city of pomona - emma corporation, as disclosure counsel, and by arnold m. alvarez-glasman, esq.,...

NEW ISSUE – BOOK ENTRY ONLY RATING: S&P: AA-See the caption “RATING”

In the opinion of Stradling Yocca Carlson & Rauth, a Professional Corporation, Bond Counsel, under existing statutes, regulations, rulings and judicial decisions, and assuming the accuracy of certain representations and compliance with certain covenants and requirements described in this Official Statement, interest (and original issue discount) on the Series BE Bonds is excluded from gross income for federal income tax purposes and is not an item of tax preference for purposes of calculating the federal alternative minimum tax imposed on individuals and corporations. In the opinion of Bond Counsel, under existing statutes, regulations, rulings and judicial decisions, interest on the Series BF Bonds is not excluded from gross income for federal income tax purposes under Section 103 of the Internal Revenue Code of 1986, as amended. In the further opinion of Bond Counsel, interest (and original issue discount) on the Series BE Bonds and interest on the Series BF Bonds is exempt from State of California personal income tax. See the caption “TAX MATTERS” with respect to tax consequences relating to the 2017 Bonds.

$32,355,000CITY OF POMONA

2017 REFUNDING REVENUE BONDS(WATER FACILITIES PROJECT)

SERIES BE (TAX-EXEMPT)



SERIES BF (TAXABLE)

Dated: Date of Issuance Due: May 1, as set forth on the inside cover page

The 2017 Bonds are being issued in fully registered form and when issued will be registered in the name of Cede & Co., as nominee of The Depository Trust Company, New York, New York. Purchasers of the 2017 Bonds will not receive securities representing their beneficial ownership in the 2017 Bonds purchased. Interest on the 2017 Bonds is payable on May 1 and November 1 of each year, commencing November 1, 2017, until the maturity thereof. The principal of and interest on the 2017 Bonds are payable by the Trustee to Cede & Co. and such interest and principal payments are to be disbursed to the Beneficial Owners of the 2017 Bonds through their nominees.

The 2017 Bonds are subject to optional and mandatory redemption as more fully described herein.

The 2017 Bonds are being issued to provide funds, together with certain other moneys: (i) to refund all of the outstanding Pomona Public Financing Authority, 2007 Revenue Bonds, Series AY (Water Facilities Project) and Pomona Public Financing Authority 2007 Taxable Revenue Refunding Bonds, Series AZ (Water Facilities Project); and (ii) to pay costs of issuance of the 2017 Bonds, all as more fully described herein.

The 2017 Bonds are being issued pursuant to the Indenture of Trust, dated as of May 1, 2017, by and between the City of Pomona and Zions Bank, a division of ZB, National Association, as trustee. The 2017 Bonds are limited obligations of the City payable solely from Net Revenues, which consist of Revenues of the City’s Water System remaining after payment of Operation and Maintenance Costs of the City’s Water System, and from amounts on deposit in certain funds and accounts created under the Indenture, including the Rate Stabilization Fund, subject to certain restrictions described herein.

The City may incur additional obligations payable from Net Revenues on a parity with the obligation to pay principal of and interest on the 2017 Bonds, subject to the terms and conditions of the Indenture, as more fully described herein.

The OBlIgATION OF The CITY TO PAY PRINCIPAl OF AND INTeReST ON The 2017 BONDS PuRSuANT TO The INDeNTuRe DOeS NOT CONSTITuTe AN OBlIgATION FOR WhICh The CITY IS OBlIgATeD TO levY OR PleDge ANY FORM OF TAxATION OR FOR WhICh The CITY hAS levIeD OR PleDgeD ANY FORM OF TAxATION. The OBlIgATION OF The CITY TO PAY PRINCIPAl OF AND INTeReST ON The 2017 BONDS ARe A SPeCIAl OBlIgATION OF The CITY PAYABle SOlelY FROM NeT ReveNueS, AND DOeS NOT CONSTITuTe A DeBT OF The CITY OR OF The STATe OF CAlIFORNIA OR OF ANY POlITICAl SuBDIvISION TheReOF IN CONTRAveNTION OF ANY CONSTITuTIONAl OR STATuTORY DeBT lIMITATION OR ReSTRICTION.

ThIS COveR PAge CONTAINS CeRTAIN INFORMATION FOR ReFeReNCe ONlY. IT IS NOT A SuMMARY OF ThIS ISSue. INveSTORS ARe ADvISeD TO ReAD The eNTIRe OFFICIAl STATeMeNT TO OBTAIN INFORMATION eSSeNTIAl TO The MAKINg OF AN INFORMeD INveSTMeNT DeCISION.

MATuRITY SCheDule – See Inside Cover Page

The 2017 Bonds are offered when, as and if issued and received by the Underwriter, subject to the approval of the valid, legal and binding nature of the 2017 Bonds by Stradling Yocca Carlson & Rauth, a Professional Corporation, Bond Counsel, and certain other conditions. Certain legal matters will be passed upon for the City by Stradling Yocca Carlson & Rauth, a Professional Corporation, as Disclosure Counsel, and by Arnold M. Alvarez-Glasman, Esq., City Attorney, for the Underwriter by its counsel, Fox Rothschild LLP, Los Angeles, California, and for the Trustee by its counsel. It is anticipated that the 2017 Bonds will be available for delivery through the facilities of The Depository Trust Company on or about May 17, 2017.

Dated: April 20, 2017

MATURITY SCHEDULE

BASE CUSIP®† 73209G




Maturity Date (May 1)

PrincipalAmount

InterestRate Yield Price

CUSIP®† Suffix

2029 $ 745,000 5.000% 2.530% 121.616 c AA82030 1,190,000 5.000 2.620 120.736 c AB62031 1,250,000 5.000 2.700 119.959 c AC42032 1,315,000 5.000 2.780 119.189 c AD2

$7,475,000 4.000% Term Bonds due May 1, 2037 Yield: 3.470% Price: 104.428c CuSIP† Ae0 $9,085,000 4.000% Term Bonds due May 1, 2042 Yield: 3.560% Price: 103.659c CuSIP† AF7 $11,295,000 5.000% Term Bonds due May 1, 2047 Yield: 3.160% Price: 115.610c CuSIP† Ag5



SERIES BF (TAXABLE)

Maturity Date (May 1)

PrincipalAmount

InterestRate Yield Price

CUSIP®†

Suffix2018 $1,925,000 1.530% 1.530% 100.000 Ah32019 1,815,000 1.701 1.701 100.000 AJ92020 1,840,000 2.011 2.011 100.000 AK62021 1,875,000 2.377 2.377 100.000 Al42022 1,925,000 2.527 2.527 100.000 AM22023 1,970,000 2.712 2.712 100.000 AN02024 2,025,000 2.862 2.862 100.000 AP52025 2,080,000 3.000 3.000 100.000 AQ32026 2,145,000 3.100 3.100 100.000 AR12027 2,210,000 3.250 3.250 100.000 AS92028 2,285,000 3.350 3.350 100.000 AT72029 1,615,000 3.450 3.450 100.000 Au42030 1,260,000 3.550 3.550 100.000 Av22031 1,305,000 3.650 3.650 100.000 AW02032 1,350,000 3.750 3.750 100.000 Ax8

$7,570,000 3.850% Term Bonds due May 1, 2037 Yield: 3.850% Price: 100.000 CuSIP† AY6 $20,360,000 4.050% Term Bonds due May 1, 2047 Yield: 4.050% Price: 100.000 CuSIP† AZ3

† CUSIP® is a registered trademark of the American Bankers Association. CUSIP Global Services (CGS) is managed on behalf of the American Bankers Association by S&P Capital IQ. Copyright© 2017 CUSIP Global Services. All rights reserved. CUSIP® data herein is provided by CUSIP Global Services. This data is not intended to create a database and does not serve in any way as a substitute for the CGS database. CUSIP® numbers are provided for convenience of reference only. Neither the City nor the Underwriter takes any responsibility for the accuracy of such numbers.

c Priced to first optional redemption date of May 1, 2027, at par.

No dealer, broker, salesperson or other person has been authorized by the City or the Underwriter to give any information or to make any representations other than those contained in this Official Statement in connection with the offering made hereby and, if given or made, such other information or representations must not be relied upon as having been authorized by the City or the Underwriter. This Official Statement does not constitute an offer to sell or the solicitation of an offer to buy, nor shall there be any sale of the 2017 Bonds by a person in any jurisdiction in which it is unlawful for such person to make such an offer, solicitation or sale.

This Official Statement is not to be construed as a contract with the purchasers of the 2017 Bonds. Statements contained in this Official Statement which involve estimates, forecasts or matters of opinion, whether or not expressly so described herein, are intended solely as such and are not to be construed as a representation of facts.

The Underwriter has provided the following sentence for inclusion in this Official Statement:

The Underwriter has reviewed the information in this Official Statement in accordance with, and as a part of, its responsibilities to investors under the federal securities laws as applied to the facts and circumstances of this transaction, but the Underwriter does not guarantee the accuracy or completeness of such information.

The information set forth herein has been obtained from official sources which are believed to be reliable but it is not guaranteed as to accuracy or completeness, and is not to be construed as a representation by the Underwriter. The information and expression of opinions herein are subject to change without notice and neither delivery of this Official Statement nor any sale made hereunder shall, under any circumstances, create any implication that there has been no change in the affairs of the City since the date hereof.

IN CONNECTION WITH THIS OFFERING, THE UNDERWRITER MAY OVERALLOT OR EFFECT TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE 2017 BONDS AT A LEVEL THAT MIGHT OTHERWISE PREVAIL IN THE OPEN MARKET. SUCH STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME. THE UNDERWRITER MAY OFFER AND SELL THE 2017 BONDS TO CERTAIN DEALERS AND DEALER BANKS AND BANKS ACTING AS AGENT AND OTHERS AT PRICES LOWER THAN THE PUBLIC OFFERING PRICES STATED ON THE COVER PAGE HEREOF AND SAID PUBLIC OFFERING PRICES MAY BE CHANGED FROM TIME TO TIME BY THE UNDERWRITER.

CERTAIN STATEMENTS CONTAINED IN THIS OFFICIAL STATEMENT REFLECT NOT HISTORICAL FACTS BUT FORECASTS AND “FORWARD-LOOKING STATEMENTS.” NO ASSURANCE CAN BE GIVEN THAT THE FUTURE RESULTS DISCUSSED HEREIN WILL BE ACHIEVED, AND ACTUAL RESULTS MAY DIFFER MATERIALLY FROM THE FORECASTS DESCRIBED HEREIN. IN THIS RESPECT, THE WORDS “ESTIMATE,” “PROJECT,” “ANTICIPATE,” “EXPECT,” “INTEND,” “BELIEVE” AND SIMILAR EXPRESSIONS ARE INTENDED TO IDENTIFY FORWARD-LOOKING STATEMENTS WITHIN THE MEANING OF THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995, SECTION 21E OF THE UNITED STATES SECURITIES EXCHANGE ACT OF 1934, AS AMENDED, AND SECTION 27A OF THE UNITED STATES SECURITIES ACT OF 1933, AS AMENDED. ALL PROJECTIONS, FORECASTS, ASSUMPTIONS, EXPRESSIONS OF OPINIONS, ESTIMATES AND OTHER FORWARD-LOOKING STATEMENTS ARE EXPRESSLY QUALIFIED IN THEIR ENTIRETY BY THE CAUTIONARY STATEMENTS SET FORTH IN THIS OFFICIAL STATEMENT.

The 2017 Bonds have not been registered under the Securities Act of 1933, as amended, in reliance upon an exemption contained in such act. The 2017 Bonds have not been registered or qualified under the securities laws of any state. The Indenture has not been qualified under the Trust Indenture Act of 1939, as amended, in reliance upon an exemption contained in such act.

The City maintains a website. However, the information presented there is not part of this Official Statement and should not be relied upon in making an investment decision with respect to the 2017 Bonds.

CITY OF POMONA COUNTY OF LOS ANGELES

STATE OF CALIFORNIA

MAYOR AND MEMBERS OF THE CITY COUNCIL

Tim Sandoval, Mayor Rubio R. Gonzalez, Member Adriana Robledo, Member Cristina Carrizosa, Member

Elizabeth Ontiveros-Cole, Member Ginna E. Escobar, Member Robert S. Torres, Member

STAFF

Linda Lowry, City Manager Onyx Jones, Finance Director

Darron Poulsen, Water & Wastewater Operations Director Arnold M. Alvarez-Glasman, Esq., City Attorney

SPECIAL SERVICES

Bond Counsel and Disclosure Counsel

Stradling Yocca Carlson & Rauth, a Professional Corporation Newport Beach, California

Municipal Advisor Urban Futures, Inc. Orange, California

Trustee

Zions Bank, a division of ZB, National Association Los Angeles, California

Escrow Bank

The Bank of New York Mellon Trust Company, N.A. Los Angeles, California

Verification Agent

Grant Thornton LLP Minneapolis, Minnesota

TABLE OF CONTENTS Page

i

SUMMARY STATEMENT .................................................................................................................................. i

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

REFUNDING PLAN ............................................................................................................................................ 2

ESTIMATED SOURCES AND USES OF FUNDS ............................................................................................ 3

THE 2017 BONDS ............................................................................................................................................... 3 General Provisions ......................................................................................................................................... 3 Redemption of the 2017 Bonds ...................................................................................................................... 4 Notice of Redemption .................................................................................................................................... 6

DEBT SERVICE PAYMENT SCHEDULE ........................................................................................................ 7

SECURITY FOR THE 2017 BONDS .................................................................................................................. 8 Limited Obligations Payable From Net Revenues ......................................................................................... 8 Rate Covenant .............................................................................................................................................. 10 Rate Stabilization Fund ................................................................................................................................ 11 Additional Indebtedness ............................................................................................................................... 11 No Reserve Fund .......................................................................................................................................... 11 Insurance; Reconstruction, Repair and Replacement ................................................................................... 11

THE CITY .......................................................................................................................................................... 12

THE WATER SYSTEM ..................................................................................................................................... 12 General ......................................................................................................................................................... 12 Water Supply ............................................................................................................................................... 12 Historic and Projected Water Supply ........................................................................................................... 20 Water System Insurance ............................................................................................................................... 20 Employee Relations ..................................................................................................................................... 21 Outstanding Indebtedness ............................................................................................................................ 21 Historic Water System Service Connections ............................................................................................... 21 Historic Water Deliveries ............................................................................................................................. 21 Historic Water System Services Charges and Sale Revenues ...................................................................... 22 Largest Customers ....................................................................................................................................... 22 Water System Rates and Charges ................................................................................................................ 22 Collection Procedures .................................................................................................................................. 25 Future Water System Improvements ............................................................................................................ 25 Projected Service Connections ..................................................................................................................... 25 Projected Water System Usage .................................................................................................................... 26

WATER SYSTEM FINANCIAL INFORMATION .......................................................................................... 26 Financial Statements .................................................................................................................................... 26 Historic and Projected Operating Results and Debt Service Coverage ........................................................ 27 Defined Benefit Pension Plan ...................................................................................................................... 28 Other Post-Employment Benefits ................................................................................................................ 34

CONSTITUTIONAL LIMITATIONS ON APPROPRIATIONS AND CHARGES ......................................... 34 Article XIIIB ................................................................................................................................................ 34 Proposition 218 ............................................................................................................................................ 35 Proposition 26 .............................................................................................................................................. 36

TABLE OF CONTENTS (continued)

Page

ii

Future Initiatives .......................................................................................................................................... 37

CERTAIN RISKS TO BONDHOLDERS .......................................................................................................... 37 Limited Obligations ..................................................................................................................................... 37 Accuracy of Assumptions ............................................................................................................................ 37 Water System Demand ................................................................................................................................. 37 Water System Expenses ............................................................................................................................... 38 Limited Recourse on Default ....................................................................................................................... 38 Rate-Setting Process under Proposition 218 ................................................................................................ 38 Natural Disasters .......................................................................................................................................... 38 Drought Declaration ..................................................................................................................................... 38 Limitations on Remedies ............................................................................................................................. 40 Loss of Tax Exemption ................................................................................................................................ 41 Secondary Market ........................................................................................................................................ 41 Parity Obligations ........................................................................................................................................ 41

APPROVAL OF LEGAL PROCEEDINGS ....................................................................................................... 41

LITIGATION ..................................................................................................................................................... 42

TAX MATTERS................................................................................................................................................. 42 Series BE Bonds .......................................................................................................................................... 42 Series BF Bonds ........................................................................................................................................... 44

RATING ............................................................................................................................................................. 44

UNDERWRITING ............................................................................................................................................. 45

MUNICIPAL ADVISOR ................................................................................................................................... 45

VERIFICATION OF MATHEMATICAL COMPUTATIONS ......................................................................... 45

CONTINUING DISCLOSURE UNDERTAKING ............................................................................................ 46

FINANCIAL INTERESTS ................................................................................................................................. 46

MISCELLANEOUS ........................................................................................................................................... 47 APPENDIX A FINANCIAL STATEMENTS ........................................................................................... A-1 APPENDIX B DEFINITIONS AND SUMMARY OF THE INDENTURE ............................................. B-1 APPENDIX C FORM OF OPINION OF BOND COUNSEL ................................................................... C-1 APPENDIX D INFORMATION CONCERNING DTC ............................................................................ D-1 APPENDIX E FORM OF CONTINUING DISCLOSURE CERTIFICATE ............................................ E-1 APPENDIX F GENERAL INFORMATION REGARDING THE CITY OF POMONA ......................... F-1

i

SUMMARY STATEMENT

This Summary Statement is subject in all respects to the more complete information contained in this Official Statement, and the offering of the 2017 Bonds to potential investors is made only by means of the entire Official Statement. Capitalized terms used and not otherwise defined in this Summary Statement have the meanings ascribed to them in this Official Statement.

Purpose. The 2017 Bonds are being issued to provide funds, together with certain other moneys: (i) to refund all of the outstanding Pomona Public Financing Authority, 2007 Revenue Bonds, Series AY (Water Facilities Project) and Pomona Public Financing Authority 2007 Taxable Revenue Refunding Bonds, Series AZ (Water Facilities Project); and (ii) to pay costs of issuance of the 2017 Bonds, all as more fully described herein. See the captions “REFUNDING PLAN” and “ESTIMATED SOURCES AND USES OF FUNDS.”

Security for the 2017 Bonds. The 2017 Bonds are limited obligations of the City payable solely from Net Revenues, which consist of Revenues of the City’s Water System remaining after payment of Operation and Maintenance Costs of the City’s Water System, and from amounts on deposit in certain funds and accounts created under the Indenture, including the Rate Stabilization Fund. The City may incur additional obligations payable on a parity with the obligation to pay principal of and interest on the 2017 Bonds in the future as described herein.

THE OBLIGATION OF THE CITY TO PAY PRINCIPAL OF AND INTEREST ON THE 2017 BONDS PURSUANT TO THE INDENTURE DOES NOT CONSTITUTE AN OBLIGATION FOR WHICH THE CITY IS OBLIGATED TO LEVY OR PLEDGE ANY FORM OF TAXATION OR FOR WHICH THE CITY HAS LEVIED OR PLEDGED ANY FORM OF TAXATION. THE OBLIGATION OF THE CITY TO PAY PRINCIPAL OF AND INTEREST ON THE 2017 BONDS IS A SPECIAL OBLIGATION OF THE CITY PAYABLE SOLELY FROM NET REVENUES, AND DOES NOT CONSTITUTE A DEBT OF THE CITY OR OF THE STATE OF CALIFORNIA OR ANY POLITICAL SUBDIVISION THEREOF IN CONTRAVENTION OF ANY CONSTITUTIONAL OR STATUTORY DEBT LIMITATION OR RESTRICTION.

See the caption “SECURITY FOR THE 2017 BONDS.”

The Refunding Plan. A portion of the proceeds of the 2017 Bonds, together with moneys held in certain funds and accounts established in connection with the 2007 Bonds, will be transferred to The Bank of New York Mellon Trust Company, N.A., as trustee for the 2007 Bonds, to refund all of the 2007 Bonds, which are currently outstanding in the aggregate principal amount of $97,375,000, on the date of issuance of the 2017 Bonds. See the caption “REFUNDING PLAN.”

Rate Covenant. The Indenture requires the City, to the fullest extent permitted by law, to fix and prescribe, at the commencement of each Fiscal Year, rates and charges for the Water Service which are reasonably expected to be at least sufficient to yield during each Fiscal Year Net Revenues equal to 120% of the Debt Service and any amounts required to be paid to the provider of a reserve fund surety bond, if any, in such Fiscal Year. See the caption “SECURITY FOR THE 2017 BONDS—Rate Covenant.”

Additional Contracts and Bonds Test. The Indenture permits the City to execute any Contracts or issue any Bonds on a parity with the obligation to pay principal of and interest on the 2017 Bonds, provided that certain conditions are satisfied as described herein. See the caption “SECURITY FOR THE 2017 BONDS—Additional Indebtedness.” The Indenture also permits the City to execute or issue obligations payable on a subordinate basis to the 2017 Bonds. The City has no other obligations outstanding payable from Net Revenues senior to or on a parity with the 2017 Bonds.

ii

No Reserve Fund. No reserve fund has been established in connection with the issuance of the 2017 Bonds.

Rate Stabilization Fund. The Indenture establishes the Rate Stabilization Fund which is held by the City. The City may withdraw all or any portion of the amounts on deposit in the Rate Stabilization Fund and transfer such amounts to the Water Revenue Fund for application in accordance with the Indenture. In the event that all or a portion of the 2017 Bonds are discharged in accordance with the Indenture, the City may transfer all or any portion of such amounts for application to the payment of the 2017 Bonds in accordance with the Indenture. On the date of issuance of the 2017 Bonds, the City will have $0 on deposit in the Rate Stabilization Fund. See the caption “SECURITY FOR THE 2017 BONDS—Rate Stabilization Fund.”

Redemption. The 2017 Bonds are subject to optional and mandatory redemption prior to maturity as described herein. See the caption “THE 2017 BONDS—Redemption of the 2017 Bonds.”

The City and the Water System. The City was incorporated in January 1888 and became a charter city in 1911. The City now encompasses approximately 22.9 square miles, and currently has an estimated population of 162,140. The City is located approximately 30 miles east of downtown Los Angeles, in the eastern portion of the County of Los Angeles, adjacent to Orange and San Bernardino Counties. The City’s Water System serves a geographic area that includes 100% of the land within City limits. For information concerning the Water System, see the caption “THE WATER SYSTEM.” For general information regarding the City, see the caption “THE CITY” and Appendix F.

1

$32,355,000 CITY OF POMONA

2017 REFUNDING REVENUE BONDS (WATER FACILITIES PROJECT)


$55,555,000 CITY OF POMONA

2017 REFUNDING REVENUE BONDS (WATER FACILITIES PROJECT)

SERIES BF (TAXABLE)

INTRODUCTION

This Official Statement, including the cover page, the inside cover page and all appendices hereto, provides certain information concerning the sale and delivery of the City of Pomona 2017 Refunding Revenue Bonds (Water Facilities Project) Series BE (Tax-Exempt) (the “Series BE Bonds”) and the City of Pomona 2017 Refunding Revenue Bonds (Water Facilities Project) Series BF (Taxable) (the “Series BF Bonds and, together with the Series BE Bonds, the “2017 Bonds”). The 2017 Bonds are being issued pursuant to an Indenture of Trust, dated as of May 1, 2017 (the “Indenture”), by and between the City of Pomona (the “City”) and Zions Bank, a division of ZB, National Association, Los Angeles, California, as trustee (the “Trustee”). Descriptions and summaries of various documents set forth in this Official Statement do not purport to be comprehensive or definitive, and reference is made to each document for complete details of all terms and conditions. All statements herein are qualified in their entirety by reference to each document. Capitalized terms used and not otherwise defined herein have the meanings ascribed to them in Appendix B.

The 2017 Bonds are being issued to provide funds, together with certain other moneys: (i) to refund all of the (a) outstanding Pomona Public Financing Authority, 2007 Revenue Bonds, Series AY (Water Facilities Project) (the “Series AY Bonds”) and (b) Pomona Public Financing Authority 2007 Taxable Revenue Refunding Bonds, Series AZ (Water Facilities Project) (the “Series AZ Bonds,” and together with the Series AY Bonds, the “2007 Bonds”); and (ii) to pay costs of issuance of the 2017 Bonds, all as more fully described herein. See the captions “REFUNDING PLAN” and “ESTIMATED SOURCES AND USES OF FUNDS.”

The 2017 Bonds are limited obligations of the City payable solely from Net Revenues, which consist of Revenues of the City’s Water System remaining after payment of Operation and Maintenance Costs of the City’s Water System, as such terms are defined in Appendix B, and from amounts on deposit in certain funds and accounts created under the Indenture, including the Rate Stabilization Fund.

The City may incur additional obligations payable on a parity with the obligation to pay principal of and interest on the 2017 Bonds in the future as described under the caption “SECURITY FOR THE 2017 BONDS—Additional Indebtedness.”

The summaries and references to the Indenture and all documents, statutes, reports and other instruments referred to herein do not purport to be complete, comprehensive or definitive, and each such summary or reference is qualified in its entirety by reference to the full Indenture and the respective document, statute, report or instrument, copies of which are available for inspection at the offices of the City in Pomona, California and will be available from the Trustee upon request and payment of duplication cost. The capitalization of any word not conventionally capitalized or otherwise defined herein indicates that such word is defined in the Indenture and, as used herein, has the meaning given to it in the Indenture. Unless otherwise indicated, all financial and statistical information herein has been provided by the City.

The City regularly prepares a variety of reports, including audits, budgets and related documents. Any registered owner of the 2017 Bonds may obtain a copy of such reports, as available, from the Trustee or the City. Additional information regarding the Official Statement may be obtained by contacting the Trustee or the City of Pomona, 505 South Garey Avenue, Pomona, California 91766, Attn: Finance Director.

2

REFUNDING PLAN

General. The Pomona Public Financing Authority (the “Authority”) issued the Series AY Bonds, which will be outstanding as of May 1, 2017 in the aggregate principal amount of $92,375,000, pursuant to an Indenture of Trust, dated as of January 1, 2007 (the “Series AY Indenture”), by and between the Authority and The Bank of New York Mellon Trust Company, N.A. (formerly known as The Bank of New York Trust Company, N.A.), as trustee (the “2007 Trustee”). The Series AY Bonds are payable from installment payments (the “2007 Installment Payments”) made under the Installment Sale Agreement, dated as of January 1, 2007 (the “2007 Installment Sale Agreement”), between the City and the Authority. The City plans to apply a portion of the proceeds of the 2017 Bonds, together with moneys held in certain funds and accounts established in connection with the Series AY Bonds, to redeem all of the Series AY Bonds and the related 2007 Installment Payments on or about May 22, 2017 (the “Redemption Date”) at a redemption price of the outstanding principal amount thereof, plus accrued interest with respect thereto, without premium (the “Series AY Redemption Price”).

The Authority issued the Series AZ Bonds, which will be outstanding as of May 1, 2017 in the aggregate principal amount of $5,000,000, pursuant to an Indenture of Trust, dated as of January 1, 2007 (the “Series AZ Indenture”), by and between the Authority and the 2007 Trustee. The Series AZ Bonds are payable from the 2007 Installment Payments made under the 2007 Installment Sale Agreement. The City plans to apply a portion of the proceeds of the Series BF Bonds, together with moneys held in certain funds and accounts established in connection with the Series AZ Bonds, to redeem all of the Series AZ Bonds and the related 2007 Installment Payments on the Redemption Date at a redemption price of the outstanding principal amount thereof, plus accrued interest with respect thereto, without premium (the “Series AZ Redemption Price”).

Under an Escrow Agreement (Series AY and AZ), dated as of May 1, 2017 (the “Escrow Agreement”), by and between the City and The Bank of New York Mellon Trust Company, N.A., as escrow agent (the “Escrow Bank”) and as 2007 Trustee, the City will deliver a portion of the proceeds of the Series BE Bonds and the Series BF Bonds to the Escrow Bank for deposit in two escrow funds (the “AY Escrow Fund” and the “AZ Escrow Fund,” respectively, and together, the “Escrow Funds”) established under the Escrow Agreement on or about the date of issuance of the 2017 Bonds. In addition, the 2007 Trustee will transfer certain moneys held in connection with the Series AY Bonds and the Series AZ Bonds to the Escrow Agent for deposit in the AY Escrow Fund and the AZ Escrow Fund, respectively, on or about the date of issuance of the 2017 Bonds.

The Escrow Agent will hold the moneys in the AY Escrow Fund and the AZ Escrow Fund uninvested and apply such moneys to redeem all of the Series AY Bonds and all of the Series AZ Bonds, respectively, on the Redemption Date at the Series AY Redemption Price and the Series AZ Redemption Price, respectively. Sufficiency of the deposits in the Escrow Funds for those purposes will be verified by Grant Thornton LLP, Minneapolis, Minnesota (the “Verification Agent”).

Assuming the accuracy of the Verification Agent’s computations, as a result of the deposit of a portion of the proceeds of the 2017 Bonds with the 2007 Trustee and the application of funds as provided in the Series AY Indenture, the 2007 Installment Payments and the Series AY Bonds will be defeased pursuant to the provisions of the 2007 Installment Sale Agreement and the Series AY Indenture under which the Series AY Bonds were issued, as of the date of issuance of the Series BE Bonds.

Assuming the accuracy of the Verification Agent’s computations, as a result of the deposit of a portion of the proceeds of the Series BF Bonds with the 2007 Trustee and the application of funds as provided in the Series AZ Indenture, the 2007 Installment Payments and the Series AZ Bonds will be defeased pursuant to the provisions of the 2007 Installment Sale Agreement and the Series AZ Indenture under which the Series AZ Bonds were issued, as of the date of issuance of the Series BF Bonds.

3

The portion of the proceeds of the Series BE Bonds and the Series BF Bonds deposited with the 2007 Trustee is pledged solely to the payment of the Series AY Bonds and the Series AZ Bonds, respectively, and will not be available for the payments of principal of and interest on the Series BE Bonds or the Series BF Bonds, as applicable.

Verification. The Verification Agent will verify the mathematical accuracy of the information provided to the Verification Agent as of the date of the closing on the 2017 Bonds relating to the adequacy of the amounts deposited in the Escrow Fund to pay on May 22, 2017 the Series AY Redemption Price and the Series AZ Redemption Price with respect to the Series AY Bonds and the Series AZ Bonds, respectively, and the computation of the yield of the 2007 Bonds and the 2017 Bonds which support Bond Counsel’s opinion that interest with respect to the Series BE Bonds received by the Owners is excluded from gross income for federal income tax purposes.

ESTIMATED SOURCES AND USES OF FUNDS

The following table sets forth the estimated sources and uses of funds:

Sources(1): Series BE Bonds Series BF Bonds Total

Principal Amount $ 32,355,000 $ 55,555,000 $ 87,910,000 Plus Original Issue Premium 3,336,183 -- 3,336,183 Additional Moneys(2) 2,617,771 4,334,131 6,951,901 Total Sources $ 38,308,954 $ 59,889,131 $ 98,198,084 Uses(1):

Refunding of Series AY Bonds $ 38,124,953 $ 54,517,229 $ 92,642,181 Refunding of Series AZ Bonds -- 5,016,479 5,016,479 Underwriter’s Discount 116,478 155,425 222,948 Costs of Issuance(3) 67,523 199,998 316,476 Total Uses $ 38,308,954 $ 59,889,131 $ 98,198,084

(1) All amounts rounded to the nearest dollar. Totals may not add due to rounding. (2) Reflects moneys held in funds and accounts established in connection with the 2007 Bonds. (3) Includes certain legal, rating agency, printing and other financing-related costs.

THE 2017 BONDS

General Provisions

The 2017 Bonds will be issued in the aggregate principal amount of $87,910,000. The 2017 Bonds will be dated as of the date of initial issuance thereof (the “Issuance Date”), will bear interest from such date at the rates per annum set forth on the inside cover page hereof, payable on May 1 and November 1 of each year, commencing November 1, 2017 (each, an “Interest Payment Date”), and will mature on the dates set forth on the inside cover page hereof. Interest on the 2017 Bonds will be computed on the basis of a 360 day year composed of twelve 30 day months.

The 2017 Bonds will be issued only in fully registered form and, when issued, will be registered in the name of Cede & Co., as nominee of The Depository Trust Company, New York, New York (“DTC”). DTC will act as securities depository for the 2017 Bonds. Ownership interests in the 2017 Bonds may be purchased in book entry form, in denominations of $5,000 or any integral multiple thereof. See the caption “—Book Entry Only System” below and Appendix D.

In the event that the book entry only system described below is discontinued, the principal of and redemption premium (if any) on the 2017 Bonds are payable by check or draft of the Trustee upon presentation

4

and surrender thereof at maturity or upon prior redemption at the office of the Trustee in Los Angeles, California (the “Office of the Trustee”). Interest on the 2017 Bonds is payable on each Interest Payment Date to the person whose name appears on the registration books maintained by the Trustee (the “Registration Books”) as the Owner thereof as of the close of business on the fifteenth day of the calendar month preceding the Interest Payment Date (the “Record Date”), such interest to be paid by check of the Trustee, sent by first class mail on the applicable Interest Payment Date to the Owner at such Owner’s address as it appears on the Registration Books. An Owner of $1,000,000 or more in principal amount of 2017 Bonds may, at such Owner’s option, be paid interest by wire transfer of immediately available funds to an account in the United States in accordance with written instructions provided to the Trustee by such Owner prior to the applicable Record Date. The principal of and interest and premium, if any, on the 2017 Bonds will be payable in lawful money of the United States of America.

The City cannot and does not give any assurances that DTC participants or others will distribute payments of principal of and interest on the 2017 Bonds received by DTC or its nominee as the registered Owner, or any redemption or other notices, to the Beneficial Owners, or that they will do so on a timely basis, or that DTC will service and act in the manner described in this Official Statement. See Appendix D for additional information concerning DTC.

Interest on any 2017 Bond will be payable from the Interest Payment Date preceding the date of issuance thereof, unless such date is after a Record Date and on or before the succeeding Interest Payment Date, in which case interest thereon will be payable from such Interest Payment Date, or unless such date is on or before October 15, 2017, in which case interest thereon will be payable from the Issuance Date.

Redemption of the 2017 Bonds

Optional Redemption. The Series BE Bonds with stated maturities on or after May 1, 2028, are subject to redemption prior to their respective stated maturities, as a whole or in part on any date as directed by the City and by lot within each maturity in integral multiples of $5,000, on or after May 1, 2027, at a price equal to the principal amount thereof plus accrued interest thereon to the date fixed for redemption, without premium.

The Series BF Bonds with stated maturities on or after May 1, 2028, are subject to redemption prior to their respective stated maturities, as a whole or in part on any date as directed by the City and by lot within each maturity in integral multiples of $5,000, on or after May 1, 2027, at a price equal to the principal amount thereof plus accrued interest thereon to the date fixed for redemption, without premium.

Mandatory Redemption. The Series BE Bonds with stated maturities on May 1, 2037 are subject to mandatory sinking fund redemption in part (by lot), on each May 1 on and after May 1, 2033 in integral multiples of $5,000 at a price equal to the principal amount thereof plus accrued interest evidenced thereby to the date fixed for redemption, without premium, in accordance with the following schedule:

Redemption Date (May 1)

Principal Amount

2033 $1,380,000 2034 1,435,000 2035 1,495,000 2036 1,550,000 2037* 1,615,000

* Final Maturity.

5

The Series BE Bonds with stated maturities on May 1, 2042 are subject to mandatory sinking fund redemption in part (by lot), on each May 1 on and after May 1, 2038 in integral multiples of $5,000 at a price equal to the principal amount thereof plus accrued interest evidenced thereby to the date fixed for redemption, without premium, in accordance with the following schedule:


Principal Amount

2038 $1,675,000 2039 1,745,000 2040 1,815,000 2041 1,890,000 2042* 1,960,000

* Final Maturity.

The Series BE Bonds with stated maturities on May 1, 2047 are subject to mandatory sinking fund redemption in part (by lot), on each May 1 on and after May 1, 2043 in integral multiples of $5,000 at a price equal to the principal amount thereof plus accrued interest evidenced thereby to the date fixed for redemption, without premium, in accordance with the following schedule:


Principal Amount

2043 $2,045,000 2044 2,145,000 2045 2,255,000 2046 2,365,000 2047* 2,485,000

* Final Maturity.

The Series BF Bonds with stated maturities on May 1, 2037 are subject to mandatory sinking fund redemption in part (by lot), on each May 1 on and after May 1, 2033 in integral multiples of $5,000 at a price equal to the principal amount thereof plus accrued interest evidenced thereby to the date fixed for redemption, without premium, in accordance with the following schedule:


Principal Amount

2033 $1,400,000 2034 1,460,000 2035 1,510,000 2036 1,570,000 2037* 1,630,000

* Final Maturity.

The Series BF Bonds with stated maturities on May 1, 2047 are subject to mandatory sinking fund redemption in part (by lot), on each May 1 on and after May 1, 2038 in integral multiples of $5,000 at a price equal to the principal amount thereof plus accrued interest evidenced thereby to the date fixed for redemption, without premium, in accordance with the following schedule:

6


Principal Amount

2038 $1,695,000 2039 1,760,000 2040 1,835,000 2041 1,905,000 2042 1,985,000 2043 2,060,000 2044 2,145,000 2045 2,230,000 2046 2,325,000 2047* 2,420,000

* Final Maturity.

Notice of Redemption

The City will give the Trustee written notice of its intention to exercise its option to redeem 2017 Bonds not less than 45 days in advance of the date of redemption. Notice of redemption will be mailed by first class mail at least 20 days but not more than 60 days before any Redemption Date, to the respective Owners of any 2017 Bonds designated for redemption at their addresses appearing on the Registration Books, to the Securities Depositories and the Information Services. Each notice of redemption will state the date of notice, the Redemption Date, the place or places of redemption, the Redemption Price, will designate the maturities, CUSIP numbers, if any, and, if less than all 2017 Bonds of any such maturity are to be redeemed, the serial numbers of the 2017 Bonds of such maturity to be redeemed by giving the individual number of each 2017 Bond or by stating that all 2017 Bonds between two stated numbers, both inclusive, have been called for redemption and, in the case of 2017 Bonds to be redeemed in part only, the respective portions of the principal amount thereof to be redeemed. Each such notice will also state that on the Redemption Date there will become due and payable on each of said 2017 Bonds or parts thereof designated for redemption the Redemption Price thereof or of said specified portion of the principal thereof in the case of a 2017 Bond to be redeemed in part only, together with interest accrued thereon to the Redemption Date, and that (provided that moneys for redemption have been deposited with the Trustee) from and after such Redemption Date interest thereon will cease to accrue, and will require that such 2017 Bonds be then surrendered to the Trustee. Neither the failure to receive such notice nor any defect in the notice or the mailing thereof will affect the validity of the redemption of any 2017 Bond. Notice of redemption of 2017 Bonds will be given by the Trustee, at the expense of the City, for and on behalf of the City.

With respect to any notice of optional redemption of 2017 Bonds, such notice will state that such redemption is conditional upon the receipt by the Trustee on or prior to the date fixed for such redemption of moneys sufficient to pay the principal of, premium, if any, and interest on such 2017 Bonds to be redeemed and that, if such moneys have not been so received, said notice will be of no force and effect and the Trustee will not be required to redeem such 2017 Bonds. In the event that such notice of redemption contains such a condition and such moneys are not so received, the redemption will not be made, and the Trustee will within a reasonable time thereafter give notice, in the manner in which the notice of redemption was given, that such moneys were not so received.

[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]

7

DEBT SERVICE PAYMENT SCHEDULE

Set forth below is an annualized schedule of principal of and interest on the 2017 Bonds for the period ending May 1 in each of the years indicated:

2017 Bonds Series BE Bonds Series BF Bonds

Period Ending May 1 Principal Interest Total Principal Interest Total

2017 Bonds Total

2018 $ -- $ 1,387,610.00 $ 1,387,610.00 $ 1,925,000.00 $ 1,809,746.69 $ 3,734,746.69 $ 5,122,356.69 2019 -- 1,452,150.00 1,452,150.00 1,815,000.00 1,864,468.46 3,679,468.46 5,131,618.46 2020 -- 1,452,150.00 1,452,150.00 1,840,000.00 1,833,595.30 3,673,595.30 5,125,745.30 2021 -- 1,452,150.00 1,452,150.00 1,875,000.00 1,796,592.90 3,671,592.90 5,123,742.90 2022 -- 1,452,150.00 1,452,150.00 1,925,000.00 1,752,024.16 3,677,024.16 5,129,174.16 2023 -- 1,452,150.00 1,452,150.00 1,970,000.00 1,703,379.40 3,673,379.40 5,125,529.40 2024 -- 1,452,150.00 1,452,150.00 2,025,000.00 1,649,953.00 3,674,953.00 5,127,103.00 2025 -- 1,452,150.00 1,452,150.00 2,080,000.00 1,591,997.50 3,671,997.50 5,124,147.50 2026 -- 1,452,150.00 1,452,150.00 2,145,000.00 1,529,597.50 3,674,597.50 5,126,747.50 2027 -- 1,452,150.00 1,452,150.00 2,210,000.00 1,463,102.50 3,673,102.50 5,125,252.50 2028 -- 1,452,150.00 1,452,150.00 2,285,000.00 1,391,277.50 3,676,277.50 5,128,427.50 2029 745,000.00 1,452,150.00 2,197,150.00 1,615,000.00 1,314,730.00 2,929,730.00 5,126,880.00 2030 1,190,000.00 1,414,900.00 2,604,900.00 1,260,000.00 1,259,012.50 2,519,012.50 5,123,912.50 2031 1,250,000.00 1,355,400.00 2,605,400.00 1,305,000.00 1,214,282.50 2,519,282.50 5,124,682.50 2032 1,315,000.00 1,292,900.00 2,607,900.00 1,350,000.00 1,166,650.00 2,516,650.00 5,124,550.00 2033 1,380,000.00 1,227,150.00 2,607,150.00 1,400,000.00 1,116,025.00 2,516,025.00 5,123,175.00 2034 1,435,000.00 1,171,950.00 2,606,950.00 1,460,000.00 1,062,125.00 2,522,125.00 5,129,075.00 2035 1,495,000.00 1,114,550.00 2,609,550.00 1,510,000.00 1,005,915.00 2,515,915.00 5,125,465.00 2036 1,550,000.00 1,054,750.00 2,604,750.00 1,570,000.00 947,780.00 2,517,780.00 5,122,530.00 2037 1,615,000.00 992,750.00 2,607,750.00 1,630,000.00 887,335.00 2,517,335.00 5,125,085.00 2038 1,675,000.00 928,150.00 2,603,150.00 1,695,000.00 824,580.00 2,519,580.00 5,122,730.00 2039 1,745,000.00 861,150.00 2,606,150.00 1,760,000.00 755,932.50 2,515,932.50 5,122,082.50 2040 1,815,000.00 791,350.00 2,606,350.00 1,835,000.00 684,652.50 2,519,652.50 5,126,002.50 2041 1,890,000.00 718,750.00 2,608,750.00 1,905,000.00 610,335.00 2,515,335.00 5,124,085.00 2042 1,960,000.00 643,150.00 2,603,150.00 1,985,000.00 533,182.50 2,518,182.50 5,121,332.50 2043 2,045,000.00 564,750.00 2,609,750.00 2,060,000.00 452,790.00 2,512,790.00 5,122,540.00 2044 2,145,000.00 462,500.00 2,607,500.00 2,145,000.00 369,360.00 2,514,360.00 5,121,860.00 2045 2,255,000.00 355,250.00 2,610,250.00 2,230,000.00 282,487.50 2,512,487.50 5,122,737.50 2046 2,365,000.00 242,500.00 2,607,500.00 2,325,000.00 192,172.50 2,517,172.50 5,124,672.50 2047 2,485,000.00 124,250.00 2,609,250.00 2,420,000.00 98,010.00 2,518,010.00 5,127,260.00

TOTAL $32,355,000.00 $32,677,410.00 $65,032,410.00 $55,555,000.00 $33,163,092.41 $88,718,092.41 $153,750,502.41 Source: B.C. Ziegler and Company.

8

SECURITY FOR THE 2017 BONDS

Limited Obligations Payable From Net Revenues

All of the Revenues, all amounts held in the Water Revenue Fund described herein under the caption “—Flow of Funds,” all amounts held in the Rate Stabilization Fund described herein under the caption “—Rate Stabilization Fund,” and any other amounts held in any fund or account established pursuant to the Indenture (except the Rebate Fund) are irrevocably pledged by the Indenture to secure the payment of the principal of and interest, and the premium, if any, on the 2017 Bonds in accordance with their terms and the provisions of the Indenture, and the Revenues will not be used for any other purpose while the 2017 Bonds remain Outstanding; provided that out of the Revenues there may be apportioned such sums for such purposes as are expressly permitted in the Indenture. Said pledge, together with the pledge created by all other Contracts and Bonds, constitutes a first lien on and security interest on Revenues and, subject to application of Revenues and all amounts on deposit therein as permitted in the Indenture, the Water Revenue Fund and other funds and accounts created under the Indenture for the payment of the principal of and interest, and the premium, if any, on the 2017 Bonds and all Contracts and Debt Service on Bonds in accordance with the terms hereof, and will attach, be perfected and be valid and binding from and after the Closing Date, without any physical delivery thereof or further act and will be valid and binding against all parties having claims of any kind in tort, contract or otherwise against the City, irrespective of whether such parties have notice of the Indenture.

“Revenues” are defined in the Indenture to include all income, rents, rates, fees, charges and other moneys derived from the ownership or operation of the Water System, including, without limiting the generality of the foregoing, (1) all income, rents, rates, fees, charges or other moneys derived by the City from the sale, furnishing and supplying of the water, recycled water or other services, facilities, and commodities sold, furnished or supplied through the facilities of or in the conduct or operation of the business of the Water System, (2) the proceeds of any stand-by or water availability charges, development fees and connection charges collected by the City, (3) the earnings on and income derived from the investment of amounts described in clauses (1) and (2) above, and from amounts in the Rate Stabilization Fund and from Water Fund reserves, but excluding (x) customers’ deposits or any other deposits or advances subject to refund until such deposits or advances have become the property of the City, (y) any proceeds of taxes or assessments restricted by law to be used by the City to pay bonds or other obligations now or later issued; and (z) revenues of any water system acquired through merger, consolidation or similar action to the extent the exclusion of such acquired water system is required pursuant to the terms of such merger, consolidation or similar action.

“Revenues” also include all amounts transferred from the Rate Stabilization Fund to the Water Revenue Fund during any Fiscal Year in accordance with the Indenture and will not include any amounts transferred from the Water Revenue Fund to the Rate Stabilization Fund during any Fiscal Year in accordance with the Indenture.

The City is obligated to make payments of principal of and interest on the 2017 Bonds solely from Net Revenues of the Water System. The term “Net Revenues” means, for any Fiscal Year of the City (currently, the City’s Fiscal Year commences July 1 of each year) (“Fiscal Year”), the Revenues for such Fiscal Year less the Operation and Maintenance Costs of the Water System for such Fiscal Year. When held by the Trustee in any funds or accounts established under the Indenture, Net Revenues will include all interest or gain derived from the investment of amounts in any of such funds or accounts. The City has no other obligations outstanding which are payable from Net Revenues senior to or on a parity with the 2017 Bonds.

“Operation and Maintenance Costs” is defined in the Indenture to mean costs spent or incurred for maintenance and operation of the Water System calculated in accordance with generally accepted accounting principles applicable to governmental agencies, including, but not limited to, the cost of acquiring, pumping and/or treating water, the reasonable expenses of management and repair and other expenses necessary to maintain and preserve the Water System in good repair and working order, and including administrative costs

9

of the City that are charged directly or apportioned to the Water System, including but not limited to salaries and wages of employees, payments to the Public Employees Retirement System, overhead, insurance, taxes (if any), fees of auditors, accountants, attorneys or engineers and insurance premiums, and including all other reasonable and necessary costs of the City or charges (other than debt service payments) required to be paid by it to comply with the terms of the Indenture or any Contract or of any resolution or indenture authorizing the issuance of any Bonds or of such Bonds; but excluding in all cases depreciation, replacement and obsolescence charges or reserves therefor and amortization of intangibles or other bookkeeping entries of a similar nature and all capital charges and other amounts transferred to the Rate Stabilization Fund.

THE OBLIGATION OF THE CITY TO PAY PRINCIPAL OF AND INTEREST ON THE 2017 BONDS PURSUANT TO THE INDENTURE DOES NOT CONSTITUTE AN OBLIGATION FOR WHICH THE CITY IS OBLIGATED TO LEVY OR PLEDGE ANY FORM OF TAXATION OR FOR WHICH THE CITY HAS LEVIED OR PLEDGED ANY FORM OF TAXATION. THE OBLIGATION OF THE CITY TO PAY PRINCIPAL OF AND INTEREST ON THE 2017 BONDS IS A SPECIAL OBLIGATION OF THE CITY PAYABLE SOLELY FROM NET REVENUES, AND DOES NOT CONSTITUTE A DEBT OF THE CITY OR OF THE STATE OF CALIFORNIA OR OF ANY POLITICAL SUBDIVISION THEREOF IN CONTRAVENTION OF ANY CONSTITUTIONAL OR STATUTORY DEBT LIMITATION OR RESTRICTION.

Flow of Funds. In order to carry out and effectuate the pledge and lien contained in the Indenture, the City has agreed and covenanted that all Revenues will be received by the City in trust under the Indenture and will be deposited when and as received in a special fund designated as the “Water Revenue Fund,” which fund is continued by the Indenture and which fund the City has agreed and covenanted to maintain and to hold separate and apart from other funds so long as the 2017 Bonds and any Contracts or Debt Service on Bonds remain unpaid. Moneys in the Water Revenue Fund will be used and applied by the City as provided in the Indenture. All moneys in the Water Revenue Fund will be held in trust and will be applied, used and withdrawn for the purposes set forth in the Indenture.

The City shall, from the moneys in the Water Revenue Fund, pay all Operation and Maintenance Costs (including amounts reasonably required to be set aside in contingency reserves for Operation and Maintenance Costs, the payment of which is not then immediately required) as such Operation and Maintenance Costs become due and payable. All remaining moneys in the Water Revenue Fund shall be set aside by the City at the following times for the transfer to the following respective special funds in the following order of priority:

First, not later than the Business Day prior to each Interest Payment Date, the City will, from the moneys in the Water Revenue Fund, transfer to the Trustee for deposit in the Payment Fund the full amount of interest and principal payments on the 2017 Bonds coming due and payable on such Interest Payment Date. The City will also, from the moneys in the Water Revenue Fund, transfer to the applicable trustee for deposit in the respective payment fund, without preference or priority, and in the event of any insufficiency of such moneys ratably without any discrimination or preference, any other Debt Service in accordance with the provisions of any Bond or Contract.

Second, on or before each Interest Payment Date the City will, from the remaining moneys in the Water Revenue Fund, thereafter, without preference or priority and in the event of any insufficiency of such moneys ratably without any discrimination or preference, transfer to the applicable trustee for such reserve funds and/or accounts, if any, as may have been established in connection with Bonds or Contracts, that sum, if any, necessary to restore such funds or accounts to an amount equal to the reserve requirement with respect thereto.

10

Third, moneys on deposit in the Water Revenue Fund on any date when the City reasonably expects such moneys will not be needed for the payment of Operation and Maintenance Costs or any of the purposes described in above may be expended by the City at any time for any purpose permitted by law, including but not limited to the deposit of amounts in the Rate Stabilization Fund in accordance with the Indenture.

Fourth, all moneys held by the City in the Water Revenue Fund will be invested in Permitted Investments and the investment earnings thereon will remain on deposit in such fund, except as otherwise provided in the Indenture.

There is established with the Trustee the Payment Fund, which the Trustee has covenanted to maintain and hold in trust separate and apart from other funds held by it so long as any principal of and interest on the 2017 Bonds remain unpaid. Except as directed in the Indenture, all payments of interest and principal on the 2017 Bonds received by the Trustee pursuant to the Indenture will be promptly deposited by the Trustee upon receipt thereof into the Payment Fund; except that all moneys received by the Trustee and required under the Indenture to be deposited in the Redemption Fund will be promptly deposited therein. All payments of interest and principal on the 2017 Bonds deposited with the Trustee will be held, disbursed, allocated and applied by the Trustee only as provided in the Indenture. The Trustee will also establish and hold an Interest Account and a Principal Account within the Payment Fund.

The Trustee will transfer from the Payment Fund and deposit into the following respective accounts, the following amounts in the following order of priority and at the following times, the requirements of each such account (including the making up of any deficiencies in any such account resulting from lack of Revenues sufficient to make any earlier required deposit) at the time of deposit to be satisfied before any transfer is made to any account subsequent in priority:

First, not later than the Business Day preceding each Interest Payment Date, the Trustee will deposit in the Interest Account that sum, if any, required to cause the aggregate amount on deposit in the Interest Account to be at least equal to the amount of interest becoming due and payable on such date on all 2017 Bonds then Outstanding. No deposit need be made into the Interest Account so long as there is in such fund moneys sufficient to pay the interest becoming due and payable on such date on all 2017 Bonds then Outstanding.

Second, not later than the Business Day preceding each date on which the principal of the 2017 Bonds becomes due and payable under the Indenture, the Trustee will deposit in the Principal Account that sum, if any, required to cause the aggregate amount on deposit in the Principal Account to equal the principal amount of the 2017 Bonds coming due and payable on such date or subject to mandatory sinking fund redemption on such date. No deposit need be made into the Principal Account so long as there is in such fund moneys sufficient to pay the principal becoming due and payable on such date on all 2017 Bonds then Outstanding.

Rate Covenant

The City will, to the fullest extent permitted by law, fix and prescribe, at the commencement of each Fiscal Year, rates and charges for the Water Service which are reasonably expected to be at least sufficient to yield during each Fiscal Year Net Revenues equal to 120% of the Debt Service for such Fiscal Year. The City may make adjustments from time to time in such rates and charges and may make such classification thereof as it deems necessary, but will not reduce the rates and charges then in effect unless the Net Revenues from such reduced rates and charges will at all times be sufficient to meet the foregoing requirements. To the extent that the covenant with respect to rates and charges in connection with any Bonds or Contracts differs from the foregoing covenant, the City will also comply with the covenant with respect to rates and charges in connection with such Bonds or Contracts.

11

Rate Stabilization Fund

There is established under the Indenture a special fund designated as the “Rate Stabilization Fund” to be held by the City in trust thereunder, which fund the City has pledged to the payment of the 2017 Bonds under the Indenture and has agreed and covenanted to maintain and to hold separate and apart from other funds so long as any 2017 Bonds remain Outstanding. On the date of the issuance of the 2017 Bonds, the City will have $0 on deposit in the Rate Stabilization Fund. Money transferred by the City from the Water Revenue Fund to the Rate Stabilization Fund in accordance with the Indenture will be held in the Rate Stabilization Fund and applied in accordance with the Indenture.

The City may withdraw all or any portion of the amounts on deposit in the Rate Stabilization Fund and transfer such amounts to the Water Revenue Fund for application in accordance with the Indenture or, in the event that all or a portion of the 2017 Bonds are discharged in accordance with the Indenture, transfer all or any portion of such amounts for application in accordance with the Indenture.

Under certain circumstances, moneys received in one Fiscal Year may be required or permitted by Generally Accepted Accounting Principles to be recorded as revenue in a subsequent Fiscal Year, regardless of whether such moneys have been deposited in the Rate Stabilization Fund. See APPENDIX A—“FINANCIAL STATEMENTS.”

Additional Indebtedness

Pursuant to the Indenture, the City may at any time execute any Contracts or issue any Bonds payable from Net Revenues on a parity with the obligation to pay principal of and interest on the 2017 Bonds, provided that certain conditions are satisfied as provided below.

(a) The Net Revenues for the most recently completed Fiscal Year or for any consecutive twelve calendar month period during the eighteen calendar month period preceding the date of adoption by the City Council of the City of the resolution authorizing the issuance of such Bonds or the date of the execution of such Contract, as the case may be, as evidenced by both a calculation prepared by the City and a special report prepared by an Independent Certified Public Accountant or an Independent Financial Consultant on such calculation on file with the City, produce a sum equal to at least 120% of the Debt Service for such twelve month period; and

(b) The Net Revenues for the most recently completed Fiscal Year or for any consecutive twelve calendar month period during the eighteen calendar month period preceding the date of the execution of such Contract or the date of adoption by the City Council of the City of the resolution authorizing the issuance of such Bonds, as the case may be, including adjustments to give effect as of the first day of such Fiscal Year or such twelve month period to increases or decreases in rates and charges for the Water Service approved and in effect as of the date of calculation, as evidenced by both a calculation prepared by the City and a special report prepared by an Independent Certified Public Accountant or an Independent Financial Consultant on such calculation on file with the City, produce a sum equal to at least 120% of the Debt Service for such twelve month period plus the Debt Service which would have accrued had such Contract been executed or Bonds been issued at the beginning of such Fiscal Year or such twelve month period.

No Reserve Fund

No reserve fund has been established in connection with the issuance of the 2017 Bonds.

Insurance; Reconstruction, Repair and Replacement

The City has covenanted to procure and maintain or cause to be procured and maintained insurance on the Water System with responsible insurers in such amounts and against such risks (including damage to or

12

destruction of the Water System) as are usually covered in connection with facilities similar to the Water System so long as such insurance is available from reputable insurance companies at reasonable rates. See Appendix B under the caption “PARTICULAR COVENANTS—Insurance” for more information regarding insurance coverages required by the Indenture. See the caption “THE WATER SYSTEM—Water System Insurance” for more information regarding the City’s current insurance coverage with respect to the Water System.

In the event of any damage to or destruction of the Water System caused by the perils covered by such insurance, the Net Proceeds thereof will be applied to the reconstruction, repair or replacement of the damaged or destroyed portion of the Water System. The City will begin such reconstruction, repair or replacement promptly after receipt of such Net Proceeds, and shall continue and properly complete such reconstruction, repair or replacement as expeditiously as possible, and will pay out of such Net Proceeds all costs and expenses in connection with such reconstruction, repair or replacement so that the same will be completed and the Water System will be free and clear of all claims and liens. The City has covenanted to reconstruct, repair or replace the damaged or destroyed portions of the Water System promptly from Net Proceeds if a failure to reconstruct, repair or replace such portions would impair or adversely affect the ability of the City to pay the 2017 Bonds. See the captions “CERTAIN RISKS TO BONDHOLDERS—Water System Expenses” and “CERTAIN RISKS TO BONDHOLDERS—Natural Disasters.”

THE CITY

The City was incorporated in January 1888 and became a charter city in 1911. The City now encompasses approximately 22.9 square miles, and currently has an estimated population of 162,140. The City is located approximately 30 miles east of downtown Los Angeles, in the eastern portion of the County of Los Angeles, adjacent to Orange and San Bernardino Counties. The City is governed by a seven-member City Council. The Mayor is directly elected at large. Since November 3, 1998, the City has been divided into six districts, which are used for all regular elections of Council members. For further information concerning the City, see Appendices A and F attached hereto.

THE WATER SYSTEM

General

The City is the sole provider of water service for residential, commercial, agricultural and industrial enterprises within the City. The City’s current population is estimated to be approximately 162,140 people. The principal facilities of the Water System, as of January 1, 2017, included 34 wells for potable water production, 22 potable water storage reservoirs with a total capacity of approximately 87.7 million gallons (“mg”), 2 recycled water storage reservoirs with a total capacity of approximately 3.7 mg, 15 potable water and 1 recycled water booster station to move water to different elevations, approximately 431 miles of water (both potable and recycled) transmission and distribution mains, and related control and telemetering systems. The operational headquarters of the Water System is located in the City at 148 North Huntington Street, which consists of administrative/field offices, a modular office unit, welding/fabrication shop and four warehouse/storage structures. The Supervisory Control and Data Acquisition System, as well as all equipment, is located on site.

Water Supply

The City obtains water from four principal sources: groundwater, surface water, imported water and recycled wastewater. Groundwater has historically been the primary source of supply. Historical production from each water source is summarized below. The total production capacity of all water facilities for Fiscal Year 2016 was 19,228 acre-feet per year (“AFY”). In Fiscal Year 2016, the City satisfied approximately 67% of its annual domestic water demands from groundwater supplies, 5% from surface supplies and 19% from imported supplies. In addition, the City produced 1,739 acre-feet or 9% of its annual domestic water demands

13

from recycled wastewater for nonpotable uses. For total water production over the past five Fiscal Years, see the table entitled “HISTORIC WATER PRODUCTION” under the caption “—Historic and Projected Water Supply” below.

Groundwater. The City has 36 active and inactive wells that can extract groundwater from three separate basins; the Chino, Six Basins and Spadra groundwater basins. Due to water quality concerns, maintenance and other considerations, some of the City’s 36 wells will typically be inactive at any given time. Total water production capacity of all wells is approximately 31 mgd, based on average groundwater elevation in the various basins. Water production capacity of the wells is dependent on the groundwater levels and groundwater quality. The Claremont Heights basin wells, among the adjudicated Six Basins discussed below, show the greatest sensitivity to water levels with capacities being the greatest when water levels are high following wet years. See the caption “CERTAIN RISKS TO BONDHOLDERS—Drought Declaration” for more information regarding recent hydrological conditions in the State of California.

Chino Basin. The Chino Basin is an alluvial groundwater basin that extends from the San Jose Fault and San Gabriel Mountains on the north to the Santa Ana River on the south and from Chino Hills on the west to the Rialto Colton Fault and Jurupa Mountains on the east. The City pumps from the upper and lower aquifer systems within the basin. The upper aquifer system is unconfined to semi-confined and yields more water, but is subject to water quality impacts from surface sources. The deeper aquifer system is confined and yields less water due to the higher percentage of silt and clay.

The City’s water rights to pump from the Chino Basin have primarily been established by a court decision, being the Chino Basin Municipal Water District v. the City of Chino et al., San Bernardino Superior Court Number 164327 (the “Chino Basin Judgment”), dated January 27, 1978. This decision adjudicated all groundwater rights in Chino Basin and established the Chino Basin Watermaster to account for and implement the management of the Chino Basin.

The Chino Basin Judgment declared that the initial safe yield of the Chino Basin is 140,000 AFY, which is allocated among three classes of water users (or “pools”): (i) overlying agricultural - 82,800 AFY, (ii) overlying non-agricultural (industries) - 7,366 AFY, and (iii) appropriative (municipal) – 49,834 AFY. To the extent that pumping by such users exceeds the share of the safe yield assigned to the overlying pools (or the operating safe yield in the case of the appropriative pool) each pool will provide funds to the Chino Basin Watermaster to replace the overproduction with replenishment water. The City is assessed a fee per acre-foot of water produced in the previous year. The amount of the fee is reassessed annually by the Chino Basin Watermaster, but has ranged from $30 to $60 per acre-foot. In Fiscal Year 2016, the assessment was $57.54 per acre-foot and totaled $720,422.78 for the City.

Pursuant to the Chino Basin Adjudication, the City has been allocated a share of the safe yield of 20.5% or 11,216 AFY, which it may produce without replenishment assessment. Occasionally, in years with higher precipitation, the City is eligible for up to 2,454 acre-feet, which is 20.454% of water rights associated with the Chino Basin enhanced stormwater capture program. In addition, the City is potentially eligible for up to 6,709 acre-feet of water rights associated with an early transfer of Agricultural Pool pumping rights related to the reduction in agricultural pumping in the basin. The City’s share of unproduced Agricultural Pool water is subject to reduction by Appropriative Pool conversion claims at the rate of 2 acre feet per year per acre of agricultural land converted to appropriative uses (example: 100 acres of farmland converted to housing development would entitle the Appropriative Pool participant in which the farmland was located to 200 acre-feet of additional water). To the extent that the City does not pump its total allocation of groundwater for the Fiscal Year, the excess is carried over to the next Fiscal Year. The maximum amount of such carryover cannot exceed 11,216 acre-feet. Finally, the City claims approximately 220 acre-feet per year of additional rights as a result of the Peace II negotiation process which is in place from 2007 to 2017. In 2016, the City’s total annual production right for the Chino Basin was 28,765 acre-feet; however these rights are variable as described above.

14

Most of the Chino Basin water rights holders entered into a Safe Yield Reset agreement (the “Reset Agreement”), which among other proposals, proposed to reduce the annual Safe Yield from 140,000 AFY to 135,000 AFY and to change the treatment of desalter production and desalter induced recharge in the Chino Basin for purposes of calculating the Safe Yield. The Reset Agreement was submitted to the San Bernardino Superior Court, which has ongoing jurisdiction over the Chino Basin, for consideration and approval. On February 22, 2017, the San Bernardino Superior Court issued a revised proposed order (the “Proposed Order”) determining that several portions of the Reset Agreement violated the provisions of Chino Basin Judgement and other court approved agreements among the Chino Basin Purveyors. The court has preliminarily determined that those provisions are not severable from the rest of the Reset Agreement due to the fact that Reset Agreement was a bargained for compromise among the majority of the Chino Basin Purveyors (the City of Chino and Jurupa Community Services District did not approve the Reset Agreement) and accordingly, it would not be equitable to institute only portions of the Reset Agreement. Accordingly, the court has preliminarily rejected the entire agreement, with the exception of the reduction in the annual Safe Yield from 140,000 AFY to 135,000 AFY. The court has asked for further briefings on the Proposed Order and has set a hearing on the Proposed Order for April 28, 2017. The City believes, but cannot guarantee, that if entered by the court the Proposed Order will not have a material adverse impact on the Net Revenues.

Water production capacity of the City’s groundwater wells can vary based on the groundwater levels and groundwater quality. Groundwater levels in the Chino Basin are monitored through the Groundwater Level Monitoring Program, which uses 700 wells to assist in the Chino Basin Watermaster’s monitoring program for hydraulic control, land subsidence and desalter impacts. The Chino Basin Watermaster also regularly monitors groundwater production at all active wells, in addition to monitoring surface water quantity and quality. Current static groundwater levels range from approximately 200 to 450 feet below ground surface.

If the City pumps groundwater from the Chino Basin in excess of its annual production right, the City would be required to pay a replenishment assessment to the Chino Basin Watermaster for purchase of imported water for replenishment. Such replenishment obligation could come in the form of a cash payment or an equivalent amount of groundwater. However, since the City’s production has always been less than its annual production right, the City has not had to pay a replenishment assessment.

Six Basins. Six Basins consists of six individual groundwater basins within the jurisdiction of the Six Basins adjudication. The City has production facilities in three of the Six Basins: Pomona, Lower Claremont Heights, and Upper Claremont Heights basins.

The pumping and storage rights for the Six Basins were adjudicated in 1998 through a stipulated judgment titled Southern California Water Company v. City of La Verne, et al. in the Superior Court of California for the County of Los Angeles (Case No. KC029152) (the “Six Basins Judgment”). The Six Basins Judgment prescribes a physical solution for the coordinated management of the Six Basins with the objective that the parties to the Six Basins Judgment can reliably pump their respective rights and maximize the beneficial use of groundwater. The Six Basins Judgment also established the Six Basins Watermaster to implement and manage the physical solution. The Court maintains continuing jurisdiction over the Six Basins Judgment.

The safe yield of Six Basins was originally established as 19,300 AFY and represents the current groundwater management plan for the Six Basins. The annual operating safe yield of Six Basins is determined based on groundwater level conditions within the individual basins and can vary widely (14,000 to 24,500 AFY). The City’s allocation of the operating safe yield is 20.8%. On average the operating safe yield is 19,300 acre-feet, with the City’s allocation being 4,014 acre-feet. For Calendar Year 2016, the operating safe yield of Six Basins was 16,000 acre-feet, with the City’s allocation set at approximately 3,328 acre-feet. The City can also carry over unused water rights, water spread and store water with certain restrictions.

15

The parties to the Six Basins Judgment have approximately 19 years of experience with the physical solution implemented by the Six Basins Judgment. Some of the parties to the Six Basins Judgment have raised questions and concerns about the current rules, regulations, agreements, and practices of the Six Basins Watermaster, and some of the parties desire a better technical approach to the management of the Six Basins. As a result, the Six Basins Watermaster parties collectively agreed to enhance the management of the Six Basins beyond the execution of the Six Basins Judgment, and in 2012, the parties initiated the development of a Strategic Plan for the Six Basins (the “Six Basins Strategic Plan”). The parties envision that the Six Basins Strategic Plan will be the new integrated management plan for the Six Basins, and that such plan could require amendments to the Six Basins Judgment.

The first two phases of the Six Basins Strategic Plan have been completed. The Phase I Report for the Six Basins Strategic Plan was completed in 2013 and included: (i) a description of the physical water resources of the Six Basins; (ii) a description of the past, present, and future water demands of the water purveyors in the Six Basins, and the water supplies available to meet those demands; (iii) a description of the needs and wants of the parties, as well as common goals for management of the Six Basins and the impediments to achieving those goals; and (iv) a description, on a conceptual level, of the recommended Six Basins Strategic Plan initiatives that, if implemented, will remove existing impediments and achieve the goals of the parties.

Phase II of the Six Basins Strategic Plan was completed in December 2015 and included: (i) a refinement and further description of the Six Basins Strategic Plan projects that were developed on a conceptual level during Phase I; (ii) a simulated model of the Six Basins for use in to evaluating the Six Basins Strategic Plan projects; (iii) economic and institutional evaluations of the Six Basins Strategic Plan projects; a recommended Six Basins Strategic Plan; and (iv) development of an implementation plan for the Six Basins Strategic Plan.

Groundwater production, levels and quality are monitored by the Six Basins Watermaster. Two spreading basins used for the spreading of imported and surplus local surface water within the Six Basins (Thompson Creek and San Antonio Creek Spreading Grounds) are owned and maintained by the Pomona Valley Protective Association (“PVPA”). The Pomona Spreading Grounds, located in the City of Claremont on the Pedley Water Treatment Plant site, is owned and maintained by the City. The Six Basins Watermaster shares in the maintenance cost for work that occurs in the San Antonio Spreading Grounds.

The City pays an annual administrative assessment based on the City’s 20.8% share of the average Six Basins safe yield of 19,300 acre-feet. For Calendar Year 2016, the City’s assessment was $20 per acre-foot for 4,014 acre-feet, totaling $80,280.

Spadra Basin. The Spadra Basin is an alluvial groundwater basin located in the western portion of the City, and is a sub-basin to the Main San Gabriel Basin. The safe yield of this basin has been estimated to be approximately 1,500 AFY, although urbanization of the area and lining of San Jose Creek have limited the amount of natural and return flow recharge to the aquifer system. The Spadra Basin has not been adjudicated and there is no formal groundwater management structure in place for the area. The basin is not considered to be in overdraft. The wells the City currently has in place in the Spadra Basin have a capacity of 1 mgd. Limited natural recharge of the basin and water quality constraints restricts the Spadra Basin’s ability to support additional wells.

Though supply from this basin has primarily been used to supplement the recycled water system, Well 28 does supply water to the potable water system on a limited basis.

The total volume of groundwater pumped by the City from the Chino Basin, Six Basins and Spadra Basin in Fiscal Years 2012-2016 is set forth in the following table:

16

HISTORIC GROUNDWATER VOLUME PUMPED IN ACRE-FEET PER YEAR

Fiscal Year ending June 30 Chino Basin Six Basins Spadra Basin Total

2012 11,421 3,913 106 15,440 2013 12,228 3,763 175 16,166 2014 12,910 3,667 170 16,747 2015 12,516 3,333 128 15,977(1)

2016 9,664 3,010 122 12,796(1)

(1) Declines in groundwater pumped for Fiscal Year 2015 and Fiscal Year 2016 reflect the City’s water conservation efforts in

response to recent statewide drought conditions. See the caption “CERTAIN RISKS TO BONDHOLDERS—Drought Declaration.”

Source: The City.

Sustainable Groundwater Management Act. On September 16, 2014, the California Governor signed Assembly Bill No. 1739 and Senate Bill Nos. 1168 and 1319 (collectively, the Sustainable Groundwater Management Act, or “SGMA”) into law. The SGMA constitutes a legislative effort to regulate groundwater on a Statewide basis. Under existing law, the provisions of the act do not apply to an adjudicated groundwater basin, as specified, or to a local agency that conforms to the requirements of an adjudication of water rights for an adjudicated groundwater basin.

The SGMA requires local agencies producing from unadjudicated basins to form local groundwater sustainability agencies (“GSAs”) that must assess conditions in their local water basins and adopt locally-based management plans. Under the SGMA, GSAs have 20 years to implement plans and achieve long-term groundwater sustainability. The SGMA protects existing surface water and groundwater rights and does not impact current drought response measures.

As noted above under the caption “—Groundwater,” the Chino Basin and Six Basins are adjudicated basins and are not subject to the SGMA. However, the Spadra Basin is a sub-basin to the Main San Gabriel Basin and is not adjudicated. Discussions involving the affected parties, which include the City, Walnut Valley Water District and Cal Poly Pomona, regarding the operation of Spadra Basin have been ongoing to formally develop a GSA. On March 6, 2017, the City Council held a public hearing and adopted a resolution approving the formation of a GSA within the Spadra Basin. The purpose of the GSA formation is to define goals, rules, basin characterization, and acquire funding for the development of a Groundwater Sustainable Plan. The parties are working with the State to meet all of the required deadlines.

Surface Water. The City’s surface water supplies are obtained from San Antonio Canyon and Evey Canyon, major tributaries which feed the San Antonio Creek watershed in the San Gabriel Mountains. The San Antonio Canyon supply is the larger of the two, and the annual quantity of water is based on stipulated rights secured by predecessor agencies. The City’s water rights from San Antonio Canyon are based on its ownership of 99.32% of the Canon Water Company (“CWC”) stock. The City is the only CWC stockowner taking delivery of water based on such ownership. In addition, the City owns all the rights to water from Evey Canyon. The City has rights to 40% of the first 10 mgd (11,202 AFY) of flow from San Antonio Creek and the San Antonio Water Company (“SAWCO”) has the remaining 60%. However, the City has the infrastructure to produce up to only 4 mgd (4,480 AFY) of that local surface water for supply and has not been able to utilize its full entitlement. The City has treated a total annual average flow of 2,000 AFY of local raw surface water over the past ten years from San Antonio Creek.

The City’s local surface water facilities include a intake/weir structure in San Antonio Canyon, the Pedley Filtration Plant (“PFP”) (owned by the City but located in the City of Claremont, and the Canon Waterline connecting San Antonio and Evey Canyons with the PFP. The intake/weir structure in San Antonio

17

Canyon apportions flow between SAWCO and the City. The Canon pipeline begins at the intake/weir structure, collects additional surface water at Evey Canyon, and supplies the PFP with raw surface water for treatment. At the PFP, the pipeline discharges into a diversion structure which conveys all instantaneous flows less than or equal to 4 mgd into the treatment plant; any excess flow above 4 mgd is diverted to a large spreading/infiltration basin located immediately adjacent to the PFP. Water not diverted from San Antonio Creek helps to recharge the Six Basins Aquifer. Local surface water not treated at the PFP is diverted to the nearby Pomona Spreading Grounds for recharge of Six Basins – resulting in a spreading credit for the City.

To maintain and increase the City’s flexibility in this area, the City implemented an agreement with SAWCO and is also planning to reline the Canon Waterline under the San Antonio Dam. The agreement with SAWCO will allow the City to obtain 110% spreading credit in Six Basins when the City diverts its portion of the weir diversion during times when the Canon Waterline is out of service.

Imported Water. The City obtains imported water from the Three Valleys Municipal Water District (“TVMWD”) which is a member agency of the Metropolitan Water District of Southern California (“MWD”). MWD is a public corporation organized in 1928 under the authority of the Metropolitan Water District Act (the “MWD Act”). The MWD Act provides a means whereby groups of cities and certain other governmental subdivisions such as municipal water districts, not necessarily contiguous, may join together for the development of a water supply. The TVMWD was formed in 1950 (originally named the “Pomona Valley Municipal Water District,” it changed its name in 1986) for the purpose of transporting state water project (“SWP”) and Colorado River water to supplement the local water supply.

The primary source of supply of imported water is MWD’s Weymouth Treatment Plant in La Verne, which currently produces a blend of Northern California and Colorado River water. The water is conveyed through the Orange County Feeder and the Pomona-Walnut-Rowland (“PWR”) Joint Water Line. Water from the TVMWD Miramar Plant is 100% SWP water. The City’s imported supply connections have a total capacity of 158.7 mgd. Although water production from imported sources has generally increased over the last few years, the City does not anticipate having to use the City’s full imported water allocation at these connections. For Fiscal Year 2017, the City is charged $987.00 per acre-foot of water purchased.

TVMWD HAS NOT ENTERED INTO ANY CONTRACTUAL COMMITMENT WITH THE CITY, THE TRUSTEE OR THE OWNERS OF THE 2017 BONDS TO PROVIDE TVMWD INFORMATION TO THE CITY OR THE OWNERS OF THE 2017 BONDS.

