oakland 1992 redevelopment agency bonds
TRANSCRIPT
NEW ISSUE BOOK-ENTRY ONLY
In the opinion of Brown & ~d. San FrancISco, California, and Kennedy & wasserman, Oakland, California, Co-Bond Counsel. based oneXistingstatutes, regulations, rulings andJudiCialdeCISions and assummg compliance by the Agency with certam covenants descnbed hereinand with the reqUIrements of the Internal Revenue Code of 1986. as amended, regarding the use. expenditure and Investment of bondproceeds and the /lmely payment of certain Investment earnIngs to the United States.Interest on the 1992A Bonds ISnot Includable In the grossIncome of tne owners of the 1992A Bonds for federal ,ncome tax purposes Co-Bond Counsel are further of the opInion that Interest on the1992A Bonds Willnotbe treated as an Item of tax preference In calcula/lng altema/lve munmumtaxable Income of mdlVlduals and corporations.however, such Interest Willbe Included as an adlustment In the calculation of corporate alterna/lve minimum taxable Income and may thereforeaffect a corporeuon:« alternative tmmmum tax and enVIronmental tax liabilitIes Co-Bond Counsel are also of the opinion that Interest on the1992A Bonds IS exempt from present State of CalIfornia personal Income taxes See "TAX EXEMPTION" herem
$53,600,000Redevelopment Agency of the City of Oakland
Central District Redevelopment ProjectSubordinated Tax Allocation Refunding Bonds, Series 1992A
Dated: Date of Delivery Due: september 1, 2019
The bonds whIch cornpnse the Issue descnbedherem(the "1992A Bonds") are bemg Issued by the Redevelopment Agencyof the City ofOakland(the"Agency") to refunda portion of the Agency'sCentral Dlstllct Redevelopment ProjectTaxAllocatIonBond, Serres 1989A(the "PnorBond"). The Pnor Bond was ISSUed In September 1989 to fmance the Redevelopment Project (as defined herein)
The 1992A Bonds are being ISSUed as $26,800,000 aggregate pnncpat amount of Penodlc Auchon Reset Secuntles (PARSsM ) and$26,800.000aggregatepnnopalamount of InverseFloabng Rate Secuntles (INFLOSsM) Intereston the 1992ABonds Will be payableon August25. 1992, and generally on each hfth Tuesday thereafter. subject to eertam excephonsas descnbed In thiS OffiCIal Statement
The 1992A Bonds will be delivered only III fully regIstered form and, when aumenncated, will be regIstered In the name of Cede & Co • asnomineeof The Deposrtory Trust Company. New York, New York ("DTC") IndiVIdual purchasesof the 1992A Bonds will be madeIn book-entryform only In the pnnclpal amountof $100,000 or any Integralmulbple thereof. BenefiCIal Owners (as defllled herein) of the 1992ABonds will notreceve bond cernncates representing their Interests In the 1992A Bonds purchased, but WIll receive a credrt balance on the books of thenorrunees of such purchasers PnnClpal of and Intereston the 1992A Bonds WIll be paid by the Trustee (hereInafterdefined) to DTC, which willIn tum remrtsuch prrnclpal and Interest to the parncipants In DTC for subsequent disbursementto the BenefICial Owners (as defllled herelll) ofthe 1992A Bonds.
MATURITY SCHEDULE$26,800,000 PARS due september 1, 2019
$26,800,000 INFLOS due september 1, 2019(Price: 100%)
The PARS WIll bear Interestfrom therr date of InItial delivery at a rate of 2 60 percentper annum (plus an IlIIllal Service Charge as definedInAppendiX D hereto of 0 28 percent per annum) to and IncludIngAugust 24, 1992, payableon August 25. 1992 The INFLOSWill bear IIIterestfromtheIrdate of Inmaldeliveryat a rate of approximately 8 98 percent per annum to andIncludingAugust 24, 1992, payableon August25, 1992
From and after August 25, 1992, for each approximately thirty-five day Rate Pened, as descrrbed herein, the PARS and the INFLOS WIllbear Interest at the PARS Rate and the INFLOS Rate. respechvely. determined pnor to each such Rate Penod pursuant to the AuctionProcedures descnbed herein, payable on each Interest Payment Date, as descnbed herem Interest on the PARS (lIIcludlng any applICableSeMCB Charge) may not exceed approximately 11 736 percent per annum Except as descnbed herem, the ServIce Cnarge (Imhally 028percentper annum) will be deductedfrom each Interestpayment on the PARS by the Trusteeand applied to pay certain fees A holder of PARSor INFLOSmay link such PARSor INFLOS wrthan equal pnnclpal amount of INFLOSor PARS, respecltvely, as descnbed hel'e,n The Interestrate which WIll be paid on PARS or INFLOS which have been Imked WIll be 5 95 percentper annum and no SerYIce Charge Will be deducted
The 1992A Bonds are subject to redemption prior to maturrty as descnbed herern and the PARS are subject to mandatory tender forpurchase as desenoed herein See "THE 1992A BONDS-Redemption"
Payment of the pnncipat of and Interest on the 1992A Bonds as the same shall become due (not Including eccelerauon or redemption,except mandatory smkmgfund redemphon) IS Insured by a fmanelal guaranty Insurance pohcyto be Issued by
MBIASImultaneously WIth the delivery of the 1992A Bonds
The 1992A Bonds arehmrted obhqanonsof the Agencyand are secured by a pledgeof SubordinatedTax Revenues (as defmedherem)andcertain other funds held by FIrst Trust of Cahfomla, NatIonal ASSOCiatIon, as trustee (the "Trustee") under a Trust Indenture,dated as of July1, 1992 (the "Indenture"), by and between the Agencyand the Trustee
The 1992A Bonds are not a debt of the City of Oakland, the State of California or any of Its political subdiviSIOns, and neither theCity of oakland, the State of Califonria nor any of its political subdiVisions ISliable thereon. In no event shall the 1992A Bonds or anyinterest or redemption premium thereon be payable out of any funds or properties other than those of the Agency as set forth In theIndenture. The 1992A Bonds do not constItute an indebtedness within the meanin9 of any constiturtlonal or statutory debt limitationor restriction.
Tlus cover page containscertain mtormanon for qUick reference only It ISnot a summary of thiS Issue Investors are advised to read theenbreOffICIal Statement to obtain mtorrnanon esseonal to the maklllg of an Informed Investment decrson
The Senes 1992A Bonds are offered when. as and If Issued, sublect to the approval of the legality thereof by Brown & ~d. SanFranCISCo, California. and Kennedy & wasserman, Oakland. California, Co-Bond Counsel Certam legal matters are sublect to the approval ofWendel, Rosen. Black, Dean & Levitan. Oakland, California, counsel to the Underwnters Certam legal matters Will be passed upon for theAgency by Jayne W Williams, City Attorney of the City of Oakland It ISanticipated that the 1992A Bonds Willbe aV8llabie for delivery to DTCon or about July 23, 1992
Goldman, Sachs & Co.
Dated July 9, 1992
Artemis Capital Group, Inc.Pryor, McClendon & Counts & Co. Inc.
8M PARS and INFL08 are service marks of Goldman,Sachs & Co
THE CITY COUNCIL AND THE REDEVEWPMENT AGENCYOF THE CITY OF OAKLAND, CALIFORNIA
One City Hall PlazaOakland, California 94612
ELlliU M. HARRIS, Mayor/Chairman
LEO BAZILE, Vice Mayor/Vice Chairman
FRANK H. OGAWA
ALETA CANNON
MARGE GIBSON-HASKELL
RICHARD SPEES
NATIIAN MILEY
MARY MOORE
WILSON C. Rll..ES, JR.
HENRY L. GARDNER, City Manager/Agency Administrator
ARRECE JAMESON, City Clerk/Agency Secretary
GARY BREAUX, Director of Finance/Agency Treasurer
JAYNE W. WILLIAMS, City Attorney/Agency Counsel
JULIA BROWN, Director, Office of Economic Development and Employment
ANTOINETTE HEWLETT, Director, Office of Community Development
SPECIAL SERVICES
CO-BOND COUNSEL
Brown & WoodSan Francisco, California
TRUSTEE
Kennedy & WassermanOakland, California
First Trust of California, National AssociationSan Francisco, California
CD-FINANCIAL ADVISORS
Public Financial Management, Inc.San Francisco, California
Henderson Capital Partners, Inc.Oakland, California
No dealer, broker, salesperson or other person has been authorized by the Agency, theCity of Oakland or the Underwriters to give any information or to make any representations,other than those contained herein, and, if given or made, such other information or representations must not be relied upon as having been authorized by any of the foregoing. This OfficialStatement does not constitute an offer to sell or the solicitation of an offer to buy, nor shall therebe any sale of the 1992A Bonds by a person in any jurisdiction in which it is unlawful for suchperson to make such an offer, solicitation or sale.
This Official Statement is not to be construed as a contract with the purchasers of the1992A Bonds. Statements contained in this Official Statement that involve estimates, forecastsor matters of opinion, whether or not expressly so described herein, are intended solely as suchand are not to be construed as representations of fact.
The information set forth herein has been obtained from official sources which arebelieved to be reliable, but it is not guaranteed as to accuracy or completeness, and is not to beconstrued as a representation by the Underwriters. The information and expressions of opinionsherein are subject to change without notice, and neither delivery of this Official Statement norany sale made hereunder shall, under any circumstances, create any implication that there hasbeen no change in the affairs of the City or the Agency since the date hereof. All summariescontained herein of the Indenture or other documents are made subject to the provisions of suchdocuments and do not purport to be complete statements of any or all of such provisions.
This Official Statement is submitted in connection with the sale of the 1992A Bondsreferred to herein and may not be reproduced or used, in whole or in part, for any otherpurpose.
IN CONNECTION WITH THIS OFFERING, THE UNDERWRITERS MAYOVERALLOT OR EFFECT TRANSACTIONS WHICH STABILIZE OR MAINTAIN THEMARKET PRICE OF THE 1992A BONDS AT A LEVEL ABOVE TIlAT WHICH MIGHTOTHERWISE PREVAIL IN THE OPEN MARKET, AND SUCH STABILIZING, IFCOMMENCED, MAY BE DISCONTINUED AT ANY TIME.
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TABLE OF CONTENTS
OFFICIAL STATEMENT
INTRODUCTION , 1THE 1992A BONDS , 3
General: Authority for Issuance 3Description of the 1992A Bonds , 3Book-Entry-Only System 4Description of Terms of PARS and INFLOS 6
General , 6Interest 7Lmkage ofINFLOS and PARS 8Master Purchaser's Letter . . . . . . .. 10Special Considerations for Purchasers of
PARS and INFLQS ........• 11Mandatory Tender of PARS 12
Redemption Provisions . . . . . . . . . . " 13PLAN OF REFUNDING 16ESTIMATED SOURCES AND USES OF
PROCEEDS OF THE 1992A BONDS " 17SECURITY FOR THE 1992A BONDS. . . . 17
General 17Subordinated Tax Revenues " 18Deposit into 1992A Reserve Account . " 21Issuance of Parity Obligations 21Historical and Current Tax Revenues . .. 22Municipal Bond Insurance . . . . . . . . " 24
DEBT SERVICE SCHEDULE . . . . . . . .. 27RISK FACTORS 28LIMITATIONS ON TAX REVENUES AND
POSSIBLE SPENDING LIMITATIONS. 29Property Tax limitations: Article XIllA. 29Implementing Legislation 31Property Tax Collection Procedures . . " 32Property Tax Admimstranve Costs .... 33Taxing Entity Revenue . . . . . . . . . . .. 34Business Inventory Exemption/Special
Subvention . .. .. . .. .. . .. 34Unitary Property 35Recent Limitation on Tax Revenues .. " 36Tax Increment limitation . . . . . . . . " 36Appropriations Li1Illtations: Article XIIIB of
the Callforma ConstItution 36Low- and Moderate-Income Housing 37Limitation on Tax Imposition " 38
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THE CITY AND THE AGENCY . . . . . .. 39The City of Oakland .. . .. . . .. . ... 39The Redevelopment Agency of the City of
Oakland............. .. .... 4Q
The PCOJect Area and the Projects . . . .. 40Ln3GATION ..........•........ 42TAX EXEMPTION ........•..... " 42RATINGS 43VERIFICATION OF MATHEMATICAL
COMPUTATIONS. . . . . . . . . . . . .. 43APPROVAL OF LEGAL PROCEEDINGS. 43UNDERWRITING 44CO-FINANCIAL ADVISORS 44MISCELLANEOUS 44APPENDIX A - DESCRIPTION OF 11IE
CITY OF OAKLAND " A-IAPPENDIX B - 11IE REDEVELOPMENT
AGENCY OF THE CITY OF OAKLAND B-1APPENDIX C - THE REDEVELOPMENT
AGENCY OF THE CITY OF OAKLAND AUDITED FINANCIAL STATEMENTS FOR THE FISCAL YEAR ENDEDJUNE 30, 1991 •.............. C-l
APPENDIX D - SUMMARY OF CERTAINPROVISIONS OF THE INDENTURE. D-l
APPENDIX E - FORM OF OPINION OFCO-BOND COUNSEL. . • . . • . . . .. E-l
APPENDIX F - FORM OF MUNICIPALBOND INSURANCE POllCY . . . . .. F-l
APPENDIX G - FORM OF MASTERPURCHASER'S LETTER G-l
OmCIAL STATEMENT
$53,600,000
Redevelopment Agency of the City of OaklandCentral District Redevelopment Project
Subordinated Tax Allocation Refunding Bonds, Series 1992A
INTRODUCTION
The purpose of this Official Statement, which includes the cover page, table of contentsand appendices hereto (the "Official Statement"), is to provide information about the$53,600,000 Redevelopment Agency of the City of Oaldand Central District RedevelopmentProject Subordinated Tax Allocation Refunding Bonds, Series 1992A (the "1992A Bonds" orthe "Bonds"), to be issued by the Redevelopment Agency of the City of Oakland (the"Agency")to refund a portion of the Agency's Central District Redevelopment Project Tax AllocationBond, Series 1989A, issued under the Indenture of Trust, dated as of August 1, 1989, by andbetween the Agency and Bankers Trust Company of California, National Association, as trustee(the "1989 Agency Indenture") in the original principal amount of $92,399,272.85 and presentlyoutstanding in the aggregate original principal amount of $88,359,272.85 (the "Prior Bond").
The Prior Bond was purchased when issued and is currently held by First Trust ofCalifornia, National Association (successor to Bankers Trust Company of California, NationalAssociation), as trustee (the" 1989 LGFA Bond Trustee") under the Indenture of Trust, datedas of August 1, 1989, by and between the Local Government Finance Authority (the "LGFA")and the 1989 LGFA Bond Trustee (the" 1989 LGFA Bond Indenture"). The payments by theAgency of principal of and interest on the Prior Bond are the principal security for the 1989Refunding Revenue Bonds (Redevelopment Agency of the City of Oakland - Central DistrictRedevelopment Project Subordinate Financing) (the "1989 LGFA Bonds") issued under the 1989LGFA Bond Indenture. The proceeds of the 1992A Bonds will be applied towards theredemption of a portion of the Prior Bond. Such amount will in tum be used by the 1989 LGFABond Trustee to redeem a corresponding principal amount of the 1989 LGFA Bonds.
The 1992A Bonds are being issued as $26,800,000 aggregate principal amount ofPeriodic Auction Reset Securities (PARS) and $26,800,000 aggregate principal amount ofInverse Floating Rate Securities (lNFLOS). The 1992A Bonds shall mature in the years andamounts and bear interest at the rates as set forth on the cover page. See "THE 1992ABONDS." THE OFFERING OF THE PARS IS CONTINGENT ON THE OFFERING OF THEINFLOS.
The City of Oakland (the "City") is located on the east side of San Francisco Bay andwas incorporated as a city in 1854. The City's charter (the "Charter") was substantially revisedin 1969 to take advantage of what is now Section 7 of Article XI of the Constitution of the Stateof California. The City, acting pursuant to the California Community Redevelopment Law(Section 33,000 et seq. of the Health and Safety Code) (the "Redevelopment Law"), created the
Agency in 1956 and, effective December 31, 1975, the City Council of the City (the "CityCouncil") declared itself to be the Agency. Although the Agency is an entity distinct from theCity, certain City personnel provide staff support for the Agency. For additional informationconcerning the City and the Agency, respectively, see "APPENDIX A - DESCRIPTION OFTHE CITY OF OAKLAND" and "APPENDIX B - TIm REDEVELOPMENT AGENCY OFTHE CITY OF OAKLAND. "
Pursuant to the Redevelopment Law, the Agency and the City have adopted aredevelopment plan (the "Plan") and created the Central District Redevelopment Project (the"Project"). The Project covers an area of more than 200 blocks located in the central businessdistrict of Oaldand (the "Project Area"). Within the Project Area there are three mainredevelopment activity areas: City Center, Chinatown and Old Oakland, which together comprisea total of 21 blocks and surround the City's convention center/hotel development.
The 1992A Bonds are being issued pursuant to a Trust Indenture, dated as of July 1,1992 (the "Indenture"), by and between the Agency and First Trust of California, NationalAssociation, as Trustee (the "Trustee"). The 1992A Bonds are being issued in accordance withthe Redevelopment Law and Article 11 of Chapter 3 of Part 1 of Division 2 of Title 5 of theCalifornia Government Code (commencing at Section 53580; the "Refunding Law") and otherapplicable laws and the Constitution of the State of California.
Pursuant to the Redevelopment Law, a portion of all property tax revenues collected byor for each taxing agency on any increase in the taxable value of certain property within theProject Area over that shown on the assessment roles for the base year applicable to the ProjectArea, may be pledged to the repayment of indebtedness incurred by the Agency in connectionwith redevelopment in the Project Area. Under the Indenture, the Agency has pledgedSubordinated Tax Revenues (as defined herein) consisting of a portion of such tax increments(exclusive of amounts pledged to certain outstanding bonds of the Agency payable prior to the1992A Bonds and amounts which may be required by the Redevelopment Law to be set asidefor certain low- and moderate-income housing purposes, if any, and special subvention revenue,if any) to the payment of the principal of, premium, if any, and interest on the 1992A Bonds.(See "SECURITY FOR TIm 1992A BONDS - Subordinated Tax Revenues" herein.)
Payment of the principal of and interest on the Bonds when due (other than by reason ofany redemption, except for mandatory sinking fund redemptions, or any acceleration of the duedate of principal) will be insured by a financial guaranty insurance policy (the "Bond InsurancePolicy") issued by Municipal Bond Investors Assurance Corporation simultaneously with thedelivery of the Bonds. (See "SECURITY FOR THE 1992A BONDS - Municipal BondInsurance" herein.)
Capitalized terms used but not defined herein shall have the respective meanings ascribedto them in the Indenture. Summaries of the Indenture and other documents contained herein aresubject to the provisions of such documents and do not purport to be complete statements of any
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or all of such provisions. Reference is hereby made to such documents on file with the Agencyfor further information in connection therewith.
THE 1992A BONDS
General: Authority for Issuance
The 1992A Bonds have been authorized by Resolutions adopted by the Agency and theCity Council of the City on June 30, 1992, and are being issued in accordance with theprovisions of the Indenture, the Redevelopment Law, the Refunding Law and other applicablelaws and the Constitution of the State of California.
Description of the 1992A Bonds
General. The 1992A Bonds are being issued as $26,800,000 aggregate principal amountof Periodic Auction Reset Securities (PARS) and $26,800,000 aggregate principal amount ofInverse Floating Rate Securities (lNFLOS). The 1992A Bonds shall mature i(I the years andamounts and bear interest at the rates as set forth on the cover page.
Interest on the 1992A Bonds will be payable on August 25, 1992, and generally on eachfifth Tuesday thereafter, subject to certain exceptions as described herein.
The 1992A Bonds are issuable in the form of fully registered bonds without coupons inthe denomination of $100,000 or any integral multiple thereof. The 1992A Bonds, when issued,will be registered in the name of Cede & Co. as a registered owner and nominee of TheDepository Trust Company, New York, New York ("DTC"). DTC will act as a securitiesdepository for the 1992A Bonds. Individual purchases may be made in book-entry-only formonly. Purchasers will not receive certificates representing their beneficial ownership interest inthe 1992A Bonds so purchased. So long as Cede & Co. is the registered owner of the 1992ABonds, as nominee of DTC, references therein to the Holders or Bondholders shall mean Cede& Co. and shall not mean the "Beneficial Owners" of the 1992A Bonds (provided that certainof the terms of the 1992A Bonds relating to the Auction Procedure may involve BeneficialOwners directly as described in Appendix D hereto). In this Official Statement, the term"Beneficial Owner" or "purchaser" shall mean the person for whom the DTC participantacquires an interest in the 1992A Bonds. See "THE 1992A BONDS - Book-Entry-On1ySystem" herein.
Place ofPayment. Principal and premium, if any, on the 1992A Bonds will be payableat the corporate trust office of the Trustee in San Francisco, California. Interest on the 1992ABonds will be payable to the holders thereof registered as of the close of business on the secondBusiness Day preceding such Interest Payment Date (the "Record Date") by check mailed toeach holder to the address shown on the registration books maintained by the Trustee. Anyinterest not punctually paid shall cease to be payable to the Bondholders on the Record Date and
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shall be paid to the person whose name is registered on the Special Record Date (as defined inthe Indenture).
Book-Entry-Only System
The 1992A Bonds when executed and delivered will be registered in the name of Cede& Co., as "Bond Owner" and nominee of The Depository Trust Company, New York, NewYork ("DTC"). So long as DTC, or its nominee, Cede & Co., is the registered owner of all1992A Bonds, all payments on the 1992A Bonds will be made directly to DTC, anddisbursement of such payments, to the hereinafter described DTC Participants will be theresponsibility of DTC, and disbursement of such payments to the persons for whom a DTCParticipant acquires an interest in the 1992A Bonds (individually, a "Beneficial Owner") will bethe responsibility of the DTC Participants as more fully described herein.
DTC is a limited-purpose trust company organized under the laws of the State of NewYork, a member of the Federal Reserve System, a "clearing corporation" within the meaningof the New York Uniform Commercial Code and a "clearing agency" registered pursuant to theprovisions of Section 17A of the Securities Exchange Act of 1934, as amended. DTC wascreated to hold securities of its participants (the "DTC Participants") and to facilitate the clearance and settlement of securities transactions among DTC Participants in such securities throughelectronic book-entry changes in accounts of the DTC Participants, thereby eliminating the needof physical movement of securities certificates. DTC Participants include securities brokers anddealers, banks, trust companies, clearing corporations and certain other organizations, some ofwhom (or their representatives) own DTC. Access to the DTC system is also available to otherssuch as banks, brokers, dealers and trust companies that clear through or maintain a custodialrelationship with a DTC Participant, either directly or indirectly.
Ownership interests in the 1992A Bonds may be purchased by or through DTCParticipants. Such DTC Participants and the Beneficial Owners will not receive 1992A Bonds,but each DTC Participant will receive a credit balance in the records of DTC in the amount ofsuch DTC Participant's interest in 1992A Bonds, which will be confirmed in accordance withDTC's standard procedures. Each Beneficial Owner may desire to make arrangements with suchDTC Participant to receive a credit balance in the records of such DTC Participant, and maydesire to make arrangements with such DTC Participant to have all notices of redemption orother communications to DTC, which may affect such persons, forwarded in writing by suchDTC Participant and to have notification made of all interest payments. NEITHER THEAGENCY NOR THE TRUSTEE WILL HAVE ANY RESPONSffiILITY OR OBLIGATIONWITH RESPECT TO THE PAYMENTS TO OR THE PROVIDING OF NOTICE FOR SUCHDTC PARTICIPANTS OR THE PERSONS FOR WHOM THEY ACT AS NOMINEES WITHRESPECT TO THE 1992A BONDS NOR ANY OBLIGATION TO MAINTAIN DTC'S BOOKENTRY SYSTEM. DTC WILL NOT BE DEEMED AN AGENT OF THE AGENCY OR THETRUSTEE FOR ANY PURPOSE, AND NEITHER THE AGENCY NOR THE TRUSTEEWILL BE RESPONSffiLE FOR THE ACTIONS OF DTC.
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With respect to 1992A Bonds registered in the name of DTC or its nominee, Cede &Co., neither the Agency nor the Trustee will have any responsibility or obligation to any DTCParticipant or to any person on behalf of whom such a DTC Participant holds an interest in1992A Bonds. Without limiting the scope of the immediately preceding sentence, the Agency,the Paying Agent and the Trustee will have no responsibility or obligation with respect to (i) theaccuracy of the records of DTC, Cede & Co. or any DTC Participant with respect to anyownership interest in the 1992A Bonds, (ii) the delivery to any DTC Participant or any otherperson, other than a Bond Owner as shown in the registration books kept by the Trustee, of anynotice with respect to the 1992A Bonds, including any notice of redemption, (iii) the selectionby DTC of the beneficial interests in the 1992A Bonds to be redeemed, if any, (iv) the paymentto any DTC Participant or any other person, other than a Bond Owner as shown in theregistration books kept by the Trustee, of any amount with respect to the Bonds or (v) anyconsent given or other action taken by DTC or Cede & Co. as Owner of the Bonds. The Agencyand the Trustee may treat and consider each Bond Owner as shown in the registration books keptby the Trustee as the holder and absolute owner of 1992A Bonds registered in such person'sname for the purpose of payment of principal of and interest on such 1992A Bonds, for thepurpose of giving notice of redemption and other matters with respect to such 1992A Bonds, forthe purpose of registering transfers with respect to such 1992A Bonds, and for all other purposeswhatsoever. The Trustee will pay all principal of and interest on and purchase price of the1992A Bonds only to the Bond Owners, as shown in the registration books kept by the Trustee,and all such payments will be valid and effective to fully satisfy and discharge the Agency'sobligations with respect to payment of principal of and interest on the 1992A Bonds to the extentof the sum or sums so paid.
SO LONG AS CEDE & CO. IS THE REGISTERED OWNER OF THE 1992A BONDS,AS NOMINEE OF DTC, REFERENCES HEREIN TO A "BOND OWNER" OR "OWNEROF BONDS" MEAN CEDE & CO. AS AFORESAID, AND SHALL NOT MEAN THEBENEFICIAL OWNERS OF THE 1992A BONDS.
DTC will receive payments from the Trustee to be remitted to the DTC Participants forsubsequent disbursement to the Beneficial Owners. The ownership interest of each BeneficialOwner in the 1992A Bonds will be recorded through the records of the DTC Participants, theownership interests of which, in tum, are recorded through a computerized book-entry systemoperated by DTC.
Upon receipt of moneys, DTC's current practice is immediately to credit the amounts ofthe DTC Participants in accordance with their respective holdings shown on the records of DTC.Payments by DTC Participants to Beneficial Owners will be governed by standing instructionsand customary practices, as is now the case with municipal securities held for the accounts ofcustomers in bearer form or registered in "street name," and will be the responsibility of suchDTC Participant and not of DTC, the Trustee or the Agency, subject to any statutory andregulatory requirements as may be in effect from time to time.
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When reference is made to any action which is required or permitted to be taken by theBeneficial Owners, such reference shall only relate to action by such Beneficial Owners or thosepermitted to act (by statute, regulation or otherwise) on behalf of such Beneficial Owners forsuch purposes. When notices are required or deemed appropriate to be given, they will be sentby the Trustee to DTC only and not to the Beneficial Owners. DTC will forward (or cause tobe forwarded) the notices to the DTC Participants so that DTC Participants may forward (orcause to be forwarded) the notices to the Beneficial Owners.
Beneficial Owners will receive a written confirmation of their purchase, detailing theterms of the 1992A Bonds acquired. Transfers of ownership interests in the 1992A Bonds willbe accomplished by book entries made by DTC and by the DTC Participants who act on behalfof the Beneficial Owners. Beneficial Owners will not receive 1992A Bonds in physical form.
For every transfer and exchange of interest in the 1992A Bonds, the Beneficial Ownersthereof may be charged a sum sufficient to cover any tax, fee or other governmental charge thatmay be imposed in relation thereto.
DTC may determine to discontinue providing its services with respect to the 1992ABonds at any time by giving notice to the Agency and discharging its responsibilities with respectthereto under applicable law. Under such circumstances, unless another securities depository isselected, 1992A Bonds will be made available in physical form. The Beneficial Owners, uponregistration of 1992A Bonds held in their name, will become the Owners of such 1992A Bonds.
The Agency may in its sole discretion determine to discontinue the system of book-entrytransfers through DTC (or a successor securities depository). In such event, the 1992A Bondswill be made available in physical form.
Description of Terms of PARS and INFLOS
The following description of the PARS and the INFLOS is intended to summarize certainbasic provisions with respect thereto. For a more complete discussion of the PARS and theINFLOS, including specifically the Auction Procedures, and for definitions of certain capitalizedterms used herein, see Appendix D hereto. The Indenture provides that the rights granted to theOwners of the PARS and INFLOS therein relating to the Auction Procedures, mandatory tenderprovisions and certain other provisions may be exercised by owners of beneficial interests insuch securities. To that extent, each reference herein to the purchase, sale or holding of PARSand INFLOS shall refer to beneficial interests in PARS and INFLOS, unless the context clearlyrequires otherwise.
General
The PARS and INFLOS will be dated their date of delivery, will mature on September I,2019, and will bear interest from their date payable on each Interest Payment Date. Such InterestPayment Dates will be (i) August 25, 1992, and (ii) every fifth Tuesday thereafter, the maturity
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date for any of the PARS and INFLOS and the sinking fund payment date for any of the PARSor INFLOS called for redemption on such sinking fund payment date; provided, however, thatif any such fifth Tuesday or the Wednesday succeeding such fifth Tuesday is not a Business Day,then the Interest Payment Date will be the Business Day next preceding such fifthTuesday whichBusiness Day is followed by a Business Day. The Record Date for each Interest Payment Datefor the PARS and the INFLOS will be the second Business Day immediately preceding suchInterest Payment Date.
Interest
PARS. The PARS will bear interest for each Rate Period at the PARS Rate, which willbe computed on the basis of a 36O-day year for the number of days actually elapsed as describedin Appendix D. The PARS Rate will be 2.60 percent per annum plus a Service Charge of 0.28percent for the Rate Period commencing on the Delivery Date to and including August 24, 1992,and thereafter will equal the sum of (a) the Auction Rate determined for each Rate Period inaccordance with the Auction Procedures, as described in Appendix D, and (b) the ServiceCharge in effect for such Rate Period. Notwithstanding the foregoing, (i) if the Auction Agentshall have failed to determine the Auction Rate for any Rate Period (including the circumstancewhere there is no Auction Agent or no Broker-Dealer), the PARS Rate for such Rate Periodshall be the No Auction Rate determined for such Rate Period plus the Service Charge then ineffect; (ii) if a failure to pay principal, interest or premium on any Bond when due shall haveoccurred under the Indenture, the PARS Rate for the Rate Period during which such failure shallhave occurred and each Rate Period thereafter commencing prior to the date on which suchfailure shall have ceased to be continuing shall be the Default Rate for such Rate Period plus theService Charge; and (iii) in no event shall the PARS Rate exceed the lesser of 11.73698632percent per annum or the maximum interest rate permitted by applicable law.
Service Charge. The Service Charge with respect to any Auction Date is the sum of theAuction Agent Fee and the Broker-Dealer Fee with respect to such Auction Date. The AuctionAgent Fee and the Broker-Dealer Fee are payable out of each interest payment on the RegularPARS and Special Linked PARS and INFLOS. The Owner of each Regular PARS and SpecialLinked PARS and INFLOS by its acceptance thereof expressly consents to the deduction by theTrustee of the Service Charge from the interest payment to be paid to such Owner on eachInterest Payment Date. The Owners of Linked PARS and INFLOS and of Special PARS are notobligated to pay the Service Charge, and there is no deduction of the Service Charge withrespect to Linked PARS and INFLOS or Special PARS. See "Linkage oflNFLOS and PARS"below. Each Owner of PARS and INFLOS, by its acceptance thereof, acknowledges that in theevent the Service Charge is not deducted, but is paid to such Owner, in a case in which theService Charge is owed, the Broker-Dealers (for themselves and on behalf of the Auction Agent)are entitled to collect such Service Charge from the Owners who owe such Service Charge.
On each Interest Payment Date, the Trustee is to pay to the Auction Agent and theBroker-Dealer the Auction Agent Fee and the Broker-Dealer Fee from the Service Charge.
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The initialService Charge is 0.28 percent per annum. The Auction Agent Fee Rate andthe Broker-Dealer Fee Rate may beadjusted from time to time with the approval of the Agencyand the Trustee upon a written request of the Auction Agent or a Broker-Dealer, as the case maybe, delivered to the Agency and the Trustee. Pursuant to the Indenture, the Agency and theTrustee shall approve such a request if they find that the proposed Auction Agent Fee Rate orBroker-Dealer Fee Rate, as the case may be, equals the prevailing rate received by such entitiesfor rendering comparable services to others. Notice ofany change in the Auction Agent Fee Rateor the Broker-Dealer Fee Rate is to be mailed to all Owners of PARS and INFLOS by theAuction Agent at least six Business Days prior to the Submission Deadline for the Auction towhich any such fee is applicable.
Any increase in the Auction Agent Fee Rate or the Broker-Dealer Fee Rate would reducethe amount of interest payable on the INFLOS. See "Special Considerations for Purchasers ofPARS and INFLOS" below.
INFLOS. The INFLOS will bear interest for each Rate Period at the INFLOS Rate, whichwill be computed on the basis of a 365-day year for the number of days actually elapsed. TheINFLOS Rate will be approximately 8.98 percent per annum from the Delivery Date to andincluding August 27, 1992 and for each Rate Period thereafter will equal
(a) 11.90 percent per annum minus
(b) the product of (A) the PARS Rate for such Rate Period, and (B) 365/360.
Notwithstanding the foregoing, (i) if the calculation of the INFLOS Rate would producean interest rate in excess of the maximum lawful rate of interest, then the INFLOS Rate shallbe equal to such maximum lawful rate of interest, and (ii) the aggregate amount of interestpayable on the INFLOS for any Rate Period shall not exceed twice the Linked Rate minus theaggregate amount of interest payable on the PARS for such Rate Period.
Linkage of INFLOS and PARS
Linking-Rate Lock Option. An Owner may link INFLOS with an equal principal amountof Regular PARS or Special PARS by purchasing such INFLOS and Regular PARS or SpecialPARS and requesting:
(a) its Direct Participant to deliver such INFLOS and Regular PARS or SpecialPARS free of charge by book-entry transfer from such Direct Participant's account at DTC intothe Auction Agent's special account at DTC; and
(b) its Broker-Dealer to deliver a Linkage Request to the Auction Agent.
HOWEVER, EXCEPT AS PROVIDED UNDER "MANDATORY TENDER OF PARS"BELOW, INFLOS AND REGULAR PARS OR SPECIAL PARS MAY NOT BE LINKED
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DURING EACH PERIOD (i) COMMENCING IMMEDIATELY PRIOR TO THE OPENINGOF BUSINESS ON THE DELIVERY DATE AND ENDING IMMEDIATELY PRIOR TOTHE OPENING OF BUSINESS ON THE FIRST INTEREST PAYMENT DATE, (ii)COMMENCING AT 11:00 A.M., NEW YORK CITY TIME, ON THE THIRD BUSINESSDAY IMMEDIATELY PRECEDING ANY INTEREST PAYMENT DATE AND ENDINGIMMEDIATELY PRIOR TO THE OPENING OF BUSINESS ON SUCH INTERESTPAYMENT DATE, AND (iii) COMMENCING IMMEDIATELY PRIOR TO THE OPENINGOF BUSINESS ON THE SECOND BUSINESS DAY NEXT PRECEDING THE DATE ONWHICH A LOTTERY IS HELD TO SELECT PARS AND INFLOS FOR REDEMPTION ANDENDING IMMEDIATELY PRIOR TO THE OPENING OF BUSINESS ON THE DATEFIXED FOR SUCH REDEMPTION (A "CLOSED PERIOD").
IN ADDmON, IF AT ANY TIME THE INFLOS AND PARS ARE NO LONGEREACH REPRESENTED BY A GLOBAL BOND REGISTERED IN THE NAME OF DTC ORITS NOMINEE, INFLOS AND PARS MAY NOT BE LINKED. ANY LINKED PARS ANDINFLOS AND ANY SPECIAL LINKED PARS AND INFLOS WILL THEREUPON AUTOMATICALLY BECOME UNLINKED AND THE SERVICE CHARGE WILL BE ASSESSEDAGAINST EACH PARS.
The Auction Agent is to redeliver free of charge by book-entry transfer to the accountat DTC of the Direct Participant specified in the Linkage Request the INFLOS and RegularPARS or Special PARS which have been delivered to the Auction Agent for linkage. When suchINFLOS and Regular PARS or INFLOS and Special PARS are redelivered, the beneficialownership of the resulting Special Linked PARS and INFLOS and Linked PARS and INFLOS,respectively, is to be recorded at DTC under separate CUSIP numbers.
Owners of Linked PARS and INFLOS and Special Linked PARS and INFLOS at theclose of business on the Record Date immediately preceding any Auction Date may not participate (as to such securities) in the Auction held on such Auction Date and are not obligated topay the Service Charge with respect to such Auction; provided that Owners of Special LinkedPARS and INFLOS are obligated to pay the Service Charge for the Auction immediatelypreceding the date of linkage thereof which Service Charge will bededucted on the first InterestPayment Date following the date of linkage.
Linked PARS and INFLOS and Special Linked PARS and INFLOS may only betransferred as linked securities in minimum denominations of $200,000 ($100,000 principalamount of INFLOS and $100,000 principal amount of PARS) and integral multiples thereof.Linked PARS and INFLOS and Special Linked PARS and INFLOS are not subject to theAuction Procedures and therefore are not subject to the transfer restrictions set forth in theMaster Purchaser's Letter. See Appendix G hereto.
Breaking Linkilge of INFLOS and PARS. An Owner of Linked PARS and INFLOS orSpecial Linked PARS and INFLOS may break such linkage at any time, other than during aClosed Period, by requesting:
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(a) its Direct Participant to deliver such Linked PARS and INFLOS or SpecialLinked PARS and INFLOS free of charge by book-entry transfer from such Direct Participant'saccount at DTC into the Auction Agent's special account at DTC; and
(b) its Broker-Dealer to deliver a Request to Break Linkage to the Auction Agent.
In addition, prior to the breaking of such linkage, unless already delivered, such Owner or itsBroker-Dealer will be required to sign and deliver a Master Purchaser's Letter to the AuctionAgent. See "Master Purchaser's Letter" below.
The Auction Agent is to redeliver free of charge by book-entry transfer such linkedPARS and INFLOS or Special Linked PARS and INFLOS from its special account at DTC tothe account at DTC of the Direct Participant specified in the Request to Break Linkage. Whensuch Linked PARS and INFLOS or Special Linked PARS and INFLOS are redelivered, thebeneficial ownership of the resulting Special PARS and INFLOS, and PARS and INFLOS,respectively, is to be recorded at DTC under a separate CUSIP number.
The Existing Owner of Special PARS will receive interest on such Special PARS for theRate Period during which such Special PARS have become unlinked from Linked PARS andINFLOS at the PARS Rate then in effect without any Service Charge deduction.
Rejecting INFLOS and PARS. If the Auction Agent receives a Linkage Request or aRequest to Break Linkage and does not receive delivery free of charge of the related INFLOSand PARS from the Direct Participant identified in such request prior to the beginning of theClosed Period next following the receipt thereof by the Auction Agent, the Auction Agent isdirected to reject such INFLOS and PARS, thereby effecting the book-entry transfer of suchINFLOS and PARS from the special account of the Auction Agent at DTC into the account ofsuch Direct Participant at DTC. As a result, the requested linkage or the requested breaking oflinkage, as the case may be, will not be made.
Master Purchaser's Letter
As a condition to purchasing PARS which are not linked to INFLOS, in any Auction orotherwise, each prospective purchaser of PARS may be required to sign and deliver to aBroker-Dealer (who will deliver copies thereof to the Auction Agent), a Master Purchaser'sLetter in the form included as Appendix G to this Official Statement.
Linked PARS and INFLOS and Special Linked PARS and INFLOS will not be subjectto the transfer restrictions contained in the Master Purchaser's Letter and may be transferred toa person who has not signed a Master Purchaser's Letter.
Each prospective purchaser of PARS should ask its Broker-Dealer whether such prospective purchaser should sign a Master Purchaser's Letter. If the Broker-Dealer submits Orders
10
for such prospective purchaser listing the Broker-Dealer as the Existing Owner or the PotentialOwner, a Master Purchaser's Letter signed by such prospective purchaser may not be required.
AN EXECUTION FORM OF THE MASTER PURCHASER'S LEITER, lWO COPIESOF WHICH ARE TO BE SENT TO THE AUCTION AGENT AND ONE COPY OF WIDCHIS TO BE SENT TO A BROKER-DEALER, IS INCLUDED AS APPENDIX G TO THISOFFICIAL STATEMENT. EXECUTION BY A PROSPECTIVE PURCHASER OR ITSBROKER-DEALER OF A MASTER PURCHASER'S LETTER IS NOT A COMMITMENTTO PURCHASE PARS IN THE OFFERING BEING MADE HEREBY OR IN ANYAUCTION, BUT IS A CONDmON PRECEDENT TO PURCHASING PARS.
Special Considerations for Purchasers of PARS and [NFLOS
Prospective purchasers of INFLOS should note the following with respect to theINFLOS:
Because the interest rate on the INFLOS will be determined by subtracting thePARS Rate (which includes the Service Charge) from a fixed amount, the interest rate on theINFLOS will:
decrease as the PARS Rate increases, and increase as the PARS Rate decreases.
As a result, the interest rate on the INFLOS willbe approximately zero if the PARS Rateis equal to 11.73698632 percent per annum.
The PARS Rate may be affected by the ratings assigned by S&P and Moody's to the1992A Bonds. In the event of a downgrading of the rating on the 1992A Bonds, the MaximumRate may increase and the Minimum Rate may increase, which may result in an increase in thePARS Rate and a decrease in the interest rate on the INFLOS. The PARS Rate may also beaffected by any matter that might cause participants in the PARS Auctions to submit bids forPARS at higher interest rates.
