted net assets be designated to support future operations in these areas. The future funding commitments of the Department related to the Clean Air Action Plan (CAAP) are a primary example of unrestricted net assets with designated uses (see note 12).

(2) Cash, Cash Equivalents, and Other Investments

The Department’s cash and cash equivalents and investments as of September 30, 2009 and 2008 are classified in the accompanying statements of net assets as follows:

2009 2008

Pooled cash and cash equivalents $ 664,793,199 725,689,304 Pooled cash and cash equivalents, restricted 241,695,780 232,528,585

Total pooled cash and cash equivalents 906,488,979 958,217,889

Bond reserves held by fiscal agents:Nonpooled cash and cash equivalents 362,691 21,473,654 Nonpooled investments 53,260,654 32,228,105

Total bond reserves held by fiscal agents 53,623,345 53,701,759 Total pooled cash and cash equivalents and bond

reserves held by fiscal agents $ 960,112,324 1,011,919,648

The majority of the Department’s cash and investments, including restricted cash and investments, are pooled with other City funds and maintained by the City Treasurer. The City Charter requires the Department to participate in the City Treasurer’s pool. The Department’s portion of the City’s total pooled cash and cash equivalents amount as of September 30, 2009 and 2008 was $906,488,979 or 56.2% and $958,217,889 or 56.2%, respectively, of the City’s pooled cash and cash equivalents. The Department’s bond reserves held by fiscal agents for the 2002, 2004, and 2005 bonds were $53,623,345 and $53,701,759 as of September 30, 2009 and 2008, respectively. The City’s investment policy authorizes the pool to invest in obligations issued or guaranteed by the federal government and its agencies and instrumentalities as well as in commercial paper rated A-1 by Standard & Poor’s Corporation or P-1 by Moody’s Commercial Paper Record, bankers’ acceptances, repurchase agreements, reverse repurchase agreements,




19 (Continued)

bank certificate of deposits, the State Treasurer’s Local Agency Investment Fund, and shares of beneficial interest (mutual funds) issued by diversified management companies.

It is the policy of the City Treasurer to invest funds in a manner that will provide the highest investment return with the maximum security while meeting the daily cash flow demands of the City and its Departments and to conform to all state and local statutes governing the investment of public funds, using the “prudent person” standard for managing the overall portfolio. The primary objective of the policy is safety of principal, liquidity, yield, and maintaining the public trust. Individual departmental cash deposits and investments within this pool cannot be specifically identified among the participating units. Interest income and gains and losses earned on pooled cash and investments are allocated monthly to the various pool participants based on their average daily cash balances.

(a) Investments Authorized by the California Government Code and the City’s Investment Policy

The table below identifies the investment types that are authorized for the City by the City’s investment policy. The table also identifies certain provisions of the City’s investment policy that address interest rate risk, credit risk, and concentration of credit risk. This table does not address debt proceeds held by bond trustee, which are governed by the provisions of debt agreements of the City, rather than the general provision of the California Government Code or the City’s investment policy.

Maximum MaximumMaximum percentage of investment in

Authorized investment type maturity portfolio one issuer

Bonds issued by the City 5 years * 30% NoneU.S. Treasury notes, bonds, or bills 5 years * None NoneRegistered state warrants or

treasury notes or bonds of theState of California 5 years * 30% None

Local agency bonds 5 years * 30 NoneFederal agency securities 5 years * 40 NoneBanker’s acceptances 180 days 40 30%Commercial paper 270 days 25 10Negotiable certificates of deposit 5 years * 30 10Time certificates of deposit 5 years * 100 10Repurchase agreements 90 days 100 NoneReverse repurchase agreements 92 days 20 NoneSecurities lending program 92 days 20 NoneMedium-term notes 5 years * 30 10%Money market funds N/A 20 10Local agency investment $40 million per

fund (LAIF) N/A None accountAsset-backed securities 5 years 20% NoneMortgage-backed securities 5 years 20 None* Maximum maturity of (5) years unless a longer maturity is approved by the City Council,

either specifically or as part of an investment program, at least (3) months prior to purchase.




20 (Continued)

(b) Investments Authorized by Debt Agreement

Investment of debt proceeds held by bond trustee is governed by provisions of the debt agreements.

(c) Interest Rate Risk

Interest rate risk is the risk that changes in market interest rates will adversely affect the fair value of an investment. Generally, the longer the maturity of an investment, the greater the sensitivity of its fair value to changes in market interest rates. One of the ways that the City manages its exposure to interest rate risk is by purchasing a combination of shorter term and longer term investments, and by timing cash flows from maturities so that a portion of the portfolio is maturing or coming closer to maturing evenly over time as necessary to provide cash flow and liquidity need for operations. The following schedule indicates the interest rate risk of the City’s investments, which includes the amount the fund has invested with the City as of September 30 (in thousands):

2009 2008Weighted Weightedaverage averagematurity maturity

Investment type Fair value (in years) Fair value (in years)

Cash and investments in citypool:

Interdepartment loan(Health SAVERS) $ 2,654 9.60 $ 2,892 10.60

U.S. Treasury notes 930,125 0.50 55,816 0.41 Federal agency securities 592,312 0.50 1,289,369 1.96 Medium-term notes — — 84,148 0.99 LAIF — — 160,848 0.09 Government managed rate

account 104,667 — 69,931 —

Subtotal city pool 1,629,758 1,663,004

Cash and deposits 80,099 — 60,313 — Outstanding checks (13,698) — (19,752) —

Total city pool $ 1,696,159 $ 1,703,565

Nonperforming short-terminvestment $ 3,962 — $ 3,962 —




21 (Continued)

The following schedule indicates the interest rate risk of the Department’s cash held by fiscal agent:

2009 2008Weighted Weightedaverage average

Fair value maturity Fair value maturity(000’s) (in years) (000’s) (in years)

Nonpooled investments – Fiscal Agent:2002A Reserve:

Federal Agency Securities $ 8,240 2.39 Treasury Notes 12,421 1.56

20,661

2004 Reserve:Federal Agency Securities 12,107 7.80 AIG Matched Funding CorporationGuaranteed Investment Contracts (GIC) $ 11,373 8.62

2005 Reserve:Federal Agency Securities 8,235 2.38 Treasury Notes 12,258 1.56

20,493

FSA Capital Management Services GIC 20,855 15.39

Total $ 53,261 $ 32,228

(d) Investments with Fair Values Highly Sensitive to Investment Risk

The City had no investments with values that were highly sensitive to investment risk as of September 30, 2009 and 2008. Highly sensitive investments are investments whose sensitivity to market interest rate fluctuations are not fully addressed by use of one of the five methods for reporting interest rate risk.

(e) Risks and Uncertainties

The City may invest in various types of investment securities. Investment securities are exposed to various risks, such as interest rate, market, and credit risks. Due to the level of risk associated with certain investment securities, it is at least reasonably possible that changes in the values of investment securities will occur in the near term and that such changes could materially affect the amounts reported in the statements of financial position.

The City invests in securities with contractual cash flows, such as asset-backed securities and mortgage-backed securities. The value, liquidity, and related income of these securities are sensitive to change in economic conditions, including real estate value, delinquencies or defaults, or both, and may be adversely affected by shifts in the market’s perception of the issuers and changes in interest rates.




22 (Continued)

(f) Disclosures Relating to Credit Risk

Generally, credit risk is the risk that an issuer of an investment will not fulfill its obligation to the holder of the investment. This is measured by the assignment of a rating by a nationally recognized statistical rating organization. Presented on the following page is the minimum rating required by the California Government Code, the City’s investment policy, and the actual rating as of year-end for each investment type (in thousands):

Rating as of year-end 2009City’s pooled Minimum Notinvestments legal required to

investment type rating be rated A-1+ A-1 AAA AA- Unrated

Cash and investmentsin city pool:

Interdepartment loan(Health SAVERS) N/A $ 2,654 2,654 — — — — —

U.S. Treasury notes N/A 930,125 930,125 — — — — — Federal agency

securities N/A 592,312 — — — 592,312 — — Medium-term notes A — — — — — — — LAIF N/A — — — — — — — Government managed

rate account N/A 104,667 104,667 — — — — —

Subtotalcity pool 1,629,758 1,037,446 — — 592,312 — —

Cash and deposits 80,099 — — — — — 80,099 Outstanding checks (13,698) — — — — — (13,698)

Total citypool $ 1,696,159 1,037,446 — — 592,312 — 66,401

Nonperforming short-terminvestment N/A $ 3,962 — — — — — 3,962




23 (Continued)

Rating as of year-end 2008City’s pooled Minimum Notinvestments legal required to

investment type rating be rated A-1+ A-1 AAA AA- Unrated

In terdepartment loan(Health SAVERS) N/A $ 2,892 2,892 — — — — —

U.S. Treasury notes N/A 55,816 55,816 — — — — — Federal agency securi ties N/A 1,289,369 — — — 1,289,369 — — Medium-term notes A 84,148 — — — 84,148 — — LAIF N/A 160,848 160,848 — — — — — Government managed

rate account N/A 69,931 69,931 — — — — —

Subtotalci ty pool 1,663,004 289,487 — — 1,373,517 — —

Cash and deposits 60,313 — — — — — 60,313 Outstanding checks (19,752) — — — — — (19,752)

Total citypool $ 1,703,565 289,487 — — 1,373,517 — 40,561

Nonperforming short-terminvestment N/A $ 3,962 — — — — — 3,962

(g) Concentration of Credit Risk

The investment policy of the City contains no limitations on the amount that can be invested in any one issuer beyond that stipulated by the California Government Code. Investments in any one issuer that represents 5% or more of the City’s total pooled investments are as follows (in thousands):

Reported amountIssuer Investment type 2009 2008

Federal Farm Credit Bank Federal agency securities $ 28,232 93,000 Federal Home Loan Bank Federal agency securities 95,440 477,695 Federal Home Loan

Mortgage Association Federal agency securities 91,865 359,571 Federal National

Mortgage Association Federal agency securities 376,776 359,103 U.S. Treasury U.S. Treasury notes and

bonds 930,125 55,816 LAIF State pool investment — 160,848

(h) Custodial Credit Risk

Custodial credit risk for deposits is the risk that, in the event of failure of a depository financial institution, a government will not be able to recover its deposits or will not be able to recover collateral securities that are in the possession of an outside party. The custodial credit risk for investments is the risk that, in the event of the failure of the counterparty (e.g., broker/dealer) to a transaction, a government will not be able to recover the value of its investment or collateral




24 (Continued)

securities that are in the possession of another party. The California Government Code and the City’s investment policy do not contain legal or policy requirements that would limit the exposure to custodial credit risk for deposits or investments, other than the following provision for deposits. The California Government Code requires that a financial institution secure deposits made by state or local government units by pledging securities in an undivided collateral pool held by a depository regulated under the state law (unless so waived by the governmental unit). The market value of the pledged securities in the collateral pool must equal at least 110% of the total amount deposited by the public agencies. California law also allows financial institutions to secure the City’s deposits by pledging first trust deed mortgage notes having a value of 150% of the secured public deposits.

All securities owned by the City are deposited in trust for safekeeping with a custodial bank different from the City’s primary bank except for one City-issued bond and investment in the State of California’s Local Agency Investment Fund (LAIF).

As of September 30, 2009, the City reported deposits of $80,099,000 less $13,698,000 for checks outstanding. As of September 30, 2008, the City’s deposits were $60,313,000 less $19,752,000 for checks outstanding.

(i) Investment in State Investment Pool

The City is a voluntary participant in the LAIF that is regulated by California Government Code Section 16429 under the oversight of the treasurer of the State of California. The fair value of the City’s investment in this pool is reported in the City’s financial statements at amounts based upon the City’s pro rata share of the fair value provided by LAIF for the entire LAIF portfolio (in relation to the amortized cost of that portfolio). The balance available for withdrawal is based on the accounting records maintained by LAIF, which are recorded on an amortized-cost basis. Included in LAIF’s investment portfolio are mortgage-backed securities, loans to certain state funds, securities with interest rates that vary according to changes in rates greater than an one-for-one basis, and structured basis.

(j) Reverse Repurchase Agreements

There were no transactions involving reverse repurchase agreements during the fiscal years ended September 30, 2009 and 2008.

(k) GASB Statement No. 31

GASB Statement No. 31, Certain Investments and External Investment – Pools, requires that certain investments and external investment pools be reported at fair value. At September 30, 2009 and 2008, the effect of valuating the City’s investments at fair value did not have a material impact on the City’s financial position.

(l) Securities Lending

The City did not engage in any securities lending programs for the fiscal years ended September 30, 2009 and 2008. Accordingly, in accordance with GASB Statement No. 28, Accounting and Financial Reporting for Securities Lending Transactions, no assets or liabilities have been recorded in the accompanying financial statements. However, from time to time, the City engages in limited




25 (Continued)

securities lending activities. These activities are governed by formal agreement with the City’s contract bank. This agreement limits the nature and amount of the transactions and provides for full collateralization of each transaction.

(3) Accounts Receivable and Other Receivables

Accounts receivable as of September 30 included the following:

2009 2008

Trade accounts receivable $ 49,048,601 46,271,949 Less allowance for doubtful accounts (1,556,758) (1,796,604)

47,491,843 44,475,345

Pier A West receivable — 5,615,510 Accounts receivable, net $ 47,491,843 50,090,855

Other receivables as of September 30 included the following:

2009 2008

Due from other governmental agencies:Current:

Federal grant – Department of Homeland Security $ 4,875,478 1,429,165 Department of Gas and Oil 41,286 — Reimbursements due from Caltrans — 311,831 State of California — 526,634

4,916,764 2,267,630

Nonperforming investments – Lehman Brothers 2,228,927 2,228,927

Total current 7,145,691 4,496,557 Long-term:

Redevelopment Agency – Convention Center 27,000,000 27,435,000 Total due from other governmental agencies $ 34,145,691 31,931,557

The receivable related to nonperforming investments – Lehman Brothers pertains to the portion of the value of the commercial paper investment held with Lehman Brothers.

Redevelopment Agency – Convention Center

In 1993, the Department advanced $30,000,000 to the Long Beach Redevelopment Agency (the Agency) to fund construction costs related to the Long Beach Convention Center expansion project. Such advance was part of an amended agreement with the Agency to fund $90,000,000 of the Long Beach Convention Center project and was to be repaid from revenue sources arising from future City transient occupancy tax revenues, payable in equal amounts over 17 years beginning October 1, 1997.




26 (Continued)

The agreement has been amended on several occasions. Most recently, during 2009, the Board of Harbor Commissioners approved to replace the existing $27,435,000 balance due from the Agency with another loan payable by the Agency. The new loan agreement stipulates that on October 1, 2009, $435,000 of the Agency’s debt, plus any interest owed on the Agency’s debt shall be forgiven. The remaining balance of $27,000,000 will be paid by the Agency from “additional tax increment” received by the Agency from planned improvements associated with the construction of Pier S. The Port is planning to construct a new terminal project, Pier S, in the next five years and the project resides within the West Long Beach Industrial Redevelopment Project Area.

Redevelopment Agency – Aquarium

During 2009, the Board of Harbor Commissioners approved the Long Beach City Manager’s request for assistance with $8.1 million of the Aquarium debt service. An agreement was entered into between the Agency and the Board of Harbor Commissioners whereby repayment of the $8.1 million will be payable from “Middle Harbor Additional Tax Increment” received by the Agency. The reimbursement from the RDA is contingent upon the Port developing port terminal and related facilities referred to as “the Middle Harbor Project,” which incorporates Piers D, E, and F and certain infill areas that reside within the North Long Beach Redevelopment Project Area. Accordingly, no receivable has been recorded in the accompanying financial statements. Only $2 million is recognized as a transfer out to the City and has been paid in fiscal year 2009. The remaining amount of $6 million will be recognized and paid when it becomes due in fiscal year 2010.

(4) Long Beach Harbor Dredging

The Harbor Department is undertaking an approximately $54 million dredging project to improve navigation in harbor waters. The project is scheduled to begin in 2010. Although there are four separate locations involved in the dredging project, the primary focus is deepening the inner turning basin south of the BP oil terminal to 76 feet, the same depth as the main channel. The deeper inner basin means large tankers will no longer need to unload part of their oil outside the breakwater to safely reach berth. The new depth also will allow ships to turn more easily in the inner basin. The dredge materials will be used to fill about 12 acres at Pier G. The project will be funded with approximately $5.9 million of federal stimulus moneys and approximately $48.1 million of revenues of the Harbor Department. During 2009, the Harbor Department advanced $43.5 million to the Army Corps of Engineers as prepayment for the dredging costs.