TVMWD HAS NOT REVIEWED THIS OFFICIAL STATEMENT AND HAS NOT MADE REPRESENTATIONS OR WARRANTIES WITH RESPECT TO THE ACCURACY OR COMPLETENESS OF THE INFORMATION CONTAINED OR INCORPORATED HEREIN, INCLUDING INFORMATION WITH REGARD TO TVMWD. TVMWD IS NOT CONTRACTUALLY OBLIGATED, AND HAS NOT UNDERTAKEN, TO UPDATE SUCH INFORMATION FOR THE BENEFIT OF THE CITY OR THE OWNERS OF THE 2017 BONDS UNDER RULE 15C2-12.

MWD faces various challenges in the continued supply of imported water to TVMWD. A description of these challenges as well as a variety of other operating information with respect to MWD is included in certain disclosure documents prepared by MWD. MWD has entered into certain continuing disclosure agreements pursuant to which MWD is contractually obligated for the benefit of owners of certain of their outstanding obligations, to file certain annual reports, notices of certain material events as defined under Rule 15c2-12 of the Exchange Act (“Rule 15c2-12”) and annual audited financial statements (the “MWD Information”) with the Municipal Securities Rulemaking Board. Certain of the MWD Information can be found at www.emma.msrb.org. MWD HAS NOT ENTERED INTO ANY CONTRACTUAL COMMITMENT WITH THE CITY, THE TRUSTEE OR THE OWNERS OF THE 2017 BONDS TO PROVIDE MWD INFORMATION TO THE CITY OR THE OWNERS OF THE 2017 BONDS.

18

MWD HAS NOT REVIEWED THIS OFFICIAL STATEMENT AND HAS NOT MADE REPRESENTATIONS OR WARRANTIES WITH RESPECT TO THE ACCURACY OR COMPLETENESS OF THE INFORMATION CONTAINED OR INCORPORATED HEREIN, INCLUDING INFORMATION WITH REGARD TO MWD. MWD IS NOT CONTRACTUALLY OBLIGATED, AND HAS NOT UNDERTAKEN, TO UPDATE SUCH INFORMATION FOR THE BENEFIT OF THE CITY OR THE OWNERS OF THE 2017 BONDS UNDER RULE 15C2-12.

Recycled Water. The City has the right to purchase and resell recycled water from the Los Angeles County Sanitation District (“LACSD”) No. 21 Pomona Water Reclamation Plant (“PWRP”). The tertiary treatment capacity of this facility is 15 mgd, and is capable of producing high quality tertiary effluent for a variety of industrial and irrigation purposes.

The City’s recycled water system includes City-owned facilities and facilities not owned by the City. The City-owned facilities that are currently active consist of the PWRP booster pump station, Well 19, Well 31, a 0.7-million gallon (MG) reservoir, and a 3-MG reservoir. In addition, the City owns a number of non-potable wells in the northeastern part of the City near I-10 (Wells S5, S1, W33, S2A, and S2B); however, these wells are currently inactive and have limited production capacities as well as water quality constraints, and consequently the City does not expect to repair or utilize these wells as recycled water supply.

Recycled water received by the City from the PWRP is currently treated to Title 22 standards, and therefore is used only for non-potable uses. It is expected that the quality of these flows will be maintained by LACSD, which owns and operates the PWRP.

In Fiscal Year 2016 the City sold approximately 1,739 acre-feet of recycled water to 8 users. The recycled water is supplied to customers on an interruptible basis.

Storage. Storage for potable water has been provided for the existing water transmission and distribution system to reduce peak flows in the pipeline, provide uniform pressure regulation and to provide a continuous source of water supply for limited periods of time when main sources of supplies are interrupted. The City has 22 reservoirs with a storage capacity of approximately 87.7 mg. Such storage capacity provides the Water System with approximately 3.5 days (based on average daily use) of emergency supplies.

Water Quality Compliance. Water quality standards imposed by law may affect the reliability of the City’s water supply. The City Water/Wastewater Operations Department contracts with private water quality laboratories approved by the State Water Resources Control Board – Division of Drinking Water (the “DDW”). Bacteriological and chemical tests of water samples (from all sources and from the distribution system) are taken on a frequent and routine basis. Sampling frequencies are based on the degree of hazard and quantity of the particular constituent in the source sample.

The City’s groundwater supplies originate from three separate hydrogeologic basins – each with its own quality issues and treatment strategies. All of the City’s wells and treatment facilities are subject to regular water quality sampling mandated by the DDW as described above, and the City is equipped to respond to a variety of constituents present in its supply sources that can affect water quality.

A majority of the groundwater pumped by the City from the Chino Basin currently undergoes blending and anion exchange treatment at the Anion Exchange Plant (“AEP”) to reduce nitrate and perchlorate concentrations. Additionally, some wells receive wellhead treatment through disinfection and air stripping. Because of high perchlorate levels, the City has had to shutdown some wells; however, the City has constructed a new perchlorate treatment plant adjacent to the AEP facility to maximize the use of the City’s existing wells in the Chino Basin.

The City pumps groundwater from three basins within the Six Basins – Pomona, Lower Claremont and Upper Claremont basins. A majority of the groundwater pumped from the Pomona Basin is treated

19

through a combination of blending and treatment plants for perchlorate, nitrate and VOCs. The Harrison Groundwater Treatment Facility treats water from Well 37 for nitrate using ion exchange. The 10 and Towne Groundwater Treatment Plant treats three wells for VOCs through air stripping, as does the Well 3 air stripping facility. Perchlorate and nitrate levels within the Six Basins are reduced through blending with TVMWD/MWD imported water. There are currently no water quality issues with water pumped from Lower Claremont or Upper Claremont basins.

Groundwater pumped from the Spadra Basin is primarily used to supplement potable peak water demands at this time. Staff is working to re-equip Well 19 (theft problems) to supplement recycled water flows to meet non-potable demand. The Well 19 water is untreated and meets Title 22 standards. The City is currently investigating areas of recently improved water quality in Spadra Basin for potential longer-term potable use.

The City monitors current and potential future drinking water regulations for Chromium VI, VOCs and other contaminants. If the regulations create a maximum contaminant level that could impact groundwater production, the City would determine the appropriate treatment actions to take to maintain groundwater production levels. To enhance the City’s ability to adapt to water quality regulations and to protect groundwater pumping rights, the City is currently undertaking a new project to install four on-site treatment processes for VOCs at four different wells within the Chino Basin that had been inactive due to water quality concerns. By installing these treatment processes on wells within the Chino Basin, it will also be possible to add four additional inactive wells to the pumping schedule by blending water. Along with the work being done in the Chino Basin, the City is also exploring the potential for additional nitrate, perchlorate and VOC treatment in the Six Basins area.

Surface water from San Antonio Creek is generally of a very high quality. The PFP, where local surface water is treated, is in continuous operation throughout most of the year, except during periods when the raw water turbidity is too high for the filters to meet the permitted finished water turbidity requirement of 10 NTU. This is typically during extreme wet weather events and is not common. It is estimated that the PFP is shut down an average of two weeks per year as the result of high raw water turbidity during exceptionally rainy periods. The flows are instead routed to the adjacent Pomona Spreading Grounds or the PVPA grounds south of the dam for groundwater recharge. The annual wet-weather shutdown time varies from year to year depending on the amount of rainfall received and the intensity of the rainfall events. As turbidity of San Antonio Creek is not expected to increase in the future, supply projections for local surface water are not expected to be impacted.

The City does not currently experience and does not foresee issues with its imported water quality as it receives treated water from TVMWD. The City is currently investigating the possibility of taking raw imported supplies and treating them at an upgraded PFP. If successful, the PFP would be able to run year-round.

The kind and degree of water treatment which is also effected through the Water System is regulated, to a large extent, by the federal government. Clean water standards set forth in the Safe Drinking Water Act and the Environmental Protection Act continue to set standards for the operations of the Water System and to mandate its use of technology. In the event that the DDW or the federal government, either acting through the Environmental Protection Agency or by adoption of additional legislation, should impose stricter quality standards upon the Water System, Operation and Maintenance Costs would increase accordingly and rates and charges would have to be increased to offset such expenses. It is not possible to predict the direction which State and Federal regulation will take with respect to water treatment. See the caption “CERTAIN RISKS TO BONDHOLDERS” for a discussion of other factors which could affect Revenues of the Water System.

20

Historic and Projected Water Supply

Set forth below is a summary of the City’s sources of water supply for Fiscal Years 2012 through 2016.

HISTORIC WATER SUPPLY IN ACRE-FEET PER YEAR

Fiscal Year ending June 30 Ground Water Surface Water Imported Water Recycled Water Total(1)

2012 15,440 2,941 3,085 1,561 23,027 2013 16,166 1,424 5,153 1,687 24,440 2014 16,747 894 5,929 793 24,363 2015 15,977 979 4,062 1,593 22,611(2)

2016 12,796 1,047 3,645 1,739 19,228(2)

(1) Gross water deliveries. (Not billed to customers.) (2) Declines in water supply for Fiscal Year 2015 and Fiscal Year 2016 reflect the City’s water conservation efforts in response

to recent statewide drought conditions. See the caption “CERTAIN RISKS TO BONDHOLDERS—Drought Declaration.” Source: The City.

Set forth below is a summary of the City’s projected water supplies over the current and next four Fiscal Years.

PROJECTED WATER SUPPLY IN ACRE-FEET PER YEAR(1)

Fiscal Year ending June 30 Ground Water Surface Water Imported Water Recycled Water Total(2)

2017 14,896(3) 1,047 3,645 2,139 21,727 2018 16,996 1,047 3,645 2,539 24,227 2019 16,996 1,047 3,645 2,939 24,627 2020 16,996 1,047 3,645 3,339 25,027 2021 16,996 1,047 3,645 3,739 25,427

(1) Projections are based on baseline assumptions set forth in the City’s 2015 Urban Water Management Plan, which have been

modified to reflect current circumstances. (2) Gross water deliveries. (Not billed to customers.) (3) Increase in groundwater supply over Fiscal Year 2016 amount reflects increased groundwater production capacity due to

wellhead VOC treatment processes to come online in Fiscal Year 2017. See the caption “—Water Supply—Water Quality Compliance” herein.

Source: The City.

Water System Insurance

The City maintains a self-insurance program for general liability, workers compensation and unemployment insurance. The City is a member of the California State Association of Counties Excess Insurance Authority (“CSAC-EIA”). CSAC-EIA is a governmental joint powers authority created by certain California counties and cities to provide a pooled approach to the members’ liability and excess workers’ compensation coverage pursuant to the California Government Code. The authority manages various types of pooled coverage programs for participating members.

21

Through CSAC-EIA, the City has a program limit of $25,000,000 with a self-insured retention of $1,000,000 for the City’s excess liability and workers compensation program. Additionally, the City purchases catastrophic excess liability coverage that provides an additional $25,000,000 in coverage.

Employee Relations

A total of 68 full-time equivalent employees operate and maintain the City’s water and sewer systems. The City’s Water and Wastewater Operations Department has never experienced a strike, slow down or work stoppage. SBPEA/Teamster Local 1932 represents non-management employees of the water and sewer systems as part of a larger collective bargaining unit.

Outstanding Indebtedness

Following the issuance of the 2017 Bonds, there will be no outstanding indebtedness other than that represented by the 2017 Bonds.

Historic Water System Service Connections

The following table presents a summary of service connections to the Water System for Fiscal Years 2012 through 2016.

HISTORIC WATER CONNECTIONS

Fiscal Year Ending June 30 Connections Increase

2012 29,273 N/A% 2013 29,377 0.4 2014 29,520 0.5 2015 29,549 0.1 2016 29,583 0.1

Source: The City.

Historic Water Deliveries

The following table presents a summary of historic potable water deliveries for the Water System in acre-feet per year for Fiscal Years 2012 through 2016.

HISTORIC WATER DELIVERIES IN ACRE-FEET PER YEAR

Fiscal Year ending June 30 Deliveries(1) Increase/(Decrease)

2012 20,011 N/A% 2013 20,913 4.3 2014 21,971 4.8 2015 20,057(2) (9.5) 2016 17,728 (13.1)

(1) Gross water sales. (Billed to customers.) (2) Decreases in water deliveries for Fiscal Year 2015 and Fiscal Year 2016 reflect the City’s water conservation efforts in

response to recent statewide drought conditions. See the caption “CERTAIN RISKS TO BONDHOLDERS—Drought Declaration.”

Source: The City.

22

Historic Water System Services Charges and Sale Revenues

The following table shows annual Water System service charges and sale revenues from water sales for Fiscal Years 2012 through 2016.

HISTORIC WATER SYSTEM SERVICE CHARGES AND SALE REVENUES

Fiscal Year ending June 30

Service Charges and Sales Revenues Increase/(Decrease)

2012 $29,398,232 N/A% 2013 30,633,205 4.2 2014 30,098,992(1) (1.7) 2015 29,076,093(1) (3.4) 2016 28,189,546(1) (3.1)

(1) Decrease in service charge revenues reflects the City’s water conservation efforts in response to recent statewide drought

conditions. See the caption “CERTAIN RISKS TO BONDHOLDERS—Drought Declaration.” Source: Audited Financial Statements of the City for Fiscal Years 2012 through 2016.

Largest Customers

The following table sets forth the ten largest customers of the Water System as of June 30, 2016, as determined by annual payments. These ten largest users of the Water System accounted for approximately 9.13% of all water sale revenues received in Fiscal Year 2016.

Customer Type of Account Annual Payment

Percentage of Service Charges

and Sales Revenues

City of Pomona Government/Commercial $691,813 2.45% Pomona Unified School Dist. Government/Commercial 638,774 2.27 LA County Fair Commercial 319,559 1.13 Ripon Cogeneration LLC Commercial 216,648 0.77 Pomona Valley Hospital

Medical Center Commercial 203,495 0.72

Crest Financing, LP Commercial 146,702 0.52 Lanterman State Hospital Government/Commercial 115,698 0.41 Village Gate Homeowners

Assn. Commercial 91,712 0.33

Nijjar Realty/PAMA Management

Commercial 79,776 0.28 Mountain Meadows Commercial 69,858 0.25 TOTAL $2,574,075 9.13% Source: The City.

Water System Rates and Charges

General. In accordance with California law, the City may, from time to time, fix, alter or change fixed monthly system access fees, commodity charges and other fees related to the Water System. Consequently, the City periodically reviews water rates. In accordance with California law, the City reviews such charges and fees to determine if they are sufficient to cover Operation and Maintenance costs, capital improvement expenditures and debt service requirements. Such charges and fees are set by the City for the

23

services provided by the Water System after a public hearing is held, generally at the time of adoption of the annual budget. Neither the City nor the Water System is subject to the jurisdiction of, or regulation by, the California Public Utilities Commission or any other regulatory body in connection with the establishment of charges and fees related to the Water System. See “CONSTITUTIONAL LIMITATIONS ON APPROPRIATIONS AND CHARGES—Proposition 218” herein for a discussion of the treatment of the City’s rates and charges in light of Proposition 218.

The City staff annually determines the accuracy of the Water System rate structure after full consideration of expected operations, maintenance and capital costs. In accordance with City policy, operating surpluses may be added to Water Utility Fund unrestricted reserves, or returned to ratepayers through mitigation of future rate increases.

Water Rates. The following table discloses the current schedule of potable water rates and charges of the City currently in effect. The City is authorized under Chapter 34 of the Pomona City Code to levy a bi-monthly charge based on meter size (the “Meter Charge”) and a water consumption charge (the “Commodity Rate”) based on consumption units of 100 cubic feet (a “Unit”), for the purpose of paying the costs associated with the potable water service provided by the Water System. The Pomona City Code also provides that rates are automatically adjusted each January 1 by the consumer price index. City Council intends to periodically review the rate structure to determine if additional rate increases are necessary. The City also charges separately for private fire service (based on the size of the applicable lateral) and temporary construction hook-ups (based on meter size and use). The City has retained a rate consultant, who is currently undertaking a study of the City’s water rates and charges to assist the City in determining whether to increase the current water rates and charges set forth herein. The City expects such rate study to be completed in 2017 and that rate increases which may be approved by the City Council would take effect in January 2018.

The current schedule of Water System rates for users of the City’s Water System, described below and in effect since January 2017, is set forth below:

WATER SERVICE CHARGES

Water Bi-Monthly Service Charge

Meter Size Service Charge Meter Size Service Charge

5/8” $ 49.45 3” $ 535.26 3/4" 66.78 4” 882.29 1” 101.49 6” 1,749.85

1½” 188.25 8” 2,790.90 2” 292.36 10” 4,005.51

Units(1) of Water Used Water Commodity Rate (per unit(1))

Single Family Residential 1st tier (1-15 units) $0.96 2nd tier (16-75 units) 1.75 3rd tier (76+ units) 3.13

Other Customers(2) 1st tier (1-15 units) $0.96 2nd tier (16-75 units) 1.90

(1) 1 consumption unit equals 100 cubic feet. (2) Includes multi-family residential, commercial, industrial and government customers. Source: The City.

24

The current charges for recycled water (per acre-foot) are 70% of the service charges for potable water shown above.

For potable water service provided outside the City limits (which service accounted for less than 1% of total water deliveries in Fiscal Year 2016), the Meter Charges and Commodity Rates are increased approximately 25%.

The chart below sets forth a comparison of the City’s current bi-monthly rates and charges for the Water System for a single family residential user with a 5/8” residential water meter to those of surrounding communities or agencies (utilizing 36 ccf of water per two month period) as of January 1, 2017:

City or Agency Average Bi-Monthly Water Bill

Rowland Water District $ 214.51 Walnut Valley Water District 155.86

City of La Verne 154.52 City of Chino 149.30

City of Ontario 143.94 City of Chino Hills 140.12

Monte Vista Water District 108.35 City of Pomona 100.60 City of Upland 99.05

Source: The City.

Water System Buy-in Fees. The City imposes upon new water service connections a one-time water system buy-in fee. The buy-in fees are based on meter size. Effective January 2017, the City levies the following water system buy-in fee:

Meter Size Buy-In Fee

5/8” $ 2,799.17 3/4” 4,198.77 1” 6,998.01

1½” 13,996.11 2” 22,393.84 3” 44,787.76 4” 69,980.95 6” 139,961.97 8” 223,939.19

10” 321,912.61

In the Fiscal Year ended June 30, 2016, 3.6% of the Water Revenues of the Water System were buy-in fees. The City’s buy-in fees are reviewed annually and revised as necessary to pay for the capital costs of constructing public water treatment and delivery facilities for the future.


25

Collection Procedures

The City is on a bi-monthly billing cycle. Bills are sent out every day of each cycle, and thus there is no uniform due date. Payment is due within twenty-one (21) days, and if not paid by the due date, a late fee up to 5% is applied to the bill amount. A past due notice is sent, pursuant to which the customer has 14 calendar days to pay. If the account remains unpaid by the past due payment date, a 15-day final notice (door hanger) is placed on the service address door and an additional penalty fee of $36.77 is assessed. Water service is disconnected 16 calendar days after the posting of the final notice and a fee of $39.71 is assessed. If services are shut-off, the fee to reestablish service is $39.71 ($76.53 after normal business hours or on holidays and weekends). Currently 0.4% of the accounts, which is less than 1% of Revenues, are considered uncollectable by the City.

Future Water System Improvements

The City intends to spend approximately $13,000,000 from Fiscal Years 2017 through 2021 on various water infrastructure projects. Projects include water main replacements, groundwater well evaluation and rehabilitation, booster pump upgrades, a new water and wastewater operations facility, a water masterplan and new water treatment facilities. Construction of these projects is expected to be completed from Fiscal Years 2017 through 2021, with approximately 90% of the projects completed by Fiscal Year 2018.

The City anticipates financing these future Water System Improvements from revenues and grants. There is no expectation of incurring additional debt within the next four Fiscal Years.

Projected Service Connections

The City currently estimates that connections to the Water System for the current and next four Fiscal Years will be as follows:

PROJECTED WATER CONNECTIONS

Fiscal Year Ending June 30 Connections Increase

2017 29,879 1.0% 2018 30,178 1.0 2019 30,479 1.0 2020 30,784 1.0 2021 31,092 1.0

Source: The City.


26

Projected Water System Usage

The City currently estimates that Water System deliveries (demand) to customers for the current and next four Fiscal Years will be as follows:

PROJECTED WATER DELIVERIES IN ACRE-FEET PER YEAR

Fiscal Year Ending June 30 Deliveries Increase

2017(1) 19,501 9.1% 2018 20,086 3.0 2019 20,688 3.0 2020 21,309 3.0 2021 21,948 3.0

(1) Based on actual results through January 2017 and increased annually thereafter, consistent with the City’s 2015 Urban Water

Management Plan and anticipated growth resulting from reduced mandatory conservation requirements described under the caption “CERTAIN RISKS TO BONDHOLDERS—Drought Declaration.”

Source: The City.

WATER SYSTEM FINANCIAL INFORMATION

Financial Statements

A copy of the most recent audited financial statements of the City for the fiscal year ending June 30, 2016, prepared by Lance Soll & Lunghard, LLP, Brea, California are included as Appendix A hereto (the “Financial Statements”). The Financial Statements have been prepared on a combined basis and include the Water Fund and the Sewer Fund. The obligation of the City to pay the principal of and interest on the 2017 Bonds is limited to Net Revenues of the Water System and the City is not obligated to apply any other revenues to make such payments.

The summary operating results contained under the caption “WATER SYSTEM FINANCIAL INFORMATION — Historic and Projected Operating Results and Debt Service Coverage” are derived from these financial statements (excluding certain non-cash items and after certain other adjustments) and are qualified in their entirety by reference to such statements, including the notes thereto.

The auditor’s letter concludes that the audited financial statements present fairly, in all material respects, the respective financial position of the governmental activities, the business-type activities, each major fund, and the aggregate remaining fund information of the City, as of June 30, 2016, and the respective changes in financial position and, where applicable, cash flows thereof for the year then ended in conformity with accounting principles generally accepted in the United States of America.

The City Council approved the audited financial statements of the City for the Fiscal Year ending June 30, 2016 on February 20, 2017.


27

Historic and Projected Operating Results and Debt Service Coverage

The following table is a summary of operating results of the Water System of the City for Fiscal Years 2012 through 2016, as well as projected operating results of the Water System of the City for Fiscal Years 2017 and 2018.

WATER SYSTEM HISTORIC AND PROJECTED OPERATING RESULTS

FISCAL YEAR ENDED JUNE 30

2012 2013 2014 2015 2016 2017(1) 2018(2)

REVENUES Charges for services(3)

$ 29,398,232 $ 30,633,205 $ 30,098,992 $ 29,076,093 $ 28,189,546 $28,412,215 $ 29,549,724

Interest revenue 67,173 5,728 69,170 37,258 207,032 249,000 314,500 Intergovernmental 388,000 -- -- -- -- -- -- Sale of surplus water

-- -- 1,512,150 812,150 567,500 1,500,000 1,300,000

TOTAL REVENUES

$ 29,853,405 $ 30,638,933 $ 31,680,312 $ 29,925,501 $ 28,964,078 $30,161,215 $ 31,164,224

OPERATION AND MAINTENANCE COSTS(4) Personnel services(5) $ 6,959,984 $ 6,972,182 $ 6,865,371 $ 7,151,904 $ 6,367,886 $ 7,415,152 $ 7,577,928 Operations(6) 9,768,281 12,924,281 14,345,271 12,241,670 11,430,023 14,337,560 15,262,441 Claims expense 119,730 79,381 77,008 16,297 12,020 10,839 11,865 Insurance 173,610 184,163 206,639 216,658 263,536 249,053 255,263 TOTAL OPERATION AND MAINTENANCE COSTS $ 17,021,605 $ 20,160,007 $ 21,494,289 $ 19,626,529 $ 18,073,465 $22,012,604 $ 23,107,497 NET REVENUES $ 12,831,800 $ 10,478,926 $ 10,186,023 $ 10,298,972 $ 10,890,613 $ 8,148,611 $ 8,056,727 DEBT SERVICE 2007 Bonds(7) $ 6,337,958 $ 6,339,571 $ 6,338,994 $ 6,341,289 $ 6,341,195 $ 6,337,961 $ -- 2017 Bonds -- -- -- -- -- -- 5,122,357 TOTAL DEBT SERVICE

$ 6,337,958 $ 6,339,571 $ 6,338,994 $ 6,341,289 $ 6,341,195 $ 6,337,961 $ 5,122,357

DEBT SERVICE COVERAGE

2.02

1.65

1.61

1.62

1.72 1.29 1.57

NET REVENUES AVAILABLE FOR OTHER PURPOSES $ 6,493,842 $ 4,139,355 $ 3,847,029 $ 3,957,683 $ 4,549,418 $ 1,810,650 $ 2,934,370

(1) Based on actual unaudited operating results through January, 2017. The projections do not include any year-end adjustments. (2) Based on preliminary budget for Fiscal Year 2018. (3) Amounts for Fiscal Year 2012 through 2016 reflect charges for services as set forth in the City’s Audited Financial Statements for Fiscal Years 2012

through 2016, respectively. Decreases in service charge revenues in Fiscal Years 2014 through 2016 reflect the City’s water conservation efforts in response to recent statewide drought conditions. See the caption “CERTAIN RISKS TO BONDHOLDERS—Drought Declaration.” Charges for services are projected to increase by approximately 1% in Fiscal Year 2017 and to increase by approximately 4% in Fiscal Year 2018.

(4) Operations and maintenance costs do not include depreciation or amortization. Includes costs to reimburse general fund for flood control and storm drain repairs and maintenance which the City attributes to the water fund.

(5) The decrease in personnel services costs in Fiscal Year 2016 is due to a non-cash accounting adjustment made to the City’s Audited Financial Statements for Fiscal Year 2016 reflecting a one-time $1 million credit to the Water Fund for pension expenses pursuant to GASB 68. Without the one-time $1 million credit, debt service coverage would have been approximately 1.56. Personnel services costs are projected to increase by approximately 16% in Fiscal Year 2017 and to increase by approximately by approximately 2% in Fiscal Year 2018, due to salary increases and increases in pension costs. Fiscal Year 2017 and 2018 projections do not reflect potential year-end adjustments.

(6) Includes cost of imported water. Also includes Water Fund payment to City General Fund for Water Fund share of City overhead which, pursuant to City Ordinance No. 3537, is equal to 5% of the total operating revenues plus interest income of the Water Fund, calculated based on the audited financial statements of the prior Fiscal Year. Operations expenses fluctuate due to varying annual costs related to water purchases and treatment. Operations expenses are projected to increase by approximately 25% in Fiscal Year 2017 and to increase by approximately 6% in Fiscal Year 2018.

(7) To be refunded from the proceeds of the 2017 Bonds. Source: The City.

28

Defined Benefit Pension Plan

Summary of Plans. The City contributes to California Public Employees Retirement System (“CalPERS”), an agent multiple-employer public employee defined benefit pension plan for all of the City’s qualified permanent and probationary employees who participate in the City’s Miscellaneous and Safety Plans. CalPERS provides service retirement and disability benefits, annual cost of living adjustments and death benefits to plan members, who must be public employees and beneficiaries. CalPERS acts as a common investment and administrative agent for participating public entities within the State, including the City. Benefits are based on years of credited service, equal to one year of full time employment. Members with five years of total service are eligible to retire at age 50 with statutorily reduced benefits. All members are eligible for non-duty disability benefits after 10 years of service. The death benefit is one of the following: the Basic Death Benefit, the 1957 Survivor Benefit, or the Optional Settlement 2W Death Benefit. The cost of living adjustments for each plan are applied as specified by the Public Employees’ Retirement Law.

CalPERS plan benefit provisions and all other requirements are established by State statute and City resolution or ordinance. Participants in the City’s CalPERS plan contribute the full amount of the required employee contribution, which is up to 7% of their annual covered salary for the Miscellaneous Plan, depending on benefit level. The City’s CalPERS Plan provisions and benefits in effect at June 30, 2016 are summarized as follows:

City of Pomona Summary of CalPERS Miscellaneous Plan Benefit Provisions

Tier 1(1) Tier 2(1) PEPRA

Hire Date Prior to 8/14/2011 On or after 8/14/2011 but

prior to 1/1/2013 On or after 1/1/2013 Benefit Formula 2.0% at 55 2.0% at 60 2.0% at 62 Benefit Vesting Schedule 5 years 5 years 5 years Benefit Payments Monthly for life Monthly for life Monthly for life Retirement Age Minimum 50 yrs Minimum 50 yrs Minimum 52 yrs Monthly Benefits, as a % of Eligible Compensation

1.426% - 2.418%, 50 yrs – 63+ yrs, respectively



Required Employee Contribution Rate 7.000% 7.000% 6.250%

Required City Contribution Rate 17.053% 17.053% 17.053%

(1) Plan is closed to new entrants. Source: Audited Financial Statements of the City for Fiscal Year 2016.

Section 20814(c) of the California Public Employees’ Retirement Law requires that the employer contribution rates for all public employers be determined on an annual basis by the actuary and shall be effective on the July 1 following notice of a change in the rate. The total plan contributions are determined through CalPERS’ annual actuarial valuation process. The actuarially determined rate is the estimated amount, expressed as a percentage of payroll, necessary to finance the costs of benefits earned by employees during the year, with an additional amount to finance any unfunded accrued liability. The employer is required to contribute the difference between the actuarially determined rate and the contribution rate of employees.

The City’s contribution rates for the Miscellaneous Plan for Fiscal Years 2015 and 2016 were 17.053% and 19.749%, respectively. For Fiscal Years 2015 and 2016, the City’s contributions to its Miscellaneous Plan totaled $3,803,283 and $4,653,491, respectively, which were equal to the respective annual required contributions (each, an “ARC”) of the City. For Fiscal Years 2015 and 2016, the City paid $1,042,803 and $1,133,271, respectively, of such CalPERS miscellaneous plan contributions from the Water Fund. The City has budgeted its annual required contribution in Fiscal Year 2017 to be approximately

29

$5,310,314 (assuming that the City elects the lump sum payment option), with $1,078,661 to be paid from the Water Fund.

The Normal Cost contribution rates for Fiscal Years 2017 and 2018 for the Miscellaneous Plan have been established by CalPERS at 8.060% and 7.888%, respectively, of annual covered payroll. Based on CalPERS’ August 2016 actuarial valuation report for the City’s Miscellaneous Plan, the City’s Fiscal Year 2017 and Fiscal Year 2018 payments for its unfunded liability for the Miscellaneous Plan have been established at $3,123,767 and $3,697,518, respectively.

Employees hired on or after January 1, 2013 who meet the definition of a “New CalPERS Member” are subject to the California Public Employees’ Pension Reform Act of 2013 (“AB 340”), which was signed by the State Governor on September 12, 2012. AB 340 established a new pension tier (2% at 62 formula) with a maximum benefit formula of 2.5% at age 67. Benefits for such participants are calculated on the highest average annual compensation over a consecutive 36 month period. Employees are required to pay at least 50% of the total normal cost rate.

Effective January 1, 2013, AB 340: (i) requires public retirement systems and their participating employers to share equally with employees the normal cost rate for such retirement systems; (ii) prohibits employers from paying employer-paid member contributions to such retirement systems for employees hired after January 1, 2013 who were not already enrolled in CalPERS through their previous employers; (iii) establishes a compulsory maximum non-safety benefit formula of 2.5% at age 67; (iv) defines final compensation as the highest average annual pensionable compensation earned during a 36 month period; and (v) caps pensionable income at $110,100 ($132,120 for employees not enrolled in Social Security) subject to Consumer Price Index increases.

Provisions in AB 340 will not likely have a material effect on City’s contributions in the short term. However, additional employee contributions, limits on pensionable compensation and higher retirement ages for new members will reduce the City’s total pension liability and potentially reduce City contribution levels in the long term.

Net Pension Liability, Pension Expense and Deferred Outflows and Deferred Inflows of Resources Related to Pensions. The following table shows the changes in net pension liability during Fiscal Year 2015 for the City’s Miscellaneous Plan.


30

Increase (Decrease)

Miscellaneous Plan Total Pension Liability (a)

Plan Fiduciary Net Position (b)

Net Pension Liability/(Assets)

(c)=(a)-(b)

Balance at: 6/30/2014 (Valuation Date) (1) $ 254,669,734 $ 207,812,443 $ 46,857,291 Changes Recognized for the Measurement Period Service Cost 3,161,189 -- 3,161,189 Interest on the Total Pension Liability 18,495,828 -- 18,495,828 Changes of Benefit Terms -- -- -- Difference between Expected and Actual Experience (3,363,816) -- (3,363,816) Changes of Assumptions (4,427,183) -- (4,427,183) Contribution from the Employer -- 3,747,091 (3,747,091) Contributions from Employees -- 1,766,013 (1,766,013) Net Investment Income -- 4,578,528 (4,578,528) Benefit Payments including Refunds of

Employee Contributions (13,367,634) (13,367,634) -- Plan to Plan Resource Movement -- (521) 521 Administrative Expense -- (235,754) 235,754 Net Changes During 2014-15 498,384 (3,512,277) (4,010,661) Balance at: 6/30/2015 (Measurement Date) (1) $ 255,168,118 $ 204,300,166 $ 50,867,952

(1) The fiduciary net position includes receivables for employee service buybacks, deficiency reserves, fiduciary self-insurance and other post-

employment benefits expense. This may differ from the plan assets reported in the funding actuarial valuation report. Source: Audited Financial Statements of the City for Fiscal Year 2016.

As of the start of the measurement period (July 1, 2014), the net pension liability for the Miscellaneous Plan was $46,857,291. For the measurement period ending June 30, 2015 (the measurement date), the City incurred a pension expense/(income) of $3,996,959 for both the Miscellaneous Plan and Safety Plan. Note that no adjustments have been made for contributions subsequent to the measurement date. Adequate treatment of any contributions made after the measurement date is the responsibility of the City. As of June 30, 2016, the City has deferred outflows and deferred inflows of resources related to pensions as follows (includes both Miscellaneous and Safety Plans):

Deferred Outflows of Resources

Deferred Inflows of Resources

Current year contributions that occurred after the measurement date of June 30, 2015 $ 11,791,373 $ --

Changes of assumptions -- (5,897,071) Differences between Expected and Actual Experiences -- (3,105,709) Net Difference between Projected and Actual Earnings

on Pension Plan Investments 19,249,497 (23,622,900) Total $ 31,040,870 $ (32,625,680)

Source: Audited Financial Statements of the City for Fiscal Year 2016.


31

$11,791,373 reported as deferred outflows of resources related to contributions subsequent to the measurement date will be recognized as a reduction of the net pension liability in the year ended June 30, 2017. Other amounts reported as deferred outflows or deferred inflows of resources related to pensions will be recognized as pension expense as follows:

Measure Period Ended

June 30:

Deferred Outflows/(Inflows)

of Resources

2016 $ (9,506,247) 2017 (5,620,383) 2018 (3,061,926) 2019 4,812,373

Source: Audited Financial Statements of the City for Fiscal Year 2016.

A summary of principal assumptions and methods used to determine the total pension liability for Fiscal Year 2016 is shown below.

City of Pomona Miscellaneous CalPERS Plans Summary of Actuarial Assumptions

Valuation Date June 30, 2014 Measurement Date June 30, 2015 Actuarial Cost Method Entry Age Normal in accordance with the requirements of

GASB Statement No. 68 Actuarial Assumptions(1): Discount Rate 7.65% Inflation 2.75% Salary Increases Varies by Entry Age and Service Investment Rate of Return 7.5% Net of Pension Plan Investment and Administrative

Expenses; includes inflation Mortality Rate Table(2) Derived using CalPERS’ Membership Data for all Funds Post Retirement Benefit Increase Contract COLA of up to 2.75% until Purchase Power

Protection Allowance Floor on Purchase Power applies, 2.75% thereafter

(1) Actuarial assumptions were the same for all Plans. (2) The Mortality Rate Table was developed based on CalPERS’ specific data. The table includes 20 years of mortality

improvements using Society of Actuaries Scale BB. For more details on this table, please refer to the 2014 experience study report from the CalPERS website.

(3) Net of pension plan investment expenses, including inflation Source: Audited Financial Statements of the City for Fiscal Year 2016.


32

The following table sets forth the schedule of funding for the City’s Miscellaneous Plan. The employer contribution rate for Fiscal Year 2017 is 21.586% of annual covered payroll for the Miscellaneous Plan and payment for its unfunded liability has been established at $3,123,767.

Valuation Date (June 30) Accrued Liability

Market Value of Assets (MVA)

Unfunded Liability Funded Ratio

Annual Covered Payroll

2011 $224,309,938 $177,419,801 $46,890,137 79.1% $23,667,462 2012 231,289,438 170,187,344 61,102,094 73.6 23,046,877 2013 235,600,974 183,795,478 51,805,496 78.0 21,207,342 2014 251,305,918 207,630,193 43,675,725 82.6 21,134,245 2015 259,811,428 203,993,535 55,817,893 78.5 22,232,767

Source: CalPERS Actuarial Report Dated August 2016.

CalPERS reported significant investment losses in 2009. CalPERS earnings reports for Fiscal Years 2010 through 2016 reported an investment gain of 13.3%, 21.7%, 0.1%, 13.2%, 18.4%, 2.4% and 0.61%, respectively. Future earnings performance may increase or decrease future contribution rates for plan participants, including the City. The CalPERS pension trust pays all retiree benefit payments associated with the City’s plan.

Actuarial Methods. The staff actuaries at CalPERS annually prepare an actuarial valuation which covers a Fiscal Year ending approximately 15 months before the actuarial valuation is delivered (thus, the actuarial valuations delivered to the City in fall 2016 covered the City’s Fiscal Year ended June 30, 2015). The actuarial valuations express the City’s required contribution rates in percentages of covered payroll, which percentages the City must contribute in the Fiscal Year immediately following the Fiscal Year in which the actuarial valuation is prepared (thus, the City’s contribution rate derived from the actuarial valuation as of June 30, 2015, which was delivered in fall 2016, affects the City’s Fiscal Year 2017-18 required contribution rate). CalPERS rules require the City to implement the actuary’s recommended rates. CalPERS provides a lump sum payment option that the City may opt to pay in July of each year, rather than having payment transmitted as a percentage of each reported biweekly payroll.

In calculating the annual actuarially recommended contribution rates, the CalPERS actuary calculates on the basis of certain assumptions the actuarial present value of benefits that CalPERS will fund under the CalPERS plans, which includes two components, the normal cost and the total pension liability. The normal cost represents the actuarial present value of benefits that CalPERS will fund under the CalPERS plans that are attributed to the current year, and the actuarial accrued liability represents the actuarial present value of benefits that CalPERS will fund that are attributed to past years. The total pension liability represents an estimate of the actuarial shortfall between actuarial value of assets on deposit at CalPERS and the present value of the benefits that CalPERS will pay under the CalPERS plans to retirees and active employees upon their retirement. The total pension liability is based on several assumptions such as, among others, the rate of investment return, average life expectancy, average age of retirement, inflation, salary increases and occurrences of disabilities. In addition, the total pension liability includes certain actuarial adjustments such as, among others, the actuarial practice of smoothing losses and gains over multiple years (which is described in more detail below). As a result, the total pension liability may be considered an estimate of the unfunded actuarial present value of the benefits that CalPERS will fund under the CalPERS plans to retirees and active employees upon their retirement and not as a fixed expression of the liability that the City owes to CalPERS under its CalPERS plans.

In each actuarial valuation, the CalPERS actuary estimates the actuarial value of the assets (the “Actuarial Value”) of the CalPERS plans at the end of the Fiscal Year (which assumes, among other things, that the rate of return during that Fiscal Year equaled the assumed rate of return, currently 7.50%. As described below, these policies and actuarial assumptions have changed significantly in recent years and are expected to change or be modified further by CalPERS in the future. The CalPERS actuary uses a smoothing

33

technique to determine Actuarial Value that is calculated based on certain policies. Certain significant recent changes in assumptions include the following:

1. On December 21, 2016, the CalPERS Board voted to lower the CalPERS discount rate to 7.0% over the next three years in accordance with the following schedule: 7.375% in fiscal year 2017-18, 7.25% in fiscal year 2018-19 and 7.00% in fiscal year 2019-20. The new discount rate will go into effect July 1, 2017 for the State and July 1, 2018 for public agencies.

2. On November 17, 2015, the CalPERS Board approved changes that could affect the assumed investment return rate in the future. In years in which CalPERS’ investment returns are more than 2% greater than forecast, the long-term assumed investment return rate will be reduced by a maximum of 0.25%. CalPERS estimates that this change will reduce the assumed investment return rate by approximately 1% (to 6.5%) within 20 years.

3. On February 18, 2014, the CalPERS Board approved changes to actuarial assumptions and methods based upon a recently completed experience study. These changes include: moving from using smoothing of the market value of assets to obtain the actuarial value of assets to direct smoothing of employer contribution rates; increased life expectancy; changes to retirement ages (earlier for some groups and later for others); lower rates of disability retirement; and other changes.

4. On April 17, 2013, the CalPERS Board approved a plan: (i) to replace the current 15-year asset-smoothing policy with a 5-year direct-rate smoothing process; and (ii) to replace the current 30-year rolling amortization of unfunded liabilities with a 30-year fixed amortization period. CalPERS’ Chief Actuary has stated that the revised approach provides a single measure of funded status and unfunded liabilities, less rate volatility in extreme years, a faster path to full funding and more transparency to employers such as the City about future contribution rates. These changes are expected to accelerate the repayment of unfunded liabilities (including CalPERS’ fiscal year 2009 market losses described above) of the City’s CalPERS plan in the near term; the exact magnitude of the potential contribution rate increases is not known at this time, but may be significant. These changes were reflected beginning with the June 30, 2014 actuarial valuation affecting contribution rates for Fiscal Year 2016 and thereafter. The City budgets for its annual pension contributions based on the rates established by CalPERS each year.

5. On March 14, 2012, the CalPERS Board approved a change in the inflation assumption used in the actuarial assumptions used to determine employer contribution rates. This reduced the assumed investment return from 7.75% to 7.50%, reduced the long-term payroll growth assumption from 3.25% to 3.00%, and adjusted the inflation component of individual salary scales from 3.25% to a merit scale varying by duration of employment, an assumed annual inflation component of 3.00% and an annual production growth of 0.25%. Although the full impact of such changes is not yet clear, CalPERS has estimated that they could result in net increases in future contribution levels of approximately 1% to 2%; however, the reduction in the inflation assumption could partially mitigate increases, if any, in the City’s required annual contributions resulting from the reduction in the assumed investment rate of return, as described above.

Changes in Pension Accounting Standards. In June 2012, the Governmental Accounting Standards Board (“GASB”) adopted new standards (GASB Statement No. 68, or “GASB 68”) with respect to accounting and financial reporting by state and local government employers for defined benefit pension plans. The new standards revise the accounting treatment of defined benefit pension plans, changing the way expenses and liabilities are calculated and how state and local government employers report those expenses and liabilities in their financial statements. Major changes include: (i) the inclusion of unfunded pension liabilities on the government’s balance sheet (previously, such unfunded liabilities were typically included as notes to the government’s financial statements); (ii) pension expense incorporates more rapid recognition of actuarial experience and investment returns and is no longer based on the employer’s actual contribution amounts; (iii) lower actuarial discount rates that are required to be used for underfunded plans in certain cases for purposes of the financial statements; (iv) closed amortization periods for unfunded liabilities that are required

34

to be used for certain purposes of the financial statements; and (v) the difference between expected and actual investment returns will be recognized over a closed five-year smoothing period. The reporting requirements took effect in the Fiscal Year 2015. Based on the adoption of the new accounting standards, beginning with the Fiscal Year 2015 actuarial valuation, the ARC and the annual pension expense will be different. GASB 68 is a change in accounting reporting and disclosure requirements, but it does not change the City’s pension plan funding obligations.

For additional information relating to the City’s plan, see Note 12 to the City’s audited financial statements for Fiscal Year 2016 attached to the Official Statement as Appendix A.

The above information is primarily derived from information produced by CalPERS, its independent accountants and its actuaries. The City has not independently verified the information provided and makes no representations nor expresses any opinion as to the accuracy of the information provided by CalPERS.

The comprehensive annual financial reports of CalPERS are available on its Internet website at www.calpers.ca.gov. The CalPERS website also contains CalPERS’ most recent actuarial valuation reports and other information concerning benefits and other matters. The textual reference to such Internet website is provided for convenience only. None of the information on such Internet website is incorporated by reference herein. The City cannot guarantee the accuracy of such information. Actuarial assessments are “forward-looking” statements that reflect the judgment of the fiduciaries of the pension plans, and are based upon a variety of assumptions, one or more of which may not materialize or may be changed in the future.

Other Post-Employment Benefits

The City provides Other Post-Employment Benefits to City employees in the form of a Collateral Benefits Plan for certain employees and a Public Employee’s Medical and Hospital Care Program Plan for all employees (including spouses and eligible dependents) who retire through CalPERS. See Note 13 in the audited financial statements of the City attached hereto as Appendix A for more information related to such plans and the City’s funding of its obligations thereunder.

CONSTITUTIONAL LIMITATIONS ON APPROPRIATIONS AND CHARGES

Article XIIIB

Article XIIIB of the California State Constitution limits the annual appropriations of the State and of any city, county, school district, authority or other political subdivision of the State to the level of appropriations of the particular governmental entity for the prior fiscal year, as adjusted for changes in the cost of living and population. The “base year” for establishing such appropriation limit is the 1978-79 State fiscal year and the limit is to be adjusted annually to reflect changes in population and consumer prices. Adjustments in the appropriations limit of an entity may also be made if: (i) the financial responsibility for a service is transferred to another public entity or to a private entity; (ii) the financial source for the provision of services is transferred from taxes to other revenues; or (iii) the voters of the entity approve a change in the limit for a period of time not to exceed four years.

Appropriations subject to Article XIIIB generally include the proceeds of taxes levied by or for the State or other entity of local government, exclusive of certain State subventions, refunds of taxes and benefit payments from retirement, unemployment, insurance and disability insurance funds. “Proceeds of taxes” include, but are not limited to, all tax revenues and the proceeds to an entity of government from: (a) regulatory licenses, user charges, and user fees (but only to the extent such proceeds exceed the cost reasonably borne by the entity in providing the service or regulation); and (b) the investment of tax revenues. Article XIIIB includes a requirement that if an entity’s revenues in any year exceed the amounts permitted to be spent, the excess would have to be returned by revising tax rates or fee schedules over the subsequent two years.

35

Certain expenditures are excluded from the appropriations limit, including payments of indebtedness existing or legally authorized as of January 1, 1979, or of bonded indebtedness thereafter approved by a vote of electors of the issuing entity and payments required to comply with court or federal mandates which without discretion require an expenditure for additional services or which unavoidably make the provision of existing services more costly.

The City is of the opinion that its charges for Water Service do not exceed the costs it reasonably bears in providing such services and therefore are not subject to the limits of Article XIIIB. The City has covenanted in the Indenture that, to the fullest extent permitted by law, it will fix and prescribe, at the commencement of each Fiscal Year, rates and charges for the Water Service which are reasonably expected to be at least sufficient to yield during each Fiscal Year Net Revenues equal to 120% of the Debt Service (including the 2017 Bonds) in such Fiscal Year. See the caption “SECURITY FOR THE 2017 BONDS—Rate Covenant.”

Proposition 218

General. An initiative measure entitled the “Right to Vote on Taxes Act” (the “Initiative”) was approved by the voters of the State at the November 5, 1996 general election. The Initiative added Article XIIIC and Article XIIID to the California Constitution. According to the “Title and Summary” of the Initiative prepared by the California Attorney General, the Initiative limits “the authority of local governments to impose taxes and property-related assessments, fees and charges.”

Article XIIID. Article XIIID defines the terms “fee” and “charge” to mean “any levy other than an ad valorem tax, a special tax or an assessment, imposed by an agency upon a parcel or upon a person as an incident of property ownership, including user fees or charges for a property-related service.” A “property-related service” is defined as “a public service having a direct relationship to property ownership.” Article XIIID further provides that reliance by an agency on any parcel map (including an assessor’s parcel map) may be considered a significant factor in determining whether a fee or charge is imposed as an incident of property ownership.

Article XIIID requires that any agency imposing or increasing any property-related fee or charge must provide written notice thereof to the record owner of each identified parcel upon which such fee or charge is to be imposed and must conduct a public hearing with respect thereto. The proposed fee or charge may not be imposed or increased if a majority of owners of the identified parcels file written protests against it. As a result, if and to the extent that a fee or charge imposed by a local government for water service is ultimately determined to be a “fee” or “charge” as defined in Article XIIID, the local government’s ability to increase such fee or charge may be limited by a majority protest.

In addition, Article XIIID includes a number of limitations applicable to existing fees and charges, including provisions to the effect that: (i) revenues derived from the fee or charge may not exceed the funds required to provide the property-related service; (ii) such revenues may not be used for any purpose other than that for which the fee or charge was imposed; (iii) the amount of a fee or charge imposed upon any parcel or person as an incident of property ownership may not exceed the proportional cost of the service attributable to the parcel; and (iv) no such fee or charge may be imposed for a service unless that service is actually used by, or immediately available to, the owner of the property in question. Property-related fees or charges based on potential or future use of a service are not permitted.

Based upon the California Court of Appeal decision in Howard Jarvis Taxpayers Association v. City of Los Angeles, 85 Cal. App. 4th 79 (2000), which was denied review by the State Supreme Court, it was generally believed that Article XIIID did not apply to charges for water services that are “primarily based on the amount consumed” (i.e., metered water rates), which had been held to be commodity charges related to consumption of the service, not property ownership. The Supreme Court stated in Bighorn-Desert View Water Agency v. Verjil, 39 Cal. 4th 205 (2006) (the “Bighorn Case”), however, that fees for ongoing water service

36

through an existing connection were property-related fees and charges. The Supreme Court specifically disapproved the holding in Howard Jarvis Taxpayers Association v. City of Los Angeles that metered water rates are not subject to Proposition 218. The City has complied with the notice and public hearing requirements of Article XIIID in determining whether to change Water System rates and charges.

On April 20, 2015, the California Court of Appeal, Fourth District, issued an opinion in Capistrano Taxpayers Association, Inc. v. City of San Juan Capistrano upholding tiered water rates under Proposition 218 provided that the tiers correspond to the actual cost of furnishing service at a given level of usage. The opinion was specific to the facts of the case, including a finding that the City of San Juan Capistrano did not attempt to calculate the actual costs of providing water at various tier levels. The City’s water rates are described under the caption “THE WATER SYSTEM—Water System Rates and Charges.” The City is studying the Capistrano Taxpayers Association ruling but does not currently expect the decision to affect its water rate structure. The City believes that its current water rates comply with the requirements of Proposition 218 and expects that any future water rates will comply with Proposition 218’s procedural and substantive requirements to the extent applicable thereto.

Article XIIIC. Article XIIIC provides that the initiative power may not be prohibited or otherwise limited in matters of reducing or repealing any local tax, assessment, fee or charge and that the power of initiative to affect local taxes, assessments, fees and charges is applicable to all local governments. Article XIIIC does not define the terms “local tax,” “assessment,” “fee” or “charge,” so it was unclear whether the definitions set forth in Article XIIID referred to above were applicable to Article XIIIC. Moreover, the provisions of Article XIIIC are not expressly limited to local taxes, assessments, fees and charges imposed after November 6, 1996. On July 24, 2006, the State Supreme Court held in the Bighorn Case that the provisions of Article XIIIC included rates and fees charged for domestic water use. In the decision, the Court noted that the decision did not address whether an initiative to reduce fees and charges could override statutory rate setting obligations. In any event, the City does not believe that Article XIIIC grants to the voters within the City the power to repeal or reduce rates and charges for the Water Service in a manner which would be inconsistent with the contractual obligations of the City. However, there can be no assurance of the availability of particular remedies adequate to protect the Beneficial Owners of the 2017 Bonds. Remedies available to Beneficial Owners of the 2017 Bonds in the event of a default by the City are dependent upon judicial actions which are often subject to discretion and delay and could prove both expensive and time consuming to obtain. So long as the 2017 Bonds are held in book-entry form, DTC (or its nominee) will be the sole registered owner of the 2017 Bonds and the rights and remedies of the 2017 Bond Owners will be exercised through the procedures of DTC.

In addition to the specific limitations on remedies contained in the applicable documents themselves, the rights and obligations with respect to the 2017 Bonds and the Indenture are subject to bankruptcy, insolvency, reorganization, moratorium, fraudulent conveyance and other similar laws affecting creditors’ rights, to the application of equitable principles if equitable remedies are sought, and to the exercise of judicial discretion in appropriate cases and to limitations on legal remedies against public agencies in the State. The various opinions of counsel to be delivered with respect to such documents, including the opinion of Bond Counsel (the form of which is attached as Appendix C), will be similarly qualified.

Proposition 26

On November 2, 2010, voters in the State approved Proposition 26. Proposition 26 amends Article XIIIC of the State Constitution to expand the definition of “tax” to include “any levy, charge, or exaction of any kind imposed by a local government” except the following: (a) a charge imposed for a specific benefit conferred or privilege granted directly to the payor that is not provided to those not charged, and which does not exceed the reasonable costs to the local government of conferring the benefit or granting the privilege; (b) a charge imposed for a specific government service or product provided directly to the payor that is not provided to those not charged, and which does not exceed the reasonable costs to the local government of providing the service or product; (c) a charge imposed for the reasonable regulatory costs to a local

37

government for issuing licenses and permits, performing investigations, inspections, and audits, enforcing agricultural marketing orders, and the administrative enforcement and adjudication thereof; (d) a charge imposed for entrance to or use of local government property, or the purchase, rental or lease of local government property; (e) a fine, penalty or other monetary charge imposed by the judicial branch of government or a local government as a result of a violation of law; (f) a charge imposed as a condition of property development; and (g) assessments and property-related fees imposed in accordance with the provisions of Article XIIID. Proposition 26 applies to charges imposed or increased after November 2, 2010 and provides that the local government bears the burden of proving by a preponderance of the evidence that a levy, charge, or other exaction is not a tax, that the amount is no more than necessary to cover the reasonable costs of the governmental activity, and that the manner in which those costs are allocated to a payor bear a fair or reasonable relationship to the payor’s burdens on, or benefits received from, the governmental activity. The City believes that its water rates and charges are not taxes under Proposition 26.

Future Initiatives

Articles XIIIB, XIIIC and XIIID and Proposition 26 were adopted as measures that qualified for the ballot pursuant to California’s initiative process. From time to time other initiatives could be proposed and adopted affecting the City’s revenues or ability to increase revenues.

CERTAIN RISKS TO BONDHOLDERS

The following information should be considered by prospective investors in evaluating the 2017 Bonds. However, the following does not purport to be an exhaustive listing of risks and other considerations may be relevant to making an investment decisions with respect to the 2017 Bonds. In addition, the order in which the following information is presented is not intended to reflect the relative importance of any such risks.

Limited Obligations

The obligation of the City to pay the 2017 Bonds is a limited obligation of the City and is not secured by a legal or equitable pledge or charge or lien upon any property of the City or any of its income or receipts, except the Net Revenues of the Water System. The obligation of the City to pay the 2017 Bonds does not constitute an obligation of the City to levy or pledge any form of taxation or for which the City has levied or pledged any form of taxation.

Accuracy of Assumptions

To estimate the revenues available to pay debt service on the 2017 Bonds, the City has made certain assumptions with regard to the rates and charges to be imposed in future years, the expenses associated with operating the Water System and the interest rate at which funds will be invested. The City believes these assumptions to be reasonable, but to the extent that any of these assumptions fail to materialize, the Net Revenues available to pay debt service on the 2017 Bonds will, in all likelihood, be less than those projected herein. The City may choose, however, to maintain compliance with the rate covenant set forth in the Indenture in part by means of contributions from available reserves or resources, including transfers from the Rate Stabilization Fund. In such event, Net Revenues may generate amounts which are less than 1.20 times Debt Service in any given Fiscal Year. See the caption “SECURITY FOR THE 2017 BONDS—Rate Covenant.”

Water System Demand

There can be no assurance that the demand for water services will occur as described in this Official Statement. Reduction in levels of demand could require an increase in rates or charges in order to comply with the rate covenant.

38

Water System Expenses

There can be no assurance that the City’s expenses will be consistent with the descriptions in this Official Statement. Water System Operation and Maintenance Costs may vary with labor costs (including costs related to pension liabilities), treatment costs, regulatory compliance costs and other factors. Increases in expenses could require an increase in rates or charges in order to comply with the rate covenant.

Limited Recourse on Default

If the City defaults on its obligation to pay the principal of and interest on the 2017 Bonds, the Trustee has the right to declare the total unpaid principal of the 2017 Bonds, together with the accrued interest thereon to be immediately due and payable. However, in the event of a default and such acceleration there can be no assurance that the City will have sufficient funds to pay the accelerated amounts due on the 2017 Bonds from Net Revenues.

Rate-Setting Process under Proposition 218

Proposition 218, which added Articles XIIIC and XIIID to the State Constitution, affects the City’s ability to maintain existing rates and impose rate increases, and no assurance can be given that future rate increases will not encounter majority protest opposition or be challenged by initiative action authorized under Proposition 218. In the event that future proposed rate increases cannot be imposed as a result of majority protest or initiative, the City might thereafter be unable to generate Net Revenues in the amounts required by the Indenture to pay the 2017 Bonds. The City believes that the current water rates approved by the City Council were effected under the public hearing and majority protest provisions of Proposition 218. See the caption “CONSTITUTIONAL LIMITATIONS ON APPROPRIATIONS AND CHARGES.”

Natural Disasters

The occurrence of any natural disaster in the City, including, without limitation, fire, earthquake, landslide, drought or flood, could have an adverse material impact on the economy within the City, its Water Revenue Fund and the revenues available for the payment of the 2017 Bonds. Portions of the Water System may be subject to unpredictable seismic activity.

The occurrence of natural disasters in the area of the Water System could result in substantial damage to the Water System which, in turn, could substantially reduce revenue generated by the Water System and affect the ability of the City to pay the 2017 Bonds. The City maintains liability insurance for the Water System and property casualty insurance (for losses other than from seismic events) for certain portions of the Water System. See the captions “SECURITY FOR THE 2017 BONDS—Insurance; Reconstruction, Repair and Replacement” and “THE WATER SYSTEM—Insurance.” However, there can be no assurance that specific losses will be covered by insurance or, if covered, that claims will be paid in full by the applicable insurers.

Drought Declaration

On January 17, 2014, the State Governor declared a drought state of emergency (the “Declaration”) with immediate effect. The Declaration includes the following orders, among others: (a) local urban water suppliers, including the City, are encouraged to implement their local water shortage contingency plans (the City’s plan is discussed below); (b) local urban water suppliers, including the City, are encouraged to update their urban water management plans to prepare for extended drought conditions; (c) the Department of Water Resources (the “DWR”) and the State Water Resources Control Board (the “SWRCB”) are directed to expedite the processing of water transfers; (d) the SWRCB is directed to put water rights holders on notice that they may be required to cease or reduce water diversions in the future; (e) the SWRCB is directed to consider modifying requirements for reservoir releases or diversion limitations; and (f) DWR is directed to take

39

necessary actions to protect water quality and supply in the Sacramento-San Joaquin River Delta/San Francisco Bay Estuary (the “Bay-Delta”), including the installation of temporary barriers or temporary water supply connections, while minimizing impacts to aquatic species.

In addition, on July 15, 2014, the SWRCB adopted emergency measures requiring water suppliers to implement mandatory Statewide water conservation actions, which are to remain in effect for 270 days. On March 17, 2015, the SWRCB adopted additional emergency regulations limiting outdoor irrigation to two days per week, extending certain measures set forth in the July 15, 2014 action for an additional 270 days, prohibiting outdoor irrigation for 48 hours following rain and prohibiting restaurants from serving water to customers unless requested.

On April 1, 2015, the California Governor issued an executive order extending the measures set forth in the Declaration and adopting the following additional orders, among others: (i) the SWRCB was directed to impose restrictions to reduce potable urban water usage, including usage by commercial, industrial and institutional properties and golf courses, by 25% from 2013 amounts through February 28, 2016; and (ii) portions of a water supplier’s service area with higher per capita use must achieve proportionally greater reductions than areas with lower per capita use.

On May 6, 2015, the SWRCB adopted regulations in response to the Governor’s executive order that required the City to effect a 20% reduction from 2013 water usage. On November 13, 2015, the Governor issued Executive Order B-36-15, which called for an extension of urban water use restrictions until October 31, 2016.

On February 2, 2016, the SWRCB extended its previous emergency regulations through October 2016 while making available credits and adjustments of up to 8% in urban water suppliers’ conservation mandates based upon climate, water-efficient growth and investments in drought-resilient supply sources. The City applied for and received a 2% adjustment to its conservation standard from the SWRCB due to a coding correction that changed the City from a coastal climate measurement to an inland valley climate measurement, which resulted in greater allowable water use. The adjusted target required the City to effect an 18% reduction from 2013 water usage.

After precipitation improved in California through the winter, on May 9, 2016 the Governor issued Executive Order B-37-16, which required the SWRCB to adjust its emergency regulations through the end of January 2017 to account for differing water supply conditions across California. It also directed the SWRCB and DWR to develop a long-term framework and requirements for increasing water efficiency, eliminating water waste, and strengthening local resilience. The order also allowed the SWRCB to extend emergency regulations in February 2017 if dry conditions persisted. On May 18, 2016 the SWRCB adopted a revised regulation gives water agencies the ability to establish their own conservation standards based on a “stress test” of supply reliability. By June 22, 2016, water agencies were required to submit self-certifications to the SWRCB demonstrating that they have sufficient supplies to withstand three additional years of severe drought. Any identified percentage gap between supplies and demands would become the water agency’s updated mandatory conservation target.

The City demonstrated that it has more than sufficient supplies to meet its projected demands, even if California endures three more years of drought. Consequently, the City’s mandatory conservation target was eliminated, retroactive to June 1, 2016. On February 8, 2017 the emergency regulation was extended another 270 days with a review scheduled for May 2017. Water suppliers are not required to update supply and demand information and the City continues to have a conservation requirement of 0%. Despite the extension of the emergency regulations through May 2017, water supply conditions have improved significantly across California; however, the City continues to implement conservation measures adopted on July 18, 2016, requiring a 10% reduction in water use relative to 2013 from all customers (as discussed under the caption “—City Response to Drought”).

40

City Response to Drought. Under Ordinance No. 4122 of the City Council adopted on June 15, 2009 (the “Drought Ordinance”), the City implemented certain permanent water conservation measures, including limits on watering hours and duration, limits on vehicle washing and a requirement that decorative water fountains use only re-circulated water. Further, under the Drought Ordinance, the City responds to drought conditions in stages according to the severity of such conditions. Upon the declaration of a Level 1 Water Supply Shortage, a 10% reduction in water usage is required for all customers and further restrictions on use are implemented, including additional limits on watering days and a requirement that all leaks or malfunctions in a user’s plumbing or distribution system be repaired within 72 hours. The City also may impose other restrictions upon reasonable notice in the event of a Level 1 water shortage.

Upon the declaration of a Level 2 Water Supply Shortage, the City further limits watering days and requires leaks or malfunctions in a user’s plumbing or distribution system to be repaired within 48 hours. Further, Level 2 requirements include a general prohibition on filling ornamental lakes and ponds, additional restrictions on vehicle washing and a prohibition against filling residential pools or spas by more than 1 foot per week. Under Level 2 conditions, the City may also impose additional restrictions as it deems necessary upon reasonable notice to customers.

In the event of severe drought conditions, the City may declare a Level 3 Water Supply Emergency Shortage. A Level 3 declaration implements a prohibition against all watering or irrigating with potable water (with limited exceptions), a requirement that leaks and malfunctions in a user’s plumbing or distribution system be repaired within 24 hours and permits the City to stop providing new potable water service except under limited circumstances. Level 3 restrictions also permit the City to discontinue service to customers who willfully violate the requirements of a Level 3 shortage.

The City is currently implementing Level 1 conservation requirements under the Drought Ordinance. Level 1 conservation measures were adopted by the City on July 18, 2016.

The City does not believe that the implementation of Level 1 Water Shortage conservation measures under the Drought Ordinance will have a material adverse effect on its ability to generate sufficient Net Revenues to pay the principal of and interest on the 2017 Bonds when due. See the Official Statement under the caption “SECURITY FOR THE 2017 BONDS—Limited Obligations Payable from Net Revenues.”

Limitations on Remedies

The ability of the City to comply with its covenants under the Indenture and to generate Net Revenues sufficient to pay principal of and interest on the 2017 Bonds may be adversely affected by actions and events outside of the control of the City and may be adversely affected by actions taken (or not taken) by voters, property owners, taxpayers or persons obligated to pay assessments, fees and charges. See the caption “CONSTITUTIONAL LIMITATIONS ON APPROPRIATIONS AND CHARGES—Proposition 218.” Furthermore, the remedies available to the owners of the 2017 Bonds upon the occurrence of an event of default under the Indenture are in many respects dependent upon judicial actions which are often subject to discretion and delay and could prove both expensive and time consuming to obtain.

In addition, usual equity principles may limit the specific enforcement under State law of certain remedies, as may the exercise by the United States of America of the powers delegated to it by the federal constitution, and the reasonable and necessary exercise, in certain exceptional situations, of the police power inherent in the sovereignty of the State and its governmental bodies in the interest of serving a significant and legitimate public purpose. Bankruptcy proceedings, or the exercise of powers by the federal or state government, if initiated, could subject the owners of the 2017 Bonds to judicial discretion and interpretation of their rights in bankruptcy or otherwise, and consequently may entail risks of delay, limitations, or modification of their rights. Remedies may be limited since the Water System serves an essential public purpose.

41

In addition to the limitations on remedies contained in the Indenture, the rights and obligations under the Indenture may be subject to bankruptcy, insolvency, reorganization, arrangement, fraudulent conveyance, moratorium and other laws relating to or affecting creditors’ rights, to the application of equitable principles, to the exercise of judicial discretion in appropriate cases and to limitations on legal remedies against cities in the State of California. The opinion to be delivered by Bond Counsel concurrently with the issuance of the 2017 Bonds will be subject to such limitations and the various other legal opinions to be delivered concurrently with the issuance of the 2017 Bonds will be similarly qualified. See Appendix C. In the event that the City fails to comply with its covenants under the Indenture or fails to pay principal of and interest on the 2017 Bonds, there can be no assurance of the availability of remedies adequate to protect the interest of the holders of the 2017 Bonds.

Loss of Tax Exemption

In order to maintain the exclusion from gross income for federal income tax purposes of interest on the Series BE Bonds, the City has covenanted in the Indenture to comply with the applicable requirements of the Internal Revenue Code of 1986, as amended (the “Code”), and not to take any action or fail to take any action if such action or failure to take such action would adversely affect the exclusion from gross income of interest on the Series BE Bonds under Section 103 of the Code. Interest on the Series BE Bonds could become includable in gross income for purposes of federal income taxation retroactive to the date of issuance of such Series BE Bonds as a result of acts or omissions of the City in violation of this or other covenants in the Indenture applicable to the Series BE Bonds. The Series BE Bonds are not subject to redemption or any increase in interest rates should an event of taxability occur and will remain outstanding until maturity or prior redemption in accordance with the provisions contained in the Indenture. See the caption “TAX MATTERS.”

Secondary Market

There can be no guarantee that there will be a secondary market for the 2017 Bonds or, if a secondary market exists, that the 2017 Bonds can be sold for any particular price. Occasionally, because of general market conditions or because of adverse history or economic prospects connected with a particular issue, secondary marketing practices are suspended or terminated. Additionally, prices of issues for which a market is being made will depend upon then prevailing circumstances. Such prices could be substantially different from the original purchase price.

Parity Obligations

The Indenture permits the City to enter into additional Contracts or issue Bonds payable from Net Revenues of the Water System on a parity with the 2017 Bonds, subject to the terms and conditions set forth therein. The entry into of additional Contracts or the issuance of Bonds could result in reduced Net Revenues available to pay the 2017 Bonds. The City has covenanted to maintain Debt Service coverage of 120%, as further described under the caption “SECURITY FOR THE 2017 BONDS—Additional Indebtedness.”

APPROVAL OF LEGAL PROCEEDINGS

The valid, legal and binding nature of the 2017 Bonds is subject to the approval of Stradling Yocca Carlson & Rauth, a Professional Corporation, acting as Bond Counsel. The form of such legal opinion is attached hereto as Appendix C, and such legal opinion will be attached to each 2017 Bond. Certain legal matters will be passed upon for the City by Stradling Yocca Carlson & Rauth, a Professional Corporation, as Disclosure Counsel, and by Arnold M. Alvarez-Glasman, Esquire, City Attorney, for the Underwriter by its counsel, Fox Rothschild LLP, and for the Trustee and the Escrow Bank by its counsel.

From time to time Bond Counsel represents the Underwriter on matters unrelated to the issuance of the 2017 Bonds or other City obligations.

42

LITIGATION

At the time of delivery of and payment for the 2017 Bonds, the City will certify that there is no action, suit, proceeding, inquiry or investigation, at law or in equity, before or by any court, regulatory agency, public board or body, pending or, to the knowledge of the City, threatened against the City affecting the existence of the City or the titles of its directors or officers to their respective offices or seeking to restrain or to enjoin the sale or delivery of the 2017 Bonds, the application of the proceeds thereof in accordance with the Indenture, or in any way contesting or affecting the validity or enforceability of the 2017 Bonds, the Indenture, or any action of the City contemplated by any of said documents, or in any way contesting the completeness or accuracy of this Official Statement or any amendment or supplement thereto, or contesting the powers of the City or its authority with respect to the 2017 Bonds or any action of the City contemplated by any of said documents, nor to the knowledge of the City, is there any basis therefor.

TAX MATTERS

Series BE Bonds

In the opinion of Stradling Yocca Carlson & Rauth, a Professional Corporation, Newport Beach, California, Bond Counsel, under existing statutes, regulations, rulings and judicial decisions, and assuming the accuracy of certain representations and compliance with certain covenants and requirements described herein, interest (and original issue discount) on the Series BE Bonds is excluded from gross income for federal income tax purposes and is not an item of tax preference for purposes of calculating the federal alternative minimum tax imposed on individuals and corporations. In the further opinion of Bond Counsel, interest (and original issue discount) on the Series BE Bonds is exempt from State of California personal income tax. Bond Counsel notes that, with respect to corporations, interest on the Series BE Bonds may be included as an adjustment in the calculation of alternative minimum taxable income, which may affect the alternative minimum tax liability of such corporations.

Bond Counsel’s opinion as to the exclusion from gross income for federal income tax purposes of interest (and original issue discount) on the Series BE Bonds is based upon certain representations of fact and certifications made by the City and others and is subject to the condition that the City complies with all requirements of the Code that must be satisfied subsequent to the issuance of the Series BE Bonds to assure that interest (and original issue discount) on the Series BE Bonds will not become includable in gross income for federal income tax purposes. Failure to comply with such requirements of the Code might cause interest (and original issue discount) on the Series BE Bonds to be included in gross income for federal income tax purposes retroactive to the date of issuance of the Series BE Bonds. The City has covenanted to comply with all such requirements.

In the opinion of Bond Counsel, the difference between the issue price of a Series BE Bond (the first price at which a substantial amount of the Series BE Bonds of a maturity is to be sold to the public) and the stated redemption price at maturity of such Series BE Bond constitutes original issue discount. Original issue discount accrues under a constant yield method, and original issue discount will accrue to a Beneficial Owner before receipt of cash attributable to such excludable income. The amount of original issue discount deemed received by a Beneficial Owner will increase the Beneficial Owner’s basis in the applicable Series BE Bond. The amount of original issue discount that accrues to the Beneficial Owner of a Series BE Bond is excluded from the gross income of such Beneficial Owner for federal income tax purposes, is not an item of tax preference for purposes of the federal alternative minimum tax imposed on individuals and corporations, and is exempt from State of California personal income tax.

The amount by which a Series BE Bond Owner’s original basis for determining loss on sale or exchange in the applicable Series BE Bond (generally, the purchase price) exceeds the amount payable on maturity (or on an earlier call date) constitutes amortizable bond premium, which must be amortized under Section 171 of the Code; such amortizable bond premium reduces the Series BE Bond Owner’s basis in the

43

applicable Series BE Bond (and the amount of tax-exempt interest received with respect to the Series BE Bonds), and is not deductible for federal income tax purposes. The basis reduction as a result of the amortization of bond premium may result in a Series BE Bond Owner realizing a taxable gain when a Series BE Bond is sold by the Owner for an amount equal to or less (under certain circumstances) than the original cost of the Series BE Bond to the Owner. Purchasers of the Series BE Bonds should consult their own tax advisors as to the treatment, computation and collateral consequences of amortizable bond premium.

The Internal Revenue Service (the “IRS”) has initiated an expanded program for the auditing of tax-exempt bond issues, including both random and targeted audits. It is possible that the Series BE Bonds will be selected for audit by the IRS. It is also possible that the market value of the Series BE Bonds might be affected as a result of such an audit of the Series BE Bonds (or by an audit of similar municipal obligations). No assurance can be given that in the course of an audit, as a result of an audit, or otherwise, Congress or the IRS might not change the Code (or interpretation thereof) subsequent to the issuance of the Series BE Bonds to the extent that it adversely affects the exclusion from gross income of interest (and original issue discount) on the Series BE Bonds or their market value.

SUBSEQUENT TO THE ISSUANCE OF THE SERIES BE BONDS, THERE MIGHT BE FEDERAL, STATE OR LOCAL STATUTORY CHANGES (OR JUDICIAL OR REGULATORY INTERPRETATIONS OF FEDERAL, STATE OR LOCAL LAW) THAT AFFECT THE FEDERAL, STATE OR LOCAL TAX TREATMENT OF THE SERIES BE BONDS OR THE MARKET VALUE OF THE SERIES BE BONDS. TAX REFORM PROPOSALS ARE BEING CONSIDERED BY CONGRESS. IT IS POSSIBLE THAT LEGISLATIVE CHANGES MIGHT BE INTRODUCED IN CONGRESS, WHICH, IF ENACTED, WOULD RESULT IN ADDITIONAL FEDERAL INCOME OR STATE TAX BEING IMPOSED ON OWNERS OF TAX-EXEMPT STATE OR LOCAL OBLIGATIONS, SUCH AS THE SERIES BE BONDS. THE INTRODUCTION OR ENACTMENT OF ANY OF SUCH CHANGES COULD ADVERSELY AFFECT THE MARKET VALUE OR LIQUIDITY OF THE SERIES BE BONDS. NO ASSURANCE CAN BE GIVEN THAT, SUBSEQUENT TO THE ISSUANCE OF THE SERIES BE BONDS, SUCH CHANGES (OR OTHER CHANGES) WILL NOT BE INTRODUCED OR ENACTED OR INTERPRETATIONS WILL NOT OCCUR. BEFORE PURCHASING ANY OF THE SERIES BE BONDS, ALL POTENTIAL PURCHASERS SHOULD CONSULT THEIR TAX ADVISORS REGARDING POSSIBLE STATUTORY CHANGES OR JUDICIAL OR REGULATORY CHANGES OR INTERPRETATIONS, AND THEIR COLLATERAL TAX CONSEQUENCES RELATING TO THE SERIES BE BONDS.

Bond Counsel’s opinions may be affected by actions taken (or not taken) or events occurring (or not occurring) after the date hereof. Bond Counsel has not undertaken to determine, or to inform any person, whether any such actions or events are taken or do occur. The Indenture and the Tax Certificate relating to the Series BE Bonds permit certain actions to be taken or to be omitted if a favorable opinion of Bond Counsel is provided with respect thereto. Bond Counsel expresses no opinion as to the effect on the exclusion from gross income of interest (and original issue discount) for federal income tax purposes with respect to any Series BE Bond if any such action is taken or omitted based upon the advice of counsel other than Stradling Yocca Carlson & Rauth, a Professional Corporation.

Although Bond Counsel has rendered an opinion that interest (and original issue discount) on the Series BE Bonds is excluded from gross income for federal income tax purposes provided that the City continues to comply with certain requirements of the Code, the ownership of the Series BE Bonds and the accrual or receipt of interest (and original issue discount) on the Series BE Bonds may otherwise affect the tax liability of certain persons. Bond Counsel expresses no opinion regarding any such tax consequences. Accordingly, before purchasing any of the Series BE Bonds, all potential purchasers should consult their tax advisors with respect to collateral tax consequences relating to the Series BE Bonds.

44

Should interest (and original issue discount) on the Series BE Bonds become includable in gross income for federal income tax purposes, the Series BE Bonds are not subject to early redemption and will remain outstanding until maturity or until redeemed in accordance with the Indenture.

Series BF Bonds

In the opinion of Bond Counsel, under existing statutes, regulations, rulings and judicial decisions, and assuming the accuracy of certain representations and compliance with certain covenants and requirements described herein, interest on the Series BF Bonds is exempt from State of California personal income tax.