Except as described under "Mandatory Tender of PARS" below, in order to linkINFLOS with PARS, an Owner of INFLOS must have purchased a like amount of PARS to belinked. See "Linkage of INFLOS and PARS" above. The Agency is not obligated to providePARS to an Owner of INFLOS who desires to link PARS with INFLOS held by such Owner.An Owner of INFLOS may be able to acquire PARS by bidding in the next succeeding Auctionfor the PARS (normally every 35 days), provided that the Existing Owners of the PARS do notsubmit Hold Orders covering all of the PARS in the Auction. In such event, no PARS wouldbe available for purchase at any rate bid by such Owner of INFLOS in that Auction. See"Auction Procedures" in Appendix D hereto. An Owner of INFLOS might be able to purchasePARS in the secondary market through a Broker-Dealer prior to the next scheduled Auction forPARS; however, an active secondary market for PARS is not expected to develop.
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Initially, Goldman, Sachs & Co. will be the sole Broker-Dealer and has advised theAgency that it intends initially to make a market for INFLOS and for PARS between Auctions;however, Goldman, Sachs & Co. is not obligated to make such markets, and no assurance canbe given that secondary markets therefor will develop.
The Indenture provides that the Auction Agent may resign from its duties as AuctionAgent or resign as a Direct Participant in DTC by giving at least 90 days' notice to the Trustee(who shall give notice of the same to each Broker-Dealer, DTC and the Agency), and does notrequire, as a condition to the effectiveness of such resignation, that a replacement Auction Agentbe in place. The Broker-Dealer Agreement provides that the Broker-Dealer thereunder mayresign upon five Business Days notice or immediately, in certain circumstances, and does notrequire, as a condition to the effectiveness of such resignation, that a replacement Broker-Dealerbe in place. For any Rate Period during which there is no duly appointed Auction Agent orduring which the Auction Agent shall fail to become a Direct Participant in DTC, or duringwhich there is no duly appointed Broker-Dealer, it will not be possible to hold Auctions, withthe result that the interest rate on the PARS will be the No Auction Rate plus the ServiceCharge. In addition, for any period during which there is no duly appointed Auction Agent orduring which the Auction Agent shall fail to be a Direct Participant in DTC, no linkage orbreaking of linkage of INFLOS and PARS will be possible.
The Service Charge is applied to pay the Auction Agent Fee and the Broker-Dealer Fee.Such fees are subject to increase as discussed above under "Interest - Service Charge." Anysuch increase will be binding upon the Owners of INFLOS and will reduce the amount ofinterest to be received by such Owners.
Mandatory Tender ofPARS
Any Owner of INFLOS may, at any time and from time to time before the SubmissionDeadline for an Auction Date, notify a Broker-Dealer that such Owner intends to submit a Bidfor a specified principal amount of PARS at the Minimum Rate on the next succeeding AuctionDate in order to link the same with such Owner's INFLOS and that if such Bid is unsuccessful,such Broker-Dealer shall, on behalf of such Owner, require through the Trustee that PARS betendered to such Owner for purchase and linkage on the seventh Business Day preceding the nextsucceeding Auction Date following the Auction in which such Bid was unsuccessful (a "TenderDate") at a price equal to the principal. amount of PARS being purchased plus accrued andunpaid interest to the Tender Date less the amount of the Service Charge for the period to theTender Date, in the following manner and with the following effect.
Tender Demand. If such Bid is unsuccessful, in whole or in part, such Broker-Dealer isto give DTC and the Auction Agent written notice (a "Tender Demand") of such tender statingthat such INFLOS Owner is the Owner of a specified principal amount of INFLOS and that suchOwner wishes to purchase an equal principal amount of PARS on the Tender Date for linkagewith such INFLOS. Any Tender Demand shall be given to DTC no later than the Business Dayfollowing the Auction in which such Bid proved unsuccessfuL
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Tender Notices. On the second Business Day following the day of DTC's receipt of aTender Demand, DTC is to select the PARS to be tendered on such Tender Date by lot and givethe Direct Participant and the Auction Agent written notice (a "Tender Notice") thereofspecifying the Tender Date, the amount of PARS to be tendered by such PARS Owner orOwners on the Tender Date and the purchase price therefor. Such Tender Notice shall be mailedto such Direct Participant and the Auction Agent by first class mail, postage prepaid, no laterthan the second Business Day following the day of DTC's receipt of such Tender Demand.
Tender and Purchase. DTC is to deliver the PARS specifiedin the Tender Notice againstpayment therefor by the Broker-Dealer by book-entry transfer on the Tender Date to the accountof the Broker-Dealer without any action on the part of or on behalf of the Owner or Owners ofthe PARS. Upon receipt of such PARS on the Tender Date, the Broker-Dealer is to deliver suchPARS against payment therefor by book-entry transfer to the account of the Direct Participantspecified by the INFLOS Owner if such Direct Participant is not such Broker-Dealer. On suchTender Date the Owner of such INFLOS is obligated to forward such purchase price to theDirect Participant of such INFLOS Owner by wire transfer. Upon such purchase, the INFLOSspecified in such Tender Demand and the PARS specified in such Tender Notice will becomeSpecial Linked PARS and INFLOS.
Failed Purchase. In the event that any INFLOS Owner who has submitted a TenderDemand fails to provide funds for the purchase of the principal amount of the PARS specifiedtherein on the Tender Date specified therein, the purchase of such PARS shall not take place onsuch Tender Date, such INFLOS Owner shall have no liability to the Owner or Owners of thePARS tendered for purchase on such Tender Date or to any other person for such purchase priceor for any other amount, and such PARS shall be deemed to be subject to a Submitted SellOrder for purposes of the next succeeding Auction.
Effect of Tender Notice. The giving of a Tender Notice shall supersede any order givenby the Existing Owner or Exisnng Owners of the PARS specified therein with respect to theAuction occurring on the Auction Date following the Tender Date specified in such TenderNotice.
Redemption Provisions
Optional Redemption - PARS. The PARS are subject to redemption prior to their statedmaturity, at the option of the Agency, from any source of available funds, as a whole or in parton any Interest Payment Date, by lot, at a redemption price equal to 100 percent of the principalamount of the PARS called for redemption, without premium.
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Optional Redemption - INFLOS. The INFLOS are subject to. redemption prior to theirstated maturity, at the option of the Agency, from any source of available funds, as a whole orin part on any Interest Payment Date, by lot, on or after September 1, 2002, at the followingredemption prices (computed upon the principal amount of INFLOS called for redemption).:
Redemption Period(Both Dates Inclusive)
September 1, 2002 to August 31, 2003September 1, 2003 to August 31, 2004September 1, 2004 and thereafter
RedemptionPrice
104%102%100%
Mandatory Redemption - 1992A Bonds. The PARS and INFLOS are subject toredemption prior to maturity, in part, by lot from sinking fund payments required by theIndenture at the principal amount thereof, without premium, as shown below:
PARS
Redemption Dates(September 1)
19931994199619982000200220032005200720092010
Principal Amountof PARS to be
Redeemed
100,000100,000100,000100,000100,000100,000100,000100,000100,000200,000
2,000,000
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Redemption Dates(September 1)
201120122013201420152016201720182019
Principal Amountof PARS to be
Redeemed
2,000,0002,200,0002,300,0002,500,0002,600,0002,800,0002,900,0003,100,0003,300,000·
• Final Maturity
INFLOS
Redemption DatesCSe,ptemberl>
19931994199619982000200220032005200720092010
Principal Amountof INFLOS to be
Redeemed
100,000100,000100,000100,000100,000100,000100,000100,000100,000200,000
2,000,000
Redemption Dates<September 1)
201120122013201420152016201720182019
Principal Amountof INFLOS to be
Redeemed2,000,0002,200,0002,300,0002,500,0002,600,0002,800,0002,900,0003,100,0003,300,000·
• Final Maturity
Money in the Principal Account may be used to purchase 1992A Bonds in lieu ofredemption.
Conditions to All Redemptions of PARS and INFLOS. No redemption of PARS orINFLOS prior to their maturity may occur unless an equal principal amount of both PARS andINFLOS in denominations of $100,000 or any integral multiple thereof are simultaneouslyredeemed or delivered to the Trustee for cancellation.
The aggregate amount of PARS and INFLOS to be redeemed in part shall be selectedfrom PARS and INFLOS which are linked together and from PARS and INFLOS which are notlinked together proportionately in accordance with the relative amounts of PARS and INFLOSwhich are and are not linked together as of a record date to be selected by the Trustee.
PARS and INFLOS cannot be linked or unlinked, as described above under "- Description of Terms of PARS and INFLOS - Linkage of INFLOS and PARS," during the periodcommencing at the close of business on the record date selected by the Trustee for redemptionand ending on the date fixed for redemption.
Selection of PARS and INFLOS For Redemption. If less than all of the PARS andINFLOS shall be called for redemption, the lottery to select the particular PARS and INFLOSshall be held as follows:
(i) in the case of a mandatory redemption as provided above, on the first BusinessDay prior to the September 1 on which such mandatory redemption shall take place; and
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(ii) in the case of an optional redemption as provided above, on the first BusinessDay prior to the Interest Payment Date preceding the Interest Payment Date on which suchoptional redemption shall take place.
Notice of Redemption. Notice will be mailed not less than 30 nor more than 60 daysbefore the date fixed for redemption (or, if later, as soon as practicable following the selectionof PARS and INFLOS for redemption) to the registered owners of any 1992A Bonds designatedfor redemption, but failure to mail such notice or any defect therein with respect to anyparticular 1992A Bond will not affect the validity of the proceedings for the redemption of anyother 1992A Bonds. See "THE 1992A BONDS - Book-Entry-Only System." Notice ofredemption shall also be mailed to certain securitiesdepositories and bond information services.Failure to mail any such notice or any defect therein will not affect the validity of theproceedings for the redemption of any 1992A Bonds.
PLAN OF REFUNDING
To refund a portion of the Prior Bond in the principal amount of $53,600,000, theproceeds of the 1992A Bonds and certain amounts to be transferred from the reserve accountestablished by the 1989 Agency Indenture will be used to purchase direct obligations of, orobligations which are unconditionally guaranteed by the United States of America (the"Defeasance Securities"). The principal of and interest on the Defeasance Securities, when due,will be sufficient to redeem the principal of and accrued interest on, the portion of the PriorBonddue on September 1, 2019, in the principal amountof $51,600,000, and to pay, when due,a portion of the principal of, and interest accrued on, the portion of the Prior Bond due onSeptember 1, 1992, in the principal amount of $2,000,000 (the "Refunded Portion"). TheRefunded Portion (not otherwise maturing on such date) will be called for redemption onSeptember 1, 1992, at a redemptionprice of 100% of the principal amount thereof, plus accruedinterest to the redemption date.
The Defeasance Securities will be deposited with the Trustee in accordance with theprovisions of the 1989 Agency Indenture and will be held in trust and utilized by the Trustee toredeem the Refunded Portion. Upon such deposit, which will be made upon the delivery of the1992A Bonds, the Refunded Portion will be deemed paid and no longer outstanding under the1989 Agency Indenture.
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FSTIMATED SOURCFS AND USFS OF PROCEEDS OF THE 1992A BONDS
The following table presents the estimated sources and uses of funds of the 1992ABonds:
SourcesPar Amount of 1992A Bonds1989 Reserve Fund
TOTAL
UsesDeposit to Escrow AccountDeposit to Redevelopment FundUnderwriters' DiscountCosts of Issuance
TOTAL
SECURITY FOR THE 1992A BONDS
General
$53,600,000.004,440,284,87
$58,040,284.87
$55,330,992.901,315,673,97
553,688.00840,000.00
$58,040,284.87
The Redevelopment Law authorizes the financing of redevelopment projects through theuse of tax increment revenues. This method provides that the taxable valuation of the propertywithin a project area on the property tax roll last equalized prior to the effective date of theordinance that adopts the redevelopment plan becomes the base year valuation. Thereafter, theincrease in taxable valuation becomes the increment upon which taxes are levied and allocatedto the applicable agency, Redevelopment agencies have no authority to levy taxes, but mustinstead look to this allocation of tax revenues to finance their activities.
Under the Redevelopment Law and Section 16 of Article XVI of the Constitution of theState of California, taxes on all taxable property in a project area levied by or for the benefit ofthe State, any city, county, district or other public corporation (the "Taxing Agencies") whencollected are generally divided as follows:
(i) An amount each year equal to the amount that would have been produced bythe then current tax rates applied to the assessed valuation (including assessed valuationattributable to business inventory under Statutes of 1980, Chapter 610) of such property withinthe project area last equalized prior to the effective date of the ordinance approving theredevelopment plan will be paid into the funds of the respective Taxing Agencies; and
(ii) Taxes (including all payments, reimbursements and subventions, if any,specifically attributable to ad valorem taxes lost by reason of tax exemptions and tax ratelimitations) received over and above the amount described in paragraph (i) above are deposited
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in a special fund of the applicable agency to pay the principal of and interest on loans, moneysadvanced to or indebtedness incurred by the applicable agency to finance or refinance the project.
In 1986 the Agency issued its Redevelopment Agency of the City of Oakland CentralDistrict Redevelopment Project Tax Allocation Refunding Bonds, Series 1986 in the originalprincipal amount of $91,555,000 (the "Superior Bonds"). The Superior Bonds have a lien onGross Tax Revenues prior to that of the 1992A Bonds. The Superior Bonds are currentlyoutstanding in the amount of $90,582,515.00. In addition, the Prior Bond is payable on a parityfrom Subordinated Tax Revenues with the 1992A Bonds and any additional Parity Obligationissued in accordance with the Indenture. The Prior Bond will be outstanding in the principalamount of $39,759,277.85 as of the date of delivery of the 1992A Bonds.
The Agency currently has $12,989,659 on deposit in the Redevelopment Fund establishedunder the 1989 Agency Indenture. The Agency intends to use these moneys on theredevelopment projects described herein under the caption "THE CITY AND THE AGENCY- The Project Area and the Projects." As described below, such moneys, so long as theyremain on deposit in the Redevelopment Fund, are pledged to the payment of the principal ofand interest on the 1992A Bonds and the Parity Obligations.
Subordinated Tax Revenues
All Subordinated Tax Revenues and all money in the Special Fund and in the funds oraccounts so specified and provided for in Jhe Indenture (including all amounts in theRedevelopment Fund established under the 1989 Agency Indenture) are irrevocably pledged tothe punctual payment of the interest on, principal of and redemption premiums, if any, on the1992A Bonds and all Parity Obligations, and the_Subordinated Tax Revenues and such othermoney shall not be used for any other purpose while-the 1992ABonds or the Parity Obligationsremain outstanding except as provided in the Indenture. This pledge constitutes a first andexclusive lien, subject to certain provisions of the Indenture, on the Subordinated Tax Revenuesand such other money for the payment of the 1992A Bonds and all Parity Obligations inaccordance with the terms thereof. This pledge shall not be deemed to constitute a lien on theSuperior Bonds Tax Revenue, except Superior Bonds Tax Revenue released from the SurplusAccount held under the Superior Bonds Indenture. All the Subordinated Tax Revenues, togetherwith any interest earned thereon, shall be deposited when and as received by the Agency in the"Redevelopment Agency of the City of Oakland Central District Redevelopment Project 1989ASpecial Fund" (established under the 1989 Agency Indenture and herein called the "SpecialFund"), which is continued by the Agency and which fund the Agency covenants and agrees tomaintain with the Trustee as trustee so long as 1992A Bonds shall be outstanding.
"Subordinated Tax Revenues" means, as defined in the Indenture, for each Bond Yearbeginning with the Bond Year ending September 1, 1992, the Gross Tax Revenues, after (i) thedeposit of Superior Bonds Tax Revenue as required under the Superior Bonds Resolution hasbeen made to the fiscal agent for the Superior Bonds and (ii) provision has been made for theamount of such taxes required to pay the Housing Set-Aside so long as such Housing Set-Aside
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is legally required to be paid prior to the payments on the 1992A Bonds or any ParityObligations, but such taxes shall be deemed to be Subordinated Tax Revenues for purposes ofthe pledge and lien created under the Indenture only up to an amount that is equal to (a) onehundred fifteen percent (115%) of the Annual Debt Service for the Bond Year (excluding forpurposes of such calculation payments with respect to Superior Bonds but including a credit forearnings on investments of funds held pursuant to the Indenture) plus (b) amounts, if any,necessary to be deposited in the 1989A Reserve Account or the 1992A Reserve Account tomaintain the required balance in such accounts during such Bond Year.
The Agency covenants and agrees under the Indenture, that all Subordinated TaxRevenues when and as received, will be received by the Agency in trust and will be immediatelydeposited by the Agency with the Trustee in the Special Fund and will be accounted for throughand held in trust in the Special Fund and the Agency shall have no beneficial right or interestin any of such money, except only as provided in the Indenture.
All moneys in the Special Fund are set aside by the Trustee in the following respectivespecial accounts within the Special Fund (each of which is continued or created under theIndenture and each of which the Agency covenants and agrees to cause to be maintained), in thefollowing order of priority:
First: On or before each Interest Payment Date commencing on August 25, 1992, theTrustee shall set aside from the Special Fund and deposit in the Interest Account an amount ofmoney which, together with any money contained therein, is equal to the aggregate amount ofthe interest becoming due and payable on the 1992A Bonds on such Interest Payment Date. Nodeposit need be made into the Interest Account if the amount contained therein is at least equalto the aggregate amount of the interest becoming due and payable on the 1992A Bonds on suchInterest Payment Date. The Trustee shall also set aside any amounts necessary to pay intereston any Parity Obligations on the applicable interest payment dates for such obligations. Allmoneys in the Interest Account shall be used and withdrawn by the Trustee solely for thepurpose of paying interest on the 1992A Bonds (and any Parity Obligations) as it shall becomedue and payable (including accrued interest on the 1992A Bonds and any Parity Obligationpurchased or redeemed prior to maturity).
Second: On or before September 1 of each year, commencing September 1, 1993, theTrustee shall set aside from the Special Fund and deposit in the Principal Account an amountof money which, together with any money contained therein, is equal to the aggregate amountof the principal becoming due and payable on the 1992A Bonds and any Parity Obligations onsuch September 1 by way of maturity or early redemption.
No deposit need be made into the Principal Account if the amount contained therein isat least equal to the aggregate amount of the principal of the 1992A Bonds (and any ParityObligations) becoming due on such September 1.
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All money in the Principal Account shall be used and withdrawn by the Trustee solelyfor the purpose of making principal payments on the 1992A Bonds and any Parity Obligations.In the event that there are insufficient moneys in the Special Fund to make in full all principalpayments under the 1992A Bonds and all Parity Obligations required to be made at anyonetime, then the available money shall be applied pro rata to the making of such principalpayments in the proportion which all such principal payments bear to each other.
Third: On or before each Interest Payment Date the Trustee shall set aside from theSpecial Fund and deposit in the 1992A Reserve Account an amount necessary to bring thebalance therein up to the Bond Reserve Requirement and any amounts necessary to reimbursethe Reserve Surety for a draw on the Reserve Account Insurance Policy. All money in the1992A Reserve Account shall be used and withdrawn by the Trustee solely for the purpose of(i) paying principal, premium, if any, and interest on the 1992A Bonds in the event no othermoneys are available therefor, (ii) reimbursement of the Reserve Surety for draws on theReserve Account Insurance Policy and (iii) making the final payment of principal on the 1992ABonds, except that for so long as the Agency is not in default hereunder, any amount in the1992A Reserve Account in excess of the Bond Reserve Requirement may, upon the request ofthe Agency, be withdrawn from the Reserve Account by the Trustee and transferred to theSurplus Account. In addition, the Trustee shall deposit any amounts required to be deposited intothe 1989A Reserve Account pursuant to the 1989 Agency Indenture or any amounts necessaryto maintain a reasonable reserve fund for any Parity Obligations.
Fourth: On May 15 of each year, beginning on May 15, 1993, the Trustee shall set asideand deposit in the Surplus Account all amounts held in the Special Fund in excess of the sumof (i) payments of the interest on and principal of the 1989 Agency Bond required to be paidunder the 1989 Agency Indenture on the following September 1, and (ii) an amount equal to theprincipal and interest payable on the 1992A Bonds and any Parity Obligations through andincluding the Interest Payment Date next succeeding the following September l, plus (iii) theamount, if any, necessary to maintain the required balance in the 1989A Reserve Account andthe 1992A Reserve Account, provided that (i) if Subordinated Tax Revenues in an amount equalto at least one hundred fifteen percent (115%) of Annual Debt Service for the then current BondYear (after credit for investment earnings transferred or expected to be transferred to the SpecialFund) plus an amount, if any, necessary to maintain the required balance in the 1989A ReserveAccount and the 1992A Reserve Account as of the date of such determination has been depositedin the Special Fund during such Bond Year, and (ii) if Subordinated Tax Revenues in an amountequal to at least one hundred fifteen percent (115%) of Annual Debt Service for the next BondYear (after credit for investment earnings transferred or expected to be transferred to the SpecialFund) plus an amount, if any, necessary to maintain the required balance in the 1989A ReserveAccount and the 1992A Reserve Account is anticipated to be deposited in the Special Fundduring such Bond Year (as evidenced by a Certificate of the Agency), and (iii) if the Agency isnot then in default hereunder (as evidenced by a Certificate of the Agency), then all such excessshall be transferred to the Agency for use by it for any lawful purpose and none of such excessshall be deposited in the Surplus Account. All money in the Surplus Account shall be used andwithdrawn by the Trustee solely for the purpose of replenishing the Interest Account or the
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Principal Account or the 1989A Reserve Account and the 1992A Reserve Account, in suchorder, in the event of any deficiency at any time in any of such accounts, or for the purpose ofpaying the interest on or principal of or redemption premiums, if any, on the 1992A Bonds (andParity Obligations) in the event that no other money of the Agency is lawfully available therefor,or for the retirement (together with other available money) of the 1992A Bonds or the 1989Agency Bond in full. All moneys in the Surplus Account on May 15 of each year in which nomoney is required by this paragraph to be deposited in the Surplus Account shall be withdrawnfrom the Surplus Account and transferred to the Agency for use by it for any lawful purpose.
Deposit into 1992A Reserve Account
Pursuant to the Indenture, the Agency is required to deposit and maintain in the 1992AReserve Account an amount equal to the Bond Reserve Requirement. The Bond ReserveRequirement may be satisfied by the deposit of a policy of insurance or other credit devicepayable in the amount of the Bond Reserve Requirement into the 1992A Reserve Account. SeeAppendix D hereto for the definition of "Bond Reserve Requirement." Concurrently with thedelivery of the 1992A Bonds, the Agency intends to deposit a Reserve Account Insurance Policypayable in an amount equal to the Bond Reserve Requirement into the 1992A Reserve Account.Such Reserve Account Insurance Policy shall be issued by Municipal Bond Investors AssuranceCorporation ("MBIA"). See "Municipal Bond Insurance" below for a description of MBIA.
Issuance of Parity Obligations
So long as any 1992A Bonds remain Outstanding the Agency shall not issue or incur anyobligations payable from Gross Tax Revenues or the Surplus Account established pursuant tothe Superior Bonds Resolution prior to the 1992A Bonds, other than refunding bonds withrespect to the Superior Bonds (and any refunding of such refunding bonds) which do not resultin increased debt service in any Bond Year (as defined in the Superior Bonds Resolution); andwithout limiting the foregoing, so long as any 1992A Bonds remain Outstanding the Agencyshall not issue any Additional Bonds pursuant to the Superior Bonds Resolution, other than suchrefunding bonds. The Agency may at any time incur or issue notes, bonds or other obligations(including reimbursement agreements or other credit facility arrangements) the payments ofwhich are payable on a parity with the payment by the Agency of the 1992A Bonds fromSubordinated Tax Revenues provided that there is first delivered to the Trustee a Certificate ofthe Agency (upon which the Trustee may conclusively rely) stating that, assuming such proposedParity Obligation had been incurred as of the first day of the prior Bond Year, Net SubordinatedTax Revenues received by the Agency in the prior Bond Year would have equalled or exceededone hundred twenty percent (120%) of Maximum Annual Debt Service (excluding for purposesof this calculation payments on Superior Bonds) and provided further that if such ParityObligations are variable rate obligations (either direct or derivative), the Agency has obtainedthe prior written consent of the Surety. In addition, the Agency may issue refunding obligationsto refund Parity Obligations which do not result in increased debt service in any Bond Year.
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Historical and Current Tax Revenues
The Agency's primary source of funds to make payments of principal of, premium, ifany, and interest on the Superior Bonds, the Prior Bond and the 1992A Bonds is the Agency'sshare of ad valorem property tax revenues which result from the completion of new real estatedevelopments and a general reassessment of properties within the Project Area.
The purpose of redevelopment is to revitalize deteriorated or underdevelopedareas withina community. As new construction progresses, property values normally increase and theultimate result is a proportionate increase in ad valorem property tax revenues.
The total taxable value of all properties within a given project area on the propertyassessment roll last equalized prior to the effective date of the ordinance adopting theredevelopment plan for such project area establishes a base from which increases in taxablevalue are computed. The base so established for the Project Area is the 1968-1969 assessmentroll. When assessment rolls were converted in California to reflect full value assessments, thebase for the Project Area was also converted and is now actually maintained in the 1982-83assessment roll of the County of Alameda (the "County"). Under the Redevelopment Law,property taxes levied based upon the amount shown on the base year assessment rolls willcontinue to be paid to and retained by all taxing agencies levying property taxes in the ProjectArea. Taxes levied by the respective taxing agencies on any increases in taxable value realiredin the Project Area will be allocated to the Agency.
It should be understood that this procedure does not involve the levy of any additionaltaxes, but provides that revenues produced by the tax rates in effect from year to year shall beapportioned to the taxing agencies levying the taxes and to the Agency on the basis describedabove. After all loans, advances and other indebtedness, including interest, incurred by theAgency in connection with the Project Area have been paid, the tax revenues will be paid to andretained by the respective taxing agencies in the normal manner.
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Table 1 below presents the taxable value of all property within the Project Area for fiscalyears ended June 30, 1987, through 1991 and estimated taxable value for fiscal year endingJune 30, 1992.
TABLE 1CENTRAL DIS1'RICT REDEVELOPMENT PROJECT AREA PROPERTY TAXABLE VALUES
(OOO's omitted)
Estimated1986-87 1987-88 1988-89 1989=90 1990=91 1991-92
Secured PropertyAssessed Values:
CountyRolls $1,141,125 $1,319,118 $1,303,255 1,416,321 1,591,203 1,738,238State Unitary Property' 365,077 363,300 1.275 1 3,223 3,329 3,009
Total SecuredAssessed Values $1,506,202 $1,682,418 $1,304,530 $1,419,544 $1,594,532 $1,741,247
Unsecured Assessed Values $ 234,982 $ 296,860 $ 289.592 $ 318.516 5281.932 $ 280,852
Total Assessed Value $1,741,184 $1,979,278 $1,594,122 $1,738,060 $1,876,464 $2,022,099
Base Year Values:Secured $ 353,828 $ 353,828 $ 214,107 $ 214,111 $214,111 $214,111Unsecured 61,017 61,017 61,017 61,130 61,130 61,130
Increase OverBase-Year Values:
Secured $1,152,374 $1,328,590 $1,090,423 $1,205,433 $1,380,421 $1,527,137Unsecured 173,965 235,843 228,575 257,386 220,803 219,722
Secured Tax Rate2 1.2617% 1.2563% 1.2434% 1.2397% 1.2260% 1.2376%Unsecured Tax Rate2 1.2725% 1.2617% 1.2563% 1.2434% 1.2397% 1.2260%
1 State UDitary property values are not computed by project area. In 1988-89, the County of Alameda decreased theassessed value (including BaseYear Value) to exclude the Unitary Property Tax Assessment. The County, however,makes a payment of tax increment to the Agency which is comparable to the amount formerly received as from theState UDitary Property Tax .Assessment. (See "LIMITATIONS ON TAX REVENUES AND POSSIBLE SPENDINGLIMITATIONS - Unitary Property. ")
2 Decline in tax rate attributable to payment of debt of entitles within the County of Alameda,Source: Redevelopment Agency of the City of Oakland.
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Table 2 below reflects historical Gross Tax R.evenues based on fiscal years endingJune 30, 1985, through 1991 taxable values. To date, the County has paid to the Agency thefull amount of Gross Tax Revenues requested by the Agency, without regard to delinquenciesin tax collections.
TABLE 2REDEVELOPMENT AGENCY OF THE CITY OF OAKLAND
CENTRAL DISI'RICT REDEVELOPMENT PROJECT AREA TAX REVENUESTax Increment, Exduding Subventions
(IlOO's omitted)
Estimated1985-86 198§--87 1987-88 1988=89'- 1989-90 1990-21 1221-22
Tax Increment Revenue:Secured Property $ 12,593 $ 14,540 $16,691 $ 13,558 $ 14,944 $ 16,924 $ 18,900Unsecured Property 1,057 2,213 2,976 2,872 3,200 2,737 2,694Unitary Property - - - 3.714 3.224 3.329 3.009- - -Total TaxIncrement Revenue $ 13,650 $ 16,753 $ 19,667 $ 20,144 $ 21,368 $ 22,990 $ 24,603
Includes payment by the County of Alameda to compensate for decreased taxable value due to excluding unitary taxassessment from assessed value.
Municipal Bond Insurance
The following information has been furnished by Municipal Bond Investors AssuranceCorporation (the "Insurer" or "MBIA") for use in this Official Statement. Reference is made toAppendix F for a specimen of the Insurer's policy.
The Insurer's policy unconditionally and irrevocably guarantees the full and completepayment required to be made by or on behalf of the Agency to the Trustee or its successor ofan amount equal to (i) the principal of (either at the stated maturity or by an advancement ofmaturity pursuant to a mandatory sinking fund payment) and interest on, the 1992A Bonds assuch payments shall become due but shall not be so paid (except that in the event of anyacceleration of the due date of such principal by reason of mandatory or optional redemption oracceleration resulting from default or otherwise, other than any advancement of maturitypursuant to a mandatory sinking fund payment, the payments guaranteed by the Insurer's policyshall be made in such amounts and at such times as such payments of principal would have beendue had there not been any such acceleration); and (ii) the reimbursement of any such paymentwhich is subsequently recovered from any owner of the 1992A Bonds pursuant to a finaljudgment by a court of competent jurisdiction that such payment constitutes an avoidablepreference to such owner within the meaning of any applicable bankruptcy law (a "Preference").
The Insurer's policy does not insure against loss of any prepayment premium which mayat any time be payable with respect to any 1992A Bond. The Insurer's policy does not, underany circumstance, insure against loss relating to: (i) optional or mandatory redemptions (other
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than mandatory sinking fund redemptions); (ii) any payments to be made on an accelerated basis;or (iii) any Preference relating to (i) and (ii) above. The Insurer's policy also does not insureagainst nonpayment of principal or Accreted Value of or interest on the 1992A Bonds resultingfrom the insolvency, negligence or any other act or omission of the Trustee or any other payingagent for the 1992A Bonds.
Upon receipt of telephonic or telegraphic notice, such notice subsequently confirmed inwriting by registered or certified mail, or upon receipt of written notice by registered or certifiedmail, by the Insurer or its designee from the Trustee or any owner of a 1992A Bond thepayment of an insured amount for which is then due, that such required payment has not beenmade, the Insurer on the due date of such payment or within one business day after receipt ofnotice of such nonpayment, whichever is later, will make a deposit of funds, in an account withCitibank, N.A., in New York, New York, or its successor, sufficient for the payment of anysuch insured amounts which are then due. Upon presentment and surrender of such 1992ABonds or presentment of such other proof of ownership of the 1992A Bonds, together with anyappropriate instruments of assignment to evidence the assignment of the insured amounts dueon the 1992A Bonds as are paid by the Insurer, and appropriate instruments to effect theappointment of the Insurer as agent for such owners of the 1992A Bonds in any legal proceedingrelated to payment of insured amounts on the 1992A Bonds, such instruments being in a formsatisfactory to Citibank, N.A., Citibank, N.A. shall disburse to such owners or the Trusteepayment of the insured amounts due on such 1992A Bonds, less any amount held by the Trusteefor the payment of such insured amounts and legally available therefor.
MBIA is the principal operating subsidiary of MBIA Inc., a New York Stock Exchangelisted company. MBIA Inc. is not obligated to pay the debts of or claims against MBIA. MBIAis a limited liability corporation rather than a several liability association. MBIA is domiciledin the State of New York and licensed to do business in all 50 states, the District of Columbiaand the Commonwealth of Puerto Rico.
As of December 31, 1990, MBIA had admitted assets of $1.5 billion (audited), totalliabilities of $1.2 billion (audited) and total capital and surplus of $579 million (audited)determined in accordance with statutory accounting practices prescribed or permitted byinsurance regulatory authorities. As of December 31, 1991, MBIA had admitted assets of $2.0billion (audited), total liabilities of $1.4 billion (audited) and total capital and surplus of $647million (audited) determined in accordance with statutory accounting practices prescribed orpermitted by insurance regulatory authorities. Copies of MBIA's year end financial statementsprepared in accordance with statutory accounting practices are available from MBIA. Theaddress of MBIA is 113 King Street, Armonk, New York 10504.
Moody's Investors Service Inc. rates all bond issues insured by MBIA Aaa and shortterm loans MIG 1, both designated to be of the highest quality.
Standard & Poor's Corporation rates all new issues insured by MBIA AAA Prime Grade.
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The Moody's Investors Service Inc. rating of MBIA should be evaluated independentlyof the Standard & Poor's Corporation rating of MBIA. No application has been made to anyother rating agency in order to obtain additional ratings on the 1992A Bonds. The ratings reflectthe respective rating agency's current assessment of the creditworthiness of MBIA and its abilityto pay claims on its policies of insurance. Any further explanation as to the significance of theabove ratings may be obtained only from the applicable rating agency.
The above ratings are not recommendations to buy, sell or hold the 1992A Bonds, andsuch ratings may be subject to revision or withdrawal at any time by the rating agencies. Anydownward revision or withdrawal of either or both ratings may have an adverse effect on themarket price of the 1992A Bonds.
In the event MBIA were to become insolvent, any claims arising under a policy offinancial guaranty insurance are excluded from coverage by the California Insurance GuarantyAssociation, established pursuant to Article 14.2 (commencing with Section 1063) of Chapter 1of Part 2 of Division I of the california Insurance Code.
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DEBT SERVICE SCHEDULE
Table 3 below projects the annual ratios between the Agency's total debt service(including payments required to be made by the Agency on the 1992A Bonds) and its availabletax increments from the Project Area (excluding the business inventory subvention and themaximum amount that may be needed for housing set-aside requirements). The table includescoverage ratios for each year based upon tax increments in each year in the amount received forfiscal year ending June 30, 1991.
TABLE 3
Gross Tax Net Tax Revenue Debt Service onYear Revenue (Based (Based Debt Service on Subordmated Senes 1989A Aggregate
Ending on Fiscal Year on Fiscal Year Series 1986 Tax and Series CoverageJune 30 1990-91)1 1990-91)2 Bonds Revenues) 1992A Bonds" Ratto
1993 $22,990,000 $18,392,000 $7,987,515 $10,404,485 $6,972,357 1.491994 22,990,000 18,392,000 7,990,065 10,401,935 7,064,242 1.471995 22,990,000 18,392,000 7,996,450 10,395,550 6,962,808 1.491996 22,990,000 18,392,000 8,010,175 10,381,825 6,947,889 1.491997 22,990,000 18,392,000 8,024,300 10,367,700 7,041,433 1.471998 22,990,000 18,392,000 8,029,420 10,362,580 6,936,122 1.491999 22,990,000 18,392,000 8,049,840 10,342,160 7,028,248 1.472000 22,990,000 18,392,000 8,058,000 10,334,000 6,926,544 1.492001 22,990,000 18,392,000 8,053,125 10,338,875 7,011,190 1.472002 22,990,000 18,392,000 8,067,500 10,324,500 6,916,702 1.492003 22,990,000 18,392,000 8,068,500 10,323,500 6,900,780 1.502004 22,990,000 18,392,000 8,100,750 10,291,250 6,991,086 1.472005 22,990,000 18,392,000 8,120,500 10,271,500 6,894,238 1.492006 22,990,000 18,392,000 8,117,000 10,275,000 6,973,534 1.472007 22,990,000 18,392,000 8,125,250 10,266,750 6,882,664 1.492008 22,990,000 18,392,000 8,162,625 10,229,375 6,960,982 1.472009 22,990,000 18,392,000 8,170,000 10,222,000 7,071,808 1.452010 22,990,000 18,392,000 6,892,375 11,499,625 7,026,497 1.642011 22,990,000 18,392,000 6,913,875 11,478,125 6,926,763 1.662012 22,990,000 18,392,000 6,966,875 11,425,125 6,899,130 1.662013 22,990,000 18,392,000 7,011,875 11,380,125 7,056,649 1.612014 22,990,000 18,392,000 7,052,000 11,340,000 6,984,692 1.622015 22,990,000 18,392,000 0 18,392,000 7,051,086 2.612016 22,990,000 18,392,000 0 18,392,000 7,001,722 2.632017 22,990,000 18,392,000 0 18,392,000 6,970,177 2.642018 22,990,000 18,392,000 0 18,392,000 6,948,494 2.652019 22,990,000 18,392,000 0 18,392,000 7,012,066 2.62
1 Does not take into account the potential effect on Gross Tax Revenue the Settlement Agreement with respect tovaluation of umtary property. See "RISK FACTORS - Unitary Property."
2 Net Deposit of 209li of Gross Tax Revenues to Low andModerate Income Housing Fund3 Represents Net Agency Tax Revenue minus Senes 1986 Bonds' Debt Service.4 Adjusted for Refunded Series 1989A Bonds.
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RISK FACTORS
Reduction in Taxable Value. Gross Tax Revenues allocated to the Agency are determinedby the amount of incremental taxable value in the project area and the current rate or rates atwhich property in the project area is taxed. The reduction of taxable values of property in theproject area caused by economic factors beyond the Agency's control, such as a relocation outof a redevelopment project area by one or more major property owners, or the complete orpartial destruction of such property caused by, among other eventualities, an earthquake, floodor other natural disaster, could cause a reduction in the Subordinated Tax Revenues securing the1992A Bonds. Such reduction of Subordinated Tax Revenues could have an adverse effect onthe Agency's ability to make timely payments of principal of and interest on and purchase priceof the Bonds secured by such Subordinated Tax Revenues. See "SECURITY FOR TIlE 1992ABONDS - Principal Taxpayers" for a description of the major property taxpayers within theRedevelopment Project Area.
Estimated Revenues and Investment ofFunds. To estimate the total Gross Tax Revenuesavailable to pay debt service on the Bonds, the Agency has madecertain assumptions with regardto present and future assessed valuation in the Project Area, future tax rates, percentage of taxescollected and the amount of funds available for investment. The Agency believes theseassumptions to be reasonable, but there is no assurance these assumptions will be realized andto the extent that the assessed valuation, the tax rates, or the amount of the funds available forinvestment, the total Gross Tax Revenues available to pay debt service on the Bonds will be lessthan those projected and such reduced Gross Tax Revenues may be insufficient to provide forthe payment of principal of, premium (if any) and interest on the 1992A Bonds. (See"SECURITY FOR TIlE 1992A BONDS - Tax Revenues and Debt Service" herein.)
Change in the Law. In addition to the other limitations on Gross Tax Revenues describedherein under "LIMITATIONS ON TAX REVENUES AND POSSIBLE SPENDINGLIMITATIONS," the California electorate or Legislature could adopt a constitutional orlegislative property tax decrease with the effect of reducing Gross Tax Revenues payable to theAgency. There is no assurance that the California electorate or Legislature will not at somefuture time approve additional limitations that could reduce the Gross Tax Revenues andadversely affect the security of the 1992A Bonds.
Reductions in Inflationary Rate. As described in greater detail below, Article XIIIA ofthe California Constitution provides that the full cash value base of real property used indetermining taxable value may be adjusted from year to year to reflect the inflationary rate, notto exceed a two percent (2%) increase for any given year, or may be reduced to reflect areduction in the consumer price index or comparable local data. Such measure is computed ona calendar year basis. (See "LIMITATIONS ON TAX REVENUES AND POSSIBLESPENDING LIMITATIONS" herein.)
Levy and Collection. The Agency has no independent power to levy and collect propertytaxes. Any reduction in the tax rate or the implementation of any constitutional or legislative
28
property tax decrease could reduce the Tax Revenues, and accordingly, could have an adverseimpact on the ability of the Agency to pay debt service on the Bonds secured by theSubordinated Tax Revenues. Likewise, delinquencies in the payment of property taxes couldhave an adverse effect of the Agency's ability to make timely debt service payments. However,it is current County policy to allocate to the Agency and to taxing entities in the County theirproportionate share of property taxes collected County-wide. Therefore, the receipt of propertytaxes by the Agency is based on County-wide collections and not on collections in theRedevelopment Project Area. In addition, it is current County policy to allocate to the Agencythe Agency's proportionate share of delinquent and redemption property payments, penalties andinterest income.
Development Risks. The Agency's ability to make payments on the Bonds will bedependent upon the economic strength of the Project Area. The general economy of the ProjectArea will be subject to all the risks generally associated with real estate development projects.Projected development within the Project Area may be subject to unexpected delays, disruptionsand changes. Real estate development operations may be adversely affected by changes ingeneral economic conditions, fluctuations in the real estate market and interest rates, unexpectedincreases in development costs and by other similar factors. Further, real estate developmentoperations within the Project Area could be adversely affected by future governmental policies,including governmental policies to restrict or control development. If projected development inthe Project Area is delayed or halted, the economy of the Project Areacould be affected causinga reduction of the Gross Tax Revenues available to repay the Bonds. In addition, if there is adecline in the general economy of the Project Area, the owners of property within the ProjectArea may be less able or less willing to make timely payments of property taxes causing a delayor stoppage of Gross Tax Revenues received by the Agency from the Project Area.
