Вы находитесь на странице: 1из 225

NEW ISSUE-BOOK-ENTRY RATINGS: See ''Ratings'' herein

In the optnum ofOrrick;Herrington & Sutel!ffeUP, San Francisco, Calrj'omllJ, andLofton De Lanete, San Francisco, Cahfomta, Co-BoM Counsel, based
upon an analysis ofextstmg laws, regulations. rulings andcourt dectsums andasswnmg, among other thmgs, compliance wun certaui covenants, l1Iterest on the
Bonds IS excludedfrom gross l1Icome for federal incometax purposes under Sectum 103 of the Internal RevenueCode of 1986and IS exempt from present State
of Calrj'omIIJ personal l1Icome taxes Co-BoM Counsel IS also of the opuuon that interest on the Bonds IS not a speq}c preference Itemfor purposes of the
federal tndivtdual andcorporate alternative nununum taxes, although Co-BoM Counsel observes that such interest IS mcluded m adjusted current earnings m
calculattng corporate alternative m'Tllmumtaxable income Co-BoM Counsel expresses no opuuon regarding any other tax consequences related to the
ownership or disposuton of, or the accrual or receipt ofinterest on, the Bonds See ":lAX MATTERS" herem
$187,500,000
Oakland Joint Powers Financing Authority
Lease Revenue Bonds
$131,500,0001998 Series A-I
$56,000,0001998 Series A-2
Dated: Date of Delivery Price -100% Nominal Maturity Date: August 1,2021
TIuscover page contains information for general reference only, It is not intended to be a summary of the security or terms of thIS issue.
Investors are adVISed to read the entire Official Statement to obtain information essential to the making of an informed investment decision:
Capitalized terms used on this cover page not otherwise defined shall have the meanings setforth herein.
The Bonds are being ISSUed to provide funds to (I) refund the CIty of Oakland Special Refunding Revenue Bonds (Pension Fmancmg) 1988
Senes A, (II) pay capitalized interest on the Bonds, (Ill) fund a reserve fund for the Bonds and (IV)pay the costs of Issuance of the Bonds
The Bonds are being issued m fully registered form Without coupons and, when ISSUed, Will be registered in the name of Cede & Co , as nominee
of The Depository Trust Company, New York, New York ("DTe") Payments of the principal of, premium, If any, and interest on the Bonds Will be
made by U S Bank Trust National ASSOCIation, as trustee for the Bonds (the "Trustee") to DTC, which ISobligated in tum to rernrt such principal,
premium, if any, and interest to Its DTC Particrpants for subsequent disbursement to the benefrcial owners of the Bonds.
The Bonds WIll be ISSUed m denommanons of $100,000 or any integral multiple thereof when the Bonds bear mterest at a Weekly Rate or a
Daily Rate or a Commercial Paper Rate, and m denormnations of $5,000 or any multiple thereof when the Bonds bear interest at a Term Rate
The term of the Bonds WIll be divided into consecutive Rate Periods, dunng which the Bonds will bear interest at a Daily Rate, Weekly Rate,
Commercial Paper Rate or Term Rate as descnbed herem Initially, interest on the Bonds will be payable in the Weekly Rate mode. Interest on
the Bonds m the Weekly Rate mode IS payable on the first Business Day of each month, commencing August 3, 1998 The Bonds are subject to
redemption and optional and mandatory tender prior to maturity as described herein.
The scheduled payment of principal of and interest on the Bonds when due WIll be guaranteed under an insurance policy to be Issued
concurrently with the delivery of the Bonds by FINANCIAL SECURITY ASSURANCE INC.
PFSA.
Payment of the purchase pnce upon optional or mandatory tender ISnot insured.
While the Bonds bear interest at the mitral Weekly Rate or such other DailyRate, Commercial Paper Rate or Term Rate (as further discussed
herein), payment of the purchase pnce of Bonds subject to optional or mandatory tender for purchase will be mitially supported by a Standby Bond
Purchase Agreement dated as of July 16, 1998, among the Authonty, the CIty, Commerzbank Akuengesellschaft, acting through its Los Angeles
Branch (the "Bank"), and U.S Bank Trust National Association, as Tender Agent The Standby Bond Purchase Agreement WIll expire on July 16,
2003, subject to extension or earlier terrmnation as descnbed therein
The Bonds are being issued by the Oakland JOint Powers Financing Authonty (the "Authority") pursuant to a Trust Agreement (as defined
herem), by and between the Authonty and the Trustee The Bonds are limned obligations of the Authonty payable solely from Revenues of the
Authonty, consisting pnmanly of Base Rental Payments (as defmed herem) to be received by the Authonty from the City of Oakland (the "City")
under a Sublease (as defined herein), by and between the Authority and the City, pursuant to winch the City has agreed to lease a portion of the
City'S sewer system (the "Leased Property") from the Authonty The Base Rental Payments to be made by the City pursuant to the Sublease are
payable by the CIty from ItS General Fund to the Authonty for the use and possession by the City of the Leased Property, subject to complete or
partial abatement resulting from substantial interference With the use and possession by the City of the Leased Property caused by damage,
destruction or talong by enunent domain or condemnation With respect to the Leased Property See "RISK FACTORS" herem
The Bonds are limited obligations of the Authority and are not secured by a legal or equitable pledge of, or charge or lien upon, any
property of the Authority or any of its income or receipts, except the Revenues. Neither the full faith and credit of the Authority nor the City
is pledged for the payment of the interest on or principal of the Bonds nor for the payment of Base Rental Payments. Neither the payment of
the principal of or interest on the Bonds nor the obligation to make Base Rental Payments constitutes a debt, liability or obligation of the
City for which the City is obligated to levy or pledge any form of taxation or for which the City has levied or pledged any form of taxation.
The Authority has DO taxing power.
The Bonds Will be offered when, as and If ISSUed, subject to the approval of validity by Orrick, Hemngton & Sutcliffe LLP, San Francisco,
Cahfomia, and Lofton De Lanete, San Francisco, Califonua, Co-Bond Counsel, and subject to certain other conditrons Certain legal matters Will be
passed upon for the Authority and the City of Oakland by Jayne W Williams, City Attorney Certain legal matters will be passed upon for the
Underwnters by Brown & Wood LLP, San FranCISCO, Cahforrua, Underwnters' Counsel Certain legal matters will be passed upon for the Bank by
King & Spalding, New York, New York. It IS expected that the Bonds Will be available for delivery through the DTe book-entry system m New
York, New York on or about July 16, 1998
Goldman, Sachs & Co.
Underwriter and Remarkettng Agent for the Senes A-I Bonds
Dated July 8, 1998
E. J. De La Rosa & ce., Inc.
Underwriter and Remarkettng Agent for the Series A-2 Bonds
SUMMARY OF CERTAIN PROVISIONS OF THE VARIABLE RATE BONDS'
Daily Rate Period Weekly Rate Period Commercial Paper Kate Period Term Rate Period
Interest Payment Dates and RecordDales Ftrst BUSiness Day of each calendar month to First BUSiness Day of each calendar month to On the BUSiness Day next succeedingthe On the first day of the stxth calendar
the registeredowner as of the BUSiness Day the registeredowner as of the BUSiness Day last day of the Commercial Paper Segment month followll1g commencement of the
next precedingthe Interest Payment Date next precedingthe Interest Payment Date to the registeredowner as of the Business Term Rate Penod In each year to the
Day next precedingthe Interest Payment registeredowner as of the fifteenthday
Date of the month next precedmgthe
Interest Payment Date
Rate Determmauon Determinedby the Remarketmg Agent each Determmed by the RemarketmgAgent not later Determmed by the Remarketmg Agent not Determmedby the Authonty
Busmess Day not later than 1030 am than 1000 a.m on the first day of such Weekly later than the tirst day of a Commercial
Rate Penod and thereafter no later than Paper Segment (and m the case of a
Wednesday of each week dunng the Weekly Commercial Paper Segment of one day. no
Rate Penod later than 2 00 P m on such date)
Rate Penod Effectivedate when adjustingto Dally Rate and FIfst Weekly Rate begms on first day of the Commercsal Paper Rate effecuve for term Term of SIX months or any Integral
each Busmess Day thereafter Weekly Rate Period and ends on thefollowmg of not less than one nor more than90 days multiple of SIX months
Wednesday and thereafter begins on each
Thursday and ends on the next succeeding
Wednesday
Nonce of VanableRate to Holder Trustee to provide nollce Trustee to provide nouee Trustee to provide nonce Trustee to provide nonce
Mandatory Tender Dates On theeffecuve date of any change In a Rate On effectivedate of any change In a Rate On effeeuve date of any change In a Rate On day next succeedingany Term Rate
Penod, on the BUSiness Day designatedby the Period, on the Busmess Day designatedby the Pened, on the Busmess Day designatedby Penod which ends pnor to the day
Trustee fo/lowlIlg notice /fom the Bank !hal an Trustee which day shall bewl!hm 15 days the Trustee folloWing notice from the Bank ongmally estabhshed as the last day of
"Event of Default" hes occurredunder the followmg notice from the Bank that an "Event that an "Event of Default" has occurred such Term Rate Penod, on effective
LiqUidity Faclhty (provided such event of of Default" has occurred under theLIqUIdity under the LiqUidity Factlny, on the day date of any change In a Rate Penod, on
default does not termmate the Liquidity Facthty Faclhty (provided such event of default does not next succeedingthe last day of any the Busmess Day designatedby the
pnor to the mandatory tender date). on the temunate the LiqUidity Facility prior to the Commercral Paper Segment, on the Trustee followmg nonce from theBank
Busmess Day not later than 5 days preceding mandalOry tender date), on the Busmess Day not Busmess Day not later than S days that an "Event of Default" has occurred
the expiranon date of the LiqUidity Facility, and later than S days precedingthe expusuon date precedmgexpirationdate of the Lsquidtty under the Lrquiduy Facility(provided
on the dale of subsntutron of a new Liquidity of the LiqUidity Factlny, and on the subststutron Facility[provsdedsuch event of default such event of default does not
Facuuy If such substitutioncauses a reduction of a new Liqurd,ty FacIlityIf such subsutuuon does not termmate the LrqurduyFacibty termmate the LiquidrtyF8Clhty pnor to
or Withdrawal of the rating on the Bonds causes a reducuon or withdrawal of the ranng pnor 10the mandatorytender date). and on the mandatory tender dale). on the
on the Bonds the date of subsnmuon of a new LiqUidity Busmess Day not later than 5 days
Facihty If such substuuuon causes a preeedmgthe expirauon date of the
reductionor WIthdrawal of the rating on the LIqUIdity Facility. and on the date of
Bonds subsuteuon of a new Lrquidity Facilrty
I f such substnuuon causes a reduction
or Withdrawal of the rallngon the
Hoods
Optional Tender Dates. Notice of Opuonal Any Busmess Day. nonce senl by owner to Any BUSiness Day, nonce sent by owner to None, none None, none
Tender Tender Agent Tender Agent not later than S00 P 10 not less
than seven days pnor 10Purchase Date
Physical Delivery of and Payment for To Tender Agent by I 00 pm on Purchase To Tender Agent by I 00 pm on Purchase To Tender Agent by I 00 pm on Purchase To Tender Agent by lOOp m on
Vanable Rate Bonds Subjectto Opllonal Date. payment same day III Immediately Date, payment same day in Immediately Date. payment same day In Immediately Purchase Date. payment III
and Mandatory Tender availablefunds available funds available funds clearinghousefunds
WnltenNoticeof Rate Penod Change 10the Trustee to mati notice to DTC at least 15 days Trustee to mall nonce to DTC at least 15 days Trustee to mall noticeto DTC at least 15 Trustee to mall notice 10 DTC at least
Vanable Rate Bondowners poor to adjustment to a DallyRate Penod pnor to effecnve date of Weekly Rate Penod days prior to effectivedate of Commercial IS days prior to effectivedale of the
change change Paper Rate Segment Term Rate Penod
The abovetable IS included for quick referenceonly and IS subject In all respects to the terms of the Trust Agreement Investors are advrsedto read the enure Official Statement to obtam mformauon essenual 10
the makmgof an mformedinvestmentdecsssen
No dealer, broker, salesperson or other person has been authorized by the Authority, the City 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 Official Statement does not constitute an offer to sell or the
solicitation of an offer to buy, nor shall there be any sale of the Bonds by any person in any jurisdiction
which it is unlawful for such person to make such offer, solicitation or sale.
This Official Statement is not to be construed as a contract with the purchasers of the Bonds.
Statements contained in this Official Statement which involve estimates, projections, forecasts or matters
of opinion, whether or not expressly so described herein, are intended solely as such and are not to be
construed as a representation of facts. The information set forth herein has been furnished by the
Authority, the City and other sources which are believed to be reliable, but is not guaranteed as to
accuracy or completeness, and IS not to be construed as a representation by, the Underwriters. The
information concerningFmancial SecurityAssurance Inc. (the "Insurer") and its municipal bond insurance
policy has been obtained from the Insurer, and is not guaranteed as to accuracy or completeness by, and
is not to be construedas a representation by, the Underwriters, the Authority or the City. The information
concerning CommerzbankAktiengesellschaft, acting through its Los Angeles Branch (the "Bank") has been
obtained from the Bank and is not guaranteed as to accuracy or completeness by, and is not to be
construed as a representation by, the Underwriters, the Authority or the City.
The information and expressions of opinion herein are subject to change without notice, and
neither delivery of this Official Statement nor any sale made hereunder shall, under any circumstances,
create any implication that there has been no change in the information or opinions set forth herein or in
the affairs of the Authority, or the City since the date hereof. This Official Statement, including any
supplement or amendment hereto, is intended to be deposited with one or more repositories.
IN CONNECTIONWITH THIS OFFERING, THE UNDERWRITERS MAY OVERALLOT OR
EFFECT TRANSACTIONS THAT STABILIZE OR MAINTAIN THE MARKET PRICE OF THE
BONDS AT LEVELS ABOVE THOSE WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN
MARKET. SUCH STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME.
This Official Statement and the information contained herein is in a form deemed final by the City
for purposes of complying with Rule 15(c)2-12 under the Securities Exchange Act of 1934, as amended.
TABLE OF CONTENTS
INTRODUCTION . .. . ... . . . . . . . . . . . . . .. . .. I
Purpose. .. . . . . . .. I
The Authority. .. ... . . . . .. . . .. .. I
Authority for Issuance of the Bonds . .. .. 1
Security for the Bonds . " 2
Bond Insurance Policy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. 2
Standby Bond Purchase Agreement for the Bonds .... .. _. .. .. 2
Bonds Constitute Limited Obligations, Sublease Not Debt . 2
Summaries Not Definitive .. .. .. 3
No Contmumg Disclosure; Additional Information 3
THE PLAN OF FINANCE . . . . . . . . . . . .. .. 3
The Refunding . . . . . .. .. . . . . . .. . . . . . . . . . . . . . . . . . . . " 3
ESTIMATED SOURCES AND USES OF FUNDS . .. " 4
THE BONDS . 4
General . 4
Bonds. . . . . . . . . . .. . .. 4
Redemption of the Bonds; Mandatory Tender of Fixed Rate Bonds. .. .. 16
SECURITY AND SOURCE OF PAYMENT FOR THE BONDS . . . . . . . . . .. 18
Pledge Under the Trust Agreement . . . . . . . . .. . .. 18
Base Rental Payments 19
Abatement . .. . .. 20
Default and Remedies . . . . . . . . . . . . . . . . .. 21
Reserve Fund . . . . . . .. .. . 21
Additional Bonds .. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
Swap Agreement for Variable Rate Bonds . . . . . . . . . .. .. 22
BOND INSURANCE . . . . . .. . _.. . .. " 22
Bond Insurance Policy . .. . '" 23
Fmancial Security Assurance Inc " . 23
THE STANDBY AGREEMENT .. _.. . 23
The Bank.. . . . . . . . . . .. . . 23
General .. .. . . . . . .. 24
Purchase of Tendered Bonds by the Bank . 24
Events of Default . .. 24
Consequences of Events of Default . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. 25
Alternate Standby Agreement . . . . . . . . . . . .. 26
THE CITY OF OAKLAND SEWER SYSTEM . . . 26
THE AUTHORITY. . . . . .. . . . .. . 27
THE CITY 27
RISK FACTORS . . . . . . . . . . . . . . . . . .. . . . ~ . 27
Base Rental Payments Not City Debt . . .. 28
Abatement Risk . .. . . . . . . . . . .. 28
No Acceleration Upon Default. 28
Limitation of Remedies . . . . . . . . . . . . . . . . . . .. 29
Rider v. City of San Diego . . . . . . . . . . . ... . . . 30
CONSTITUTIONAL AND STATUTORY LIMITATIONS ON TAXES
AND APPROPRIATIONS . . . . . ... . . . . . . . 30
Article XIII A of the State Constitution " . . . . . . 30
Article XIII B of the State Constitution . . . . .. .. . 31
Statutory Spending Limitations .. 32
Proposition 218: Articles XIII C and XlII D of the State Consntution . 32
Further Initiatives . . . . . . . . . . . . . . . . . . . . " 34
Year 2000 Compliance . . . . . . . . . . . . . . . . . . . 34
TAX MATTERS . . . . . . . " 34
LEGAL MATTERS.. . " . 35
LITIGATION '" . . . . . . . . . . . . " 36
VERIFICATION . . . .. . .. .. 36
RATINGS.. . .. . .. . 36
FINANCIAL ADVISOR. . . . . . . . . . . . . . . . .. 36
REMARKETING AGENTS . . . . .. .. .. 37
UNDERWRITING... 37
NO CONTINUING DISCLOSURE; ADDITIONAL INFORMATION. . . . . . . . . .. .. 37
EXECUTION AND DELIVERY . . . .. . 38
APPENDIX A - CERTAIN INFORMATION CONCERNING THE CITY OF OAKLAND
APPENDIX B - AUDITED FINANCIAL STATEMENTS OF THE CITY OF OAKLAND
APPENDIX C - BOOK-ENTRY SYSTEM
APPENDIX D - SUMMARY OF CERTAIN PROVISIONS OF PRINCIPAL LEGAL DOCUMENTS
APPENDIX E - SPECIMEN BOND INSURANCE POLICY
APPENDIX F - PROPOSED FORM OF OPINION OF CO-BOND COUNSEL
APPENDIX G - CERTAIN INFORMATION CONCERNING THE BANK
11
OAKLAND JOINT POWERS FINANCING AUTHORITY
AUTHORITY GOVERNING BOARD
Elihu M Hams, Chairman
Jane Brunner
Henry Chang, Jr
Ignacio De La Fuente
Nathan MIley
Nancy Nadel
Larry Reid
John Russo
RIchard Spees
CITY OF OAKLAND, CALIFORNIA
CITY COUNCIL
Elihu M Hams, Mayor
Jane Brunner
Henry Chang, Jr
Ignacio De La Fuente
Nathan MIley
CITY OFFICIALS
Nancy Nadel
Larry Reid
John Russo
RIchard Spees
Robert C Bobb
Dolores A Blanchard
George G. Musgrove
Jayne W Wl1hams
Ceda Floyd
Deborah A Edgerly
Barbara A Lloyd
City Manager
Assistant City Manager
ASSIstant City Manager
CIty Attorney
City Clerk
Director of Budget & Finance
Treasury Manager
SPECIAL SERVICES
Co-Bond Counsel
Ornck, Herrington & Sutcliffe LLP
San Francisco, Califorma
Lofton De Lancie
San Francisco, California
Financial Advisor
Public Financial Management, Inc
San Francisco, California
Trustee and Tender Agent
U S Bank Trust National Association
San Francisco, California
Verification Agent
Ernst & Young
Tucson, Anzona
THIS PAGEINTENTIONALLY LEFTBLANK
OFFICIAL STATEMENT
$187,500,000
Oakland Joint Powers Financing Authority
Lease Revenue Bonds
$131,500,000 1998 Series A-I
$56,000,000 1998 Series A-2
INTRODUCTION
This Introduction is subject In all respects to the more complete Information contained elsewhere
in this Official Statement The offering of the Bonds to potential investors IS made only by means of the
entire Official Statement. Capitalized terms used In this Introduction and not otherwise defined herein
shall have the respective meanings assigned to them elsewhere in this Official Statement.
Purpose
The purpose of this Official Statement, which includes the cover page and appendices hereto, is
to set forth certain information concerning the sale and delivery by the Oakland Joint Powers Financing
Authority (the "Authority") of its Lease Revenue Bonds in the aggregate principal amount of
$187,500,000, comprised ofthe 1998Series A-I Bonds in the aggregate principal amount of $131,500,000
and the 1998 Series A-2 Bonds in the aggregate principal amount of $56,000,000 (collectively, the
"Bonds"). The Bonds are being issuedto provide funds for the following purposes (collectively referred
to herein as the "Project"): (i) to refund the City of Oakland Special Refunding Revenue Bonds (pension
Financing) 1988 Series A (the "Prior Bonds"), (ii) to pay capitalized interest on the Bonds, (iii) fund a
reserve fund for the Bonds and (IV) to pay the costs of issuance of the Bonds. See "THE PLAN OF
FINANCE" and "ESTIMATED SOURCES AND USES OF FUNDS" herein.
The Authority
The Authority is a joint exercise of powers agency organized under the laws of the State of
California (the "State") and composed of the City of Oakland (the "City") and the Redevelopment Agency
of the City of Oakland (the "Agency") pursuant to a Joint Exercise of Powers Agreement dated as of
February 1, 1993. The Authority was formed to assist in the financing of public capital improvements,
working capital or liability or other revenue programs. See "THE AUTHORITY" herein.
Authority for Issuance of the Bonds
The Bonds are being issued pursuant to the Marks-Roes Local Bond Poolmg Act of 1985,
constituting Article 4 of Chapter 5 of Division 7 of Title 1 of the Government Code of the State (the
"Bond Act"), a Trust Agreement, dated as of July 1, 1998 (the "Trust Agreement"), by and between the
Authority and U.S Bank Trust National Association, as trustee (the "Trustee"), and pursuant to and 10
accordance with other applicable laws of the State, the City Charter and resolutions adopted by the City
and the Authonty, all as more fully described herein.
Security for the Bonds
The Bonds are limited obligations of the Authority payable solely from Revenues (as defined
herein) of the Authority, consistmg primarily of base rental payments (the "Base Rental Payments")
payable by the CIty to the Authority pursuant to a Sublease, dated as of July 1, 1998 (the "Sublease"), by
and between the Authority, as lessor thereunder, and the City, as lessee thereunder. The Base Rental
Payments to be made by the City are payable by the City from its General Fund for the right to the use
and possession by the City of the portion of the sewer system (the "System") leased under the Sublease
referred to herein as (the "Leased Property").
The Base Rental Payments to be made by the City Will be in amounts calculated to be sufficient
to pay principal of and interest on the Bonds and amounts owing under any Related Obligations (I e.,
amounts owing by the Authority under any bond insurance, reserve insurance, credit agreement, hedge
agreement, liquidity agreement or similar agreement) when due, subject to a maximum annual amount of
$25,100,000. The City has agreed in the Sublease to make all Base Rental Payments and Additional
Payments, subject to the abatement of such Base Rental Payments and Additional Payments m the event
of material damage to or destruction of the Leased Property or taking of the Leased Property in whole
or in part. The City has covenanted in the Sublease to take such action as may be necessary to include the
Base Rental Payments and Additional Payments due under the Sublease in its annual budget, and to make
necessary annual appropriations therefor.
Bond Insurance Policy
Concurrently With the issuance of the Bonds, Financial Security Assurance Inc. (the "Insurer") will
issue its Municipal Bond Insurance Policy for the Bonds (the "Policy"). The Policy guarantees the
scheduled payment of principal of and interest on the Bonds when due as set forth in the form of the
Policy included as an exhibit to this Official Statement. See "BONDINSURANCE" and "APPENDIX E -
SPECIMEN BOND INSURANCE POLICY." The Policy does not insure the payment of the purchase
price upon optional or mandatory tender of the Bonds or the redemption price of the Bonds, other than
mandatory sinking fund redemption.
Standby Bond Purchase Agreement for the Bonds
While the Bonds bear interest at the initial Weekly Interest Rate, Daily Rate, Commercial Paper
Rate or Term Rate (as further described herein), payment of the purchase price of the Bonds that are
tendered but not remarketed will be initially supported by a Standby Bond Purchase Agreement, dated as
of July 16, 1998 (the "Standby Agreement") among the City, Authority, Commerzbank Aktiengesellschaft,
acting through its Los Angeles Branch (the "Bank") and U.S. Bank Trust National Association, as Tender
Agent. The Bank's commitment to purchase Bonds will terminate immediately upon the occurrence of
certain events See "THE STANDBY AGREEMENT" and "APPENDIX G - CERTAIN INFORMATION
REGARDING THE BANK."
Bonds Constitute Limited Obligations; Sublease Not Debt
The Bonds are limited obligations of the Authority and are not secured by a legal or equitable
pledge of, or charge or lien upon, any property of the Authority or any of its income or receipts, except
the Revenues Neither the full faith and credit of the Authority nor the City is pledged for the payment
of the interest on or principal of the Bonds nor for the payment of Base Rental Payments Neither the
payment of the principal of or interest on the Bonds nor the obligation to make Base Rental Payments
2
constitutes a debt, liabrhty or obligation of the City for which the CIty is obligated to levy or pledge any
form of taxation or for which the City has levied or pledged any form of taxation. The Authority has no
taxing power.
Summaries Not Definitive
Brief descriptions of the Bonds, the Authority, the City, and the System, including the Leased
Property, are included in this Official Statement, together with summaries of the Sublease, the Lease, the
Trust Agreement and the Standby Agreement. Such descriptions and summaries do not purport to be
comprehensive or definitive. All references herem to the Bonds, the Sublease, the Lease, the Trust
Agreement and the Standby Agreement are qualified in their entirety by reference to the actual documents,
or WIth respect to the Bonds, the forms thereof included in the Trust Agreement, copies of all of which
are available for inspection at the corporate trust office of the Trustee in San Francisco, California.
No Continuing Disclosure; Additional Information
The offering of the Bonds is exempt from the provisions of Rule 15(c)2-12 (the "Rule") of the
Securities and Exchange Commission. Neither the CIty, the Authority, the Insurer nor the Bank has
covenanted to supply any continuing information to Bondowners with respect to the Bonds, the Authority,
the City, the Insurer or the Bank for purposes of the Rule.
The City regularly prepares a variety of reports, including audits, budgets and related documents,
as well as certain periodic activity reports. Any Bondowner may obtain a copy of any such report, as
available, from the Trustee or the City. Additional information may be obtained by contacting the Trustee
or:
City of Oakland
Budget and Finance Agency
Treasury Division
150 Frank H. Ogawa Plaza, Suite 5330
Oakland, California 94612-2093
Attention: Treasury Manager
Phone' (510) 238-6100
Fax: (510) 238-2137
THE PLAN OF FINANCE
The Refunding
The proceeds of the Bonds will be used to provide a portion of the funds necessary to refund all
of the outstanding City of Oakland Special Revenue Bonds (pension Financing) 1988 Series A (referred
to herein as the "Prior Bonds"), which are outstanding in the aggregate principal amount of $173,675,000.
The Prior Bonds were issued pursuant to an Indenture, dated as of November 1, 1988 (the "1988
Indenture"), by and between the City and U.S. Bank Trust National Association, as successor trustee, in
order to provide funds to refund certain obligations of the City. The Pnor Bonds will be redeemed on
August 1, 1998.
3
ESTIMATED SOURCES AND USES OF FUNDS
The estimated sources and uses of funds with respect to the Bonds are as follows:
Total
Sources:
Pnncipal Amount of the Bonds
Transfer from 1988 Indenture
Swap Premium Payment
TOTAL SOURCES OF FUNDS
Uses
Deposit to Escrow Fund
Deposit to Interest Account
')
Deposit to Reserve Fund
Costs of Issuance and Underwriters' Discount'"
TOTAL USES OF FUNDS
$187,500,000.00
15,326,714.00
617,174.18
$203,443,888.18
$183,481,743.75
328,767 12
17,709,88817
1.923,489 14
$203,443,888.18
(1) Such amount to pay interest on the Bonds through August 3, 1998
(2) Includes legal fees, fees of the Trustee, underwriter's discount, co-structuring agent fee, the premium for
municipal bond insurance, the fees of the Bank, ratmg agencies fees, pnntmg costs and certain miscellaneous
expenses.
THE BONDS
General
The Bonds are being issued in the aggregate principal amount of $187,500,000, comprised of
$131,500,000 aggregate principal amount of Series A-I Bonds and $56,000,000 aggregate principal
amount of Series A-2 Bonds (collectively, the "Bonds"). The Bonds will be issued in fully registered
form, and, when issued, will be registered in the name of Cede & Co., as nominee of The Depository
Trust Company, New York, New York ("DTC"). DTC will act as securities depository of the Bonds.
Ownership interests in the Bonds may be purchased in book-entry form only. Purchasers will not receive
securities certificates representing their interests in the Bonds purchased. Payments of principal of,
premium, if any, and interest on the Bonds will be paid by the Trustee to DTC which is obligated in turn
to remit such principal, premium, if any, and interest to its DTC Participants for subsequent disbursement
to the beneficial owners of the Bonds. See "APPENDIX C - BOOK-ENTRY SYSTEM" herein.
Bonds
The Bonds will be dated their date of delivery and will mature on August I, 2021. The Bonds
will initially be issued at a Weekly Rate Period as determined by the respective Remarketing Agent.
Goldman, Sachs & Co. has been appointed by the Authority as the exclusive remarketing agent
with respect to the Series A-I Bonds and E. J. De La Rosa & Co., Inc. has been appointed by the
Authority as the exclusive remarketing agent with respect to the Series A-2 Bonds (each a "Remarketing
Agent"). The Authority will enter into a Remarketing Agreement with each Remarketing Agent with
respect to the remarketing of Bonds to be remarketed by such Remarketing Agent.
4
The Bonds of each Series (z.e., Series A-I and Series A-2) will be divided mto consecutive Rate
Periods, during which the Variable Rate Bonds of each such series may bear mterest at a Daily Rate,
Weekly Rate, Commercial Paper Rate or Term Rate as described herein. In the event that Variable Rate
Bonds of each series are in different Rate Periods, the description of the Bonds herem shall refer to the
series of Bonds 10 such Rate Penods.
The Bonds bearing interest at a Daily or Weekly Rate are subject to tender for purchase at the
option of the Owners of the Bonds, and under certain circumstances the Bonds are subject to mandatory
tender for purchase, in the manner and at the times described herein. The Bonds are subject to
extraordinary, optional and mandatory redemption pnor to maturity in the manner and at the times
descnbed herein.
When the Bonds bear interest at a Weekly Rate, a Daily Rate or a Commercial Paper Rate (as
described below), the authorized denominations of such Bonds will be $100,000 or any integral multiple
thereof. When the Bonds bear interest at a Term Rate (as described below), the authorized denommations
will be $5,000 or any integral multiple thereof.
Payment ofPrincipal andInterest. The principal of and premium, if any, on the Bonds shall be
payable to the Owners upon surrender thereof at the principal corporate trust office of the Trustee
Interest shall be payable to the registered Owners as of the Record Date (as defined below), such interest
to be paid on any Bonds held 10 book-entry-only form in immediately available funds by no later than
2.30 p.m., New York City time. Otherwise interest shall be payable (i) by bank check mailed by first
class mail on the interest payment date to such Owners or (ii) during any Rate Penod other than a Term
Rate Period, in immediately available funds (by wire transfer or by deposit to the account of the Owner
of any such Bonds if such account IS maintained with the Trustee), but in respect of any Owner of Bonds
in a Weekly Rate Period or Daily Rate Period only to any Owner which owns Bonds in an aggregate
principal amount of at least $1,000,000 on the Record Date and who shall have provided wire transfer
mstructions to the Trustee prior to the close of business on such Record Date; except, in each case, that,
if and to the extent that there shall be a default in the payment of the interest due on such interest payment
date, such defaulted interest shall be paid to the Owners in whose name any such Bonds are registered as
of a special record date to be fixed by the Trustee, notice of which shall be given to such Owners not less
than 10 days pnor thereto. Notwithstanding the foregoing, interest on any Bonds beanng a Commercial
Paper Rate (except any Bonds held 10 book-entry-only form) shall be paid only upon presentation to the
Tender Agent of the Bonds on which such payment IS due.
For any Weekly Rate Period or Daily Rate Period, interest on the Bonds shall accrue to and be
payable on the first Business Day (as hereinafter defined) of each calendar month, and on the Business
Day next succeeding the last day of each Rate Period. For any Commercial Paper Rate Segment, interest
on the Bonds shall be payable on the Business Day next succeeding the last day thereof. For any Term
Rate Penod, interest shall be payable on the first day of the srxth month following the commencement of
the Term Rate Period and the first day of each sixth month thereafter, and on the Business Day next
succeeding the last day of such Term Rate Period. Interest shall be computed, 10 the case of any Weekly
Rate Penod, Dally Rate Period or Commercial Paper Rate Period, on the basis of a 365/366-day year for
the number of days actually elapsed and, 10 the case of a Term Rate Period, on the basis of a 360-day year
consistmg of twelve 30-day months. The Trust Agreement provides that the maximum interest rate on
Bonds (other than Provider Bonds) bearing interest at a Daily Rate, Weekly Rate, Commercial Paper Rate
or Term Rate is 12% per annum.
5
A "Business Day" means a day that is not a Saturday, Sunday or legal holiday on which bank
institutions located in the State of New York or in any state in which the office of the Trustee, the Tender
Agent or the Remarketing Agent are located or at which requests for funds under the Liquidity Facility
or the Policy are made are authorized to remain closed or on which the New York Stock Exchange is
closed.
The "Record Date" for the Bonds is (i) with respect to any interest payment date in respect of any
Weekly Rate Period, Daily Rate Period or Commercial Paper Segment, the Business Day next preceding
such interest payment date, or (ii) with respect to any interest payment date in respect of a Term Rate
Period, the fifteenth day of the month preceding such interest payment date.
Interest Rates and Rate Periods. The term of the Bonds of each Series shall be divided mto
consecutive Rate Periods, during each of which the Bonds of such Series shall bear interest at the Dally
Rate, Weekly Rate, Commercial Paper Rate(s) or Term Rate as described below. Changes in Rate Periods
will be effective and notice of changes of Rate Periods will be given as described herein. Upon notice
from the Bank, the Authority may not change from one Rate Period to another Rate Period without the
prior written consent of the Bank Except as described under clause (2) under "Commercial Paper Rate
Period - Adjustment to Commercial Paper Rates" below, no more than one Rate Period may apply to
the Bonds of one Series at the same time.
Initially, interest on the Bonds WIll be payable in the Weekly Rate mode.
Weekly Rate Period
Weekly Rate. During each Weekly Rate Period, the Bonds shall bear interest at the Weekly Rate
determined by the applicable Remarketmg Agent no later than the first day of such Weekly Rate Period
and thereafter no later than Wednesday of each week during such Weekly Rate Period, unless any such
Wednesday shall not be a Business Day, in which event the Weekly Rate shall be determined by the
Remarketing Agent on the next succeeding Business Day.
The Weekly Rate shall be determined by the Remarketmg Agent (based on an examination of tax-
exempt obligations comparable in the judgment of the Remarketing Agent to the Bonds and known by
the Remarketing Agent to have been priced or traded under then prevailing market conditions) to be the
lowest rate which would enable the Remarketing Agent to sell such Bonds on the effective date of such
rate at a price (without regard to accrued interest) equal to 100% of the principal amount thereof In the
event the Remarketing Agent fails to establish a Weekly Rate for any week, then the Weekly Rate for such
seek shall be the same as the Weekly Rate or the immediately preceding week if the Weekly Rate for such
preceding week was determined by the Remarketing Agent. In the event that the Weekly Rate for the
immediately preceding week was not determined by the Remarketing Agent, or in the event that the
Weekly Rate determined by the Remarketing Agent shall be held to be invalid or unenforceable by a court
of law, then the interest rate for such week shall be equal to 100% of the Bond Market Association
Mumcipal Swap Index, or Its successors or assigns, made available for the week preceding the date of
determination, or if such index is no longer available, or no such index was so made available for the
week preceding the date of determination, 75% of the interest rate on 30-day high grade unsecured
commercial paper notes sold through dealers by major corporations as reported in The Wall Street Journal
on the day the Weekly Rate would otherwise be determined as provided in the Trust Agreement for such
Weekly Rate Period. In no event shall any Weekly Rate be greater than 12% per annum.
6
In the event the Liquidity Facility Provider is not then obligated to purchase the Bonds or if the
Liquidity Facility Provider is in default on its purchase obligation under the Liquidity Facility, the interest
rate on the Bonds shall be equal to 100% of the Bond Market Association Municipal Swap Index, or its
successors or assigns, made available for the week preceding the date of determination, or if such index
is no longer available, or no such index was so made available, for the week preceding the date of
determination, 75% of the interest rate on 3D-day high grade unsecured commercial paper notes sold
through dealers by major corporations as reported in The Wall Street Journal on the day the Weekly Rate
would otherwise be determined as provided in the Trust Agreement for such Weekly Rate Period. In no
event shall any Weekly Rate be greater than 12% per annum.
Adjustment to Weekly Rate. The interest rate borne by the Bonds shall be adjusted to a Weekly
Rate upon receipt by the Trustee, the Paying Agent, the Bank, the Insurer and the Remarketing Agent of
a written notice by the Authority, which notice (1) shall specify the effective date of such adjustment to
a Weekly Rate which shall be (a) a Business Day not earlier than the 12th day (15th day if the then
current Rate Period is a Term Rate Period or if such Bonds are then held in book-entry-only form)
following the third Business Day after receipt by the Trustee and the Paying Agent of such notice (or such
shorter period after the date of such receipt as is acceptable to the Paying Agent), (b) in the case of an
adjustment from a Term Rate Period, a day on which the Bonds could be redeemed at the option of the
Authority or the day Immediately following the last day of the then current Term Rate Period, and (c) in
the case of an adjustment from a Commercial Paper Rate Period, either the day immediately following
the last day of the then current Commercial Paper Rate Period or, for each Bond, the day immediately
following the last day of the last Commercial Paper Segment for such Bonds in the then current
Commercial Paper Rate Period, all as determined in accordance with clause (1) or (2), respectively, under
"Commercial Paper Rate Period - Adjustment to Commercial Paper Rates" below; provided, however, that
if prior to the Authority's making such election, any Bonds shall have been called for redemption and such
redemption shall not have theretofore been effected, the effective date of such Weekly Rate Period for all
Bonds shall not precede such redemption date; and (2) shall be accompanied by an opinion of bond
counsel as required by the Trust Agreement.
Notice of Adjustment to Weekly Rate. The Trustee shall give notice by mail of an adjustment
to a Weekly Rate Period to the Owners of the affected Bonds not less than 12 days (15 days if the then
current Rate Period is a Term Rate Period or if the Bonds are then held in book-entry-only form) prior
to the effective date of such Weekly Rate Period. Such notice shall state (1) that the interest rate on the
Bonds will be adjusted to a Weekly Rate, (2) the effective date of such Weekly Rate Period, (3) that the
Bonds are subject to mandatory tender for purchase on such effective date, (4) the procedures for such
mandatory tender, and (5) that the Owners of the Bonds do not have the right to retain their Bonds on
such effective date.
Daily Rate Period
Daily Rate Dunng each Daily Rate Period, the Bonds shall bear interest at the Daily Rate, which
shall be determined by the applicable Remarketing Agent for each Business Day either on such Busmess
Day or on the next preceding Business Day and which may be determined by the Remarketing Agent for
any day that IS not a Business Day on any such day during which there shall be active trading in tax-
exempt secunties comparable to such Bonds for such day.
The Daily Rate will be the lowest rate determined by the Remarketing Agent (based on an
examination of tax-exempt securities comparable in the judgment of the applicable Remarketing Agent
to such Bonds and known by the Remarketing Agent to have been priced or traded under then prevailing
7
market conditions) which would enable the Remarketing Agent to sell such Bonds on the effective date
of such rate at a price (without regard to accrued interest) equal to 100% of the principal amount thereof
In the event that the Remarketing Agent fails to establish a Daily Rate for any day, then the Daily Rate
for such day shall be the same as the Daily Rate for the Immediately preceding Business Day if the Daily
Rate for such preceding Business Day was determined by the Remarketing Agent. In the event that the
Daily Rate for the immediately preceding day was not determined by the Remarketing Agent, or m the
event that the Daily Rate deterrnmed by the Remarketing Agent shall be held to be invalid or
unenforceable by a court of law, then the interest rate for such day shall be equal to 100% of the Bond
Market Association Municipal Swap Index made available for the week preceding the date of
determination, or if such index is no longer available, or no such index was so made available for the
week preceding the date of determination, 75% of the interest rate on 30-day high grade unsecured
commercial paper notes sold through dealers by major corporations as reported in The Wall Street Journal
on the day the Daily Rate would otherwise be determined as provided in the Trust Agreement for such
Daily Rate Period. In no event shall the Daily Rate be greater than 12% per annum.
Adjustment to Daily Rate. The interest rate borne by the Bonds will be adjusted to a Daily Rate
upon receipt by the Trustee, the Paying Agent, the Bank, the Insurer and the Remarketing Agent of a
written notice from the Authority, which notice (1) shall specify the effective date of the adjustment to
a Daily Rate which shall be (a) a Business Day not earlier than the 12th day (15th day if the then current
Rate Period IS a Term Rate Period or if such Bonds are then held in book-entry-only form) following the
third Business Day after the receipt by the Trustee and the Paying Agent of such notice (or such shorter
period after the date of such receipt as is acceptable to the Paying Agent), (b) in the case of an adjustment
from a Term Rate Period, a day on which such Bonds could be redeemed at the option of the Authonty
or the day immediately following the last day of the then current Term Rate Period, and (c) in the case
of an adjustment from a Commercial Paper Rate Period, either the day immediately following the last day
of the then current Commercial Paper Rate Period or, for each Bond, the day immediately following the
last day of the last Commercial Paper Segment for such Bonds in the then current Commercial Paper Rate
Penod, all as determined in accordance with clause (I) or (2), respectively, under "Commercial Paper Rate
Period-Adjustment to Commercial Paper Rates" below; provided, however, that if prior to the Authonty's
making such election, any Bonds shall have been called for redemption and such redemption shall not
have theretofore been effected, the effective date of such Daily Rate Period for all Bonds shall not precede
such redemption date, and (2) shall be accompanied by an opinion of bond counsel as required by the
Trust Agreement.
Notice ofAdjustment to Daily Rate. The Trustee shall give notice by mail of an adjustment to
a Daily Rate Period to the Owners of such Bonds not less than 12 days (15 days if the then current Rate
Period is a Term Rate Period or if such Bonds are then held in book-entry-only form) prior to the
effective date of such Daily Rate Period. Such notice shall state (1) that the interest rate on such Bonds
will be adjusted to a Daily Rate, (2) the effective date of such Daily Rate Period, (3) that such Bonds are
subject to mandatory tender for purchase on such effective date, (4) the procedures for such mandatory
tender, and (5) that the Owners of the Bonds do not have the right to retain their Bonds on such effective
date.
Commercial Paper Rate Period
Commercial Paper Segments andCommercial Paper Rates. Dunng each Commercial Paper Rate
Period, each affected Bond shall bear interest during each Commercial Paper Segment for such Bond at
the Commercial Paper Rate for such Commercial Paper Segment.
8
Each Commercial Paper Segment for any Bonds shall be a period ending on a day immediately
preceding a Business Day, of not less than one nor more than 90 days, determined by the Remarketing
Agent to be, in its judgment, the period which, together with all other Commercial Paper Segments for
all Bonds then outstanding for which it IS the Remarketing Agent, is likely to result in the lowest overall
net interest expense on the Bonds Any Bonds purchased on behalf of the Authority and remaining unsold
by the Remarketing Agent as of the close of business on the effective date of the Commercial Paper
Segment for such Bonds will have a Commercial Paper Segment of one day, or, if such Commercial Paper
Segment would end on a day which does not precede a Business Day, a Commercial Paper Segment of
more than one day ending on the first day immediately preceding the next succeeding Business Day. No
Commercial Paper Segment shall extend beyond the final maturity date of the Bonds. If, for any reason,
the Remarketing Agent fails or is unable to determine a Commercial Paper Segment on any Bonds, the
Commercial Paper Segment for such Bonds shall be one day, or, if such Commercial Paper Segment
would end on a day which does not precede a Business Day, such Commercial Paper Segment shall end
on the first day immediately preceding the Business Day next succeeding such day. In determining the
number of days in each Commercial Paper Segment, the Remarketing Agent shall take into account the
following factors: (1) existing short-term tax-exempt market rates and indices of such short-term rates,
(II) the existmg market supply and demand for short-term tax-exempt securities, (III) existing yield curves
for short-term and long-term tax-exempt securities for obligations of credit quality comparable to the
Bonds, (IV) general economic conditions, (V) economic and financial conditions that may affect or be
relevant to the Bonds, (VI) the Commercial Paper Segment of other Bonds and (VII) such other facts,
circumstances and conditions pertaining to financial markets as the Remarketing Agent, in its sole
discretion, shall determine to be relevant.
The Commercial Paper Rate for each Commercial Paper Segment for each Bond shall be the rate
determined by the Remarketing Agent (based on an examination of tax-exempt obligations comparable
to the Bonds in the judgment of the Remarketing Agent and known by the Remarketing Agent to have
been priced or traded under then prevailing market conditions) to be the lowest rate which would enable
the Remarketing Agent to sell such Bonds on the effective date of each rate at a price (without regard to
accrued interest) equal to 100% of the principal amount thereof. If a Commercial Paper Rate for a
Commercial Paper Segment of one day is not determined or effective, the Commercial Paper Rate for such
Commercial Paper Segment shall be the rate per annum equal to 75% of the interest rate on high grade
unsecured commercial paper notes sold through dealers by major corporations as reported by The Wall
Street Journal on the first day of such Commercial Paper Segment and which maturity most nearly equals
the Commercial Paper Segment for which a Commercial Paper Rate is being calculated. In no event shall
the Commercial Paper Rate for any Bond exceed 12% per annum.
Adjustment to Commercial Paper Rates. The interest rate borne by the Bonds shall be adjusted
to Commercial Paper Rates upon receipt by the Trustee, the Paying Agent, the Bank, the Insurer and the
Remarketing Agent of a written notice from the Authonty, which notice (1) shall specify the effective date
of the Commercial Paper Rate Penod which shall be (a) a Business Day not earlier than the 12th day
(15th day if the then current Rate Period is a Term Rate Period or if such Bonds are then held in book-
entry-only form) following the third Business Day after the date of receipt by the Trustee and the Paying
Agent of such notice (or such shorter period after the date of such receipt as shall be acceptable to the
Paying Agent) and (b) in the case of an adjustment from a Term Rate Period, a day on which the Bonds
could be redeemed at the option of the Authority or the day immediately following the last day of such
Term Rate Period; provided, however, that if prior to the Authority making such election any Bonds have
been called for redemption and redemption has not yet been effected, the effective date of the Commercial
Paper Rate Period for all Bonds shall not precede such redemption date, and (2) shall be accompanied by
an opinion of bond counsel as required by the Trust Agreement.
9
Notice 0/ Adjustment to Commercial Paper Rates. The Trustee shall give notice by mail of an
adjustment to a Commercial Paper Rate Period to the Owners of the Bonds not less than 12 days (15 days
If the then current Rate Penod IS a Term Rate Period or if such Bonds are then held in book-entry-only
form) prior to the effective date of such Commercial Paper Rate Period. Such notice shall state (I) that
the interest rate on such Bonds will be adjusted to Commercial Paper Rates, (2) the effective date of such
Commercial Paper Rate Penod, (3) that such Bonds are subject to mandatory tender for purchase on such
effective date (4) the procedures for such mandatory tender, and (5) that the Owners of such Bonds do
not have the right to retain their Bonds on such effective date.