(5) Alameda Corridor Right-of-Way Purchase

In December 1994, the Department and the Harbor Department of the City of Los Angeles (collectively, the Ports) executed the purchase of the rights-of-way needed for the development of the Alameda Corridor Project (the Project), which is a comprehensive transportation corridor between the Ports and the central Los Angeles area. The Ports purchased these rights, sharing the cost on a 50/50 basis, from the three railroad companies then serving the Ports: Union Pacific Railroad Company (Union Pacific), Southern Pacific Railroad Company (Southern Pacific), and Atchison, Topeka and Santa Fe Railroad Companies (Atchison, Topeka and Santa Fe). After the purchase, Southern Pacific merged into Union Pacific and Atchison, Topeka and Santa Fe merged with Burlington Northern to form the Burlington Northern Santa Fe.




27 (Continued)

The total purchase comprised the right-of-way property from the three former railroad companies and a drill track from Southern Pacific to provide an additional right-of-way to access local businesses along the Project. As of September 30, 2009 and 2008, total costs to the Department related to the rights-of-way purchase amounted to $207,823,264.

Construction of the Project began in 1997 and it was completed in April 2002. Funding for the Project came from federal, state, and local sources, and from issuance of debt. Some of the benefits derived from the Project are the consolidation of the railroad services onto a single set of rail lines, the improvement of the rail transportation conditions around the Ports, the securing of efficient and competitive service to and from the Ports, and the increase in public safety along the route on which Port-related traffic occurs. These benefits will extend to other governmental entities by allowing them to utilize the right-of-way.

Repayment to the Ports for their investments in the right-of-way and for any advances provided to the Project will occur only after the Project has generated revenues sufficient to retire all debt and to fund maintenance reserve (see note 12).




28 (Continued)

(6) Capital Assets Capital Assets Rollforward Schedule

Balance, Balance,October 1, September 30,

Description 2008 Additions Disposals Transfers 2009

Nondepreciable capital assets:Purchased land $ 439,913,481 — — 988,466 440,901,947 Constructed land 418,900,226 — — 31,726 418,931,952 Construction in progress 164,535,655 90,778,090 — (74,614,123) 180,699,622 Rights-of-way (note 4) 207,823,264 — — — 207,823,264

Subtotal 1,231,172,626 90,778,090 — (73,593,931) 1,248,356,785

Depreciable capital assets:Structures and facilities 1,947,975,911 — (110,735) 63,426,819 2,011,291,995 Furniture, fixtures, and

equipment 17,499,336 1,421,482 (894,023) 10,167,112 28,193,907

Subtotal 1,965,475,247 1,421,482 (1,004,758) 73,593,931 2,039,485,902

Total capital assets $ 3,196,647,873 92,199,572 (1,004,758) — 3,287,842,687


Description 2007 Additions Disposals Transfers 2008

Nondepreciable capital assets:Purchased land $ 439,913,481 — — — 439,913,481 Constructed land 410,790,540 — — 8,109,686 418,900,226 Construction in progress 225,836,752 76,778,067 — (138,079,164) 164,535,655 Rights-of-way (note 4) 207,823,264 — — — 207,823,264

Subtotal 1,284,364,037 76,778,067 — (129,969,478) 1,231,172,626

Depreciable capital assets:Structures and facilities 1,818,157,460 6,597 (4) 129,811,858 1,947,975,911 Furniture, fixtures, and

equipment 16,683,825 1,036,417 (378,526) 157,620 17,499,336

Subtotal 1,834,841,285 1,043,014 (378,530) 129,969,478 1,965,475,247

Total capital assets $ 3,119,205,322 77,821,081 (378,530) — 3,196,647,873




29 (Continued)

Accumulated Depreciation Rollforward ScheduleBalance, Balance,

October 1, Disposals/ September 30,Description 2008 Additions Transfers 2009

Structures and facilities $ 939,735,636 81,085,167 — 1,020,820,803 Furniture, fixtures, and equipment 13,296,429 4,760,470 (808,824) 17,248,075

Total accumulateddepreciation $ 953,032,065 85,845,637 (808,824) 1,038,068,878

Balance, Balance,October 1, Disposals/ September 30,

Description 2007 Additions Transfers 2008

Structures and facilities $ 861,237,212 78,558,860 (60,436) 939,735,636 Furniture, fixtures, and equipment 12,676,431 998,524 (378,526) 13,296,429

Total accumulateddepreciation $ 873,913,643 79,557,384 (438,962) 953,032,065

(7) Commercial Paper Notes

In 1994, the Board of Harbor Commissioners authorized the issuance of up to $383,500,000 in commercial paper notes of Series A, B, and C and the Department issued $148,000,000 of Series A notes to pay for acquisition costs of property, facilities, and oil rights in the North Harbor District. The notes are designated as follows:

Series A – Subject to Internal Revenue Service Code Alternative Minimum Tax (AMT) Series B – Not subject to AMT Series C – Taxable




30 (Continued)

The Department’s gross revenues secure the notes. The obligation to pay the principal portion of outstanding notes is further supported by a revolving line of credit, which is currently $175,000,000. The notes are in bearer form, in denominations of $100,000 with integral multiples of $50,000 in excess thereof, and will mature not more than 270 days after date of issuance. Management may consider paying the commercial paper and related interest obligations and satisfy this obligation within the 2010 fiscal year. The remaining principal balance outstanding at September 30, 2009 was $31,400,000, and was classified as current liabilities. If paid in full or in part, the Department intends to leave open the option to reissue any amount of the commercial paper. The principal balance and accrued interest outstanding at September 30, 2008 were $60,150,000 and $185,725, respectively, and were classified as current liabilities.

Commercial Paper – Principal Only – Rollforward ScheduleBalance, Balance,

October 1, September 30,Description 2008 Additions Reductions 2009

Series A: maturity datesJanuary 10, 2009interest rate: 1.05 $ 60,150,000 — (28,750,000) 31,400,000


Description 2007 Additions Reductions 2008

Series A: maturity datesMay 11, 2008 – June 11,2008 range of interest rates:1.23% – 3.69% $ 60,150,000 — — 60,150,000




31 (Continued)

(8) Bonded Indebtedness

Outstanding bonded indebtedness as of September 30 was as follows:

2009 2008

1998 Harbor Revenue Refunding Bonds:Maturing 2010 through 2019 at 6.0% interest $ 129,485,000 138,755,000 Plus unamortized premium, net of refunding charges and

cost of issuance 1,564,016 1,726,511 Total 1998 Harbor Revenue Refunding Bonds $ 131,049,016 140,481,511

2000A Harbor Revenue Bonds :Maturing 2010 through 2025 at 5.25% to 5.75% interest $ 223,780,000 232,320,000 Plus unamortized premium 1,370,872 1,458,608

Total 2000A Harbor Revenue Bonds $ 225,150,872 233,778,608

2002B Harbor Revenue Bonds (Fixed rate portion):Maturing 2010 through 2027 at 5.0% to 5.5% interest $ 125,220,000 129,355,000 Plus unamortized premium 5,469,705 5,780,043

Total 2002B Harbor Revenue Bonds $ 130,689,705 135,135,043

2004A & B Harbor Revenue Refunding Bonds:Maturing 2010 through 2018 at 4.0% to 5.0% interest $ 80,985,000 88,080,000 Plus unamortized premium, net of refunding charges and

cost of issuance 3,359,394 3,748,890

Total 2004A & B Harbor Revenue RefundingBonds $ 84,344,394 91,828,890

2005A & B Harbor Revenue Refunding Bonds:Maturing 2010 through 2025 at 5.0% interest $ 225,735,000 234,840,000 Plus unamortized premium, net of refunding charges and

cost of issuance 5,958,158 6,339,479

Total 2005A & B Harbor Revenue RefundingBonds $ 231,693,158 241,179,479

Summary:Principal $ 785,205,000 823,350,000 Net premium 17,722,145 19,053,531 Less current portion (40,120,000) (38,145,000)

Net long-term bonded indebtedness $ 762,807,145 804,258,531




32 (Continued)

Harbor Revenue Bonds Payable Rollforward ScheduleBalance, Balance,

October 1, September 30, Amounts dueDescription 2008 Additions Reductions 2009 within one year

1998 $ 138,755,000 — 9,270,000 129,485,000 9,825,000 2000 A 232,320,000 — 8,540,000 223,780,000 9,010,000 2002 B 129,355,000 — 4,135,000 125,220,000 4,345,000 2004 A & B 88,080,000 — 7,095,000 80,985,000 7,380,000 2005 A & B 234,840,000 — 9,105,000 225,735,000 9,560,000

$ 823,350,000 — 38,145,000 785,205,000 40,120,000

Balance, Balance,October 1, September 30, Amounts due

Description 2007 Additions Reductions 2008 within one year

1998 $ 147,535,000 — 8,780,000 138,755,000 9,270,000 2000 A 240,415,000 — 8,095,000 232,320,000 8,540,000 2002 A 133,820,000 — 133,820,000 — — 2002 B 133,295,000 — 3,940,000 129,355,000 4,135,000 2004 A & B 94,900,000 — 6,820,000 88,080,000 7,095,000 2005 A & B 243,515,000 — 8,675,000 234,840,000 9,105,000

$ 993,480,000 — 170,130,000 823,350,000 38,145,000

Aggregate debt service requirements on bonded indebtedness to maturity are summarized as follows:

Principal Interest Total

Year(s) ending September 30:2010 $ 40,120,000 41,876,091 81,996,091 2011 42,225,000 39,763,691 81,988,691 2012 44,515,000 37,465,654 81,980,654 2013 46,940,000 35,042,179 81,982,179 2014 49,495,000 32,485,830 81,980,830 2015 – 2019 279,625,000 118,884,782 398,509,782 2020 – 2024 212,770,000 52,239,323 265,009,323 2025 – 2027 69,515,000 5,224,350 74,739,350

$ 785,205,000 362,981,900 1,148,186,900

Details of each outstanding debt issue are as follows:

(a) 1998 Harbor Revenue Refunding Bonds

The City of Long Beach Harbor Revenue Refunding Bonds Series 1998A (the 1998 Bonds) are secured by the Department’s gross revenues. The 1998 Bonds, dated February 1, 1998, amounting to $206,330,000 were issued to current refund all of the City’s Harbor Revenue Bonds Series 1989A (the 1989 Bonds). The 1989 Bonds were defeased and the liability for those bonds was removed




33 (Continued)

from the Department’s statements of net assets. No amounts remain outstanding as of September 30, 2009. Serial bonds aggregating to $129,485,000 are outstanding and will mature on May 15 of each year from 2010 to 2019 in amounts ranging from $9,825,000 to $16,600,000 with interest payable semiannually on May 15 and November 15 at coupon rates of 6.0%. The 1998 Bonds are not subject to optional or mandatory redemption before their respective maturity dates.

Funds have been allocated at September 30 to the respective accounts in conformity with the bond resolution as follows:

2009 2008

Service account (amount reserved to meet currentdebt service requirements) $ 6,597,788 6,598,238

Reserve account (amount reserved for maximum annualdebt service requirements) 17,596,976 17,596,976

$ 24,194,764 24,195,214

The current refunding resulted in a difference between the reacquisition price and net carrying amount on the old debt of $8,569,501. This difference, reported in the accompanying financial statements as a deduction from bonds payable, is amortized using the straight-line method over the life of the new bonds.

(b) 2000A Harbor Revenue Bonds

The City of Long Beach Harbor Revenue Bonds Series 2000A (the 2000A Bonds) are secured by the Department’s gross revenues. The 2000A Bonds, dated November 1, 2000, amounting to $275,000,000 were issued to finance certain capital improvements at the Port, to fund capitalized interest on a portion of the debt issuance, to fund a repayment reserve, and to finance the costs of issuance.

Serial bonds aggregating to $223,780,000 will mature on May 15 of each year from 2010 to 2025 in amounts ranging from $9,010,000 to $20,180.000 with interest payable semiannually on May 15 and November 15 at coupon rates ranging from 5.25% to 5.75%. The 2000A Bonds maturing on or before May 15, 2010 will not be subject to call and redemption before maturity. Serial bonds maturing on or after May 15, 2011 are subject to call and redemption, prior to maturity, at the option of the Board of Harbor Commissioners, as a whole or in part on any date, on or after May 15, 2010 at premiums of 1.0%, from May 15, 2010 through May 14, 2011; at 0.5% from May 15, 2011 to May 14, 2012; and at par from May 15, 2012 and thereafter.




34 (Continued)


2009 2008



$ 29,259,998 29,458,522

(c) 2002B Harbor Revenue Bonds

The City of Long Beach Harbor Revenue Bonds Series 2002B (the 2002B Bonds) are secured by the Department’s gross revenues. The 2002B Bonds were remarketed in the principal amount of $144,240,000 and are dated June 26, 2002, the date of delivery of the original bonds.

Serial bonds aggregating to $86,775,000 will mature on May 15 of each year from 2010 to 2023 in amounts ranging from $4,345,000 to $8,460,000 with interest payable semiannually on May 15 and November 15 at coupon rates ranging from 5.00% to 5.50%. Bonds maturing on or before May 15, 2014 are not subject to call and redemption prior to maturity; bonds maturing on or after May 2015 will be subject to call and redemption prior to maturity, at the option of the Board, as a whole or in part on any date, on or after May 15, 2014, at a redemption price equal to the principal amount of the Series 2002B Bonds to be redeemed, plus accrued interest thereon to the date fixed for redemption, without premium.

Term bonds of $38,445,000 will mature on May 15, 2027. The term bonds have an interest rate of 5.2%. Term bonds will be subject to call and redemption prior to maturity and redeemed at a redemption price equal to the par amount thereof from Mandatory Sinking Account Payments in amounts from $8,895,000 to $10,335,000 from 2024 to 2027, respectively, for the term bonds scheduled to mature on May 15, 2027.

Funds have been allocated at September 30 in conformity with the bond resolution as follows:

2008 2008

Service account (amount reserved for maximum annualdebt service requirements) $ 4,089,304 4,084,335

(d) 2004 Harbor Revenue Refunding Bonds

The City of Long Beach Harbor Revenue Refunding Bonds Series 2004A & B (the 2004 Bonds) are secured by the Department’s gross revenues. The 2004 Bonds, dated March 10, 2004, amounting to $113,410,000 were issued to current refund and to defease all of the City’s Harbor Revenue Bonds Series 1993, to pay the premium for the Bond Insurance Policy, to fund the Series 2004 Reserve Fund, and to finance the costs of issuance of the Series 2004 Bonds. The 1993 Bonds are defeased




35 (Continued)

and the liability for those bonds has been removed from the Department’s statements of net assets. No amounts remain outstanding as of September 30, 2009.

Serial bonds aggregating to $80,985,000 are outstanding and will mature on May 15 of each year from 2010 to 2018 in amounts ranging from $7,380,000 to $10,825,000 with interest payable semiannually on May 15 and November 15 at coupon rates ranging from 4.0% to 5.0%. The Series 2004 Bonds maturing on or before May 15, 2014 are not subject to call and redemption prior to maturity.

The Series 2004 Bonds maturing on or after May 15, 2015 will be subject to call and redemption prior to maturity, at the option of the Board of Harbor Commissioner, as a whole or in part on any date, on or after May 15, 2014, at a redemption price equal to the principal amount of the Series 2004 Bonds to be redeemed, plus accrued interest thereon to the date fixed for redemption, without premium.


2008 2008



$ 15,635,242 15,634,792


(e) 2005 Harbor Revenue Refunding Bonds

The City of Long Beach Harbor Revenue Refunding Bonds Series 2005A & B (the 2005 Bonds) are secured by the Department’s gross revenues. The 2005 Bonds, dated March 23, 2005, amounting to $257,975,000 were issued to current refund and to defease all of the City’s Harbor Revenue Bonds Series 1995 (1995 Bonds), to pay the premium for the Bond Insurance Policies, to fund a repayment reserve for the Series 2005 Bonds, and to finance the costs of issuance of the Series 2005 Bonds.

The 1995 Bonds are defeased and the liability for those bonds was removed from the Department’s statements of net assets. No amounts remain outstanding as of September 30, 2009. Serial bonds aggregating to $200,765,000 are outstanding and will mature on May 15 of each year from 2010 to 2025 in amounts ranging from $9,560,000 to $19,785,000 with interest payable semiannually on May 15 and November 15 at coupon rates of 5.0%. Serial bonds aggregating to $24,970,000 are outstanding and will mature on May 15 of 2017 and 2018 with amounts due of $11,540,000 and




36 (Continued)

$13,430,000, respectively, with interest payable semiannually on May 15 and November 15 at 5.0% coupon rate.