LIMITATIONS ON TAX REVENUES ANDPOSSIBLE SPENDING LIMITATIONS
Property Tax Limitations: Article XIllA
California voters, on June 6, 1978, approved an amendment (commonly known as bothProposition 13 or the Jarvis-Garin Initiative) to the Constitution of the State of California. Thisamendment, which added Article XIIIA to the California Constitution, among other things,affects the valuation of real property to mean "the county assessor's valuation of real propertyas shown on the 1975-76 tax bill under full cash value, or thereafter, the appraised value of realproperty when purchased, newly constructed, or a change in ownership has occurred after the1975 assessment. " The full cash value may be adjusted annually to reflect inflation at a rate notto exceed two percent (2%) per year or any reductions in the consumer price index orcomparable local date, or any reduction in the event of declining property value caused bydamage, destruction or other factors. The amendment further limits the amount of any advalorem tax on real property to one percent (1%) of the full cash value except that additionaltaxes may be levied to pay debt service on indebtedness approved by the voters prior to July 1,1978. In addition, an amendment to Article XIII was adopted in June 1986 by initiative which
29
exempts any bonded indebtedness approved by two-thirds of the votes cast by the voters for theacquisition or improvement of real property from the one percent (1 %) limitation.
On September 22, 1978, the California Supreme Court upheld the amendment overchallenges on several state and federal constitutional grounds. Amador Valley Joint Union HighSchool District v, State Board ofRqualizauon (1978) 22 Cal.3d 208. The Court reserved certainconstitutional issues and the validity of legislation implementing the amendment for futuredetermination in proper cases.
In the general election held November 4, 1986, voters of the State of California approvedtwo measures, Propositions 58 and 60, which further amend Article XIllA. Proposition 58amends Article XIllA to provide that the terms "purchase" and "change of ownership," for thepurposes of determining full cash value of property under Article XIllA, do not include thepurchase or transfer of (1) real property between spouses and (2) the principal residence and thefirst $1,000,000 of other property between parents and children. This amendment to ArticleXIIIA may reduce the rate of growth of local property tax revenues.
Proposition 60 amends Article XllIA to permit the Legislature to allow persons over theage of 55 who sell their residence and buy or build another of equal or lesser value within twoyears in the same county, to transfer the old residence's assessed value to the new residence.Revenue and Taxation Code Section 69.5 implements Proposition 60. As a result of theLegislature's action, the growth of property tax revenues may decline.
On January 18, 1989, the United States Supreme Court struck down the practice of aWest Virginia county tax assessor of valuing property based on recent purchase prices butmaking only minor modifications in the assessment of land not recently sold. AlleghenyPittsburgh Coal Co. v, County Commission o/Webster County (1989) 488 U.S. 336, 109 S.Ct.633. The West Virginia Constitution states that "taxation shall be equal and uniform throughoutthe State, and all property, both real and personal, shall be taxed in proportion to its value .... "The court held that the county assessor's undervaluing of comparable property not recently solddenied equal protection under the law to the petitioners. In a footnote, the Court stated that itwas not deciding whether the same method of valuing property would stand on a differentfooting if it were the law of the state, as it is under Article XllIA of the California Constitution,rather than "the aberrational local enforcement policy it appears to be [in West Virginia]."109 S.Ct. at 638, n. 4.
Based on the decision in the West Virginia case, property owners in California broughtthree suits challenging the acquisition value assessment provisions of Article XIllA. Two casesinvolved residential property, and one case involved commercial property. In all three cases,state trial and appellate courts have upheld the constitutionality of Article XIllA's assessmentrules and concluded that the West Virginia case did not apply to California's laws. Nordlingerv, Lynch (1990) 225 Cal.App.3d 1259, R. B. Macy & Co. v, Contra Costa County (1990) 226Cal.App.3d 352, Northwest Financial, Inc. v, State Board 0/ Equalization (1991) 229Cal.App.3d 198. On June 3, 1991, the U.S. Supreme Court agreed to hear the appeal in R.B.
30
Macy & Co., the challenge relating to commercial property, but the plaintiff subsequentlywithdrew its case. On October 7, 1991, the U.S. Supreme Court agreed to hear the appeal inNordlinger, a challenge relating to residential property. Nordlinger v, Hahn (1991) 112 S.Ct.49. On June 18, 1992, the Supreme Court upheld the rulings of the State court in Nordlingerv, Lynch. Nordlinger v, Hahn. - S.Ct. -, 1992 WL 132447, 92 Daily Journal D.A.R. 8196.Although it appears that constitutional challenges to Article XllIA are exhausted, the Agencycannot predict what impact any future developments might have on the Agency's receipt of taxincrement funds.
Implementing Legislation
Legislation enacted by the California Legislature to implement Article XllIA (Statutesof 1978, Chapter 292, as amended) provides that, notwithstanding any other law, local agenciesmay not levy any property tax, except to pay debt service on indebtedness approved by thevoters prior to July 1, 1978, and that each county will levy the maximum tax permitted byArticle XIllA of $4.00 per $100 assessed valuation (based on the traditional practice in California of using twenty-five percent (25%) of full cash value as the assessed value for taxpurposes). The legislation further provides that, for the 1978-79 fiscal year only, the tax leviedby each county was to be appropriated among all taxing agencies within the county in proportionto their average share of taxes levied in certain previous years.
The apportionment of property taxes in fiscal years after 1918-79 has been revisedpursuant to Statutes of 1979, Chapter 282 which provides relief funds from State moneysbeginning in fiscal year 1918-79 and is designed to provide a permanent system for sharing Statetaxes and budget surplus funds with local agencies. Under Chapter 282, cities and countiesreceive about one-third more of the remaining property tax revenues collected under Proposition13 instead of direct State aid. School districts receive a correspondingly reduced amount ofproperty taxes, but receive compensation directly from the State and are given additional relief.Chapter 282 does not affect the derivation of the base levy ($4.00 per $100 assessed valuation)and the bonded debt tax rate.
Effective as of the 1981-82 fiscal year, assessors in California no longer record propertyvalues in the tax rolls at the assessed value of twenty-five percent (25 %) of market values. Alltaxable property is shown at full market value. In conformity with this change in procedure, alltaxable property value included in this Official Statement is shown at one hundred percent(100%) of market value and all general tax rates reflect the $1 per $100 of taxable value. Taxrates for bond service and pension liability are also applied to one hundred percent (100%) ofmarket value.
Future assessed valuation growth allowed under Article XIllA (new construction, changeof ownership, two percent (2%) annual value growth) will be allocated on the basis of "situs"among the jurisdictions that serve the tax rate area within which the growth occurs except forcertain utility property assessed by the State Board of Equalization ("Unitary Property") whichis allocated by a different method as described under "-Unitary Property" below.
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Property Tax Collection Procedures
Classifications. In California, property which is subject to ad valorem taxes is classifiedas "secured" or "unsecured." Secured and unsecured property are entered on separate parts ofthe assessment roll maintained by the county assessor.
The secured classification includes property on which any property tax levied by theCounty becomes a lien on that property sufficient, in the opinion of the county assessor, tosecure payment of the taxes. Every tax which becomes a lien on secured property has priorityover all other liens on the secured property, regardless of the time of the creation of other liens.A tax levied on unsecured property does not become a lien against the taxes on unsecuredproperty, but may become a lien on certain other property owned by the taxpayer.
Collections. The method of collection delinquent taxes is substantially different for theclassifications of property.
The taxing authority has four ways of collecting unsecured property taxes in the absenceof timely payment by the taxpayer: (1) a civil action against the taxpayer; (2) filing a certificatein the office of the county clerk specifying certain facts in order to obtain a judgment lien oncertain property of the taxpayer; (3) filing a certificate of delinquency for record in the countyrecorder's office, in order to obtain a lien on certain property of the taxpayer; and (4) seizureand sale of the personal property, improvements or possessory interests belonging or assessedto the assessee.
The exclusive means of enforcing the payment of delinquent taxes with respect toproperty on the secured roll is the sale of property securing the taxes to the State for the amountof taxes which are delinquent.
The County currently allocates property taxes to the Agency based on County-wideproperty tax collections. As a result, the Agency shares in the burden of delinquent propertytaxes but also receives its proportionate share of delinquent and redemption property taxpayments, penalties and interest income.
Current tax payment practices by the County provide for payment to the Agency of GrossTax Revenues on a monthly basis although the first payment to the Agency is not made untilNovember or December. Except for property tax advances made by the County to the Agencyin December and April, actual payments to the Agency are made on the basis of County-wideproperty tax collections. Tax increment generated from debt service tax rates is allocated to theAgency based on one hundred percent (100%) of the calculated tax levy.
Penalties. A ten percent (10%) penalty is added to delinquent taxes which have beenlevied with respect to property on the secured roll. In addition, property on the secured roll onwhich taxes are delinquent is sold to the State on or about June 30 of the fiscal year. Suchproperty may thereafter be redeemed by payment of the delinquent taxes and a delinquency
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penalty, plus a redemption penalty of one and one-half percent (l'h %) per month from the dateof sale to the time of redemption. If taxes are unpaid for a period of five years or more, theproperty is deeded to the State and then is subject to sale by the county tax collector.
A ten percent (10%) penalty also applies to delinquent taxes on property on the unsecuredroll, and further, an additional penalty of one and one-half percent (Ph %) per month accrueswith respect to such taxes beginning the first day of the third month following the delinquencydate.
AB 2372 (Chapter 1230, Statutes of 1989) provides that each county is to distributeproperty tax revenues to local agencies (such as the Agency) in accordance with certainprovisions of the California Revenue and Taxation Code, but that penalties and interest onproperty tax delinquencies are to be deposited in the county's general fund.
Delinquencies. The valuation of property is determined as of March 1 each year andequal installments of taxes levied upon secured property become delinquent on the followingDecember 10 and April 10. As described above under "Collections," the Agency currentlyreceives property taxes with a deduction for delinquencies plus the Agency's proportionate shareof delinquent and redemption property payments, penalties and interest income.
Taxes on secured property are due March 1 and become delinquent August 31.
Supplemental Assessments. A bill enacted in 1983, SB 813 (Chapter 498, Statutes of1983), provides for the supplemental assessment and taxation of property as of the occurrenceof a change in ownership or completion of new construction. Previously, statues enabled theassessment of such changes only as of the next March 1 tax lien date following the change andthus delayed the realization of increased property taxes from the new assessments for up to 14months. As enacted, Chapter 498 provided increased revenue to redevelopment agencies to theextent that supplemental assessments as a result of new construction or changes of ownershipoccur within the boundaries of redevelopment projects subsequent to the March 1 lien date. Tothe extent such supplemental assessments occur within the Redevelopment Project Area, GrossTax Revenues may increase.
Property Tax Administrative Costs
In 1990, the State Legislature enacted SB 2557 (Chapter 466, Statutes of 1990) whichallows counties to charge for the cost of assessing, collecting and allocating property taxrevenues to local government jurisdictions on a prorated basis. The provisions of SB 2557 arenot clear as to the inclusion of redevelopment agencies as a local government agency which mustshare the cost of property tax administration. It has been the practice of most Californiacounties, including Alameda County, to reduce an agency's tax increment or bill an agency forits pro rata share of property tax administrative costs.
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Taxing Entity Revenue
Chapter 147, Statues of 1984, modified Section 33676 of the California CommunityRedevelopment Law and allows taxing entities to receive additional property taxes in aredevelopment project area above the base year revenue amount. Section 33676 allows anaffected taxing entity to elect, by resolution prior to the adoption of a redevelopment plan, toreceive property taxes generated from (i) increases in the tax rate levied by the affected entity;and (ii) annual increases in the real property portion of the base year value up to the in1lationlimit of two percent (2 %) provided in Article XllIA of the California Constitution.
Section 33676 provides that each school district shall adopt the resolution and othertaxing entities may adopt the resolution. Alameda County elected to receive such 33676 revenuein Resolution No. 86-815. Section 33676 is not valid in a project area for any taxing entitywhich has entered into an agreement to receive payments of tax increment from a redevelopmentagency as allowed by California Health & Safety Code Section 33401 to alleviate fiscal detrimentresulting from a project area. According to Agency staff, no tax sharing agreements with taxingentities exist in the Project Area.
Business Inventory Exemption/Special Subvention
Prior Law. Under prior State law, the State reimbursed cities, counties, special. districtsand redevelopment agencies ("local agencies") a portion of taxes which would have beengenerated by the exempted portion of business inventory value (50%). In 1979, the Legislatureenacted Assembly Bill 66 (Chapter 1150, Statues of 1979), eliminating the assessment andtaxation ofbusiness inventory property and providing for replacement revenue for local agencies,except redevelopment agencies. In 1980, the Legislature enacted AB 1994 (Chapter 610, Statuesof 1980) providing replacement revenue, in part, for the loss of business inventory revenues byredevelopment agencies.
Curren: Law. SB 794 (Chapter 447, Statues of 1984) repealed the provision of businessinventory replacement revenue provided in both Chapter 1150 and Chapter 610 for localagencies. This measure holds redevelopment agencies harmless from the loss of businessinventory replacement revenues through statepayments (special subventions). Under current law,if redevelopment agencies do not receive sufficient tax revenue generated from the newsupplemental roll, the State pays a special subvention to restore to such agencies the differencebetween the level of business inventory subventions which were to be paid under prior law andthe amount of revenue received from taxes on the supplemental roll. Ifin any year, the Agency'srevenues from the supplemental roll exceed the former amount of business inventory replacementrevenues, such excess will be credited against the State special subvention due in future yearsuntil the entire excess has been credited. As a result of these changes, redevelopment agenciesshould receive over time approximately the same amounts of revenues as they receive in1983-84 had business inventory subventions not been terminated.
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AB 160 (Chapter 449, Statutes of 1990) makes several changes with respect to the specialsupplemental subvention. First, AB 160 changes the payment schedule for the subvention fromthree annual payments on October 31, February 28 and June 30 to two payments onDecember 31 and July 1. Second, the December 31, 1990 payment consisted of an amount equalto twenty-five percent (25%) of the total amount the Agency would otherwise be entitled toreceive in the 1990-91 fiscal year, and the July 1, 1991 payment consisted of an amount equalto fifty percent (50 %) of the amount the Agency would otherwise be entitled to receive in the1990-91 fiscal year. Thus, AB 160 cut the special supplemental subvention for the 1990-91fiscal year by twenty-five percent (25%). Finally, the Agency may not, on or after the effectivedate of AB 160, pledge as security for payment of the principal and interest of bonds, anyspecial supplemental subvention amounts.
Unitary Property
AB 454 (Chapter 921, Statues of 1987) provided that revenues derived from UnitaryProperty, commencing with the 1988-89 fiscal year, will be allocated as follows: (1) forrevenues generated from the one percent (1 %) tax rate, (a) each jurisdiction, includingredevelopment project areas, will receive a percentage up to one hundred two percent (102%)of its prior year State-assessed unitary revenue; and (b) if county-wide revenues generated fromUnitary Property are greater than 102% of the previous year's revenues, each jurisdiction willreceive a percentage share of the excess unitary revenues by a specified formula and (2) forrevenue generated from the application of the debt service tax rate to county-wide unitary taxablevalue, each jurisdiction will receive a percentage share of revenue based on the jurisdiction'sannual debt service requirements and the percentage of property taxes received by eachjurisdiction from unitary property taxes. This provision applies to all Unitary Property exceptrailroads whose valuation will continue to be allocated to individual tax rate areas.
The provisions of AB 454 do not constitute an elimination of the assessment of any Stateassessed property nor a revision of the method of assessing utilities by the State Board ofEqualization. Generally, AB 454 allows valuation growth or decline of Unitary Property to beshared by all jurisdictions in a county.
On February 1, 1991, the Superior Court for the County of Sacramento issued aStatement of Decision in AT&T Communications of California, et al. v, State Board ofEqualization, which reduced the valuation of certain unitary property owned by AT&T forproperty tax purposes. Under the decision, the valuation method used by the Board ofEqualization to value unitary property was declared illegal and a new method of valuation,resulting in significantly lower values and therefor significantly lower property tax revenues, wasimposed. The effect on AT&T's statewide assessed value was to reduce it from approximately$1,750,000,000 to approximately $1,100,000,000. The resulting refund ordered by the courtexceeded $9,000,000. The Agency understands that, as a result of this case, the State Board ofEqualization and several other utility companies whose unitary property valuations could beaffected by the principles announced in the Superior Court decision have entered into asettlement agreement (the "Settlement Agreement"). The Settlement Agreement's effectiveness,
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however, is dependent on the fulfillment of certain covenants. If effective, the SettlementAgreement would have only a prospective fiscal impact on utility assessments, which would bephased down by approximately 10.5% over a three-year period. The Agency estimates that theportion of tax increment revenues allocable to the Agency with respect to the Project Area andattributable to unitary property is approximately $9,561,000 for fiscal year 1991-92. The Agencycannot predict the effect of any future litigation or settlement agreements concerning thesematters on the amount of Gross Tax Revenues received or to be received by the Agency.
Recent Limitation on Tax Revenues
An initiative to amend the California Constitution entitled "Property Tax RedevelopmentAgencies" was approved by California voters at the November 8, 1988 general election. Underprior law, a redevelopment agency using tax increment revenue receives additional property taxrevenue whenever a local government increases its property tax rate to payoff its generalobligation bonds. This initiative amends the California Constitution to allow the CaliforniaLegislature to prohibit redevelopment agencies from receiving any of the property tax revenueraised by increased property tax rates imposed by local governments to make payments on theirbonded indebtedness. The initiative only applies to tax rates levied to finance bonds approvedby the voters on or after January 1, 1989. AB 89 (Chapter 250, Statutes of 1989) amendedSection 33670 of the Redevelopment Law to implement the amendment to the CaliforniaConstitution made by the initiative. Any revenue reduction to redevelopment agencies woulddepend on the number and value of the general obligation bonds approved by voters in futureyears. The Agency does not currently project receiving any Tax Revenues as a result of generalobligation bonds which may be approved on or after January 1, 1989.
Tax Increment Limitation
Pursuant to SB 690 (Chapter 639, Statutes of 1985), the Agency was required to adopta resolution setting forth a limit on the amount of tax increment the Agency may receive withrespect to each of its redevelopment project areas and a time limit as to the incurrence ofindebtedness to be repaid with such tax increment. The maximum amount of tax increment theAgency may receive from the Project Area was established in the amount of $1,348,862,000 byresolution adopted on December 16, 1986. Based on Agency records, the Agency has receivedapproximately $156,400,000 to date from the Project Area.
Appropriations Limitations: Article XIllB of the California Constitution
On November 6, 1979, California voters approved Proposition 4, the so-called GannInitiative, which added Article XIIIB to the California Constitution. The principal effect ofArticle XllIB is to limit the annual appropriations of the State and any city, county, schooldistrict, authority or other political subdivision of the State to the level of appropriations for theprior fiscal year, as adjusted for changes in the cost of living, population and services renderedby the government entity. The "base year" for establishing such appropriation limit is 1978-79
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fiscal year and the limit is to be adjusted annually to reflect changes in population, consumerprices and certain increases in the cost of services provided by these public agencies.
Appropriations subject to Article XIIIB include generally the proceeds of taxes levied bythe State or other entity of local government, exclusive of certain State subventions, refunds oftaxes, and benefit payments from retirement, unemployment insurance and disability insurancefunds. Proceeds of taxes include, but are not limited to, all tax revenues and the proceeds to anentity of government from (1) regulatory licenses, user charges, and user fees (but only to theextent such proceeds exceed the costs of providing the service or regulation) and (2) theinvestment of tax revenues.
Article XIIIB includes a requirement that if an entity's revenues in any year exceed theamounts permitted to be spent, the excess would have to be returned by revising tax rates or feeschedules over the subsequent two years. While the tax rate is assumed. to decline to one percent(1%) of taxable value and remain constant in subsequent years, current law permits taxingentities deriving revenues from one percent (1%) rate to reduce their levies under certaincircumstances. It is the apparent intent of the law to insulate the other taxing entities andredevelopment agencies from the affects of such reductions on their property tax revenues.
Effective September 30, 1980, the California Legislature added Section 33678 to theRedevelopment Law which provided that the allocation of taxes to a redevelopment agency forthe purpose of paying principal of, or interest on, loans, advances, or indebtedness shall not bedeemed the receipt by such agency of proceeds of taxes levied by or on behalf of the agencywithin the meaning of Article XIIIB, nor shall such portion of taxes be deemed receipt ofproceeds of taxes by, or an appropriation subject to the limitation of, any other public bodywithin the meaning or for the purpose of the Constitution and the laws of the State of California,including Section 33678 of the Redevelopment Law. The constitutionality of Section 33678 hasbeen upheld in two California appellate court decisions: Brown v. Community RedevelopmentAgency ofthe City ofSanta Ana (1985) 168 Cal.App.3d 1014 and Bell Community Redevelopment Agency v. Woosley (1985) 169 Cal.App. 3d 24. The plaintiff in Brown petitioned theCalifornia Supreme Court for a heanng of this case. The California Supreme Court formallydenied the petition and therefore the earlier court decisions are now final and binding. On thebasis of these court decisions, the Agency has not adopted such an appropriations limit.
Low- and Moderate-Income Housing
Chapter 696, Statutes of 1980, added sections 33486 and 33487 to the RedevelopmentLaw, relating to the merger of redevelopment project areas and the requirement thatredevelopment agencies set aside 20% of all taxes which were allocated to the redevelopmentagency for the purposes of increasing and improving the community's supply of low- andmoderate-income housing. Section 33487 requires that (except as provided below) not less than20% of all taxes which are allocated to the redevelopment agency for merged redevelopmentprojects, irrespective of the date of adoption of the final redevelopment plans, must be depositedby the agency in a low- and moderate-income housing fund. The agency must use the moneys
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in such fund to assist in the construction or rehabilitation of housing units which will beavailable to, or occupied by, persons and families of low or moderate income, and very lowincome households, for a period of not less than 30 years. The term "construction andrehabilitation" includes acquisition of land; improvements to land; the acquisition, rehabilitation,or construction of structures; or the provision of subsidies necessary to provide housing forpersons and families of low or moderate income, and very low income households.
The agency may use the funds set aside as described above, inside or outside the projectarea. However, the agency may only use these funds outside the project area upon a resolutionof the agency and the legislative body that such use will be of benefit to the project area.
If moneys deposited in the low- and moderate-income housing fund have not beencommitted for the purposes described above for a period of six years following deposit in suchfunds, the agency may offer such moneys to the housing authority which operates within thejurisdiction of the agency, for the purpose of constructing or rehabilitating housing as providedabove. However, if no housing authority operates within the jurisdiction of the agency, theagency may continue to retain such moneys for use as described above.
Section 33486 provides that if the redevelopment agency has, prior to the merger ofredevelopment project areas, incurred any indebtedness on account of a constituent project areaso merged, taxes attributable to that area which are allocated to the agency must be first usedto comply with the terms of any bond resolution or other agreement pledging such taxes fromthe constituent project area. Except as provided in the previous sentence, taxes attributable toeach project area merged pursuant to this provision which are allocated to the redevelopmentagency may be allocated to the entire merged project area for the purpose of paying debt serviceon indebtedness incurred by the redevelopment agency to finance or refinance the mergedredevelopment project.
If in any fiscal year, the agency deposits less than 20 % of taxes allocated to it into thelow- and moderate-income housing fund because of the provisions described in the previousparagraph, a deficit is created in the low- and moderate-income housing fund in an amount equalto the difference between 20% of the taxes allocated to the agency and the amount deposited insuch year. The agency must eliminate the deficit by expending taxes allocated in the yearssubsequent to the creation of the deficit and, until such time as such deficit has been eliminated,an agency may not incur new obligations for purposes other than the assistance of theconstruction or rehabilitation of housing units as described above, except to comply with theterms of any resolution or other agreement pledging such taxes, which existed on the date of themerger of the project areas.
Limitation on Tax Imposition
A statutory initiative ("Proposition 62") was adopted by the voters voting in the State ofCalifornia at the General Election of November 4, 1986, which (i) requires that any tax forgeneral governmental purposes imposed by local governmental entities be approved by resolution
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or ordinance adopted by two-thirds vote of the governmental entity's legislative body and by amajority vote of the electorate of the governmental entity, (ii) requires that any special tax(defined as taxes levied for other than general governmental purposes) imposed by a localgovernmental entity be approved by a two-thirds vote of the voters within that jurisdiction, (iii)restricts the use of revenues from a special tax to the purposes or for the service for which thespecial tax was imposed, (iv) prohibits the imposition of ad valorem taxes on real property bylocal governmental entities except as permitted by Article XIIIA, (v) prohibits the imposition oftransaction taxes and sales taxes on the sale of real property by local governmental entities and(vi) requires that any tax imposed by a local governmental entity on or after Mar 1, 1985 beratified by a majority vote of the electorate within two years of the adoption of the initiative orbe terminated by November 15, 1988. A recent decision of a State Court of Appeal in the caseof City o/Westminsterv, County ofOrange (1985) 204 Cal.App.3d 623. has declared that theprovisions of Proposition 62 requiring majority vote approval of the electorate for general fundtaxes, as referred to in section (vi), are unconstitutional. A petition for review of the decisionwas filed with the State Supreme Court on October 21, 1988. The petition was denied by theCourt on December 15, 1988, making the Court of Appeal decision final.
THE CITY AND THE AGENCY
The City of Oakland
The City of Oakland is located on the east side of San Francisco Bay approximately sevenmiles from San Francisco via the San Francisco-Oakland Bay Bridge. An area of diversecharacter, the City ranges from industrialized lands bordering the Bay to suburban foothills inthe east. Historically the industrial heart of the Bay Area, Oakland has developed into a majorfinancial, commercial and governmental center. The City is the hub of an extensivetransportation network which includes a highly developed freeway system and the westernterminals of major railroads and trucking firms, as well as one of the largest container-ship portson the West Coast. Oakland supports an expanding international airport and rapid-transit lineswhich connect it with most of the Bay Area.
The City was incorporated as a town in 1852, and as a city in 1854, and became acharter city in 1889. The City's charter (the "Charter") was SUbstantially revised in 1969 to takeadvantage of what is now Section 7 of Article XI of the Constitution of the State of Californiagiving cities home rule as to municipal. affairs. The Charter provides for the election,organization, powers and duties of the legislative branch, known as the City Council; the powersand duties of the executive and administrative branches; fiscal and budgetary matters, personneladministration, franchise, licenses, permits, leases and sales; employees' pension funds; and thecreation and organization for the Port of Oakland.
For additional information concerning the City, its government and its financial affairs,see "APPENDIX A - DESCRIPTION OF THE CITY OF OAKLAND. "
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The Redevelopment Agency of the City of Oakland
The Redevelopment Agency of the City of Oakland was activated on October 11, 1956,by action of the Oakland City Council pursuant to the Redevelopment Law. EffectiveDecember 31, 1975, the Oakland City Council declared itself to be the Agency. The Mayorserves as Chairperson of the Agency.
Agency staff services are provided by City staff under an agreement between the Agencyand the City entered into in December 1975. Such support includes project management, realestate acquisition and disposition, relocation, engineering and planning, legal, financing andfiscal services.
The Agency is charged with the responsibility for elimination of blight through theprocess of redevelopment. Generally, this process is culminated when the Agency disposes ofland for development by the private sector, but before this can be accomplished, the Agencymust complete the process of acquiring and assembling the necessary sites, relocating residentsand businesses, demolishing the deteriorated improvements, grading and preparing the sites forpurchase by developers and providing or ancillary off-site improvements.
All powers of the Agency are vested in its nine members. The Agency exercisesgovernmental functions in carrying out projects and has sufficiently broad authority to acquire,develop, administer and sell or lease property, including the right of eminent domain and theright to issue bonds and expend their proceeds.
For additional information concerning the Agency and its financial affairs, see"APPENDIX C - THE REDEVELOPMENT AGENCY OF THE CITY OF OAKLANDAUDITED FINANCIAL STATEMENTS FORTIIEFISCAL YEAR ENDED JUNE 30, 1991."
The Project Area and the Projects
The Central District Redevelopment Project Area encompasses approximately 200 blocks,including the entire central business district of the City. Within the Project Area are three majorredevelopment action areas: City Center, Chinatown and Victorian Row. See "APPENDIX B- THE REDEVELOPMENT AGENCY OF THE CITY OF OAKLAND - The Central DistrictRedevelopment Project" for a description of the Project Area.
The Agency intends to use proceeds of the 1992A Bonds to refund the Refunded Portionof the Prior Bond, the proceeds of which have been designated for public improvements withinthe Project Area. These projects include parking facilities, commercial space, and theconstruction and renovation of public buildings. Proposed projects that have been identified bythe Office of Economic Development and Employment and the Office of CommunityDevelopment include the following:
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Old Oakland. The Old Oakland project is a major mixed use project of from 300 to 500residential units, including public and private parking. Commercial space is planned and thereis the possibility of meeting space for the Convention Center.
Civic Center Plaza. This development project is planned to complement the City HallAnnex buildings, either with or without an underground parking structure.
Rotunda. The Rotunda project is rehabilitation of the structure for occupancy by repairingearthquake damage.
City Hall Annex. The project is to design, develop, acquire, and prepare the site toconstruct a 350,000 square foot City government building.
City Hall Restoration. This project includes facade and public space improvement toOakland City Hall.
Chinatown Redevelopment Project. This project involves the construction of 600 Cityowned parking spaces and 24,000 square feet of space for the Asian Cultural Centers (withtenant improvements) and the Asian library.
Veterans Building. This is a renovation of a senior center.
Fox Theatre. The proposal is the purchase and renovation of the Fox Theatre, a historicstructure in the downtown business area.
Alice Arts Center. A performing arts center and public housing facility is presently underrenovation.
Broadway Garage. This project is a multi-level garage in the central business district.Site clearing and clean-up has begun.
Franklin Street Parking Garage. The proposal is to acquire the parking garage toencourage development in the Broadway-Franklin area.
Chinatown Parking. Even after the current Chinatown project is complete, parking willbe inadequate in the Chinatown Area. This project is to acquire and construct another 500 spaceparking garage in the Chinatown area.
Multi-Service Center. Renovation is in progress on this low-income housing facility andservice center. The project is jointly owned by the County of Alameda and the City.
Downtown Arena. This project is a proposal to acquire and prepare land for transfer toa developer.
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LmGATION
There is no litigation now pending or threatened (i) to restrain or enjoin the issuance orsale of the 1992A Bonds; or (ii) questioning or affecting the validity of any of the proceedingsfor the authorization, sale, execution or delivery of the 1992A Bonds.
The City is involved in certain litigation and disputes incidental to its operations. Uponthe basis of information presently available, the City Attorney believes that there are substantialdefenses to such litigation and disputes and that, in any event, any ultimate liability in excessof applicable insurance coverage resulting therefrom will not materially adversely affect thefinancial position or results of operations of the City.
The City and the Agency are separate legal entities and neither is responsible for the actsor debts of the other. Should there be an adverse judgment as a result of any litigation againstthe City, there would be no effect on the security for the 1992A Bonds and minimal impact, ifany, on the Agency. (See "APPENDIX A - DESCRIPTION OF THE CITY OF OAKLAND- Litigation" herein.)
TAX EXEMPTION
In the opmion of Brown & Wood, San Francisco, California, and Kennedy &Wasserman, Oakland, California, Co-Bond Counsel, based on existing statutes, regulations,rulings and judicial decisions and assuming compliance by the Agency with certain covenantsin the documents and requirements of the Internal Revenue Code of 1986, as amended, regardingthe use, expenditure and investment of bond proceeds and the timely payment of certaininvestment earnings to the U.S. Treasury, interest on the 1992A Bonds is not includable in thegross income of the Owners of the 1992A Bonds for purposes of federal income taxation. Failureto comply with such covenants and requirements may, however, cause interest on the 1992ABonds to be included in gross income for federal income tax purposes retroactively to the dateof delivery of the 1992A Bonds.
Interest on the 1992A Bonds will not be treated as an item of tax preference incalculating the alternative minimum taxable income of individuals or corporations; however,such interest will be included as an adjustment in the calculation ofcorporate alterative minimumtaxable income and may therefore affect a corporation's alternative minimum tax andenvironmental tax liabilities.
Ownership of tax-exempt obligations may result in collateral income tax consequencesto certain taxpayers, including, without limitation, financial institutions, property, and casualtyinsurance companies, certain foreign corporations doing business in the United States, certainS Corporations with excess passive income, individual recipients of Social Security or RailroadRetirement benefits, and taxpayers with outstanding indebtedness to purchase or carry tax exemptobligations. Co-Bond Counsel express no opinion as to any such collateral federal income tax
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consequences and, accordingly, prospective purchasers of the 1992A Bonds should consult theirtax advisors as to the applicability of any such collateral consequences.
Co-Bond Counsel are also of the opinion that interest on the 1992A Bonds is exemptfrom personal income tax imposed by the State of California.
RATINGS
Moody's Investors Service ("Moody's") and Standard & Poor's Corporation ("S&P")have assigned ratings of "Aaa" and "AAA", respectively, to the 1992A Bonds with theunderstanding that upon delivery of the 1992A Bonds, a policy insuring the payments when duerepresented by the 1992A Bonds will be issued by the Insurer. An explanation concerning thesignificance of the rating given by Moody's may beobtained from Moody's at 99 Church Street,New York, New York 10007, (212) 553-Q470. An explanation of the ratings given by S&P maybe obtained from S&P at 25 Broadway, New York, New York 10004, (212) 208-8000. Certaininformation and materials concerning the 1992A Bonds, the Agency and the City were furnishedto Moody's and S&P by the Agency and the City. If in the judgment of either of the ratingservices, circumstances so warrant, either rating service may raise, lower or withdraw its rating.If a downward change or withdrawal occurs, it could have an adverse effect on the resale priceof the 1992A Bonds.
VERIFICATION OF MATHEMATICAL COMPUTATIONS
The accuracy of the mathematical computations of the adequacy of the maturing principalof and interest earned on defeasance obligations to provide for the payment of the principal of,redemption premium and interest on the Refunded Portion when due, which computationssupport the conclusion that the 1992A Bonds are not "arbitrage bonds" under Section 148 of theInternal Revenue Code of 1986, will be verified by Ernst & Young, Tucson, Arizona,independent certified public accountants.
APPROVAL OF LEGAL PROCEEDINGS
Certain legal matters incident to the issuance of the 1992A Bonds have been or will beapproved by Brown & Wood, San Francisco, California and Kennedy & Wasserman, Oakland,California, as Co-Bond Counsel with respect to the 1992A Bonds. Certain legal matters relatingto the issuance of the 1992A Bonds will bepassed upon for the Underwriters by their counsel,Wendel, Rosen, Black, Dean & Levitan, Oakland, California, and certain legal matters incidentto the issuance of the 1992A Bonds will be passed upon for the Agency by its counsel, Jayne W.Williams, City Attorney of the City of Oakland.
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UNDERWRITING
The Underwriters have agreed to purchase the 1992A Bonds at a price of $53,046,312.00(which represents the $53,600,000.00 principal amount of the 1992A Bonds less anUnderwriters' discount of$553,688.00). The Underwriters will purchase all of the 1992A Bondsif any are purchased, the obligation to make such purchase being subject to certain terms andconditions contained in a Bond Purchase Agreement and the approval of certain legal mattersby counsel.
The Underwriters may offer and sell the 1992A Bonds to certain dealers and others atprices lower than the respective public offering prices stated herein. After the initial publicoffering, the respective offering prices may be changed from time to time by the Underwriters.
CO-FINANCIAL ADVISORS
The City has retained Public Financial Management, Inc., San Francisco, California andHenderson Capital Partners, Inc., Oakland, California, as financial advisors (the "Co-FinancialAdvisors") in connection with the preparation of this Official Statement and with respect to theissuance of the 1992A Bonds. The Co-Financial Advisors are not obligated to undertake, andhave not undertaken to make, an independent verification or to assume responsibility for theaccuracy, completeness, or fairness of the information contained in this Official Statement.Public Financial Management, Inc., is an independent advisory firm and is not engaged in thebusiness of underwriting, trading, or distributing municipal securities or other public securities.Public Financial Management, Inc. is a wholly-owned subsidiary of Marine Midland Bank,N.A., New York, New York. Henderson Capital Partners, Inc. is a municipal securities brokerdealer which provides financial advisory and underwriting services to state and localgovernmental entities.
MISCELLANEOUS
All the summaries contained herein of the Indenture, applicable legislation, agreementsand other documents are made subject to the provisions of such documents respectively and donot purport to be complete statements of any or all of such provisions. Reference is hereby madeto such documents on file with the Agency for further information in connection therewith.
Insofar as any statements made in this Official. Statement involve matters of opinion orof estimates, whether or not expressly stated, they are set forth as such and not as
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representations of fact. No representation is made that any of such statements made will berealized, Neither this Official Statement nor any statement that may have been made orally orin writing is to be construed as a contract with the Owners of the 1992A Bonds.
The execution and delivery of this Official Statement has been duly authorized by theAgency.
THE REDEVELOPMENT AGENCY OF THECITY OF OAKLAND
By: lsI Henry L. GardnerHenry L. GardnerAgency Administrator
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APPENDIX A
DESCRIPI'ION OF THE CITY OF OAKLAND
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APPENDlXADescription of the City of Oakland
GENERAL '" .Introduction .City Government .
FINANCIAL INFORMATION .Ad Valorem Property Taxation .Assessed Valuations .Tax Levies, Collections and DelinquenciesTax Rates .............••....Principal Taxpayers . . . . . . . . . . . . •Budget Process •••.•.••••••••.Fmancial and Accounting Infonnatlon .Comparative Financial Statements ....Financial Obligations . . . . . . • . . . . .
A-IA-IA-IA-IA-IA-2A-3A-SA-6A-6A-7A-9
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Statement of Direct and Overlapping Debt A-13Labor Relations . . • . . . . . . . . . . .. A-ISRetirement Programs . . . . . . . . . . .. A-ISOakland Hills Fire •............ A-I6Loma Prieta Earthquake. . . . . . . . .. A-I7
ECONOMIC PROFILE A-I8In~tion A-I8P~on A-WEmpwyment A-20Largest Employers A-22Commercial Activity .. . . . . . . . . .. A-23Construction Activity . . . . . . . . . . .. A-24Median Household Income A-24
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GENERAL
Introduction
The City of Oakland (the "City") is located in the County of Alameda (the "County")on the east side of San Francisco Bay, approximately seven miles from San Francisco via theSan Francisco-Oakland Bay Bridge. Oakland ranges from industrialized lands bordering the Bayin the west to suburban foothills in the east. Historically the industrial heart of the Bay Area,Oakland has developed into a financial, commercial and governmental center. The City is thehub of an extensive transportation network which includes a freeway system and the westernterminals of major railroads and trucking firms, as well as one of the largest container-ship portsin the United States. Oakland supports an expanding international airport and rapid-transit lineswhich connect it with most of the Bay Area. Oakland is the seat of government for AlamedaCounty and is the sixth most populous city in the State.
City Government
The City was incorporated as a town in 1852, as a city in 1854 and became a charter cityin 1889. Oakland is governed by a nine-member City Council, seven of whom are elected bydistrict and two of whom, including the Mayor, are elected on a city-wide basis. The Mayor andCouncil members serve four-year terms. The Council appoints a City Manager who isresponsible for daily administration of City affairs and preparation and submission of the annualbudget under the direction of the Mayor and City Council for the Mayor's submission to the CityCouncil.
Subject to civil service regulations, the City Manager appoints City employees except theCity Attorney, City Clerk, Director of Finance and City Auditor. The City Council appoints theCity Manager and the City Attorney, and the City Clerk and the Director of Finance areappointed by the City Manager subject to City Council approval. The Director of Finance servesas the City's Treasurer. The City Auditor is elected at the same time as the Mayor.
The City provides a full range of services contemplated by statute or charter, includingthose functions delegated to cities under State law. These services include public safety (policeand fire), sanitation and environmental health enforcement, recreational and cultural activities,public improvements, planning, zoning and general administrative services.
FINANCIAL INFORMATION
Ad Valorem Property Taxation
City property taxes are assessed and collected by the County at the same time and on thesame rolls as are County, school and special district property taxes. Under California's 1991/92adopted budget, the County was permitted to pass on costs for certain services provided to localgovernment agencies including the collection of property taxes. The County has imposed a fee
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on the City based on the County's cost for the previous year. This is a prorated charge to alljurisdictions based on each jurisdiction's share of property tax receipts.
The valuation of secured property is established as of March 1, and is subsequentlyequalized in August, and is payable in two installments of taxes due November 1 andFebruary 1, respectively. Taxes become delinquent on December 10 and April 10 for eachrespective installment. Taxes on unsecured property (personal property and leasehold) are dueon August 31 of each year based on the preceding fiscal year's secured tax rate.
State law exempts $7,000 of the full cash value of an owner-occupied dwelling, but thisexemption does not result in any loss of revenue to local agencies, since the State reimburseslocal agencies for the value of the exemptions.
Assessed Valuations
All property is assessed using full cash value as defined by Article XIIIA of the StateConstitution. State law provides exemptions from ad valorem property taxation for certainclasses of property such as churches, colleges, nonprofit hospitals, and charitable institutions.
Future assessed valuation growth allowed under Article xrnA (new construction, certainchanges of ownership, 2% inflation) will be allocated on the basis of "situs" among thejurisdictions that serve the tax rate area within which the growth occurs. Local agencies andschools will share the growth of "base" revenues from the tax rate area. Each year's growthallocation becomes part of each agency's allocation in the following year. The availability ofrevenue from growth in tax bases to such entities may be affected by the establishment ofredevelopment agencies which, under certain circumstances, may be entitled to revenuesresulting from the increase in certain property values.
For assessment and collection purposes, property is classified as either "secured" or"unsecured" and is listed accordingly on separate parts of the assessment roll. The "securedroll" is that part of the assessment roll containing State-assessed property and real propertyhaving a tax lien which is sufficient, in the opinion of the assessor, to secure payment of thetaxes. Unsecured property comprises all property not attached to land such as personal propertyor business property. Boats and airplanes are examples of unsecured property. Unsecuredproperty is assessed on the "unsecured roll."