Adjustment/rom Commercial Paper Rates. At any time during a Commercial Paper Rate Period,
the mterest rate borne by the Bonds shall be adjusted from Commercial Paper Rates and the Bonds shall
instead bear interest as otherwise permitted m the Trust Agreement, upon receipt by the Trustee, the
Paying Agent, the Bank, the Insurer and the Remarketmg Agent of wntten notice from the Authority
specifymg the Rate Period to follow with respect to the Bonds and instructing the Remarketing Agent to
(I) determine Commercial Paper Segments of such duration that, as soon as possible,
all Commercial Paper Segments shall end on the same date, not earlier than the 11th day (14th
day if such Bonds are then held in book-entry-only form) following the third Business Day (or
such shorter period acceptable to the Paying Agent) following the receipt by the Trustee and the
Paying Agent of notice from the Authority, which date shall be the last day of the then current
Commercial Paper Rate Period, and, upon the establishment of such Commercial Paper Segments,
the day next succeeding the last day of all such Commercial Paper Segments shall be the effective
date of the Daily Rate Period, Weekly Rate Penod or Term Rate Period selected by the Authority;
or
(2) determine Commercial Paper Segments of such duration as will, m the Judgment
of the Remarketing Agent, best promote an orderly transition to the new Rate Period beginning
not earlier than the 11th day (14th day if such Bonds are then held in book-entry-only form)
following the third Business Day (or such shorter period acceptable to the Paying Agent) after the
receipt by the Trustee and Remarketing Agent of the notice of such selection of the Authonty
If the Authority selects alternative (2) above, the day next succeeding the last day of the
Commercial Paper Segment for each Bond shall be, With respect to such Bond, the effective date of the
Daily Rate Penod, Weekly Rate Period or Term Rate Period selected by the Authority. An adjustment
from a Commercial Paper Rate Period described in this paragraph may result in some of the Bonds
bearing interest at a Daily Rate, Weekly Rate or Term Rate while other Bonds continue to bear interest
at Commercial Paper Rates.
Term Rate Period
Term Rate. Dunng each Term Rate Period, the Bonds shall bear interest at the Term Rate to
remain in effect for a Term Rate Period of at least six months, which shall be determined by the
applicable Remarketing Agent on a Business Day selected by the Remarketing Agent, but not more than
30 days prior to and not later than the effective date with respect to any Bonds for such Term Rate Period
The Term Rate shall be the lowest rate determined by the Remarketing Agent on such date, and
communicated on such date to the Trustee, the Insurer and the Authority (based on an examination of tax-
exempt obligations comparable in the judgment of the Remarketing Agent to such Bonds and known by
the Remarketing Agent to have been priced or traded under then prevailing market conditions) which
10
would enable the Remarketing Agent to sell such Bonds on the effective date of such Term Rate Period
at a price (without regard to accrued Interest) equal to 100% of the principal amount thereof. If, for any
reason, a Term Rate for any Term Rate Period IS not determined or effective or if an adjustment from a
Term Rate Period to another Rate Period IS not effective, the Bonds shall be deemed to bear interest at
a Commercial Paper Rate and have a Commercial Paper Segment of one day (unless such Commercial
Paper Segment would end on a day which does not precede a BUSiness Day, in which case such
Commercial Paper Segment shall end on the first day immediately preceding the Business Day next
succeeding such day) and the Commercial Paper Rate shall be equal to the rate per annum equal to 75%
of the interest rate on high grade unsecured commercial paper notes sold through dealers by major
corporations as reported by The Wall Street Journal on the first day of such Commercial Paper Segment
and which maturity most nearly equals the Commercial Paper Segment for which a Commercial Paper
Rate is being calculated. In no event shall any Term Rate be greater than 12% per annum.
Adjustment to or Continuation of Term Rate. The interest rate borne by the Bonds shall be
adjusted to or continued as a Term Rate upon receipt by the Trustee, the Paying Agent, the Bank, the
Insurer and the Remarketing Agent of a written notice from the Authority. Such notice shall specify the
effective date of a Term Rate Period during which such Bonds shall bear interest at such Term Rate,
which effective date shall be (I) a Business Day not earlier than the 12th day (15th day if the then current
Rate Period is a Term Rate Period or if such Bonds are then held In book-entry-only form) following the
third BUSiness Day after receipt by the Trustee and the Paying Agent of such notice (or such shorter
period after the date of such receipt as shall be acceptable to the Paying Agent), (2) in the case of an
adjustment from a Term Rate Period, a day on which such Bonds could be redeemed at the option of the
Authority or the day immediately following the last day of the then current Term Rate Period, and (3) in
the case of an adjustment from a Commercial Paper Rate Penod, either the day immediately following
the last day of the then current Commercial Paper Rate Period or, for each Bond, the day immediately
following the last day of the last Commercial Paper Segment for such Bond in the then current
Commercial Paper Rate Period, all as determined in accordance with clause (I) or (2), respectively, under
"Commercial Paper Rate Period - Adjustment from Commercial Paper Rates," provided, however, that if
prior to the Authority's making such election, any Bonds shall have been called for redemption and such
redemption shall not have theretofore been effected, the effective date of such Term Rate Period for all
Bonds shall not precede such redemption date. Prior to the Initial conversion to a Term Rate Period, the
Authonty shall provide to the Trustee confirmation from the ratmg agencies then rating the Bonds of the
rating on the Bonds during the Term Rate Period.
On or before the Business Day next preceding the effective date specified in such notice of
adjustment to or continuation of a Term Rate for the Bonds, the Authority shall grve written notice to the
Insurer, the Trustee, the Paying Agent and the Remarketing Agent, which notice (l) shall specify the last
day of such Term Rate Period, (2) may elect two or more consecutive Term Rate Periods and the duration
of each such Term Rate Period, (3) may elect that such Term Rate Period shall be automatically renewed
for successive Term Rate Periods each having the same duration as the Term Rate Period so specified,
provided, however, that if the last day of any such successive Term Rate Period shall not be a day
immediately preceding a Business Day, then such successive Term Rate Period shall end on the first day
immediately preceding the BUSiness Day next succeeding such day, or if such day would be after the day
preceding the maturity date of the Bonds, such succeeding Term Rate Period shall end on the maturity
date of the Bonds, and (4) may specify for such Term Rate Period(s) optional redemption provisions,
prices and periods different from those set forth In the Trust Agreement, and shall be accompanied by an
opinion of bond counsel as required by the Trust Agreement.
11
If, by the date required to give notice to the Owners of such Bonds as required by the Trust
Agreement, the Trustee has not received the Authority's notice of an adjustment to Commercial Paper
Rates, the Daily Rate, the Weekly Rate or the Term Rate and accompanied by an appropriate opmion of
bond counsel, the Bonds shall be deemed to bear interest at a Commercial Paper Rate and have a
Commercial Paper Segment of one day (unless such Commercial Paper Segment would end on a day
which does not precede a Business Day, in which case such Commercial Paper Segment shall end on the
first day immediately preceding the Business Day next succeeding such day) and the Commercial Paper
Rate shall be equal to 75% of the interest rate on high grade unsecured commercial paper notes sold
through dealers by major corporations as reported by The Wall Street Journal on the first day of such
Commercial Paper Segment and which maturity most nearly equals the Commercial Paper Segment for
which a Commercial Paper Rate is being calculated by the Remarketing Agent.
On the proposed effective date of an adjustment to or continuation of the Term Rate apphcable
to the Bonds, the Remarketmg Agent shall notify the Liquidity Facility Provider, the Tender Agent and
the Trustee whether or not it has remarketed all such Bonds subject to mandatory tender for purchase
pursuant to the Trust Agreement. In the event that all such Bonds have not been so remarketed, all such
Bonds shall nevertheless continue to be subject to mandatory tender for purchase but the proposed
adjustment to or continuation of the Term Rate shall not become effective for any Bonds and in lieu
thereof such Bonds shall be deemed to bear interest at a Commercial Paper Rate and have a Commercial
Paper Segment of one day (unless such Commercial Paper Segment would end on a day which does not
precede a Business Day, in which case such Commercial Paper Segment shall end on the first day
Immediately preceding the Business Day next succeeding such day) and the Commercial Paper Rate shall
be equal to 75% of the interest rate on high grade unsecured commercial paper notes sold through dealers
by major corporations as reported by The Wall Street Journal on the first day of such Commercial Paper
Segment and which maturity most nearly equals the Commercial Paper Segment for which a Commercial
Paper Rate IS being calculated by the Remarketing Agent.
Notice ofAdjustment to or Continuation of Term Rate. The Trustee shall give notice by mail
of an adjustment to or continuation of a Term Rate Period to the Owners of the affected Bonds not less
than 12 days (15 days if the then current Rate Period is a Term Rate Period or if such Bonds are then held
in book-entry-only form) prior to the effective date of such Term Rate Period. Such notice shall state (I)
that the Interest rate on such Bonds will be adjusted to, or continue to be, a Term Rate, (2) the effective
date of the Term Rate Period, (3) that such Bonds shall be subject to mandatory tender for purchase on
such effective date, (4) the procedures for such mandatory tender, and (5) that the Owners of such Bonds
do not have the right to retain their Bonds on such effective date.
Opinion of Counsel
The adjustment from one Interest rate penod to another is conditioned in each case on the delivery
by nationally recognized bond counsel of an opmion to the effect that the adjustment is authorized or
permitted by the Trust Agreement and apphcable law and will not, in and of itself, adversely affect any
exclusion from gross income for federal income tax purposes of interest on the Bonds.
Determinations Binding
The establishment and determmation of the various interest rates and the various Rate Periods
referred to above shall be conclusive and binding upon the Remarketing Agent, the Trustee, the Authority
and the Owners of the Bonds.
12
Rescission of Election
Notwithstanding anything 10 the Trust Agreement to the contrary, the Authority may rescind any
election by It to adjust to or contmue a Rate Penod with respect to Bonds as described above prior to the
effective date of such adjustment or continuation by giving written notice thereof to the City, the Bank,
the Trustee, the LIqUIdIty Facility Provider and the Remarketing Agent prior to such effective date If
the Trustee receives notice of such rescission prior to the time the Trustee has given notice to the Owners
of the Bonds, then such notice of adjustment or continuation shall be of no force and effect. If the
Trustee receives notice from the Authority of rescission of an adjustment to or continuation of a Rate
Period after the Trustee has grven notice thereof to the Owners of the Bonds, then the Rate Penod for the
Bonds shall automatically adjust to a Commercial Paper Rate Period on the date originally scheduled for
such adjustment or continuation. No opinion of nationally recognized bond counsel shall be required 10
connection with the automatic adjustment to a Commercial Paper Rate Period pursuant to this paragraph
If a Commercial Paper Rate for the first day of such Commercial Paper Rate Period is not determmed as
provided under "Commercial Paper Rate Period--Adjustment to Commercial Paper Rates", the Commercial
Paper Rate for the first day of such Commercial Paper Rate Penod shall be the rate of interest per annum
equal to 75% of the interest rate on high grade unsecured commercial paper notes sold through dealers
by major corporations as reported by The Wall Street Journal on the first day of such Commercial Paper
Segment and which maturity most nearly equals the Commercial Paper Segment for which a Commercial
Paper Rate is being calculated by the Remarketing Agent.
Mandatory Tender for Purchase of Bonds
The Bonds are subject to mandatory tender for purchase at a purchase price equal to the pnncipal
amount thereof plus accrued interest, if any, upon the occurrence of any of the following events:
(a) on the effective date of any change in a Rate Penod for such Bonds;
(b) as to each Bond in a Commercial Paper Rate Period, on the day next succeeding
the last day of any Commercial Paper Segment with respect to such Bonds;
(c) on a Business Day designated by the Trustee, which day shall not be more than
15 days following receipt by the Trustee of notice from the Bank that an "Event of Default" has
occurred under the Liquidity Agreement with respect to such Bonds, and such "Event of Default"
does not terminate the obligations of the Bank under the Liquidity Agreement prior to the date
of such mandatory tender,
(d) on the Business Day not later than 5 days preceding the Expiration Date of any
Liquidity Facility, including the Standby Agreement with respect to the Bonds; or
(e) as to all Bonds of a Senes, on the Substitution Date WIth respect to such Series
The Bonds are also subject to mandatory tender for purchase on the day next succeeding any Term
Rate Penod which ends prior to the day originally established as the last day of such Term Rate Penod,
at a purchase price equal to the principal amount thereof plus an amount equal to any premium which
would have been payable on such day had the Authority directed optional redemption of such Bonds on
that day
13
The Trustee shall give notice to the Owners of the Bonds of the termination of any Liquidity
Facility and of the provision of any proposed Alternate Liquidity Facility, not less than 15 days prior to
such termination.
Owner Option to Tender for Purchase
During a Daily Rate Penod or a Weekly Rate Period the Bonds shall be purchased by the Tender
Agent from remarketing proceeds or funds received from the Authority or any Liquidity Facility then
available for such purpose, at the election of the Owners thereof at the times and subject to the condrnons
described below Payments for Bonds purchased will be made by the close of business on the dates
specified by the Owners thereof for purchase, if the conditions for such purchase described below have
been strictly complied Withby the Owners. Each Bond must be accompanied by an instrument of transfer
(which may be the form pnnted on the Bonds) executed in blank by its owner or his duly authorized
attorney, with such signature guaranteed by a guarantor institution participating in a guarantee program
acceptable to the Tender Agent. The Tender Agent may refuse to accept delivery of any Bonds for which
a proper instrument of transfer has not been provided, If any Bonds is to be purchased in part, the amount
purchased and the amount not purchased must each be an authorized denomination.
The term "Owner" or "Bondowner" generally means the registered owner of any Bonds However,
at any time Bonds are held m book-entry-only form, (i) such terms shall also mean any beneficial owner,
or nornmee of such beneficial owner, of Bonds for purposes of tendering Bonds for purchase at the option
of the Owner, as described m "Exercise of Tender Option Rights Relating to Book-Entry Bonds" below,
but not for purposes of receiving payment thereon or notices With respect thereto, (ii) Bonds need not be
delivered m connection with any Owner option to tender, and all references to physical delivery of such
Bonds shall be ineffective. See "Exercise of Tender Option Rights Relating to Book-Entry Bonds" below.
Owner Tender for Purchase - Daily Rate Period. During any Daily Rate Period, any Bonds (or
portions thereof in authorized denommations) shall be purchased at the election of the Owner on any
Business Day at a purchase price equal to the pnncipal amount thereof plus accrued interest, if any, to
the date of purchase upon:
(a) dehvery to the Tender Agent at the pnncipal office of the Tender Agent, not later
than II :00 a.m., New York time, on such Business Day, of an irrevocable notice in writing or by
telephone which states the principal amount of such Bonds to be purchased and the date of such
purchase; and
(b) delivery of such Bonds to the Tender Agent at or pnor to 1:00 p.m , New York
time, on such Business Day
If, after the giving of such Irrevocable notice, delivery of such Bonds fails to occur, such Bonds shall be
deemed to have been delivered and will be purchased and the former Owner will have no claim under the
Trust Agreement except for the payment of the purchase pnce.
Owner Tender for Purchase - Weekly Rate Period. During any Weekly Rate Period, any Bonds
(or portions thereof in authorized denominations) shall be purchased at the election of the Owner on any
Business Day at a purchase price equal to the pnncipal amount thereof plus accrued interest, if any, to
the date of purchase upon:
14
(a) delivery to the Tender Agent at the pnncipal office of the Tender Agent of an
irrevocable wntten notice or telephonic notice confirmed in writing by 5.00 p.m., New York time,
on any Business Day which states the principal amount of such Bonds to be so purchased and the
date on which such Bonds is to be purchased, which date shall be a Busmess Day not prior to the
seventh day next succeeding the date of the delivery of such notice; and
(b) delivery of such Bonds to the Tender Agent at or prior to 1'00 p.m., New York
time, on the date specified in such notice.
If, after the giving of such irrevocable notice, delivery of such Bonds fails to occur, such Bonds
shall be deemed to have been delivered and will be purchased and the former Owner will have no claim
under the Trust Agreement except for the payment of the purchase price.
Exercise of Tender Option Rights Relating to Book-Entry Bonds
FOR SO LONG AS THE BONDS ARE REGISTERED IN THE NAME OF CEDE & CO., AS
NOMINEE FOR DTC, THE TENDER OPTION RIGHTS OF OWNERS OF BONDS MAYBE
EXERCISED ONLY BY ADIRECT PARTICIPANT OF DTCACTING, DIRECTLYORINDIRECTLY,
ON BEHALF OF A BENEFICIAL OWNER OF BONDS BY GIVING NOTICE OF ITS ELECTION TO
TENDER BONDS OR PORTIONS THEREOF AT THE TIMES AND IN THE MANNER DESCRIBED
ABOVE. BENEFICIAL OWNERS WILL NOT HAVE ANY RIGHTS TO TENDER BONDS
DIRECTLY TO THE TENDER AGENT. PROCEDURES UNDER WIllCH A BENEFICIAL OWNER
MAY DIRECT A DIRECT PARTICIPANT OF DTC, OR AN INDIRECT PARTICIPANT OF DTC
ACTING THROUGH A DIRECT PARTICIPANT OF DTC, TO EXERCISE A TENDER OPTION
RIGHT IN RESPECT OF BONDS OR PORTIONS THEREOF IN AN AMOUNT EQUAL TO ALL OR
A PORTION OF SUCH BENEFICIAL OWNER'S BENEFICIAL OWNERSHIP INTEREST THEREIN
SHALL BE GOVERNED BY STANDING INSTRUCTIONS AND CUSTOMARY PRACTICES
DETERMINED BY SUCH DIRECT PARTICIPANT OR INDIRECT PARTICIPANT. FOR SO LONG
AS THE BONDS ARE REGISTERED IN THE NAME OF CEDE & CO., AS NOMINEE FOR DTC,
DELIVERY OF BONDS REQUIRED TO BE TENDERED FOR PURCHASE SHALL BE EFFECTED
BY THE TRANSFER BY A DIRECT PARTICIPANT ON THE APPLICABLE PURCHASE DATE OF
A BOOK-ENTRY CREDIT TO THE ACCOUNT OF THE TENDER AGENT OF A BENEFICIAL
INTEREST IN SUCH BONDS.
Payment of Purchase Price
If moneys sufficient to pay the purchase price of Bonds to be purchased as described above under
"Mandatory Tender for Purchase" and "Owner Option to Tender for Purchase" shall be held by the Tender
Agent on the date such Bonds are to be purchased, such Bonds shall be deemed to have been purchased,
irrespective of whether or not such Bonds shall have been delivered to the Tender Agent, and the former
Owner will have no claim under the Trust Agreement or otherwise except for the payment of the purchase
pnce.
Payment of the purchase price of any such Bonds shall be made in immediately available funds
(except in clearinghouse funds for Bonds in Term Rate Periods unless such Bonds are held in book-entry-
only form), but only upon presentation and surrender of such Bonds to the Tender Agent (except for
Bonds held in book-entry-only form) Payment of the purchase price of any such Bonds held in book-
entry-only form shall be made by 2.30 p.m., New York City time Funds for the payment of purchase
price shall be made solely from the following sources first from Immediately available funds in the
15
Remarketmg Proceeds Account and then from funds on deposit in the Liquidity Deposit Account. Neither
the Tender Agent nor the Remarketmg Agent will be obligated to provide funds from any other source.
Remarketing of Bonds
Each Remarketing Agent shall use its best efforts to remarket any Bonds required to be purchased
as described above which It has agreed to remarket pursuant to the applicable Remarketmg Agreement
Any Bonds so remarketed shall remain outstanding and may again become subject to purchase.
Summary of Certain Provisions of the Bonds. The table appearing at the front of this Official
Statement entitled "SUMMARY OF CERTAIN PROVISIONS OF THE BONDS" summarizes the dates
on which interest will be paid, the record dates applicable thereto, the dates each interest rate will be
determmed, the penod each interest rate will be in effect, the requirements for notice to registered owners
of Interest rate adjustments, the dates on which Bonds are subject to mandatory tender for purchase, the
dates on which registered owners may tender their Bonds for purchase to the Tender Agent and the
requirements in order to change from one Rate Period to a new Rate Period. (All times shown are New
York City tune.) The table does not purport to summarize all material provisions of the Bonds, and IS
subject in all respect to the terms of the Trust Agreement. See "APPENDIX D - SUMMARY OF
CERTAIN PROVISIONS OF PRINCIPAL LEGAL DOCUMENTS - TRUST AGREEMENT" for a
further summary of the provisions of the Trust Agreement
Redemption of the Bonds; Mandatory Tender of Fixed Rate Bonds
Extraordinary Redemption
The Bonds are subject to extraordinary redemption by the Authority on any date prior to their
respective stated maturities, upon notice as provrded in the Trust Agreement, as a whole or in part by lot
within each stated maturity of the Bonds, in authorized denominations, from prepayments made by the
City from the net proceeds received by the City due to a taking of the Leased Property or portions thereof
under the power of emment domam, or from the net proceeds of insurance received for material damage
to or destruction of the Leased Property or portions thereof, under the circumstances described in the Trust
Agreement and the Sublease, at a redemption price equal to the principal amount of the Bonds to be
redeemed and accrued Interest thereon to the date of redemption, without premium. If less than all
outstanding Bonds are to be redeemed on anyone date, the Trustee shall select such Bonds to be
redeemed so that the aggregate annual debt service on the Bonds which will be payable after such
redemption date will be as nearly proportional as practicable to the aggregate annual debt service on the
Bonds outstanding pnor to such redemption date, except that any Provider Bonds shall be redeemed first
Mandatory Sinking Fund Redemption
The Bonds are subject to mandatory smking fund redemption prior to their respective stated
matunties, In part on August 1 of each year on and after August 1,2000, by lot, from and in the amount
of the mandatory sinking account payments due and payable on such dates, at a redemption price equal
to the sum of the pnncipal amount thereof, plus accrued interest thereon, to the redemption date, Without
premium, In the amounts and on the dates set forth below (subject to notification In the event of
extraordinary redemption and mandatory tender as described above):
16
1998 Senes A-I Term Bonds
(Due August 1,2021)
1998 Senes A-2 Term Bonds
(Due August I, 2021)
Sinking Fund
Payment Date
(August l)
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
2021t
t Fmal Maturity.
Mandatory
Sinking Account
Payments
$ 4,800,000
6,800,000
6,700,000
6,600,000
6,400,000
6,300,000
6,200,000
6,100,000
6,000,000
5,800,000
5,700,000
5,500,000
5,400,000
5,300,000
5,100,000
5,000,000
4,800,000
4,700,000
4,600,000
4,600,000
4,500,000
14,600,000
Sinking Fund
Payment Date
(August 1)
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
2021t
Mandatory
Sinking Account
Payments
$ 2,000,000
2,900,000
2,800,000
2,800,000
2,800,000
2,700,000
2,700,000
2,600,000
2,500,000
2,500,000
2,400,000
2,400,000
2,300,000
2,200,000
2,200,000
2,100,000
2,000,000
2,000,000
1,900,000
1,900,000
1,900,000
6,400,000
Optional Redemption
Optional Redemption During Term Rate Period. During any Term Rate Period and on the day
next succeeding the last day of each such Rate Period, the Bonds may be redeemed at the option of the
Authority, in whole or in part, and if in part by lot, at any time, at the redemption prices, plus accrued
interest, if any, to the redemption date all as provided in the Trust Agreement.
Optional Redemption During Weekly or Daily Rate Period. Onany Business Day dunng a Daily
Rate Period or Weekly Rate Period, the Bonds may be redeemed at the option of the Authority, in whole
or in part, at a redemption price equal to the principal amount thereof plus accrued interest, if any, to the
date of redemption, without premium.
Optional Redemption During any Commercial Paper Rate Period. During any Commercial Term
Rate Period, each Bond may be redeemed at the option of the Authority on the day next succeeding the
last day of each Commercial Paper Segment for such Bonds at a redemption price equal to Its principal
amount, without premium.
17
Selection of Bonds for Redemption
Whenever less than all Outstanding Bonds are to be redeemed, the Authority shall desrgnate the
pnncipal amount of Bonds of each matunty to be redeemed. If less than all of the Outstanding Bonds
of the same Series maturing by their terms on anyone date are to be redeemed at anyone time, the
Trustee shall select Bonds of such maturity date to be redeemed by lot in such manner as the Trustee shall
determine (except that any Provider Bonds shall be first redeemed). All or a portion of any Bond may
be redeemed in accordance with the Trust Agreement; provided, however, that the portion of any Bond
to be redeemed shall be in authorized denominations and all Bonds to remain Outstanding after any
redemption in part shall be in authorized denominations In the event term Bonds are designated for
redemption, the Authority may designate which mandatory sinking account payments are allocated to such
redemption
Notice of Redemption; Notice of Mandatory Tender of Fixed Rate Bonds
Whenever redemption or mandatory tender of FIxed Rate Bonds is authorized under the Trust
Agreement, the Trustee is required to mail to affected Owners of the Bonds a notice of redemption or
mandatory tender, containing the information required by the Trust Agreement, by first-class mail, not less
than 30 days nor more than 60 days before the date of any such redemption date or mandatory tender,
except in the case of a mandatory tender upon the occurrence of an Event of Default under the Liquidity
Facility, in which case notice shall be given not less than 10 days before the mandatory tender date So
long as DTC or its nominee is acting as securities depository for the Bonds, all such mailed notices shall
be sent to DTC or ItS nominee, as the registered Owner of the Bonds and not to the beneficial owners of
the Bonds.
Neither the failure of an Owner of the Bonds to receive any such notice, nor the failure to give
such notice to certain depositories or Information services as required by the Trust Agreement, nor any
defect in any such notice, shall invalidate any of the proceedings for the redemption or mandatory tender
of any Bonds.
If notice of redemption or mandatory tender has been duly given and money for the payment of
the redemption or purchase price of the Bonds called for redemption or mandatory tender is held by the
Trustee, then on the redemption date or mandatory tender date designated in such notice Bonds so called
for redemption or mandatory tender shall become due and payable, and from and after the date so
designated interest on such Bonds shall cease to accrue (with respect to the Bonds so redeemed), and the
Owners of such Bonds shall have no rights in respect thereof except to receive payment of the redemption
price or mandatory purchase price thereof
SECURITY AND SOURCE OF PAYMENT FOR THE BONDS
Pledge Under the Trust Agreement
The Trust Agreement provides that the Bonds are payable solely from, and are secured by a hen
on, (a) all Base Rental Payments and other payments paid by the City and received by the Authority
pursuant to the Sublease as further described below (but not Additional Payments), (b) all interest and
other income from any investment of any money In any fund or account (other than the Rebate Fund)
established pursuant to the Trust Agreement or the Sublease and (c) Swap Revenues (as defined in the
Trust Agreement) (collectively, the "Revenues"), all under the terms and conditions set forth in the Trust
18
Agreement. As and to the extent set forth in the Trust Agreement, all the Revenues are irrevocably
pledged for the security and payment of the Bonds and Related Obligations; but nevertheless out of the
Revenues certain amounts may be applied for other purposes as provided in the Trust Agreement.
The Bonds are limited obligations of the Authority and are not secured by a legal or
equitable pledge of, or charge or lien upon, any property of the Authority or any of its income or
receipts, except the Revenues. Neither the full faith and credit of the Authority nor the City is
pledged for the payment of the interest on or principal of the Bonds nor for the payment of Base
Rental Payments under the Sublease. Neither tbe payment of the principal of or interest on the
Bonds nor the obligation to make Base Rental Payments under the Sublease constitutes a debt,
liability or obligation of the City for whicb the City is obligated to levy or pledge any form of
taxation or for which tbe City has levied or pledged any form of taxation. Tbe Authority bas no
taxing power.
Base Rental Payments
General. As rental for the right to use and occupy the Leased Property, the City covenants to pay
Base Rental Payments and also to pay Additional Payments in amounts required by the Authority. The
Base Rental Payments are calculated to be sufficient to pay the principal of and interest on the Bonds and
amounts owing under any swap agreement, hedge agreement, credit agreement, liquidity agreement or
similar agreement entered into by the Authority in connection with the Bonds (referred to herein as
"Related Obligations") as the same become due and payable
FOR INFORMATION REGARDING THE CITY, INCLUDING FINANCIAL INFORMATION,
SEE APPENDICES A AND BAITACHED HERETO. SEE ALSO "THE CITY" AND "CONSTITU-
TIONAL AND STATUTORY LIMITATIONS ON TAXES AND APPROPRIATIONS" HEREIN.
Covenant to Budget and Appropriate. Pursuant to the Sublease, the City covenants to take such
action as may be necessary to include the amount of the annual Base Rental Payments and Additional
Payments estimated by the City to be payable under the Sublease in its budget, and to make the necessary
annual appropriations for such payments. Such covenant is deemed to be a duty imposed by law, and It
is the duty of each and every public official of the City to take such action and do such things as are
required by law in the performance of the official duty of such officials to enable the City to carry out
and perform such covenants
Insurance. The Leased Property will be Insured to the extent set forth in the Sublease. See
"APPENDIX D - SUMMARY OF CERTAIN PROVISIONS OF PRINCIPAL LEGAL DOCUMENTS -
SUBLEASE -- Fire and Extended Coverage" and "-- Rental Interruption or Use Insurance" herein. The
Sublease requires the City to insure or have insured the Leased Property with companies acceptable to the
Authority for such amounts and against such hazards (provided however, the City shall not be required
to obtain earthquake insurance with respect to the Leased Property) as the Authority may require,
mcludmg, but not limited to, Insurance for damage to the Leased Property Such insurance shall be In
an amount equal to the replacement (without deduction for depreciation) of all structures constituting any
part of the Leased Property, excluding the cost of excavations, of grading and filling, and of the land, or,
in the alternative, shall be in an amount and in a form sufficient, in the event of total or partial loss, to
enable all Bonds then Outstanding to be redeemed.
The proceeds of such Insurance are to be used for the repair, reconstruction or replacement of the
damagedor destroyed portion ofthe Leased Property Alternatively, the Authority, if the proceeds of such
19
insurance and any amounts transferrable from the Reserve Fund as allocable to the Bonds to be redeemed,
together with any other moneys then available for the purpose are at least sufficient to redeem an
aggregate principal amount of Outstanding Bonds equal to the amount of Outstanding Bonds attributable
to the portion of the Leased Property so destroyed or damaged (determined by reference to the proportion
which the cost of such portion of the Leased Property bears to the aggregate cost of the Leased Property
and as first approved by the Bank), may elect not to repair, reconstruct or replace the damaged or
destroyed portion of the facility and thereupon shall cause said proceeds to be used for the redemption
of Outstanding Bonds pursuant to the provisions of the Trust Agreement.
The Authority and the City have also agreed to promptly apply for any federal disaster aid or State
disaster aid in the event that any portion of the Leased Property is damaged or destroyed as a result of
an earthquake or other disaster. Any proceeds received as a result of such disaster aid shall be applied
by the Authority and the City to the repair, reconstruction, restoration or replacement of the damaged or
destroyed portions of the Leased Property, or to the redemption of Bonds if such use of disaster aid is
permitted.
The City shall be required to procure or cause to be procured and maintain or cause to be
maintained throughout the term of the Sublease, to the extent such insurance is commercially available,
rental interruption or use insurance to cover loss, total or partial, of the rental income from or the use of
the Leased Property as a result of any of the hazards covered by the insurance required by the Sublease,
in an amount sufficient to pay the maximum Base Rental Payments for any three month period (except
that such insurance may be subject to a deductible clause of not to exceed thirty (30) days of Base Rental
Payments on such portion of the Leased Property subject to loss).
Abatement
Use. Base Rental Payments and Additional Payments are paid by the City in each rental payment
period for and in consideration of the right of use of the Leased Property during each such period for
which said rental is to be paid. See "THE PLAN OF FINANCE" and "APPENDIX D - SUMMARY OF
CERTAIN PROVISIONS OF PRINCIPAL LEGAL DOCUMENTS - SUBLEASE" hereto.
Damage or Destruction. The Base Rental Payments due in the maximum annual amount of
$25, I00,000 and Additional Payments will be abated proportionately during any period in which by reason
of any damage or destruction (other than by condemnation which is otherwise provided for m the
Sublease) there is substantial interference with the use of the Leased Property by the City, m the
proportion in which the cost of that portion of the Leased Property rendered unusable bears to aggregate
cost of the entire Leased Property. Such abatement will continue for the period commencing with such
damage or destruction and ending with the substantial completion of the work of repair or reconstruction.
In the event of any such damage or destruction, the Sublease continues in full force and effect and the
City waives any right to terminate the Sublease by virtue of any such damage or destruction. In the event
the Leased Property cannot be repaired during the period that proceeds of the City's rental interruption
insurance will be available in heu of Base Rental Payments (a period of three) plus the period for which
funds are available from the Reserve Fund, or in the event that casualty insurance proceeds are insufficient
to provide for complete repair of the Leased Property, there could be insufficient funds to cover payments
to Bondowners in full. See "APPENDIX D - SUMMARYOF CERTAIN PROVISIONS OF PRINCIPAL
LEGAL DOCUMENTS - SUBLEASE -- Hazard Insurance" and "-- Rental Interruption or Use and
Occupancy Insurance" herein.
20
Default and Remedies
Upon an Event of Default described below, the City will be deemed to be in default under the
Sublease and the Authority may exercise any and all remedies granted pursuant to the Sublease, subject
to the Authority's assignment of the right to enforce certain of these remedies to the Trustee pursuant to
the Trust Agreement. The Sublease provides that upon any such default, includmg a failure to pay any
Base Rental Payments or Additional Payments, the Authority may without terminating the
Sublease, contmue to collect rent from the City on an annual basis by seeking a separate judgment each
year for that year's defaulted Base Rental Payments, Additional Payments and other amounts until the end
of the term of the Sublease The enforcement of this remedy would be subject to limitations on legal
remedies against public agencies in the State, statutory andjudicial limitations on lessors' remedies under
real property leases and to other terms of the Lease and the Sublease.
The Trustee has no right to terminate the Sublease or reenter or relet the Leased Property
and no possessory right to the Leased Property. Upon the occurrence of an event of default, there
is no remedy of the acceleration of the total Base Rental Payments due over the term of the
Sublease, and the Trustee is not empowered to sell or lease a fee simple, leasehold or other interest
in the Leased Property and use the proceeds of such sale to prepay the Bonds or pay debt service
thereon.
Events of Default under the Sublease include (i) the failure of the City to pay any rental payable
under the Sublease when the same becomes due and payable, (ii) the failure of the City to keep, observe
or perform any term, covenant or condition of the Sublease to be kept or performed by the City after
notice and the elapse of a 30-day grace period and (iii) the bankruptcy or insolvency of the CIty.
FORA FURTHERDESCRIPTION OF THE PROVISIONS OF THE SUBLEASE, INCLUDING
THE TERMS THEREOF AND A DESCRIPTION OF CERTAIN COVENANTS THEREIN,
INCLUDING MAINTENANCE, UTILITIES, TAXES, ASSESSMENTS, INSURANCE AND EVENTS
OF DEFAULT AND AVAILABLE REMEDIES, SEE "SUMMARYOF CERTAIN PROVISIONS OF
PRINCIPAL LEGAL DOCUMENTS - SUBLEASE" IN APPENDIX D ATTACHED HERETO.
Reserve Fund
Upon issuance of the Bonds, the Trustee shall deposit in the Reserve Fund established pursuant
to the Trust Agreement an amount sufficient to satisfy the Reserve Fund Requirement (as defined In the
Trust Agreement). All money in the Reserve Fund shall be used and withdrawn by the Trustee solely for
the purpose of paymg the interest on or principal, in that order, of the Bonds m the event of any
deficiency in payment of such mterest and principal or for the retirement of all the Bonds then
Outstanding, except that so long as the Authority is not in default under the Trust Agreement, any cash
amounts in the Reserve Fund in excess of the Reserve Requirement shall be Withdrawn from the Reserve
Fund and deposited in the Revenue Fund, on or before each mterest payment date. See "APPENDIX D -
SUMMARY OF CERTAIN PROVISIONS OF PRINCIPAL LEGAL DOCUMENTS - TRUST
AGREEMENT -- Reserve Fund" herein.
In the alternative, a surety bond or msurance policy Issued to the Trustee, on behalf of the
Bondowners, by a company licensed to issue an insurance policy guaranteeing the timely payment of
principal of and interest on the Bonds (a "municipal bond insurer") the claims-paying abihty of which IS
rated "Aaa" by Moody's Investors Service and "AAA" by Standard & Poor's or a letter of credit Issued
or confirmed by a state or national bank, or a foreign bank with an agency or branch located in the
21
continental United States, which has outstanding an issue of unsecured long term debt securities rated at
least equal to the second highest rating category of Moody's Investors Service and Standard & Poor's,
but in no event less than the rating for the Bonds given by any rating agency which has a then currently
effective rating on the Bonds, may be deposited 10 the Reserve Fund to meet the Reserve Fund
Requirement, and subject to the terms and conditions of the Trust Agreement.
The Reserve Fund Requirement will initially be funded in an amount of $17,709,888.17
Additional Bonds
The Authority may at any time, by Supplemental Trust Agreement, provide for the Issuance of
Additional Bonds subject to satisfaction of certain provisions contained in the Trust Agreement.
Additional Bonds Will be payable from Base Rental Payments and other Revenues as provided in the Trust
Agreement and secured by a pledge of and charge and lien upon the Revenues equal to the pledge, charge
and lien securing the outstanding Bonds therefore issued under the Trust Agreement, subject to the terms
and conditions of the Trust Agreement. In addition, the Authority may enter into Related Obhgations the
payments under which would be on a parity With the Bonds. See "APPENDIX D - SUMMARY OF
CERTAIN PROVISIONS OF PRINCIPAL LEGAL DOCUMENTS - TRUST AGREEMENT--
Additional Bonds", "-- Pledge of Revenues; and Assignment of Base Rental Payments, Deposit of
Revenues herein
Swap Agreement for Variable Rate Bonds
The City has entered IDtO an interest rate swap agreement (the "Swap Agreement") With an affiliate
of Goldman Sachs Group, L.P. (the "Swap Provider"), in order to create a synthetic fixed rate until
August 1, 2021 for Base Rental Payments corresponding to approximately $170,000,000 initial principal
amount of the Bonds. Pursuant to such agreement, the City will be required to pay the Swap Provider
a fixed amount based on a notional amount equal to such Bonds and will be entitled to receive from the
Swap Provider an amount expected to approximate the interest cost on the Bonds.
Under certain conditions the Swap Agreement may be subject to early termination. Any such
early terrmnanon may result in the payment by the City of a termination payment.
Payments received by the City under the Swap Agreement are not pledged to the payment
of the Bonds.
BOND INSURANCE
The following information has been furnished by Financial Security Assurance Inc for use in this
Official Statement. Such information has not been independently confirmed or verified by the Authority
or the City. No representation is made herein as to the accuracy or adequacy of such information or as
to the absence of material adverse changes in such information subsequent to the date hereof, or that the
information contamed and incorporated herein by reference is correct Reference is made to
APPENDIX E for a specimen of the Insurer's policy
22
Bond Insurance Policy
Concurrently with the Issuance of the Bonds, Financial Security Assurance Inc ("Fmanclal
Security") will Issue Its Municipal Bond Insurance Pohcy for the Bonds (the "Policy") The Policy
guarantees the scheduled payment of principal of and Interest on the Bonds when due as set forth 10 the
form of the Pohcy mcluded APPENDIX E to this Official Statement
THE POLICY IS NOT COVERED BY THE PROPERTY/CASUALTY INSURANCE
SECURITY FUND SPECIFIED IN ARTICLE 76 OF THE NEW YORK INSURANCE LAW.
Financial Security Assurance Inc.
Frnancial Security IS a New York domiciled insurance company and a wholly owned subsidiary
of Financial Security Assurance Holdings Ltd ("Holdings"). Holdings is a New York Stock Exchange
hsted company whose major shareholders Include Fund American Enterprises Holdings, Inc., The TokIO
Marine and FIre Insurance Co., Ltd and U S WEST Capital Corporation The shareholders of Holdings
are not hable for the obligatrons of Financial Security
At March 31, 1998, Financial Security's total policyholders' surplus and contingency reserves were
approximately $808,603,000 and its total unearned premium reserve was approximately $503,683,000 in
accordance with statutory accounting prmcrples At March 31, 1998, Financial Security's total
shareholders' equity was approximately $923,047,000 and ItS total net unearned premium reserve was
approximately $428,158,000 10 accordance WIth generally accepted accounting pnnciples.
The financial statements Included as exhibrts to the annual and quarterly reports filed by Holdings
WIth the Secunties and Exchange Commission are hereby incorporated herem by reference Also
incorporated herem by reference are any such financial statements so filed from the date of this Official
Statement until the termination of the offering of the Bonds
Copies of such materials Incorporated by reference will be provided upon request to Fmancral
Security 350 Park Avenue, New York, New York 10022, Attention Commurncanons Department
(telephone (212) 826-0100)
The Policy does not protect investors against changes 10 market value of the Bonds, which market
value may be imparred as a result of changes 10 prevailing interest rates, changes In applicable ratings or
other causes Fmancial Security makes no representation regarding the Bonds or the advisability of
mvestmg 10 the Bonds Financial Security makes no representation regarding the Official Statement, nor
has It participated 10 the preparation thereof, except that Financial Security has provided to the Authority
and the City the information presented under this caption for inclusion 10 the Official Statement
THE STANDBY AGREEMENT
The Bank
DUring the nutial Weekly Rate Period, payment of the purchase price of the Bonds upon
mandatory or optional tender will be initially supported by a Standby Bond Purchase Agreement (the
"Standby Agreement") among the CIty, the Authority, Commerzbank Aknengesellschaft, acting through
23
its Los Angeles Branch (the "Bank"), and U.S. Bank Trust National Association as Tender Agent. The
obligation of the Bank to purchase Bonds will terminate Immediately upon the occurrence of certain
Events of Default (as further described below). See "APPENDIX G" hereto for certain information
regarding the Bank. Capitalized terms not otherwise defined in this section entitled "THE STANDBY
AGREEMENT" shall have the meanings given such terms in the Standby Agreement.
General
The Standby Agreement provides for the purchase of those Bonds which are tendered by the
owners thereof to the Tender Agent or are subject to mandatory purchase but, in either case, not
remarketed by the apphcable Remarketing Agent. The Standby Agreement will expire on July 16,2003
(the "Expiration Date") as same may be extended under the Standby Agreement, prior to the Initially
scheduled date of maturity of the Bonds, unless extended or terminated as described herein.
Under certain circumstances described below, the obligation of the Bank to purchase Bonds
tendered by the holders thereof or subject to mandatory purchase may be terminated Immediately without
notice. In such event, sufficient funds may not be available to purchase Bonds tendered by the holders
thereof or subject to mandatory purchase. In addition, the Standby Agreement does not provide security
for the payment of pnncipal of or interest or premium, if any, on the Bonds.
Purchase of Tendered Bonds by the Bank
The Bank will purchase pursuant to the Standby Agreement from time to time during the period
prior to the expiration or earlier termination of the Standby Agreement, at the times and in the manner
set forth In the Standby Agreement, Bonds which have been tendered purchase but which are not
remarketed or which have been tendered for mandatory purchase prior to the expiration of the Standby
Agreement but which are not remarketed. The price to be paid by the Bank for such Bonds will be equal
to the aggregate principal amount of each such Bond (provided that the aggregate pnncipal amount of all
Bonds so purchased shall not exceed the Available Principal Commitment as defined in the Standby
Agreement) plus the lesser of (i) the Available Interest Commitment (as defined in the Standby
Agreement) and (ii) interest accrued thereon to but excluding Purchase Date, without premium
Events of Default
The following events, among others, constitute Events of Default under the Standby Agreement.
As set forth below under the caption "Consequences of Events of Default," any Event of Default listed
in clause (a) through (e) (a "Bond Insurer Termination Event") will result in Immediate termination,
without notice, of the Bank's obligation to purchase Bonds under the Standby Agreement. An Event of
Default listed in clause (f) or (g) may result in termmation of the Bank's obligation to purchase Bonds
under the Standby Agreement upon 20 days' notice Reference is made to the Standby Agreement for
a complete listing of all Events of Default
(a) Any pnncipal of, or Interest on, any Bond shall not be paid when due by the Authonty
and an insurance payment in respect of such principal and Interest is not paid by the Bond Insurer when
and as required under the Bond Insurance Policy; or
(b) The occurrence of one or more of the following events: (i) the Issuance, under the laws
of the State of New York, of an order of rehabilitation, liquidation or dissolution of the Bond Insurer; (ii)
the Institution of a proceeding in a court having Jurisdiction In the premises seeking an order of relief,
24
rehabilitation, reorganization, conservation, liquidation or dissolution in respect of the Bond Insurer under
any bankruptcy, insolvency or other similar law now or hereafter in effect and, if such proceeding is an
involuntary proceeding commenced against the Bond Insurer, (A) such proceeding is not terminated for
a period of 90 consecutive days, (B) the Bond Insurer consents to any relief referred to in this clause (ii)
or (C) the court grants the relief sought in such proceeding; (iii) the consent of the Bond Insurer to any
relief referred to in the preceding clause (ii) in an involuntary case or other proceeding commenced against
it; (iv) the making by the Bond Insurer of an assignment for the benefit of creditors; or (v) the initiation
by the Bond Insurer of any actions to authorize any of the foregoing; or
(c) The Bond Insurer (i) shalI fail, wholly or partially, to make a payment when due of
pnncipal or interest to the Trustee as required under the Bond Insurance Policy; or (ii) shalI fail, wholly
or partially, to make payment under any other insurance policy issued by it when due which failure shalI
continue for five Business Days, provided that a failure referred to m clause (ii) will not cause an Event
of Default if (A) the obligation of the Bond Insurer to pay is being contested by the Bond Insurer in good
faith by appropriate proceedings or is due to an injunction, regulation or other order, not applicable to the
Bond Insurance Policy, of a court or governmental authority in a jurisdiction outside of California and (B)
such failure is not attributable to the financial condition of the Bond Insurer; or
(d) The Bond Insurance Policy, or any material provision thereof, is held to be invalid by a
final nonappealable order of a court of competent junsdiction or the validity or enforceability thereof is
contested by the Bond Insurer; or
(e) The Bond Insurer IS substituted as insurer of the Bonds, or the Bond Insurance Policy is
surrendered, canceled or terminated or amended or modified in any material respect without the prior
written consent of the Bank; or
(f) The Authority shall fail to pay within five (5) Business Days after the same has become
due any fee or other amount owing under the Standby Agreement (not otherwise referred to in (a) above);
or
(g) The Authority shall fail to deliver to the Bank, within 90 days of the Authority's receipt
of a notice from the Bank requesting that it obtain a substitute or additional bond insurance policy due
to the rating on the Bonds being lowered by S&P, if the Bonds are then rated by S&P, below "A-", by
Moody's, if the Bonds are still rated by Moody's, below "A3", and by Fitch, if the Bonds are still rated
by Fitch, below "A-", evidence that the Authority obtained a substitute or additional bond insurance policy
such that the Bonds are thereafter so rated at or above "A-" by S&P, at or above "A3" by Moody's or at
or above "A-" by Fitch.
Consequences of Events of Default
FolIowing the occurrence of the above referenced Events of Default, the Bank may take anyone
or more of the following actions, among others:
(i) In the case of any Bond Insurer Termination Event, the Available Commitment
and the obligation of the Bank to purchase Bonds shalI immediately terminate without notice, and
thereafter the Bank shalI be under no obligation to purchase Bonds.
(ii) In the case of any Event of Default referred to in clause (f) or (g) under "Event
of Default" the Bank may give written notice of such Event of Default to the Insurer, the Trustee,
25
the Remarketing Agents and the Bond Insurer and stating that the termination of the Standby
Agreement will occur on the twentieth (20th) day following receipt by the Tender Agent of such
notice.
(iii) In the case of any other Event of Default as specified in the Standby Agreement,
the Bank's shall have all remedies provided at law or in equity, including without hmrtation,
specific performance; provided however, the Bank shall not have the right to terminate Its
obligation to purchase Bonds, to declare any amount due and owing under the StandbyAgreement
due and payable, or to acceleratethe maturity date of any Bond, except as set forth in the Standby
Agreement and the Trust Agreement
Reference is made to the Standby Agreement for a complete descnption of all consequences of
Events of Default.