The Series 2005 Bonds maturing on or before May 15, 2015 are not subject to call and redemption prior to maturity. The Series 2005 Bonds maturing on or after May 15, 2016 are subject to call and redemption prior to maturity, at the option of the Board of Harbor Commissioners, as a whole or in part on any date, on or after May 15, 2015, at a redemption price equal to 100% of the principal amount of the Series 2005 Bonds to be redeemed, plus accrued interest thereon to the date fixed for redemption, without premium.


2009 2008



$ 28,793,295 28,673,169


(f) Debt Covenants

The Department’s management believes that it has complied with all the covenants related to the outstanding debt as of September 30, 2009 and 2008.

(9) Retirement Programs

(a) Pension Plan

The Department participates on a cost-sharing basis with the City in CalPERS, a defined benefit, agent multiple-employer pension system that acts as a common investment and administrative agent for entities in California. The system also provides death and disability benefits.

The Department is billed by the City for its share of pension costs based upon rates established by CalPERS for the City’s general employees. CalPERS does not calculate a separate pension obligation for the Department; therefore, no separate Department obligation can be presented herein. The Department paid $5,525,128, $4,213,160, and $3,855,758 to the City, which was equal to its annual required contribution for fiscal years 2009, 2008, and 2007, respectively.

As employees of the City, the Department’s full-time employees are eligible to participate in CalPERS, becoming vested in the system after five years of service. Upon vesting, employees on




37 (Continued)

tier 1 (those hired on or before October 20, 1989) and who retire at age 55 are entitled to receive an annual retirement benefit, payable for life, in an amount not to exceed 2.7% (with up to a 5.0% annual Cost of Living Adjustment (COLA) increase) of their highest paid year of employment for each year of credited service. Employees on tier 2 (those hired after October 20, 1989 but before October 1, 2006) and who retire at age 55 are entitled to receive an annual retirement benefit, payable for life, in an amount not to exceed 2.7% (with up to a 2.0% annual COLA increase) of their highest paid year of employment for each year of credited service. The City created tier 3 for employees hired after October 1, 2006. Vested tier 3 employees who retire at age 55 are entitled to receive an annual retirement benefit, payable for life, in an amount equal to 2.5% (with up to a 2.0% annual COLA increase) of their highest paid year of employment for each year of credited service.

Further information regarding the City’s participation in CalPERS may be found in the City’s Comprehensive Annual Financial Report for the year ended September 30, 2009.

(b) Postretirement Healthcare Benefits

Plan Description

The City’s Retired Employees Health Insurance Program is a single-employer defined benefit healthcare plan.

Under the provisions of the City’s Personnel Ordinance, upon retirement, the City allows retirees, their spouses, and eligible dependents to use the cash value at retirement of the retiring employee’s accumulated unused sick leave to pay for health, dental, and long-term care insurance premiums. Full-time City employees are entitled to receive up to 96 hours of sick leave per year. Unused sick leave may be accumulated until termination or retirement. No sick leave benefits are vested. The City has provided two one-time early retirement incentive programs. The first had a maximum value of $25,000 for employees, based on age, who retired during calendar year 1996 and the second incentive offered a 16 hour increase in sick leave per year of service to management employees who retired by June 30, 2004. In all cases, once the cash value of the retired employee’s unused sick leave is exhausted, the retiree can terminate coverage or elect to continue paying the premiums at the retiree’s expense.

At September 30, 2009, there were 580 participants in the City’s Retired Employees Health Insurance Program, and the noninterest bearing cash value equivalent of the remaining unused sick leave for the current retirees totaled $17,517,000. Total premiums and actual claims paid by the City under the Retired Employees Health Insurance Program for the fiscal year ended September 30, 2009 were $7,250,000, and are included in the expenses of the Employee Benefits Internal Service Fund.

Termination Benefits

As of September 30, 2009, the City has recorded a liability in the Employee Benefits Internal Service Fund of $82,895,000 based on an actuarial study of current and future retiree accumulated sick leave in accordance with GASB Statement No. 16, Accounting for Compensated Absences. The liability takes into account an estimate of future usage, additional leave accumulation and wage increases for both current retirees and active employees, and an additional amount relating to the sick leave incentive for employees who retired during calendar year 1996. The actuarial study assumes an




38 (Continued)

investment return of 5.0%; wage increases of 3.5% per year for miscellaneous and 4.5% per year for safety employees; and insurance premium increases of 4.5%. The estimated current portion of such obligation of $6,250,000 has been fully funded and the long-term portion of the liability of $76,645,000 is being funded, over time, through burden rates charged to the various City funds, applied as a percentage of current productive salaries.

Other Postemployment Benefits

As of September 30, 2009, the City has also recorded a liability in the Employee Benefits Internal Service Fund of $10,404,000 based on an actuarial study of the “implicit subsidy” as defined by GASB Statement No. 45, Accounting and Financial Reporting by Employers for Postemployment Benefits Other Than Pensions, (GASB 45). While the City does not directly contribute any funding towards the cost of premiums for retirees, the ability to obtain coverage at any active employee’s rate constitutes an economic benefit to the retirees. The inclusion of the retirees in the City’s healthcare benefit plans increases the overall health plan rates. The economic benefit is defined as an “implicit subsidy” under GASB 45.

The ability to participate in the City’s plan by self-paying the premiums extends for the lifetime of the retiree. However, upon attaining the age of Medicare eligibility, the retiree may enter a plan coordinated by Medicare. Standard actuarial practice assumes that Medicare supplemental plans do not generally give rise to an implicit subsidy, and while we have included Medicare eligible retirees in this valuation, their liability under GASB 45 and their implicit subsidy are both zero.

This plan does not issue a separate financial report.

Funding Policy

The contribution requirement of plan members and the City are established and may be amended by the City. The required contribution is based on projected pay-as-you-go financing requirements, with an additional amount to prefund benefits as determined annually by the City Council. As of September 30, 2009, the City has not prefunded the plan.




39 (Continued)

Annual OPEB Cost and Net OPEB Obligation

The City’s annual Other Postemployment Benefit (OPEB) cost (expense) is calculated based on the annual required contribution of the employer (ARC), an amount that is actuarially determined in accordance with the requirements of GASB 45. The ARC represents the level of funding that, if paid on an ongoing basis, is projected to cover normal cost each year and amortize any unfunded actuarial liabilities (or funding excess) over a period not to exceed 30 years. The following table shows the components of the City’s annual OPEB cost for the year, the amount actually contributed to the plan, and changes in the City’s net OPEB obligation (in thousands):

ARC $ 8,418 Interest on net OPEB obligation 262 Adjustment to ARC (219)

Annual OPEB cost 8,461 Contribution made (3,306)

Increase in net OPEB obligation 5,155 Net OPEB obligation – beginning of year 5,249 Net OPEB obligation – end of year $ 10,404

The ARC was determined as part of the September 2008 actuarial valuation. For the year ended September 30, 2009, the City’s annual OPEB cost, the percentage of annual OPEB cost contributed to the plan, and the net OPEB obligation were as follows (in thousands):

Percentageof annual

Annual OPEB OPEB cost Net OPEBcost contributed obligation

Fiscal year ended:September 30, 2008 $ 8,102 35.2% $ 5,249 September 30, 2009 $ 8,418 39.1% $ 10,404

The OPEB liability is not recorded in the Department’s financial statements.




40 (Continued)

Funded Status and Funding Progress

The funded status of the plan as of September 30, 2009 was as follows (in thousands):

Actuarial accrued liability (AAL) $ 110,324 Actuarial value of plan assets —

Unfunded AAL (UAAL) $ 110,324

Funded ratio (actuarial value of plan assets/AAL) —%Covered payroll $ 295,450 UAAL as a percentage of covered payroll 37.3%ARC as a percentage of covered payroll 2.8%

Actuarial valuations of an ongoing plan involve estimates of the value of reported amounts and assumptions about the probability of occurrence of events far into the future. Examples include assumptions about future employment, mortality, and the healthcare cost trend. Amounts determined regarding the funded status of the plan and the annual required contributions of the employer are subject to continual revision as actual results are compared with past expectations and new estimates are made about the future. The schedule of funding progress, presented as required supplementary information following the notes to the financial statements, presents multiyear trend information that shows whether the actuarial value of plan assets is increasing or decreasing over time relative to the actuarial accrued liabilities for benefits.

Actuarial Methods and Assumption

Projections of benefits for financial reporting purposes are based on the substantive plan (the plan as understood by the employer and plan members) and include the types of benefits provided at the time of each valuation and the historical pattern of sharing of benefit costs between the employer and plan members to that point. The actuarial methods and assumptions used include techniques that are designed to reduce short-term volatility in actuarial accrued liabilities and the actuarial value of assets, consistent with the long-term perspective of the calculations.

In the September 30, 2008 actuarial valuation, the entry age normal cost method was used. The actuarial assumptions included a 5% investment rate of return (net of administrative expenses), an annual healthcare trend rate that begins at 11.2% for HMO plans and 8.5% for PPO plans that grades down to 4.5% for all plans by September 30, 2017, and an inflation assumption of 3%. The Entry Age Normal (EAN) cost method spreads plan costs for each participant from entry date to the expected retirement date. Under the EAN cost method, the plan’s normal cost is developed as a level amount over the participants’ working lifetime. The actuarial value of plan assets was zero. The plans unfunded actuarial accrued liability is being amortized using the level percentage of payroll method on an open basis over 30 years.

(c) Deferred Compensation Plan

The City offers its employees the option to participate in a deferred compensation plan created in accordance with Internal Revenue Code Section 457 allowing them to defer or postpone receipt of income. Amounts deferred may not be paid to the employee during employment with the City except




41 (Continued)

for a catastrophic circumstance creating an undue financial hardship for the employee. Further information regarding the City’s deferred compensation plan may be found in the City’s Comprehensive Annual Financial Report for the year ended September 30, 2009.

(10) Operating Leases

The major portion of the Department’s property is leased to others. Such property includes marine terminal facilities, special-purpose facilities, office and commercial space, and land.

Some marine terminal facilities are leased under agreements that provide the tenants with preferential but not exclusive use of the facilities. Some leases provide for rentals based on gross revenues or, in the case of marine terminal facilities, on annual usage of the facilities. The leases and the preferential assignments generally provide for minimum rentals.

Property under lease at September 30 consisted of the following:

2009 2008

Land $ 759,763,424 758,853,968 Docks and wharves 485,934,116 485,934,116 Warehouses and sheds 46,103,617 46,103,617 Cranes and shiploaders 164,981,253 164,981,252 Buildings and other facilities 298,616,223 298,616,223 Infrastructure 756,153,386 714,287,139

Historical cost of leased property 2,511,552,019 2,468,776,315

Less accumulated depreciation (750,859,669) (679,698,718) Book value of leased property $ 1,760,692,350 1,789,077,597

The future minimum rental income under noncancelable operating leases having an initial term in excess of one year is as follows:

Year(s) ending September 30:2010 $ 225,262,000 2011 243,021,000 2012 234,163,000 2013 232,709,000 2014 231,835,000 2015 – 2019 1,117,140,000 2020 – 2024 930,784,000 2025 – 2029 354,371,000 2030 and thereafter 4,877,000

Total $ 3,574,162,000




42 (Continued)

(11) Investment in Joint Venture

Intermodal Container Transfer Facility Joint Powers Authority (ICTF)

The Department and the Harbor Department of the City of Los Angeles (the Venturers) entered into a joint venture agreement to form ICTF for the purposes of financing and constructing an intermodal container transfer facility (the facility) to transfer cargo containers between trucks and railroad cars. The facility has been leased to Southern Pacific, now merged with Union Pacific (the Tenant). The facility was developed by the Tenant who assumed operational responsibility for the facility. The Venturers’ share net income and equity distributions from ICTF equally. Audited balance sheets and statement of income and Venturers’ equity (in condensed format) for the years ended June 30, 2009 and 2008 were as follows:

Condensed Balance Sheets2009 2008

Current assets $ 19,360,869 21,117,285 Property and equipment 2,951,098 3,059,129

Total assets $ 22,311,967 24,176,414

Current liabilities $ 171,546 24,744

Venturers’ equity:Harbor Department of the City of Los Angeles 11,249,529 12,255,153 Harbor Department of the City of Long Beach 10,890,892 11,896,517

Total Venturers’ equity 22,140,421 24,151,670 Total liabilities and Venturers’ equity $ 22,311,967 24,176,414

Condensed Statement of Income and Venturers’ Equity

2009 2008Operating revenue $ 5,901,089 8,339,855 Operating expense (160,667) (108,030)

Operating income 5,740,422 8,231,825

Interest income 248,329 650,045 Net income 5,988,751 8,881,870

Venturers’ equity, July 1, 2008 and 2007 24,151,670 15,269,800 Cash disbursement to Venturers (8,000,000) — Venturers’ equity, June 30, 2009 and 2008 $ 22,140,421 24,151,670

On October 21, 2009, the ICTF Board authorized a cash distribution of $8,000,000 to be shared equally by the Venturers.




43 (Continued)

Pursuant to an indenture of trust dated November 1, 1984, ICTF issued $53,900,000 of 1984 Series A bonds on behalf of the Tenant to construct the facility. In 1989, ICTF issued $52,300,000 of 1989 Series A Refunding Revenue Bonds on behalf of the Tenant to advance refund the 1984 Series A Bonds.

In 1999, ICTF issued its Intermodal Container Transfer Facility Refunding Revenue Bonds, 1999 Series A. In connection with the issuance, Union Pacific and ICTF entered into a Second Amended and Restated Installment Sale and Security Agreement dated October 1, 1999. The proceeds of the 1999 Bonds, together with other funds, were used by ICTF to redeem all of the Intermodal Container Transfer Facility Refunding Revenue Bonds, 1989 Series A. The bonds are payable solely from payments by the Tenant under a long-term lease agreement for the use of the facility.

The nature of the bonds is such that the long-term indebtedness is that of the Tenant and not of ICTF, the Department, or the Harbor Department of the City of Los Angeles. The ICTF financial statements for the year ended June 30, 2009 can be obtained from the Department.

(12) Commitments and Contingencies

The Department is subject to claims and lawsuits arising from the normal course of business. The City Attorney’s office evaluates these claims on a regular basis. Department management may make provision for probable losses if deemed appropriate on advice of legal counsel. To the extent that such provision for damages is considered necessary, appropriate amounts are reflected in the accompanying financial statements.

Based upon information obtained from the City Attorney with respect to remaining cases, it is the opinion of management that the estimated liability for unreserved claims and suits will not have a material impact on the financial statements of the Department. Contract commitments and purchase orders for which materials or services were not received at September 30, 2009 and 2008 aggregated $118,090,362 and $60,114,329, respectively.

(a) Risk Management

The Department currently carries an all-risk property insurance program covering loss or damage by fire and other risks (excluding earthquake and flood) with a loss limit of $1,336,000,000. The coverage also includes terrorism exposure.

To address third-party liability exposure, an excess liability insurance program is carried by the Department with total limits of $150,000,000 in excess of $1,000,000 self-insured retention. The excess liability insurance program covers the Department’s operations and includes acts of terrorism within the $150,000,000 limit. In addition, the Department carries specialized insurance policies providing coverage for damage to owned vessels, damage to other vessels, and pollution liability.




44 (Continued)

Following is a summary of insurance coverage for the Harbor Department:

2009 2008

Insurance coverage for fire andother risks $ 1,000,000,000 1,000,000,000

Comprehensive generalliability 150,000,000 150,000,000

Self-insured retention 1,000,000 1,000,000

Port tenants, contractors, and vendors are required to carry various types and levels of insurance, including general liability insurance on leased premises. The insurance must include coverage for bodily injury and property damage liabilities, and name the City, its Board of Harbor Commissioners, and the Department’s officers and employees as additional insured. The amount of settlements reached by the Department did not exceed the amount of insurance coverage in any of the past three fiscal years.

The Department participates in the City’s self-insured workers’ compensation program. During fiscal years 2009 and 2008, it made payments to the City’s Insurance Fund totaling $1,220,567 and $1,173,934, respectively, for permanent and temporary Department employees. Amounts in the City’s Insurance Fund are accumulated to meet losses as they arise.

Claims expenditures and liabilities are reported when it is probable that a loss has been incurred and the amount of that loss, including those incurred but not reported, can be reasonably estimated. Based on an opinion from legal counsel, the Department recognized litigation claim liabilities of $5,000,000 for fiscal year 2009. The Department did not recognize any litigation claim or judgment for fiscal year 2008.