The passage of AB 454 in 1987 changed the manner in which unitary and operatingnonunitary property is assessed by the State Board of Equalization. The legislation deleted theformula for the allocation of assessed value attributed to such property and imposed a Statemandated local program by requiring the assignment of the assessment value of all unitary andoperating nonunitary property in each county of each State assessee other than a regulatedrailway company. The legislation established formulas for the computation of applicablecountywide tax rates for such property and for the allocation of property tax revenuesattributable to such property among taxing jurisdictions in the county beginning in fiscal year
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1988/89. This legislation requires each county to issue each State assessee, other than a regulatedrailway company, a single tax bill for all unitary and operating nonunitary property.
The following table represents a six-year history of assessed valuations in the City:
CITY OF OAKLANDASSESSED VALUATIONS'
FiscalYear Local Secured Utihty Unsecured Total
1986/87 $ 8,861,815,756 $883,599,960 $1,410,875,331 $11,156,291,047
1987/88 9,574,894,509 953,123,290 1,487,663,988 12,015,681,787
1988/89 10,134,786,232 54,229,8012 1,516,573,931 11,705,589,964
1989/90 11,153,589,360 56,118,189 1,582,277,848 12,791,985,393
1990/91 12,211,539,476 51,665,8562 1,557,854,483 13,821,059,815
1991/92 13,045,041,452 56,668,15g2 1,193,649,163 14,295,378,774
1 Before redevelopment tax allocation increment deduction2 Reflects implementation of AB 454
Source: Alameda County Auditor-Controller
Tax Levies, Collections and Delinquencies
Taxes are levied for each fiscal year on taxable real and personal property which issituated in the City as of the preceding March 1. A supplemental roll is developed whenpropertychanges hands which produces additional revenue.
A ten percent penalty attaches to any delinquent payment for secured roll taxes. Inaddition, property on the secured roll with respect to which taxes are delinquent becomes taxdefaulted. Such property may thereafter be redeemed by payment of the delinquent taxes and thedelinquency penalty, plus a redemption penalty to the time of redemption. If taxes are unpaidfor a period of five years or more, the property is subject to auction sale by the County TaxCollector.
In the case of unsecured property taxes, a 10% penalty attaches to delinquent taxes onproperty on the unsecured roll, and an additional penalty of 1.5% per month begins to accruebeginning November 1st of the fiscal year, and a lien is recorded against the assessee. Thetaxing authority has four ways of collecting unsecured personal property taxes: (1) a civil actionagainst the taxpayer; (2) filing a certificate in the office of the County Clerk specifying certainfacts in order to obtain a judgment lien on specific property of the taxpayer; (3) filing acertificate of delinquency for record in the County Recorder's office in order to obtain a lien on
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specified property of the taxpayer; and (4) seizure and sale of personal property, improvementsor possessory interests belonging or assessed to the assessee.
Each County levies (except for levies to support prior voter-approved indebtedness) andcollects all property taxes for property falling within that county's taxing boundaries. Thesecured tax levy and year-end delinquencies for the City for the five most recent fiscal years areshown in the table below:
CITY OF OAKLANDSECURED AND UNSECURED TAX LEVY AND DELINQUENCIES
ApportionedAmount Delinquent as % Del. Secured Tax
Xm!: Secured Tax Levv' of June 30 June 30 Collectiorr
1986/87 $199,856,503 $7,338,604 6.12% $30,082,473
1987/88 127,733,624 7,118,021 5.57 31,701,308
1988/89 126,097,763 7,008,343 5.56 34,108,364
1989/90 135,197,368 8,462,045 6.26 36,751,879
1990/91 146,349,421 9,920,924 6.78 39,751,879
1991/92 143,248,355' N/A N/A 40,803,034
1 All taxes collected by the County within the City.2 Does not include tax increments paid to the Redevelopment Agency of the City of Oakland.3 Partial year as of April 30, 1992
Source: City of OakJand, Office ofFinance.
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TaRates
The City is divided into 33 Tax Rate Areas. This figure includes one special Tax RateArea comprised of aircraft taxable within the City. The largest Tax Rate Area within the Cityis Tax Rate Area 17-001 which has a total assessed valuation of $10,408,557,955 or 70.9% ofthe City's total assessed valuation. A five-year history of the tax components within this TaxRate Area is shown below:
CITY OF OAKLANDTAX RATE AREA 1''-1
SUMMARY OF TAX RATES(Pen:ent of Property Assessed Value)
Tax Agepcy 1286187 1987188 1988189 1989190 1290191
Countywide TaxI 1.0000% 1.0000% 1.0000% 1.0000% 1.0000%
Oakland Unified School District 0.0295 0.0236 0.0216 0.0184 0.0166
Peralta ColDIDUIIity CoUege 0.0163 0.0131 0.0126 0.0111 0.0109District
OaIdlllld Unified School Districr 0.0140 0.0120 0.0114 0.0108 0.0109
Bay Area Rapid TtlDSit District 0.0390 0.0372 0.0319 0.0250 0.0251
East BayReaioual Park District 0.0000 0.0000 0.0047 0.0032 0.0028
City of 0aIdanct' 0.1575 0.1575 0.1575 ~ Q..l1ll
Combined Tax Rates 1.2563% 1.2434% 1.2397% 1.2260% 1.2376%
1 Maximnm rate for purposes other tbm paying debt service in accordance with Article XllIA of theState of Constitution.
2 Represents tax levied UDder Education Code Section 16090.3 Represents tax levied to correct underfunded obligations in the Police andFire Retirement System.
Source: Alomeda CoIl1lty Auditor-ConlTOUer.
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Principal Taxpayers
The following table lists the major taxpayers in the City in terms of their 1991/92assessed valuation:
CITY OF OAKLAND20 LARGESI' LOCALLY SECURED TAXPAYERS FOR 1991/92
1991-92 AssessedProperty Owner Valuation
1. Eleven Eleven Associates2. State of California Public Employees Retirement System3. Kauer Foundation Health Plan, Inc.4. Clorox Company5. Samuel Merritt Hospital6. Ordway Associates7. Abmanson Commercial Development Company8. Lake Merritt Plaza9. Bramelea Limited and City Square One10. Kaiser Center, Incorporated11. Owens Dlinois Glass Container Incorporated12. Webster Street Partners Limited13. CF Oakland Associates Limited14. Sparknight15. FI' International Incorporated and Toyomura Fumi16._Safeway Stores, Incorporated17. Felschmann's Yeast Incorporated18. Springwood Investment19. Argonaut Financial Services Incorporated20. Silberblatt 5.5. Incorporated and Oakland Associates
Total-Top Twenty
Percent of Total City-wide Assessment: 9.81 ~Source: California Municipal Stalistics, Inc.
Budget Process
The City's budget is developed on a cash basis.
$127,949,526101,225,40095,527,52593,915,38087,460,44585,527,14883,034,52379,899,48477,910,35176,269,77563,761,77459,206,55843,026,15433,498,13232,687,86130,106,11228,337,62727,625,45126,763,11726,245,364
$1,279,971,687
The budget process begins in the fall of each year with staff developing broad guidelinesfor the subsequent year's budget preparation. These are presented to and discussed with the cityCouncil and finalized.
Internal budget hearings are held between the City Manager and heads of each departmentto discuss resources and funding for the following year; concurrently, City Council members
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meet with departments and review their requests. Formal public hearings are held for eachdepartmental budget during May and June.
At least 30 days prior to the beginning of the fiscal year, the Mayor submits the proposedbudget to the City Council and the time is then set by the city Council for public hearings. Uponconclusion of the public hearings, the City Council may make necessary revisions.
The operating budget is adopted by the City Council on or before June 30 of each year.It contains appropriations for all funds and all first year appropriations for capital improvements.
The City Manager employs an independent certified public accountant who, upon request,but at least annually, examines books, records, inventories and reports of all offices andemployees who receive, control, handle or disburse public funds, and those ofany other officers,employees or departments as the City Manager directs.
Within a reasonable period following the fiscal year-end, the accountant submits the finalaudit to the City Council. The City then publishes the financial statements as of the close of thefiscal year.
Financial and Accounting Information
The accounts of the City are organized on the basis of funds and account groups, eachof which is considered a separate accounting entity. The operations of each fund are accountedfor with a separateset of self-balancing accounts that comprise its assets, liabilities, fund equity,revenues, and expenditures, or expenses, as appropriate. Government resources are allocated toand accounted for in individual funds based on the purposes for which they are to be spent andthe means by which spending activities are controlled. The various funds are grouped into eightgeneric fund types and three broad fund categories as follows:
Government Funds:
General Fund. The general fund is the general operating fund of the City. It isused to account for all financial resources except those required to be accounted for inanother fund.
Special Revenue Funds. Special revenue funds are used to account for theproceeds of specific revenue sources (other than special assessments, expendable trusts,or major capital projects) that are legally restricted to expenditures for specifiedpurposes.
Debt Service Funds. Debt service funds are used to account for the accumulationof resources for, and the payment of, the principal of and interest on general obligationlong-term debt, and related costs.
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Capital Projects Funds. Capital projects funds are used to account for financialresources to be used for the acquisition or construction of major capital facilities (otherthan those financed by proprietary funds, special assessment funds and trust funds).
Special Assessment Funds. Special assessment funds are used to account for thefinancing of public improvements or services deemed to benefit the properties againstwhich special assessments are levied.
Proprietary Funds:
Enterprise Funds. Enterprise funds are used to accountfor operations (a) that arefinanced and operated in a manner similar to private enterprises where the intent of thegoverning body is that the costs (expenses, including depreciation) of providing goodsor services to the generalpublicon a continuing basis be financed or recoveredprimarilythough user charges; or (b) where the governing body has decided that periodicdetermination of revenuesearned, expenses incurred and/or net income is appropriate forcapital maintenance, public policy. management control, accountability, or otherpurposes.
Internal Service Funds. Internalservicefundsare used to account for thefinancingof goods or services provided by one department or agency to other departments oragencies of the City, or to other governments, on a cost- reimbursementbasis.
Fiduciary Funds:
Trust and Agency Funds. Trust and agency funds are used to account for assetsheld by theCity in a trusteecapacity or as an agent for individuals, private organizations,other governments and/or other funds.
All government funds are accounted for using the modified accrual basis of accounting.Their revenuesare recognized whentheybecomemeasurable and availableas net current assets.Taxpayer-assessed income, gross receipts and other taxes are considered "measurable" when inthe hands of intermediary collecting governments and are recognized as revenue at that time.Anticipated refunds of such taxesare recorded as liabilitiesand reductions of revenue when theyare measurable and their validity seems certain.
Expenditures are generally recognized under the modified accrual basis of accountingwhen the related fund liability is incurred. Exceptions to this general rule include:(1) accumulated unpaid vacation, sickpay, and other employee amounts which are not accrued;and (2) principal and interest on general long-term debt which is recognized when due.
All proprietary funds are accounted for using the accrual basis of accounting. Theirrevenues are recognized when they are incurred.
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Comparative Financial Statements
The following table reflects the City's general fund audited financial statements for thefiscal years 1986/87 through 1990/91 actual revenues, expenditures and fund balances:
CITY OF OAKLANDGENERAL FUND
REVENUES, EXPENDITURES AND OPERATING SURPLUSES1986/87 THROUGH 1990/91
(OOO's)Total Revenues and Actual Actual Actual Actual Actual
Expenditures 1986/87 1987/88 1988/89 1989/20 1990/91
REVENUESTaxes $146,150 $155,403 $174,712 $170,084 $177,768Permits and Licenses 9,484 4,775 4,946 5,518 6,610Traffic fines and variouspenalties 4,623 4,787 6,423 7,117 7,420Interest and rental income 8,920 10,017 16,582 12,852 12,015Revenue from cunentservices 7,038 15,105 16,987 17,619 22,105Grant revenue 2,026 2,619 1,057 10,395 6,230Other revenue ~ ~ 3,472 6.629 7,802TOTAL REVENUES $178,277 $193,149 $224,179 $230,214 $239,500
EXPENDITURESGeneral government $ 19,993 $ 18,092 $ 21,696 $ 26,993 $ 27,893Public safety 84,932 88,122 103,163 130,420 143,287Office of public works 12,731 13,456 17,256 20,598 27,026Office of general services 3,885 4,519 6,196 5,890 5,006Parks, Recreation andCultural 22,108 23,818 26,515 18,616 16,579Economic, Community andSocial Programs 4,829 3,514 3,858 6,485 6,579Nondepartmental! 18,692 16,701 7,445 11,216 15,243Debt Service ~ ~ -ill __0 __0
TOTAL EXPENDITURES $167,295 $168,347 $186,254 $220,218 $241,613
(2,113)(9,581)
(46,271)$ 61,903
9,99624,85726,185
$119,868
37,925(50,517)3
365$ 58,830
24,802(16,839)3
13,461$ 60,357
Excess (defiClency) ofRevenues over Expenditures 10,982Operating Transfers (15,321)Combined Adjustmentr (11,172)Ending Balance $ 38,933
1 Includes rent payable on lease obhgations.2 Includes audit reclassifications and net residual equity transfers.3 Operating transfers related to the refundmg of City and Various Properties Certificates of
Participation (1988/89) and the Certificatesof Participation related to the Oakland Museum(1987/88). These financings liquidated and transferred various restricted investments from theGeneral Fund Group to other Fund Groups.Source: City of Oakland Audited Financial Statements.
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The following table reftects the City's revenues, expenditures and operating surpluses forthe general purpose fund for fiscal years 1987/88 through 1990/91:
CITY OF OAKLANDGENERAL PURPOSE FUND
REVENUES, EXPENDITURES AND OPERATING SURPLUSES1987/88 THROUGH 1990/91 ACTUAL
1991/92 ADOPI'ED BUDGET(OOO's)
AdoptedActual Actual Actual Actual Budget
Total RevenUes and Expenditures 1987/88 1988/89 1989190 1990/91 1991192
REVENUESTaxes $155,403 $174.712 $170,084 $77,768 $185,690Permits and Licenses 4,775 4,946 5,518 6.610 7,720Traffic fines and vanous penalties 4.787 6.423 7,117 7,420 6,630Interest and rental income 10,017 16.582 12,852 12.015 7.140Revenue from current services 15.105 16.987 17.619 22,105 17.390Grant revenue 2,619 1.057 10.3951 6,230 10,440Other revenue -.ill 3.472 6,629 20,63@ 8,880
TOTAL REVENUES $193,149 $224,179 $230,214 $252,334 $243,890
EXPENDITURESGeneral government $ 18.092 $ 21.696 $ 26.993 $ 27.893 $ 30.190Public safety 88.122 103.163 130,420 143.287 138,400Office of pubhc works 13,456 17,256 20,598 27,026 25,150Office of general services 4.519 6,196 5,890 17.43:z3 4.320Parks. Recreation and Cultural 23,818 26.515 18.616 16.579 22,370Economic, Community and SocialPrograms 3.514 3.858 6.485 6,579 6.050Nondepartmental 16,826 7.510 9,510 11.172 17,700Capital Improvement 0 0 1,706 4,071 1,150Interdepartmental Transfers 16,8392 50.517 (24,851) 9.581 (1.540)
TOTAL EXPENDITURES $185,186 $236,771 $195,361 $263,620 $243,790
Excess (deficiency) of Revenues overExpenditures $ 7.963 $(12.592) $ 34,853 $(11,286) 100
1 Increase reflects anticipated re1.1Dbursement from the Federal Emergency Management Assistance programfor earthquake related expenses,
2 Operating transfers related to the refunding of City and Various Properties Certificates of Participation(1988/89) and the Certificates of Participation related to the Oakland Museum (1987/88),
3 Includes amounts from llAD,Source: City of Ookltmd 1991/92 Adopted Policy Budget, City of Oakland Financial Statements.
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Financial Obligations
Shott-Term. The City of Oakland implemented a short-term financing program in 1981to finance general fund cash flow deficits during the fiscal year (July 1 through June 30). Shownbelow are the short-term borrowings for each year since. The City has never defaulted on thepayment of any of these notes.
The 1991/92 notes were issued in the principal amount of $35,000,000 on November 26,1991. The notes will become due November 25, 1992 and bear interest at a rate of 4.75%(priced to yield 4.15 %). According to the terms of issuance, the City has pledged to set asidecertain receipts from taxes, revenues and other moneys which are received by the City for theCity's general fund sufficient to pay principal and interest on the notes. Such receipts are to befrom moneys received during fiscal year 1991/92 and will be set aside on certain dates all priorto June 30, 1992.
CITY OF OAKLANDSHORT-TERM BORROWING
FA Year1981/821982/831983/8419841851985/861986/871987/881988/891989/901990/911991192
Source: City of Oakland, Ojfice ofFinance.
Amount$16,000,000
16,000,00026,000,00029,800,00035,700,00039,000,00026,000,00030,000,00022,500,00027,500,00035,000,000
Lease Obligations. Since 1982, the City has entered into four separate sale- leasebackarrangements involving City property. Certificates of participation were issued by the CivicImprovement Corporation to finance the acquisition and construction of capital improvementsto twenty-three City properties, and by the Oakland Redevelopment Agency for the acquisitionand improvements to the Henry J. Kaiser Convention Center, the George F. Scotian MemorialConvention Center, and the Oakland Museum. Because the certificates in each case areultimately secured by lease payments from the City to various nonprofit corporations, thecertificates are recorded as direct obligations of the City.
Long-Term Borrowings. In 1988, the City issued revenue refunding bonds in the amountof $209,835,000 which mature from 1993 to 2021. Such bonds are payable solely from theproceeds of guaranteed annuity contracts held in trust with PFRS (as defined below at
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"Retirement Programs") in the Pension Annuity Expendable Trust fund. Because of the natureof the financing structure, such bonds are recorded as direct obligations of the City.
In addition, the Oakland Redevelopment Agency has issued three series of Tax AllocationBonds for two redevelopment project districts. In each case, the Tax Allocation Bonds arelimited obligations of the Agency and are solely payable from and secured by a pledge of anincremental portion of tax revenues assessed on property within each respective project district.For fiscal year 1990/91, the redevelopment tax increment within the City is valued at$1,696,107,000.
Special Assessment Debt. In April 1989, the City issued $4,365,000 of Medical HillParking District Refunding Improvement Bonds. Such bonds are payable from additionalproperty tax assessments levied against property owners in the Medical Hill Parking District.In the event of continuing delinquencies in the payment of the property owners' installments, theCity, in the absence of any other bidder, is obligated to purchase at delinquent assessment salesand pay future delinquent installments of assessments and interest thereon until the land is resoldor redeemed.
Internal Service Fund Long-Term Obligations. In 1980, the Oakland RedevelopmentAgency purchased and leased back City Hall West to the City. In 1988, the Agency issued 1988City Hall West Lease Revenue and Refunding Bonds. The bonds are payable from and securedby a pledge of annual lease rentals to be received from the City.
Enterprise Funds Long-Term Obligations. Numerous revenue bonds and certificates ofindebtedness have been issued by the Port of Oakland and the Acorn Mortgage Program. In thecase of the Port of Oakland, the outstanding balance for such obligations was determined to be$292,231,000 as of June 30, 1990. The Port operates on an enterprise basis in that debt servicefor Port bonds is not payable from general City revenues. In the case of the Acorn MortgageProgram, the outstanding balance for such obligations was determined to be $9,045,000 as ofJune 30, 1990. Such obligations are secured by a pledge of FHA insured mortgage loans issuedfrom the related bond proceeds to developers in the Acorn Redevelopment Project Area.
Oakland-Alameda County Coliseum. Oakland-Alameda County Coliseum, Inc. is a nonprofit corporation managed by a self-appointed Board of Directors. The Board manages the fiscalaffairs and policies of the corporation at its own discretion. The corporation has issued bondswhich are payable from the operating revenues of the Corporation. Currently, the City andCounty lease the Coliseum Complex from the Corporation. The lease obligates the City and theCounty to make annual rent payments of $750,000 each. The lease terminates in 2006.
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In the fiscal years 1991/92 through 1995/96, the City of Oakland will be makingcombined lease payments from its general fund as shown below:
CITY OF OAKLANDGENERAL FUND LEASE OBLIGATIONS
Henry J. G.F. Scot1aDKaiser Memorial Civic
Convention Convention Improvement Oaklandtmm: ~ Corporation Mil,.,.F1scaI Year
19921993199419951996Balance Duel
$4,339,3134,339,3134,339,3134,704,3125,069,313
$43,500,000
$3,895,0003,895,0003,895,0004,200,0004,502,238
$38,000,000
$7,017,0006,909,0006,894,0006,867,0006,735,000
$52,300,000
$1,902,7133,072,6483,192,8283,192,240
$9,408,025
fill!$15,251,313
17,046,02618,200,96118,964,14019,498,791
$173,208,000
1 Principal be1ance as of July 1, 1991.SoIlTCe: City ofOa1cland, Office ofFinance.
The City has never defaulted on the payment of principal or interest on any of itsindebtedness or lease obligations.
Statement of Direct and Overlapping Debt
Contained within the City are numerous overlapping local agencies providing publicservices. These local agencies have outstanding bonds issued in the form of general obligation,lease revenue and special assessment bonds. The direct and overlapping debt of the City isshown below. Self-supporting revenue bonds, tax allocation bonds and nonbonded capital leaseobligations are excluded from the debt statement.
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CITY OF OAKLANDSTATEMENT OF DIRECT AND OVERLAPPING DEBT
1990/91 Assessed Valuation: 512,976,386,744(after deducting SI,858,l2S,758 redevelopment incremental valuation)
Direct and Overlapping Bonded Debt .. Applicable
San Francisco Bay Area Rapid Transit District 7.8649'Alameda-Contra Costa Transit District Cert. of Part. 22.467Oakland-Alameda CollDty Cohseum 60.188Alameda County Board of Education Public Facilities Corp. 20.376Alameda County Authority and Cert. of Part. 20.376East Bay Municipal Utility District 21.290East Bay Municipal Utihty District, Special Distnct #1 53.954East Bay RegIonal Park Distnct 11.722Bay Area Pollution Control Authority 3.645Peralta Community College District 56.194Oakland Unified School District 99.996Oakland Unified School District Cert. of Part. 99.996San Leandro Unified School District Cert. of Part. 14.492Castro Valley Unified School District and Cert. of Part. 0.008-0.120City of Oakland 100City of Oakland Building Authonties 100City of Oakland 1915 Act Bonds 100
Debt 5/1/92$ 24,803,056
6,284,0208,191,5871,591,366
50,016,7639,511,308
16,571,9716,821,032
4,1921,933,074
16,109,35649,468,021
315,926192
12,000,000381,185,000'
3,990,000
$588,796,8642
9,511,30816,571,9718,191,687
$554,521,998
TOTAL GROSS DIRECT AND OVERLAPPING BONDED DEBTLess: East Bay Municipal Utility District (100 9' self-supporting)
East Bay M.U.D., Special District #1 (1009' self-supportingOakland-A1ameda County Coliseum (1009' self-supporting)
TOTAL NET DIRECT AND OVERLAPPING BONDED DEBT
1 Excludes refunding Certificates of Participation 1992 Series A.2 Excludes tax and revenue antlcipation notes, revenue, mortgage revenue and tax allocation bonds and
nonbonded capital lease obligations.
RATIOS TO ASSESSED VALUATION:Gross Direct Debt ($399,990,000)Net Direct Debt ($393,185,000)Total Gross DebtTotal Net Debt
3.089'13.039'4.54%4.279'
STATE SCHOOL BUILDING AID REPAYABLE AS OF 6/30/91:
! General Obligation BondsLease Revenue Bonds and Cert. of Part.Share of Oakland Alameda County ColiseumLease-Revenue Bonds
Source: CaliforniaMunicipal Statistics, Inc.
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$10,722,154
$ 12,000,000381,185,000
6.805.000$399,990,000
Labor Relations
City employees are represented by five labor unions and associations, described in thetable below, the largest one being Service Employees United Public Employees (Local 790)which represents approximately 49 percent of all City employees. Approximately 72 percent ofall City employees are covered by negotiated agreements.
CITY OF OAKLANDLABOR RELATIONS
Employee Organization Nwnber of Employees
Oakland Public Officers Association 743
United Public Employees (Local 790) 2,690
International Brotherhood of Electrical WoIkers 26
International Association of Firefighters 32(Local #557)
Western Council of Engineers 95
Source: City of Oa1dlJnd. Office of Personnel Resources Managemelll
Retirement Programs
Contract Expiration Date
June 30, 1992
June 30, 1994
June 30, 1994
Negotiations underway
June 30, 1994
The Police and Fire Retirement System (PFRS) is a defined benefit plan administered bya Board ofTrustees and covers uniformed employees hired prior to July 1, 1976. As of June 30,1991, PFRS covered 457 current employees and 1,525 retired employees. E1fectiveJuly 1, 1976,the City began providing for and funding an amount equal to the annual normal service cost ofall PFRS participants and the amortization of unfunded benefits accumulated as of that date overa forty year period. On June 7, 1988, voters approved a City measure to extend the amortizationperiod of the unfunded benefits to fifty years. In accordance with these voter approved measures,the City annually levies an ad valorem tax on all property within the City subject to taxation bythe City to help fund the accumulated unfunded benefits. For fiscal year 1991, the City levieda tax of .1575 % for this purpose. The present value of vested benefits (benefits to whichparticipants are entitled regardless of future service) was an amount that exceeded related planassets at June 30, 1990 by approximately $702.6 million. E1fective July 1, 1985, the City'scontributions to PFRS have been at the rate of 76 percent of all uniformed employees'compensation subject to retirement contribution.
The City's annual contribution to PFRS is determined by calculating the total pensionliability for public safety employees under both PFRS and the Public Employees RetirementSystem (PERS). The amount to be contributed to both plans is allocated between years such thata level percentage of payroll (61.04% in 1991) will amortize the unfunded liabilities by 2026
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and 2000 of PFRS and PERS, respectively. Contributions to PERS are deducted and thedifference is contributed to PFRS.
For the fiscal year ended June 30, 1991, contributions to PFRS totaling $31.4 million($28.9 million employer and $2.5 million employee) were made in accordance with aetuariallydetermined contribution requirements. Employer and employee contributions equaled 105% and19%, respectively, of current year covered payroll for plan participants. The City's actuariesdo not make an allocation of the contribution amount between normal cost and the unfundedactuarial liability because the plan is closed.
Oakland Municipal Employees' Retirement System (OMERS) is administered by the Cityand covers three nonuniformed employees hired prior to September 1, 1970 who have notelected to transfer to the PERS as well as 416 retired employees. For the year ended June 30,1991, the City, in accordance with aetuarially determined contribution requirements, did notmake contributions to OMERS as the plan is fully funded.
PERS is a defined benefit plan administered by the State of California and covers allnonuniformed employees except those who have not elected to transfer from OMERS and alluniformed employees hired after June 30, 1976. As of June 30, 1991, the unfunded pensionbenefit obligation under PERS was $13.1 million.
For accounting purposes, employees covered under PERS are classified as eithermiscellaneous employees or safety employees. City miscellaneous employees and City safetyemployees are required to contribute 7% and 9%, respectively, of their annual salary to PERS.The City'S contribution rates for the fiscal year ended lune 30, 1991, were 7.9% and 7.3% foreach group, respectively. The City pays the entire amount of the miscellaneous employees'annual contribution (7 %) to PERS. The remaining portion of the required employee contribution,if any, is paid by the City.
PERS uses an actuarial method which takes into account those benefits that are expectedto be earned in the future as well as those already accrued. PERS also uses the level percentageof payroll method to amortize any unfunded actuarial liabilities. The amortization period of theunfunded actuarial liability ended lune 30, 1990.
Oakland Hills FIre
On October 20, 1991, a fire damaged the Oakland Hills. None of the property damagedby the fire is located in the Central District Reducement Project Area. An estimated 1,990 acresof forest and residential property were damaged. 2,354 homes and 456 apartment units weredestroyed in the fire, most of which were in Oakland. An additional 87 homes were damaged.Property destroyed in the fire has been subject to lower assessed valuations. After rebuildingsubstantially the same as the previous home, the value assigned to the new home will be thesame as the Proposition 13 value of the home on the Assessor's file prior to the fire.
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The City has spent $35 million responding to the fire. The State has approved assistanceto the City and the City fully expects 100% of this cost to be reimbursed by the FederalEmergency Management Agency (FEMA). Additionally, the fire represents a $1.1 million lossfrom property taxes or approximately 1% of the City's total property tax. There is legislationpending to reimburse the City for lost property taxes as a result of the fire.
The City has completed its debris clean up and erosion control measures. 90% of theprivate lots have been cleared of debris. There have been no major slides in the burn area. Theerosion control program has cost $5 million and will be reimbursed by FEMA. The debriscleanup program will be funded jointly by FEMA, the State and insurance companies at anestimated cost of $20 million.
Litigation. Although only one suit arising out of the Oakland Hills Fire has been filed todate against the City, over 500 individuals have filed prelitigation damage claims, many of whichare part of a class action, against the City and other local governments seeking damages inexcess of $2 billion. These claims include wrongful death, real property damage, personalproperty damage and personal injury claims. These claims are based on several legal theoriesincluding dangerous condition of public property, breach of mandatory duty, special relationshipand negligence in fire fighting. The six-month period for filing damage claims against the Citypursuant to the California Government Code has expired, however, there is a possibility thatsubrogation claims by insurers may be made in the future without regard to the expired sixmonth limit. Claimants have six months to file suit from the date the City mails a rejection letteror, if the City does not formally reject the claims within forty-five (45) days of receipt thereof,the claimants have two years from the date the claim is filed to file suit. The City has notcompleted an evaluation of these claims, its defenses thereto and its potential liability therefor.The City is unable to determine at this time the extent to which the amounts claimed realisticallyrepresent the ultimate liability of the City to claimants should the claims be rejected andlitigation ensue.
The City and the Agency are separate legal entities and neither is responsible for the actsor debts of the other. Should there be an adverse judgment against the City, there would be noeffect on the security for the 1992A Bonds and minimal impact, if any, on the Agency.
Lorna Prieta Earthquake
The October, 1989 Lorna Prieta earthquake damaged a number of old structures in thedowntown district of Oakland. Of the 24 major commercial buildings that sustained damage,eight have been renovated and reopened. A number of the buildings which remain closed aresingle-room occupancy hotels which served low income residents. Due to the age and historicalnature of some of these structures, and the effects of the current economic recession, thecommercial owners have not secured the necessary loans to repair these buildings. The City hasbeen working with these hotel owners to arrange financing from FEMA, the State and theOakland Redevelopment Agency.
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ECONOMIC PROFILE
Introduction
Founded in 1852, Oakland occupies 53.8 square miles, with 19 miles of coastline on theSan Francisco Bay in northern California. It is the seat of government of Alameda County, oneof nine counties comprising the San Francisco Bay region, and the center of commerce for theBay Area. The Bay Area has a population of over 6,000,000 people. A large number of publicentities are headquartered in Oakland, including the Bay Area Rapid Transit District (BART),East Bay Municipal Utility District, Association of Bay Area Governments (ABAG), AlamedaCounty Transportation Authority, and the University of California Board of Regents. TheCalifornia Department of Transportation (Caltrans) will be completing its headquarters buildingin 1992 and the U.S. General Services Administration will complete its twin towers in 1993.
Oakland's population exceeds 376,700, making it the sixth largest city in California andthe third largest Bay Area city. The 1990 census figures demonstrate that Oakland is one of themost ethnically diverse city in the country, with 81 different languages and dialects spoken. TheCity's workforce is both sizable and multi-skilled. More than half of its residents are betweenthe ages of 25 and 49, while almost 35 percent live in households with income levels of $35,000or more.
The East Bay economy (Alameda and Contra Costa Counties), which accounted for 39percent of all new job growth in the Bay Area in the 1980s and 30.2 percent in 1990, willcontinue to be the primary engine of growth for the Bay Area of the 199Os. Sales and MarketingManagement Magazine estimates that the value of goods and services will increase by 66 percentby the year 2000. With $38.3 billion in buying power and nearly $16.2 billion in retail sales in1990, the two-countyarea is one of the highest spending markets in the nation. Projections madeby ABAG indicate that Oakland's employment growth between the years 1985 to 1995 will be12.5 percent or over 23,000 jobs.
Historically, the City'S economic base has been largely industrial, and the City retainsa strong manufacturing sector. Over 700 manufacturing firms are located in the City with anincreasing commercial and service sector presence. According to the Oakland Chamber ofCommerce there is approximately 12 million square feet of office space Within the City, andabout 50% of that is in Class A office buildings. Oakland's vacancy rate for office space was14.5% at the end of the first quarter of 1992, while its Class A office vacancy rate was 13.7%.Two major office buildings and one parking garage are under construction. An increasingnumber of major retailers have opened locations in Oakland and there are severalcommercial/shopping districts emerging in the City.
Much of the City's economic strength is attributable to its extensive transportationsystem. The Port of Oakland is one of the busiest container facilities in the nation and OaklandInternational Airport offers service to more than 150 cities. Nine major U.S. and Californiahighways converge in Oakland, providing convenient travel throughout the Bay Area and direct
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access to other regions of the country. High speed rail transportation to San Francisco andthroughout the East Bay is offered by the Bay Area Rapid Transit District (BARn and local busservice is provided by AC Transit. Additionally, ferry service is available to San Francisco.
Services and other important resources are extensive and locally provided. Eight majorhospitals with over 1,700 beds are located in the City and serve City residents. There are morethan 170 public and private schools which provide educational opportunities to the City's youngpeople on the elementary and secondary levels. Utility services are provided by East BayMunicipal Utility District, Pacific Gas and Electric, and Pacific Bell. In addition to other BayArea media, the City has its own regional newspaper, radio stations, and a television station.
Having begun its development as a commercial and transportation center with the GoldRush in 1849, Oakland is today recognized as the center of commerce for the entire Bay Area.It is also one of the main sea terminals for cargo moving between the Western United States andthe Pacific Rim, latin America and Europe. Since 1960, Oakland International Airport, operatedby the Port of Oakland, has developed into a major regional center of air passenger and cargojet operations. last year it was one of the fastest- growing airports in the nation in number ofpassengers served. It currently provides 56 percent of the Bay Area's cargo flights. The City'sforeign trade zone is the largest in the Bay Area with the number of goods flowing through the .zone having doubled in 1990, and revenues in excess of $25 million.
Over the last 25 years, there have been significant gains in diversifying the City'seconomic base. While manufacturing jobs have decreased, the economy now offers a balancedmixture of trade, government, financial and service-oriented occupations, and has a growingskilled crafts sector. The City's abandoned warehouses, foundries, and long silent cigar,macaroni and tent factories are being rapidly converted into live/work studios for crafts people.
Less obvious to people passing through Oakland are the City's increasingly robustneighborhood retail areas such as Glenview, Lakeshore and Grand Avenue, Piedmont Avenue,Fruitvale, Montclair Village, Rockridge and Chinatown. In fact it was because of the activityin these commercial/shopping districts that the City did not suffer a significant decline in salestax revenue despite temporary closure of several major retail stores after the 1989 Loma Prietaearthquake.
Development of Oakland's downtown has long been a primary thrust of city planning.Over the past two decades, the central business district (extending to Lake Merritt) hasundergone a dramatic physical renaissance. New office and retail buildings, refurbished publicfacilities, renovated historical buildings, a new convention center, transportation improvements,parking facilities, luxury hotels, park enhancements and outdoor art have created a cosmopolitanenvironmental enhancing the City's status as the hub of the Bay Area.
The quality of life in the City is enhanced by abundant opportunities for recreation,entertainment and culture. The City has a moderate climate and has 64 parks within its bordersincluding Lake Merritt which is located downtown. The Oakland-Alameda County Coliseum
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hosts concerts and other special events, and is the home to Oakland A's baseball and GoldenState Warriors basketball. A variety of museums, music, dance and theater groups, both amateurand professional, perform regularly in the City.
Population
The City is the sixth largest in the State of California. Between 1980 and 1991, the City'spopulation increased by a total of 11% or 37,412. The County has experienced steady populationgrowth since 1960, and it is estimated that population has grown by 187,621 or 17% since 1980.The fastest growing cities are located in the southern and eastern portions of the County. TheCounty is the second most populous in the Bay Area and the sixth most populous in the State.
CITY OF OAKLAND AND ALAMEDA COUNTYPOPULATION
Xm City of Oakland Alameda County
1960 367,548 908,209
1970 358,486 1,064,049
1980 339,288 1,105,379
1990 372,242 1,279,182
1991 376,700 1,293,000
Source: Statisticsfor 1991 are State Department ofFinance estimates as ofJanuary 1. The 1960,1970, 1980 and 1990 totals are U.S. Censusfigures.
Employment
During the past seven years of economic expansion, Alameda County's labor force hasgrown steadily. It is expected that the County will continue to experience moderate job growthwith approximately 82,000 more jobs in the County by 1996 than in 1989. This represents anincrease of 13.8 percent or an average of 2.0 percent per year. Reflecting the national recessionin 1990 and 1991, local job growth was slower at that time than during the preceding severalyears. As the overall economy recovers, job growth in the County will also accelerate. Federalgovernment employment will increase in 1993 when the new Oakland federal building iscompleted. At this time, the various military bases in the County are not slated for closure.
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The following table represents the labor patterns in the County for 1987 through 1990and for February 1991 and February 1992 and civilian labor force figures for the City for thesame period:
CIVILIAN LABOR FORCE, EMPLOYMENT AND UNEMPLOYMENTANNUAL AVERAGES
(000')
ALAMEDA COUNTY
February February1987 1988 1989 1990 mf 1m
Civilian Labor Force 639.9 667.6 685.6 675.7 675.5 688.3Employment 607.3 636.9 656.5 647.6 639.0 646.2Unemployment 32.6 30.7 29.1 28.1 36.5 42.1Unemployment Rate 5.1 " 4.691i 4.2" 4.291i 5.491i 6.191i
Wage and Salary Employment" 5.1 " 4.6% 4.2" 4.2" 5.4% 6.191iTotal All Industries 552.2 573.3 598.7 608.6 N/A N/AAgriculture 1.8 1.9 1.859 1.5 N/A N/ANonagriculture 550.4 571.4 6.9 607.1 N/A N/A
Mining & CoDstruction 28.8 30.5 31.7 31.4 N/A N/A
Manufacturing 74.7 80.4 83.3 81.9 N/A N/A
Transportation & Public Utilities 35.7 36.5 38.8 40.5 N/A N/A
Wholesale Trade 36.3 37.6 40.9 40.8 N/A N/A
Retail Trade 100.1 102.9 106.1 108.3 N/A N/A
Finance, Insurance & Real Estate 29.2 29.6 30.4 30.8 N/A N/A
Services 127.4 134.1 143.3 149.6 N/A N/A
Government 118.2 119.8 122.4 123.8 N/A N/A
Civilian Labor Foree (2) 181.1 187.3 195.2 190.5 191.4 195.1Employment 168.3 175.3 183.7 179.5 177.1 179.2Unemployment 12.8 12.0 11.4 11.0 14.3 16.5Unemployment Rate 7.09li 6.491i 5.9" 5.891i 7.591i 8.491i
1 Monthly labor force figwes are Dot directly comparable to annual averages. The annual average for 1991will be available by June 1992. Wage and salary information is Dot available on a month to month basisfor the County.
2 Based on place of residence.3 Based on place of work.
Soun:e: California Employment DevelopmentDepartment
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Largest Employers
The following tables represent the largest public and private employers in the City ofOakland:
Public Entity
CITY OF OAKLANDLARGESI' PUBLIC EMPLOYERS
Product/Seryice
AC Transit DistnctAlameela CountyBay Area Rapid Tnmsit DistrictEast Bay MUDlcipal Utility DistnctHigh1aDd Hospital OaklandCity of OaklandNaval Hospital Oakland
Oakland Public SchoolsOakland Army BasePenlta CoIll1DUllity CollegeUS Navy Supply CenterUS Post Office
Source: Oakland CIuunber of COI7IInQce
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Pubhc TransportationGovernmental OperationsPublic TransportationUtilitylWaterCounty Medical CenterGovernmental OperationsHospital-Medical CenterEducationMilitary Traffic Management/Cargo ControlEducationGovernment InstallationPostal Services
Company
CITY OF OAKLANDLARGESI' PRIVATE EMPLOYERS
ProdudlService
American President Companies, Inc.American Protective ServicesAT&TBlue CrossChildren's HospitalCiticorp SavingsClorox CompanyEmporiumGnmnyGooseICF-Kaiser EngineersKaiser Foundation Health PlanKilpatricks BakeryMother's Cake & Cookie Co.Oakland ScavengerOwens-DlinoisPacific BellPacific Gas & ElectricSafeway Stores, Inc.San Francisco French Bread Co.Scott Co.Southern Pacific TransportationSummit Mechcal CenterSunshine BiscuitsThe TnbuneWorld Savings and Loan
Source: DokJand ChombeTof Commerce.
Commercial Activity
Ocean ShippingSecurityCommunicationsHealth Care InsurerHospital ServiceBankingHousehold ProductsDepartment StoreFood ProductsAluminum ProductslEngineeringHospital ServicesBakery ProductsBakery ProductsGarbage CollectionGlass ContainerPublic UtilityPublic UtilityGrocery StoresBakery ProductsMechanicalTransportationHospital ServicesBakery ProductsNewspaperBanking
A six-year history of retail sales for the City is shown in the following table:
CITY OF OAKLANDTAXABLE TRANSACTIONS 1986-1991
Retail Sales
198619871988198919901991 (9 months)
$2,366,556,0002,352,164,0002,472,515,0002,530,690,0002,447,917,0001,770,548,000
Source: StDle Board ofEqualiztztion, Departmen: ofResearch andStatistics.
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Xrm:1986
1987
1988
1989
1990
1991
Construction Activity
A six-year history of building permits and valuation appears in the following table:
CITY OF OAKLANDBUILDING PERMITS AND VALUATIONS 1'86-1991
Residential Residential Valuation Nonresidential ValuationPermits <In Thn"pmk) <In Thn",,!nck)
820 $144,902 $104,596
650 101,383 82,709
612 106,892 92,260
505 73,941 57,776
336 71,399 49,284
762 113,323 89,982
SoIl1'Ct!: 1986: "Ctzlifornia Construelion Trends, • Security PacificBank. 1987 tMollg1l1991:"California BuildingPermitActivity, • EconomicScie1lCt!S Corporation.
Median Household Income
Effective Buyer Income (EBI) is defined as personal income less personal income tax andnontax payments, such as fines, fees or penalties. Median household EBI for the City is shownin the table below.