Alternate Standby Agreement
In the event that the Bank shall decide not to extend the Expiration Date of the Standby Bond
Purchase Agreement, or the Bank shall purchase the Bonds pursuant to a Mandatory Purchase, the
Authority shall use its "best efforts" to obtain an Alternate Liquidity Facihty to replace the Standby Bond
Purchase Agreement and, if it IS not able to do so, to effect the conversion of the interest rate on the
Bonds to a Term Rate fixed to maturity as contemplated by the Trust Agreement.
The Authonty agrees that any Alternate Liquidity Facility will require, as a condition to the
effectiveness of the Alternate Liquidity Facility, that the issuer of the Alternate Liquidity Facilrty will
provide funds, on the date the Alternate Liquidity Facility becomes effective, for the purchase of all
Provider Bonds at par plus accrued interest (at the Provider Rate) through the Purchase Date. On such
date any and all amounts due under the Standby Agreement and under the Trust Agreement or the Bonds
due to the Bank shall be payable in full to the Bank.
THE CITY OF OAKLAND SEWER SYSTEM
The portion of the City'S sewer system(the "System") constitutingthe Leased Property under the
Sublease consists of all 8" pipes of the System which are owned by the City, and shall include all 8"
pipeline which may be acquired by the City In replacement of the existing pipeline. The LeasedProperty
represents approximately 79% by length of all sanitary sewer pipes owned by the City.
The City's sanitary sewer system serves an area of approximately 54 square miles and provides
collection and disposal for residential, commercial and light industrial sewage generated Within the City.
The City is the sole and exclusive provider of sewer service within the corporate limits of the City. The
City is now in the tenth year of a 25-year project for the comprehensive rehabilitation of approximately
40% of the sewer system. This project Includes the rehabilitation and, where necessary, replacement of
sections of the existing sewer system, Including the sewer structure, pipeline and connections to pnvate
sewer lines. The rehabilitated sewer hnes will have a useful life of approximately 50 years.
26
No revenues of the System are pledged to or available for the repayment of the Bonds. The
Bonds are solely payable from Base Rental Payments and Additional Payments as provided in the
Sublease. See "SECURITY AND SOURCE OF PAYMENT FOR mE BONDS" herem
The Trustee has no right to terminate the Sublease or reenter or relet the Leased Property
and no possessory right to the Leased Property. Upon the occurrence of an event of default, there
is no remedy of the acceleration of the total Base Rental Payments due over the term of the
Sublease, and the Trustee is not empowered to sell or lease a fee simple, leasehold or other interest
in the Leased Property and use the proceeds of such sale to prepay the Bonds or pay debt service
thereon.
THE AUTHORITY
The Oakland Joint Powers Financing Authority was formed pursuant to the provisions of
Articles I and 4 of Chapter 5 of Division 7 of Title I of the Government Code of the State and a Joint
Exercise of Powers Agreement, dated as of February 1, 1993 by and between the Redevelopment Agency
of the City of Oakland and the City. The Authority was formed to assist the City ID the financing of
public capital improvements, working capital and liability or other revenue programs. The Authority
functions as an independent entity and its policies are determined by its governing board and the City
COunCIl. The Authority has no employees and all staff work is done by City staff or by consultants to
the Authonty.
The current officers of the Authority are set forth below:
Robert C. Bobb
Deborah Edgerly
Ceda Floyd
Executive Director
Treasurer
Secretary
THE CITY
The City of Oakland is the County seat of the County of Alameda (the "County") and IS the third
largest city in the San Francisco Bay Area and the eighth largest city in California For further
information concerning the City see "APPENDIX A -- CERTAIN INFORMATION CONCERNINGTHE
CITY OF OAKLAND" and "APPENDIX B - ADDITIONAL FINANCIAL STATEMENTS OF THE
CITY OF OAKLAND" herein.
RISK FACTORS
The following factors, which represent material nsk factors that have been identified at this time,
should be considered along with all other information in this Official Statement by potential investors in
evaluating the Bonds. However, such discussion does not purport to be an exhaustive listing of risks and
other considerations which may be relevant to an investment in the Bonds. There can be no assurance
made that other risk factors will not become evident at any future time.
27
Base Rental Payments Not City Debt
NEITHER THE FULL FAITH AND CREDIT OF THE AUTHORITY OR THE CITY IS
PLEDGED FOR THE PAYMENT OF THE INTEREST ON OR PRINCIPAL OF THE BONDS NOR
FOR THE PAYMENT OF BASE RENTAL PAYMENTS. NEITHER THE PAYMENT OF THE
PRINCIPAL OF OR INTEREST ON THE BONDS NOR THE OBLIGATION TO MAKE BASE
RENTAL PAYMENTS CONSTITUTES A DEBT, LIABILITY OR OBLIGATION OF THE
AUTHORITY OR THE CITY FOR WInCH ANY SUCH ENTITY IS OBLIGATED TO LEVY OR
PLEDGE ANY FORM OF TAXATION OR FOR WInCH ANY SUCH ENTITY HAS LEVIED OR
PLEDGED ANY FORM OF TAXATION. THE AUTHORITY HAS NO TAXING POWER. In the
event that available revenues are less than required to make Base Rental Payments, the City could choose
to fund other municipal services before making Base Rental Payments and other payments due under the
Sublease. The same result could occur if, because of State Constitutional limits on expenditures, the City
is not permitted to appropriate and spend all of its available revenues.
Abatement Risk
During any period in which, by reason of material damage or destruction, there is substantial
interference with the use and possession by the City of any portion of the Leased Property, Base Rental
Payments due under the Sublease with respect to the Leased Property in the maximum annual amount of
$25,100,000 will be abated proportionately, and the City waives any and all nghts to terminate the
Sublease by virtue of any such interference and the Sublease shall continue in full force and effect. The
method for calculating the amount of abatement is described in "BASE RENTAL PAYMENTS-
Abatement" herein.
Seismic Considerations
The City is located in an area considered to be seismically active. There are several geological
faults in the greater San Francisco Bay Area that have potential to cause serious earthquakes. These faults
include the San Andreas Fault, the Hayward Fault and the Calaveras Fault. The Hayward Fault is a
geologic break in the Franciscan bedrock which trends northwesterly along the west front of the Oakland
Hills, while the northern portion of the San Andreas Fault roughly follows the western edge of the tilted
bedrock block along the shoreline of the Pacific Ocean approximately to miles west of the City. The
Calaveras Fault is approximately 10 miles to the east and south of the City.
The Lorna Pneta earthquake, which occurred in October 1989 along the San Andreas Fault with
a magnitude of 7.1 on the Richter Scale and an epicenter near Santa Cruz, approximately 25 miles south
of the City, caused no significant structural damage to the System, or any component of the Leased
Property
Earthquake insurance is not maintained on the Leased Property and the Sublease does not require
the City to obtain earthquake insurance
No Acceleration Upon Default
In the event of a default, there is no remedy of acceleration of the total Base Rental Payments due
over the term of the Sublease and the Trustee is not empowered to sell a fee simple, leasehold or other
interest in the Leased Property and use the proceeds of such sale to prepay the Bonds or pay debt service
thereon Moreover, any suit for money damages would be subject to limitations on legal remedies against
28
public agencies In the State, statutory and judicial limitations on lessors' remedies under real property
leases, other terms of the Lease and the Sublease and the Trust Agreement and limitations on enforcement
of judgments against funds needed to serve the public welfare and interest as described below.
Limitation of Remedies
The enforcement of any remedies provided in the Lease, Sublease and Trust Agreement could
prove both expensive and time consuming. The Trustee has no right to terminate the Sublease or reenter
or relet the Leased Property and no possessory right to the Leased Property. If the City defaults under
the Sublease, the Authority has no right to reenter and relet the LeasedProperty.
Any suit for money damages would be subject to statutory and judicial limitations on lessors'
remedies under real property leases, other terms of the Lease, Sublease and the Trust Agreement and
limitations on legal remedies against public agencies in the State, including a limitation on enforcement
ofJudgments against funds needed to serve the public welfare and interest.
In addition to the limitations on remedies contained in the Sublease and the Trust Agreement, the
rights and remedies provided in the Lease, Sublease and Trust Agreement Lease may be limited by and
are subject to provisions of federal bankruptcy laws, as now or hereafter enacted, and to other laws or
equitable principles that may affect creditors' rights. Under Chapter 9 of the Bankruptcy Code (Title II,
United States Code), which governs bankruptcy proceedings for public agencies, there are no involuntary
petitions in bankruptcy. If the City were to file a petition under Chapter 9 of the Bankruptcy Code, the
Owners, the Trustee and the Authority could be prohibited or severely restricted from taking any steps
to enforce their rights under the Sublease and from taking any steps to collect amounts due from the CIty
under the Sublease.
29
Rider v. City of San Diego
In May 1996, a taxpayer filed an action (the "Rider Case") against the City of San DIego ("San
Diego") and the San Diego Convention Center Expansion Authority (the "Authority") challenging the
validity of a lease revenue financing involving a lease having features similar to the Sublease. In the
Rider Case, the plaintiffs mamtain that voter approval is required for the San Diego lease (a) since the
lease constituted indebtedness prohibited by Article XVI, Section 18 of the California Constitution without
a two-thirds vote of the electorate, and (b) since San Diego was prohibited under its charter from issuing
bonds without a two-thirds vote of the electorate, and the power of the Authority, a joint powers authority,
one of the members of which is San Diego, to issue bonds is no greater than the power of San Diego.
In response to San Diego's motion for summary judgment, the trial court rejected the Plaintiffs' arguments
and ruled that the lease was constitutionally valid and that the Authority's related lease revenue bonds did
not require voter approval. The Plaintiffs appealed the matter to the Court of Appeals for the Fourth
District, which likewise affirmed the validity of the lease and of the lease revenue bond financing
arrangements. The Plaintiffs then filed a petition for review with the California State Supreme Court, and,
on April 2, 1997, the California Supreme Court granted the Plaintiffs' petition for review, The Supreme
Court heard oral arguments with respect to the case on June 4, 1998. No decision from the State Supreme
Court is expected until the later part of the 1998 calendar year. Although the City cannot predict the
outcome of the Rider Case, and the grant of review Indicates the Court is willing to hear the claims, the
use of financing leases has been affirmed by the California Supreme Court for over fifty years. Moreover,
Co-Bond Counsel will render their legal opinion with respect to the validity of the Sublease and the Bonds
in the form set forth in Appendix F hereto and will not qualify their opinion with respect to the Rider
Case. However, Co-Bond Counsel's opinion is based on existing law, and no assurance can be given, and
Co-Bond Counsel is rendering no opinion, that the Supreme Court's decision in the Rider Case will not
adversely affect the validity of the Bonds and the exemption from income tax of interest on Bonds
CONSTITUTIONAL AND STATUTORY LIMITATIONS ON TAXES
AND APPROPRIATIONS
Article XIII A of the State Constitution
Section l(a) of Article XIII A of the State Constitution limits the maximum ad valorem tax on
real property to 1% of full cash value (as defined in Section 2 of Article XIII A), to be collected by
counties and apportioned according to law. Section l(b) of Article XIII A provides that the 1% limitation
does not apply to ad valorem taxes to pay interest or redemption charges on (l) indebtedness approved
by the voters prior to July I, 1978 or (2) any bonded indebtedness for the acquisition or improvement of
real property approved on or after July 1, 1978, by two-thirds of the votes cast by the voters voting on
the proposition. Section 2 of Article XIII A defines "full cash value" to mean "the county assessor's
valuation of real property as shown on the 1975-76 tax bill under full cash value or, thereafter, the
appraised value of real property when purchased, newly constructed, or a change in ownership has
occurred after the 1975 assessment." The full cash value may be adjusted annually to reflect inflatIon at
a rate not to exceed 2% per year, or to reflect a reduction in the consumer price index or comparable data
for the area under taxing jurisdiction or reduced in the event of declining property value caused by
substantial damage, destrucnon or other factors. Legislation enacted by the State Legislature to Implement
Article XIII A provides that notwithstanding any other law, local agencies may not levy any ad valorem
property tax except to pay debt service on Indebtedness approved by the voters as described above
30
The voters of the State subsequently approved vanous measures which further amended
Article XIII A. One such amendment generally provides that the purchase or transfer of (i) real property
between spouses or (ii) the principal residence and the first $1,000,000 of the full cash value of other real
property between parents and children, do not constitute a "purchase" or "change of ownership" triggering
reassessment under Article XIII A. This amendment could serve to reduce the property tax revenues of
the County. Other amendments permitted the State Legislature to allow persons over 55 or "severely
disabled homeowners" who sell their residence and buy or build another of equal or lesser value within
two years in the same county, to transfer the old residence's assessed value to the new residence.
In the November 1990 election, the voters approved the amendment of Article XIII A to permit
the State Legislature to exclude from the definition of "new construction" seismic retrofitting
improvements or improvements utilizing earthquake hazard mitigation technologies constructed or installed
10 exisnng buildings after November 6, 1990.
Article XIII A has also been amended to permit reduction of the "full cash value" base in the
event of declining property values caused by damage, destruction or other factors, provided that there
would be no increase in the "full cash value" base in the event of reconstruction of property damaged or
destroyed in a disaster. Because of the recent decrease in property values in certain areas of the State,
certain counties have announced that they will review the assessed values of properties within those
counties. See "APPENDIX A - CERTAIN INFORMATION CONCERNING THE CITY OF
OAKLAND - Assessed Valuations."
Article xm B of the State Constitution
Article XIII B of the State Constitution limits the annual appropriations of the State and of any
city, county, school district, authority or other political subdivision of the State to the level of
appropriations for the prior fiscal year, as adjusted for changes in the cost of living, population and
services for which the fiscal responsibility is shifted to or from the governmental entity. The "base year"
for establishing this appropriations limit is the 1978-79 fiscal year, and the limit is adjusted annually to
reflect changes in population, consumer prices and certain increases or decreases in the cost of services
provided by these public agencies
Appropnanons of an entity of local government subject to Article XIII B include generally
authorizations to expend during a fiscal year the proceeds of taxes levied by or for the entity and the
proceeds of State subventions, exclusive of certain State subventions, refunds of taxes, and benefit
payments from retirement, unemployment insurance and disability insurance funds. "Proceeds of taxes"
include, but are not limited to, all tax revenues, most State subventions and the proceeds to the local
governmental entity from (1) regulatory licenses, user charges, and user fees (to the extent that such
proceeds exceed the cost reasonably borne by such entity) and (2) the investment of tax revenues.
Article XIII B provides that if a governmental entity's revenues in any year exceed the amounts permitted
to be spent, the excess must be returned by revising tax rates or fee schedules over the subsequent two
years.
Article XIII B does not limit the appropriation of moneys to pay debt service or indebtedness
existing or authorized as of January 1, 1979, or for bonded indebtedness approved thereafter by a vote
of the electors of the issuing entity at an election held for that purpose Furthermore, in 1990, Article
XIII B was amended to exclude from the appropriations limit "all qualified capital outlay projects, as
defined by the Legislature" from proceeds of taxes. The Legislature has defined "qualified capital outlay
project" to mean a fixed asset (including land and construction) with a useful life of 10 or more years and
31
a value which equals or exceeds $100,000. As a result of this amendment, the appropriations to pay the
lease payments on the City'S long-term general fund lease obligations (including the Sublease) are
generally excluded from the City's appropriations limit
Statutory Spending Limitations
A statutory initiative ("Proposition 62") was adopted by voters voting in the State at the
November 4, 186 General Election which (1) requires that any tax for general governmental purposes
Imposed by local governmental entities be approved by resolution or ordinance adopted by two-thirds vote
of the governmental agency's legislative body and by a majority of the electorate of the governmental
entity, (2) requires that any special tax (defined as taxes levied for other than general governmental
purposes) imposed by a local governmental entity be approved by a two-thirds vote of the voters within
that Jurisdiction, (3) restncts the use of revenues from a special tax to the purposes or for the service for
which the special tax was Imposed, (4) prohibits the imposition of ad valorem taxes on real property by
local governmental entities except as permitted by Article XIII B, (5) prohibits the imposition of
transaction taxes and sales taxes on the sale ofreal property by local governmental entities and (6) requires
that any tax imposed by a local governmental entity on or after March I, 1985 be ratified by a majority
vote of the electorate Within two years of the adoption of the initiative or be terminated by November 15,
1988.
Following ItS adoption by the voters, various provisions of Proposition 62 were declared
unconstitutional at the appellate court level. On September 28, 1995, however, the California Supreme
Court, in Santa Clara County Local Transportation Authority v Guardtno, upheld the constitutionality
of the portion of Proposition 62 requiring a two-thirds vote in order for a local government or district to
impose a special tax, and, by Implication, upheld a parallel provision requiring a majority vote in order
for a local government or district to impose any general tax The Santa Clara decision did not address
the question of whether or not it should be applied retroactively.
The Santa Clara decision also did not decide the question of the applicability of Proposition 62
to charter cities. In the opinion of the City Attorney, the City should be exempt from the provisions of
Proposition 62 because, as a charter City under the California Constitution, it should not be affected by
a statutory initiative, such as Proposition 62.
Since November 5, 1986 (the effective date of Proposition 62), the City has adopted, extended
or increased a number of taxes Without voter approval, including business license, transient occupancy,
utility consumption, property transfer, parking and municipal services taxes. The City continues to collect
such new, extended or increased taxes. The City estimates that it collected approximately $95 3 million
from such taxes In fiscal year 1995/96. If a court were to determine that a jurisdiction imposed a tax in
VIOlation of Proposition 62, a court could require the City to submit such taxes to the electorate for an
approving vote or require the City to cease collecting such taxes. Moreover, If a court were to determine
that aJurisdiction imposed a tax in violation of Proposition 62, Proposition 62 would require that a portion
of the I% ad valorem property tax levy allocated to that jurisdiction be reduced by $1 for every $1 In
revenue attnbutable to the tax for each year that the tax is collected
Proposition 218: Articles XIll C and XIll D of the State Constitution
On November 5, 1996, the voters of the State approved Proposition 218, known as the "Right to
Vote on Taxes Act" Proposition 218 adds Articles XIII C and XIII D to the California Constitution and
contains a number of Interrelated provisions affecting the ability of the City to levy and collect both
32
existing and future taxes, assessments, fees and charges The interpretation and application of Proposition
218 will ultimately be determined by the courts with respect to a number of the matters discussed below,
and it IS not possible at this time to predict with certainty the outcome of such determination. The
provisions of Proposition 218, as so interpreted and applied, may adversely affect the City's ability to meet
certain of its obligations.
Proposition 218 (Article XIII C) requires that all new local taxes be submitted to the electorate
before they become effective. Taxes for general governmental purposes of the City require a majority
vote and taxes for specific purposes, even if deposited in the City's General Fund, require a two-thirds
vote. Further, any general purpose tax which the City imposed, extended or increased, without voter
approval, after December 31, 1994 may continue to be imposed only If approved by a majority vote In
an election which must be held within two years of November 5, 1996. Since December 31, 1994, the
City has increased two classes of taxes within Its Business License Tax Ordinance: Firearms and Electric
Busmess. The Firearms Business License Tax was approved by the voters on June 2, 1998. The Electric
Business License Tax is currently in effect, and will be submitted to the voters in November 1998. The
voter approval requirements of Proposition 218 reduce the flexibility of the City to raise revenues for the
General Fund, and no assurance can be given that the City will be able to impose, extend or increase such
taxes in the future to meet increased expenditure needs.
Proposition 218 (Article XIII D) also adds several new provisions making it generally more
difficult for local agencies to levy and maintain "assessments"for municipal services and programs. These
provisions include, among other things, (i) a prohibition against assessments which exceed the reasonable
cost of the proportional special benefit conferred on a parcel, (ii) a requirement that the assessment must
confer a "special benefit," as defined in Article XIII D, over and above any general benefits conferred,
and (iii) a majority protest procedure which involves the mailing of notice and a ballot to the record owner
of each affected parcel, a public hearing and the tabulation of ballots weighted according to the
proportional financial obligation of the affected party. "Assessment" In Article XIII D is defined to mean
any levy or charge upon real property for a special benefit conferred upon the real property. This would
include maintenance assessments for open space areas, street medians, street lights and parks. If the City
becomes unable to continue to collect assessment revenues for these programs, the programs rmght have
to be curtailed and/or funded by amounts in the City's General Fund. All but one of the City's
assessments are security for bonded indebtedness, and should be exempt from the provisions of Article
XIII D. The remaining assessment is levied by the Landscape and Lighting Assessment District ("LLAD"),
which was approved by the citizens through an initiative, and should be exempt from the provisions of
Article XIII D.
In addition, Proposition 218 (Article XIII D) adds several provisions affecting "fees" and
"charges," defined for purposes of Article XIII D to mean "any levy other than an ad valorem tax, a
special tax, or an assessment, imposed by a local government upon a parcel or upon a person as an
incident of property ownership, including a user fee or charge for a property related service." All new
and, after June 30, 1997, existing property related fees and charges must conform to requirements
prohibiting, among other things, fees and charges which (i) generate revenues exceeding the funds required
to provide the property related service, (ii) are used for any purpose other than those for which the fees
and charges are imposed, (iii) are for a service not actually used by, or immediately available to, the
owner of the property in question, or (iv) are used for general governmental services, including police,
fire or library services, where the service is available to the public at large in substantially the same
manner as it is to property owners. This may require the City's General Fund to forego collecting some
or all of the annual amounts it collects from the City's enterprise funds. Further, before any property
related fee or charge may be imposed or increased, written notice must be given to the record owner of
33
each parcel of land affected by such fee or charge. The City must then hold a hearing upon the proposed
imposition or increase, and if written protests against the proposal are presented by a majority of the
owners of the identified parcels, the City may not impose or Increase the fee or charge. Moreover, except
for fees or charges for sewer, water and refuse collection services, or fees for electrical and gas service,
which are not treated as "property related" for purposes of Article XIII D, no property related fee or
charge may be imposed or increased WIthout majority approval by the property owners subject to the fee
or charge or, at the option of the local agency, two-thirds voter approval by the electorate residing in the
affected area. The only enterprise fund operated by the City which may be subject to Proposition 218 IS
the Sewer Enterprise Fund. The fees and charges of the Sewer Enterprise Fund may be determined to be
fees and charges subject to the initiative power referred to In Article XIII C, as described below In the
event that fees and charges cannot be appropriately increased or are reduced pursuant to exercise of the
initiative power, the City may have to decide whether to support any deficiencies in these enterprise funds
WIth moneys from the General Fund or to curtail service, or both.
Proposition 218 (Article XIII C) also removes many of the limitations on the Initiative power in
matter of reducing or repealing any local tax, assessment, fee or charge. No assurance can be given that
the voters of the City will not, in the future, approve an initiatrve or initiatives which reduce or repeal
local taxes, assessments, fees or charges currently comprising a substantial part ofthe City's General Fund.
"Assessments," "fees" and "charges" are not defined in Article XIII C, and it is unclear whether these
terms are intended to have the same meanings for purposes of Article XIII C as for Article XIII D
described above. If not, the scope of the initiative power under Article XIII C potentially could include
all sources of General Fund moneys not received from or Imposed by the federal or State government or
derived from investment income
Further Initiatives
Article XIII A, Article XIII B, Proposition 62 and Proposition 218 were adopted as measures that
qualified for the ballot pursuant to California's initiative process. From time to time other initiative
measures could be adopted, further affecting City revenues or the City's ability to expend revenues.
Year 2000 Compliance
The CIty has conducted a comprehensive review and assessment of its computer applications and
has made inquiry of its key supphers, customers and vendors with respect to the "year 2000 problem" (i.e
the risk that computer apphcanons may not be able to properly perform date-sensitive functions after
December 31, 1999) and, based on that review and inquiry, does not believe that the year 2000 problem
will result m a material adverse change in its financial condition, operations, or properties, or ability to
comply WIth its obligations under the Trust Agreement, the Sublease or the Standby Agreement. The City
can grve no assurance, however, that all issues associated with the "year 2000 problem" have been
identified. Any such unidentified problem could have a material adverse impact on the operations of the
CIty (financial or otherwise)
TAX MATTERS
In the opinion of Orrick, Hemngton & Sutcliffe LLP, San Francisco, California and Lofton De
Lancie, San Francisco, California, Co-Bond Counsel, based upon an analysis of existing laws, regulations,
rulings and court decisions, and assuming, among other matters, compliance with certain covenants,
Interest on the Bonds is excluded from gross income for federal income tax purposes under Section 103
34
of the Internal Revenue Code of 1986 (the "Code") and is exempt from State of California personal
Income taxes. Co-Bond Counsel is also of the opinion that interest on the Bonds is not a specific
preference item for purposes of the federal individual or corporate alternative minimum taxes, although
Co-Bond Counsel observes that such interest IS included in adjusted current earnings in calculating
corporate alternative minimum taxable income. A complete copy of the proposed form of opinion of Co-
Bond Counsel is set forth in APPENDIX F hereto.
The Code imposes various restrictions, conditions and requirements relating to the exclusion from
gross income for federal tax purposes of interest on obligations such as the Bonds. The Authority and
the City have covenanted to comply with certain restrictions designed to assure that interest on the Bonds
WIll not be included in federal gross income. Failure to comply with these covenants may result in interest
on the Bonds being included in federal gross income, possibly from the date of issuance of the Bonds
The opinion of Co-Bond Counsel assumes compliance with these covenants. Co-Bond Counsel has not
undertaken to determine (or to inform any person) whether any actions taken (or not taken) or events
occumng (or not occurring) after the date of Issuance of the Bonds may adversely affect the tax status
of interest on the Bonds. Further, no assurance can be given that pending or future legislation or
amendments to the Code, If enacted into law, or any proposed legislation or amendments to the Code, will
not adversely affect the value of, or the tax status of interest on the Bonds. Prospective purchasers of the
Bonds are urged to consult their own tax advisors with respect to proposals to restructure the federal
income tax.
Certain requirements and procedures contained or referred to in the Sublease, the Trust Agreement,
the Tax Certificate and other relevant documents may be changed and certain actions (including, without
hmitanon, defeasance of the Bonds) may be taken or omitted under the circumstances and subject to the
terms and conditions set forth in such documents, upon the advice or with the approving opinion of
nationally recognized bond counsel. Co-Bond Counsel expresses no opinion as to the interest on the
Bonds If any such change occurs or action is taken or omitted upon the advice or approval of bond
counsel other than Orrick, Herrington & Sutcliffe LLP and Lofton De Lanete.
Although Co-Bond Counsel IS of the opinion that interest on the Bonds is excluded from gross
income for federal income tax purposes and is exempt from State of California personal income taxes, the
ownership or disposition of, or the accrual or receipt of interest on, the Bonds may otherwise affect a
Bondowner's federal or state tax liability. The nature and extent of these other tax consequences will
depend upon the Bondowner's particular tax status or other items of income or deduction Co-Bond
Counsel express no opinion regardmg any such other tax consequences
LEGAL MATTERS
The validity of the Bonds and certain other legal matters are subject to the approving opinion of
Orrick, Herrington & Sutcliffe LLP, San FranCISCO, California, and Lofton De Lancie, Co-Bond Counsel.
A complete copy of the proposed form of Co-Bond Counsel opinion is contained in APPENDIX F hereto.
Co-Bond Counsel undertakes no responsibility for the accuracy, completeness, or fairness of this Official
Statement. Certain legal matters will be passed upon for the Underwriters by Brown & Wood LLP, San
Francisco, California, Underwriters' Counsel. Certain legal matters will be passed upon for the Authority
and the City by Jayne W Williams, City Attorney. Certain legal matters will be passed upon for the Bank
by King & Spalding, New York, New York. The fees of Co-Bond Counsel and Underwriters' Counsel
are contingent upon the closing of the Bonds.
3S
LITIGATION
No litigation is pending or threatened against the Authority or the City concerning the validity of
the Bonds, the Lease, the Sublease or the Trust Agreement, and an opinion to that effect will be furnished
at the time of the original delivery of the Bonds. The Authority is not aware of any litigation pending
or threatened questiomng the pohtical existence of the Authority and the City or contestmg the City's
ability to appropriate or make Base Rental Payments and Additional Payments, if any.
There are a number of lawsuits and claims pending against the City. In the opinion of the City
Attorney, the aggregate amount of liability that the City might incur as a result of adverse decistons in
such cases would be covered under the CIty'S self-insurance program.
VERIFICATION
Ernst & Young, certified public accountants, will verify the accuracy of (i) mathematical
computations concerning the adequacy of the maturing principal amounts of and interest earned on the
governmental obligations credited to the Escrow Fund for the Prior Bonds, to pay the principal of and
interest when due and the redemption premium at redemption of the Prior Bonds and (ii) the mathematical
computations of the yield on the governmental obligations purchased with amounts credited to the Escrow
Fund, whrch verification will be used in part by Co-Bond Counsel in concluding that interest on the Bonds
IS excluded from gross income for federal income taxes as described under "TAX MATIERS."
RATINGS
Moody's Investors Service, Standard and Poor's, a division of the McGraw-Hili Companies, Inc.
and Fitch, IBCA, LLP, have assigned the Bonds the long-term ratings of "Aaa", "AAA" and "AAA, and
the short-term ratings of "VMIG-I", "A-I+" and "FI+", respectively, with the understanding that upon
delivery of the Bonds, the Policy will be issued by the Insurer and the Standby Bond Purchase Agreement
will be delivered by the Bank. Such ratings reflect only the views of such organizations and explanations
of the significance of such ratings may be obtained only from the respective organizations at: Moody's
Investors Service, 99 Church Street, New York, New York 10007-2796, telephone number (212)
553-0317; Standard and Poor's, 25 Broadway, New York, New York 10004, telephone number (212)
208-1002, and Fitch, One State Street Plaza, New York, New York 10004, telephone number (800) 753-
4824 There is no assurance that such ratings will continue for any given period or that they will not be
revised downward or withdrawn entirely by the respective ranng agencies, if in the judgment of such
rating agency, circumstances so warrant. Any such downward revisionor withdrawal of such ratings may
have an adverse effect on the market price of the Bonds.
FINANCIAL ADVISOR
The City has retained Public Financial Management, Inc., San FranCISCO, California, as financial
advisor (the "Financial Advisor") in connection with the preparation of this Official Statement and with
respect to the issuance of the Bonds. The Financial Advisor IS not obligated to undertake, and has not
undertaken to make, an independent verification or assume responsibility for the accuracy, completeness
or fairness of the information contained in this Official Statement. Public Financial Management, Inc. is
36
an independent financial advisory firm and is not engaged in the business of underwnting, trading or
distributmg municipal securities or other pubhc securities
REMARKETING AGENTS
Goldman, Sachs & Co. has been appointed to serve as Remarketing Agent for the Senes A-I
Bonds and E. J. De La Rosa & Co , Inc has been appointed to serve as Remarketing Agent for the Series
A-2 Bonds (collectively, the "Remarketing Agents"). The Remarketing Agents will carry out the duties
and obligations provided for the Remarketing Agents under and in accordance with the provisions of the
Trust Agreement and the Remarketmg Agreements executed m connectIon with the Bonds. The principal
office and the telephone number of Goldman, Sachs & Co. (for purposes of Its responsibihties as
Remarketing Agent for the Series A-I Bonds) is 85 Broad Street, New York, New York 10004, AttentIon:
Short-Term Tax Exempt Trading, and the principal office and telephone number for E J. De La Rosa &
Co., Inc. (for purposes of its responsibihties WIth respect to the Series A-2 Bonds) is 11900 W Olympic
Blvd., Suite 500, Los Angeles, California 90064, Attention. Benjarmn Stem.
UNDERWRITING
The Series A-I Bonds are being purchased by Goldman, Sachs & Co. who has agreed, subject to
certain conditions set forth in the Purchase Contract between the Authority and the Underwriter, to
purchase the Series A-I Bonds at a price of $131,401,375 (such amount represent the par amount of the
Series A-I Bonds m the amount of $131,500,000, less underwriter's discount of $98,625).
The Senes A-2 Bonds are being purchased by E. J. De La Rosa & Co., Inc. who has agreed,
subject to certain condrtions set forth in the Purchase Contract between the Authority and the Underwriter,
to purchase the Senes A-2 Bonds at a price of $55,958,000 (such amount representing the par amount of
Series A-2 Bonds m the amount of $56,000,000, less an underwnter's discount of $42,000).
The Underwriters may offer and sell the Bonds to certam dealers and others at pnces lower than
the offering prices stated on the cover page The offering pnces may be changed from time to time by
the Underwnters. The Purchase Contract for the Bonds provides that the Underwnters will purchase all
of such Bonds, If any are purchased, subject to certain terms and conditions set forth in the Purchase
Contract.
NO CONTINUING DISCLOSURE; ADDITIONAL INFORMATION
The offering of the Bonds is exempt from the provisions of Rule 15(c)2-12 (the "Rule") of the
Secunties and Exchange Commission and neither the City, the Authority, the Insurer nor the Bank (as
defined below) has covenanted to supply any continuing mformation to Bondowners with respect to the
Bonds, the Authonty, the City, the Insurer or the Bank for purposes of the Rule.
The City regularly prepares a vanety of reports, including audits, budgets and related documents,
as well as certain periodic activrty reports. Any Bondowner may obtain a copy of any such report, as
available, from the Trustee or the City Additional information may be obtained by contactmg the Trustee
or the City at the addresses indicated rn this Official Statement
37
EXECUTION AND DELIVERY
The execution and delivery of this Official Statement has been duly authorized by the Authority
and the City.
OAKLAND JOINT POWERS FINANCING
AUTHORITY
By: lsi Robert C. Bobb
Executive Director
CITY OF OAKLAND
By: lsi Robert C. Bobb
CIty Manager
38
APPENDIX A
CERTAIN INFORMATION CONCERNING THE CITY OF OAKLAND
THIS PAGEINTENTIONALLY LEFTBLANK
APPENDIX A
CERTAIN INFORMATION CONCERNING THE CITY OF OAKLAND
General Information
Overview. 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 the San
Francisco-Oakland Bay Bridge. Oakland ranges from industrialized lands bordering the Bay In the west
to suburban foothills in the east. Historically the industrial heart of the Bay Area, the City has developed
into a financial, commercial and governmental center Oakland IS also the hub of an extensive
transportation network which includes a freeway system and the western terminals of major railroads and
trucking firms, as well as one of the largest container-ship ports in the United States. The City supports
an expanding International airport and rapid-transit lines which connect It with most ofthe Bay Area The
City is the seat of government for Alameda County and IS the eighth most populous city In the State of
California (the "State")
City Government The CIty was incorporated as a town in 1852 and as a CIty In 1854, and
became a charter city in 1889. Oakland is governed by a nine-member City Council, seven of whom are
elected by district and two of whom, Including the Mayor, are elected on a city-wide basis. The Mayor
and Council members serve four-year staggered terms The Council appoints a CIty Manager who IS
responsible for daily administration of City affairs and preparation and submission of the annual budget
under the direction of the Mayor and City Council for the Mayor's submission to the City Council
Subject to civil service regulations, the City Manager appoints City employees except the City
Attorney, CIty Clerk and City Auditor The City Council appoints the City Attorney, and the CIty Clerk
is appointed by the City Manager subject to City Council approval. The Director of Budget and Finance
serves as the City's Treasurer and supervises the City's financial affairs. 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, Including those
functions delegated to cities under State law. These services Include public safety (police and fire),
sanitation and environmental health enforcement, recreational and cultural activities, public improvements,
planning, zoning and general administrative services.
Budget Process. The City's budget is developed on Generally Accepted Accounting Principles
("GAAP") basis (modified accrual for governmental funds and accrual for proprietary and pension trust
funds), with one exception. For budgetary purposes, outstanding commitments related to construction
contracts and other purchases of goods and services are recorded as expenditures at the time such contracts
or purchases are entered into (under GAAP, these obligations are recognized when goods are received or
services rendered) The City Charter requires that the City Counctl adopt a balanced budget by June 30,
preceding the start of the fiscal year on July I
Recently, the budget cycle was changed to a two-year process in order to promote long-term
decision making, to increase funding stability and to allow for greater performance evaluation. The City
Manager and Agency heads conduct internal budget hearings to develop budget proposals for presentation
to the Mayor Within 60 to 90 days before the end of the two-year cycle, the Mayor submits the proposed
two-year budget to the City Council and each Agency's formal public budget hearing IS scheduled Upon
A-I
conclusion of the public hearings, the City Council may make adjustments and/or revrsions The CIty
Council adopts the City'S operatmg budget on or before June 30. It contains appropriations for all funds
and all two-year appropriations for the five-year Capital Improvements Program.
Having strearnhned the budget process, the City has designated specific cnteria for mid-cycle (end
of year one) review and/or reVISIOns: Federal and State mandates, sigmficant changes m mid-year revenue
projections and any fully cost-covered program changes. Additionally, 50% of any year-one surplus in
the General Fund will roll forward to the department for year two The other 50% will be reserved by
the CIty for technology Improvements.
The City Manager employs an mdependent certified public accountant who exammes books,
records, mventones and reports of all officers and employees who receive, control, handle or disburse
pubhc funds, and those of any other officers, employees or departments as the CIty Manager directs
These duties are performed both annually and upon request The City's independent auditor for fiscal year
1996-1997 was KPMG Peat Marwick LLP
Withm a reasonable period followmg the fiscal year-end, the accountant submits the final audit
to the City Council The City then publishes the financial statements as of the close of the fiscal year
Investment Policy
Pursuant to City Council Resolution No. 56127, the City Council delegated to the Director of
Budget and Finance the authority to invest the City's operating fund within the guidelmes of Section
53600 of the State Government Code. This section of the State Government Code also directs the CIty
to present an annual mvestment policy for confirmation to the City Council The objectives of the
Investment Policy are to preserve capital, provide adequate liquidity to meet cash disbursements of the
City and reduce overall portfolio nsks while rnaintainmg market average rates of return
The Investment Policy is subject to revision by the City at any time, and was most recently
amended on July 23, 1996. The City Council IS scheduled to adopt a new Investment Policy for Fiscal
Year 1998-99 on July 14, 1998 Proposed changes include, among others, specified application of the
Investment Policy to the operating fund of the Oakland Redevelopment Agency, reduction of minimum
financial institution credit requirements in the case of federally insured deposits, and the addition of State
of California and local government oblrgations to permissible investments under specified condtnons The
proposed Investment Policy also incorporates the provisions of Resolution No 74074 C.M.S adopted by
the CIty Council on February 17, 1998 to prohibtt investment in firms deriving greater than 15% of their
revenues from tobacco products
Current Investment Portfolio
As of June 30, 1998, as shown below the CIty mamtamed approximately $165,139,059 in its
operating fund, excluding capital funds, debt service funds, special revenue funds and pension trust funds.
The operating fund IS classified by different types of investment securities and is invested in accordance
WIth the Investment Policy
The composition of the operatmg fund, mcluding the average term and days to maturity, IS
provided below. The days to matunty IS an average for each category of mvestment security The City
currently maintains 57 15% of the operating fund m investments that mature in SIX months or less
A-2
CITY OF OAKLAND OPERATING FUND
(As of June 30, 1998)
Average Yield to Maturity
Percent of Average Days to 360-Day 365-Day
Investments Book Value Portfolro Term Maturity EqUIvalent EqUIvalent
Federal Agency Issues - Coupon $107,250,907 93 6495% 710 494 5674% 5753%
Federal Agency Issues - DIscount 1,963,00667 I 19 124 5 5471 5547
Medium Term Notes 4,627,46000 280 431 406 5895 5976
Money Market 14,609,034 67 885 I 1 5675 5754
Local Agency Investment Funds 15,796,000 00 957 I I 5602 5680
Certificates of Deposit 500,00000 30 182 167 5420 5495
Bankers Acceptances 3,945,01510 239 176 112 5599 5677
Commercial Paper - Discount 16,447,63444 996
--.22 ~
5646 5725
TOTAL INVESTMENTS AND
AVERAGES $165,139,05881 10000% 490 340 5666% 5745%
Source Cay of Oakland. Budget and Finance Agency. Treasury Dtviston
Fitch Investors Service, L.P ("Fitch") has assigned a managed fund credit rating of "AAA" and
a market risk rating of "V-l+" to the City Portfoho. These ratings were most recently affirmed by Fitch
on June 3, 1998, Fitch's managed fund credit ratings are an assessment of the overall credit quality of
a fund's portfolio. Ratings are based on an evaluation of several factors, Including credit quahty and
diversification of assets inthe portfolio, management strength, and operational capabilities Fitch managed
fund market risk ratings are an assessment of relative market risks and total return stability in the
portfolio, Market risk ratings are based on, but not limited to, analysis of Interest rate, denvative,
hquidity, spread, and leverage risk. Fitch's managed fund credit and market risk ratings are based on
information provided to Fitch by the City, including monthly confirmation of portfolio holdings. FItch
does not venfy the underlying accuracy of this information, These ratings do not constitute
recommendations to purchase, sell or hold any security
Financial Obligations
The City has never defaulted on the payment of principal or Interest on any of Its Indebtedness
or lease obligations
General Obligation Debt As of June 30,1998, the City had outstanding a total of$136,135,000
aggregate principal amount of general obligation bonds,
The Senes 1992 General Obhgation Bonds of $50,000,000 were Issuedat the maximum authonzed
amount approved by the voters in June 1992 to provide funds to enhance emergency response capabilities
and seismic reinforcement of pubhc facilmes and infrastructure.
The Series 1991A General Obhgation Bonds In the amount of $12,000,000 were issued as part
of the maximum authorized amount of $60,000,000 approved by the voters In November 1990 for the
purpose of financing the acquisition of open space and the rehabilitation, development and expansion of
park and recreational facilities within the CIty. In March 1995, the Senes 1995B General Obliganon
Bonds Inthe amount of $15,000,000 were issued, and in Apnl 1997, the Series 1997C General Obhgation
A-3
Bonds of $22,250,000 were issued, both under the 1990 authorization. The City now has $10 75 milhon
remaining 10 authorized but unissued general obhgation debt.
In Apnl1997, the Series 1997 (Measure I) General Obligation Bonds of $45,420,000 were Issued
for the purpose of financing the repair, construction, acquisition and improvement of certam libraries,
museums and other cultural and recreational facilities
Short-Term Obligations. The City of Oakland implemented a short-term financing program in
1981 to finance general fund temporary cash flow deficits dunng the fiscal year (July 1 through June 30).
The City has Issued short-term notes for each of the last ten fiscal years, including the Issuance of
$60,000,000 Tax and Revenue Anticipation Notes for the fiscal year ended June 30, 1998. The City has
never defaulted on the payment of any of these notes The City expects to Issue Its 1998-99 Tax and
Revenue Annctpation Notes In July 1998.
Lease Obligations. Since 1982, the City has entered into sale-leaseback transactions to finance
the acquisition and construction of capital improvements to City properties Most recently, in April 1996,
the City participated in the Issuance of $103,945,000 in Lease Revenue Bonds to finance a portion of the
design, construction, rehabilitanon and equipping of two City admmistration buildings and a CIVIC plaza
The bonds are secured by lease payments payable by the City from the City'S General Fund to the
Oakland Joint Powers Financing Authority. In November 1992, the California Statewide Community
Development Authority ("CSCDA") Issued $149,825,000 of lease revenue bonds to repurchase the Kaiser
Convention Center ("Kaiser") and the George P. Scotlan Memorial Convention Center ("Scotian") The
City concurrently leased Kaiser and Scotian from the CSCDA. In May 1992, the Oakland Redevelopment
Agency (the "Agency") issued $39,408,000 in Refunding Certificates of Participation to defease the
Oakland Museum Certificates of Participation 1987 Series A. The Agency leased the Museum's facilities
and site to the City under a lease agreement In December 1985, the City entered into vanous
simultaneous agreements to finance certain capital improvements on City property, such as traffic control
devices, street resurfacing, parkmg lots, garages and the rehabihtation of various City buildings In each
case, the bonds or the certificates are secured by lease payments payable by the City to governmental
agencies or nonprofit corporations, and the securities are recorded as direct obligations to the City
A-4
In the fiscal years 1997-98through 2001-02 the CIty IS required to make combined lease payments
from ItS General Fund as shown below
CITY OF OAKLAND ANNUAL GENERAL FUND LEASE OBLIGATIONS
Oakland CIVIC Oakland
FIScal Oakland Convention Improvements Oakland Admimstranon Oakland
Year Cohseum'" Centers Corp Museum BUI\dmgs(2) Arena'? Total
1997/98 $11,000,000 $10,804,586 $3,525,000 $3,700,650 s 0 s 0 $29,030,236
1998/99 11,000,000 10,799,639 3,565,000 3,701,690 2,916,753 9,500,000 41,483,082
1999/00 11,000,000 10,801,774 3,600,000 3,703,930 5,833,506 9,500,000 44,439,210
2000/01 11,000,000 12,518,704 3,700,000 3,702,380 7,548,141 9,500,000 47,969,225
2001/02 11,000,000 12,510,039 3,615,000 3,703,480 7,549,536 9,500,000 47,878,055
Pnncipal
Balance!" $197,210,000 $144,195,000 $45,300,000 $33,413,025 $103,945,000 $140,000,000 $659,063,025
(I) Annual amount shown represents one-half of the maximum annual lease obhganon (I e $22 million) payable by the CIty and the County,
for which the CIty and the County are JOintly and severally hable The CIty anucipates that football related revenues WIll pay a portion of
the debt servrce relatmg to this lease obhganon
(2) Principal amount outstanding as of July I, 1998
r Interest on the Oakland Adrmmstranon BUIldings bonds IS caprtaltzed through November I, 1998
(4) Interest on the Oakland Coliseum Arena was capitahzed through May I, 1998
Source CIty ofOakland, Budget and Fmance Agency, Treasury Dsvtston
Financings for Sports Facilities.
Improvement of Oakland-Alameda County Stadium In connection with the relocation to the CIty
of the Oakland Raiders, a Califorma lirmted partnership, a National Football League professional football
team (the "Raiders"), the CIty and Alameda County (the "County") entered into a senes of agreements (the
"Raiders Agreements") with the Raiders for the Improvement and expansion of the Oakland-Alameda
County Stadium (the "Stadium" and, together with the improvements, the "Stadium Project"). The CIty
and the County also formed the Oakland-Alameda County Coliseum Authority. ajomt powers agency (the
"Authority")
In September 1995, the Authority Issued tax-exempt and taxable lease revenue bonds in the
aggregate principal amount of $197,700,000 to finance the Stadium Project The bonds are limited
obligations of the Authority payable from revenues of the Authority, consistmg pnrnanly of rental
payments payable by the CIty and the County to the Authority, pursuant to a Master Lease, dated as of
August I, 1995 (the "Master Lease") by and between the Authority, as lessor, and the City and County,
as lessees The rental payments to be made by the CIty and the County are payable from their respective
general funds for the right to use and occupy the Stadium. The final matunty date of the tax-exempt
senes of bonds is February 2004 The taxable senes of the bonds matures m February 2025
The rental payments to be made under the Master Lease are joint and several obligations drvided
equally between the City and the County and are calculated to be sufficient to pay principal of and interest
on the bonds when due, subject to a maximum annual amount of $22,000,000 In addition to pnncipal
and interest on the bonds, the County and the City are required, as additional rent, to pay all fees, costs
and expenses, as well as all administrative costs of the Authority related to the bonds, the related
obhgations, the site and the facilities. The CIty and the County have agreed in the Master Lease to make
A-5
all rental payments, subject to the abatement of such payments In the event of material damage to or
destruction of or takmg of the Stadium m whole or m part.
The CIty and the County each have agreed in the Master Lease to take the required action to
include one-half (1/2) of the rental payments due under the Master Lease in their respective annual
budgets, and to make necessary annual appropriations therefor For each of the 1996-97, 1997-98 and
1998-99 fiscal years the CIty appropnated $11,000,000 for this purpose. The City and the County have
also covenanted for the benefit of the bondholders that If either entity fails In any fiscal year to budget
or pay Its one-half (1/2) share of such rental payment and other amounts owing under the Master Lease
payable during such fiscal year, the other entity IS required, by supplemental budget in such fiscal year,
to appropriate and pay such additional amounts as are necessary to cure any resulting deficiency caused
by the failure to appropnate.