Liability for Claims and Judgments Rollforward ScheduleBalance, Balance,


Accrued claims andjudgments $ — 5,000,000 — 5,000,000



Accrued claims andjudgments $ 2,385,000 — 2,385,000 —




45 (Continued)

(b) Potential Obligations Related to the Alameda Corridor Transportation Authority

The Alameda Corridor Use and Operating Agreement was executed by the Department, the Harbor Department of the City of Los Angeles (Port of Los Angeles), the ACTA, and the Burlington Northern Santa Fe and Union Pacific Railroads (the railroads). This agreement provides for a payment of funds, known as a “Shortfall Advance,” to be made, under certain circumstances, to ACTA by the Department and the Port of Los Angeles. Revenues generated by Use Fees and Container Charges, paid by the railroads, will be used to pay debt service on ACTA financing, to establish and maintain a bond repayment reserve account, and to pay ACTA’s reasonable expenses relating to administration of the rail corridor.

To the extent that the revenues from use and container charges are not sufficient to meet ACTA’s obligations, the Department and the Port of Los Angeles have agreed to advance the funds necessary to make up the difference. This obligation began after completion of the corridor project and is limited to a total of 40% of the total annual required amount, with the Department and the Port of Los Angeles each responsible for one half or 20% of the required amount.

ACTA’s latest Notice of Estimated Shortfall Advances and Reserve Accounting Funding (the Notice) was transmitted to the Department on August 6, 2009; estimates included in the Notice are dependent upon the accuracy of the assumptions used in their formulation. It is anticipated that there will be differences between estimates and actual results; the differences may be material. The projected shortfall for fiscal year 2010, based on the Notice submitted by ACTA, is $0. Any shortfall advance made by the Department and the Port of Los Angeles is reimbursable, with interest, by ACTA. Reimbursement could begin as soon as 2018. The Department is funding a cash reserve to satisfy claims related to the shortfall advance potential obligation. The balances of the reserve as of September 30, 2009 and 2008 were $46,045,000 and $36,882,792, respectively.

(c) New Gerald Desmond Bridge Matching Contribution

The Department is pursuing the replacement of the Gerald Desmond Bridge. The total cost to replace the bridge is estimated at $1.1 billion. The Department anticipates that funding of this project will come primarily from federal and state sources, but local matching funds will also be required.

In anticipation of this funding requirement, the Department has set aside funds to provide the expected 10% local match. As of September 30, 2009 and 2008, funds earmarked for this project were $51,978,585 at each year-end.

(d) Clean Air Action Plan (CAAP)

In January 2007, the Department adopted a wide-ranging Green Port Policy that greatly expanded the Department’s commitment to sustain the environment by establishing new guidelines for the Port’s current operations and future development. Key provisions include protection of the community from the harmful impacts of port operations and employment of state-of-the-art technology to minimize environmental impacts. Air emissions from ships at berth account for over one third of all vessel air emissions. Providing electrification reduces emissions significantly. With electrification, or “cold ironing,” vessels can shut down their auxiliary engines, while at berth, and plug into dockside electric substations.




46 (Continued)

In November 2007, the governing boards of the ports of Long Beach and Los Angeles approved the landmark San Pedro Bay Ports CAAP. This plan commits the ports to an aggressive plan to reduce pollution by at least 45% in the next five years. The plan addresses all port-related emission sources – ships, trains, trucks, terminal equipment, and harbor craft – to significantly reduce health risks posed by air pollution.

The Clean Trucks Program (CTP) is a key element of CAAP. Beginning October 1, 2009, CTP banned pre-1989 trucks from entering the Port’s shipping terminals. By January 1, 2010, only trucks built after 1993 will be allowed into the Port’s shipping terminals, and by January 1, 2012, all trucks must meet 2008 federal Environmental Protection Agency emission standards that make new trucks more than 80% less polluting than older trucks. In order to assist with the replacement of trucks, the Port offers three options: lease to own; grants for an engine retrofit; and loan subsidy for the purchase of clean trucks. While the Port does not own or operate the more than 16,000 drayage trucks that serve port terminals, CTP will greatly accelerate the reduction of air pollution and public health risks posed by dirty diesel trucks that would otherwise remain on the roadways for many years if not decades.

Projects funded must improve air quality, foster the use of ship-to-shore electricity at the ports, and enhance use of pollution-based impact fees to improve air quality and public health.

(e) Future Oil Well Abandonment Costs

Costs related to the abandonment and site clearance of oil properties (abandonment costs) purchased in March 1994 are based on estimates provided by the Department of Gas and Oil of the City of Long Beach. Estimates of abandonment costs are reviewed annually and adjusted to reflect changes in abandonment practices, increased abandonment expenses, number and life of productive wells, general changes in the life of the oil field, and changes in oil price levels.

The future oil well abandonment cost liability at September 30, 2009 and 2008 was $26,700,000 and $19,900,000, respectively. The amounts related to oil properties acquired in 1994 are presented as long-term abandonment cost liabilities in the financial statements.

Future Oil Well Abandonment Cost Liability Rollforward ScheduleBalance, Balance,


Oil abandonment liability $ 19,900,000 6,800,000 — 26,700,000



Oil abandonment liability $ 18,800,000 1,100,000 — 19,900,000




47 (Continued)

(13) Pollution Remediation

The Department purchased 725 acres of property in the Harbor District in 1994. The property contains soil requiring remediation of environmentally hazardous materials. The remediation is required only on the portion of the land that the Department chooses to develop. To the extent that such remediation is necessary, the Department’s liability is mitigated by provisions in the purchase agreement that make Union Pacific Resource Company (UPRC), the seller, responsible for a portion of the remediation costs. UPRC was acquired by Anadarko Petroleum Co. (APC) that assumed this liability in accordance with the original purchase agreement. APC’s responsibility is limited to a period not to exceed 15 years and a maximum amount of $112,500,000 according to the following table:

AllocationRemediation cost APC Department

First $50 million $ 50,000,000 —Second $50 million 25,000,000 25,000,000Third $50 million 12,500,000 37,500,000Fourth $50 million 25,000,000 25,000,000All additional costs — 100%

Maximum liability $ 112,500,000

Currently, the Department has developed 131 acres and plans to develop 160 additional acres.




48 (Continued)

Additionally, the Department is required to clean up the sediments of an area known as Installation Restoration Site 7 (IR Site 7). The Department has recognized liabilities associated with IR Site 7 for fiscal years 2009 and 2008, in the amounts of $20,074,012 and $19,623,347, respectively, including long-term and short-term obligations. The liability for fiscal year 2008 includes amounts for remediation liability associated with IR Site 7 ($19,623,347) and Pier A West ($57,246,082). Work on Pier A West was completed in fiscal year 2009; except as stated above, management has no knowledge of any other liabilities at the end of fiscal year 2009.

Pollution Remediation Obligation – Short-Term Roll Forward ScheduleBalance, Balance,


Pier A West $ 56,581,138 — 56,581,138 — IR Site 7 3,830,666 15,243,346 — 19,074,012

$ 60,411,804 15,243,346 56,581,138 19,074,012


2007 Additions Reductions 2008

Pier A West $ 9,600,000 56,581,138 9,600,000 56,581,138 IR Site 7 — 3,830,666 — 3,830,666

$ 9,600,000 60,411,804 9,600,000 60,411,804

Pollution Remediation Obligation – Long-Term Roll Forward ScheduleBalance, Balance,


Pier A West $ 664,944 — 664,944 — IR Site 7 15,792,681 — 14,792,681 1,000,000

$ 16,457,625 — 15,457,625 1,000,000


2007 Additions Reductions 2008

Pier A West $ 38,100,000 664,944 38,100,000 664,944 IR Site 7 — 15,792,681 — 15,792,681

$ 38,100,000 16,457,625 38,100,000 16,457,625




49 (Continued)

(14) Transfers to the City of Long Beach

The City Council, by authority of City Charter Chapter XII, Section 1209 (c)(4), and with the approval of the Board of Harbor Commissioners, adopted a resolution to transfer 10% of the Department’s net income for fiscal years 2009 and 2008 to the City’s Tidelands Operating Fund: $16,083,972 and $16,059,464, respectively. The 10% transfer to the Tidelands Operating Fund is reported as part of the Due to City of Long Beach account in the accompanying statements of net assets and as a nonoperating expense in the statements of revenues, expenses, and changes in fund net assets. The total transferred to the City during fiscal year 2009 was $18,587,376, which includes the $16,083,972 discussed above plus $2,068,404 for Aquarium of the Pacific debt service assistance requested by the City Manager, plus $435,000 debt forgiveness related to the Long Beach Convention Center. The latter two items are discussed in note 3.

(15) Environmental Mitigation Credits

The Department disbursed $39,375,000 in fiscal year 1997 to secure environmental mitigation credits that would allow the Port to complete projects within its complex. These credits are redeemed based on the number of acres of landfill completed by the Port.

An agreement between the Department, the Port of Los Angeles, and several federal and state regulatory agencies provided for the Department’s purchase of land located within the wetlands restoration project at the Bolsa Chica Wetlands in Orange County, California. The land was transferred to the state in return for environmental mitigation credits to allow for the construction of up to 267 acres of landfill in the outer harbor area. During fiscal year 2007, the Department acquired $11,400,000 of available environmental mitigation credits. No acquisitions or utilization of credits occurred during fiscal years 2009 and 2008.

The cost incurred in the acquisition of the land has been classified as a noncurrent asset. As of September 30, 2009, the Department has completed landfills that required the utilization of $6,492,525 of the available credits. The balance of environmental mitigation costs will be adjusted in the future as landfill credits are used for port development. The balance of the Environmental Mitigation Credits was $44,278,068 at September 30, 2009 and 2008.




50

(16) Net Assets

Net Assets is the difference between total assets and total liabilities. Increases or decreases in net assets may indicate improvement or deterioration of the Department’s financial condition. The Department does not intend to liquidate capital assets to fund ongoing operations. Restricted assets are subject to external restrictions such as construction of capital assets, matching funding requirements for federally funded projects, repayment of long-term debt, and fulfillment of contractual obligations with third parties. Unrestricted net assets are available to fund the Department’s continuing operations. As of September 30, 2009 and 2008, the Department held net assets as follows:

2009 2008

Invested in capital assets, net of related debt $ 1,410,740,241 1,335,522,370

Restricted for capital projects:Environmental mitigation credits (note 15) 44,278,068 44,278,068

Restricted for debt service (note 8) 101,972,603 102,046,032 Restricted – third-party obligations – nonrelated-entity debt

service contingency and matching contribution (note 12) 147,301,520 147,301,520

Total restricted 293,552,191 293,625,620

Unrestricted:Contributed capital – outside sources 30,427,546 30,427,546 Contributed capital – other City funds 27,749,166 27,749,166 Other unrestricted 665,348,129 616,255,513

Total unrestricted 723,524,841 674,432,225 Total net assets $ 2,427,817,273 2,303,580,215

(17) Subsequent Events

The Board of Harbor Commissioners and the City Council have approved on March 15, 2010 and March 23, 2010, respectively, the restructuring of certain Port debt. The proposed debt restructuring will consist of cash defeasance of the existing Series 2000A AMT-bonds in the amount of approximately $215 million, issuance of Series 2010 non-AMT bonds in an approximate amount of $230 million, and tendering certain AMT-bonds from Series 2002B, 2004A, and 2005A and issuing equivalent non-AMT refunding bonds. Pricing of the new money bonds and the tender launch is anticipated at the end of March 2010 while notice of redemption of the Series 2000A bond is anticipated in early April 2010.

APPENDIX B

SUMMARY OF CERTAIN PROVISIONS OF THE RESOLUTION

The following is a brief summary of certain provisions of the Master Resolution and theThirteenth Supplemental Resolution not previously discussed in this Official Statement. Such summary isnot intended to be definitive, and reference is made to the Master Resolution and the ThirteenthSupplemental Resolution in their entirety for the complete terms thereof. Capitalized terms used in thissummary which are not otherwise defined in this Official Statement have the meanings ascribed to suchterms in the Master Resolution or the Thirteenth Supplemental Resolution.

CERTAIN DEFINITIONS

“Accreted Value” means, with respect to any Capital Appreciation Bond, the principal amountthereof plus the interest accrued thereon from its date, compounded at the approximate interest ratethereof on each date specified therein. The Accreted Value at any date to which reference is made will bethe amount set forth in the Accreted Value Table as of such date, if such date is a compounding date, andif not, as of the immediately preceding compounding date.

“Accreted Value Table” means the table denominated as such which appears as an exhibit to, andto which reference is made in, a Supplemental Resolution for any Series of Capital Appreciation Bondsissued pursuant to any such Supplemental Resolution.

“Assumed Debt Service” means, with respect to any Excluded Principal Payment for any FiscalYear (or other designated 12-month period) on or after the Excluded Principal Payment date, the sum ofthe amount of principal and interest which would be payable in each such Fiscal Year (or other designated12-month period) if that Excluded Principal Payment were amortized for a period specified by the Board(no greater than thirty (30) years from the date of such Excluded Principal Payment) on a substantiallylevel debt service basis, calculated based on a fixed interest rate equal to the rate at which the City, actingby and through the Board, could borrow (as of the time of calculation) for such period, as certified by acertificate of a financial advisor or investment banker delivered to the Board, who may rely conclusivelyon such certificate, within thirty (30) days of the date of calculation; provided that with respect to anyExcluded Principal Payment secured pursuant to a credit or liquidity instrument which, if drawn upon,would create a repayment obligation which has a lien on Revenues on a parity within the lien of theRevenue Bonds or Parity Debt, Assumed Debt Service will be the principal and interest which would bepayable under the credit or liquidity instrument in the event that the credit or liquidity instrument wasdrawn upon to pay or purchase all of such Revenue Bonds or Parity Debt, then Outstanding.

“Board” means the Board of Harbor Commissioners of the City.

“Bond Obligation” means, as of any given date of calculation, (a) with respect to any OutstandingCurrent Interest Bond, the principal amount of such Revenue Bond, and (b) with respect to anyOutstanding Capital Appreciation Bond, the Accreted Value thereof as of the date next preceding suchdate of calculation on which interest on such Capital Appreciation Bond was compounded (unless suchdate of calculation is a date on which such interest is compounded in which case as of such date).

“Bond Purchase Agreement” means the Bond Purchase Agreement, dated April 29, 2010,between E. J. De La Rosa & Co., Inc., as the Underwriter, and the City, acting by and through the Board.

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“Bonds” or “Revenue Bonds” means the City of Long Beach Harbor Revenue Bonds authorizedby, and at any time Outstanding pursuant to, the Resolution.

“Bond Service Fund” means the Harbor Bond Service Fund established by the Treasurer andmaintained pursuant to the Resolution.

“Business Day” means any day other than (a) a Saturday, Sunday, or a day on which bankinginstitutions in the State or the State of New York are authorized or obligated by law or executive order tobe closed, and (b) for purposes of payments and other actions relating to credit or liquidity enhancedRevenue Bonds, a day upon which commercial banks in the city in which is located the office of thecredit or liquidity enhancer at which demands for payment under the credit document with respect to thecredit or liquidity enhancement are to be presented are authorized to be closed.

“Capital Appreciation Bonds” means Revenue Bonds on which interest is compounded and paidat maturity or on prior redemption.

“Charter” means the Charter of the City of Long Beach, California.

“City” means the City of Long Beach, California.

“Code” means the Internal Revenue Code of 1986, as amended, including regulations, rulings andjudicial decisions promulgated thereunder.

“Current Interest Bonds” means Revenue Bonds which pay interest at least semiannually to theOwners thereof excluding the first payment of interest thereon.

“Excluded Principal Payments” means each payment of principal of Revenue Bonds or ParityDebt which the Board determines (in the Supplemental Resolution or other document delivered on a datenot later than the date of issuance of such Revenue Bonds or Parity Debt) will be paid with moneys whichare not Revenues but from future debt obligations of the City, acting by and through the Board, and anyFiscal Agent may rely conclusively on such determination of the Board. No such determination willaffect the security for such Revenue Bonds or Parity Debt or the obligation of the City to pay suchpayments from Revenues or from a reserve fund.

“Fiscal Agent” means with respect to the Series 2010B Bonds, U.S. Bank National Association,or its successor thereto. With respect to any other Series of Revenue Bonds, “Fiscal Agent” means thefiscal agent or paying agent appointed pursuant to the Supplemental Resolution authorizing the issuanceof such Series.

“Fiscal Agent Agreement” means the Fiscal Agent Agreement, dated as of May 1, 2010, by andbetween the City, acting by and through the Board, and the Fiscal Agent.

“Fiscal Year” means the official fiscal year of the City, which begins on October 1 and ends onSeptember 30 of the following year.

“Harbor Department” means the Harbor Department of the City.

“Harbor Revenue Fund” means the Harbor Revenue Fund established by the Charter.

“Interest Account” means the Interest Account of the Bond Service Fund established andmaintained pursuant to the Master Resolution.

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“Interest Payment Date” means, with respect to the Series 2010B Bonds, each May 15 andNovember 15, commencing November 15, 2010 the dates upon which interest on the Series 2010B Bondsbecomes due and payable.