With certain exceptions, the difference between the issue price of a Series BF Bond (the first price at which a substantial amount of the Series BF Bonds of the same maturity is to be sold to the public) and the stated redemption price at maturity with respect to such Series BF Bond (to the extent the redemption price at maturity is greater than the issue price) constitutes original issue discount. Original issue discount accrues under a constant yield method. The amount of original issue discount deemed received by the Beneficial Owner of a Series BF Bond will increase the Beneficial Owner’s basis in the Series BF Bond. Beneficial Owners of the Series BF Bonds should consult their own tax advisors with respect to taking into account any original issue discount on the Series BF Bonds.

The amount by which a Series BF Bond Beneficial Owner’s original basis for determining loss on sale or exchange in the applicable Series BF Bond (generally, the purchase price) exceeds the amount payable on maturity (or on an earlier call date) constitutes amortizable bond premium, which the Beneficial Owner of a Series BF Bond may elect to amortize under Section 171 of the Code; such amortizable bond premium reduces the Series BF Bond Beneficial Owner’s basis in the applicable Series BF Bond (and the amount of taxable interest received with respect to the Series BF Bonds), and is deductible for federal income tax purposes. The basis reduction as a result of the amortization of bond premium may result in a Series BF Bond Beneficial Owner realizing a taxable gain when a Series BF Bond is sold by the Beneficial Owner for an amount equal to or less (under certain circumstances) than the original cost of the Series BF Bond to the Beneficial Owner. The Beneficial Owners of the Series BF Bonds that have a basis in the Series BF Bonds that is greater than the principal amount of the Series BF Bonds should consult their own tax advisors with respect to whether or not they should elect such premium under Section 171 of the Code.

The tax discussion set forth above is included for general information only and may not be applicable depending upon a Series BF Bond Owner’s particular situation. The ownership and disposal of the Series BF Bonds and the accrual or receipt of interest on the Series BF Bonds may otherwise affect the tax liability of certain persons. Bond Counsel expresses no opinion regarding any such tax consequences. BEFORE PURCHASING ANY OF THE SERIES BF BONDS, ALL POTENTIAL PURCHASERS SHOULD CONSULT THEIR INDEPENDENT TAX ADVISORS WITH RESPECT TO THE TAX CONSEQUENCES RELATING TO THE SERIES BF BONDS AND THE TAXPAYER’S PARTICULAR CIRCUMSTANCES.

A complete copy of the proposed opinion of Bond Counsel is set forth in Appendix C.

RATING

S&P Global Ratings, a Standard & Poor’s Financial Services, LLC business (“S&P”) has assigned the rating of “AA-” to the 2017 Bonds. There is no assurance that any credit rating given to the 2017 Bonds will be maintained for any period of time or that a rating may not be lowered or withdrawn entirely by S&P if, in the judgment of S&P, circumstances so warrant. Any downward revision or withdrawal of such rating may have an adverse effect on the market price of the 2017 Bonds. Such rating reflects only the views of S&P, and an explanation of the significance of such rating may be obtained from S&P. Generally, rating agencies base their ratings on information and materials furnished to them (which may include information and material from the City which is not included in this Official Statement) and on investigations, studies and assumptions by the rating agencies.

45

The City has covenanted in a Continuing Disclosure Certificate to file on the Municipal Securities Rulemaking Board’s Electronic Municipal Market Access System (“EMMA”) notices of any rating changes on the 2017 Bonds. See the caption “CONTINUING DISCLOSURE UNDERTAKING” below and Appendix E—“FORM OF CONTINUING DISCLOSURE CERTIFICATE.” Notwithstanding such covenant, information relating to rating changes on the 2017 Bonds may be publicly available from the rating agencies prior to such information being provided to the City and prior to the date the City is obligated to file a notice of rating change on EMMA. Purchasers of the 2017 Bonds are directed to the ratings agencies and their respective websites and official media outlets for the most current ratings changes with respect to the 2017 Bonds after the initial issuance of the 2017 Bonds.

In providing a rating on the 2017 Bonds, S&P may have performed independent calculations of coverage ratios using its own internal formulas and methodology which may not reflect the provisions of the Indenture. The City makes no representations as to any such calculations, and such calculations should not be construed as a representation by the City as to past or future compliance with any bond covenants, the availability of particular revenues for the payment of Debt Service or for any other purpose.

UNDERWRITING

The 2017 Bonds will be purchased by B.C. Ziegler and Company (the “Underwriter”) pursuant to a Bond Purchase Agreement, dated April 20, 2017, by and between the City and the Underwriter (the “Purchase Contract”). Under the Purchase Contract, the Underwriter has agreed to purchase all, but not less than all, of the 2017 Bonds for an aggregate purchase price of $90,929,707.10 (representing the principal amount of the 2017 Bonds, less Underwriter’s discount of $316,476.00, plus original issue premium of $3,336,183.10). The Purchase Contract provides that the Underwriter will purchase all of the 2017 Bonds if any are purchased, the obligation to make such a purchase being subject to certain terms and conditions set forth in the Purchase Contract, the approval of certain legal matters by counsel and certain other conditions.

The initial public offering prices stated on the inside cover page of this Official Statement may be changed from time to time by the Underwriter. The Underwriter may offer and sell the 2017 Bonds to certain dealers (including dealers depositing 2017 Bonds into investment trusts), dealer banks, banks acting as agents and others at prices lower than said public offering prices.

MUNICIPAL ADVISOR

The City has retained Urban Futures, Inc., Orange, California (the “Financial Advisor”) as municipal advisor in connection with the sale of the 2017 Bonds. The Municipal Advisor is not obligated to undertake, and has not undertaken to make, an independent verification or to assume any responsibility for the accuracy, completeness or fairness of the information contained herein.

The Municipal Advisor is an independent advisory firm and is not engaged in the business of underwriting, trading or distributing municipal or other public securities.

VERIFICATION OF MATHEMATICAL COMPUTATIONS

The Verification Agent, a firm of independent certified public accountants, will deliver to the City, on or before the settlement date of the 2017 Bonds, its verification report indicating that it has verified, in accordance with the Statement on Standards for Consulting Services established by the American Institute of Certified Public Accountants (the “AICPA”), the mathematical accuracy of the mathematical computations of the adequacy of the cash to pay the Series AY Redemption Price and the Series AZ Redemption Price.

The Verification Agent relied on the accuracy, completeness and reliability of all information provided by, and on all decisions and approvals of, the City and its retained advisors, consultants or legal counsel. The Verification Agent was not engaged to perform audit or attest services under AICPA auditing or

46

attestation standards or to provide any form of attest report or opinion under such standards in conjunction with this engagement.

CONTINUING DISCLOSURE UNDERTAKING

The City has covenanted in a Continuing Disclosure Certificate for the benefit of the holders and Beneficial Owners of the 2017 Bonds to provide certain financial information and operating data relating to the City by not later than March 1 following the end of the City’s Fiscal Year (currently its Fiscal Year ends on June 30) (the “Annual Report”), commencing with the report for Fiscal Year ending June 30, 2017, and to provide notices of the occurrence of certain enumerated events. The Annual Report and the notices of enumerated events will be filed by the City with EMMA for municipal securities disclosures, maintained on the Internet at http://emma.msrb.org/. The specific nature of the information to be contained in the Annual Report and the notice of material events is set forth in Appendix E. These covenants have been made in order to assist the Underwriter in complying with subsection (b)(5) of Rule 15c2-12 adopted by the Securities and Exchange Commission.

Within the last five years, the City has on occasion failed to comply in certain material respects with its previous continuing disclosure undertakings pursuant to Rule 15c2-12, including, but not limited to, the failure to timely file annual reports for some of the City’s outstanding debt obligations, the failure to include certain operating information in connection with some of the City’s annual reports, the failure to properly file certain annual reports for all outstanding CUSIPs, and the failure to timely file certain notices of rating changes. In connection with such annual reports, the City did not file notices of a failure to provide annual financial information on or before the date specified in its prior continuing disclosure undertakings. The City has since brought itself current with respect to all of its filings that were required to have been made within the past five years.

FINANCIAL INTERESTS

The fees being paid to the Underwriter, Bond Counsel, Disclosure Counsel, Fox Rothschild LLP, as counsel to the Underwriter, the Municipal Advisor, the Trustee and the Escrow Bank are contingent upon the issuance and delivery of the 2017 Bonds. From time to time, Bond Counsel represents the Underwriter on matters unrelated to the 2017 Bonds.


47

MISCELLANEOUS

Insofar as any statements made in this Official Statement involve matters of opinion or of estimates, whether or not expressly stated, they are set forth as such and not as representations of fact. No representation is made that any of such statements made will be realized. Neither this Official Statement nor any statement which may have been made verbally or in writing is to be construed as a contract with the Owners of the 2017 Bonds.

The execution and delivery of this Official Statement have been duly authorized by the City.

CITY OF POMONA

By: /s/ Linda Lowry City Manager

[THIS PAGE INTENTIONALLY LEFT BLANK]

APPENDIX A

FINANCIAL STATEMENTS

�

�

�

�Comprehensive Annual Financial Report

For the Year Ended June 30, 2016

CITY OF POMONA, CALIFORNIA

COMPREHENSIVE ANNUAL FINANCIAL REPORT

FISCAL YEAR ENDED JUNE 30, 2016

This page intentionally left blank.

CITY OF POMONA, CALIFORNIA

COMPREHENSIVE ANNUAL FINANCIAL

REPORT

Year Ended June 30, 2016

Elliott Rothman Mayor John Nolte Councilmember, District 1 Adriana Robledo Councilmember, District 2

Cristina Carrizosa Councilmember, District 3

Paula Lantz Councilmember, District 4

Ginna E. Escobar Councilmember, District 5 Debra Martin Councilmember, District 6

Prepared by the City of Pomona Finance Department Onyx Jones, Finance Director

CITY OF POMONA


JUNE 30, 2016 TABLE OF CONTENTS

Page Number INTRODUCTORY SECTION Letter of Transmittal ............................................................................................................................... i Certificate of Achievement for Excellence in Financial Reporting ....................................................... vi Organizational Chart ............................................................................................................................ vii Directory of City Officials ..................................................................................................................... viii FINANCIAL SECTION INDEPENDENT AUDITORS’ REPORT ................................................................................................ 1 MANAGEMENT DISCUSSION AND ANALYSIS .................................................................................. 5 BASIC FINANCIAL STATEMENTS

Government-Wide Financial Statements: Statement of Net Position ...................................................................................................... 19 Statement of Activities ........................................................................................................... 20

Governmental Fund Financial Statements: Balance Sheet - Governmental Funds ................................................................................... 26

Reconciliation of the Balance Sheet of Governmental Funds to the Statement of Net Position ............................................................................................ 29

Statement of Revenues, Expenditures, and Changes in Fund Balances - Governmental Funds ........................................................................................... 30

Reconciliation of the Statement of Revenues, Expenditures, and Changes in Fund Balances of Governmental Funds to the Statement of Activities ............................................................................................................ 32

Proprietary Fund Financial Statements:

Statement of Net Position - Proprietary Funds ...................................................................... 34

Statement of Revenues, Expenses, and Changes in Net Position - Proprietary Funds .................................................................................................. 38

Statement of Cash Flows - Proprietary Funds ....................................................................... 40

Fiduciary Fund Financial Statements:

Statement of Fiduciary Net Position - Fiduciary Funds ......................................................... 46 Statement of Changes in Fiduciary Net Position - Fiduciary Funds ...................................... 47

CITY OF POMONA



Page Number

FINANCIAL SECTION (CONTINUED)

Index to Notes to Financial Statements .......................................................................................... 51 Notes to Financial Statements ........................................................................................................ 55

REQUIRED SUPPLEMENTARY INFORMATION

Budgetary Information ................................................................................................................. 132 Budgetary Comparison Schedule – General Fund ............................................................... 133 Budgetary Comparison Schedule – Housing Authority.... ..................................................... 134 Budgetary Comparison Schedule – Miscellaneous Grants .................................................. 135

Schedule of Changes in Net Pension Liability and Related Ratios Miscellaneous Plan ................................................................................................................ 136 Safety Plan ............................................................................................................................. 137 Schedule of Plan Contributions .................................................................................................... 138

COMBINING AND INDIVIDUAL FUND STATEMENTS AND SCHEDULES

Combining Balance Sheet – Nonmajor Governmental Funds .................................................... 142 Combining Statement of Revenues, Expenditures, and Changes in Fund Balances – Nonmajor Governmental Funds ................................................... 146 Budgetary Comparison Schedules:

General Debt Service ............................................................................................................ 150 Public Financing Authority Debt Service ............................................................................... 151 Community Development Block Grant .................................................................................. 152 State Gas Tax ....................................................................................................................... 153 Proposition A ......................................................................................................................... 154 Proposition C ......................................................................................................................... 155 Vehicle Parking District ......................................................................................................... 156 Air Quality Improvement ........................................................................................................ 157 Landscape Maintenance District ........................................................................................... 158 Asset Forfeiture ..................................................................................................................... 159 Traffic Offender ..................................................................................................................... 160 Measure R ............................................................................................................................. 161 General Sanitation Fees Operations ..................................................................................... 162 Special Fees ......................................................................................................................... 163 Capital Outlay ........................................................................................................................ 164

CITY OF POMONA



Page Number

COMBINING AND INDIVIDUAL FUND STATEMENTS AND SCHEDULES (CONTINUED)

Internal Service Funds:

Combining Statement of Net Position – Internal Service Funds ........................................... 167 Combining Statement of Revenues, Expenses, and Changes in in Net Position – Internal Service Funds ............................................................................... 168 Combining Statement of Cash Flows – Internal Service Funds ........................................... 169

Fiduciary Funds:

Combining Balance Sheet – Agency Funds ......................................................................... 172 Combining Statement of Changes in Assets and Liabilities – Agency Funds ....................................................................................................................... 174

STATISTICAL SECTION Net Position by Component ......................................................................................................... 178 Changes in Net Position .............................................................................................................. 180 Fund Balances - Governmental Funds ........................................................................................ 184 Changes in Fund Balances - Governmental Funds .................................................................... 186 Governmental Activities Tax Revenue by Source ....................................................................... 188 Assessed Value and Estimated Actual Value of Taxable Property ............................................. 189 Property Tax Rates - Direct and Overlapping Governments ....................................................... 190 Principal Property Taxpayers ...................................................................................................... 191 Top 25 Sales Tax Generators ..................................................................................................... 192 Property Tax Levies and Collections ........................................................................................... 193 Ratios of Outstanding Debt by Type............................................................................................ 194 Ratios of General Bonded Debt Outstanding .............................................................................. 196 Direct and Overlapping Debt ....................................................................................................... 197 Legal Debt Margin Information .................................................................................................... 198 Pledged Revenue Coverage - Water........................................................................................... 199 Pledged Revenue Coverage - Sewer .......................................................................................... 200 Demographic and Economic Statistics ........................................................................................ 201 Principal Employers ..................................................................................................................... 202 Authorized Full-Time City Employees by Function ...................................................................... 203 Taxable Sales by Category ......................................................................................................... 204 Operating Indicators by Function ................................................................................................. 206 Capital Asset Statistics by Function ............................................................................................ 207

i

7

January 26, 201�

Honorable Mayor and City Council and Citizens of the City of Pomona Pomona, California

The audited Comprehensive Annual Financial Report (CAFR) of the City of Pomona, California (City) for the fiscal year ended June 30, 2016 is hereby submitted.

An independent certified public accounting firm audits the basic financial statements. The purpose of the audit is to ensure that the basic financial statements present fairly, in all material respects, the financial position and the results of operations of the City. Responsibility for both the accuracy of the data, and the completeness and fairness of the presentation, including all disclosures, rests with the City. Lance, Soll & Lunghard, LLP, Certified Public Accountants, have issued an unmodified opinion of the City of Pomona’s financial statements for the year ended June 30, 2016. The financial statements have been prepared in accordance with generally accepted accounting principles in the United States. This means that the statements have been prepared using guidelines designed to fairly set forth the financial position and results of operations of the City as measured by the financial activity of its various funds. The independent auditor’s report is located on page 1 of the Financial Section. All disclosures necessary to enable the reader to gain the maximum understanding of the City’s financial activities have been included.

Generally accepted accounting principles require that management provide a narrative introduction, overview, and analysis to accompany the basic financial statements in the form of Management’s Discussion and Analysis (MD&A). This letter of transmittal is designed to complement the MD&A and should be read in conjunction with it. The City’s MD&A can be found immediately following the report of the independent auditors.

In addition to the comprehensive audit, the City is required to undergo an annual single audit in conformity with the provisions of Title 2 U.S. Code of Federal Regulation Part 200 - Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards. Information related to this single audit, including a schedule of federal financial assistance, findings and recommendations and auditor’s report on the internal control structure and compliance with applicable laws and regulations, is provided in a separate single audit report.

REPORTING ENTITY

The primary unit of the government is the City, and includes component units all of which are described below:

The Primary Government The City was founded on January 6, 1888 and became a charter city in 1911. The City operates under a Council-Manager form of municipal government.

ONYX JONES Finance Director

THE CITY OF

POMONA Finance Department

i�

The accompanying Comprehensive Annual Financial Report includes the activities of the City, the primary government, and its component units, which are the Pomona Public Financing Authority, the City of Pomona Housing Authority, and the Canon Water Company. Financial information for the City and these component units is accounted for in the accompanying financial statements in accordance with principles defining the reporting entity adopted by the Governmental Accounting Standards Board. The City Council serves as the governing board of the Housing Authority. The City Manager, City Attorney, Finance Director/City Treasurer, Senior Accountant, and the Deputy City Manager serve as the governing board for the Pomona Public Financing Authority. The Public Works Director, Deputy Public Works Director, Water/Wastewater Manager, Supervising Water Resources Engineer, and Water Treatment and Quality Supervisor for the City serve as the governing board of the Canon Water Company. All of these component units are presented on a blended basis.

The former Redevelopment Agency, now Successor Agency, is a separate legal entity, which was formed to hold the assets of the former Redevelopment Agency pursuant to City Council action taken on January 9, 2012 with members of the City Council sitting as the Successor Agency to the Redevelopment Agency. The activity of the Successor Agency is overseen by an Oversight Board which is comprised of individuals appointed by various government agencies including the City of Pomona.

The Pomona Public Financing Authority (the Authority) is a joint exercise of powers agreement organized under Section 6500 of the California Government Code on October 27, 1988 between the City, the Redevelopment Agency, and the Redevelopment Agency of the City of West Covina. The purpose of the Authority is to act as a vehicle for various financing activities of the City and the Agency. The funds of the Authority have been included in the governmental activities in the financial statements. Separate audited statements are also issued for the Authority and are available for review in the Pomona Public Library.

The Housing Authority of the City of Pomona (the Housing Authority) was organized pursuant to the State of California Health and Safety Code, Section 34242. The Authority exists pursuant to adopted resolution No. 93-114 adopted June 7, 1993. Its purpose is to prepare and carry out plans to ensure sanitary and safe housing exists in the City of Pomona and that such housing is available to persons of low income at affordable rental rates. The City provides management assistance to the Housing Authority, and the members of the City Council also act as the governing body of the Housing Authority. The Housing Authority’s financial data and transactions are blended with the major governmental funds. Separate audited statements are also issued for the Housing Authority and are available for review in the Pomona Public Library.

This report includes all funds of the City of Pomona, California, and each of its component units. Component units are legally separate entities for which the primary government is financially accountable. The City provides full services to its residents including public safety, land use planning and zoning, housing and economic development, building and safety regulation and inspection, water, sewer and refuse services, maintenance of parks, streets and related infrastructure, recreational activities and library services.

THE CITY OF POMONA

The City is located at the southeast end of Los Angeles County and borders San Bernardino County’s western boundary and is just five miles north of Orange County. The City has a population of 155,604 and covers an area of approximately 23 square miles. The City is a charter city and is governed by a mayor and six council members. Council members are elected by district with the mayor elected from the City at large. Each member of the Council is elected to a term of four years.

i��

LOCAL ECONOMY

The City of Pomona continues to enjoy a broadly based diverse economy, albeit one with an emphasis upon government, healthcare, and other service-oriented industries. Among Pomona’s large employers are the school district (Pomona USD), the City of Pomona itself, California State Polytechnic University, and the Department of Social Services. Notable private sector employers include Tom & Glasser Inc., First Transit, Hayward Industries, Inland Valley Care and Rehab, Kittich Corporation, Verizon, Walmart, Los Angeles County Fair Association (Fairplex) and Target. As a regional healthcare hub, Pomona boasts a premier facility in the Pomona Valley Hospital Medical Center and the non-profit Casa Colina Centers for Rehabilitation.

Per 2016 estimates published by the Labor Market Information Division of the California Employment Development Department (the most recent such data available), the City’s employed civilian labor force presently stands at approximately 64,900 workers.

Retail Sales and Use Tax remains an extremely significant source of revenue, and activity now is still on the rebound from levels depressed by the so-called “Great Recession,” with annual taxable retail sales of more than $1.56 billion dollars during Fiscal Year 2015-16 based on actual revenues received. The City of Pomona remains central to the region’s building and construction industry, while other business-to-business sales represent a notable share of local sales tax receipts.

Current assessed valuation for the City of Pomona including redevelopment areas is $9,840,105,629 according to the Office of the Los Angeles County Auditor-Controller. Based on the City assessed valuation, overall property tax receipts (secured, unsecured, transfer tax, in-lieu, etc.) were 31.1% of the 2015-16 General Fund revenues, while sales tax and related line items were 19.1% of that same total.

LONG-TERM FINANCIAL PLANNING

Pomona’s vigilant ongoing review and control over expenditure growth has been, and will continue as, a critical factor in maintaining and improving the City’s overall financial health. To ensure its fiscal health, on May 2, 2011, the City Council adopted resolution number 2011-49 approving the City’s Fiscal Sustainability Policy. This policy established guidelines for the City’s overall fiscal planning and management and is intended to foster and support continued financial strength and stability of the City. The policy is quite comprehensive and covers areas of Budget, Economic Development, Risk Management, Accounting-Auditing-Financial Reporting, Cash Management and Investments, and Debt Management. The policy also required a separate Fund Balance Policy to ensure fiscal health of the City. Part of the Fund Balance Policy adopted by the City Council on June 20, 2011, requires the General Fund to have a ‘Committed Fund Balance’ of 17% of operating expenditures by June 30, 2020. The policy provides a scale for reaching the 17% starting with 8% as of June 2012 and ending with the 17% in 2020. Based on 2015-16 General Fund expenditure and fund balance numbers, the General Fund has already exceeded the final goal of 17%.

OUTLOOK FOR THE FUTURE

As the City looks ahead to 2016-17, staff is encouraged by the General Fund reserve balance and indicators that a modest economic recovery is finally underway. However the adopted FY 16/17 budget does include a deficit and the revenues and organizational structure are being reviewed to help future budgets. The City is also fully aware that the rebounds to the tax revenues are slow and the City’s financial structure could be challenged in the future. The City of Pomona must identify sustainable resources to address increasing cost such as retirement, continued rise in retiree health costs, debt service requirements, yearly increase for the LA County Fire contract, costs for deferred maintenance of facilities and infrastructure, and a decrease in funding for programs such as Asset Forfeiture.

i�

FINANCIAL INFORMATION

Management of the City is responsible for establishing and maintaining an internal control structure designed to ensure that the assets of the City are protected from loss, theft or misuse and to ensure that adequate accounting data are compiled to allow for the preparation of financial statements in conformity with accounting principles generally accepted in the United States of America. The internal control structure is designed to provide reasonable, but not absolute, assurance that these objectives are met. The concept of reasonable assurance recognizes that: (1) the cost of control should not exceed the benefits likely to be derived; and (2) the valuation of costs and benefits requires estimates and judgments by management.

Single Audit. As a recipient of federal and state financial assistance, the City is also responsible for ensuring that an adequate internal control structure is in place to ensure compliance with applicable laws and regulations related to those programs. This internal control structure is subject to periodic evaluation by management and the staff of the City. The City is required to undergo an annual single audit in conformity with the provisions of Title 2 U.S. Code of Federal Regulation Part 200 - Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards. The results of the City’s single audit for the fiscal year ended June 30, 2016 are published under separate cover.

Budgetary Controls. The City maintains budgetary controls to ensure compliance with legal provisions embodied in the annual adopted budget approved by the City’s governing body. The legal level of budgetary control (that is, the level at which expenditures cannot exceed the appropriated amount) is at the department level in the General Fund and by fund total for all other funds. For budgeting purposes, the General Fund is composed of several departments while all other budgeted funds are each considered to be a single department. The City maintains an encumbrance accounting system as one technique of accomplishing budgetary control, however all operating encumbrances lapse at year-end unless specifically approved by City Council resolution per the City Charter.

OTHER INFORMATION

Risk Management. The City maintains a self-insurance program to provide for the general liability, workers compensation and unemployment benefits claims.

Independent Audit. The accounting firm of Lance, Soll & Lunghard, LLP was selected to perform the annual independent audit. The annual audit is designed to meet the requirements of generally accepted auditing standards in the United States, the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States, and the Federal Single Audit Act of 1996, as amended and related �� . The auditors’ report on the basic financial statements is included in the financial section of this report. The auditors’ report related specifically to the single audit is included in a separate Single Audit Report.

Certificate of Achievement. The Government Finance Officers Association of the United States and Canada (GFOA) awarded a Certificate of Achievement for Excellence in Financial Reporting to the City of Pomona for its Comprehensive Annual Financial Report for the fiscal year ended June 30, 2015. The City of Pomona has received a Certificate of Achievement for the last twenty-three consecutive years (1993-2015). The Certificate of Achievement is a prestigious national award recognizing conformance with the highest standards for preparation of state and local government financial reports.

In order to be awarded a Certificate of Achievement, a government unit must publish an easily readable and efficiently organized comprehensive annual financial report, whose contents conform to program standards. The CAFR must satisfy both generally accepted accounting principles in the United States and applicable legal requirements.

The Certificate of Achievement is valid for a period of one year only. We believe our current report continues to conform to the Certificate of Achievement program requirements, and we are submijting ij to GFOA for consideration.

Additiona. Information. For addijional information, please refer to the Management's Discussion and Analysis in the Introductory Section of this report. This discussion and analysis of the City's financial performance provides an overview of the City's financial activities for the fiscal year ended June 30, 2016. Please read it in conjunction with the basic financial statements and the accompanying notes to the basic financial statements.

Acknowledgments. The preparation of this report on a timely basis could not have been accomplished without the effICient and dedicated services of the entire Finance Department staff. Special recognijion is given to all the Accounting division staff and the City's audit firm for their services in the coordination and assistance in the preparation of this year's report.

In closing, without the leadership and support of the City Council, preparation of this report would not have been possible.

Respectfully submitted,

v

vi

Government Finance Officers Association

Certificate of Achievement for Excellence

in Financial Reporting

Presented to , City of Pomona

California

For its Comprehensive Annual Financial Report

. for the Fiscal Year Ended

June 30, 2015

Executive DirectoliCEO

.... 't

.

..

rf

CITY OF POMONA

Organizational Chart

vii

CITY OF POMONA

DIRECTORY OF CITY OFFICIALS at June 30, 2016

CITY COUNCIL

Elliott Rothman Mayor

John Nolte Councilmember

District 1

Paula Lantz Councilmember

District 4

Adriana Robledo Councilmember

District 2

Ginna E. Escobar Councilmember

District 5

Cristina Carrizosa Councilmember

District 3

Debra Martin Councilmember

District 6

APPOINTED ADMINISTRATIVE OFFICIALS

City Manager ......................................................................Linda Lowry City Attorney .................................................. Arnold Alvarez-Glasman City Clerk ......................................................................... Eva M. Buice City Treasurer ....................................................................... Onyx Jones

DEPARTMENT DIRECTORS

Finance .................................................................................. Onyx Jones Fire (Los Angeles County) ............................................... Jim Robinson Human Resources ........................................................ Linda Matthews Information Technology .................................................... John DePolis Library ................................................................................. Mark Gluba Community Development/Community Services .......... Mark Lazzaretto Police Chief ........................................................................ Paul Capraro Public Works .......................................................................... Rene Salas Water/Wastewater .......................................................... Darron Poulsen

viii

INDEPENDENT AUDITORS’ REPORT

To the Honorable Mayor and Members of the City Council City of Pomona, California Report on the Financial Statements We have audited the accompanying financial statements of the governmental activities, the business-type activities, each major fund, and the aggregate remaining fund information of City of Pomona, California, (the City) as of and for the year ended June 30, 2016, and the related notes to the financial statements, which collectively comprise the City’s basic financial statements as listed in the table of contents. Management’s Responsibility for the Financial Statements Management is responsible for the preparation and fair presentation of these financial statements in accordance with accounting principles generally accepted in the United States of America; this includes the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error. Auditor’s Responsibility Our responsibility is to express opinions on these financial statements based on our audit. We conducted our audit in accordance with auditing standards generally accepted in the United States of America and the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor’s judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity’s preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control. Accordingly, we express no such opinion. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinions.

203 N. Brea Blvd., Suite 203 Brea, CA 92821 Phone: 714.672.0022

An Association of Independent Accounting Firms

To the Honorable Mayor and Members of the City Council City of Pomona, California Opinions In our opinion, the financial statements referred to above present fairly, in all material respects, the respective financial position of the governmental activities, the business-type activities, each major fund, and the aggregate remaining fund information of the City of Pomona, California, as of June 30, 2016, and the respective changes in financial position and, where applicable, cash flows thereof for the year then ended in accordance with accounting principles generally accepted in the United States of America. Other Matters Required Supplementary Information Accounting principles generally accepted in the United States of America require that the management’s discussion and analysis, the budgetary comparison schedules for the General Fund, Housing Authority and Miscellaneous Grant Fund, the schedules of changes in net pension liability and related ratios, and the schedules of plan contributions be presented to supplement the basic financial statements. Such information, although not a part of the basic financial statements, is required by the Governmental Accounting Standards Board, who considers it to be an essential part of financial reporting for placing the basic financial statements in an appropriate operational, economic, or historical context. We have applied certain limited procedures to the required supplementary information in accordance with auditing standards generally accepted in the United States of America, which consisted of inquiries of management about the methods of preparing the information and comparing the information for consistency with management’s responses to our inquiries, the basic financial statements, and other knowledge we obtained during our audit of the basic financial statements. We do not express an opinion or provide any assurance on the information because the limited procedures do not provide us with sufficient evidence to express an opinion or provide any assurance. Other Information Our audit was conducted for the purpose of forming opinions on the financial statements that collectively comprise the City’s basic financial statements. The introductory section, combining and individual nonmajor fund financial statements and schedules, and statistical section are presented for purposes of additional analysis and are not a required part of the basic financial statements. The combining and individual nonmajor fund financial statements and schedules are the responsibility of management and were derived from and relate directly to the underlying accounting and other records used to prepare the basic financial statements. Such information has been subjected to the auditing procedures applied in the audit of the basic financial statements and certain additional procedures, including comparing and reconciling such information directly to the underlying accounting and other records used to prepare the basic financial statements or to the basic financial statements themselves, and other additional procedures in accordance with auditing standards generally accepted in the United States of America. In our opinion, the combining and individual nonmajor fund financial statements and schedules are fairly stated in all material respects in relation to the basic financial statements as a whole. The introductory and statistical sections have not been subjected to the auditing procedures applied in the audit of the basic financial statements and, accordingly, we do not express an opinion or provide any assurance on them.

2

To the Honorable Mayor and Members of the City Council City of Pomona, California Other Reporting Required by Government Auditing Standards In accordance with Government Auditing Standards, we have also issued our report dated January 25, 2017 on our consideration of the City’s internal control over financial reporting and on our tests of its compliance with certain provisions of laws, regulations, contracts, and grant agreements and other matters. The purpose of that report is to describe the scope of our testing of internal control over financial reporting and compliance and the results of that testing, and not to provide an opinion on internal control over financial reporting or on compliance. That report is an integral part of an audit performed in accordance with Government Auditing Standards in considering the City’s internal control over financial reporting and compliance.

Brea, California January 25, 2017

3


4

MANAGEMENT’S DISCUSSION AND ANALYSIS

Fiscal Year Ended June 30, 2016

The following Management’s Discussion and Analysis (MD&A) of the City of Pomona’s financial performance provides an introduction and overview to the financial activities of the City for the fiscal year ended June 30, 2016. This narrative discussion and analysis focuses on the fiscal year 2015-16 activities, resulting changes and current known facts; therefore, the information presented here should be considered in conjunction with additional information furnished in the transmittal letter and the accompanying basic financial statements. FINANCIAL HIGHLIGHTS

� The assets of the City exceeded its liabilities at the close of the fiscal year by $206 million. � As of the close of the current fiscal year, the City’s governmental funds reported combined ending fund

balances of $94.2 million. � At the end of the current fiscal year, committed fund balance for fiscal sustainability in the General Fund

was $15.7 million, which is 17% of total general fund expenditures, including transfers out. OVERVIEW OF THE FINANCIAL STATEMENTS This discussion and analysis portion of the annual financial report is intended to serve as an introduction to, and provide the reader with a fundamental understanding of, the Comprehensive Annual Financial Report (CAFR) for the City of Pomona. The CAFR is divided into four main sections. First is the Introductory Section which provides the letter of transmittal, an organizational chart, and a list of City officials. The Introductory Section is followed by the Financial Section, which contains the independent auditor’s report, the management’s discussion and analysis, and finally the basic financial statements. These statements contain the “core” financial information for the City of Pomona. The basic financial statements include the government-wide financial statements, followed by the fund financial statements, and finally, the notes to the financial statements. The Financial Section is followed by the Supplemental Data portion of the report, which provides individual fund and combining information that rolls up into the amounts shown in the basic financial statements. The final portion of the CAFR is the Statistical Section. This section presents selected financial and demographic information, generally presented on a multi-year basis. Government-wide financial statements. The government-wide financial statements are designed to provide the reader with a broad overview of the City of Pomona’s finances, in a manner similar to a private sector business. Information contained within the government-wide statements includes the entire City government (except fiduciary funds) and the City’s component units. These statements use the accrual basis of accounting with the measurement focus on that of economic resources. All assets and liabilities, both financial and capital, short-term and long-term, are included. All revenues and expenses during the year, regardless of when cash is received or disbursed, are reported. The government-wide financial statements include the Statement of Net Position and the Statement of Activities. The Statement of Net Position presents information on all of the City of Pomona’s assets and liabilities, with the difference between the two reported as “net position”. Increases or decreases in net position may serve as a useful indicator as to whether the financial condition of the City of Pomona is improving or deteriorating over time.

Onyx Jones Finance Director

THE CITY OF

POMONA Finance Department

5

CITY OF POMONA Management’s Discussion and Analysis, Continued Year Ended June 30, 2016 The Statement of Activities presents information showing how the City’s net position changed during the most recent fiscal year. All changes in net position are reported as soon as the underlying event causing the change occurs, regardless of when cash is actually received or disbursed. This means that revenues and expenses in this statement are recorded when earned or a liability is incurred. Thus, items such as the value of earned but unused vacation leave will be recorded as an expense of the current period, even though the actual use of the vacation time may not be until subsequent periods. Both of the government-wide statements distinguish between functions of the City of Pomona that are principally supported by taxes or intergovernmental revenues (governmental activities) from other functions that are intended to recover all or a significant portion of their costs through user fees and charges (business-type activities). The governmental activities of the City of Pomona include general government, public safety, urban development, neighborhood services, and interest and fiscal charges. The business-type activities of the City of Pomona include water, sewer, refuse and Canon Water Company operations. Fund financial statements. A “fund” is a grouping of related accounts that is used to maintain control over resources that have been segregated for specific activities or objectives. The City of Pomona, like other state and local governments, uses fund accounting to ensure and demonstrate compliance with finance related legal requirements. The fund financial statements provide more detailed information about the City’s most significant funds, not the City as a whole. All of the funds of the City of Pomona can be divided into three categories: governmental funds, proprietary funds, and fiduciary funds. Governmental funds include activities of the City that are not proprietary or fiduciary. These funds are used to account for, essentially, the same functions reported as “governmental activities” in the government-wide financial statements. Unlike the government-wide financial statements, however, governmental fund financial statements use the modified accrual basis of accounting and focus on near-term inflows and outflows of spendable resources, as well as the balances of spendable resources available at the end of the fiscal year. Only assets expected to be used and liabilities that come due during the year or soon thereafter are reported on the Balance Sheet. No capital assets are included. Revenues for which cash is received during or soon after the end of the year, and expenditures for goods and services that have actually been received during the year, are included within the Statement of Revenues, Expenditures, and Changes in Fund Balance. Because the focus of governmental funds is narrower than that of the government-wide financial statements, it is useful to compare the information presented for governmental funds in the fund financial statements with similar information presented for “governmental activities” in the government-wide financial statements. By doing so, the reader may better understand the long-term impact of the City’s near-term financing decisions. Both the Governmental Fund Balance Sheet and the Statement of Revenues, Expenditures, and Changes in Fund Balance provide a reconciliation to facilitate this comparison. The City of Pomona maintains 19 individual governmental funds. Individual fund information is presented for the “major” funds in the governmental fund balance sheet and in the governmental fund statement of revenues, expenditures, and changes in fund balance. The major funds presented include the General Fund, the Housing Authority Fund, the Miscellaneous Grants Fund, the General Debt Service Fund, and the Public Financing Authority Debt Service Fund. Information for the remaining governmental funds is combined into a single “other governmental funds” column on the face of the financial statements. Individual fund data for each of these non-major governmental funds is provided in the form of “combining statements” presented in the Supplemental Data portion of the report. Proprietary funds are used to report two types of funds: enterprise funds and internal service funds. Enterprise funds report the same functions presented as “business-type” activities in the government-wide financial statements. These include activities that the City operates similar to a private business. The City of Pomona uses enterprise funds to account for the operations of the City and Canon Water Company all of which are considered “major” funds. Internal service funds are an accounting device used to accumulate and allocate costs internally among the City’s various functions. The City of Pomona uses internal service funds to account for its self-insurance activities, equipment maintenance activities, information technology activities, and printing/mail service activities. Because these four services predominately benefit governmental rather than business-type functions, the activities have been included within “governmental activities” in the government-

6

CITY OF POMONA Management’s Discussion and Analysis, Continued Year Ended June 30, 2016

wide financial statements. All internal service funds are combined into a single aggregated column presentation in the proprietary fund financial statements. Individual fund data for the internal service funds is provided in the form of combining statements presented in the Supplemental Data portion of the report. Proprietary funds use the accrual basis of accounting and focus on the accumulation and use of economic resources. Proprietary fund financial statements include a Statement of Net Position, a Statement of Revenues, Expenses, and Changes in Net Position, and a Statement of Cash Flows. All assets and liabilities, both financial and capital, short and long-term are included within these statements. All revenues earned and expenses incurred during the year are also included, regardless of when cash is actually received or paid. Fiduciary funds are used to account for resources held for the benefit of parties outside of the government. Fiduciary funds are not reflected in the government-wide financial statements because the funds are custodial in nature, and therefore, these resources are not available to fund the City of Pomona programs. Notes to the financial statements. The notes to the financial statements provide additional information that is essential to a full understanding of the information contained in the government-wide and fund financial statements. The combining statements referred to earlier in connection with non-major governmental funds and internal service funds are presented immediately following the notes to the financial statements. GOVERNMENT-WIDE FINANCIAL ANALYSIS Net position. As mentioned earlier, net position may serve over time as a useful indicator of a government’s financial position. Total net position has increased when compared to the prior year, indicating that the City’s overall financial position has improved. Below is a summary schedule showing the components that make up the City’s net position (in millions) at June 30, 2016 and 2015.

2016 2015 2016 2015 2016 2015Current and other assets 120.7$ 117.4$ 88.3$ 88.2$ 209.0$ 205.6$ Capital assets 265.8 273.5 159.2 156.5 425.0 430.0

Total assets 386.5 390.9 247.5 244.7 634.0 635.6

Deferred outflows of resourcesDeferred charge 0.1 0.1 1.5 1.7 1.6 1.8 Deferred pension related items 27.2 7.9 3.8 1.1 31.0 9.0

Total deferred outflows of resources 27.3 8.0 5.3 2.8 32.6 10.8

Current and other liabilities 24.5 8.5 11.2 6.8 35.7 15.3 Long-term liabilities outstanding 247.0 247.6 145.3 150.0 392.3 397.6

Total liabilities 271.5 256.1 156.5 156.8 428.0 412.9

Deferred inflows of resourcesDeferred pension related items 28.3 27.3 4.3 4.2 32.6 31.5

Total deferred inflows of resources 28.3 27.3 4.3 4.2 32.6 31.5

Net Position:

Net Investment in capital assets 224.5 232.2 43.0 42.1 267.5 274.3 Restricted 116.5 138.5 24.0 28.9 140.5 167.4 Unrestricted (227.0) (255.2) 25.0 15.5 (202.0) (239.7)

Total net position 114.0$ 115.5$ 92.0$ 86.5$ 206.0$ 202.0$

Business-TypeGovernmentalTotalActivities Activities

7

CITY OF POMONA

Management’s Discussion and Analysis, Continued Year Ended June 30, 2016

For the City of Pomona, total assets deferred outflows exceeded total liabilities and deferred inflows by $206 million at June 30, 2016. As the table above shows, an amount of $267.5 million is reported as net investment in capital assets. This amount represents those capital assets (land, buildings, improvements, equipment, and work in progress), some of which have been acquired over time and financed by the issuance of long-term debt. The City of Pomona uses these capital assets to provide services to the citizens of the City, and the assets are therefore not available for meeting current financial obligations. Although net investment in capital assets is reported net of related debt, it should be noted that the resources needed to repay the debt must come from other operating sources, since the capital assets themselves cannot be used to make debt service payments.

An additional portion of net position, in the amount of $140.5 million, reported as restricted net position represents resources that are subject to external restrictions on how it may be used. Restrictions include assets that are legally set aside for future capital development, capital projects, housing-related activities, debt service reserves, and other legally restricted amounts. The remaining balance is unrestricted net position of $(202 million). It is not uncommon in government entities to see an unrestricted net position deficit. There are many reasons why this could occur but the City of Pomona has a deficit due to the issuance of several long term liabilities that were used to slowly invest in City assets over a long period of time rather than all at once in advance. Also the City was required to implement new accounting standards in FY 2014/15, GASB 68 which required the City to record the total unfunded liability relating to Pension plans. This caused the unrestricted net position deficit to increase significantly. In FY 2018, GASB 75 will negatively impact the City’s unrestricted Net Position by having to record the unfunded liability for the City’s Other Post-Employment Benefits (OPEB).

Changes in net position. The statement of net position provides a snapshot at a given point in time of the assets and liabilities of the City. The other citywide statement provided is the Statement of Activities. This statement provides the reader with information regarding the revenues, expenses, and changes in net position over the fiscal year. Generally, all changes to the City’s net position from one fiscal year to the next flow through the statement of activities. The City’s programs for governmental activities include legislative and support services, Police, Fire, Public Works, Urban Development, Community Services, and Library. The programs for the business-type activities include water utilities, sewer, and residential refuse operations. The following is a summary schedule showing the components that make up the City’s changes in net position (in millions) for the years ended June 30, 2016 and 2015.

2016 2015 2016 2015 2016 2015Revenues:Program Revenues:

Charges for services 17.3$ 14.3$ 17.3$ 14.3$ Water - - 28.2$ 29.9$ 28.2 29.9 Sewer - - 4.4 4.7 4.4 4.7 Refuse - - 9.7 9.6 9.7 9.6

Operating contributions and grants 17.0 17.6 - - 17.0 17.6 Capital contributions and grants 11.4 12.6 - - 11.4 12.6

General Revenues:Taxes:

Property taxes 33.7 36.4 - - 33.7 36.4 Sales taxes 15.2 13.5 - - 15.2 13.5 Motor vehicle licenses 0.1 0.1 - - 0.1 0.1 Transient occupancy taxes 1.7 1.6 - - 1.7 1.6 Property transfer taxes 1.9 1.6 - - 1.9 1.6 Franchises taxes 6.4 6.6 - - 6.4 6.6 Utility users taxes 16.4 17.5 - - 16.4 17.5 Business licenses (nonregulatory) 3.4 3.3 - - 3.4 3.3 Other taxes 0.1 0.1 - - 0.1 0.1

Interest and rentals 2.7 2.1 0.3 0.1 3.0 2.2 Miscellaneous 3.3 3.5 1.4 0.1 4.7 3.6 Gain on sale of capital assets - - - - - - Extraordinary gain (loss) on RDA dissolution - 0.8 - - - 0.8

Total revenues 130.5$ 131.5$ 44.0$ 44.4$ 174.5$ 175.9$

TotalGovernmental

ActivitiesBusiness-Type

Activities

8

CITY OF POMONA


2016 2015 2016 2015 2016 2015Expenses:General government 7.6$ 5.6$ -$ -$ 7.6$ 5.6$ Public safety 68.9 67.6 - - 68.9 67.6 Urban development 43.5 42.1 - - 43.5 42.1 Neighborhood services 7.9 6.2 - - 7.9 6.2 Interest on long-term debt 5.0 5.2 - - 5.0 5.2 Water - - 25.8 27.1 25.8 27.1 Sewer - - 4.0 3.9 4.0 3.9 Refuse - - 8.0 8.5 8.0 8.5 Canon Water Company - - - - - - Total expenses 132.9 126.7 37.8 39.5 170.7 166.2

Increase in net position before transfers (1.9) 4.8 5.7 4.9 3.8 9.7 Transfers (0.5) 1.0 0.5 (1.0) - - Increase (decrease) in net position (2.4) 5.8 6.2 3.9 3.8 9.7 Net position at beginning of year 115.6 264.6 86.6 99.7 202.2 364.3 Restatement of Net Position 0.8 (154.8) (0.8) (17.0) - (171.8) Net position at end of year 114.0$ 115.6$ 92.0$ 86.6$ 206.0$ 202.2$

TotalGovernmental

ActivitiesBusiness-Type

Activities

Governmental Activities - The City’s program revenues totaled $45.7 million. The City paid for the remaining “public benefit” portion of governmental activities with $87.2 million in taxes (some of which is restricted for certain programs). The cost of all governmental activities this year was $132.9 million. However, as shown above in the changes in net position, the amount taxpayers ultimately financed for these activities was $87.2 million since some of the cost was paid by Charge for Services revenue ($17.3 million), or by other governments and organizations that subsidized certain programs with operating contributions and grants ($17 million), and capital contributions and grants ($11.4 million). The City had a $2.4 million decrease in net position from governmental activities (see Financial Analysis of the City’s Funds – General Fund for explanation) in 2015-16.

Business Type Activities - The cost of all business-type activities in 2015-16 was $37.8 million. As shown above in the changes in net position, the amount of revenue received was $44.0 million. Total resources available during the year to finance business-type activities were $129.8 million consisting of Net Position at July 1, 2015 of $85.8 million, after a restatement of $(.8 million) due to a capitalization error, revenues of $44.0 million, expenditures of $37.8 million and consideration of $(0.5 million) in transfers; thus net position increased by $6.2 million. The increase was primarily due to the reduction in expenses in the Water Fund primarily due to the decrease in purchase of water when compared to the prior year. The City and its residents made a conscious effort to reduce water usage due to the drought and imposed water restrictions. The conservation efforts also lead to decreased charges for services revenue for the City.

FINANCIAL ANALYSIS OF THE CITY’S FUNDS

The City uses governmental fund accounting to ensure compliance with budgetary allocations and to maintain control over resources that are legally, or otherwise, restricted for specific purposes. Following is a discussion of the individual “major” funds as shown on the Balance Sheet for Governmental Funds in the basic financial statements.

General Fund - The General Fund is used to account for the general operations of the City. It is used to account for all financial resources, except those required to be accounted for in another fund. The General Fund is always reported as a “major fund”. The General Fund reported $91.7 million in revenues and $87.1 million in expenditures resulting in revenues over expenditures in the amount of $4.6 million before accounting for net other financing uses of $5 million, resulting in the General Fund fund balance to decrease by $.5 million for the fiscal year. Total fund balance at June 30, 2016 was $16.8 million, composed of $23.4 million in assets combined with $3.6 million in liabilities and $3 million in deferred inflows and resources. Total fund balance includes $0.1 million in nonspendable fund balance, which represents that portion of fund balance that is not available for appropriation. Committed fund balance totals $15.7 million for fiscal sustainability. The City has a

9

CITY OF POMONA Management’s Discussion and Analysis, Continued Year Ended June 30, 2016 fiscal sustainability policy that was adopted by resolution 2011-49 for the purpose of guiding the City’s financial planning to meet financial obligations while providing high quality services. The policy states that 17% of the general fund operating expenditures including transfers out is to be committed for fiscal sustainability. The committed portion of fund balance can only be used for specific purposes pursuant to constraints imposed by formal action of the City Council, and remains in-place unless removed in the same manner. The remaining portion of fund balance is considered unassigned. General fund revenues increased $1.7 million in the fiscal year when compared to the prior year which was due to an increase in licenses and permits revenues. In total, tax revenues decreased when compared to the prior fiscal year. Two major sources of tax revenue that decreased were Property Tax and Utility Users Tax. The reason for the Property Tax decrease was due to the passing of SB 107 where certain portions of the property tax relating to the old redevelopment agency project area caps that went to the City were kept by the County instead. The Utility Users Tax decreased mainly due to the continued water conservation efforts, decrease in the number of telephone lines in homes, lower cost cell phone plans and increase solar power for homes. General fund expenditures increased by $7 million (including transfers out) mainly due to the City ending employee furloughs, the various bargaining units receiving merit and Cost of Living increases as well as the increased CalPERS retirement costs. CalPERS changed their actuarial assumptions in July 2011 resulting in rate increases that took effect in FY 2012. The yearly increases have been significant and will continue for FY 2017 and beyond. Housing Authority Fund – The Housing Authority Fund accounts for grant revenues for housing assistance program payments and acquisition, rehabilitation, and administration of properties used to provide affordable rental housing. The Housing Authority fund has historically been a “major” fund based on criterion set forth by GASB 34. For the fiscal year the Housing Authority reported $13.5 million in revenues and $13.2 million in expenditures, resulting in a net change in fund balance in the amount of $0.3 million. The Housing Authority fund is made up of $29.2 million in assets, combined with $0.3 million in liabilities and $1.3 million in deferred inflows and resources resulting in $27.6 million in fund balance. The $27.6 million in fund balance is restricted for Urban Development. Housing Authority fund revenues increased by $3.5 million in the fiscal year when compared to the prior year due to increased funding from the Department of Housing and Urban Development. Housing Authority expenditures decreased .5% when compared to the prior year. Miscellaneous Grants Fund – The Miscellaneous Grants fund accounts for the revenues received and expenditures made for federal, state and or county approved programs and projects. The Miscellaneous Grants fund has historically been a “major” fund based on criterion set forth by GASB 34. For the fiscal year, the Miscellaneous Grants fund reported $3.3 million in revenues and $2.9 in expenditures resulting in excess of revenues over expenditures of $0.3 million. After a total other financing sources of $0.1, the resulting net change in fund balance totals $0.4. The fund is made up of $23.1 million in assets combined with $0.3 million in liabilities and $3.9 million in deferred inflows and resources resulting in $18.9 million in fund balance. The entire fund balance is restricted for specific purposes. Miscellaneous Grants revenue and expenditures decreased 52% and 52% respectively. Non-Major Funds - The Non-Major Governmental Funds show a net decrease of $1.2 million in fund balance which was the result of a restatement increasing fund balance of $.8 million due to a capitalization error and a decrease in fund balance of $2.0 due to revenues being less than expenditures. The primary reason for the decrease in fund balance was due to the increased level of construction costs relating to various projects funded in the Capital Outlay fund. The following funds were reported as “major” funds on the Statement of Net Position for Proprietary Funds in the basic financial statements: Water Fund – The Water Fund is used to account for all activities associated with the distribution and transmission of potable water as well as reclaimed water to users. The Water Fund reported $28.2 million in operating revenues and operating expenses of $20.8 million resulting in operating income of $7.4 million. After consideration of non-operating revenues, expenses and transfers the total change in net position is $3.2 million with total revenues in excess of expenses. The beginning net position is $64.8 million resulting in an ending fund balance of $68 million. The Water Fund is made up of $62.8 million in current assets, $126.6 in non-current assets, $3.7 million in deferred outflows of resources, $9.1 million in current liabilities, $112.9 in non-current liabilities and $3.1 million in deferred inflow of resources resulting in net position of $68 million.

10

CITY OF POMONA Management’s Discussion and Analysis, Continued Year Ended June 30, 2016 Sewer Fund – The Sewer Fund is used to account for the operation and maintenance of the City’s sewer network. The Sewer Fund reported $4.5 million in operating revenues and operating expenses of $2.7 million resulting in operating income of $1.8 million. After consideration of non-operating revenues, non-operating expenses, and transfers the total change in net position is $0.9 million with total revenues in excess of expenses. The beginning net position of $16.6 million was restated to $15.8 due to a capitalization error thus decreasing the beginning net position. The Sewer Fund is made up of $16.2 million in current assets, $28.9 in non-current assets, $0.9 million in deferred outflows of resources, $0.7 million in current liabilities, $28.1 in non-current liabilities and $0.5 million in deferred inflow of resources resulting in net position of $16.7 million. Refuse Fund – The Refuse Fund is used to account for all activities associated with residential refuse collection, and curbside collection of recycling materials. The Refuse Fund reported $9.9 million in operating revenues and operating expenses of $8.2 million resulting in operating income of $1.6 million. After consideration of non-operating revenues, non-operating expenses and transfers the total change in net position is $1.6 million with total revenues in excess of expenses. The beginning net position of $3.9 million was increased to $5.5 million. The Refuse Fund is made up of $7.6 million in current assets, $3.6 in non-current assets, $0.7 million in deferred outflows of resources, $1.4 million in current liabilities, $4.3 in non-current liabilities and $0.7 million in deferred inflow of resources resulting in net position of $5.5 million. Canon Water Company – The Canon Water Company Fund is used to account for the activities of the Canon Water Company. The Canon Water Company was elected as a major fund by the City. The fund reported $0.06 million in operating revenues and operating expenses of $0.02 million resulting in operating income of $0.04 million. After consideration of non-operating revenues the total change in net position is $0.04 million with total revenues in excess of expenses. The Canon Water Company Fund is made up of $0.423 million in assets and $0.007 in liabilities resulting in net position of $0.416 million. GENERAL FUND BUDGETARY INFORMATION The originally adopted General Fund budget contained $91.3 million in appropriations to fund operations and services. This amount increased to $95.4 million by the end of the fiscal year through City Council approved budget amendments. This increase in the amount of $4.1 million consisted primarily of:

� Increased personnel costs due to Merit increase and Cost of Living increase per the Memorandums of Understanding (MOU’s).

� Approximately $800 thousand for increased costs relating to the Interwest Contract. The City contracts out services to Interwest where Interwest receives a percentage of the revenues. Revenues were anticipated to increase significantly therefore the appropriations increase significantly as well.

� At the mid-year budget review, there were recommendations for various projects to increase appropriations by approximately $1.48 million

General Fund expenditures as a whole were under budget at the completion of the fiscal year. All General Fund revenue budget category estimates were exceeded by the actual revenues except for Taxes, Charges for Services, and Interest and Rentals for Services. The budget shortfall for taxes was $4.6 million and the reason for this was the unknown effects of the implementation of SB 107, the triple flip expiring, and decrease in UUT.

11

CITY OF POMONA


DEBT ADMINISTRATION

At the end of the fiscal year, the City and its component units (Pomona Public Financing Authority and Pomona Housing Authority) had total long-term debt outstanding of $410.2 million.

Governmental Business-TypeActivities Activities Total

Pollution remediation obligations 1,345,606$ -$ 1,345,606$ Obligations under capital leases 702,985 2,430,985 3,133,970 Notes payable 435,000 - 435,000 Revenue bonds 37,938,000 130,187,861 168,125,861 Pension obligation refunding bonds 44,152,153 - 44,152,153 Certificates of participation 10,970,569 - 10,970,569 Compensated absences 7,252,814 1,403,610 8,656,424 Claims payable 14,057,215 - 14,057,215 Net pension liability 121,670,922 14,745,588 136,416,510 OPEB obligations 22,923,937 - 22,923,937

Total 261,449,201$ 148,768,044$ 410,217,245$

Additional information on the City’s long-term debt may be found in Note 10 in the Notes to the Basic Financial Statements.

CASH MANAGEMENT

To obtain flexibility in cash management, the City employs a pooled cash system (Reference Note 3 in the Notes to the Basic Financial Statements). Under the pooled cash concept, the City invests the cash of all funds with maturities planned to coincide with cash needs. Idle cash is invested in certain eligible securities as constrained by law and further limited by the City’s Investment Policy. The goals of the City’s Investment Policy are safety, liquidity and yield.

CAPITAL ASSETS

The capital assets of the City are those assets, which are used in the performance of the City’s functions including infrastructure assets. At June 30, 2016, net capital assets of the governmental activities totaled $265.8 million and the net capital assets of the business-type activities totaled $159.1 million. Depreciation on capital assets is recognized in the government-wide financial statements.

12

CITY OF POMONA Management’s Discussion and Analysis, Continued Year Ended June 30, 2016 For Government Activities, the largest increase in Capital Assets was in the infrastructure class. $5.1 million was transferred from Construction in Process to Infrastructure due to three projects that were completed in FY 2015-16. The projects were:

� Project #68547 – Major Street Rehabilitation ($4 million) � Project #64709 – Sidewalks ($1.1) � Project #51209 – Crimeview Dashboard ($.05 million)

For Enterprise Activities, the largest increase in Capital Assets was in the infrastructure class. $18.1 million was transferred from Construction in Process to Machinery & Equipment due to several projects that were completed in FY 2015-16. The main projects were:

� Project #95064 – Treatment – Perclorate Facility ($8.3 million) � Project #95066 – SCADA System ($3.5) � Project #95033 – Water Mains – Foothill Blvd. ($3.5 million)

Additional information on the City of Pomona’s capital assets may be found in Note 8 in the Notes to the Basic Financial Statements. ECONOMIC FACTORS The National and Statewide economy played a role in City’s financial position at the end of FY 2015-16. Revenues such as property taxes, investment income, development impact fees, and charges for services were still short of anticipated amounts due to impacts of the slowly rebounding housing and financial markets.

Original Accumulated BookDescription Cost Depreciation Value

Capital Assets - Governmental ActivitiesLand 80,966,521$ -$ 80,966,521$ Construction in progress 22,030,816 - 22,030,816 Buildings and improvements 14,941,552 12,255,957 2,685,595 Improvements other than buildings 60,003,395 26,210,091 33,793,304 Machinery and equipment 21,146,261 17,764,462 3,381,799 Furniture and fixtures 1,014,456 860,742 153,714 Autos and trucks 11,219,732 8,820,685 2,399,047 Equipment under capital leases 1,037,970 470,120 567,850 Infrastructure 382,767,392 262,927,487 119,839,905

Total 595,128,095$ 329,309,544$ 265,818,551$

Capital Assets - Business -Type ActivitiesLand 9,089,782$ -$ 9,089,782$ Construction in progress 4,405,074 - 4,405,074 Buildings and improvements 3,482,783 3,301,266 181,517 Improvements other than buildings 286,638 130,161 156,477 Machinery and equipment 221,948,295 80,732,207 141,216,088 Furniture and fixtures 5,105 5,105 - Autos and trucks 4,510,802 3,385,111 1,125,691 Equipment under capital leases 4,257,381 1,277,214 2,980,167

Total 247,985,860$ 88,831,064$ 159,154,796$

13

CITY OF POMONA Management’s Discussion and Analysis, Continued Year Ended June 30, 2016 However, the City of Pomona’s total Fiscal Year 2015-16 General Fund revenues grew by $1.7 million (approximately 1.9%) versus prior year actuals. That being said, there were both increases and decreases across all revenues, with several in particular worth noting. All tax related revenue decreased by $1.7 million. Property taxes decrease approximately $1.5 million as a reflection of passed legislation, specifically SB 107, which affected the allocation of property taxes to local governments. Utility Users Tax decreased $1 million due to water conservation efforts, decreased number of telephone lines in homes, lower cost cell phone plans and increased solar power usage for homes. Sales and Use Tax increased $1.6 million also as a reflection of the continued improvement of the local economy in the City. Building permit receipts increased by $1.3 million as a result on the continued improvement in the local economy. Finally, healthy across-the-board growth in construction related receipts (Building Permits, Job Fees, New Construction Tax, et al) point to a firm foundation for future economic growth. General Fund expenditures increased by $7 million (approximately 8.3%) versus the prior year actual including transfers out. The increase is mainly due to increased salary and retirement costs. CalPERS changed their actuarial assumptions in July 2011 resulting in rate increases that took effect in FY 2012. The yearly increases have been significant and will continue for FY 2017 and beyond. The City has ongoing deferred maintenance and capital improvement expenditures that are essential and unavoidable costs of doing business. Over the past few years, the City has only been able to do minimal capital and maintenance projects with one time money sources. The City’s goal is to dedicate at least 1% of General Fund revenues annual to the Capital Improvement Program and to the vehicle/major equipment Replacement Fund. The City is also suffering a Service Deficit. The economic downturn in 2009 resulted in a reduction in service due to layoffs and regular attrition for the City. As the fiscal implications of the recession begin to stabilize and the economic outlook improves, it is essential for the City to continue to seek innovative, cost effective measures to restore the functions and levels of service to the community. CONTACTING THE CITY’S FINANCIAL MANAGEMENT This financial report is designed to provide Pomona residents, taxpayers, customers, investors and creditors with a general overview of the City’s finances and to show the City’s accountability for the money it receives. Questions about this report, separate reports of the City’s component units, or need any additional financial information, should be directed to the City of Pomona Finance Department at 505 S. Garey Avenue (P.O. Box 660), Pomona, California, 91769.

14

BASIC FINANCIAL STATEMENTS

15


16

GOVERNMENT-WIDEFINANCIAL STATEMENTS

17


18


22

Governmental Fund Financial StatementsProprietary Fund Financial StatementsFiduciary Fund Financial Statements

FUND FINANCIAL STATEMENTS

23


24

GOVERNMENTAL FUND FINANCIAL STATEMENTS

The General Fund is the City's primary operating fund. It accounts for all financial resources of the generalgovernment, except those required to be accounted for in another fund.

The General Debt Service Fund accounts for the payment of interest and principal on debt incurred by the City.

The Public Financing Authority Debt Service Fund accounts for the payment of interest and principal on the localagency revenue bonds, notes payable and other debt of the Public Financing Authority.

The City has determined the following funds to be major funds:

The Housing Authority Fund accounts for grant revenues for acquisition, rehabilitation, and administration ofproperties used to provide affordable rental housing.

The Miscellaneous Grants Fund accounts for revenues received and expenditures made for Federal and/or Stateapproved programs/projects.

25

CITY OF POMONA

BALANCE SHEETGOVERNMENTAL FUNDSJUNE 30, 2016

Debt Service Fund

GeneralAssets:Cash and investments 10,448,022$ 2,036,678$ 2,906,119$ 1,328,050$ Receivables (net):

Accounts 4,264,358 - 165 -Notes and loans - 11,180,470 19,479,151 -Interest 21,944 3,852 3,086 1,632

Prepaid costs 32,252 640 - -Due from other governments 6,703,926 510,101 689,267 5,480 Due from other funds 1,872,608 - - -Advances to other funds - - - -Advances to Successor Agency - 4,000,000 - -Inventories 74,624 - - -Land held for resale - 4,490,541 - -Other investments - 600,000 - -Restricted assets:

Cash and investments 11,903 6,373,095 - 4,416,135

Total Assets 23,429,637$ 29,195,377$ 23,077,788$ 5,751,297$

Liabilities, Deferred Inflow ofResources, and Fund Balances:Liabilities:Accounts payable 1,558,994$ 10,953$ 224,672$ -$ Payroll payable 1,721,476 63,043 43,243 -Accrued liabilities 5,313 167,068 - -Deposits payable - 32,470 - -Due to other governments - - - -Due to other funds - - - 1,764,620 Interest payable - - - 1,206,990 Advances from other funds 304,435 - - 41,950,000

Total Liabilities 3,590,218 273,534 267,915 44,921,610 Deferred Inflows of Resources:Unavailable revenues 2,999,767 1,327,766 3,961,050 -

Total Deferred Inflows of Resources 2,999,767 1,327,766 3,961,050 -

Fund Balances: Nonspendable Inventories 74,624 - - - Prepaid costs 32,252 640 - - Restricted Urban development - 27,593,437 18,574,544 - Public safety - - 274,279 - Neighborhood services - - - - Capital projects - - - - Assessment district improvement - - - - Debt service - - - - Committed Fiscal sustainability 15,664,972 - - - Unassigned 1,067,804 - - (39,170,313)

Total Fund Balances 16,839,652 27,594,077 18,848,823 (39,170,313)

Total Liabilities, Deferred Inflow of Resources and Fund Balances 23,429,637$ 29,195,377$ 23,077,788$ 5,751,297$

Special Revenue Funds

General Debt Service

Housing Authority

Miscellaneous Grants

See Notes to Financial Statements 26

CITY OF POMONA

BALANCE SHEETGOVERNMENTAL FUNDSJUNE 30, 2016

Assets:Cash and investmentsReceivables (net):

AccountsNotes and loansInterest

Prepaid costsDue from other governmentsDue from other fundsAdvances to other fundsAdvances to Successor AgencyInventoriesLand held for resaleOther investmentsRestricted assets:

Cash and investments

Total Assets

Liabilities, Deferred Inflow ofResources, and Fund Balances:Liabilities:Accounts payablePayroll payableAccrued liabilitiesDeposits payableDue to other governmentsDue to other fundsInterest payableAdvances from other funds

Total LiabilitiesDeferred Inflows of Resources:Unavailable revenues

Total Deferred Inflows of Resources

Fund Balances: Nonspendable Inventories Prepaid costs Restricted Urban development Public safety Neighborhood services Capital projects Assessment district improvement Debt service Committed Fiscal sustainability Unassigned

Total Fund Balances

Total Liabilities, Deferred Inflow of Resources and Fund Balances

Debt Service Fund

100,318$ 22,294,902$ 39,114,089$

- 643,730 4,908,253 - 1,903,878 32,563,499

120 26,818 57,452 - 8,441 41,333 - 1,168,022 9,076,796 - - 1,872,608

41,950,000 304,435 42,254,435 - - 4,000,000 - - 74,624 - - 4,490,541 - - 600,000

4,201,521 2,282,023 17,284,677

46,251,959$ 28,632,249$ 156,338,307$

2,000$ 3,846,606$ 5,643,225$ 1,986 210,987 2,040,735

- - 172,381 - 68,523 100,993 - 3,798 3,798 - 69,512 1,834,132 - - 1,206,990 - - 42,254,435

3,986 4,199,426 53,256,689

- 529,146 8,817,729

- 529,146 8,817,729

- - 74,624 - 8,441 41,333

- 19,346,520 65,514,501 - 1,740,472 2,014,751 - 1,662,395 1,662,395 - 917,200 917,200 - 228,649 228,649

46,247,973 - 46,247,973

- - 15,664,972 - - (38,102,509)

46,247,973 23,903,677 94,263,889

46,251,959$ 28,632,249$ 156,338,307$

Total Governmental

Funds

Public Financing

Authority Debt Service

Non-Major Governmental

Funds



28

CITY OF POMONA

STATEMENT OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCESGOVERNMENTAL FUNDS YEAR ENDED JUNE 30, 2016

Debt Service Fund

General Revenues:Taxes 76,888,873$ -$ -$ 646,562$ Special assessments - - - -Licenses and permits 7,122,185 - - -Intergovernmental 205,289 12,297,325 2,576,815 -Charges for services 3,719,655 117,574 153,521 -Interest and rentals 731,529 624,169 356,133 7,280Fines and forfeitures 2,040,214 - - -Contributions from Successor Agency - - - -Miscellaneous 990,701 421,867 185,679 341,168

Total Revenues 91,698,446 13,460,935 3,272,148 995,010

Expenditures:Current: General government 4,769,534 - - 226,076 Public safety 69,328,233 - 572,879 - Urban development 9,244,681 13,094,221 1,909,480 - Neighborhood services 3,258,082 - 351,729 -

Capital outlay 192,589 98,000 140,002 -Debt service: Principal retirement 281,827 - - 1,001,000 Interest and fiscal charges 18,783 - - 4,418,698

Total Expenditures 87,093,729 13,192,221 2,974,090 5,645,774 Excess (Deficiency) of Revenues

Over (Under) Expenditures 4,604,717 268,714 298,058 (4,650,764)

Other Financing Sources (Uses):Transfers in - - 104,588 5,563,641 Transfers out (5,053,168) - - -Capital leases - - - -

Total Other Financing Sources(Uses) (5,053,168) - 104,588 5,563,641

Net Change in Fund Balances (448,451)$ 268,714$ 402,646$ 912,877$

Fund Balances:Beginning of year, as originally reported 17,288,103$ 27,325,363$ 18,446,177$ (40,083,190)$

Restatements - - - -

Beginning of year, as restated 17,288,103 27,325,363 18,446,177 (40,083,190) Net change in fund balances (448,451) 268,714 402,646 912,877

End of Year 16,839,652$ 27,594,077$ 18,848,823$ (39,170,313)$

Housing Authority

Miscellaneous Grants




CITY OF POMONA

STATEMENT OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCESGOVERNMENTAL FUNDS YEAR ENDED JUNE 30, 2016

Revenues:TaxesSpecial assessmentsLicenses and permitsIntergovernmentalCharges for servicesInterest and rentalsFines and forfeituresContributions from Successor AgencyMiscellaneous

Total Revenues

Expenditures:Current: General government Public safety Urban development Neighborhood services

Capital outlayDebt service: Principal retirement Interest and fiscal charges

Total ExpendituresExcess (Deficiency) of Revenues

Over (Under) Expenditures

Other Financing Sources (Uses):Transfers inTransfers outCapital leases

Total Other Financing Sources(Uses)

Net Change in Fund Balances

Fund Balances:Beginning of year, as originally reported

Restatements

Beginning of year, as restatedNet change in fund balances

End of Year

Debt Service Fund

Non-Major TotalGovernmental Governmental

Funds Funds

-$ 153,375$ 77,688,810$ - 1,176,050 1,176,050 - 2,294,605 9,416,790 - 12,645,426 27,724,855 - 643,148 4,633,898

231,277 655,238 2,605,626 - 15,401 2,055,615 - 602,278 602,278

10,577 1,316,381 3,266,373

241,854 19,501,902 129,170,295

6,734 240 5,002,584 - 1,897,341 71,798,453 - 10,948,207 35,196,589 - 1,027,275 4,637,086 - 7,236,147 7,666,738

1,575,000 221,891 3,079,718 180,658 9,559 4,627,698

1,762,392 21,340,660 132,008,866

(1,520,538) (1,838,758) (2,838,571)

- 4,231,644 9,899,873 - (4,728,706) (9,781,874) - 400,408 400,408

- (96,654) 518,407

(1,520,538)$ (1,935,412)$ (2,320,164)$

47,768,511$ 25,090,810$ 95,835,774$ - 748,279 748,279

47,768,511 25,839,089 96,584,053 (1,520,538) (1,935,412) (2,320,164)

46,247,973$ 23,903,677$ 94,263,889$

Public Financing

Authority Debt Service


PROPRIETARY FUNDFINANCIAL STATEMENTS

The Water Utility Enterprise Fund accounts for activities associated with the distribution and transmission ofpotable water to users.

The Sewer Enterprise Fund accounts for the operation and maintenance of the City's sewer network.

The Refuse Enterprise Fund accounts for activities associated with refuse collection, and curbside collection ofrecycling materials.

The Canon Water Company Enterprise Fund accounts for the activities of the Canon Water Company.