Certain football-related revenues are credited towards rental payments under the Master Lease
Amounts that are appropnated by the City but not expended in any given year may be applied to the
following year's appropriation The primary source of football-related revenue that IS credited towards
rental payments IS that generated through the sale of personal seat licenses("PSLs"), which give the holder
the nght to purchasetickets for games over a IO-year period. Sales of PSLs to date have not met the pace
originally projected If PSLs continue to be sold at a rate slower than that originally projected, it will
have a budgetary Impact on the CIty. The most recent projections of revenues and expenditures for the
Stadium show revenues ranging from $16 I million to $17 rmlhon and expenditures ranging from $29 7
milhon to $317 million, creating an estimated funding gap of approximately $126 million to $156
million. The City and the County are each responsible for half of such amount, which would be
approximately $6 million to $7.8 million each. Although the City and the County are in the process of
rrunatmg steps whrch would rmtigate this ongoing adverse impact, no assurances can be made when or
if these efforts will be successful In hght of these developments, the CIty is currently projecting an
impact of approximately $7.7 million in fiscal year 1997-98 and $6 0 million in fiscal year 1998-99, but
there can be no assurance that the actual impact will not be hrgher The CIty has set aside a Cohseum
reserve fund from which these amounts are paid Following payment of all amounts for fiscal year 1997-
98 the balance projected to be available for fiscal year 1998-99 is $6 million
Failure of the City, the County or one or more ofthe other public entities to perform ItS respective
obligations under the Raiders Agreements could provide a baSIS for the Raiders to termmate their
obligation to play football at the Stadium, potentially resulting in a diminution or elimination of football-
related revenues which would otherwise be available to the pubhc entities for, among other purposes,
payment of the bonds and related obligations The obligation of the CIty and the County to make rental
payments under the Master Lease IS not contmgent upon the performance by the Raiders or any other
party of their respective obligations under the Raiders Agreements
In September 1997, the CIty, along with the County and the Authority, filed an action (the "SUIt")
m Alameda County Supenor Court against the Raiders relating to the Raiders' interference With the
Authorrty's abrhty to enter mto an agreement to sell the name of the Stadium and the Raiders' threat to
attempt to rescind the Master Agreement. On July 7, 1998 the Raiders filed an answer and cross-
complaint to the SUIt in the changed venue of Sacramento County Superior Court. The answer raised
various defenses and counter-claims seekmg declaratory relief and recision of contract, among other
clarms The CIty and the other party defendants contmue to review the answer of the Raiders and WIll
be preparmg a jomt response. ThIS htiganon IS ongomg and no assurancecan be made by the CIty as to
ItS ultrrnare outcome.
A-6
ConstructumofNew Oakland-Alameda County ColtseumArena On July 15, 1996 the CIty entered
into various agreements (the "Agreements") with the County, the Authonty and the Golden State Warriors,
an NBA professional basketball team (the "Warriors"), providing for a complete renovation of the old
arena at the Coliseum complex, wrth the Warriors as anchor tenant at the newly renovated arena (the
"Arena") Construction was completed in November 1997 The new Arena was built within the existmg
structure of the old arena and has a capacity of 19,200 seats for basketball, including approximately 70
luxury SUItes, making It the largest basketball and indoor concert facihty in the Bay Area. On August 2,
1996, the Authority Issued $140,000,000 m Lease Revenue Bonds (the "Arena Bonds") to finance the costs
of the Arena improvements and the Warriors Practice Facility. Pursuant to a Master Lease dated as of
June 1, 1996 (the "Arena Master Lease"), the City and the County agreed to lease the Arena from the
Authority The base rental payments under the Arena Master Lease are security for the Arena Bonds
The rental payments made under the Arena Master Lease are joint and several obhgations divided
equally between the City and the County and are calculated to be sufficient to pay pnncipal of and interest
on the bonds when due, subject to a maximum annual amount of $19,000,000. The City and the County
have agreed In the Arena Master Lease to make all rental payments, subject to the abatement of such
payments in the event of material damage to or destruction of or taking of the Arena rn whole or in part.
The City and the County each have agreed in the Arena Master Lease to take the required action
to include one-half (1/2) of the rental payments due under the Arena Master Lease in their respective
annual budgets, and to make necessary annual appropriations therefor. The City and the County have also
covenanted for the benefit of the bondholders that If either entrty falls in any fiscal year to budget or pay
ItS one-half (1/2) share of such rental payment and other amounts owing under the Arena Master Lease
payable during such fiscal year, the other entity is required, by supplemental budget m such fiscal year,
to appropriate and pay such additional amounts as are necessary to cure any resultmg deficiency caused
by the failure to appropriate.
On July 23, 1997, the Warners and the Authority entered into a Memorandum ofUnderstandmg
("MOU") that requires the parties to negotiate In good faith to supplement their previous agreements
relatmg to the construction and operation of the new Arena by entering into a detailed Operating LIcense
Agreement, to be agreed upon by the parties, in accordance WIth the terms of the MOU. In the MOU,
the Warnors have agreed to pay, through a wholly-owned management company, annual rent In an amount
equal to the debt service on the Arena Bonds in exchange for the right to operate the Arena ThIS
payment obligation IS secured by the pledge of certam revenues, Including $7.4 million of premium
seating revenue from the Warriors due under the license plus other revenue, and the Warriors' wholly-
owned management company will maintain a debt service revenue fund in the amount of$7 4 million until
pledged revenues reach a certain level; these obligations are further secured by a first lien secunty Interest
m certain Arena revenues. The Warners and the Authority also agreed to increase the term of the
Warriors' license to June 30, 2026, WIth an option to renew for up to two additional five year terms,
subject to a Warriors' license buyout option after ten years provided the Warriors pay an amount equal
to the then outstanding indebtedness of the Arena Bonds The Authonty and the Warnors are contmumg
to negotiate the terms of the Operatmg LIcense Agreement and It IS currently the mtention of the Authority
that the Warnors' wholly-owned management company WIll begin operating the Arena on July 1, 1999,
at the earliest The Authority has recently acted to authorize officials and staff to enter into an agreement
for operation of the Stadium and the new Arena with the Oakland Coliseum Joint Venture ("Jomt
Venture"), a jomt venture between Spectacor Management Group ("SMG"), a Pennsylvania general
partnership comprised of the Hyatt Corporation and ARAMARK Corporation, and Barry Lawson
Williams, President of Williams Pacific Ventures. SMG is an industry leader in the private management
of public assembly and multi-purpose facilities, includmg arenas, convention centers, theaters and
A-7
stadiums Included among its current world-wide engagements are 19 arenas and 7 stadiums Other
Cahforma venues under management include the Moscone Center in San Francisco, the Los Angeles
Memorial Coltseum, the Los Angeles Sports Arena and the Long Beach Arena
It IS anticipated that the agreement between the Authority and Joint Venture will have a two-year
term, WIth an option by the Authority to remove Arena operations from the Agreement after one year.
Under the agreement the Jomt Venture's compensation is performance-based
Long-Term Borrowings. In February 1997, the CIty issued $436,289,659.15 of taxable pension
obhgation bonds These bonds have serial maturities to 2010. The source of payment for pnncipal of
and interest on the bonds is not limited to any source of funds, but includes tax overnde revenues, which
are the revenues generated and collected by the City as proceeds of Its annual tax levy authorized by
Measure R and Measure 0, enacted by the voters on June 8, 1976 and June 7, 1988, respectively The
obligation of the CIty to make payments with respect to the bonds is an obligation Imposed upon the City
by law Hence, these bonds are direct obligations of the City
In 1988, the City issued revenue refunding bonds in the amount of $209,835,000 (referred to
herem as the "Pnor Bonds") which have serial and term matunties to 202 I Such bonds are payable solely
from the proceeds of life Insurance annuity contracts held in trust WIth the Pohce and FIre Retirement
System in the Pension Annuity Expendable Trust fund. Because of the nature of the financing structure,
such bonds are recorded as direct obligations of the City. The Prior Bonds will be redeemed on August 1,
1998 WIth proceeds of the Bonds.
In addition, the Agency has issued several senes of Its tax allocation bonds for two redevelopment
project districts. In each case, the tax allocation bonds are limited obliganons of the Agency and are
payable solely from and secured by a pledge of an Incremental portion of tax revenues assessed on
property Within each respective project distnct. For the fiscal year ending June 30, 1998, the
redevelopment tax Increment revenues within the City are esnmated to total $24,067,488.
Special Assessment Debt In April 1994, the City issued $2,020,000 of 1994 Refunding
Improvement Bonds Medical Hill Parking Assessment, Series 3 Bonds to defease the Medical Hill Parking
Assessment District Refundmg Bonds dated March 1989. In December 1994, the City issued $7,370,000
of Lrrmted Obligation Improvement Bonds for Its Fire Area Utility Underground Assessment Distnct No.
1994- I, an area consistmg of approximately 2,500 assessed parcels m the Oakland hills The proceeds
of the bonds were to be used to finance a portion of the costs of the construction and mstallation of
underground electnc, telephone and cable T.V public utility hnes, includmg the mstallanon of
underground electric transformers, pnrnary electric vaults, and numerous telephone, cable T V and street
light boxes, street lights and primary electric and telephone conduits, and certam street Improvements
In December 1994, the CIty Issued $876,315 of Limited Obhgation Improvement Bonds, Senes
1994 for Its Assessment District No 1994-2 (Rockridge Area Water Improvements), and area consisting
of approximately 776 assessed parcels in the Oakland hills The proceeds of the bond issue were used
to finance a portion of the costs of the acquisition and installation of certain water system Improvements,
uti hty pipel mes, fire hydrants and certain related street reparrs,
In August 1994, the CIty Issued $349,98942 of Limited Obligation Improvement Bonds for the
Skylme Sewer Assessment District, consisting of 30 parcels in the Oakland Hills The proceeds of the
Bonds were used to finance the construction of a sewer line
A-8
The City also has established the following assessment districts and levied assessments in order
to finance the costs of ornamental street lighting and/or undergrounding utihties: in 1994, Lakeshore
Ornamental Lighting Assessment District--Phase I ($86,568.00), Ocean VIew Ornamental Lighting
Assessment District ($15,25000), In 1995, Lakeshore Ornamental Lighting Assessment Distnct--Phase
II ($31,782.96); in 1996, Lower Hubert Road Ornamental Lighting Assessment District ($50,327 39); and
In 1997, Proctor Utility Underground Assessment District No 1997-2 ($37,818.00), Lakeshore Phase III
UtilrtyUnderground Assessmentfnstrict No. 1997-3($106,914.00), La Salle, Liggett, Pershing and Wood
Area Utility Undergrounding AssessmentDistrict No 1974-4($893,878.00), Harbord, Estates, McAndrew
and Wood Area Utility Assessment Distnct No. 19997-5 ($797,146.00), and Grizzly Peak Utility
Undergrounding Assessment DIstrict No. 1997-6 ($174,990.00), which 1997 issues were part of a pooled
financing undertaken by the Oakland Joint Powers Financing Authority which Issued, on behalf of the
City, its $1,250,000 Special Assessment Pooled Revenue Bonds Senes 1997 to more efficiently finance
the costs of borrowing for each of said assessment distncts.
With respect to special assessment debt, the bonds are payable from addttional special property
tax assessments levied against property owners in the assessment district. In the event of contmumg
delinquencies In the payment of the property owners' installments, the CIty, In the absence of other
bidders, IS obligated to purchase defaulted properties at delinquent assessment sale and pay delinquent and
future installments of assessments and interest thereon until the defaulted properties are resold or
redeemed.
No Defaults. The City has never defaulted on any of Its debt.
Estimated Direct And Overlapping Debt. Contained within the City are numerous overlapping
local agencies providing public services 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 as of May 1, 1998 is shown below. Self-supportmg revenue bonds, tax allocation bonds and
non-bonded capital lease obligations are excluded from the debt statement.
A-9
CITY OF OAKLAND
Statement of Direct and Overlapping Debt
1997-98 Assessed Valuation
Redevelopment Incremental Valuation
Adjusted Assessed Valuation
$17,757,998,296
1.747,897,186
$16,010,101,110
DIRECT AND OVERLAPPING TAX AND ASSESSMENT DEBT % ApplIcable
San Francisco Bay Area Rapid Transit District 8.152%
East Bay Mumcipal Utility Distnct 21.321
East Bay Municipal Utility DIStrict, Special Distnct No 53.378
East Bay Regional Park Distnct 11.743
Peralta Community College Distnct 55.231
Oakland Unified School Distnct 99 996
San Leandro Unified School Distnct 19 333
CIty of Oakland 100.000
CIty of Oakland 1915 Act Bonds 100000
CIty of Emeryville 1915 Act Bonds 10417-18790
TOTAL GROSS DIRECT AND OVERLAPPING TAX AND ASSESSMENT DEBT
Less East Bay Municipal Utihty District (100% self-supporting)
East Bay Municipal Utihty DIstrict , Special District No. I (100% self-supporting)
TOTAL NET DIRECT AND OVERLAPPING TAX AND ASSESSMENT DEBT
Debt 5/1/98
$ 6,912,896
1,753,652
24,876,817
22,506,047
13,713,857
43,303,245
2,996,615
137,705,000
11,010,000
1,802,817
$266,580,946
1,753,652
24,876,817
$239,950,477
$ 5,734,558
101,362,995
114,299,634
1,704,395
207,264
38,458,462
516,191
643
666,633,025 (I)
432,989,659
$1,361,906,826
$1,628,487,772 (2)
$1,601,857,303
GROSS COMBINED TOTAL DEBT
NET COMBINEDTOTAL DEBT
DIRECT AND OVERLAPPING GENERAL FUND OBLIGAnON DEBT:
Alameda-Contra Costa Transit District Certificates of Participation 22 577%
Alameda County and Coliseum Authonty General Fund Obligations 20 099
Alameda County Pension Obliganons 20 099
Alameda County Board of Education Public Facilities Corporation 20.099
Chabot-Las Positas Community College DIstrict Certificates of Participanon 2.758
Oakland Unified School DIstrict Certificates of Participanon 99.996
San Leandro Unified School District Certificates of Participanon 19.333
Castro Valley Unified School District Certificates of Participation 0.016
City of Oakland and Coliseum Authonty General Fund Obhganons 100000
City of Oakland Pension Obhgations 100000
TOTAL DIRECT AND OVERLAPPING GENERAL FUND OBLIGATION DEBT
(I) Excludes lease revenue bonds to be sold.
(2) Excludes tax and revenue anticipation notes, revenue, mortgage revenue and tax allocation bonds and non-
bonded capital lease obhganons
Ratios to 1997-98 Assessed ValuatIOn
DIrect Debt ($137,705,000)
Total Gross DIrect and Overlappmg Tax and Assessment Debt
Total Net DIrect and Overlapping Tax and Assessment Debt
078%
150%
135%
RatIOS to AdJusted Assessed ValuatIOn
Combmed DIrect Debt ($1,237,327,684)
Gross Combined Total Debt
Net Combined Total Debt
773%
10.17%
1001%
STATE SCHOOL BUILDING AID REPAYABLE AS OF 6/30/97 $4,337,410
Source California Municipal Statistics, Inc.
A-to
Property Taxation
Ad Valorem Property Taxes. City property taxes are assessed and collected by the County at the
same time and on the same rolls as are County, school and special district property taxes. The County
is permitted under state law to pass on costs for certain services provided to local government agencies
including the collection of property taxes. The County imposed a fee on the City of approximately 1.2%
of taxes collected for tax collection services provided in fiscal year 1997-98
Assessed Valuations. All property is assessed using full cash value as defined by Article XIIIA
of the State Constitution State law provides exemptions from ad valorem property taxation for certain
classes of property such as churches, colleges, nonprofit hospitals and charitable instrtutions
Future assessed valuation growth allowed under Article XIIlA (new construction, certain changes
of ownership, 2% inflation) will be allocated on the basis of "situs" among the junsdictions that serve the
tax rate area Within which the growth occurs. Local agencies and schools will share m the growth of
"base" revenues from the tax rate area. Each year's growth allocation becomes part of each agency's
allocation in the following year The availability of revenue from growth in tax bases to such entities may
be affected by the establishment of redevelopment agencies which, under certain Circumstances, may be
entitled to revenues resultmg from the increase in certain property values The City has established a
redevelopment agency which receives certain incremental property tax revenues m specified project areas
throughout the City.
The passage of Assembly Bill 454 In 1987 changed the manner in which unitary and operating
nonunitary property is assessed by the State Board of Equalization. The legislanon deleted the formula
for the allocation of assessed value attributed to such property and imposed a State-mandated local
program requiring the assignment of the assessmentvalue of all Unitary and operatmg non-unitary property
in each county of each State assesseeother than a regulated railway company. The legislation established
formulas for the computation of applicable county-Wide tax rates for such property and for the allocation
of property tax revenues attributable to such property among taxing jurisdictions in the county beginning
in fiscal year 1988-89. This legislation requires each county to issue each State assessee, other than a
regulated railway company, a single tax bill for all unitary and operating nonunrtary property
A-II
(I)
The following table represents a five-year history of assessed valuations in the CIty
CITY OF OAKLAND
ASSESSED VALUATlONS(I)
(In $OOO's)
FIscal
Year Local Secured Utility Unsecured Total
1993/94 $14,022,252 $58,911 $1,925,987 $16,007,150
1994/95 14,480,337 57,363 1,856,049 16,393,748
1995/96 14,813,287 55,165 2,077,110 16,945,562
1996/97 14,964,944 64,955 2,194,244 17,224,143
1997/98 15,265,600 80,139 2,413,259 17,757,998
Before redevelopment tax allocation Increment deduction
Source Alameda County Auditor-Controller.
Tax Levies, Collections and Delinquencies. Taxes are levied for each fiscal year on taxable real
and personal property which is situated in the CIty as of the preceding March 1. A supplemental roll that
produces additional revenue is developed when property changes hands.
A ten percent penalty attaches to any delinquent payment for secured roll taxes In addrtion,
property on the secured roll with respect to which taxes are delinquent becomes tax-defaulted. Such
property may thereafter be redeemed by payment ofthe delinquent taxes and the delinquency penalty, plus
a redemption penalty to the time of redemption. If taxes are unpaid for a period of five years or more,
the property IS subject to auction sale by the County Tax Collector
In the case of unsecured property taxes, a 10% penalty attaches to delinquent taxes on property
on the unsecured roll, and an additional penalty of 1.5% per month begins to accrue beginning November
1st of the fiscal year, and a Iien is recorded against the assessee The taxing authority has four ways of
collecting unsecured personal property taxes. (1) a civil action against the taxpayer; (2) filing a certificate
10 the office of the County Clerk specifying certain facts in order to obtain a judgment lien on specific
property of the taxpayer, (3) filing a certificate of delinquency for recording in the County Recorder's
office in order to obtain a lien on specified property of the taxpayer; and (4) seizure and sale of personal
property, improvements or possessory Interests belonging or assessed to the assessee
Each county levies (except for levies to support pnor voter-approved indebtedness) and collects
all property taxes for property falling WIthinthat county's taxing boundaries. The secured and unsecured
tax levy and year-end uncollected amounts for the City for the five most recent fiscal years are shown In
the table below.
A-12
CITY OF OAKLAND
SECURED AND UNSECURED TAX LEVY
AND AMOUNTS UNCOLLECTED
(in thousands)
Year
1992/93
1993/94
1994/95
1995/96
1996/97
Secured Tax Levy(l)
$69,850(2)
70,813
69,112
74,866
74,518
Amount Uncollected
as of June 30
$3,880
3,831
3,339
2,819
2,724
Percent Uncollected
as of June 30
5.55%
541
483
377
366
(I) City'S portion of the taxes collected by the County, excluding tax increments paid to the Redevelop-
ment Agency of the City of Oakland.
(2) The decrease in property tax levy and subsequent collection IS primarily due to the reallocanon of
$4,656,744 from the City to the State.
Source Alameda County Auditor-Controller
Tax Rates. The City is divided into 33 Tax Rate Areas The largest Tax Rate Area wrthm the
City IS Tax Rate Area 17-001 which has a total assessedvaluation of $10,822,252,959, or 629% of the
City'S total assessed valuation A five-year history of the tax components wrthm this Tax Rate Area IS
shown below.
CITY OF OAKLAND
TAX RATE AREA 17-001
SUMMARY OF TAX RATES
(percent of Property Assessed Value)
Tax Agency 1993/94 1994/95 1995/96 1996/97 1997/98
Countywide Tax(ll 10000% 10000% 10000% 10000% 10000%
Oakland Unified School District 00157 00134 00192 00186 00193
Peralta Community College Distnct 00038 00010 00057 00041 00065
Oakland Unified School Distnct'" 00103 00094 00103 00077 00074
Bay Area Rapid Transit Distnct 00240 00235 00230 00225 00220
East Bay Regional Park District 00069 00066 00094 00080 00081
East Bay MUnicipal Utility District - 0 - - 0 - 00108 00108 00096
CIty of Oakland(3) 01862 01870 01850 01728 02204
Combmed Tax Rates 12469% 12409% 12634% 12445% 12933%
= = = =
(I)
(1)
(3)
Maximum rate for purposes other than paymg debt service in accordance with Article XIIlA of the State Constrtuuon
Represents tax levied under Education Code Secnon 16090
o1575% represents tax levied to correct underfunded obhganons m the Pohce and Fire Retirement System Additional
amount represents levies for general obhganon debt See "Retirement Program" herem
Source Alameda County Auditor-Controller
A-13
The following table lists the major taxpayers In the CIty In terms of their 1997-98 assessed
valuation
CITY OF OAKLAND
TOP TEN SECURED PROPERTY TAXPAYERS
Property Owner Type of Business
1997-98 Assessed
Valuation
COOO's)
1 Shorenstein Realty Investors
2 Kaiser Foundation Health Plan, Inc.
3 Lake Merritt Plaza
4 The Clorox Company
5 Ordway Associates
6 Kaiser Center, Inc
7 Owens Illmois Glass Container
8 Webster St. Partners, Ltd.
9 Pacific Renaissance Associates II
10. CF Oakland Associates, Ltd
Total - Top Ten
Property Management
Health Service
Property Management
Household Products
Property Management
Property Management
Manufacturing
Property Management
Property Management
Property Management
$128,915
112,511
88,563
78,637
66,290
61,307
59,967
46,440
37,360
31,330
$711,320
Represents 4 7% of Secured and Unsecured City-wide 1997-98 Assessment (i.e $15,264,599,644,
such amount being net of all exemptions)
Source Alameda County Assessor
Financial and Accounting Information
The accounts of the City are organized on the basis of funds and account groups, each of which
IS considered a separate accounting entity The operations of each fund are accounted for with a separate
set of self-balancing accounts that comprise its assets, liabilities, fund equity, revenues, and expenditures,
or expenses, as appropriate Government resources are allocated and accounted for In mdividual funds
based on the purposes for which they are to be spent and the means by which spendmg activmes are
controlled The various funds are grouped mto eight generic 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 accounts for normal
recurring activities traditionally associated with governments which are not required to be accounted for
In another fund. These activities are funded principally by property taxes, sales and use taxes, busmess
and utility taxes, interest and rental Income, charges for services and federal and State grants
Special Revenue Funds Special revenue funds are used to account for the proceeds of specific
revenue sources (other than special assessments, expendable trusts, or major capital projects) that are
legally restricted to expenditures for specified purposes
A-14
Debt Service Funds Debt service funds are used to account for the accumulation of resources
to be used for the payment of the principal of and interest on long-term debt and related costs
Capital Projects Funds Capital projects funds are used to account for financial resources to be
used for the acquisition or construction of major capital facilities (other than those financed by proprietary
funds, special assessment funds and trust funds).
Special Assessment Funds Special assessment funds are used to account for the financing of
public Improvements or services deemed to benefit the properties against which special assessments are
levied
Proprietary Funds.
Enterprise Funds Enterprise funds are used to account for operations that are financed and
operated in a manner similar to private enterprises where the intent of the governing body IS that the costs
(expenses, Including depreciation) of providing goods or services to the general public on a continuing
baSIS be financed or recovered primarily through user charges
Internal Service Funds. Internal service funds are used to account for the financing of goods or
services provided by one department or agency to other departments or agencies of the City, or to other
governments, on a cost-reimbursement basis.
All proprietary funds are accounted for using the accrual basis of accounting. Their revenues are
recognized when they are Incurred
Fiduciary Funds.
Trust and Agency Funds Trust and agency funds are usedto account for assets held by the CIty
In a trustee capacity or as an agent for individuals, private organizations, other governments and/or other
funds. These include the pension trust, expendable trust and agencyfunds. Operation ofthe pension trust
funds are accounted for and reported in the same manner as the proprietary fund types. Operations of
expendable trust funds are accounted for in essentially the same manner as governmental fund types
Agency funds are custodial in nature and do not involve measurement of results of operations
All government funds are accounted for using the modified accrual basis of accounting. Their
revenues are recogmzed when they become measurable and available as net current assets
Taxpayer-assessed income, gross receipts and other taxes are considered "measurable" when In the hands
of intermediary collectmg governments and are recognized as revenue at that time. Anticipated refunds
of such taxes are recorded as liabilities and reductions of revenue when they are measurable and their
validity seems certain.
Expenditures are generally recogmzed under the modified accrual basis of accounting when the
related fund liability is incurred. An exception to this general rule is that principal and interest on general
long-term debt is recognized when due
Comparative Financial Statements. The following table reflects the City'S general fund audited
financial statements for the fiscal years 1992-93 through 1996-97 listing actual revenues, expenditures and
fund balances and the adopted budget for 1997-98
A-15
CITY OF OAKLAND
GENERAL PURPOSE FUND REVENUES, EXPENDITURES
AND OPERATING SURPLUSES 1992-93 THROUGH 1996-97 ACTUAL
AND 1997-98 ADOPTED BUDGETS
(in thousands)
Total Revenue Actual Actual Actual Actual Actual Adopted Budget
and Expenditures 1992/93 1993/94 1994/95 1995/96 1996/97 1997/98
REVENUES
Taxes!" $188,803 $196,136 $187,054 $212,160 $221,793 $217360
Licenses and Perrruts 5,456 4,756 5,860 6.868 7,097 9510
Traffic Fines and Various Penalties 6,565 7,480 9,154 8,189 9,506 10 750
Interest and Income 8,269 11,188 9,901 4,478 8,702 4220
Revenue from Current Services?' 23,733 22,792 24,805 26,838 32,008 48610
Grant Revenue 6,589 16,071 8,576 6,751 7,443 5690
Other Revenue, mcludmg Transfers
---.222. ---l.d!Q ~ ~ ~
20070
Total $240,374 $261,933 $264,654 $272.022 $295,504 $316,210
=
EXPENDiTURES
General Govemment'" $ 31,844 $30,573 $ 28,011 $ 28,986 $ 33,078 $ 30.610
Pubhc Safety'? 156,421 158,/27 133,626 136,621 145,839 155,500
Public Works!" 33,518 39,281 38,141 42,176 41,552 30070
Office of General Services 4,075 3,936 3,645
Life Ennchrnent'" 25,179 26,531 23,440 24,772 25,038 27860
Community and Economic
Development'" 3,526 454 699 719 1.629 15170
Payment to Unfunded Pension
Obliganon 27,674 27,034 440,409 0
Other'" 5,797 5,404 9,918 10,338 16,764 27500
Transfers!')
---ill) (5,966) 3553 1\,041 (410,044) 28.680
Total $260.267 $258,340 $268,709 $28\,687 $294,265 $315.390
Excess (deficiency) of Revenues
Over Expenditures $(19,893) $ 3,593 s (4,053) $ (9,665) s 1,239 s 820
(7)
(4)
(6)
(3)
(X)
(,)
(I)
(2)
Includes property, state and local taxes
Previously classified in Interest Income, the amount of $2,509,000 for Rental Income was reclassified m Revenue from
Current Services m FY 19951996
Includes elected and appointed officials, agencies and admirustrative services
Includes pohce and fire services
Previously classified m Office of General Services, the amount of $176,000 for Office of General Services was reclassified
m Office ofPubhc Works In FY 1995-1996 Previously classified in Pubhc Works, the Office of Planrung and BUIlding
amount was reclassifled In Community and Economic Development In FY 1997-1998
Includes Parks and Recreation, Library, Museum, Agmg and Health and Human Services
Includes Plannmg and BUIlding (as ofFY 1997-1998), HOUSing and Neighborhood Development and Economic Development
and Employment
Includes capital outlays and debt service interest charges, does not mclude rent payable on lease obhganons
Includes operating transfers and (for FY 1996/97) receipt of bond proceeds for payment of unfunded pension obligation
Source CIty of Oakland, Comprehensive Annual Financtal Report and 1997-1999 Adopted Policy Budget
A-16
Motor Vehicle License Fees
In the 1997-98 fiscal year the City received approximately $15.7 million from the State allocated
under the Motor Vehicle License Fee Statute, such amount representing approximately 2 4% of the CIty'S
budget For the 1998-99 fiscal year, the CIty has budgeted for receipts of approximately $16 3 rmlhon
from vehicle license fees (2.5% of the City budget). It should be noted that Assembly BIll 1776 was
mtroduced in the State Assembly on February 5, 1998, which legislanon provides for the gradual
elimination of the vehicle license fee on noncommercial vehicles over a five-year period. Assembly Bill
1776 provides for the transfer of sales and use tax revenues to local governments in the event that any
local governments lose any money as a result of the reduction and/or ehrmnanon of the noncommercial
license fee Assembly BIll 1776 has not been enacted into law. The CIty can provide no assurance,
however, that should Assembly Bill 1776 becomes law that other revenues from the State will be available
to replace lost motor vehicle license fees
Labor Relations
CIty employees are represented by SIX labor unions and associations, described m the table below,
the largest one bemg the Service Employees United Public Employees (Local 790), which represents
approximately 47% of all CIty employees Approximately 80% of all CIty employees are covered by
negotiated agreements, as shown below. For the Local 790/part-tlme employee bargaining umt, the City'S
previous contract terms have been extended pursuant to a Letter of Understanding, and negottations for
a successor contract are currently underway. The newest accredited union IS the International Federation
of Professional and Technical Engineers (Local 21). The CIty has never experienced an employee work
stoppage Pursuant to the Meyers-Milas-Brown Act (California Government Code Section 3500 et seq ),
the City continues to meet and confer with the exclusive bargainmg representatives ofthe CIty employees.
CITY OF OAKLAND
LABOR RELATIONS
Employee OrganizatlonlBargaining Umt
International Association of Firefighters (Local 557)
International Brotherhood of Electrical Workers (Local 1245)
International Federation of Professional and Technical Engineers
(Local 21)fUmts A and W
Oakland Police Officers ASSOCIatIOn
United Public Employees (Local 790)/full-tlme
United Public Employees (Local 790)/part-tlme
Western Council of Engineers
Number of Contract
Employees Termmatron
490 6/30/98
26 6/30/99
300 6/30/99
680 6/30/98
1,424 6/30/99
800 6/30/99
91 6/30/99
Source CIty of Oakland, Office of Personnel Resource Management.
Retirement Program
The Police and Fire Retirement System (tlpFRS
tI
) IS a defined benefit plan adrrunistered by a
Board of Trustees and covers uniformed employees hired prior to July I, 1976. As of June 30, 1997,
PFRS covered 262 current employees and 1,495 retired employees. Effective July 1, 1976, the CIty began
A-17
providing for and funding an amount equal to the annual normal service cost of all PFRS participants and
the arnortizatron of unfunded benefits accumulated as of that date over a forty year penod On June 7,
1988, voters approved a City measure to extend the amortization penod of the unfunded benefits to fifty
years, ending In 2026. In accordance with these voter-approved measures, the City annually levres an ad
valorem tax on all property within the City subject to taxation by the City to help fund the accumulated
unfunded benefits For fiscal year 1998, the City levied a tax of 0.1575% for this purpose The present
value of vested benefits (benefits to which participants are entitled regardless of future service) was an
amount that exceeded related plan assets at January I, 1998, by approximately $237,900,000
The Oakland Mumcipal Employees Retirement System ("OMERS") IS adrmmstered by the City
and covers two nonumformed employees hired prior to September I, 1970 who have not elected to
transfer to the PERS as well as 234 retired employees. For the year ended June 30, 1997, the City, in
accordance WIth actuanally determined contribution requirements, did not make contributions to OMERS
as the plan IS fully funded
PERS IS a defined benefit plan admmistered by the State of California and covers all
nonuniformed employees except those who have not elected to transfer from OMERS and all Uniformed
employees hired after June 30, 1976. As of June 30, 1996, the pension benefit obligation for the City
miscellaneous employees was unfunded by $19 8 milhon; the pension benefit obligation for City safety
employees was overfunded by $5 6 rmlhon.
For accounting purposes, employees covered under PERS are classified as either miscellaneous
employees or safety employees. City miscellaneous employees and CIty safety employees are required
to contribute 7% and 9%, respectively, of their annual salary to PERS. The City contribution rates for
the fiscal year ending June 30, 1997 are 9.3% and 12.2% for each group, respectively The City pays the
entire amount of its employees contnbution rate for miscellaneous and safety employees, Including the
annual contribution of 7% and 9% to PERS
PERS uses an actuarial method which takes into account those benefits that are expected to be
earned in the future as well as those already accrued. PERS also uses the level percentage of payroll
method to amortize any unfunded actuarial liabilities. The amortization penod of the unfunded actuarial
liability ends June 30, 20II
City Demographic and Economic Information
Founded in 1852, the City occupies 53.8 square miles, WIth 19 miles of coastline on the San
Francisco Bay in northern California. The City'S convenient access to mass transit, freeways, rail hnes
and airports; Its favorable chmate, environmental quality and mulnple cultures; its proximity to supenor
umversities and research mstitutions; and its diverse employee base contribute to the cosmopolitan
character of the City and have made it the center of commerce for the Bay Area.
The City'S population exceeds 388,100, making It the eighth largest City In California and the third
largest In the Bay Area At least 81 different languages and dialects are spoken within the City, It IS the
only major city to have no census tract composed of a single race. The City's workforce IS both Sizable
and multi-skilled The City ranks fourth in the nation for cities With the highest percentage of workforce
in skilled occupations, white collar and blue collar workers comprise 63 8% and 36 2%, respectively, of
the workforce
A-18
According to the Association of Bay Area Governments (ABAG), Alameda County (In which the
CIty IS located) IS one of three Bay Area counties which will lead the San Francisco Bay Area in both
population and household growth between 1995 and 2015, accounting for nearly 64% of the region's
population growth. Between 1995 and 2010, the City population IS expected to grow from 386,800 to
406,000, or a 4.4% increase during the period.
The CIty'S economic base historically has been predominantly Industrial Over the past 25 years,
there have been significant gains in diversifying the CIty'S economic base. While manufacturing Jobs have
decreased, commercial and service-oriented sectors have come to playa larger role in the economy
The CIty'S largest employers include both public and private entmes, Many of the City's largest
public employers are headquartered in the CIty, including the CIty itself, the Bay Area Rapid Transit
District ("BART"), East Bay Municipal Utility Distnct ("EBMUD") and the Alameda-Contra Costa Transit
Distnct ("AC Transit") The State and Federal governments both have located major office buildings In
downtown Oakland. The CIty'S largest private employer is Kaiser Pennanente, followed by Summit
Medical Center, United Parcel Service, Children's Hospital and United Airlines.
The City has attracted numerous relocating businesses in recent years According to Cushman &
Wakefield's Office Market Report (First Quarter 1998), total inventory In the Oakland Metropolitan Area
exceeds 22 million square feet, split nearly evenly between the Central BUSInessDistnct ("CBD") and the
non-CBD. Overall vacancy rate for all classes of space (CBD and non-CBD) was reported at 15 2%, a
I 3% increase from year end 1998, CBD overall vacancy rate was reported at 16.9% Cushman &
Wakefield attnbute the increased vacancy rate to an Increase in available space in the CBD as the State
and the University of Cahforrna Office of the President agencies vacate multi-tenant buildings and move
Into their own build-to-suit buildings. The report states that as no large areas of space are expected to
return to the market In the foreseeable future, the Oakland Metropolitan area should rebound throughout
the balance of 1998
Development of the City's downtown has long been a primary thrust of CIty planning Over the
past two decades, the central business district has undergone a dramatic physical renaissance New office
and retail buildmg, refurbished public facilities, luxury hotels, park enhancements and outdoor art have
created a cosmopolitan environment enhancing the City's status as the hub of the Bay Area. Recently
completed projects include the downtown University of California Office ofthe President, the Ehhu Hams
State Building, the City Admmistration Buildings, the Martin Luther King, Jr Plaza project, the Warriors
Headquarters and Practice Facility and the Jack London Square retail project. Projects that are currently
under development include the Coliseum Shoreline Retail Project and the Fruitvale Station community
shopping center
Much of the City's economic strength IS attributable to its extensive transportation network The
City IS today recogmzed as the center of commerce for the Bay Area Nine major U S. and Cahfornia
highways converge in the City, providing convenient travel throughout the Bay Area and direct access to
other regions of the country. High speed light rail transit throughout the Bay Area IS provided by BART
and local bus service is offered by AC Transit, 98% of which lines connect WIth BART Other
transportation services mclude the Alameda/Oakland Ferry Service, Amtrak and Greyhound Bus Lines
In addition to ground transportation, the CIty is home to an International arrport and to one of the
main sea terrmnals for cargo moving between the western United States and the Pacific RIm, Latin
America and Europe. The Port of Oakland loads and discharges more than 97% of contamerized goods
bound to and through the Bay Area, making it the third largest contamer port on the Pacific Coast, the
A-19
fourth largest in the United States and among the top twenty in the world. About 75.5% of the CIty'S
foreign maritime trade IS WIth Asia The Port is currently undertaking a project to dredge the bay, which
will allow It to compete with other West Coast ports for Pacific Rim trade. Oakland International Airport
(the "Airport"), operated by the Port of Oakland, is a major regional center of air passenger and cargo jet
operations and the second largest airport Inthe Bay Area. The Airport currently provides more than 70%
of the Bay Area's cargo flights. In 1997, the Airport served over 9.1 million passengers and 1.4 million
tons of air cargo.
Services and other important resources are extensive and locally provided. Five major hospitals
are located in the City. Over 170 public and private schools provide elementary, middle, special and
secondary education. The Oakland Unified School Districts operates 88 schools, which includes
elementary, middle and junior, high, and special education. In addition, there are a Wide range of private
and nonprofit elementary and secondary schools in the City Seven colleges are located in the City,
reporting enrollment of over 20,000 students. Utility services are provided by Pacific Bell, EBMUD and
Pacific Gas & Electric. The City has its own regional newspaper, radio stations and a Fox Network
television station.
The City has many well-established medium density residential neighborhoods, consrstmg
primarily of single family homes. The City is also an affordable community containing neighborhoods
in price levels from low income (22% of housing units are valued below $100,000) to high income (32.5%
of housing units are valued above $250,000) Of total housing units, over 38% are owner-occupied and
over 55% are rented. Shopping districts such as Montclair, College Avenue, Piedmont Avenue,
Grand/Lakeshore Avenues and Park Boulevard form a spme for the surrounding residential areas. The
City credits the activity in the commercial/shopping district with mitigating declines in City sales tax
revenues after the 1989 Lorna Prieta earthquake, despite temporary closure of several major downtown
retail stores.
The quality of life in the City IS enhanced by abundant opportunities for recreation, entertainment
and culture at more than 140 parks, playgrounds, community centers and other recreational facilities
operated by the City. The City has a moderate climate and has 64 parks within its borders, including Lake
MeITItt, which IS located downtown The Oakland-Alameda County Coliseum hosts concerts and other
special events, and is the home to the Oakland A's baseball, Oakland Raiders football and Golden State
Warriors basketball teams. In addition, a wide and diverse variety of music, dance and theater groups,
both amateur and professional, perform regularly in the City. The City's recently renovated Ahce Arts
Center is a multi-cultural and multi-disciplinary performing arts complex that presents local, regional and
national theater, dance and music productions.
Military Base Closures. Substantially all major mihtary facilities in the City and the County are
scheduled to be closed or downsized. These facilities represent approximately 16,000 military and 6,000
Civilian jobs Several efforts are underway to mitigate the Impact of base closures in the City and the
County, Including the gradual conversion of the bases to civilian uses. Among these are the activities of
the Alameda County Economic Development Advisory Board ("EDAB"), a consortium of public and
private entitles in the County organized to assist regional conversion efforts, which IS working with such
organizations as the Bay Area Defense Conversion Action Team, the Bay Area Economic Forum, the Bay
Area Regional Technology Alliance and Jomt Venture Silicon Valley. The City and the County have
formed a local reuse authority (the Oakland Base Reuse Authority) under a joint powers agreement for
development of comprehensive local reuse plans with respect to Naval Medical Center Oakland and the
Oakland Army Base. The Port will receive approximately 100 acres of waterfront property at the Naval
Supply Center and is developing plans for the use of thrs property. A portion of the property received
A-20
has been leased by the Port to private employers. Additionally, the East Bay Conversion and
Reinvestment Commission is the recipient of grants from the Federal Office of Economic Adjustment to
work on a pilot study on defense conversion and to provide community planning assistance. The City IS
unable to predict what the financial impact of military base closures will be on the City
Population. The City is the eighth largest in the State. Between 1990 and 1997, the City's
population Increased by a total of 4.3% or 15,858. The City has experienced steady population growth
since 1980, during this period it IS estimated that population has grown by 48,763, or 144% The CIty
IS the third most populous In the Bay Area. The following chart illustrates the population of the City and
the County from 1970 through 1997.
CITY OF OAKLAND AND ALAMEDA COUNTY
POPULATION
Year Crtv of Oakland Alameda County
1970 361,561 1,071,446
1980 339,337 1,105,379
1990 371,100 1,276,702
1991 378,200 1,294,700
1992 378,200 1,310,500
1993 379,700 1,326,300
1994 381,400 1,338,400
1995 381,400 1,344,200
1996 387,600 1,356,300
1997 388,100 1,375,900
Source- United States Department of Commerce, Bureau of the Census and State of California
Department of Ftnance.
Employment. Over the past several years, employment growth patterns for the CIty suffered as
the State's economy contracted, although recent trends are positive as the State's economy and
employment have rebounded.
A-21
The following table represents the labor patterns in the City from 1993 through 1997, and May,
1998
CITY OF OAKLAND, STATE OF CALIFORNIA AND UNITED STATES
CIVILIAN LABOR FORCE, EMPLOYMENT, and UNEMPLOYMENT
1993 through 1997, and May, 1998
Unemployment
Year and Area Labor Force Employment Unemployment Rate
1993
CIty 181,280 162,660 18,620 10.3
State 15,359,300 13,918,300 1,441,200 9.4
United States 129,200,000 120,259,000 8,940,000 6.9
1994
CIty 181,280 163,940 17,340 9.6
State 15,450,000 14,122,100 1,327,900 8.6
United States 131,056,000 123,060,000 7,996,000 6.1
1995
City 180,540 164,250 16,290 90
State 15,412,200 14,202,800 1,209,400 78
United States 132,304,000 124,900,000 7,404,000 5.6
1996
City 180,130 166,040 14,090 7.8
State 15,568,600 14,444,400 1,124,200 72
United States 133,943,000 126,708,000 7,236,000 54
1997
CIty 184,580 171,780 12,800 69
State 15,971,800 14,965,500 1,006,300 63
United States 136,297,000 129,558,000 6,739,000 4.9
May, 1998 *
CIty **
184,910 173,730 11,180 60
State 16,234,600 15,286,400 948,200 5.8
United States 137,364,000 131,453,000 5,910,000 43
*
Average for May, 1998
**
preliminary, not seasonally adjusted
Source Caltfornta State Employment Development Department
A-22
Largest Employers. The following tables represent the largest public and pnvate employers In
the CIty
CITY OF OAKLAND
LARGEST PUBLIC EMPLOYERS!')
As of May 1998
Public Entitv Product/ServIce
Number of
Employees
County of Alameda'!'
Oakland Unified School District
City of Oakland
Bay Area Rapid Transit
East Bay Municipal Utihty DIStTiCt
Peralta Community College
US Army
East Bay Regional Park DIStTiCt
Consolidated Schools of Oakland
Alameda-Contra Costa Transit
Governmental Operations
Education
Governmental Operations
Pubhc Transportation
Utility/Water
Education
Mihtary Services
Parks
Education
Public Transportation
10,850
6,620
4,830
2,950
1,600
1,500
760
580
430
420
(I) Federal and State Government not included.
Source City of Oakland, Community and Economic Development Agency
CITY OF OAKLAND
LARGESTPRWATEEMPLOYERS
As of May 1998
Pubhc Entity Product/Service
Number of
Employees
Kaiser Foundation/Permanente/Hospital
Summit Medical Center
Umted Parcel Service
United Airhnes
Federal Express
Southwest Airlmes
The Clorox Company
Oakland Scavenger Co
DIOcese of Oakland
Oakland-Alameda County Cohseum Inc.
Health Services
Hospital Services
Dehvery Services
Transportation
Dehvery Services
Transportation
Household Products
Waste Disposal
Roman Catholic Church
Sports Stadium
4,590
2,250
2,060
1,880
1,680
1,620
1,340
1,130
1,020
750
Source City of Oakland, Community and Economic Development Agency
A-23
Commercial Activity. A five-year history of total taxable transactions for the City IS shown In
the following table.
CITY OF OAKLAND
TAXABLE TRANSACTIONS 1992-1996
Year Total Sales
1992 $2,384,237,000
1993 2,264,740,000
1994 2,322,874,000
1995 2,495,567,000
1996 2,596,521,000
Source State Board of Equalization, Department of Research and Stattsttcs,
Construction Activity. A five-year history of building permits and valuation appears In the
following table.
CITY OF OAKLAND
BUILDING PERMITS AND VALUATIONS 1993-1997
Nonresidentral
Residential Residential Valuation Valuation
Year Permits (In Thousands) (In Thousands)
1993 165 $71,659 $178,728
1994 N/A 51,710 96,004
1995 290 47,129 132,865
1996 180 79,278 99,844
1997 176 39,425 202,995
Source Comprehensive Annual Ftnanctal Report. FIscal Year Ended June 30, 1997
A-24
Median HouseholdIncome. Effective Buying Income ("EBI") is defined as personal income less
personal mcome tax and non-tax payments, such as fines, fees or penalties Median household EBI for
the City is shown in the table below.
CITY OF OAKLAND AND ALAMEDA COUNTY
MEDIAN HOUSEHOLD EFFECTIVE BUYING INCOME
1992-1996(1) Median EBI
Year City of Oakland Alameda County California United States
1992 $29,767 $40,289 $37,686 $33,178
1993 31,203 42,284 39,330 35,056
1994 32,842 44,381 40,969 37,070
1995(2)
28,033 38,436 34,533 32,238
1996(2)
28,788 39,658 35,216 33,482
(I) Latest Information available.
(2) The definition of "EBI" changed beginmng in 1995; accordingly, the 1995 and 1996 data IS not
directly comparable with the previous years
Source "Survey of Buying Power, n Sales and Marketing Management Magazine.
A-25
THIS PAGE INTENTIONALLY LEFf BLANK
APPENDIX B
AUDITED FINANCIAL STATEMENTS OF THE CITY OF OAKLAND
COMPREHENSIVE ANNUAL FINANCIAL REPORT
FISCAL YEAR ENDED JUNE30, 1997
TABLE OF CONTENTS
Page
FINANCIAL SECTION
INDEPENDENT AUDITORS' REPORT
K P ~ I G Peat Marwick LLP 3
GENERAL PURPOSE FINANCIAL STATEMENTS
Combined Balance Sheet - All Fund Types, Account Groups and
Discretely Presented Component Units........................................................................ 8
Combilled Statement of Revenues, Expenditures
and Changes in Fund Balances - All
Governmental Fund Types and Expendable
Trust Funds 12
Combined Schedule of Revenues, Expenditures and
Encumbrances - Budget and Actual on a Budgetary
Basis - General Fund and Annually Budgeted Special
Revenue and Debt Service Funds................................................................................. 18
Combined Statement of Revenues, Expenses and Changes
in Retained Earnings - All Proprietary Fund Types
and Discretely Presented Component Units 22
Combined Statement of Cash Flows - All Proprietary Fund Types and
DIscretely Presented Component Units 24
Combined Statement of Changes in Plan Net Assets - Pension Trust Funds..................... 28
iii
* CITY OF OAKLAND
Page
Notes to Financial Statements
(1) Organization and Definition of Reporting Entity................................................ 29
(2) Summary of Significant Accounting Policies...................................................... 30
(3) Cash and Investments and Restricted Cash and Investments 41
(4) Due To/Due From Other Funds........................................................................... 47
(5) Memorandums of Understanding 48
(6) Notes and Loans Receivable................................................................................ 49
(7) Fixed Assets......................................................................................................... 50
(8) Property Heldfor Resale 51
(9) Tax and Revenue Anticipation Notes Payable 52
(10) Long-Term Obligations 52
(11) Contributed Capital.............................................................................................. 67
(12) Self-Insurance...................................................................................................... 67
(13) Reservations and Designations of Fund Balances 70
(14) Segment Informationfor Enterprise Funds 72
(15) Joint Venture........................................................................................................ 74
(16) Pension Plans and Deferred Compensation Plans 77
(17) Reconciliation of Operations on Modified Accrual Basis
to Budgetary Basis.......................................................................................... 84
(18) Postemployment Benefits Other Than Pension Benefits............................ 84
(19) Excess of ExpendituresOver Appropriations...................................................... 85
(20) Commitments and Contingent Liabilities............................................................ 85
(21) Subsequent Event....................................................................... 88
IV
KPMG Peat Marwick LLP
One Kaiser Plaza
Oakland CA 94612
Independent Auditors' Report
Honorable Mayor and Members of the
City Council of the City of Oakland.