“Investment Securities” means any securities in which the City may legally invest, from time totime, funds subject to its control, including, without limitation, (i) shares in money market mutual fundswhich qualify as investments pursuant to Sections 53601 and 53635 of the Government Code of the State;(ii) shares in money market mutual funds the assets of which would otherwise qualify as investmentspursuant to Sections 53601 and 53635 of the Government Code of the State except that such moneymarket mutual funds include in their assets (a) registered warrants, treasury notes or bonds of any statewithin the United States and/or (b) bonds, notes, warrants or other evidence of indebtedness of anycounty, city, city and county or other public agency of any state within the United States, (iii) aninvestment agreement of any maturity with a financial institution or insurance company or insuranceholding company which has at the date of execution thereof an outstanding issue of unsecured, uninsuredand unguaranteed obligations, rated in either of the two highest long-term rating categories by Moody’s orS&P, or in the case of any insurance company has a claims paying ability rated in either of the twohighest rating categories by Moody’s and S&P, or an investment agreement of any maturity with a personthat is a subsidiary of such a financial institution or such an insurance company or such an insuranceholding company, provided that such person’s obligations under such investment agreement areabsolutely and unconditionally guaranteed by such financial institution or such insurance company orsuch insurance holding company, and (iv) the City’s investment pool maintained by the Treasurer inaccordance with the City’s adopted investment policy, provided all investments in such investment poolmeet the requirements of (i), (ii) or (iii).

“Law” means the Charter and Division I of Chapter 3.52 of Title 3 of the Municipal Code of theCity of Long Beach as the same may be amended and modified.

“Maintenance Costs” means all reasonable expenses of management and other expensesnecessary to operate, maintain and preserve the Port in good repair and working order, excludingdepreciation.

“Mandatory Sinking Account Payment” means, with respect to Revenue Bonds of any Series andmaturity, the amount required by the Resolution to be deposited by the Treasurer in the Principal Accountfor the payment of Term Bonds of such Series and maturity.

“Master Resolution” means Resolution No. HD-1475, adopted by the Board on November 8,1989, as amended and supplemented.

“Maximum Annual Debt Service” means the greatest amount of principal and interest becomingdue and payable on all Revenue Bonds and Parity Debt in any Fiscal Year including the Fiscal Year inwhich the calculation is made or any subsequent Fiscal Year; provided, however, that for the purposes ofcomputing Maximum Annual Debt Service:

(a) Excluded Principal Payments and interest thereon will be excluded from suchcalculation and Assumed Debt Service will be included in such calculation:

(b) if the Parity Debt or Revenue Bonds are Variable Rate Indebtedness and (i) aresecured pursuant to a credit or liquidity instrument which, if drawn upon, could create arepayment obligation which has a lien on Revenues subordinate to the lien of the Parity Debt orRevenue Bonds or (ii) are not secured by any credit or liquidity instrument, the interest rate onsuch Parity Debt or Revenue Bonds for periods when the actual interest rate cannot yet be

B-4

determined will be assumed to be equal to an interest rate calculated by multiplying 1.20 timesthe interest rate on the Parity Debt or Revenue Bonds on the date of calculation or, if such ParityDebt or Revenue Bonds are not currently Outstanding, 1.20 times the interest rate that such ParityDebt or Revenue Bonds would bear if they were Outstanding on such date, as certified by acertificate of a financial advisor or investment banker delivered to the Board;

(c) if the Parity Debt or Revenue Bonds are Variable Rate Indebtedness and aresecured pursuant to a credit or liquidity instrument which, if drawn upon, could create arepayment obligation which has a lien on Revenues on a parity with the lien of the Parity Debt orRevenue Bonds, the interest rate on such Parity Debt or Revenue Bonds for periods when theactual interest rate cannot yet be determined will be assumed to be equal to the greater of themaximum rate on the credit or liquidity instrument and the maximum rate on the Parity Debt orRevenue Bonds;

(d) principal and interest payments on Parity Debt and Revenue Bonds will beexcluded to the extent such payments are to be paid from amounts on deposit with the Treasurer,the Fiscal Agent or any other fiduciary in an escrow specifically therefor and to the extent thatsuch interest payments are to be paid from the proceeds of Parity Debt or Revenue Bonds held bythe Treasurer, the Fiscal Agent or any other fiduciary as capitalized interest specifically to paysuch interest;

(e) in determining the principal amount due in each Fiscal Year, payment will(unless a different subsection of this definition applies for purposes of determining principalmaturities or amortization) be assumed to be made in accordance with any amortization scheduleestablished for such debt, including any Mandatory Sinking Account Payments or any scheduledredemption or payment of Revenue Bonds on the basis of Accreted Value, and for such purpose,the redemption payment or payment of Accreted Value will be deemed a principal payment andinterest that is compounded and paid as Accreted Value will be deemed due on the scheduledredemption or payment date of such Capital Appreciation Bond: and

(f) if any interest rate swap agreement is in effect with respect to, and is payable ona parity with the Parity Debt or Revenue Bonds to which it relates, no amounts payable undersuch interest rate swap agreement will be included in the calculation of Maximum Annual DebtService unless the sum of (i) interest payable on such Parity Debt or Revenue Bonds, plus (ii)amounts payable under such interest rate swap agreement, less (iii) amounts receivable undersuch interest rate swap agreement are expected to be greater than the interest payable on theParity Debt or Revenue Bonds to which it relates, then, in such instance the amount of suchpayments expected to be made that exceed the interest expected to be paid on the Parity Debt orRevenue Bonds will be included in such calculation.

“Net Revenues” means, for any period, the Revenues for such period less Maintenance Costs forsuch period.

“Outstanding” when used as of any particular time with reference to Revenue Bonds, means allRevenue Bonds theretofore, or thereupon being, authenticated and delivered by the Fiscal Agent pursuantto the Resolution except (a) Revenue Bonds theretofore canceled by the Fiscal Agent or surrendered tothe Fiscal Agent for cancellation; (b) Revenue Bonds with respect to which all liability of the City willhave been discharged by defeasance pursuant to the Resolution; and (c) Revenue Bonds for the transfer orexchange of or in lieu of or in substitution for which other Revenue Bonds will have been authenticatedand delivered by the Fiscal Agent pursuant to the Resolution.

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“Owner” or “Bondholder” means the person in whose name a Revenue Bond is registered.

“Parity Debt” means (a) any indebtedness or other obligation of the City for borrowed money, (b)any obligations of the City for deferred purchase price, or (c) any interest rate swap agreement meetingthe requirements of the Resolution, in each case having an equal lien and charge upon the Revenues andtherefore payable on a parity with the Revenue Bonds (whether or not any Revenue Bonds areOutstanding).

“Port” means the entire harbor system subject to and under the jurisdiction of the Board asdefined in the Charter, and including, without limitation, all harbor or port improvements, work, utilities,appliances, facilities and water craft, owned, controlled or operated by the City in or upon or pertaining tothe waterfront or navigable waters of the City as such system now exists together with all additionsacquired, constructed or financed with surplus revenues or funds derived from the sale of indebtednessauthorized by the Master Resolution or any subsequent resolution of the Board, together with allimprovements and extensions to said systems later constructed or acquired.

“Principal Account” means the Principal Account of the Bond Service Fund established andmaintained pursuant to the Master Resolution.

“Record Date” means for a May 15 Interest Payment Date the preceding May 1 and for aNovember 15 Interest Payment Date the preceding November 1.

“Redemption Fund” means the Redemption Fund established and maintained by the MasterResolution with respect to the Revenue Bonds.

“Redemption Price” means, with respect to any Revenue Bond (or portion thereof), the principalamount of such Revenue Bond (or portion thereof) plus the applicable premium, if any, payable uponredemption thereof pursuant to the provisions of such Revenue Bond and the Resolution.

“Resolution” means the Master Resolution as amended, modified or supplemented by eachSupplemental Resolution, including without limitation, the Thirteenth Supplemental Resolution.

“Revenue Bonds” means the City of Long Beach Harbor Revenue Bonds authorized by, and atany time Outstanding pursuant to the Resolution, including the Series 2010B Bonds.

“Revenues” means all revenues and all money secured or collected for the benefit of and receivedby the Board from or arising out of the use and operation of the Port, including, without limitation, alltolls, charges, rentals, compensations or fees required to be paid for services, franchises or licenses, aspermitted or required by the Charter or otherwise by law, ordinance or order, to the City for the operationof any public service utility upon lands and waters under the control and management of the HarborDepartment and all investment earnings credited to the Harbor Revenue Fund and not required to becredited to a sub-fund, excepting therefrom any revenues arising from any lease, contract or otheragreement providing for the drilling for, developing, producing, extracting, taking or removing, storingand disposing of oil, gas or other hydrocarbon substances from the tide and submerged lands granted tothe City by the State.

“Serial Bonds” means Revenue Bonds, maturing in specified years, for which no MandatorySinking Account Payments are provided.

“Series” whenever used with respect to Revenue Bonds, means all of the Revenue Bondsdesignated as being of the same series, authenticated and delivered in a simultaneous transaction

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regardless of variations in maturity, interest rate, redemption and other provisions, and any RevenueBonds thereafter authenticated and delivered upon transfer or exchange or in lieu of or in substitution for(but not to refund) such Revenue Bonds as provided in the Resolution.

“Series 2010B Bonds” means the City of Long Beach, California Harbor Revenue RefundingBonds, Series 2010B.

“Series 2010B Costs of Issuance Fund” means the City of Long Beach, California HarborRevenue Refunding Bonds, Series 2010B Costs of Issuance Fund established and maintained pursuant tothe Thirteenth Supplemental Resolution.

“Series 2010B Rebate Fund” means the City of Long Beach, California Harbor RevenueRefunding Bonds, Series 2010B Rebate Fund established and maintained pursuant to the ThirteenthSupplemental Resolution.

“Series 2010B Reserve Fund” means the City of Long Beach, California Harbor RevenueRefunding Bonds, Series 2010B Reserve Fund established and maintained pursuant to the ThirteenthSupplemental Resolution.

“State” means the State of California.

“Supplemental Resolution” means any resolution duly executed and delivered, supplementing,modifying or amending the Resolution.

“Tax Certificate” means the Tax Compliance Certificate to be dated May 12, 2010, by the City,acting by and through the Board, with respect to the Series 2010B Bonds.

“Term Bond” means Revenue Bonds payable at or before their specified maturity date or datesfrom Mandatory Sinking Account Payments established for that purpose and calculated to retire suchRevenue Bonds on or before their specified maturity date or dates.

“Thirteenth Supplemental Resolution” means the Supplemental Resolution to be adopted by theBoard on May 10, 2010 in connection with the issuance of the Series 2010B Bonds.

“Treasurer” means the City Treasurer of the City of Long Beach.

“Underwriter” means E. J. De La Rosa & Co., Inc.

“United States Bankruptcy Code” means Title 11 U.S.C., Section 101 et seq., as amended andsupplemented from time to time, or any successor federal act.

“Variable Rate Indebtedness” means (a) any indebtedness the interest rate on which is not fixedat the time of incurrence of such indebtedness, and has not at some subsequent date been fixed, at a singlenumerical rate for the entire term of the indebtedness, and (b) commercial paper notes issued pursuant toany program whereby maturing commercial paper notes are or may be paid with the proceeds of newcommercial paper notes.

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MASTER RESOLUTION

Authorization of Revenue Bonds

The Master Resolution authorizes the issuance of the “City of Long Beach Harbor RevenueBonds,” which Revenue Bonds, subject to any limitations contained in the Law or imposed by the City orthe Board may be issued in an unlimited principal amount and will be issued in Series pursuant toSupplemental Resolutions adopted under the terms and conditions of the Master Resolution.

Equality of Security

The Master Resolution constitutes a contract between the City, acting by and through the Board,and the Owners from time to time of the Revenue Bonds. The covenants and agreements set forth in theMaster Resolution to be performed by or on behalf of the City or the Fiscal Agent will be for the equaland proportionate benefit, security and protection of all Owners of the Revenue Bonds, withoutpreference, priority or distinction as to security or otherwise of any Revenue Bond over any otherRevenue Bond by reason of the Series, time of issue, sale or negotiation thereof or for any causewhatsoever, except as expressly provided therein or in the Master Resolution. Nothing in the MasterResolution prevents additional security being provided to particular Series of Revenue Bonds under anySupplemental Resolution.

Establishment of Funds and Accounts

The Harbor Revenue Fund was created pursuant to the Law. The Bond Service Fund wasestablished as a sub-fund within the Harbor Revenue Fund pursuant to a resolution adopted by the Boardand is continued by the Master Resolution. The Master Resolution creates a Principal Account and anInterest Account within the Bond Service Fund. The Master Resolution also creates a Redemption Fund.

Application of Funds and Accounts

Flow of Funds. The Law and the Master Resolution require that all Revenues be deposited withthe Treasurer and placed in the Harbor Revenue Fund as received. As soon as practicable in eachcalendar month, the Treasurer will transfer to the Bond Service Fund, and to any funds and accountsestablished and maintained to pay debt service on any Parity Debt, amounts sufficient to satisfy thefunding requirements of such funds and accounts. See “—Funds and Accounts; Bond Service Fund”below. After making such transfers, the Treasurer will transfer monthly to any reserve fund establishedunder a Supplemental Resolution for a Series of Revenue Bonds, including the Series 2010B ReserveFund and any reserve fund established for any Parity Debt, upon the occurrence of any deficiency therein,1/12th of the aggregate amount of each unreplenished prior withdrawal from such reserve fund and thefull amount of any deficiency due to any required valuation of the investments in such reserve fund untilthe balance in that reserve fund is at least equal to the reserve requirement for that Series of RevenueBonds or issue of Parity Debt, as the case may be. Any Revenues remaining in the Harbor Revenue Fundafter making the foregoing transfers will be used first to pay Maintenance Costs and thereafter may beused for any lawful purpose.

Funds and Accounts; Bond Service Fund. So long as any Revenue Bonds are Outstanding, theTreasurer is required by the Resolution to transfer Revenues from the Harbor Revenue Fund to theInterest Account of the Bond Service Fund as soon as practicable in each month an amount equal to (a) atleast one-sixth of the aggregate half-yearly amount of interest becoming due and payable on OutstandingCurrent Interest Bonds (except for Revenue Bonds constituting Variable Rate Indebtedness) during thenext ensuing six months (excluding any interest for which there is moneys deposited in the Interest

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Account from the proceeds of any Series of Revenue Bonds or other source and reserved as capitalizedinterest to pay such interest during said next ensuing six months), until the requisite half-yearly amount ofinterest on all such Outstanding Current Interest Bonds (except for Revenue Bonds constituting VariableRate Indebtedness) is on deposit in such account; provided that from the date of delivery of a Series ofCurrent Interest Bonds until the first interest payment date for such Series the amounts so paid withrespect to such Series will be sufficient on a monthly pro rata basis to pay the aggregate amount ofinterest becoming due and payable on said interest payment date for such Series and (b) 110% of theaggregate amount of interest, estimated by the Treasurer in his or her reasonable judgment, to accrueduring that month on all Outstanding Revenue Bonds that are Variable Rate Indebtedness; provided,however, that the amount of such deposit into the Interest Account for any month may be reduced by theamount by which the deposit in the prior month for interest estimated to accrue on Outstanding RevenueBonds that are Variable Rate Indebtedness exceeded the actual amount of interest accrued during thatmonth on said Outstanding Revenue Bonds that are Variable Rate Indebtedness and further provided thatthe amount of such deposit into the Interest Account for any month will be increased by the amount bywhich the deposit in the prior month for interest estimated to accrue on Outstanding Revenue Bonds thatare Variable Rate Indebtedness was less than the actual amount of interest accrued that month on saidOutstanding Revenue Bonds that are Variable Rate Indebtedness. No deposit need be made into theInterest Account if the amount contained therein is at least equal to the interest to become due andpayable on the interest payment dates falling within the next six months upon all the Revenue Bondsissued and then Outstanding (but excluding any moneys on deposit in the Interest Account from theproceeds of any Series of Revenue Bonds or other source and reserved as capitalized interest to payinterest on any future interest payment dates following such interest payment dates). If the City, actingthrough the Board, will issue or incur any Parity Debt, the payments required to be placed in any debtservice fund to pay interest on such Parity Debt will rank on a parity with the payments required to beplaced in the Interest Account.

Amounts in the Interest Account will be used and withdrawn by the Treasurer solely for thepurpose of paying interest on the Revenue Bonds as it will become due and payable (including accruedinterest on any Revenue Bonds purchased or redeemed prior to maturity) and making payments toproviders of credit and liquidity enhancement for any Revenue Bonds with respect to reimbursement tosuch providers of interest payments on any Revenue Bonds made by such providers.