The City has determined the following funds to be major funds:

33

CITY OF POMONA

STATEMENT OF NET POSITIONPROPRIETARY FUNDS JUNE 30, 2016

Assets:Current:

Cash and investments 36,991,279$ 8,342,505$ 5,254,426$ Receivables (net):

Accounts 8,194,024 1,123,916 2,349,154 Interest 41,817 11,223 6,518

Prepaid costs 9,000 - - Inventories 321,805 - -

Restricted:Cash 17,284,361 6,700,618 -

Total Current Assets 62,842,286 16,178,262 7,610,098 Noncurrent:

Other Investments 9,000 - - Capital assets, not being depreciated 13,242,203 252,653 - Capital assets, net of depreciation 113,311,458 28,683,903 3,641,206

Total Noncurrent Assets 126,562,661 28,936,556 3,641,206

Total Assets 189,404,947 45,114,818 11,251,304 Deferred Outflows of Resources:Deferred charges on refunding 1,022,974 494,660 - Deferred pension related items 2,717,790 392,062 724,879

Total Deferred Outflows of Resources 3,740,764 886,722 724,879

Total Assets and DeferredOutflows of Resources 193,145,711$ 46,001,540$ 11,976,183$

Water Sewer Refuse

Business-Type ActivitiesEnterprise Funds


(CONTINUED)

CITY OF POMONA

STATEMENT OF NET POSITIONPROPRIETARY FUNDSJUNE 30, 2016

Assets:Current:

Cash and investmentsReceivables (net):

AccountsInterest

Prepaid costsInventories

Restricted:Cash

Total Current AssetsNoncurrent:

Other InvestmentsCapital assets, not being depreciatedCapital assets, net of depreciation

Total Noncurrent Assets

Total AssetsDeferred Outflows of Resources:Deferred charges on refundingDeferred pension related items

Total Deferred Outflows of Resources

Total Assets and DeferredOutflows of Resources

GovernmentalActivities

Total

267,994$ 50,856,204$ 9,419,928$

128,442 11,795,536 - - 59,558 15,338

2,870 11,870 3,200 - 321,805 357,977

- 23,984,979 -

399,306 87,029,952 9,796,443

- 9,000 - - 13,494,856 -

23,373 145,659,940 359,228

23,373 159,163,796 359,228

422,679 246,193,748 10,155,671

- 1,517,634 - - 3,834,731 730,180

- 5,352,365 730,180

422,679$ 251,546,113$ 10,885,851$

Internal Service Funds

Canon Water Company -

February 28, 2016


35

CITY OF POMONA

STATEMENT OF NET POSITIONPROPRIETARY FUNDS JUNE 30, 2016

Water Sewer Refuse


Liabilities, Deferred Inflowsof Resources and Net Position:

Liabilities:Current:

Accounts payable 2,076,113$ 5,898$ 506,268$ Payroll payable 278,810 39,164 64,380 Accrued liabilities 209,786 - - Interest payable 816,034 100,294 51,274 Deposits payable 3,590,297 - - Due to other funds - - - Compensated absences 748,000 115,000 191,000 Claims and judgments - - - Bonds, notes, and capital leases 1,415,000 415,000 586,826

Total Current Liabilities 9,134,040 675,356 1,399,748

Noncurrent:Compensated absences 294,837 6,620 48,153 Claims and judgments - - - Net pension liability 10,679,955 1,624,965 2,440,668 Bonds, notes, and capital leases 101,912,861 26,445,000 1,844,159

Total Noncurrent Liabilities 112,887,653 28,076,585 4,332,980

Total Liabilities 122,021,693 28,751,941 5,732,728

Deferred Inflows of Resources:Deferred pension related items 3,136,895 480,675 700,451

Total Deferred Inflows of Resources 3,136,895 480,675 700,451

Net Position:Net Investment in capital assets 34,598,821 7,156,354 1,210,221 Restricted for capital projects 10,350,047 4,585,138 - Restricted for debt service 6,934,314 2,115,479 - Unrestricted 16,103,941 2,911,953 4,332,783

Total Net Position 67,987,123 16,768,924 5,543,004

Total Liabilities, Deferred Inflowsof Resources and Net Position 193,145,711$ 46,001,540$ 11,976,183$

Reconciliation of Net Position to the Statement of Net PositionNet Position per Statement of Net Position - Proprietary FundsPrior years' accumulated adjustment to reflect the consolidation of internal service funds activities related to the enterprise fundsCurrent years' adjustments to reflect the consolidation of internal service activities related to enterprise fundsNet Position per Statement of Net Position


CITY OF POMONA

STATEMENT OF NET POSITIONPROPRIETARY FUNDSJUNE 30, 2016

Liabilities, Deferred Inflowsof Resources and Net Position:


Accounts payablePayroll payableAccrued liabilitiesInterest payableDeposits payableDue to other fundsCompensated absencesClaims and judgmentsBonds, notes, and capital leases

Total Current Liabilities

Noncurrent:Compensated absencesClaims and judgmentsNet pension liabilityBonds, notes, and capital leases

Total Noncurrent Liabilities

Total Liabilities

Deferred Inflows of Resources:Deferred pension related items


Net Position:Net Investment in capital assetsRestricted for capital projectsRestricted for debt serviceUnrestricted

Total Net Position

Total Liabilities, Deferred Inflowsof Resources and Net Position

Reconciliation of Net Position to the Statement of Net PositionNet Position per Statement of Net Position - Proprietary FundsPrior years' accumulated adjustment to reflect the consolidation of internal service funds activities related to the enterprise fundsCurrent years' adjustments to reflect the consolidation of internal service activities related to enterprise fundsNet Position per Statement of Net Position


Total Internal

Service Funds


February 28, 2016


6,846$ 2,595,125$ 451,096$ - 382,354 78,675- 209,786 -- 967,602 -- 3,590,297 -- - 38,476- 1,054,000 115,000- - 5,549,895- 2,416,826 -

6,846 11,215,990 6,233,142

- 349,610 46,584- - 8,507,320- 14,745,588 2,705,525- 130,202,020 -

- 145,297,218 11,259,429

6,846 156,513,208 17,492,571

- 4,318,021 788,066

- 4,318,021 788,066

23,373 42,988,769 359,228- 14,935,185 -- 9,049,793 -

392,460 23,741,137 (7,754,014)

415,833 90,714,884 (7,394,786)

422,679$ 251,546,113$ 10,885,851$

90,714,884$

953,677

327,523 91,996,084$

37

CITY OF POMONA

STATEMENT OF REVENUES, EXPENSES,AND CHANGES IN NET POSITIONPROPRIETARY FUNDSYEAR ENDED JUNE 30, 2016

Operating Revenues:Charges for services 28,189,546$ 4,425,247$ 9,692,936$ Miscellaneous - 65,155 184,365

Total Operating Revenues 28,189,546 4,490,402 9,877,301

Operating Expenses:Personnel services 6,367,886 915,887 1,554,064 Operations 11,430,023 1,061,888 5,472,055 Claims expense 12,020 - - Insurance 263,536 36,318 71,924 Amortization of deferred loss on refunding 78,691 58,195 - Franchise Fees - - 604,903 Depreciation 2,680,328 600,474 519,621

Total Operating Expenses 20,832,484 2,672,762 8,222,567

Operating Income (Loss) 7,357,062 1,817,640 1,654,734

Nonoperating Revenues (Expenses):Intergovernmental - - 45,841 Interest revenue 207,032 90,333 16,560 Interest expense (4,831,103) (1,230,362) (58,401) Sale of surplus water 567,500 - - Gain (loss) on disposal of capital assets (181,079) (116,493) -

Total Nonoperating Revenues (Expenses) (4,237,650) (1,256,522) 4,000

Income (Loss) Before Transfers 3,119,412 561,118 1,658,734

Transfers in 1,737,051 1,141,178 - Transfers out (1,637,561) (758,667) -

Changes in Net Position 3,218,902$ 943,629$ 1,658,734$

Net Position:Beginning of year, as originally reported 64,768,221$ 16,573,574$ 3,884,270$ Restatements - (748,279) -

Beginning of year, as restated 64,768,221 15,825,295 3,884,270 Changes in Net Position 3,218,902 943,629 1,658,734

End of Year 67,987,123$ 16,768,924$ 5,543,004$

Reconciliation of Changes in Net Position to the Statement of Activities:

Changes in Net Position, per the Statement of Revenues,Expenses and Changes in Net Position - Proprietary Funds

Adjustment to reflect the consolidation of current fiscal yearinternal service funds activities related to enterprise funds

Changes in Net Position of Business-Type Activities per Statement of Activities


Water Sewer Refuse


CITY OF POMONA

STATEMENT OF REVENUES, EXPENSES,AND CHANGES IN NET POSITIONPROPRIETARY FUNDSYEAR ENDED JUNE 30, 2016

Operating Revenues:Charges for servicesMiscellaneous

Total Operating Revenues

Operating Expenses:Personnel servicesOperationsClaims expenseInsuranceAmortization of deferred loss on refundingFranchise FeesDepreciation

Total Operating Expenses

Operating Income (Loss)

Nonoperating Revenues (Expenses):IntergovernmentalInterest revenueInterest expenseSale of surplus waterGain (loss) on disposal of capital assets

Total Nonoperating Revenues (Expenses)

Income (Loss) Before Transfers

Transfers inTransfers out

Changes in Net Position

Net Position:Beginning of year, as originally reportedRestatements

Beginning of year, as restatedChanges in Net Position

End of Year

Reconciliation of Changes in Net Position to the Statement of Activities:

Changes in Net Position, per the Statement of Revenues,Expenses and Changes in Net Position - Proprietary Funds

Adjustment to reflect the consolidation of current fiscal yearinternal service funds activities related to enterprise funds

Changes in Net Position of Business-Type Activities per Statement of Activities


Total

64,221$ 42,371,950$ 9,537,751$ - 249,520 325,403

64,221 42,621,470 9,863,154

- 8,837,837 1,402,146 18,408 17,982,374 3,279,302

- 12,020 5,465,914 - 371,778 54,849 - 136,886 - - 604,903 -

2,672 3,803,095 41,752

21,080 31,748,893 10,243,963

43,141 10,872,577 (380,809)

- 45,841 - 8 313,933 59,762 - (6,119,866) - - 567,500 - - (297,572) -

8 (5,490,164) 59,762

43,149 5,382,413 (321,047)

- 2,878,229 - - (2,396,228) (600,000)

43,149$ 5,864,414$ (921,047)$

372,684$ 85,598,749$ (6,473,739)$ - (748,279) -

372,684 84,850,470 (6,473,739) 43,149 5,864,414 (921,047)

415,833$ 90,714,884$ (7,394,786)$

5,864,414$

327,523

6,191,937$

Business-Type Activities Enterprise Funds

Internal Service Funds


February 28, 2016


CITY OF POMONA

STATEMENT OF CASH FLOWSPROPRIETARY FUNDS YEAR ENDED JUNE 30, 2016

Cash Flows from Operating Activities:Cash received from customers and users 26,597,212$ 4,431,116$ 9,663,028$ Cash received from/(paid for) other - 65,155 184,365 Cash paid to suppliers for goods and services (10,754,409) (1,079,493) (5,895,791) Cash paid for general and administrative expenses (7,531,060) (1,102,985) (1,866,487)

Net Cash Provided (Used) by Operating Activities 8,311,743 2,313,793 2,085,115

Cash Flows from Non-CapitalFinancing Activities:

Cash transfers in 1,737,051 1,141,178 - Cash transfers out (1,637,561) (758,667) - Amounts received from other funds - - - Amounts paid to other fundsAdvance to other funds 5,000,000 - - Proceeds from sale of surplus water 567,500 - - Grant subsidy - - 45,841

Net Cash Provided (Used) by Non-Capital Financing Activities 5,666,990 382,511 45,841

Cash Flows from Capital and Related Financing Activities:

Acquisition and construction of capital assets (5,456,082) (2,078,004) (18,333)Principal paid on capital debt (1,350,000) (400,000) (573,408) Interest paid on capital debt (4,991,197) (1,231,691) (70,303)

Net Cash Provided (Used) by Capital and Related Financing Activities (11,797,279) (3,709,695) (662,044)

Cash Flows from Investing Activities:Interest received 169,792 86,677 13,149

Net Cash Provided (Used) byInvesting Activities 169,792 86,677 13,149

Net Increase (Decrease) in Cashand Cash Equivalents 2,351,246 (926,714) 1,482,061

Cash and Cash Equivalents, Beginning of Year 51,924,394 15,969,837 3,772,365

Cash and Cash Equivalents, End of Year 54,275,640$ 15,043,123$ 5,254,426$


Water Sewer Refuse


(CONTINUED)

CITY OF POMONA

STATEMENT OF CASH FLOWSPROPRIETARY FUNDSYEAR ENDED JUNE 30, 2016

Cash Flows from Operating Activities:Cash received from customers and usersCash received from/(paid for) otherCash paid to suppliers for goods and servicesCash paid for general and administrative expenses

Net Cash Provided (Used) by Operating Activities


Cash transfers inCash transfers outAmounts received from other fundsAmounts paid to other fundsAdvance to other fundsProceeds from sale of surplus waterGrant subsidy

Net Cash Provided (Used) by Non-Capital Financing Activities


Acquisition and construction of capital assetsPrincipal paid on capital debtInterest paid on capital debt

Net Cash Provided (Used) by Capital and Related Financing Activities

Cash Flows from Investing Activities:Interest received

Net Cash Provided (Used) byInvesting Activities

Net Increase (Decrease) in Cashand Cash Equivalents

Cash and Cash Equivalents, Beginning of Year

Cash and Cash Equivalents, End of Year


Total Internal

Service Funds

-$ 40,691,356$ 9,537,842$ - 249,520 325,403

(10,763) (17,740,456) (6,740,890) - (10,500,532) (1,757,045)

(10,763) 12,699,888 1,365,310

- 2,878,229 - - (2,396,228) (600,000) - - 34,989

- (5,000,000) - 5,000,000 - - 567,500 - - 45,841 -

- 6,095,342 (5,565,011)

- (7,552,419) (13,491) - (2,323,408) - - (6,293,191) -

- (16,169,018) (13,491)

8 269,626 50,987

8 269,626 50,987

(10,755) 2,895,838 (4,162,205)

278,749 71,945,345 13,582,133

267,994$ 74,841,183$ 9,419,928$


February 28, 2016


41

CITY OF POMONA

STATEMENT OF CASH FLOWSPROPRIETARY FUNDS YEAR ENDED JUNE 30, 2016


Water Sewer Refuse

Reconciliation of Operating Income to Net CashProvided (Used) by Operating Activities:Operating income (loss) 7,357,062$ 1,817,640$ 1,654,734$ Adjustments to reconcile operating income (loss) net cash provided (used) by operating activities:

Depreciation 2,680,328 600,474 519,621 Amortization 78,691 58,195 - (Increase) decrease in accounts receivable (1,592,334) 5,869 (29,908) (Increase) decrease in prepaid expense 2,355 - - (Increase) decrease in inventory (102,981) - - (Increase) decrease in deferred outflows (1,914,104) (268,677) (546,551) Increase (decrease) in accounts payable 590,875 (17,605) 181,167 Increase (decrease) in payroll payable 52,369 7,900 10,991 Increase (decrease) in accrued liabilities 109,898 - - Increase (decrease) in deposits payable 87,487 - - Increase (decrease) in compensated absences 85,278 (9,045) 25,170 Increase (decrease) in claims and judgments - - - Increase (decrease) in net pension liability 778,360 104,838 243,630 Increase (decrease) in deferred inflows 98,459 14,204 26,261

Total Adjustments 954,681 496,153 430,381 Net Cash Provided (Used) by Operating Activities 8,311,743$ 2,313,793$ 2,085,115$

Non-Cash Investing, Capital, and Financing Activities:Amortization of bond premium/discount 148,783$ -$ -$ Amortization of deferred charges on refunding 78,691 58,195 - Loss (Gain) on disposal of capital assets 181,079 116,493 -


CITY OF POMONA

STATEMENT OF CASH FLOWSPROPRIETARY FUNDSYEAR ENDED JUNE 30, 2016

Reconciliation of Operating Income to Net CashProvided (Used) by Operating Activities:Operating income (loss)Adjustments to reconcile operating income (loss) net cash provided (used) by operating activities:

DepreciationAmortization(Increase) decrease in accounts receivable(Increase) decrease in prepaid expense(Increase) decrease in inventory(Increase) decrease in deferred outflowsIncrease (decrease) in accounts payableIncrease (decrease) in payroll payableIncrease (decrease) in accrued liabilitiesIncrease (decrease) in deposits payableIncrease (decrease) in compensated absencesIncrease (decrease) in claims and judgmentsIncrease (decrease) in net pension liabilityIncrease (decrease) in deferred inflows

Total AdjustmentsNet Cash Provided (Used) by

Operating Activities

Non-Cash Investing, Capital, and Financing Activities:Amortization of bond premium/discountAmortization of deferred charges on refundingLoss (Gain) on disposal of capital assets


Total Internal

Service Funds


February 28, 2016


43,141$ 10,872,577$ (380,809)$

2,672 3,803,095 41,752- 136,886 -

(64,221) (1,680,594) 91800 3,155 1,280

- (102,981) 26,141- (2,729,332) (528,728)

6,845 761,282 70,053- 71,260 352- 109,898 -- 87,487 -- 101,403 (70,531)- - 1,955,667- 1,126,828 223,590- 138,924 26,452

(53,904) 1,827,311 1,746,119

(10,763)$ 12,699,888$ 1,365,310$

-$ 148,783$ -$ - 136,886 -- 297,572 -

43


44

FIDUCIARY FUNDFINANCIAL STATEMENTSThe City’s fiduciary funds consist of agency funds and one private purpose trust fund. Fiduciary fund types areaccounted for according to the nature of the fund.

Agency Funds are custodial in nature (assets equal liabilities) and do not involve measurement of results ofoperations.

Private-Purpose Trust Fund is used by the City to account for the assets and liabilities of the formerRedevelopment Agency and the receipt of funds to make estimated installment payments of enforceable obligationsuntil the obligations of the former Redevelopment Agency are paid in full and assets have been liquidated.

45

CITY OF POMONA

STATEMENT OF FIDUCIARY NET POSITIONFIDUCIARY FUNDSJUNE 30, 2016

AgencyFunds

Assets:Cash and investments 3,886,477$ 20,092,586$Receivables (net):

Accounts 13,460 706,898Notes and loans - 4,099,660Interest 750 9,621

Deposits - 600Due from other governments 8,808 -Land held for resale - 19,648,669Restricted assets:

Cash and investments - 52,473,582Capital assets:

Capital assets, not being depreciated - 125,423Capital assets, net of depreciation - 65,852

Total Assets 3,909,495$ 97,222,891

Deferred Outflows of Resources:Deferred charge on refunding 808,104

Total Deferred Outflows of Resources 808,104

Liabilities:Accounts payable 1,714,154$ 132,469Payroll payable - 9,852Interest payable - 3,645,082Deposits payable 1,970,578 186,916Due to other governments - 6,025,479Due to external parties/other agencies 224,763 -Long-term liabilities:

Due within one year - 7,347,607Due in more than one year - 210,426,194

Total Liabilities 3,909,495$ 227,773,599

Net Position:Held in trust for other purposes (129,742,604)

Total Net Position (129,742,604)$

Private-Purpose Trust

Fund Successor

Agency of the Former RDA


CITY OF POMONA

STATEMENT OF CHANGES IN FIDUCIARY NET POSITIONFIDUCIARY FUNDSYEAR ENDED JUNE 30, 2016

Additions:Taxes 15,962,097$ Intergovernmental 3,704,040 Contributions from City 2,173 Charges for services 600 Interest and rentals 1,588,744 Miscellaneous 413,455

Total Additions 21,671,109

Deductions:Personnel services 274,006 Operations 7,622,579 Interest and fiscal charges 12,454,433 Contributions to other governments 604,451

Total Deductions 20,955,469

Changes in Net Position 715,640

Net Position:Beginning of year (130,458,244)

Net Position - End of year (129,742,604)$

Private-Purpose Trust Fund Successor

Agency of the Former RDA



48

NOTES TO FINANCIAL STATEMENTS

49


50

CITY OF POMONA INDEX TO NOTES TO FINANCIAL STATEMENTS JUNE 30, 2016 � Page Number Note 1 – Summary of Significant Accounting Policies ................................................................... 55

Financial Reporting Entity ............................................................................................................... 55 City of Pomona Housing Authority ........................................................................................... 55 City of Pomona Public Financing Authority .............................................................................. 56 Canon Water Company............................................................................................................ 56

Basis of Accounting and Measurement Focus ............................................................................... 56 Government-Wide and Fund Financial Statements .................................................................... 56 Governmental Fund Financial Statements .................................................................................. 57 Proprietary Fund Financial Statements ....................................................................................... 58 Fiduciary Fund Financial Statements .......................................................................................... 59

Assets, Liabilities and Net Position or Equity ................................................................................. 60 Cash, Cash Equivalents and Investments .................................................................................. 60 Interfund Transactions ................................................................................................................. 60 Inventories and Prepaid Items..................................................................................................... 61 Capital Assets ............................................................................................................................. 61 Land Held for Resale ................................................................................................................... 62 Long-Term Debt .......................................................................................................................... 62 Compensated Absences ............................................................................................................. 62 Claims Payable ........................................................................................................................... 62 Unearned and Unavailable Revenue .......................................................................................... 63 Deferred Outflows/Inflows of Resources ..................................................................................... 63 Net Pension Liability .................................................................................................................... 63 Net Position ................................................................................................................................. 64 Fund Balances ............................................................................................................................ 64 Property Taxes ............................................................................................................................ 65 Use of Estimates ......................................................................................................................... 65 Effect of New Accounting Standards ........................................................................................... 66

Note 2 – Stewardship, Compliance and Accountability .................................................................. 66

Deficit Fund Balance or Net Position .............................................................................................. 66 Excess of Expenditure Over Appropriations ................................................................................... 67

Note 3 – Cash and Investments ......................................................................................................... 67

Summary of Cash and Investments ............................................................................................... 67 Deposits .......................................................................................................................................... 67 Investments .................................................................................................................................... 67 Investment in Local Agency Investment Funds .............................................................................. 67 Interest Rate Risk ........................................................................................................................... 69 Credit Risk ...................................................................................................................................... 69 Fair Value Hierarchy ....................................................................................................................... 69 Custodial Credit Risk ...................................................................................................................... 70 Concentration of Credit Risk ........................................................................................................... 70

Note 4 – Loans Receivable (Net) ....................................................................................................... 71 Note 5 – Interfund Transactions ........................................................................................................ 71

Government-Wide Financial Statements ........................................................................................ 71 Internal Balances ..................................................................................................................... 71 Transfers .................................................................................................................................. 71

Fund Financial Statements ............................................................................................................. 72 Due To/Due From ................................................................................................................... 72 Long-Term Advances ............................................................................................................... 72 Transfers .................................................................................................................................. 73

51

CITY OF POMONA INDEX TO NOTES TO FINANCIAL STATEMENTS (CONTINUED) JUNE 30, 2016 �

Page Number Note 6 – Due from Other Governments ............................................................................................ 73 Note 7 – Land Held for Resale ........................................................................................................... 73 Note 8 – Capital Assets ...................................................................................................................... 74

Government-Wide Financial Statements ........................................................................................ 74 Governmental Activities .................................................................................................................. 75 Business-Type Activities ................................................................................................................. 76

Note 9 – Other Investments................................................................................................................ 76

Note 10 – Long-Term Debt ................................................................................................................. 77 Governmental Activities Long-Term Debt ...................................................................................... 77

Pollution Remediation Obligations .............................................................................................. 77 Obligations under Capital Leases ............................................................................................... 77 Notes Payable ............................................................................................................................. 78 Revenue Bonds ........................................................................................................................... 79 Pension Obligation Refunding Bonds ......................................................................................... 83 Certificates of Participation .......................................................................................................... 85 Compensated Absences ............................................................................................................. 86 Claims Payable ........................................................................................................................... 86

Business-Type Activities ................................................................................................................. 86 Obligations under Capital Leases ............................................................................................... 86 Revenue Bonds ........................................................................................................................... 87 Compensated Absences ............................................................................................................. 91

Pledged Revenue ........................................................................................................................... 92 Outstanding Principal on Capital-Related Debt .............................................................................. 92

Governmental Activities ............................................................................................................... 92 Business-Type Activities ............................................................................................................. 93

Note 11 – Non-City Obligations ......................................................................................................... 93 Note 12 – Defined Benefits Pension Plan Obligations .................................................................... 94

General Information about the Pension Plan ................................................................................. 94 Plan Description .......................................................................................................................... 94 Benefits Provided ........................................................................................................................ 94 Employees Covered .................................................................................................................... 95 Contribution Description .............................................................................................................. 95 Net Pension Liability ....................................................................................................................... 96 Actuarial Methods and Assumptions used to Determine Total Pension Liabilities ..................... 96 Change of Assumptions .............................................................................................................. 96 Discount Rate .............................................................................................................................. 97 Changes in Net Pension Liabilities ................................................................................................. 98 Sensitivity of Net Pension Liability to Changes in the Discount Rate ......................................... 99 Pension Plan Fiduciary Net Position ........................................................................................... 99 Pension Expense and deferred Outflows and Deferred Inflows of Resources Related to Pensions ................................................................................................................ 99

52


Page Number Note 13 – Other Post Employment Benefits ................................................................................... 100

Collateral Benefits Plan ................................................................................................................ 100 Plan Description ........................................................................................................................ 100 Eligibility ..................................................................................................................................... 100 Funding Policy ........................................................................................................................... 100 Annual Pension Cost ................................................................................................................. 101 Funded Status and Funding Progress ...................................................................................... 101

Public Employees’ Medical and Hospital Care Program (PEMHCA) Plan ................................... 102 Plan Description ........................................................................................................................ 102 Eligibility ..................................................................................................................................... 102 Funding Policy ........................................................................................................................... 102 Annual OPEB Cost and Net OPEB Obligation .......................................................................... 103 Funded Status and Funding Progress ...................................................................................... 103 Actuarial Methods and Assumptions ......................................................................................... 104

Note 14 – Joint Powers Agreements ............................................................................................... 104

Alameda Corridor-East Construction Authority ............................................................................ 104 CSAC – Excess Insurance Authority ............................................................................................ 105 Foothill Air Support Team ............................................................................................................. 105 Foothill Transit .............................................................................................................................. 105 Gold Line Phase II Construction Authority ................................................................................... 106 Interagency Communications Interoperability System ................................................................. 106 Los Angeles County Disaster Management Area D ..................................................................... 106 Los Angeles Interagency Metropolitan Police Apprehensive Crime Task Force ......................... 106 Pomona Valley Transportation Authority ...................................................................................... 107 Pomona-Walnut-Rowland (PWR) Joint Water Line Commission ................................................. 107 San Gabriel Valley Council of Governments ................................................................................ 108 Tri-City Mental Health Center ....................................................................................................... 109

Note 15 – Risk Management............................................................................................................. 109 Note 16 – Commitments and Contingencies .................................................................................. 110

Agency Participation Agreement .................................................................................................. 110 Contractual Commitments ............................................................................................................ 110 Lawsuits ........................................................................................................................................ 110

Note 17 – Net Position and Fund Balance ...................................................................................... 110

Government-Wide Financial Statements ...................................................................................... 110 Net Investment in Capital Assets .............................................................................................. 110 Unrestricted Net Position ........................................................................................................... 110

Fund Financial Statements ........................................................................................................... 110 Net Investment in Capital Assets .............................................................................................. 110

Net Position and Fund Balances Restatement ............................................................................. 111 Note 18 – Successor Agency Trust for Assets of Former Redevelopment Agency .................. 112

Cash and Investments .................................................................................................................. 113 Loans Receivable (Net) ................................................................................................................ 113 Land Held for Resale .................................................................................................................... 114 Capital Assets ............................................................................................................................... 114

53


Page Number Note 18 – Successor Agency Trust for Assets of Former

Redevelopment Agency (Continued) ............................................................................ 115 Long-Term Debt............................................................................................................................ 115

Pollution Remediation Obligations ............................................................................................ 115 County Deferred Tax Loans ...................................................................................................... 115 Notes Payable ........................................................................................................................... 116 Tax Allocation Bonds ................................................................................................................. 117 Advances from the Public Financing Authority .......................................................................... 119 Advances from the Housing Authority ....................................................................................... 125 Compensated Absences ........................................................................................................... 125

Pledged Tax Revenues ................................................................................................................ 126 Insurance ...................................................................................................................................... 126 Commitments and Contingencies ................................................................................................. 127

Agreement for Allocation of Tax Increment Funds ................................................................ 127

54

CITY OF POMONA NOTES TO FINANCIAL STATEMENTS JUNE 30, 2016��

Note 1: Summary of Significant Accounting Policies

The basic financial statements of the City of Pomona, California (City), have been prepared in conformity with generally accepted accounting principles (GAAP) as applied to governmental agencies. The Governmental Accounting Standards Board (GASB) is the accepted standard setting body for establishing governmental accounting and financial reporting principles. The more significant of the City’s accounting policies are described below.

Financial Reporting Entity

The City was incorporated in 1888 and became a “Charter Law” City in 1911 under the laws of the State of California. The City operates under the Council-Manager form of governments. The City principally provides general administrative services, public safety services, library, recreational services, street, highway and bridge repairs and maintenance, and water and sanitation services. As required by GAAP, these basic financial statements present the City and its component units, entities for which the City is considered to be financially accountable. The following blended component units, although legally separate entities, are, in substance, part of the City’s operations and data from these units are combined with the data of the City. They are reported as blended for the following reasons: (1) the governing board is substantively the same as the primary government, and there is a financial benefit or burden relationship between the primary government and the component unit; (2) the component unit provides services entirely, or almost entirely, to the primary government or otherwise exclusively, or almost exclusively, benefits the primary government even though it does not provide services directly to it; and (3) the component unit’s total debt outstanding, including leases, is expected to be repaid entirely or almost entirely with the resources of the primary government. Management determined that the following component units should be blended based on the criteria above:

� City of Pomona Housing Authority � City of Pomona Public Financing Authority � Canon Water Company

These component units are included in the primary government because of the significance of their financial or operational relationship. Each of the blended component units in the accompanying basic financial statements of the City are described below:

City of Pomona Housing Authority The City of Pomona Housing Authority (Housing Authority) was organized in 1993 under the California Health and Safety Code. The objective of the Housing Authority is to aid low-income families in obtaining decent, safe and sanitary housing through Federal assistance programs and low/moderate income housing programs. The Housing Authority was included within the scope of the reporting entity of the City because its governing body is composed in its entirety of City Council members of the City.

55

CITY OF POMONA NOTES TO FINANCIAL STATEMENTS (CONTINUED) JUNE 30, 2016��

Note 1: Summary of Significant Accounting Policies (Continued)

City of Pomona Public Financing Authority The City of Pomona Public Financing Authority (Authority) is a joint exercise of powers authority created by a joint powers agreement between the City, the former Redevelopment Agency of the City of Pomona (Agency) and the former Redevelopment Agency of the City of West Covina, dated October 27, 1988. The purpose of the Authority is to provide, through the issuance of debt, financing necessary for the construction of public improvements. The Authority is not subject to federal or state income taxes. The Authority was included within the scope of the reporting entity of the City because its governing body is composed in its entirety of City staff.

Canon Water Company The Canon Water Company of Pomona (Company) was incorporated on August 6, 1897. The Company owns and maintains a pipeline which transports water to the City. The Company was included within the scope of the reporting entity of the City because it provides services almost entirely to the City and its governing body is composed of City staff.

All component units had a fiscal year ended June 30, 2016, except for Canon Water Company, which had a fiscal year ended February 28, 2016. Since the governing boards for these entities were composed of either City Council members or City employees, they are considered blended component units. Blended component units, although legally separate entities, are in substance, part of the City’s operations and so data from these units are reported with the interfund data of the primary government. The component units listed above issue separate financial statements which can be obtained at City Hall and on line at www.ci.pomona.us.

Basis of Accounting and Measurement Focus The accounting policies of the City conform to accounting principles generally accepted in the United States of America for local governmental units. The accounts of the City are organized on the basis of funds, each of which is considered a separate accounting entity. The operations of each fund are accounted for by providing a separate set of self-balancing accounts that comprise its assets, liabilities, fund balance, revenues and expenditures or expenses, as appropriate. Governmental resources are allocated to and accounted for in individual funds based upon the purpose of which they are to be spent and means by which spending activities are controlled. Government – Wide and Fund Financial Statements The City’s government-wide financial statements include a Statement of Net Position and a Statement of Activities and Changes in Net Position. These statements present summaries of governmental and business-type activities for the City accompanied by a total column. Fiduciary activities of the City are not included in these statements. These basic financial statements are presented on an “economic resources” measurement focus and the accrual basis of accounting. Economic resources measurement focus considers all of the assets available for the purpose of providing goods and services and reports all inflows, outflows, and balances affecting or reflecting an entity’s net position. Accordingly, all of the City’s assets and liabilities, including capital assets, as well as infrastructure assets and long-term liabilities, are included in the

56



accompanying Statement of Net Position. The Statement of Activities presents changes in net position. Under the accrual basis of accounting, revenues are recognized in the period in which they are earned and expenses are recognized in the period in which the liability is incurred. Certain types of transactions are reported as program revenues for the City in three categories:

� Charges for services � Operating grants and contributions � Capital grants and contributions

Certain eliminations have been made in regard to interfund activities. All internal balances in the Statement of Net Position have been eliminated except those representing balances between the governmental activities and the business-type activities, which are presented as internal balances and eliminated in the total primary government column, if any. In the Statement of Activities, internal service fund transactions have been eliminated; however, those transactions between governmental and business-type activities have not been eliminated. The following interfund activities have been eliminated:

� Due to and from other funds � Advances to and from other funds � Transfers in and out

Governmental Fund Financial Statements Governmental fund financial statements include a Balance Sheet and a Statement of Revenues, Expenditures and Changes in Fund Balances for all major governmental funds and non-major funds aggregated. An accompanying schedule is presented to reconcile and explain the differences in fund balance as presented in these statements to the net position presented in the government-wide financial statements. The City has presented all major funds that met the applicable criteria. The City reports the following major governmental funds:

� The General Fund is the City's primary operating fund. It accounts for all financial resources of the general government, except those required to be accounted for in another fund.

� The Housing Authority Fund accounts for grant revenues received for the acquisition, rehabilitation and administration of properties used to provide affordable rental housing and the low and moderate income housing functions of the former Redevelopment Agency.

� The Miscellaneous Grants Fund accounts for revenues received and expenditures made for Federal and/or State approved programs/projects.

� The General Debt Service Fund accounts for the payment of interest and principal on debt incurred by the City.

57



� The Public Financing Authority Debt Service Fund accounts for the payment of interest and principal on the local agency revenue bonds and other debt of the Authority.

All governmental funds are accounted for on a spending or “current financial resources” measurement focus and the modified accrual basis of accounting. Accordingly, only current assets and current liabilities are included on the balance sheets. The Statement of Revenues, Expenditures and Changes in Fund Balances present increases (revenues and other financing sources) and decreases (expenditures and other financing uses) in net current assets. Under the modified accrual basis of accounting, revenues are recognized in the accounting period in which they become both measurable and available to finance expenditures of the current period.

Revenues are considered to be available when it is collectible within the current period or soon enough thereafter to pay liabilities of the current period. For this purpose, the government considers revenues to be available if it is collected within 60 days of the end of the current fiscal period except for grant revenue where the government considers revenue to be available if collected within 120 days of the end of current fiscal year. The primary revenue sources, which have been treated as susceptible to accrual by the City, are real and personal property tax, other local taxes, franchise fees, forfeitures and penalties, rents and concessions, interest revenue, and state and federal grants. Expenditures are recorded in the accounting period in which the related fund liability is incurred. Unavailable revenue arises when potential revenues do not meet both the “measurable” and “available” criteria for recognition in the current period. Unearned revenue arises when the government receives resources before it has a legal claim to it, as when grant monies are received prior to incurring qualifying expenditures. In subsequent periods when both revenue recognition criteria are met or when the government has a legal claim to the resources, the unavailable revenue and unearned revenue are removed from the balance sheet and revenue is recognized. The reconciliations of the Fund Financial Statements to the Government-Wide Financial Statements are provided to explain the differences created by the integrated approach of GASB Statement No. 34.

Proprietary Fund Financial Statements Proprietary fund financial statements include a Statement of Net Position, a Statement of Revenues, Expenses and Changes in Net Position, and a Statement of Cash Flows for all proprietary funds.

The City reports the following major proprietary funds:

� The Water Utility Enterprise Fund accounts for activities associated with the distribution and transmission of potable water to users and recycled water.

� The Sewer Enterprise Fund accounts for the operation and maintenance of the City's sewer network.

58



� The Refuse Enterprise Fund accounts for activities associated with residential refuse collection, curbside collection of recycling materials, and various related programs.

� The Canon Water Company Enterprise Fund accounts for the activities of the

Canon Water Company. The Internal Service Funds account for the maintenance and repair of City vehicles and equipment, risk management (general liability, workers’ compensation and unemployment), information technology and printing/mail service provided to other departments or agencies of the City. Internal service balances and activities have been combined with the governmental activities in the government-wide financial statements.

Proprietary funds are accounted for using the “economic resources” measurement focus and the accrual basis of accounting. Accordingly, all assets and liabilities (whether current or noncurrent) are included on the Statement of Net Position. The Statement of Revenues, Expenses and Changes in Net Position presents increases (revenues) and decreases (expenses) in total net position. Under the accrual basis of accounting, revenues are recognized in the period in which they are earned while expenses are recognized in the period in which the liability is incurred. Operating revenues in the proprietary funds are those revenues that are generated from the primary operations of the fund. All other revenues are reported as nonoperating revenues. Operating expenses are those expenses that are essential to the primary operations of the fund. All other expenses are reported as nonoperating expenses. Fiduciary Fund Financial Statements Fiduciary fund financial statements include a Statement of Fiduciary Net Position and a Statement of Changes in Fiduciary Net Position. The City’s fiduciary funds consist of agency funds and one private purpose trust fund. Fiduciary fund types are accounted for according to the nature of the fund. Agency funds are custodial in nature (assets equal liabilities) and do not involve measurement of results of operations. The Agency Funds account for assets held by the City for governments or individuals. These funds include receipts and disbursements of funds for the debt service activity of the 1911 Act assessment districts, cash deposits collected for street and sidewalk encroachment permits, debt services activity, cash guarantees (deposits) collected by the City for various construction improvement projects, payment of various employee benefits and deductions, including, but not limited to, health and dental insurance premiums, federal and state withholding taxes, life insurance and other withholdings from regular compensation.

The Private-purpose trust fund is accounted for using the “economic resources” measurement focus and the accrual basis of accounting. Under the accrual basis of accounting, revenues are recognized in the period in which the revenue is earned, while expenses are recognized in the period in which the liability is incurred. The City uses its private-purpose trust fund to account for the assets and liabilities of the former Redevelopment Agency and the receipt of funds to make installment payments of enforceable obligations until the obligations of the former Redevelopment Agency are paid in full and assets have been liquidated.

59


Note 1: Summary of Significant Accounting Policies (Continued) Assets, Liabilities and Net Position or Equity

Cash, Cash Equivalents and Investments

The City pools its available cash for investment purposes. The City’s cash and cash equivalents are considered to be cash on hand, demand deposits, and short-term investments with original maturity of three months or less from the date of acquisition. Cash and cash equivalents are combined with investments and displayed as Cash and Investments. Highly liquid market investments with maturities of one year or less at time of purchase are stated at amortized cost. All other investments are stated at fair value. Market value is used as fair value for those securities which approximated fair value for which market quotations are readily available. The City participates in an investment pool managed by the State of California titled Local Agency Investment Fund (LAIF) which has invested a portion of the pool funds in structured notes and asset-backed securities. LAIF’s investments are subject to credit risk with the full faith and credit of the State of California collateralizing these investments. In addition, these structured notes and asset-backed securities are subject to market risk as to changes in interest rates. In accordance with GASB Statement No. 40, Deposit and Investment Risk Disclosures (an amendment of GASB No. 3), certain disclosure requirements, if applicable, are provided for deposit and investment risk in the following areas: � Interest Rate Risk � Credit Risk

� Overall � Custodial Credit Risk � Concentration of Credit Risk

� Foreign Currency Risk For purposes of the statement of cash flows of the proprietary fund types, cash and cash equivalents include all investments, as the City operates an internal cash management pool which maintains the general characteristics of a demand deposit account.

Interfund Transactions

Activity between funds that are representative of lending/borrowing arrangements outstanding at the end of the fiscal year are referred to as “due to/from other funds” (i.e., current portion of interfund loans) or “advances to/from other funds” (i.e., noncurrent portion of interfund loans). Any residual balances outstanding between the governmental activities and business-type activities are reported in the governmental-wide financial statements as “internal balances.”

60

CITY OF POMONA NOTES TO FINANCIAL STATEMENTS (CONTINUED) JUNE 30, 2016��Note 1: Summary of Significant Accounting Policies (Continued)

Inventories and Prepaid Items

Inventories within the various fund types consist of materials and supplies which are valued at cost on a first-in, first-out basis. Reported expenditures reflecting the purchase of supplies have been restated to reflect the consumption method of recognizing inventory-related expenditures. Certain payments to vendors reflect costs applicable to future accounting periods and are recorded as prepaid items in both government-wide and fund financial statements.

Capital Assets

Capital assets, which include land, construction in progress, buildings and improvements, improvements other than buildings, machinery and equipment, autos and trucks, equipment under capitalized lease and infrastructure assets (e.g. roads, bridges, traffic signals, and similar items), are reported in the applicable governmental or business-type activities in the Government-Wide Financial Statements. City policy has set the capitalization threshold for reporting capital assets at $5,000 and capital projects at $250,000. Capital assets are valued at historical cost or estimated historical cost if actual historical cost was not available. Donated assets are valued at its estimated fair market value on the date donated. Depreciation is recorded on a straight-line basis over estimated useful lives of the assets as follows:

Assets YearsBuildings and building improvements 10-50Improvements other than buildings 10-75Machinery and equipment 5-100Furniture and fixtures 5-10Autos and trucks 5-10Equipment under capitalized lease 5-15Infrastructure 25-75

For infrastructure systems, the City elected to use the “Basic Approach” as defined by GASB Statement No. 34 for infrastructure reporting. The City defines infrastructure as the basic physical assets that allow the City to function. The assets include streets, bridges, sidewalks, drainage systems, and lighting systems, etc. Each major infrastructure system can be divided into subsystems. For example, the street system can be subdivided into pavement, curb and gutters, sidewalks, medians, streetlights, landscaping and land. These subsystems were not delineated in the basic financial statements. The appropriate operating department maintains information regarding the subsystems. Major outlays for capital assets and improvements are capitalized as projects are constructed. Interest on construction-related debt incurred during the period of construction is capitalized as a cost of the constructed assets.

61


The long-term principal portion of debt on non-proprietary capital assets acquired through lease purchase contracts is accounted for in the government-wide financial statements as “capital lease obligations”. Capital assets acquired under capital leases are capitalized at the net present value of the total lease payments in the government-wide financial statements.

Land Held for Resale

Land purchased for resale is capitalized as inventory at acquisition costs. Long-Term Debt

In the government-wide financial statements, and proprietary fund types in the fund financial statements, long-term debt and other long-term obligations are reported as liabilities in the applicable governmental activities, business-type activities or proprietary fund type statement of net position. Bond premiums and discounts are deferred and amortized over the life of the bonds using the effective interest method. Bonds payable are reported net of the applicable bond premium or discount. Issuance costs, whether or not withheld from the actual debt proceeds received, are reported as debt service expenses when incurred. In the fund financial statements, governmental fund types recognize bond premiums and discounts, as well as bond issuance costs, during the current period. The face amount of debt issued is reported as other financing sources. Premiums received on debt issuances are reported as other financing sources while discounts on debt issuances are reported as other financing uses. Issuance costs, whether or not withheld from the actual debt proceeds received, are reported as debt service expenditures.

Compensated Absences

In governmental funds, compensated absences are recorded as expenditures in the years paid, as it is the City’s policy to liquidate any unpaid compensated absences at June 30 from future resources, rather than currently available financial resources. In proprietary funds, compensated absences are expensed to the various funds in the period they are earned, and such fund’s share of the unpaid liability is recorded as a long-term liability of the fund. Vested or accumulated compensated absences in proprietary funds are recorded as an expense and liability of those funds as the benefits accrue to employees. The compensated absences liability will be liquidated through the General Fund for governmental activities and through the proprietary funds for the business-type activities.

Claims Payable

The City records a liability to reflect an actuarial estimate of ultimate uninsured losses for both general liability claims (including property damage claims) and workers’ compensation claims. The estimated liability for workers’ compensation claims and general liability claims includes “incurred but not reported” (IBNR) claims. There is no fixed payment schedule to pay these liabilities.

62


Unearned and Unavailable Revenue

Unearned revenue is recognized for transactions for which revenue has not yet been earned. Unearned revenue includes monies received in advance from the fiscal agents on the amounts deposited in the reserve funds for various bonds and prepaid charges for services. Unavailable revenue represents money received during the current or previous years that has not been earned or is not considered available to finance expenditures of the current period.

Deferred Outflows/Inflows of Resources In addition to assets, the statement of financial position will sometimes report a separate section for deferred outflows of resources. This separate financial statement element, deferred outflows of resources, represents a consumption of net position that applies to a future period(s) and so will not be recognized as an outflow of resources (expense/ expenditure) until then. The City has two items that qualify for reporting in this category. One is deferred charges on refunding reported in the government-wide statement of net position and the proprietary funds statement of net position. Deferred charges on refunding results from the difference in the carrying value of refunded debt and its reacquisition price. This amount is deferred and amortized over the shorter of the life of the refunded or refunding debt. The other item is deferred pension related items reported in the government-wide statement of net position and the proprietary funds statement of net position. The City reports deferred outflows of resources for pension contributions made after the actuarial measurement date, this amount is deferred and will be expensed in the following fiscal year, and deferred outflows of resources for the net difference between projected and actual earning on pension plan, this amount will be amortized over a five-year period on a straight-line basis. In addition to liabilities, the Statement of Financial Position and Governmental Fund Balance Sheet reports a separate section for deferred inflows of resources. This separate financial statement element, deferred inflows of resources, represents an acquisition of net position or fund balance that applies to a future period and so will not be recognized as an inflow of resources (revenue) until that time. The government has one item, which arises only under the modified accrual basis of accounting that qualifies for reporting in this category. The item, unavailable revenue, is reported only in the governmental funds balance sheet. The governmental funds report unavailable revenues from grant revenues. These amounts are deferred and recognized as an inflow of resources in the period when the amounts become available. In addition, the government has deferred inflows of resources relating to the net pension obligation reported in the government-wide statement of net position and the proprietary funds statement of net position. These amounts are the result of the net difference between projected and actual earnings on pension plan investments and are being amortized over a five-year period on a straight-line basis. Deferred pension related items also include differences between expected and actual experience and changes in assumptions. These will be recognized as pension expense over the expected average remaining service lifetime.

63


Net Pension Liability

For purposes of measuring the net pension liability, deferred outflows and inflows of resources related to pensions, and pension expense, information about the fiduciary net position and additions to/deductions from the fiduciary net position have been determined on the same basis as they are reported by the CalPERS Financial Office. For this purpose, benefit payments (including refunds of employee contributions) are recognized when currently due and payable in accordance with the benefit terms. Investments are reported at fair value.

Net Position

In the government-wide financial statements, net position is classified in the following:

Net Investment in Capital Assets – This amount consists of capital assets net of accumulated depreciation and reduced by outstanding debt that is attributed to the acquisition, construction, or improvement of the assets. Restricted Net Position – This amount is restricted by external creditors, grantors, contributors, or laws or regulations of other governments. Unrestricted Net Position – This amount is all net position that does not meet the definition of “net investment in capital assets” or “restricted net position.”

Net position flow assumption

Sometimes the government will fund outlays for a particular purpose from both restricted (e.g., restricted bond or grant proceeds) and unrestricted resources. In order to calculate the amounts to report as restricted – net position and unrestricted – net position in the government-wide and proprietary fund financial statements, a flow assumption must be made about the order in which the resources are considered to be applied. It is the government’s policy to consider restricted – net position to have been depleted before unrestricted – net position is applied.

Fund Balances In the fund financial statements, government funds report the following fund balance classification:

Non-spendable Fund Balance – This includes amounts that cannot be spent because they are either (a) not in spendable form or (b) legally or contractually required to be maintained intact. Restricted Fund Balance – This includes amounts that are constrained on the use of resources by either (a) external creditors, grantors, contributors, or laws of regulations of other governments or (b) by law through constitutional provisions or enabling legislation. Committed Fund Balance – This includes amounts that can only be used for specific purposes pursuant to constraints imposed by formal action of the government’s highest authority.

64


Assigned Fund Balance – This includes amounts that are constrained by the government’s intent to be used for specific purposes, but are neither restricted nor committed. The governing board by Resolution No. 2011-63A gave the authority to assign amounts for specific purposes to the Finance Director. Unassigned Fund Balance – This is the residual amounts that have not been restricted, committed, or assigned to specific purposes. Only the General Fund can report positive unassigned fund balance. All other funds’ fund balances have been restricted, committed or assigned for the purpose of those particular funds.

The City Council, as the City's highest level of decision-making authority, may commit fund balance for specific purposes pursuant to constraints imposed by resolution. These committed amounts cannot be used for any other purpose unless the City Council removes or changes the specified use through the same type of formal action taken to establish the commitment. City Council action to commit fund balance needs to occur within the fiscal reporting period; however the amount can be determined subsequently. Fund balance flow assumptions

Sometimes the government will fund outlays for a particular purpose from both restricted and unrestricted resources (the total of committed, assigned, and unassigned fund balance). In order to calculate the amounts to report as restricted, committed, assigned, and unassigned fund balance in the governmental fund financial statements, a flow assumption must be made about the order in which the resources are considered to be applied. An individual governmental fund could include non-spendable resources and amounts that are restricted or unrestricted (committed, assigned, or unassigned) or any combination of those classifications. Restricted amounts are to be considered spent when an expenditure is incurred for purposes for which both restricted and unrestricted fund balance is available, committed, and assigned. Then unassigned amounts are considered to have been spent when an expenditure is incurred for purposes for which amounts in any of those unrestricted fund balance classifications can be used.

Property Taxes

Property taxes attach a legal enforceable lien on property as of January 1. Taxes are levied on July 1 and are payable in two installments on December 10 and April 10. The County of Los Angeles (County) bills and collects the property taxes and remits it to the City in installments during the year. The City’s property tax revenues are recognized when an enforceable legal lien is attached to the property. The County is permitted by State Law (Proposition 13) to levy taxes at 1% of full market value (at time of purchase) and can increase the property tax base not more than 2% per year. The City receives a share of this basic levy proportionate to the amount received prior to the passage of Proposition 13 in 1978.

65



Use of Estimates

The preparation of the basic financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of certain assets and liabilities and the disclosure of contingent assets and liabilities at the date of the basic financial statements and the related reported amounts of revenues and expenses, if applicable, during the reporting period. Actual results could differ from those estimates.

Effect of New Accounting Standards

During the fiscal year ended June 30, 2016, the City implemented the following Governmental Accounting Standards Board (GASB) standards:

GASB Statement No. 72 – Fair Value Measurement and Application. This Statement addresses accounting and financial reporting issues related to fair value measurements. The definition of fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. This Statement provides guidance for determining a fair value measurement for financial reporting purposes. This Statement also provides guidance for applying fair value to certain investments and disclosures related to all fair value measurements. The City has fully conformed to and implemented GASB Statement No. 72 as of June 30, 2016.

Note 2: Stewardship, Compliance and Accountability

Deficit Fund Balances or Net Position

At June 30, 2016, the following funds had the following fund balance deficit:

Governmental FundsGeneral Debt Service (39,170,313)$

Internal Services FundsSelf Insurance (6,237,884) Equipment Maintenance (800,855) Information Technology (319,588) Printing/Mail Services (17,760)

The General Debt Service Fund deficit is the result of the issuance of bonds and the Self-Insurance Fund deficit is due to outstanding claim liabilities. The Equipment Maintenance Fund and the Information Technology Fund deficits are due to the implementation of GASB 68. The Printing/Mail Services Fund deficit is due to liabilities due to other funds. The City will eliminate the internal service deficits with future revenue.

Excess of Expenditures Over Appropriations

Excess expenditures over appropriations were as follows:

Expenditures Appropriations Excess

Special Fees Fund 67,780$ 55,000$ 12,780$ Capital Oulay Fund 8,511,843 5,505,238 3,006,605

No budget adopted for the Assessment District Improvement Fund.

66


Note 3: Cash and Investments The City maintains a cash and investment pool, which includes cash balances and authorized investments of all funds. This pooled cash is invested by the City Treasurer to enhance earnings. The pooled interest earned is allocated to the funds based on average quarter-end cash balances of the various funds.

Summary of Cash and Investments

The following is a summary of cash and investments at June 30, 2016:

Governmental Activities

Business-Type Activities Fiduciary Funds Total

Cash and investments 48,534,017$ 50,856,204$ 23,979,063$ 123,369,284$ Restricted cash 17,284,677 23,984,979 52,473,582 93,743,238

Total 65,818,694$ 74,841,183$ 76,452,645$ 217,112,522$

Cash and investments is comprised of the following at June 30, 2016:

Cash and cash equivalents:Petty cash and change funds 9,307$ Demand deposit 31,217,667

Total cash and cash equivalents 31,226,974 Investments:

Local Agency Investment Fund 83,126,983 Federal Home Loan Bank 3,010,410 Freddie Mac 6,004,917

Total investments 92,142,310

123,369,284$

Deposits

The carrying amounts of the City’s cash deposits were $31,217,667 at June 30, 2016. Bank balances at June 30, 2016, were $32,871,008 which were fully insured or collateralized with securities held by the pledging financial institutions in the City’s name as discussed below. The $1,653,341 difference represents outstanding checks and other reconciling items. The California Government Code requires California banks and savings and loan associations to secure the City’s cash deposits by pledging securities as collateral. This Code states that collateral pledged in this manner shall have the effect of perfecting a security interest in such collateral superior to those of a general creditor. Thus, collateral for cash deposits is considered to be held in the City's name. The market value of pledged securities must equal at least 110% of the City's cash deposits. California law also allows institutions to secure City deposits by pledging first trust deed mortgage notes having a value of 150% of the City’s total cash deposits. The City may waive collateral requirements for cash deposits, which are fully insured up to $250,000 by the Federal Deposit Insurance Corporation (FDIC). The City has waived the collateralization requirements.

67


Note 3: Cash and Investments (Continued)

The City follows the practice of pooling cash and investments of all funds, except for funds required to be held by fiscal agents under the provisions of bond indentures. Interest income earned on pooled cash and investments is allocated on an accounting period basis to the various funds based on the quarter-end cash and investment balances. Interest income from cash and investments with fiscal agents is credited directly to the related fund.

Investments

Under the provisions of the City’s investment policy, and in accordance with California Government Code Section 53601, the City is authorized to invest or deposit in the following:

� Securities issued or guaranteed by the federal government or its agencies � Bankers’ acceptances that are eligible for purchase by the Federal Reserve

System � Commercial paper, rated A-1/P-1, secured by an irrevocable line of credit or

government securities � Certificates of deposits with national and state licensed or chartered banks,

federal or state savings and loans associations � Medium-term corporate notes, rated AAA or AA � Money market funds � Local Agency Investment Fund (LAIF)

In accordance with GASB Statement No, 31, Accounting and Financial Reporting for Certain Investments and for External Investment Pools, investments are stated at fair value at the year end.

Investment in Local Agency Investment Funds The City is a participant in LAIF which is regulated by California Government Code Section 16429 under the oversight of the Treasurer of the State of California. The City’s investments with LAIF at June 30, 2016, included a portion of the pool funds invested in Structured Notes and Asset-Backed Securities:

Structured Notes: debt securities (other than asset-backed securities) whose cash flow characteristics (coupon rate, redemption amount, or stated maturity) depend upon one or more indices and/or that have embedded forwards or options. Asset-Backed Securities: generally mortgage-backed securities that entitle their purchasers to receive a share of the cash flows from a pool of assets such as principal and interest repayments from a pool of mortgages (for example, Collateralized Mortgage Obligations) or credit card receivables.

As of June 30, 2016, the City had $83,126,983 invested in LAIF, which had invested 2.08% of the pool investment funds in Structured Notes and Asset-Backed Securities. The LAIF fair value factor of 1.000621222 was used to calculate the fair value of the investments in LAIF. LAIF is overseen by the Local Agency Investment Advisory Board, which consists of five members, in accordance with State statute.

68


Note 3: Cash and Investments (Continued) Interest Rate Risk

As a means of limiting its exposure to fair value losses arising from rising interest rates, the City’s investment policy (Policy) limits investments to a maximum maturity of five years. The weighted average days to maturity of the total portfolio shall not exceed the City’s anticipated liquidity needs for the next six (6) months. The City is in compliance with this provision of the Policy. At June 30, 2016, the City had the following investment maturities:

1 Year or Less

1 to 3 Years

3 to 5 Years Total

InvestmentsLocal Agency Investment Fund 83,126,983$ -$ -$ 83,126,983$ Freddie Mac - - 6,004,917 6,004,917 Federal Home Loan Bank - 3,010,410 - 3,010,410

83,126,983$ 3,010,410$ 6,004,917$ 92,142,310$

Credit Risk

The City’s Policy limits investments in commercial paper to the highest grade of stand alone or enhanced (prime) commercial paper as rated by Moody’s Investor Service, Standard & Poor’s Corporation, or Fitch Financial Services and requires that the management company of mutual funds must have attained the highest ranking or the highest letter and numerical rating provided by not less than two nationally recognized statistical rating organizations. Investments in U.S. Treasury securities are not considered to have credit risk; therefore, their credit quality is not disclosed. As of June 30, 2016, the City's investments in external investment pools and money market mutual funds are unrated.

Moody'sStandard &

Poor's

Local Agency Investment Fund Not Rated Not RatedFederal Home Loan Bank Aaa AA+

Fair Value Hierarchy

The City categorizes its fair value measurements within the fair value hierarchy established by generally accepted accounting principles. The hierarchy is based on the valuation inputs used to measure the fair value of the asset. Level 1 inputs are quoted prices in active markets for identical assets; Level 2 inputs are significant other observable inputs; Level 3 inputs are significant unobservable inputs.

69


Note 3: Cash and Investments (Continued)

The City has the following recurring fair value measurements as of June 30, 2016:

Totals 1 2 3Local Agency Investment Fund 83,126,983$ -$ 83,126,983$ -$ Freddie Mac 6,004,917 - 6,004,917 - Federal Home Loan Bank 3,010,410 - 3,010,410 -

Totals 92,142,310$ -$ 92,142,310$ -$

LevelInvestments by fair value level

Deposits and securities classified in Level 1 of the fair value hierarchy are valued using prices quoted in active markets for those securities. Local Agency Investment Funds classified in Level 2 of the fair value hierarchy are valued using specified fair market value factors. Freddie Mac and Federal Home Loan Bank securities classified in Level 2 of the fair value hierarchy are valued using institutional bond quotes.

Custodial Credit Risk

For deposits, custodial credit risk is the risk that, in the event of the failure of a deposit 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. For an investment, custodial credit risk is the risk that, in the event of the failure of the counterparty, the City will not be able to recover the value of its investments or collateral securities that are in the possession of an outside party. The City’s investment policy does not contain legal or policy requirements that would limit the exposure to custodial credit risk for deposits or investments, other than the provision for deposits stated in the California Government Code. Bank balances of $32,353,014 net of FDIC insurance, which was in excess of federal depository insurance limits, was held in collateralized accounts. Of the City’s investments held by trustees and fiscal agents, $93,743,238 of securities was held by the counterparty’s trust department, the trustee for the bonds, not in the name of the City as of June 30, 2016.

Concentration of Credit Risk

The City’s Policy states that not more than 20% of the portfolio shall be invested in any one entity or any one instrument to protect the City from concentration of credit risk, with the following exceptions: U.S. Treasury Obligations, governmental agencies (i.e. GNMA, FFCB, FHLB, FHLMC, FNMA, etc.), and investment pools (LAIF). In addition, purchases of commercial paper from U.S. corporations must not exceed 15% of the value of the portfolio at any time and single issuer holdings to no more than 10 percent per issuer. The City is in compliance with these provisions of the Policy.��In accordance with GASB Statement No. 40, if the City has invested more than 5% of its investments in any one issuer, it is exposed to credit risk. As of June 30, 2016, none of the City’s deposits or investments was exposed to credit risk. Investments guaranteed by the U.S. government and investments in mutual funds and external investment pools are excluded from this requirement.

70


Note 4: Loans Receivable (Net)

At June 30, 2016, the City’s net loans receivable consisted of the following:

Balance July 1, 2015 Additions Deletions

Balance June 30, 2016

440,000$ -$ 135,000$ 305,000$ 7,863,356 215,909 359,280 7,719,985 1,232,315 28,423 - 1,260,738

491,493 6,772 - 498,265 942,145 319,954 - 1,262,099 352,740 1,860 6,956 347,644

4,499,423 111,450 48,406 4,562,467 2,138,781 - 119,500 2,019,281

1,441,137 127,095 - 1,568,232 6,419,494 18,043 49,952 6,387,585 3,010,389 59,697 182,302 2,887,784

Owner Participation Agreement (OPA) 176,716 - - 176,716 52,450 - - 52,450

720,000 - - 720,000 Holt Ave. Housing Partners LP Loans 1,906,142 19,000 - 1,925,142

833,346 36,765 - 870,111

Total 32,519,927$ 944,968$ 901,396$ 32,563,499$

Section 108 LoansDeferred Home Improvement LoansPrototype LoansRental Rehabilitation LoansCHDOHOPE 3 LoansShield of Faith

Telacu

Manufactured Housing Rehabilitation LoansOccupied Rehabilitation LoansMAP Loans, netNIP Loans

First Time Home Buyer ProgramMulti-Family

Note 5: Interfund Transactions

Government-Wide Financial Statements Internal Balances - At June 30, 2016, the City had the following internal receivable and payable.

Internal Receivable

Internal PayableBusiness-Type

Activities

Governmental Activities 1,281,200$

The accumulation of the $1,281,200 balance was to consolidate the internal service funds activities related to the enterprise funds.

Transfers - At June 30, 2016, the City had the following transfers. The purpose of the transfers was for debt service payments and to reimburse a construction project.

Transfers Out

Transfers InBusiness-Type

Activities

Governmental Activities 482,001$

71


Note 5: Interfund Transactions (Continued) Fund Financial Statements

Due To/Due From - At June 30, 2016, the City had the following short-term interfund receivables and payables.


Non Major Governmental

FundsInternal Service

Funds Total

1,764,620$ 69,512$ 38,476$ 1,872,608$ General Fund

Due from Other FundsGovernmental Funds:

Due to Other Funds

Due from other funds to the General Fund was for Series AR debt service payment in the General Debt Service Fund. Due to the General Fund from the Non-Major Funds was to cover negative cash deficit at the end of the fiscal year.

Long-Term Advances - At June 30, 2016, the City had the following interfund long-term advances:

General Fund

General Debt Service Total

-$ 41,950,000$ 41,950,000$ Non-Major Governmental Funds 304,435 - 304,435

304,435$ 41,950,000$ 42,254,435$

Public Financing Authority

Total

Advance from Other FundsGovernmental Funds

Advances to Other FundsGovernmental Funds:

Long-term advances between the Public Financing Authority and the General Debt Service Fund are loan proceeds used to fund projects.

72


Note 5: Interfund Transactions (Continued)

Transfers - At June 30, 2016, the City had the following transfers:

Non-MajorMiscellaneous General debt Governmental

Grants Service Funds Water Sewer Total

Governmental FundGeneral Fund 81,004$ 4,339,294$ 632,870$ -$ -$ 5,053,168$ Non-Major Governmental Funds 23,584 207,297 1,732,557 1,624,090 1,141,178 4,728,706

Total Governmental Funds 104,588 4,546,591 2,365,427 1,624,090 1,141,178 9,781,874

Proprietary FundsWater - 600,000 1,037,561 - - 1,637,561 Sewer - 417,050 228,656 112,961 - 758,667 Internal Service Funds - - 600,000 - - 600,000

Total Proprietary Funds - 1,017,050 1,866,217 112,961 - 2,996,228

Total 104,588$ 5,563,641$ 4,231,644$ 1,737,051$ 1,141,178$ 12,778,102$

Proprietary FundsTransfers In

Governmental Funds

Transfers out

The transfer of $4,339,294 between the General Fund and the General Debt Service Fund was for Series AG, AN / AP, AU / AV, and AR debt service payments. All other General Fund transfers were in the normal course of the City’s business.

Note 6: Due from Other Governments

At June 30, 2016, the City’s due from other governments consisted of the following:


1,694,352$ 6,944,731

380,383 57,330

Total 9,076,796$

Federal governmentState of California

Local government entitiesCounty of Los Angeles

Note 7: Land Held for Resale

At June 30, 2016, land held for resale in the amount of $4,490,541 is recorded at cost in the Housing Authority Fund.

73


Note 8: Capital Assets

Government-Wide Financial Statements At June 30, 2016, the City’s capital assets consisted of the following:


Business-Type Activities Total

80,966,521$ 9,089,782$ 90,056,303$ 22,030,816 4,405,074 26,435,890

Total non-depreciable assets 102,997,337 13,494,856 116,492,193

14,941,552 3,482,783 18,424,335 60,003,395 286,638 60,290,033 21,146,261 221,948,295 243,094,556 1,014,456 5,105 1,019,561

11,219,732 4,510,802 15,730,534 1,037,970 4,257,381 5,295,351

382,767,392 - 382,767,392 Total depreciable assets, at cost 492,130,758 234,491,004 726,621,762

12,255,957 3,301,266 15,557,223 26,210,091 130,161 26,340,252 17,764,462 80,732,207 98,496,669

860,742 5,105 865,847 8,820,685 3,385,111 12,205,796

470,120 1,277,214 1,747,334 262,927,487 - 262,927,487

Total accumulated depreciation 329,309,544 88,831,064 418,140,608

Total depreciable assets, net 162,821,214 145,659,940 308,481,154

Total capital assets 265,818,551$ 159,154,796$ 424,973,347$

Equipment under capitalized leasesInfrastructure

Infrastructure

Buildings and building improvementsImprovements other than buildingsMachinery and equipmentFurniture and fixturesAutos and trucksEquipment under capitalized leases

Less accumulated depreciation:

Machinery and equipmentFurniture and fixturesAutos and trucks

Non-depreciable assetsLandConstruction in process

Depreciable assets:Buildings and building improvementsImprovements other than buildings

74


Note 8: Capital Assets (Continued)

The following is a summary of capital assets for governmental activities:

Balance July 1, 2015 Additions Deletions Transfers


81,168,660$ 411,000$ 613,139$ -$ 80,966,521$ 22,682,709 5,833,903 1,361,585 (5,124,211) 22,030,816

Total non-depreciable assets 103,851,369 6,244,903 1,974,724 (5,124,211) 102,997,337

14,941,552 - - - 14,941,552 60,003,395 - - - 60,003,395 20,754,160 360,203 - 31,898 21,146,261 1,014,456 - - - 1,014,456

10,756,126 478,569 14,963 - 11,219,732 1,037,970 - - - 1,037,970

380,805,974 15,967 3,146,862 5,092,313 382,767,392 Total depreciable assets, at cost 489,313,633 854,739 3,161,825 5,124,211 492,130,758

11,968,419 287,538 - - 12,255,957 24,683,385 1,526,706 - - 26,210,091 16,466,672 1,297,790 - - 17,764,462

812,785 47,957 - - 860,742 8,283,866 551,782 14,963 - 8,820,685

288,588 181,532 - - 470,120 257,167,573 8,534,097 2,774,183 - 262,927,487

Total accumulated depreciation 319,671,288 12,427,402 2,789,146 - 329,309,544 Total depreciable assets, net 169,642,345 (11,572,663) 372,679 5,124,211 162,821,214

Total capital assets 273,493,714$ (5,327,760)$ 2,347,403$ -$ 265,818,551$

Infrastructure

Improvements other than buildingsMachinery and equipmentFurniture and fixturesAutos and trucksEquipment under capitalized leases

Less accumulated depreciation:Buildings and building improvements

Non-depreciable assets:LandConstruction in process

Depreciable assets:Buildings and building improvementsImprovements other than buildings

Equipment under capitalized leases


Infrastructure

Depreciation expense for capital assets of the governmental activities for the year ended June 30, 2016, is as follows:

General Government 216,206$ Public safety 1,818,135 Community Services 1,149,169 Urban development 9,202,140 Internal service funds 41,752

Total 12,427,402$

75


Note 8: Capital Assets (Continued)

The following is a summary of capital assets for business-type activities:

Balance July 1, 2015 Additions Deletions Transfers


9,089,782$ -$ -$ -$ 9,089,782$ 19,965,564 2,571,425 - (18,131,915) 4,405,074

Total non-depreciable assets 29,055,346 2,571,425 - (18,131,915) 13,494,856

3,482,783 - - - 3,482,783 286,638 - - - 286,638

200,002,139 4,232,715 418,474 18,131,915 221,948,295 5,105 - - - 5,105

4,510,802 - - - 4,510,802 4,257,381 - - - 4,257,381

Total depreciable assets, at cost 212,544,848 4,232,715 418,474 18,131,915 234,491,004

3,291,986 9,280 - - 3,301,266 119,452 10,709 - - 130,161

77,715,074 3,138,037 120,904 - 80,732,207 5,105 - - - 5,105

3,165,780 219,331 - - 3,385,111 851,476 425,738 - - 1,277,214

Total accumulated depreciation 85,148,873 3,803,095 120,904 - 88,831,064

Total depreciable assets, net 127,395,975 429,620 297,570 18,131,915 145,659,940

Total capital assets 156,451,321$ 3,001,045$ 297,570$ -$ 159,154,796$

Equipment under capitalized lease

Equipment under capitalized leases

Less accumulated depreciation:Buildings and building improvementsImprovements other than buildings

Furniture and fixturesAutos and trucks

Non-depreciable assets:LandConstruction in process

Depreciable assets:Buildings and building improvements

Machinery and equipment


Improvements other than buildings

Depreciation expense for capital assets of the business-type activities for the year ended June 30, 2016, is as follows:

2,680,328$ 600,474 519,621

2,672 Total 3,803,095$

WaterSewerRefuseCanon Water Company

Note 9: Other Investments

In November 2006, the Housing Authority of the City Pomona acquired a 29.846% membership interest in Mission Promenade I from a member interest holder for a purchase price of $600,000. Other investments in the Water Enterprise fund represent one-quarter of share of the San Antonio Water Company for a cost of $9,000.

76


Note 10: Long-Term Debt

The following is a summary of long-term debt for the year ended June 30, 2016:

Accreted/Balance Accrued Balance Due Within

July 1, 2015 Interest Additions Deletions June 30, 2016 One YearGovernmental Activities

Pollution remediation obligations 960,809$ -$ 1,200,000$ 815,203$ 1,345,606$ 630,000$ Obligation under capital leases 586,295 - 400,408 283,718 702,985 353,008 Notes payable 655,000 - - 220,000 435,000 220,000 Revenue bonds 39,564,000 - - 1,626,000 37,938,000 1,720,000 Pension obligation refunding bonds 44,333,953 433,200 - 615,000 44,152,153 715,000 Certificates of participation 11,336,191 - - 365,622 10,970,569 355,000

Subtotal 97,436,248 433,200 1,600,408 3,925,543 95,544,313 3,993,008

Compensated absences 7,118,226 - 4,945,134 4,810,546 7,252,814 4,946,000 Claims payable 12,101,548 - 5,581,864 3,626,197 14,057,215 5,549,895 Total governmental activities 116,656,022$ 433,200$ 12,127,406$ 12,362,286$ 116,854,342$ 14,488,903$

Business-Type ActivitiesObligations under capital leases 3,004,393$ -$ -$ 573,408$ 2,430,985$ 586,826$ Revenue bonds 132,086,644 - - 1,898,783 130,187,861 1,830,000

Subtotal 135,091,037 - - 2,472,191 132,618,846 2,416,826

Compensated absences 1,302,207 - 1,052,183 950,780 1,403,610 1,054,000 Total business-type activities 136,393,244$ -$ 1,052,183$ 3,422,971$ 134,022,456$ 3,470,826$

Governmental Activities Long-Term Debt

Pollution Remediation Obligations The City acquired properties which were determined to have soil and groundwater contamination. The City is responsible for the investigation, characterization and remediation of the soil and groundwater from the contamination. The City had a remediation study performed to determine any potential harm to the surrounding areas. The pollution remediation costs were initially estimated at $1,781,262. During the current fiscal year, the City spent $815,203 on clean-up cost. The remaining outstanding cost to complete the clean-up is estimated at $1,345,606 at June 30, 2016. Obligations under Capital Leases

At June 30, 2016, obligations under capital leases consisted of the following:

Balance

July 1, 2015 Additions DeletionsBalance

June 30, 2016Due Within One Year

155,673$ -$ 76,891$ 78,782$ 78,782$ 430,622 - 138,850 291,772 143,489

PNC #1 - 400,408 67,977 332,431 130,737 Total 586,295$ 400,408$ 283,718$ 702,985$ 353,008$

HCC #2PPF #1

The City has entered into numerous equipment lease-purchase agreements with a leasing company whereby the lessor acquired certain equipment and leased it to the City with an option to purchase. The related assets have been capitalized as capital assets.

77


Note 10: Long-Term Debt (Continued) The total leased assets by major asset class consisted of the following:

June 30, 2016

260,616$ 777,354

Equipment under capitalized leases, at cost 1,037,970 (470,120)

Equipment under capitalized leases, net 567,850$

Machinery and equipmentAutos and trucks

Accumulated depreciation

The depreciation expense for equipment under capitalized leases was $181,532 for the year ended June 30, 2016.

The rates of interest on the lease purchase agreements range from 2.19% to 3.30% per annum. The annual debt service requirement outstanding at June 30, 2016, is as follows:

Principal Interest Total

2016-2017 353,008$ 16,579$ 369,587$ 2017-2018 281,990 6,877 288,867 2018-2019 67,987 768 68,755

Total 702,985$ 24,224$ 727,209$

Notes Payable At June 30, 2016, notes payable consisted of the following:

Balance Balance Due WithinJuly 1, 2015 Additions Deletions June 30, 2016 One Year

HUD Section 108 Loan 430,000$ -$ 145,000$ 285,000$ 145,000$ City of Claremont 225,000 - 75,000 150,000 75,000

655,000$ -$ 220,000$ 435,000$ 220,000$

HUD Section 108 Loan

The City has three notes guaranteed by the United States Department of Housing and Urban Development (HUD) under Section 108 of the Community Development Act and are payable from future Community Development Block Grant (CDBG) entitlements. The notes were made to Casa Herrera ($2,375,000) on February 1, 1998; Village Car Wash ($100,000) on September 17, 2012; and Freddie’s Auto Repair ($100,000) on August 20, 2012. On June 30, 2010, the balance of the original loan for Casa Herrera was defeased to refinance the loan at a lower interest rate. The new interest rate for Casa Herrera ranges from 4.96% to 5.77%, with new loan terms beginning on February 1, 2011 and maturing August 1, 2016. The interest rate for both Village Car Wash and Freddie’s Auto Repair is variable and equal to 20 basis points (0.2%) above the applicable London Interbank Offered Rates (LIBOR), currently at 2.5%, with loan terms beginning on

78


Note 10: Long-Term Debt (Continued)

July 1, 2013 and maturing on August 1, 2023. Casa Herrera is responsible for the principal payment on its note and the City is responsible for the interest payment. Village Car Wash and Freddie’s Auto Repair are responsible for principal and interest payments on its notes. Again, all notes are guaranteed by CDBG funds; thus, in the event of default, the City’s CDBG entitlement funds may be used to cover any outstanding debt.

The annual debt service requirement at June 30, 2016, is as follows:


2016-2017 145,000$ 5,663$ 150,663$ 2017-2018 20,000 3,500 23,500 2018-2019 20,000 3,000 23,000 2019-2020 20,000 3,000 23,000 2020-2021 20,000 3,000 23,000 2021-2025 60,000 3,000 63,000

Total 285,000$ 21,163$ 306,163$

City of Claremont

On July 2, 2013, the City entered into a loan agreement with the City of Claremont for $300,000 to improve storm drain facilities within the City of Pomona. The loan requires repayment with 2% interest over a period of four (4) years.

The annual debt service requirement at June 30, 2016, is as follows:


2016-2017 75,000$ 3,750$ 78,750$ 2017-2018 75,000 3,750 78,750

Total 150,000$ 7,500$ 157,500$

Revenue Bonds At June 30, 2016, revenue bonds consisted of the following:



Due Within One Year

3,915,000$ -$ 480,000$ 3,435,000$ 505,000$ 3,389,000 - 386,000 3,003,000 415,000

19,420,000 - 65,000 19,355,000 625,000 525,000 - 525,000 - -

2,310,000 - 35,000 2,275,000 30,000 10,005,000 - 135,000 9,870,000 145,000

Total 39,564,000$ -$ 1,626,000$ 37,938,000$ 1,720,000$

(126,560)$ -$ (7,031)$ (119,529)$ 2006 Taxable Lease Revenue Bonds, Series AVUnamortized Deferred Loss on Refunding

2006 Taxable Lease Revenue Bonds, Series AV

2005 Taxable Lease Revenue Bonds, Series AP2006 Lease Revenue Bonds, Series AU

2005 Subordinate Revenue Bonds, Series AL2005 Reassessment and Refunding Bonds, Series AM2005 Lease Revenue Bonds, Series AN

79


Note 10: Long-Term Debt (Continued) 2005 Subordinate Revenue Bonds, Series AL – Original Issuance $11,370,000

On February 1, 2005, the Public Financing Authority issued $11,370,000 in 2005 Subordinate Revenue Bonds, Series AL to purchase the 2005 Reassessment and Refunding Revenue Bonds, Series AM, to finance certain capital improvements in the City and to fund a reserve account for the Bonds. Interest on the bonds is payable semiannually on each September 2 and March 2, commencing September 2, 2005. The rates of interest range from 2.50% to 5.10% per annum. Principal on the subordinate revenue bonds is payable in annual installments ranging from $275,000 to $955,000. During 2008, the bonds in the amount of $1,975,000 were called. The annual debt service requirement for the 2005 Subordinate Revenue Bonds, Series AL outstanding at June 30, 2016, is as follows:


2016-2017 505,000$ 157,385$ 662,385$ 2017-2018 530,000 132,671 662,671 2018-2019 555,000 106,423 661,423 2019-2020 585,000 78,270 663,270 2020-2021 615,000 48,270 663,270 2021-2022 645,000 16,448 661,448

Total 3,435,000$ 539,467$ 3,974,467$

2005 Reassessment and Refunding Revenue Bonds, Series AM – Original Issuance $9,524,000

On February 1, 2005, the City issued $9,524,000 in 2005 Reassessment and Refunding Revenue Bonds, Series AM, to provide funds to refund the refunding Improvement Bonds, Assessment District No. 294. Interest on the bonds is payable semiannually on each September 2 and March 2. The rate of interest is 7.22% per annum.

During 2008, the bonds in the amount of $1,920,000 were called. The annual debt service requirement for the 2005 Reassessment and Refunding Revenue Bonds, Series AM outstanding at June 30, 2016, is as follows:

Principal Interest Total2016-2017 415,000$ 201,835$ 616,835$ 2017-2018 449,000 170,645 619,645 2018-2019 482,000 137,036 619,036 2019-2020 516,000 101,008 617,008 2020-2021 549,000 62,561 611,561 2021-2022 592,000 21,371 613,371

Total 3,003,000$ 694,456$ 3,697,456$

80


Note 10: Long-Term Debt (Continued) 2005 Lease Revenue Bonds, Series AN – Original Issuance $19,910,000

On May 1, 2005, the Public Financing Authority issued $19,910,000 in 2005 Lease Revenue Bonds, Series AN, to refinance certain obligations of the City in connection with the Authority’s 1995 Lease Revenue Bonds, Series P (now retired) and finance certain public improvements of the City.

Interest on the bonds is payable semiannually on each October 1 and April 1. The rates of interest range from 3.00% to 4.375% per annum. Principal is payable in annual installments ranging from $45,000 to $1,460,000. The bonds are secured by certain revenues consisting of certain Lease Payments with respect to the leased property by the City. The annual debt service requirement for the 2005 Lease Revenue Bonds, Series AN outstanding at June 30, 2016, is as follows:

Principal Interest Total2016-2017 625,000$ 893,723$ 1,518,723$ 2017-2018 650,000 869,173 1,519,173 2018-2019 675,000 842,998 1,517,998 2019-2020 700,000 815,060 1,515,060 2020-2021 730,000 785,110 1,515,110 2021-2026 4,150,000 3,439,676 7,589,676 2026-2031 5,190,000 2,332,750 7,522,750 2031-2036 6,635,000 861,875 7,496,875

Total 19,355,000$ 10,840,365$ 30,195,365$

2005 Taxable Lease Revenue Bonds, Series AP – Original Issuance $4,385,000

On May 1, 2005, the Public Financing Authority issued $4,385,000 in 2005 Taxable Lease Revenue Bonds, Series AP, to refinance certain obligations of the City in connection with the Authority’s 1995 Lease Revenue Bonds, Series P (now retired) and finance certain public improvements of the City. Interest on the bonds is payable semiannually on each October 1 and April 1. The rates of interest range from 4.120% to 4.300% per annum. Principal is payable in annual installments ranging from $370,000 to $525,000. The bonds are secured by certain revenues consisting of certain Lease Payments with respect to the leased property by the City. At June 30, 2016, these bonds were paid in full.