We have audrted the accompanying general purpose financial statements of the City of Oakland,
California (the "City") as of June 30,1997, and for the year then ended, listed In the accompanying
table of contents. These general purpose financial statements are the responsibility of management of
the CIty. Our responsibility is to express an opimon on these general purpose financial statements
based on our audit. We did not audit the financial statements of the Oakland Municipal Employees'
Retirement System, the Police and Fire Retirement System or the Oakland Redevelopment Agency,
whose statements reflect total assets and total revenues which represent 3% and 0%, respectively, of
the combined totals of the Special Revenue Funds; 25% and 47% of the combined totals of the Debt
Service Funds, 42% and 63% of the combined totals of the Capital Projects Funds; 77% and 96% of
the combined totals of the Fiduciary Fund Types and 16% of the combined total liabihues of the
General Long-Term Obligations Account Group. We also did not audit the financial statements of the
Port of Oakland and the Oakland Convention and Visitors Authority, discretely presented component
units Those statements were audited by other auditors whose reports have been furnished to us, and
In our opmion, Insofar as it relates to the amounts included for such entities in the Special Revenue,
Debt Service, Capital Projects and Enterpnse Funds, Fiduciary Fund Types, General Long-Term
Obligations Account Group, and discretely presented component units, is based solely on the reports
of the other auditors.
We conducted our audit In accordance Withgenerally accepted auditing standards and the standards
applicable to financial audits contained In Govemment Auditing Standards Issued by the Comptroller
General of the United States Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the general purpose financial statements are free of matenal
misstatement An audit includes exarruning, on a test baSIS, evidence supporting the amounts and
disclosures In the general purpose financial statements. An audit also includes assessing the
accounting pnnciples used and significant estimates made by management, as well as evaluating the
overall general purpose financial statement presentation. We believe that our audit and the reports of
other auditors provide a reasonable basis for our opinion
In our oprmon, based on our audit and the reports of other auditors, the general purpose financial
statements referred to above present fairly, In all matenal respects, the financial position of the City
as of June 30, 1997, and the results of Its operations and the cash flows of its propnetary fund types
for the year then ended in conforrruty with generally accepted accounting principles.
In accordance with Government Auditing Standards, we have also ISSUed our report dated
December 8, 1997 on our consideration of the City's Internal control over financial reponing and our
tests of Its compliance WIth certain provisions of laws, regulations, contracts and grants
Me'T,ber Firm oj
Il:PMG II'l1ernaltOnai
KPMG Peat Marwick LLP
Independent Auditors' Report, Continued
As discussed in note 15 to the general purpose fmancial statements, during the year ended June 30,
1997, the City changed the presentation of the Oakland-Alameda County Coliseum Authority (the
Authority). The Authority was reclassified from an enterprise fund to a net investment in JOInt venture
10 the general fixed assets account group In addition in accordance with Governmental Accounting
Standard Board Statement No. 25, Financial Reponing for Defined Benefit Pension Plans and Note
Disclosures for Defined Contribution Plans, the City has shown the results of operations of the
pension trust funds in a combined statement of changes in plan net assets. The results of operations of
the pension trust funds had been previously reponed in the combined statement of revenues, expenses
and changes in fund balances.
Our audit was conducted for the purpose of forming an opmion on the general purpose financial
statements taken as a whole. The combining and individual fund and account group financial
statements and schedules listed in the foregoing table of contents, which are also the responsibihty of
the management of the City, are presented for purposes of additional analysis and are not a required
part of the general purpose financial statements of the CIty. Such additional information has been
subjected to the auditing procedures applied in our audrt of the general purpose financial statements
(other than the financial statements of the Oakland Municipal Employees' Retirement System, the
Pohce and Fire Retirement System, the Oakland Redevelopment Agency, the Port of Oakland and the
Oakland Convention and Visitors Authonty, which were audited by other auditors whose reports
expressed unqualified opinions) and, 10 our opinion, is fairly presented in all material respects when
considered 10 relation to the general purpose financial statements taken as a whole.
The statistical section listed in the accompanying table of contents IS presented for the purpose of
additional analysis and IS not a required part of the general purpose financial statements of the City.
Such additional mformation has not been subjected to the auditing procedures apphed 10 our audit of
the general purpose financial statements, and, accordingly, we do not express an opinion thereon.
December 8, 1997
* CITY OF OAKLAND
ALL FUND TYPES, ACCOUNT GROUPS AND
DISCRETELY PRESENTED COMPONENT UNITS
COMBINED BALANCE SHEET
June 30, 1997
(In Thousands)
Proprietary
Governmental Fund Types Fund Types
Special Debt Capital Internal
General Revenue Service Projects Enterprise Service
ASSETS ANDOTHER DEBITS
Assets
Cash and rnv estments $ 720 $ 15.573 $ 20.739 $ 1 0 2 , 7 ~ 1 $ 9.175 s 13.901
Receivables(net of allowance for
uncollectibles):
Accrued interest 732 1,757 605 7397
Dividends
Propertytaxes 1389
6().+
62 71
Accounts receivable 25,120 7,066 II 5.255 I ...m 77
Grants receivable 11.965
Special assessments 2,010
Receivable from Port of Oakland 6,076
Due fromother funds 74,759 10.081 5.163 7.168 5.363
Notes and loans receivable (net of
allowance for uncollectibles) 13,771 62.602 38.691
Restrictedcash and imestrnents 2 , 7 ~ 5 5.456 92.569 280.363
lnventones
9..B
Fixed assets(net, whereapplicable
of accumulateddepreciation) 63.9-17 9.697
Property heldfor resale 21,.:147 51.308
Other 2.598
Other Debits
Amount available in debt service
funds
Amount tobeprovidedfor
long-term obligations
TOTALASSETS AND
OTHERDEBITS $ 125,312 $ 115,104 $142,606 $ 495592 $ 7 ~ 5 5 6 $ 29.981
8
GENERAL PURPOSE FINANCIAL STATEMENTS
Fiduciary
Fund Types
Trust
and
Agency
Account Groups
General General
Fixed Long-Term
Assets Obligations
Total
(Memorandum
Only)
Primary
Government
Component
Units
Oakland
Port of Convention &
Oakland Visitors Authority
Total
(Memorandum
Only)
Reporting
Entity
$1.003.029 s $ $1.165.878 $ 68,745 $119 $1234.742
3.442 13.933 3.628 17561
388 388 388
2.126 2.126
79 39.0H 33,262 70 72.373
11.965 11.965
2.010 2.010
6.076 6.076
IA33 103.968 91 104.0:W
115,064 115.064
293537 674.670 133253 807.923
943 26 969
632.495 706.139 781,547 20 1.487.706
72.755 72.755
2598 38.533 3 41.134
73,985
I 381 295
73.985
1 'l81 295
73.985
1'l81295
$1.301.908 $632.495 $1,455280 $4.372.834 $1.058.968 $329 $5A32.131
(continued)
9
CITY OF OAKLAND
ALL FUND TYPES, ACCOUNT GROUPS AND
DISCRETELY PRESENTED COMPONENT UNITS
COMBINED BALANCE SHEET, continued
June 30, 1997
(In Thousands)
Proprietary
Governmental Fund Types Fund Types
Special Debt Capital Internal
General Revenue Service Projects Enterprise Service
LIABILITIES, EQUITYAND
OTHERCREDITS
Liabilities
Accounts payable and
accruedliabilities $ $ 10.169 $ $ 8.988 s 991 S 870
Due to other funds 19.235 13.931 1.782 -L697
Payable to primal"} government
Deferred rev enue B,026 71,971 2.009
Matured bonds and Interest pay able 18.506
Long-termobligations 6.721
Obligations under deferred
compensation plans
Due to bondholders
Other '%3 29 19 767
Total liabrhties 95612 101 -!Q.! 68 621 73228 5567
EquityandOtherCredits
Investment In general fixed assets
Contnbuted capital 17.382
Retained earmngs (deficit) 65.062 7.032
Fund balances:
Net assets held in trust
for pension benefits
Reserved 2,729 1.527 73,985
Unreserved:
Designated 14,039 12,129
Undesignated 12932 44
Total equityand other credits '9700 13700 7398<; 3(H 65 062 2-1
TOTAL LIABILITIES, EQUITY
AND OTHERCREDITS $125312 $115.104 $ 74.556 $ 29.981
The notes to the financial statements are an Integral part of thisstatement.
10
GENERAL PURPOSE FINANCIAL STATEMENTS
Fiduciary
Fund Types
Trust
and
Agency
Account Groups
General General
Fixed Long-Term
Assets Obligations
Total
(Memorandum
Only)
Primary
Government
Component
Units
Oakland
Port of Convention &
Oakland Visitors Authority
Total
(Memorandum
Only)
Reporting
Entity
S 19701-1 S
5; $ 253.727 s 33.053 $259 $ 287.0W
2.399 IQ.l..059 10.+ 059
6.076 6.076
1 6 6 5 ~ 3.520 170.068
18.506 13.908 32AI-I
1.650 1.-155180 1.-163.651 5525-17 2.016.198
100.950 100.950 2-1292 1252-12
11.885 11.885 11.885
9 3787 18 Oft!
-.2l
2 J 9 - 1 ~
313907 1-15\280 "1231D 651460 350 277-1923
632.-195 632.495 632.495
17.382 161.753 179.135
72.09-1 2-15.755 (21) 317.828
809.100 809.100 809.100
17-1.998 675.603 675.603
26.168 26.168
3903 16879 16879
988001 632 49, 22-19 721 407508 .-ill.) 2 6';7 "08
$1.301.908 s 632.495 $1.455180 $-U72.83-1 $1.058.968 $329 $5.-132.131
(concluded)
11
CITY OF OAKLAND
ALL GOVERNMENTAL FUND TYPES AND EXPENDABLE TRUST FUNDS
COMBINED STATEMENT OF REVENUES, EXPENDITURES AND
CHANGES IN FUND BALANCES
Year ended June 30, 1997
(In Thousands)
Governmental Fund Types
Special Debt Capital
General Revenue Service Projects
REVENUES
Taxes:
Property $ 72,798 $ 20,284 S 4.113 S 22.618
State:
Sales and Use 31,069 6,184
Motor Vehicle In-lieu 15,080
Gas 7,056
Local:
Business License 31,923 12
Utility Consumption 32,783
Real Estate Transfer 17,645
Transient Occupancy 7,321
Parking 4,595
Franchise 8,579
Licenses and permits 7.097
Fines and penalties 9,506 704 8
Interest/Investment, net 8.702 3.074 8.896 20.897
Charges for services 32,008 1259 182
Federal and state grants and subventions 7,443 67,759 2.457
Pension annuity distribution
Other 8.955 8.319 171 3,156
TOTAL REVENUES $295504 S114.651 $13 188 $49310
12
Fiduciary
Fund Type
Expendable
Trust
s
558
3
19.425
1.246
521232
Total
(Memorandum
Only)
S119.813
37,253
15.080
7.056
31.935
32,783
17.645
7,321
4595
8579
7,097
10,218
42,127
33.452
77,659
19,425
21.847
$493,885
(continued)
GENERAL PURPOSE FINANCIAL STATEMENTS
13
* CITY OF OAKLAND
ALL GOVERNMENTAL FUND TYPES AND EXPENDABLE TRUST FUNDS
COMBINED STATEMENT OF REVENUES, EXPENDITURESAND
CHANGES IN FUND BALANCES, continued
Year ended June 30, 1997
(In Thousands)
Govemmental Fund Types
Special Debt Capital
General Revenue Service Projects
EXPENDITURES
Current:
Elected and Appointed Officials
Mayor $ 831 S 20 S 13
Council l.tH7
Ct t} Manager 2.363 600 10
Cit} Attorney 5,429 228 35
CIl} Auditor 713
Cit} Clerk. 2.089 .+
Agencies
Admmistranv e Sen Ices
Personnel Resource Management 3.986
Retirement and Risk Administration 895
Communication and Information
Sen Ices 7215 19 131
Budget and Finance 7.910 606 52 170
Police Sen Ices 2.989 19
Fire Sen Ices 51.126 2.370 117
Life Enrichment
Parks and Recreation 9.627
Library 8.179 .+.58.+
Museum .+.555 1 1
Aging 2.()()..t 3.709 3
Health and Human Sen ices 673 10.502
Community and Economic Development
Planning and Building 12.529 190 2.+
HOUSing and Neighborhood Development 875 32.533 2.0-+3
Economic Development and Employment 754 5.912
Redevelopment Agency 1,452
Public Works 29,023 15.753 2.8-+2
Payment to unfunded pension
Other 11208 8.043 969 3.1-n
Capital outlay 2,951 11.935 70.168
Debt service:
Pnncipal repayment 22.846
Interest charges 2605 W91.+
TOTAL EXPENDITURES 7Q.! W9 115860 83781 1Q.+9'7
EXCESS (DEFICIENCY) OF REVENUES
OVER (UNDER) EXPENDITURES $ (-+08 805)
$ !I '09)
$(70591) srss 6-17)
14
Fiduciary
Fund Type
Expendable
Trust
Total
(Memorandum
Only)
GENERAL PURPOSE FINANCIAL STATEMENTS
$ 131 s 995
576 2223
58 3.031
9-B 6.635
713
37 2.130
UOO
895
7.365
289 9227
8-12 98563
53.613
78 2-1.861
163 13269
78 4.635
5.716
11.175
302 13.045
2.152 37.603
22-13 8.909
26.387
775 48.393
4-W.409
6217 29580
637 85,691
22.846
62519
In'l I 0"46'8
llill
$(5107.H)
(continued)
15
* CITY OF OAKLAND
All GOVERNMENTAL FUND TYPES AND EXPENDABLE TRUST FUNDS
COMBINED STATEMENT OF REVENUES, EXPENDITURES AND
CHANGES IN FUND BALANCES, continued
Year Ended June 30,1997
(In Thousands)
Governmental Fund Types
Special Debt Capital
General Revenue Service Projects
EXCESS (DERCIENCY) OF REVENUES
OVER (UNDER) EXPENDITURES,
BROUGHT FORWARD $(408,805) $ (\209) $(70.593) S (55,647)
OTHER FINANCING
SOURCES (USES)
Bond proceeds 438.844 700 493 68.082
Property sale proceeds 322 1.744
Operaung transfers in 18,068 2,901 65,238 48.382
Operating transfers out (47.190) (272) (72,441)
TOTAL OTHER RNANCING
SOURCES (USES) 410,044 329 65,731 45,767
EXCESS (DERCIENCY) OF REVENUES
AND OTHER ANANCING SOURCES
OVER (UNDER) EXPENDITURES AND
OTHER FINANCING USES 1,239 (880) (4.862) (9,880)
Fund balances at beginning of year 28.461 14,580 79.15I 431.940
Residual equity transfer
(04)
304
FUND BALANCES AT END OF YEAR $ 29.700 $13.700 s 73.985 S 422.364
The notes to the financial statements are an Integral part of this statement
16
Fiduciary
Fund Type
Expendable
Trust
$ 5.511
10.039
(19.425)
(9.386)
(3.875)
182.776
$178.901
Total
(Memorandum
Only)
$(530,743)
508.1 19
2.066
144.628
(142.328)
512,485
(18.258)
736.908
$ 718.650
(concluded)
GENERAL PURPOSE FINANCIAL STATEMENTS
17
~ CITY OF OAKLAND
GENERAL FUND AND ANNUALLY BUDGETED SPECIAL REVENUE
AND DEBT SERVICE FUNDS
COMBINED SCHEDULE OF REVENUES, EXPENDITURES AND ENCUMBRANCES
BUDGET AND ACTUAL ON A BUDGETARY BASIS
Year ended June 30, 1997
(In Thousands)
General Fund
Actual on a Variance -
Revised Budgetary Favorable
Budget Basis (Unfavorable)
REVENUES
Taxes:
Property $ 72,524 $ 72,798 S 274
State:
Sales and Use 31.828 31,069 (759)
Motor Vehicle In-lieu 14,820 15,080 260
Gas
Local:
Business License 29,040 31,923 2.883
Utility Consumption 33,385 32.783 (602)
Real Estate Transfer 13,401 17.645 4244
Transient Occupancy 6,918 7,321 403
Parking 4,669 4,595 (74)
Franchise 8,713 8,579 (134)
Licenses and permits 9,247 7,097 (2.150)
Fines and penalties 9,239 9,506 267
Interest 3.725 16.849 13.124
Charges for services 29.978 32.008 2.030
Federal and state grants and subventions 6,348 7.443 1.095
Other 5.976 8.955 2.979
TOTAL REVENUES $279.811 S303,65I 523,840
18
GENERAL PURPOSE FINANCIAL STATEMENTS
Revised
Budget
Annually Budgeted
Special Revenue Funds
Actual on a Variance -
Budgetary Favorable
Basis (Unfavorable)
Revised
Budget
Annually Budgeted
Debt Service Funds
Actual on a Variance -
Budgetary Favorable
Basis (Unfavorable)
515.369
5.856
6.908
10
$16.046
6,184
7.056
12
s 677
328
148
2
$6,258 $ 3.512 $(2,746)
448 254 (194) 8 8
3 581 578 825 825
169 169
450 963 513
113 68
(45) 279 171
(J08)
529.157 531.333 $2.176 $6.537 $4516 $(2.021 )
(continued)
19
CITY OF OAKLAND
GENERAL FUNDANDANNUALLY BUDGETED SPECIAL REVENUE
AND DEBT SERVICE FUNDS
COMBINED SCHEDULEOF REVENUES, EXPENDITURES AND ENCUMBRANCES
BUDGET AND ACTUAL ON A BUDGETARY BASIS, continued
Year ended June 30, 1997
(In Thousands)
General Fund
$ 834 $ 831 s 3
1572 (66.
2.011 2J57 (3-16)
U51 ( 1.099)
7/7 832
2.165 2.023
4.023 286
866 825
7.016 (258)
7.818 7.871 (53)
95.102 355
51.273 3338
8J50 9.630 ( 1.280)
8372 8.176 1%
4.429 4557 ( 128)
1978 \.990 (12)
795 668 127
11.83\ 12.270 (439)
933 193
501 \.026 (525)
31.411 29.432 1.979
9.076
21.074 1\.274 9.800
2.807 2.638
EXPENDITURES AND ENCUMBRANCES
Current
Elected and Appoooted Officials
Mavor

CIty Manager
Cit} Attorney
City Auditor
City Clerk
Agencies
Admmistrauve Services
Personnel Resource Management
Retirement and Risk Admrrnstrauon
Cornmumcauon and Information
Services
BUdget and Finance
Police Services
Fire Services
Life Enrichment
Parks and Recreation
Libraf}
Museum
Agmg
Health and Human Services
Commuruty and Econormc Development
Plannmg and Building
Housing and Neighborhood Development
Econornic Development and Employment
Public Works
Payment to unfunded pension
Other
Capual outlay
Debt service'
Pnncrpal repayment
Interest charges
TOTAL EXPENDITURES ANDENCUMBRANCES
EXCESS(DERCIENCY)OF REVENUES OVER(UNDER)
EXPENDITURES ANDENCUMBRANCES
Revised
Budget
726.808
$ (4-16.997)
Actual on a
Budgetary
Basis
70" 001
$ (398357)
Variance
Favorable
(Unfavorable)
24800

The notes to the financial statements are an Integral pan of thiS statement.
20
GENERAL PURPOSE FINANCIAL STATEMENTS
Revised
Budget
s
73
23
29-1
12.681
Annually Budgeted
Special Revenue Funds
Actual on a
Budgetary
Basis
$
73
88
19
332
12.648
Variance .
Favorable
(Unfavorable)
$
-I
(381
Revised
Budget
$
76
Annually Budgeted
Debt Service Funds
Actual on a
Budgetary
Basis
$
39
Variance -
Favorable
(Unfavorable)
$
37
21
~ CITY OF OAKLAND
ALL PROPRIETARY FUND TYPES AND
DISCRETELY PRESENTED COMPONENT UNITS
COMBINED STATEMENT OF REVENUES, EXPENSES AND
CHANGES IN RETAINED EARNINGS
Year Ended June 30,1997
(In Thousands)
OPERATING REVENUES
Rental
Interest
Charges for sen Ices
Other
TOTAL OPERATING REVENUES
OPERATING EXPENSES
Personnel
Supplies
Depreciation and amortization
Contractual sen ices and supplies
Repairs and maintenance
General and admmistratrv e
Rental
Interest
Other
TOTAL OPERATING EXPENSES
OPERATING INCOME (LOSS)
NON-OPERATING REVENUES (EXPENSES)
Support
Federal and state grants
Interest. net
Other. net
TOTAL NON-OPERATING REVENUES (EXPENSES)
INCOME BEFORE OPERATING TRANSFERS
Operating transfers in
Operating transfers out
TOTAL OPERATING TRANSFERS
NET INCOME (LOSS)
Depreciation of fixed assets acqui red
Withcontnbuted capital
Retained earnings at beginning of year
Residual equity transfer
RETAINED EARNINGS AT END OF YEAR
The notes to the financial statements are an integral pan of this statement.
22
Proprietary
Fund Types
Internal
Enterprise Service
$ 97 S 360
17.086 27.38-1
2003
-_...
19186 27 7 - l , ~
6.125 9.583
3-l) 5.602
2.237 3500
1.315 358
...1 1.123
1.757 3....79
76-' 916
2-'8
88 3006
12920 27 ~ 6 7
6266
-ffi
57 12
(300)
-l...!.fi:!
<2...3)
....lJ1D.
6023 I 3 ~ 7
.f.UQQ)
lU!lID
6023
-'2::W
69,157 7.975
(10118)
$ 65.062 $7.032
GENERAL PURPOSE FINANCIAL STATEMENTS
Total Total
(Memorandum Component (Memorandum
Only) Units Only)
Primary Port of Oakland Convention Reporting
Government Oakland & Visitors Authority Entity
s s $ 540 s150,863
4 4
44.470 60 4U30
2007
--l
2008
H9866
-<ill
197
15.708 35.467 1,732 52.907
3298 69 9.314
5.737 32.199 II 37.947
1.673 22.031 334 24.038
I.I(H 5,472 38 6.674
5236 9.950 762 15.948
1.680 2.851 4531
2-18 2-18
1 094

3 ! 10
40 -187 II 1268

1"4717
6447 18598 Jl..ill) 42688
2,409 2,409
69 69
(300) (24.053) (24353)
I !(H (3379)
--

931 (27432) ..l.4Q2 (24090)
7380 11.166 5" 18598
----"""
<2 WOl
(2300)
<2 30{)) <2 300)
s 080 11.166
---2
!6 "98
4,141 4,141
77.132 230.4-18 (73) 307
no 118)
--
(JO 118)
$72.094 s 245,755 $ (21) $ 317.828
23
* CITY OF OAKLAND
All PROPRIETARY FUND TYPES AND
DISCRETELY PRESENTED COMPONENT UNITS
COMBINED STATEMENT OF CASH FLOWS
Year ended June 30, 1997
(In Thousands)
Proprietary
Fund Types
Internal
Enterprise Service
CASH FLOWS FROM OPERATING
ACTIVITIES
Total
(Memorandum
Only>
Primary
Government
2.237 3500 5.737
(I,O-J5) ( 1.0-til
881 (21) 860
(I) ( I)
275 275
(-t07) (-t07)
Operating Income (loss)
Adjustments to reconcile operating
income (loss) to net cash provided
by operating activities
Depreciation and amortization
Gam on reti rement of fixed assets
Changes in assets and liabilities
Accounts receivable
Inventories
Other assets
Accounts pay able and
accrued liabilities
Deferred revenue
Obliganons under deferred
compensation plans
Other liabilities
Other
NET CASH PROVIDED BY (USED IN)
OPERATING ACTIVITIES
CASH FLOWS FROM NON-CAPITAL
FINANCING ACTIVITIES
Inter-fund repayments
Inter-fund borrowings
Operating transfers to other funds
NET CASH PROVIDED BY (USED IN)
NON-CAPITAL FINANCING
ACTIVITIES
24
$6266
861 ..
83
I ~
$ 181
3252
(2.915)
(873)
I' 300)
$(6088)
$ 6.'+-17
! 1866
(2.832)
..71
(2300)
$H66I)
Component
Units
Port of Oakland Convention
Oakland & Visitors Authority
S 38598
GENERAL PURPOSE FINANCIAL STATEMENTS
Total
(Memorandum
Only)
Reporting
Entity
$ 42.688
32.199 ) 1
( 1.<5)
(11.018) 50 (10.108)
9 8
53 (2)
326
2.071 16 1.680
2355 2.355
3.862 3.862
(6355) (6.355)
428) (25 411)

<'
$
(120)
(8)
$ (28)
(2.952)
0463
(2
$ (..J 789)
(continued)
25
$ CITY OF OAKLAND
ALL PROPRIETARY FUNDTYPES AND
DISCRETELY PRESENTED COMPONENT UNIT
COMBINED STATEMENT OF CASH FLOWS, continued
Year ended June 30, 1997
(In Thousands)
Proprietary
Fund Types
Internal
Enterprise Service
CASH FLOWS FROM CAPITAL AND
RELATED FINANCING ACTIVITIES
Total
(Memorandum
Only)
Primary
Government
Repay ment of caprtal lease obligauons
Long-term debt
New borrowmgs
Repayment of pnncipal
Pay ment of interest
Proceeds fromsale of fixed assets
Acquisition and construction
of capr tal assets
Grants from govemmental agencies
Support fromCIl} funds, membership
dues. and others
Passenger facihty charges
$
(367)
(300)
(7329)
57
$
(2.383)
12
1.16-1
s
(367)
(300)
(9.712)
69
LIM
NET' CASHPROVIDED BY(USED FOR)CAPITAL
AND RELATED FINANCING ACTIVITIES (79WI
CASH FLOWS FROM
INVESTING ACTIVITIES
Purchaseof Investments
Proceedsfromsales of investments
Interest on investments
(1 "07) (9 1-10)
NET' CASH USED IN
INVESTING ACTIVITIES
NET' INCREASE (DECREASE) IN
CASHANDEQUIVALENTS 2,102 (4N3) (1.9-11 I
CASHANDEQUIVALENTS AT
BEGINNING OF YEAR
7073 17 9-1-1 250\7
CASHANDEQUIVALENTS
AT ENDOFYEAR $ 9,175 $13.901 $23.076
The notes to the flnancial statements are an Integral part of this statement.
26
Component
Units
Port of Oakland Convention
Oakland & VisitorsAuthority
GENERAL PURPOSE FINANCIAL STATEMENTS
Total
(Memorandum
Only)
Reporting
Entity
s S (5) s (5)
262.660 262.660
(201.939) (202306)
(33262) (33562)
10.021; 10.028
(77.07'+) (2) (86.788)
10.066 JO.l35
2.-+09 3 ~ ~ 7 3
1.+.R0-+ l-l 80-+
11-l717) 2402 (21 -l61)
(88.838) (88.838)
52.-+20 52.-+20
-lOW -l6W
1'1 7 ~ 9 ) I3J 7W)
(10.139) 16 (12.06-+)
7881;.+
-illl
10-+ 00-+
$ 68.7-l5 s IJ9 s 91.940
(concl uded)
27
* CITY OF OAKLAND
PENSION TRUST FUNDS
COMBINED STATEMENT OF CHANGES IN PLAN NET ASSETS
Year ended June 30, 1997
(In Thousands)
ADDITIONS:
Contributions:
City of Oakland
Members
Total
Investment Income:
Net appreciation in fair value
of investments
Interest
Dividends
Total
Less investment expense
Net Investment income
TOTAL ADDITIONS
DEDUCTIONS:
Disbursements to members and
beneficiaries:
Retirement
Disability
Death
Total
Administrative expenses
Interest expense - bonds
Interest on PERS
Termination refunds of
employees' contributions
TOTAL DEDUCTIONS
EXCESS OF ADDITIONS OVER
DEDUCTIONS
NET ASSETS HELD IN TRUST
FOR PENSION BENEFITS:
Beginning of year
End of year
28
$440,041
1.791
441,832
36,356
20,712
5.144-
62.212
(825)
61.387
503.219
$ 35,108
21.358
1.816
58.282
944
102
1,094
238
60,660
442559
366541
$809,100
NOTES TO FINANCIAL STATEMENTS
NOTES TO FINANCIAL STATEMENTS
June 30, 1997
(1) ORGANIZATION AND DEFINITION OF REPORTING ENTITY
The CIty of Oakland, California, (the CIty) was incorporated on May 25, 1854, by the State of
California and IS organized and exists under and pursuant to the provisions of State law The
Charter established a Council-Manager form of government consisting of nine elected
Councilrnernbers, including the Mayor, and a Council-appointed City Manager.
The City has defined Its reporting entity in accordance With generally accepted accounting
principles (GAAP) which provide guidance for determining which governmental acnvrties,
organizations. and functions should be included in the reporting entity. The General Purpose
Financial Statements present Information on the activities of the reporting entity, includmg all
of the fund types and account groups of the CIty (the pnmary government) and its component
units
Generally accepted accounting pnnciples require that the component units be separated into
blended or discretely presented Units for reportrng purposes. Although legally separate entities,
blended component Units are, in substance, part of the City's operations Therefore, they are
reported as part of the primary government. Discretely presented component unrts are reported
In a separate column m the combined financial statements to emphasize that they are legally
separate from the City.
Blended Component Units
The Redevelopment Agency of the City of Oakland (Agency) was activated on October II,
1956. for the purpose of redeveloping certain areas of the CIty designated as project areas. Its
pnncipal acnvines are acquiring real property for the purpose of removing or preventing blight,
constructing improvements thereon, and rehabilitating and restoring exisung properties. The
Oakland CIty Council serves as the Board of the Agency. The Agency's funds are reported as
special revenue, capital projects and expendable trust funds.
The Civic Improvement Corporation (Corporation) was created to provide a lease financing
arrangement for the City. It IS reported as a debt service fund.
The Oakland Joint Powers Financing Authority (JPFA) was formed to assist rn the financmg of
pubhc capital Improvements. JPFA is a joint exercise agency organized under the laws of the
State of California and is composed of the City and the Agency. JPFA transactions are recorded
29
~ CITYOF OAKLAND
III the capital projects and debt service funds, and the general long-term obligations account
group.
Discretely Presented Component Units
The Port of Oakland (Port) IS a public entity established in 1927 by the City. Operations
Include the Oakland International Airport; the Port of Oakland Marine Terrnmal Facilities; and
commercial real estate which includes Oakland Portside Associates (OPA), a California hrmted
partnership, and the Port of Oakland Public Benefit Corporation (Port-PBC), a nonprofit
benefit corporation. The Port is governed by a seven-member Board of Port Commissioners
(the Board) which are appointed by the City Council, upon nornmanon by the Mayor. The
Board appoints an Executive Director to administer operations. The Port prepares and controls
ItS own budget, administers and controls its fiscal activities, and is responsible for all Port
construction and operations The Port IS required by City charter to deposit its operanng
revenues In the City treasury. The City is responsible for Investing and managing such funds.
Effective July 1, 1995, the Oakland Convention and VIsitors Authority (OCVA) was created as
a consolidation of the former Oakland Convention and Visitors Bureau and the former Oakland
Convention Center Management, Inc. OCVA is responsible for markenng the City as a
convention and tourist destination, as well as operating the Oakland Convention Center. OCVA
IS pnrnanly funded by the City and the Agency.
Complete financial statements of the individual component unrts can be obtained from'
Budget and Finance Agency
City of Oakland
505 - 14th Street, Suite 910
Oakland, CA 94612
(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation - Fund Accounting
The accounts of the City are organized on the basis of funds and account groups, each of which
is considered a separate accounting entity The operations of each fund are accounted for with a
separate set of self-balancing accounts that compnse its assets, liabilities. fund equity,
revenues, and expenditures or expenses, as appropnate. The various funds and account groups
are summarized by type in the General Purpose Financial Statements. Fund types and account
groups used by the City are described below.
Governmental Fund Types
Governmental Fund Types are those through which most governmental functions of the City
are financed. The acquisition, use and balances of the City's expendable financial resources
and the related liabilities (except those accounted for in Proprietary Fund Types) are accounted
for through Governmental Fund Types. The measurement focus IS upon deterrrunation of
30
NOTES TOFINANCIAL STATEMENTS
financial position and changes in financial position, rather than upon net income determination.
The following are the City's Governmental Fund Types:
The General Fund is the primary operating fund of the City. It accounts for normal recurnng
activines traditionally associated with governments which are not required to be accounted for
in another fund. These activities are funded principally by property taxes, sales and use taxes,
business and utility taxes, interest and rental Income, charges for services, and federal and state
grants.
Special Revenue Funds account for certain revenue sources that are legally restricted to be
spent for specified purposes. Other restricted resources are accounted for in trust, debt service,
and capital projects funds.
Debt Service Funds account for the accumulation of resources to be used for the payment of
general long-term debt principal and interest as well as related costs.
Capital Projects Funds account for financial resources to be used for the acquismon,
construction or improvement of major capital facilities (other than those financed through the
proprietary fund types).
Proprietary Fund Types
Proprietary Fund Types are used to account for the City's ongomg organizations and activities
which are similar to those often found In the private sector and are accounted for on the flow of
economic resources measurement focus and use the accrual basis of accountmg. Under this
method. revenues are recorded when earned and expenses are recorded at the time liabilities are
Incurred. The City adopts all applicable FASB Statements and Interpretations issued on or
before November 30, 1989, in accounting and reporting for its proprietary operations unless
those pronouncements conflict with or contradict GASB pronouncements. The measurement
focus is upon determination of net income, financial position and changes in cash flows. The
following are the City's Proprietary Fund Types:
Enterprise Funds account for operations that are financed and operated In a manner similar to
pnvate business enterprises, where the Intent of the City Council is that the costs (expenses.
Including depreciation) of providing goods or services to the general public on a continuing
baSIS be financed or recovered primarily through user charges.
Internal Service Funds account for operations that provide goods and services to other City
departments and agencies, or to other governments, on a cost-reimbursement basis.
Fiduciary Fund Types
Trust and Agency Funds account for assets held by the City in a trustee capacity or as an
agent for individuals, private organizations. other governmental units and/or other funds. These
Include the pension trust, expendable trust, and agency funds. Operations of the pension trust
31
CITY OF OAKLAND
funds are accounted for In the same manner as the proprietary fund types Operations of
expendable trust funds are accounted for In essentially the same manner as governmental fund
types Agency funds are custodial in nature and do not involve measurement of results of
operations.
Account Groups
The General Fixed Assets Account Group accounts for recorded fixed assets of the CIty.
other than those accounted for In the propnetary fund types.
The General Long-Term Obligations Account Group accounts for all long-term obligations.
including claim liabilities and vested compensation and sick leave of the City. except for those
obligations accounted for In the proprietary fund types.
Basis of Accounting
Measurement Focus
The accounting and reporting treatment applied to a fund IS determined by its measurement
focus. All governmental fund types and expendable trust funds are accounted for using a
current financial resources measurement focus. Only current assets and current liabilities are
generally Included on their balance sheets. Operating statements for these funds present
increases (revenues and other financing sources) and decreases (expenditures and other
financing uses) 10 net current assets.
All propnetary fund types and pension trust funds are accounted for on a flow of economic
resources measurement focus. With this measurement focus, all assets and liabilities associated
with the operations of these funds are included on the balance sheet. Proprietary fund type
operating statements present Increases (revenues) and decreases (expenses) 10 net total assets.
Reported fund equity (net total assets) is segregated into contnbuted capital and retained
earmngs components.
Modified Accrual Basis of Accounting
The modified accrual baSIS of accounting is followed in the governmental fund types and
expendable trust and agency funds. Under the modified accrual basis of accounting, revenues
are recorded when susceptible to accrual, that IS, when both measurable and available.
"Measurable" means the amount of the transaction can be determined and "available" means
collectible Within the current penod or soon enough thereafter to be used to pay liabilities of
the current penod. Expenditures, other than principal and interest on general long-term
obhgations, are recorded when the fund liability is incurred and is expected to be hquidated
with expendable available resources. The exception to the general modified accrual expenditure
recognition criteria is that principal and interest on general long-term obligations are recorded
when due or when amounts have been accumulated in the debt service funds for payments to be
made early in the following year.
32
NOTES TO FINANCIAL STATEMENTS
Intergovernmental revenues which are primarily grants and subventions received as
reimbursement for specific purposes or projects are recognized based upon the expenditures
recorded. Intergovernmental revenues which are virtually unrestricted as to purpose of
expenditure and revocable only for failure to meet prescribed compliance requirements are
retlected as revenues at the time of receipt or earlier if they meet the availability cntenon.
Property taxes receivable within the governmental fund types which have been collected within
sixty days followmg fiscal year-end are considered measurable and available and are
recognized as revenues in the funds.
The County of Alameda is responsible for assessing, collecting and distributing property taxes
in accordance with enabling state law, and for remitting such amounts to the City. Property
taxes are assessed and levied as of March I on all taxable property located in the City. and
result m a lien on real property. Property taxes are then due in two equal installments. the first
on November I and the second on March I of the following calendar year, and are delinquent
after December lO and April 10, respectively. Since the passage of California's Proposition 13,
beginning with fiscal year 1978-79, general property taxes are limited to a flat 1% rate applied
to the 1975-76 full value of the property, or 1% of the sales price of the property or of the
construction value added after the 1975-76 valuation. Assessed values on properties (exclusive
of Increases related to sales and construction) can rise a maximum of 2% per year. Taxes were
levied at the maximum 1% rate during the fiscal year ended June 30, 1997.
Special assessments are recorded as revenues and receivables to the extent installments are
considered current. The estimated installments receivable not considered current are recorded
as receivables and offset by deferred revenue.
Other major revenues are susceptible to accrual and are also recognized as revenue when they
are collected within 60 days of fiscal year-end. These include interest, utility consumption
taxes. franchise fees, transient occupancy taxes, and certain rentals. Real estate transfer taxes
on assessed properties transferred pnor to the fiscal year-end and held by Alameda County, and
sales and use taxes and motor vehicle in lieu taxes held by the State at year-end on behalf of the
City are also recognized as revenue.
Major revenues that are determined not to be susceptible to accrual because they are either not
available soon enough to pay liabilities of the current period or are not objectively measurable
include delinquent property taxes, licenses (other than business licenses), permits, fines and
forfeitures.
Accrual Basis of Accounting
The accrual basis of accounting is utilized in all proprietary fund types and pension trust funds.
Under the accrual basis of accounting, revenues are recognized when earned and expenses are
recognized when incurred.
33
* CITY OF OAKLAND
Deferred Revenue
Deferred revenue is that for which asset recognition criteria have been met, but for which
revenue recognition cnteria have not been met. The City typically records deferred revenue
related to: uncollected property taxes; estimated special assessments not yet payable;
Intergovernmental revenues (primarily grants and subventions) received but not earned
(qualifying expenditures not yet incurred); long-term contracts; and notes or loans receivable
arising from loan subsidy programs which are charged to operations upon funding.
Budgetary Data
Original Budget
In accordance with the provisions of the City Charter, the City prepares and adopts a budget on
or before June 30 for each fiscal year. The City Charter prohibits expending funds for which
there is no legal appropriation. Therefore, the City IS required to adopt budgets for all CIty
funds.
Pnor to July I. the original adopted budget IS finalized through the passage of a resolution by
the City Council. The level of legal budgetary control by the City Council is established at the
fund level. For management purposes. the budget is controlled at the departmental level of
expenditure withm funds.
On June 24, 1997. the City Council voted unanimously to adopt the City's first two-year
budget for fiscal years 1998 and 1999. FY1996-97 was not affected by this change.
Revised Budget
The revised budgetary data presented in the accompanying "General Fund and Annually
Budgeted Special Revenue and Debt Service Funds-Combmed Schedule of Revenues,
Expenditures and Encumbrances- Budget and Actual on a Budgetary BaSIS," reflect the
following changes to the original budget:
Certain projects or programs are appropriated on a multi-year rather than annual baSIS. If
such projects or programs are not completed at the end of the fiscal year, unexpended
appropriations are carried forward to the following year with the approval of the City
Manager Annually appropriated funds (not related to multi-year projects or programs)
lapse at the end of the fiscal year. unless such funds were encumbered or otherwise
approved for carryforward by the City Manager. Appropriations carried forward from the
prior year are included in the revised budgetary data. Histoncally, appropriations earned
forward have ultimately resulted in expenditures.
Transfers of appropnations between funds must be approved bythe City Council. Required
supplemental appropriations financed by unanticipated revenues or beginning available
fund balances must also be approved by the City Council. The General Fund budget was
34
NOTES TO FINANCIAL STATEMENTS
augmented by approximately $417 ,940,000, principally to authorize the General Fund to
spend the proceeds of the pension bonds for contributions to the Oakland Polrce and Fire
Retirement System (PFRS).
Transfers of appropriations between departments and projects within the same fund must be
approved by the City Manager. Revised budget amounts reported in the accompanying
General Purpose Financial Statements reflect both the appropriation changes approved by
the City Council and the transfers approved by the City Manager.
Encumbrances
Encumbrance accounting, under which purchase orders, contracts, and other commitments for
expenditure of funds are recorded to reserve that portion of the applicable appropriation. is
employed as an extension of formal budgetary control in the governmental fund types.
Encumbrances outstanding at fiscal year end are reported as reservations of fund balances and
the related appropriation is automatically earned forward into the next fiscal year.
Encumbrances do not constitute expenditures or liabilities because the commitments will be
honored dunng the subsequent fiscal year Encumbrances are combined with expenditures for
budgetary comparison purposes.
Budgetary Basis of Accounting
The CIty adopts budgets each fiscal year on a basis of accounting which is different from
GAAP The major areas of difference are discussed in Note 17.
Certain funds of the City contain capital projects, grant projects, loan programs or other
programs that are budgeted on a multi-year basis. The amounts of the projects and programs
budgeted on a multi-year basis are significant compared to the items budgeted on an annual
basis; therefore, a comparison of budget to actual for the fund would not be meaningful. As a
result, such funds that are excluded from budgetary reportmg are:
Special Revenue Funds
Federal and State Grants
Other Assessment Districts
Other Special Revenues
Oakland Redevelopment Agency
Debt Service Funds
Tax Allocation Bonds
Capital Projects Funds
Parks and Recreation Fund
Municipal Improvement
Emergency Services Fund
Oakland Redevelopment Agency
35
* CITY OF OAKLAND
In addition, the Lease Financings Debt Service Fund IS not budgeted by the City because the
fund is reported for financial statement purposes only, and includes the results of certain lease
financings between the City and the Agency and between the City and the California Statewide
Communities Development Authority. Any financial activity related to these financings is
budgeted on a basis consistent with the form of the transactions, whereas for reporting purposes
the financial activity is recorded in a manner consistent with the substance of the transaction.
While the City adopts budgets for all funds, the budget to actual comparisons for the following
funds have not been shown due to some projects and programs being adopted on a multi-year
basis and the complexity of the presentation.
Enterprise Funds
Park and Recreation Fund
Sewer Service Fund
Oakland-Alameda County Coliseum Authority
Internal Service
Equipment Fund
Radio Fund
Facilities Fund
Reproduction Fund
Central Stores Fund
Pension Trust Funds
OMERS
PFRS
Expendable Trust Funds
Oakland Redevelopment Agency Project Fund
Parks, Recreation and Cultural Trust Fund
Pension Annuity Fund
Other Expendable Trust Funds
Agency Funds
Deferred Employee Cornpensation Fund
Housing Finance Revenue Bond Fund
Cash and Investments
The City follows the practice of pooling cash of all funds for investment, except for the
Oakland Redevelopment Agency funds, agency fund types, and restncted funds held by outside
custodians. Investments are stated at cost or amortized cost, except for assets of OMERS.
PFRS and deferred compensation plans which are reported at fair value and primarily consist of
investments with maturities greater than one year.
36
NOTES TO FINANCIAL STATEMENTS
Income earned or losses arising from the investment of pooled cash are allocated on a monthly
basis to the participating funds (except for Enterprise, Internal Service and certain Special
Revenue Funds) and component units based on their proportionate share of the average daily
cash balance.
For purposes of the Statements of Cash Flows, the CIty considers all highly liquid Investments
with a maturity of three months or less when purchased to be cash equivalents. Restricted cash
and Investments generally have original matunnes of greater than three months and are
therefore not considered cash equivalents. The proprietary fund types' investments in the City
cash and Investment pool are, In substance, demand deposits and are therefore considered to be
cash equivalents.
Due From/Due To Other Funds
DUring the course of operations, numerous transactions occur between mdrvidual funds for
goods provided or services rendered. These receivables and payables are classified as "due
from other funds" or "due to other funds."
Restricted Cash and Investments
Proceeds from debt and other cash and investments held by fiscal agents by agreement are
classified as restricted assets
Other Assets
Other assets primarily Include bond discounts and Issuance costs for proprietary fund type debt
which are deferred and amortized over the term of the bonds under the interest method. Bond
discounts and Issuance costs for governmental fund type debt are expended when Incurred
Inventories
Inventories, consisting of materials and supplies held for consumption, are stated at cost Cost
IS generally calculated USIng the first-In, first-out method. Inventory items are considered
expenses when used.
General Fixed Assets
General fixed assets are those acquired for general governmental purposes. Such assets
currently purchased or constructed are recorded as expenditures in the governmental fund types
and are capitalized at cost In the General Fixed Assets Account Group, with the exception of
certain assets acquired prior to July 1, 1984, which have been recorded at estimated historical
cost Donated fixed assets are recorded at estimated fair market value at the trrne of receipt.
Public dornam infrastructure (general fixed assets consisting of certain improvements other
than buildings) is not capitalized and IS not included in the General Fixed Assets Account
37
~ CITY OF OAKLAND
Group. These assets include roads, bridges, curbs and gutters, streets and sidewalks. drainage
systems, lighting systems, and similar assets. Such assets normally are immovable and of value
only to the City; therefore, stewardship for capital expenditures IS satisfied without recording
such assets.
No depreciation is provided on general fixed assets.
Fixed Assets - Proprietary Fund Types and Discretely Presented
Component Unit
Fixed assets m the proprietary fund types and discretely presented component unit are
generally stated at cost, with the exception of certain assets acquired pnor to July I. 1984,
which have been recorded at estimated historical cost. Depreciation is provided using the
straight-line method based on the estimated useful life of the asset as follows'
Facihues, sewers and improvements
Container cranes
Furniture, machinery and other equipment
5-50 years
25 years
3-10 years
Tenant improvements which revert to the Port at the end of the lease term are recorded In an
appropriate asset account, WIth an offsetting credit to deferred revenue. The asset is depreciated
over its useful life, not less than the term of the lease, and the deferred revenue IS amortized
over the term of the lease, mcludmg renewal options.
Land Held for Resale
The Agency charges capital outlay expenditures for the full cost of developing and
adrmnistenng its projects. Land held for resale is recorded as an asset at the lower of cost or
estimated net realizable value, with an equal amount recorded as a reservation of fund balance.
Vacation and Sick Leave Pay
Vacation pay may be accumulated and is payable upon retirement or terrrunatron of an
employee. Sick leave vests to an employee upon being employed for at least ten years with the
City. Upon termmation, a vested employee is entitled to one-third of the Sick leave
accumulated to the date of termination.