CITY OF OAKLAND AND ALAMEDA COUNTYMEDIANHOUSEHOLD EFFECTIVE BUYING INCOME
1985-l9H Median EBI
Xrm: City of QakJand Alameda County California United Slates
1985 $20,712 $28,037 $26,557 $23,680
1986 21,960 29,756 28,227 24,632
1987 23,028 31,220 30,537 25,888
1988 22,927 30,984 30,088 24,488
1989 23,257 31,440 30,713 25,976
1990 25,306 34,211 33,342 27,912
Note: Beginning in 1988, metlwdoJogy used to calculateMedian EBI dilfen from t'hat in previousyean.
Source: "S/lIWY ofBuying Power, • Sales and Marketing MQ1I(Jgement Magazine.
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APPENDIXB
THE REDEVEWPMENT AGENCY OF THE CITY OF OAKLAND
(THIS PAGE INTENTIONALLY LEFT BLANK)
APPENDIX B
THE REDEVELOPMENT AGENCY OF THE CITY OF OAKLAND
Members, Authority and Personnel
The Redevelopment Agency of the City of Oakland (the "Agency") was activated onOctober 11, 1956, by action of the Oakland City Council pursuant to the California CommunityRedevelopment Law. Effective December 31, 1975, the City Council declared itself to be theAgency. The members of the Agency include the Mayor, Elihu M. Harris, as Chairman of theAgency, and the other members of the City Council of the City of Oakland: Leo Bazile,Frank H. Ogawa, Aleta Cannon, Marge Gibson-Haskell, Nathan Miley, Mary Moore, Wilson C.Riles, Jr., and Richard Spees.
Agency staff services areprovided by City staff under an agreement between the Agencyand the City entered into in December 1975. Such support includes project management, realestate acquisition and disposition, relocation, engineering and planning, legal, financing andfiscal services.
Henry L. Gardner serves as City Manager and Agency Administrator. He was appointedto these positions in 1981. He formerly served as Assistant City Manager and has been employedby the City since 1971.
Jayne W. Williams serves as City Attorney and Agency Counsel. She was appointed tothese positions in 1987.
Gary Breaux serves as Agency Treasurer. He also serves as City Director of Finance.He was appointed to these positions in 1991.
Arrece Jameson serves as Secretary to the Agency, as well as City Clerk. Ms. Jamesonhas held the position of Secretary to the Agency since 1977 and has been employed by the Citysince 1950.
Julia T. Brown, Director of the Office of Economic Development and Employment, wasappointed in 1990.
Antoinette Hewlett, Director of the Office of Community Development, was appointedin 1979.
Administration of the Agency's projects is a staff function within the City organizationalframework and has been a shared responsibility of the Office of Economic Development andEmployment (Commercial/Industrial Projects) and Office of Community Development (HousingProjects).
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Powers
All powers of the Agency are vested in its nine members. They are charged with theresponsibility of eliminating blight through the process of redevelopment. Generally, this processis culminated when the Agency disposes of land for development by the private sector. In orderto accomplish this the Agency has broad authority to acquire, develop, administer, sell or leaseproperty, including the right of eminent domain and the authority to issue bonds and expendtheir proceeds.
Prior to this, the Agency must complete the process of acquiring and assembling thenecessary sites, relocating residents and businesses, demolishing the deteriorated improvements,complete environmental mitigation, grade and prepare the site for purchase, and in connectionwith any development can cause streets, highways and sidewalks to be constructed orreconstructed and public utilities to be installed.
Redevelopment in the State of California is carried out pursuant to the CommunityRedevelopment Law (Section 33000 et seq. of the Health and Safety Code). Section 33020 ofthe Law defines redevelopment as the planning, development, replanning redesign, clearance,reconstruction or rehabilitation, or any combination of these, of all or part of a survey area andthe provision of such residential, commercial, industrial, public or other structures or spaces asmay be appropriate or necessary in the interest of the general welfare, including recreational andother facilities incidental or appurtenant to them.
The Agency may, out of the funds available to it for such purposes, pay for all or partof the value of the land and the cost of buildings, facilities, structures or other improvementsto be publicly owned and operated to the extent that such improvements are of benefit to theproject area and not other reasonable means of financing is available.
The Agency must sell or lease remaining property within a project area forredevelopment by others in strict conformity with the redevelopment plan, and may specify aperiod within which such redevelopment must begin and be completed.
In accordance with these criteria the Agency has adopted Redevelopment Plans indesignated project areas that authorize the use of the redevelopment process and procedures.Besides the Central District Redevelopment Project, the active projects include two designatedprojects and three proposed projects (see below for descriptions).
Agency Ymances
The Agency's audited financial statements for the fiscal year ending June 30, 1991, arefound in Appendix C.
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The Central District Redevelopment Project
The Central District Redevelopment Project Area encompasses an area of 200 Cityblocks, including the entire Central Business District. The Project Area is the economic andtransportation hub of the East Bay portion of the San Francisco-Qaldand Metropolitan Area. Itcontains nearly 40 major office buildings of over 30,000 square feet each with approximately9 million square feet of rentable office space. The class A buildings currently have a vacany rateof approximately 13.7%. This vacancy rate exists predominantly in the older office buildingsand in the portion of new buildings still under construction.
The Project Area is at the heart of the BART transit system, having three stations locatedwithin its boundaries. More than forty bus lines connect the Project Area with other parts ofQaldand and nearby communities. Freeway access to the Project Area is excellent, and wassignificantly enhanced with the completion of the John B. Williams Freeway in 1985.
Within the Project Area are three major redevelopment action areas: City Center,Chinatown and Victorian Row. These three action areas surround the Oakland ConventionCenterlParc Oakland Hotel Complex, which was developed with Agency financial assistance.A second hotel/garage project is in progress and will be developed with Agency financialassistance. The Agency owns and operates the Housewives Market and is continuing with plansto develop new retail business in the Central District.
City Center. The City Center action area is a major mixed-use multipurpose developmenton a 15 block site assembled by the Agency. It consists of three major elements: (1) the tenblocks being developed and/or managed by Bramalea Pacific Inc.; (2) the two blocks beingdeveloped by DWA-Fed Oak for the General Services Administration's Oakland FederalBuilding; and (3) the three blocks of Preservation Park.
Chi1Ultown. The Chinatown action area is a multi-phased development on a four blocksite assembled by the Agency. The first phase consisted of a six story podium covering one cityblock, with the lower floors designed for commercial, retail and restaurant use and the upperfloors for office use. Construction was completed in late 1982.
Viaorian Row. Victorian Row, started in 1978, consists of the rehabilitation/restorationof eleven mid to late nineteenth century Victorian commercial structures in three phases, andnew construction in a fourth phase, for office and commercial uses.
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Special Programs
In addition to undertaking redevelopment activity within the three major action areas, theAgency has initiated three other programs in the Central District Project Area.
The Cultural Development Program provides grants and technical assistance to local nonprofit arts organizations, producing a wide array of arts activities and assisting in marketingCentral District activities through technical assistance, advertising and promotion.
The Employment and Training Program provides assistance to employers in accessingemployment and training resources, and by providing a work force trained to the employer'sspecifications. Over 750 high school students are presently enrolled in the program.
The Drug Nuisance Abatement Housing Program is designed to eradicate drug dealingand use in Oakland's low- and moderate-income residences. The program places the duty toabate drug related nuisances on the property owners in conjunction with the Oakland PoliceDepartment.
Controls, Land Use and BuDding Restrictions
The Central District Urban Renewal Plan (the "Plan") designates six major use areas thatcover the entire Project Area: commercial core, peripheral commercial, civic and institutional,residential (apartment), residential (neighborhood), and general industrial. The Plan outlinesguidelines for predominant and secondary uses in each area, residential development densitiesand floor areas, off-street parking requirements, and off-street loading requirements. The Planis intended to provide the framework for the Agency's planning and execution of renewalactivities. The Agency's formal land use control powers are limited, however, to approvedrehabilitation, activity, and acquisition areas within the Project Area, as described below. Citycodes, including the zoning regulations of the City of Oakland and other Oakland municipalcodes and ordinances apply throughout the Project Area.
The Plan provides for the establishment of rehabilitation, acquisition and activity areaswithin the Project Area in which the Agency is empowered to employ various urban renewaltechniques and to exercise special land use controls as authorized by the Redevelopment Law.These areas can be established only by resolution of the City Council based on recommendationsby the City Planning Commission. Three such action areas (described earlier) have beenestablished. Pursuant to state law requirements, environmental impact data have been completedfor each action area.
For each of these areas, the Plan sets forth land use controls, enforceable by the Agency,related to: primary and secondary uses, size and operating characteristics of acceptable use,design standards, building requirements, off-street parking and loading requirements, signcontrol, utilities undergrounding, circulation and other obligations to be imposed onredevelopers. The Plan provides that no building, sign, or structure be constructed and no
B-4
existing improvement be rehabilitated within established rehabilitation, acquisition, or activityareas except in accordance with architectural, landscape, and site plans submitted to andapproved in writing by the Agency.
Under certain circumstances, the Agency is authorized to permit a variation from thelimits, restrictions and controls established by the Plan. However, no variation shall be grantedwhich changes a basic land use or which permits other than a minor departure from the Planprovisions. In permitting a variation, the Agency is required to impose such conditions as arenecessary to protect the public health, safety or welfare, and to assure compliance with thepurposes of the Plan. Any variation permitted by the Agency is not to supersede any otherapproval required under City codes and ordinances.
Other Projects
In addition to the Central District Redevelopment Project two designated redevelopmentprojects and three proposed projects are briefly described below.
Acorn Project. Redevelopment began the Acorn Project in 1962 on a 50-block area westof downtown Oakland. Approximately 610 structures were acquired, the occupants relocated,the buildings demolished and the sale of assembled land to private non-profit developers whobuilt over 1,000 low-moderate income residential units. A 23-block area at the southern edgeof the project contains industrial and commercial development where more than 20 new firmshave bought land and built new facilities.
Oak Censer Project. Oak Center is a 56-block residential community in West Oakland,adjacent to downtown and the Acorn Project, mainly composed of Victorian structures. Thesestructures were preserved through may efforts and a variety of financing techniques. Those thatwere unfeasible for renovation were demolished and the vacant land made available for futuredevelopment.
Martin Luther King, Jr. Community Plaza. This is a proposed mixed use developmentlocated at the Old Merritt College Campus in North Oakland which will consist of office, retail,civic activities and residential space.
Coliseum Area Project. This is a proposed 4,100 acre redevelopment project in EastOaldand with the objective of economically revitalizing the area and increase jobs for Oaklandresidents. Activities will include commercial and industrial rehabilitation, public improvements,acquisitionand assemblage of marketable parcels of land and construction of low and moderateincome housing.
West Oakland Area Project. This program proposes to alleviate blight in West Oaklandthrough housing development, commercial revitalization and aesthetic improvement.
B-5
Litigation and Claims
There is no litigation pending, or to the knowledge of officials of the Agency, threatened,against or affecting the Agency, seeking to restrain or enjoin the issuance of the 1992A Bondsor the application of the proceeds thereof to payment of the Prior Bond, or in which anunfavorable decision, ruling or finding would adversely affect the validity or enforceability ofthe 1992A Bonds, .the Indenture, or the transactions contemplated thereby.
B-6
APPENDIXC
THE REDEVELOPMENT AGENCY OF THE CITY OF OAKLANDAUDITED FINANCIAL STATEMENTS
FOR THE FISCAL YEAR ENDED JUNE 30, 1991
(THIS PAGE INTENTIONALLY LEFI' BLANK)
WILLIAMS. ADLEY & COMPANY
REDEVELOPMENT AGENCY OFTHE CITI' OF OAKLAND
Flnancial Statements andSupplemental Information
June 30, 1991
(With Independent Auditors' Report Thereon)
REDEVELOPMENT AGENCY OF 1HE em OF OAKLANDTABLE OF CONTENTS
June 30. 1991
Independent Auditors' Report
CoI:lbined Financial Statements:
1
Combined Balance Sheer- All Fund Typesand Account Group 2
Combined Statement of Revenues, Expendituresand Changes in Fund Balances· All GovernmentalFund Types 4
Statement of Revenues. Expenses and Changes inRetained Earnings· Enterprise Fund 5
Statement of Cash Flows - Enterprise Fund 6
Notes to Combined Financial Statements 7
Supplemental Financial Information:
Combining Balance Sheet - Capital ProjectFunds by Action Area 29
Combining Statement of Revenues. Expendituresand Changes in Fund Balances· CapitalProject Funds by Action Area 30
Schedule of Capital Project ExpendituresCentral District 31
Combining Balance Sheer- Debt Service Funds 32
Combining Statement of Revenues, Expenditures andChanges in Fund Balances - Debt Service Funds 33
Combining Balance Sheet - City-AgencyLease Financing Debt Service Funds 34
Combining Statement of Revenues, Expendituresand Changes in Fund Balances - City-AgencyLease Financing Debt Service Funds 35
Independent Auditors' Report on Compliance ofCalifornia Redevelopment Agencies 36
WilliAMS. ADLEY& COMPANYCer:.f!!,; :>-"bile Accountants
INDEPENDENT AUDITORS' REPORT
To the Members of the Redevelopment Agencyof the City of Oakland:
We have audited the combined component unit financial statements of the RedevelopmentAgency of the City of Oakland (the Agency) as of and for the year ended June 30, -1991 aslisted in the accompanying table of contents. These financial statements are theresponsibility of the Agency's management. Our responsibility is to express an opinion onthese financial statements based on our audit.
We conducted our audit in accordance with generally accepted auditing standards. Thosestandards require that we plan and perform the audit to obtain reasonable assurance aboutwhether the financial statements are free of material misstatement. An audit includesexamining, on a test basis, evidence supporting the amounts and disclosures in the financialstatements. An audit also includes assessing the accounting principles used and significantestimates made by management, as well as evaluating the overall financial statementpresentation. We believe that our audit provides a reasonable basis for our opinion.
In ocr opinion, the financial statements referred to above present fairly, in all materialrespects, the financial position of the Redevelopment Agency of the City of Oakland at June30, 1991 and the results of its operations and the changes in financial position of theEnterprise Fund for the year then ended in conformity with generally accepted accountingprizc.ples.
Our audit was made for the purpose of forming an opinion on the combined financialstatements taken as a whole. The supplemental financial information as listed in theaccompanying table of contents are presented for purposes of additional analysis and arenot a required part of the combined financial statements. Such information has beensubjected to the auditing procedures applied in the audit of the combined financialstatements and, in our opinion, is fairly presented in all material respects in relation to thecomb.ned financial statements taken as a whole.
CL1Lt~~~~ ( (j,,7'k4C.~wru.u..\tS, ADLEY' &C({MPANYOctober 31, 1991
1330 Broadwa, SUIte 1825 Oakland. CA 94612 •.
(415) 893-8114 Fax 893·2603
IU~OI~VI£LOI'MENT AGENCY OF THE CI1Y OF OAKLANI)
Combined Rulunce Sheet • All fund TYllCS nnd Account GroupJune 30. 1"91
ProprietaryGoyernmental Fund TWes Fund Type Account Group
General TotalsCapital Debt Enterprise I,ong-Term (Memorandum
~ Project Service Administrative fund Obligations Only)
Cash S 2,418,711 5 100 S 2.418.811Restricted cash and investments with
fiscal agent 75,073.387 $ 49,023,939 s 885.413 124.982,739Pooled cash and investments:
Cash Overdraft (708,639) (708.639)Accrued intcrest receivable 818,503 818,503
N Investments 73,305,000 73,305.000Discount on investments (565,578) (565,578)Less: Other funds interests (72,849.28()) (72,849,286)
Equity in pooled cash and investments 54,410.429 803.951 17,634,906 72,849.286Due from other Redevelopment Agency funds 730,000 730,000Due from City of Oakland 12,256.162 850,000 13,106,162Due from U.S. General Services Adminlstration 292,806 292,806Direct financing lease
receivables- City of Oakland 39,270,000 ~9,270.000
Accounts receivable (net of 5200,000allowance for doubtful accounts) 3,008,680 62,315 3,070,995
Accrued interest receivable 2,279,607 2,279,607NOles receivable 22,468,263 81,520,223 8,462,538 112,451,024Property held for resale 9,251,123 9,251,123Amount avaihtblc in Debt Service Fund S 4S,243.26S 4S,243,26SAmount to he provided for retirement of
general long-term obligations 264,290,115 264,290,115
Total assets 5IB2,189Jg§ $,1Z2.§BQ,4~ 5.l§,485,0Q2 52.347,251 5J.09,533,3§2 $690.235,933
IUtlll£VKLOltMENT AGENCY OF THE CITY OF OAKlAND
Combined n:tlnnce Sheet - All Fund Type.c; and Account Group, ContinuedJune 30, 1991
l)ropricl:uyGuVCrtlJOOl.lUI Fund1'>!l!CS_-"_ Fund Ty~ L\ccuun' GWlll!
General TotulsCapital Debt Enterprise Long-Term (Memorandum
Liabilities Project Service Administrative Fun'" Obligations Only)
Accrued debt service s4,511,601 s 144,613 s 4,656,214Ccniticates of participation $116,810,000 116,810,000Tax allocation refunding bonds payable 179,709,273 t79,709,273Lease revenue refunding bonds payable 3,960,000 3,960,000Mortgage revenue bonds payable 8,895,000 8,895.000Due to other Redevelopment Agency funds s 730,000 730,000Due to City of Oakland s 1,832,327 1,832,327Advances from City of Oakland 9,054,107 9,054.107
~Deferred revenue 24,194,576 120,919,556 120,000 145,234.132Refundable deposits 487,637 36,467 524,104Accrued liabilities 898,991 898,991Other Ii..bilities 6,006 6,006
Total liabilities 27,413,531 125,437,163 886,467 9,039,613 309,533,380 472,310,154
fund Balance
Retained earnings 308,338 308,338Fund balances:
Reserved for debt service 45,243,265 45,243,265Reserved for property held for resale 9,251,123 9,251,123Reserved for long-term loans 730,000 730,000Reserved for future projects 145,524,514 '6,86N,53? I62,J93.053
Total fund equity 154.775.637 45,243,265 17.598.532 308.338 217.925,779
Total liabilities and fund equity $~ $~ $18.485.006 $2,347·951. $309,53~,3W! $~22,235,933
REDEVELOPMENT AGENCY OF THE CITY OFO~D
Combined Statement of Revenues, Expenditures and Changes in Fund BalancesAll Governmental Fund Types
Year ended June 30, 1991
Governmental Fund TypesTotals-
Capital Debt (Memorandum~ ~ Administrari\e Only)
Revenues:Tax il:crement S 25,125,670 S 672;127 S 25,797$1City graJIts 442,587 442,587lDterest on restricted cash and investments
v.Uh fiscal agent 6,475.130 3,.520,556 9,995,686lDteresl on pooled cash and investments 4.182,264 54,737 S U34,375 5,471,376Interest on notes receivable 1,526.182 8,137,377 9,663,559lDteresl on direct liDlmciDg lease receivables
• City of Oakland 2,797$l7 2,797$l7Sale of real property 1,467,751 1.467,751Rents :LIId reimbursements 819,939 819,939Other 1911.580 150488 2.062068
TOlal revenues 41,951.103 15.l82,774 l.384,863 58,518,740
Expenditures:Debt Senice:
RetiremeJ1t of long-term debt 12,S15,000 12,S15,000IDtcresl 23,706,022 23,706,022
Operation and managemeJ1t of acquired property 531,378 531,378Site dearaDc:e and toxic remediation 6,883,802 6,8Il3,802Ptojeet improwments 2l,02S,349 2}.025,349General aDd administrative 9,68l,968 9,681,968Cost of property sold 1.410,000 1.4'70,000Other 1.644.340 14.829 134000 1.793169
Talai expcuditures 41216831 36.235851 134000 7760668l\
Excess (Deficiency) of revenues over expenditures 714,266 (21.053,077) USO,863 (19,087,948)Other 6nanciD{ sonrces (uses):
Operating transfers in 12,418,663 30,258,166 42,736,829Operating transfers out (38.786,914) (3,599,117) (350,195) (42,I36,829)Proceeds from insurance 3,300,000 3,300,000Loan proceeds 9000000 9.OQQQQQ
Tou! Olhcr liDlmciDg sources (uses> (l7.308.251) 29952049 ( J50798) '21QQQQQ
Ex=ss of revenues and otherfuuncing sources overcxpcuditurcs and other financiag uses (16,593,985) 8,905,972 900,Q65 (6.781,948)
Fund balances at begiuuiug of year 171.369,622 36.331,293 16698,474 224,405.389
Fund balances ;H end of year $154,775,637 $45,243'265 $\7 598.539 $211617441
4
REDEVELOPMENT:AGENCY OF ras CI1Y OF OAKLAND
Statement of Revenues, Expenses and Changes inRetain~ Earnings. Enterprise Fund
Year ended June 30, 1991
Revenues:Interest on cash with fiscal agentInterest on notes receivable
Total revenues
Expenses:InterestOther
Total expenses
Net Income
Retained earnings at beginning of year
Retained earnings at end of year
S 105,141791.796
896,937
879,675l3,643
893,318
3.619
304,719
5308,338
See accompanying notes to combined financial statements.
5
REDEVELOPMENT AGENCY OF THE CITY OF OAKLA.'iD
Statement or Cash FlowsEnterprise. Fund
Year ended June 30, 1991
Cash flows from operating activities:
Cash provided by operations:Net income
Decrease in notes receivableDecrease in accrued interest receivable
Net cash provided by operating activities:
Cash flows from non-capital financing activities:
Principal payments on bondsDecrease in accrued interest payable
Net cash used for non-capital financing activities:
Increase in cash
Balance of cash with fiscal agent at beginning of year
S 3,619
134,14072.540
210,899
150,0002.336
152.336
58,563
826.850
Balance of cash with fiscal agent at end of year
See accompanying notes to combined financial statements.
6
REDEVELOPMENT AGENCY OF THE crrv OF OAKLAND
Notes to Combined Financial StatementsJune 30, 1991
(1) Activities of the Redevelopment A2ency of the City of Oakland
The Redevelopment Agency. a component unit of the City of Oakland (the Agency).was activated on October 11. 1956 for the purpose of redeveloping certain areas ofthe City of Oakland (City) designated as project areas. Its principal activities are theacquisition of real property for the purpose of removing or preventing blight,providing for the construction of improvements thereon and the rehabilitation andrestoration of existing properties.
The principal sources of funding for the Agency's activities have been:
Bond issues. notes and other financing sources.
Advances. loan and grants-in-aid from the City.
Property tax revenue attributable to increases in the assessed valuations in theassociated project areas.
Grants received from the U.S. Depanment of Housing and UrbanDevelopment under the Urban Renewal Program, NeighborhoodDevelopment Program and Community Development Block Grant Program(through the City of Oakland), as well as Section 312 rehabilitation loans.
Generally, funding from bond issues, notes, loans and City advances are eventuallyrepayable from incremental property tax revenue. The Agency has entered intorepayment agreements with the City or is obligated to do so under the terms offunding agreements. The amount of incremental property tax revenue received isdependent upon the local property tax assessments.and rates, which are outside ofthe control of the Agency. Accordingly, the length of time that will be necessary torepay the City is not readily determinable.
The Agency has undertaken seven projects to date which consist of the CentralDistrict (which is segmented into several action areas including Chinatown, CityCenter and Victorian Row), Acorn, Elmhurst, Oak Center, Peralta College,Stanford/Adeline and the 77th Avenue Industrial areas. The Elmhurst, Oak Centerand Stanford/Adeline projects are substantially complete. The Peralta Collegeproject has been completed. The 77th Avenue Industrial project is inactive.
The Central District Redevelopment Project, the Agency's primary project, providesfor the development and rehabilitation of commercial and residential structures forapproximately 200 blocks of Oakland's downtown area.
7
REDEVELOPMENT AGENCY OF THE CITY OF OAKLAND
Notes to Combined Financial StatementsJune 30, 1991
(1) Activities of tbe Redevelopment Aaen" of tbe Cit] of Oakland, <Cont'd,)
The Agency has also purchased from and leased back to the City certain majorproperties including the HJ. Kaiser Convention Center, George P. ScotIanMemorial-Oakland Convention Center (Scotian Convention Center) and the OaklandMuseum.
c:-.' SummaI)' of Sienificant Accounting Policies
Basis Qf Presentation - Fund Accounting
The accounts of the Agency are organized on the basis of funds or accountgroups, each of which is considered a separate accounting entity. Theoperations of each fund are accounted for with a separate set of self-balancingaccounts that comprise its assets, liabilities, fund equity, revenues, andexpenditures or expenses, as appropriate. The various funds are summarizedby type in the financial statements. Fund types and the account group used bythe Agency are described below.
Governmental Fund TWes:
<&pital PrQjects Fund - The Agency is organized into project areas whichconstitute separate accounting entities within the Agency. The operations ofeach project area are accounted for through a Capital Projects Fund. TheCapital Projects Fund accounts for financial resources to be used for theacquisition, construction or improvement of major capital facilities.
Debt ServiceFunds - The Debt Service Funds account for the accumulation ofresources for, and the payment of, general long-term obligation principal,interest and related costs.
Administrative Fund - The balances related to activities that are not directlyassociated with a specific project area as well as activities of the Agency'spooled investments are accounted for through the Administrative Fund.
ProprietaQ' Fund TWe:
Enterprise Fund - The Enterprise Fund is used to account for operations of theAcorn Mortgage Revenue Bond program where the intent of the Agency is thatthe costs of providing services to the public on an on-going basis be financedor recovered primarily through user charges.
8
REDEVELOPMENT AGENCY OF THE CITY OF OAKLAND
Notes to Combined Financial StatementsJune 30, 1991
(2) Summan of SiiDificant Accountin2 Policies. (Cont'd.)
Basis Qf PresentatiQn - Fund AccQunting (Cont'd.)
Account Group:
General Long-Term QbligatiQns Account GrQup - The General Long-TermObligations Account Group is established to account for the Agency'slong-term obligations expected to be financed by governmental funds.
Basis of AccQunting
MQdified Accrual Basis Qf Accounting:
The modified accrual basis of accounting is followed in the governmental fundtypes. Revenues are recorded when susceptible to accrual, that is, bothmeasurable and available. "Measurable" means the amount of the transactionscan be determined and "available" means collectible within the current periodor SOQn enough thereafter to be used to pay liabilities of the current periodExpenditures are recorded when the related fund liability is expected to beliquidated with expendable available resources, Principal and interest ongeneral long-term obligations are recorded as fund liabilities when due or whenamounts have been accumulated in the Debt Service Funds for payments to bemade early in the following year.
Accrual Basis of Accounting:
The accrual basis of-accounting is utilized in the proprietary fund t)'PC. Underthe accrual basis of accounting, revenues are recognized when earned andexpenses are recorded when incurred.
Measurement Focus
The accounting and reponing treatment applied to a fund is determined by itsmeasurement focus. All government funds are accounted for on a funds flowmeasurement focus. Qnly current assets and current liabilities are generally includedon their balance sheets. Governmental fund operating statements present increases(revenues and other financing sources) and decreases (expenditures and otherfinancing uses) in net current assets.
9
REDEVELOPMENT AGENCY OF THE crrr OF OAKLAND
Notes to Combined Financial StatementsJune 30, 1991
(2) Summary of Siwiticant Accountin~Policies, (Cont'd.)
Measurement Focus. (Cont'd.)
The proprietary fund is accounted for on a capital maintenance measurement focus.Assets and liabilities (whether current or non-current) associated with this activity areincluded on their balance sheets.
Investments
Investments held directly by the Agency are stated at amortized cost. Amortizationof investment premiums and discount is recorded in interest income. Securities heldby Fiscal Agents are stated at purchase cost.
Investment earnings are accrued as they are measurable and available.
Restricted Cash and Investments with Fiscal Agents
Proceeds from debt and other funds which are restricted for the payment of debt andheld by fiscal agents by agreement are classified as restricted assets,
Land Held for Resale
Property held for resale and/or lease is recorded at lower of cost or estimatedconveyance value, with an equal amount recorded as a reservation of fund balance,
Direct Financing Lease Receivables
The Agency accounts for its long-term direct financing leases (Debt Service Fund)on the modified accrual basis wherein the present value of the minimum leasepaynien1s is capitalized and reduced as payments are received. Capital leases areoffset by deferred revenue. Revenue is recognized as payments are received.
Fund Equity
Reservations of fund balances indicate those portions of fund equity which are notavailable for appropriation or expenditure or which have been legally restricted toa specific use.
10
REDEVELOPMENT AGENCY OF mE CITY OF OAKLAND
Notes to Combined Financial StatementsJune 30, 1991
(2 I Summary of Simificant Accognting Policies. (Cont'd.)
The Agency has reserved fund balance as follows:
Reserved for debt service - To comply with debt covenants, these monies are setaside and held by a fiscal agent for future payment of debt service principal andinterest.
Reserved for land held for resale - To account for assets acquired with certain fundsgranted to the Agency not available for appropriation.
Reserved for future projects - To account for assets set aside for futureredevelopment projects.
Tax Increment Revenue
Tax increment revenues are recognized when measurable and available from localtaxing authorities.
Pooled Cash and Investments
Advances are made to a common cash and investment pool maintained by theAgency to pool assets for investment purposes. Income on pooled assets is allocatedto the individual funds based on the fund's average daily balance in relation to totalpooled assets.
Budgetarv Data
The Agency operates on a project basis. Annual budgetary data is not presented asit would not provide a meaningful comparison to actual revenues and expenditures.
Total (Memorandum Only) Columns on Combined Statements
Total columns on the combined statements are presented to aggregate financial data.Data in these columns does not present financial position or results of operations inconformity with .generally accepted accounting principles, nor is such datacomparable to a consolidation. Eliminations of interfund activity have not beenmade between fund types.
11
REDEVEWPMENf AGENCY OF THE CI1Y OF OAKLAND
Notes to Combined Financial StatementsJune 30, 1991
(3-' Transactions with the CUy or Oakland
The Agency and the City are closely related but are separate legal entities. The CityCouncil members serve as the governing board for the Agency. The Agency does nothave any employees nor does it have facilities separate from the City. A substantialportion of the Agency's expenditures represents reimbursement to the City.
The City provides administrative services and materials related to the variousprojects, as well as advances and loans. For certain projects, as described below, theAgency has entered into repayment agreements to reimburse the City for all amountsadvanced for those projects. .
At June 30, 1991, the following amounts were due from or to the Oty:
Direct Financing Lease Receivables • City of Oakland:
Oakland Museum direct financing lease receivablein semiannual installments ranging from $2,794,632to $4,037,625 through March 15,2012, with interestimputed at 8.04%
City Hall West direct financing lease receivable insemiannual installments of $194,000 through October31, 2010, with interest imputed at 8.20%
Due from City of Oakland:
Reimbursements to the City for various redevelopmentloans made by the City in connection with the CentralCentral District Urban Renewal Project. The City willreimburse the Agency as amounts are collected on theunderlying loans.
Various Agency advances to the City currently receivable.
Due to City of Oakland:
Various City advances on Agency projects currentlypayable.
12
Amount
$35,310,000
3.960J)OO
$12,309,924
796.238
$13,106,1~
REDEVELOPMENT AGENCY OF TIlE CITY OF OAKL~"iD
Notes to Comblced Financial StatementsJune 30, 1991
(3) Transactions with the Cih of Oakland (Cont'd.)
A summary of future minimum lease payments from the above-mentioned directfinancing lease receivables follows:
Year endin~ June 30
19921993199419951996
Thereafter
City Hall OaklandWest Museum TOtal
s388,000 s 2,988,432 S 3.376.432388,000 3,246,872 3,634,87i388,000 3,244,682 3,632,682388,000 3,257,852 3,645,852388,000 3,261,132 3,649,132
5.626.000 60.506.437 66.132.437
Total future minimumlease paymentsreceivable 7,566,000
Less amounts representinginterest (3.606,000)
Present value of futureminimum lease payments
receivable $3.960,000
(4) Cash and Investments
76,505,407
(41.195,407)
S35310.QQ5J
84,071,407
(44,801.407)
The Agency maintains a common cash and investment pool for use by all funds. Eachfund's portion of this pool is classified in the combined balance sheet as equity inpooled assets. Additionally, cash and investments in the Debt Service and EnterpriseFunds are separately held by the Agency's fiscal agents.
Agency investments are categorized by type to give an indication of the level ofcredit risk assumed at year-end. Category 1 includes investments that are insured orregistered or for which the securities are held by the Agency or its agent in theAgency's name. Category 2 includes uninsured and unregistered investments forwhich the securities are held by the Agency's custodian in the Agency's name.
13
REDEVELOPMENT AGENCY OF THE CITY OF OAKLAND
Notes to Combined Financial StatementsJune 30, 1991
t4, Cash and Investments (CQnt'd.>
At June 30, 1991, the carrying value, market value and category of credit risk of theAgency's cash and investments are as follows:
Cash
Restricted cash and investmentswith fiscal agents:
CashCertificates of depositU.S. Treasury securitiesU.S. government agency securitiesGovernment money market fund
Pooled cash and investments:Certificates of depositU.S. Treasury securitiesU.S. government agency securitiesPurchase agreementsMunicipal SecuritiesCommercial paperBankers' acceptances
NetCarrying
Value
$ l.7IQ.m
$ 18,7698,780
101,320,205378,837
23.256,148
$124.982,739'
s 200,0004,932,020
27,092,6352,519,4911,794,2469,055,911
27,145,119
$72.739,422
MarketValue
$ 1.110.172
s 18,7698,780
99,929,617382,538
23.256,148
$123595.852
s 200,0004,874,195
27,382,3232,519,4911,785,0009,019,473
27.145,119
$72.925,601
RiskCate~oO'
122
1222
22
California Government Code requires collateral for demand deposits and certificatesof deposit at 110% of all deposits not covered by federal deposit insurance. Sincethe Agency uses only authorized public depositories, all funds deposited withfinancial institutions are fully insured or collateralized.California statutes authorize Agency officials to invest pooled funds in United Statesbonds and obligations, guaranteed United States agency issues, bank certificates ofdeposit, bankers' acceptances, repurchase agreements and prime commercial paperissues.For the purpose of the Statement of Cash Flows, cash equivalents consist of cash andcertificates of deposit in the amount of $10,828 and U.S,Treasury securities and U.S,Agency securities with maturities of 6 months or less of $874,585.
14
REDEVELOPMENT AGENCY OF THE CITY OF OAKLAND
Notes to Cemblned Financial StatementsJune 30, 1991
(5) Notes Receivable
Notes receivable consisted of the following at June 30, 1991:
Amount
Acorn Project Mortgage Loans
Note receivable related to the sale ofthe HJ. Kaiser Convention Center
Note receivable related to the sale ofthe G.P. Scotlan Memorial Convention Center
Other Agency Redevelopment ProjectConstruction and Rehabilitation Loans
15
$ 8,462,538
43,518,102
38,002,120
22.468.264
$112.451,024
REDEVELOPMENT AGENCY OF THE CITY OF OAKLAND
Notes to Combined Financial StatementsJune 30, 1991
(51 Notes Receivable (Cont'd.)
Acorn Project Mortgage Loan
Pursuant to a building loan agreement dated May 30, 1980 and amended April 23,1981 the Agency has agreed to provide a developer of property within the AcornRedevelopment Project up to $9,319,200 in FHA-insured mortgage loans from theproceeds of Agency Mortgage Revenue Bond issues (see note 7). The fundsadvanced to the developer are secured by a deed of trust on the property beingdeveloped and are repayable in monthly installments of 583,256 including interest at10.125% per annum with the remaining balance due on October 1,2010.
HJ. Kaiser Convention Center
In connection with the purchase and sale of the HJ. Kaiser Convention Center (seenote 7), the Agency has an installment sale agreement with Associates LimitedPartnership (Oakter). Under the terms of the agreement, Oakter agreed to pay theAgency $37,196,298 for the Convention Center. Oakter paid $1,204,849 in cash withthe $35,991,449 balance payable in sixty semiannual principal and interestinstallments ranging from $2,169,656 to $2,534,656. Interest not covered by thesemiannual payments has been deferred and added to the outstanding notereceivable balance. Principal reductions are scheduled to begin on April 1, 1995.This installment sale agreement has an effective interest rate of 9.97% per annumand is secured by a deed of trust and the Partnership's rights in its lease agreementwith the City.
G.P. Scotian Memorial Convention Center
In connection with the purchase and sale of the Scotian Convention Center (see note7), the Agency has an installment sale agreement with the OCCEN CorporationLimited Partnership (OCCEN). Under the term- of the agreement, OCCEN agreedto pay the Agency 539,410,926 for the Convention Center. OCCEN paid 51,410,926in cash and the $38,000,000 balance including deferred interest of 51,201 is payablein sixty-one semiannual installments which commenced on September 1, 1984.Payments range from $1,947,500 to $2,252,876 with principal reductions beginning onMarch 1, 1995. This installment sale agreement has an effective interest rate of10.25% per annum and IS secured by a deed of trust and the Partnership's rights inits lease agreement with the City.
16
REDEVEWPMENT AGENCY OF THE CITY OF OAKLAND
Notes to Combined Financial StatementsJune 30, 1991
m Notes Receivable (Coot'd.)
Project Construction and Rehabilitation Loans
The Agency has made advances to developers of various other Agencyredevelopment projects. These advances are evidenced by a note or loan receivableas follows:
East Bay Asian Local Development Company, bearing interestat 6%, through September 1, 1989 and zero interest thereafter, principal and interest due March 2, 1992 or earlierupon the receip.t of Department of Housing and UrbanDevelopment Grant Funds from the City.
Greater Emrnanual Housing Development Corporation, bearinginterest at 9%, interest payable monthly, principal andinterest due December 29, 1992 or earlier under certainprovisions of the note.
Cahon, Inc., bearing interest at 9%, principal and interestdue December 1, 1991 or earlier under certain provisionsof the note.
Preservation Venture, bearing interest at 1/2% over the Bankof America reference rate, principal and interest dueAugust 31, 1993.
Mar Associates, bearing interest at 9q>(, principal and interestdue January 10, 1991. (Due date in process of beingextended).
San Antonio Terrace Associates, bearing 9%, interest atprincipal and interest due December 31, 1991 or earlier undercertain provisions of the note.
Touraine Partners bearing interest at 6%, principal and interestdue September 22, 1991.
Oaks Associates, bearing interest at 6%, principal and interest dueMay 2, 1991. (Due date in process of being extended).
17
S 339,349
565,000
1,100,000
4,577,594
5,070,595
631,009
1.333,846
566,031
REDEVELOPMENT AGENCY OF THE CITY OF OAKLA.'iD
Notes to Combined Financial StatementsJune JO, 1991
(~) Notes Receivable (Cont'd.)
Slim Jenkins Court Associates, bearing interest at 9%, principaland interest due March 29, 1991. (Due date in process ofbeing extended).
Pacific Renaissance Associates II , bearing interest at 10%,principal and interest due July 30, 2015.
Other notes receivable
18
943,774
7,000,000
)41.066
S22.4§8.264
REDEVELOPMENT AGENCY OF TIlE CI1Y OF OAKLA.1\\D
Notes to Combined Financial StatementsJune 30, 1991
(6) Property Held for Rt!sale
Property held for resale at June 30, 1991 consisted of the following:
ChinatownCity CenterHousewives MarketAcorn Plaza Shopping CenterOak Center
(i) LoDl~·Term Obligations
General Long-Term Obligations
$ 2,100,0003,335,9881,610,9632,105,000
99,172
$9,251,123
The following is a summary of changes in the General Long-Term ObligationsAccount Group for the year ended June 30, 1991:
RetirementsBalance and Balance
July 1. 1990 Additions Decreases June 30, 1991
Certificates ofparticipation s 116,810,000 s 116,810.000
Tax allocationbondspayable 183,224,273 3,515,000 179,709,273
Lease revenuerefunding bonds 3,960,000 3.960,000
Advances from Cityof Oakland 8,883,744 485.546 315,183 9,054,107
$312,878,017 $485.546 $3,830,183 $309.533,380
19
REDEVELOPMENT AGENCY OF THE CI1Y OF OAKLAND
Notes to Combined Financial StatementsJune 30, 1991
n Long-Term Obligations (Cont'd.)
General Loni-Term Obliiations (Cont'd.)
Long-term obligations consist of the following:
Certificates of Panicipation:HJ. Kaiser Convention CenterHJ. Kaiser Convention CenterG.P. ScotIan MemorialOakland Museum 1987 Series AOakland Museum 1987 Series AOakland Museum 1987 Series A
Maturity
200220142014
1992-200220072012
Interest~
9.875%10.00%10.25%
6.200/0-7.85%8.10%
8.125%
Balance atJune 30. 1991
S 8.550.00034.950,00038.000,0009,850.000
10.115,00015345.000
116,810,000
Tat Allocation Bonds:Central District RefundingSeries 1986:
Serial bondsTerm bonds
AcornRefunding 1988:
Serial bondsTerm bonds
Central DistrictSeries 1989:
Serial bondsCapital Appreciation BondsTerm Bonds
1991-2000 5.250/0-7.5%2001-2014 7.5%
1993-2000 6.30-7.00%2007 7.40%
1993-2000 5.750/0-6.55%2001-2009 6.60/0-6.65%2010-2019 7.125%
19,560.00066,375,00085,935,000
1,300,0002.075.0003.375,000
26,900.00011.899.27351,600,00090.399,273
Lease Revenue Refunding Bonds 1999-2010 5.20%-7.375%
Advances from the City of Oakland
Total General Long-Term Obligations20
179,709,273
3,960.000
9.054.107
s399,533,380
REDEVELOPMENT AGENCY OF THE CITY OF OAKLA.1\D
Notes to Combined Financial StatementsJune 30, 1991
(1) Lon2-Term Obli2ations, (Cont'd.)
H.I. Kaiser Convention Center
Concurrently with the issuance of the certificates dated September 1, 1982, theAgency purchased the HJ. Kaiser Convention Center from the City and sold thefacility to a partnership which then leased the facility back to the City. Thecertificates are special limited obligations of the Agency payable solely frompayments made to the Agency by the partnership under the terms of an installmentsale agreement between the Agency and the partnership (see note 5).