81


Note 10: Long-Term Debt (Continued) 2006 Lease Revenue Bonds, Series AU – Original Issuance $2,540,000

On December 6, 2006, the Public Financing Authority issued $2,540,000 in 2006 Lease Revenue Bonds, Series AU to finance certain public improvements of the City. Interest on the bonds is payable semiannually on each June 1 and December 1. The rates of interest range from 3.250% to 4.375% per annum. Principal is payable in annual installments ranging from $25,000 to $310,000. The bonds are secured by certain revenues consisting of certain Lease Payments with respect to the leased property by the City. The annual debt service requirement for the 2006 Lease Revenue Bonds, Series AU outstanding at June 30, 2016, is as follows:


2016-2017 30,000$ 97,055$ 127,055$ 2017-2018 35,000 95,975 130,975 2018-2019 35,000 94,680 129,680 2019-2020 35,000 93,350 128,350 2020-2021 40,000 91,985 131,985 2021-2026 220,000 434,379 654,379 2026-2031 270,000 385,081 655,081 2031-2036 415,000 315,806 730,806 2036-2041 520,000 217,875 737,875 2041-2045 675,000 86,406 761,406

Total 2,275,000$ 1,912,593$ 4,187,593$

2006 Taxable Lease Revenue Bonds, Series AV – Original Issuance $10,790,000

On December 6, 2006, the Public Financing Authority issued $10,790,000 in 2006 Taxable Lease Revenue Bonds, Series AV, to refinance certain obligations of the City in connection with the City’s Certificates of Participation, 2002 Series AE (Mission Promenade Project) and finance certain public improvements of the City. Interest on the bonds is payable semiannually on each June 1 and December 1. The rates of interest range from 5.00% to 5.70% per annum. Principal is payable in annual installments ranging from $95,000 to $665,000. The bonds are secured by certain revenues consisting of certain Lease Payments with respect to the leased property by the City.

82



The annual debt service requirement for the 2006 Taxable Lease Revenue Bonds, Series AV outstanding at June 30, 2016, is as follows:

Principal Interest Total2016-2017 145,000$ 558,170$ 703,170$ 2017-2018 150,000 550,920 700,920 2018-2019 160,000 542,520 702,520 2019-2020 170,000 533,560 703,560 2020-2021 175,000 524,040 699,040 2021-2026 1,050,000 2,460,320 3,510,320 2026-2031 1,375,000 2,131,600 3,506,600 2031-2036 1,810,000 1,698,560 3,508,560 2036-2041 2,385,000 1,121,190 3,506,190 2041-2045 2,450,000 359,100 2,809,100

Total 9,870,000$ 10,479,980$ 20,349,980$

The following is a summary of unamortized deferred loss on refunding outstanding at June 30, 2016:



(126,560)$ -$ (7,031)$ (119,529)$

Amortization expense was $7,031 for June 30, 2016.

Pension Obligation Refunding Bonds

Balance July 1, 2015

Accreted Interest Deletions


Due Within One Year

2006 Pension Obligation Bonds, Series AR 44,333,953$ 433,200$ 615,000$ 44,152,153$ 715,000$

The City is a member of the California Public Employees’ Retirement System (PERS), a public employees’ defined benefits retirement program. In 2004, the City issued $32,300,000 and $5,700,000 in Pension Obligation Bonds, in order to fund the City’s unamortized, unfunded actuarial accrued liability and fund the current year general fund contribution with PERS (see Note 11 for more information on the PERS pension plan). In 2006, the City issued $42,280,684 in Pension Obligation Refunding Bonds, Series AR to refinance the City’s outstanding Pension Obligation Refunding Bonds, Series 2004 AJ and Series 2004 AK. The refunding achieved net present value savings of $868,932, or 2.3% of refunded par and changed the debt structure from variable rate to fixed rate.

83


Note 10: Long-Term Debt (Continued) 2006 Pension Obligation Refunding Bonds, Series AR – Original Issuance $42,280,684

On February 1, 2006, the City issued $42,280,684 Pension Obligations Refunding Bonds, Series 2006 AR (Bonds) to refinance the City’s outstanding Pension Obligation Refunding Bonds, Series 2004 AJ and its Pension Obligation Refunding Bonds, Series 2004 AK, to capitalize certain interest on the Bonds and to pay the costs of issuing the Bonds. The Bonds were issued as current interest bonds in the principal amount of $36,205,000 and as capital appreciation bonds in the original issuance amount of $6,075,684. Interest on the current interest bonds is payable semiannually on each January 1 and July 1. The rates of interest vary and range from 5.24% to 5.832% per annum. Principal is payable in annual installments ranging from $71,302 to $5,140,000. The capital appreciation bonds are payable only at maturity and will not bear interest on a current basis. The accreted value of each capital appreciation bond is equal to its accreted value upon the maturity thereof, being comprised of its initial purchase price and the accreted interest between the delivery date and its respective maturity date. The obligation of the City to make payments with respect to the Bonds is an absolute and unconditional obligation of the City imposed upon the City by the Retirement Law and is not limited to any special source of funds. The City’s obligation for the Bonds is any money available in the City’s General Fund. The Bonds are not secured or limited as to payment by any special source of funds of the City. The current interest bonds are subject to redemption prior to maturity. The capital appreciation bonds are not subject to redemption prior to maturity. The annual debt service requirement outstanding at June 30, 2016, is as follows:

AccretedPrincipal Interest Interest Total

2016-2017 715,000$ 2,089,629$ -$ 2,804,629$ 2017-2018 812,552 2,068,759 22,449 2,903,760 2018-2019 913,230 2,044,731 51,770 3,009,731 2019-2020 1,013,725 2,017,271 86,276 3,117,272 2020-2021 1,113,533 1,985,967 126,467 3,225,967 2021-2026 7,161,363 9,293,201 1,458,636 17,913,200 2026-2031 10,972,750 7,701,302 2,532,250 21,206,302 2031-2036 21,450,000 336,522 - 21,786,522

Total 44,152,153$ 27,537,382$ 4,277,848$ 75,967,383$

84


Note 10: Long-Term Debt (Continued) Certificates of Participation


BalanceJune 30, 2016

Due Within One Year

10,785,000$ -$ 335,000$ 10,450,000$ 355,000$ 551,191 - 30,622 520,569 -

Total 11,336,191$ -$ 365,622$ 10,970,569$ 355,000$

2003 Certificate of Participation, Series AGUnamortized Bond Premium

2003 Certificates of Participation, Series AG – Original Issuance $13,985,000

On July 1, 2003, the City issued $13,985,000 Certificates of Participation, 2003 Series AG, to provide funds to finance certain public improvements, including street improvements throughout the City. Principal payments are made once a year on June 1. The bonds are set to mature on June 1, 2034. The Authority realized an original premium of approximately $918,655 and incurred cost of issuance of approximately $725,000. Interest on the bonds is payable semiannually on each June 1 and December 1. The rates of interest range from 2.800% to 10.000% per annum. Principal is payable in annual installments ranging from $210,000 to $880,000.

The annual debt service requirement outstanding at June 30, 2016, is as follows:


2016-2017 355,000$ 574,750$ 929,750$ 2017-2018 375,000 555,225 930,225 2018-2019 395,000 534,600 929,600 2019-2020 415,000 512,875 927,875 2020-2021 440,000 490,050 930,050 2021-2026 2,585,000 2,060,575 4,645,575 2026-2031 3,380,000 1,266,375 4,646,375 2031-2034 2,505,000 280,500 2,785,500

Total 10,450,000$ 6,274,950$ 16,724,950$

The following is a summary of the 2003 Certificate of Participation, Series AG unamortized premium outstanding at June 30, 2016:



551,191$ -$ 30,622$ 520,569$

85


Note 10: Long-Term Debt (Continued) Compensated Absences

The following is a summary of compensated absences outstanding as of June 30, 2016:



Due Within One Year

7,118,226$ 4,945,134$ 4,810,546$ 7,252,814$ 4,946,000$

For the governmental activities, the majority of the liability will be paid by the General Fund.

Claims Payable

The following is a summary of the claims payable outstanding as of June 30, 2016:



Due Within One Year

12,101,548$ 5,581,864$ 3,626,197$ 14,057,215$ 5,549,895$

Claims payable will be liquidated from the Self-Insurance Fund.

Business-Type Activities Obligations under Capital Leases



Due Within One Year

HCC #1 3,004,393$ -$ 573,408$ 2,430,985$ 586,826$

The City has entered into numerous equipment lease-purchase agreements with a leasing company whereby the lessor acquired certain equipment and leased it to the City with an option to purchase. The related assets have been capitalized in the capital assets account.

The total leased assets by major asset class consisted of the following:

June 30, 2016

4,257,381$ Equipment under capitalized lease, at cost 4,257,381

(1,277,214) Equipment under capitalized lease, net 2,980,167$

Equipment

Accumulated depreciation

The depreciation expense for equipment under capitalized leases was $425,738 for the year ended June 30, 2016.

86


Note 10: Long-Term Debt (Continued) The annual debt service requirement outstanding at June 30, 2016, is as follows:


2016-2017 586,825$ 56,885$ 643,710$ 2017-2018 600,557 43,153 643,710 2018-2019 614,610 29,100 643,710 2019-2020 628,993 14,719 643,712

Total 2,430,985$ 143,857$ 2,574,842$

Revenue Bonds

Balance



12,545,000$ -$ 225,000$ 12,320,000$ 240,000$ 94,580,000 - 1,075,000 93,505,000 1,130,000 4,686,644 - 148,783 4,537,861 - 5,560,000 - 275,000 5,285,000 285,000

14,715,000 - 175,000 14,540,000 175,000

Total 132,086,644$ -$ 1,898,783$ 130,187,861$ 1,830,000$

(552,855)$ -$ (58,195)$ (494,660)$ 2007 Revenue Bonds, Series AY (1,101,665) - (78,691) (1,022,974)

Total (1,654,520)$ -$ (136,886)$ (1,517,634)$

2002 Refunding Revenue Bonds, Series AF

2007 Revenue Bonds, Series BA

2002 Refunding Revenue Bonds, Series AF2007 Revenue Bonds, Series AY Unamortized Bond Premium

Unamortized Deferred Loss on Refunding

2007 Taxable Revenue Refunding Bonds, Series AZ

2002 Refunding Revenue Bonds, Series AF – Original Issuance $15,205,000

On October 1, 2002, the Public Financing Authority issued $15,205,000 in 2002 Sewer Refunding Revenue Bonds, Series AF, for the purpose of making an advance to the City’s Sewer Fund for refunding the 1996 Revenue Bonds, Series Q, as well as provide funds to refinance certain sewer obligations of the City of Pomona and to finance certain improvements to the City’s sewer enterprise project.

Interest is payable on June 1 and December 1 of each year. Interest rates range from 2.0% to 4.2% on serial bonds of $3,900,000. Principal is payable in annual installments ranging from $165,000 to $790,000 through December 2043. Term bonds of $1,210,000, $1,075,000, $2,620,000, $2,815,000 and $3,585,000 mature on December 1, 2023, 2026, 2032, 2037, and December 1, 2042, respectively.

87



Principal Interest Total2016-2017 $ 240,000 $ 577,175 $ 817,175 2017-2018 245,000 567,625 812,625 2018-2019 260,000 557,395 817,395 2019-2020 270,000 546,395 816,395 2020-2021 280,000 534,425 814,425 2021-2026 1,630,000 2,464,450 4,094,450 2026-2031 2,045,000 2,051,688 4,096,688 2031-2036 2,555,000 1,525,325 4,080,325 2036-2041 3,255,000 807,375 4,062,375 2041-2043 1,540,000 78,000 1,618,000

Total $ 12,320,000 $ 9,709,853 $ 22,029,853

This advance refunding has increased the aggregate debt service payments that were required for the Refunded Bonds by approximately $1,588,000 and provided an economic loss (difference between the present value of the new and old debt service payments) of approximately $1,500,000. The following is a summary of unamortized deferred loss on refunding outstanding at June 30, 2016:



(552,855)$ -$ (58,195)$ (494,660)$


2007 Revenue Bonds, Series AY – Original Issuance $99,370,000

On January 1, 2007, the Public Financing Authority issued $99,370,000 in 2007 Revenue Bonds, Series AY, to provide funds to partially refund the Authority’s 1999 Refunding Revenue Bonds, Series AA and the 1999 Revenue Bonds, Series AC, and to finance the acquisition and construction of certain improvements to the Water Enterprise of the City. Interest on the bonds is payable semiannually on each November 1 and May 1. The rates of interest range from 4.00% to 5.00% per annum. Principal is payable in annual installments ranging from $885,000 to $6,040,000. The bonds are secured by an Installment Sale Agreement, dated as of January 1, 2007 between the City and the Authority. The Installment Payments are a special limited obligation of the City, payable from and secured by a pledge of and first lien on all Net Revenues, subject to the parity lien, if any, of any additional obligations as provided for in the Installment Sale Agreement, in the Utility Fund of the City in trust under the Installment Sale Agreement.

88



The annual debt service requirement outstanding at June 30, 2016, is as follows:

Principal Interest Total2016-2017 $ 1,130,000 $ 4,625,450 $ 5,755,450 2017-2018 1,175,000 4,580,250 5,755,250 2018-2019 1,235,000 4,521,500 5,756,500 2019-2020 1,280,000 4,472,100 5,752,100 2020-2021 1,335,000 4,420,900 5,755,900 2021-2026 7,665,000 21,108,000 28,773,000 2026-2031 10,980,000 18,961,500 29,941,500 2031-2036 16,055,000 15,649,000 31,704,000 2036-2041 20,475,000 11,215,000 31,690,000 2041-2046 26,135,000 5,557,750 31,692,750 2046-2048 6,040,000 302,000 6,342,000

Total $ 93,505,000 $ 95,413,450 $ 188,918,450

The following is a summary of the 2007 Revenue Bonds, Series AY unamortized premium outstanding at June 30, 2016:



4,686,644$ -$ 148,783$ 4,537,861$

Amortization expense was $148,783 for June 30, 2016. The advance refunding resulted in a difference between the reacquisition price (Series AY & AZ) and the net carrying amount of the bonds (Series AA & AC) of $1,809,884. This difference is considered to be a deferred loss on refunding. The deferred loss on refunding, reported in the basic financial statements as a deduction from long-term debt, is amortized on a straight-line method over 23 years. The following is a summary of unamortized deferred loss on refunding outstanding at June 30, 2016:



(1,101,665)$ -$ (78,691)$ (1,022,974)$


89


Note 10: Long-Term Debt (Continued) 2007 Taxable Revenue Refunding Bonds, Series AZ – Original Issuance $6,930,000

On January 1, 2007, the Public Financing Authority issued $6,930,000 in 2007 Taxable Revenue Refunding Bonds, Series AZ, to provide funds to partially refund the Authority’s 1999 Refunding Revenue Bonds, Series AA (now retired) and 1999 Revenue Bonds, Series AC (now retired), and to finance the acquisition and construction of certain improvements to the Water Enterprise of the City. Interest on the bonds is payable semiannually on each November 1 and May 1. The rates of interest range from 5.267% to 5.650% per annum. Principal is payable in annual installments ranging from $200,000 to $555,000. The bonds are secured by an Installment Sale Agreement, dated as of January 1, 2007 between the City and the Authority. The Installment Payments are a special limited obligation of the City, payable from and secured by a pledge of and first lien on all Net Revenues, subject to the parity lien, if any, of any additional obligations as provided for in the Installment Sale Agreement, in the Water Enterprise Fund of the City in trust under the Installment Sale Agreement. The annual debt service requirement outstanding at June 30, 2016, is as follows:

Principal Interest Total2016-2017 285,000$ 297,511$ 582,511$ 2017-2018 300,000 282,500 582,500 2018-2019 320,000 265,550 585,550 2019-2020 340,000 247,470 587,470 2020-2021 355,000 228,260 583,260 2021-2026 2,110,000 815,860 2,925,860 2026-2030 1,575,000 181,365 1,756,365

Total 5,285,000$ 2,318,516$ 7,603,516$

2007 Revenue Bonds, Series BA – Original Issuance $15,575,000

On January 1, 2007, the Public Financing Authority issued $15,575,000 in 2007 Revenue Bonds, Series BA, to provide funds to finance certain improvements to the City’s Sewer Enterprise. Interest on the bonds is payable semiannually on each June 1 and December 1. The rates of interest range from 3.625% to 5.000% per annum. Principal is payable in annual installments ranging from $110,000 to $1,595,000. The bonds are secured by an Installment Sale Agreement, dated as of January 1, 2007 between the City and the Authority. The Installment Payments are a special limited obligation of the City, payable from and secured by a pledge of and first lien on all Net Revenues, subject to the parity lien securing the Authority’s 2002 Refunding Revenue Bonds, Series AF, and of any additional obligations as provided for in the Installment Sale Agreement, in the Sewer Enterprise Fund held by the City in trust under the Installment Sale Agreement.

90




2016-2017 175,000$ 642,148$ 817,148$ 2017-2018 185,000 635,296 820,296 2018-2019 190,000 628,483 818,483 2019-2020 195,000 621,260 816,260 2020-2021 205,000 613,603 818,603 2021-2026 1,140,000 2,938,680 4,078,680 2026-2031 1,410,000 2,677,523 4,087,523 2031-2036 1,780,000 2,330,100 4,110,100 2036-2041 2,240,000 1,890,844 4,130,844 2041-2046 5,425,000 1,211,738 6,636,738 2046-2048 1,595,000 88,931 1,683,931

Total 14,540,000$ 14,278,606$ 28,818,606$


In the enterprise funds, the liability for vested and unpaid compensated absences (accrued vacation, sick pay, executive leave, and comp time) is reported in the fund as the benefits are earned and vest. The compensated absences accrued in the enterprise funds amounted to $1,302,208 at June 30, 2016.



Due Within One Year

1,302,207$ 1,052,183$ 950,780$ 1,403,610$ 1,054,000$

For the business-type activities, the liabilities will be paid in future years from the propriety funds.

91



Pledged Revenue The City has pledged certain tax revenue to the repayment of its Water and Sewer Enterprise Fund bonds through final maturity on May 1, 2047, or earlier. These bonds were issued to refinance Series Q, Series AA/AC and finance certain public improvements of the City. All net available revenues are irrevocably pledged by the City to the repayment of the bond’s debt services. In 2016, the Water and Sewer Enterprise Funds have net available revenues of $10,319,759 and total debt service paid was $7,976,918. The bonds required 77% of net revenue. Annual principal and interest payments on the bonds are expected to require roughly 92% of future net revenue. The total principal and interest remaining to be paid at June 30, 2016, on the Bonds is as follows:

Debt Issue Remaining Balance

2002 Series AF Bonds 22,029,853$ 2007 Series AY Bonds 188,918,450 2007 Series AZ Bonds 7,603,516 2007 Series BA Bonds 28,818,606

Total 247,370,425$

Revenue2015-2016Revenue

Net available revenues;excluding debt service 10,319,759$

Outstanding Principal on Capital-Related Debt The City has acquired capital assets through the issuance of bonds and capital lease obligations. Following is the outstanding balance at June 30, 2016, of capital assets related debt. Governmental Activities:

Outstanding Principal on Capital Related

Debt

10,897,438$ 19,204,510

2,084,282 4,292,694

Capital Lease Obligations 702,985

Total 37,181,909$

2003 Certificates of Participation, Series AG2005 Lease Revenue Bonds, Series AN2006 Lease Revenue Bonds, Series AU2006 Taxable Lease Revenue Bonds, Series AV

92

CITY OF POMONA

NOTES TO FINANCIAL STATEMENTS (CONTINUED) JUNE 30, 2016��Note 10: Long-Term Debt (Continued)

Business-Type Activities:

Outstanding Principal on Capital Related

Debt

Water2007 Revenue Bonds, Series AY 87,920,704$ 2007 Taxable Revenue Refunding Bonds, Series AZ 4,262,025

Subtotal 92,182,729 Sewer

2002 Refunding Revenue Bonds. Series AF 9,843,357 2007 Revenue Bonds, Series BA 12,661,735

Subtotal 22,505,092 Refuse

Capital Lease Obligation 2,430,985

Total 117,118,806$

Note 11: Non-City Obligations

The following bond issues are not reflected as City long-term debt because these debts are solely payable from and secured by specific revenue sources described in the official statements of the respective issues. Neither the faith and credit nor the taxing power of the City, the Successor Agency, the State of California or any political subdivision thereof, is pledged for payment of these bonds. Accordingly, since this debt does not constitute an obligation of the City, it is not reflected as long-term debt in the accompanying basic financial statements. The City is acting only as an agent.

Mortgage Revenue Bonds

Single family and multifamily housing revenue bonds were issued to provide construction and permanent financing to developers of multifamily residential rental projects located in the City to be partially occupied by persons of low and moderate income. These bonds are secured by first trust deeds and private mortgage insurance. The bonds, together with interest thereon, are payable solely from bond proceeds, revenues and other amounts derived solely from home mortgage and developer loans secured by first deeds of trust, irrevocable letters of credit and irrevocable surety bonds. The mortgage revenue bonds outstanding at June 30, 2016, is as follows:

BalanceMortage Revenue Bonds June 30, 2016

Single Family, Series 1983 A (Southwest Project Bonds) 700,000$ Single Family Mortgage Refunding Bonds 90A 26,520,000 Single Family Mortgage Refunding Bonds 90B 11,625,000

38,845,000$

93


Note 12: Defined Benefit Pension Plan Obligations

General Information about the Pension Plan

Plan Description The City contributes to the California Public Employees Retirement System (PERS), an agent multiple-employer public employee defined benefit pension plan. PERS provides retirement and disability benefits, annual cost-of-living adjustments, and death benefits to plan members and beneficiaries. PERS acts as a common investment and administrative agent for participating public entities within the State of California. Benefit provisions and all other requirements are established by State statute and City ordinance. Copies of PERS’ annual financial report may be obtained from its Executive Office located at 400 P Street, Sacramento, California 95814.

Benefits Provided

CalPERS provides service retirement and disability benefits, annual cost of living adjustments and death benefits to plan members, who must be public employees and beneficiaries. Benefits are based on years of credited service, equal to one year of full time employment. Members with five years of total service are eligible to retire at age 50 with statutorily reduced benefits. All members are eligible for non-duty disability benefits after 10 years of service. The death benefit is one of the following: the Basic Death Benefit, the 1957 Survivor Benefit, or the Optional Settlement 2W Death Benefit. The cost of living adjustments for each plan are applied as specified by the Public Employees’ Retirement Law.

Tier 1 * Tier 2* PEPRA

Hire date Prior to August 14, 2011

On or after August 14, 2011

but prior to January 1, 2013

On or after January 1, 2013

Benefit formula 2.0% @ 55 2.0% @ 60 2.0% @ 62Benefit vesting schedule 5 years service 5 years service 5 years serviceBenefit payments monthly for life monthly for life monthly for lifeRetirement age minimum 50 yrs minimum 50 yrs minimum 52 yrs

Monthly benefits, as a % of eligible compensation

1.426% - 2.418%, 50 yrs - 63+ yrs,

respectively

1.092% - 2.418%, 50 yrs - 63+ yrs,

respectively

1.000% - 2.500%, 52 yrs - 67+ yrs,

respectively

Required employee contribution rates 7.000% 7.000% 6.250%

Required employer contribution rates 17.053% 17.053% 17.053%

Miscellaneous Plan

* Plan is closed to new entrants

94


Note 12: Defined Benefit Pension Plan Obligations (Continued)

Tier 1 * Tier 2 * PEPRA

Hire date Prior to November 21, 2010

On or after November 21, 2010

but prior to January 1, 2013

On or after January 1, 2013

Benefit formula 3.0% @ 50 3.0% @ 55 2.7% @ 57Benefit vesting schedule 5 years service 5 years service 5 years serviceBenefit payments monthly for life monthly for life monthly for lifeRetirement age minimum 50 yrs minimum 50 yrs minimum 50 yrs

Monthly benefits, as a % of eligible compensation 3.000%, 50+ yrs

2.400% - 3.000%, 50 yrs - 55+ yrs,

respectively

2.000% - 2.700%, 50 yrs - 57+ yrs,

respectively

Required employee contribution rates 9.000% 9.000% 12.750%

Required employer contribution rates 40.523% 40.523% 40.523%

Safety Plan

* Plan is closed to new entrants Employees Covered

At June 30, 2016, the following employees were covered by the benefit terms of the plan:

DescriptionMiscellaneous

Plan Safety PlanActive members 356 152 Transferred members 326 24 Terminated members 184 17 Retired members and beneficiaries 852 383 Total 1,718 576

Number of members

Contribution Description Section 20814(c) of the California Public Employees’ Retirement Law (PERL) requires that the employer contribution rates for all public employers be determined on an annual basis by the actuary and shall be effective on the July 1 following notice of a change in the rate. The total plan contributions are determined through CalPERS’ annual actuarial valuation process. The actuarially determined rate is the estimated amount necessary to finance the costs of benefits earned by employees during the year, with an additional amount to finance any unfunded accrued liability. The employer is required to contribute the difference between the actuarially determined rate and the contribution rate of employees. For the year ended June 30, 2016, the employer contributions recognized as a reduction to the net pension liability for all the Miscellaneous Plan and Safety Plan were $3,803,283 and $5,171,283 respectively.

95


Note 12: Defined Benefit Pension Plan Obligations (Continued) Net Pension Liability

The City’s net pension liability is measured as the total pension liability, less the pension plan’s fiduciary net position. The net pension liability of each of the Plans is measured as of June 30, 2015, using an annual actuarial valuation as of June 30, 2014 rolled forward to June 30, 2015 using standard update procedures. A summary of principal assumptions and methods used to determine the net pension liability is shown below.

Actuarial Methods and Assumptions Used to Determine Total Pension Liability

For the measurement period ended June 30, 2015 (the measurement date), the total pension liability was determined by rolling forward the June 30, 2014 total pension liability. The June 30, 2014 and the June 30, 2015 total pension liabilities were based on the following actuarial methods and assumptions:

Actuarial Cost Method Entry Age Normal in accordance with the requirements of GASB Statement No. 68

Discount Rate 7.65%Inflation 2.75%Salary Increases Varies by Entry Age and Service Investment Rate of Return 7.50% Net of Pension Plan Investment and

Administrative Expenses; includes Inflation

Mortality Rate Table (1) Derived using CalPERS’ Membership Data for all Funds

Post Retirement Benefit Increase Contract COLA up to 2.75% until Purchasing

Power Protection Allowance Floor on Purchasing Power applies, 2.75% thereafter

Actuarial Assumptions

(1) The mortality table used was developed based on CalPERS’ specific data. The table includes 20 years of mortality improvements using Society of Actuaries Scale BB. For more details on this table, please refer to the 2014 experience study report.

All other actuarial assumptions used in the June 30, 2014 valuation were based on the results of an actuarial experience study for the period from 1997 to 2011, including updates to salary increase, mortality and retirement rates. The Experience Study report can be obtained at CalPERS’ website under Forms and Publications.

Change of Assumptions �

GASB 68, paragraph 68 states that the long-term expected rate of return should be determined net of pension plan investment expense but without reduction for pension plan administrative expense. The discount rate was changed from 7.50 percent (net of administrative expense in 2014) to 7.65 percent as of the June 30, 2015 measurement date to correct the adjustment which previously reduced the discount rate for administrative expense.�

96



Discount Rate The discount rate used to measure the total pension liability was 7.65% for each Plan. To determine whether the municipal bond rate should be used in the calculation of a discount rate for each plan, CalPERS stress tested plan that would most likely result in a discount rate that would be different from the actuarially assumed discount rate. Based on the testing, none of the tested plan run out of assets. Therefore, the current 7.65 percent discount rate is adequate and the use of the municipal bond rate calculation is not necessary. The long term expected discount rate of 7.65 percent is applied to all plans in the Public Employees Retirement Fund. The stress test results are presented in a detailed report called “GASB Crossover Testing Report” that can be obtained at CalPERS’ website under the GASB 68 section. The long-term expected rate of return on pension plan investments was determined using a building-block method in which best-estimate ranges of expected future real rates of return (expected returns, net of pension plan investment expense and inflation) are developed for each major asset class.

�In determining the long-term expected rate of return, CalPERS took into account both short-term and long-term market return expectations as well as the expected pension fund cash flows. Such cash flows were developed assuming that both members and employers will make their required contributions on time and as scheduled in all future years. Using historical returns of all the funds’ asset classes, expected compound (geometric) returns were calculated over the short-term (first 10 years) and the long-term (11-60 years) using a building-block approach. Using the expected nominal returns for both short-term and long-term, the present value of benefits was calculated for each fund. The expected rate of return was set by calculating the single equivalent expected return that arrived at the same present value of benefits for cash flows as the one calculated using both short-term and long-term returns. The expected rate of return was then set equivalent to the single equivalent rate calculated above and rounded down to the nearest one quarter of one percent. The table below reflects long-term expected real rate of return by asset class. The rate of return was calculated using the capital market assumptions applied to determine the discount rate and asset allocation. These geometric rates of return are net of administrative expenses. �

Asset ClassNew Strategic

AllocationReal Return Years 1-10*

Real Return Years 11+**

Global Equity 51.00% 5.25% 5.71%Global Debt Securities 19.00% 0.99% 2.43%Inflation Assets 6.00% 0.45% 3.36%Private Equity 10.00% 6.83% 6.95%Real Estate 10.00% 4.50% 5.13%Infrastructure and Forestland 2.00% 4.50% 5.09%Liquidity 2.00% -0.55% -1.05%

* An expected inflation of 2.5% used for this period**An expected inflation of 3.0% used for this period �

97



Changes in the Net Pension Liability

The following table shows the changes in net pension liability recognized over the measurement period.

Total Pension Liability

(a)

Plan Fiduciary Net Position

(b)


(c)=(a)-(b)Balance at: 6/30/2014 (Valuation Date) (1) 254,669,734$ 207,812,443$ 46,857,291$ Changes Recognized for the Measurement Period:

Service Cost 3,161,189 - 3,161,189 Interest on the Total Pension Liability 18,495,828 - 18,495,828 Changes of Benefit Terms - - -

Difference between Expected and Actual Experience (3,363,816) - (3,363,816) Changes of Assumptions (4,427,183) - (4,427,183) Contribution from the Employer - 3,747,091 (3,747,091) Contributions from Employees - 1,766,013 (1,766,013) Net Investment Income - 4,578,528 (4,578,528) Benefit Payments including Refunds of Employee Contributions (13,367,634) (13,367,634) - Plan to Plan Resource Movement - (521) 521 Administrative Expense - (235,754) 235,754

Net Changes During 2014-15 498,384 (3,512,277) 4,010,661 Balance at: 6/30/2015 (Measurement Date) (1) 255,168,118$ 204,300,166$ 50,867,952$

Increase (Decrease)

Miscellaneous Plan

Total Pension Liability

(a)

Plan Fiduciary Net Position

(b)


(c)=(a)-(b)Balance at: 6/30/2014 (Valuation Date) (1) 324,344,654$ 245,455,660$ 78,888,994$ Changes Recognized for the Measurement Period:

Service Cost 4,785,362 - 4,785,362 Interest on the Total Pension Liability 23,712,742 - 23,712,742 Changes of Benefit Terms - - -

Difference between Expected and Actual Experience (2,090,216) - (2,090,216) Changes of Assumptions (5,565,887) - (5,565,887) Contribution from the Employer - 6,367,577 (6,367,577) Contributions from Employees - 2,743,727 (2,743,727) Net Investment Income - 5,342,317 (5,342,317) Benefit Payments including Refunds of Employee Contributions (18,221,480) (18,221,480) - Plan to Plan Resource Movement - 521 (521) Administrative Expense - (271,705) 271,705

Net Changes During 2014-15 2,620,521 (4,039,043) 6,659,564 Balance at: 6/30/2015 (Measurement Date) (1) 326,965,175$ 241,416,617$ 85,548,558$

Increase (Decrease)

Safety Plan

(1) The fiduciary net position includes receivables for employee service buybacks,

deficiency reserves, fiduciary self-insurance and OPEB expense. This may differ from the plan assets reported in the funding actuarial valuation report.

98



Sensitivity of the Net Pension Liability to Changes in the Discount Rate

The following presents the City’s proportionate share of the net pension liability for the Plan, calculated using the discount rate for each Plan, as well as what the City’s proportionate share of the net pension liability would be if it were calculated using a discount rate that is 1-percentage point lower or 1-percentage point higher than the current rate:

�Discount Rate -

1%(6.65%)

Current Discount Rate

(7.65%)

Discount Rate + 1%

(8.65%)

211,290,057$ 136,416,510$ 74,573,728$ �

Pension Plan Fiduciary Net Position

The plan fiduciary net position disclosed in the GASB 68 accounting valuation report may differ from the plan assets reported in the funding actuarial valuation report due to several reasons. First, for the accounting valuations, CalPERS must keep items such as deficiency reserves, fiduciary self-insurance and OPEB expense included as assets. These amounts are excluded for rate setting purposes in the funding actuarial valuation. In addition, differences may result from early Comprehensive Annual Financial Report closing and final reconciled reserves.

Pension Expense and Deferred Outflows and Deferred Inflows of Resources Related to Pensions

As of the start of the measurement period (July 1, 2014), the net pension liability was $125,746,785. For the measurement period ending June 30, 2015 (the measurement date), the City incurred a pension expense/(income) of $3,996,959 for both the Miscellaneous Plan and Safety Plan. Note that no adjustments have been made for contributions subsequent to the measurement date. Adequate treatment of any contributions made after the measurement date is the responsibility of the employer. As of June 30, 2016, the City has deferred outflows and deferred inflows of resources related to pensions as follows:

Deferred Outflows of Resources

Deferred Inflows of Resources

Current year contributions that occurred after the measurement date of June 30, 2015 11,791,373$ -$ Changes of Assumptions - (5,897,071) Differences between Expected and Actual Experiences - (3,105,709) Net Difference between Projected and Actual Earnings on Pension Plan Investments 19,249,497 (23,622,900) Total 31,040,870$ (32,625,680)$

99


Note 12: Defined Benefit Pension Plan Obligations (Continued) $11,791,373 reported as deferred outflows of resources related to contributions subsequent to the measurement date will be recognized as a reduction of the net pension liability in the year ended June 30, 2017. Other amounts reported as deferred outflows or deferred inflows of resources related to pensions will be recognized as pension expense as follows:

Measurement DeferredPeriod Ended Outflows/(Inflows)

June 30: of Resources2016 (9,506,247)$ 2017 (5,620,383) 2018 (3,061,926) 2019 4,812,373

Note 13: Other Post-Employment Benefits

Collateral Benefits Plan Plan Description

The Collateral Benefits Plan provides a supplemental retirement benefit to City employees upon resigning from the City and concurrently retiring with CalPERS. The supplemental benefit is a monthly benefit of $100 from the first of the month following retirement from the City until the age of 65 for Tier 1 and Tier 2 employees. Tier 1 employees include Mid-Management and Confidential, Police Officers’ Association, City Employees’ Association, and Management Group B employees, and are required to have at least 20 years of City service upon retiring after July 1, 1987. Tier 2 employees include Executive Management Group A employees and are required to have at least one year of City service upon retiring after July 1, 1991. Employees hired after July 1, 2011, are not eligible for this plan.

Eligibility

Bargaining Group City ServiceExecutive Management Group B, Mid-Management/Confidential Employees' Association, City Employees' Association, Police Officers' Association 20 YearsExecutive Management Group A 1 YearPolice Management Not Eligible

There are 88 participants receiving collateral benefits at June 30, 2016.

Funding Policy The City’s funding policy is to contribute the annual required contribution. The annual required contribution equals the sum of:

� normal cost, and � amortization of the unfunded actuarial accrued liability.

100

CITY OF POMONA

NOTES TO FINANCIAL STATEMENTS (CONTINUED) JUNE 30, 2016��Note 13: Other Post-Employment Benefits (Continued)

Government Accounting Standards Board Statement No. 27 (Statement 27) requires that the City determine the plan’s annual pension cost based on the most recent actuarial valuation. The annual pension cost equals the plan’s annual required contribution, adjusted for historical differences between the annual required contribution and amounts contributed. The actuary has determined the City’s annual required contribution equal to the sum of (a) normal cost, and (b) amortization of the unfunded actuarial accrued liability.

Annual Pension Cost

For the year ending June 30, 2016, the City’s annual pension cost for the Collateral Benefits Plan of $102,949 was equal to the actuarial required contribution.

The summary of principal assumptions and methods used to determine the annual required contribution is shown below:

Valuation Date July 1, 2012Actuarial Cost Method Entry Age Normal Cost MethodAmortization Method Level DollarAverage Remaining Period Closed-12.5 Years as of July 1, 2013Asset Valuation Method Market Value on Date of ValuationActuarial Assumptions

Investment Rate of Return 7.00%Inflation 3.00%Salary Increases n/aCost of Living Adjustment None

The following table provides 3 years of historical information of the Annual Pension Cost for the Collateral Benefits Plan:

Year Ending

Annual Pension

Cost(APC)Percentage of

APC Contributed

Net Pension Obligation

(Asset)

6/30/2014 110,032$ 100% -$ 6/30/2015 110,032 100% - 6/30/2016 102,949 100% -

Funded Status and Funding Progress

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 table below shows an analysis of the actuarial value of assets as a percentage of the actuarial accrued liability and the unfunded actuarial accrued liability as a percentage of the annual covered payroll.

101


Note 13: Other Post-Employment Benefits (Continued)

UnfundedActuarial Actuarial Actuarial Actuarial UAAL as a %Valuation Value of Accrued Accrued Funded Covered of Covered

Date Assets Liability Liability Ratio Payroll Payroll7/1/2009 179,275$ 954,779$ (775,504)$ 18.8% n/a n/a7/1/2012 220,801 976,744 (755,943) 22.6% n/a n/a7/1/2014 258,073 905,593 (647,520) 28.5% n/a n/a

Schedule of Funding ProgressCollateral Benefits Plan

Public Employees’ Medical and Hospital Care Program (PEMHCA) Plan

Plan Description

Employees of the City who retire through CalPERS, their spouses, and eligible dependents, may receive health plan coverage through the Public Employees’ Medical and Hospital Care Program (PEMHCA) Plan (Plan). The Plan is a single employer defined benefit plan which provides the retirees a monthly medical contribution that is not to exceed the cost of the plan selected, with the maximum contribution limited for individual retirees based on bargaining groups as listed below:

Bargaining Group BenefitPomona City Council Members 700$ Pomona Executive Management Group 700 Pomona Mid-Management/Confidential Employees' Association 700 Pomona City Employees' Association 700 Pomona Police Managers' Association 700 Pomona Police Officers' Association 700 Firefighters (Pre-Merger with Los Angeles County Fire District) 465

Police Management retirees with at least 22 years of service as a Police Officer receive up to 90% contribution towards the most expensive 2-party CalPERS plan premium. This benefit terminates once the retiree is eligible for Medicare (age 65). This provision has been eliminated for employees hired or promoted to the unit after July 1, 2011.

Eligibility There are 488 employees eligible to receive or are receiving post-employment benefits at June 30, 2016.

Funding Policy The required contribution of the City is based on a pay-as-you-go financing requirement. For fiscal year 2016, the City contributed $3,393,250 to the retiree health plan.

102



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 actuarially determined in accordance with the parameters of GASB Statement 45. The ARC represents a 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 excesses) 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 to the Plan:

Total

$ 6,736,902 792,089

(1,014,032) Annual OPEB cost (expense) 6,514,959

3,393,250

Increase in net OPEB obligation 3,121,709 19,802,228

22,923,937$ Net OPEB obligation - end of year

Annual required contributionInterest on net OPEB obligationAdjustment to annual required contribution

Contributions made

Net OPEB obligation - beginning of year

The City’s annual OPEB cost, the percentage of annual OPEB cost contributed to the plan, and the net OPEB obligation for 2016 is as follows:

Fiscal Year Ended

Annual OPEB Cost

Annual Contribution

% of Annual OPEB Cost Contributed

Net OPEB Obligation

6/30/2014 5,252,076$ 3,107,605$ 59.2% 17,668,252$ 6/30/2015 5,479,146 3,345,170 61.1% 19,802,228 6/30/2016 6,514,959 3,393,250 52.1% 22,923,937

Funded Status and Funding Progress

As of January 1, 2016, the most recent actuarial valuation date, the plan was zero percent funded. The Actuarial Accrued Liability (AAL) for benefits was $88,492,843 and the actuarial value of assets was $0 resulting in an Unfunded Actuarial Accrued Liability (UAAL) of $88,492,843. The covered payroll (annual payroll of active employees covered by the plan) was $39,293,795 and the ratio of UAAL to the covered payroll was 225.2%. 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.

103



The table below shows an analysis of the actuarial value of assets as a percentage of the actuarial accrued liability and the unfunded actuarial accrued liability as a percentage of the annual covered payroll.

Actuarial Valuation

Date

Actuarial Value of Assets (AVA)

Entry Age Actuarial Accrued Liability

Unfunded Actuarial

Accrued LiabilityFunded Ratio

Annual Covered Payroll

UAAL as Percentage of Covered

Payroll

1/1/2012 -$ 77,168,916$ (77,168,916)$ 0.0% 36,101,000$ 213.8%1/1/2014 - 76,618,515 (76,618,515) 0.0% 40,318,000 190.0%1/1/2016 - 88,492,843 (88,492,843) 0.0% 39,293,795 225.2%

Public Employees' Medical and Hospital Care Program PlanSchedule of Funding Progress

Actuarial valuation is performed every two years. Actuarial Methods and Assumptions

Projections of benefits for financial reporting purposes are based on the substantive plan (the plan as understood by the employer and the plan members) and include the types of benefits provided at the time of each valuation and the historical pattern of sharing of benefit costs between the employer and plan members to that point. The actuarial methods and assumptions used include techniques that are designed to reduce the effects of short-term volatility in actuarial accrued liabilities and the actuarial value of assets, consistent with the long-term perspective of the calculations. In the January 1, 2016, actuarial valuation, the entry age normal (EAN) cost method was used. The EAN normal cost equals the level annual amount of contribution from the employee’s date of hire (entry date) to their retirement date that is sufficient to fund the projected benefit. The actuarial assumptions include a 4.0% investment rate of return which is based on the expected return on funds invested by CalPERS, and an annual healthcare cost trend rate of 7.0% and 5.0% for PPO and HMO respectively and reduced to an ultimate rate of 5.0% thereafter. The actuarial assumption for inflation was 2.75%. As of the valuation date, there are no eligible plan assets. The UAAL is being amortized over an initial 30 years using the level percentage-of-pay method on a closed basis. The remaining amortization period at June 30, 2016, was 22 years. As of the actuarial valuation date of January 1, 2016, the City had 508 active eligible participants and 693 eligible retired participants and beneficiaries.

Note 14: Joint Powers Agreements

Alameda Corridor-East Construction Authority The City approved and adopted a Joint Exercise of Powers Agreement in November 2012. The Alameda Corridor East Construction Authority (ACE) is a single purpose construction authority created by the San Gabriel Council of Governments in 1998 to mitigate the impacts of significant increases in rail traffic over 70 miles of mainline railroad in the San Gabriel Valley. The ACE Project consists of multiple construction projects to improve safety at various rail crossings as well as at various grade separations in the San Gabriel Valley.

104


Note 14: Joint Powers Agreements (Continued)

CSAC – Excess Insurance Authority

The City became a member of CSAC Excess Insurance Authority (Authority) in July 2008. The Authority is a risk sharing pool of California public agencies dedicated to controlling losses and providing effective risk management solutions. Membership is currently comprised of various member counties and various public entity organizations. The governing board consists of one representative from each member county and seven members elected by the public entity membership.

Foothill Air Support Team

The City joined the Foothill Air Support Team (FAST) in January 2011. FAST was developed in 1999 creating a joint helicopter patrol operation that could enhance member agencies ability to deter criminal activity and apprehend offenders. The governing board consists of one representative from each of the seven member agencies.

Foothill Transit The City is a member of the Foothill Transit Joint Powers Agreement. The JPA is comprised of 20 cities and the County of Los Angeles. The purpose of the authority is to provide a more efficient and cost effective local transportation service for the area. Each member city has one representative and three members are appointed by the Board of Supervisors. Below are the most currently available condensed audited financial statements of the JPA as of June 30, 2016. Separate financial statements of Foothill Transit are available from its offices located in West Covina, California.

Total

Assets 323,376,245$ Liabilities 85,238,408 Net Position 238,137,837$

Revenues 18,531,384$ Expenses 101,711,307 Operating income (83,179,923) Nonoperating revenue (expenses) 62,643,667 Net income (20,536,256) Capital contributions 27,386,888 Net Position - July 1, 2015 231,287,205 Net Position - June 30, 2016 238,137,837$

105



Gold Line Phase II Construction Authority The City participates in the Gold Line Phase II Construction Authority (GLCA) joint venture, which became effective September 3, 2003. The GLCA oversees the planning, funding, designing and construction contracts for the completion of the Los Angeles-Pasadena Metro Blue Line light rail project. The GLCA’s governing Board is comprised of an appointed representative from each of the affected cities and agencies, including the cities of Azusa, Claremont, Duarte, Glendora, Arcadia, La Verne, Ontario, Montclair, Irwindale, Pomona, San Dimas, Monrovia, Pasadena, and South Pasadena, and the San Bernardino Associated Governments (SANBAG). Los Angeles County Metropolitan Transportation Agency (LACMTA) will have the responsibility to operate and maintain the rail after its completion. Member agencies will be paid for attending meetings, not to exceed $1,800 per year, per member agency, plus direct expenses. Member agencies are not allowed to withdraw from the GLCA and each member agency is required to pay $31,445 in initial dues (first payments were due October 1, 2003) and each member will be held liable for its share of operating costs.

The City paid the joint venture $0 during the year ended June 30, 2016. Assets are divided based on the proportionate equity share at the time the joint venture dissolves, which is currently not significant to the City.

Interagency Communications Interoperability System

The City participates in the Interagency Communications Interoperability System (ICIS) joint powers authority which became effective September 2003. The intent of ICIS is to provide public safety agencies with a formalized governance structure through which the participants may share resources to construct and manage a system for wide-area communications interoperability. The governing board is comprised of one member from each of the seven member agencies. The City paid $46,000 in annual dues for the fiscal year ending June 30, 2016.

Los Angeles County Disaster Management Area D

The City has participated in the Disaster Management Area D joint powers agreement (JPA) since 1958. The JPA is intended to promote the coordination of disaster management, training and preparedness of the Area D member cities under the direction of the Disaster Management Area Board. The governing board includes one representative from each of the 23 member cities. Annual dues at the rate of $0.05 per capita are paid and totaled $7,498 for the fiscal year ending June 30, 2016.

Los Angeles Interagency Metropolitan Police Apprehensive Crime Task Force

The City joined the Los Angeles Interagency Metropolitan Police Apprehensive Crime Task Force (LA Impact) in March 2011. It is a compilation of numerous federal, state, and local law enforcement agencies in Los Angeles County, whose primary purpose is to investigate major crimes, with an emphasis on dismantling mid-to-major level drug trafficking organizations. Since its inception, LA Impact has grown to 80 Officers from 35 different Los Angeles County law enforcement agencies. The City is solely responsible for the salary and benefits of one (1) Police Sergeant position, currently assigned to this program, which is fully funded within the Police Department’s General Fund budget.

106



Pomona Valley Transportation Authority The City is a member of the Pomona Valley Transportation Authority (PVTA). The PVTA is comprised of four cities and is organized under a Joint Powers Agreement pursuant to the California Government Code. The purpose of the PVTA is to study, implement and provide for public transportation that will best serve transit-dependent persons, including handicapped and senior adults residing in the Pomona Valley. Each member city has two representatives on the Board of Directors. Officers of the PVTA are elected annually by the Board of Directors. The City does not have an equity interest in the PVTA. However, the City does have an ongoing financial interest. Because the City also has an ongoing financial responsibility for continued funding of the PVTA, the City is able to influence operations. As a result, the PVTA uses its resources on behalf of the City. Following are the most currently available condensed audited financial statements of the PVTA as of June 30, 2016. Separate financial statements of the PVTA are available from its offices located in La Verne, California.

TotalAssets 3,203,422$

Liabilities 1,753,828$ Contributed capital 280,499 Retained earnings 1,169,095 Total liabilities and fund equity 3,203,422$

Operating revenues 298,577$ Operating expenses 4,347,374 Operating (income) (4,048,797) Non-operating revenue 4,150,873 Net income 102,076 Retained earnings - July 1, 2015 1,067,019 Retained earnings - June 30, 2016 1,169,095$

Pomona-Walnut-Rowland (PWR) Joint Water Line Commission

The City participates in the Pomona-Walnut-Rowland (PWR) Joint Water Line Commission (Commission) joint venture, which provides for the acquisition, construction, maintenance, repair and operation of a water transmission pipeline for the benefit of member agencies. The Pomona-Walnut-Rowland Joint Water Line Commission’s governing board is comprised of an appointed representative from each of three member agencies – the City, Walnut Valley Water District, and Rowland Water District. The cost of providing water to the member agencies is financed through user charges. The Commission purchases water for resale to the member agencies at a price sufficient to provide reserve funds for emergencies. In addition, the member agencies are billed for the costs of maintenance and operation of the pipeline. The City paid the joint venture $3,550,577 during the year ended June 30, 2016, which is comprised of $3,244,020 for

107



water use and $306,557 for capacity charges and other charges. Assets are divided based on the proportionate equity share at the time the joint venture dissolves. The City’s share in the equity of the Commission at June 30, 2016, was $686,767. As of June 30, 2016, the three participants had the following approximate ownership equity interest:

Agreement Balance

City of Pomona 28% $ 686,767 Walnut Valley Water District 43% 1,054,676 Rowland Water District 28% 686,767 Unallocated 1% 24,527

Total 100% $ 2,452,737

Member Percentages

The Commission’s basic financial statements for the fiscal year ended June 30, 2016, reflect the implementation of GASB 34 and include the following:

Total Assets 5,473,079$ Total Liabilities 3,020,343

Net Position 2,452,736$

The Commission does not recognize income or loss. Net operating expenditures in excess of users’ assessments are treated as accounts receivable on the Commission’s books and charged to each user’s account in the following year. Conversely, user’s assessments in excess of net operating expenditures are treated as a liability and credited against each user’s account, also in the following year. Under this basis, operating expenses for the Commission totaled $16,415,037 compared to total operating revenues of $16,418,204 in fiscal year 2016. Complete financial statements can be obtained from the Pomona-Walnut-Rowland Joint Water Line Commission, P.O. Box 8460, Rowland Heights, CA 91748.

San Gabriel Valley Council of Governments

The City is a member of the San Gabriel Valley Council of Governments (Council) which became effective March 1994. The Council provides member agencies a vehicle to voluntarily engage in regional and cooperative planning and coordination of government services and responsibilities to assist member agencies in the conduct of their affairs. The goal and intent of the Council is one of voluntary cooperation among members for the collective benefit of cities and unincorporated areas in the San Gabriel Valley. The governing board is comprised of one member from each of 31 member cities and the San Gabriel Valley Water Districts, except the County of Los Angeles. The County has three members who represent the unincorporated communities of Supervisor Districts 1, 4, and 5. All member agencies pay dues. The City paid $31,200 in annual dues for the fiscal year ending June 30, 2016.

108


Note 14: Joint Powers Agreements (Continued) Tri-City Mental Health Center

The City is a member of the Tri City Mental Health Center (Center). The Center is a jointly governed organization comprised of three cities and is organized under a Joint Powers Agreement pursuant to the California Government Code. The purpose of the Center is to develop mental health services and facilities to serve persons residing in the three member cities. The City’s contribution to the Center was $43,675 for the year ended June 30, 2016. The Board of Directors is comprised of seven members, two councilmembers from Pomona, one councilmember each from the cities of Claremont and La Verne, and one non-elected member from each of the three cities. Below are the most currently available condensed audited financial statements of the Center as of June 30, 2016. Separate financial statements of the Center are available from its offices located in Pomona, California.

Total

Assets 34,483,936$ Deferred outflows of resources 1,251,844 Liabilities 14,166,881 Deferred inflows of resources 7,470,262 Net Position 14,098,637$

Revenues 6,274,947$ Expenses 15,862,691 Operating income (9,587,744) Non-operating revenue (expenses) 13,489,224 Net income 3,901,480 Special items 636,581 Net Position - July 1, 2015 (as restated) 9,560,576 Net Position - June 30, 2016 14,098,637$

Note 15: Risk Management

The Self-Insurance Internal Service Fund is part of the City’s self-insurance program for general liability, workers compensation, and unemployment insurance. The City is a member of the California State Association of Counties Excess Insurance Authority (CSAC-EIA). Through CSAC-EIA, the City has a program limit of $25 million dollars with a self-insured retention of $1 million for its excess liability program and its worker’s compensation program. Additionally, the City purchases catastrophic excess liability coverage that provides an additional $25 million in coverage. CSAC-EIA is a governmental joint powers authority created by certain California counties and cities to provide a pooled approach to the members’ liability and excess workers’ compensation coverage as allowed under the California Government Code. The authority manages various types of pooled coverage programs for participating members.

As of June 30, 2016, estimated claims payable amounted to $14,057,215.

109


Note 15: Risk Management (Continued)

The estimated claims payable reported at June 30, 2016, is based on the requirements of GASB Statement No. 10, which requires that a liability for claims be reported if information prior to the issuance of the financial statements indicates that it is probable that a liability has been incurred at the date of the financial statements and the amount of the loss can be reasonably estimated. The following is a summary of changes in claims liabilities over the past three fiscal years:

Beginning Balance

Expenses and Changes in Estimates

Claims Payments Ending Balance

2013-2014 19,031,566$ 2,024,844$ 4,876,966$ 16,179,444$ 2014-2015 16,179,444 2,029,341 6,107,237 12,101,548 2015-2016 12,101,548 5,581,864 3,626,197 14,057,215

Claims Payable

Note 16: Commitments and Contingencies

Agency Participation Agreement On April 5, 2004, the City entered into a reclaimed water agreement with the Los Angeles County Sanitation District (LACSD). The agreement is for 20 years, beginning on July 1, 2003, and requires the City to sell its interest in the Northside Recycled Water Line, a 20” non-reinforced concrete gravity reclaimed water pipeline to the LACSD for $441,730. Additionally, the contract provides the City with up to 2/3 of the supply of water from the plant which can then be sold by the City to other customers. The City receives discounted rates on water during the first 12 years of the agreement.

Contractual Commitments The following schedule summarizes the major capital project contractual commitments of the City as of June 30, 2016:

Remaining Commitments

Gentry Brothers 11,314,352$ Troy Acoustics 1,893,792 AMB Electric 565,134 Ferreira Construction Co. 509,122 General Pump Co. 368,955 Wildan Associates 188,259 Stantec Consulting Services 186,287 RKA 181,551 Albert A. Webb Associates 125,699 Leighton Consulting Inc. 125,384 Dudek & Associates 124,065 VA Consulting 120,366 Gonzales Goodale Architects 116,000 Civil Source, Inc. 115,077 Fehr & Peers Kaku Associates 112,714 E2 Managet 105,527 All Other Commitment 435,545

Total 16,587,829$

Vendor

110


Note 16: Commitments and Contingencies (Continued)

Lawsuits The City is a defendant in certain other legal actions arising in the normal course of operations. As of June 30, 2016, in the opinion of City management, there were no additional outstanding matters that would have a significant effect on the financial position of the funds of the City.

Note 17: Net Position and Fund Balance

Government-Wide Financial Statements Net Investment in Capital Assets The following is a calculation of net the investment in capital assets at June 30, 2016:

Governmental Business-TypeActivities Activities Total

Capital assets, net of accumulated depreciation 265,818,551$ 159,154,796$ 424,973,347$ Less: Outstanding principal on capital related debt (41,347,328) (116,166,027) (157,513,355)

Net investment in capital assets 224,471,223$ 42,988,769$ 267,459,992$

Primary Government

Unrestricted Net Position The unrestricted net position for governmental activities has a deficit balance of $227,001,243 at June 30, 2016.

Fund Financial Statements Net Investment in Capital Assets The following is a calculation of net investment in capital assets, for the Proprietary Funds at June 30, 2016:

CanonInternal Service

Water Sewer Refuse Water Total Funds

Capital assets, net of accumulated depreciation 126,553,661$ 28,936,556$ 3,641,206$ 23,373$ 159,154,796$ 359,228$ Less: outstanding principal on capital related debt (91,954,840) (21,780,202) (2,430,985) - (116,166,027) -

34,598,821$ 7,156,354$ 1,210,221$ 23,373$ 42,988,769$ 359,228$

Enterprise Funds

111


Note 17: Net Position and Fund Balance (Continued) Net Position and Fund Balances Restatement

Beginning net position and fund balances have been restated as follows:

Governmental FundsCapital OutlayTo correct prior period capital outlay expenditures 748,279$

Enterprise FundsSewer FundTo correct prior period capital outlay expenditures (748,279)$

Note 18: Successor Agency Trust for Assets of Former Redevelopment Agency

On June 28, 2011, Governor Jerry Brown signed into law two bills that amended California Community Redevelopment Law in order to address the state’s ongoing budget deficit. ABx1 26 (”the Bill”) dissolved all California redevelopment agencies (RDAs) effective October 1, 2011. This legislation prevented RDAs from engaging in new activities and outlined a process for winding down the RDA’s financial affairs. It also set forth a process for distributing funds from the former RDAs to other local taxing entities. A companion bill, ABx1 27, was also passed, which allowed individual RDAs to avoid dissolution if they agreed to make substantial annual payments into a Special District Allocation Fund and Educational Revenue Augmentation Fund. In response, the California Redevelopment Association, the League of California Cities and other parties filed petitions with the California Supreme Court challenging the constitutionality of both ABx1 26 and ABx1 27. On December 29, 2011, the California Supreme Court upheld the constitutionality of ABX1 26, while striking down ABx1 27 as unconstitutional. The ruling in California Redevelopment Association v. Matosantos also extended some of the deadlines stipulated in ABx1 26 due to delays caused by the litigation. As a result, approximately 400 RDAs were dissolved on February 1, 2012, with the assets and liabilities transferred to Successor Agencies and Successor Housing Agencies pursuant to ABx1 26. The California State Legislature made additional changes to the dissolution process when Governor Jerry Brown signed AB 1484 into law on June 27, 2012. This legislation made a variety of substantive amendments to the original Dissolution Act. These actions impacted the reporting entity of the City of Pomona that previously had reported a redevelopment agency within the reporting entity of the City as a blended component unit. The Bill provides that upon dissolution of a redevelopment agency, either the City or another unit of local government would agree to serve as the “successor agency” to hold the assets until the assets were distributed to other units of state and local government. On January 9, 2012, the City Council adopted resolution number 2012-8 electing to assume the responsibility of Successor Agency for the former Pomona Redevelopment Agency. After enactment of the law, redevelopment agencies in the State of California could not enter into new projects, obligations or commitments. Subject to the control of an established oversight board, remaining assets can only be used to pay enforceable obligations in existence at the date of dissolution. Subsequent to the dissolution, Successor Agencies are only allocated revenue up to the amount necessary to pay the estimated annual installment payments on enforceable obligation of the former redevelopment agency until all enforceable obligations have been paid in full and all assets have been liquidated.

112

CITY OF POMONA

NOTES TO FINANCIAL STATEMENTS (CONTINUED) JUNE 30, 2016��Note 18: Successor Agency Trust for Assets of Former Redevelopment Agency (Continued)

The Bill directed the State Controller of the State of California to review the propriety of any transfers of assets between Redevelopment Agencies and other public bodies that occurred after January 1, 2011. If the public body that received such transfers was not contractually committed to a third party for the expenditure or encumbrance of those assets, the State Controller was required to order the available assets to be transferred to the public body designated as the successor agency by the Bill. The State completed its required audit and provided the Successor Agency its report on November 26, 2014.

Management believes, in consultation with legal counsel, that the obligations of the former Redevelopment Agency due to the City are valid enforceable obligations payable by the Successor Agency trust under the requirements of the Bill. The City’s position on this issue is not a position of settled law and there is considerable legal uncertainty regarding this issue. It is reasonably possible that a legal determination may be made at a later date by an appropriate judicial authority that would resolve this issue unfavorably to the City.

In accordance with the timeline set forth in the Bill (as modified by the California Supreme Court on December 29, 2011) all redevelopment agencies in the State of California were dissolved and ceased to operate as a legal entity as of February 1, 2012.

Cash and Investments

The following is a summary of cash and investments of the Successor Agency at June 30, 2016:

Cash and investments 20,092,586$ Restricted cash 52,473,582

Total 72,566,168$

The Successor Agency’s cash and investments are pooled with the City’s cash and investment in order to generate optimum interest income. The share of the pooled cash account is separately accounted for, and investment income is allocated to all participating funds based on the relationship of average quarterly cash balances to the total of the pooled cash and investments. Information regarding the authorized types of deposits and investments, the type of risks (i.e. credit, interest rate, custodial, etc.) and other disclosures associated with the City's pooled cash and investments is reported in Note 2.

Loans Receivable (Net)

At June 30, 2016, the Successor Agency’s net loans receivable consisted of the following:



1,450,000$ -$ -$ 1,450,000$ 210,600 - - 210,600

1,289,060 - - 1,289,060 1,150,000 - - 1,150,000

Garey Village Complex 5,000,000 - 5,000,000 -

Total 9,099,660$ -$ 5,000,000$ 4,099,660$

Business Assistance LoansGuadalajara MarketPomona Fox TheaterPomona Fox Theater

113


Note 18: Successor Agency Trust for Assets of Former Redevelopment Agency (Continued) Land Held for Resale

At June 30, 2016, land held for resale in the amount of $19,648,669 is recorded at cost in the Successor Agency Trust Fund.

Capital Assets The following is a summary of capital assets for the Successor Agency as of June 30, 2016:

Balance BalanceJuly 1, 2015 Additions Deletions June 30, 2016

Non-depreciable assets:Land 125,423$ -$ -$ 125,423$

Total non-depreciable assets 125,423 - - 125,423

Depreciable assets:Buildings and building improvements 63,126 - - 63,126 Inprovements other than buildings 148,995 - - 148,995 Machinery and equipment 429,179 - - 429,179 Furniture and fixtures 8,361 - - 8,361 Autos and trucks 19,513 - - 19,513

Total depreciable assets, at cost 669,174 - - 669,174

Less accumulated depreciationBuildings and building improvements 13,889 1,263 - 15,152 Inprovements other than buildings 125,157 5,962 - 131,119 Machinery and equipment 429,178 - - 429,178 Furniture and fixtures 8,360 - - 8,360 Autos and trucks 19,513 - - 19,513

Total accumulated depreciation 596,097 7,225 - 603,322

Total depreciable assets, net 73,077 (7,225) - 65,852

Total capital assets 198,500$ (7,225)$ -$ 191,275$

114


Note 18: Successor Agency Trust for Assets of Former Redevelopment Agency (Continued) Long-Term Debt

The following summary of debts of the Successor Agency as of June 30, 2016, follows:


Accreted/Accrued Interest Additions Deletions


Due Within One Year

Pollution remediation obligations 1,700,000$ -$ -$ -$ 1,700,000$ 630,000$ County deferred tax loans 48,488,194 4,040,497 - - 52,528,691 - Notes payable 3,330,366 - - 29,209 3,301,157 29,607 Tax allocation bonds 7,455,000 - - 570,000 6,885,000 595,000 Advances from the Public Financing Authority 155,255,000 - - 5,925,000 149,330,000 6,065,000 Advance from the Housing Authority - SERAF loan 4,000,000 - - - 4,000,000 - Compensated absences 104,515 - 31,468 107,030 28,953 28,000 Total $ 220,333,075 $ 4,040,497 $ 31,468 $ 6,631,239 $ 217,773,801 $ 7,347,607

Pollution Remediation Obligations

The dissolution law that eliminated all redevelopment agencies in the State requires that all assets of the former Redevelopment Agency be sold, following State approval of the Long Range Property Management Plan (LRPMP). On October 7, 2014, the Successor Agency received State approval for the sale of a property. The property was the location of a former landfill and is subject to remedial action. As of June 30, 2016, the remediation cost is estimated at $1,700,000. Sale of the property is contingent upon the completion of the remediation.

County Deferred Tax Loans

At June 30, 2016, the County deferred tax loans consisted of the following:


Accrued Interest Additions Deletions


Southwest Pomona Project Area 41,100,138$ 2,877,010$ -$ -$ 43,977,148$ South Garey/Freeway Corridor Project Area 7,388,056 1,163,487 - - 8,551,543

Total 48,488,194$ 4,040,497$ -$ -$ 52,528,691$

The former Redevelopment Agency entered into agreements with the County of Los Angeles whereby a portion of the County’s share of tax increment revenues from the Southwest Pomona Project Area and South Garey/Freeway Corridor Project Area are loaned annually to the Successor Agency. Interest on both loans accrue at 7% per year, compounded annually. The Successor Agency will commence repayment of the loans when excess funds become available.

�

115


Note 18: Successor Agency Trust for Assets of Former Redevelopment Agency (Continued)

Notes Payable



Due Within One Year

2,378,080$ -$ -$ 2,378,080$ -$ 167,129 - - 167,129 - 785,157 - 29,209 755,948 29,607

Total 3,330,366$ -$ 29,209$ 3,301,157$ 29,607$

Mission Promenade, LLCPVEF NoteUS Bank Loans

Mission Promenade, LLC

In December 2008, the former Redevelopment Agency partially financed the purchase of the Mission Promenade project (MP 1) with a promissory unsecured note bearing 0% interest for the first 5 years. After the maturity date of 5 years, the Note is to bear interest at the LIBOR rate +1% or 6%, whichever is greater. The note may be prepaid at any time. The Successor Agency may sell the retail and office condominium project at any time in whole or in part. Once the $9 million threshold is received by the Successor Agency, the excess cash flow from the property operations (rental income minus operating expenses) is to be paid to Mission Promenade, LLC to reduce the Note amount. The outstanding balance on the note, which includes the brokerage obligation, at June 30, 2016, is $2,378,080. Due to insufficient Successor Agency funds available and thus the inability to pay the note, the Successor Agency will not report a due within one year.

Pomona Valley Education Foundation Note (PVEF Note)

In March 2008, the former Redevelopment Agency partially financed the purchase of properties from the Pomona Valley Education Foundation (PVEF) with a promissory note of $167,129. The note is secured by a Second Trust Deed on the properties. In five years after closing, the Note is to accrue interest at a rate of 5% with the unpaid balance all due and payable in ten years. Due to insufficient Successor Agency funds available and thus the inability to pay the note, the Successor Agency will not report a due within one year. The annual debt service requirements outstanding at June 30, 2016, is as follows:

Principal Interest Total2016-2017 108,634$ 27,161$ 135,795$ 2017-2018 33,426 8,357 41,783 2018-2019 25,069 6,264 31,333

Total 167,129$ 41,782$ 208,911$

US Bank Loans

In March 2008, the former Redevelopment Agency partially financed the purchase of properties from the Pomona Valley Education Foundation by assuming existing loans on the properties totaling $988,730 bearing an adjustable interest rate not to exceed 12.250% from U.S. Bank.

116


Note 18: Successor Agency Trust for Assets of Former Redevelopment Agency (Continued) The annual debt service requirements at June 30, 2016, is as follows:

Principal * Interest Total2016-2017 29,577$ 26,681$ 56,258$ 2017-2018 30,481 26,066 56,547 2018-2019 31,615 24,932 56,547 2019-2020 32,791 23,756 56,547 2020-2021 34,011 22,536 56,547 2021-2026 189,998 92,735 282,733 2026-2031 228,065 54,667 282,732 2031-2036 179,410 11,600 191,010

Total 755,948$ 282,973$ 1,038,921$

* Interest rate is adjustable and was calculated using two separateinterest rates as of June 30, 2016.

Tax Allocation Bonds

Balance



1,145,000$ -$ 335,000$ 810,000$ 350,000$ 6,310,000 - 235,000 6,075,000 245,000

Total 7,455,000$ -$ 570,000$ 6,885,000$ 595,000$

1998 Tax Allocation Bonds, Series X1998 Tax Allocation Bonds, Series Y

1998 Tax Allocation Refunding Bonds, Series X – Original Issuance $5,055,000

On October 1, 1998, the former Redevelopment Agency issued $5,055,000 in 1998 Tax Allocation Refunding Bonds, Series X, for the Mountain Meadows Redevelopment Project to refund $4,360,000 of the loan between the former Redevelopment Agency and the Public Financing Authority related to the Public Financing Authority’s 1993 Refunding Revenue Bonds, Series N. Interest is payable semiannually on June 1 and December 1 at rates varying from 3.0% to 5.1% per annum. $3,595,000 of bond principal is payable in annual installments ranging from $95,000 to $300,000 through December 1, 2013. Term bonds of $1,000,000 and $460,000 mature on December 1, 2016 and December 1, 2024, respectively, and are subject to mandatory redemption from a sinking fund account in amounts ranging from $45,000 to $350,000, as outlined in the bonds’ official statement. A municipal bond insurance policy has been issued that insures the payment of the principal and interest on the bonds when due. During 2007, the bonds in the amount of $790,000 were refunded by the 2006 Taxable Revenue Bonds, series AT.

117



The annual debt service requirements outstanding at June 30, 2016, is as follows:

Principal Interest Total2016-2017 350,000$ 34,203$ 384,203$ 2017-2018 45,000 23,625 68,625 2018-2019 50,000 21,060 71,060 2019-2020 50,000 18,360 68,360 2020-2021 55,000 15,525 70,525 2021-2025 260,000 28,890 288,890

Total 810,000$ 141,663$ 951,663$

1998 Tax Allocation Refunding Bonds, Series Y – Original Issuance $8,980,000

On October 1, 1998, the former Redevelopment Agency issued $8,980,000 in 1998 Tax Allocation Refunding Bonds, Series Y, for the West Holt Avenue Redevelopment Project to refund $7,130,000 of the loan between the former Redevelopment Agency and Public Financing Authority related to the Public Financing Authority’s 1993 Refunding Revenue Bonds, Series N, and to finance certain redevelopment activities within the West Holt Avenue Project Area. Interest on the bonds is payable semiannually on November 1 and May 1 at rates varying from 3.0% to 5.0% per annum. $1,770,000 of bond principal is payable in annual installments ranging from $115,000 to $180,000 through May 1, 2011. Terms bonds of $390,000, $2,360,000 and $4,380,000 mature on May 1, 2013, May 1, 2022, and May 1, 2032, respectively, and are subject to mandatory redemption from a sinking fund account in amounts ranging from $190,000 to $550,000 as outlined in the bonds’ official statements. Bonds maturing on May 1, 2009 through May 1, 2011 are subject to redemption prior to maturity, as a whole or in part, at the option of the Agency on any date on or after May 1, 2008 at redemption prices ranging from 100% to 101% of principal. A municipal bond insurance policy has been issued that insures the payment of the principal and interest on the bonds when due. During 2007, the bonds in the amount of $645,000 were refunded by the 2006 Taxable Revenue Bonds, Series AT. The annual debt service requirements outstanding at June 30, 2016, is as follows:


2016-2017 245,000$ 333,278$ 578,278$ 2017-2018 260,000 319,925 579,925 2018-2019 275,000 305,755 580,755 2019-2020 290,000 290,768 580,768 2020-2021 305,000 274,963 579,963 2021-2026 1,800,000 1,105,340 2,905,340 2026-2031 2,350,000 552,750 2,902,750 2031-2032 550,000 30,250 580,250

Total 6,075,000$ 3,213,029$ 9,288,029$

118



Advances from the Public Financing Authority The Public Financing Authority issued various debt instruments and advanced the proceeds to the former Redevelopment Agency, subsequently the Successor Agency, for the purposes described below for each debt issued. The Successor Agency is responsible for installment payments to the Public Financing Authority in amounts equal to the debt service requirement. The following is a summary of changes for the year ended June 30, 2016, of the long-term debts issued through the Public Financing Authority with proceeds advanced to the Successor Agency:



Due Within One Year

35,780,000$ -$ 450,000$ 35,330,000$ 470,000$ 30,300,000 - 2,110,000 28,190,000 2,120,000 18,545,000 - 1,380,000 17,165,000 1,440,000

7,990,000 - 310,000 7,680,000 325,000 25,875,000 - 70,000 25,805,000 65,000 6,875,000 - 420,000 6,455,000 440,000 7,380,000 - 275,000 7,105,000 285,000

22,510,000 - 910,000 21,600,000 920,000

155,255,000$ -$ 5,925,000$ 149,330,000$ 6,065,000$

2007 Subordinate Revenue Bonds, Series AW2006 Subordinate Revenue Bonds, Series AX

1998 Revenue Refunding Bonds, Series W2001 Revenue Refunding Bonds, Series AD2003 Revenue Refunding Bonds, Series AH

Series AQ2006 Revenue Bonds, Series AS2006 Taxable Revenue Bonds, Series AT

2005 Taxable Housing Tax Revenue Bonds,

1998 Revenue Refunding Bonds, Series W – Original Issuance $52,335,000

On March 1, 1998, the Public Financing Authority issued $52,335,000 in 1998 Revenue Refunding Bonds, Series W for the purpose of making an advance to the former Redevelopment Agency for refinancing the 1983 Refunding Southwest Pomona RDA Tax Allocation Bonds, refinancing in whole the 1994 variable Rate Demand Refunding Revenue Bonds, Series M Bonds, and refinancing a portion of the 1993 Local Agency Revenue Bonds, Series L. The prior bonds, now retired, were issued to finance or refinance certain improvements in the Southwest Pomona Redevelopment Area.

Interest on the bonds is payable semiannually on each August 1 and February 1. The rates of interest range from 3.8% to 5% per annum. Principal is payable in annual installments ranging from $30,000 to $4,105,000. Term bonds of $3,005,000, $16,690,000 and $29,285,000 mature on February 1, 2018, February 1, 2024 and February 1, 2030, respectively, and are subject to mandatory redemption from a sinking fund account in amounts ranging from $545,000 to $5,495,000, as outlined in the bond’s official statement. MBIA has issued a municipal bond insurance policy that insures the payment of the principal and interest on the bonds when due. During 2007, the bonds in the amount of $13,305,000 were refunded by the 2006 Revenue Bonds, Series AS, 2006 Taxable Revenue Bonds, Series AT, and 2006 Subordinate Revenue Bonds, Series AX.

119



The annual debt service requirements for the 1998 Revenue Bonds, Refunding Series W outstanding at June 30, 2016, is as follows:

Principal Interest Total2016-2017 470,000$ 1,766,500$ 2,236,500$ 2017-2018 495,000 1,743,000 2,238,000 2018-2019 520,000 1,718,250 2,238,250 2019-2020 545,000 1,692,250 2,237,250 2020-2021 2,645,000 1,665,000 4,310,000 2021-2026 15,365,000 6,202,250 21,567,250 2026-2030 15,290,000 1,958,000 17,248,000

Total 35,330,000$ 16,745,250$ 52,075,250$

2001 Revenue Refunding Bonds, Series AD – Original Issuance $39,165,000

On April 1, 2001, the Public Financing Authority issued $39,165,000 in 2001 Revenue Bonds, Series AD for the purpose of making an advance to the former Redevelopment Agency to refinance certain prior bonds and to make an additional advance to the former Redevelopment Agency to provide financing for certain improvements in the merged project area. Tax Allocation Bonds defeased include the 1997 Refunding RDA Series S, the 1997 Refunding Series T, the 1998 Refunding Series U, the 1998 Refunding Subordinate Series V and the 1998 Refunding Series Z; the 1993 Refunding Series L Revenue Bonds were partially defeased.

Interest on the bonds is payable semiannually on each August 1 and February 1. The rates of interest range from 3.50% to 5.39% per annum. Principal is payable in annual installments ranging from $95,000 to $2,470,000. Term bonds of $10,550,000, $10,115,000 and $7,525,000 mature on February 1, 2021, February 1, 2027 and February 1, 2033, respectively, and are subject to mandatory redemption from a sinking fund account in amounts ranging from $445,000 to $2,470,000, as outlined in the bond’s official statement. The annual debt service requirements for the 2001 Revenue Bonds, Series AD outstanding at June 30, 2016, is as follows:

Principal Interest Total2016-2017 2,120,000$ 1,409,500$ 3,529,500$ 2017-2018 2,350,000 1,303,500 3,653,500 2018-2019 2,470,000 1,186,000 3,656,000 2019-2020 2,175,000 1,062,500 3,237,500 2020-2021 1,435,000 953,750 2,388,750 2021-2026 8,345,000 3,621,500 11,966,500 2026-2031 7,945,000 1,452,750 9,397,750 2031-2034 1,350,000 89,750 1,439,750

Total 28,190,000$ 11,079,250$ 39,269,250$

120


Note 18: Successor Agency Trust for Assets of Former Redevelopment Agency (Continued) 2003 Revenue Refunding Bonds, Series AH – Original Issuance $46,650,000

On November 1, 2003, the Public Financing Authority issued $46,650,000 in 2003 Revenue Bonds, Series AH, to provide funds for a loan to the former Redevelopment Agency for certain improvements and to refinance certain former Redevelopment Agency obligations to the Public Financing Authority, including defeasance of 1993 Series L. Interest on the bonds is payable semiannually on each August 1 and February 1. The rates of interest range from 3.70% to 5.25% per annum. Principal is payable in annual installments ranging from $370,000 to $4,870,000. Term bonds of $2,410,000 and $10,145,000 mature on February 28, 2028 and 2034, respectively. During 2007, the bonds in the amount of $17,110,000 were refunded by the 2006 Revenue Bonds, Series AS, 2006 Taxable Revenue Bonds, Series AT, and 2006 Subordinate Revenue Bonds, Series AX. The annual debt service requirements for the 2003 Revenue Bonds, Series AH outstanding at June 30, 2016, is as follows:

Principal Interest Total2016-2017 1,440,000$ 844,978$ 2,284,978$ 2017-2018 1,520,000 785,938 2,305,938 2018-2019 1,540,000 706,138 2,246,138 2019-2020 1,805,000 625,288 2,430,288 2020-2021 370,000 530,525 900,525 2021-2026 2,070,000 2,388,465 4,458,465 2026-2031 6,990,000 1,820,410 8,810,410 2031-2035 1,430,000 132,413 1,562,413

Total 17,165,000$ 7,834,155$ 24,999,155$

2005 Taxable Housing Tax Revenue Bonds, Series AQ – Original Issuance $10,065,000

On December 1, 2005, the Public Financing Authority issued $10,065,000 in 2005 Taxable Housing Tax Revenue Bonds, Series AQ, to provide funds to make a loan to the former Redevelopment Agency for the purpose of financing redevelopment activities with respect to the Merged Redevelopment Project Area. Interest on the bonds is payable semiannually on each August 1 and February 1. The rates of interest range from 5.23% to 6.25% per annum. Principal is payable in annual installments ranging from $100,000 to $750,000. The bonds are secured by monies in the Redevelopment Property Tax Trust Fund (RPTTF) monies for the Recognized Obligation Payment Schedules (ROPS).