Vested vacation, SIck leave and compensatory nme are accrued, as appropriate, for all funds.
With respect to obligations of the governmental fund types, amounts expected to be paid
monetarily or by way of compensatory time off are accrued in the appropriate fund If current
resources are expected to be used. The remainder is recorded in the General Long-Term
Obligations Account Group.
38
NOTES TOFINANCIAL STATEMENTS
Retirement Plans
The City has three defined benefit retirement plans: Oakland Police and Fire Retirement
System (PFRS), Oakland Municipal Employees' Retirement System (OMERS), and Calrforrna
Public Employees' Retirement System (PERS). Refer to Note 16for additional information.
Claims and Judgments
The costs of claims and judgments estimated to be paid with current expendable resources are
accrued as current liabilities of the General Fund when the liability is incurred and the amount
can be reasonably estimated. The remaining estimated costs are recorded in the General Long-
Term Obligations Account Group.
Interfund Transfers
Interfund transfers are generally recorded as operating transfers except for the following types
of transactions:
Charges for services are recorded as revenues in the performmg fund and
expenditures/expenses in the requestmg fund.
Transactions that constitute reimbursement to a fund for expenditures/expenses mmally
made from it that are properly applicable to another fund are recorded as expendi-
tures/expenses In the reimbursing fund and as a reduction of expenditures/expenses in the
fund that is reimbursed.
Residual equity transfers, which represent nonrecurring or nonroutine transfers of equity
between funds, are reported as decreases or increases in fund balance for governmental and
proprietary fund types.
Joint Venture
The City records Its 50% equity interest in the Oakland-Alameda County Coliseum Authority
(Authority) joint venture in the General Fixed Assets Account Group, as required by GASB
Statement 14. See Note 15 for further information on the joint venture.
Contributed Capital
Primary Government
Contnbuted capital m the proprietary fund types represents the accumulation of contnbutions
In the form of cash or other assets which generally do not have to be returned to the
contnbutor, Such contnbutions are recorded directly to contributed capital and, accordingly,
39
~ CITYOF OAKLAND
are not recognized as revenue. The following transactions are recorded to contributed capital In
the proprietary fund types and discretely presented component urut:
Cash and other asset transfers of equity from the pnmary government or other funds.
Fixed assets contributed from the primary government or other funds or from the General
Fixed Assets Account Group.
Discretely Presented Component Unit
Contributed caprtal in the Port includes grants from government agencies which are restricted
for the acquisition or construction of capital assets, and passenger facility charges which are
restncted in use for projects eligible under federal legislation and approved by the Federal
AVIation Adrrurustranon. Depreciation expense on assets acquired with contnbuted capital IS
charged to contributed capital
Fund Equity
Reservations of fund balances indicate those portions of fund equity which are not available for
appropnanon or expenditure or which have been legally restricted to a specrfic use.
Portions of unreserved fund balances have been designated to indicate those portions of fund
balances that which the City has tentative plans to utilize In a future period. These amounts
may not result in actual expenditures.
Total Columns on Combined Financial Statements
Total columns on the accompanying General Purpose Financial Statements are captioned
"Memorandum Only" to indicate that they are presented only to facilitate financial analysis,
Data In these columns do not purport to present financial position, results of operations. or cash
flows of the City in conformity WIth GAAP. Such data is not comparable to a consolidation
Use of Estimates
The preparation of financial statements in conformity with generally accepted accountmg
pnnciples requires management to make estimates and assumptions that affect the reported
amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of
the financial statements and the reported amounts of revenues and expenses dunng the
repornng period. Actual results could differ from those estimates.
40
NOTES TOFINANCIAL STATEMENTS
(3) CASH AND INVESTMENTS AND RESTRICTED CASH AND INVESTMENTS
Primary Government
The City maintains a cash and investment pool consisting of City funds and cash held for
OMERS, PFRS and the Port. The City's funds are invested by the Director of Budget and
FInance according to the investment policy adopted by the City Council. The objectives of the
policy are legality, safety, liquidity, diversity, and yield. The policy addresses soundness of
financial institutions in which the City can deposit funds, types of investment instruments
permitted by the California Government Code, duration of the investments, and the percentage
of the portfolio which may be Invested in certain instruments. Pooled investments permitted by
the policy Include:
United States Treasury bills and notes;
federal agency issues;
bankers' acceptances;
commercial paper;
medium term corporate notes and deposit notes with ratings In the top 3 categories by
either Standard and Poor's Corporation or Moody's Investor Service Inc.;
negotiable certificates of deposit;
certificates of deposit;
Local Agency Investment Fund;
money market mutual funds;
repurchase agreements; and
reverse repurchase agreements.
The City's investment policy stipulates that the collateral to back up repurchase agreements be
priced at market value and be held in safekeeping by the City'S primary custodian.
Additionally. the City Council has adopted certain requirements prohibiting investments In
nuclear weapons makers, and restricting investments in U.S. Treasury bills and notes due to
their use In funding nuclear weapons research and production. As of June 30, 1997, the City
was in compliance with the above stated investment requirements.
Other deposits and investments are invested pursuant to the governing bond covenants,
deferred compensation plans, or retirement systems' investment policies. Under the investment
policies, the investment counsel is given the full authority to accomplish the objectives of the
bond covenants or retirement systems subject to the discretionary limits set forth In the
policies.
The retirement systems' investment policies allow the following:
Obligations of the United States Government, any agency of the United States
Government, common stocks, mutual funds, preferred stocks and securities convertible
Into common stocks, Federal Housing Administration mortgages, certificates and shares
41
CITY OF OAKLAND
of state or federal chartered savings and loan associanons. equity or mortgage debt
Investments in existing real property or In property to be constructed. except that no
mortgage investments may be funded until the Improvements on the property are
substantially complete.
Total deposits and investments (in thousands):
Deposits
Investments
TOTAL
City
$ 94,565
1.745.983
$1.840,548
Port
$ 12.119
189.879
5201.998
OCVA
$ 119
$ 119
Total
S 106.803
1.935.862
$2.042.665
These are classified on the Combined Balance Sheet as (in thousands):
City Port OCVA Total
Cash and investments $1.165.878 s 68.745 $ 119 S1234.742
Restricted cash and investments 674670 133.253 807.923
TOTAL $1.840,548 5201.998 S 119 S2.042.665
Deposits
At June 30. 1997. the carrying amount of the City's deposits was $94565.000 and the bank
balance was $95,500,219. The difference between the carrying amount and the bank balance
was primarily due to deposits in transit and outstanding checks. Deposits include checking
accounts. interest earning savings accounts. money market funds. and nonnegotiable
certificates of deposit. Of the bank balance. $600,000 was FDIC Insured and 594.900219 was
collateralized with securities held by the pledging financial Institution In the City's name. In
accordance with Section 53652 of the California Government Code.
The California Government Code requires that governmental securities or first trust deed
mortgage notes be used as collateral for demand deposits and certificates of deposit at 110
percent and 150 percent, respectively, of all deposits not covered by federal deposit Insurance.
The collateral must be held by the pledging financial institution's trust department and IS
considered held In the City's name.
42
NOTES TO FINANCIAL STATEMENTS
Investments
The CIty's investments are categorized to give an indication of the level of custodial credit risk
assumed by the City at year-end. Category I includes investments that are insured or registered,
or securities held by the City or its agent in the City's name. Category 2 includes uninsured and
unregistered Investments, with the securities held by the counterparty's trust department or
agent In the CIty'S name. Category 3 includes uninsured and unregistered Investments, with the
secunues held by the counterparty or by its trust department or agent but not in the City's
name
At June 30. 1997, Investments included the following (In thousands):
Category 1 Category 3
Carrying
Amount Market
Subject to Custodial Credit Risk
U S Treasury securities
Federal agency Issues
MUnicipal bonds
Commercial paper
Banker's acceptance
Corporate stocksand bonds
Negotiable ceruficates of deposit
Medium term corporate notes
Long-term repurchase and
mvestment agreements
Total
$ 195.86-1
253.%7
5.-167
370.-115
39.-157
19-1,535
13.068
32283
8-1288
$1.189.3-1-1
$
-1.330
152.658
2 ~ 000
5> 181.988
s 195.864 s 2132-11
253.967 261052
5.-167 5.-159
37-:1.7-15 375 -186
39.-157 -10.3-15
3-17.193 3-16.6-16
13.068 13172
32283 32.753
10928R 1101-1-1
1.371332 1 398298
Investments Not Subject to
Custodial Credit Risk
Real estate deeds
Real estate mortgage loans/investments
Mutual funds
Life Insurance annuity contracts
Local Agency Investment Fund
Inv estrnents held b) broker-dealers
under securities loans
Total
TOTAL INVESTMENTS
Less Port of Oakland Pooled 1mestments
TOTAL CITY INVESTMENTS
-158
7.183
106.315
150.000
18.916
180818
463690
1.835.022
(89019)
$1.7-15.983
-158
7.183
106.315
150.000
J8.916
180.818
463690
1.861.988
(9256-1)
$1.769 -12-1
43
* CITY OF OAKLAND
Securities Lending Transactions
PFRS is authonzed to enter into secunues lending transactions which are short term
collateralized loans of PFRS securities to brokers with a simultaneous agreement allowing
PFRS to invest and receive earnings on the loan collateral for a loan rebate fee. All securities
loans can be terminated on demand by either PFRS or the borrower, although the average term
of loans is one week.
Metropolitan West Securities, Inc. (MetWest) administers the securtties lending program.
MetWest is responsible for maintaining an adequate level of collateral in an amount equal to at
least 102% of the market value of loaned U.S. government securities. Collateral received may
include cash, letters of credit, or secunnes. If securities collateral is received. PFRS cannot
pledge or sell the collateral securities unless the borrower defaults.
At year-end, PFRS had no credit risk exposure to borrowers because the amounts PFRS owed
to borrowers exceeded the amounts the borrowers owed to PFRS. PFRS' contract with
MetWest requires It to indemnify PFRS If the borrowers fail to return the securities (and If the
collateral is inadequate to replace the securities lent) or fail to pay PFRS for income
distributions by the securities' issuers while the securtties are on loan.
As of June 30, 1997, PFRS had securities on loan with a market value of SI80,818.000 for cash
collateral of $187,354,000. The cash collateral of $181,988,000 is in investments classified
under nsk category 3 and $5,366,000 is in investments not subject to custodial credit risk.
PFRS' securities lending income for the year ending June 30, 1997, is as follows'
Gross Income
Expenses:
Borrower rebates
Administration fees
Total Expenses
NET INCOME FROM SECURITIES LENDING
Derivatives
$7.908.015
7,413,204
203.325
7.616.529
$ 291.486
The City has invested in certain derivatives as permitted by its investment policy. Derivatives
Included in the investment pool at June 30,1997, amount to $1,649,484.
44
NOTES TOFINANCIAL STATEMENTS
Discretely Presented Component Unit
36,371
49,710
24,292
22261
352
267
$ 66,426
104
2.215
68745 TOTAL CASH AND INVESTMENTS
Restricted cash and Investments:
Sinking fund and reserve deposits
with fiscal agents
Unexpended bond proceeds restncted
for construction
Deferred compensation plan assets
Cash and Investments with City:
Passenger facility charges
Other
Restricted deposits with fiscal agents for
current debt service
The Port's cash and investments are reported as follows at June 30, 1997 (in thousands):
Cash and investments:
Cash and investments with the City
Cash on hand
Cash In bank accounts
TOTAL RESTRICTED CASH AND INVESTMENTS
TOTAL
133253
$201,998
$ 2,590
545
67,724
17,808
89,039
24292
$201,998
The carrying amount of Port cash and investments is as follows at June 30, 1997 (cost
approximates market) (In thousands):
Cash on hand and at bank
Government securiues money market mutual funds
U.S. Treasury obligations
Guaranteed investment contracts
Cash and investments WIth the City of Oakland
Deferred compensation plan mutual funds
TOTAL
45
CITY OF OAKLAND
Cash and Investments With the City of Oakland
Pursuant to the City Charter, Port operating revenues are deposited in the City treasury. These
funds are cornmmgled in the City cash and investment pool. The Port receives a monthly
interest allocation from investment earnings of the City based on the average dally balance on
deposit and the earnings of the investments. All investments deposited in the City treasury are
Insured or registered, or held by the City or its agent In the City's name
Restricted Cash and Investments
Port bond resolutions authonze the investment of restncted cash, including deposits, with fiscal
agents for debt service. Authonzed Investment securities are specified in the vanous bond
indentures. All indentures permit investments in U.S. Treasury obligations and bank certificates
of deposit. Certain indentures also permit investments In federal agency obligations. certain
state and secured municipal obligations, long-term and medium-term guaranteed corporate debt
securities In the two highest ratmg categories, commercial paper rated prime. repurchase
agreements, certain money market mutual funds, and certain guaranteed investment contracts
Deposits
The carrying amount of Port deposits with banks and fiscal agents was S12.119.000 at June 30,
1997. The bank balances are Insured or collateralized with securities held by the pledging
financial mstitunon In the Port's name, in accordance with Section 53652 of the Cahforrua
Government Code.
The California Government Code requires governmental secunties or first trust deed mortgage
notes as collateral for demand deposits and certificates of deposit at 110 percent and 150
percent, respectively, of all deposits not covered by federal deposit insurance. The collateral
must be held by the pledging financial institution's trust department and IS considered held In
the City's name.
All investments subject to custodial credit nsk are Category I investments.
46
NOTES TO FINANCIAL STATEMENTS
(4) DUE TO/DUE FROM OTHER FUNDS
The following were the current interfund balances at June 30,1997 (in thousands):
Due from Due to
General Fund $ 74759 $ 14,082
Special Revenue Funds
Federal and State Grants 3,226 16,979
Traffic Safety and Control 6 68
State Gas Tax 135
Landscape and Lighting Assessment District 179 342
Other Assessment Districts J7 23
Other Special Revenue 6,653 1,688
10,081 19235
Debt Service Funds
General Obhganon Bonds 41
Tax Allocation Bonds 21,244
Lease Fmancmgs 4,835 21,872
Special Revenue Bonds 287 4,817
5,163 47,933
Capital Projects Funds
Parks and Recreation 446
Municipal Improvement Capital 4,465 3,699
Emergency Services 8
Oakland Redevelopment Agency 2,703 9,778
7,168 ]3,931
Enterprise Funds
Parks and Recreation 96
Sewer Service 1 1,686
Oakland Convention and Visitors Authority 91
92 1,782
Internal Service Funds
Equipment 4,661 150
RadiO 6
Facilities 505 3,773
Reproduction 86 7
Central Stores 11I 761
5.363 4,697
Trust and Agency Funds
Expendable Trust Funds
Oakland Redevelopment Agency Projects 1,433 2,394
Parks, Recreation and Cultural Trust 5
1433 2.399
TOTAL
$104,059 $104,059
47
~ CITY OF OAKLAND
(5) MEMORANDUMS OF UNDERSTANDING
The City and the Port have Memorandums of Understanding (MOUs) relating to: (a) general
obligation bonds issued by the City for the benefit of the Port; (b) vanous administrative,
personnel, data processing, and financial services (Special Services); and (c) police, fire, public
street cleaning and maintenance, and similar services (General Services) provided by the City
to the Port.
Pursuant to the Sixth Supplemental Agreement to the MOUs, the City and the Port agreed that
the total remammg obligation of the Port to the City arising out of or related to any and all
general obligation bonds issued by the City for the benefit of the Port was $3 1.749.000. of
which $0 IS remainmg at June 30,1997.
Payments for Special Services are treated as a cost of Port operations and have Priority over
certain other expenditures of Port revenues. At June 30, 1997, $1,687,000 In Special Services
expenditures was accrued as a current liability by the Port and as a receivable by the City
The Port's legal counsel advised the Port that payments for General Services and Lake Merritt
to the City are payable only to the extent the Port determines annually that surplus monies are
available Subject to final approvals by the Port and the City, and subject to availabrhty of
surplus monies, the Port will reimburse the City annually for General Services and Lake
Merntt tideland trust properties. At June 30, 1997, $661,000 and $728,000. respectively. were
accrued as a current habihty by the Port and as a receivable by the City.
The City and the Port are in the process of negotiating an MOU for payments to be made by the
Port to the City for fiscal year 1997, in consideration for services provided by the City on
Tidelands Trust properties. Such payments are expected to amount to $3.000.000. and represent
a portion of the total expenses Incurred by the City in the provision of services withm the Lake
Merritt Tidelands boundaries.
48
NOTES TO FINANCIAL STATEMENTS
(6) NOTES ANDLOANS RECEIVABLE
Notes and loans receivable at June 30, 1997, consisted of the following (in thousands):
Grant-in-aid loans at various interest rates and due dates (0% to 6% at June 30. 1997)
Pacific Renaissance Associates II, beanng interest at 10%, principal and interest due July
30,2015
Oakland Hotel Associates. Ltd., bearing interest at 7.67%, principal and interest due July
1.2013. or earlier under certain provisions of the note
Mar Associates, beanng interest at 9%, principal and interest due March 9,2002
Oakland Hotel Associates, Ltd., bearing Interest at Bank of America reference rate (6% at
June 30.1997), no pnncrpal and interest payable until December 30. 2026
Oakland Business Development Corporauon-Dufw un Towers, bearing interest at 6%,
principal and Interest due September 8,1999
Foothill Plaza Partnership. bearing interest at 3'iC, principal and interest payable In equal
rnomhly Installments through Jul) 20,2018
Oakland Renaissance Ltd., bearing interest at 7.72'iC, principal and Interest due June 12.
2031
American Brass Foundry, lnc., bearing interest at 7'. principal and interest due
December 2007
Oakland BUSiness Dev elopment Corporation Neighborhood Economic Dei elopment
Fund revolvmg loan program. non-interest beanng, various borrowers
Hillary Development, bearing Interest at 3', principal and interest due September II.
1996
Hamson Hotel ASSOCIates, beanng interest at 6'iC. principal and interest due December
15.2<W>
Woodrow Hotel, beanng interest at 6.50Q. pnncipal and interest due December 3. 2023
Other pass-thru loans at \ arious interest rates and matunues (0% to 1O'iC at June 30,
1997)
Other notes and loans recei vable at \ arious Interest rates and maturities
E.M Mortgage Health Service. beanng interest at 8 75'iC, principal and interest due April

Granny Goose Foods, $1,782 bearing interest at 8.5'iC. principal and interest due January
13,2017. and $435 principal and interest due January 13.2007
Cahon, Inc.. beanng Interest at 9%, through June 30, 1993, and zero interest thereafter.
principal and interest due December 31. 1996, or earlier under certain provrsions of
the note
Piedmont/Macarthur Apartment Project, bearing Interest at 6%, monthly payment
schedule. remaining pnncrpal and unpaid interest due September 30. 1997. or no
later than March 31. 1998
Old Town Square Housing Development/Keatmg Housing lniuative Inc., with zero
interest. pnncrpal due December 3 1.2000
Women's Economic Agenda. bearing interest at 6%. principal and interest due August
14,2025
TOTAL
$ 34.623
7.000
7,758
2.900
3.379
2.-t25
1521
1.770
1.919
1.-l91
1.6-l8
1.997
l.-l16

19.-t17
1100
2.218
1,100
1579
1.800
2-120
$115.06-+
49
CITY OF OAKLAND
(7) FIXED ASSETS
A summary of changes in general fixed assets for the year ended June 30, 1997. follows (m
thousands):
Land
Facilities and
improvements
Furniture, machinery
and equipment
Investments in jomt
venture
Construction in
progress
TOTAL
Balance
July 1,
1996
$ 68,631
432,561
29,810
54.393
$585.395
Transfers/
Additions Deletions
s 2 S 154
99,370 44282
3,071 6,855
10,118 5.422
34,050 42,798
$146,611 $99.511
Balance
June 30,
1997
$ 68,479
487.649
26,026
4,696
45.645
$632.495
A summary of property and equipment at June 30. 1997. for proprietary fund types and
discretely presented component units follows (10 thousands):
Component Units
Less accumulated depreciation
and amortization (12.429)
TOTAL $ 6 3 9 ~
42,767 26.005
54,272 98
43,287 1,080,453 98
<33.590) (298,906) (78)
$ 9.697 s 781.547 $20
50
Land
Facilities and improvements
Container cranes
Furniture, machmery and
equipment
Construction in progress
Enterprise
Funds
$ 220
76,156
76,376
Internal
Service
Funds
s 310
210
Port
of
Oakland
$ 111.474
789.917
98,785
Oakland
Convention &
Visitors
Authority
$-
NOTES TO FINANCIAL STATEMENTS
(8) PROPERTY HELD FOR RESALE
Property held for resale at June 30, 1997, consisted of the following (in thousands):
Chinatown
City Center
Housewives Market
Rotunda Building
Multi-Service Center
Plaza Building
Swans Market
Taldan Site
State BUilding
City Hall Annex
Preservation Park
City Center Garage West
America Recreation Center
Acorn Shopping Center
Fox Theater
11 th-12th Broadway & Franklin
US Ice Skating Rink
Total
$ 2,100
3,336
1,611
1,850
5,100
613
4,425
1.301
3,026
2,880
6,448
21,447
1
2,970
3,000
2,059
10.588
$72.755
The Agency acquired the Preservation Park project, which was developed by a joint venture
between the Agency and Bramalea Pacific, Inc., by credit bid at a foreclosure sale. On January
5, 1996, under an Assumption Agreement between the City and the Agency, the Agency
assumed the $6,448,000 obligation of the Preservation Park project.
On May 8, 1991, the Agency entered Into a joint venture agreement with Bramalea Pacific, Inc.
under the name of City center Garage West Associates (Associates). The purpose of the JOint
venture was to construct and operate a multi-level parking structure and other related stores and
offices. Associates entered Into a loan agreement With the City for $22,000,000 to construct the
garage. On May 23,1995, due to the Canadian bankruptcy of Bramalea's parent company, the
City took title to the garage in settlement of the loan obligation of Associates. On October 12,
1995, the City transferred the title of the garage to the Agency to hold as property held for
resale and will operate for the purpose of facilitating the future development of the City Center
Project In acceptance of the title to the garage, the Agency acquired the City'S loan to
Associates The Agency agreed to repay the City's loan balance of $2 1,447,000.
In June 1996, U.S. Ice Ventures defaulted on their loan repayment obligations to the Agency
pursuant to loan documents between the Agency and U.S. Ice Ventures. As a result of the
default, the Agency sued U.S. Ice Ventures to enforce the Agency's nghts under the
agreements between the Agency and U.S. Ice Ventures. In October 1996, U.S. Ice Ventures
filed for bankruptcy. On May 1, 1997, under the bankruptcy settlement, the Agency took title
of the property.
51
CITY OFOAKLAND
(9) TAX AND REVENUE ANTICIPATION NOTES PAYABLE
During the fiscal year ended June 30, 1997, the City issued tax and revenue anticipation notes
payable of $55,000,000. The notes were issued to satisfy General Fund obligations and carried
an effecuve interest rate of approximately 4.75%. Principal and interest were due and repaid on
June 30, 1997.
(10) LONG-TERM OBLIGATIONS
General Long-TermObligations
The following is a summary of changes in general long-term obligations for the year ended
June 30,1997 (in thousands):
Additional
Balance Obligations Maturities Balance
at July 1, and Net and at June 30,
1996 Increases Retirements 1997
General obligation bonds $ 72,465 $ 67,670 $ 1,820 S 138.315
Tax allocation bonds 205,629 6.755 198,874
Lease financings 336.383 4.140 332,243
Special assessment debt with
governmental commitment 9,961 465 301 10.125
Special revenue bonds 183,400 436,290 9.830 609.860
Accrued vacation and
SIck leave 18,440 9,644 28.084
Self-insurance liability for
workers' compensation 35,700 2.000 33,700
Estimated claims payable 616 6,076 6.692
Contingent liability for
Authority debt (Note 15) 97.387 97.387
TOTAL $862594 $617532 $24.846 SI.455.280
General long-term obligations at June 30, 1997, consisted of the following (in thousands):
52
General Obligation Bonds
General Obligation Bonds Series 199IA (a)
General Obligation Bonds Series 1995B (a)
General Obligation Bonds Series I997C (a)
General Obligation Bonds Series 1992 (b)
Serial bonds
Term bonds
Term bonds
General Obligation Bonds Series 1997 (c)
Maturity
1997-2015
1997-2019
1997-2003
1997-2012
2017
2022
1997-2002
Interest
Rates
5.50%-850%
5.30%-8.25%
600%
4.25%-11.00%
6.00%
6.00%
5.25%-5.75%
Balance at
June 30, 1997
s I I . ~
14.662
22250
20.084
10.435
14.-160
45420
138 315
NOTES TOFINANCIAL STATEMENTS
Tax Allocation Bonds
Acorn Refunding Series 1988 (d)
Serial bonds
1997-2000 6.70%-7.00%
615
Term bonds
2007 7.40%
2,075
Central District Tax Allocation Senes 1989A (e)
Serial bonds
1997-2000 630%-6.55% 12,730
Capital appreciation bonds
2001-2009 660%-6.65%
11.899
Central District Senior Tax Allocation
Refunding Series 1992 (f)
Serial bonds
1995-2008 4.50%-600%
48.630
Term bonds
2009-2014 550%-6.15% 35.910
Central DIstrict Subordinated Tax
Allocation Refunding Series 1992A (g) 1995-2019 5.95<4 53.000
Central DIstrict Subordinated Tax Allocation
Senes 1993A (h)
Serial bonds
I995-200t 4.835
Term bonds 2005-2009 5.30tK
Term bonds
2010-2013 5.00,/(

Term bonds 2014-2021 5009< 11.025
Central District Subordinated Tax
Allocation Bonds. Series 1995A 0)
Serial bonds 1997 500tK 170
Serial bonds 1999 5.25% 195
Serial bonds 2001 550% 225
Term bonds 2008 720<4 1.010
Term bonds 2015 750%
Term bonds 2021 760%
7060
198
Lease Financings
Oakland lPFA Lease Revenue Bonds. Series 1996 0)
Serial bonds 2001-2012 609<-5.50% 28.125
Term bonds 2013-2017 590% 18.396
Term bonds 2018-2022 575% 24.610
Term bonds 2023-2027 575% 32.816
California StatewIde Communities
Del elopment Authority Bonds (k)
Serial bonds 1997-2008 4 J5%-6.20% 62.1l3
Term bonds 2009-2011 600% 31.900
Term bonds 2012-2015 5.509<,
52.630
Oakland Museum 1992 Series A (I)
Serial bonds 19972003 440%-6.00% 12.030
Term bonds 2005 6.25% 5.020
Term bonds 2012 6.00% 15.900
Capital appreciation bonds 2006-2007 645%-6.55% 2.203
Civic Improvement Corporation (rn) 1997-2016 Variable 46.500
112
Special Assessment Debt with
Governmental Commitment
Medical Hill Parking District Refunding
Irnprov ement Bonds 1m (n) I997-200t 4.20Ok-6.oo% 1.697
Rockndge Area Water Improvement Series 1994 (0) 1997-2024 625-7.5% 860
Fife Area Utility Underground Assessment District (p)
Series 75% 3939
Series (Ta\able) 1997-2014 963-10 10k 3.189
Oakland lPFA Special Assessment Pooled Revenue
Bonds 1996 Senes A (q) 1997-2020 450-6.70%
10m
53
CITY OF OAKLAND
Special Revenue Bonds
Special Revenue Refunding Bonds (r)
Serial bonds
Term bonds
Taxable Pension Obligation Bonds Series 1997(s)
Other Long-Term Liabilities
Accrued \ acanon and sick leave
Self-insurance liability for workers' compensation
(Note 12)
Estimated claims payable (Note 12)
Contingent liability for Authonty debt (Note 15)
TOTAL GENERAL LONG-TERM OBLIGATIONS
General Obligation Bonds
1997-2003
200+-2022
1997-2010
6 SO'7C-7
760%
563%-7.3lo/c


290
609860

33.700
6.692
97387
16, 861
SIASS.280
(a) General Obligation Bonds Series 1991A, Series 1995B and Series 1997C
The City received authorization to Issue $60 million of General Obligation Bonds by a
two-thirds vote of the electorate on the November 6. 1990, general election The bonds
were authorized for the purpose of financing the acquisition of land and to expand and
develop park and recreation facilities. On February 19, 1991, the City Issued S12.000.000
of General Obhgation Bonds Series 199IA. On March I, 1995, the City issued a second
series, $15.000,000 General Obligation Bonds Series 1995B On April 1, 1997. the City
issued a third series, $22,250.000 Series 1997C. leaving the authorized but urussued
amount of $10.750,000. The City IS obligated to levy ad valorem taxes upon all property
subject to taxation within the City, without lirrutatron of rate or amount. for the payment
of the principal and interest on the bonds.
(b) General Obligation Bonds Series 1992
On July 15, 1992, the City issued $50 million of General Obligation Bonds Series 1992
The City received authorization to Issue these bonds by two-thirds vote of the electorate
on the June 2, 1992, primary election. Bond proceeds are to be used for enhancement of
the City's emergency response capabilities and for seismic reinforcement of essential
public facilities and infrastructure.
(c) General Obligation Bonds Series 1997
On March IS, 1997, the City issued $45,420,000 of general obligation bonds to repair,
construct, acquire and improve libraries, museums and other cultural and recreational
facilities throughout the City. The bonds represent the first and only series of bonds
within the authorization approved by the voters of the City on November 5, 1996 The
City is obligated to levy ad valorem taxes upon all property subject to taxation withm the
City, without limitation of rate or amount, for the payment of the principal and interest on
the bonds.
S4
NOTES TO FINANCIAL STATEMENTS
Tax Allocation Bonds
(d) Acorn Tax Allocation Refunding Bonds Series 1988
On November 1, 1988, the Acorn Tax Allocation Refunding Bonds Series 1988 in the
amount of $3,375,000 were issued by the Agency to advance refund $2,895,000 of Acorn
Tax Allocation Refunding Bonds. The bonds are a limited obligation of the Agency and
are payable from and secured by a pledge of a portion of tax revenues assessed on
property within the Central District Redevelopment Project Area, allocable to the Agency
pursuant to Redevelopment Law. Bonds maturing in 2007 are subject to mandatory
sinkmg fund requirements commencing May 1,2001, and are subject to prior redemption.
(e) Central District Tax Allocation Refunding Bonds Series 1989A
On August 1, 1989. $92,399,000 Central District Tax Allocation Refunding Bonds Series
1989A were issued by the Agency. Proceeds of the bonds are being used by the Agency
to finance projects and improvements in the Central District Redevelopment Project Area.
The bonds are a limited obligation of the Agency and are payable from and secured by a
pledge of a portion of tax revenues assessed on property within the Central District
Redevelopment Project Area, allocable to the Agency pursuant to Redevelopment Law.
As discussed under Central Distnct Subordinated Tax Allocation Refunding Series
1992A, the Agency refunded all of the $51.600,000 term portion and $2,000,000 of the
serial portion of the Series 1989A bonds.
(f) Central District Senior Tax Allocation Refunding Bonds Series 1992
On November 15, 1992, the Agency issued $97,655,000 of Central District Senior Tax
Allocation Refunding Bonds Series 1992 at an effective interest cost of 6.25%. The bonds
were issued to defease in substance all of the Agency's Central District Tax Allocation
Refunding Bonds Series 1986 in the amount of $84,325,000. The bonds are secured by
senior tax revenue of the Agency The Senes 1992 Senior Tax Allocation Refunding
Bonds are a limited obligation of the Agency and are payable from and secured by a
pledge of a portion of tax revenues assessed on property within the Central District
Redevelopment Project Area, allocable to the Agency pursuant to Redevelopment Law.
(g) Central District Subordinated Tax Allocation Refunding Bonds Series 1992A
On July 9, 1992, the Agency issued $53,600.000 of Central District Subordinated Tax
Allocation Refunding Bonds Series 1992A, at an interest rate of 5.95% to provide a bond
equivalent yield of 6.02%. These bonds were used to refund the $51,600,000 term bond
portion and $2,000,000 of the serial bond portion of the Agency's Central District Tax
Allocation Refunding Bonds Series 1989A. These bonds are on panty with the Central
Distnct Subordinated Tax Allocation Bonds Series 1993A and Central District Tax
Allocation Refunding Bonds Senes 1989A. These bonds are a limited obligation of the
55
* CITY OF OAKLAND
Agency and are payable from and secured by a pledge of a portion of tax revenues
assessed on property wrthin the Central DIstrict Redevelopment Project Area, allocable to
the Agency pursuant to Redevelopment Law.
(h) Central District Subordinated Tax Allocation Bonds Series 1993A
On March I, 1993, the Agency issued $25,000,000 of Central DIstrict Subordinated Tax
Allocation Bonds Series 1993A. A portion of the proceeds of the bonds IS intended to be
used to finance the renovation and reconstruction of the Oakland City Hall and other
redevelopment projects in the Central DIstrict Redevelopment Project Area. The
rernaimng proceeds were used to establish a caprtahzed interest account to pay Interest
charges through March I, 1995, and to establish a reserve account. The bonds are on
panty with the Central DIstrict Tax Allocation Refunding Bonds Senes 1989A and
Central District Subordinated Tax Allocation Refunding Series 1992A bonds. and are a
limited obligation of the Agency payable from and secured by a pledge of a portion of tax
revenues assessed on property within the Central DIstrict Redevelopment Project Area.
allocable to the Agency pursuant to Redevelopment Law.
(i) Central District Subordinated Tax Allocation Refunding Series 1995A
On August I, 1995, the Agency issued $10,000,000 of Central District Redevelopment
Project Subordinated Tax Allocation Bonds Series 1995A, at an Interest cost of 780ge
The bonds mature on September I, 2021.
Proceeds of the bonds provide the Agency's portion of the construction costs of the City
Administration facilities. Remaining proceeds may be used for other capital expenditures
within the Central District Project.
These bonds are issued on parity with the Redevelopment Agency's Central District
Redevelopment Project Subordinated Tax Allocation Bonds Series 1993A, the Agency's
Subordinated Tax Allocation Refunding Bonds, Series 1992A and the Agency's Central
District Subordinated Tax Allocation Refunding Bonds Series 1989A.
Lease Financings
(j) Oakland JPFA Lease Revenue Bonds Series 1996
On March IS, 1996, the Oakland Joint Power Financing Authority (JPFA) Issued Lease
Revenue Bonds Series 1996 In the amount of $103,947,000. Bond proceeds are to be used
for the design, construction, rehabilitation and equipping of two buildings which will be
part of the administrative center of the City of Oakland. The bonds are payable from
revenue consisting primarily of lease payments to be made by the City to the JPFA for
certain real property and improvements thereon under a lease agreement.
56
NOTES TO FINANCIAL STATEMENTS
(k) California Statewide Communities Development Authority Bonds
On November 1, 1992, the California Statewide Communities Development Authority
(CSCDA) issued $149,825,000 of 1992 Lease Revenue Bonds to purchase the Kaiser
Convention Center (Kaiser) and the George P. Scotian Memorial Convention Center
(ScotIan). The City concurrently leased Kaiser and Scotlan from CSCDA.
Due to the substance of the financing transaction, the effect of the issuance of the Bonds
has been recorded directly as an issuance of debt by the City to finance the reacquisition
of the Kaiser and Scotlan Convention Centers. Accordingly, the Bonds are recorded in the
General Long-Term Obligations Account Group. The City'S capital lease obligation is not
reflected in the City's General Purpose Financial Statements.
The senal bonds maturing on or after October 1, 2002, the term bonds maturing on
October I, 2010: and the term bonds maturing on October 1,2014, are subject to optional
redemption, in such order of maturity as the CIty shall direct, commencing October I,
2002. The bonds maturmg on October 1,2010, and October 1,2014, will be subject to
mandatory redemption, or in part by lot, on October 1 in each year, commencing on
October 1,2008, and October 1,2001, respectively.
(1) Oakland Museum 1992Series A
On May 15, 1992, the Agency issued $39,408,000 in Refunding Certificates of
Participation (Certificates) with an effective interest cost of 6.442% to legally defease the
Oakland Museum Certificates of Participation 1987 Series A.
The Agency has leased the Museum's facilities and site to the City under a lease
agreement. The Agency is not obligated to make any payments in respect to the
Certificates except from the payments by or on behalf of the City pursuant to the lease
agreement.
Due to the substance of the financing transaction. the effect of the issuance of the
Certificates has been recorded directly as an issuance of debt by the City to finance the
reacquisition of the Museum. Accordingly, the Certificates are recorded by the City in the
General Long-Term Obligations Account Group. The Agency's direct financing lease
receivable and City'S capital lease obligation are not reflected in the City's General
Purpose Financial Statements.
(m) CivicImprovement Corporation
On December 1, 1985, the City entered into various simultaneous agreements to finance
the acquisition and construction of capital improvements on City property, such as traffic
control devices, street resurfacmg, parking lots, garages and the rehabilitation of various
City buildings. The following is a summary of the agreements that have been entered
into.
57
* CITY OF OAKLAND
Certificates of Participation-The CIvic Improvement Corporation (Corporation), a
not-for-profit corporation, Issued $52,300,000 variable rate demand certificates of
parncipation evidencing the proportionate interests of the owners thereof In lease
payments to be made by the CIty for certain property pursuant to a master lease
agreement with the Corporation.
Master Lease Agreement-The City entered into a lease agreement with the
Corporation whereby the Corporation agreed to provide financing for certain
proposed capital improvements. Under the terms of the agreement, the City agreed to
supervise and provide for the construction and Improvement of certain City
properties. The Improvements were paid by the Corporanon from the proceeds of the
certificates that were held by the Trustee. Once the improvements are completed. the
Corporation has agreed to lease the projects to the CIty. The lease payments to be
received by the Corporation are equal to the related pnncrpal and Interest payments on
the certificates
Letter of Credit-The letter of credit (LC) is an Irrevocable direct-pay obligation of
National Westrrunster Bank PLC (Bank). The LC was due to expire on September
24, 1995, but has been automatically extended until the Bank gives two years' notice
that It will not continue to extend the LC. In aggregate, the City has available under
the LC $48,602,000 as of June 30, 1997, of which $47,600.000 may be drawn for the
payment of the unpaid pnncipal amount of the certificates, and SI ,100.000 may be
drawn for payment of interest accrued on the certificates. In order to obtam the LC.
the CIty became obligated to pay commission fees of three -eighths of one percent per
annum on the available amount outstanding on the LC. For the year ended
June 30, 1997. the City paid a total letter of credit fee of approximately S185,571
Special Assessment Debt with Governmental Commitment
(n) Medical Hill Parking District Refunding Improvement Bonds 1994
In April 1994, the City issued $2,020,000 of 1994 Refunding Improvement Bonds
Medical Hill Parking Assessment District, Series 3 (Refunding Bonds) at an Interest rate
of 6.237%. The Refunding Bonds are payable from assessments levied against property
owners in the Medical Hill Distnct, In the event of contmumg delmquencres in the
payment of the property owners' installments, the CIty, in the absence of any other
bidder, is obligated to purchase the delinquent property owner's property at a delinquent
assessment sale and pay delinquent and future installments of assessments and interest
thereon until the land is resold or redeemed.
(0) Rockridge Area Water Improvement Bonds Series 1994
In December 1994, the City Issued $876,000 Rockndge Water Area Improvement Bonds
Series 1994 for the purpose of certain acquisitions and improvements within Assessment
58
NOTES TO FINANCIAL STATEMENTS
District No. 1994-2 (Rockridge Area Water Improvements). The Bonds were Issued
pursuant to Resolution No. 71071 and the Improvement Bond Act of 1915. An amount
equal to $76,700 and $86,000 was designated for the Reserve and the Cost of Issuance
accounts, respectively. The Bonds are a limited obligation of the City and are secured by
the unpaid portion of special assessments levied upon the lands benefited by the
Improvements to be acquired and constructed with the proceeds.
(p) Fire Area Utility Underground Bonds Series 1994Aand Series 1994B(Taxable)
In December 1994, the City issued $3,950,000 Fire Area Utility Underground
Assessment Distnct Bonds Series 1994A and $3,420,000 Fire Area Utility Assessment
District Bonds Series 1994B (Taxable). The Bonds were issued pursuant to Resolution
No. 69877 and the Improvement Bond Act of 1915 for the purpose of raismg funds for
the installation of certain underground utilmes within the Fire Area Utility Assessment
District 1994-1 An amount equal to $395,000 and $295,000 was transferred to the
Reserve Accounts for Series A and B, respectively, from the proceeds of $7,183,000 (net
of original issue and underwriter discounts) An additional amount of $156,000 was
transferred from the proceeds to the Cost of Issuance Account. The bonds are a limited
obligation of the City and are secured by the unpaid portion of special assessments levied
upon the land parcels benefited by the improvements to be acquired and constructed WIth
the proceeds.
(q) Oakland JPFA Special Assessment Pooled Revenue Bonds 1996 Series A
In August 1996, the Oakland Joint Powers Financing Authonty ("JPFA") issued Special
Assessment Pooled Revenue Bonds 1996 Series A, in the amount of $465,000. The
Bonds were Issued pursuant to Resolution No 96-02 of the JPFA, to provide funds for a
loan to the City (pursuant to City Resolution No. 72830) for the purpose of funding (I)
the installation of certain underground utilrnes and street light fixtures within four
districts In the City of Oakland, and (2) the construction of a sewer line in the Skyline
Sewer District. Loan repayment will be secured exclusively by the unpaid portion of
special assessments levied upon the properties benefited by the improvements acquired
and constructed WIth the loan proceeds.
Special Revenue Bonds
(r) Special Revenue Refunding Bonds
The Special Revenue Refunding Bonds are payable solely from the proceeds of life
Insurance annuity contracts held In trust With PFRS In the Pension Annuity Expendable
Trust Fund The bonds, maturing in 2021, are subject to mandatory redemption prior to
their stated maturities in direct order of their maturities from SInking fund payments
commencing on August 1,2004.
59
CITY OF OAKLAND
(5) Taxable Pension Obligation Bonds Series 1997
On February 1, 1997, the City issued Taxable Pension Obligation Bonds Series 1997,
Sub-series A, in the amounts of $393,790,000 Current Interest Bonds and $26,704,659 of
Capital Appreciation Bonds and Sub-series B in the amount of $15,795,000 Current
Interest Bonds. The proceeds of the bonds will be used to fund (I) a portion of the current
balance of the City's unfunded actuarial accrued liability (UAAL) for retirement benefits
to members of the Oakland Police and Fire Retirement System (PFRS), (2) a portion of
the City's current normal contribution to PFRS for the fiscal year ending June 30, 1997,
and (3) pay costs of issuance of the Bonds. The payment to PFRS in the amount of
$417,173,300 equals the present value of the payments the City would otherwise be
required to make to amortize the current balance of the City's UAAL through June 30,
2011, and a portion ofthe City's normal contribution as stated in (2) above.
In March 1997, the City entered into a debt service deposit agreement with a third party
whereby the City received $8,147,000 in exchange for forgoing its right to receive
investment earnings on the amounts deposited with the trustee in advance of the date that
the Pension Obligation Bonds debt service payment is due to the bondholders. The
compensation the City received has been recorded in the General Fund as deferred
revenue and will be amortized over the 14 year life of the agreement using the effective
interest method. The first deposit will be made in August 1997.
Proprietary and Fiduciary Fund Types Long-Term Debt
Proprietary and fiduciary fund types long-term debt at June 30, 1997. was as follows (In
thousands):
Sewer Service Enterprise Fund
Construction Loans
Pension Trust Fund
Oakland Municipal Employees'
Retirement System Revenue
Bonds 1976
Maturity
1992-2011
2002
Interest
Rates
3.50%
6.50%
Balance at
June 30,
1997
s 6,721
$ 1,650
In March 1990, the City and East Bay Municipal Utility District (EBMUD) entered Into an
agreement to secure financing for the rehabilitation of the City'S sewer system through the
California State Revolving Fund Loan Program.
During the fiscal year ended June 30, 1992, construction was completed on the sewer projects.
Upon completion of these projects, the City became liable for the City's share of the completed
project costs. The liability amounting to $6,721 at June 30, 1997, will be repaid to EBMUD in
equal annual installments through 2011. The main source of repayment comes from monthly
sewer service charges collected from EBMUD homeowners.
60
NOTES TOFINANCIAL STATEMENTS
Discretely Presented Component Unit - Port of Oakland
The Port of Oakland debt at June 30, 1997, was as follows (in thousands):
2009 450%
2010 4.50%
2019 4.50%
2020 4.50%
2002 470%
2000 9.00%
2019 5.00%-680%
Parity Bonds (a)
1990Revenue Bonds Series D
1992 ReI enue BondsSeriesE
1993 ReI enue Bonds SeriesF
1997 Revenue Bonds SeriesG
1997 ReI enue Bonds Series H
1997 ReI enue Bonds Series 1
1997 ReI enue Bonds Series J
Total Parity Bonds
Department of Boating and
Waterways (DBW) Loans (b)
Small Craft Harbor ReIenueBonds SeriesA-D
Small Craft Harbor ReIenueBonds Senes 1981
Small Craft Harbor Revenue Bonds Series 1982
Small Craft Harbor ReIenue Bonds Series 1983
1991 Marina Planning Loan
Total DBW Loans
Mitsubrshi Note
Special Facihues Revenue Bonds 1992 Series A (c)
TOTAL PORT OF OAKLAND LONG-TERM DEBT
(a) Parity Bonds
Maturity
2003
2022
2009
2025
2015
2019
2026
Interest
Rates
6125-800%
500-6.50%
275-5.75%
360-600%
3.6O-5.50'7c
5.40-560%
5.50%
Balance at
June 30,
1997
$ 28.810
148,700
55,027
85.000
77.995
8-1,820
)4 8-!'i
4 9 ~ 197
2.164
IJ54
1.014
381
64
4977
873
'i I 'i()()
$ 552547
The 1990 Senes D Bonds, the 1992 Series E Bonds. the 1993 Serres F Bonds. and the
1997 Series G, Series H, Series I, and Series J Bonds (collectively the Parity Bonds) are
payable solely from and secured by a pledge of "Pledged Revenues." The 1989 Indenture
and the Supplemental Trust Ninth Indenture, dated February 1, 1997 (the Ninth
Supplemental Trust Indenture) define Pledged Revenues as substantially all revenues and
other cash receipts of the Port, including amounts held in the Port Revenue Fund and the
lesser of Oakland Portside Associate's (OPA) net revenues or $3,300,000, but excluding
amounts received from certain taxes, certain insurance proceeds and special facilities
revenues. Pledged revenues do not include cash received from Passenger Facility Charges
(PFC) unless projects included in a financmg are determined to be PFC eligible, rn which
case PFCs can be pledged for debt service on the bonds. Currently the Port has not
included any of these type of projects in a bond issuance. In addition, payment of bond
principal and interest on the Parity Bonds when due is guaranteed by municipal bond
insurance policies.
The Port has covenanted to achieve Pledged Revenues sufficient to pay: the sum of
principal and interest on the outstanding Parity Bonds as they become due and payable in
each year; all payments for compliance WIth terms of the Indenture and Supplemental
Indentures, including but not limited to required deposits to any Reserve Fund; all other
61
~ CITY OF OAKLAND
payments necessary to meet ongoing legal obligations of the Port payable from Pledged
Revenues; and all current Operation and Maintenance Expenses (as defined).
The Port has covenanted in the 1989 Indenture to achieve in each fiscal year Net
Revenues (as defined) of at least 125% of the actual debt service (as defined) becoming
due on the outstanding Parity Bonds less debt service paid in such year from the proceeds
of other borrowings. For the year ended June 30, 1997, Net Revenues exceeded this
requirement.
The Port has also covenanted in the 1989 Indenture not to issue any additional obhganons
payable from or secured by Pledged Revenues. which would rank superior to the 1989
Bonds and any outstanding bonds (as defined) under the Ninth Supplemental Trust
Indenture. The 1990 Bonds. 1992 Bonds. 1993 Bonds. and 1997 Bonds have been issued
at parity. Additional bonds may be issued on a parity or subordinate basis with the
outstanding bonds subject to certain debt service coverage ratios and other requirements.