The Certificates of Participation have mandatory sinking fund requirementscommencing April 1, 1995 and are subject to prior redemption,
George F. ScotIan Memorial Convention Center
Concurrently with the issuance of the certificates dated December 1, 1983, theAgency purchased the Scotian Convention Center from the City and sold the facilityto a partnership which then leased the facility back to the City. The certificates arespecial limited obligations to the Agency payable solely from payments made to theAgency by the partnership under the terms of an installment sale agreement betweenthe Agency and the partnership (see note 5).
The Certificates of Participation have mandatory sinking fund requirementscommencing April 1, 1995 and are subject to prior redemption.
Oakland Museum
Concurrently with the issuance of the certificates dated September 1, 1987 theAgency purchased the Oakland Museum from a partnership and then leased thefacility to the City. The certificates are special limited obligations to the Agencypayable solely from payments made to the Agency by the City under the terms of therelated Master Lease Agreement (see note 3).
The term Certificates of Participation mature in 2007 and 2012 and have mandatorysinking fund requirements beginning in April I, 2003 and are subject to priorredemption.
Tax Allocation Bonds
In fiscal year 1987 the Central District Redevelopment Project Tax AllocationRefunding Bonds, Series 1986 were used to defease the Central DistrictRedevelopment Project Tax Allocation Bonds, Series A and Series B.
21
REDEVELOPMENT AGENCY OF THE CITY OF OAKLA."D
Notes to Combined Financial StatementsJune 30, 1991
til Long-Term Obligations, (Cont'd,)
Tax Allocation Bonds. (Cont'd.)
The outstanding balance at June 30, 1991 of the defeased bonds was $63,915,000.The Central District Redevelopment Project Tax Allocation Refunding Bonds arepayable from and secured by a pledge of incremental property taxes resulting fromthe increase in assessed valuations within the Central District RedevelopmentProjectsubsequent to the adoption of the related redevelopment plan. The Agency must setaside from incremental tax revenue received from the Central District an amountequal to 125% of the annual debt service requirement for the ensuing fiscal year.Such amounts are held by the fiscal agent.
The term bonds are subject to mandatory redemption requirements beginningFebruary 1, 2001.
The Acorn Redevelopment Project 1988 Tax Allocation Refunding Bonds were usedto advance refund $2,895,000 of outstanding Acorn Redevelopment Project TaxAllocation Refunding Bonds (prior bonds) with an average coupon rate of 11.84%.As a result, the prior bonds are considered to be defeased and the liability of theprior bonds has been removed from the general long-term obligations account group.
The Acorn Redevelopment Project 1988 Tax Allocation Refunding Bonds arepayable from and secured by a pledge of incremental property taxes allocated to theAgency resulting from the increased in assessed valuation of properties within theAcorn Redevelopment Project.
Bonds maturing in 2007 are subject to mandatory sinking fund requirementscommencing May 1, 2001 and are subject to prior redemption.
22
REDEVELOPMENT AGENCY OF THE CITY OF OAKlAl'I;"D
Notes to Combined Financial StatementsJune 30, 1991
(i) Long-Term Obligations, (Cont1d,)
Tax Allocation Bonds. (Cont'd.)
On August 1,1989, the Central District Redevelopment Project Tax Allocation Bond,Series 1989A ('Tax Allocation Bond"), was issued by the Agency. The Agency willuse the net proceeds of the Tax Allocation Bond to finance projects and relatedimprovements in the Central District Redevelopment Project Area. The TaxAllocation Bond is a limited obligation of the Agency and is payable from andsecured by a pledge of a portion of tax revenues assessed on property within theCentral District Redevelopment Project Area, allocable to the Agency pursuant toRedevelopment Law.
The lien created by the pledge of the tax revenues is subordinate to a lien on taxrevenues in favor of the Agency's Central District Redevelopment Project TaxAllocation Refunding Bonds, Series 1986. The Agency may only incur additionalindebtedness payable from subordinated tax revenues on a parity with the TaxAllocation Bond when set subordinated tax revenues received by the Agency in theprior year equals or exceeds 120% of maximum annual debt service, excluding debtservice on the Series 1986 bonds.
The Term Bonds are subject to optional redemption in whole or in part on anyinterest payment date, in such amounts as directed by the Agency. The Term Bondsare, also, subject to mandatory sinking fund redemption in whole, or in part by lot,on September 1 in each year commencing September 1, 2010.
Lease Revenue Refunding Bonds Payable
In 1988, the Agency defeased the 1980 City Hall West Lease Revenue and RefundingBonds by placing the proceeds of the 1988City Hall West Lease Revenue RefundingBonds in an irrevocable trust to provide for all future debt service payments on thedefeased bonds. Accordingly the trust account assets and the liability for thedefeased bonds were not included in the Agency's financial statements. During thisyear these bonds were retired.
The 1988 Lease Revenue Refunding Bonds are special limited obligations of theAgency payable solely from payments made to the Agency by the City under theterms of the related City Hall West Lease Agreement (see note 3).
23
REDEVELOPMENT AGENCY OF THE CITY OF OAKLA.'1iD
Notes to Combined Financial StatementsJune 30, 1991
(7) LoD2-Tenn Obli2ations, (Cont'd.)
Lease Revenue Refunding Bonds Payable (Cont'd.)
On October 17, 1989, the City Hall West building which secures payment on theLease Revenue Refunding Bonds, suffered significant damage in the Loma PrietaEarthquake. The City maintained earthquake and business interruption insuranceon the building and, during 1991, the Agency received $3,300,000 (in addition to the$5,000,000 received in 1990) in proceeds from the insurance policies. These proceedshave been reported as other financing sources in the financial statements.
Since the 1988 Refunding Bonds continue to remain outstanding .and since theAgency meets its Debt Service requirements with lease revenues received from theCity, the Agency has two legal options it may pursue with regards to the insuranceproceeds. The Agency may either (a) repair, replace, or reconstruct City Hall Westwith such insurance proceeds, or (b) cause such insurance proceeds to be used forthe redemption of all outstanding bonds at a redemption price of 100% of theprincipal amount. plus accrued interest.
The City has hired a consultant to do a comprehensive study of City office spaceneeds and until a decision is made as to whether the City Hall West site is apreferred site for a new City office building,the Agency has not chosen either optionstated above. In the interim, the City has agreed to make lease payments on CityHall West so that the Agency can continue to meet the Debt Service requirementson the outstanding bonds.
Advances from City to the Redevelopment Agency
The City has made various advances to the Agency for redevelopment projects. Theadvances are payable principally from future tax increment revenues. Approximately$8,000,000 of the advances bear interest at 6% per annum. The remaining advancesare non-interest bearing.
Defeasance of Vanous Properties Debt
In 1985, the City sold buildings and improvements of City Hall and VariousProperties to the Agency. The City concurrently leased back the Properties in a saleleaseback transaction.
The Agency issued 1985 Certificates of Participation totaling $221.540,000 with anaverage yield of 8.95% in order to finance the acquisition of the Properties.
24
REDEVELOPMENT AGENCY OF THE CITY OF OAKLAND
Notes to Combined Financial StatementsJune 30, 1991
I;') Lone-Term Obli2ations. (Cont'd.)
Defeasance Qf VariQus PrQperties Debt CCQnt'd.)
In 1988, Special Revenue Refunding Bonds were sold by tbe City with an averageyield of 7.35%. The proceeds were used to repay the City'S capital lease obligationfor City Hall and Various Properties to the Agency and provide sufficient funds todefease the 1985 Certificates. The outstanding balance at June 30, 1991 of thedefeased certificates amount to $ 193,490,000.
Enterprise Fund Oblig:a1iQns
Enterprise fund obligations at June 30, 1991 are as follows:
198Q.AcQrn Mortgage Revenue Bonds1981·Acorn Mortgage Revenue Bonds
Maturity
20112001
Interest~
8.875%11.80%
Balance atJune 30.1991
S 6,220,0002.675.000
s U95,()QQ
The Acorn Mortgage Revenue Bonds are payable from and secured by a pledge ofFHA insured mortgage loans issued from the related bond proceeds to the owner ofAcorn I housing in the Acorn Redevelopment Project Area. (See note 9)
Bond Indentures
There are a number of limitations and restrictions contained in the various bondindentures. The Agency believes it is in compliance with all significant limitationsand restrictions.
25
REDEVELOPMEl''T AGENCY OF THE CITY OF OAKlAND
Notes to Combined Financial StatementsJune 30, 1991
m Long-Term Obligations. <Cont'd.)
Annual Future Payments
The following table presents the Agency's aggregate annual amount of futurepayments required to amortize the outstanding certificates ofpanicipation bonds, andlong-term liabilities to the City of Oakland as of June 30, 1991.
GeneralYear ending Enterprise Long-Term
June 30 B!m1 Obligations I21al
1992 $1,027.676 $ 27.058,256 S 28.085,9321993 1,027,306 27,439,554 28,466,8601994 1,025.604 27.526.642 28.552,2461995 1,032,426 28,197,639 29,230,0651996 1,031,735 28,891.579 29,923,314Thereafter 1?,432,277 560,948.122 576.,380,399
Amounts withunspecified paymentdates (advances fromCity of Oakland) 9,054,107 9,054,107
Totals 20.577,024 709,115,899 729,692,923
Less amountsrepresentinginterest (11.682,024) (399,582,519) (411.264,543)
Liability atJune 30, 1991 $ 8.895'()OO S 309533.380 S ll§.428,J.80
26
REDEVELOPMENT AGENCY OF THE CI1Y OF OAKLA.1IliD
Notes to Combined Financial StatementsJune 30, 1991
tS} Commitments and Contin&encies
As of June 30. 1991. the Agency has entered into contractual commitments ofapproximately $826.000 for materials and services relating to various projects. Thesecommitments and future costs will be funded by currently available funds, taxincrement reve-nue and other sources.
The Agency is involved in various claims and litigation arising in the ordinary courseof its activities. In the opinion of the Agency's in-house counsel, the City Attorney'sOffice for the City of Oakland, none of these claims are expected to have asignificant impact on the financial condition of the Agency or its operations.
In connection with the sale of land in the Central District project, the Agencyentered into an agreement to place $1,000.000 of the sales proceeds in escrowpending the removal of hazard substances and contamination. The developer filedclaims amounting to $2,700.000 which were rejected by the Agency. In accordancewith the agreement, the Agency filed for arbitration with the American ArbitrationAssociation, and as a result has paid $184,439 in the fiscal year. On October 1,1991the Agency negotiated an agreement in principal to pay an additional amount up to$1,300.000 in settlement of the claim which is pending ratification by the partiesinvolved.
At June 30, 1991, the Agency was committed to fund $6,096,000 in loans and hadissued $6,442.000 in repayment guarantees and letters of credit in connection withseveral low and moderate income housing projects. These commitments were madeto facilitate the construction of low and moderate income housinz within the City of- .Oakland.
27
REDEVELOPMENT AGENCY OF THE CI1Y OF OAKLA."D
Notes to Combined Financial StatementsJune 30, 1991
(9) Subsequent Events
On July 9, 1991 the Agency sold the Acorn Shopping Center for $1,910,000. As aresult the U.S. Economic Development Administration (EDA), which provided a$1,234,000 grant to construct the Center, has claimed that S6OO.122 of the salesprecedes, less a pro rata deduction for customary expenses of sale, should be paidto them. The Agency is in negotiation with EDA and expects that no payment willbe made. Because of this claim, the Agency has agreed to indemnify the TitleCompany up to $1,400,000. This amount of the sales proceeds have been set asideuntil the EDA matter is resolved.
On August 25, 1991 the Department of Housing and Urban Development (HUD)took control of the Acorn I housing. Effective August 1, 1991, HUD stopped makingrent subsidy payments to the owner to force long-deferred maintenance and repairs.As a result, the owner is in default on the mortgage loan and foreclosure is inprocess. The Acorn Mortgage Revenue Bonds, which are payable from mortgageloan payments, are in default and willbe retired from the mortgage insurance in thenext few months. The Agency's liability on the bonds is limited to the revenues andother assets pledged under the bond indenture and held by the Trustee.
28
REDEVELOPMENT AGENCY OF THE CI1Y OF OAK.LAXD
Combining Balance Sheet - Capital Project Funds by Action AreaJune 30, 1991
Central Other~ Acorn District Protects Total
Cash 51,118,699 s 1,307,198 5 (7,186) 5 2,418,711Restricted cash and investments with
fiscal agent 75,CJ73.)frl 75,073,387Equity in pooled cash and investments 2,264,221 53,744,854 (1.s98,~) 54,410,429Due from other Redevelopment Agency funds 730,000 730,000Due frem City of Oakland 10,489,183 1,766,979 12,256,162Due ircm U.s. General Services Administration 292,806 292,806Accounts receivable (net of $200,000 allowance
for doubtful accounts) 119,691 2,282,053 606,936 3,008,680NOles receivable 13,451,983 9,016~ 22,468,263Accrue': interest receivable 99,465 1,046,873 1,133,269 2,279,607Property held for resale 2105.QQQ 5.435.988 1.710.135 9251.123
Total assets 55.707,076 $163.854325 $12.627767 $182.189.168
Liabilities
Due to City of Oakland 5 13,633 s 1,388,007 5 430,687 5 1,832,327Deferred revenue 22,865,782 1,328,m 24,194,576Refund:lble deposits 8,880 478,227 530 487,637Accrue': liabilities 61.971 837·020 -- 898.991
Total liabilities 84,484 25,569,036 1,760,011 27,413,531
Fund Balances
Reserved for Property held for resale 2,105,000 5,435,988 1,710,135 9,251,123Unreserved fund balances 3517.592 132.849.301 9,157.621 145524514
Total fund balance 5622592 138285289 10867756 154 775.637
Total liabilities and fund balances 55.707.076 5163:8543 25 512627,767 $182189.168
29
REDEVELOPMEl\1'f AGENCY OF THE CITY OF OAKLA.:.'iD
Combining Statement of Revenues, Expenditures and Changes in Fund Balances Capital Project Funds by Action Area
Year ended June 30, 1991
Central Other
&2m District PrQjegs
Revenues;Tax increment 5844,471 $24,281,199 $25,125,670Federal grants-in-aid W~ 442,587Interest on restricted cash and investments
with fiscal agents 6,475,130 6,475,130Interest on pooled cash and investments 186,683 4,135,110 (139.519) .4,182,264Interest on notes receivable 491,168 835,030 1,326,198SaIe of real property 1,467,751 1,467,751Rents and reimbursements 268,304 551,635 819,939Other 4,095 1,267.286 839,483 211lS6i
Total revenues 1,303,553 38,669,979 1,977,571 41,951,103
Expenditures:Operation and management of acquired property 127,792 400,173 3,413 531,378Site clearance and toxics remediation 6,883,802 6,883,802PrQject improvements 16,750,094 4,275,255 21,025,349General and administrative 111,729 8,118,976 1.,451,263 9,681,968Cost of property sold 1,470,000 1,470,000Other 1.644.340 1.644.340
Total expenditures 239521 35.267.385 5,729.931 41236.837
Excess (deficiency) of revenuesover expenditures 1,064,032 3,402,594 (3,752,360) 714,266
Other financing sources (uses):Operating transfers in 71,324 6,512,801 5.894.538 12,478,663Operating transfers out (1,486,698) (37,300,216) (38,786,914)Proceeds from issuance of bonds 1.(J()() 000 8,000·000 9000·000
Total other financing (uses) sources ( 415374) ( 22787.415) 5894"38 (17 308 251)
Excess (deficiency) of revenuesand other financing sourcesover (under) expenditures andother financing uses 648,658 (19,384,821) 2,142,178 (16,593,985)
Fund balances at beginning of year 4.973934 157.670,113 8,725.575 171.369.622
Fund balances at end of year $5,622592 $138.285,292 $19 867,753 $154.775,637
30
REDEVELOPMENT AGENCY OF THE crrr OF OAKLAl,D
Schedule of Capital Project Expenditures - Central DistrictYear ended June 30, 1991
City Center Chinatown Other Total
Expenditures:Operation and management of acquired property s 153 s 88,214 s 311,806 $ 400,173Site clearance and toxies remediation 5,904,046 979,756 6,883,802Project improvements 1,904,032 10,154,276 4.691.786 16,750,094General and administrative 971,576 787,8fJ7 6,359,533 8,118,976Cost of property sold 1.470.000 1,470,000Other 1.547 272 1.642.521 1.644.340
Total expenditures $8.781354 $12,010.385 $14,475.646 $35,267.385
31
REDEVELOPMEl\'T AGENCY OF TIlE CITY OF OAKL\..,"D
Combining Balance Sheet - Debt Service FundsJune 30, 1991
Assets
TaxAllocation
IktU
City-AgencyLease
Financing
Restricted cash and investmentswith fiscal agent
Equity in pooledcash and investments
Direct financing leasereceivables • City of Oakland
Accounts receivableNotes to receivable
Total assets
Liabilities
Accrued debt serviceDeferred revenueOther liabilities
Total liabilities
Fund balances - reservedfor debt service
$35,806,157 $13,217,782 S49,023,939
803,951 803,951
39,270,000 39,270,00062,315 62,315
81.520.223 81.520.223
$36,672,~ $1M..QQ.§,OQ5 S170,68Q.4~
$ 4,511,601 S 4,511,601$120,919,556 120,919,556
6,006 6,006
4,511,601 120,925,56~ 125,437,163
32.160,822 13,082,443- 45.243.265
Total liabilities and fundbalance $36.672,423
32
$134.008.005 S170,680,428
REDEVELOPMENT AGENCY OF THE CITY OF OAKLA.~D
Combining Statement of Revenues, Expenditures andChanges in Fund Balances
Debt Service FundsJune 30, 1991
Revenues:Tax incrementInterest on restricted cash andinvestments with fiscal agentInterest on pooled cash andand investmentsInterest on notes receivableInterest on direct financing
lease receivables - City of Oakland
Total revenues
TaxAllocation
Debt
s 672,227
2,619,151
54,737
3,346,115
City-AgencyLease
Financing
S 672,227
s 901,405 3,520,556
54,7378,137,377 8,137,377
2.797,877 2,797,877
11,836,659 15,182,774
Expenditures:Debt Service:Retirement of long-term obligationsInterestOther
Total expenditures
Excess (Deficiency) of revenuesover expenditures
Other financing sources (uses):Operating transfer in (out) - netProceeds from insurance settlement
Total other financing uses
Excess of revenues and otherfinancing sources overexpenditures and otherfinancing usesexpenditures and otherfinancing uses
Fund balances at beginning of year
Fund balances at end of year
12,515,00012,401,703
24,916,703
(21,570,588)
26,801,773
26,801.773
5,231,185
26,929,637
$32160,822
33
11,304,31814,830
11,319,148
517,511
(142,724)3.300,000
3,157,276
3,674,787
9,407,656
SI3,082,44J
12,515,00023,706,021
14,83036,235,851
(21,053,077)
26,659,0493,300,000
29,959,049
8,905,972
36.337,293
S4524J265
REDEVELO'-MENT AGENCV OF THE CITY OF OAKLAND
Combining Balance Sheet - City-Agency Lease Flnaneing Deht Service FundsJune 30, 1991
IU~I)I~VI~I.OltMI~N1· AGENCY OF TI"'~ CI'I'V or OAKIJANI)
('umhinilll~ Slah.'menl of Revenues, EXI.cmUltircs :nul ( 'lu"',~t~S
ill I,'mld Ualallccs - City-Agcncy tense FimUicing Dchl Service FlIIul~
Year ended June 30. 1991
HJ. Kaiser ScotianCity Hall Convention Convention Oakland
West Center Center MuseumRevenues:
Interest on restricted cash and investmentswith fiscal agent s498,200 $ 14,437 s 3,216 S 385,552 S 901,405
Interest on notes receivable 4,239,877 3,897,500 8,137,377Interest on direct financing lease recelvables -
City of Oakland 388.000 2.409,877 2,79Z877
Total revenues 886,200 4,254,314 3,900,716 2,795,429 11,836,659
Expenditures:I.H Debt Service:V\
Interest 275,375 4,339,313 3,895,000 2,794,631 11,304,319General and administrative -- 12329 2,500 14.829
Total expenditures 275.315 4,351.642 3,897.500 2.794.631 11.319.148
Excess (deficiency) of revenuesover (under) expenditures 610.825 (97,328) 3,216 798 517,s11
Other financing sources (uses):Operating transfers in (out) • net (142,724) (142,724)Proceeds from insurance settlement 3.300.000 3.300.000
Total other finuncing sources .,JJS7.276 --_. ..J.1ID11lElCCCS\ (deficiency) of revenues and
other financing sources overexpenditures and other financing uses 3,768,101 ( 97,328) 3,216 798 3,674,787
Fund balances at beginning of year 5.335.627 135,202 875 3.935.952 9.407.656
Fund balances at end of year S 9.103,728 S 37.874 S 4,091 S 3.936.750 $13.082.443
35
WILLIAMS. ADLEY & COMPANY8ertlfled Public Accountants
INDEPENDENT AUDITORS' REPORT ON COMPLlA.'1CE OFCALIFORNIA BEDEVELOPMEl\'T AGENCIES
To the Members of the City of OaklandRedevelopment Agency:
We have audited the combined component unit financial statements of theRedevelopment Agency of the City of Oakland (the Agency) as of and for the yearended June 30, 1991 and have issued our report thereon dated October 31, 1991.
We conducted our audit in accordance with generally accepted auditing standards.Section 33080.1(a) of the Health and Safety Code of the State of California. and theprocedures contained in the Controller of the State of California Guidelines forCompliance Audits of California Redeyelwment Agencies. Those standards require thatwe plan and perform the audit to obtain reasonable assurance about whether the unitfinancial statements are free of material misstatement.
Compliance with laws, regulations and administrative requirements applicable to theAgency, is the responsibility of the management of the Agency. As part of obtainingreasonable assurance about whether the unit financial statements are free of materialmisstatement, we performed tests of the Agency's compliance with certain provisions oflaws, regulations and administrative requirements. However, our objective was not toprovide an opinion on overall compliance with such provisions.
The results of our tests indicate that, with respect to the items tested, the Agencycomplied in all material respects, with the provisions referred to in the precedingparagraph. With respect to items not tested, nothing came to our attention that causedus to believe that the Agency had not complied, in all material respects, with thoseprovisions.
This report is intended for the information of the management and others within theAgency and officials of the State of California Controller's Office. This restriction is notintended to limit the distribution of this report, which is a matter of public record.
oJ~~ JlI~tr'&:t:'~WILLIAMS, ADLEY"'&1:0MPOctober 31, 1991
36
1330 Broadway, Suite 1825 • Oakland. CA 94612 (415) 893-8114 Fa. 893-2603
APPENDIXD
SUMMARY OF CERTAIN PROVISIONS OF THE INDENTURE
(THIS PAGE INTENTIONALLY LEFI' BLANK)
APPENDIX D
SIIIfARY OF CERTAIN PROVISIONS OF THE INDENTURE
The following is a brief summary of the provisions of the Indenture. This summary IS notintended to be comprehensive or definitive. Reference is made to the actual Indenture for thecomplete terms thereof This Appendix IS divided into two sections: the first section concernsthe general provisions of the Indenture and the second section concerns the provisions of theIndenture relating more specifically to the terms of the PARS and INFLOS and the AuctionProcedures. The I992A Bonds are referred to as the "Bonds" in this Appendix D.
SlIIWlY OF GENERAL PROVISIONS OF THE INDENTURE
DEFINITIONS
"Annual Debt Service"; ''Maximum Annual Debt Service" means, for eachBond Year, the sum of (1) the interest falling due on (A) the Bonds in suchBond Year, assuming that all Principal Installments are paid as scheduled,and (B) all Parity Obligations and Superior Bonds in such Bond Year,assuming that Parity Obligations and Superior Bonds in the nature of serialbonds are retired as scheduled and that Parity Obligations and SuperiorBonds in the nature of term bonds, are redeemed f rom a sinking accoun t asmay be scheduled, (2) the principal amount of the Bonds, Parity Obligationsand Superior Bonds in the nature of serial bonds, if any, falling due bytheir terms in such Bond Year, and (3) the minimum amount; of the Bonds,Parity Obligations and Superior Bonds in the nature of term bonds requiredto be paid or called and redeemed in such Bond Year, together wi th theredemption premiums, if any, thereon. The term ''Maximum Annual DebtService" means the largest Annual Debt Service during the period from thedate of such determination through the last maturity date of the Bonds, anyParity Obligations or any Superior Bonds. For purposes of the definitionsof "Annual Debt Service" and "Maximum Annual Debt Service," all variablerate Parity Obligations shall be assumed to bear interest at a rate ofinterest equal to the greater of (a) 110% of the average rate thereon forthe most recent Bond Year, or if there is no such prior Bond Year for suchvariable rate Parity Obligations, at a rate of interest equal to 110% of theaverage rate that would have been borne by such variable rate ParityObligations had they been outstanding during such Bond Year, as estimated byan independent financial consultant acceptable to the Trustee and (b) thelowest rate which in the written opinion of Standard & Poor's is necessaryso that the credit quality of the 1989 Agency Bond or the Bonds is notimpaired to such an extent that the rating on the 1989 Agency Bond or theBonds by Standard & Poor's, if it were so rated wi~hout any creditenhancement, would be lowered or withdrawn solely as a result of theissuance of such variable rate Parity Obligations.
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"Bond Reserve Requirement" means a sum computed by the Agency equal tothe lesser of (i) ten percent (10%) of the proceeds of the Bonds, (H) themaximum annual debt service requirements on all Bonds Outstanding in thecurrent or any future Bond Year, or (iii) 125% of the average amount of debtservice due on all Bonds Outstanding in the current or any future Bond Year,calculated under the assumption that the principal amount of the Bonds arepaid in accordance with Mandatory Sinking Fund Payments; provided that priorto the retirement of the 1989 Agency Bond, the "Bond Reserve Requirement"described above shall be calculated with respect to the combined debtservice requirement of the 1989 Agency Bond and the Bonds and reduced by theamount on deposit in the 1989A Reserve Account.
"Bond Year" means the period commencing on September 2 to and includingSeptember 1 of the following calendar year.
"Fiscal Year" means the period commencing on July 1 of each year andterminating on the next succeeding June 30, or any other twelve-month periodhereafter selected and designated as the official fiscal year period of theAgency.
"Gross Tax Revenues" means taxes (including all payments, reimbursementsand subventions, if any, specifically attributable to ad valorem taxes lostby reason of tax exemptions and tax rate limitations) eligible forallocation to the Agency pursuant to the Law as provided in theRedevelopment Plan without any reduction by reason of Article XIIIB of theConstitution of the State of California.
"Holder" or "Bondholder" whenever used herein with respect to a Bondmeans the person in whose name such Bond is registered.
"Housing Set-Aside" means amounts not exceeding 20% of Gross TaxRevenues which may be required by the Law to be set aside for certain lowand moderate income housing purposes.
"Investment Securities" means any of the following which at the time ofinvestments are legal investments under the laws of the State for the moneysproposed to be invested therein:
(1) direct obligations of the United States of America (includingobligations issued or held in book-entry form on the books of theDepartment of the Treasury of the United States of America) or those forwhich the faith and credit of the United States of America are pledgedfor the payment of principal and interest;
(2) any of the following direct or indirect obligations of thefollowing agencies of the United States of America and governmentsponsored entities: (L) direct obligations of the Export-Import Bank;(it) certificates of beneficial ownership issued by the Farmers HomeAdministration; (Hi) participation certificates issued by the GeneralServices Administration; (iv) mortgage-backed bonds, pass-through
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obligations or any evidences of indebtedness issued and guaranteed bythe Government National Mortgage Association. the Federal NationalMortgage Association. the Federal Home Loan Mortgage Corporation or theFederal Housing Administration; (v) project notes issued by the UnitedStates Department of Housing and Urban Development; and (vi) publichousing notes and bonds guaranteed by the United States of America; and
(3) registered State warrants or treasury notes or bonds of theState. including bonds payable solely out of the revenues from arevenue-producing property owned. controlled or operated by the State orby a department. board. agency or authority thereof. and bonds. notes,warrants or other evidences of indebtedness of any governmental body theinterest on which is excluded from gross income for federal income taxpurposes and for which the payment of cash or obligations described inclause (1) or (2) of this definition in an amount sufficient to pay theprincipal of. premium, if any, and interest thereon when due has beenirrevocably deposited with a trustee or other fiscal depository;provided that all such obligations shall be rated in the highest ratingcategory by one Rating Agency.
(4) interest-bearing demand or time deposits (including certificates of deposit) in federal or state chartered savings and loan associations or in federal or state banks (including the Trustee or affiliate),provided that: (i) in the case of a savings and loan association. suchdemand or time deposits shall be fully insured by the Federal Savingsand Loan Insurance Corporation, or the unsecured obligations of suchsavings and loan association shall be rated "A" or better by each RatingAgency; and (ii ) in the case of a bank, such demand or t!me depos i tsshall be fully insured by the Federal Deposit Insurance Corporation, orthe unsecured obligations of such bank (or the unsecured obligations ofthe parent bank holding company of which such bank is the lead bank)shall be rated "A" or better by each Rating Agency;
(5) commercial paper rated "P-l" or higher by Moody's and "A-I" orhigher by Standard & Poor's;
(6) obligations issued by any corporation organized and operatingwithin the United States of America having assets in excess of$500,000,000 which obligations are rated "A" or better by each RatingAgency;
(7) money market funds rated in the highest Rating Category byStandard & Poor's or Moody's or money market funds the assets of whichare invested solely in Securities described in paragraphs (1), (2) or(3) above and repurchase agreements fully secured by Securitiesdescribed in paragraphs (1). (2) or (3) above;
(8) collateralized mortgage obligations rated "A" or better byeach Rating Agency and approved by the Surety;
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(9) investment agreements with respect to funds allocable to theBonds approved by the Surety; and
(10) repurchase agreements which provide for the transfer ofsecurities from a dealer bank or securities firm (seller/borrower) to amunicipal entity (buyer/lender), and the transfer of cash from amunicipal entity to the dealer bank or securities firm with an agreementthat the dealer bank or securities firm will repay the cash plus a yieldto the municipal entity in exchange for the securities at a specifieddate.
Repurchase Agreements (nReposn) must satisfy the following criteria orbe approved by the Surety.
1. Repos must be between the !Dlmicipal entity (or its agent) or theTrustee and a dealer bank or securities firm
a. Primary dealers on the Federal Reserve reporting dealer list,or
b. Banks rated nAn or above by S&P and Moody's.
2. The written Repo contract must include the following:
a. Securities which are acceptable for transfer are:
(1) Direct U.S. governments, or
(2) Federal agencies backed by the full faith and credit ofthe U.S. government
b. The term of the repo may be up to 18 months
c. The collateral must be delivered to the municipal entity,trustee (if trustee is not supplying the collateral) or thirdparty acting as agent for the trustee (if the trustee issupplying the collateral) before/simultaneous with payment(perfection by possession of certificated securities).
d. Valuation of Collateral
(1) The securities must be valued weekly, marked-to=market atcurrent market price~ accrued interest
(a) The value of collateral must be equal to 1021 of theamount of cash transferred by the municipal entityto the dealer bank or security firm under the Repoplus accrued interest. If the value of securitiesheld as collateral slips below 1021 of the value ofthe cash transferred by municipality, thenadditional cash and/or acceptable securities must betransferred.
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2. Legal Qpinion which must be delivered tQ the municipal entity:
a. RepQ meets guidelines under state law fQr legal investment Qfpublic funds.
(11) any Qther investment apprQved in writing by the Surety.
"l.m!:" means the CQDDIlunity RedevelQpment Law of the State of Ca1ifQrnia(being Part 1 of Division 24 of the Health and Safety CQde of the State ofCalifQrnia, as amended), and all laws amendatory thereQf or supplementaltheretQ.
"LGFA" means the Local Government FinanceGovernment Finance Joint PQwers Authority) ,agency existing under the laws of the State Qf
Authority (formerly the Locala joint exercise of powers
California.
"Moody's" means Moody's Investors Service, a corporation organized andexisting under the laws of the State of Delaware, its successors and theirassigns.
''Net Subordinated Tax ReVenues" means, for each Bond Year, SubordinatedTax Revenues less that amount of Subordinated Tax Revenues attributable topayments, reimbursements and subventions, if any, specifically attributableto ad valorem taxes lost by reason of tax exemptions and tax limitations.
"1989 AgencY Bond" means the Redevelopment Agency of the City of OaklandCentral District Redevelopment Project Tax Allocation Bond, Series 1989A,initially issued in the principal amount of $92,399,272.85.
"1989 AgencY Bond Indenture" means that certain Indenture of Trust,dated as of August I, 1989, by and between the Agency and the 1989 AgencyBond Trustee relating to the 1989 Agency Bond.
"1989 LGFA Bond Indenture" means that certain Indenture of Trust, datedas of August 1, 1989, by and between Bankers Trust Company of California,National Association, as trustee and the LGFA relating to the 1989 LGFABonds.
"1989 LGFA Bond Trustee" means First Trust of California, NationalAssociation (as successor to Bankers Trust Company of California, NationalAssociation), as trustee under the 1989 LGFA Bond Indenture.
"1989 LGFA Bonds" means the Local Government Finance Authority 1989Refunding Revenue Bonds (Redevelopment Agency of the City of Oakland _Central District Redevelopment Project Subordinate Financing) initiallyissued in the prin~ipa1 amount of $92,399,272.85.
"1989A Reserve Account" means the reserve account established under the1989 Agency Bond Indenture with respect to the 1989 Agency Bond.
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"1992A Reserve ACCQwt" means the account by that name establishedpursuant to the Indenture.
"Parity Obligations" means the 1989 Agency Bond and any otherindebtedness Qr other obligations of the Agency payable on a parity with theBonds and the 1989 Agency Bond from SubQrdinated Tax Revenues whichindebtedness or other obligations are identified as Parity Obligations inthe instrument or document representing such indebtedness or otherobligations and in the resolution or ordinance of the Agency authorizing thesame.
"Projects" means the wdertaking of the Agency pursuant to theRedevelopment Plan and the Law for the redevelopment of the Project Area.
"Project Area" means the project area described in the RedevelopmentPlan.
"Rating Agency" means each of the following rating agencies which, as ofthe date of any determination wder the Indenture, then maintains a ratingon the Bonds: (a) Moody's Investors Service, Inc , , its successors andassigns; and (b) Standard & POQr's Corporation, its successors and assigns.
"Rating Category" means one of the general rating categories of eitherMoody's or S&P, without regard to any refinement or graduation of suchrating category by a numerical modifier or otherwise.
"Redevelopment Plan" means the redevelopment plan for the CentralDistrict Redevelopment Project of the Agency in Oakland, California, titled"Central District Urban Renewal Plan," adopted and approved as theRedevelopment Plan for the Project by Ordinance No. 7987, adopted by theCouncil of the City of Oakland, California on June 12, 1969, as amended,together with all further amendments thereto made in accordance with the Law.
"~" means Standard & Poor's Corporation, a corporation organized andexisting wder the laws of the State of New YQrk, its successors and assigns.
"Special Subvention Revenue" means subventions received by the Agencypursuant to Sections 16112.5 and 16112.7 of the California Government Code.
"Subordinated Tax Revenues" means, for each Bond Year beginning with theBond Year ending September 1, 1992, the Gross Tax Revenues, after (i) thedeposit of Superior Bonds Tax Revenue as required under the Superior BondsResolution has been made to the fiscal agent for the Superior Bonds,(ii) provision has been made for the amount of such taxes required to paythe Housing Set-Aside so long as such Housing Set-Aside is legally requiredto be paid prior to the payments on the Bonds or any Parity Obligations, and(iii) the deduction of Special Subvention Revenue, but such taxes shall bedeemed to be Subordinated Tax Revenues for purposes of the pledge of theIndenture and the deposit of moneys with the Trustee only up to an amormtthat is equal to (a) one hwdred fifteen percent (115%) of the Annual Debt
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Service for the Bond Year (excluding for purposes of such calculationpayments with respect to Superior Bonds but including a credit forinvestment earnings transferred to the Special Fund pursuant to theIndenture) plus (b) an amount , if any, necessary to be deposited in the1992A Reserve Accormt and the reserve account established for any ParityObligations to maintain the required balance therein during such Bond Year.
"Superior Bonds" means, at any time upon determination thereof, allbonds at such time of determination outstanding tmder the Superior BendsResolution including any bond issued exclusively for the purpose ofreftmding any outstanding Superior Bonds as permitted by the Indenture.
"Superior Bonds Resolution" means Resolution No. 86-30 of the Agency,adopted on Jtme 3, 1986, and pursuant to which the Superior Bonds are issued.
"Superior Bonds Tax Revenue" means, for each Fiscal Year beginning withthe Fiscal Year ending Jrme 30, 1987, the first taxes (inclUding allpayments, reimbursements and subventions, if any, specifically attributableto ad valorem taxes lost by reason of tax exemptions and tax ratelimitations) eligible for allocation to the Agency pursuant to the Law asprovided in the Redevelopment Plan, up to an amotmt that is equal to (i) onehtmdred twenty-five percent (125%) of the Annual Debt Service (as defined inthe Superior Bonds Resolution) for the next ensuing Fiscal Year plus (ii) anamount, if any, necessary to be deposited in the Reserve Accotmt heldpursuant to the Superior Bonds Resolution to maintain the required balancetherein during such Fiscal Year, without any reduction by reason of ArticleXIIIB of the Constitution of the State of California.
PARITY OBLIGATIONS
So long as the Bonds remain outstanding the Agency shall not issue orincur any obligations payable from Gross Tax Revenues or the Surplus Accotmtestablished pursuant to the Superior Bonds Resolution prior to the Bonds,other than refunding bonds with respect to the Superior Bonds (and anyrefunding of such reftmding bonds) which do not resul t in increased debtservice in any Bond Year (as defined in the Superior Bonds Resolution); andwithout limiting the foregoing, so long as the Bonds remain outstanding theAgency shall not issue any Additional Bonds pursuant to the Superior BondsResolution, other than such reftmding bonds. The Agency may at any timeincur or issue notes, bonds or other obligations (Lnc l.uddng reimbursementagreements or other credit facility arrangements) the payments of which arepayable on a parity with the payment by the Agency of the Bonds fromSubordinate Tax Revenues provided that there is first delivered to theTrustee a Certificate of tae Agency (upon which the Trustee may conclusivelyrely) stating that, assuming such proposed Parity Obligation had beenincurred as of the first day of the prior Bond Year, Net Subordinated TaxRevenues received by the Agency in the prior Bond Year would have equalledor exceeded one htmdred twenty percent (120%) of Maximum Annual Debt Service(excluding for purposes of this calculation payments on Superior Bonds), and
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provided further that if such Parity Obligations are variable rateobligations (either direct or indirect), (i) the Agency has obtained theprior written consent of the Surety. In addition, the Agency may issuerefunding obligations to refund Parity Obligations which do not result inincreased debt service in any Bond Year.
TAX REV.IN1IES
Pledge of SubordiDated Tax B.eveIlues; Special Fund
All the Subordinated Tax Revenues and all money in the Special Fund andin the funds or accounts so specified and provided for in the Indenture areirrevocably pledged to the punctual payment of the interest on and principalof and redemption premiums, if any, on the Bonds and all Parity Obligations,and the Subordinated Tax Revenues and such other money shall not be used forany other purpose while the Bonds or any Parity Obligations remainoutstanding except as provided in the Indenture. The Indenture states thatthe foregoing pledge constitutes a first and exclusive lien subject to theprovisions of the Indenture on the Subordinated Tax Revenues and such othermoney for the payment of the Bonds and all Parity Obligations in accordancewith the terms thereof. This pledge shall not be deemed to constitute alien on the Superior Bonds Tax Revenue, except Superior Bonds Tax Revenuereleased from the Surplus Account held under the Superior Bonds Indenture.All the Subordinated Tax Revenues, together with any interest earnedthereon, will, so long as the Bonds remain outstanding under the Indenture,be deposited when and as received by the Agency in the "Redevelopment Agencyof the City of Oakland Central District Redevelopment Project 1989A SpecialFund" (the "Special Fund").
Receipt and Deposit of SubordiDated Tax Revenues
The Agency covenants and agrees in the Indenture that all SubordinatedTax Revenues when and as received, will be received by the Agency in trustand will be immediately deposited by the Agency with the Trustee in theSpecial Fund and will be accounted for through and held in trust in theSpecial Fund, and the Agency shall have no beneficial right or interest inany of such money, except only as in the Indenture provided.
Establism.ent and Maintenance of Accounts for Use of Money in the SpecialFund
All money in the Special Fund is required to be set aside by the Trusteein the following respective special accounts within the Special Fund in thefollowing order of priority:
(a) Interest Account;
(b) Principal Account;
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(c) Reserve Account; and
(d) Surplus Account.
All money in each of such accounts will be held in trust by the Trustee andapplied as follows:
(1) Interest Account. On or before each Interest Payment Date,the Trustee shall set aside from the Special Fund and deposit in theInterest Account an amount of money which, together with any moneycontained therein, is equal to the aggregate amount of the interestbecoming due and payable on the Bonds on such Interest Payment Date (andany Parity Obligations on their relevant interest payment dates). Nodeposit need be made into the Interest Account if the amount containedtherein is at least equal to the aggregate amormt of the interestbecoming due and payable on the Bonds on such Interest Payment Date (andany Parity Obligations on their relevant interest payment dates).
(2) Principal Account. On or before September 1 of each year,commencing September 1, 1993. the Trustee shall set aside from theSpecial Frmd and deposit in the Principal Accormt an amormt of moneywhich. together with any money contained therein, is equal to theaggregate amormt of the principal becoming due and payable on the Bondsand any Parity Obligations on such Interest Payment Date by way ofmaturity or early redemption.