121


Note 18: Successor Agency Trust for Assets of Former Redevelopment Agency (Continued) The annual debt service requirements for the 2005 Taxable Housing Tax Revenue Bonds, Series AQ outstanding at June 30, 2016, is as follows:

Principal Interest Total2016-2017 325,000$ 471,613$ 796,613$ 2017-2018 345,000 451,300 796,300 2018-2019 365,000 429,738 794,738 2019-2020 390,000 406,925 796,925 2020-2021 415,000 382,550 797,550 2021-2026 2,485,000 1,491,188 3,976,188 2026-2031 3,355,000 627,300 3,982,300

Total 7,680,000$ 4,260,614$ 11,940,614$

2006 Revenue Bonds, Series AS – Original Issuance $26,305,000

On December 1, 2006, the Public Financing Authority issued $26,305,000 in 2006 Revenue Bonds, Series AS, to make a loan to the former Redevelopment Agency for the purpose of refinancing a portion of the Public Financing Authority’s 1998 Refunding Revenue Bonds, Series W, 2003 Revenue Bonds, Series AH, and 2003 Subordinate Revenue Bonds, Series AI. Interest on the bonds is payable semiannually on each August 1 and February 1. The rates of interest range from 3.50% to 5.00% per annum. Principal is payable in annual installments ranging from $65,000 to $5,400,000. The bonds are secured by certain revenues on the Series AS Loan pursuant to a Loan Agreement, dated as of December 1, 2006, between the Public Financing Authority and the former Redevelopment Agency. The loan payments are limited obligations of the Successor Agency payable solely from and secured by the pledged tax revenues to be derived from the Successor Agency’s project area remaining after payment of the Senior Obligations. The annual debt service requirements for the 2006 Revenue Bonds, Series AS outstanding at June 30, 2016, is as follows:

Principal Interest Total2016-2017 65,000$ 1,246,210$ 1,311,210$ 2017-2018 105,000 1,243,723 1,348,723 2018-2019 165,000 1,240,469 1,405,469 2019-2020 235,000 1,235,218 1,470,218 2020-2021 450,000 1,227,300 1,677,300 2021-2026 1,440,000 5,925,344 7,365,344 2026-2031 6,730,000 5,247,813 11,977,813 2031-2036 12,035,000 2,301,250 14,336,250 2036-2041 4,580,000 596,700 5,176,700

Total 25,805,000$ 20,264,027$ 46,069,027$

122



2006 Taxable Revenue Bonds, Series AT – Original Issuance $8,355,000

On December 1, 2006, the Public Financing Authority issued $8,355,000 in 2006 Taxable Revenue Bonds, Series AT, to make a loan to the former Redevelopment Agency for the purpose of refinancing a portion of the Public Financing Authority’s 1998 Refunding Revenue Bonds, Series W, 2003 Revenue Bonds, Series AH, 1998 Tax Allocation Refunding Bonds, Series X (now retired), and 1998 Tax Allocation Refunding Bonds, Series Y (now retired). Interest on the bonds is payable semiannually on each August 1 and February 1. The rates of interest range from 5.289% to 5.718% per annum. Principal is payable in annual installments ranging from $340,000 to $760,000. The bonds are secured by certain revenues on the Series AT Loan pursuant to a Loan Agreement, dated as of December 1, 2006 between the Public Financing Authority and the former Redevelopment Agency. The loan payments are limited obligations of the Successor Agency payable solely from and secured by the pledged tax revenues to be derived from the Successor Agency’s project area remaining after payment of the Senior Obligations. The annual debt service requirements for the 2006 Taxable Revenue Bonds, Series AT outstanding at June 30, 2016, is as follows:

Principal Interest Total2016-2017 440,000$ 355,574$ 795,574$ 2017-2018 465,000 330,643 795,643 2018-2019 490,000 303,340 793,340 2019-2020 520,000 274,464 794,464 2020-2021 545,000 244,016 789,016 2021-2026 3,235,000 699,740 3,934,740 2026-2029 760,000 21,728 781,728

Total 6,455,000$ 2,229,505$ 8,684,505$

2007 Subordinate Revenue Bonds, Series AW – Original Issuance $8,375,000

On July 1, 2007, the Public Financing Authority issued $8,375,000 in 2007 Subordinate Revenue Bonds, Series AW, to provide funds for a loan to the former Redevelopment Agency for certain improvements, funding a reserve account for the Bonds and paying costs of issuing the Bonds. Interest on the Bonds is payable semiannually on each February 1 and August 1. The rates of interest range from 4.25% to 5.125% per annum. Principal on $1,348,000 of the subordinate bonds is payable in annual installments ranging from $230,000 to $285,000. Term bonds of $625,000, $1,910,000 and $4,285,000 mature on February 1, 2019, February 1, 2024, and February 1, 2033, respectively.

123


Note 18: Successor Agency Trust for Assets of Former Redevelopment Agency (Continued) The annual debt service requirements for the 2007 Subordinate Revenue Bonds, Series AW outstanding at June 30, 2016, is as follows:

Principal Interest Total2016-2017 285,000$ 351,206$ 636,206$ 2017-2018 305,000 337,550 642,550 2018-2019 320,000 322,706 642,706 2019-2020 335,000 306,731 641,731 2020-2021 345,000 289,731 634,731 2021-2026 2,030,000 1,154,075 3,184,075 2026-2031 2,540,000 580,406 3,120,406 2031-2034 945,000 40,616 985,616

Total 7,105,000$ 3,383,021$ 10,488,021$

2006 Subordinate Revenue Bonds, Series AX – Original Issuance $25,865,000

On December 1, 2006, the Public Financing Authority issued $25,865,000 in 2006 Subordinate Revenue Bonds, Series AX, to make a loan to the former Redevelopment Agency for the purpose of refinancing a portion of the Public Financing Authority’s 1998 Refunding Revenue Bonds, Series W, 2003 Revenue Bonds, Series AH, and 2003 Subordinate Revenue Bonds, Series AI (now retired), and financing certain improvements in the former Redevelopment Agency’s Merged Redevelopment Project. Interest on the bonds is payable semiannually on each August 1 and February 1. The rates of interest range from 4.00% to 5.00% per annum. Principal is payable in annual installments ranging from $145,000 to $1,515,000. The bonds are secured by certain revenues on the Series AX Loan pursuant to a Loan Agreement, dated as of December 1, 2006, between the Public Financing Authority and the former Redevelopment Agency. The loan payments are limited obligations of the Successor Agency payable solely from and secured by the Subordinate Tax Revenues to be derived from the Successor Agency’s project area remaining after payment of the Senior/ Subordinate Obligations.

124


Note 18: Successor Agency Trust for Assets of Former Redevelopment Agency (Continued) The annual debt service requirements for the 2006 Subordinate Revenue Bonds, Series AX outstanding at June 30, 2016, is as follows:

Principal Interest Total2016-2017 920,000$ 1,024,265$ 1,944,265$ 2017-2018 925,000 984,598 1,909,598 2018-2019 970,000 943,370 1,913,370 2019-2020 975,000 900,580 1,875,580 2020-2021 1,020,000 856,690 1,876,690 2021-2026 5,565,000 3,519,750 9,084,750 2026-2031 6,955,000 1,967,875 8,922,875 2031-2036 3,240,000 503,750 3,743,750 2036-2041 1,030,000 123,250 1,153,250

Total 21,600,000$ 10,824,128$ 32,424,128$

Advances from the Housing Authority

Balance



SERAF loan 4,000,000$ -$ -$ 4,000,000$ -$

On July 24, 2009, Assembly Bill AB4-26 that shifts former Redevelopment Agency funds and established a Supplemental Educational Revenue Augmentation Fund (SERAF) was passed. It was a “budget trailer bill” that was part of the State’s legislation to balance its budget. The former Redevelopment Agency of the City of Pomona’s share of SERAF obligation was $8,264,547 in Fiscal Year 2009-10 and $1.7 million in Fiscal Year 2010-11. Health and Safety Code Section 33690(c) provides that a redevelopment agency, which made a finding that insufficient monies were available to fund its SERAF obligation in Fiscal Years 2009-10 or 2010-11, may borrow funds from its Low and Moderate Income Housing Fund to make the full SERAF payment. On May 3, 2010, the Redevelopment Agency Board authorized a loan of $5,000,000 from the Low-Mod Fund to provide partial funding for the balance of the SERAF payment due. The Successor Agency’s outstanding balance on the note as of June 30, 2016, is $4,000,000.


The following is a summary of compensated absences outstanding as of June 30, 2016:



Due Within One Year

104,515$ 31,468$ 107,030$ 28,953$ 28,000$

125


Note 18: Successor Agency Trust for Assets of Former Redevelopment Agency (Continued) Pledged Tax Revenues

The City has pledged, as security for bonds issued, either directly or through the Pomona Public Financing Authority, certain tax revenues to the repayment of certain Successor Agency debts (bonds, loans and advances) through final maturity of bonded debt on February 1, 2047, or earlier retirement, whichever occurs first. Tax revenues consist of tax increment revenues allocated to the Successor Agency to various project areas pursuant to Section 33670 of the Redevelopment Law. Such Law excludes a portion of tax increment revenues required to be paid under Tax-Sharing Agreements unless the payment of such amounts has been subordinated to the payment of debt service on the Bonds. Assembly Bill 1X 26 provided that upon dissolution of the Redevelopment Agency, property taxes allocated to redevelopment agencies no longer are deemed tax increment but rather property tax revenues and will be allocated first to local agency and school entity pursuant to any pass through agreement, then second to successor agencies to make payments on the indebtedness incurred by the dissolved redevelopment agency. For the current year, the total property tax revenue recognized by the City was $15,962,097 and the debt service obligation on the bonds was $14,676,025. Remaining balance on the debt at June 30, 2016, is as follows:

Debt Issue Remaining BalanceCounty of LA Agreement 52,528,691$ 1998 Series W Bonds 52,075,250 1998 Series X Bonds 951,663 1998 Series Y Bonds 9,288,029 2001 Series AD Bonds 39,269,250 2003 Series AH Bonds 24,999,155 2005 Series AQ Bonds 11,940,614 2006 Series AS Bonds 46,069,027 2006 Series AT Bonds 8,684,505 2007 Series AW Bonds 10,488,021 2006 Series AX Bonds 32,424,128

Total 288,718,333$

Insurance

The Successor Agency is covered under the City of Pomona’s insurance policies. Therefore, the limitation and self-insured retentions applicable to the City also apply to the Successor Agency. Additional information as to coverage and self-insured retentions can be found in Note 14.

126


Note 18: Successor Agency Trust for Assets of Former Redevelopment Agency (Continued) Commitments and Contingencies

Agreement for Allocation of Tax Increment Funds

On December 5, 1988, the former Redevelopment Agency entered into an agreement with the County whereby the County has agreed to provide sufficient allocation of tax increment to allow the Successor Agency to meet its debt service agreements on debt it has incurred in connection with the Southwest Pomona Project Area. Beginning in fiscal year 1988-89, and thereafter for the life of the project, the County will provide a grant to the Successor Agency for any “deficiencies” of tax increment revenues allocated to the Successor Agency as described in the agreement. In accordance with the agreement, during the fiscal year 2015-16, the Successor Agency received a grant in the amount of $3,100,000, which was recorded as intergovernmental revenue.

127


128


129


130

�


131

CITY OF POMONA BUDGETARY INFORMATION JUNE 30, 2016��

Budgetary Information

Annual budgets are adopted on a basis consistent with generally accepted accounting principles in the United States for all governmental funds, except that encumbrances are shown in the year incurred for budgetary purposes. All annual appropriations lapse at fiscal year end. On or before the last day in January of each year, all operational units submit requests for appropriations to the City Manager for budget preparation purposes. The City Council holds public hearings and a final budget must be adopted no later than June 30. The appropriated budget is prepared by fund, function, and department. The City’s department directors, with approval of the Finance Director and City Manager, may make transfers of appropriations within a department and between departments within a fund. The legal level of budgetary control (i.e., the level at which expenditures may not legally exceed appropriations) is the fund level. The City Council made several supplemental budgetary appropriations throughout the year. The supplementary budgetary appropriations made in the various governmental funds are not detailed in the required supplementary information. Under encumbrance accounting, purchase orders, contracts and other commitments for expenditures are recorded to reserve that portion of the applicable appropriation. Encumbrance accounting is employed as an extension of formal budgetary accounting. Unexpended appropriations lapse at year-end regardless of encumbrances. Following are the budget comparison schedules for the General Fund and all major special revenue funds.

132

CITY OF POMONA

BUDGETARY COMPARISON SCHEDULEGENERAL FUNDYEAR ENDED JUNE 30, 2016

Variance with Final Budget

Budget Amounts Actual PositiveOriginal Final Amounts (Negative)

Budgetary Fund Balance, July 1 17,288,103$ 17,288,103$ 17,288,103$ -$ Resources (Inflows):Taxes 80,429,226 81,519,226 76,888,873 (4,630,353) Licenses and permits 4,963,260 6,229,151 7,122,185 893,034 Intergovernmental 202,900 202,900 205,289 2,389 Charges for services 3,053,648 4,137,732 3,719,655 (418,077) Interest and rentals 666,108 966,108 731,529 (234,579) Fines and forfeitures 1,812,000 1,812,000 2,040,214 228,214 Miscellaneous 217,800 667,388 990,701 323,313 Proceeds from sale of capital assets - - - -

Amounts Available for Appropriations 108,633,045 112,822,608 108,986,549 (3,836,059)

Charges to Appropriations (Outflows):General government 4,389,592 4,787,027 4,769,534 17,493 Public safety 69,844,192 69,993,526 69,328,233 665,293 Urban development 8,669,178 9,915,530 9,244,681 670,849 Neighborhood services 3,618,386 3,725,072 3,258,082 466,990 Capital outlay 47,000 717,050 192,589 524,461 Debt service: Principal retirement 226,354 296,861 281,827 15,034 Interest and fiscal charges 3,750 3,750 18,783 (15,033) Transfers out 4,546,057 5,919,177 5,053,168 866,009

Total Charges to Appropriations 91,344,509 95,357,993 92,146,897 3,211,096

Budgetary Fund Balance, June 30 17,288,536$ 17,464,615$ 16,839,652$ (624,963)$

133

CITY OF POMONA

BUDGETARY COMPARISON SCHEDULEHOUSING AUTHORITYYEAR ENDED JUNE 30, 2016



Budgetary Fund Balance, July 1, as restated 27,325,363$ 27,325,363$ 27,325,363$ -$ Resources (Inflows):Intergovernmental 12,144,426 12,174,088 12,297,325 123,237 Charges for services 30,000 30,000 117,574 87,574 Interest and rentals 384,273 384,273 624,169 239,896 Miscellaneous 422,000 422,000 421,867 (133)

Amounts Available for Appropriations 40,306,062 40,335,724 40,786,298 450,574

Charges to Appropriations (Outflows):Urban development 13,378,743 13,405,905 13,094,221 311,684 Capital outlay - 2,500 98,000 (95,500)

Total Charges to Appropriations 13,378,743 13,408,405 13,192,221 216,184

Budgetary Fund Balance, June 30 26,927,319$ 26,927,319$ 27,594,077$ 666,758$

134

CITY OF POMONA

BUDGETARY COMPARISON SCHEDULEMISCELLANEOUS GRANTSYEAR ENDED JUNE 30, 2016

Variance withFinal Budget


Budgetary Fund Balance, July 1 18,446,177$ 18,446,177$ 18,446,177$ -$ Resources (Inflows):Intergovernmental 5,424,432 8,320,572 2,576,815 (5,743,757) Charges for services 51,000 116,017 153,521 37,504 Interest and rentals - - 356,133 356,133 Miscellaneous 526,947 584,104 185,679 (398,425) Transfers in 75,010 75,010 104,588 29,578


Charges to Appropriations (Outflows):Public safety 291,011 1,073,778 572,879 500,899 Urban development 5,405,571 7,525,959 1,909,480 5,616,479 Neighborhood services 375,134 375,134 351,729 23,405 Capital outlay 144,000 310,254 140,002 170,252

Total Charges to Appropriations 6,215,716 9,285,125 2,974,090 6,311,035


135

CITY OF POMONA

SCHEDULE OF CHANGES IN NET PENSION LIABILITY AND RELATED RATIOS

AS OF JUNE 30, FOR THE LAST TEN FISCAL YEARS (1)

MEASUREMENT PERIOD 2015 2016

TOTAL PENSION LIABILITYService Cost 3,310,829$ 3,161,189$ Interest 18,086,982 18,495,828Difference Between expected and Actual Experience - (3,363,816)Changes in Assumptions - (4,427,183)Benefit Payments, Including Refunds of employee Contributions (12,464,852) (13,367,634)Net Change in Total Pension Liability 8,932,959$ 498,384$ Total Pension Liability - Beginning 245,736,775 254,669,734Total Pension Liability - Ending (a) 254,669,734$ 255,168,118$

PLAN FIDUCIARY NET POSITIONContribution - Employer 3,048,502$ 3,747,091$ Contribution - Employee 1,640,223 1,766,013Net Investment Income 31,444,609 4,578,528Benefit Payments, Including Refunds of Employee Contributions (12,464,852) (13,367,634)Other Changes in Fiduciary Net Position - (236,275)Net Change in Fiduciary Net Position 23,668,482$ (3,512,277)$ Plan Fiduciary Net Position - Beginning 184,143,961 207,812,443Plan Fiduciary Net Position - Ending (b) 207,812,443$ 204,300,166$

Plan Net Pension Liability/(Assets) - Ending (a) - (b) 46,857,291$ 50,867,952$

81.60% 80.06%

Covered-Employee Payroll 21,843,562$ 22,874,123$

214.51% 222.38%

(2) Net of administrative expenses.

Notes to Schedule:

Changes of Assumptions: There were no changes in assumptions.

Plan Fiduciary Net Position as a Percentage of the Total Pension Liability

Plan Net Pension Liability/(Asset) as a Percentage of Covered-Employee Payroll

MISCELLANEOUS PLAN - AGENT MULTIPLE-EMPLOYER DEFINED BENEFIT PLAN

(1) Historical information is required only for measurement for which GASB 68 is applicable. Fiscal Year 2015 was the first yearof implementation, therefore only two years are shown.

Benefit Changes: The figures above do not include any liability impact that may have resulted from plan changes whichoccurred after June 30, 2013. This applies for voluntary benefit changes as well as any offers of Two Years Additional ServiceCredit (a.k.a. Golden Handshakes).

136

CITY OF POMONA

SCHEDULE OF CHANGES IN NET PENSION LIABILITY AND RELATED RATIOS

AS OF JUNE 30, FOR THE LAST TEN FISCAL YEARS (1)

MEASUREMENT PERIOD 2015 2016

TOTAL PENSION LIABILITYService Cost 4,880,486$ 4,785,362$ Interest 23,069,282 23,712,742 Difference Between expected and Actual Experience - (2,090,216) Changes in Assumptions - (5,565,887) Benefit Payments, Including Refunds of employee Contributions (17,510,572) (18,221,480) Net Change in Total Pension Liability 10,439,196$ 2,620,521$ Total Pension Liability - Beginning 313,905,458 324,344,654 Total Pension Liability - Ending (a) 324,344,654$ 326,965,175$

PLAN FIDUCIARY NET POSITIONContribution - Employer 4,480,201$ 6,367,577$ Contribution - Employee 1,402,077 2,743,727 Net Investment Income 37,455,889 5,342,317 Benefit Payments, Including Refunds of Employee Contributions (17,510,572) (18,221,480) Other Changes in Fiduciary Net Position - (271,184) Net Change in Fiduciary Net Position 25,827,595$ (4,039,043)$ Plan Fiduciary Net Position - Beginning 219,628,065 245,455,660 Plan Fiduciary Net Position - Ending (b) 245,455,660$ 241,416,617$

Plan Net Pension Liability/(Assets) - Ending (a) - (b) 78,888,994$ 85,548,558$

75.68% 73.84%

Covered-Employee Payroll 15,182,720$ 16,419,672$

519.60% 521.01%

(2) Net of administrative expenses.

Notes to Schedule:

Changes of Assumptions: There were no changes in assumptions.

SAFETY PLAN - AGENT MULTIPLE-EMPLOYER DEFINED BENEFIT PLAN

Plan Fiduciary Net Position as a Percentage of the Total

Plan Net Pension Liability/(Asset) as a Percentage of Covered-

(1) Historical information is required only for measurement for which GASB 68 is applicable. Fiscal Year 2015 was the first year ofimplementation, therefore only two years are shown.

Benefit Changes: The figures above do not include any liability impact that may have resulted from plan changes whichoccurred after June 30, 2013. This applies for voluntary benefit changes as well as any offers of Two Years Additional ServiceCredit (a.k.a. Golden Handshakes).

137

CITY OF POMONA

SCHEDULE OF PLAN CONTRIBUTIONSAS OF JUNE 30, FOR THE LAST TEN FISCAL YEARS (1)

2015 2016

Miscellaneous PlanActuarially Determined Contribution 3,803,283$ 4,653,491$ Contribution in Relation to the Actuarially Determined Contribution (3,803,283) (4,653,491) Contribution Deficiency (Excess) -$ -$

Covered-Employee Payroll (3) (4) 21,843,562$ 22,874,123$

Contributions as a Percentage of Covered-Employee Payroll (3) 17.41% 20.34%

Safety PlanActuarially Determined Contribution 5,171,283$ 7,137,882$ Contribution in Relation to the Actuarially Determined Contribution (5,171,283) (7,137,882) Contribution Deficiency (Excess) -$ -$

Covered-Employee Payroll (3) (4) 15,182,720$ 16,419,672$

Contributions as a Percentage of Covered-Employee Payroll (3) 34.06% 43.47%

Note to Schedule:

Valuation Date: June 30, 2013

Methods and assumptions used to determine contribution rates:Actuarial cost method Entry age normal cost method

Amortization method Level percent payroll / closed period

Assets valuation method Market ValueDiscount rateProjected salary increases 3.30% to 14.20% depending on age, service, and type of employment Inflation 2.75%Payroll growth 3.00%Individual salary growth

Retirement age

Mortality

7.50% (net of administrative expenses)

A merit scale varying by duration of employment coupled with an assumed annual inflation growth ate of 2.75% and an annual The probabilities of retirement are based on the 2010 CalPERS Experience Study for the period from 1997 to 2007.

The probabilities of retirement are based on the 2010 CalPERS Experience Study for the period from 1997 to 2007. Pre-retirement and post-retirement mortality rates include 5 years of projected mortality improvement using Scale AA published by the Society of Actuaries.

(1) Historical information is required only for measurement for which GASB 68 is applicable. Fiscal Year 2015 was the first year ofimplementation, therefore only two years are shown.

138

COMBINING AND INDIVIDUAL FUND STATEMENTS AND SCHEDULES

139


140

CITY OF POMONA

COMBINING BALANCE SHEETNONMAJOR GOVERNMENTAL FUNDS JUNE 30, 2016

Assets:Cash and investments 67$ 1,508,079$ 2,325,710$ 7,787,601$ Receivables (net):

Accounts - 22,168 2,000 - Notes and loans 1,903,878 - - - Interest - 910 2,869 9,629

Prepaid costs - - - - Due from other governments 717,782 - 295,281 - Advances to other funds - - - - Restricted assets:

Cash and investments - - - -

Total Assets 2,621,727$ 1,531,157$ 2,625,860$ 7,797,230$

Liabilities, Deferred Inflows ofResources, and Fund Balances:Liabilities:Accounts payable 71,468$ 184,122$ 157,149$ 261$ Payroll payable 41,167 33,477 4,854 3,066 Deposits payable - - - - Due to other governments 3,798 - - - Due to other funds 63,675 - - -

Total Liabilities 180,108 217,599 162,003 3,327

Deferred Inflows of Resources:Unavailable revenues 131,455 - 295,281 -

Total Deferred Inflows of Resources 131,455 - 295,281 -

Fund Balances: Nonspendable Prepaid costs - - - - Restricted Urban development 2,310,164 1,313,558 2,168,576 7,793,903 Public safety - - - - Neighborhood services - - - - Capital projects - - - - Assessment district improvement - - - -

Total Fund Balances 2,310,164 1,313,558 2,168,576 7,793,903

Total Liabilities, Deferred Inflows of Resources, and Fund Balances 2,621,727$ 1,531,157$ 2,625,860$ 7,797,230$


Community Development Block Grant State Gas Tax Proposition A Proposition C

142

CITY OF POMONA

COMBINING BALANCE SHEETNONMAJOR GOVERNMENTAL FUNDSJUNE 30, 2016



Prepaid costsDue from other governmentsAdvances to other fundsRestricted assets:


Total Assets

Liabilities, Deferred Inflows ofResources, and Fund Balances:Liabilities:Accounts payablePayroll payableDeposits payableDue to other governmentsDue to other funds

Total Liabilities

Deferred Inflows of Resources:Unavailable revenues


Fund Balances: Nonspendable Prepaid costs Restricted Urban development Public safety Neighborhood services Capital projects Assessment district improvement

Total Fund Balances

Total Liabilities, Deferred Inflows of Resources, and Fund Balances

(CONTINUED)

2,389,069$ 639,272$ 810,148$ 1,385,315$

92,120 - - - - - - -

3,068 753 1,067 1,928 - - - 8,441

327 52,149 25,267 5,080 304,435 - - -

- - - -

2,789,019$ 692,174$ 836,482$ 1,400,764$

15,757$ 29,553$ 87,844$ 74,594$ 10,606 1,752 6,288 19,461

2,334 - - - - - - - - - - -

28,697 31,305 94,132 94,055

30,274 - - -

30,274 - - -

- - - 8,441

2,730,048 660,869 - - - - - 1,298,268 - - 742,350 - - - - - - - - -

2,730,048 660,869 742,350 1,306,709

2,789,019$ 692,174$ 836,482$ 1,400,764$


Vehicle Parking District

Air Quality Improvement

Landscape Maintenance

District Asset

Forfeiture

143

CITY OF POMONA






Total Assets


Total Liabilities




Total Fund Balances


611,930$ 2,376,609$ -$ 920,045$

- - 345,191 - - - - -

754 3,134 553 - - - - - - - - - - - - -

- - - -

612,684$ 2,379,743$ 345,744$ 920,045$

160,159$ 50,417$ 251,530$ -$ 10,321 21,243 27,058 -

- - - - - - - - - - 5,837 -

170,480 71,660 284,425 -

- - - -

- - - -

- - - -

- 2,308,083 61,319 - 442,204 - - -

- - - 920,045 - - - - - - - -

442,204 2,308,083 61,319 920,045

612,684$ 2,379,743$ 345,744$ 920,045$


Traffic Offender Measure R

General Sanitation

Fees Operations

Special Fees Fund

144

CITY OF POMONA






Total Assets


Total Liabilities




Total Fund Balances


1,486,566$ 54,491$ 22,294,902$

182,251 - 643,730 - - 1,903,878

2,035 118 26,818 - - 8,441

72,136 - 1,168,022 - - 304,435

2,107,120 174,903 2,282,023

3,850,108$ 229,512$ 28,632,249$

2,763,752$ -$ 3,846,606$ 30,831 863 210,987 66,189 - 68,523

- - 3,798 - - 69,512

2,860,772 863 4,199,426

72,136 - 529,146

72,136 - 529,146

- - 8,441

- - 19,346,520 - - 1,740,472 - - 1,662,395

917,200 - 917,200 - 228,649 228,649

917,200 228,649 23,903,677

3,850,108$ 229,512$ 28,632,249$

Capital Projects Funds

Capital Outlay

Assessment District

Improvement

Total Non-Major Governmental

Funds

145

CITY OF POMONA

COMBINING STATEMENT OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCESNONMAJOR GOVERNMENTAL FUNDS YEAR ENDED JUNE 30, 2016

Revenues:Taxes -$ -$ -$ -$ Special assessments - - - - Licenses and permits - - - - Intergovernmental 1,930,834 3,291,861 2,738,458 2,276,663 Charges for services 31,887 1,079 - - Interest and rentals 2,001 5,066 12,506 42,085 Fines and forfeitures - - - - Contributions - - - - Miscellaneous 10,681 71,030 26,280 -

Total Revenues 1,975,403 3,369,036 2,777,244 2,318,748

Expenditures:Current: General government - - - - Public safety 111,991 - - - Urban development 1,659,639 2,790,865 2,245,902 100,589 Neighborhood services - - - - Capital outlay - - 44,752 - Debt service: Principal retirement 145,000 - - - Interest and fiscal charges 5,730 - - -

Total Expenditures 1,922,360 2,790,865 2,290,654 100,589

Excess (Deficiency) of RevenuesOver (Under) Expenditures 53,043 578,171 486,590 2,218,159

Other Financing Sources (Uses):Transfers in 18,000 131,750 - - Transfers out (253,664) (1,292,161) - (348,300) Capital leases - - - -

Total Other Financing Sources(Uses) (235,664) (1,160,411) - (348,300)

Net Change in Fund Balances (182,621)$ (582,240)$ 486,590$ 1,869,859$

Fund Balances:Beginning of year, as originally reported 2,492,785$ 1,895,798$ 1,681,986$ 5,924,044$

Restatements - - - -

Beginning of year, as restated 2,492,785 1,895,798 1,681,986 5,924,044 Net change in fund balances (182,621) (582,240) 486,590 1,869,859

End of Year 2,310,164$ 1,313,558$ 2,168,576$ 7,793,903$

Proposition C

Community Development Block Grant State Gas Tax Proposition A


146

CITY OF POMONA


Revenues:TaxesSpecial assessmentsLicenses and permitsIntergovernmentalCharges for servicesInterest and rentalsFines and forfeituresContributionsMiscellaneous

Total Revenues

Expenditures:Current: General government Public safety Urban development Neighborhood services Capital outlayDebt service: Principal retirement Interest and fiscal charges

Total Expenditures

Excess (Deficiency) of RevenuesOver (Under) Expenditures





Restatements


End of Year

(CONTINUED)

13,877$ -$ -$ -$ - - 1,176,050 - - - - - - 188,273 - -

194,089 - 819 29,645 542,325 3,290 4,139 9,419

- - - - - - - -

98,001 - - 1,101,641

848,292 191,563 1,181,008 1,140,705

- - - - - - - 1,587,940

796,715 63,938 - - - - 1,027,275 -

313,000 - - 198,385

76,891 - - - 3,829 - - -

1,190,435 63,938 1,027,275 1,786,325

(342,143) 127,625 153,733 (645,620)

- - - 1,308 - (5,054) - - - - - -

- (5,054) - 1,308

(342,143)$ 122,571$ 153,733$ (644,312)$

3,072,191$ 538,298$ 588,617$ 1,951,021$ - - - -

3,072,191 538,298 588,617 1,951,021 (342,143) 122,571 153,733 (644,312)

2,730,048$ 660,869$ 742,350$ 1,306,709$


Vehicle Parking District

Air Quality Improvement

Landscape Maintenance

District Asset

Forfeiture

147

CITY OF POMONA



Total Revenues


Total Expenditures






Restatements


End of Year

-$ -$ -$ -$ - - - - - - 1,418,501 500,376 - 1,704,639 - -

305,375 - - - 3,321 14,303 2,093 625

- - 15,401 - - - - - - - 599 -

308,696 1,718,942 1,436,594 501,001

- - - - 197,410 - - -

- 903,598 2,319,182 67,779 - - - -

275,116 15,538 - -

- - - - - - - -

472,526 919,136 2,319,182 67,779

(163,830) 799,806 (882,588) 433,222

- 2,240 934,182 - - (677,926) - - - - - -

- (675,686) 934,182 -

(163,830)$ 124,120$ 51,594$ 433,222$

606,034$ 2,183,963$ 9,725$ 486,823$ - - - -

606,034 2,183,963 9,725 486,823 (163,830) 124,120 51,594 433,222

442,204$ 2,308,083$ 61,319$ 920,045$


Traffic Offender Measure R

General Sanitation

Fees Operations

Special Fees Fund

148

CITY OF POMONA



Total Revenues


Total Expenditures






Restatements


End of Year

139,498$ -$ 153,375$ - - 1,176,050

375,728 - 2,294,605 514,698 - 12,645,426

80,254 - 643,148 13,554 511 655,238

- - 15,401 602,278 - 602,278

8,149 - 1,316,381

1,734,159 511 19,501,902

240 - 240 - - 1,897,341 - - 10,948,207 - - 1,027,275

6,360,002 29,354 7,236,147

- - 221,891 - - 9,559

6,360,242 29,354 21,340,660

(4,626,083) (28,843) (1,838,758)

3,144,164 - 4,231,644 (2,151,601) - (4,728,706)

400,408 - 400,408

1,392,971 - (96,654)

(3,233,112)$ (28,843)$ (1,935,412)$

3,402,033$ 257,492$ 25,090,810$ 748,279 - 748,279

4,150,312 257,492 25,839,089 (3,233,112) (28,843) (1,935,412)

917,200$ 228,649$ 23,903,677$

Total Non-Major Governmental

Funds

Capital Projects Funds

Capital Outlay

Assessment District

Improvement

149

CITY OF POMONA

BUDGETARY COMPARISON SCHEDULEGENERAL DEBT SERVICEYEAR ENDED JUNE 30, 2016



Budgetary Fund Balance, July 1 (40,083,190)$ (40,083,190)$ (40,083,190)$ -$ Resources (Inflows):Taxes 547,106 547,106 646,562 99,456 Interest and rentals 1,615 1,615 7,280 5,665 Miscellaneous 334,053 334,053 341,168 7,115 Transfers in 5,572,772 5,572,772 5,563,641 (9,131)

Amounts Available for Appropriations (33,627,644) (33,627,644) (33,524,539) 103,105

Charges to Appropriation (Outflows):General government 39,739 39,739 226,076 (186,337) Debt service: Principal retirement 756,365 756,365 1,001,000 (244,635) Interest and fiscal charges 4,663,332 4,663,332 4,418,698 244,634 Transfers out 1,095,000 1,095,000 - 1,095,000


Budgetary Fund Balance, June 30 (40,182,080)$ (40,182,080)$ (39,170,313)$ 1,011,767$

150

CITY OF POMONA

BUDGETARY COMPARISON SCHEDULEPUBLIC FINANCING AUTHORITY DEBT SERVICEYEAR ENDED JUNE 30, 2016



Budgetary Fund Balance, July 1 47,768,511$ 47,768,511$ 47,768,511$ -$ Resources (Inflows):Interest and rentals 305,489 305,489 231,277 (74,212) Miscellaneous - - 10,577 10,577 Transfers in 1,095,000 1,095,000 - (1,095,000)


Charges to Appropriation (Outflows):General government 6,734 6,734 6,734 - Debt service: Principal retirement 1,575,000 1,575,000 1,575,000 - Interest and fiscal charges 180,658 180,658 180,658 -

Total Charges to Appropriations 1,762,392 1,762,392 1,762,392 -

Budgetary Fund Balance, June 30 47,406,608$ 47,406,608$ 46,247,973$ (1,158,635)$

151

CITY OF POMONA

BUDGETARY COMPARISON SCHEDULECOMMUNITY DEVELOPMENT BLOCK GRANTYEAR ENDED JUNE 30, 2016



Budgetary Fund Balance, July 1 2,492,785$ 2,492,785$ 2,492,785$ -$ Resources (Inflows):Intergovernmental 2,211,307 2,255,857 1,930,834 (325,023) Charges for services - 40,976 31,887 (9,089) Interest and rentals - - 2,001 2,001 Miscellaneous 145,800 145,800 10,681 (135,119) Transfers in - - 18,000 18,000

Amounts Available for Appropriations 4,849,892 4,935,418 4,486,188 (449,230)

Charges to Appropriations (Outflows):Public safety 168,208 111,991 111,991 -Urban development 2,098,401 2,096,358 1,659,639 436,719 Debt service: Principal retirement 145,800 145,800 145,000 800 Interest and fiscal charges 15,100 15,100 5,730 9,370 Transfers out - - 253,664 (253,664)



152

CITY OF POMONA

BUDGETARY COMPARISON SCHEDULESTATE GAS TAXYEAR ENDED JUNE 30, 2016



Budgetary Fund Balance, July 1 1,895,798$ 1,895,798$ 1,895,798$ -$ Resources (Inflows):Intergovernmental 3,452,038 3,452,038 3,291,861 (160,177) Charges for services - - 1,079 1,079 Interest and rentals 1,870 1,870 5,066 3,196 Miscellaneous - - 71,030 71,030 Transfers in 256,750 256,750 131,750 (125,000)


Charges to Appropriations (Outflows):Urban development 2,943,589 2,943,589 2,790,865 152,724 Capital outlay 125,000 125,000 - 125,000 Transfers out 1,426,879 1,426,879 1,292,161 134,718



153

CITY OF POMONA

BUDGETARY COMPARISON SCHEDULEPROPOSITION AYEAR ENDED JUNE 30, 2016



Budgetary Fund Balance, July 1 1,681,986$ 1,681,986$ 1,681,986$ -$ Resources (Inflows):Intergovernmental 2,739,580 2,774,580 2,738,458 (36,122) Interest and rentals 1,592 1,592 12,506 10,914 Miscellaneous 12,000 26,280 26,280 -


Charges to Appropriations (Outflows):Urban development 2,289,237 2,351,790 2,245,902 105,888 Capital outlay 86,400 135,680 44,752 90,928 Transfers out 730,000 730,000 - 730,000



154

CITY OF POMONA

BUDGETARY COMPARISON SCHEDULEPROPOSITION CYEAR ENDED JUNE 30, 2016



Budgetary Fund Balance, July 1 5,924,044$ 5,924,044$ 5,924,044$ -$ Resources (Inflows):Intergovernmental 2,272,410 2,272,410 2,276,663 4,253 Interest and rentals 4,603 4,603 42,085 37,482 Transfers in - - - -


Charges to Appropriations (Outflows):Urban development 131,860 131,860 100,589 31,271 Capital outlay - (365,062) - (365,062) Transfers out 2,495,535 2,848,535 348,300 2,500,235

Total Charges to Appropriations 2,627,395 2,615,333 448,889 2,166,444

Budgetary Fund Balance, June 30 5,573,662$ 5,585,724$ 7,793,903$ 2,208,179$

155

CITY OF POMONA

BUDGETARY COMPARISON SCHEDULEVEHICLE PARKING DISTRICTYEAR ENDED JUNE 30, 2016



Budgetary Fund Balance, July 1 3,072,191$ 3,072,191$ 3,072,191$ -$ Resources (Inflows):Taxes 12,758 12,758 13,877 1,119 Charges for services 205,904 205,904 194,089 (11,815) Interest and rentals 565,030 565,030 542,325 (22,705) Miscellaneous - - 98,001 98,001 Transfers in - - - -Proceeds from sale of capital assets 301,475 301,475 - (301,475)


Charges to Appropriations (Outflows):Urban development 823,934 879,214 796,715 82,499 Capital outlay t - 313,000 313,000 -Debt service: Principal retirement 80,720 80,720 76,891 3,829 Interest and fiscal charges - - 3,829 (3,829)

Total Charges to Appropriations 904,654 1,272,934 1,190,435 82,499


156

CITY OF POMONA

BUDGETARY COMPARISON SCHEDULEAIR QUALITY IMPROVEMENTYEAR ENDED JUNE 30, 2016



Budgetary Fund Balance, July 1 538,298$ 538,298$ 538,298$ -$ Resources (Inflows):Intergovernmental 188,400 628,400 188,273 (440,127) Interest and rentals - - 3,290 3,290 Transfers in - 50,000 - (50,000)

Amounts Available for Appropriations 726,698 1,216,698 729,861 (486,837)

Charges to Appropriations (Outflows):Urban development 347,305 837,305 63,938 773,367 Transfers out 85,000 85,000 5,054 79,946

Total Charges to Appropriations 432,305 922,305 68,992 853,313

Budgetary Fund Balance, June 30 294,393$ 294,393$ 660,869$ 366,476$

157

CITY OF POMONA

BUDGETARY COMPARISON SCHEDULELANDSCAPE MAINTENANCE DISTRICTYEAR ENDED JUNE 30, 2016



Budgetary Fund Balance, July 1 588,617$ 588,617$ 588,617$ -$ Resources (Inflows):Special assessments 1,196,401 1,196,401 1,176,050 (20,351) Charges for services - - 819 819 Interest and rentals 757 757 4,139 3,382


Charges to Appropriations (Outflows):Neighborhood services 1,276,592 1,276,592 1,027,275 249,317



158

CITY OF POMONA

BUDGETARY COMPARISON SCHEDULEASSET FORFEITUREYEAR ENDED JUNE 30, 2016



Budgetary Fund Balance, July 1 1,951,021$ 1,951,021$ 1,951,021$ -$ Resources (Inflows):Charges for services - - 29,645 29,645 Interest and rentals - - 9,419 9,419 Miscellaneous 1,368,000 1,368,000 1,101,641 (266,359) Transfers in - - 1,308 1,308


Charges to Appropriations (Outflows):Public safety 2,110,933 1,973,891 1,587,940 385,951 Capital outlay 78,580 215,622 198,385 17,237



159

CITY OF POMONA

BUDGETARY COMPARISON SCHEDULETRAFFIC OFFENDERYEAR ENDED JUNE 30, 2016



Budgetary Fund Balance, July 1 606,034$ 606,034$ 606,034$ -$ Resources (Inflows):Charges for services 325,000 325,000 305,375 (19,625) Interest and rentals - - 3,321 3,321

Amounts Available for Appropriations 931,034 931,034 914,730 (16,304)

Charges to Appropriations (Outflows):Public safety 220,593 220,593 197,410 23,183 Capital outlay 298,000 413,000 275,116 137,884

Total Charges to Appropriations 518,593 633,593 472,526 161,067


160

CITY OF POMONA

BUDGETARY COMPARISON SCHEDULEMEASURE RYEAR ENDED JUNE 30, 2016



Budgetary Fund Balance, July 1 2,183,963$ 2,183,963$ 2,183,963$ -$ Resources (Inflows):Intergovernmental 1,704,328 1,704,328 1,704,639 311 Interest and rentals - - 14,303 14,303 Transfers in - - 2,240 2,240


Charges to Appropriations (Outflows):Urban development 986,981 971,049 903,598 67,451 Capital outlay - 15,932 15,538 394 Transfers out 728,000 728,000 677,926 50,074



161

CITY OF POMONA

BUDGETARY COMPARISON SCHEDULEGENERAL SANITATION FEES OPERATIONSYEAR ENDED JUNE 30, 2016



Budgetary Fund Balance, July 1 9,725$ 9,725$ 9,725$ -$ Resources (Inflows):Licenses and permits 1,392,531 1,392,531 1,418,501 25,970 Interest and rentals - - 2,093 2,093 Fines and forfeitures 8,218 8,218 15,401 7,183 Miscellaneous 800 800 599 (201) Transfers in 1,426,879 1,426,879 934,182 (492,697)


Charges to Appropriations (Outflows):Urban development 2,828,429 2,828,429 2,319,182 509,247



162

CITY OF POMONA

BUDGETARY COMPARISON SCHEDULESPECIAL FEES FUNDYEAR ENDED JUNE 30, 2016



Budgetary Fund Balance, July 1 486,823$ 486,823$ 486,823$ -$ Resources (Inflows):Licenses and permits 321,200 321,200 500,376 179,176 Use of money and property - - 625 625

Amounts Available for Appropriation 808,023 808,023 987,824 179,801 Charges to Appropriation (Outflow):Urban development - 55,000 67,779 (12,779)

Total Charges to Appropriations - 55,000 67,779 (12,779)


163

CITY OF POMONA

BUDGETARY COMPARISON SCHEDULECAPITAL OUTLAYYEAR ENDED JUNE 30, 2016



Budgetary Fund Balance, July 1, as restated 4,150,312$ 4,150,312$ 4,150,312$ -$ Resources (Inflows):Taxes - - 139,498 139,498 Licenses and permits 12,000 12,000 375,728 363,728 Intergovernmental - 13,214 514,698 501,484 Charges for services - - 80,254 80,254 Interest and rentals - - 13,554 13,554 Contributions from Successor Agency - 3,841,535 602,278 (3,239,257) Miscellaneous - 120,000 8,149 (111,851) Transfers in 4,568,535 26,701,728 3,144,164 (23,557,564) Capital leases - - 400,408 400,408


Charges to Appropriation (Outflows):General government - - 240 (240) Capital outlay 4,218,535 5,033,763 6,360,002 (1,326,239) Transfers out 356,475 520,475 2,151,601 (1,631,126)

Total Charges to Appropriations 4,575,010 5,554,238 8,511,843 (2,957,605)

Budgetary Fund Balance, June 30 4,155,837$ 29,284,551$ 917,200$ (28,367,351)$

164

INTERNAL SERVICE FUNDS

The Internal Service Funds account for the maintenance and repair of City vehicles and equipment, riskmanagement, general liability, workers' compensation, information technology, and printing and mail servicesprovided to other departments or agencies of the City.

165


166

CITY OF POMONA

COMBINING STATEMENT OF NET POSITIONINTERNAL SERVICE FUNDSJUNE 30, 2016

TotalAssets:Current:

Cash and investments 8,619,505$ 800,423$ -$ -$ 9,419,928$ Receivables (net):

Interest 15,338 - - - 15,338 Prepaid costs 3,200 - - - 3,200 Inventories - 357,977 - - 357,977

Total Current Assets 8,638,043 1,158,400 - - 9,796,443 Noncurrent:

Capital assets, net of depreciation - 143,781 215,447 - 359,228

Total Noncurrent Assets - 143,781 215,447 - 359,228

Total Assets 8,638,043 1,302,181 215,447 - 10,155,671 Deferred Outflows of Resources:

Deferred pension related items 142,188 426,563 161,429 - 730,180

Total Deferred Outflows of Resources 142,188 426,563 161,429 - 730,180

Total Assets and DeferredOutflows of Resources 8,780,231$ 1,728,744$ 376,876$ -$ 10,885,851$


Accounts payable 270,928$ 138,427$ 41,741$ -$ 451,096$ Payroll payable 17,917 45,113 15,445 200 78,675 Due to other funds - - 20,916 17,560 38,476 Compensated absences - 115,000 - - 115,000 Claims and judgments 5,549,895 - - - 5,549,895

Total Current Liabilities 5,838,740 298,540 78,102 17,760 6,233,142

Noncurrent:Compensated absences - 46,584 - - 46,584 Claims and judgments 8,507,320 - - - 8,507,320 Net pension liability 520,661 1,685,350 499,514 2,705,525

Total Noncurrent Liabilities 9,027,981 1,731,934 499,514 - 11,259,429

Total Liabilities 14,866,721 2,030,474 577,616 17,760 17,492,571

Deferred Inflows of Resources:Deferred pension related items 151,394 495,384 141,288 - 788,066

Total Deferred Inflows of Resources 151,394 495,384 141,288 - 788,066

Net Position:Net investment in capital assets - 143,781 215,447 - 359,228 Unrestricted (6,237,884) (940,895) (557,475) (17,760) (7,754,014)

Total Net Position (6,237,884) (797,114) (342,028) (17,760) (7,394,786)

Total Liabilities, Deferred Inflowsof Resources and Net Position 8,780,231$ 1,728,744$ 376,876$ -$ 10,885,851$

Self-Insurance

Funds Equipment

Maintenance Information Technology

Printing/Mail Services

167

CITY OF POMONA

COMBINING STATEMENT OF REVENUES, EXPENSES,AND CHANGES IN NET POSITIONINTERNAL SERVICE FUNDSYEAR ENDED JUNE 30, 2016

TotalOperating Revenues:Charges for services 4,019,950$ 3,959,530$ 1,532,334$ 25,937$ 9,537,751$ Miscellaneous 325,403 - - - 325,403

Total Operating Revenues 4,345,353 3,959,530 1,532,334 25,937 9,863,154

Operating Expenses:Personnel services - 1,043,677 358,469 - 1,402,146 Operations - 2,115,894 1,119,711 43,697 3,279,302 Claims expense 5,465,914 - - - 5,465,914 Insurance - 43,743 11,106 - 54,849 Depreciation - 19,312 22,440 - 41,752

Total Operating Expenses 5,465,914 3,222,626 1,511,726 43,697 10,243,963

Operating Income (Loss) (1,120,561) 736,904 20,608 (17,760) (380,809)

Nonoperating Revenues (Expenses):Interest revenue 59,762 - - - 59,762

Total Nonoperating Revenues (Expenses) 59,762 - - - 59,762

Income (Loss) Before Transfers (1,060,799) 736,904 20,608 (17,760) (321,047)

Transfers out - (600,000) - - (600,000)

Changes in Net Position (1,060,799) 136,904 20,608 (17,760) (921,047)

Net Position:Beginning of Year (5,177,085) (934,018) (362,636) - (6,473,739)

End of Year (6,237,884)$ (797,114)$ (342,028)$ (17,760)$ (7,394,786)$

Self-Insurance

Funds Equipment



168

CITY OF POMONA

COMBINING STATEMENT OF CASH FLOWSINTERNAL SERVICE FUNDSYEAR ENDED JUNE 30, 2016

TotalCash Flows from Operating Activities:Cash received from customers and users 4,019,950$ 3,959,621$ 1,532,334$ 25,937$ 9,537,842$ Cash received from (paid for) other 325,403 - - - 325,403 Cash paid to suppliers for goods and services (3,305,987) (2,128,246) (1,266,626) (40,031) (6,740,890) Cash paid for general and administrative expenses (54,269) (1,287,764) (415,012) - (1,757,045)

Net Cash Provided (Used) by Operating Activities 985,097 543,611 (149,304) (14,094) 1,365,310


Cash transfers out - (600,000) - - (600,000) Amounts received from other funds - - 20,916 14,073 34,989 Amounts paid to other funds (5,000,000) - - - (5,000,000)

Net Cash Provided (Used) by Non-Capital Financing Activities (5,000,000) (600,000) 20,916 14,073 (5,565,011)


Acquisition and construction of capital assets - - (13,491) - (13,491)

Net Cash Provided (Used) by Capital and Related Financing Activities - - (13,491) - (13,491)

Cash Flows from Investing Activities:Interest received 50,987 - - - 50,987

Net Cash Provided (Used) byInvesting Activities 50,987 - - - 50,987

Net Increase (Decrease) in Cashand Cash Equivalents (3,963,916) (56,389) (141,879) (21) (4,162,205)

Cash and Cash Equivalents, Beginning of Year 12,583,421 856,812 141,879 21 13,582,133

Cash and Cash Equivalents, End of Year 8,619,505$ 800,423$ -$ -$ 9,419,928$

Reconciliation of Operating Income to Net CashProvided (Used) by Operating Activities:Operating income (loss) (1,120,561)$ 736,904$ 20,608$ (17,760)$ (380,809)$ Adjustments to reconcile operating income (loss) net cash provided (used) by operating activities:

Depreciation - 19,312 22,440 - 41,752 (Increase) decrease in accounts receivable - 91 - - 91 (Increase) decrease in prepaid expense (3,200) - - 4,480 1,280 (Increase) decrease in inventories - 26,141 - - 26,141 (Increase) decrease in deferred outflows (103,506) (299,618) (125,604) - (528,728) Increase (decrease) in deferred inflows 5,151 15,453 5,848 - 26,452 Increase (decrease) in accounts payable 201,461 5,250 (135,809) (849) 70,053 Increase (decrease) in payroll payable 5,999 (10,751) 5,069 35 352 Increase (decrease) in claims and judgments 1,955,667 - - - 1,955,667 Increase (decrease) in net pension liability 44,086 121,360 58,144 223,590 Increase (decrease) in compensated absences - (70,531) - - (70,531)

Total Adjustments 2,105,658 (193,293) (169,912) 3,666 1,746,119 Net Cash Provided (Used) by Operating Activities 985,097$ 543,611$ (149,304)$ (14,094)$ 1,365,310$

Non-Cash Investing, Capital, and Financing Activities:

Self-Insurance

Funds Equipment



During fiscal year 2015-2016, there was no non-cash investing, capital and financing activities.

169


170

The Agency Funds account for assets held by the City for other funds, governments or individuals. These fundsinclude receipts and disbursements of funds for the debt service activity of the 1911 Act assessment districts, cashdeposits collected for street and sidewalk encroachment permits, debt services activity related to debt withoutgovernment commitment for various assessment district improvements, cash guarantees (deposits) collected by theCity for various construction improvement projects, deposits of miscellaneous, self-supporting City projects, paymentof various employee benefits and deductions, including, but not limited to, health and dental insurance premiums,federal and state withholding taxes, life insurance and other withholdings from regular compensation.

FIDUCIARY FUNDS

171

CITY OF POMONA

COMBINING BALANCE SHEETAGENCY FUNDSJUNE 30, 2016

Assets:Cash and investments 224,478$ 420,113$ 720,779$ 1,244,551$ Receivables:

Accounts - - - 13,460Interest 285 465 - -

Due from other governments 6,183 - - 2,625

Total Assets 230,946$ 420,578$ 720,779$ 1,260,636$

Liabilities:Accounts payable -$ -$ 2,660$ 434,938$ Deposits payable 6,183 420,578 718,119 825,698Due to external parties/other agencies 224,763 - - -

Total Liabilities 230,946 $ 420,578 $ 720,779 $ 1,260,636 $

Assessment Districts

Engineers' Revolving

Construction Guarantee

Municipal Revolving

172

CITY OF POMONA

COMBINING BALANCE SHEETAGENCY FUNDSJUNE 30, 2016

Assets:Cash and investmentsReceivables:

AccountsInterest

Due from other governments

Total Assets

Liabilities:Accounts payableDeposits payableDue to external parties/other agencies

Total Liabilities

Total

1,276,556$ 3,886,477$

- 13,460 - 750 - 8,808

1,276,556$ 3,909,495$

1,276,556$ 1,714,154$ - 1,970,578 - 224,763

1,276,556 $ 3,909,495 $

Employee Benefits/

Deductions

173

CITY OF POMONA

COMBINING STATEMENT OF CHANGES IN ASSETS AND LIABILITIESAGENCY FUNDSYEAR ENDED JUNE 30, 2016

Balance Balance7/1/2015 Additions Deductions 6/30/2016

Assessment Districts

Assets:Cash and investments 223,449$ 1,181$ 152$ 224,478$ Receivables:

Interest 196 285 196 285Due from other governments 37,389 6,183 37,389 6,183

Total Assets 261,034$ 7,649$ 37,737$ 230,946$

Liabilities:Deposits payable 37,389$ 6,183$ 37,389$ 6,183$ Due to external parties/other agencies 223,645 1,415 297 224,763

Total Liabilities 261,034$ 7,598$ 37,686$ 230,946$

Engineers' Revolving

Assets:Cash and investments 570,868$ -$ 150,755$ 420,113$ Receivables:

Interest 319 465 319 465Total Assets 571,187$ 465$ 151,074$ 420,578$

Liabilities:Deposits payable 571,187$ 582$ 151,191$ 420,578$

Total Liabilities 571,187$ 582$ 151,191$ 420,578$

Construction Guarantee

Assets:Cash and investments 920,014$ -$ 199,235$ 720,779$

Total Assets 920,014$ -$ 199,235$ 720,779$

Liabilities:Accounts payable 4,409$ 69,315$ 71,064$ 2,660$ Deposits payable 915,605 48,003 245,489 718,119

Total Liabilities 920,014$ 117,318$ 316,553$ 720,779$

Municipal Revolving

Assets:Cash and investments 901,655$ 1,682,281$ 1,339,385$ 1,244,551$ Receivables:

Accounts 10,037 40,733 37,310 13,460 Due from other governments 3,834 2,625 3,834 2,625

Total Assets 915,526$ 1,725,639$ 1,380,529$ 1,260,636$

Liabilities:Accounts payable 238,272$ 1,361,093$ 1,164,427$ 434,938$ Deposits payable 677,254 148,444 - 825,698

Total Liabilities 915,526$ 1,509,537$ 1,164,427$ 1,260,636$

174

CITY OF POMONA

COMBINING STATEMENT OF CHANGES IN ASSETS AND LIABILITIESAGENCY FUNDSYEAR ENDED JUNE 30, 2016

Balance Balance7/1/2015 Additions Deductions 6/30/2016

Employee Benefits/Deductions

Assets:Cash and investments 1,680,299$ 36,641,436$ 37,045,179$ 1,276,556$

Total Assets 1,680,299$ 36,641,436$ 37,045,179$ 1,276,556$

Liabilities:Accounts payable 1,680,299$ 36,641,436$ 37,045,179$ 1,276,556$

Total Liabilities 1,680,299$ 36,641,436$ 37,045,179$ 1,276,556$

Total - All Agency Funds

Assets:Cash and investments 4,296,285$ 38,324,898$ 38,734,706$ 3,886,477$ Receivables:

Accounts 10,037 40,733 37,310 13,460 Interest 515 750 515 750

Due from other governments 41,223 8,808 41,223 8,808 Total Assets 4,348,060$ 38,375,189$ 38,813,754$ 3,909,495$

Liabilities:Accounts payable 1,922,980$ 38,071,844$ 38,280,670$ 1,714,154$ Deposits payable 2,201,435 203,212 434,069 1,970,578 Due to external parties/other agencies 223,645 1,415 297 224,763

Total Liabilities 4,348,060$ 38,276,471$ 38,715,036$ 3,909,495$

175


176

This�part�of�the�City�of�Pomona's�comprehensive�annual�financial�report�presents�detailed�informationas�a�context�for�understanding�what�the�information�in�the�financial�statements,�note�disclosures,�andrequired�supplementary�information�says�about�the�City's�overall�financial�health.

These�schedules�contain�information�to�help�the�reader�to�understandhow�the�City's�financial�performance�and�wellbeing�have�changed�over�time.

These�schedules�contain�information�to�help�the�reader�assess�theCity's�most�significant�ownsource�revenue.

These�schedules�present�information�to�help�the�reader�assess�the�affordability�of�theCity's�current�levels�of�outstanding�debt�and�the�City's�ability�to�issue�additional�debt�in�the�future.

These�schedules�offer�demographic�and�economicindicators�to�help�the�reader�understand�the�environment�within�which�the�City's�financial�activities�take�place.

These�schedules�contain�service�and�infrastructure�data�to�help�the�reader�understand�how�the�information�in�the�City's�financial�report�relates�to�the�services�the�City�provides�andthe�activities�it�performs.

177

Schedule�1

179

Schedule�2

181

Schedule�2

183

Schedule�3

185

City of PomonaChanges in Fund Balances - Governmental FundsLast Ten Fiscal Years

2007 2008 2009 2010 2011Revenues:

Taxes 105,245,421$ 113,490,746$ 109,044,092$ 98,510,896$ 95,691,191$Special assessments 1,166,719 1,172,826 1,220,222 1,214,569 1,214,829Licenses and permits 6,690,241 6,261,842 7,350,264 4,297,116 3,333,417Intergovernmental 34,431,013 27,091,322 25,673,807 48,689,417 50,654,510Charges for services 2,296,395 2,755,212 2,080,651 8,855,789 3,625,992Interest and rentals 19,509,672 19,954,480 17,115,029 14,542,222 15,732,587Fines and forfeitures 2,647,955 3,364,372 4,108,850 2,065,041 1,784,123Loans repaid 912,428 235,265 253,064 46,814 -Contributions and donations 3,344,179 257,000 - - -Miscellaneous 2,240,671 2,629,419 4,888,034 3,401,802 4,663,782

Total Revenues 178,484,694 177,212,484 171,734,013 181,623,666 176,700,431

Expenditures:General government 5,000,827 5,054,617 4,104,160 4,046,274 3,073,323Public safety 64,735,812 70,637,275 72,729,944 67,888,838 61,574,218Urban development 58,373,543 59,624,349 69,119,619 88,899,216 83,925,250Neighborhood services 12,120,611 20,816,615 8,823,294 7,121,480 5,889,207Capital outlay 19,944,715 2,246,951 5,462,154 2,969,473 2,644,383Debt service:

Principal retirement 9,251,232 8,078,448 4,127,225 4,338,517 5,480,210 Interest and fiscal charges 27,328,302 27,092,737 26,855,452 27,311,933 26,522,841 Debt issuance costs 1,253,413 241,350 - - -Total Expenditures 198,008,455 193,792,342 191,221,848 202,575,731 189,109,432

Excess (Deficiency) of RevenuesOver (Under) Expenditures (19,523,761) (16,579,858) (19,487,835) (20,952,065) (12,409,001)

Other Financing Sources (Uses):Notes and loans issued 74,207,460 8,805,595 533,765 533,765 649,425Bond premium 1,087,257 57,600 - - -Payments to escrow agent (59,750,000) - - - -Proceeds from capital leases 1,714,407 304,646 2,048,956 - -Proceeds from sale of capital assets 110,148 980,368 34,894 5,640,158 1,764,196Gain/Loss - sale of land held for resale (654,961) (101,238) - - -Transfers in 71,510,464 35,568,008 29,592,084 21,194,695 25,487,284Transfers out (70,794,439) (39,460,156) (29,602,334) (20,150,085) (29,524,748)

Total Other Financing Sources (Uses) 17,430,336 6,154,823 2,607,365 7,218,533 (1,623,843)Extraordinary gain/(loss) on dissolution

of Redevelopment Agency - - - - -Net Change in Fund Balances (2,093,425)$ (10,425,035)$ (16,880,470)$ (13,733,532)$ (14,032,844)$

Debt service as a percentage of noncapital expenditures 21.25% 18.49% 16.68% 15.86% 17.16%

Fiscal Year

186

City of PomonaChanges in Fund Balances - Governmental FundsLast Ten Fiscal Years

Revenues:TaxesSpecial assessmentsLicenses and permitsIntergovernmentalCharges for servicesInterest and rentalsFines and forfeituresLoans repaidContributions and donationsMiscellaneous

Total Revenues

Expenditures:General governmentPublic safetyUrban developmentNeighborhood servicesCapital outlayDebt service:

Principal retirement Interest and fiscal charges Debt issuance costsTotal Expenditures


Other Financing Sources (Uses):Notes and loans issuedBond premiumPayments to escrow agentProceeds from capital leasesProceeds from sale of capital assetsGain/Loss - sale of land held for resaleTransfers in Transfers out

Total Other Financing Sources (Uses)Extraordinary gain/(loss) on dissolution

of Redevelopment AgencyNet Change in Fund Balances

Debt service as a percentage of noncapital expenditures

Schedule 4

2012 2013 2014 2015 2016

79,677,392$ 72,063,654$ 74,894,452$ 79,325,218$ 77,688,810$1,229,707 1,229,658 1,193,067 1,213,093 1,176,0504,234,901 5,770,483 6,637,168 6,569,523 9,416,790

38,432,208 35,229,918 32,189,819 30,287,748 27,724,8553,637,583 4,619,080 4,145,014 4,009,626 4,633,898

13,417,141 4,364,959 2,294,343 2,098,902 2,605,6261,820,973 1,960,621 2,119,972 2,063,417 2,055,615

- - - - -- - - 51,581 602,278

5,223,877 5,040,269 2,329,091 3,175,185 3,266,373147,673,782 130,278,642 125,802,926 128,794,293 129,170,295

2,385,778 4,388,871 3,569,806 4,037,452 5,002,58461,362,969 62,362,342 65,349,307 68,400,434 71,798,45359,708,273 45,707,873 43,679,402 43,859,126 35,196,5895,577,913 5,007,798 4,748,939 4,702,795 4,637,0861,835,062 2,040,791 1,660,811 993,126 7,666,738

8,123,605 2,437,533 2,817,951 2,916,051 3,079,71825,243,568 7,358,464 4,974,045 4,855,160 4,627,698

- - - - -164,237,168 129,303,672 126,800,261 129,764,144 132,008,866

(16,563,386) 974,970 (997,335) (969,851) (2,838,571)

- 200,000 300,000 - -- - - - -- - - - -

620,860 695,000 - - 400,408271,938 4,529,370 1,047,249 35,530 -

- - - - -15,766,850 16,654,519 8,628,509 9,379,865 9,899,873

(15,076,732) (15,699,821) (7,764,284) (8,368,065) (9,781,874)1,582,916 6,379,068 2,211,474 1,047,330 518,407

(68,237,733) (195,359) - - -(83,218,203)$ 7,158,679$ 1,214,139$ 77,479$ (2,320,164)$

20.55% 7.70% 6.23% 6.03% 6.20%

187

City of Pomona Schedule 5Governmental Activities Tax Revenue by SourceLast Fiscal Ten Years (in thousands of dollars)

Fiscal Year Motor Property UtilityEnded Property Sales Vehicle Transient Transfer Users Business

June 30 Tax Tax License Occupancy Tax Franchise Tax Licenses Other Total

2007 51,952$ 19,073$ 874$ 1,727$ 2,152$ 5,872$ 18,290$ 2,845$ 2,460$ 105,245$ 2008 56,246 17,200 719 1,719 1,189 5,776 18,154 2,978 1,974 105,9552009 65,303 10,629 555 1,450 1,020 6,861 17,732 3,051 19 106,6202010 60,773 11,225 479 1,300 1,115 6,095 17,166 2,891 10 101,0542011 58,117 9,507 829 1,267 987 5,911 17,719 2,730 4 97,0712012 41,755 10,805 84 1,359 1,112 5,961 17,375 3,065 70 81,5862013 32,144 12,355 69 1,474 1,476 5,672 16,941 3,123 20 73,2742014 33,631 12,040 - 1,561 1,430 6,029 17,312 3,172 13 75,1882015 36,409 13,545 68 1,568 1,581 6,563 17,466 3,347 59 80,6062016 33,717 15,171 61 1,724 1,860 6,426 16,419 3,409 139 78,926

188

City of Pomona Schedule 6Assessed Value and Estimated Actual Value of Taxable PropertyLast Ten Fiscal Years (in thousands of dollars)

Estimated Factor ofFiscal Year Less: Total Taxable Total Actual Taxable

Ended Residential Commercial Industrial Unitary Unsecured Tax Exempt Assessed Direct Tax Taxable AssessedJune 30 Property Property Property Other Values Property Property (1) Value Rate (2) Value (3) Value (3)

2007 5,555,560$ 850,046$ 927,732$ 619,284$ 5,880$ 376,178$ 274,419$ 8,060,261$ 1$ -$ -$ 2008 6,175,439 946,442 1,012,035 690,821 790 372,791 429,662 8,768,656 1.13719 - -2009 6,486,480 1,019,941 1,104,778 754,630 790 384,081 447,378 9,303,322 0.14340 8,726,237 0.9379702010 5,759,284 1,039,418 1,197,842 830,321 788 381,397 459,461 8,749,589 0.17547 8,691,272 1.0048392011 5,441,493 1,034,597 1,244,142 885,973 788 352,403 538,120 8,421,276 0.20728 8,288,686 0.9842552012 5,571,482 998,040 1,226,077 905,772 655 360,777 652,301 8,410,502 0.20375 8,637,468 1.0269862013 5,679,812 1,019,770 1,178,211 884,418 655 350,896 678,279 8,435,483 0.21734 9,148,296 1.0845022014 5,932,623 1,059,762 1,233,924 869,787 374 372,621 647,264 8,821,827 0.18781 11,575,340 1.3121252015 6,396,012 1,070,267 1,261,918 942,134 - 379,640 814,565 9,235,406 0.19079 12,340,257 1.3361902016 6,713,231 1,111,554 1,325,414 305,936 - 383,971 818,224 9,840,106 0.22197 10,658,330 1.339440

Source: Los Angeles County Assessor data, MuniServices, LLC (for years 2007 to 2015), HdL for the 2016 year. Prior Year values have been restated for consistency and compliance with GASB No. 44 guidelines(1) Exemptions are exclusive of home owner exemptions.(2) Total direct tax rate is the voter approved taxes over and above the 1% Proposition 13 tax for TRA 007-790.(3) Estimated Actual Value is derived from a series of calculations comparing median assessed values from 1940 to current median sale prices. Based on these calculations a multiplier value was extrapolated and applied to current assessed values.

189

City of Pomona Schedule 7Property Tax Rates - Direct and Overlapping Governments(Rate per $100 of assessed value)Last Ten Fiscal Years

2007 2008 2009 2010 2011 2012 2013 2014 2015 2016

Basic City and County Levy:City of Pomona 0.000000 0.000000 0.233504 0.310821 0.233504 0.233504 0.233504 0.233504 0.233504 0.233504Other taxing agencies 0.000000 0.000000 0.766496 0.689179 0.766496 0.766496 0.766496 0.766496 0.766496 0.766496

Total 1.000000 1.000000 1.000000 1.000000 1.000000 1.000000 1.000000 1.000000 1.000000 1.000000

Override Assessments:County 0.000660 0.000000 0.000000 0.000000 0.000000 0.000000 0.000000 0.000000 0.000000 0.000000Unified Schools 0.124010 0.113790 0.115771 0.145455 0.177212 0.173636 0.184882 0.164074 0.165993 0.297990Community College 0.021840 0.017500 0.023326 0.025710 0.026363 0.026415 0.028957 0.020231 0.021294 0.037950Flood Control 0.000050 0.001400 0.000000 0.000000 0.000000 0.000000 0.000000 0.000000 0.000000 0.000000Metro Water District 0.004700 0.004500 0.004300 0.004300 0.003700 0.003700 0.003500 0.003500 0.003500 0.003500

Total 0.151260 0.137190 0.143397 0.175465 0.207275 0.203751 0.217339 0.187805 0.190787 0.339440

Total Tax Rate 1.151260 1.137190 1.143397 1.175465 1.207275 1.203751 1.217339 1.187805 1.190787 1.339440

Source: Los Angeles County Auditor/Controller data, MuniServices, LLC (for years 2007 to 2015), HdL for the 2016 year.2007-08 and prior: prior year CAFR reportsFor presentation purposes, TRA 007-790 is represented

190

City of Pomona Schedule 8Principal Property TaxpayersCurrent Fiscal Year and Nine Years Ago

Percent of Percent ofTotal City Total City

Taxable Taxable Taxable Taxable Assessed Assessed Assessed Assessed

Taxpayer Valuation Rank Value Valuation Rank ValueCrest Financing LP 83,535,719$ 1 0.85%Los Angeles County Fair Assoc 46,592,577 2 0.47% 32,998,297$ 4 0.41%Rexford Indurstrial Realty LP 39,412,025 3 0.40%KTR Pomona LLC 37,004,717 4 0.38%Monterey Station LLC 35,515,060 5 0.36%LBA Realty Fund III - Company VII LLC 30,666,314 6 0.31%CMC Dragon LP 29,112,221 7 0.30%Pomona II LLC 28,858,509 8 0.29%PI Properties 25,739,538 9 0.26%Bre Paragon MF Olive Ridge 24,624,203 10 0.25%Pomona Valley Hospital Medical Center 89,532,866 1 1.11%Udr Crest Lp 61,860,611 2 0.77%Casa Colina Hospital 43,889,801 3 0.54%West 2nd Street Storage Ptrs 31,992,300 5 0.40%Ripon Cogeneration LLC 30,917,652 6 0.38%Realty Associates 24,645,474 7 0.31%Rockwell Collins Inc. 23,441,869 8 0.29%Topanga Owensmouth 7 LLC 23,114,984 9 0.29%Devry Inc. 21,268,678 10 0.26%

Source: Los Angeles County Assessor data, HdL, Coren & Cone

20072016

191

City of Pomona Schedule 9Top 25 Sales Tax Generatorsin Alphabetical OrderCurrent Fiscal Year and Nine Years Ago

2016 2007ACS Distributors Arco AM/PM Mini MartsAlstar Kia Barretts Equine SalesArco AM/PM Mini Marts Car Pros KiaBastian Material Handling Chevron Service StationsCornucopia Foods Circuit CityDD's Discounts Contractors WarhouseFerguson Enterprises Ferguson EnterprisesGiant RV Center GTE Communication Systems CorpGlobal Rental Company Home DepotHD Supply Repair & Remodel Huntington HardwareHome Depot Mike Thompson's RecreationalHuntington Hardware Myers Tire SupplyHyundai Lease Titling Trust Puma OilMar-Co Equipment Company Rancho Valley Chevrolet/GeoMike Thompson's Recreational Redhill Forest Products IncPhenix Enterprises Rio Rancho Buick/Pontiac/GMCRalph's Grocery Company Rio Rancho Chrysler Jeep & DodRichard S. Dawson Company Rohr SteelRohr Steel Shell Service StationsRyder Vehicle Sales Siemens Energy & AutomationSheraton Hotel Sylvania Lighting ServicesSuperior Duct Fabrication Texaco Service StationsTarget Stores Toys R UsUSA Service Stations Wal Mart StoresWal Mart Stores West Coast RV's

Source: MuniServices, LLC

192

City of Pomona Schedule 10Property Tax Levies and CollectionsLast Ten Fiscal Years

FiscalYear Taxes Levied Delinquent

Ended for the Percentage Tax PercentageJune 30 Fiscal Year Amount of Levy Collections Amount of Levy

2007 11,542,995$ 11,208,880$ 97.1% 1,627,684$ 12,836,564$ 111.2%2008 12,434,540 12,278,199 98.7% 1,355,970 13,634,169 109.6%2009 13,488,955 12,976,085 96.2% 977,302 13,953,387 103.4%2010 12,344,605 12,099,841 98.0% 608,391 12,708,232 102.9%2011 11,962,439 11,830,918 98.9% 697,738 12,528,656 104.7%2012 12,329,907 12,113,998 98.2% 377,392 12,491,390 101.3%2013 12,528,234 12,434,130 99.2% 349,337 12,783,467 102.0%2014 13,596,705 13,442,112 98.9% 637,832 14,079,944 103.6%2015 14,612,641 14,510,121 99.3% 613,771 15,123,892 103.5%2016 13,843,856 13,691,612 98.9% 230,228 13,921,840 100.6%

Source: Los Angeles County Auditor/Controller, City of Pomona Finance Department

Collected within theFiscal Year of the Levy Total Collections to Date

193

City of PomonaRatios of Outstanding Debt by TypeLast Ten Fiscal Years

Fiscal Year Tax Pension Certificates TotalEnded Allocation Revenue Obligation of Governmental

June 30 Bonds Bonds Ref Bonds Participation Other Activities

2007 9,815,000$ 227,448,178$ 42,280,684$ 13,801,167$ 32,120,626$ 325,465,655$2008 9,730,000 229,692,274 42,280,684 13,520,545 33,021,439 328,244,9422009 9,645,000 227,390,370 42,280,684 13,234,923 36,000,684 328,551,6612010 9,555,000 224,932,467 42,209,382 12,944,301 37,228,313 326,869,4632011 9,460,000 222,313,564 44,114,118 12,643,679 43,497,491 332,028,8522012 - 43,836,347 44,299,214 12,333,057 2,379,277 102,847,8952013 - 42,446,378 44,400,752 12,012,435 1,864,337 100,723,9022014 - 41,110,000 44,414,040 11,681,813 1,754,285 98,960,1382015 - 39,564,000 44,333,953 11,336,191 1,241,295 96,475,4392016 - 37,938,000 44,152,153 10,970,569 1,137,985 94,198,707

Notes: Details regarding the City's outstanding debt can be found in the notes tothe financial statements.

(1) These ratios are calculated using personal income and population for the prior year.