So long as Revenue Bonds are Outstanding, the Treasurer is required by the Resolution to transferRevenues from the Harbor Revenue Fund to the Principal Account of the Bond Service Fund as soon aspracticable in each month an amount equal to at least (a) one-sixth of the aggregate semiannual amount ofBond Obligation becoming due and payable on the Outstanding Revenue Bonds of all Series havingsemiannual maturity dates or semiannual Mandatory Sinking Account Payments due within the next sixmonths, plus (b) one-twelfth of the aggregate yearly amount of Bond Obligation becoming due andpayable on the Outstanding Revenue Bonds for all Series having annual maturity dates or annualMandatory Sinking Account Payments due within the next 12 months; provided that if the Boarddetermines by resolution that any principal payments on the Revenue Bonds of any Series will berefunded on or prior to their respective due dates or paid or prepaid from amounts on deposit in a reservefund established and maintained for Revenue Bonds of that Series, no amounts need be set aside towardssuch principal to be so refunded or paid. If during the 12-month period (or six-month period with respectto Revenue Bonds having semiannual Mandatory Sinking Account Payments) immediately preceding aMandatory Sinking Account Payment date, the Treasurer has purchased Term Bonds of the Series andmaturity subject to such Mandatory Sinking Account Payment with moneys in the Principal Account, or,during such period and prior to giving notice of redemption, the City has deposited Term Bonds of suchSeries and maturity with the Fiscal Agent for cancellation, or Term Bonds of such Series and maturitywere at any time purchased or redeemed by the Treasurer or the Fiscal Agent from a redemption fundestablished and maintained with respect to such Series and allocable to said Mandatory Sinking Account

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Payment, such Term Bonds so purchased or deposited or redeemed will be applied, to the extent of thefull principal amount thereof, to reduce amounts required to be deposited in the Principal Account. AllTerm Bonds purchased from the Principal Account or deposited by the City with the Fiscal Agent forsuch Series shall be allocated first to the next succeeding Mandatory Sinking Account Payment for suchSeries and maturity of Term Bonds, then as a credit against such future Mandatory Sinking AccountPayments for such Series and maturity of Term Bonds as may be specified by the Board. All Term Bondsredeemed by the Treasurer or the Fiscal Agent from amounts in a redemption fund established andmaintained with respect to such Series will be credited to such future Mandatory Sinking AccountPayments for such Series and maturity of Term Bonds as may be specified by the Board.

No deposit need be made into the Principal Account so long as there is in such fund, moneyssufficient to pay the Bond Obligation of all Revenue Bonds issued and then Outstanding and maturing bytheir terms or subject to mandatory redemption within the next 12 months. If the City, acting through theBoard, issues or incurs any Parity Debt, the payments required to be placed in any debt service fund orsinking fund to pay the principal of, or mandatory sinking fund payments with respect to such Parity Debtwill rank on a parity with the payments required to be placed in the Principal Account.

All amounts in the Principal Account will be used and withdrawn by the Treasurer solely for thepurposes of paying the Bond Obligation of the Revenue Bonds when due and payable at maturity or uponredemption and making payments to providers of credit and liquidity enhancement for any RevenueBonds with respect to reimbursement to such providers of payments of Revenue Bonds made by suchproviders.

Redemption Fund. All moneys deposited with the Treasurer for the purpose of optionallyredeeming Revenue Bonds will, unless otherwise directed by the Board, be deposited in the RedemptionFund. All amounts deposited in the Redemption Fund will be used and withdrawn by the Treasurer solelyfor the purpose of redeeming Revenue Bonds of any Series, in the manner, at the times and upon theterms and conditions specified in the Supplemental Resolution pursuant to which the series of RevenueBonds was created; provided that, at any time prior to the Fiscal Agent for such Series giving notice ofredemption, the Treasurer shall, upon receipt of a request of the Board, apply such amounts to thepurchase of Revenue Bonds at public or private sale, as and when and at such prices (including brokerageand other charges, but excluding, in the case of Current Interest Bonds, accrued interest, which is payablefrom the Interest Account) as is directed by the Board, except that the purchase price (exclusive of suchaccrued interest) may not exceed the Redemption Price or Accreted Value then applicable to suchRevenue Bonds. All Terms Bonds purchase or redeemed from the Redemption Fund will be allocated toMandatory Sinking Account Payments applicable to such Series and maturity of Term Bonds as may bespecified in a request of the Board.

Investment of Moneys in Funds and Accounts

All moneys in any of the funds and accounts held by the Treasurer (including those establishedpursuant to any Supplemental Resolution, including the Thirteenth Supplemental Resolution) will beinvested in Investment Securities maturing or available on demand not later than the date on which it isestimated that such moneys will be required by the Treasurer.

Unless otherwise provided in a Supplemental Resolution, all interest profits and other incomereceived from the investment of moneys in any fund or account, other than any rebate fund establishedpursuant to any Supplemental Resolution, will be credited to the Harbor Revenue Fund.

The City, acting by and through the Board, may enter into an interest rate swap agreementcorresponding to the interest rate or rates payable on a Series of Revenue Bonds or any portion thereof

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and the amounts received by the Board on behalf of the City, if any, pursuant to such interest rate swapagreement may be applied to the deposits required under the Master Resolution; in which case, the entitywith which the Board on behalf of the City may contract for an interest rate swap is limited to entities thedebt securities of which are rated in one of the two highest short-term or long-term debt rating categoriesby Moody’s and S&P. If the Board so designates, amounts payable under the interest rate swapagreement will be secured by Revenues and other assets pledged under the Master Resolution to theRevenue Bonds on a parity basis therewith and, in such event, the Treasurer will deposit in the InterestAccount, at the times and in the manner provided in the Master Resolution, the amounts to be paid undersuch interest rate swap agreement, as if such amounts were additional interest due on the Revenue Bondsto which such interest rate swap agreement relates, and the Treasurer will pay to the other party to theinterest rate swap agreement, to the extent required thereunder, amounts deposited in the Interest Accountfor the payment of interest on the Revenue Bonds with respect to which such agreement was entered into.

Covenants

In addition to the Rate Covenant set forth in the Official Statement under the caption“SECURITY AND SOURCES OF PAYMENT FOR THE SERIES 2010B Bonds—Rate Covenant”certain other covenants (some of which are summarized below) are set forth in the Resolution.

Punctual Payment. The City, acting through the Board, will punctually pay or cause to be paidthe principal or redemption price and interest to become due in respect of all Revenue Bonds, in strictconformity with the terms of such Revenue Bonds and the Master Resolution, according to the true intentand meaning thereof, and will punctually pay or cause to be paid all transfers to the Bond Service Fund,but in each case only out of Revenues as provided in this Master Resolution or such other moneys, assetsor security which will be provided for or pledged to the payment of any Series of Revenue Bonds asprovided in the Supplemental Resolution creating the Series.

Waiver of Laws. The Board on behalf of the City will not at any time insist upon or plead in anymanner whatsoever, or claim or take the benefit or advantage of, any stay or extension law now or at anytime hereafter in force that may affect the covenants and agreements contained in the Resolution or in anyRevenue Bonds, and all benefit or advantage of any such law or laws is expressly waived by the Board onbehalf of the City to the extent permitted by law.

Further Assurances. The Board on behalf of the City will make, execute and deliver any and allsuch instruments and assurances as may be reasonably necessary or proper to carry out the intention or tofacilitate the performance of the Resolution.

Against Encumbrances; Discharge Claim; Assessments. No pledge, lien or charge upon any ofthe Revenues having priority over or parity with the lien of the Revenue Bonds is permitted to be created.Except with respect to the issuance of Additional Bonds or Parity Debt, no pledge, lien or charge uponany of the Revenues on a parity with the lien of the Revenues Bonds will be created. The Board on behalfof the City will pay or cause to be paid from the Harbor Revenue Fund and discharge all lawful claims forlabor, materials and supplies furnished for or in connection with the Port which, if unpaid, may become alien or charge upon the Revenues prior or superior to the lien of the Revenue Bonds and impair thesecurity of the Revenue Bonds. The Board on behalf of the will pay or cause to be paid from the HarborRevenue Fund all taxes and assessments or other governmental charges lawfully levied or assessedagainst the City upon or in respect of the Port or upon any part thereof or upon any of the Revenuestherefrom.

Accounting Records and Financial Statements. The City, acting through the Board, will at alltimes keep, or cause to be kept, proper books of record and account, prepared in accordance with

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generally accepted accounting principles, in which complete and accurate entries will be made of alltransactions relating to the Revenues. Such books of record and account will be available for inspectionat reasonable hours and under reasonable circumstances by the Fiscal Agent or by the holders of not lessthan 10% of the Outstanding Revenue Bonds or their representatives authorized in writing.

The Board on behalf of the City will furnish to the Fiscal Agent, within 120 days after the end ofeach Fiscal Year, the financial statements of the Harbor Department for such Fiscal Year, together withthe report and opinion of an independent certified public accountant stating that the financial statementshave been prepared in accordance with generally accepted accounting principles or if the financialstatements have not been prepared in accordance with generally accepted accounting principles, statingthe exceptions thereto and that such accountant’s examination of the financial statements was performedin accordance with generally accepted auditing standards. The Board will furnish a copy of the financialstatements to the Fiscal Agent. The Fiscal Agent will furnish a copy of the financial statements uponrequest to any Bondholder.

Operate Port in Efficient and Economical Manner. The Board on behalf of the City willoperate the Port in an efficient and economical manner and operate, maintain and preserve the Port ingood repair and working order.

No Sale; Eminent Domain. Except as otherwise provided in the Resolution, the Port will not bemortgaged or otherwise encumbered, sold, leased or pledged, or any charge placed on the Port, ordisposed of as a whole or substantially as a whole unless such sale or other disposition can be so arrangedso as to provide for a continuance of payments into the Harbor Revenue Fund sufficient in amount topermit payment therefrom of the principal of and interest on and premium, if any, due upon the call andredemption thereof, of the Revenue Bonds and all Parity Debt, payment of which is required to be madeout of the Revenues of the Port, and also to provide for such payments into the funds as are requiredunder the terms of the Resolution.

Any amounts received as awards as a result of the taking of all or any substantial part of the Portby the lawful exercise of eminent domain or from any sale of all or any substantial part of the Port to agovernment threatening to exercise the power of eminent domain, if and to the extent that such right canbe exercised against such property of the City, will either be used for the acquisition and/or constructionof improvements and extensions of the Port or will be placed in the appropriate funds and will be used topay or call and redeem Revenue Bonds and any Parity Debt in the manner provided in the MasterResolution or any Supplemental Resolution.

Insurance. At all times there will be maintained with responsible insurers or through a programof self-insurance, all such insurance on the Port as is customarily maintained with respect to works andproperties of like character against accident to, loss of or damage to such works or properties. If anyuseful part of the Port is damaged or destroyed, unless the Board determines that restoration would beuneconomical, such part will be restored to use, to the extent it can be so restored, using insuranceproceeds and any other moneys available therefor. The money collected from insurance against accidentto or destruction of the Port will be used for repairing or rebuilding the damaged or destroyed Port, and tothe extent not so applied, will be applied at the option of the Board, to acquire and/or constructimprovements and extensions of the Port or to pay or call or redeem Revenue Bonds and any Parity Debt.

Amendments to Master Resolution

The Resolution and the rights and obligations of the City, the Owners of the Revenue Bonds andthe Fiscal Agent may be modified or amended from time to time and at any time by a SupplementalResolution adopted by the Board with the written consent of the Owners of a majority in aggregate

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amount of Bond Obligation of the Revenue Bonds (or, if such Supplemental Resolution is only applicableto a Series of Revenue Bonds, the Revenue Bonds of that Series) then Outstanding; provided that if suchmodification or amendment will, by its terms, not take effect so long as any Revenue Bonds of anyparticular maturity remain Outstanding, the consent of the Owners of such Revenue Bonds will not berequired and such Revenue Bonds will not be deemed to be Outstanding for the purpose of anycalculation of Revenue Bonds; provided further, that if at such time the payment of all the principal ofand interest on all Outstanding Revenue Bonds of a Series is guaranteed by providers of credit or liquidityenhancement (or both), which will be financial institutions or associations having unsecured debtobligations rated, or incurring or securing other debt obligations rated on the basis of such credit orliquidity enhancement, in one of the two highest rating categories of Moody’s or S&P, the consent of theproviders of the credit or liquidity enhancement of the Revenue Bonds of that Series may be substitutedfor the required consent of bondholders for such Series.

No such modification or amendment will (a) extend the fixed maturity of any Revenue Bond, orreduce the amount of Bond Obligation thereof, or extend the time of payment or reduce the amount of anyMandatory Sinking Account Payment provided for the payment of any Revenue Bond, or reduce the rateof interest thereon, or extend the time of payment of interest thereon, or reduce any premium payableupon the redemption thereof, without the consent of the Owner of each Revenue Bond so affected,(b) reduce the percentage of Bond Obligation the consent of the Owners of which is required to effect anysuch modification or amendment, or permit the creation of any lien on the Revenues and other assetspledged under the Resolution prior to or on a parity with the lien created by the Resolution, or deprive theOwners of the Revenue Bonds of the lien created by the Resolution on such Revenues and other assets (ineach case, except as expressly provided in the Master Resolution), without the consent of the Owners ofall of the Revenue Bonds then Outstanding, or (c) modify any rights or duties of the Fiscal Agent withoutits consent.

The Resolution and the rights and obligations of the City, of the Fiscal Agent and of the Ownersof the Revenue Bonds may also be modified or amended from time to time and at any time by aSupplemental Resolution, which the Board may adopt without the consent of any Bondholders but only tothe extent permitted by law and only for any one or more of the following purposes: (a) to add to thecovenants and agreements of the City in the Resolution thereafter to be observed, (b) to pledge or assignadditional security for the Revenue Bonds (or any portion thereof), (c) to surrender any right or powerreserved to or conferred upon the City, (d) to cure any ambiguity, inconsistency or omission, or of curingor correcting any defective provision, contained in the Resolution, or in regard to matters or questionsarising under the Resolution, as the Board may deem necessary or desirable, and which will not materiallyand adversely affect the interests of the Owners of the Revenue Bonds, (e) to modify, amend orsupplement the Resolution to permit the qualification thereof under the Trust Indenture Act of 1939, asamended, or any similar federal statute hereafter in effect, and to add such other terms, conditions andprovisions as may be permitted by said act or similar federal statute, and which will not materially andadversely affect the interests of the Owners of the Revenue Bonds, (f) to provide for the issuance of aSeries of Revenue Bonds with such interest rate, payment maturity and other terms as the Board maydeem desirable, subject to the provisions of the Master Resolution, (g) to provide for the issuance ofRevenue Bonds in book-entry form or bearer form, provided that no such provision will materially andadversely affect the interests of the Owners of the Revenue Bonds, (h) to make modifications oradjustments necessary, appropriate or desirable to accommodate credit or liquidity enhancementsincluding letters of credit and insurance policies delivered with respect to any reserve fund, (i) if theBoard has covenanted in a Supplemental Resolution to maintain the exclusion of interest on a Series ofRevenue Bonds from gross income for purposes of federal income taxation, to make such provisions asare necessary or appropriate to ensure such exclusion, and (j) for any other purpose that does notmaterially and adversely affect the interests of the Owners of the Revenue Bonds.

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Defeasance

Except as may be provided in any Supplemental Resolution creating a Series of Revenue Bonds,Revenue Bonds of any Series may be paid by the City in any of the following ways:

(a) by paying or causing to be paid the Bond Obligations of and interest on allRevenue Bonds Outstanding of the Series, as and when the same become due and payable;

(b) by depositing with the Treasurer, the Fiscal Agent, an escrow agent or otherfiduciary, in trust, at or before maturity, money or securities in the necessary amount to pay orredeem all Revenue Bonds Outstanding of the Series; or

(c) by delivering to the Fiscal Agent, for cancellation by it, all Revenue Bonds thenOutstanding of the Series.

Upon the deposit with the Treasurer, the Fiscal Agent, an escrow agent or other fiduciary, in trust,at or before maturity, of money or securities in the necessary amount to pay or redeem any OutstandingRevenue Bond (whether upon or prior to its maturity or the redemption date of such Revenue Bond), thenall liability of the City in respect of such Revenue Bond will cease, terminate and be completelydischarged, provided that the Owner thereof will thereafter be entitled to the payment of the principal ofand premium, if any, and interest on the Revenue Bonds, and the City will remain liable for suchpayment, but only out of such money or securities deposited as aforesaid for their payment.