(3) 1992A Reserve Accormt. On or before each Interest PaymentDate the Trustee shall set aside from the Special Frmd and deposit inthe 1992A Reserve Accormt an amount necessary to bring the balancetherein up to the Bond Reserve Requirement and any amormts necessary toreimburse the Reserve Surety for a draw on the Reserve Accormt InsurancePolicy. All money in the 1992A Reserve Accormt will be used andwithdrawn by the Trustee solely for the purpose of (i) paying principal,premium, if any, and interest on the Bonds in the event no other moneysare available therefor, (11) reimbursement of the Reserve Surety fordraws on the Reserve Accormt Insurance Policy and (iii) making the finalpayment of principal on the Bonds, except that for so long as the Agencyis not in default under the Indenture, any amormt in the Reserve Accormtin excess of the Bond Reserve Requirement may, upon the written requestof the Agency, be withdrawn from the Reserve Accormt by the Trustee andtransferred to the Surplus Account. In addition, the Trustee shalldeposit any amormts required to be deposited into the 1989A ReserveAccormt or any amount necessary to maintain a reserve frmd for anyParity Obligations.
The Agency may satisfy the Bond Reserve Requirement, with the priorconsent of the Surety, by depositing a policy of insurance issued by amunicipal bond insurance company, the claims paying ability of which israted in the highest Rating Category of Moody's and S&P, or by
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depositing a letter of credit or other credit facility issued by a bankor other financial institution the obligations of which are rated in notlower than the two highest Rating Categories of Moody's and S&P, intothe 1992A Reserve Account.
(4) Surplus Account. On May 15 of each year, beginning on May IS,1993, the Trustee shall set aside and deposit in the Surplus Account allamounts held in the Special Fund in excess of the sum of (i) payments ofthe interest on and principal of the 1989 Agency Bond required to bepaid under the 1989 Indenture, and (ii) an amount equal to the principaland interest payable on the Bonds and any Parity Obligations through andincluding the Interest Payment Date next succeeding the followingSeptember I, plus (iii) the amount, if any, necessary to maintain therequired balance in the 1989A Reserve Account and the 1992A ReserveAccount (and the reserve account established for any other ParityObligations), provided that (i) if Subordinated Tax Revenues in anamount equal to at least one hundred fifteen percent (lIS%.) of AnnualDebt Service for the then current Bond Year (after credit for investmentearnings transferred or expected to be transferred to the Special Fnnd)plus an amount, if any, necessary to maintain the required balance inthe 1989A Reserve Account and the 1992A Reserve Acconnt (and the reserveaccount established for any other Parity Obligations) as of the date ofsuch determination was deposited in the Special Fund during such BondYear, and (d i ) if Subordinated Tax Revenues in an amount equal to atleast one hundred fifteen percent (lIS%.) of Annual Debt Service for thenext Bond Year (after credit for investment earnings transferred orexpected to be transferred to the Special Fund) plus an amount, if any,necessary to maintain the required balance in the 1989A Reserve Accountand the 1992A Reserve Account (and the reserve account established forany other Parity Obligations) as of the date of such determination hasbeen deposited into the Special Fund during such Bond Year (as evidencedby a certificate of the Agency), and (iii) if the Agency is not then indefault under the Indenture, then all such excess shall be transferredto the Agency for use by it for any lawful purpose and none of suchexcess shall be deposited in the Surplus Account. All money in theSurplus Account shall be used and withdrawn by the Trustee solely forthe purpose of replenishing the Interest Account or the PrincipalAccount or the 1989A Reserve Account and the 1992A Reserve Account (andthe reserve account established for any other Parity Obligations), insuch order, in the event of any deficiency at any time in any of suchaccounts, or for the purpose of paying the interest on or principal ofor redemption premiums, if any, on the Bonds (and Parity Obligations) inthe event that no other money of the Agency is lawfully availabletherefor, or for the retirement (together with other available money) ofthe Bonds or the 1989 Agency Bond in full. All moneys in the SurplusAccount on May 15 of each year in which no money is required by thisparagraph to be deposited in the Surplus Account will be withdrawn fromthe Surplus Account and transferred to the Agency for use by it for anylawful purpose.
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Deposit and InvestaeDt of Money in FUDds and AcCOUDts
All money held by the Agency or the Trustee in any of the funds oraccounts under the Indenture is required to be invested in InvestmentSecurities. The Investment Securities in which money in the Special Fund,the Interest Account, the Principal Account, the 1992A Reserve Account orthe Surplus Account is so invested are required to mature prior to the dateon which such money is estimated to be required to be paid out under theIndenture. Any interest, income or profits from the deposits or investmentsof all funds and accounts is required to be deposited in the Special Fund.The Trustee is required to value all investments in the funds or accountsheld under the Indenture at their market value not less than one time duringeach Fiscal Year or upon request of the Agency.
conrwr.rs OF TIlE AGENCY
The Agency will not mortgage or otherwise encumber, pledge or place anycharge upon any of the Subordinated Tax Revenues, except as provided in theIndenture, and will not issue any obligation or security superior to or on aparity with the Bonds payable in whole or in part from the Subordinated TaxRevenues (other than Parity Obligations).
Pa,.ent of ClaiJu
The Agency will pay and discharge any and all lawful claims for labor,materials or supplies which, if unpaid, might become a lien or charge uponthe properties owned by the Agency or upon the Subordinated Tax Revenues orany part thereof, or upon any funds in the hands of the Trustee, or whichmight impair the security of the Bonds; provided that the Agency is notrequired to make any such payments so long as the Agency in good faith shallcontest the validity of any such claims.
Books and AccOUDts; Financial and Project Statements
The Agency is required to keep proper books of record and accounts,separate from all other records and accounts of the Agency, in whichcomplete and correct entries shall be made of all transactions relating tothe Projects and the Special Fund. Such books of record and accounts shallat all times during business hours be subject to the inspection of theTrustee or of the Holders or their representatives authorized in writing.
FiDancing the Projects
The Agency will continue the financing of the Projects to be aided withthe proceeds of the 1989 Agency Bond with all practicable dispatch, and suchfinancing will be accomplished and completed in a sound, economical andexpeditious manner and in conformity with the Redevelopment Plan (including
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without limitation Section 600(c) of the Redevelopment Plan which includeslimitations with respect to tax increment and debt relating to that portionof the Project Area added to the plan boundaries after June 12, 1979) andthe Law so as to complete the Projects as soon as possible.
Taxation of :Leased Property
Whenever any property in the Projects is redeveloped by the Agencysubsequent to the date of the Indenture and thereafter is leased by theAgency to any person or persons, or whenever the Agency leases any realproperty in the Projects to any person or persons for redevelopment (exceptfor property to be used for public streets or public off-street parkingfacilities or easements or rights of way for public utilities, or othersimilar uses), the property shall be assessed and taxed in the same manneras privately-owned property (in accordance with the Law), and the lease orcontract shall provide (1) that the lessee shall pay taxes upon the assessedvalue of the entire property and not merely upon the assessed value of theleasehold interest. and (2) that if for any reason the taxes paid by thelessee on such property in any year during the term of the lease shall beless than the taxes that would have been payable upon the entire property ifthe property were assessed and taxed in the same manner as privately- ownedproperty, the lessee shall pay such difference to the Agency within thirty(30) days after the taxes for such year become payable. and in any eventprior to the delinquency date of such taxes established by law, which suchpayments shall be treated as Gross Tax Revenues and shall be deposited bythe Agency as required by the Indenture and the Superior Bonds Resolution.
Disposi~iOD of lroperty in Project Area
The Agency will not authorize the disposition of any real property inthe Project Area to anyone which will result in such property becomingexempt from taxation because of public ownership or use or otherwise (exceptfor public ownership or use contemplated by the Redevelopment Plan in effecton the date of the Indenture. or property to be used for public streets orpublic off-street parking facilities or easements or rights of way forpublic utilities. or other similar uses) if such dispositions, together withall similar prior dispositions on or subsequent to the effective date of theIndenture. shall comprise more than ten per cent (10'1) of the land area inthe Project Area. If the Agency proposes to make any such dispositionwhich. together with all similar dispositions on or subsequent to theeffective date of the Indenture. shall comprise more than ten per cent (10%)of the land area in the Project Area, it shall appoint an independentredevelopment consultant meeting the requirements of the Indenture (an"Independent Redevelopment Consultant") and direct such consultant to submita report on the effect of such proposed disposition, and will apply to theTrustee for approval of such proposed disposition. If the report concludesthat the Subordinated Tax Revenues for the then current Bond Year. adjustedto give effect to the disposition. will not be less than 115'1 of MaximumAnnual Debt Service (which for purposes of this calculation shall excludepayments on the Superior Bonds), the Trustee shall approve such proposed
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disposition. If the Consultant's Report concludes that Subordinated TaxRevenues (as adjusted) will be less than such amount, the Trustee shalldisapprove such proposed disposition unless such new owner or owners shalleither:
(l) undertake, in a wri t ing recorded in the real property recordsof the County, to pay to the Trustee or the trustee for Superior Bonds,so long as the Superior Bonds are outstanding, an amount equal to theamount that would have been received by such trustees as Gross TaxRevenues if such property were assessed and taxed in the same manner asprivately-owned non-exempt property, which payment shall be made withinthirty (30) days after taxes for each year would become payable to thetaxing agencies for non-exempt property and in any event prior to thedelinquency date of such taxes established by law; or
(2) pay to the Trustee or the trustee for Superior Bonds, so longas the Superior Bonds are outstanding, a single sum equal to the amountestimated by such trustees (who may request and rely upon a Consultant'sReport with respect to such estimate) to be receivable from taxes onsuch property from the date of such payment to the maturity date of theBonds, less a reasonable discount value;
in either of which cases the Trustee shall approve such disposition.
All such payments to the Trustee or the trustee for Superior Bonds inlieu of taxes will be treated as Gross Tax Revenues and are required to bedeposited by such trustees as required by the Indenture and the SuperiorBonds Resolution.
Aaenclment of Redevelo.,.eDt Plan
If the Agency proposes to amend the Redevelopment Plan (except for anyamendment to grant eminent domain powers to the Agency for the Projects), itis required to appoint an Independent Redevelopment Consultant and directsuch consultant to submit a Consultant's Report on the effect of suchproposed amendment, and is required to apply to the Trustee for approval ofsuch proposed amendment. If the Consultant's Report concludes that theSubordinated Tax Revenues eligible for allocation to the Agency under theLaw will not be reduced to an amount less than 115'1 of the Maximum AnnualDebt Service (which for purposes of this calculation shall exclude paymentson Superior Bonds) for the next ensuing Bond Year following such proposedamendment, the Trustee may approve such amendment. If the Consultant'sReport concludes that the Subordinated Tax Revenues eligible for allocationto the Agency under the Law will be reduced by such amount by such proposedamendment, the Trustee shall disapprove such proposed amendment.
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Tax Revenues
The Agency covenants in the Indenture to comply with all requirements ofthe Law to insure the allocation and payment to it of the Gross TaxRevenues, including without limitation the timely filing of any necessarystatements of indebtedness with appropriate officials of Alameda County, inorder to assure the prompt and timely payment of principal of and intereston the Bonds.
AMEdDMil'tt OF TIll IlOlElmJRB
The Indenture and the rights and obligations of the Agency and of theHolders of the Bonds and of the Trustee may be modified or amended from timeto time and at any time by an indenture or indentures supplemental thereto,which the Agency and the Trustee may enter into when the written consent ofthe Surety and the Holders of a majority in aggregate principal amount ofthe Bonds then Outstanding shall have been filed with the Trustee; providedthat if such modification or amendment will, by its terms, not take effectso long as any Bonds of any particular maturity remain Outstanding, theconsent of the Holders of such Bonds shall not be required and such Bondsshall not be deemed to be Outstanding for the purpose of any calculation ofBonds Outstanding. No such modification or amendment shall (1) extend thefixed maturity of any Bond, or change the method of determining the rate ofinterest thereon (other than as provided herein), or reduce the amount ofprincipal of any Bond, or extend the time of payment or reduce the amount ofany Mandatory Sinking Fund Payment provided in the Indenture for the paymentof any Bond, or reduce the rate of interest thereon, or extend the time ofpayment of interest thereon, or reduce any premium payable upon theredempt ion thereof, without the consent of the Holder of each Bond soaffected, or (2) reduce the aforesaid percentage of Bonds the consent of theHolders of which is required to effect any such modification or amendment,or permit the creation of any lien on the Subordinated Tax Revenues andother assets pledged under the Indenture prior to or on a parity with thelien created by the Indenture (except as expressly provided in theIndenture), or deprive the Holders of the Bonds of the lien created by theIndenture on such Subordinated Tax Revenues and other assets (except asexpressly provided in the Indenture), without the consent of the Holders ofall of the Bonds then Outstanding. Notwithstanding the foregoing theAppendix of the Indenture concerning Auction Procedures may be amended byseparate procedures described below under "SUMMARY OF PROVISIONS OF THEINDENTURE RELATING TO PARS AND INFLOS AND AUCTION PROCEDURES - Amendment ofAuction Procedures."
If at any time the Agency shall request the Trustee to enter into anysupplement or amendment to the Indenture, at the expense of the Agency,cause notice of the proposed execution of such supplement or amendment to bemailed by first-class mail, postage prepaid, to all Bondholders of record attheir addresses appearing on the bond registration books maintained by theTrustee. Such notice shall briefly set forth the nature of the proposed
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supplement or amendment and shall state that copies thereof are on file atthe principal corporate trust office of the Trustee for inspection by allBondholders.
Whenever, at any time within one year after the date of the mailing ofsuch notice, the Agency shall deliver to the Trustee an instrument orinstruments in writing purporting to be executed by the Holders of not lessthan a majority in aggregate principal amount of the Bonds then Outstanding,which instrument or instruments shall refer to the proposed supplement oramendment described in such notice and shall specifically consent to andapprove the execution thereof in substantially the form of the copy thereofreferred to in such notice, thereupon, but not otherwise, the Trustee mayexecute such supplement or amendment in substantially such form, withoutliability or responsibility to any Holder of any Bond, whether or not suchHolder shall have consented thereto.
If the Holders of not less than a majority in aggregate principal amountof the Bonds Outstanding at the time of the execution of such supplementalagreement shall have consented to and approved the execution thereof asherein provided, no Holder of any Bond shall have any right to object to theexecution of such supplement or amendment, or to object to any of the termsand provisions contained therein or the operation thereof or in any mannerto question the propriety of the execution thereof, or to enjoin or restrainthe Trustee or the Agency from executing the same or from taking any actionpursuant to the provisions thereof.
The Indenture and the rights and obligations of the Agency, of theTrustee and of the Holders of the Bonds may also be modified or amended fromtime to time and at any time by an indenture or indentures supplementalthere to, which the Agency and the Trus tee may enter into wi th the priorwritten consent of the Surety, but without the consent of any Bondholders,but only to the extent permitted by law and only for anyone or more of thefollowing purposes:
(1) to add to the covenants and agreements of the Agency in theIndenture other covenants and agreements thereafter to be observed, topledge or assign additional security for the Bonds (or any portionthereof), or to surrender any right or power therein reserved to orconferred upon the Agency, provided, that no such covenant, agreement,pledge, assignment or surrender shall materially adversely affect theinterests of the Holders of the Bonds;
(2) to make such provisions for the purpose of curing anyambiguity, inconsistency or omission, or of curing or correcting anydefective provision, contained in the Indenture, or in regard to mattersor questions arising under the Indenture, as the Agency may deemnecessary or desirable and not inconsistent with the Indenture, andwhich shall not materially adversely affect the interests of the Holdersof the Bonds;
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(3) to modify, amend or supplement the Indenture in such manner asto permit the qualification thereof under the Trust Indenture Act of1939, as amended, or any similar federal statute hereafter in effect,and to add such other terms, conditions and provisions as may bepermitted by said act or similar federal statute, and which shall notmaterially adversely affect the interests of the Holders of the Bonds;
(4) to provide for the issuance of coupon Bonds, if at such timefederal law shall permit the issuance of coupon Bonds; provided thatprior to such issuance the Agency shall have obtained the opinion ofnationally recognized bond counsel to the effect that such issuance willnot affect the exclusion of the interest on the Bonds from gross incomeof the Holders for purposes of federal income taxation;
(5) toexcluded fromtaxation;
preserve the status of the interest on the Bonds asgross income of the Holders for purposes of federal income
(6) to provide for Substitute Bond Insurance Policy.
The Trus tee may consul t wi th counsel, who may be counsel of or to theAgency, prior to entering into any supplemental indenture with respect to apurpose described in the foregoing paragraph, and the opinion of suchcounsel shall be full and complete authorization and protection in respectof the execution and delivery by the Trustee of any such supplementalindenture in good faith in accordance therewith.
EVENTS OF DEFAULT AND REMEDIES OF THE HOLDER
The Indenture contains the following events of default ("Events ofDefaul t"):
(a) default, after demand of the Surety for performance on theBond Insurance Policy, in the due and punctual payment of the principalor Redemption Price of any Bond when and as the same shall become dueand payable, whether at maturity as therein expressed, by proceedingsfor redemption, by declaration or otherwise;
(b) default, after demand of the Surety for performance on theBond Insurance Policy, in the due and punctual payment of anyinstallment of interest on any Bond when and as such interestinstallment shall become due and payable;
(c) default by the Agency in the observance of any of the othercovenants, agreements or conditions on its part in this Indenture or inthe Bonds contained, if such default shall have continued for a periodof sixty (60) days after written notice thereof, specifying such defaultand requiring the same to be remedied, shall have been given to theAgency by the Trustee, or to the Agency and the Trustee by the Holdersof not less than twenty-five per cent (25%) in aggregate principalamount of the Bonds at the time Outstanding;
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(d) If the Agency shall file a petition or answer seekingreorganization or arrangement under the federal bankruptcy laws or anyother applicable law of the United States of America, or if a court ofcompetent jurisdiction shall approve a petition, filed with or withoutthe consent of the Agency, seeking reorganization under the federalbankruptcy laws or any other applicable law of the United States· ofAmerica, or if, under the provisions of any other law for the relief oraid of debtors, any court of competent jurisdiction shall assume custodyor control of the Agency or of the whole or any substantial part of itsproperty.
If an Event of Default shall occur, then, and in each and every suchcase during the continuance of such Event of Default, the Trustee may, andupon the written direction of the Holders of not less than a majority inaggregate principal amount of the Bonds at the time Outstanding shall, uponnotice in writing to the Surety and the Agency, declare the principal of allof the Bonds then Outstanding, and the interest accrued thereon, to be dueand payable immediately, and upon any such declaration the same shall becomeand shall be immediately due and payable, anything in the Indenture or inthe Bonds contained to the contrary notwithstanding; provided that no suchacceleration may occur without the prior written consent of the Surety.
DEFEASANCE
The Bonds may be paid by the Agency in any of the following ways,provided that the Agency also pays or causes to be paid any other sumspayable hereunder by the Agency and related to such Bonds:
(a) by paying or causing to be paid the principal or Redemption Priceof and interest on Outstanding Bonds, as and when the same become due andpayable;
(b) by depositingmoneys or securities,Accountant delivered to
with the Trustee, in trust, at or before maturity,in the amount necessary in the opinion of an
the Trustee to payor redeem Outstanding Bonds; or
(c) by delivering to the Trustee, for cancellation by it, allOutstanding Bonds.
If the Agency shall pay all Outstanding Bonds and shall also payorcause to be paid all other sums payable hereunder by the Agency, then and inthat case, at the election of the Agency (evidenced by a Certificate of theAgency, filed with the Trustee, signifying the intention of the Agency todischarge all such indebtedness and the Indenture), and notwithstanding thatany Bonds shall not have been surrendered for payment, the Indenture and thepledge of Subordinate Tax Revenues and other assets made under the Indentureand all covenants, agreements and other obligations of the Agency under theIndenture shall cease, terminate, become void and be completely dischargedand satisfied (except with respect to the transfer or exchange of Bondsprovided for herein or therein and the mandatory sinking fund redemption ofthe Bonds).
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Upon the deposit with the Trustee. in trust. at or before maturity. ofmoney or securities in the amount necessary to payor redeem any OutstandingBond (whether upon or prior to its maturity or the redemption date of suchBond). provided that. if such Bond is to be redeemed prior to maturity.notice of such redemption shall have been given as provided in the Indentureor provision satisfactory to the Trustee shall have been made for the givingof such notice. the Indenture may be released and discharged in accordancewith the provisions thereof but the liability of the Agency in respect ofsuch Bonds shall continue. provided that thereafter the Holder thereof shallbe entitled only to payment out of such money or securities deposited withthe Trustee as aforesaid for their payment.
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stlMARY OF PROVISIONS OF TIlE IImENTOIlERELATING TO PAIS AIm INFLOS .AIm AUCTION PB.OCED1JIlES
The Indenture provides that the rights granted to the Owners of the PARSand INFLOS therein relating to the Auction Procedures, mandatory tenderprov1s10ns and certain other provisions may be exercised by owners ofbeneficial interests in such securities. To that extent, each reference inthis Appendix D to the purchase, sale or holding of PARS and INFLOS shallrefer to beneficial interests in PARS and INFLOS, unless the context clearlyrequires otherwise.
DEFINITIONS
"Auction" means each Periodic implementation of the Auction Procedures.
"Auction A&ent" means the auction agent acting pursuant to theIndenture, initially The Bank of New York, a New York banking corporation.
"Auction A&ent Fee" means, with respect to any Auction Date, the fee tobe paid from the interest payable on the Regular PARS and Special LinkedPARS and INFLOS to the Auction Agent on the second Interest Payment Datesucceeding such Auction Date for conducting an Auction for the benefit ofthe Owners of Regular PARS and Special Linked PARS and INFLOS on suchAuction Date, as determined in accordance with the Indenture.
"Auction A&ent Fee Rate" means, with respect to any Auction Date, therate per annum to be used in computing the Auction Agent Fee to be paid tothe Auction Agent for the services rendered by it with respect to suchAuction Date, which rate shall equal .03 of 1 percent per annum untilchanged in accordance with the Indenture, and thereafter shall equal therate per annum most recently determined pursuant to the Indenture.
"Auction A&reement" means the Auction Agreement, dated as of July 1,1992, between the Auction Agent and the Trustee and all amendments theretoand any other agreement entered into by the Trustee and any successorAuction Agent in lieu of the original Auction Agreement and all amendmentsthereto.
"Auction Date" means, during any period in which the Auction Proceduresare not suspended in accordance with the provisions of the Indenture, theBusiness Day next preceding each Interest Payment Date for the PARS (whetheror not an Auction shall be conducted on such date); provided, however, thatthe last Auction Date shall be the Business Day next preceding the InterestPayment Date next preceding the final maturity date of the PARS.
"Auction Procedures" means the procedures for conducting Auctions forPARS set forth in the Indenture.
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"Auction Rate" means, for each Rate Period, (i) if Sufficient ClearingBids exist, the Winning Bid Rate; (ii) if Sufficient Clearing Bids do notexist (other than because all of the PARS are either the subject ofSubmitted Hold Orders or were Linked PARS and INFLOS or Special Linked PARSand INFLOS at the close of business on the immediately preceding RecordDate), the Maximum Rate; or (iii) if all of the PARS are the subject ofSubmitted Hold Orders or were Linked PARS and INFLOS or Special Linked PARSand INFLOS at the close of business on the immediately preceding RecordDate, the No Auction Rate.
"Available PARS" means, on each Auction Date, the aggregate principalamount of Regular PARS and Special PARS at the close of business on theimmediately preceding Record Date that are not the subject of Submitted HoldOrders.
"Bidder" means each Existing Owner and Potential Owner who places anOrder.
"Broker-Dealer" means any broker-dealer or other entity that ispermitted by law to perform the functions required of a Broker-Dealer in theIndenture on behalf of Existing Owners and Potential Owners of PARS that isa Direct Participant in the Securities Depository, that has been selected bythe Agency and that is a party to a Broker-Dealer Agreement with the AuctionAgent that remains effective.
"Broker-Dealer Agreement" means an agreement between the Auction Agentand a Broker-Dealer pursuant to which such Broker-Dealer agrees to followthe procedures specified in the Indenture, as such agreement may from timeto time be amended or supplemented, and also means the Broker-DealerAgreement, dated as of July 1, 1992, between the Auction Agent and Goldman,Sachs & Co. and all amendments thereto.
"Broker-Dealer Fee" means, with respect to any Auction Date, the feefrom the interest payable on the Regular PARS and the Special Linked PARSand INFLOS to be paid to the Broker-Dealer on the second Interest PaymentDate succeeding such Auction Date for its services for the benefit of theOwners of the Regular PARS and Special Linked PARS and INFLOS relating tothe Auction conducted on such Auction Date, as determined in accordance withthe Indenture.
"Broker-Dealer Fee Rate" means, with respect to any Auction Date, therate per annum to be used in computing the Broker-Dealer Fee to be paid tothe Broker-Dealer for the services rendered by it with respect to suchAuction Date, which rate shall equal .25 of 1 percent per annum untilchanged in accordance wi th the Indenture, and thereaf ter shall equal therate per annum most recently determined pursuant to the Indenture.
"Business Day" means any day except Saturday, Sunday or any day on whichbanking institutions located in the States of New York or California arerequired or authorized to close or on which the New York Stock Exchange isclosed.
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"Closed Period" means each period (i) commencing immediately prior tothe opening of business on the Delivery Date and ending immediately prior tothe opening of business on the first Interest Payment Date, (ii) commencingat 11:00 a.m., New York City time, on the third Business Day immediatelypreceding any Interest Payment Date and ending immediately prior to theopening of business on such Interest Payment Date, and (iii) commencingimmediately prior to the opening of business on the second Business Day nextpreceding the date on which a lottery is held to select PARS and INFLOS forredemption and ending immediately prior to the opening of business on thedate fixed for redemption.
"Default Rate" means, in respect of any Rate Period, 265 percent of thePARS Index determined on the Auction Date next preceding the first day ofsuch Rate Period; provided, however, that in no event shall the DefaultRate, when added to the Service Charge, exceed the lesser of 11.7369863percent per annum or the maximum rate permitted by applicable law, anythingin the Indenture or herein to the contrary notwithstanding.
"Delivery Date" means the date of initial delivery of the Bonds.
"Direct Participant" means the member of, or the participant in, theSecurities Depository that will act on behalf of a Bidder and is identifiedas such in such Bidder's Master Purchaser's Letter.
"IrIQ." shall mean The Depository Trust Company or any substitutedepository appointed pursuant to the Indenture.
"Existing Owner" means a person who has signed a Master Purchaser'sLetter and is listed as the Owner of PARS or is listed as a beneficial ownerof PAPS in the records of the Auction Agent.
"Index Agent" means the index agent appointed in accordance with theIndenture, initially Kenny S&P Evaluation Services, a division of KennyInformation Systems, Inc.
"INFLOS" means the Inverse Floating Rate Securities (INFLOS) issuedunder the Indenture, as shown on the cover page of this Official Statement.
"INFLOS Rate" means the rate of interest to be borne by the INFLOS foreach Rate Period which shall be the rate per annum indicated on the coverpage of this Official Statement for the Rate Period commencing on theDelivery Date and thereafter shall equal (i) 11.90 percent per annum minus(ii) the product of (A) the PARS Rate for such Rate Period and (B) 365/360,all as determined in accordance with the Indenture. Notwithstanding theforegoing, (i) if the calculation of the INFLOS Rate would produce aninterest rate in excess of the maximum lawful rate of interest, then theINFLOS Rate shall be equal to such maximum lawful rate of interest, and (ii)the aggregate amount of interest payable on the INFLOS for any Rate Periodshall not exceed twice the Linked Rate minus the aggregate amount ofinterest payable on the PARS for such Rate Period.
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"Interest Payment Date" means (A) August 25. 1992. and (B) every fifthTuesday thereafter. the maturity date for any of the PARS and INFLOS and thesinking fund payment date for any of the PARS or INFLOS called forredemption on such sinking fund payment date; provided. however. that if anysuch fifth Tuesday or the Wednesday succeeding such fifth Friday is not aBusiness Day, the Interest Payment Date shall be the Business Day nextpreceding such fifth Tuesday which Business Day is followed by a BusinessDay.
"Linkage Request" means a request to link Regular PARS and INFLOS orSpecial PARS and INFLOS by a person who is an Existing Owner of Regular PARSor Special PARS and who is an Owner of INFLOS. which shall be delivered bysuch person's Broker-Dealer to the Auction Agent in substantially the formattached to the Broker-Dealer Agreement.
"Linked PARS and INFLOS" means (i) Regular PARS and INFLOS of equalprincipal amount which are linked pursuant to the prov1s1ons of theIndenture from and after the first Auction Date succeeding the date oflinkage (assuming such linkage still exists on such Auction Date) to anduntil the date linkage is broken pursuant to the provisions of theIndenture, and (ii) Special PARS and INFLOS of equal principal amount whichare linked pursuant to the provisions of the Indenture from and after thedate of linkage to and until the date linkage is broken pursuant to theprovisions of the Indenture.
"Linked Rate" means 5.951. percent per annum computed on the basis of a360-day year of twelve 30-day months.
''Master Purchaser's Letter" means a letter substantially in the formattached to the Broker-Dealer Agreement addressed to a Broker-Dealer. amongothers, in which a person agrees. among other things. to offer to purchase,to purchase. to offer to sell and/or to sell PARS as set forth in theIndenture.
''Maximum Rate" means. as of any Auction Date. the product of the PARSIndex multiplied by the PARS Multiple; provided. however. that in no eventshall the Maximum Rate, when added to the Service Charge, exceed the lesserof 11. 7369863 percent per annum and the maximum interest rate permitted byapplicable law, anything in the Indenture or herein to the contrarynotwithstanding.
''Minimum Rate" means, as of any date of determination thereof. 75percent of the PARS Index.
''Moody's'' means Moody's Investors Service, Inc., a corporation organizedand existing under the laws of the State of Delaware, its successors andassigns. and, for the purposes of the Auction Procedures. if suchcorporation shall be dissolved or liquidated or shall no longer perform thefunctions of a securities rating agency, ''Moody' s" shall be deemed to referto any other nationally recognized securities rating agency designated by
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the Agency by notice to the Trustee, the Auction Agent, the Index Agent andthe Broker-Dealers; provided, however, that such notice shall not beeffective unless accompanied by a consent of a majority of theBroker-Dealers.
"No Auction Rate" means, as of any Auction Date, the r'at.e- determined bymultiplying the percentage of the PARS Index set forth below, based on thePrevailing Rating of the PARS in effect at the close of business on theBusiness Day immediately preceding such Auction Date, by the PARS Index:
Prevailing Bating
AAA/Aaa .•.•....••.....••.•••...•..•.••AA./Aa " " " "" ..AIA " ..BBB/Baa " " ..Below BBB/Baa
Percentageof PARS Index
90%95%
100%110%120%
provided, however, that in no event shall the No Auction Rate, when added tothe Service Charge, exceed the lesser of 11.7369863 percent and the maximuminterest rate permitted by applicable law, anything in the Indenture orherein to the contrary notwithstanding.
"~" means, as the context requires, a Hold Order, a Bid or aSell,Order. "Owner" means a registered owner of any of the Bonds.
"WS" means the Periodic Auction Reset Securities (PARS) issued underthe Indenture, as shown on the cover page of this Official Statement.
"PARS Multiple" means, as of any Auction Date, the percentage of thePARS Index determined as set forth below, based on the Prevailing Rating ofthe PARS in effect at the close of business on the Business Day immediatelypreceding such Auction Date:
AAA./Aaa ..AA/Aa .•.•.•..••.••...•.•..•••.•.•.••..A/A ••.•.•.•.....•••.•..•..•••.•.•.••.•BBB/Baa .•.•...•..••.••.•..•••.•.•..•..Below BBB/Baa .•.••••••.•...••.•••.••.•
Percentageof PARS Index
140%150%165%180%265%
"PARS Rate" means the rate of interest (compounded on the basis of a360-day year for the actual number of days elapsed) to be borne by the PARSfor each Rate Period which shall be the rate per annum indicated on thecover page of this Official Statement (including the Service Charge) for theRate Period commencing on the Delivery Date and thereafter shall equal thesum of the Auction Rate for each Rate Period plus the Service Charge then in
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effect for such Rate Period, all as determined in accordance with theIndenture; provided, however, that if the Auction Agent shall have failed todetermine the Auction Rate for any Rate Period (including, withoutlimitation, the circumstance where there is no Auction Agent or noBroker-Dealer), the PARS Rate for such Rate Period shall be the No-AuctionRate determined for such Rate Period plus the Service Charge then in effect;and provided, further, that, if a failure to pay principal, interest orpremium on any Bond when due shall have occurred, the PARS Rate for the RatePeriod during which such failure shall have occurred and each Rate Periodthereafter commencing prior to the date on which such failure shall haveceased to be continuing shall be the Default Rate for such Rate Period plusthe Service Charge then in effect; and provided, further, that in no eventshall the PARS Rate exceed the lesser of 11.7369863 percent per annum or themaximum interest rate permitted by applicable law.
"Potential Owner" means any person, including any Existing Owner, (L)who shall have executed a Master Purchaser's Letter, and (ii) who may beinterested in acquiring PARS or, in the case of an Existing Owner, anadditional principal amount of PARS.
"Prevailing Rating" means (i) AAA/Aaa, if the PARS shall have a ratingof AAA or better by S&P and a rating of Aaa or better by Moody's, (ii) ifnot AAA/Aaa, then AA/AA if the PARS shall have a rating of AA- or better byS&P and a rating of Aa3 or better by Moody's, (iii) if not AAA/Aaa or AA/AA,then A/A if the PARS shall have a rating of A- or better by S&P and a ratingof A3 or better by Moody's, (iv) if not AAA/Aaa, AA/AA or A/A, then BBB/Baaif the PARS shall have a rating of BBB- or better by S&P and a rating ofBaa3 or better by Moody's, and (v) if not AAA/Aaa, AA/AA, A/A or BBB/Baa,then below BBB/Baa, whether or not the PARS are rated by any securitiesrating agency. For purposes of this definition, S&P's rating categories ofAAA, AA-,A- and BBB-, and Moody's rating categories of Aaa, Aa3, A3 andBaa3, shall be deemed to refer to and include the respective ratingcategories correlative thereto in the event that either or both of suchRating Agencies shall have changed or modified their generic ratingcategories or if any successor thereto appointed in accordance with thedefinition thereof shall use different rating categories.
"Rate Period" means the period from and including each Interest PaymentDate for the PARS and INFLOS to and including the day (whether or not aBusiness Day) preceding the next succeeding Interest Payment Date; provided,however, that the first Rate Period shall be the period from and includingthe Delivery Date to and including the day next preceding the first InterestPayment Date.
"Rating Agency" means Moody' s or Standard & Poor's and their respectivesuccessors and assigns.
"Record Date" means the second Business Day immediately preceding anInterest Payment Date.
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"Regular PARS" means PARS which are not Special PARS, Linked PARS andINFLOS or Special Linked PARS and INFLOS.
"Request to Break Linkage" means an Owner's request to break linkage ofLinked PARS and INFLOS or Special Linked PARS and INFLOS, which shall bedelivered by such Owner's Broker-dealer to the Auction Agent insubstantially the form attached to the Broker-Dealer Agreement.
"Securities DepQsitQry" means DTC or any othar securities depos Ltoryselected by the Agency which agrees tQ fQllQW the procedures required to befQllQwed by such securities depositQry in cQnnectiQn with the BQnds.
"Service Charge" means, with respect to an Auet Lon Date, the sum of theAuction Agent Fee and the Broker-Dealer Fee payable out; of the interestpayable Qn the Regular PARS and Special Linked PARS and INFLOS with respecttQ such AuctiQn Date.
"Special. Linked PARS and INFLOS" means Regular PARS and INFLOS of equalprincipal amounts which are linked pursuant to the prOV1S1ons of theIndenture from and after the date of linkage tQ and until the earlier Qf (i)the first Auction Date succeeding the date of linkage, and (Ld ) the datelinkage is broken pursuant to the provisions of the Indenture.
"Special PARS" means PARS which become WIlinked from Linked PARS andINFLOS pursuant to the provisions of the Indenture from and after the datelinkage is broken to and untd l the earlier of (i) the first Auction Datesucceeding the date linkage is broken, and (ii) the date linkage isreestablished with an INFLOS pursuant to the prQvisions of the Indenture.
"Standard & Poor's" Qr "~" means Standard and Poor I s Corpor'at.Lon , acQrporation organized and existing under the laws of the State Qf New York,its succeasozs and assigns and, for purposes of the Auction Pzocedures , ifsuch corporation shall be dissolved or liquidated or shall no lQnger performthe functions of a securities rating agency, "Standard and Poor t s and "S&P"shall be deemed to refer to any other natiQnally recognd.sed securitiesrating agency designated by the Agency by nQtice to the Trustee, the AuctionAgent, the Index Agent and the Broker-Dealers; provided, however, that suchnotice shall not be effective unless accQmpanied by a consent of a majorityof the Broker-Dealers.
"Submission Deadline" means 1:00 p.m., New York City time, on anyAuctiQn Date or such Qther time as shall be specified from time to time bythe AuctiQn Agent pursuant co the Auct Lon Agreement as the time by whichBroker-Dealers are required tQ submit Orders to the Auction Agent.
"Sufficient Clearing Bids" means, with respect to any Auction, there areSufficient Clearing Bids if the aggregate principal amount of PARS that arethe subject of Submitted Bids by Potential Owners specifying one or morerates not higher than the Maximum Rate is not less than the sum Qf (i) theaggregate principal amount of PARS that are the subject of Submitted Bids by
D-25
Existing Owners specifying rates higher than the Maximum Rate. and (ii) theaggregate principal amount of PARS that are the subject of Submitted SellOrders (other than because all PARS are either subject to Submitted HoldOrders or were Linked PARS and INFLOS or Special Linked PARS and INFLOS atthe close of business on the immediately preceding Record Date).
''Winning Bid Rate" means the lowest rate specified in any Submitted Bidwhich if selected by the Auction Agent as the Auction Rate would cause theaggregate principal amount of PARS that are the subject of Submitted Bidsspecifying a rate not greater than such rate to be not less than theaggregate principal amount of Available PARS.
AUCTION lJlOCBDtJIlES
The following is a summary of the procedures to be used in conductingAuctions. As a summary, it does not purport to be complete and is qualifiedin its entirety by reference to the Auction Procedures set forth in theIndenture, the Auction Agreement and the Broker-Dealer Agreements.
Orders by Existing Owners and Potential. Owners. Prior to the SubmissionDeadline on each Auction Date:
(i) each Existing Owner may submit to a Broker-Dealer, in writingor by such other method as shall be reasonably acceptable to suchBroker-Dealer, information as to:
(A) the principal amount of PARS, if any, held by suchExisting Owner which such Existing Owner desires to continue tohold for the next succeeding Rate Period without regard to the ratedetermined by the Auction Procedures for such Rate Period;
(:8) the principal amount of PARS, if any, held by suchExisting Owner which such Existing Owner desires to continue tohold for the next succeeding Rate Period if the rate determined bythe Auction Procedures for such Rate Period shall not be less thanthe rate per annum then specified by such Existing Owner (and whichsuch Existing Owner desires to sellon the next succeeding InterestPayment Date if the rate determined by the Auction Procedures shallbe less than the rate per annum then specified by such ExistingOwner); and/or
(c) the principal amount of PARS, if any. held by suchExisting Owner which such Existing Owner offers to sell on the nextsucceeding Interest Payment Date without regard to the ratedetermined by the Auction Procedures for the next succeeding RatePeriod; and
(ii) for the purpose of implementing the Auctions and thereby toachieve the lowest possible interest rate on the PARS, theBroker-Dealers will contact Potential Owners (including persons who are
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Existing Owners), by telephone or otherwise, to determine the principalamount of PARS, if any, which each such Potential Owner offers topurchase if the rate determined by the Auction Procedures for the nextsucceeding Rate Period is not less than the rate per annum specified bysuch Potential Owner.
For the purposes hereof, an Order containing the information referred toin clause (L) (A) above is referred to as a "Bold Order," an Ordercontaining the information referred to in clause (i)(B) or (Ld ) above isreferred to as a "Bid" and an Order containing the information referred toin clause (i)(C) above is referred to as a "Sell Order."
A Bid by an Existing Owner shall constitute an irrevocable offer to sell:
(A) the principal amount of PARS specified in such Bid if the ratedetermined by the Auction Procedures on such Auction Date shall be less thanthe rate specified therein; or
(B) such principal amount or a lesser principal amount of PARS to bedetermined as set forth in clause (iv) of the first paragraph of the sectionbelow entitled "Allocation of PARS" (the Allocation Provisions) if the ratedetermined by the Auction Procedures on such Auction Date shall be equal tosuch specified rate; or
(c) a lesser principal amount of PARS to be determined as set forth inclause (iii) of the second paragraph of the Allocation Provisions if suchspecified rate shall be higher than the Maximum Rate and Sufficient ClearingBids do not exist.
A Sell Order by an Existing Owner shall constitute an irrevocable offerto sell:
(A) the principal amount of PARS specified in such Sell Order; or
(B) such principal amount or a lesser principal amount of PARS as setforth in clause (iii) of the second paragraph of the Allocation Provisionsif Sufficient Clearing Bids do not exist.
A Bid by a Potential Owner shall constitute an irrevocable offer topurchase:
(A) the principal amount of PARS specified in such Bid if the ratedetermined by the Auction Procedures on such Auction Date shall be higherthan the rate specified therein; or
(B) such principal amount or a lesser principal amount of PARS as setforth in clause (v) of the first paragraph of the Allocation Provisions ifthe rate determined by the Auction Procedure on such Auction Date shall beequal to such specified rate.