194

Schedule 11

Total Total Percentage DebtRevenue Business-type Primary of Personal per

Bonds Other Activities Government Income (1) Capita (1)

140,135,710$ 2,219,551$ 142,355,261$ 467,820,916$ n/a 2,885139,885,619 1,744,955 141,630,574 469,875,516 n/a 2,876139,635,527 1,286,361 140,921,888 469,473,549 n/a 2,873139,070,435 844,741 139,915,176 466,784,639 n/a 2,857137,580,343 515,674 138,096,017 470,124,869 n/a 2,877136,030,252 174,904 136,205,156 239,053,051 n/a 1,468135,674,210 4,112,175 139,786,385 240,510,287 n/a 1,593133,915,426 3,564,689 137,480,115 236,440,253 n/a 1,558132,086,642 3,004,392 135,091,034 231,566,473 n/a 1,519130,187,861 2,430,985 132,618,846 226,817,553 n/a 1,458

Business-type Activities

195

City of Pomona Schedule 12Ratios of General Bonded Debt OutstandingLast Ten Fiscal Years (dollars in thousands, except per capita)

PercentageFiscal Year Tax Pension Certificates Restricted of Actual

Ended Revenue Allocation Obligation of for Net Bonded Value PerJune 30 Bonds Bonds Ref Bonds Participation Total Debt Service * Debt of Property (1) Capita (2)

2007 227,448$ 9,815$ 42,281$ 13,802$ 293,346$ 7,031$ 286,315$ 3.9% 1,809$ 2008 229,692 9,730 42,281 13,521 295,224 14,073 281,151 3.6% 1,8072009 227,390 9,645 42,281 13,235 292,551 13,233 279,318 3.1% 1,7902010 224,932 9,555 42,209 12,944 289,640 17,589 272,051 3.3% 1,7792011 222,313 9,460 44,114 12,644 288,531 29,115 259,416 3.4% 1,9332012 43,836 - 44,299 12,333 100,468 51,855 48,613 1.2% 6702013 42,446 - 44,401 12,012 98,859 50,439 48,420 1.2% 6552014 41,110 - 44,414 11,682 97,206 49,229 47,977 1.1% 6402015 39,564 - 44,334 11,336 95,234 47,845 47,389 1.0% 6252016 37,938 - 44,152 10,971 93,061 46,248 46,813 0.9% 598

* Includes bond reserves and unspent bond proceeds.

Notes: Details regarding the City's outstanding debt can be found in the notes to the financial statements.

(1) See Schedule 6 for property value data.(2) Population data can be found in Schedule 17.

General Bonded Debt Outstanding

196

City of Pomona Schedule 13Direct and Overlapping DebtCurrent Year and Nine Years Ago

Total Debt City’s Share ofOVERLAPPING DEBT 06/30/2016: 6/30/2016 % Applicable (1) Debt 06/30/2016

Los Angeles County Flood Control District -$ 0.000% -$ Metropolitan Water District 44,916,916 0.619% 277,825Citrus Community College District 96,907,553 1.229% 1,191,254Mount San Antonio Community College District 367,992,615 12.047% 44,331,779Bonita Unified School District 128,484,790 0.254% 326,984Claremont Unified School District 29,070,000 6.077% 1,766,684Pomona Unified School District 240,584,892 75.786% 182,329,896

Total Overlapping Debt 907,956,766 230,224,422City of Pomona 1915 Act Bonds 3,915,000 100.000% 3,915,000Obligations Under Capital Leases 702,958 100.000% 702,958Notes Payable 435,000 100.000% 435,000Revenue Bonds 37,938,000 100.000% 37,938,000Pension Obligation Refunding Bonds 44,152,153 100.000% 44,152,153Certificates of Participation 10,970,569 100.000% 10,970,569

Total Direct Debt 98,113,680 98,113,680 TOTAL DIRECT AND OVERLAPPING DEBT 1,006,070,446$ 328,338,102$

Total Debt City’s Share ofOVERLAPPING DEBT 06/30/2007: 6/30/2007 % Applicable (1) Debt 06/30/2007

Los Angeles County 8,395,000$ 0.685% 57,471$ Los Angeles County Flood Control District 370,000 0.672% 2,487Metropolitan Water District 165,681,509 0.757% 1,253,815Citrus Community College District 57,100,000 1.335% 762,289Mount San Antonio Community College District 176,917,046 12.915% 22,849,244Bonita Unified School District 54,539,790 0.144% 78,666Claremont Unified School District 42,665,000 6.766% 2,886,576Pomona Unified School District 153,632,278 76.916% 118,168,231

Total Overlapping Debt 659,300,623 146,058,779City of Pomona 1915 Act Bonds 9,485,000 100.000% 9,485,000Participation Agreement - 100.000% -County Deferred Tax Loan 25,475,833 100.000% 25,475,833Obligations Under Capital Leases 4,169,793 100.000% 4,169,793Notes Payable 2,475,000 100.000% 2,475,000Revenue Bonds 227,448,178 100.000% 227,448,178Tax Allocation Bonds 9,815,000 100.000% 9,815,000Pension Obligation Refunding Bonds 42,280,684 100.000% 42,280,684Certificates of Participation 13,801,167 100.000% 13,801,167

Total Direct Debt 334,950,655 334,950,655 TOTAL DIRECT AND OVERLAPPING DEBT 994,251,278$ 481,009,434$

Source: HdL, and prior year CAFR1) Percentage of overlapping agency's assessed valuation located within the boundaries of the city.

197

City of Pomona Schedule 14Legal Debt Margin InformationLast Ten Fiscal Years (in thousands of dollars)

2007 2008 2009 2010 2011 2012 2013 2014 2015 2016Assessed valuation 8,060,261$ 8,768,656$ 9,303,322$ 8,749,589$ 8,421,276$ 8,410,502$ 8,435,483$ 8,821,827$ 9,840,106$ 9,840,106$Debt limit percentage 15.00% 15.00% 15.00% 15.00% 15.00% 15.00% 15.00% 15.00% 15.00% 15.00%Debt limit 1,209,039$ 1,315,298$ 1,395,498$ 1,312,438$ 1,263,191$ 1,261,575$ 1,265,322$ 1,323,274$ 1,476,016$ 1,476,016$Amount of debt applicable to debt limit - - - - - - - - - -

Legal debt margin 1,209,039$ 1,315,298$ 1,395,498$ 1,312,438$ 1,263,191$ 1,261,575$ 1,265,322$ 1,323,274$ 1,476,016$ 1,476,016$

Total debt applicable to the limit as a percentage of debt limit 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00%

Legal Debt Margin Calculation for Fiscal Year 2016

Assessed Value 9,840,106$Debt Limit 15% 1,476,016Debt applicable to debt limit -

Legal Debt Margin 1,476,016$

Notes: Under State Finance Law, the City's outstanding general obligation debt should not exceed 15percent of the total assessed property value. By law, the general obligation debt subject to the limitationmay be offset by amounts set aside for repaying general obligation bonds.

198

City of Pomona Schedule 15Pledged Revenue Coverage - WaterLast Ten Fiscal Years

Fiscal Year Less NetEnded Water Operating Available

June 30 Revenue Expenses Revenue Principal Interest Total Coverage

2007 32,745,372 30,868,171 1,877,201 - 616,981 616,981 3.02008 26,282,806 21,557,482 4,725,324 - - - N/A2009 27,750,167 22,229,863 5,520,304 - 5,106,170 5,106,170 1.12010 27,071,134 20,970,174 6,100,960 200,000 5,099,665 5,299,665 1.22011 27,087,846 19,041,122 8,046,724 1,095,000 5,087,935 6,182,935 1.32012 27,735,841 18,961,467 8,774,374 1,140,000 5,041,155 6,181,155 1.42013 28,794,435 20,836,902 7,957,533 1,190,000 4,992,405 6,182,405 1.32014 29,734,402 22,343,608 7,390,794 1,240,000 4,941,475 6,181,475 1.22015 29,076,093 20,837,368 8,238,725 1,295,000 4,888,376 6,183,376 1.32016 28,189,546 18,073,465 10,116,081 1,350,000 4,991,195 6,341,195 1.6

Notes: Details regarding the City's Water Fund outstanding debt can be found in the notes to the financial statements.

Prior Year information has been restated for consistency and compliance with GASB No. 44 guidelines.

No ratio calculation for 2008 due to bond refunding.

Water Revenue Bonds

Debt Service

199

City of Pomona Schedule 16Pledged Revenue Coverage - SewerLast Ten Fiscal Years

Fiscal Year Less NetEnded Sewer Operating Available

June 30 Revenue Expenses Revenue Principal Interest Total Coverage

2007 3,745,389 2,671,343 1,074,046 175,000 827,787 1,002,787 1.12008 4,368,532 2,356,508 2,012,024 180,000 1,295,540 1,475,540 1.42009 4,424,826 2,426,368 1,998,458 180,000 1,302,305 1,482,305 1.32010 4,348,448 2,530,093 1,818,355 295,000 1,310,465 1,605,465 1.12011 4,400,436 2,444,519 1,955,917 325,000 1,301,753 1,626,753 1.22012 4,570,662 2,445,349 2,125,313 340,000 1,290,216 1,630,216 1.32013 4,497,533 2,511,043 1,986,490 355,000 1,277,020 1,632,020 1.22014 4,736,852 2,800,219 1,936,633 370,000 1,262,289 1,632,289 1.22015 4,783,591 2,777,759 2,005,832 385,000 1,247,875 1,632,875 1.22016 4,490,402 2,014,093 2,476,309 400,000 1,231,690 1,631,690 1.5

Notes: Details regarding the City's Sewer Fund outstanding debt can be found in the notes to the financial statements.

Prior Year information has been restated for consistency and compliance with GASB No. 44 guidelines.

Sewer Revenue Bonds

Debt Service

200

City of Pomona Schedule 17Demographic and Economic StatisticsLast Ten Fiscal Years

PerPersonal Capita

Fiscal Income (2) Personal Median Public School UnemploymentYear Population (1) (in thousands) Income (2) Age Enrollment (3) Rate (4)

2007 162,140 2,398,683 14,794 26.5 33,683 5.8%2008 163,405 2,398,683 14,679 26.5 33,683 5.8%2009 163,408 2,747,869 16,816 28.7 30,032 8.4%2010 162,817 2,728,162 16,756 28.7 31,864 12.9%2011 149,243 2,651,969 17,769 28.6 28,298 14.7%2012 149,950 2,533,677 16,897 28.1 27,737 13.2%2013 150,942 2,593,902 17,185 29.5 27,186 12.2%2014 151,713 2,392,059 15,767 30.2 26,264 11.0%2015 152,419 2,659,712 17,450 29.9 25,311 7.9%2016 155,604 2,575,663 16,552 30.4 24,673 7.5%

Source: 2008-09, 2009-10, 2011-12, 2012-13, 2013-14, and 2014-15: MuniServices, LLCSource: 2010-11, 2008-09 and prior: prior year previous CAFR reports.Source: 2015-16, HdL(1) Population Projections are provided by California Department of Finance Projections.(2) Income Data is provided by the United States Census Data and is adjusted for inflation.(3) Public School Enrollment reflects the total number of students enrolled in Pomona Unified School District only, per scho(4) Unemployment rates are provided by the Employment Development Department, Bureau of Labor and Statistics Depar

201

City of Pomona Schedule 18Principal EmployersCurrent Year and Nine Years Ago

Percentage PercentageNumber of of Total City Number of of Total City

Employer Employees Rank Employment Employees Rank Employment

Pomona Valley Hospital 3,270 1 5.0% 3,080 2 4.6%Pomona Unified School District 2,926 2 4.5% 3,406 1 5.1%California State Polytechnic University 2,612 3 4.0%Fairplex 954 4 1.5%Casa Colina Rehabilitation Center 938 5 1.4% 600 6 0.9%City of Pomona 685 6 1.1% 708 4 1.1%Verizon 596 7 0.9% 596 7 0.9%County of Los Angeles Department of Social Services 400 8 0.6% 378 9 0.6%First Transit 348 9 0.5% 311 11 0.5%Inland Valley Care & Rehab 341 10 0.5% 270 15 0.4%Kittrich Corporation 256 11 0.4%Torn & Glasser Inc. 242 12 0.4%Hayward Industries Inc 230 13 0.4% 351 10 0.5%Walmart Stores Inc 207 14 0.3% 284 13 0.4%Anheuser Busch Sales Pomona 204 15 0.3%Lanterman Developmental Center 1,780 3 2.6%California Acrylic Industries 650 5 1.0%Royal Cabinets 450 8 0.7%Interstate Brands West Corp 300 12 0.4%Pioneer Electronics 280 14 0.4%

Source: City of Pomona business license data and Businesses; 2007 CAFRTotal Employment Source: www.labormarketinfo.edd.ca.gov

20072016

202

City of Pomona Schedule 19Authorized Full-Time City Employees by FunctionLast Ten Fiscal Years

Function 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016General Government 36 36 29 26 24 20 19 19 20 20Support Services 46 52 44 36 33 32 32 32 31 32Police 345 348 342 335 271 270 269 270 268 270Public Works 88 87 81 199 184 184 170 169 170 106Water/Wastewater 0 0 0 0 0 0 0 0 0 68Community Development 40 40 40 38 47 40 38 40 0 0Dev & Neighborhood Svcs 0 0 0 0 0 0 0 0 47 47Utility Services 127 128 127 0 0 0 0 0 0 0Community Services and

Library 78 80 78 32 21 21 11 9 2 2

Total 760 771 741 666 580 567 539 539 538 545

Various departments were consolidated in 2009-2010

Source: City of Pomona Finance Department

203

City of PomonaTaxable Sales by CategoryLast Ten Calendar Years (in thousands of dollars)

2007 2008 2009 2010 2011

Apparel Stores 7,929$ 9,884$ 8,210$ 12,239$ 12,339$ General Merchandise 49,839 49,203 48,733 43,655 42,089Food Stores 71,838 72,852 70,991 71,379 66,041Eating and Drinking Places 121,796 124,146 119,631 117,873 115,634Building Materials 283,287 234,707 189,624 160,244 146,146Auto Dealers and Supplies 217,924 178,694 91,100 77,879 58,177Service Stations 194,850 207,178 161,684 158,016 196,602Other Retail Stores 130,933 148,426 115,747 115,538 132,188All Other Outlets 544,522 343,162 284,376 263,940 279,060Drug Stores - - - - -Home Furnishing - - - - -Packaged Liquor Store - - - - -

Total 1,622,918$ 1,368,252$ 1,090,096$ 1,020,763$ 1,048,276$

Source: MuniServices, LLC

204

Schedule 20

2012 2013 2014 2015 2016

12,581$ 13,953$ 15,277$ 22,874$ 22,621$ 41,037 43,478 52,726 62,148 67,79963,376 65,447 68,432 74,104 77,912

121,730 128,363 135,882 149,074 179,655163,013 185,123 207,681 242,612 269,84767,975 75,686 78,793 78,672 97,748

216,063 201,642 195,460 180,021 143,687137,444 165,937 127,969 142,246 130,415301,495 316,419 308,980 360,476 333,147

- - 14,704 14,696 14,521- - 16,848 13,418 26,194- - 7,321 7,677 8,220

1,124,714$ 1,196,048$ 1,230,073$ 1,348,018$ 1,371,766$

205

Schedule�21

206

Schedule�22

207


208

B-1

APPENDIX B

DEFINITIONS AND SUMMARY OF THE INDENTURE

The following is a summary of certain provisions of the Indenture which are not described elsewhere. This summary does not purport to be comprehensive and reference should be made to the Indenture for a full and complete statement of the provisions thereof.

DEFINITIONS; CONTENT OF CERTIFICATES AND OPINIONS

Definitions. Unless the context otherwise requires, the terms defined in the Indenture, for all purposes of the Indenture and of any indenture supplemental thereto and of any certificate, opinion or other document therein mentioned, have the meanings therein specified, to be equally applicable to both the singular and plural forms of any of the terms therein defined.

Accountant’s Report. The term “Accountant’s Report” means a report signed by an Independent Certified Public Accountant.

Authorized Representative. The term “Authorized Representative” means, with respect to the City, its Mayor, Vice Mayor, City Clerk, City Manager, Finance Director or any other person designated as an Authorized Representative of the City by a Certificate of the City signed by its Mayor, Vice Mayor, City Clerk, City Manager, Finance Director and filed with the Trustee.

BE Bonds. The term “BE Bonds” means the City of Pomona 2017 Refunding Revenue Bonds (Water Facilities Project) Series BE (Tax-Exempt).

BF Bonds. The term “BF Bonds” means the City of Pomona 2017 Refunding Revenue Bonds (Water Facilities Project) Series BF (Taxable).

Bond Counsel. The term “Bond Counsel” means Stradling Yocca Carlson & Rauth, a Professional Corporation, or another firm of nationally recognized attorneys experienced in the issuance of obligations the interest on which is excludable from gross income under Section 103 of the Code.

Bonds. The term “Bonds” means all revenue bonds or notes of the City authorized, executed, issued and delivered by the City, the payments of which are payable from Net Revenues on a parity with the 2017 Bonds and which are secured by a pledge of and lien on Revenues as described in the Indenture.

Bond Year. The term “Bond Year” means the period beginning on the date of issuance of the 2017 Bonds and ending on May 1, 2018, and each successive one year or, during the last period prior to maturity, shorter period thereafter until there are no Outstanding 2017 Bonds.

Business Day. The term “Business Day” means: (i) a day which is not a Saturday, Sunday or legal holiday on which banking institutions in the State, or in any other state in which the Office of the Trustee is located, are closed; or (ii) a day on which the New York Stock Exchange is not closed.

Certificate; Direction; Request; Requisition. The terms “Certificate,” “Direction,” “Request” and “Requisition” of the City mean a written certificate, direction, request or requisition signed in the name of the City by its Authorized Representative. Any such instrument and supporting opinions or representations, if any, may, but need not, be combined in a single instrument with any other instrument, opinion or representation, and the two or more so combined will be read and construed as a single instrument. If and to the extent required by the Indenture, each such instrument will include the statements provided for in the Indenture.

City. The term “City” means City of Pomona, a municipal corporation duly organized and existing under and by virtue of the laws of the State.

B-2

Closing Date. The term “Closing Date” means the date on which the 2017 Bonds are delivered to the original purchaser thereof.

Code. The term “Code” means the Internal Revenue Code of 1986, as amended.

Continuing Disclosure Certificate. The term “Continuing Disclosure Certificate” means the Continuing Disclosure Certificate, dated the Closing Date, of the City, as originally executed or as it may be from time to time amended or supplemented in accordance with its terms.

Contracts. The term “Contracts” means all contracts of the City previously or later authorized and executed by the City, the payments under which are payable from Net Revenues on a parity with the 2017 Bonds and which are secured by a pledge and lien on Revenues as described in the Indenture; and excluding contracts entered into for operation and maintenance of the Water System.

Debt Service. The term “Debt Service” means, for any period of calculation, the sum of: (1) the interest payable during such period on all outstanding Bonds, assuming that all outstanding serial Bonds are retired as scheduled and that all outstanding term Bonds are redeemed or paid from sinking fund payments as scheduled (except to the extent that such interest is capitalized or is reasonably anticipated to be reimbursed to the City by the United States of America pursuant to Section 54AA of the Code (Section 1531 of Title I of Division B of the American Recovery and Reinvestment Act of 2009 (Pub. L. No. 111-5, 23 Stat. 115 (2009), enacted February 17, 2009)), or any future similar program); (2) those portions of the principal amount of all outstanding serial Bonds maturing in such period; (3) those portions of the principal amount of all outstanding term Bonds required to be redeemed or paid in such period; and (4) those portions of the Contracts required to be made during such period, (except to the extent that the interest evidenced and represented thereby is capitalized or is reasonably anticipated to be reimbursed to the City by the United States of America pursuant to Section 54AA of the Code (Section 1531 of Title I of Division B of the American Recovery and Reinvestment Act of 2009 (Pub. L. No. 111-5, 23 Stat. 115 (2009), enacted February 17, 2009)), or any future similar program); provided that, as to any such Bonds or Contracts bearing or comprising interest at other than a fixed rate, the rate of interest used to calculate Debt Service will be the greater of: (a) the actual interest rate on such Bonds or Contracts on the date of calculation, or if the indebtedness is not yet outstanding, the initial interest rate (if established and binding); (b) if the Bonds or Contracts have been outstanding for at least twelve months, the average rate over the twelve calendar months immediately preceding the date of calculation; and (c) (i) if interest on the indebtedness is excludable from gross income under the applicable provisions of the Code, the most recently published Securities Industry and Financial Markets Association Index for tax-exempt variable rate obligations; or (ii) if interest is not so excludable, the interest rate on direct U.S. Treasury Obligations with comparable maturities plus 50 basis points; provided, however, that for purposes of any portion of the additional debt test or rate covenant set forth in the Indenture, measuring actual debt service coverage during a test period, variable rate indebtedness will be deemed to bear interest at the actual rate per annum applicable during the test period; and provided further that, if any series or issue of such Bonds or Contracts have 25% or more of the aggregate principal amount of such series or issue due in any one year, Debt Service will be determined for the Fiscal Year of determination as if the principal of and interest on such series or issue of such Bonds or Contracts were being paid from the date of incurrence thereof in substantially equal annual amounts over a period of 25 years from the date of calculation; and provided further that, as to any such Bonds or Contracts or portions thereof bearing no interest but which are sold at a discount and which discount accretes with respect to such Bonds or Contracts or portions thereof, such accreted discount will be treated as interest in the calculation of Debt Service; and provided further that, the amount on deposit in a debt service reserve fund on any date of calculation of Debt Service will be deducted from the amount of principal due at the final maturity of the Bonds and Contracts for which such debt service reserve fund was established and in each preceding year until such amount is exhausted; and provided further that, Debt Service will not include interest which is paid from investment earnings on amounts on deposit in reserve funds and transferred to the Payment Fund.

Depository; DTC. The term “Depository” or “DTC” means The Depository Trust Company, New York, New York, a limited purpose trust company organized under the laws of the State of New York, in its capacity as securities depository for the 2017 Bonds.

Escrow Agreement. The term “Escrow Agreement” means the Escrow Agreement (Series AY and AZ), dated as of May 1, 2017, by and among the City, the Pomona Public Financing Authority, and the Escrow Bank.

B-3

Escrow Bank. The term “Escrow Bank” means The Bank of New York Mellon Trust Company, National Association, as escrow bank under the Escrow Agreement.

Event of Default. The term “Event of Default” means any of the events specified as such in the Indenture.

Federal Securities. The term “Federal Securities” means any direct, noncallable general obligations of the United States of America (including obligations issued or held in book entry form on the books of the Department of the Treasury of the United States of America), or noncallable obligations the timely payment of principal of and interest on which are fully and unconditionally guaranteed by the United States of America.

Fiscal Year. The term “Fiscal Year” means the twelve month period beginning on July 1 of each year and ending on the next succeeding June 30, both dates inclusive, or any other twelve month period later selected and designated as the official fiscal year period of the City.

Indenture. The term “Indenture” means the Indenture of Trust, dated as of May 1, 2017, by and between the City and the Trustee, as originally executed or as it may from time to time be supplemented, modified or amended by any Supplemental Indenture.

Independent Certified Public Accountant. The term “Independent Certified Public Accountant” means any firm of certified public accountants appointed by the City, each of whom is independent of the City pursuant to the Statement on Auditing Standards No. 1 of the American Institute of Certified Public Accountants.

Independent Financial Consultant. The term “Independent Financial Consultant” means a financial consultant or firm of such consultants appointed by the City, which may, for purposes of the certification described in the definition of “Paired Obligations” be an interest rate swap adviser, and who, or each of whom: (1) is in fact independent and not under domination of the City; (2) does not have any substantial interest, direct or indirect, with the City; and (3) is not connected with the City as an officer or employee thereof, but who may be regularly retained to make reports thereto.

Information Services. The term “Information Services” means the Municipal Securities Rulemaking Board; or, in accordance with then-current guidelines of the Securities and Exchange Commission, such other services providing information with respect to called bonds as the City may specify in a certificate to the Trustee and as the Trustee may select.

Initial Rating Requirement. The term “Initial Rating Requirement” means the rating requirement described in the Indenture.

Interest Account. The term “Interest Account” means the account by that name in the Payment Fund established pursuant to the Indenture.

Interest Payment Date. The term “Interest Payment Date” means May 1 and November 1 of each year, commencing November 1, 2017.

Investment Agreement. The term “Investment Agreement” means an investment agreement supported by appropriate opinions of counsel, provided that the guarantor thereof is rated at least “AA” and “Aa” by S&P and Moody’s, respectively, and as further described in the definition of “Permitted Investments.”

Letter of Representations. The term “Letter of Representations” means the letter of the City and the Trustee delivered to and accepted by the Depository on or prior to delivery of the 2017 Bonds as book entry bonds setting forth the basis on which the Depository serves as depository for such book entry bonds, as originally executed or as it may be supplemented or revised or replaced by a letter from the City and the Trustee delivered to and accepted by the Depository.

Minimum Rating Requirement. The term “Minimum Rating Requirement” means the rating requirement described in the Indenture.

B-4

Moody’s. The term “Moody’s” means Moody’s Investors Service, Inc. or any successor thereto.

Net Proceeds. The term “Net Proceeds” means, when used with respect to any casualty insurance or condemnation award, the proceeds from such insurance or condemnation award remaining after payment of all expenses (including attorneys’ fees) incurred in the collection of such proceeds.

Net Revenues. The term “Net Revenues” means, for any Fiscal Year, the Revenues for such Fiscal Year less the Operation and Maintenance Costs for such Fiscal Year. When held by the Trustee in any funds or accounts established under the Indenture, Net Revenues will include all interest or gain derived from the investment of amounts in any of such funds or accounts.

Nominee. The term “Nominee” means the nominee of the Depository, which may be the Depository, as determined from time to time pursuant to the Indenture.

Office. The term “Office” means with respect to the Trustee, the principal corporate trust office of the Trustee in Los Angeles, California, or such other or additional offices as may be specified in writing by the Trustee to the City, except that with respect to presentation of 2017 Bonds for payment or for registration of transfer and exchange such term means the office or agency of the Trustee at which, at any particular time, its corporate trust agency business is conducted.

Operation and Maintenance Costs. The term “Operation and Maintenance Costs” means costs spent or incurred for maintenance and operation of the Water System calculated in accordance with generally accepted accounting principles applicable to governmental agencies, including, but not limited to, the cost of acquiring, pumping and/or treating water, the reasonable expenses of management and repair and other expenses necessary to maintain and preserve the Water System in good repair and working order, and including administrative costs of the City that are charged directly or apportioned to the Water System, including but not limited to salaries and wages of employees, payments to the Public Employees Retirement System, overhead, insurance, taxes (if any), fees of auditors, accountants, attorneys or engineers and insurance premiums, and including all other reasonable and necessary costs of the City or charges (other than debt service payments) required to be paid by it to comply with the terms of the Indenture or any Contract or of any resolution or indenture authorizing the issuance of any Bonds or of such Bonds; but excluding in all cases depreciation, replacement and obsolescence charges or reserves therefor and amortization of intangibles or other bookkeeping entries of a similar nature and all capital charges and other amounts transferred to the Rate Stabilization Fund.

Opinion of Counsel. The term “Opinion of Counsel” means a written opinion of counsel (including but not limited to counsel to the City) selected by the City. If and to the extent required by the provisions of the Indenture, each Opinion of Counsel will include the statements provided for in the Indenture.

Outstanding. The term “Outstanding,” when used as of any particular time with reference to 2017 Bonds, means (subject to the provisions of the Indenture) all 2017 Bonds theretofore or thereupon being authenticated and delivered by the Trustee under the Indenture except: (i) 2017 Bonds theretofore canceled by the Trustee or surrendered to the Trustee for cancellation; (ii) 2017 Bonds with respect to which all liability of the City has been discharged in accordance with the Indenture, including 2017 Bonds (or portions thereof) described therein; and (iii) 2017 Bonds for the transfer or exchange of or in lieu of or in substitution for which other 2017 Bonds have been authenticated and delivered by the Trustee pursuant to the Indenture.

Owner; 2017 Bond Owner. The term “Owner” or “2017 Bond Owner,” whenever used in the Indenture with respect to a 2017 Bond, means the person in whose name the ownership of such 2017 Bond is registered on the Registration Books.

Paired Obligation Provider. The term “Paired Obligation Provider” means a party to a Paired Obligation other than the City.

Paired Obligations. The term “Paired Obligations” means any Bond or Contract (or portion thereof) designated as Paired Obligations in the resolution, indenture or other document authorizing the issuance or

B-5

execution and delivery thereof, which are simultaneously issued or executed and delivered: (i) the principal of which is of equal amount maturing and to be redeemed or prepaid (or cancelled after acquisition thereof) on the same dates and in the same amounts; and (ii) the interest rates which, taken together, are reasonably expected to result in a fixed interest rate obligation of the City for the term of such Bond or Contract, as certified by an Independent Financial Consultant in writing, and which comply with the provisions of the Indenture.

Participants. The term “Participants” means those broker-dealers, banks and other financial institutions from time to time for which the Depository holds book entry certificates as securities depository.

Payment Fund. The term “Payment Fund” means the fund by that name established pursuant to the Indenture.

Permitted Investments. The term “Permitted Investments” means any of the following which at the time of investment are legal investments under the laws of the State for the moneys proposed to be invested therein (provided that the Trustee is entitled to rely upon any Written Request from the City as conclusive certification to the Trustee that the investments described therein are so authorized under the laws of the State of California): (A) for all purposes, including: (i) as defeasance investments in refunding escrow accounts; and (ii) for the purpose of investing (and receiving premium credit for) accrued and capitalized interest: (1) cash; or (2) direct obligations of (including obligations issued or held in book entry form on the books of) the Department of the Treasury of the United States of America; and (B) for all purposes other than: (i) defeasance investments in refunding escrow accounts; and (ii) investing (and receiving credit for) accrued and capitalized interest: (1) obligations of any of the following federal agencies which obligations represent full faith and credit of the United States of America, including the Export-Import Bank; Farmers Home Administration; General Services Administration; U.S. Maritime Administration; Small Business Administration; Government National Mortgage Association (GNMA); U.S. Department of Housing & Urban Development (PHAs); and Federal Housing Administration; (2) bonds, notes or other evidences of indebtedness rated “AAA” and “Aaa” by the applicable Rating Agency issued by the Federal National Mortgage Association or the Federal Home Loan Mortgage Corporation with remaining maturities not exceeding three years; (3) U.S. dollar denominated deposit accounts, certificates of deposit, federal funds and banker’s acceptances with domestic commercial banks, which may include the Trustee and its affiliates, which: (I) have a rating on their short term certificates of deposit on the date of purchase of “A-1” or “A-1+” by S&P and “P-1” by Moody’s; or (II) deposits insured by the Federal Deposit Insurance Corporation maturing no more than 360 days after the date of purchase (ratings on holding companies are not considered as the rating of the bank); (4) commercial paper which is rated at the time of purchase in the single highest classification, “A-1+” by S&P and “P-1” by Moody’s and which matures not more than 270 days after the date of purchase; (5) investments in a money market fund rated “AAAm,” “AAm,” “AAAm-G” or “AAm-G” or better by S&P, including such funds for which the Trustee, its affiliates or subsidiaries provide investment advisory or other management services or for which the Trustee or an affiliate of the Trustee serves as investment administrator, shareholder servicing agent, and/or custodian or subcustodian, notwithstanding that: (I) the Trustee or an affiliate of the Trustee receives fees from funds for services rendered, (II) the Trustee collects fees for services rendered pursuant to the Indenture, which fees are separate from the fees received from such funds, and (III) services performed for such funds and pursuant to the Indenture may at times duplicate those provided to such funds by the Trustee or an affiliate of the Trustee; (6) pre-refunded municipal obligations defined as follows: any bonds or other obligations of any state of the United States of America or of any agency, instrumentality or local governmental unit of any such state which are not callable at the option of the obligor prior to maturity or as to which irrevocable instructions have been given by the obligor to call on the date specified in the notice and which are rated, based on the escrow, in the highest rating category of S&P and Moody’s, or any successor thereto; (7) any Investment Agreement; (8) the Local Agency Investment Fund of the State of California; and (9) any other investment permitted by law.

Principal Account. The term “Principal Account” means the account by that name in the Payment Fund established pursuant to the Indenture.

Rate Stabilization Fund. The term “Rate Stabilization Fund” means the fund by that name established pursuant to the Indenture.

Rating. The term “Rating” means any currently effective rating on the 2017 Bonds issued by a Rating Agency.

B-6

Rating Agencies. The term “Rating Agencies” means S&P and Moody’s.

Rebate Fund. The term “Rebate Fund” means the fund by that name established pursuant to the Indenture.

Record Date. The term “Record Date” means, with respect to any Interest Payment Date, the 15th day of the calendar month preceding such Interest Payment Date, whether or not such day is a Business Day.

Redemption Date. The term “Redemption Date” means the date fixed for an optional redemption prior to maturity of the 2017 Bonds.

Redemption Fund. The term “Redemption Fund” means the fund by that name established pursuant to the Indenture.

Redemption Price. The term “Redemption Price” means, with respect to any 2017 Bond (or portion thereof), the principal amount of such 2017 Bond (or portion) plus the interest accrued to the applicable Redemption Date and the applicable premium, if any, payable upon redemption thereof pursuant to the provisions of such 2017 Bond and the Indenture.

Registration Books. The term “Registration Books” means the records maintained by the Trustee for the registration of ownership and registration of transfer of the 2017 Bonds pursuant to the Indenture.

Responsible Officer of the Trustee. The term “Responsible Officer of the Trustee” means any officer within the corporate trust division (or any successor group or department of the Trustee) including any vice president, assistant vice president, assistant secretary or any other officer or assistant officer of the Trustee customarily performing functions similar to those performed by the persons who at the time are such officers, respectively, with responsibility for the administration of the Indenture.

Revenues. The term “Revenues” means all income, rents, rates, fees, charges and other moneys derived from the ownership or operation of the Water System, including, without limiting the generality of the foregoing, (1) all income, rents, rates, fees, charges or other moneys derived by the City from the sale, furnishing and supplying of the water, recycled water or other services, facilities, and commodities sold, furnished or supplied through the facilities of or in the conduct or operation of the business of the Water System, (2) the proceeds of any stand-by or water availability charges, development fees and connection charges collected by the City, (3) the earnings on and income derived from the investment of amounts described in clauses (1) and (2) above, and from amounts in the Rate Stabilization Fund and from Water Fund reserves, but excluding (x) customers’ deposits or any other deposits or advances subject to refund until such deposits or advances have become the property of the City, (y) any proceeds of taxes or assessments restricted by law to be used by the City to pay bonds or other obligations before or later issued; and (z) revenues of any water system acquired through merger, consolidation or similar action to the extent the exclusion of such acquired water system is required pursuant to the terms of such merger, consolidation or similar action.

“Revenues” will also include all amounts transferred from the Rate Stabilization Fund to the Water Revenue Fund during any Fiscal Year in accordance with the Indenture and will not include any amounts transferred from the Water Revenue Fund to the Rate Stabilization Fund during any Fiscal Year in accordance with the Indenture.

S&P. The term “S&P” means S&P Global Ratings, a Standard & Poor’s Financial Services, LLC business, or any successor thereto.

Securities Depositories. The term “Securities Depositories” means The Depository Trust Company; and, in accordance with then current guidelines of the Securities and Exchange Commission, such other addresses and/or such other securities depositories as the City may designate in a Written Request of the City deliver to the Trustee.

State. The term “State” means the State of California.

B-7

Supplemental Indenture. The term “Supplemental Indenture” means any indenture later duly authorized and entered into between the City and the Trustee, supplementing, modifying or amending the Indenture; but only if and to the extent that such Supplemental Indenture is specifically authorized under the Indenture.

Tax Certificate. The term “Tax Certificate” means the Tax Certificate dated the Closing Date, concerning certain matters pertaining to the use and investment of proceeds of the BE Bonds issued by the City on the date of issuance of the BE Bonds, including any and all exhibits attached thereto.

Trustee. The term “Trustee” means Zions Bank, a division of ZB, National Association, a national banking association duly organized and existing under the laws of the United States of America, or its successor as Trustee under the Indenture as provided therein.

2007 AY Bonds. The term “2007 AY Bonds” means the Pomona Public Financing Authority 2007 Revenue Bonds, Series AY (Water Facilities Project).

2007 AZ Bonds. The term “2007 AZ Bonds” means the Pomona Public Financing Authority 2007 Taxable Revenue Refunding Bonds, Series AZ (Water Facilities Project).

2007 Bonds. The term “2007 Bonds” means, collectively, the 2007 AY Bonds and the 2007 AZ Bonds.

2017 Bonds. The term “2017 Bonds” means, collectively, the BE Bonds and the BF Bonds issued by the City and at any time Outstanding pursuant to the Indenture.

Valuation Date. “Valuation Date” means the fifth Business Day preceding the date of redemption.

Value. The term “Value,” which will be determined as of the end of each month, means that the value of any investments will be calculated as follows: (a) for the purpose of determining the amount of any fund, all Permitted Investments credited to such fund will be valued at fair market value. The Trustee will determine the fair market value based on accepted industry standards and from accepted industry providers. Accepted industry providers include, but are not limited to, pricing services provided by Financial Times Interactive Data Corporation, Bank of America Merrill Lynch and Morgan Stanley Smith Barney. (b) As to certificates of deposit and bankers’ acceptances: the face amount thereof, plus accrued interest. (c) As to any investment not specified above: market value, or, if the market value is not ascertainable by the City or the Trustee, at cost.

Water Service. The term “Water Service” means the water distribution service made available or provided by the Water System.

Water Revenue Fund. The term “Water Revenue Fund” means the fund by that name continued pursuant to the Indenture.

Water System. The term “Water System” means the entire water supply, treatment, storage and distribution system of the City, including but not limited to all facilities, properties and improvements at any time owned, controlled or operated by the City for the supply, treatment and storage of water to residents of the City and adjacent areas, and any necessary lands, rights, entitlements and other property useful in connection therewith, together with all extensions thereof and improvements thereto at any time acquired, constructed or installed by the City.

Written Consent of the City; Written Order of the City; Written Request of the City; Written Requisition of City. The terms “Written Consent of the City,” “Written Order of the City,” “Written Request of the City” and “Written Requisition of the City” mean, respectively, a written consent, order, request or requisition signed by or on behalf of the City by an Authorized Representative or by any two persons (whether or not members of the City Council) who are specifically authorized by resolution of the City to sign or execute such a document on its behalf.

Content of Certificates and Opinions. Every certificate or opinion provided for in the Indenture except the certificate of destruction provided for therein, with respect to compliance with any provision thereof will include:

B-8

(1) a statement that the person making or giving such certificate or opinion has read such provision and the definitions therein relating thereto; (2) a brief statement as to the nature and scope of the examination or investigation upon which the certificate or opinion is based; (3) a statement that, in the opinion of such person he has made or caused to be made such examination or investigation as is necessary to enable him to express an informed opinion with respect to the subject matter referred to in the instrument to which his signature is affixed; (4) a statement of the assumptions upon which such certificate or opinion is based, and that such assumptions are reasonable; and (5) a statement as to whether, in the opinion of such person, such provision has been complied with.

Any such certificate or opinion made or given by an officer of the City may be based, insofar as it relates to legal or accounting matters, upon a certificate or opinion of or representation by counsel or an Independent Certified Public Accountant or Independent Financial Consultant, unless such officer knows, or in the exercise of reasonable care should have known, that the certificate, opinion or representation with respect to the matters upon which such certificate or statement may be based, as aforesaid, is erroneous. Any such certificate or opinion made or given by counsel or an Independent Certified Public Accountant or Independent Financial Consultant may be based, insofar as it relates to factual matters (with respect to which information is in the possession of the City) upon a certificate or opinion of or representation by an officer of the City, unless such counsel or Independent Certified Public Accountant or Independent Financial Consultant knows, or in the exercise of reasonable care should have known, that the certificate or opinion or representation with respect to the matters upon which such person’s certificate or opinion or representation may be based, as aforesaid, is erroneous. The same officer of the City, or the same counsel or Independent Certified Public Accountant or Independent Financial Consultant, as the case may be, need not certify to all of the matters required to be certified under any provision of the Indenture, but different officers, counsel or Independent Certified Public Accountants or Independent Financial Consultants may certify to different matters, respectively.

THE 2017 BONDS

Terms of the 2017 Bonds. Each 2017 Bond will be dated the date of initial delivery, and will bear interest from the Interest Payment Date next preceding the date of authentication thereof unless: (a) it is authenticated after a Record Date and on or before the following Interest Payment Date, in which event it will bear interest from such Interest Payment Date; or (b) unless it is authenticated on or before October 15, 2017, in which event it will bear interest from the date of initial delivery; provided, however, that if, as of the date of authentication of any 2017 Bond, interest thereon is in default, such 2017 Bond will bear interest from the Interest Payment Date to which interest has previously been paid or made available for payment thereon. Interest on the 2017 Bonds will be calculated on the basis of a 360 day year composed of twelve 30 day months.

Transfer of 2017 Bonds. Any 2017 Bond may, in accordance with its terms, be transferred on the Registration Books by the person in whose name it is registered, in person or by his or her duly authorized attorney, upon surrender of such 2017 Bond at the Office of the Trustee for cancellation, accompanied by delivery of a written instrument of transfer, duly executed in a form acceptable to the Trustee. The Trustee will not be required to register the transfer of any 2017 Bond during the period in which the Trustee is selecting 2017 Bonds for redemption and any 2017 Bond that has been selected for redemption.

Whenever any 2017 Bond or 2017 Bonds is surrendered for transfer, the City will execute and the Trustee will authenticate and will deliver a new 2017 Bond or 2017 Bonds of authorized denomination or denominations for a like series and aggregate principal amount of the same maturity and series. The Trustee will require the 2017 Bond Owner requesting such transfer to pay any tax or other governmental charge required to be paid with respect to such transfer. Following any transfer of 2017 Bonds, the Trustee will cancel and destroy the 2017 Bonds that it has received.

Exchange of 2017 Bonds. 2017 Bonds may be exchanged at the Office of the Trustee for a like aggregate principal amount of other authorized denominations of the same series and maturity and series. The Trustee will not be required to exchange any 2017 Bond during the period in which the Trustee is selecting 2017 Bonds for redemption and any 2017 Bond that has been selected for redemption. The Trustee will require the 2017 Bond Owner requesting such exchange to pay any tax or other governmental charge required to be paid with respect to such exchange. Following any exchange of 2017 Bonds, the Trustee will cancel and destroy the 2017 Bonds that it has received.

B-9

Registration Books. The Trustee will keep or cause to be kept, at the Office of the Trustee, sufficient records for the registration and transfer of ownership of the 2017 Bonds, which will upon reasonable notice and at reasonable times be open to inspection during regular business hours by the City and the Owners; and, upon presentation for such purpose, the Trustee will, under such reasonable regulations as it may prescribe, register or transfer or cause to be registered or transferred, on such records, the ownership of the 2017 Bonds as provided in the Indenture. The person in whose name any 2017 Bond is registered will be deemed the Owner thereof for all purposes of the Indenture, and payment of or on account of the interest on and principal and Redemption Price of by such 2017 Bonds will be made only to or upon the order in writing of such registered Owner, which payments will be valid and effectual to satisfy and discharge liability upon such 2017 Bond to the extent of the sum or sums so paid.

2017 Bonds Mutilated, Lost, Destroyed or Stolen. If any 2017 Bond becomes mutilated, the City, at the expense of the Owner of said 2017 Bond, will execute, and the Trustee will thereupon authenticate and deliver, a new 2017 Bond of like tenor, series and authorized denomination in exchange and substitution for the 2017 Bonds so mutilated, but only upon surrender to the Trustee of the 2017 Bond so mutilated. Every mutilated 2017 Bond so surrendered to the Trustee will be canceled by it and upon the Written Request of the City delivered to, or upon the order of, the City. If any 2017 Bond is lost, destroyed or stolen, evidence of such loss, destruction or theft may be submitted to the Trustee and, if such evidence be satisfactory to the Trustee and indemnity satisfactory to the Trustee is given, the City, at the expense of the Owner, will execute, and the Trustee will thereupon authenticate and deliver, a new 2017 Bond of like tenor, series and authorized denomination in lieu of and in substitution for the 2017 Bond so lost, destroyed or stolen (or if any such 2017 Bond has matured or is about to mature, instead of issuing a substitute 2017 Bond, the Trustee may pay the same without surrender thereof). The City may require payment by the Owner of a sum not exceeding the actual cost of preparing each new 2017 Bond issued under the Indenture and of the expenses which may be incurred by the City and the Trustee in the premises. Any 2017 Bond issued under the provisions of the Indenture in lieu of any 2017 Bond alleged to be lost, destroyed or stolen will constitute an original additional contractual obligation on the part of the City whether or not the 2017 Bond so alleged to be lost, destroyed, or stolen be at any time enforceable by anyone, and will be entitled to the benefits of the Indenture with all other 2017 Bonds secured by the Indenture. Notwithstanding any other provision of the Indenture, in lieu of delivering a new 2017 Bond for a 2017 Bond which has been mutilated, lost, destroyed or stolen and which has matured or has been selected for redemption, the Trustee may make payment of such 2017 Bond upon receipt of indemnity satisfactory to the Trustee.

Book Entry System.

(a) Election of Book Entry System. Prior to the issuance of the 2017 Bonds, the City may provide that such 2017 Bonds will be initially issued as book entry 2017 Bonds. If the City elects to deliver any 2017 Bonds in book entry form, then the City will cause the delivery of a separate single fully registered bond (which may be typewritten) for each maturity date of such 2017 Bonds in an authorized denomination corresponding to that total principal amount of the 2017 Bonds designated to mature on such date. Upon initial issuance, the ownership of each such 2017 Bond will be registered in the 2017 Bond Registration Books in the name of the Nominee, as nominee of the Depository, and ownership of the 2017 Bonds, or any portion thereof may not thereafter be transferred except as provided in the Indenture.

With respect to book entry 2017 Bonds, the City and the Trustee have no responsibility or obligation to any Participant or to any person on behalf of which such a Participant holds an interest in such book entry 2017 Bonds. Without limiting the immediately preceding sentence, the City and the Trustee have no responsibility or obligation with respect to: (i) the accuracy of the records of the Depository, the Nominee, or any Participant with respect to any ownership interest in book entry 2017 Bonds; (ii) the delivery to any Participant or any other person, other than an Owner as shown in the 2017 Bond Registration Books, of any notice with respect to book entry 2017 Bonds, including any notice of redemption; (iii) the selection by the Depository and its Participants of the beneficial interests in book entry 2017 Bonds to be redeemed in the event that the City redeems the 2017 Bonds in part; or (iv) the payment by the Depository or any Participant or any other person, of any amount of principal of, premium, if any, or interest on book entry 2017 Bonds. The City and the Trustee may treat and consider the person in whose name each book entry 2017 Bond is registered in the 2017 Bond Registration Books as the absolute Owner of such book entry 2017 Bond for the purpose of payment of principal of, premium and interest on such 2017 Bond, for the purpose of giving notices of redemption and other matters with respect to such 2017

B-10

Bond, for the purpose of registering transfers with respect to such 2017 Bond, and for all other purposes whatsoever. The Trustee will pay all principal of, premium, if any, and interest on the 2017 Bonds only to or upon the order of the respective Owner, as shown in the 2017 Bond Registration Books, or his respective attorney duly authorized in writing, and all such payments will be valid and effective to fully satisfy and discharge the City’s obligations with respect to payment of principal of, premium, if any, and interest on the 2017 Bonds to the extent of the sum or sums so paid. No person other than an Owner, as shown in the 2017 Bond Registration Books, will receive a 2017 Bond evidencing the obligation to make payments of principal of, premium, if any, and interest on the 2017 Bonds. Upon delivery by the Depository to the City and the Trustee of written notice to the effect that the Depository has determined to substitute a new nominee in place of the Nominee, and subject to the provisions in the Indenture with respect to Record Dates, the word Nominee in the Indenture will refer to such nominee of the Depository.

(b) Delivery of Letter of Representations. In order to qualify the book entry 2017 Bonds for the Depository’s book entry system, the City and the Trustee (if required by the Depository) will execute and deliver to the Depository a Letter of Representations. The execution and delivery of a Letter of Representations does not in any way impose upon the City or the Trustee any obligation whatsoever with respect to persons having interests in such book entry 2017 Bonds other than the Owners, as shown on the 2017 Bond Registration Books. By executing a Letter of Representations, the City agrees to take all action necessary at all times so that the City and Trustee will be in compliance with all representations of the City in such Letter of Representations. In addition to the execution and delivery of a Letter of Representations, the City and the City will take such other actions, not inconsistent with the Indenture, as are reasonably necessary to qualify book entry 2017 Bonds for the Depository’s book entry program.

(c) Selection of Depository. In the event that: (i) the Depository determines not to continue to act as securities depository for book entry 2017 Bonds; or (ii) the City determines that continuation of the book entry system is not in the best interest of the beneficial owners of the 2017 Bonds or the City, then the City will discontinue the book entry system with the Depository. If the City determines to replace the Depository with another qualified securities depository, the City will prepare or direct the preparation of a new single, separate, fully registered 2017 Bond for each of the maturity dates of such book entry 2017 Bonds, registered in the name of such successor or substitute qualified securities depository or its Nominee as provided in the Indenture. If the City fails to identify another qualified securities depository to replace the Depository, then the 2017 Bonds will no longer be restricted to being registered in such 2017 Bond Registration Books in the name of the Nominee, but will be registered in whatever name or names the Owners transferring or exchanging such 2017 Bonds designate, in accordance with the provisions of the Indenture.

(d) Payments To Depository. Notwithstanding any other provision of the Indenture to the contrary, so long as all Outstanding 2017 Bonds are held in book entry form and registered in the name of the Nominee, all payments of principal of, redemption premium, if any, and interest on such 2017 Bond and all notices with respect to such 2017 Bond will be made and given, respectively to the Nominee, as provided in the Letter of Representations or as otherwise instructed by the Depository and agreed to by the Trustee notwithstanding any inconsistent provisions in the Indenture.

(e) Transfer of 2017 Bonds to Substitute Depository.

(i) The 2017 Bonds will be initially issued as provided in the Indenture. Registered ownership of such 2017 Bonds, or any portions thereof, may not thereafter be transferred except: (A) to any successor of DTC or its nominee, or of any substitute depository designated pursuant to clause (B) below (“Substitute Depository”); provided that any successor of DTC or Substitute Depository is qualified under any applicable laws to provide the service proposed to be provided by it; (B) to any Substitute Depository, upon: (1) the resignation of DTC or its successor (or any Substitute Depository or its successor) from its functions as depository; or (2) a determination by the City that DTC (or its successor) is no longer able to carry out its functions as depository; provided that any such Substitute Depository is qualified under any applicable laws to provide the services proposed to be provided by it; or (C) to any person as provided below, upon: (1) the resignation of DTC or its successor (or any Substitute Depository or its successor) from its functions as depository; or (2) a determination by the City that DTC or its successor (or Substitute Depository or its successor) is no longer able to carry out its functions as depository.

B-11

(ii) In the case of any transfer pursuant to clauses (A) or (B) above, upon receipt of all Outstanding 2017 Bonds by the Trustee, together with a Written Request of the City to the Trustee designating the Substitute Depository, a single new 2017 Bond, which the City will prepare or cause to be prepared, will be issued for each maturity of 2017 Bonds then Outstanding, registered in the name of such successor or such Substitute Depository or their Nominees, as the case may be, all as specified in such Written Request of the City. In the case of any transfer pursuant to clause (C) above, upon receipt of all Outstanding 2017 Bonds by the Trustee, together with a Written Request of the City to the Trustee, new 2017 Bonds, which the City will prepare or cause to be prepared, will be issued in such denominations and registered in the names of such persons as are requested in such Written Request of the City, subject to the limitations of the Indenture, provided that the Trustee is not required to deliver such new 2017 Bonds within a period of less than 60 days from the date of receipt of such Written Request from the City.

(iii) In the case of a partial redemption or an advance refunding of any 2017 Bonds evidencing a portion of the principal maturing in a particular year, DTC or its successor (or any Substitute Depository or its successor) will make an appropriate notation on such 2017 Bonds indicating the date and amounts of such reduction in principal, in form acceptable to the Trustee, all in accordance with the Letter of Representations. The Trustee is not liable for such Depository’s failure to make such notations or errors in making such notations and the records of the Trustee as to the Outstanding principal amount of such 2017 Bonds will be controlling.

(iv) The City and the Trustee are entitled to treat the person in whose name any 2017 Bond is registered as the Owner thereof for all purposes of the Indenture and any applicable laws, notwithstanding any notice to the contrary received by the Trustee or the City; and the City and the Trustee have no responsibility for transmitting payments to, communicating with, notifying, or otherwise dealing with any beneficial owners of the 2017 Bonds. Neither the City nor the Trustee have any responsibility or obligation, legal or otherwise, to any such beneficial owners or to any other party, including DTC or its successor (or Substitute Depository or its successor), except to the Owner of any 2017 Bonds, and the Trustee may rely conclusively on its records as to the identity of the Owners of the 2017 Bonds.

ISSUANCE OF 2017 BONDS; APPLICATION OF PROCEEDS

Validity of 2017 Bonds. The validity of the authorization and issuance of the 2017 Bonds is not dependent on and will not be affected in any way by any proceedings taken by the City or the Trustee with respect to any other agreement. The recital contained in the 2017 Bonds that the same are issued pursuant to the Constitution and laws of the State will be conclusive evidence of the validity and of compliance with the provisions of law in their issuance.

REDEMPTION OF 2017 BONDS

Selection of 2017 Bonds for Redemption. Whenever provision is made in the Indenture for the redemption of less than all of the 2017 Bonds, the Trustee will select the 2017 Bonds for redemption as a whole or in part on any date as directed by the City and by lot within each maturity of a Series of 2017 Bonds in integral multiples of $5,000 in accordance with the Indenture. The Trustee will promptly notify the City in writing of the numbers of the 2017 Bonds or portions thereof so selected for redemption.

Partial Redemption of 2017 Bonds. Upon surrender of any 2017 Bond redeemed in part only, the City will execute and the Trustee will authenticate and deliver to the Owner thereof, at the expense of the City, a new 2017 Bond or 2017 Bonds of authorized denominations equal in aggregate principal amount to the unredeemed portion of the 2017 Bonds surrendered and of the same series, interest rate and maturity.

Effect of Redemption. Notice of redemption having been duly given as aforesaid, and moneys for payment of the Redemption Price of, together with interest accrued to the date fixed for redemption on, the 2017 Bonds (or portions thereof) so called for redemption being held by the Trustee, on the Redemption Date designated in such notice, the 2017 Bonds (or portions thereof) so called for redemption will become due and payable, interest on the 2017 Bonds so called for redemption will cease to accrue, said 2017 Bonds (or portions thereof) will cease to be entitled to any benefit or security under the Indenture, and the Owners of said 2017 Bonds will have no rights in

B-12

respect thereof except to receive payment of the Redemption Price thereof. The Trustee will, upon surrender for payment of any of the 2017 Bonds to be redeemed on their Redemption Dates, pay such 2017 Bonds at the Redemption Price. All 2017 Bonds redeemed pursuant to the provisions of the Indenture will be canceled upon surrender thereof.

REVENUES, FUNDS AND ACCOUNTS; PAYMENT OF PRINCIPAL AND INTEREST

Application of Interest Account. All amounts in the Interest Account will be used and withdrawn by the Trustee solely for the purpose of paying interest on the 2017 Bonds as it becomes due and payable (including accrued interest on any 2017 Bonds purchased or accelerated prior to maturity pursuant to the Indenture).

Application of Principal Account. All amounts in the Principal Account will be used and withdrawn by the Trustee solely to pay the principal amount of the 2017 Bonds at maturity, mandatory sinking fund redemption, purchase or acceleration; provided, however, that at any time prior to selection for redemption of any such 2017 Bonds, upon written direction of the City, the Trustee will apply such amounts to the purchase of 2017 Bonds at public or private sale, as and when and at such prices (including brokerage and other charges, but excluding accrued interest, which is payable from the Interest Account) as directed pursuant to a Written Request of the City, except that the purchase price (exclusive of accrued interest) may not exceed the Redemption Price then applicable to the 2017 Bonds.

Application of Redemption Fund. There has been established with the Trustee a special fund designated as the “Redemption Fund.” All amounts in the Redemption Fund will be used and withdrawn by the Trustee solely for the purpose of paying the Redemption Price of the 2017 Bonds to be redeemed on any Redemption Date pursuant to the Indenture; provided, however, that at any time prior to selection for redemption of any such 2017 Bonds, upon written direction of the City, the Trustee will apply such amounts to the purchase of 2017 Bonds at public or private sale, as and when and at such prices (including brokerage and other charges, but excluding accrued interest, which is payable from the Interest Account) as directed pursuant to a Written Request of the City, except that the purchase price (exclusive of accrued interest) may not exceed the Redemption Price then applicable to the 2017 Bonds.

Investments. All moneys in any of the funds or accounts established with the Trustee pursuant to the Indenture will be invested by the Trustee solely in Permitted Investments. Such investments will be directed by the City pursuant to a Written Request of the City filed with the Trustee at least two Business Days in advance of the making of such investments. In the absence of any such directions from the City, the Trustee will invest any such moneys in Permitted Investments described in clause (B)(5) of the definition thereof; provided, however, that any such investment will be made by the Trustee only if, prior to the date on which such investment is to be made, the Trustee has received a written direction from the City specifying a specific money market fund and, if no such written direction from the City is so received, the Trustee will hold such moneys uninvested. Obligations purchased as an investment of moneys in any fund will be deemed to be part of such fund or account.

All interest or gain derived from the investment of amounts in any of the funds or accounts established under the Indenture will be deposited in the Interest Account unless otherwise provided in the Indenture. For purposes of acquiring any investments under the Indenture, the Trustee may commingle funds (other than the Rebate Fund) held by it thereunder upon the Written Request of the City. The Trustee may act as principal or agent in the acquisition or disposition of any investment and may impose its customary charges therefor. The Trustee will incur no liability for losses arising from any investments made pursuant to the Indenture.

All investment earnings on amounts in the Rate Stabilization Fund will be transferred to the Water Revenue Fund upon receipt thereof.

The City has acknowledged that to the extent that regulations of the Comptroller of the Currency or other applicable regulatory entity grant the City the right to receive brokerage confirmations of security transactions as they occur, the City has specifically waived receipt of such confirmations to the extent permitted by law. The Trustee will furnish the City periodic cash transaction statements which include detail for all investment transactions made by the Trustee under the Indenture. The Trustee or any of its affiliates may act as sponsor, advisor or manager in connection with any investments made by the Trustee under the Indenture. The City will invest, or cause to be invested, all moneys in any fund or accounts established with the Trustee as provided in the Tax Certificate. For

B-13

investment purposes, the Trustee may commingle the funds and accounts established under the Indenture, but will account for each separately. In making any valuations of investments under the Indenture, the Trustee may utilize and rely on computerized securities pricing services that may be available to the Trustee, including those available through the Trustee accounting system.

Rebate Fund.

(a) Establishment. The Trustee will establish a fund for the BE Bonds designated the “Rebate Fund.” Absent an opinion of Bond Counsel that the exclusion from gross income for federal income tax purposes of interest on the BE Bonds will not be adversely affected, the City will cause to be deposited in the Rebate Fund such amounts as are required to be deposited therein pursuant to the Indenture and the Tax Certificate. All money at any time deposited in the Rebate Fund will be held by the Trustee in trust for payment to the United States Treasury. All amounts on deposit in the Rebate Fund for the BE Bonds will be governed by the Indenture and the Tax Certificate, unless and to the extent that the City delivers to the Trustee an opinion of Bond Counsel that the exclusion from gross income for federal income tax purposes of interest on the BE Bonds will not be adversely affected if such requirements are not satisfied. Notwithstanding anything to the contrary contained in the Indenture or in the Tax Certificate, the Trustee: (i) will be deemed conclusively to have complied with the provisions thereof if it follows all Requests of the City; and (ii) has no liability or responsibility to enforce compliance by the City with the terms of the Tax Certificate; and (iii) may rely conclusively on the City’s calculations and determinations and certifications relating to rebate matters; and (iv) has no responsibility to independently make any calculations or determinations or to review the City’s calculations or determinations thereunder.

(i) Annual Computation. Within 55 days of the end of each Bond Year (as such term is defined in the Tax Certificate), the City will calculate or cause to be calculated the amount of rebatable arbitrage, in accordance with Section 148(f)(2) of the Code and Section 1.148-3 of the Treasury Regulations (taking into account any applicable exceptions with respect to the computation of the rebatable arbitrage, described, if applicable, in the Tax Certificate (e.g., the temporary investments exceptions of Section 148(f)(4)(B) and the construction expenditures exception of Section 148(f)(4)(C) of the Code), and taking into account whether the election pursuant to Section 148(f)(4)(C)(vii) of the Code (the “1½% Penalty”) has been made), for such purpose treating the last day of the applicable Bond Year as a computation date, within the meaning of Section 1.148-1(b) of the Treasury Regulations (the “Rebatable Arbitrage”). The City will obtain expert advice as to the amount of the Rebatable Arbitrage to comply with the foregoing provisions.

(ii) Annual Transfer. Within 55 days of the end of each Bond Year, upon the Written Request of the City, an amount will be deposited to the Rebate Fund by the Trustee from any Net Revenues legally available for such purpose (as specified by the City in the aforesaid Written Request), if and to the extent required so that the balance in the Rebate Fund equals the amount of Rebatable Arbitrage so calculated in accordance with clause (i) above. In the event that immediately following the transfer required by the previous sentence, the amount then on deposit to the credit of the Rebate Fund exceeds the amount required to be on deposit therein, upon Written Request of the City, the Trustee will withdraw the excess from the Rebate Fund and then credit the excess to the Payment Fund.

(iii) Payment to the Treasury. The Trustee will pay, as directed by Written Request of the City, to the United States Treasury, out of amounts in the Rebate Fund: (A) Not later than 60 days after the end of: (X) the fifth Bond Year; and (Y) each applicable fifth Bond Year thereafter, an amount equal to at least 90% of the Rebatable Arbitrage calculated as of the end of such Bond Year; and (B) Not later than 60 days after the payment of all the BE Bonds, an amount equal to 100% of the Rebatable Arbitrage calculated as of the end of such applicable Bond Year, and any income attributable to the Rebatable Arbitrage, computed in accordance with Section 148(f) of the Code and Section 1.148-3 of the Treasury Regulations.

In the event that, prior to the time of any payment required to be made from the Rebate Fund, the amount in the Rebate Fund is not sufficient to make such payment when such payment is due, the City will calculate or cause to be calculated the amount of such deficiency and deposit an amount received from any legally available source equal to such deficiency prior to the time such payment is due. Each payment required to be made pursuant to the foregoing provisions will be made to the Internal Revenue Service Center, Ogden, Utah 84201 on or before the date

B-14

on which such payment is due, and will be accompanied by Internal Revenue Service Form 8038-T (prepared by the City), or will be made in such other manner as provided under the Code.

(b) Disposition of Unexpended Funds. Any funds remaining in the Rebate Fund after redemption and payment of the BE Bonds and the payments described in clause (a) above being made may be withdrawn by the City and utilized in any manner by the City.

(c) Survival of Defeasance. Notwithstanding anything in the Indenture to the contrary, the obligation to comply with the Rebate Fund requirements of the Indenture will survive the defeasance or payment in full of the BE Bonds.

Application of Funds and Accounts When No 2017 Bonds are Outstanding. On the date on which all 2017 Bonds are retired under the Indenture or provision made therefor pursuant to the Indenture and after payment of all amounts due the Trustee thereunder, all moneys then on deposit in any of the funds or accounts (other than the Rebate Fund) established with the Trustee pursuant to the Indenture will be withdrawn by the Trustee and paid to the City for use by the City at any time for any purpose permitted by law.

PARTICULAR COVENANTS

Punctual Payment. The City will punctually pay or cause to be paid the principal and interest to become due in respect of all of the 2017 Bonds, in strict conformity with the terms of the 2017 Bonds and of the Indenture, according to the true intent and meaning thereof, but only out of Net Revenues and other assets pledged for such payment as provided in the Indenture.

Extension of Payment of 2017 Bonds. The City will not directly or indirectly extend or assent to the extension of the maturity of any of the 2017 Bonds or the time of payment of any claims for interest by the purchase of such 2017 Bonds or by any other arrangement, and in case the maturity of any of the 2017 Bonds or the time of payment of any such claims for interest will be extended, such 2017 Bonds or claims for interest will not be entitled, in case of any default under the Indenture, to the benefits of the Indenture, except subject to the prior payment in full for the principal of all of the 2017 Bonds then Outstanding and of all claims for interest thereon which have not been so extended. Nothing in the Indenture will be deemed to limit the right of the City to issue Bonds for the purpose of refunding any Outstanding 2017 Bonds, and such issuance will not be deemed to constitute an extension of maturity of 2017 Bonds.

Against Encumbrances. The City will not make any pledge of or place any lien on Revenues or the moneys in the Water Revenue Fund or the Rate Stabilization Fund except as provided in the Indenture. The City may at any time, or from time to time, execute Contracts or issue Bonds as permitted in the Indenture. The City may also at any time, or from time to time, incur evidences of indebtedness or incur other obligations for any lawful purpose which are payable from and secured by a pledge of lien on Revenues on any moneys in the Water Revenue Fund and the Rate Stabilization Fund as may from time to time be deposited therein, provided that such pledge and lien is subordinate in all respects to the pledge of and lien thereon provided in the Indenture.

Power to Issue 2017 Bonds and Make Pledge and Assignment. The City is duly authorized pursuant to law to issue the 2017 Bonds and to enter into the Indenture and to pledge and assign the Revenues and other assets purported to be pledged and assigned under the Indenture in the manner and to the extent provided in the Indenture. The 2017 Bonds and the provisions of the Indenture are and will be the legal, valid and binding special obligations of the City in accordance with their terms, and the City and the Trustee will at all times, subject to the provisions of the Indenture and to the extent permitted by law, defend, preserve and protect said pledge and assignment of Revenues and other assets and all the rights of the 2017 Bond Owners under the Indenture against all claims and demands of all persons whomsoever.

Accounting Records and Financial Statements. The Trustee will at all times keep, or cause to be kept, proper books of record and account, prepared in accordance with corporate trust industry standards, in which complete and accurate entries are made of all transactions made by it relating to the proceeds of 2017 Bonds and all funds and accounts established by it pursuant to the Indenture. Such books of record and account will be available

B-15

for inspection by the City upon reasonable prior notice during business hours and under reasonable circumstances. The City will keep appropriate accounting records in which complete and correct entries are made of all transactions relating to the Water System, which records are available for inspection by the Trustee (which has no duty to inspect such records) at reasonable hours and under reasonable conditions. The City will prepare and file with the Trustee annually within 270 days of each Fiscal Year (commencing with the Fiscal Year ending June 30, 2017) financial statements of the City for the preceding Fiscal Year prepared in accordance with generally accepted accounting principles, together with an Accountant’s Report thereon. The Trustee has no duty to review such financial statements.

Tax Covenants. Notwithstanding any other provision of the Indenture, absent an opinion of Bond Counsel that the exclusion from gross income of the portion of interest on the BE Bonds will not be adversely affected for federal income tax purposes, the City has covenanted to comply with all applicable requirements of the Code necessary to preserve such exclusion from gross income with respect to the BE Bonds and has specifically covenanted, without limiting the generality of the foregoing, as follows:

(a) Private Activity. The City will take no action or refrain from taking any action or make any use of the proceeds of the BE Bonds or of any other moneys or property which would cause the BE Bonds to be “private activity bonds” within the meaning of Section 141 of the Code;

(b) Arbitrage. The City will make no use of the proceeds of the BE Bonds or of any other amounts or property, regardless of the source, or take any action or refrain from taking any action which will cause the BE Bonds to be “arbitrage bonds” within the meaning of Section 148 of the Code;

(c) Federal Guarantee. The City will make no use of the proceeds of the BE Bonds or take or omit to take any action that would cause the BE Bonds to be “federally guaranteed” within the meaning of Section 149(b) of the Code;

(d) Information Reporting. The City will take or cause to be taken all necessary action to comply with the informational reporting requirement of Section 149(e) of the Code necessary to preserve the exclusion of interest on the BE Bonds pursuant to Section 103(a) of the Code;

(e) Hedge Bonds. The City will make no use of the proceeds of the 2017 Bonds or any other amounts or property, regardless of the source, or take any action or refrain from taking any action that would cause the BE Bonds to be considered “hedge bonds” within the meaning of Section 149(g) of the Code unless the City takes all necessary action to assure compliance with the requirements of Section 149(g) of the Code to maintain the exclusion from gross income of interest on the 2017 Bonds for federal income tax purposes; and

(f) Miscellaneous. The City will take no action or refrain from taking any action inconsistent with its expectations stated in the Tax Certificate executed by the City in connection with the issuance of the BE Bonds and will comply with the covenants and requirements stated therein and incorporated by reference in the Indenture.

The foregoing tax covenants are not applicable to, and nothing contained in the Indenture be deemed to prevent the City from causing the Trustee to issue revenue bonds or to execute and deliver contracts payable on a parity with the BE Bonds, the interest with respect to which has been determined by Bond Counsel to be subject to federal income taxation.

Waiver of Laws. The City will not at any time insist upon or plead in any manner whatsoever, or claim or take the benefit or advantage of, any stay or extension law now or at any time later in force that may affect the covenants and agreements contained in the Indenture or in the 2017 Bonds, and all benefit or advantage of any such law or laws has been expressly waived by the City to the extent permitted by law.

Further Assurances. The City will make, execute and deliver any and all such further indentures, instruments and assurances as may be reasonably necessary or proper to carry out the intention or to facilitate the

B-16

performance of the Indenture and for the better assuring and confirming unto the Owners of the 2017 Bonds of the rights and benefits provided in the Indenture.

Observance of Laws and Regulations. To the extent necessary to assure its performance under the Indenture, the City will well and truly keep, observe and perform all valid and lawful obligations or regulations now or later imposed on the City by contract, or prescribed by any law of the United States of America, or of the State, or by any officer, board or commission having jurisdiction or control, as a condition of the continued enjoyment of any and every right, privilege or franchise now owned or later acquired by the City, respectively, including its right to exist and carry on its business, to the end that such contracts, rights and franchises will be maintained and preserved, and will not become abandoned, forfeited or in any manner impaired.

Compliance with Contracts. The City will neither take nor omit to take any action under any contract if the effect of such act or failure to act would in any manner impair or adversely affect the ability of the City to pay principal of or interest on the 2017 Bonds; and the City will comply with, keep, observe and perform all agreements, conditions, covenants and terms, express or implied, required to be performed by it contained in all other contracts affecting or involving the Water System, to the extent that the City is a party thereto.

Prosecution and Defense of Suits. The City will promptly, upon request of the Trustee or any 2017 Bond Owner, from time to time take such action as may be necessary or proper to remedy or cure any defect in or cloud upon the title to the Water System or any part thereof, whether now existing or later developing, will prosecute all such suits, actions and other proceedings as may be appropriate for such purpose and will indemnify and save the Trustee (including all of its employees, officers and directors), the Trustee and every 2017 Bond Owner harmless from all loss, cost, damage and expense, including attorneys’ fees, which they or any of them may incur by reason of any such defect, cloud, suit, action or proceeding.

The City will defend against every suit, action or proceeding at any time brought against the Trustee (including all of its employees, officers and directors) or any 2017 Bond Owner upon any claim arising out of the receipt, application or disbursement of any of the payments of principal of or interest on the 2017 Bonds or involving the rights of the Trustee or any 2017 Bond Owner under the Indenture; provided that the Trustee or any 2017 Bond Owner at such party’s election may appear in and defend any such suit, action or proceeding. The City will indemnify and hold harmless the Trustee against any and all liability claimed or asserted by any person, arising out of such receipt, application or disbursement.

Continuing Disclosure. The City has covenanted and agreed that it will comply with and carry out all of its obligations under the Continuing Disclosure Certificate to be executed and delivered by the City in connection with the issuance of the 2017 Bonds. Notwithstanding any other provision of the Indenture, failure of the City to comply with the Continuing Disclosure Certificate is not considered an Event of Default; however, any Owner or Beneficial Owner may take such actions as may be necessary and appropriate, including seeking mandate or specific performance by court order, to cause the City to comply with the foregoing obligations. For purposes of the Indenture, “Beneficial Owner” means any person which has or shares the power, directly or indirectly, to make investment decisions concerning ownership of any 2017 Bonds (including persons holding 2017 Bonds through nominees, depositories or other intermediaries).

Against Sale or Other Disposition of Property. The City will not enter into any agreement or lease which impairs the operation of the Water System or any part thereof necessary to secure adequate Revenues for the payment of the principal of and interest on the 2017 Bonds, or which would otherwise impair the operation of the Water System. Any real or personal property which has become nonoperative or which is not needed for the efficient and proper operation of the Water System, or any material or equipment which has become worn out, may be sold if such sale will not impair the ability of the City to pay the principal of and interest on the 2017 Bonds and if the proceeds of such sale are deposited in the Water Revenue Fund.

Nothing in the Indenture restricts the ability of the City to sell any portion of the Water System if such portion is immediately repurchased by the City and if such arrangement cannot by its terms result in the purchaser of such portion of the Water System exercising any remedy which would deprive the City of or otherwise interfere with its right to own and operate such portion of the Water System.

B-17

Against Competitive Facilities. To the extent that it can so legally obligate itself, the City has covenanted that it will not acquire, construct, maintain or operate and will not, to the extent permitted by law and within the scope of its powers, permit any other public or private agency, corporation, district or political subdivision or any person whomsoever to acquire, construct, maintain or operate within the City any water system competitive with the Water System.

Maintenance and Operation of the Water System. The City will maintain and preserve the Water System in good repair and working order at all times and will operate the Water System in an efficient and economical manner and will pay all Operation and Maintenance Costs as they become due and payable.

Payment of Claims. The City will pay and discharge any and all lawful claims for labor, materials or supplies which, if unpaid, might become a lien on the Revenues or the funds or accounts created under the Indenture or on any funds in the hands of the City pledged to pay the principal of or interest on the 2017 Bonds or to the Owners prior or superior to the lien under the Indenture.

Insurance.

(a) The City will procure and maintain or cause to be procured and maintained insurance on the Water System with responsible insurers in such amounts and against such risks (including damage to or destruction of the Water System) as are usually covered in connection with facilities similar to the Water System so long as such insurance is available from reputable insurance companies at reasonable rates.

In the event of any damage to or destruction of the Water System caused by the perils covered by such insurance, the Net Proceeds thereof will be applied to the reconstruction, repair or replacement of the damaged or destroyed portion of the Water System. The City will begin such reconstruction, repair or replacement promptly after receipt of such Net Proceeds, and will continue and properly complete such reconstruction, repair or replacement as expeditiously as possible, and will pay out of such Net Proceeds all costs and expenses in connection with such reconstruction, repair or replacement so that the same are completed and the Water System is free and clear of all claims and liens. The City has covenanted to reconstruct, repair or replace the damaged or destroyed portions of the Water System promptly from Net Proceeds if a failure to reconstruct, repair or replace such portions would impair or adversely affect the ability of the City to pay the 2017 Bonds.

(b) The City will procure and maintain such other insurance as it deems advisable or necessary to protect its interests and the interests of the 2017 Bond Owners, which insurance affords protection in such amounts and against such risks as are usually covered in connection with municipal water systems similar to the Water System.

(c) Any insurance required to be maintained by clause (a) above and, if the City determines to procure and maintain insurance pursuant to clause (b) above, such insurance, may be maintained under a self-insurance program so long as such self-insurance is maintained in the amounts and manner usually maintained in connection with water systems similar to the Water System and is, in the opinion of an accredited actuary, actuarially sound.

Payment of Taxes and Compliance with Governmental Regulations. The City will pay and discharge all taxes, assessments and other governmental charges which may be lawfully imposed upon the Water System, or any part thereof or upon the Revenues when the same become due. The City will duly observe and conform with all valid regulations and requirements of any governmental authority relative to the operation of the Water System, or any part thereof, but the City is not required to comply with any regulations or requirements so long as the validity or application thereof is contested in good faith.

Collection of Rates and Charges. The City will have in effect at all times by-laws, rules and regulations requiring each customer to pay the rates and charges applicable to the Water Service and providing for the billing thereof and for a due date and a delinquency date for each bill.

B-18

Eminent Domain Proceeds. If all or any part of the Water System is taken by eminent domain proceedings, the Net Proceeds thereof will be applied either to additions, betterments, extensions or improvements to the Water System or, if the City elects not to apply such Net Proceeds to such capital items or if such Net Proceeds are not fully expended for such purposes, such Net Proceeds not required by the City for such purposes will be deposited in the Water Revenue Fund.

Enforcement of Contracts. The City will not voluntarily consent to or permit any rescission of, nor will it consent to any amendment to or otherwise take any action under or in connection with any contracts previously or later entered into if such rescission or amendment would in any manner impair or adversely affect the ability of the City to pay principal of and interest on the 2017 Bonds.

EVENTS OF DEFAULT AND REMEDIES OF 2017 BOND OWNERS

Events of Default. The following events will be Events of Default under the Indenture:

(a) Default by the City in the due and punctual payment of the principal of any 2017 Bonds, the principal of any Bonds or the principal with respect to any Contract, when and as the same become due and payable, whether at maturity as therein expressed, by proceedings for redemption, by acceleration, or otherwise.