The money or securities referenced above must be one or more of the following:

(a) lawful money of the United States of America in an amount equal to the BondObligation of such Revenue Bonds and all unpaid interest thereon to maturity or redemption, asthe case may be; or

(b) direct obligations of the United States of America or bonds or other obligationsfor which the faith and credit of the United States of America are pledged for the payment ofprincipal and interest, the principal of and interest on which when due will, in the opinion of anindependent certified public accountant delivered to the Fiscal Agent (upon which opinion theFiscal Agent may conclusively rely), provide money sufficient to pay the Bond Obligation orredemption price and all unpaid interest to maturity, or to the redemption date, as the case maybe, on the Revenue Bonds to be paid or redeemed.

Proceedings Constitute Contract

The provisions of the Resolution will constitute a contract between the City, acting by andthrough the Board, and the Bondholders of such Revenue Bonds, and the provisions thereof will beenforceable by any Bondholder for the equal benefit and protection of all Bondholders similarly situatedby mandamus, accounting, mandatory injunction or any other suit, action or proceeding at law or inequity that is now or may hereafter be authorized under the laws of the State in any court of competentjurisdiction.

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THIRTEENTH SUPPLEMENTAL RESOLUTION

Fiscal Agent

U.S. Bank National Association has been appointed as Fiscal Agent to act as the agent of theBoard for the Series 2010B Bonds. The Fiscal Agent has agreed to perform such duties and only suchduties as are specifically set forth in the Thirteenth Supplemental Resolution, the Master Resolution andthe Fiscal Agent Agreement. The Fiscal Agent has agreed to exercise and use the same degree of careand skill as a prudent person would exercise or use under the circumstances in the conduct of his or herown affairs.

The Board may remove the Fiscal Agent at any time with or without cause and will remove theFiscal Agent if at any time the Fiscal Agent ceases to be financially eligible, or becomes incapable ofacting, or is adjudged a bankrupt or insolvent, or a receiver of the Fiscal Agent or its property isappointed, or any public officer takes control or charge of the Fiscal Agent or of its property or affairs forthe purpose of rehabilitation, conservation or liquidation.

The Fiscal Agent may at any time resign by giving written notice of such resignation to the Cityand the Board and by giving the Bondholders notice of such resignation by mail at the addresses shownon the registration books maintained by the Fiscal Agent. Upon receiving such notice of resignation, theBoard will promptly appoint a successor Fiscal Agent by an instrument in writing.

Any removal or resignation of the Fiscal Agent and appointment of a successor Fiscal Agent willbecome effective upon acceptance of appointment by the successor Fiscal Agent. If no successor FiscalAgent will have been appointed and have accepted appointment within forty-five (45) days of givingnotice of removal or notice of resignation as aforesaid, the resigning Fiscal Agent may petition any courtof competent jurisdiction for the appointment of a successor Fiscal Agent, and such court may thereupon,after such notice (if any) as it may deem proper, appoint such successor Fiscal Agent.

Series 2010B Costs of Issuance Fund

Pursuant to the Thirteenth Supplemental Resolution, the Treasurer is required to establish andmaintain a fund separate from any other fund established and maintained thereunder or under theResolution designated as the “City of Long Beach, California Harbor Revenue Refunding Bonds, Series2010B Costs of Issuance Fund.” Amounts in the Series 2010B Costs of Issuance Fund will be disbursedfrom time to time, upon requisition of the Board, to pay the costs of issuance of the Series 2010B Bonds.Amounts in the Series 2010B Costs of Issuance Fund will be invested and reinvested in InvestmentSecurities and the earnings upon such accounts will be credited to such fund.

Series 2010B Reserve Fund

For a description of the Series 2010B Reserve Fund reference is made to the forepart of thisOfficial Statement under the caption “SECURITY AND SOURCES OF PAYMENT OF THE SERIES2010B BONDS—Series 2010B Reserve Fund; Reserve Funds for Prior Bonds and Series 2010A Bonds—Series 2010B Reserve Fund.”

Series 2010B Rebate Fund

Pursuant to the Thirteenth Supplemental Resolution, the Treasurer is required to establish andmaintain a fund separate from any other fund established and maintained thereunder or under theResolution designated as the “City of Long Beach, California Harbor Revenue Refunding Bonds, Series

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2010B Rebate Fund.” Moneys will be deposited in and transferred to the Series 2010B Rebate Fund andapplied therefrom in accordance with the terms and conditions of the Tax Certificate delivered inconnection with issuance of the Series 2010B Bonds.

Tax Covenants

The Board has undertaken not to take any action, or fail to take any action, if any such action orfailure to take action would adversely affect the exclusion from gross income of the interest on theSeries 2010B Bonds under Section 103 of the Code. The Board will not directly or indirectly use orpermit the use of any proceeds of the Series 2010B Bonds or any other funds of the Board, or take or omitto take any action that would cause the Series 2010B Bonds to be “arbitrage bonds” within the meaning ofSection 148(a) of the Code. The Board has also made certain other tax covenants. The Board has agreedthat there will be paid from time to time all amounts required to be rebated to the federal government ofthe United States of America pursuant to the Code.

APPENDIX C

FORM OF OPINION OF BOND COUNSEL

[Closing Date]

City of Long BeachLong Beach, California

Board of Harbor Commissionersof the City of Long Beach

Long Beach, California



Ladies and Gentlemen:

We have acted as Bond Counsel in connection with the issuance and sale by the City of LongBeach, California (the “City”), acting by and through its Board of Harbor Commissioners (the “Board”),of $158,085,000 aggregate principal amount of the City of Long Beach, California Harbor RevenueRefunding Bonds, Series 2010B (the “Series 2010B Bonds”). The Series 2010B Bonds are being issuedpursuant to the provisions of Article XII of the Charter of the City (the “Charter”), Chapter 3.52, DivisionI of the Long Beach Municipal Code (the “Municipal Code”), certain provisions of the Revenue BondLaw of 1941 and Section 54300, et seq., of the Government Code of the State of California (collectively,the “Bond Law”), and Resolution No. HD-1475, adopted by the Board on November 8, 1989, as amended(the “Master Resolution”), as supplemented by Resolution No. HD-____ adopted by the Board onMay 10, 2010 (the “Thirteenth Supplemental Resolution,” and together with the Master Resolution, the“Resolution”). Issuance of the Series 2010B Bonds has been authorized by Resolution No. HD-2549(“Resolution No. HD-2549”), adopted by the Board on March 8, 2010, and by Resolution No. RES-10-0033 (the “City Resolution”) adopted by the City Council of the City on March 23, 2010. Capitalizedterms not otherwise defined herein shall have the meanings ascribed thereto in the Resolution.

In connection with the issuance of the Series 2010B Bonds, we have examined the following:

(a) copies of the Charter, the Municipal Code and the Bond Law;

(b) certified copies of the Resolution, Resolution No. HD-2549 and the City Resolution;

(c) an executed copy of the Fiscal Agent Agreement, dated as of May 1, 2010, by andbetween the City, acting by and through the Board, and U.S. Bank National Association, as fiscal agent;

(d) certifications of the City, the Board, the Harbor Department of the City and others;

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(e) an executed copy of the Tax Compliance Certificate, dated the date hereof, relating to theSeries 2010B Bonds and other matters (the “Tax Certificate”);

(f) an opinion of the City Attorney; and

(g) such other documents, opinions and matters as we deemed relevant and necessaryrendering the opinions set forth herein.

From such examination, we are of the opinion that:

1. The City is a charter city and municipal corporation organized and existing under theConstitution of the State of California. The Board is a commission duly established and existing underthe Charter.

2. Pursuant to the Charter and the Municipal Code, the City, acting by and through theBoard, has the power and authority to issue the Series 2010B Bonds.

3. The Series 2010B Bonds have been validly authorized and issued in accordance with theCharter, the Municipal Code, the Bond Law and the Resolution and represent valid and binding speciallimited obligations of the City. The Series 2010B Bonds are secured by a pledge of and lien upon and area charge upon and are payable from the Revenues and certain funds and accounts created under theCharter and the Resolution. The Series 2010B Bonds are not a debt of the City, nor a legal or equitablepledge, charge, lien or encumbrance upon any of its property or upon any of its income, receipts orrevenues, except the Revenues and the funds and accounts specifically pledged to the payment thereof.The general fund of the City is not liable for the payment of the Series 2010B Bonds or any interestthereon, nor is the credit or the taxing power of the City pledged therefor. An owner of the Series 2010BBonds may not compel the exercise of the taxing power of the City or the forfeiture of any of its property.

4. The Resolution has been duly adopted by the Board and constitutes the valid and bindingobligation of the Board, acting on behalf of the City, enforceable against the Board, acting on behalf ofthe City, in accordance with its terms.

5. Under existing laws, regulations, rulings and judicial decisions, interest on the Series2010B Bonds is excluded from gross income for federal income tax purposes, except that such exclusiondoes not apply with respect to interest on any Series 2010B Bond for any period during which such Series2010B Bond is held by a person who is a “substantial user” of the facilities financed or refinanced by theSeries 2010B Bonds or a “related person” to such substantial user within the meaning of Section 147(a) ofthe Internal Revenue Code of 1986, as amended. Interest on the Series 2010B Bonds is not a specificpreference item nor included in adjusted current earnings for purposes of the federal alternative minimumtax imposed on individuals and corporations.

6. Under existing laws, regulations, rulings and judicial decisions, interest on the Series2010B Bonds is exempt from present State of California personal income tax.

The opinions set forth in the first sentence of paragraph 5 regarding the exclusion of interest fromgross income of the recipient is subject to continuing compliance by the Board with covenants regardingfederal tax law contained in the Resolution and the Tax Certificate. Failure to comply with suchcovenants could cause interest on the Series 2010B Bonds to be included in gross income retroactive tothe date of issue of the Series 2010B Bonds. Although we are of the opinion that interest on the Series2010B Bonds is excluded from gross income for federal tax purposes, the accrual or receipt of interest onthe Series 2010B Bonds may otherwise affect the federal income tax liability of the recipient. The extent

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of these other tax consequences will depend upon the recipient’s particular tax status or other items ofincome or deduction. We express no opinion regarding any such consequences.

The obligations of the City, acting by and through the Board, the security provided therefor, ascontained in the Series 2010B Bonds and the Resolution, may be subject to general principles of equitywhich permit the exercise of judicial discretion, and are subject to the provisions of applicablebankruptcy, insolvency, reorganization, arrangement, moratorium or similar laws relating to or affectingthe enforcement of creditors’ rights generally, now or hereafter in effect, and to the limitations on legalremedies against cities in the State of California. We have not undertaken any responsibility for theaccuracy, completeness or fairness of the Official Statement dated April 29, 2010, or any other offeringmaterial relating to the Series 2010B Bonds and express no opinion relating thereto. Our engagementwith respect to the Series 2010B Bonds has concluded with their issuance, and we disclaim any obligationto update this letter.

Very truly yours,

APPENDIX D

BOOK-ENTRY-ONLY SYSTEM

Introduction

Unless otherwise noted, the information contained under the caption “—General” below has beenprovided by DTC. Neither the City nor the Board make any representations as to the accuracy or thecompleteness of such information. The Beneficial Owners of the Series 2010B Bonds should confirm thefollowing information with DTC, the Direct Participants or the Indirect Participants.

NONE OF THE CITY, THE BOARD OR THE FISCAL AGENT WILL HAVE ANYRESPONSIBILITY OR OBLIGATION TO DIRECT PARTICIPANTS, TO INDIRECTPARTICIPANTS, OR TO ANY BENEFICIAL OWNER WITH RESPECT TO (A) THE ACCURACYOF ANY RECORDS MAINTAINED BY DTC, ANY DIRECT PARTICIPANT, OR ANY INDIRECTPARTICIPANT; (B) ANY NOTICE THAT IS PERMITTED OR REQUIRED TO BE GIVEN TO THEOWNERS OF THE SERIES 2010B BONDS UNDER THE RESOLUTION OR THE FISCAL AGENTAGREEMENT, (C) THE SELECTION BY DTC OR ANY DIRECT PARTICIPANT OR INDIRECTPARTICIPANT OF ANY PERSON TO RECEIVE PAYMENT IN THE EVENT OF A PARTIALREDEMPTION OF THE SERIES 2010B BONDS; (D) THE PAYMENT BY DTC OR ANY DIRECTPARTICIPANT OR INDIRECT PARTICIPANT OF ANY AMOUNT WITH RESPECT TO THEPRINCIPAL OR INTEREST DUE WITH RESPECT TO THE OWNER OF THE SERIES 2010BBONDS; (E) ANY CONSENT GIVEN OR OTHER ACTION TAKEN BY DTC AS THE OWNERS OFSERIES 2010B BONDS; OR (F) ANY OTHER MATTER REGARDING DTC.

General

The Series 2010B Bonds will be delivered in book-entry only form. DTC will act as securitiesdepository for the Series 2010B Bonds. The Series 2010B Bonds will be issued as fully-registeredsecurities registered in the name of Cede & Co. (DTC’s partnership nominee) or such other name as maybe requested by an authorized representative of DTC. One fully registered Series 2010B Bond certificatewill be issued for each maturity of the Series 2010B Bonds, each in the aggregate principal amount ofsuch maturity, and will be deposited with DTC or held by the Fiscal Agent.

DTC is a limited-purpose trust company organized under the New York Banking Law, a“banking organization” within the meaning of the New York Banking Law, a member of the FederalReserve System, a “clearing corporation” within the meaning of the New York Uniform CommercialCode, and a “clearing agency” registered pursuant to the provisions of Section 17A of the SecuritiesExchange Act of 1934, as amended. DTC holds and provides asset servicing for over 3.5 million issuesof U.S. and non-U.S. equity issues, corporate and municipal debt issues, and money market instruments(from over 100 countries) that DTC’s participants (“Direct Participants”) deposit with DTC. DTC alsofacilitates the post-trade settlement among Direct Participants of sales and other securities transactions indeposited securities, through electronic computerized book-entry transfers and pledges between DirectParticipants’ accounts. This eliminates the need for physical movement of securities certificates. DirectParticipants include both U.S. and non-U.S. securities brokers and dealers, banks, trust companies,clearing corporations, and certain other organizations. DTC is a wholly-owned subsidiary of TheDepository Trust & Clearing Corporation (“DTCC”). DTCC is the holding company for DTC, NationalBonds Clearing Corporation and Fixed Income Clearing Corporation, all of which are registered clearingagencies. DTCC is owned by the users of its regulated subsidiaries. Access to the DTC system is alsoavailable to others such as both U.S. and non-U.S. securities brokers and dealers, banks, trust companies,

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and clearing corporations that clear through or maintain a custodial relationship with a Direct Participant,either directly or indirectly (“Indirect Participants”). DTC has Standard & Poor’s highest rating: “AAA.”The DTC Rules applicable to Direct Participants are on file with the Securities and ExchangeCommission. More information about DTC can be found at www.dtcc.com and www.dtc.org. The Cityand the Board have not undertaken any responsibility for and make no representations as to the accuracyor the completeness of the content of such material contained on the websites described in the precedingsentence including, but not limited to, updates of such information or links to other Internet sites accessedthrough the aforementioned websites.

Purchases of the Series 2010B Bonds under the DTC system must be made by or through DirectParticipants, which will receive a credit for the Series 2010B Bonds on DTC’s records. The ownershipinterest of each actual purchaser of each Series 2010B Bond (“Beneficial Owner”) is in turn to berecorded on the Direct and Indirect Participants’ records. Beneficial Owners will not receive writtenconfirmation from DTC of their purchase. Beneficial Owners are, however, expected to receive writtenconfirmations providing details of the transaction, as well as periodic statements of their holdings, fromthe Direct or Indirect Participant through which the Beneficial Owner entered into the transaction.Transfers of ownership interests in the Series 2010B Bonds are to be accomplished by entries made on thebooks of Direct and Indirect Participants acting on behalf of Beneficial Owners. Beneficial Owners willnot receive certificates representing their ownership interests in the Series 2010B Bonds, except in theevent that use of the book-entry system for the Series 2010B Bonds is discontinued.

To facilitate subsequent transfers, all Series 2010B Bonds deposited by Direct Participants withDTC are registered in the name of DTC’s partnership nominee, Cede & Co. or such other name as may berequested by an authorized representative of DTC. The deposit of Series 2010B Bonds with DTC andtheir registration in the name of Cede & Co. or such other DTC nominee do not effect any change inbeneficial ownership. DTC has no knowledge of the actual Beneficial Owners of the Series 2010BBonds; DTC’s records reflect only the identity of the Direct Participants to whose accounts such Series2010B Bonds are credited, which may or may not be the Beneficial Owners. The Direct and IndirectParticipants will remain responsible for keeping account of their holdings on behalf of their customers.