On February 4, 1997, the Port of Oakland issued $262,660 of revenue bonds in four
senes, Proceeds from the sale of the bonds, together with Port cash, were applied to (I)
finance the cost of capital improvements; (2) refinance OPA's $38,368,000 construction
loan; (3) refund all of the 1989 Series A and B bonds; (4) satisfy the reserve fund
requirements; and (5) finance certain costs of Issuance. As part of the refinancing. OPA
pledged a portion of its revenue (defined as the lesser of OPA Net Revenues or
$3.300,000) as collateral for the payment of principal, premium, If any, and Interest on
the bonds.
Series H and I, totahng $162,815,000. refunded the 1989 Series A and B Series J.
totaling $14.845.000. was used to payoff a portion of the outstanding OPA construction
loan. Series G. totaling approximately $74,500.000. after bond issuance costs and reserve
funding requirement, is to be used to fund capital projects with $14.400.000 of the
amount reimbursing the Port for prior capital expenditures. The net Interest cost on the
bonds was approximately 5.6%.
There was no gain or loss recognized from the refunding and the Port effectively reduced
its aggregate debt service payments over the next 23 years by $56.330,000 and obtained
an economic gain (difference between the present values of the old and new debt service
payments net of the Port's cash contribution and accrued interest received at the
refunding) of $23.804,000.
(b) Department of Boating and Waterways Loans
Department of Boating and Waterway Loans were issued pursuant to various resolutions
of the Board of Port Commissioners and are subordinate to the Parity Bonds.
62
NOTES TO FINANCIAL STATEMENTS
(c) Special Facilities Revenue Bonds 1992 Series A
The Port issued the Special Facilities Bonds 1992 Series A pursuant to a trust indenture
dated June 1, 1992. The Special Facilities Bonds were issued to finance the design and
construction of certain facilities and Improvements on premises situated in the Seventh
Street Manne Terrnmal area.
The Special Facilities Bonds are limited obligations of the Port payable from and secured
by the Bond Payment Obligation (as defined) derived by the Port under the Non-
exclusive Preferential Assignment Agreement (the Agreement) between the Port and
Mitsui O.S.K. Lines, Ltd. (MOL). MOL's rights and obligations under the Agreement
have been assigned to and assumed by Trans Pacific Container Service Corp. (TraPac), an
affiliate of MOL. TraPac's obligations under the Agreement, including Its obligation to
make payments sufficient to pay the pnncipal and Interest on the Special Facilities Bonds,
have also been guaranteed by MOL.
Principal and Interest on the bonds when due is also collateralized by an Irrevocable
direct-pay letter of credit expiring July 1,2002, issued by The Industrial Bank of Japan,
Ltd.. Los Angeles Agency. If the letter of credit expires or terminates without bemg
replaced or renewed, the bonds will be subject to mandatory redemption.
Defeased Bonds
The following is a schedule of outstanding bonds that are defeased. Cash and investments in
U.S. government securities were placed in irrevocable trusts to provide for all future debt
service on the old bonds. Accordingly, the assets and the corresponding liabilities are not
reflected in the accompanying General Purpose Financial Statements.
Name of Issue
Primary Government
Central Distnct Redevelopment Tax Allocation Bonds, Senes A and B
Medical Hill Parking District Refunding Bonds 1989
TOTAL
Discretely Presented Component Unit
Port of Oakland 1989 Revenue Bonds Series C
Outstanding
at June 30, 1997
(in thousands)
$ 800
2.840
$ 3.640
$34.802
63
CITY OF OAKLAND
Repayment Schedule
The annual requirements to amortize all long-term debt as of June 30. 1997. are as follows (In
thousands):
Years Ending
June 30,
1998
1999
2000
2001
2002
Thereafter
General Long-TermDebt
Special
Assessment
General Tax Debt with
Obligation Allocation Lease Governmental
Bonds Bonds Financings Commitment
$ II ,156 s 17,793 $ 23,834 S 1.069
11,100 17,832 23,867 1.076
11,030 17,806 23,901 1.066
10,970 18,783 27,362 1,069
10,894 17,977 27,378 1,054
208.196 270,153 466,748 17.246
263,346 360,344 593,090 22580
Less amounts
representing
interest and
discounts
Principal debt
at June 30,1997
(J25,03!)
$138.315
(J61,470)
$198,874
(260,847)
$332,243
02.455)
$ 10,125
Interest rates related to the Civic Improvement Corporation Cernficates of Particrpation
included in the Lease Financings are adjustable. Estimates of future debt service payments
included in the schedule above were determined by utilizing the maximum rate allowed under
the terms of the Certificates of twelve percent,
64
NOTES TO FINANCIAL STATEMENTS
Special Pension Total Component
Revenue Enterprise Trust Fund Primary Unit
Bonds Fund Debt Debt Govemment Port of Oakland
S 37,363 $ 616 $ 151 $ 91.982 s 42,929
58566 616 548 113,605 42,887
62,562 616 219 ))7.200 42,830
62.054 616 560 121,414 42,473
63,700 616 548 122,167 42,383
770.804 5536 1,738.683 868,787
1.055,049 8,616 2.026 2,305,051 1,082,289
(445,189)
$ 609.860
(1.895)
$ 6.721
(376)
$ 1.650
(J .(07263)
$1.297.788
(529,742)
$ 552547
65
CITY OF OAKLAND
Other Liabilities
The following long-term debt has been issued by the City on behalf of named agents of the
City. The bonds and note do not constitute an indebtedness of the City. The bonds are payable
solely from revenue sources defined in the individual bond and note documents, and from other
monies held for the benefit of the bond and note holders pursuant to the bond and note
Indentures. In the opmion of City officials, these bonds and note are not payable from any
revenues or assets of the City, and neither the full faith and credit nor the taxing authority of
the City. State or any political subdivision thereof is obligated for the payment of the principal
or Interest on the bonds and note. Accordingly. no liability has been recorded in the General
Long-Term Obligations Account Group. The debt Issued and outstanding at June 30, 1997,
follows (in thousands)
Authorized Outstanding at
and Issued Maturity June 30, 1997
Housing Mortgage Programs
Housing Revenue Bonds Series D. 1991 S 112.890 S 15.960
CIl) of Oakland Insured Refunding Revenue
Bonds (Children's Hospital Medical Center of
Northern California). Series A 19.-l90 511/09
CII) of Oakland Health Facilit) Revenue Note
(The Blood Ban" of the Alameda-Contra
Costa Medical Association). Series [979 2500 1111/99 375
CIl) of Oakland Economic Development
Revenue Bond (Cardio-Pulmonary Building).
Series 1985 2500 1211105 1.800
Count) of Alameda/City of Oakland Variable
Rate Demand Revenue Bonds (The Old
Oakland Company Project). December [98-l 9,900 12n199 9.900
Cit) of Oakland Variable Rate Demand Revenue
Bonds (The Delger Block/Ross House
Compan) Project). December 198-l 9500 12n199 9500
Count) of Alameda/Cit) of Oakland Variable Rate
Demand Revenue Bond (The Wilcox/Leirnert
Company Project). December 198-l 9,500 12n199 9500
Cit) of Oakland Liquidity Facrhty Revenue
Bonds (Association of Bay Area
Governments). Series 3.300 [2/1/09 2.175
Cit) of Oakland Health Facility Revenue Bonds
(Children's Hospital Medical Center of
Northern California), 1987 23.000 1211/15 20520
Cit) of Oakland Insured Health Facility Revenue Bond
(East Oakland Health Center Project). Series 1990 2500 1011120 2Aoo
City of Oakland Refunding Revenue Bonds
(Oakland YMCA Project). Series 1990 8,700 611110 8.300
Cit) of Oakland Variable Rate Demand Bonds
Series ImA (Leamington Project) 8550 1111/97
Cit) of Oakland Skyline Sewer Assessment
District Bonds 350 9/2120
TOTAL
$ 103.315
66
NOTESTO FINANCIAL STATEMENTS
(11) CONTRIBUTED CAPITAL
A summary of changes in contributed capital for the year ended June 30, 1997, follows (in
thousands):
BALANCE AT JUNE 30, 1996
Grants from governmental agencies
Passenger facility charges
Depreciation of property and equipment
acquired with contributed capital
BALANCE AT JUNE 30,1997
(12) SElF-INSURANCE
Primary
Govemment
Internal
Service Funds
$17,382
$ 17,382
Component
Unit
Port of
Oakland
$135,413
15.677
14,804
(4.141)
$161.753
Changes m the balances of claims liabilines for for all self-insured claims for the years ended
June 30. 1997 and 1996. are as follows (m thousands):
Unpaid claims, beginning of fiscal year
Current year claims and changes in estimates
Claim payments
Unpaid claims, end of fiscal year
1997 1996
$50,886 $47218
19,410 19.775
(J 6.117) (J6.107)
$54,179 $50.886
Primary Government
The City is exposed to various risks of loss related to torts; theft of, damage to, and destruction
of assets: errors and omissions; injuries to employees; natural disasters; unemployment
coverage; and providing health benefits to employees. retirees and their dependents.
The City IS self-insured for its general liability, workers' compensation, malpractice liability.
general and auto liability.
Property Damage
Property damage risks are covered on an occurrence basis by commercial insurance purchased
from Independent third parties. All properties are insured at full replacement values after a
$25,000 deductible to be paid by the City. For the past 10 years, there have been no SIgnificant
reductions in any of the City's insurance coverage and no settlement amounts have exceeded
commercial insurance coverage.
67
CITY OF OAKLAND
General Liability
Numerous lawsuits are pending or threatened against the City. The City Attorney estimates that
as of June 30, 1997, the amount of liability determined to be probable of occurrence is
approximately $13,479,000. Of this amount, claims and litigation approximating $6,787,000
are estimated to be payable with current expendable resources and are included as accrued
liabilities of the General Fund. The remainder of $6,692,000 is included in the General
Long-Term Obligations Account Group. The recorded liability is the City's best estimate based
on available information and may be revised as further information is obtained and as pending
cases are litigated. The Agency is involved in various claims and litigation arising in the
ordinary course of its activities. In the opinion of the Agency's in-house counsel, the City
Attorney's Office for the City of Oakland, none of these claims are expected to have a
significant impact on the financial condition of the Agency or its operations.
The City is self-insured for general liability. The City has not accumulated or segregated assets
or reserved fund balance for the payment of estimated claims and judgments.
Workers' Compensation
The City is self-insured for workers' compensation. Payment of claims is provided through
annual appropriations which are based on claim payment experience and supplemental
appropriations. As of June 30, 1997. the amount of workers' compensation liability determined
to be probable is approximately $40,700,000. Of this amount, workers' compensation
approximating $7,000,000 is estimated to be payable with current expendable resources and is
included as accrued liabilities of the General Fund. The remaining amount of $33.700.000 is
included in the General Long-Term Obligations Account Group.
68
NOTES TO FINANCIAL STATEMENTS
Discretely Presented Component Unit
Workers' Compensation
The Port is exposed to risk of loss related to injuries to employees. The Port is self-insured and
self-administered for workers' compensation up to a maximum of $350 per accident. Effective
February 7, 1996, the Port carries commercial insurance for claims in excess of $350. The Port
also carried this excess insurance with a $350 per accident self-insured retention in the two
policy years ending July 31, 1995 and 1994.
Claim expenses and liabilities are reported when it is probable that a loss has occurred and the
amount of the loss can be reasonably estimated. These losses are based on actuarial estimates
and include an estimate of claims that have been incurred but not reported. Changes in the
reported liability resulted from the following (in thousands):
Workers' compensation liability at beginning of fiscal year
Current year claims and changes in estimates
Claim payments
Workers' compensation liability at end of fiscal year
1997 1996
$3.000 $3.600
954 323
(954) (923)
$3.000 $3.000
General Liability
The Port maintains general liability insurance in excess of specified deductibles. For the
airport. coverage is provided in excess of $100,000 in the aggregate up to a maximum of
$200.000,000. For the harbor area, coverage is provided in excess of $] ,000,000 per
occurrence up to $150,000,000. Liabilities are recorded as accrued expense when it is
determined that a loss to the Port is probable and the amount is estimable.
69
CITY OF OAKLAND
(13) RESERVATIONS AND DESIGNATIONS OF FUND BALANCES
The components of the City's reserved and unreserved-designated fund balances at June 30.
1997. follow (In thousands):
RESERVED
Pension obligations
Capital projects
Property held for resale
Employees' retirement systems
Debt service
Encumbrances
TOTAL RESERVED FUND
BALANCES
70
UNRESERVED-DESIGNATED
Capital Improvement projects
Recycling program
MUlti-purpose reserve
Telecommunications reserve
TOTAL UNRESERVED-
DESIGNATED FUND
BALANCES
$ 6211
4,620
2.482
726
$14.039
$12,129
$12.129
S
s
Capital Pension
Projects Trust
Funds Funds Total
$ $174,998 $ 174,998
371,056 371,056
51,308 72,755
809,100 809,100
52,538
4,256
$422.364 $984.098 $1.484.703
NOTES TO FINANCIAL STATEMENTS
s
s
s
$
s 18.340
4.620
2,482
726
$ 26.168
71
* CITY OF OAKLAND
(14) SEGMENT INFORMATION FOR ENTERPRISE FUNDS
The City accounts for operations WhICh provide facilities. harbor and airport services, housing
programs, parks and recreation programs, sewage treatment, and convention management as
enterprise funds. These operations are financed by user charges or interest income. Segment
information as of and for the year ended June 30, 1997. follows (in thousands):
72
For Year Ended June 30, 1997
Operating revenues
Operating income
Depreciation and amortization
Grants from governmental agencies
Operating transfers in
Operating transfers out
Interest and other non-operating
revenues (expenses), net
Net income
Property and equrprnent -
additions
As of June30, 1997
Net working capital
Total assets
Total equity
Long-term obligations and advances -
Payable from operating revenues
Parks and
Recreation
$ 942
74
13
74
S (lIS)
488
373
Sewer
Service
s 17.199
5.147
2224
57
(300)
4.904
7.329
S 7.951
74.068
64.689
6.721
Oakland-Alameda
County
Coliseum Authority
s 1,045
1.045
1.045
$
Total
Enterprise
Funds
$19,186
6,266
2,237
57
(300)
6,023
7,329
$ 7,836
74,556
65,062
6,721
NOTES TO FINANCIAL STATEMENTS
73
$ CITY OF OAKLAND
Parks and Recreation
The City owns and operates two golf courses. The City's policy IS to fund these operations
through golf course fees and other golf revenues without reliance on the General Fund.
Sewer Service
The City rnaintams sewer service facilities between the private property hookups and the main
collection system operated by the East Bay Murncipal Utility DIstrict. The CIty's policy IS to
fund operations through user charges and/or operanng transfers from the General Fund.
Oakland-Alameda County Coliseum Authority
The Authority was created in a Joint exercise of powers agreement to assist m the fmancmg of
public capital Improvements in the Oakland-Alameda County Coliseum complex. The
Authority was accounted for as an enterprise fund until the year ended June 30. 1997. when the
CIty elected to change the presentation of the Authority. (See Note 15 for addrnonal
discussion)
(15) JOINT VENTURE
Oakland-Alameda County Coliseum
The City is a participant with the County of Alameda (the County) m a joint exercise of powers
agreement known as the Oakland-Alameda County Coliseum Authority (the Authority). which
was formed on July I. 1995. to assist the City and County in the financing of publrc capital
improvements m the Coliseum Stadium and the Coliseum Arena pursuant to the Mark-Roos
Local Bond Poohng Act of 1985. The Oakland-Alameda County Coliseum Authority
Financing Corporanon (the Corporanon) is reported as a blended component Unit of the
Authority The Board of Directors of the Authority and the Corporation consists of two council
members from the City and two members of the Board of Supervisors from the County.
In August 1995, the Authority issued $9,200,000 in Fixed Rate Refunding Lease Revenue
Bonds and $188500,000 In Variable Rate Lease Revenue Bonds (collectively known as the
Stadium Bonds) to satisfy certam obligations of the Authonty, the City, the County, the
Corporation and Oakland-Alameda County Coliseum Inc. (Coliseum Inc.), which manages the
operations of the Coliseum Complex, to finance the costs of rernodelmg the stadium portion of
the Cohseum complex as well as relocating the Rarders to the CIty.
The Stadium Bonds are limited obhgauons of the Authority payable solely from revenues of
the Authority on behalf of the City and County. These revenues consist of certain football
revenues from the sale of seat rights as well as annual seat maintenance fees, a portion of net
parking and concession revenues and concessionaires' initial fees. In the event that such
football revenues are insufficient to make base rental payments, the City and the County are
obligated to make up the shortfall in the base rental payment from their respective General
74
NOTES TOFINANCIAL STATEMENTS
Funds. The City and the County each have covenanted to appropriate $1 I million annually to
cover such shortfalls in revenue; however, the City and the County are jointly and severally
liable to cover such shortfall, which means that the City could have to pay up to $22 million
annually in the event of default by the County.
On August 2,1996, the Authority Issued $70,000,000 Series A-I and $70,000,000 Series A-2
Variable Rate Lease Revenue Bonds (Arena Bonds) to finance the costs of remodeling the
Coliseum Arena (Arena) and to satisfy certain obligations of the Authority, the City, the
County and Coliseum Inc. in connection with the retention of the Golden State Warriors to play
professional basketball at the Arena for at least 20 basketball seasons, beginning with the 1997-
98 season. These obligations are evidenced in a series of agreements (the Warriors Agreement)
among the Warriors, the City, the County, Coliseum Inc. and the Authority.
Under the original Wamors Agreement, the Arena Bonds are limited obligations of the
Authority payable solely from revenues of the Authority received by the Authority on behalf of
the CIty and the County. These revenues consist of payments from the Warriors of up to
$7.428,000 annually from premium seating revenues. the sale of personal seat licenses by the
Authority, concessionaire payments and the Arena naming rights. If necessary to prevent a
default. additional premium seating revenues up to $25,000,000 may be pledged to service
Arena debt. If the above revenues are not sufficient to cover the debt service requirements in
any fiscal year, the City and County are obligated to make up the shortfall in the base rental
payment from their respective General Funds. The City and the County each have covenanted
to appropriate up to $9,500,000 annually to cover such revenue shortfalls; however, the CIty
and the County are jointly and severally liable to cover such shortfalls, which means that the
City could have to pay up to $19,000,000 annually in the event of default by the County.
On July 22, 1997, the City adopted a Memorandum of Understanding (the MOU) between the
Authonty, the CIty. the County, Coliseum, lnc., the Warnors Arena Management (WAM) and
the Warriors which modified the original Warriors Agreement. Under this MOD, WAM
receives the right to operate and maintain the Arena in return for which WAM will pay to the
Authonty annual rental equal to the amount of debt service due on the Arena Bonds, including
letter of credit and trustee fees and similar related expenses. WAM's obligation to pay the
annual rental payment IS secured by certain pledged revenues, including $7,400,000 of
premium seating revenue due under the License from the Warriors, plus nammg rights revenue
and facility fees collected pursuant to the License. Until pledged revenues reach a specified
level, WAM will maintain a debt service reserve fund in the amount of $7,400,000. The effect
of this MOU IS to shift the primary risk of operations and debt service from the Authority and
Coliseum, Inc. to WAM and the Warriors. However, because of the Authority agreements with
the Letter of Credit Bank and the holders of the Arena Bonds, the Authority cannot be released
from the ultimate obligation to pay the Arena Bonds. If WAM were terminated as operator of
the Arena, all of the Warriors obligations would remain.
75
~ CITY OF OAKLAND
The Authority has entered into the following interest rate swap agreements for portions of the
bonds issued to finance the Stadium and Arena improvements:
In 1995-96 for $140,000,000 of the variable rate Stadium Bonds at a fixed rate of 6.75%.
The agreement expires February 1,2006. The market value of the swap at June 30, 1997 is
$(4,767,300).
On August 22, 1996, for $84,000,000 of the variable rate Arena Bonds at a fixed rate of
6.85%. The agreement is effective November I, 1997, and expires on September I, 2001.
The market value of the swap at June 30, 1997 is $( I ,066,220).
Based on the swap agreements, the Authority owes mterest calculated at the fixed rates stated
above to the counterparty of the swap. In return, the counterparty owes the Authority interest
based on a variable rate that matches the rate required by the variable rate bonds. Only the net
difference in interest payments is actually exchanged with the counterparty The bond principal
is not exchanged; It IS only the basis on which the interest payments are calculated. The
Authority continues to pay interest to the bond holders at the vanable rate provided by the
bonds. However. during the term of the swap agreement, the Authority effectively pays a fixed
rate on the debt. The Authority will be exposed to variable rates if the counterparty to the swap
defaults or if the swap IS terrnmated. A termination of the swap agreement may also result in
the Authority's making or receiving a termination payment. The Authority is exposed to credit
losses in the event of non-performance by the counterparty to this Interest rate swap. but has no
off-balance sheet credrt risk of accounting loss. The Authonty anticipates. however. that the
counterparty will be able to fully satisfy its obligations under this agreement.
Debt service requirements for the Coliseum debt are as follows (in thousands):
Years Ending June 30, Stadium Debt Arena Debt
1988 $ 15,676 $
1999 15.666 4217
2000 15.678 2232
2001 15,715 2,486
2002 15,681 2,754
2003-2007 78,304 20,383
2008-2012 78,132 34,824
2013-2017 78,669 57,828
2018-2022 79,191 93,250
2023 on 47,948 113.740
Less interest (245,885) 091.714)
Total $194,775 $140,000
76
NOTES TO FINANCIAL STATEMENTS
The CIty has a 50% equity Interest in the Joint Venture. The City's portion of net assets is
calculated from the unaudited financial activity of the Authority as (In thousands)
Total assets as of June 30, 1997
Less amounts to be provided for retirement of long term debt
Total assets
Less total lrabihties
NET ASSETS
50% interest
$666,335
310,069
356,266
346,874
$ 9,392
$ 4,696
Dunng the year ended June 30. 1997, the City elected to change the presentation of the
Authority from that of an enterprise fund to that of including the net investment III JOInt venture
of $4,696,000 In the General Fixed Assets Account Group
The Authority has anucipated a deficit for repayment of Its Stadium bonds, such that the City
and County will have to contribute to base rental payments. Of the $20500,000 appropriated In
the General fund as part of the above agreements, it is estimated that the CIty Will have to
contnbute $3,994,000 for the 1997-98 fiscal year. There are many uncertamnes In the
esnrnanon of revenues for the Authority beyond one year into the future, therefore the City has
established a contingent habihty to fund the Authority deficit In the General Long-Term
Obliganons Account Group at an amount equal to its contingent share (50%) of the outstanding
Stadium Bonds In the amount of $97,387,000.
Complete financial statements of the Authority can be obtained from:
County Auditor-Controller's Office
1221 Oak Street
Oakland, CA 94612
(16) PENSION PLANS AND DEFERRED COMPENSATION PLANS
The City has three defined benefit retirement plans: Police and Fire Retirement System (PFRS),
Oakland Municipal Employees' Retirement System (OMERS) and Califorma Public
Employees' Retirement System (PERS). PFRS and OMERS are closed plans which cover
employees hired prior to July 1976 and September 1970, respectively. These two plans are
considered part of the City's reporting entity and are included in the City's General Purpose
Financial Statements as pension trust funds. City employees hired subsequent to the plans'
closure dates are covered by PERS, which IS administered by the State of Califorrna.
Member and employer contributions are recognized in the penod in which the contnbutions are
due, and benefits and refunds are recogmzed when payable.
Short-term investments are reported at cost, which approximates fair value. Securities traded on
a national or international exchange are valued at the last reported sales price at current
77
$ CITY OF OAKLAND
exchange rates. Mortgages are reported based on the rernammg principal balances which
approximates the value of future principal and interest payments discounted at prevailing
Interest rates for similar Instruments. The fair value of real estate investments IS based on prices
in a competitive market as determined by a specialist.
Investments representing 5% or more of the market value of the OMERS net assets for pension
benefits as of June 30, 1997, are as follows:
Stocks
Arnencan Express Corporation
Bnstol Meyers Squibb
Chase Manhattan Corporation
Duke Energy Corporation
Phillips Petroleum
Shared Medical Services
Sherwin-Williams Company
South New England Telecom
Southern Company
Vanan Associates, Inc.
Washington Water Power
Total
Shares
10.000
6.000
6240
15.666
8.000
10,000
12,000
20.000
20,000
10.000
20,000
Market Value
5 745.000
486.000
605.667
750.981
350,000
540.000
370.500
777 .500
437.500
542.500
392500
55.998.148
No investments in anyone non-federal organization represented 5% or more of PFRS net
assets for pension benefits as of June 30,1997.
Complete financial statements of the Plans can be obtamed from:
Lance R. Bateman, Controller
City of Oakland
505 - 14th Street, Suite 910
Oakland, CA 94612
The total June 30,1997, covered payroll for the City was $18,784,440 for PFRS, $130,457 for
OMERS and $153,372.540 for PERS. The information for the City's three plans is presented
below:
78
Type of plan
Reponing enuty
Last complete actuanal study
PFRS
Smgle employer
City
June 30. 1996
OMERS
Smgle employer
City
June 30. 1996
PERS
Agent mula-employer
State
June 30, 1996
NOTES TO FINANCIAL STATEMENTS
Actuarial Present Value of Credited Projected Benefits (in millions) as of June 30:
PFRS OMERS PERS TOTAL
1996 1996 1996
Retirees and beneficiaries
currently receiving benefits
and terminated employees not
yet receiving benefits $ 789.0 $11.1 $284.6 $ 1,084.7
Current employees:
Accumulated employee
contributions including
allocated investment
earnings 38.2 .2 171.7 210.1
Employer-financed:
Vested 156.0 .5 201.2 357.7
Nonvested 7.1 7.1
Total pension
benefit obligation (a) 983.2 11.8 664.6 1.659.6
Net assets available for
benefits. at market (359.2) (16.9) (758.1 ) 0,\ 34.2)
UNFUNDED (OVERFUNDED)
PENSION BENEFIT OBLIGATION $ 624.0 $ (5.1) $ (93.5) S 525.4
(a) The pension benefit obligation (PBO) is presented to provide a standardized disclosure
measure of the present value of pension benefits, adjusted for the effects of projected
salary increases, estimated to be payable In the future as a result of employee service to
date. The measure IS the actuarial present value of credited projected benefits and is
mdependent of the actuarial funding method used to determine contributions to each
pension plan. It will help users assess the funding status of each plan on a going-concern
basis, assess progress made in collecting sufficient assets to pay benefits when due. and
make comparisons among employers.
Significant actuarial assumptions
SIgnificant actuarial assumptions used to compute the contnbution requirements are the same
as those used to compute the standardized measure of the pension benefit obligation.
PFRS OMERS PERS
General wage Increase:
Inflation 5.5% 3.0% 4.5%
Merit or seniority 6.5%
Investment return 8.0% 8.0% 8.5%
79
.. CITY OF OAKLAND
Employees covered as of June30, 1997
Retirees and beneficianes
currently receiving
benefits and termmated
employees entitled to
benefits but not currently
receiving them
Current employees- vested
Trend Information
PFRS
1,495
262
OMERS
222
2
PERS
1,452
2.422
Total
3,169
2.686
Trend information gives an mdication of the progress made m accumulatmg sufficient assets to
pay benefits when due. For the fiscal year ended June 30, 1997. 1996 and 1995. the trend
information is summanzed as follows (in millions):
Net assets available for Unfunded (overfunded) Employer
benefits as a percentage pension benefit obligation contributions
of the pension as a percentage of percentage of
Year benefit obligation covered payroll covered payroll
PFRS
1997 N/A N/A 1279.1%
1996 36.5% 3105% 171 6%
1995 N/A N/A 153.29'0
OMERS
1997 N/A N/A
NI A(I)
1996 143.0% (4113)%
N/A(I)
1995 N/A N/A
N/A(l)
PERS
1997 N/A N/A
17.0%(2)
1996 114.1% (49.3)% 17.0%(2)
1995 114.7% (47.1)%
17.5%(2)
(I) None was required
(2) Employer contribution includes employee's share paid by employer.
80
NOTES TO FINANCIAL STATEMENTS
Police and Fire Retirement System
PFRS provides death, disability and service retirement benefits to uniformed employees and
their beneficiaries. Members who complete at least 25 years of service, or 20 years of service
and have reached the age of 55, or have reached the age of 65, are eligible for retirement
benefits. The basic retirement allowance equals 50% of the compensation attached to the
average rank held during the three years immediately preceding retirement, plus an additional
allowance of 1-2/3% of such compensation for each year of service (up to ten) subsequent to:
a) qualifying for retirement, and b) July I, 1951. Early retirees will receive reduced benefits
based on the number of years of service. Benefit provisions and all other requirements are
established by the City Charter (Charter).
In accordance with the Charter, active members of PFRS contribute a percentage of earned
salaries based upon entry age as determined by the City's consulting actuary. By statute,
employee contributions are limited to 13% of earned salaries. Employee contributions are
refundable with interest at 4% per annum if an employee elects to WIthdraw from the plan upon
termmanon of employment with the City.
The City's annual contribution to PFRS was determined by calculating the total pension
liability for public safety employees under both PFRS and PERS. The amount to be contributed
to both plans was allocated between years such that a level percentage of payroll (60.49% in
fiscal year 1996-97) will amortize the unfunded liabilities by 2026 and 2000 for PFRS and
PERS. respectively. The City issued pension obligation bonds in February 1997 to fund the
PFRS untiI the year 20II. Bond proceeds in the amount of $417,173,300 were transferred to
the plan for investment. The bonds are an obligation of the City. Contributions to PERS are
deducted and the difference is used to make debt service payments.
For the year ended June 30, 1997, contributions to PFRS totaling $441,825,172 ($440,040.805
employer and $1,784,367 employee) were made in accordance with actuarially determined
contribution requirements, Employer and employee contributions equaled 164% and 9%,
respectively, of current year covered payroll for plan participants.
The City's actuaries do not make an allocation of the contribution amount between normal cost
and the unfunded actuarial liability because the plan is closed.
The plan is currently involved in class action ligitation seeking payment of additional benefits
to retired firefighters. If petitioners prevail, management estimates that an award would exceed
$13,500,000.
Oakland Municipal Employees' Retirement System
OMERS provides death, disability and service retirement benefits to participants of the plan.
Members who complete at least 20 years of service and have reached the age of 52, or who
complete at least 10 years of service and reach the age of 60, or have reached the age of 70, are
81
* CITY OF OAKLAND
eligible for retirement benefits. The retirement allowance is calculated on a basis which takes
Into account the final three-years' average compensation, age and the number of years of
service. Benefit provisions and all other requirements are established by the Charter.
Employee contnbutions to OMERS totaling $7,208 were made during 1997 in accordance with
actuarially determined contribution requirements. Employee contnbunons are refundable with
interest at 4.5% per annum If an employee elects to withdraw from the plan upon termination
of employment with the City. For the year ended June 30, 1997, the City. in accordance with
actuarially determined contribution requirements, was not required to make contributions to
OMERS.
California Public Employees' Retirement System
The City contributes to the California Public Employees' Retirement System (PERS). an agent
multiple-employer public employee retirement system that acts as a common investment and
administrative agent for participating public entitles within the State of Cahforrua.
All City employees who work on a half-time basis or more are eligible to participate In PERS.
Benefits vest after five or ten years of service, depending on the plan. To be ehgible for service
retirement, the employee must be at least age SO and have five years of PERS-credlted service.
City employees who retire receive monthly retirement allowances for life. The amount of the
retirement allowance IS dependent upon the number of years of PERS-credlted service, the
benefit factor (the percent of pay to which each employee IS entitled for each year of service IS
determined by the employee's age at retirement) and final compensation (the employee's
monthly pay rate for the highest 12 months). PERS also provides for a death benefit. These
benefit provisions and all other requirements are established by State statute
City miscellaneous employees and City safety employees are required to contribute 7% and
9%, respectively, of their annual salary to PERS. The City'S contnbution rates for the fiscal
year ended June 30. 1997, were 9.3% and 12.2% for miscellaneous employees and safety
employees, respectively. The City pays the entire amount of ItS employees' contnbuuon rate
for miscellaneous and safety employees, including the annual contnbunon of 7% and 9% to
PERS.
PERS uses the Entry Age Normal Actuarial Cost Method, which is a projected benefit cost
method. That is, it takes into account those benefits that are expected to be earned In the future
as well as those already accrued. PERS also uses the Level Percentage of Payroll Method to
amortize any unfunded actuanal liabilities. The amortization penod of the unfunded actuarial
liability ends June 30,2011.
82
NOTES TO FINANCIAL STATEMENTS
The CIty'S contributions for employees for the year ended June 30, 1997, consisted of the
following amounts (dollars in millions).
Percent of Percent of
Current Current Total
Covered Covered Combined
Miscellaneous Payroll Safety Payroll Contribution
Components of contn bunon
to PERS
Normal cost $ 159 155Ck $11.5 225Ck $274
Amornzauon of unfunded
actuanal accrued liability
-ll ---l..B.
-i.L.Q)
....a.m -..Jl.B.
TOTAL $ 177 17.3Ck $10.5 205Ck S 28.2
Employer and employee portions
of contnbuuon to PERS
Employer $10.5 W.W $ 5.9 II 5'k SI6A
Employee
Paid by City 7.2 70 3.2 64 IDA
Paid by employees
-l...:!. -.2...6. ..-L:!
TOTAL $177 17.3'k $105 205'7c S 28 2
Deferred Compensation Plans
The CIty and the Port offer their employees deferred compensation plans created In accordance
with Internal Revenue Code Section 457. Separate plans are maintained for City and Port of
Oakland employees. The plans. available to all employees. permit them to defer a portion of
their salary until future years. The deferred compensation IS not available to employees until
termination, retirement, death, or unforeseeable emergency.
All amounts of compensation deferred under the plans, all property and rights purchased with
those amounts, and all Income attributable to those amounts, property or rights are (until paid
or made available to the employee or other beneficiary) solely the property and nghts of the
Ctty and the Port (without bemg restncted to the provisions of benefits under the plan), subject
only to the claims of general creditors. Participants' nghts under the plan are equal to those of
general creditors of the City and the Port in an amount equal to the fair market value of the
deferred account for each particrpant.
It IS the opinion of the CIty's legal counsel that the City and the Port have no liability for losses
under the plans but do have the duty of due care that would be required of an ordinary prudent
Investor. The City and Port believe that it is unlikely they will use the assets to satisfy the
claims of general creditors in the future.
Deferred compensation plan assets of the CIty of $100,950,000 as of June 30, 1997, are
included at fair value in the Deferred Employee Compensation Agency Fund. Deferred
compensation plan assets of the Port are included at fair value in the Port's financial statements
and amounted to approximately $24,292,000 as of June 30. 1997.
83
~ ~ CITY OF OAKLAND
(17) RECONCILIATION OF OPERATIONS ON MODIFIED ACCRUAL BASIS
TO BUDGETARY BASIS
The "All Governmental Fund Types and Expendable Trust Funds Combmed Statement of
Revenues, Expenditures and Changes in Fund Balances" has been prepared on the modified
accrual basis of accounting In accordance with GAAP. The "General Fund and Annually
Budgeted Special Revenue and Debt Service Funds Combined Schedule of Revenues,
Expenditures and Encumbrances - Budget and Actual on a Budgetary Basis" has been prepared
on the budgetary basis, which is different from GAAP.
The followmg schedule is a reconciliation of the budgetary and GAAP results of operations (10
thousands):
Excess of revenues and other financing
sources over expenditures and
encumbrances and other financing
uses - budgetary basis
Deferral of forward swap agreement
INote lO(s) I
Encumbrances, net
Unbudgeted funds
EXCESS (DEFICIENCY) OF REVENUES
AND OTHER FINANCING SOURCES
OVER (UNDER) EXPENDITURES AND
OTHER FINANCING USES - GAAP BASIS
General
Fund
S 11,687
(8,147)
304
(2,605)
$ 1.239
Special
Revenue
Funds
S 1.016
(381 )
11.515)
S (880)
Debt
Service
Funds
530.165
(35,027)
5 (4.862)
For budgetary purposes, outstanding commitments related to construction contracts and other
purchases of goods and services are recorded as expenditures at the time contracts or purchase
agreements are entered into. Under GAAP, these obligations are recognized when goods are
received or services are rendered.
Certain reimbursements from the Port and other governmental agencies are budgeted on an
accrual basis, whereas such items are recognized as revenues for GAAP purposes when
received.
(18) POSTEMPLOYMENT BENEFITS OTHERTHAN PENSION BENEFITS
The City has three programs in place to partially pay health insurance premiums for certain
classes of retirees from City employment.
The City pays part of the health insurance premiums for all retirees from City employment
receiving a pension annuity earned through City service and participating in a City-sponsored
PERS health benefit plan. The City contnbution constituted an average of approximately 5% of
84
NOTES TO FINANCIAL STATEMENTS
health Insurance premium charges for retirees. Approximately $604,032 was paid on behalf of
1,730 retirees under this program for the year ended June 30, 1997.
A City Council resolution, dated November 12, 1985, and a related City Administrative
Instruction, dated May I, 1991, established a quarterly payment of $225 to qualifying retirees
from CIty employment who were active, full-time or permanent part-time, unrepresented City
employees at the time of retirement on or after July 1, 1985. Such payments commenced the
last quarter of the year ended June 30, 1991, and constitute premium payment required for
approximately 115 retirees. An expendable trust fund was set up to finance these benefits and
the City has made contnbutions to this fund to finance future payments. For the year ended
June 30, 1997, $114,638 In benefit payments were made under this program. The trust fund
balance was $10,210 as of June 30, 1997.
A City Council resolution, dated October 13, 1987, approved a Letter of Understanding With
United Public Employees Local 790 that established a trust to contribute toward the cost of
health insurance premiums to retirees from City employment who were active, full-time City
employees In represented units upon retirement on or after July I, 1987. The Letter of
Understanding required the City to contnbute $119,000 to the trust annually through July I,
1993. Effective August I, 1990, the City ininated payments of $225 per quarter to ehgible
employees. This amount constitutes premium payment required for approximately 191 retirees.
For the year ended June 30, 1997, $145,163 In benefit payments were made under this
program. The trust fund balance was $331,133 as of June 30, 1997.
(19) EXCESS OF EXPENDITURES OVER APPROPRIATIONS
As of June 30. 1997, the followmg funds reported excess expenditures over appropriations:
Debt Service Funds
General Obhganon Bonds
Special Revenue Bonds
s 176,000
$10,188,000
The General Obligation Bonds expenditures include unbudgeted bond Issuance costs and
related fees for bonds Issued In FY1996-97.
The Special Revenue Bonds Fund includes an unbudgeted interest payment related to the
Taxable Pension Obligation Bonds Series 1997.
(20) COMMITMENTS AND CONTINGENT LIABILITIES
Grants and Subventions
Receipts from federal and state financial assistance programs are subject to audit by
representatives of the federal and state governments to determine if the monies were expended
In accordance With appropriate statutes, grant terms and regulations. The City believes that no
significant liabilities will result from such audits.
85
~ CITYOF OAKLAND
Construction Commitments
Primary Government
The City has committed funding in the amount of $431,945,000 to a number of capital
improvement projects.
Discretely Presented Component Unit
The Port IS undertaking a number of capital Improvement projects, the most significant of
which include certain airport Improvements, container terminal construction. new container
cranes, and channel dredging to accommodate larger vessels. The Port has recerved approval to
dredge the inner harbor to a depth of 42 feet. Dredging the inner harbor to a depth of 42 feet IS
estimated to cost approximately $55,000,000 to be funded by internally generated operating
funds. 1997 Senes G Bonds and additional borrowings. if necessary. As of June 30, 1997, the
Port has paid approximately $39207,000 of the costs.
The Port IS In the process of performmg a feasibility study at a cost of approximately
$4,000.000 to investigate further deepening of the channels to 50 feet. The project IS currently
estimated to cost approximately $100,000,000 to $150,000.000 of whrch the Port's share has
not yet been determined.
The Cahfornia Department of Boating and Waterways (DBW) and the Port entered Into a loan
and operation contract on February 21,1994, amended on February 20.1995. and September
II, 1995, whereby DBW agreed to make a construction loan to the Port In the amount of
$7,176,000. The purpose of the loan is to develop the boating facilines of the Jack London
Square mannas. The loan will bear compound Interest at the rate of 4 5% per annum and will
be paid over thirty years. Repayment of the loan will begm on August I. 1998 No distributions
have been made on the loan as of June 30,1997.
Individual Fund Deficits
As of June 30, 1997, the following funds reported deficrts in fund balances and/or retained
earnings:
86
Debt Service
Special Revenue Bonds
Internal Service
Facilities
Central Stores
Expendable Trust
Oakland Redevelopment Agency
$2267.000
$4,110.000
$ 460.000
$1,149.000
NOTES TO FINANCIAL STATEMENTS
Discretely Presented Component Unit
Oakland Convention and Visitors Authority $ 21,000
The Debt Service Special Revenue Bonds deficit includes an accrual to adjust for amounts
held by a trustee to be used for future debt service payments. The deficit is expected to be
funded by transfers from the capital projects funds.
The CIty's Facilities deficit is expected to be funded through increased user charges for the
costs incurred m each fund.
The City's Central Stores deficit is expected to be funded through increased user charges
for the costs incurred m each fund.
The CIty's Expendable Trust Oakland Redevelopment Agency deficit IS expected to be
funded by reimbursements from the Agency.
The Oakland Convention and Visitors Authority deficit is expected to be funded by
transfers from the City general fund and Agency capital projects fund.
Other Contingencies
Primary Government
As of June 30, 1997, the Agency has entered into contractual commitments of approximately
$2,306,968 for materials and services relating to various projects. These commitments and
future costs will be funded by currently available funds, tax increment revenue and other
sources.
At June 30, 1997, the Agency was committed to fund $3,021,251 in loans and had issued
$1,648,600 in repayment guarantees and letters of credit m connection with several low and
moderate income housing projects. These commitments were made to facilitate the
construction of low and moderate income housing within the City.
Discretely Presented Component Unit
In July 1987, the California Department of Health Services (Department) issued an order
determining that the Port and a former tenant of the Port are responsible for the costs of
cleaning up hazardous substances on a site leased by several former tenants. The Port received
a Remedial Action Plan from the Department which included an apportionment of liability for
the costs of hazardous substance removal and remedial actions. The Port is in the process of
reviewing the Plan and determining its response. In October 1990, the Port and a former tenant
agreed to share equally in the remediation costs. As of June 30, 1997, the Port had accrued a
liability of $936,000 representmg Its expected 50% share of the total estimated investigation,
monitoring and remediation costs related to this site. The ultimate remediation costs have not
been determined.
87
~ CITY OF OAKLAND
The Port has certam legal obligations to modify or remove various underground storage tanks.
A Tank Management Strategy Report on Port-owned underground tanks was prepared for the
Port by an outside environmental consulting company. As of June 30. 1997, the Port recorded
liability of $2.019.000 which represents the expected remaining costs to modify or remove
designated Port-owned underground storage tanks. Dunng the year ended June 30. 1997. the
Port continued soil remediation and tank removal.
On August 9, 1994, the Board of Port Commissioners authonzed a settlement for a lawsuit
Involving the alleged unlawful filling of wetlands by the Port. A Consent Decree was entered
Into on December IS, 1994, by the United States District Court for the Northern District of
California to Implement the settlement. The Consent Decree requires the Port to spend
$2.500.000 to create, enhance and restore seasonal and tidal wetlands over approximately 72
acres of Port land. In addition to the $2,500.000, the Port estimates it will incur S185.000 In
internal Port staff costs. Title to the 72 acres of land will be turned over to the East Bay
Regional Park District (EBRPD) at the end of the construction. Whatever funds are left of the
52500.000 at the end of construction Will be turned over to the EBRPD to fund morutonng and
maintenance of the wetlands. As of June 30, 1997. the Port has accrued $2.636,000 for the
creation, enhancement and restoration of the wetlands.
The Port has accrued approximately $2,169,000 for environmental clean-up and remediation at
the site. The nature of all rernedranon activities that may be required on the site IS currently
unknown. The extent of the clean-up, therefore, has not yet been fully determined.
At June 30, 1997, the Port had accrued approximately $1,870,000 for vanous environmental
remediation programs In addition to those noted above The Port's management believes that it
has Identified all Significant hazardous waste sites and has included the estimated probable
costs In this environmental accrual.
(21) SUBSEQUENT EVENT
Tax and Revenue Anticipation Notes
On July 24, 1997, the City Issued tax and revenue anticipation notes payable of $60,000,000.
The notes were Issued to satisfy General Fund obligations and earned an effective interest rate
of approximately 4.50%. Principal and interest are due and payable on June 30, 1998.
88
REQUIRED SUPPLEMENTAL SCHEDULES
OAKLAND MUNICIPAL EMPLOYEES' RETIREMENT SYSTEM
SCHEDULE OF FUNDING PROGRESS
(In Millions)
Actuarial Accrued
Actuarial Value ($) Actuarial Actuarial ASasa
Valuation of Plan Liability ($) Funded Surplus Covered Percentage (%)
Date
Assets(1)(2)
(AAL) Ratio (%) (AS) ($) Payroll ($) of Covered
July1,
(a) (b) (a/b) (b-a) (c) [(b-a)/c]
1990 25.5 15.5 165 nor .076 (13,158)
1992 18.3 14.4 127 (3.9) .102 (3,824)
1994 16.2 12.0 135 (4.2) .119 (3,529)
1996 16.9 11.8 142 (5.1) .124 (4,113)
(I) At market.
(2lAmounts have been restated to reflect transfer of net assets payable to PERS related to plan members
transferred to PERS In 1974.
89
. I . ! . . ~
~ ~ CITY OF OAKLAND
POLICE AND FIRE RETIREMENT SYSTEM
SCHEDULE OF FUNDING PROGRESS
(In Millions)
Actuarial Accrued
Actuarial Value ($) Actuarial Unfunded UAAL as a
Valuation of Plan liability ($) Funded AAL ($) Covered Percentage (%)
Date Assets'!' (AAL) Ratio (%) (UAAL) Payroll ($) of Covered
July 1,
(a) (b) (a/b) (b-a) (c) [(b-a)/c]
1990 255.0 947.6 26.9 692.6 24.6 2.815
1992 287.2 941.6 30.5 654.4 23.3 2.809
1994 304.3 947.4 32.1 643.1 20.1 3.200
1996 359.2 983.2 36.5 624.0 20 1 3.105
(I) At market.
90
REQUIRED SUPPLEMENTAL SCHEDULES
CALIFORNIA PUBLIC EMPLOYEES' RETIREMENT SYSTEM
EIGHT-YEARCOMPARATIVE SUMMARY OF FUNDING PROGRESS
(unaudited-see accompanying Independent Auditors' Report)
Ten Years Ended June 30,1997
(In Millions)
1990 1991 1992 1993 1994 1995 1996 1997
Net assets available
for benefits $ 3609 $3962 $4454 $4944 $6079 $6658 $7580 N/A
Pension benefit obhgabon $3740 $3992 $464 4 $4986 $ 5415 $5804 $6645 N/A
Percentage funded 96% 99% 96% 99% 112% 115% 114% N/A
Unfunded pension
$ $ (664) s (855) s(935) benefitobhgalion $ 131 $ 30 $ 190 42 N/A
Annual covered payroll $1294 $1475 $1566 $1463 $143 8 $1463 $1463 N/A
Unfunded pension
benelltobhgalion as
apercentage of
(46)% (47)'"
N/A
covered payroll 10% 2% 12% 3' (49)%
"
CIty's actuanally determined
eentnbunens (employer
porlionyannual covered
1 0 ~ , 10% payroll 9" 10% 19% 9% 11% 10%
"
91
THIS PAGE INTENTIONALLY LEFT BLANK
APPENDIX C
BOOK-ENTRY SYSTEM
THIS PAGE INTENTIONALLY LEFT BLANK
APPENDIX C
BOOK-ENTRY SYSTEM
The following description of DTC, the procedures and record keeping with respect to bene-
ficial ownership interests in the Bonds, payment of principal, interest and other payments on the
Bonds to DTC Participants or Beneficial Owners, confirmation and transfer of beneficial ownership
interest in such Bonds and other related transactions by and between DTC, the DTC Participants
and the Beneficial Owners is based solely on information provided by DTC. Accordingly, no repre-
sentations can be made by the Authority or the City concerning these matters and neither the DTC
Participants nor the Beneficial Owners should rely on the foregoing information with respect to such
matters, but should instead confirm the same with DTC or the DTC Participants, as the case may
be.