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Anything contained in the Indenture or herein to the contrarynotwithstanding:
(i) for purposes of any Auction, any Order which specifies PARS tobe held, purchased or sold in a principal amount which is not $100,000or an integral multiple thereof shall be rounded down to the nearest$100,000, and the Auction Agent shall conduct the Auction Procedures asif such Order had been submitted in such lower amount;
(d i ) for purposes of any Auction, any portion of an Order of anExisting Owner which relates to a PARS which has been called forredemption on or prior to the Interest Payment Date next succeeding suchAuction shall be invalid with respect to such portion and the AuctionAgent shall conduct the Auction Procedures as if such portion of suchOrder had not been submitted;
(iii) for purposes of any Auction, no portion of a PARS which hasbeen called for redemption on or prior to the Interest Payment Date nextsucceeding such Auction shall be included in the calculation ofAvailable PARS;
(Lv ) the Auction Procedures shall be suspended during the periodcommencing on the date of the Auction Agent's receipt of notice from theTrustee of the failure to pay principal, interest or premium on any Bondwhen due but shall resume with the next Auction to occur on the nextregularly scheduled Auction Date which occurs at least two Business Daysafter the Auction Agent receives a notice from the Trustee that suchfailure has been waived or cured;
(v) Owners of Linked PARS and INFLOS and Special Linked PARS andINFLOS at the close of business on the Record Date immediately precedingany Auction Date are not Existing Owners for purposes of the AuctionProcedures and may not participate in the Auction held on such AuctionDate with respect to such PARS. An Existing Owner of Regular PARS orSpecial PARS who is also the Owner of Linked PARS and INFLOS or SpecialLinked PARS and INFLOS at the close of business on the immediatelypreceding Record Date may not submit Orders in an Auction with respectto such Linked PARS and INFLOS or Special Linked PARS and INFLOS, andsuch Linked PARS and INFLOS or Special Linked PARS and INFLOS will notbe included in the gate principal amount of PARS held by such ExistingOwner for the purposes of the Auction Procedures. If any Owner ofLinked PARS and INFLOS or Special Linked PARS and INFLOS at the close ofbusiness on the immediately preceding Record Date submits a Bid withrespect to such Linked PARS and INFLOS or Special Linked PARS andINFLOS, such Bid will be invalid, and the Auction Agent shall conductthe Auction Procedures as if such Order had not been submitted; and
(vi) the giving of a Tender Notice with respect to Regular PARS orSpecial PARS shall supercede any Order given by the Existing Owner ofsuch PARS with respect to such PARS for the Auction occurring on theAuction Date following the Tender Date specified in such Tender Notice.
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Sw-ission of Orders by Broker-Dealers to Auction Agent. EachBroker-Dealer will submit to the Auction Agent, in writing or by such othermethod as shall be reasonably acceptable to the Auction Agent, prior to theSubmission Deadline on each Auction Date, all Orders obtained by suchBroker-Dealer and specifying with respect to each Order:
(i) the name of the Bidder placing such Order;
(ii) the aggregate principal amount of PARS that are the subject ofsuch Order;
(iii) to the extent that such Bidder is an Existing Owner:
(A) the principal amount of PARS, if any, subject to any HoldOrder placed by such Existing Owner;
(B) the principal amount of PARS, if any, subject to any Bidplaced by such Existing Owner and the rate specified in such Bid;and
(c) the principal amount of PARS, if any, subject to any SellOrder placed by such Existing Owner; and
(iv) to the extent such Bidder is a Potential Owner, the ratespecified in such Bid.
The Auction Agent shall be entitled to rely upon the terms of any Ordersubmitted to it by a Broker-Dealer.
If any rate specified in any Bid contains more than three figures to theright of the decimal point, the Auction Agent shall round such rate up tothe next highest one thousandth of one percent (0.0011).
If an Order or Orders covering all of the PARS held by an Existing Owneris not submitted to the Auction Agent prior to the Submission Deadline, theAuction Agent shall deem a Hold Order to have been submitted on behalf ofsuch Existing Owner covering the principal amount of PARS held by suchExisting Owner and not subject to Orders submitted to the Auction Agent.
If one or more Orders covering in the aggregate more than the principalamount of PARS held by any Existing Owner are submitted to the AuctionAgent, such Orders shall be considered valid as follows and in the followingorder of priority:
(i) all Hold Orders shall be considered valid, but only up to andincluding in the aggregate the principal amount of PARS held by suchExisting Owner;
(ii) (A) any bid of an Existing Owner shall be considered valid asa Bid of an Existing Owner up to and including the excess of theprincipal amount of PARS held by such Existing Owner over the principalamount of PARS subject to Hold Orders referred to in paragraph (i) above;
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(B) subject to clause (A), if more than one Bid with the same rateis submitted on behalf of such Existing Owner and the principal amountof PARS subject to such Bids is greater than such excess of theprincipal amount of PARS held by such Existing Owner over the principalamount of PARS subject to Hold Orders referred to in paragraph (d )above, such Bids shall be considered valid up to the amount of suchexcess;
(C) subject to clause (A), if more than one Bid with differentrates is submitted on behalf of such Existing Owner. such Bids shall beconsidered Bids of an Existing Owner in the ascending order of theirrespective rates up to the amount of the excess of the principal amountof PARS held by such Existing Owner over the principal amount of PARSheld by such Existing Owner subject to Hold Orders referred to inparagraph (i) above; and
(D) the principal amount, if any, of such PARS subject to Bids notconsidered to be Bids of an Existing Owner under this paragraph (Ld )shall be treated as the subject of a Bid by a Potential Owner; and
(iii) all Sell Orders shall be considered Sell Orders, but only upto and including a principal amount of PARS equal to the excess of theprincipal amount of PARS held by such Existing Owner over the sum of theprincipal amount of the PARS considered to be subject to Hold Orderspursuant to paragraph (L) above and the principal amount of PARSconsidered to be subject to Bids of such Existing Owner pursuant toparagraph (ii) above.
If more than one Bid is submitted on behalf of any Potential Owner, eachBid shall be considered a separate Bid with the rate and the principalamount of PARS specified therein.
Any Bid submitted by an Existing Owner or a Potential Owner specifying arate lower than the Minimum Rate shall be treated as a Bid specifying theMinimum Rate.
None of the Agency, the Trustee or the Auction Agent shall beresponsible for the failure of any Broker-Dealer to submit an order to theAuction Agent on behalf of any Existing Owner or Potential Owner.
DeteraiDatioo of PARS Bate. Not later than 9:30 a.m., New York Citytime, on each Auction Date the Auction Agent shall advise the Broker-Dealersand the Trustee by telephone of the Minimum Rate, the Maximum Rate and thePARS Index.
Promptly after the Submission Deadline on each Auction Date, the AuctionAgent shall assemble all valid Orders submitted or deemed submitted to it bythe Broker-Dealers (each such Order as submitted or deemed submitted by aBroker-Dealer being hereinafter referred to as a "Submitted Hold Order," a
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"Submitted Bid" or a "Submitted Sell Order," as thecollectively as "Submitted Orders") and shall determine:PARS; (d L) whether there are Sufficient Clearing Bids;Rate; and (iv) the Service Charge.
case may be, and(L) the Available(iii) the Auction
Promptly after the Auction Agent has made the determinations set forthin the preceding paragraph, the Auction Agent shall advise the Trustee andthe Agency by telephone (promptly confirmed in writing) or facsimiletransmission of the Auction Rate and the Service Charge for the nextsucceeding Rate Period.
Allocation of PARS. In the event of Sufficient Clearing Bids, subjectto the further provisions described below. Submitted Orders shall beaccepted or rejected as follows in the following order of priority:
(i) the Submitted Sell Order of each Existing Owner shall beaccepted and the Submitted Bid of each Existing Owner specifying anyrate that is higher than the Winning Bid Rate shall be rejected, thusrequiring each such Existing Owner to sell the PARS that are the subjectof such Submitted Sell Order or Submitted Bid;
(ii) the Submitted Bid of each Existing Owner specifying any ratethat is lower than the Winning Bid Rate shall be accepted, thusrequiring each such Existing Owner to continue to hold the PARS that arethe subject of such Submitted Bid;
(iii) the Submitted Bid of each Potential Owner specifying any ratethat is lower than the Winning Bid Rate shall be accepted, thusrequiring each such Potential Owner to purchase the PARS that are thesubject of such Submitted Bid;
(iv) the Submitted Bid of each Existing Owner specifying a ratethat is equal to the Winning Bid Rate shall be accepted. thus requiringeach such Existing Owner to continue to hold the PARS that are thesubject of such Submitted Bid, but only up to and including theprincipal amount of PARS obtained by multiplying (A) the aggregateprincipal amount of PARS which are not the subject of Submitted HoldOrders described in paragraph (vi) below or of Submitted Bids describedin paragraphs (Li.) or (iii) above by (B) a fraction, the numerator ofwhich shall be the principal amount of PARS held by such Existing Ownersubject to such Submitted Bid and the denominator of which shall be theaggregate principal amount of PARS subject to such Submitted Bids madeby all such Existing Owners that specified a rate equal to the WinningBid Rate, and the remainder. if any. of such Submitted Bid shall berejected. thus requiring each such Existing Owner to sell any excessamount of PARS;
(v) the Submitted Bid of each Potential Owner specifying a ratethat is equal to the Winning Bid Rate shall be accepted, thus requiringeach such Potential Owner to purchase the PARS that are the subject of
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such Submitted Bid, but only in an amount equal to the principal amountof PARS obtained by multiplying (A) the aggregate principal amount ofPARS which are not the subject of Submitted Hold Orders described inparagraph (vi) below or Submitted Bids described in paragraphs (ii),(iii) or (iv) above by (B) a fraction, the numerator of which shall bethe principal amount of PARS subject to such Submitted Bid and thedenominator of which shall be the sum of the aggregate principal amountof PARS subject to such Submitted Bids made by all such Potential Ownersthat specified a rate equal to the Winning Bid Rate, and the remainder,if any, of such Submitted Bid shall be rejected;
(vi) the Submitted Hold Order of each Existing Owner shall beaccepted, thus requiring each such Existing Owner to continue to holdthe PARS that are the subject of such Submitted Hold Order; and
(vii) the Submitted Bid of each Potential Owner specifying any ratethat is higher than the Winning Bid Rate shall be rejected.
If Sufficient Clearing Bids have not been made (other than because allof the PARS are either subject to Submitted Hold Orders or were Linked PARSand INFLOS or Special Linked PARS and INFLOS at the close of business on theimmediately preceding Record Date), subject to the further provisionsdescribed below, Submitted Orders shall be accepted or rejected as followsand in the following order of priority:
(i) the Submitted Bid of each Existing Owner specifying any ratethat is not higher than the Maximum Rate shall be accepted, thusrequiring each such Existing Owner to continue to hold the PARS that arethe subject of such Submitted Bid;
(ii) the Submitted Bid of each Potential Owner specifying any ratethat is not higher than the Maximum Rate shall be accepted, thusrequiring each such Potential Owner to purchase the PARS that are thesubject of such Submitted Bid;
(iii) the Submitted Sell Orders of each Existing Owner shall beaccepted as Submitted Sell Orders and the Submitted Bids of eachExisting Owner specifying any rate that is higher than the Maximum Rateshall be deemed to be and shall be accepted as Submitted Sell Orders, inboth cases 'only up to and including the principal amount of PARSobtained by multiplying (A) the aggregate principal amount of PARSsubject to Submitted Bids described in paragraph (ii) above by (B) afraction, the numerator of which shall be the principal amount of PARSheld by such Existing Owner subject to such ,Submitted Sell Order or suchSubmitted Bid deemed to be a Submitted Sell Order and the denominator ofwhich shall be the principal amount of PARS subject to all suchSubmitted Sell Orders and such Submitted Bids deemed to be SubmittedSell Orders, and the remainder of each such Submitted Sell Order orSubmitted Bid shall be deemed to be and shall be accepted as a HoldOrder and each such Existing Owner shall be required to continue to holdsuch excess amount of PARS;
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(iv) the Submitted Hold Order of each Existing Owner shall beaccepted, thus requiring each such Existing Owner to continue to holdthe PARS that are the subject of such Submitted Hold Order; and
(v) the Submitted Bid of each Potential Owner specifying any ratethat is higher than the Maximum Rate shall be rejected.
If, as a result of the procedures described above, any Existing Owner orPotential Owner would be required to purchase or sell an aggregate principalamount of PARS which is not an integral multiple of $100,000 on any AuctionDate, the Auction Agent shall by lot, in such manner as it shall determinein its sole discretion, round up or down the principal amount of PARS to bepurchased or sold by any Existing Owner or Potential Owner on such AuctionDate so that the aggregate principal amount of PARS purchased or sold byeach Existing Owner or Potential Owner on such Auction Date shall be anintegral multiple of $100,000, even if such allocation results in one ormore of such Existing Owners or Potential Owners not purchasing or sellingany PARS on such Auction Date.
If, as a resul t of the procedures described above, any Potential Ownerwould be required to purchase less than $100,000 in principal amount of PARSon any Auction Date, the Auction Agent shall by lot, in such manner as itshall determine in its sole discretion, allocate PARS for purchase amongPotential Owners so that the principal amount; of PARS purchased on suchAuction Date by any Potential Owner shall be an integral multiple of$100,000, even if such allocation results in one or more of such PotentialOwners not purchasing PARS on such Auction Date.
Notice of PARS Bate. On each Auction Date, the Auction Agent shallnotify by telephone or other telecommunication device or in writing eachBroker-Dealer that participated in the Auction held on such Auction Date ofthe following:
(i) the PARS Rate determined on such Auction Date for thesucceeding Rate Period;
(ii) whether Sufficient Clearing Bids existed for the determinationof the Winning Bid Rate;
(iii) if such Broker-Dealer submitted a Bid or a Sell Order onbehalf of an Existing Owner, whether such Bid or Sell Order was acceptedor rejected, in whole or in part, and the principal amount of PARS, ifany, to be sold by such Existing Owner;
(iv) if such Broker-Dealer submitted a Bid on behalf of a PotentialOwner, whether such Bid was accepted or rejected, in whole or in part,and the principal amount of PARS, if any, to be purchased by suchPotential Owner;
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(v) if the aggregate principal amount of PARS to be sold by allExisting Owners on whose behalf such Broker-Dealer submitted Bids orSell Orders is different from the aggregate principal amount of PARS tobe purchased by all Potential Owners on whose behalf such Broker-Dealersubmitted a Bid, the name or names of one or more Broker-dealers (andthe Direct Participant, if any, of each such other Broker-Dealer) andthe principal amount of PARS to be (A) purchased from one or moreExisting Owners on whose behalf such other Broker-Dealers submitted Bidsor Sell Orders, or (B) sold to one or more Potential Owners on whosebehalf such other Broker-Dealers submitted Bids; and
(vi) the immediately succeeding Auction Date.
On each Auction Date, each Broker-Dealer that submitted an Order onbehalf of any Existing Owner or Potential Owner shall (d ) advise eachExisting Owner and Potential Owner on whose behalf such Broker-Dealersubmitted an Order as to: (A) the PARS Rate determined on such Auction Date;(B) whether any Bid or Sell Order submitted on behalf of each such ExistingOwner or Potential Owner was accepted or rejected; and (C) the immediatelysucceeding Auction Date; (ii) instruct each Potential Owner on whose behalfsuch Broker-Dealer submitted a Bid that was accepted, in whole or in part,to instruct such Potential Owner's Direct Participant to pay to suchBroker-Dealer (or its Direct Participant) through the Securities Depositorythe amount necessary to purchase the principal amount of PARS to bepurchased pursuant to such Bid against receipt of such PARS; and (iii)instruct each Existing Owner on whose behalf such Broker-Dealer submitted aSell Order that was accepted or a Bid that was rejected, in whole or inpart, to instruct such Existing Owner's Direct Participant to deliver tosuch Broker-Dealer (or its Direct Participant) through the SecuritiesDepository the principal amount of PARS to be sold pursuant to such Bid orSell Order against payment therefor.
The Auction Agent. The Auction Agent will enter into an agreement withthe Trustee. The Auction Agent shall be (a) a bank or trust companyorganized under the laws of the United States or any state or territorythereof having a combined capital stock, surplus and undivided profits of atleast $30,000,000, or (b) a member of the National Association of SecuritiesDealers Inc , , or any successor self-regulatory organization (the "NASD"),having a capitalization of at least $30,000,000 and, in either case,authorized by law to perform all the duties imposed upon it by the Indentureand a Direct Participant in the Securities Depository. The Auction Agentmay at any time resign and be discharged of the duties and obligations bygiving at least 90 days notice to the Trustee who shall give notice of thesame to the Agency, each Broker-Dealer and the Securities Depository. TheAuction Agent may be removed at any time by the Trustee by written noticedelivered to the Auction Agent, each Broker-Dealer and the Agency. Upon anysuch resignation or removal, the Trustee shall appoint a successor AuctionAgent meeting the requirements of the Indenture. If no successor AuctionAgent meeting the requirements referred to above is appointed, the Trusteeshall petition a court of competent jurisdiction to appoint a successor
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Auction Agent having such qualifications as such court shall prescribe. Inthe event of the resignation or removal of the Auction Agent, the AuctionAgent shall pay over, assign and deliver any moneys and PARS held by it insuch capacity to its successor or to the Trustee if no successor has beenappointed.
Broker-Dealers. At the time of theSachs & Co. will be the sole Broker-Dealer.time that additional firms must be allowedin Auctions for the PARS.
issuance of the PARS, Goldman,The Agency may stipulate at any
to participate as Broker-Dealers
The Broker-Dealer Agreements provide that a Broker-Dealer may submitOrders in Auctions for its own account. If a Broker-Dealer submits an Orderfor its own account in any Auction, it might have an advantage over otherBidders in that it would have knowledge of Orders placed through it in, thatAuction; such Broker-Dealer, however, would not have knowledge of Orderssubmitted by other Broker-Dealers in that Auction. In the Broker-DealerAgreements, Broker-Dealers agree to handle customer orders in accordancewith their respective duties under applicable securities laws and rules.
PARS Index. The PARS Index on any Auction Date will be the arithmeticaverage of the interest rates per annum on variable rate demand obligationsor similar obligations quoted to the Index Agent at the time of thedetermination of the PARS Index by at least five members of the NASD, eachof which must be actively engaged in the remarketing of such obligations andis acting as a remarketing agent or in a similar capacity in respect of suchissue of obligations the interest rate on which is so quoted to the IndexAgent. For purposes of the foregoing, (L) each issue of such obligationsshall be rated by either Moody's or S&P in its highest short-term ratingcategory (without regard to pluses or minuses or numerical designationswithin a rating category), (ii) the owners of such obligations shall havethe right to demand the purchase thereof upon seven days' notice, (iii) theinterest rate on such obligations shall be predetermined weekly, (dv ) theinterest rate on such obligations shall generally become effective onWednesday or each calendar week, (v) the interest on such obligations shallbe excluded from gross income for purposes of federal income taxation andshall not constitute an item of tax preference subject to the federalalternative minimum tax (unless at the time of determination of the PARSIndex interes t on the PARS shall be such an item), and (vi) if there shallbe more than one such interest rate quoted to the Index Agent by any suchmember of the NASD, the highest of such quoted interest rates shall be usedin the determination of the PARS Index.
If for any reason on any Auction Date the number of members of the NASDwhich shall have quoted interest rates to the Index Agent is less than five,the PARS Index will be the arithmetic average of (L) the interest rateswhich have been so quoted, if any, and (ii) the interest rates per annum onvariable rate demand obligations or similar obligations having the terms andcharacteristics set forth in clauses (L) , (ii) and (v) of the immediatelypreceding paragraph quoted to the Index Agent at the time of the
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determination of the PARS Index by members of the NASD as that interest ratewhich, if borne by such obligations, would be the minimum interest ratenecessary in order for such member, acting as principal in the ordinarycourse of its business, to be willing to buy such obligations at par on suchAuction Date. Such members of the NASD shall be (L) not fewer in numberthan the difference between five and the number of members of the NASD whichshall have quoted interest rates provided as described in the immediatelypreceding paragraph, and (ii) actively engaged in the remarketing ofvariable rate demand obligations or similar obligations.
If for any reason on any Auction Date the PARS Index cannot or shall notbe determined as provided above, the PARS Index shall be determined by theIndex Agent and shall be 80 percent of LIBOR. For this purpose, "LIBOR"means, on any day, the average (rounded to the next higher 1/16 of 1percent) of the respective rates per annum quoted by each of the principalLondon offices of Bankers Trust Company, The Bank of Tokyo, Ltd., Swiss BankCorporation and National Westminister Bank PLC, or their respectivesuccessors (the "Reference Banks"), at which United States dollar depositsfor a one-month period in the amount of u.S. $10,000,000 are offered by suchReference Banks to leading banks in the London interbank market atapproximately 11:00 a.m., London time, on such day, or if such day is not aday on which dealings in deposits in United States dollars are transacted inthe London interbank market, then on the text preceding day on which suchdealings were transacted in such market. If any Reference Bank does notquote a rate required to determine LIBOR, LIBOR shall be determined in thebasis of the quotation or quotations furnished by the remaining ReferenceBanks and any Substitute Reference Bank or Banks (as defined below) selectedby the Index Agent to provide such quotation or quotations not beingsupplied by Reference Banks or, if the Index Agent does not select anySubstitute Reference Bank, by the remaining Reference Banks. For thepurposes of this definition, "Substitute Reference Bank" means the principalLondon office of The Chase Manhattan Bank National Association, DeutscheBank Aktiengesellschaft or Morgan Guaranty Trust Company of New York ortheir respective successors, or, if none of such Substitute Reference Banksis engaged in dealings in United States dollars in the London interbankmarket, then a bank or banks selected by the Index Agent engaged in dealingsin United States dollars in the London interbank market.
If for any reason on any Auction Date the PARS Index cannot or shall notbe determined as provided in the preceding paragraphs, the PARS Index shallbe determined by the Index Agent and shall be 90 percent of the average ofthe per annum yield to maturity applicable to the most recently auctionedthirteen-week United States Treasury Bills, based on bids as of 3:30 p.m.,New York City time, on the last Business Day prior to the Auction Date, asquoted to the Index Agent by at least three recognized government securitiesdealers in New York City selected by the Index Agent.
If for any reason on any Auction Date the PARS Index shall not bedetermined as hereinabove provided, the PARS Index shall be the PARS Ratefor the Rate Period ending on such Auction Date.
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The determination of the PARS Index as provided in the Indenture shallbe conclusive and binding upon the Owners of the Bonds.
~ct.ent of Auction Procedures. With the consent of the Insurer, theprovisions of the Indenture concerning the Auction Procedures including themandatory tender provisions and the definitions applicable thereto,including without limitation, the definitions of Default Rate, Maximum Rate,Minimwo Rate, No Auction Rate, PARS Index, PARS Multiple and Auction Rate,may be amended (d ) by obtaining the consent of the Trustee if the Trusteedetermines that such amendment does not materially adversely affect therights of any Bondholder or (ii) by obtaining the consent of the registeredowners of all PARS and 51% in aggregate principal amount of the INFLOS or(iii) in the event that all of the PARS and INFLOS are Linked PARS andINFLOS, by obtaining the consent of the registered owners of at least 51% inaggregate principal amount of the Linked PARS and INFLOS. In the secondevent, if on the first Auction Date occurring at least 40 days after thedate on which the Trustee mailed notice to the registered owners of theBonds as required by the Auction Agreement, Sufficient Clearing Bids havebeen received or all of the PARS are subject to Submitted Hold Orders, thepropo~ed amendment shall be deemed to have been consented to by the ownersof all PARS. As a condition precedent to any amendment of the Indenturereferred to in this paragraph, there shall be delivered to the Trustee andthe Agency an opinion of nationally recognised bond counsel to the effectthat such amendment will not adversely affect the validity of the Bonds orany exemption from federal income taxation to which the interest on theBonds would otherwise be entitled.
histing Owners. The Auction Agent is required to maintain a list ofExisting Owners. The Auction Agent may rely upon, as evidence of theidentities of the Existing Owners, a list of the initial Existing Ownersprovided by the Broker-Dealers, the results of Auctions, notices from theSecurities Depository, regarding the results of mandatory tenders and theresults of linkage and breaking of linkage, and notices from any ExistingOwner, the Direct Participant of any Existing Owner or the Broker-Dealer forany Existing Owner with respect to such Existing Owner's transfer of PARS toanother person only if such transfer is made to a person that has delivereda signed Master Purchaser's Letter to the Auction Agent and if (i) suchtransfer is pursuant to an Auction, or (ii) the Auction Agent has beennotified in writing (A) by such Existing Owner or its Direct Participant orBroker-Dealer of such transfer, or (B) by a Broker-Dealer of any person thatpurchased or sold such PARS in an Auction of the failure of such PARS to betransferred as a result of the Auction. The Auction Agent will not berequired to accept any notice delivered after 3:00 p.m., New York City time,on the Business Day next preceding an Auction Date.
Index Agent. The Index Agent shall perform the functions specified inthe Indenture and described herein as an agent of the Trustee. The IndexAgent will for each Rate Period determine the PARS Index in accordance withthe Indenture as of each Auction Date, ::lnd notify the Trustee and the
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Auction Agent of each such PARS Index on the date of determination thereof.Subject to any applicable governmental restrictions, the Index Agent may beor become the owner of or trade in Bonds with the same rights as if it werenot the Index Agent.
Qualificatioas of 1Ddez: Agent; Resigoation; a-wal. The Index Agentshall be a nationally recognized municipal securities evaluation serviceauthorized by law to perform all the duties imposed upon it by theIndenture. The Index Agent may at any time resign and be discharged of theduties and obligations created by the Indenture by giving at least 60 days'notice to the Agency, each Broker-Dealer, the Trustee and the AuctionAgent. The Index Agent may be removed at any time by an instrument, signedby the Trustee and delivered to the Index Agent~ each Broker-Dealer, theAgency and the Auction Agent. Upon any such resignation or removal, theTrustee shall appoint a successor Index Agent meeting the requirementsdescribed under this heading.
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APPENDIXE
FORM OF OPINION OF CO-BOND COUNSEL
(THIS PAGE INTENTIONALLY LEFT BLANK)
July _, 1992
Redevelopment Agency ofthe City of Oakland
Oakland, California
Re: $, --=Redevelopment Agency of the City of Oakland
Central District Redevelopment ProjectSubordinated Tax Allocation Refunding Bonds,
Series 1992A
Ladies and Gentlemen:
We have acted as co-bond counsel to the RedevelopmentAgency of the City of Oakland (the "Agency") in connection withthe issuance of its Redevelopment Agency of the City of OaklandCentral District Redevelopment Project Subordinated TaxAllocation Refunding Bonds, Series 1992A in the principalamount of $ (the "Bonds"). The Bonds are beingissued under the provisions of the Community Redevelopment Lawof the State of California (being Part 1 of Division 24 of theHealth and Safety Code of the State of California) and Chapter3 of Part 1 of Division 2 of Title 5 of the Government Code ofthe State of California (collectively, the "Law"), and pursuantto a Trust Indenture, dated as of July 1, 1992 (the "TrustIndenture"), by and between the Agency and First Trust ofCalifornia, National Association, as trustee (the "Trustee").
In our capacity as co-bond counsel, we have reviewed theLaw and a certified copy of the record of proceedings relatingto the issuance of thp Bonds, including the Trust Indenture,certifications of the Agency, the City of Oakland, the Trustee,and others, opinions of counsel to the Agency and the Trustee,and such other documents, opinions and instruments as we deemednecessary to render the opinions set forth herein. Capitalizedterms not otherwise defined herein shall have the meaningsascribed thereto in th~ Trust Indenture.
1
Certain requirements and procedures contained or referredto in the Trust Indenture and other relevant documents may bechanged and certain actions may be taken or omitted under thecircumstances and subject to the terms and conditions set forthin such documents, upon the advice or with the approvingopinion of nationally recognized bond counsel. No opinion isexpressed herein as to any Bond or the interest thereon if anysuch change occurs or action is taken or omitted upon theadvice or approval of counsel other than ourselves.
We have assumed the genuineness of all documents andsignatures presented to us. We have not undertaken to verifyindependently, and have assumed, the accuracy of the factualmatters represented, warranted or certified in the documents.Furthermore, we have assumed compliance with all covenants andagreements contained in the Trust Indenture, including (withoutlimitation) covenants and agreements compliance with which isnecessary to assure that future actions, omissions or eventswill not cause interest on the Bonds to be included in grossincome for federal income tax purposes. In addition, we callattention to the fact that the rights and obligations under theBonds and the Trust Indenture are subject to bankruptcy,insolvency, reorganization, arrangement, moratorium and othersimilar laws affecting creditors' rights, to the application ofequitable principles, to the exercise of judicial discretion inappropriate cases and to the limitations on legal remedies inthe State of California.
Based on and subject to the foregoing, and in reliancethereon, as of the date hereof, we are of the followingopinions:
(1) The Agency has, and the proceedings show, lawfulauthority for the issuance of the Bonds under the laws ofthe State of California now in force, and the Bondsconstitute valid, legal and binding special obligations ofthe Agency payable solely from the Subordinated TaxRevenues and monies in certain funds and accounts asspecified in the Trust Indenture, subject to thelimitations set forth therein.
(2) The Trust Indenture has been duly executed anddelivered by the Agency and, assuming due authorization,execution and delivery by the Trustee, constitutes thevalid and binding obligation of the Agency. The Bonds andall Parity Obligations are secured by a pledge of, andcharge and lien upon, the Subordinated Tax Revenues andmonies in certain funds and accounts as specified in theTrust Indenture, and the Subordinated Tax Revenues and suchmonies constitute a trust fund for the security and paymentof the interest on and principal of the Bonds and allParity Obligation~
2
(3) The Agency has issued, and the Trust Indentureprovides that the Agency may hereafter issue, additionalbonds, payable from the Subordinated Tax Revenues andsecured by a charge and lien upon the Subordinated TaxRevenues equal to the charge and lien securing the Bonds,upon the terms and subject to the conditions set forth inthe Trust Indenture.
(4) The Bonds are not a debt of the City of Oakland,the State of California, or any of its politicalsubdivisions (other than the Agency), and neither the Cityof Oakland, the State of California, nor any of itspolitical subdivisions (other than the Agency) is liablefor them, nor in any event shall the Bonds be payable outof any funds or properties other than those of the Agencyas set forth in the Trust Indenture.
(5) Based on existing statutes, regulations, rulingsand judicial decisions and assuming compliance by theAgency with certain covenants in the Trust Indenture andrequirements of the Internal Revenue Code of 1986, asamended, regarding the use, expenditure and investment ofBond proceeds and the timely payment of certain investmentearnings to the United States Treasury, interest on theBonds is not includable in the gross income of the ownersof the Bonds for purposes of federal income taxation.Interest on the Bonds will not be treated as an item of taxpreference in calculating the alternative minimum taxableincome of individuals or corporations; however, interest onthe Bonds will be included as an adjustment in thecalculation of corporate alternative minimum taxable incomeand may therefore affect a corporation's alternativeminimum tax and environmental tax liabilities. We expressno opinion regarding other income tax consequences causedby ownership of, or receipt of interest on, the Bonds.
(6) Interest on the Bonds is exempt from personalincome tax imposed by the State of California.
Respectfully submitted,
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APPENDIXF
FORM OF MUNICIPAL BOND INSURANCE POLICY
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A1BIAAPPENDIX F
FlNANCIAL GUARANIT INSURANCE POLICY
Municipal Bond Investors Assurance CorporationArmonk. New York 10504
PolICY No XXXXXX
MunICipal Bond Inves.ors Assurance Ccnporallon (the "Insurer' I, m conS1denhon of the I"'ymen. of .he premIum and sub!Cc. 10 the Ie""" of thl<pchcy. hereby uncondtllonally and "revo<ably ,uanntee. to any owner. IS here~rdefmed of the follm'''"1 descrIbed obh,al1ons the fuJI andcomplete p.ymen. requIred '0 be mode by or on beh~1f of the I..uer 10 [pAYING AOENT) or .L••uc....or (.he "P.ymg Agenl") of on ,mounlequal 10 (I) the: ptU1Clpol of (eIther al the: .lated matonty or by any advancemeDl of _lunty punultlt 10 • m__cwy ......mg fund p.ymenU ...dmlere" on. the Obll,.lIons (as that "rm .. defined below) as .uch p.yments .holl become due bu••hall nUl be so p.,d Cexcepllhat In the event ofany ....lenllon of the due dale of .uch prtnClpol by re..on of mand.tory or optional redemption or eeee I...tion re.uh.n, from default orotherw.se, other .hIn .ny advltl<:<men. of mltunty punlllll' '0 • mltldatory ......mg fund I"'yment. the I"'y....nts guoran.eed hereby .hall be madeIn sech amount.~ and at SItch tunes as such p.ymenu of pnnctp.J would have been due had there not been any :such acceleration), and (II) therermber""men' of .ny .lIob poymenl whICh " .uboeq....lly recov.red from any owner punu.n••0 a fin.1 Judgment by • coun of ccmeeteerrun,dlCl,Oft that such payment constitutes .. avoidable preference to such owner within the ftlCMlDI of _Y IpPhcablc bankruptcy 1..... TheamounL. refersed \0 In el..... (I) and (ii) of the preced.ng sen"'", .hall be referred 10 herem collecl1vdy ., .he "In,ured Amounts""Obl'~ilflon.'l;"shall mean
(PARAMOum](J,.EOAL TIlLE OF ISSUE)
Upon re"lpl of "'lephonlC or "'legrophlC nol",", ouch notlC< ou"",,,quently confirmed .n wntlftg by reg....red or ee..lfied m'''. or upon recetpl ofwrrtten nonce by reg,,"'red or ....di.d m.. l, by the Insurer from the PaY'"I Agent or ony owner of on Obbg."on the payment of an InsuredAmount for which 1'1i then due. that such reqUired payment h&~ not been made. the In..,ureron the due date of such payment or wldun one busll"IeS$day ..f~t reectpt of not1ee of such ftonplynte.ftt. whu:hever ,c, later. w,lI make a depostt of funcIs. 1ft U\ account w"h C"'bank. N A . In New York.New York or tis eeee........ufficlent for the: poyment of .ny ,.ch Insured Amounts whK:h are .hen due Upon p"'..n....n.1tld ,urrendor of wehOblt,allon' or pre..entmenl of such other proof of ownership of the Obltg.hOllS. IOS.ther wllb ony oppropn... ,ns.rumenL< of ....'nmonl 10evsdeeee the assignment of the Insured Amounca due on the Obligations as are pAId by the Insurer. and appropnate InstrumenL.. to effect theappotnllnent of .he In.urer as ...nt for .uch owners of the: Obltg.II01lS In any Iegol proceeding rela..d ." p.yment of Insured AmounL' on theOblig."ons••uch iJI.uvments bemg m • form 1I...fllCtcwy to Clllbank. N.A.. C'tIibaDk. N.A. ahall dI.burse 10 .uch owne... or the Poy.ng Agenlpayment of the Insured Amounts due on such Oblt,allons...... any amount held by .he Poymg Agent for the p.yment of such Insured Amounts.nd legally .v.tllble therefor Th.. polley doe. nUl mo.re aga.nst 1_ of any prep.ymen. premt.m wluch m.y •• any lane be p.y.ble withre<pOcl.o .ny Obllgal'on
As u<ed herem. the term 'owner" ....n mean the ""mered eweer of any ObltgatlOtl .. mdlClled m the boob m.mlamed by the PaYIng Agent. the....Uet. or any de',g_ of the Issuer for .uch purpose 1he term o.....r .hall not UK:lude the Issuer or my patty whose .greernent w,th the Is.uercon.lIlUlC. the underly.ng ..cun.y for the: Obllg.lIons
Any ••tvICe of process on the Insurer m.y be mode '0 .he In.urer II tis offices Ioc•..,d •• 113 Katg S.....t. Armonk. New Yorit 10504 and .uch""tvIC. of proe<.. shall be v.11dItld blnd.ng
Th" policy " nOIK.....n.bIe for my reason. 1he premIum on th.. polICY .. not ",fund.bl. for any "'UOlI ,ncludmg the paymenl pnor 10malunty of the Obllg."ons
In .he even. the In....r were '0 become OISolv...t. any clallftS ItISmg .nder a polICY of fa.......1guannty IJISIJtIrK:< ate excluded from coverageby the Caltfom.. Insurance Guaranty Assoc'ItIOl\, eatabltshed p....ont to ArtJcIo 14.2 (commencing WIth Secl1011 1(63) of o.apler I of P,n 2 ofD,vlSlon I of.he CoI.fomia 1n.1I11lIIC< Code
IN WrINESS WHEREOF. the Insurer has c.used this policy 10 be .xecuted In f..sande on lIS behalf by its duly .uthon:oed off"""" th.. [DAYJd.y of [MO!'n'Hj. 1991
MUNICIPAL BOND INVESTORSASSURANCE CORPORATION
Aaoar:
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APPENDIXG
FORM OF MASTER PURCHASER'S LETTER
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APPENDIX G:FORM OF MASTER PURCHASER'S LEI I'ER
Relating to Securities Involving Rate Settings Through Auctions
THE COMPANY
THE AUCTION AGENT
A BROKER-DEALER
AN AGENT MEMBER
OTHER PERSONS
Dear Sirs:
1. This letter is designed to apply to publicly or privately offered debt or equitysecurities ("Securities") of any issuer ("Company") which are described in any final prospectus,private placement memorandum or other offering materials relating to such Securities as thesame may be amended or supplemented (collectively, with respect to the particular Securitiesconcerned, the "Prospectus"), and which involve periodic rate settings through auctions("Auctions"). This letter shall be for the benefit of any Company or auction agent ("TrustCompany"), broker-dealer, agent member, securities depository or other interested person inconnection with any Securities and related Auctions (it being understood that such persons maybe required to execute specified agreements and nothing herein shall alter such requirements).The terminology used herein is intended to be general in its application and not to exclude anySecurities in respect of which (in the Prospectus or otherwise) alternative terminology is used.
2. We may from time to time offer to purchase, purchase, offer to sell and/or sellSecurities of any Company as described in the Prospectus relating thereto. We agree that thisletter shall apply to all such purchases, sales and offers and to Securities owned by us. Weunderstand that (a) the dividend/interest rate on Securities may be based from time to time onthe results of Auctions as set forth in the Prospectus, (b) a component to each such dividendIinterest rate on Securities may include fees and charges owed to the Trust Company or otherinterested person, including a broker-dealer, and (c) such fees and charges may be deductedprior to receipt of such dividend/interest rate. We agree that in the event any such fee or chargeis not so deducted and is paid to us in a circumstance in which it is owed to any Trust Companyor other interested person, we are not relieved of our liability to such Trust Company or otherinterested person for payment of any such fee or charge and we shall make such paymentpromptly upon notice delivered to us that such payment is due. We agree that the TrustCompany or other interested person may collect such fees and charges on its or all interestedparties' behalf.
3. We agree that any bid or sell order placed by us shall constitute an irrevocable offerby us to purchase or sell the Securities subject to such bid or sell order, or such lesser amountof Securities as we shall be required to sell or purchase as a result of such Auction, at theapplicable price, all as set forth in the Prospectus, and that if we fail to place a bid or sell orderwith respect to Securities owned by us with a broker-dealer on any auction date, or a broker-dealer to which we communicate a bid or sell order fails to submit such bid or sell order to theTrust Company concerned, we shall be deemed to have placed a hold order with respect to such
o-i
Securities as described in the Prospectus. We authorize any broker-dea.ler that submits a bid orsell order as our agent in Auctions to execute contracts for the sale of Securities covered by suchbid or sell order. We recognize that the payment of such broker-dealer for Securities purchasedon our behalf shall not relieve us of any liability to such broker-dea1er for payment for suchSecurities.
4. We agree that, dunng the applicable period as described in the Prospectus dispositionsof Securities can be made only in the denominations set forth in the Prospectus and we will sell,transfer or otherwise dispose of any Securities held by us from time to time only pursuant to abid or sell order placed in an Auction, to or through a broker-dealer or when permitted in theProspectus, to a person that has signed and delivered, or caused to be delivered on its behalf,to the applicable Trust Company a letter substantially in the form of this letter (or otherapplicable purchaser's letter), provided that in the case of all transfers other than pursuant toAuctions we or our broker-dea1er or our agent member shall advise such transfer. We understand that a restrictive legend will be placed on certificates representing the Securities and stop-transfer instructions will be issued to the transfer agent andlor registrar, all as set forth in theProspectus. We agree to comply with any other transfer restrictions or other related proceduresas described in the Prospectus.
5. We agree that, during the applicable period as described in the Prospectus, ownershipof Securities shall be represented by one or more global certificates registered in the name ofthe applicable Bond Depository or its nominee, that we will not be entitled to receive anycertificate representing the Securities and that our ownership of any Securities will be maintainedin a book-entry form by the securities depository for the account of our agent member, whichin tum will maintain records of our beneficial ownership. We authorize and instruct our agentmember to disclose to the applicable Trust Company such information concerning our beneficialownership of Securities as such Trust Company shall request.
6. We acknowledge that partial deliveries of Securities purchased in Auctions may bemade to us and such deliveries shall constitute good delivery as set forth in the Prospectus.
7. This letter is not a commitment by us to purchase any Securities.8. This letter supersedes any prior-dated version of this master purchaser's letter, and
supplements any prior or post-dated purchaser's letter specific to particular Securities; anyrecipient of this letter may rely upon it until such recipient has received a signed writingamending or revoking this letter.
9. The description of Auction procedures set forth in each applicable Prospectus areincorporated by reference herein and, in case of any conflict between this letter and any suchdescription, such description shall control.
10. Any photocopy or other reproduction of this letter shall be deemed of equal effectas a signed original.
11. Our agent member of The Depository Trust Company currently is
12. Our personnel authorized to place orders with broker-dealers for the purposes setforth in the Prospectus in Auctions currently is/are, , telephonenumber L) ~.
13. Our taxpayer identification number is _
G-2
14. We agree that, during the applicable periods described in the Prospectus, if wedecide to link: our beneficial ownership of any Securities which permit such linkage with ourbeneficial ownership of other debt or equity securities which pennit such linkage of theCompany, or if we decide to break any linkage, we will instruct our agent member and ourbroker-dealer to link: such beneficial ownership or break such linkage in accordance with theprocedures set forth in the Prospectus, and we acknowledge that such instructions must besubmitted through the applicable Trust Company and may not be given during certain periodsdescribed in the Prospectus.
15. We acknowledge that the Securities may be subject to mandatory tender by us asdescribed in the Prospectus. We further agree that if we should receive any payment inconnection with any tender transaction to which we are not entitled (as a result of failure ofanother security holder to provide the tender price or otherwise), we will take such actions(including return of funds and repayment of interest to any party who provided funds to us whichthey were not obligated to provide) so that all interested parties (including any broker-dealer)are restored to the positions which would have obtained if the tender transaction were effected,or not effected, as the case may be, in accordance with the provisions set forth in theProspectus.
Dated:
Mailing address of purchaser
(Name of Purchaser)
By:'----------
Printed Name
Title
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