Conveyance of notices and other communications by DTC to Direct Participants, by DirectParticipants to Indirect Participants, and by Direct Participants and Indirect Participants to BeneficialOwners will be governed by arrangements among them, subject to any statutory or regulatoryrequirements as may be in effect from time to time.

While the Series 2010B Bonds are in the book-entry-only system, redemption notices will be sentto DTC. If less than all of the Series 2010B Bonds are being redeemed, DTC’s practice is to determine bylot the amount of the interest of each Direct Participant in such issue to be prepaid.

Neither DTC nor Cede & Co. (nor any other DTC nominee) will consent or vote with respect tothe Series 2010B Bonds unless authorized by a Direct Participant in accordance with DTC’s MMIProcedures. Under its usual procedures, DTC mails an Omnibus Proxy to the Fiscal Agent as soon aspossible after the record date. The Omnibus Proxy assigns Cede & Co.’s consenting or voting rights tothose Direct Participants to whose accounts the Series 2010B Bonds are credited on the record date(identified in a listing attached to the Omnibus Proxy).

Principal and interest payments on the Series 2010B Bonds will be made to Cede & Co., or suchother nominee as may be requested by an authorized representative of DTC. DTC’s practice is to creditDirect Participants’ accounts upon DTC’s receipt of funds and corresponding detail information from theCity or the Fiscal Agent on the payable date in accordance with their respective holdings shown onDTC’s records. Payments by Direct and Indirect Participants to Beneficial Owners will be governed by

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standing instructions and customary practices, as is the case with securities held for the accounts ofcustomers in bearer form or registered in “street name,” and will be the responsibility of such Direct andIndirect Participant and not of DTC, the Fiscal Agent or the City, subject to any statutory or regulatoryrequirements as may be in effect from time to time. Payment of principal and interest payments to Cede& Co. (or such other nominee as may be requested by an authorized representative of DTC) is theresponsibility of the City or the Fiscal Agent, disbursement of such payments to Direct Participants willbe the responsibility of DTC, and disbursement of such payments to the Beneficial Owners will be theresponsibility of Direct and Indirect Participants.

DTC may discontinue providing its services as depository with respect to the Series 2010B Bondsat any time by giving reasonable notice to the City. Under such circumstances, in the event that asuccessor depository is not obtained, certificates representing the Series 2010B Bonds are required to beprinted and delivered.

The City may decide to discontinue use of the system of book-entry-only transfers through DTC(or a successor securities depository). In that event, certificates representing the Series 2010B Bonds willbe printed and delivered to the registered holders of the Series 2010B Bonds.

The information in this Appendix D concerning DTC and DTC’s book-entry system has beenobtained from sources that the City and the Board believe to be reliable, but none of the City, the Board orthe Underwriter take any responsibility for the accuracy thereof.

APPENDIX E

FORM OF CONTINUING DISCLOSURE CERTIFICATE

This Continuing Disclosure Certificate (the “Certificate”) is executed and delivered by the City ofLong Beach, California, acting by and through its Board of Harbor Commissioners (the “Issuer”) inconnection with the issuance of $158,085,000 City of Long Beach, California Harbor Revenue RefundingBonds, Series 2010B (the “Series 2010B Bonds”), pursuant to the terms of the Resolution (as definedherein). The Issuer covenants and agrees as follows:

Section 1. Purpose of the Disclosure Certificate. This Certificate is being executed anddelivered by the Issuer for the benefit of the Holders and Beneficial Owners of the Series 2010B Bondsand in order to assist the Participating Underwriters in complying with Securities and ExchangeCommission Rule 15c2-12(b)(5).

Section 2. Definitions. In addition to the definitions set forth in the Resolution, which apply toany capitalized term used in this Certificate unless otherwise defined in this Section, the followingcapitalized terms shall have the following meanings:

“Annual Report” shall mean any Annual Report provided by the Issuer pursuant to, and asdescribed in, Sections 3 and 4 hereof.

“Beneficial Owner” shall mean any person which (a) has or shares the power, directly orindirectly, to vote or consent with respect to, to make investment decisions concerning the ownership of,or to dispose of ownership of, any Series 2010B Bonds (including persons holding Series 2010B Bondsthrough nominees, depositories or other intermediaries), or (b) is treated as the owner of any Series 2010BBonds for federal income tax purposes.

“Dissemination Agent” means the Issuer, or any successor Dissemination Agent designated inwriting by the Issuer and which has filed with the Issuer a written acceptance of such designation.

“EMMA System” means the MSRB’s Electronic Municipal Market Access system, or such otherelectronic system designated by the MSRB.

“Holders” means either the registered owners of the Series 2010B Bonds, or if the Series 2010BBonds are registered in the name of The Depository Trust Company or other recognized securitiesdepository, any applicable participant in its depository system.

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

“MSRB” means the Municipal Securities Rulemaking Board, or any successor thereto.

“Obligated Person” shall mean any “obligated person” within the meaning of the Rule.

“Official Statement” shall mean the Official Statement, dated April 29, 2010, prepared anddistributed in connection with the initial sale of the Series 2010B Bonds.

“Participating Underwriter” shall mean the original underwriter of the Series 2010B Bondsrequired to comply with the Rule in connection with offering of the Series 2010B Bonds.

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“Resolution” shall mean, collectively, Resolution No. HD-1475, which resolution was adopted ata regular meeting of the Board of Harbor Commissioners (the “Board”) duly called and held onNovember 8, 1989, as amended and supplemented and as further supplemented by Resolution No. HD-_____, which resolution was adopted at a regular meeting of the Board duly called and held onMay 10, 2010.

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

Section 3. Provision of Annual Reports.

(a) The Issuer shall provide, or shall cause the Dissemination Agent to provide, tothe MSRB through the EMMA System (in an electronic format and accompanied by identifyinginformation all as prescribed by the MSRB) an Annual Report which is consistent with therequirements of Section 4 hereof by not later than 210 days after the end of the Issuer’s fiscal yearin each fiscal year. The Issuer’s first Annual Report shall be due April 28, 2011. Not later than15 Business Days prior to said date, the Issuer shall provide the Annual Report to theDissemination Agent (if other than the Issuer). The Annual Report may be submitted as a singledocument or as separate documents comprising a package, and may include by reference otherinformation as provided in Section 4 hereof. The audited financial statements of the Issuer maybe submitted separately from the balance of the Annual Report if they are not available by thedate of submission, provided such financial statements are submitted within 210 days after theend of the Issuer’s fiscal year. If the Issuer’s fiscal year changes, the Issuer, upon becomingaware of such change, shall give notice of such change in the same manner as for a Listed Eventunder Section 5(c) hereof.

(b) If by 15 Business Days prior to the date specified in subsection (a) for providingthe Annual Report to the MSRB, the Dissemination Agent (if other than the Issuer) has notreceived a copy of the Annual Report, the Dissemination Agent shall contact the Issuer todetermine if the Issuer is in compliance with subsection (a).

(c) If the Issuer is unable to provide to the MSRB or the Dissemination Agent (ifother than the Issuer), an Annual Report by the date required in subsection (a), the Issuer shallsend a notice to the MSRB through the EMMA System in substantially the form attached heretoas Exhibit A.

(d) The Dissemination Agent (or the Issuer, as applicable) shall confirm in writing tothe Issuer that the Annual Report has been filed as required hereunder, stating the date filed.

Section 4. Content of Annual Reports. The Issuer’s Annual Report shall contain or incorporateby reference the following, updated to incorporate information for the most recent fiscal or calendar year,as applicable (the tables referred to below are those appearing in the Official Statement relating to theSeries 2010B Bonds, unless otherwise noted):

(a) The audited financial statements of the Harbor Department for the prior fiscalyear, prepared in accordance with generally accepted accounting principles as promulgated toapply to governmental entities from time to time by the Governmental Accounting StandardsBoard. If the Harbor Department’s audited financial statements are not available by the time theAnnual Report is required to be filed pursuant to Section 3(a) hereof, the Annual Report shallcontain unaudited financial statements in a format similar to the financial statements contained in

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the final Official Statement, and the audited financial statements shall be filed in the same manneras the Annual Report when they become available.

(b) Table 2—Harbor Department of the City of Long Beach, Debt ServiceRequirements (but only to the extent such information has changed).

(c) Table 3—Harbor Department of the City of Long Beach, Debt Service Coverageof Revenue Bonds and Parity Debt.

(d) Table 4—Harbor Department of the City of Long Beach, Revenue TonnageSummary.

(e) Table 6—Harbor Department of the City of Long Beach, Cargo Summary.

(f) Table 9—Harbor Department of the City of Long Beach, Sources of OperatingRevenues.

(g) Table 10—Harbor Department of the City of Long Beach, Wharfage Revenues.

(h) Table 13—Harbor Department of the City of Long Beach, ComparativeSummary of Statements of Revenues and Expenses.

(i) Table 14—Harbor Department of the City of Long Beach, Comparative BalanceSheet–Assets.

(j) Table 15—Harbor Department of the City of Long Beach, Comparative BalanceSheet–Liabilities and Equity/Net Assets.

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 Issuer or related public entities, which have beensubmitted to the MSRB. If the document included by reference is a final official statement, it must beavailable from the MSRB. The Issuer shall clearly identify each such other document so included byreference.

Section 5. Reporting of Significant Events.

(a) This Section 5 shall govern the giving of notices of the occurrence of any of thefollowing events with respect to the Series 2010B Bonds or arising under the Resolution.

(i) principal and interest payment delinquencies;

(ii) non-payment related defaults;

(iii) unscheduled draws on the debt service reserves reflecting financialdifficulties;

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

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

(vi) adverse tax opinions or events affecting the tax-exempt status of the Series2010B Bonds;

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(vii) modifications to rights of bondholders;

(viii) bond calls;

(ix) defeasances;

(x) release, substitution or sale of property securing repayment of the Series2010B Bonds; and

(xi) rating changes.

(b) Whenever the Issuer obtains knowledge of the occurrence of a Listed Event withrespect to the Series 2010B Bonds, the Issuer shall as soon as possible, but in no event more thanten (10) days following such event, determine if such event would be material under applicablefederal securities laws.

(c) If the Issuer determines that a Listed Event would be material under applicablefederal securities laws, the Issuer shall promptly file notice of such occurrence to theDissemination Agent (if other than the Issuer) or to the MSRB through the EMMA System (if theIssuer is the Dissemination Agent). If the Dissemination Agent is not the Issuer, upon receipt ofwritten notice of a Listed Event the Dissemination Agent shall promptly provide such notice of aListed Event to the MSRB through the EMMA System. Notwithstanding the foregoing, notice ofListed Events described in subsections (a)(viii) and (ix) need not be given under this subsectionany earlier than the notice (if any) of the underlying event is given to Holders of affected Series2010B Bonds pursuant to the Resolution.

Section 6. Termination of Reporting Obligation. The Issuer’s obligations under thisCertificate shall terminate upon the legal defeasance, prior redemption or payment of amounts fullysufficient to pay and discharge the Series 2010B Bonds. If such termination occurs prior to the finalmaturity of the Series 2010B Bonds, the Issuer shall give notice of such termination in the same manneras for a Listed Event under Section 5(a) hereof.

Section 7. Dissemination Agent. The Issuer may perform the duties of the DisseminationAgent, or from time to time, appoint or engage a Dissemination Agent to assist it in carrying out itsobligations under this Certificate, and may discharge any such Agent, with or without appointing asuccessor Dissemination Agent. The Dissemination Agent shall not be responsible or liable in anymanner whatsoever for the content of any notice or report prepared by the Issuer pursuant to thisCertificate. Any such Dissemination Agent shall file with the Issuer a written acceptance of suchdesignation. As of the date of this Certificate, there is no Dissemination Agent.

Section 8. Amendment; Waiver. Notwithstanding any other provision of this Certificate, theIssuer may amend this Certificate, and any provision of this Certificate may be waived, provided that allof the following conditions are satisfied:

(a) If the amendment or waiver relates to the provisions of Sections 3(a), 4, or 5(a)hereof, it may only be made in connection with a change in circumstances that arises from achange in legal (including regulatory) requirements, change in law (including rules orregulations) or in interpretations thereof, or change in the identity, nature or status of anObligated Person with respect to the Series 2010B Bonds, or the type of business conducted;

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(b) The undertaking, as amended or taking into account such waiver, would, in theopinion of nationally recognized bond counsel, have complied with the requirements of the Ruleat the time of the original issuance of the Series 2010B Bonds, after taking into account anyamendments or interpretations of the Rule, as well as any change in circumstances; and

(c) The amendment or waiver either (i) is approved by the Holders of the Series2010B Bonds in the same manner as provided in the Resolution for amendments to theResolution with the consent of Holders, or (ii) does not, in the opinion of nationally recognizedbond counsel, materially impair the interests of the Holders or Beneficial Owners of the Series2010B Bonds.

In the event of any amendment or waiver of a provision of this Certificate, the Issuer shall describe suchamendment in the next Annual Report, and shall include, as applicable, a narrative explanation of thereason for the amendment or waiver and its impact on the type (or in the case of a change of accountingprinciples, on the presentation) of financial information or operating data being presented by the Issuer.In addition, if the amendment relates to the accounting principles to be followed in preparing financialstatements, (i) notice of such change shall be given in the same manner as for a Listed Event underSection 5(c) hereof, and (ii) the Annual Report for the year in which the change is made should present acomparison (in narrative form and also, if feasible, in quantitative form) between the financial statementsas prepared on the basis of the new accounting principles and those prepared on the basis of the formeraccounting principles.

Section 9. Additional Information. Nothing in this Certificate shall be deemed to prevent theIssuer from disseminating any other information, using the means of dissemination set forth in thisCertificate or any other means of communication, or including any other information in any AnnualReport or notice of occurrence of a Listed Event, in addition to that which is required by this Certificate.If the Issuer chooses to include any information in any Annual Report or notice of occurrence of a ListedEvent in addition to that which is specifically required by this Certificate, the Issuer shall have noobligation under this Certificate to update such information or include it in any future Annual Report ornotice of occurrence of a Listed Event.

Section 10. Default. In the event of a failure of the Issuer to comply with any provision of thisCertificate, any Holder or Beneficial Owner of the Series 2010B Bonds may take such actions as may benecessary and appropriate, including seeking mandate or specific performance by court order, to cause theIssuer (or the Dissemination Agent, if other than the Issuer), as the case may be, to comply with itsobligations under this Certificate. A default under this Certificate shall not be deemed an Event ofDefault under the Resolution, and the sole remedy under this Certificate in the event of any failure of theIssuer to comply with this Certificate shall be an action to compel performance.

Section 11. Duties, Immunities and Liabilities of Dissemination Agent. The DisseminationAgent shall have only such duties as are expressly and specifically set forth in this Certificate, and theIssuer agrees to indemnify and save the Dissemination Agent, its officers, directors, employees andagents, harmless against any claims, losses, expenses and liabilities which such Dissemination Agent mayincur arising out of or in the exercise or performance of the powers and duties given to the DisseminationAgent hereunder, including the costs and expenses (including attorneys’ fees) of defending, in anymanner or forum, against any claim of liability, but excluding liabilities due to the Dissemination Agent’snegligence or willful misconduct. The obligations of the Issuer under this Section shall surviveresignation or removal of the Dissemination Agent and payment of the Series 2010B Bonds.

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Section 12. Beneficiaries. This Certificate shall inure solely to the benefit of the Issuer, theDissemination Agent, the Participating Underwriters and the Holders and Beneficial Owners from time totime of the Series 2010B Bonds, and shall create no rights in any other person or entity.

IN WITNESS WHEREOF, the undersigned has duly authorized, executed and delivered thisCertificate as of May 12, 2010.

CITY OF LONG BEACH, CALIFORNIA, acting byand through the Board of Harbor Commissioners

ByName:Title:

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EXHIBIT A

NOTICE TO MUNICIPAL SECURITIES RULEMAKING BOARDOF FAILURE TO FILE ANNUAL REPORT

Name of Issuer: City of Long Beach, California

Name of Bond Issue: Harbor Revenue Refunding Bonds, Series 2010B

Name of Obligated Person: Harbor Department of the City of Long Beach, California

Date of Issuance: May 12, 2010

CUSIP: 542424___

NOTICE IS HEREBY GIVEN that the City of Long Beach, acting by and through it Board ofHarbor Commissioners, has not provided an Annual Report with respect to the above-named Series2010B Bonds as required by Section 3 of the Continuing Disclosure Certificate, dated May 12, 2010, bythe City of Long Beach, California, acting by and through it Board of Harbor Commissioners. The Cityanticipates that the Annual Report will be filed by __________, 20__.

Dated: _______________.

CITY OF LONG BEACH, CALIFORNIA, acting byand through the Board of Harbor Commissioners

ByAuthorized Representative

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