(b) Default by the City in the due and punctual payment of any installment of interest on any 2017 Bonds, any installment of interest on any Bond or any installment of interest with respect to any Contract, when and as the same become due and payable.

(c) Default by the City in the observance of any of the other covenants, agreements or conditions on its part in the Indenture or in the 2017 Bonds, or required by any Bond or indenture relating thereto or by any Contract, if such default continues for a period of 60 days after written notice thereof, specifying such default and requiring the same to be remedied, has been given to the City by the Trustee or by the Owners of not less than a majority in aggregate principal amount of 2017 Bonds Outstanding, a majority in principal amount of such Bond outstanding, or a majority in principal amount outstanding with respect to such Contract, as applicable; provided, however, that if in the reasonable opinion of the City the default stated in the notice can be corrected, but not within such 60 day period and corrective action is instituted by the City within such 60 day period and diligently pursued in good faith until the default is corrected, such default will not be an Event of Default under the Indenture.

(d) The City files a petition or answer seeking arrangement or reorganization under the federal bankruptcy laws or any other applicable law of the United States of America or any state therein, or if a court of competent jurisdiction approves a petition filed with or without the consent of the City seeking arrangement or reorganization under the federal bankruptcy laws or any other applicable law of the United States of America or any state therein, or if under the provisions of any other law for the relief or aid of debtors any court of competent jurisdiction assumes custody or control of the City or of the whole or any substantial part of its property.

(e) Payment of the principal of any Bond or with respect to any Contract is accelerated in accordance with its terms.

Remedies Upon Event of Default. If any Event of Default specified in clauses (a) or (b) above occurs and is continuing, the Trustee will, and for any other Event of Default, the Trustee may, and, at the written direction of the Owners of not less than a majority in aggregate principal amount of the 2017 Bonds at the time Outstanding, will, in each case, upon notice in writing to the City, declare the principal of all of the 2017 Bonds then Outstanding, and the interest accrued thereon, to be due and payable immediately, and upon any such declaration the same will become and be immediately due and payable, anything in the Indenture or in the 2017 Bonds contained to the contrary notwithstanding.

Nothing contained in the Indenture permits or require the Trustee to accelerate payments due under the Indenture if the City is not in default of its obligation thereunder.

B-19

Any such declaration is subject to the condition that if, at any time after such declaration and before any judgment or decree for the payment of the moneys due has been obtained or entered, the City deposits with the Trustee a sum sufficient to pay all the principal of and installments of interest on the 2017 Bonds payment of which is overdue, with interest on such overdue principal at the rate borne by the respective 2017 Bonds to the extent permitted by law, and the reasonable charges and expenses of the Trustee, or deposits with the applicable trustee with respect to any Contract a sum sufficient to pay all the principal and installments of interest with respect to such Contract payment of which is overdue, with interest on such overdue principal at the rate borne by such Contract to the extent permitted by law, and the reasonable charges and expenses of the applicable trustee with respect to such Contract, or deposits with the applicable trustee with respect to any Bond a sum sufficient to pay all the principal of and installment of interest on such Bond payment of which is overdue, with interest on such overdue principal at the rate borne by such Bonds to the extent permitted by law, and the reasonable charges and expenses of the applicable trustee with respect to such Bonds, and any and all other Events of Default known to the Trustee or the applicable trustee with respect to such Contract or Bonds (other than in the payment of principal of and interest on the 2017 Bonds, payment of principal and interest with respect to such Contract or payment of principal and interest on such Bond, as applicable, due and payable solely by reason of such declaration) have been made good or cured to the satisfaction of the Trustee or provision deemed by the Trustee to be adequate has been made therefor, then, and in every such case the Trustee will on behalf of the Owners of all of the 2017 Bonds, rescind and annul such declaration and its consequences and waive such Event of Default; but no such rescission and annulment will extend to or affect any subsequent Event of Default, or impair or exhaust any right or power consequent thereon.

Application of Revenues and Other Funds After Default. If an Event of Default occurs and is continuing, all Revenues held or thereafter received by the Trustee and any other funds then held or thereafter received by the Trustee under any of the provisions of the Indenture (other than amounts held in the Rebate Fund) will be applied in the following order:

(a) To the payment of any expenses necessary in the opinion of the Trustee to protect the interests of the Owners of the 2017 Bonds, Contract or Bonds and payment of reasonable fees and expenses of the Trustee (including reasonable fees and disbursements of its counsel) incurred in and about the performance of its powers and duties under the Indenture;

(b) To the payment of Operation and Maintenance Costs; and

(c) To the payment of the principal of and interest then due on the 2017 Bonds (upon presentation of the 2017 Bonds to be paid, and stamping or otherwise noting thereon of the payment if only partially paid, or surrender thereof if fully paid), in accordance with the provisions of the Indenture, the payment of the principal and interest then due with respect to such Contract in accordance with the provisions thereof and the payment of the principal of and interest then due on such Bonds in accordance with the provisions thereof and of any indenture related thereto, in the following order of priority:

First: To the payment to the persons entitled thereto of all installments of interest then due on the 2017 Bonds, with respect to such Contract or on such Bonds, as applicable, in the order of the maturity of such installments, and, if the amount available is not sufficient to pay in full any installment or installments maturing on the same date, then to the payment thereof ratably, according to the amounts due thereon, to the persons entitled thereto, without any discrimination or preference; and

Second: To the payment to the persons entitled thereto of the unpaid principal of any 2017 Bonds, principal with respect to such Contract or principal of any Bonds, as applicable, which have become due, whether at maturity or by acceleration or redemption, with interest on the overdue principal at the rate of 8% per annum, and, if the amount available is not sufficient to pay in full all the 2017 Bonds, all amounts due under such Contract or all the Bonds, as applicable, together with such interest, then to the payment thereof ratably, according to the amounts of principal due on such date to the persons entitled thereto, without any discrimination or preference; and

Third: If there exists any remainder after the foregoing payments, such remainder will be paid to the City.

B-20

Trustee to Represent 2017 Bond Owners. The Trustee has been irrevocably appointed (and the successive respective Owners of the 2017 Bonds, by taking and holding the same, will be conclusively deemed to have so appointed the Trustee) as trustee and true and lawful attorney in fact of the Owners of the 2017 Bonds for the purpose of exercising and prosecuting on their behalf such rights and remedies as may be available to such Owners under the provisions of the 2017 Bonds or the Indenture and applicable provisions of law. Upon the occurrence and continuance of an Event of Default or other occasion giving rise to a right in the Trustee to represent the 2017 Bond Owners, the Trustee in its discretion may, and upon the written request of the Owners of a majority in aggregate principal amount of the 2017 Bonds then Outstanding, and upon being indemnified to its satisfaction therefor, will proceed to protect or enforce its rights or the rights of such Owners by such appropriate action, suit, mandamus or other proceedings as it deems most effectual to protect and enforce any such right, at law or in equity, either for the specific performance of any covenant or agreement contained in the Indenture, or in aid of the execution of any power therein granted, or for the enforcement of any other appropriate legal or equitable right or remedy vested in the Trustee or in such Owners under the 2017 Bonds or the Indenture or any law; and upon instituting such proceeding, the Trustee is entitled, as a matter of right, to the appointment of a receiver of the Revenues and other assets pledged under the Indenture, pending such proceedings. All rights of action under the Indenture or the 2017 Bonds or otherwise may be prosecuted and enforced by the Trustee without the possession of any of the 2017 Bonds or the production thereof in any proceeding relating thereto, and any such suit, action or proceeding instituted by the Trustee will be brought in the name of the Trustee for the benefit and protection of all the Owners of such 2017 Bonds, subject to the provisions of the Indenture.

2017 Bond Owners’ Direction of Proceedings. Anything in the Indenture to the contrary notwithstanding, the Owners of a majority in aggregate principal amount of the 2017 Bonds then Outstanding have the right, by an instrument or concurrent instruments in writing executed and delivered to the Trustee, and upon indemnification of the Trustee to its satisfaction to direct the method of conduct in all remedial proceedings taken by the Trustee under the Indenture, provided that such direction is not otherwise than in accordance with law and the provisions of the Indenture, and that the Trustee has the right to decline to follow any such direction which in the opinion of the Trustee would be unjustly prejudicial to 2017 Bond Owners not parties to such direction.

Suit by Owners. No Owner of any 2017 Bonds has the right to institute any suit, action or proceeding at law or in equity, for the protection or enforcement of any right or remedy under the Indenture with respect to such 2017 Bonds, unless: (a) such Owners have given to the Trustee written notice of the occurrence of an Event of Default; (b) the Owners of not less than 50% in aggregate principal amount of the 2017 Bonds then Outstanding have made written request upon the Trustee to exercise the powers granted in the Indenture or to institute such suit, action or proceeding in its own name; (c) such Owner or Owners have tendered to the Trustee reasonable indemnity against the costs, expenses and liabilities to be incurred in compliance with such request; (d) the Trustee has failed to comply with such request for a period of 60 days after such written request has been received by, and said tender of indemnity has been made to, the Trustee; and (e) no direction inconsistent with such written request has been given to the Trustee during such 60 day period by the Owners of a majority in aggregate principal amount of the 2017 Bonds then Outstanding.

Such notification, request, tender of indemnity and refusal or omission have been declared, in every case, to be conditions precedent to the exercise by any Owner of 2017 Bonds of any remedy under the Indenture or under law; it being understood and intended that no one or more Owners of 2017 Bonds have any right in any manner whatever by his or their action to affect, disturb or prejudice the security of the Indenture or the rights of any other Owners of 2017 Bonds, or to enforce any right under the 2017 Bonds, the Indenture, or applicable law with respect to the 2017 Bonds, except in the manner provided in the Indenture, and that all proceedings at law or in equity to enforce any such right will be instituted, had and maintained in the manner provided in the Indenture and for the benefit and protection of all Owners of the Outstanding 2017 Bonds, subject to the provisions of the Indenture.

Absolute Obligation of the City. Nothing in the Indenture or in the 2017 Bonds affects or impairs the obligation of the City, which is absolute and unconditional, to pay the principal of and interest on the 2017 Bonds to the respective Owners of the 2017 Bonds at their respective dates of maturity, or upon call for redemption, as provided in the Indenture, but only out of the Revenues and other assets therein pledged therefor, or affects or impairs the right of such Owners, which is also absolute and unconditional, to enforce such payment by virtue of the contract embodied in the 2017 Bonds.

B-21

Remedies Not Exclusive. No remedy conferred upon or reserved to the Trustee or to the Owners of the 2017 Bonds in the Indenture is intended to be exclusive of any other remedy or remedies, and each and every such remedy, to the extent permitted by law, will be cumulative and in addition to any other remedy given thereunder or now or later existing at law or in equity or otherwise.

No Waiver of Default. No delay or omission of the Trustee or of any Owner of the 2017 Bonds to exercise any right or power arising upon the occurrence of any Event of Default will impair any such right or power or be construed to be a waiver of any such Event of Default or an acquiescence therein.

THE TRUSTEE

Duties, Immunities and Liabilities of Trustee.

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

(b) The City may remove the Trustee at any time, unless an Event of Default has occurred and is then continuing, and will remove the Trustee if at any time requested to do so by an instrument or concurrent instruments in writing signed by the Owners of not less than a majority in aggregate principal amount of the 2017 Bonds then Outstanding (or their attorneys duly authorized in writing) or if at any time the Trustee ceases to be eligible in accordance with the Indenture, or becomes incapable of acting, or is adjudged a bankrupt or insolvent, or a receiver of the Trustee or its property is appointed, or any public officer takes control or charge of the Trustee or of its property or affairs for the purpose of rehabilitation, conservation or liquidation, in each case by giving written notice of such removal to the Trustee and thereupon will promptly appoint a successor Trustee by an instrument in writing.

(c) The Trustee may at any time resign by giving written notice of such resignation to the City and by giving the 2017 Bond Owners notice of such resignation by mail at the addresses shown on the Registration Books. Upon receiving such notice of resignation, the City will promptly appoint a successor Trustee by an instrument in writing.

(d) Any removal or resignation of the Trustee and appointment of a successor Trustee will become effective upon acceptance of appointment by the successor Trustee. If no successor Trustee has been appointed and have accepted appointment within 45 days of giving notice of removal or notice of resignation as aforesaid, the resigning Trustee or any 2017 Bond Owner (on behalf of himself and all other 2017 Bond Owners) may petition any court of competent jurisdiction for the appointment of a successor Trustee, and such court may thereupon, after such notice (if any) as it may deem proper, appoint such successor Trustee. Any successor Trustee appointed under the Indenture will signify its acceptance of such appointment by executing and delivering to the City and to its predecessor Trustee a written acceptance thereof, and thereupon such successor Trustee, without any further act, deed or conveyance, will become vested with all the moneys, estates, properties, rights, powers, trusts, duties and obligations of such predecessor Trustee, with like effect as if originally named Trustee in the Indenture; but, nevertheless at the Written Request of the City or the request of the successor Trustee, such predecessor Trustee will execute and deliver any and all instruments of conveyance or further assurance and do such other things as may reasonably be required for more fully and certainly vesting in and confirming to such successor Trustee all the right, title and interest of such predecessor Trustee in and to any property held by it under the Indenture and will pay over, transfer, assign and deliver to the successor Trustee any money or other property subject to the trusts and conditions therein set forth. Upon request of the successor Trustee, the City will execute and deliver any and all instruments as may be reasonably required for more fully and certainly vesting in and confirming to such successor Trustee all such moneys, estates, properties, rights, powers, trusts, duties and obligations. Upon acceptance of appointment by a successor Trustee as provided in the Indenture, the City will mail or cause the successor trustee to mail a notice of the succession of such Trustee to the trusts under the Indenture to each rating agency which is then rating the 2017

B-22

Bonds and to the 2017 Bond Owners at the addresses shown on the Registration Books. If the City fails to mail such notice within 15 days after acceptance of appointment by the successor Trustee, the successor Trustee will cause such notice to be mailed at the expense of the City.

(e) Any Trustee appointed under the provisions of the Indenture in succession to the Trustee will be a trust company, banking association or bank having the powers of a trust company, having a combined capital and surplus of at least $75,000,000, and subject to supervision or examination for federal or state authority. If such bank, banking association or trust company publishes a report of condition at least annually, pursuant to law or to the requirements of any supervising or examining authority above referred to, then for the purpose of the Indenture the combined capital and surplus of such trust company, banking association or bank will be deemed to be its combined capital and surplus as set forth in its most recent report of condition so published. In case at any time the Trustee ceases to be eligible in accordance with the provisions of the Indenture, the Trustee will resign immediately in the manner and with the effect specified therein.

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

Liability of Trustee.

(a) The recitals of facts in the Indenture and in the 2017 Bonds will be taken as statements of the City, and the Trustee does not assume responsibility for the correctness of the same, or make any representations as to the validity or sufficiency of the Indenture or the 2017 Bonds, nor does the Trustee incur any responsibility in respect thereof, other than as expressly stated in the Indenture in connection with the respective duties or obligations therein or in the 2017 Bonds assigned to or imposed upon it. The Trustee will, however, be responsible for its representations contained in its certificate of authentication on the 2017 Bonds. The Trustee will not be liable in connection with the performance of its duties under the Indenture, except for its own negligence or willful misconduct. The Trustee may become the Owner of 2017 Bonds with the same rights it would have if it were not Trustee, and, to the extent permitted by law, may act as depository for and permit any of its officers or directors to act as a member of, or in any other capacity with respect to, any committee formed to protect the rights of 2017 Bond Owners, whether or not such committee represents the Owners of a majority in principal amount of the 2017 Bonds then Outstanding.

(b) The Trustee will not be liable for any error of judgment made in good faith by a responsible officer, unless it is proved that the Trustee was negligent in ascertaining the pertinent facts.

(c) The Trustee will not be liable with respect to any action taken or omitted to be taken by it in good faith in accordance with the direction of the Owners of not less than a majority (or such other percentage provided for in the Indenture) in aggregate principal amount of the 2017 Bonds at the time Outstanding relating to the time, method and place of conducting any proceeding for any remedy available to the Trustee, or exercising any trust or power conferred upon the Trustee under the Indenture.

(d) The Trustee will not be liable for any action taken by it in good faith and believed by it to be authorized or within the discretion or rights or powers conferred upon it by the Indenture.

(e) The Trustee will not be deemed to have knowledge of any Default or Event of Default under the Indenture or any other event which, with the passage of time, the giving of notice, or both, would constitute an Event of Default thereunder unless and until a Responsible Officer of the Trustee has actual knowledge of such event or the Trustee has been notified in writing, in accordance with the Indenture, of such event by the City or the Owners of not less than 50% of the 2017 Bonds then Outstanding. Except as otherwise expressly provided in the Indenture, the Trustee is not bound to ascertain or inquire as to the performance or observance by the City of any of the terms, conditions, covenants or agreements in the Indenture of any of the documents executed in connection

B-23

with the 2017 Bonds, or as to the existence of an Event of Default thereunder or an event which would, with the giving of notice, the passage of time, or both, constitute an Event of Default thereunder. The Trustee is not responsible for the validity, effectiveness or priority of any collateral given to or held by it.

(f) No provision of the Indenture requires the Trustee to expend or risk its own funds or otherwise incur any financial liability in the performance of its duties thereunder, or in the exercise of any of its rights or powers.

(g) The Trustee is under no obligation to exercise any of the rights or powers vested in it by the Indenture at the request, order or direction of any of the Owners pursuant to the Indenture, unless such Owners have offered to the Trustee security or indemnity acceptable to the Trustee against the costs, expenses and liabilities which might be incurred by it in compliance with such request or direction. No permissive power, right or remedy conferred upon the Trustee under the Indenture will be construed to impose a duty to exercise such power, right or remedy.

(h) Whether or not expressly so provided in the Indenture, every provision of the Indenture relating to the conduct or affecting the liability of or affording protection to the Trustee is subject to the provisions under the caption “THE TRUSTEE.”

(i) The Trustee has no responsibility or liability with respect to any information, statement, or recital in any official statement, offering memorandum or any other disclosure material prepared or distributed with respect to the 2017 Bonds.

(j) The immunities extended to the Trustee also extend to its directors, officers, employees and agents.

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

(l) The Trustee will not be considered in breach of or in default in its obligations under the Indenture or progress in respect thereto in the event of enforced delay (“unavoidable delay”) in the performance of such obligations due to unforeseeable causes beyond its control and without its fault or negligence, including, but not limited to, Acts of God or of the public enemy or terrorists, acts of a government, acts of the other party, fires, floods, epidemics, quarantine restrictions, strikes, freight embargoes, earthquakes, explosion, mob violence, riot, inability to procure or general sabotage or rationing of labor, equipment, facilities, sources of energy, material or supplies in the open market, litigation or arbitration involving a party or others relating to zoning or other governmental action or inaction pertaining to the Water System, malicious mischief, condemnation, and unusually severe weather or delays of suppliers or subcontractors due to such causes or any similar event and/or occurrences beyond the control of the Trustee.

(m) The Trustee has the right to accept and act upon instructions, including funds transfer instructions (“Instructions”) given pursuant to the Indenture and delivered using Electronic Means (“Electronic Means”), which means the following communications methods: e-mail, facsimile transmission, secure electronic transmission containing applicable authorization codes, passwords and/or authentication keys issued by the Trustee, or another method or system specified by the Trustee as available for use in connection with its services under the Indenture); provided, however, that the City will provide to the Trustee an incumbency certificate listing officers with the authority to provide such Instructions (“Authorized Officers”) and containing specimen signatures of such Authorized Officers, which incumbency certificate will be amended by the City whenever a person is to be added or deleted from the listing. If the City elects to give the Trustee Instructions using Electronic Means and the Trustee in its discretion elects to act upon such Instructions, the Trustee’s understanding of such Instructions will be deemed controlling. The City has understood and agreed that the Trustee cannot determine the identity of the actual sender of such Instructions and that the Trustee will conclusively presume that directions that purport to have been sent by an Authorized Officer listed on the incumbency certificate provided to the Trustee have been sent by such Authorized Officer. The City is responsible for ensuring that only Authorized Officers transmit such Instructions to the Trustee and that the City and all Authorized Officers are solely responsible to safeguard the use and

B-24

confidentiality of applicable user and authorization codes, passwords and/or authentication keys upon receipt by the City. The Trustee will not be liable for any losses, costs or expenses arising directly or indirectly from the Trustee’s reliance upon and compliance with such Instructions notwithstanding the fact that such directions conflict or are inconsistent with a subsequent written instruction. The City has agreed: (i) to assume all risks arising out of the use of Electronic Means to submit Instructions to the Trustee, including without limitation the risk of the Trustee acting on unauthorized Instructions, and the risk of interception and misuse by third parties; (ii) that it is fully informed of the protections and risks associated with the various methods of transmitting Instructions to the Trustee and that there may be more secure methods of transmitting Instructions than the method(s) selected by the City; (iii) that the security procedures (if any) to be followed in connection with its transmission of Instructions provide to it a commercially reasonable degree of protection in light of its particular needs and circumstances; and (iv) to notify the Trustee immediately upon learning of any compromise or unauthorized use of the security procedure.

(n) The Trustee is not concerned with or accountable to anyone for the subsequent use or application of any moneys which are released or withdrawn in accordance with the provisions of the Indenture.

(o) The Trustee is under no obligation to exercise any of the rights or powers vested in it by the Indenture at the request, order or direction of any of the Owners pursuant to the provisions thereof unless such Owners have offered to the Trustee reasonable security or indemnity against the costs, expenses and liabilities which may be incurred therein or thereby.

(p) The permissive right of the Trustee to do things enumerated in the Indenture will not be construed as a duty and it will not be answerable for other than its negligence or willful misconduct.

Right to Rely on Documents. The Trustee will be protected in acting upon any notice, resolution, requisition, request, consent, order, certificate, report, opinion, notes, direction, facsimile transmission, electronic mail or other paper or document believed by it to be genuine and to have been signed or presented by the proper party or parties. The Trustee may consult with counsel, who may be counsel of or to the City, with regard to legal questions, and the opinion of such counsel will be full and complete authorization and protection in respect of any action taken or suffered by it under the Indenture in good faith and in accordance therewith.

The Trustee may treat the Owners of the 2017 Bonds appearing in the Trustee’s Registration Books as the absolute owners of the 2017 Bonds for all purposes and the Trustee will not be affected by any notice to the contrary.

Whenever in the administration of the trusts imposed upon it by the Indenture the Trustee deems it necessary or desirable that a matter be proved or established prior to taking or suffering any action thereunder, such matter (unless other evidence in respect thereof is specifically prescribed in the Indenture) may be deemed to be conclusively proved and established by a Certificate, Request or Requisition of the City, and such Certificate, Request or Requisition will be full warrant to the Trustee for any action taken or suffered in good faith under the provisions of the Indenture in reliance upon such Certificate, Request or Requisition, but in its discretion the Trustee may, in lieu thereof, accept other evidence of such matter or may require such additional evidence as it may deem reasonable.

Preservation and Inspection of Documents. All documents received by the Trustee under the provisions of the Indenture will be retained in its possession and will be subject at all reasonable times to the inspection of the City and any 2017 Bond Owner, and their agents and representatives duly authorized in writing, at reasonable hours and under reasonable conditions.

Compensation and Indemnification. The City will pay to the Trustee from time to time all reasonable compensation for all services rendered under the Indenture, and also all reasonable expenses, charges, legal and consulting fees and other disbursements and those of their attorneys, agents and employees, incurred in and about the performance of their powers and duties under the Indenture.

The City will indemnify, defend and hold harmless the Trustee, its officers, employees, directors and agents from and against any loss, costs, claims, liability or expense (including fees and expenses of its attorneys and

B-25

advisors) incurred without negligence or bad faith on its part, arising out of or in connection with the execution of the Indenture, acceptance or administration of the trust provided for in the Indenture, including costs and expenses of defending itself against any claim or liability in connection with the exercise or performance of any of its powers thereunder. The rights of the Trustee and the obligations of the City under the foregoing provisions will survive removal or resignation of the Trustee under the Indenture or the discharge of the 2017 Bonds and the Indenture.

MODIFICATION OR AMENDMENT OF THE INDENTURE

Amendments Permitted.

(a) The Indenture and the rights and obligations of the City and of the Owners of the 2017 Bonds and of the Trustee may be modified or amended from time to time and at any time by an indenture or indentures supplemental thereto, which the City and the Trustee may enter into when the written consent of the Owners of a majority in aggregate principal amount of all 2017 Bonds then Outstanding, exclusive of 2017 Bonds disqualified as provided in the Indenture, has been filed with the Trustee. No such modification or amendment will: (1) extend the fixed maturity of any 2017 Bonds, or reduce the amount of principal thereof or premium (if any) thereon, or extend the time of payment, or change the rate of interest or the method of computing the rate of interest thereon, or extend the time of payment of interest thereon, without the consent of the Owner of each 2017 Bond so affected; or (2) reduce the aforesaid percentage of 2017 Bonds the consent of the Owners of which is required to affect any such modification or amendment, or permit the creation of any lien on the Revenues and other assets pledged under the Indenture prior to or on a parity with the lien created by the Indenture except as permitted in the Indenture, or deprive the Owners of the 2017 Bonds of the lien created by the Indenture on such Revenues and other assets except as permitted in the Indenture, without the consent of the Owners of all of the 2017 Bonds then Outstanding. It is not necessary for the consent of the 2017 Bond Owners to approve the particular form of any Supplemental Indenture, but it will be sufficient if such consent approves the substance thereof. Promptly after the execution by the City and the Trustee of any Supplemental Indenture pursuant to the foregoing provisions, the Trustee will mail a notice, setting forth in general terms the substance of such Supplemental Indenture, to each Rating Agency and the Owners of the 2017 Bonds at the respective addresses shown on the Registration Books. Any failure to give such notice, or any defect therein, will not, however, in any way impair or affect the validity of any such Supplemental Indenture.

(b) The Indenture and the rights and obligations of the City, the Trustee and the Owners of the 2017 Bonds may also be modified or amended from time to time and at any time by a Supplemental Indenture, which the City and the Trustee may enter into without the consent of any 2017 Bond Owners, if the Trustee receives an opinion of Bond Counsel to the effect that the provisions of such Supplemental Indenture will not materially adversely affect the interests of the Owners of the Outstanding 2017 Bonds, including, without limitation, for any one or more of the following purposes:

(i) to add to the covenants and agreements of the City contained in the Indenture other covenants and agreements thereafter to be observed, to pledge or assign additional security for the 2017 Bonds (or any portion thereof), or to surrender any right or power reserved to or conferred upon the City in the Indenture;

(ii) to make such provisions for the purpose of curing any ambiguity, inconsistency or omission, or of curing or correcting any defective provision, contained in the Indenture, or in regard to matters or questions arising under the Indenture, as the City may deem necessary or desirable;

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

(iv) to modify, amend or supplement the Indenture in such manner as to cause interest on the BE Bonds to remain excludable from gross income under the Code; and

(v) to make such modifications as are determined to be necessary by the City.

B-26

(c) The Trustee may in its discretion, but is not obligated to, enter into any such Supplemental Indenture authorized by the Indenture which materially adversely affects the Trustee’s own rights, duties or immunities under the Indenture or otherwise.

(d) Prior to the Trustee entering into any Supplemental Indenture under the Indenture, there will be delivered to the Trustee an opinion of Bond Counsel stating, in substance, that such Supplemental Indenture has been adopted in compliance with the requirements of the Indenture and that the adoption of such Supplemental Indenture will not, in and of itself, adversely affect the exclusion of interest on the BE Bonds from federal income taxation and interest on the 2017 Bonds from state income taxation.

Effect of Supplemental Indenture. Upon the execution of any Supplemental Indenture pursuant to the Indenture, the Indenture will be deemed to be modified and amended in accordance therewith, and the respective rights, duties and obligations under the Indenture of the City, the Trustee and all Owners of 2017 Bonds Outstanding will thereafter be determined, exercised and enforced thereunder subject in all respects to such modification and amendment, and all the terms and conditions of any such Supplemental Indenture will be deemed to be part of the terms and conditions of the Indenture for any and all purposes.

Endorsement of 2017 Bonds; Preparation of New 2017 Bonds. 2017 Bonds delivered after the execution of any Supplemental Indenture pursuant to the Indenture may, and if the Trustee so determines will, bear a notation by endorsement or otherwise in form approved by the City and the Trustee as to any modification or amendment provided for in such Supplemental Indenture, and, in that case, upon demand on the Owner of any 2017 Bonds Outstanding at the time of such execution and presentation of his or her 2017 Bonds for the purpose at the Office of the Trustee or at such additional offices as the Trustee may select and designate for that purpose, a suitable notation will be made on such 2017 Bonds. If the Supplemental Indenture so provides, new 2017 Bonds so modified as to conform, in the opinion of the City and the Trustee, to any modification or amendment contained in such Supplemental Indenture, will be prepared and executed by the City and authenticated by the Trustee, and upon demand on the Owners of any 2017 Bonds then Outstanding will be exchanged at the Office of the Trustee, without cost to any 2017 Bond Owner, for 2017 Bonds then Outstanding, upon surrender for cancellation of such 2017 Bonds, in equal aggregate principal amount of the same maturity.

Amendment of Particular 2017 Bonds. The provisions of the Indenture do not prevent any 2017 Bond Owner from accepting any amendment as to the particular 2017 Bonds held by him.

DEFEASANCE

Discharge of Indenture. The 2017 Bonds may be paid by the City in any of the following ways, provided that the City also pays or causes to be paid any other sums payable under the Indenture by the City:

(a) by paying or causing to be paid the principal of and interest and redemption premiums (if any) on the 2017 Bonds, as and when the same become due and payable;

(b) by depositing with the Trustee, in trust, at or before maturity, money or securities in the necessary amount (as provided in the Indenture) to pay or redeem all 2017 Bonds then Outstanding; or

(c) by delivering to the Trustee, for cancellation by it, all of the 2017 Bonds then Outstanding.

If the City also pays or causes to be paid all other sums payable under the Indenture by the City, then and in that case, at the election of the City (as evidenced by a Certificate of the City, filed with the Trustee, signifying the intention of the City to discharge all such indebtedness and the Indenture), and notwithstanding that any 2017 Bonds have not been surrendered for payment, the Indenture and the pledge of Revenues and other assets made under the Indenture and all covenants, agreements and other obligations of the City under the Indenture will cease, terminate, become void and be completely discharged and satisfied. In such event, upon the Written Request of the City, the Trustee will execute and deliver to the City all such instruments as may be necessary or desirable to evidence such discharge and satisfaction, and the Trustee will pay over, transfer, assign or deliver all moneys or securities or other

B-27

property held by it pursuant to the Indenture which are not required for the payment or redemption of 2017 Bonds not theretofore surrendered for such payment or redemption to the City.

Discharge of Liability on 2017 Bonds. Upon the deposit with the Trustee, in trust, at or before maturity, of money or securities in the necessary amount (as provided in the Indenture) to pay or redeem any Outstanding 2017 Bonds (whether upon or prior to the maturity or the Redemption Date of such 2017 Bonds; provided that, if such Outstanding 2017 Bonds are to be redeemed prior to maturity, notice of such redemption must be given as provided in the Indenture or provisions satisfactory to the Trustee must be made for the giving of such notice), then all liability of the City in respect of such 2017 Bonds will cease, terminate and be completely discharged, and the Owners thereof will thereafter be entitled only to payment out of such money or securities deposited with the Trustee as aforesaid for their payment, subject however, to the provisions of the Indenture.

The City may at any time surrender to the Trustee for cancellation by it any 2017 Bonds previously issued and delivered, which the City may have acquired in any manner whatsoever, and such 2017 Bonds, upon such surrender and cancellation, will be deemed to be paid and retired.

Deposit of Money or Securities with Trustee. Whenever in the Indenture it is provided or permitted that there be deposited with or held in trust by the Trustee money or securities in the necessary amount to pay or redeem any 2017 Bonds, the money or securities so to be deposited or held may include money or securities held by the Trustee in the funds and accounts established pursuant to the Indenture and will be:

(a) lawful money of the United States of America in an amount equal to the principal amount of such 2017 Bonds and all unpaid interest thereon to maturity, except that, in the case of 2017 Bonds which are to be redeemed prior to maturity and in respect of which notice of such redemption has been given as provided in the Indenture or provisions satisfactory to the Trustee have been made for the giving of such notice, the amount to be deposited or held will be the principal amount of such 2017 Bonds and all unpaid interest and premium, if any, thereon to the Redemption Date; or

(b) Federal Securities the principal of and interest on which when due will, in the written opinion of an Independent Certified Public Accountant or Independent Financial Consultant filed with the City and the Trustee, provide money sufficient to pay the principal of and all unpaid interest to maturity, or to the Redemption Date (with premium, if any), as the case may be, on the 2017 Bonds to be paid or redeemed, as such principal, interest and premium, if any, become due, provided that in the case of 2017 Bonds which are to be redeemed prior to the maturity thereof, notice of such redemption has been given as provided in the Indenture or provision satisfactory to the Trustee has been made for the giving of such notice;

provided, in each case, that: (i) the Trustee has been irrevocably instructed (by the terms of the Indenture or by Written Request of the City) to apply such money to the payment of such principal, interest and premium, if any, with respect to such 2017 Bonds; and (ii) the City has delivered to the Trustee an opinion of Bond Counsel addressed to the City and the Trustee to the effect that such 2017 Bonds have been discharged in accordance with the Indenture (which opinion may rely upon and assume the accuracy of the Independent Certified Public Accountant’s or Independent Financial Consultant’s opinion referred to above).

Payment of 2017 Bonds After Discharge of Indenture. Notwithstanding any provisions of the Indenture, any moneys held by the Trustee in trust for the payment of the principal of, or interest on, any 2017 Bonds and remaining unclaimed for two years after the principal of all of the 2017 Bonds has become due and payable (whether at maturity or upon call for redemption or by acceleration as provided in the Indenture), if such moneys were so held at such date, or two years after the date of deposit of such moneys if deposited after said date when all of the 2017 Bonds became due and payable, will be repaid to the City free from the trusts created by the Indenture upon receipt of an indemnification agreement acceptable to the City and the Trustee indemnifying the Trustee with respect to claims of Owners of 2017 Bonds which have not yet been paid, and all liability of the Trustee with respect to such moneys will thereupon cease; provided, however, that before the repayment of such moneys to the City as aforesaid, the Trustee will at the written direction of the City (at the cost of the City) first mail to the Owners of 2017 Bonds which have not yet been paid, at the addresses shown on the Registration Books, a notice, in such form as may be deemed appropriate by the Trustee with respect to the 2017 Bonds so payable and not presented and with respect to the provisions relating to the repayment to the City of the moneys held for the payment thereof.

B-28

MISCELLANEOUS

Liability of City Limited to Revenues. Notwithstanding anything in the Indenture or the 2017 Bonds, but subject to the priority of payment with respect to Operation and Maintenance Costs, the City is not required to advance any moneys derived from any source other than the Revenues, the Water Revenue Fund and other moneys pledged under the Indenture for any of the purposes in the Indenture mentioned, whether for the payment of the principal of or interest on the 2017 Bonds or for any other purpose of the Indenture. Nevertheless, the City may, but is not required to, advance for any of the purposes of the Indenture any funds of the City which may be made available to it for such purposes.

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

Limitation of Rights to Parties and 2017 Bond Owners. Nothing in the Indenture or in the 2017 Bonds expressed or implied is intended or will be construed to give to any person other than the City, the Trustee and the Owners of the 2017 Bonds, any legal or equitable right, remedy or claim under or in respect of the Indenture or any covenant, condition or provision therein or in the Indenture contained; and all such covenants, conditions and provisions are and will be held to be for the sole and exclusive benefit of the City, the Trustee and the Owners of the 2017 Bonds.

Waiver of Notice; Requirement of Mailed Notice. Whenever in the Indenture the giving of notice by mail or otherwise is required, the giving of such notice may be waived in writing by the person entitled to receive such notice and in any such case the giving or receipt of such notice will not be a condition precedent to the validity of any action taken in reliance upon such waiver. Whenever in the Indenture any notice is required to be given by mail, such requirement will be satisfied by the deposit of such notice in the United States mail, postage prepaid, by first class mail.

Destruction of 2017 Bonds. Whenever in the Indenture provision is made for the cancellation by the Trustee and the delivery to the City of any 2017 Bonds, the Trustee will destroy such 2017 Bonds as may be allowed by law, and deliver a certificate of such destruction to the City.

Severability of Invalid Provisions. If any one or more of the provisions contained in the Indenture or in the 2017 Bonds is for any reason held to be invalid, illegal or unenforceable in any respect, then such provision or provisions will be deemed severable from the remaining provisions contained in the Indenture and such invalidity, illegality or unenforceability will not affect any other provision of the Indenture, and the Indenture will be construed as if such invalid or illegal or unenforceable provision had never been contained therein. The City has declared that it would have entered into the Indenture and each and every other Section, paragraph, sentence, clause or phrase thereof and authorized the issuance of the 2017 Bonds pursuant thereto irrespective of the fact that any one or more Sections, paragraphs, sentences, clauses or phrases of the Indenture may be held illegal, invalid or unenforceable.

Evidence of Rights of 2017 Bond Owners. Any request, consent or other instrument required or permitted by the Indenture to be signed and executed by 2017 Bond Owners may be in any number of concurrent instruments of substantially similar tenor and will be signed or executed by such 2017 Bond Owners in person or by an agent or agents duly appointed in writing. Proof of the execution of any such request, consent or other instrument or of a writing appointing any such agent, or of the holding by any person of 2017 Bonds transferable by delivery, will be sufficient for any purpose of the Indenture and will be conclusive in favor of the Trustee and the City if made in the manner provided in the Indenture.

The fact and date of the execution by any person of any such request, consent or other instrument or writing may be proved by the certificate of any notary public or other officer of any jurisdiction, authorized by the laws thereof to take acknowledgments of deeds, certifying that the person signing such request, consent or other instrument acknowledged to him the execution thereof, or by an affidavit of a witness of such execution duly sworn to before such notary public or other officer.

B-29

The Ownership of 2017 Bonds will be proved by the Registration Books.

Any request, consent, or other instrument or writing of the Owner of any 2017 Bond will bind every future Owner of the same 2017 Bond and the Owner of every 2017 Bond issued in exchange therefor or in lieu thereof, in respect of anything done or suffered to be done by the Trustee or the City in accordance therewith or reliance thereon.

Disqualified 2017 Bonds. In determining whether the Owners of the requisite aggregate principal amount of 2017 Bonds have concurred in any demand, request, direction, consent or waiver under the Indenture, 2017 Bonds which are known by the Trustee to be owned or held by or for the account of the City, or by any other obligor on the 2017 Bonds, or by any person directly or indirectly controlling or controlled by, or under direct or indirect common control with, the City or any other obligor on the 2017 Bonds, will be disregarded and deemed not to be Outstanding for the purpose of any such determination. 2017 Bonds so owned which have been pledged in good faith may be regarded as Outstanding for the purposes of the Indenture if the pledgee establishes to the satisfaction of the Trustee the pledgee’s right to vote such 2017 Bonds and that the pledgee is not a person directly or indirectly controlling or controlled by, or under direct or indirect common control with, the City or any other obligor on the 2017 Bonds. In case of a dispute as to such right, any decision by the Trustee taken upon the advice of counsel will be full protection to the Trustee. Upon request, the City will certify to the Trustee those 2017 Bonds that are disqualified pursuant to the Indenture and the Trustee may conclusively rely on such certificate.

Money Held for Particular 2017 Bonds. The money held by the Trustee for the payment of the interest, principal or premium due on any date with respect to particular 2017 Bonds (or portions of 2017 Bonds in the case of registered 2017 Bonds redeemed in part only) will, on and after such date and pending such payment, be set aside on its books and held in trust by it for the Owners of the 2017 Bonds entitled thereto, subject, however, to the provisions of the Indenture but without any liability for interest thereon.

Funds and Accounts. Any fund or account required by the Indenture to be established and maintained by the Trustee may be established and maintained in the accounting records of the Trustee, either as a fund or an account, and may, for the purposes of such records, any audits thereof and any reports or statements with respect thereto, be treated either as a fund or as an account; but all such records with respect to all such funds and accounts will at all times be maintained in accordance with corporate trust industry standards to the extent practicable, and with due regard for the requirements of the Indenture and for the protection of the security of the 2017 Bonds and the rights of every Owner thereof.

Waiver of Personal Liability. No member, officer, agent, employee, consultant or attorney of the City will be individually or personally liable for the payment of the principal of or premium or interest on the 2017 Bonds or be subject to any personal liability or accountability by reason of the issuance thereof; but nothing contained in the Indenture will relieve any such member, officer, agent, employee, consultant or attorney from the performance of any official duty provided by law or by the Indenture.

CUSIP Numbers. Neither the Trustee nor the City are liable for any defect or inaccuracy in the CUSIP number that appears on any 2017 Bond or in any redemption notice. The Trustee may, in its discretion, include in any redemption notice a statement to the effect that the CUSIP numbers on the 2017 Bonds have been assigned by an independent service and are included in such notice solely for the convenience of the 2017 Bondholders and that neither the City nor the Trustee will be liable for any inaccuracies in such numbers.

Choice of Law. THE INDENTURE WILL BE GOVERNED BY THE LAWS OF THE STATE OF CALIFORNIA.

Paired Obligation Provider Guidelines. For purposes of the Indenture, Paired Obligations will comply with the following conditions: (a) A Paired Obligation Provider will initially have a long-term rating of A- or better by S&P and A3 or better by Moody’s. (b) So long as the long-term rating of the Paired Obligation Provider is not reduced below Baa2 by S&P or BBB by Moody’s, the interest rate of such Paired Obligation will be deemed to be equal to the irrevocable fixed interest rate attributable thereto for purposes of the Indenture.

B-30

In the event that a Paired Obligation Provider does not maintain the Minimum Rating Requirement and the City does not replace such Paired Obligation Provider with another Paired Obligation Provider which maintains the Initial Rating Requirement within ten Business Days of notice that the Paired Obligation Provider has not maintained the Minimum Rating Requirement, interest with respect to such Paired Obligations will be computed for purposes of the Indenture without regard to payments to be received from the Paired Obligation Provider.

C-1

APPENDIX C

FORM OF OPINION OF BOND COUNSEL

Upon issuance of the 2017 Bonds, Stradling Yocca Carlson & Rauth, a Professional Corporation, Bond Counsel, proposes to render its final approving opinion in substantially the following form:

May __, 2017

City of Pomona 505 South Garey Avenue Pomona, California 91766

Re: City of Pomona 2017 Refunding Revenue Bonds (Water Facilities Project) Series BE (Tax-Exempt) and City of Pomona 2017 Refunding Revenue Bonds (Water Facilities Project) Series BF (Taxable)

Members of the City Council:

We have examined a certified copy of the record of the proceedings of the City of Pomona (the “City”) relative to the issuance of the $32,355,000 City of Pomona 2017 Refunding Revenue Bonds (Water Facilities Project) Series BE (Tax-Exempt) (the “Series BE Bonds”) and the $55,555,000 City of Pomona 2017 Refunding Revenue Bonds (Water Facilities Project) Series BF (Taxable) (the “Series BF Bonds,” and together with the Series BE Bonds, the “2017 Bonds”), dated the date hereof, and such other information and documents as we consider necessary to render this opinion. In rendering this opinion, we have relied upon certain representations of fact and certifications made by the City, the initial purchaser of the 2017 Bonds and others. We have not undertaken to verify through independent investigation the accuracy of the representations and certifications relied upon by us.

The 2017 Bonds are being issued pursuant to an Indenture of Trust, dated as of May 1, 2017 (the “Indenture”), by and between the City and Zions Bank, a division of ZB, National Association, as trustee (the “Trustee”). The 2017 Bonds mature on the dates and in the amounts referenced in the Indenture. The 2017 Bonds are dated their date of delivery and bear interest at the rates per annum referenced in the Indenture. The 2017 Bonds are registered in the form set forth in the Indenture.

Based on our examination as Bond Counsel of existing law, certified copies of such legal proceedings and such other proofs as we deem necessary to render this opinion, we are of the opinion, as of the date hereof and under existing law, that:

1. The proceedings of the City show lawful authority for the issuance and sale of the 2017 Bonds under the laws of the State of California now in force, and the Indenture has been duly authorized, executed and delivered by the City, and, assuming due authorization, execution and delivery by the Trustee, as appropriate, the 2017 Bonds and the Indenture are valid and binding obligations of the City enforceable against the City in accordance with their terms.

2. The obligation of the City to make the payments of principal of and interest on the 2017 Bonds from Net Revenues (as such term is defined in the Indenture) is an enforceable obligation of the City and does not constitute an indebtedness of the City in contravention of any constitutional or statutory debt limit or restriction.

3. Under existing statutes, regulations, rulings and judicial decisions, and assuming the accuracy of certain representations and compliance with certain covenants and requirements described herein, interest

C-2

(and original issue discount) on the Series BE Bonds is excluded from gross income for federal income tax purposes and is not an item of tax preference for purposes of calculating the federal alternative minimum tax imposed on individuals and corporations. It should be noted that, with respect to corporations, such interest may be included as an adjustment in the calculation of alternative minimum taxable income, which may affect the alternative minimum tax liability of such corporations.

4. Interest (and original issue discount) on the 2017 Bonds is exempt from State of California personal income tax.

5. The amount by which a Series BE Bond Owner’s original basis for determining loss on sale or exchange in the applicable Series BE Bond (generally, the purchase price) exceeds the amount payable on maturity (or on an earlier call date) constitutes amortizable bond premium, which must be amortized under Section 171 of the Internal Revenue Code of 1986, as amended (the “Code”); such amortizable bond premium reduces the Series BE Bond Owner’s basis in the applicable Series BE Bond (and the amount of tax-exempt interest received), and is not deductible for federal income tax purposes. The basis reduction as a result of the amortization of Series BE Bond premium may result in a Series BE Bond Owner realizing a taxable gain when a Series BE Bond is sold by the Owner for an amount equal to or less (under certain circumstances) than the original cost of the Series BE Bond to the Owner. Purchasers of the Series BE Bonds should consult their own tax advisors as to the treatment, computation and collateral consequences of amortizable bond premium.

6. The difference between the issue price of a Series BE Bond (the first price at which a substantial amount of the Series BE Bonds of a maturity is to be sold to the public) and the stated redemption price at maturity of such Series BE Bond constitutes original issue discount. Original issue discount accrues under a constant yield method, and original issue discount will accrue to a Series BE Bond Owner before receipt of cash attributable to such excludable income. The amount of original issue discount deemed received by a Series BE Bond Owner will increase the Series BE Bond Owner’s basis in the applicable Series BE Bond. The amount of original issue discount that accrues to the Owner of a Series BE Bond is excluded from the gross income of such Series BE Bond Owner for federal income tax purposes, is not an item of tax preference for purposes of the federal alternative minimum tax imposed on individuals and corporations, and is exempt from State of California personal income tax

7. Under existing statutes, regulations, rulings and judicial decisions, interest on the Series BF Bonds is not excluded from gross income for federal income tax purposes under Section 103 of the Code.

The opinions expressed herein as to the exclusion from gross income of interest on the Series BE Bonds are based upon certain representations of fact and certifications made by the City and are subject to the condition that the City comply with all requirements of the Code that must be satisfied subsequent to the issuance of the 2017 Bonds to assure that such interest (and original issue discount) on the Series BE Bonds will not become includable in gross income for federal income tax purposes. Failure to comply with such requirements of the Code might cause interest (and original issue discount) on the Series BE Bonds to be included in gross income for federal income tax purposes retroactive to the date of issuance of the Series BE Bonds. The City has covenanted to comply with all such requirements.

The opinions expressed herein may be affected by actions taken (or not taken) or events occurring (or not occurring) after the date hereof. We have not undertaken to determine, or to inform any person, whether any such actions or events are taken or do occur. Our engagement ends as of the date of issuance of the 2017 Bonds. The Indenture and the Tax Certificate relating to the Series BE Bonds permit certain actions to be taken or to be omitted if a favorable opinion of Bond Counsel is provided with respect thereto. No opinion is expressed herein as to the effect on the exclusion from gross income of interest (and original issue discount) on the Series BE Bonds for federal income tax purposes with respect to any Series BE Bond if any such action is taken or omitted based upon the opinion or advice of counsel other than ourselves. Other than expressly stated herein, we express no other opinion regarding tax consequences with respect to the Series BE Bonds.

C-3

The opinions expressed herein are based upon our analysis and interpretation of existing laws, regulations, rulings and judicial decisions and cover certain matters not directly addressed by such authorities. We call attention to the fact that the rights and obligations under the Indenture and the 2017 Bonds are subject to bankruptcy, insolvency, reorganization, moratorium, fraudulent conveyance and other similar laws affecting creditors’ rights, to the application of equitable principles if equitable remedies are sought, to the exercise of judicial discretion in appropriate cases and to limitations on legal remedies against public agencies in the State of California.

Our opinion is limited to matters governed by the laws of the State of California and federal law. We assume no responsibility with respect to the applicability or the effect of the laws of any other jurisdiction.

We express no opinion herein as to the accuracy, completeness or sufficiency of the Official Statement relating to the 2017 Bonds or other offering material relating to the 2017 Bonds and expressly disclaim any duty to advise the owners of the 2017 Bonds with respect to matters contained in the Official Statement.

Respectfully submitted,

D-1

APPENDIX D

INFORMATION CONCERNING DTC

The information in this section concerning DTC and DTC’s book entry only system has been obtained from sources that the City believes to be reliable, but the City takes no responsibility for the completeness or accuracy thereof. The following description of the procedures and record keeping with respect to beneficial ownership interests in the 2017 Bonds, payment of principal, premium, if any, accreted value, if any, and interest on the 2017 Bonds to DTC Participants or Beneficial Owners, confirmation and transfers of beneficial ownership interests in the 2017 Bonds and other related transactions by and between DTC, the DTC Participants and the Beneficial Owners is based solely on information provided by DTC.

The Depository Trust Company (“DTC”), New York, NY, will act as securities depository for the 2017 Bonds. The 2017 Bonds will be issued as fully-registered securities registered in the name of Cede & Co. (DTC’s partnership nominee) or such other name as may be requested by an authorized representative of DTC. One fully-registered 2017 Bond will be issued for each annual maturity of the 2017 Bonds, each in the aggregate principal amount of such annual maturity, and will be deposited with DTC.

DTC, the world’s largest securities depository, is a limited-purpose trust company organized under the New York Banking Law, a “banking organization” within the meaning of the New York Banking Law, a member of the Federal Reserve System, a “clearing corporation” within the meaning of the New York Uniform Commercial Code, and a “clearing agency” registered pursuant to the provisions of Section 17A of the Securities Exchange Act of 1934. DTC holds and provides asset servicing for over 3.5 million issues of U.S. and non-U.S. equity issues, corporate and municipal debt issues, and money market instruments (from over 100 countries) that DTC’s participants (“Direct Participants”) deposit with DTC. DTC also facilitates the post-trade settlement among Direct Participants of sales and other securities transactions in deposited securities, through electronic computerized book entry transfers and pledges between Direct Participants’ accounts. This eliminates the need for physical movement of securities certificates. Direct Participants include both U.S. and non-U.S. securities brokers and dealers, banks, trust companies, clearing corporations, and certain other organizations. DTC is a wholly-owned subsidiary of The Depository Trust & Clearing Corporation (“DTCC”). DTCC is the holding company for DTC, National Securities Clearing Corporation and Fixed Income Clearing Corporation, all of which are registered clearing agencies. DTCC is owned by the users of its regulated subsidiaries. Access to the DTC system is also available to others such as both U.S. and non-U.S. securities brokers and dealers, banks, trust companies, and clearing corporations that clear through or maintain a custodial relationship with a Direct Participant, either directly or indirectly (“Indirect Participants”). DTC is rated AA+ by Standard & Poor’s. The DTC Rules applicable to its Participants are on file with the Securities and Exchange Commission. More information about DTC can be found at www.dtcc.com.

Purchases of 2017 Bonds under the DTC system must be made by or through Direct Participants, which will receive a credit for the 2017 Bonds on DTC’s records. The ownership interest of each actual purchaser of each 2017 Bonds (“Beneficial Owner”) is in turn to be recorded on the Direct and Indirect Participants’ records. Beneficial Owners will not receive written confirmation from DTC of their purchase. Beneficial Owners are, however, expected to receive written confirmations providing details of the transaction, as well as periodic statements of their holdings, from the Direct or Indirect Participant through which the Beneficial Owner entered into the transaction. Transfers of ownership interests in the 2017 Bonds are to be accomplished by entries made on the books of Direct and Indirect Participants acting on behalf of Beneficial Owners. Beneficial Owners will not receive bonds representing their ownership interests in 2017 Bonds, except in the event that use of the book entry system for the 2017 Bonds is discontinued.

To facilitate subsequent transfers, all 2017 Bonds deposited by Direct Participants with DTC are registered in the name of DTC’s partnership nominee, Cede & Co., or such other name as may be requested by an authorized representative of DTC. The deposit of 2017 Bonds with DTC and their registration in the name of Cede & Co. or such other DTC nominee do not effect any change in beneficial ownership. DTC has no knowledge of the actual Beneficial Owners of the 2017 Bonds; DTC’s records reflect only the identity of the Direct Participants to whose accounts such 2017 Bonds are credited, which may or may not be the Beneficial Owners. The Direct and Indirect Participants will remain responsible for keeping account of their holdings on behalf of their customers.

D-2

Conveyance of notices and other communications by DTC to Direct Participants, by Direct Participants to Indirect Participants, and by Direct Participants and Indirect Participants to Beneficial Owners will be governed by arrangements among them, subject to any statutory or regulatory requirements as may be in effect from time to time. Beneficial Owners of 2017 Bonds may wish to take certain steps to augment the transmission to them of notices of significant events with respect to the 2017 Bonds, such as redemptions, tenders, defaults, and proposed amendments to the 2017 Bonds documents. For example, Beneficial Owners of 2017 Bonds may wish to ascertain that the nominee holding the 2017 Bonds for their benefit has agreed to obtain and transmit notices to Beneficial Owners. In the alternative, Beneficial Owners may wish to provide their names and addresses to the registrar and request that copies of notices be provided directly to them.

Redemption notices shall be sent to DTC. If less than all of the 2017 Bonds within a maturity are being redeemed, DTC’s practice is to determine by lot the amount of the interest of each Direct Participant in such maturity to be redeemed.

Neither DTC nor Cede & Co. (nor any other DTC nominee) will consent or vote with respect to 2017 Bonds unless authorized by a Direct Participant in accordance with DTC’s MMI Procedures. Under its usual procedures, DTC mails an Omnibus Proxy to the City as soon as possible after the record date. The Omnibus Proxy assigns Cede & Co.’s consenting or voting rights to those Direct Participants to whose accounts 2017 Bonds are credited on the record date (identified in a listing attached to the Omnibus Proxy).

Redemption proceeds, distributions, and dividend payments on the 2017 Bonds will be made to Cede & Co., or such other nominee as may be requested by an authorized representative of DTC. DTC’s practice is to credit Direct Participants’ accounts upon DTC’s receipt of funds and corresponding detail information from the City or the Trustee, on payable date in accordance with their respective holdings shown on DTC’s records. Payments by Participants to Beneficial Owners will be governed by standing instructions and customary practices, as is the case with securities held for the accounts of customers in bearer form or registered in “street name,” and will be the responsibility of such Participant and not of DTC, the Trustee or the City, subject to any statutory or regulatory requirements as may be in effect from time to time. Payment of redemption proceeds, distributions, and dividend payments to Cede & Co. (or such other nominee as may be requested by an authorized representative of DTC) is the responsibility of the City or the Trustee, disbursement of such payments to Direct Participants will be the responsibility of DTC, and disbursement of such payments to the Beneficial Owners will be the responsibility of Direct and Indirect Participants.

A 2017 Bond Owner shall give notice to elect to have its 2017 Bonds purchased or tendered, through its Participant, to the Trustee, and shall effect delivery of such 2017 Bond by causing the Direct Participant to transfer the Participant’s interest in the 2017 Bonds, on DTC’s records, to the Trustee. The requirement for physical delivery of 2017 Bond in connection with an optional tender or a mandatory purchase will be deemed satisfied when the ownership rights in the 2017 Bond are transferred by Direct Participants on DTC’s records and followed by a book entry credit of tendered 2017 Bond to the Trustee’s DTC account.

DTC may discontinue providing its services as depository with respect to the 2017 Bonds at any time by giving reasonable notice to the City or the Trustee. Under such circumstances, in the event that a successor depository is not obtained, physical certificates are required to be printed and delivered.

The City may decide to discontinue use of the system of book entry only transfers through DTC (or a successor securities depository). In that event, 2017 Bonds will be printed and delivered to DTC.

THE TRUSTEE, AS LONG AS A BOOK ENTRY ONLY SYSTEM IS USED FOR THE 2017 BONDS, WILL SEND ANY NOTICE OF REDEMPTION OR OTHER NOTICES TO OWNERS ONLY TO DTC. ANY FAILURE OF DTC TO ADVISE ANY DTC PARTICIPANT, OR OF ANY DTC PARTICIPANT TO NOTIFY ANY BENEFICIAL OWNER, OF ANY NOTICE AND ITS CONTENT OR EFFECT WILL NOT AFFECT THE VALIDITY OF SUFFICIENCY OF THE PROCEEDINGS RELATING TO THE REDEMPTION OF THE 2017 BONDS CALLED FOR REDEMPTION OR OF ANY OTHER ACTION PREMISED ON SUCH NOTICE.

E-1

APPENDIX E

FORM OF CONTINUING DISCLOSURE CERTIFICATE

Upon issuance of the 2017 Bonds, the City proposes to enter into a Continuing Disclosure Certificate in substantially the following form:

This Continuing Disclosure Certificate (the “Disclosure Certificate”) is executed and delivered by the City of Pomona (the “City”) in connection with the issuance of the $32,355,000 City of Pomona 2017 Refunding Revenue Bonds, Series BE (Tax-Exempt) (the “BE Bonds”) and the $55,555,000 City of Pomona 2017 Refunding Revenue Bonds, Series BF (Taxable) (the “BF Bonds,” and together with the BE Bonds, the “Bonds”). The Bonds are being issued pursuant to an Indenture of Trust, dated as of May 1, 2017 (the “Indenture”), by and between Zions Bank, a division of ZB, National Association, as trustee (the “Trustee”) and the City. The City covenants and agrees as follows:

1. Purpose of this Disclosure Certificate. This Disclosure Certificate is being executed and delivered by the City for the benefit of the Holders and Beneficial Owners of the Bonds and in order to assist the Participating Underwriter in complying with the Rule.

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

Annual Report. The term “Annual Report” means any Annual Report provided by the City pursuant to, and as described in, Sections 3 and 4 of this Disclosure Certificate.

Beneficial Owner. The term “Beneficial Owner” means any person which: (a) has the power, directly or indirectly, to vote or consent with respect to, or to dispose of ownership of, any Bonds (including persons holding Bonds through nominees, depositories or other intermediaries); or (b) is treated as the owner of any Bonds for federal income tax purposes.

Dissemination Agent. The term “Dissemination Agent” means Urban Futures, Inc., or any successor Dissemination Agent designated in writing by the City and which has filed with the City a written acceptance of such designation.

EMMA. The term “EMMA” means the Municipal Securities Rulemaking Board’s Electronic Municipal Market Access System for municipal securities disclosures, maintained on the Internet at http://emma.msrb.org/.

Fiscal Year. The term “Fiscal Year” means the one-year period ending on the last day of June of each year.

Holder. The term “Holder” means a registered owner of the Bonds.

Listed Events. The term “Listed Events” means any of the events listed in Sections 5(a) and (b) of this Disclosure Certificate.

Official Statement. The term “Official Statement” means the Official Statement dated April 20, 2017 relating to the Bonds.

Participating Underwriter. The term “Participating Underwriter” means B.C. Ziegler and Company, the original underwriter of the Bonds required to comply with the Rule in connection with offering of the Bonds.

Rule. The term “Rule” means Rule 15c2-12 adopted by the Securities and Exchange Commission under the Securities Exchange Act of 1934, as the same may be amended from time to time.

E-2

3. Provision of Annual Reports.

(a) The City shall, or shall cause the Dissemination Agent to, provide not later than March 1 following the end of its Fiscal Year (commencing with Fiscal Year 2017) to EMMA an Annual Report relating to the immediately preceding Fiscal Year which is consistent with the requirements of Section 4 of this Disclosure Certificate, which Annual Report may be submitted as a single document or as separate documents comprising a package, and may cross-reference other information as provided in Section 4 of this Disclosure Certificate.

(b) If the City is unable to provide to EMMA an Annual Report by the date required in subsection (a), the City shall send to EMMA a notice in the manner prescribed by the Municipal Securities Rulemaking Board.

4. Content of Annual Reports. The Annual Report shall contain or incorporate by reference the following:

(a) The audited financial statements of the City for the prior Fiscal Year, prepared in accordance with generally accepted accounting principles as promulgated to apply to governmental entities from time to time by the Governmental Accounting Standards Board. If the City’s audited financial statements are not available by the time the Annual Report is required to be filed pursuant to Section 3(a), the Annual Report shall contain unaudited financial statements in a format similar to the financial statements contained in the final Official Statement, and the audited financial statements shall be filed in the same manner as the Annual Report when they come available;

(b) Principal amount of the Bonds outstanding;

(c) An update of the information in the tables contained in the Official Statement under the following captions: (i) “THE WATER SYSTEM—Historic and Projected Water Supply,” (except for the information related to the projected water supply), (ii) “—Historic Water System Service Connections,” (iii) “—Historic Water Deliveries,” (iv) “—Historic Water System Service Charges and Sales Revenues,” (v) “—Largest Customers,” (vi) “—Water System Rates and Charges,” (except for the information related to nearby communities) and (vii) “WATER SYSTEM FINANCIAL INFORMATION—Historic and Projected Operating Results and Debt Service Coverage” (including a combined debt service coverage calculation for all parity obligations then outstanding for the most recent completed Fiscal Year and excluding information related to projected operating results); and

(d) A description of additional Contracts or Bonds (as such terms are defined in the Indenture) executed or issued by the City during the most recently completed Fiscal Year.

Any or all of the items listed above may be included by specific reference to other documents, including official statements of debt issues of the City or related public entities, which have been submitted to EMMA; provided, that if any document included by reference is a final official statement, it must be available from the Municipal Securities Rulemaking Board; and provided further, that the City shall clearly identify each such document so included by reference.

5. Reporting of Significant Events.

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

1. principal and interest payment delinquencies;

2. unscheduled draws on debt service reserves reflecting financial difficulties;

3. unscheduled draws on credit enhancements reflecting financial difficulties;

E-3

4. substitution of credit or liquidity providers, or their failure to perform;

5. adverse tax opinions, the issuance by the Internal Revenue Service of proposed or final determinations of taxability or Notices of Proposed Issue (IRS Form 5701 TEB);

6. tender offers;

7. defeasances;

8. ratings changes; and

9. bankruptcy, insolvency, receivership or similar proceedings.

Note: For the purposes of the event identified in subparagraph (9), the event is considered to occur when any of the following occur: the appointment of a receiver, fiscal agent or similar officer for an obligated person in a proceeding under the U.S. Bankruptcy Code or in any other proceeding under state or federal law in which a court or governmental authority has assumed jurisdiction over substantially all of the assets or business of the obligated person, or if such jurisdiction has been assumed by leaving the existing governmental body and officials or officers in possession but subject to the supervision and orders of a court or governmental authority, or the entry of an order confirming a plan of reorganization, arrangement or liquidation by a court or governmental authority having supervision or jurisdiction over substantially all of the assets or business of the obligated person.

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

1. unless described in Section 5(a)(5), other notices or determinations by the Internal Revenue Service with respect to the tax status of the Bonds or other events affecting the tax status of the Bonds;

2. modifications to the rights of Bond holders;

3. optional, unscheduled or contingent Bond redemptions;

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

5. non-payment related defaults;

6. the consummation of a merger, consolidation, or acquisition involving the City or the sale of all or substantially all of the assets of the City, other than in the ordinary course of business, the entry into a definitive agreement to undertake such an action or the termination of a definitive agreement relating to any such actions, other than pursuant to its terms; and

7. appointment of a successor or additional trustee or the change of the name of a trustee.

(c) If the City determines that knowledge of the occurrence of a Listed Event under Section 5(b) would be material under applicable federal securities laws, the City shall file a notice of such occurrence with EMMA in a timely manner not more than ten (10) Business Days after the event.

6. Customarily Prepared and Public Information. Upon request, the City shall provide to any person financial information and operating data regarding the City which is customarily prepared by the City and is publicly available.

7. Termination of Obligation. The City’s obligations under this Disclosure Certificate shall terminate upon the legal defeasance, prior redemption or payment in full of all of the Bonds. If such termination

E-4

occurs prior to the final maturity of the Bonds, the City shall give notice of such termination in the same manner as for a Listed Event under Section 5(c).

8. Amendment; Waiver. Notwithstanding any other provision of this Disclosure Certificate, the City may amend this Disclosure Certificate, and any provision of this Disclosure Certificate may be waived, provided that, in the opinion of nationally recognized bond counsel, such amendment or waiver is permitted by the Rule.

9. Additional Information. Nothing in this Disclosure Certificate shall be deemed to prevent the City from disseminating any other information, using the means of dissemination set forth in this Disclosure Certificate or any other means of communication, or including any other information in any notice of occurrence of a Listed Event, in addition to that which is required by this Disclosure Certificate. If the City chooses to include any information in any notice of occurrence of a Listed Event in addition to that which is specifically required by this Disclosure Certificate, the City shall not thereby have any obligation under this Disclosure Certificate to update such information or include it in any future notice of occurrence of a Listed Event.

10. Default. In the event of a failure of the City to comply with any provision of this Disclosure Certificate, any Holders or Beneficial Owners of at least 50% aggregate principal amount of the Bonds may take such actions as may be necessary and appropriate, including seeking mandate or specific performance by court order, to cause the City to comply with its obligations under this Disclosure Certificate. A default under this Disclosure Certificate shall not be deemed an Event of Default under the Indenture, and the sole remedy under this Disclosure Certificate in the event of any failure of the City to comply with this Disclosure Certificate shall be an action to compel performance.

No Holder or Beneficial Owner of the Bonds may institute such action, suit or proceeding to compel performance unless they shall have first delivered to the City satisfactory written evidence of their status as such, and a written notice of and request to cure such failure, and the City shall have refused to comply therewith within a reasonable time.

11. Beneficiaries. This Disclosure Certificate shall inure solely to the benefit of the City, the Participating Underwriter and Holders and Beneficial Owners from time to time of the Bonds, and shall create no rights in any other person or entity.

Dated: May __, 2017 CITY OF POMONA

By: Its: City Manager

Acknowledged and accepted by URBAN FUTURES, INC., as Dissemination Agent

By:

F-1

APPENDIX F

GENERAL INFORMATION REGARDING THE CITY OF POMONA

The following information is presented as general background data. The 2017 Bonds are payable solely from the Net Revenues as described in the Official Statement. The taxing power of the City, the State or any political subdivision thereof is not pledged to the payment of the 2017 Bonds.

General Information

The City was incorporated in January 1888 and became a charter city in 1911. The City now encompasses approximately 22.9 square miles. The City is located approximately 30 miles east of downtown Los Angeles, in the eastern portion of the County of Los Angeles, adjacent to Orange and San Bernardino Counties.

The City Charter provides for a council-manager form of government, with an elected council of seven members including a mayor. City Councilmembers are elected by district for overlapping four-year terms. The Mayor is the presiding officer of the Council and is elected at large for a two-year term. The City Manager appoints department heads on the basis of specialized knowledge, experience and education in their area of responsibility.

Population

The City has an estimated current population of 155,604. Table F-1 sets forth total population for the City, the County of Los Angeles (the “County”) and the State of California (the “State”).

Table F-1 City of Pomona, County of Los Angeles and State of California

Population

January 1 City of Pomona County of Los

Angeles State of California

2012 151,672 9,956,722 37,881,357 2013 153,410 10,023,753 38,239,207 2014 154,140 10,093,053 38,567,459 2015 154,712 10,155,069 38,907,642 2016 155,604 10,241,335 39,255,883

Source: State of California, Department of Finance, E-4 Population Estimates for Cities, Counties and State, 2011-2016, with

2010 Census Counts.


F-2

Employment and Industry

Table F-2 summarizes the civilian labor force, civilian employment and civilian unemployment figures over the period from 2011 through 2015 in the City, the County, the State and the United States.

Table F-2 City of Pomona, County of Los Angeles, State of California and United States

Labor Force, Employment and Unemployment Yearly Average

Year and Area Civilian Labor

Force Civilian

Employment(1) Civilian

Unemployment(2) Civilian Unemployment

Rate(3)

2011 Pomona 66,900 57,800 9,000 13.5% Los Angeles County 4,928,500 4,327,900 600,500 12.2 California 18,419,500 16,260,100 2,159,400 11.7 United States 153,617,000 139,869,000 13,747,000 8.9 2012 Pomona 66,600 58,500 8,100 12.1% Los Angeles County 4,921,800 4,385,300 536,500 10.9 California 18,554,800 16,630,100 1,924,700 10.4 United States 154,975,000 142,469,000 12,506,000 8.1 2013 Pomona 67,100 59,900 7,300 10.8% Los Angeles County 4,979,000 4,494,400 484,600 9.7 California 18,671,600 17,002,900 1,668,700 8.9 United States 155,389,000 143,929,000 11,460,000 7.4 2014 Pomona 67,800 61,600 6,200 9.2% Los Angeles County 5,025,900 4,611,500 414,300 8.2 California 18,811,400 17,397,100 1,414,300 7.5 United States 155,922,000 146,305,000 9,617,000 6.2 2015 Pomona 67,500 62,500 5,100 7.5% Los Angeles County 5,011,700 4,674,800 336,900 6.7 California 18,981,800 17,798,600 1,183,200 6.2 United States 157,130,000 148,834,000 8,296,000 5.3

(1) Includes persons involved in labor-management trade disputes. (2) Includes all persons without jobs who are actively seeking work. (3) The unemployment rate is computed from unrounded data; therefore, it may differ from rates computed from rounded

figures in this table. Source: California Employment Development Department, March 2015 Benchmark; U.S. Department of Labor, Bureau of

Labor Statistics.


F-3

Table F-3 sets forth the industry employment and the labor force estimates for the years 2011 through 2015 for the Los Angeles-Long Beach-Glendale MSA Metropolitan Statistical Area (“MSA”). Annual industry employment information is not compiled by sector for the City.

Table F-3 Los Angeles-Long Beach-Glendale MSA Industry Employment and Labor Force

Annual Average

Type of Employment 2011 2012 2013 2014 2015

Total Farm 5,600 5,400 5,500 5,200 5,000 Total Nonfarm 3,945,700 4,036,000 4,112,700 4,189,000 4,274,200 Total Private 3,380,200 3,479,100 3,561,400 3,632,800 3,707,800 Goods Producing 476,000 480,800 488,800 488,000 490,800 Mining and Logging 4,100 4,300 4,500 4,300 3,900 Construction 105,100 109,200 116,200 119,600 126,100 Manufacturing 366,900 367,400 368,200 364,100 360,800 Durable Goods 204,200 204,300 204,300 202,900 202,400 Nondurable Goods 162,800 163,100 163,800 161,300 158,400 Service Providing 3,469,700 3,555,200 3,623,900 3,701,000 3,783,400 Private Service Producing 2,904,200 2,998,400 3,072,600 3,144,800 3,217,000 Trade, Transportation and Utilities 750,700 767,400 781,800 798,800 817,800 Wholesale Trade 205,800 211,900 218,700 222,500 227,000 Retail Trade 393,000 400,900 405,600 413,000 420,500 Transportation, Warehousing and Utilities 151,800 154,500 157,500 163,400 170,400 Information 192,000 191,500 196,400 198,000 202,700 Financial Activities 210,100 212,400 213,000 211,100 214,200 Professional and Business Services 542,500 571,100 593,200 599,100 600,300 Educational and Health Services 677,300 699,500 702,100 720,700 742,200 Leisure and Hospitality 394,700 415,800 440,500 466,600 488,100 Other Services 137,000 141,700 145,700 150,500 151,700 Government 565,500 556,800 551,200 556,200 566,400 Total, All Industries 3,951,300 4,041,400 4,118,100 4,194,200 4,279,200

Note: The “Total All Industries” data is not directly comparable to the employment data found herein. Source: State of California, Employment Development Department, Labor Market Information Division, Los Angeles-Long

Beach-Glendale MSA Industry Employment & Labor Force - by Annual Average, March 2015 Benchmark.


F-4

Major Employers

Table F-4 sets forth the principal employers in the City as of June 30, 2016.

Table F-4 City of Pomona

Principal Employers

Employer Number of Employees

Pomona Valley Hospital 3,720 Pomona Unified School District 2,926 California State Polytechnic University 2,612 Fairplex 954 Casa Colina Rehabilitation Center 938 City of Pomona 685 Verizon 596 County of Los Angeles Department of Social Services 400 First Transit 348 Inland Valley Care & Rehab 341 Kittrich Corporation 256 Torn & Glasser Inc. 242 Hayward Industries Inc. 230 Walmart Stores Inc. 207 Anheuser Busch Sales Pomona 204

Source: City of Pomona, Comprehensive Annual Financial Report, Fiscal Year Ended June 30, 2016.

Commercial Activity

Trade outlet and retail sales activity are summarized in Tables F-5 and F-6 based on reports of the State Board of Equalization.


Total Taxable Transactions and Number of Sales Permits 2011 through 2015(1)

Calendar Year Retail Sales(2)

Retail Sales Permits

Total Taxable Transactions(2)

Issued Sales Permits

2011 727,128 3,331 1,100,664 4,649 2012 767,593 3,343 1,191,591 4,658 2013 781,599 3,326 1,239,009 4,635 2014 817,869 3,409 1,331,872 4,747 2015 863,851 (3) 1,353,565 (3)

(1) Reflects latest information available. (2) Dollar amounts are in thousands. (3) Number of permits has not been provided for 2015 for cities Source: California State Board of Equalization.


F-5


Taxable Retail Sales 2011 through 2015(1)(2)(3)

Type of Business 2011 2012 2013 2014 2015(3)

Motor Vehicle & Parts Dealers $ 79,344 $ 104,207 $ 11,419 $ 114,994 $ 59,541 Home Furnishings & Appliance Stores 17,171 20,365 18,584 14,208 7,064 Building Materials & Garden Equipment & Supplies

70,021 70,799 75,990 82,983 24,161

Food & Beverage Stores 64,460 64,480 66,580 74,060 37,157 Gasoline Stations 220,722 221,196 209,743 203,028 85,667 Clothing & Clothing Accessories Stores

14,507 15,382 16,757 24,764 11,227

General Merchandise Stores 45,548 49,353 55,789 65,141 33,469 Food Services & Drinking Places 121,307 130,544 138,537 149,208 72,351 Other Retail Group 94,049 91,267 88,201 89,483 43,546

Retail Stores Totals 727,128 767,593 781,599 817,869 394,187 All Other Outlets 373,536 423,998 457,410 514,002 247,452

Total All Outlets $ 1,110,664 $ 1,191,591 $ 1,239,009 $ 1,331,872 $ 641,640 (1) Reflects latest information available. (2) Dollar amounts are in thousands. (3) Taxable Sales for California Cities by Type of Business only available through 2nd quarter. Source: California State Board of Equalization.


F-6

Building Activity

Table F-7 summarizes building activity in the City from 2011 through 2015, reflecting the latest available information.


Building Permit Valuations 2011 through 2015

2011 2012 2013 2014 2015 Residential Single Family $10,694,610 $15,507,704 $777,507 $7,319,268 $ 0 Multi-Family 0 0 20,099,673 465,485 18,517,719 Alteration/Additions 1,872,566 2,617,489 1,076,346 1,407,155 2,081,911 Total $12,567,176 $18,125,193 $21,953,526 $9,191,908 $20,599,630 Non-Residential New Commercial $1,641,278 $7,860,216 $19,807,867 $12,353,859 $3,907,805 New Industry 0 0 23,158,611 7,528,131 0 Other(1) 1,809,698 2,058,722 18,614,425 14,703,483 718,453 Alteration/Additions 10,776,263 3,919,130 9,411,917 5,685,716 10,330,437 Total $14,227,239 $13,838,068 $70,992,820 $40,271,189 $14,956,695 Total All Industry Total Single Family Units 47 67 4 35 0 Multi-Family Units 0 0 251 4 159

Total 47 67 255 39 159 (1) Includes churches and religious buildings, hospitals and institutional buildings, schools and educational buildings,

residential garages, public works and utilities buildings. Source: California Homebuilding Foundation/Construction Industry Research Board.

CIT

Y O

F P

OM

ON

A • 2017 R

EF

UN

DIN

G R

EV

EN

UE

BO

ND

S (W

AT

ER

FA

CIL

ITIE

S P

RO

JEC

T) S

ER

IES

BE

(TA

X-E

XE

MP

T) A

ND

SE

RIE

S B

F (T

AX

AB

LE

)