General
DTC will act as securities depository for the Bonds. The Bonds will be Issued as fully-registered
securities registered in the name of Cede & Co. (DTC's partnership nominee). One fully-registered bond
certificate will be issued for each maturity of the Bonds each in the aggregate pnncipal amount of such
matunty and will be deposited with DTe.
DTC is a limited-purpose trust company organized under the New York Banking Law, a "banking
orgamzation" within the meaning of the New York Banking Law, a member of the Federal Reserve
System, a "clearing corporation" within the meaning of the New York Uniform Commercial Code, and
a "c1earmg agency" registered pursuant to the provisions of Section 17A of the Securities Exchange Act
of 1934. DTC holds bonds that its participants (the "Participants") deposit with DTC. DTC also facili-
tates the settlement among Participants of securities transactions, such as transfers and pledges, in
deposited securities through electronic computerized book-entry changes in Participants' accounts, thereby
elimmating the need for physical movement of bonds. Direct Participants include securities brokers and
dealers, banks, trust companies, clearing corporations and certam other organizatrons. DTC is owned by
a number of its Direct Participants and by the New York Stock Exchange, Inc., the Arnencan Stock
Exchange, Inc., and the National Association of Securities Dealers Inc. Access to the DTC system is also
available to others such as securities brokers and dealers, banks and trust companies that clear through or
maintain a custodial relationship with a Direct Participant, either directly or indirectly ("Indirect
Participants"). The rules applicable to DTC and its Participants are on file with the Securities and
Exchange Commission
Purchases of the Bonds under the DTC system must be made by or through Direct Participants
which will receive a credit for the Bonds on DTC's records. The ownership interest of each actual
purchaser of each Bond ("Beneficial Owner") is in tum to be recorded on the Direct and Indirect
Participants' records. Beneficial Owners will not receive written confirmation from DTC of their
purchase, but Beneficial Owners are expected to receive written confirmations providing details of the
transaction, as well as periodic statements of their holdings, from the Direct or Indirect Participant through
which the Beneficial Owner entered into the transaction. Transfers of ownership mterests in the Bonds
are to be accomplished by entries made on the books of Participants acting on behalf of Beneficial
Owners Beneficial Owners Will not receive bonds representing their ownership mterests 10 the Bonds,
except m the event that use of the book-entry system for the Bonds is discontinued
C-I
To facilitate subsequent transfers, all Bonds deposited by Participants with DTC are registered In
the name of DTC's partnership nominee, Cede & Co. The deposit of bonds with DTC and their registra-
tion in the name of Cede & Co effect no change In beneficial ownership DTC has no knowledge of the
actual Beneficial Owners of the Bonds, DTC's records reflect only the identity of the DIrect Participants
to whose accounts such Bonds are credited which mayor may not be the Beneficial Owners. The
Parncipants will remain responsible for keeping account of their holdings on behalf of their customers.
Conveyance of notices and other commumcanons by DTC to Direct Participants, by Direct
Particrpants to Indirect Participants, and by Direct Participants and Indirect Participants to Beneficial
Owners will be governed by arrangements among them, subject to any statutory or regulatory requirements
as may be in effect from time to time
Neither DTC nor Cede & Co will consent or vote with respect to the Bonds Under ItS usual
procedures, DTC malls an Omnibus Proxy to the Trustee as soon as possible after the record date. The
Omnibus Proxy assigns Cede & Co. 's consenting or voting nghts to those DIrect Participants to whose
accounts the Bonds are credited on the record date (identified in a listing attached to the Omnibus Proxy).
Principal and interest payments on the Bonds will be made to DTC. DTC's pracnce is to credit
Direct Participants' accounts on payment dates in accordance wrth their respective holdings shown on
DTC's records unless DTC has reason to believe that it Will not receive payment on the date payable.
Payments by Participants to Beneficial Owners will be governed by standing instructions and customary
practices, as IS the case with securities held for the accounts of customers in bearer form or registered In
"street name," and will be the responsibility of such Participant and not of DTC, the Trustee or the
Authority, subject to any statutory or regulatory requirements as may be in effect from time to time
Payment of principal and interest to DTC IS the responsibility of the Authority or the Trustee, disburse-
ment of such payments to Direct Participants shall be the responsibility of DTC, and disbursement of such
payments to the Beneficial Owners shall be the responsibility of Direct and Indirect Participants.
DTC may discontinue providing ItS services as securities depository with respect to the Bonds at
any time by giving reasonable notice to the Authonty or the Trustee. Under such circumstances, in the
event that a successor securities depository is not obtained, the Bonds are required to be printed and
delivered as described In the Trust Agreement.
The Authority may decide to discontinue use of the system of book-entry transfers through DTC
(or a successor securities depository) In that event, the Bonds will be pnnted and delivered as described
in the Trust Agreement.
The Authority and the Trustee cannot and do not give any assurances that DTC, the DTC
Participants or others will distribute payments of principal, interest or any premium with respect
to the Bonds paid to DTC or its nominee as the registered owner, or any redemption or other
notices, to the Beneficial Owners, or that they will do so on a timely basis or will serve and act in
the manner described in this Official Statement. The Authority and the Trustee are not responsible
or liable for the failure of DTC or any DTC Participant to make any payment or give any notice
to a Beneficial Owner with respect to the Bonds or any error or delay relating thereto.
The foregoing descnption of the procedures and record-keeping with respect to beneficial
ownership interests in the Bonds, payment of principal, interest and other payments on the Bonds to DTC
Participants or Beneficial Owners, confirmation and transfer of beneficial ownership interests In such
Bonds and other related transacnons by and between DTC, the DTC Participants and the Beneficial
C-2
Owners is based solely on information provided by DTC. Accordingly, no representations can be made
concerning these matters and neither the DTC Participants nor the Beneficial Owners should rely on the
foregoing information with respect to such matters, but should instead confirm the same with DTC or the
DTC Participants, as the case may be.
Discontinuance of DTC Services
In the event that (a) DTC determines not to continue to act as securities depository for the Bonds
or (b) the Authority determines to remove DTC from its functions as a depository, DTC's role as
securities depository for the Bonds and use of the book-entry system will be discontinued. If the
Authority fails to select a qualified securities depository to replace DTC, the Authority will cause the
Trustee to execute and deliver new Bonds in fully registered form in such denominations numbered in the
manner determined by the Trustee and registered in the names of such persons as are requested in a
written request of the Authority. The Trustee shall not be required to deliver such new Bonds within a
period of less than 60 days from the date of receipt of such written request of the Authority. Upon such
registration, such persons in whose names the Bonds are registered will become the registered owners of
the Bonds for all purposes.
C-3
THISPAGEINTENTIONALLY LEFf BLANK
APPENDIX D
SUMMARY OF CERTAIN PROVISIONS OF PRINCIPAL LEGAL DOCUMENTS
THIS PAGE INTENTIONALLY LEFT BLANK
APPENDIX D
SUMMARY OF CERTAIN PROVISIONS OF PRINCIPAL LEGAL DOCUMENTS
Thefollowing summarydiscussion ofcertainprovisionsofthe Trust Agreement, the Lease
and the Sublease is made subject to the complete text of the Trust Agreement, the Lease and the
Sublease. This summary does not purport to be a complete statement of said provisions and
prospectivepurchasers of the Bonds are referred to the complete text of said documents, copies
of whicn are available from the CIty or the Trustee.
CERTAIN DEFINITIONS
"Act" means the Joint Exercise of Powers Act (being Chapter 5 of Division 7 of Title 1
of the Government Code of the State, as amended) and all laws amendatory thereof or
supplemental thereto
"Alternate Liquidity Facility" means a replacement liquidity facility which satisfies the
requirements specified in the Trust Agreement.
"Authonzed Denominations" means, with respect to Bonds bearing interest at a Term
Rate, $5,000 and any integral multiple thereof and, with respect to the Tender and Commercial
Paper Rate Bonds, $100,000 or any integral multiple thereof.
"Base RentalDue Date" means the third (3rd) busmess day preceding the first (1st) day
of each calendar month.
"Beneficial Owner" means any person who has the power, directly or indirectly, to vote
or consent with respect to, or to dispose of ownership of, any Bonds, including any person
holding Bonds through nominees or depositories.
"Bond Counsel" means counsel of recognized national standing in the field of law relating
to municipal bonds, appointed by the Authority.
"Bond Insurance Policy" means the bond insurance policy in effect on the Closing Date
guaranteeing the scheduled payment of principal of and interest on the Bonds, and any additional
bond insurance policy guaranteeing the scheduled payment of principal of and mterest on any
additional Series of Bonds.
"Bond Insurer" means, with respect to the Bonds, Financial Security Assurance Inc., a
New York stock Insurance company, or any successor thereto, and the provider of a Bond
Insurance Policy for any other Senes of Bonds issued under the Trust Agreement.
"Bonds" means the "Oakland Joint Powers Financing Authority Lease Revenue Bonds,
1998 Series A" issued and so designated by the Authority under and pursuant to the Trust
D-l
Agreement. The Bonds consist of 1998 Series A-I Bonds and 1998 Series A-2 Bonds.
"Additional Bonds" means all bonds of the Authority authorized by and at any time Outstanding
pursuant to a Supplemental Trust Agreement hereto and executed, issued and delivered in
accordance with the Trust Agreement. "Serial Bonds" means Bonds for which no sinking fund
payments are provided. "Term Bonds" means Bonds which are payable on or before their
specified maturity dates from sinking fund payments established for that purpose and calculated
to retire such Bonds on or before their specified maturity dates.
"Bond Year" means the twelve (l2)-month period ending on August 1 of each year to
which reference is made.
"Business Day" means a day that is not a Saturday, Sunday or legal holiday on which
banking institutions in the State of New York or in any state in which the office of the
Remarketing Agent, the Tender Agent or the Trustee is located or at which requests for funds
under the Liquidity Facility or the Bond Insurance Policy are made are authorized to remain
closed or a day on which the New York Stock Exchange is closed.
"Certificate of the Authority" means an instrument in writing signed by the President,
Vice-President, Executive Director, Secretary or Treasurer of the Authority, or any such
official's duly authorized designee, or by any other officer or employee of the Authority duly
authorized by resolution of the Authority for that purpose.
"Certificate of the City" means an instrument in writing signed by the City Manager of
the City or Director of Budget and Finance of the City, or either such official's duly authorized
designee, or by any other officer or employee of the City duly authorized by the City Council
of the City for that purpose.
"Closing Date" means July 16, 1998.
"Code" means the Internal Revenue Code of 1986, as amended.
"Commercial Paper Rate" means, with respect to any Bond, the non-variable rate
associated with such Bond established In accordance with the Trust Agreement.
"Commercial Paper Rate Period" means each period comprised of Commercial Paper
Segments during which Commercial Paper Rates are in effect.
"Commercial Paper Segment" means, with respect to each Bond bearing interest at a
Commercial Paper Rate, the penod established in accordance with the Trust Agreement.
"Costs of Issuance Fund" means the fund by that name established pursuant to the Trust
Agreement.
"Current Interest Bonds" means Bonds the interest on which is payable on each Interest
Payment Date to the maturity date for each such Bond.
D-2
"Daily Rate" means the variable interest rate that is determined on each Business Day
pursuant to the Trust Agreement.
"Daily Rate Period" means each period during which interest on the Bonds is payable
or is accrued at a Daily Rate.
"Debt Service" means, for any Fiscal Year or other period, the sum of (1) the interest
accruing during such Fiscal Year or other period on all Outstanding Bonds and any net payment
owed on any Swaps, assuming that all Outstanding Serial Bonds are retired as scheduled and that
all Outstanding Term Bonds are redeemed or paid from sinking fund payments as scheduled
(except to the extent that such interest is to be paid from the proceeds of sale of any Bonds so
long as such funded interest is in an amount equal to the gross amount necessary to pay such
interest on the Bonds and is invested in Government Securities which mature no later than the
related Interest Payment Date), (2) the principal amount of all Outstanding Serial Bonds
maturing during such Fiscal Year or other period, and (3) the principal amount of all
Outstanding Term Bonds required to be redeemed or paid (together with the redemption
premiums, if any, thereon) during such Fiscal Year or other period; provided, that the foregoing
shall be subject to adjustment and recalculation as follows:
(A) with respect to Variable Rate Bonds, the interest payments shall be
calculated at a rate equal to 12%; and
(B) with respect to Swaps and Swapped Bonds, the payments shall be adjusted
to give effect to the Swap in such manner and to such extent (1) as may be required
under generally accepted accounting principles, consistently applied or (2) in the absence
of requirements imposed by generally accepted accounting principles, as shall be stated
in a Certificate of the Authority (which Certificate shall be delivered to the Trustee and
the Bond Insurer concurrently with the later of the issuance of the Swapped Bonds or the
execution of the Swap) in such manner as shall present fairly the reasonably expected
Debt Service on the Swap and Swapped Bonds after the execution of the Swap.
"Depository" means DTC or another recognized securities depository selected by the
Authority which maintains a book-entry system for the Bonds.
"DTC" means The Depository Trust Company, New York, New York.
"EscrowAgreement" means that escrow agreement, entitled "Escrow Agreement," dated
as of July I, 1998, between the City and U.S. Bank Trust Company National Association.
"Escrow Fund" means the fund by that name established pursuant to the Escrow
Agreement.
"Expiration Date" means the date on which any Liquidity Facility is scheduled to expire
pursuant to its terms (taking into account any extension or renewal of such Liquidity Facility).
D-3
"Financial Newspaper" means The Wall Street Journal or The Bond Buyer, or any other
newspaper or journal printed in the English language, publishing financial news and selected by
the Authority with the consent of the Bond Insurer.
"Fiscal Year" means the twelve (12) month period terminating on June 30 of each year,
or any other annual accounting period hereafter selected and designated by the Authority as its
Fiscal Year in accordance with applicable law
"Fitch" means Fitch mCA, Inc. a corporation duly organized and existing under and by
virtue of the laws of the State of Delaware, and its successors and assigns, except that if such
corporation shall be dissolved or liquidated or shall no longer perform the functions of a
securities rating agency, then the term "Fitch" shall be deemed to refer to any other nationally
recognized securities rating agency selected by the City consent of the Bond Insurer.
"Fixed Rate" refers to a fixed, non-variable rate of interest on a Series of Bonds which
is determined upon their issuance and remains the interest rate on the Bonds to their maturity.
"Government Securtties" means United States of America Treasury bills, notes, bonds
or certificates of indebtedness, or obligations the timely payment of which is guaranteed directly
by the United States of America, including evidences of direct ownership of proportionate
interests in future interest or principal payments of such obligations, commonly known as U. S.
Treasury STRIPS, and interest strips of the Resolution Funding Corporation held in book-entry
form by the Federal Reserve Bank of New York.
"Independent Certified Public Accountant" means any certified public accountant or firm
of such accountants duly licensed and entitled to practice and practicing as such under the laws
of the State or a comparable successor, appointed and paid by the Authority, and who, or each
of whom -
(1) is in fact independent according to the Statement of Auditing Standards
No.1 and not under the domination of the Authority or the City;
(2) does not have a substantial financial interest, direct or indirect, in the
operations of the Authority or the City; and
(3) is not connected with the Authority or the City as a member, officer or
employee of the Authority or the City, but who may be regularly retained to audit the
accounting records of and make reports thereon to the Authority or the City.
"Information Services" means Financial Information, Inc.'s "Daily Called Bond
Service"," 30 Montgomery Street, 10th Floor, Jersey City, New Jersey 17302, Attention
Editor; Kenny Information Services' "Called Bond Service"," 65 Broadway, 16th Floor, New
York, New York 10006; Moody's Investors Service's "Municipal and Government", 99 Church
Street, 8th Floor, New York, New York 10007, Attention: Municipal News Reports; and
Standard & Poor's Corporation's "Called Bond Record", 25 Broadway, 3rd Floor, New York,
New York 10004; or, in accordance with then current guidelines of the Securities and Exchange
Commission, such other addresses and/or such other services providing information with respect
D-4
to called bonds, or such services as the Authority may designate in a Certificate of the Authority
delivered to the Trustee.
"Insurance Consultant" means an individual or firm employed by the City, including the
Risk Manager of the City, that has experienced actuarial personnel in the field of risk
management.
"Interest Payment Date" means with respect to each Series of Bonds (1) when used at
any time that interest on such Series of Bonds is payable at a Daily Rate or a Weekly Rate, the
first Business Day of each month and the maturity or redemption date thereof; (2) when used
at any time that interest on such Series of Bonds is payable at a Term Rate, the first day of the
sixth calendar month following the commencement of the Term Rate Period and the first day of
each sixth calendar month, and the maturity date thereof; (3) when used with respect to any
Commercial Paper Segment, the Business Day next succeeding the last day of such Commercial
Paper Segment, and (4) with respect to any Rate Period, the day next succeeding the last day
thereof.
"Interest Payment Period" means, for Bonds in a Rate Period, other than a Commercial
Paper Rate Period, the period from and including an Interest Payment Date to and excluding the
following Interest Payment Date and for Bonds in a Commercial Paper Rate Period, each
Commercial Paper Segment.
"Lease" means that certain lease, entitled "Lease" by and between the City and the
Authority, dated as of July 1, 1998, as originally executed and recorded or as it may from time
to time be supplemented, modified or amended pursuant to the provisions hereof and thereof.
"Leased Property" means that portion of the City of Oakland's sewer system more
particularly described in Exhibit A to the Sublease.
"Liquidity Agreement" means an agreement between the Authority or the Trustee or the
Tender Agent and a Liquidity Facility Provider, as originally executed and as it may from time
to time be supplemented, modified or amended in accordance with its terms, and any similar
agreement entered into in connection with an Alternate Liquidity Facility.
"Liquidity Deposit Account" means the account by that name in the Purchase Fund
established pursuant to the Trust Agreement.
"Liquidity Facility" means any letter of credit, standby bond purchase agreement or other
liquidity facility issued or provided by a financial institution, insurance company or association
pursuant to which the Trustee and/or the Tender Agent, as the case may be, is entitled to obtain
funds to pay the Purchase Price of any Series of Bonds or any Alternate Liquidity Facility
substituted therefor in accordance with the provisions hereof. The initial Liquidity Facility for
the Bonds is the Standby Bond Purchase Agreement, dated July 16, 1998, by and among the
Authority, City, U.S. Bank Trust National Association, as tender agent, and Commerzbank
Aktiengesellschaft, acting through its Los Angeles Branch, as Agent and the sole bank
thereunder, and, in certain circumstances, the agreement between Commerzbank
Aktiengesellschaft, acting through its Los Angeles Branch, and the Tender Agent.
D-5
"Liquidity Facility Provider" means any issuer of a Liquidity Facility or any agent for
the issuer or issuers thereof. The irntial Liquidity Facility Provider for the 1998Series A Bonds
is Commerzbank Aktiengesellschaft, acting through its Los Angeles Branch, as Agent and the
sole bank under the initial Liquidity Facility.
"Moody's" means Moody's Investors Service, Inc., a corporation duly organized and
existing under and by virtue of the laws of the State of Delaware, and its successors and assigns,
except that if such corporation shall be dissolved or liquidated or shall no longer perform the
functions of a securities rating agency, then the term "Moody's" shall be deemed to refer to any
other nationally recognized secunnes rating agency selected by the City with the consent of the
Bond Insurer.
"1998 Series A-I Bonds" means the "Oakland Joint Powers Financing Authority Lease
Revenue Bonds, 1998Series A-I" issued and so designated by the Authority under and pursuant
to the Trust Agreement.
"1998 Senes A-2 Bonds" means the "Oakland Joint Powers Financing Authority Lease
Revenue Bonds, 1998 Series A-2" issued and so designated by the Authority under and pursuant
to the Trust Agreement.
"Notice by Mail" or "Notice" of any action or condition "by Mail" means a written notice
meeting the requirements of this Trust Agreement mailed by first-class mail to the owners of
specified Bonds, at the address shownon the registration books maintained pursuant to the Trust
Agreement.
"Opinion of Counsel" means a written opinion of Bond Counsel.
"Outstanding", when used as of any particular time with reference to Bonds, means
(subject to the provisions of the Trust Agreement) all Bonds except
(1) Bonds theretofore cancelled by the Trustee or surrendered to the Trustee
for cancellation;
(2) Bonds paid or deemed to have been paid within the meaning of the Trust
Agreement;
(3) Bonds deemed tendered but not yet presented for purchase; and
(4) Bonds in lieu of or in substitution for which other Bonds shall have been
executed, issued and delivered by the Authority pursuant to the Trust Agreement.
"Permuted Encumbrances" means (1) the Lease, as it may be amended from time to time;
(2) the Sublease, as it may be amended from time to time; (3) the Trust Agreement, as it may
be amended from time to time; (4) any right or claim of any mechanic, laborer, materialman,
supplier or vendor not filed or perfected in the manner prescribed by law; (5) rights,
reservations, covenants, conditions or restrictions to which the Authority and the City consent
D-6
in writing and certify to the Trustee will not impair the leasehold interests of the Authority; and
(6) subleases of the City.
"Permitted Investments" means any of the following (but not including any obligation
issued by the Authority or the City) to the extent then permitted by law (the Trustee is entitled
to rely upon any investment direction received by it as a certification that such investment
constitutes a Permitted Investment under the Trust Agreement):
(1) (A) Direct obligations (other than an obligation subject to variation in
principal repayment) of the United States of America ("United States Treasury
Obligations"), (B) obligations fully and unconditionallyguaranteed as to timely payment
of principal and interest by the United States of America, (C) obligations fully and
unconditionally guaranteed as to timely payment of principal and interest by any agency
or instrumentality of the United States of America when such obligations are backed by
the full faith and credit of the United States of America, or (D) evidences of ownership
of proportionate interests in future interest and principal payments on obligations
described above held by a bank or trust company as custodian, under which the owner
of the investment is the real party in interest and has the nght to proceed directly and
individually against the obligor and the underlying government obligations are not
available to any person claiming through the custodian or to whom the custodian may be
obligated.
(2) Federal Housing Administrationdebentures.
(3) The listed obligations of government-sponsored agencies which are not
backed by the full faith and credit of the United States of America:
(A) Federal Home Loan Mortgage Corporation (FHLMC) (i)
Participation certificates (excluded are stripped mortgage securities which are
purchased at prices exceeding their principal amounts) and (ii) Senior debt
obligations
(B) Farm Credit Banks (formerly: Federal Land Banks, Federal
Intermediate Credit Banks and Banks for Cooperatives) consolidated system-wide
bonds and notes
(C) Federal Home Loan Banks (FHL Banks) Consolidated debt
obligations
(D) Federal National Mortgage Association (FNMA) (i) senior debt
obligations and (ii) Mortgage-backed securities (excluded are stripped mortgage
securities which are purchased at prices exceeding their principal amounts)
(E) Student Loan Marketing Association (SLMA) senior debt
obligations (excluded are securities that do not have a fixed par value and/or
whose terms do not promise a fixed dollar amount at maturity or call date)
D-7
(F) Financing Corporation (FICO) debt obligations
(G) Resolution Funding Corporation (REFCORP) debt obligations
(4) Unsecured certificates of deposit, time deposits and bankers' acceptances
(having maturities of not more than 30 days) of any bank the short-term obligations of
which are rated "A-I" or better by S&P.
(5) Deposits the aggregate amount of which are fully insured by the Federal
Deposit Insurance Corporation (FDIC), in banks which have capital and surplus of at
least $5 million.
(6) Commercial paper (having original maturities of not more than 270 days)
rated "A-I +" by S&P and "Prime-I" by Moody's
(7) Money market funds rated "AAm" or "AAm-G" by S&P, or better.
(8) "State Obligations," which means:
(A) Direct general obligations of any state of the United States of
America or any subdivision or agency thereof to which is pledged the full faith and credit
of a state the unsecured general obligation debt of which is rated "A3" by Moody's and
"A" by S&P, or better, or any obligation fully and unconditionally guaranteed by any
state, subdivision or agency whose unsecured general obligation debt is so rated;
(B) Direct general short-term obligations of any state agency or
subdivision or agency thereof described in (A) above and rated "A-I +" by S&P and
"Prime-I" by Moody's; and
(C) Special Revenue Bonds (as defmed in the United States Bankruptcy
Code) of any state, state agency or subdivision described in (A) above and rated "AA"
or better by S&P and "Aa" or better by Moody's.
(9) Pre-refunded municipal obligations rated "AAA" by S&P and "Aaa" by
Moody's meeting the following requirements:
(A) the municipal obligations are (i) not subject to redemption prior to
maturity or (ii) the trustee for the municipal obligations has been given
irrevocable instructions concerning their call and redemption and the issuer of the
municipal obligations has covenanted not to redeem such municipal obligations
other than as set forth in such instructions;
(B) the municipal obligations are secured by cash or United States
Treasury Obligations which may be applied only to payment of the principal of,
interest and premium on such municipal obligations;
D-8
{C) the principal of and interest on the United States Treasury
Obligations (plus any cash in the escrow) has been verified by the report of
independent certified public accountants to be sufficient to pay in full all principal
of, interest and premium, if any, due and to become due on the municipal
obligations ("Verification");
(D) the cash or Umted States Treasury Obligations serving as security
for the municipal obligations are held by an escrow agent or trustee in trust for
owners of the municipal obligations;
(E) no substitution of a Umted States Treasury Obligation shall be
permitted except with another United States Treasury Obligation and upon
delivery of a new Verification; and
(F) the cash or United States Treasury Obligations are not available to
satisfy any other claims, including those by or against the trustee or escrow agent
(10) Repurchase Agreements:
(A) With (i) any domestic bank, or domestic branch of a foreign bank,
the long-term debt of which is rated "A" or better by S&P and Moody's or (ii)
any broker-dealer with "retail customers" or a related affiliate thereof which
broker-dealer has, or the parent company of which has, long-term debt rated at
least "A" by S&P and Moody's, which broker-dealer falls under the jurisdiction
of the SecuritiesInvestors Protection Corporation (SIPC); or (iii) any other entity
rated "A" or better by S&P and Moody's and acceptable to the Bond Insurer,
provided that:
a The market value of the collateral is maintained at levels
and upon such conditions as would be acceptable to S&P and Moody's to
mamtain an "A" rating in an "A" rated structured financing (With a
market value approach);
b. The Trustee or a third party acting solely as agent therefor
(the "Holder of the Collateral") has possession of the collateral or the
collateral has been transferred to the Holder of the Collateral in
accordance With applicable state and federal laws (other than by means of
entries on the transferor's books);
c. The repurchase agreement shall state and an opinion of
counsel shall be rendered at the time such collateral is delivered that the
Trustee has a perfected first priority security interest in the collateral, any
substituted collateral and all proceeds thereof;
d. All other requirements of S&P in respect of repurchase
agreements shall be met.
D-9
e. The repurchase agreement shall provide that if during its
term the provider's rating by either Moody's or S&P is withdrawn or
suspended or falls below "A-" by S&P or "A3 " by Moody's, as
appropriate, the provider must, at the direction of the Authority or the
Trustee (who shall give such direction if so directed by the Bond Insurer),
within 10 days of receipt of such direction, repurchase all collateral and
terminate the agreement, with no penalty or premium to the Authority or
Trustee.
Notwithstanding the above, if a repurchase agreement has a term of 270 days or less
(with no evergreen provision), collateral levels need not be as specified in (a) above, so
long as such collateral levels are 103% or better and the provider is rated at least "A"
by S&P and Moody's, respectively.
(11) Investment agreements with a domestic or foreign bank or corporation
(other than a life or property casualty insurance company) the long-term debt of which,
or, in the case of a guaranteed corporation the long-term debt, or, in the case of a
monoline financial guaranty insurance company, claims paying ability, of the guarantor
is rated at least "AA" by S&P and "Aa" by Moody's; provided that, by the terms of the
mvestment agreement:
(A) interest payments are to be made to the Trustee at times and in
amounts as necessary to pay debt service on the Bonds;
(B) the invested funds are available for withdrawal without penalty or
premium, at any time upon not more than seven days' prior notice (which notice
may be amended or withdrawn at any time pnor to the specified withdrawal
date); provided, that the Trust Agreement specifically requires the Authority or
the Trustee to give notice in accordance with the terms of the investment
agreement so as to receive funds thereunder with no penalty or premium paid,
(C) the investment agreement shall state that it is the unconditional and
general obligation of, and is not subordinated to any other obligation of, the
provider thereof;
(D) the Authority or the Trustee receives the opnuon of domestic
counsel (which opmion shall be addressed to the Authority and the Bond Insurer)
that such investment agreement is legal, valid, bmding and enforceable upon the
provider m accordance with its terms and of foreign counsel (if applicable) in
form and substance acceptable, and addressed to, the Bond Insurer;
(E) the investment agreement shall provide that if during its term:
(i) the provider's rating by either S&P or Moody's falls below
"AA-" or "Aa3", respectively, the provider shall, at its option, within 10
days of receipt of publication of such downgrade, either (i) collateralize
the investment agreement by delivering or transfernng in accordance with
D-lO
applicable state and federal laws (other than by means of entries on the
provider's books) to the Authority, the Trustee or a third party acting
solely as agent therefor (the "Holder of the Collateral") collateral free and
clear of any third-party liens or claims the market value of which
collateral is maintained at levels and upon such conditions as would be
acceptable to S&P and Moody's to maintain an II A" rating in an "AII rated
structured financing (with a market value approach); or (ii) repay the
principal of and accrued but unpaid interest on the investment, and
(ii) the provider's rating by either S&P or Moody's is
withdrawn or suspended or falls below II A-" or II A3", respectively, the
provider must, at the direction of the Authority or the Trustee (who shall
give such direction if so directed by the Bond Insurer), within 10 days of
receipt of such direction, repay the prmcipal of and accrued by unpaid
interest on the investment, in either case with no penalty or premium to
the Authority or Trustee; and
(F) the investment agreement shall state and an opinion of counsel shall
be rendered, in the event collateral is required to be pledged by the provider
under the terms of the investment agreement, at the time such collateral is
delivered, that the Holder of the Collateral has a perfected first priority security
interest in the collateral, any substituted collateral and all proceeds thereof (in the
case of bearer securities, this means the Holder of the Collateral is in possession);
(G) the investment agreement must provide that if during its term:
(i) the provider shall default in its payment obligations, the
provider's obligations under the investment agreement shall, at the
direction of the Authority or the Trustee (who shall give such direction if
so directed by the Bond Insurer), be accelerated and amounts invested and
accrued by unpaid interest thereon shall be repaid to the Authority or
Trustee, as appropriate, and
(ii) the provider shall become insolvent, not pay its debts as
they become due, be declared or petition to be declared bankrupt, etc.
("event of bankruptcy"), the provider's obligations shall automatically be
accelerated and amounts invested and accrued but unpaid interest thereon
shall be repaid to the Authority or Trustee, as appropriate.
(12) The State of California Local Agency Investment Fund to the extent any
funds to be invested therein by the Trustee are held in the name of the Trustee and
subject to withdrawal by the Trustee directly.
(13) Any other investment approved in writing by the Bond Insurer.
"Principal Payment Date" means any date on which principal of the Bonds is required
to be paid (whether by reason of maturity, redemption or acceleration).
D-11
"Provider Bonds" means Variable Rate Bonds not entitled to be purchased under the
Liquidity Facility, including, without limitation, Bonds held by the Liquidity Facility Provider,
or which are tendered and not remarketed, but excluding Bonds held by the Authority or the
City.
"Provider Rate" means, to the extent permitted by law, the rate of interest per annum
payable with respect to each Provider Bond, which rate shall be determined as set forth in the
Liquidity Agreement for such Series of Bonds.
"Purchase Date" means any date on which any Bond is required to be purchased pursuant
to the Trust Agreement.
"Purchase Price" means with respect to any Bond purchased pursuant to the Trust
Agreement, the pnncipal amount of such Bond plus interest, in the event the Purchase Date is
not an Interest Payment Date, accrued thereon to the Purchase Date.
"Rate Period" means any Daily Rate Period, Weekly Rate Period, Commercial Paper
Rate Period or Term Rate Period.
"Rating Category" means one of the general long-term (or short-term, if so specifically
provided) rating categories of Fitch, Moody's or S&P, without regard to any refmement or
gradation of such rating category by a numerical modifier or otherwise.
"Redemption Price" means, with respect to any Bond (or portion thereot), the principal
amount of such Bond (or portion) plus the applicable premium, if any, payable upon redemption
thereof pursuant to the provisions of such Bond and the Trust Agreement.
"Regular Record Date" means (1) with respect to any Interest Payment Date in respect
of any Daily Rate Period, Weekly Rate Period or Commercial Paper Segment, the Business Day
next preceding such Interest Payment Date; and (2) with respect to any Interest Payment Date
in respect of any Term Rate Period, the fifteenth day of the month preceding such Interest
Payment Date.
"Related Obligations" means all obligations of the Authority under the Liquidity Facility,
Reserve Facility, and any hedge agreement, bond insurance, reserve insurance, credit agreement
or similar agreement entered into in connection with or related to any Series of the Bonds, which
obligations include, but are not limited to, obligations relating to payment of fees, expenses,
indemnities and increased costs. "Related Obligations" does not include the Rate Swap
Transaction between the City and G.S. Fmancial Products, US., L.P., dated January 9, 1997.
"Remarketing Agreement" means that certain remarketing agreement, dated as of July 1,
1998, between the Authority and Goldman, Sachs & Co., as the initial Remarketing Agent for
the 1998 Series A-I Bonds, that certain remarketing agreement, dated as of July 1, 1998,
between the Authority and E. J. De La Rosa & Co., Inc., as the initial Remarketing Agent for
the 1998 Series A-2 Bonds and any similar agreement entered into in connection with any other
Series of Bonds, as such agreement or agreements may from time to time be amended and
D-12
supplemented, relating to the remarketing of the Bonds delivered or deemed to be delivered for
purchase by the Owners thereof, and any similar agreement entered into with any successor
Remarketing Agent or substitute Remarketing Agreement.
"Rental Payment Period" means the twelve month period commencing August 1 of each
year and ending the following July 31, provided that the first Rental Payment Period shall
commence on the date of recordation of the Sublease or a memorandum hereof in the Office of
the County Recorder of the County of Alameda and shall end on July 31, 1998.
"Reserve Facility" means a surety bond, an insurance policy or a letter of credit meeting
the requirements set forth therefor in the Trust Agreement.
"Reserve FundRequirement" means, as of any date of calculation (calculated on a Bond
Year basis), an amount equal to the lesser of (1) maximum annual Debt Service on all Bonds
Outstanding; or (2) 125% of average annual Debt Service on all Bonds Outstanding; provided
that with respect to an issue of Bonds bearing interest at a variable rate, for which a fixed rate
Swap is not in place the interest rate thereon for purposes of calculating the Reserve Fund
Requirement shall be assumed to be equal, if such interest is excludable from gross income for
federal income tax purposes, to the "25 Bond Revenue Bond Index" most recently published in
The Bond Buyer preceding the applicable date of calculation, plus 50 basis points (not to exceed
the amount that may be deposited in the Reserve Fund from Bond proceeds without requiring
yield restriction under the Code) or, if such interest is not so excludable, to the interest rate on
direct U.S. Treasury Obligations with comparable maturities, plus 50 basis points; such amount
to be determined by or on behalf of the Authority and specified in writing to the Trustee, and
provided, further, that with respect to the issuance of the Bonds or any Additional Bonds if the
Bond Reserve Fund would have to be funded or increased by an amount greater than ten percent
(10%) of the stated principal amount of such Bonds (or, if the issue has more than a de minimis
amount of original issue discount or premium, of the issue price of such Bonds) then the Reserve
Fund Requirement shall be such lesser amount as is determined by a deposit of such ten percent
(10%) and provided further that on the Closing Date the Reserve Fund Requirement for the
Bonds is $17,709,888.17. The Reserve Fund Requirement is determined on the date of sale of
a Series of Bonds and thereafter may only be reduced upon the redemption, payment at maturity
or defeasance of a portion of the Bonds.
"Revenues" means (1) all Base Rental Payments paid by the City and received by the
Authority pursuant to the Sublease (but not Additional Payments), (2) all interest or other income
from any investment, pursuant to the Trust Agreement, of any money in any fund or account
(other than the Rebate Fund) established pursuant to this Trust Agreement or the Sublease; and
(3) Swap Revenues.
"Securities Depositories" means: The Depository Trust Company, 711 Stewart Avenue,
Garden City, New York 11530, Fax-(516) 227-4039 or 4190; Midwest Securities Trust
Company, Capital Structures-Call Notification440 South LaSalle Street, Chicago, Illinois 60605,
Fax-(312) 663-2343; Philadelphia Depository Trust Company, Reorganization Division, 1900
Market Street, Philadelphia, Pennsylvania 19103, Attention: Bond Department, Fax-(215) 496-
5058; or such other addresses and/or such other securities depositories as the Authority may
designate to the Trustee.
D-13
"Special Record Date" means the date established by the Trustee pursuant to the Trust
Agreement as a record date for the payment of defaulted interest with respect to the Bonds.
"S&P" means Standard & Poor's Ratings Services, a division of The McGraw-Hill
Companies, Inc., and its successors and assigns, except that if such entity shall be dissolved or
liquidated or shall no longer perform the functions of a securities rating agency, then the term
"S&P" shall be deemed to refer to any other nationally recognized securities rating agency
selected by the City with the consent of the Bond Insurer.
"Sublease" means that certain lease, entitled "Sublease" by and between the Authority
and the City, dated as of July 1, 1998, as originally executed and recorded or as it may from
time to time be supplemented, modified or amended pursuant to the provisions hereof and
thereof.
"Substitution Date" means the date upon which a new Liquidity Facility is being accepted
by the Trustee or a Liquidity Facility is assigned by a Liquidity Facility Provider, and that
results in a reduction or withdrawal of the rating on the Series of Bonds to which such Liquidity
Facility relates.
"Supplemental Trust Agreement" means any trust agreement then in full force and effect
which has been duly executed and delivered by the Authority and the Trustee amendatory of the
Trust Agreement or supplemental to the Trust Agreement; but only if and to the extent that such
Supplemental Trust Agreement is executed and delivered pursuant to the provisions of the Trust
Agreement.
"Swap" means an interest rate swap, cap, floor, collar or other hedging transaction which
is entered into by the Authority for the purpose of managing interest rate risk with respect to
specified Bonds which are being issued concurrently with the execution of the Swap, which are
proposed to be issued in connection with such Swap, or which are Outstanding at the time of
execution of such Swap. The term "Swap" does not include the Rate Swap Transaction between
the City and as Financial Products, U.S., L.P., dated January 9, 1997.
"Swap Party" means the entity which is a party to a Swap.
"Swap Revenues" means the sum of money due to be paid by a Swap Party to the
Authority pursuant to any Swap subject to any netting of payments provided by the applicable
Swap.
"Swapped Bonds" means the Bonds to which a Swap relates.
"Tax Certificate" means the Tax Certificate delivered by the Authority at the time of the
issuance and delivery of the Bonds, as the same may be amended or supplemented in accordance
with its terms.
"Tender and Commercial Paper Rate Bonds" means all of the Bonds which are
outstanding and do not bear interest at a Term Rate or a Fixed Rate.
D-14
"Term Rate" means a non-variable interest rate on any of a Series of Bonds established
pursuant to the Trust Agreement.
"Term Rate Period" means each period of six months duration or longer during which
a Term Rate is in effect.
"Trust Agreement" means that certain trust agreement, entitled "Trust Agreement" dated
as of July 1, 1998, between the Authority and the Trustee, as originally executed and as it may
from time to time be amended or supplemented by all supplemental trust agreements executed
pursuant to the provisions thereof.
"Trustee" means U.S. Bank Trust National Association or any other association or
corporation which may at any time be substituted in its place as provided in the Trust
Agreement.
"Yanable Rate Bonds" means Bonds bearing interest at a Daily Rate, Weekly Rate,
Commercial Paper Rate or Term Rate.
"Weekly Rate" means the variable interest rate on any Series of Bonds established
pursuant to the Trust Agreement as a weekly interest rate.
"Weekly Rate Period" means each period during which a Weekly Rate is in effect.
TRUST AGREEMENT
Pledge of Revenues
All Revenues, all amounts on deposit in the Revenue Fund, any other amounts (including
proceeds of the sale of the Bonds) held by the Trustee in any fund or account established under
the Trust Agreement (other than amounts on deposit in the Rebate Fund or the Purchase Fund)
are irrevocably pledged to the payment of the interest and premium, if any, on and principal of
the Bonds and the Related Obligations as provided in the Trust Agreement, and the Revenues
and other amounts pledged under the Trust Agreement shall not be used for any other purpose
while any of the Bonds or the Related Obligations remain Outstanding; provided, however, that
out of the Revenues and other moneys there may be applied such sums for such purposes as are
permitted under the Trust Agreement. The pledge constitutes a pledge of and charge and first
lien upon the Revenues, all other amounts pledged under the Trust Agreement and all other
moneys on deposit in the funds and accounts established under the Trust Agreement (excluding
amounts on deposit in the Rebate Fund) for the payment of the interest on and principal of the
Bonds and the Related Obligations in accordance with the terms of the Trust Agreement and
thereof.
D-15
Assignment of Base Rental Payments; Deposit of Revenues
To effect the pledge of the Revenues under the Trust Agreement, pursuant to the Trust
Agreement, the Authority assigns to the Trustee the right to receive and collect the Base Rental
Payments payable by the City under the Sublease and the right to enforce, whether by action at
law or in equity or by other means, all provisions, covenants and agreements of the Sublease
with respect to the payment of Base Rental Payments including specifically the right to collect
each Base Rental Payment installment and other amounts as they become due and to enforce
such payment by mandamus action against the City (and their board, officers and employees)
and to compel the City to perform and carry out their duties to budget and appropriate the
necessary amounts to pay such Base Rental Payments on an annual basis.
In order to carry out and effectuate the pledge, charge and lien contained in the Trust
Agreement, the Authority agrees and covenants that all Revenues and all other amounts pledged
under the Trust Agreement when and as received shall be received by the Authority in trust
under the Trust Agreement for the benefit of the Bondowners, and Owners of any Related
Obligations and shall be transferred when and as received by the Authority to the Trustee for
deposit in the Revenue Fund. All Revenues and all other amounts pledged under the Trust
Agreement are required to be accounted for through and held in trust in the Revenue Fund, and
the Authority shall have no beneficial right or interest in any of the Revenues except only as
provided in the Trust Agreement.
Additional Bonds
The Authority may at any time, but only with the express prior written consent of the
Bond Insurer and the Liquidity Facility Provider, issue Additional Bonds pursuant to a
Supplemental Trust Agreement, payable from the Revenues and secured by a pledge of and
charge and lien upon the Revenues equal to the pledge, charge and lien securing the Outstanding
Bonds theretofore issued hereunder, but only subject to the following specific conditions, which
are hereby made conditions precedent to the issuance of any such Additional Bonds:
(a)
herein.
The Authority shall be in compliance with all agreements and covenants contained
(b) The Supplemental Trust Agreement shall require that the proceeds of the sale of
such Additional Bonds shall be applied to the refunding or repayment of any Bonds then
Outstanding, including the payment of redemption premiums and costs and expenses of and
incident to the authorization and sale of such Additional Bonds and refunding of the Bonds to
be refunded.
(c) The Supplemental Trust Agreement shall provide, if necessary, that from such
proceeds or other sources an amount shall be deposited in the Reserve Fund so that following
such deposit there shall be on deposit in the Reserve Fund an amount at least equal to the
Reserve Fund Requirement.
D-16
(d) The aggregate principal amount of Bonds issued and at any time Outstanding
hereunder shall not exceed any limit imposed by law, by the Trust Agreement or by any
Supplemental Trust Agreement.
(e) The Sublease shall have been amended, If necessary, so that the Base Rental
Payments payable by the City thereunder in each Fiscal Year shall at least equal Debt Service,
including Debt Service on the Additional Bonds, in each Fiscal Year.
(1) Written confirmation from the rating agencies of the then-current rating on the
1998 Series A Bonds.
Limitations on the Issuance of Obligations Payable from Revenues
The Authority may not, so long as any of the Bonds are Outstanding, issue any
obligations or securities, however denominated, payable in whole or in part from Revenues
except the following:
(a) Additional Bonds.
(b) Any Related Obligations.
(c) Obligations owing with respect to a Reserve Facility, including principal, interest
and fees relating thereto.
(d) Obligations which are junior and subordinate to the payment of the principal,
premium, interest and reserve fund requirements for the Bonds and which subordinated
obligations are payable as to principal, premium, interest and reserve fund requirements, if any,
only out of Revenues after the prior payment of all amounts then required to be paid hereunder
from Revenues for principal, premium, interest and reserve fund requirements for the Bonds and
Related Obligations or to the Bond Insurer, as the same become due and payable and at the times
and in the manner as required in the Trust Agreement.
Establishment of Funds and Accounts
The Trust Agreement establishes the Revenue Fund, including the Interest Account and
the Principal Account therein, the Reserve Fund, the Purchase Fund, including the Liquidity
Deposit Account and the Remarketing Proceeds Account therein, the Costs of Issuance Fund and
the Rebate Fund. The Escrow Fund is established and held by the Trustee, as escrow agent,
under the Escrow Agreement.
Application of Moneys
Revenue Fund Subject to the requirement to deposit amounts in the Rebate Fund, all
money in the Revenue Fund is required to be set aside by the Trustee in the following respective
special accounts within the Revenue Fund in the following order of priority:
(a) Interest Account, and
D-17
(b) Principal Account.
On each Principal Payment Date, following payment of principal of and interest on the
Bonds and any Related Obligations, any excess amount on deposit in the Revenue Fund shall be
transferred to the Authority for deposit into the Reserve Fund to the extent necessary to increase
the amount therein to the Reserve Fund Requirement and any excess shall be returned to the City
as an excess of Base Rental Payments.
Interest Account. On or before each Interest Payment Date, the Trustee is required to
set aside from the Revenue Fund and deposit in the Interest Account that amount of money
which is equal to the amount of interest becoming due and payable on all Outstanding Bonds on
the next succeeding Interest Payment Date. On or before each payment date on a Swap, the
Trustee is required to set aside from the Revenue Fund and deposit in the Interest Account that
amount of money equal to the net amount payable on the Swap on such payment date. Such
amounts payable are required to be certified in writing to the Trustee by the Authority.
No deposit IS required to be made in the Interest Account If the amount contained therein
and available to pay interest on the Bonds is at least equal to the aggregate amount of interest
becoming due and payable on all Outstanding Bonds on such interest payment date and the net
amount due and payable on any Swap on or before such interest payment date.
Principal Account. On or before the third Business Day preceding each August 1,
commencing on August 1, 2000, the Trustee is required to set aside from the Revenue Fund and
deposit in the Principal Account an amount of money equal to the amount of all sinking fund
payments required to be made on such August 1 into the respective sinking fund accounts for
all Outstanding Term Bonds and the principal amount of all Outstandmg Serial Bonds maturing
on such August 1. In addition, on or before the third Business Day preceding the first day of
each month, the Trustee is required to set aside from the Revenue Fund and deposit into the
Principal Account an amount of money equal to the amount due on Related Obligations, if any,
in the next month. Such amounts payable are required to be certified in writing to the Trustee
by the Authority.
No deposit is required to be made in the Principal Account if the amount contained
therein and available to pay principal of the Bonds is at least equal to the aggregate amount of
the principal of all Outstanding Serial Bonds maturing by their terms on such August 1 plus the
aggregate amount of all sinking fund payments required to be made on such August 1 for all
Outstanding Term Bonds.
The Trustee is required to establish and maintain within the Principal Account a separate
subaccount for the Term Bonds of each Series and maturity, designated as the " Sinking
Account" (the "Sinking Account"), inserting therein the Series and maturity (if more than one
such account is established for such Series) designation of such Bonds. With respect to each
Sinking Account, on each mandatory sinking account payment date established for such Sinking
Account, the Trustee IS required to apply the mandatory sinking account payment required on
that date to the redemption (or payment at maturity, as the case may be) of Term Bonds of the
Series and maturity for which such Sinking Account was established, upon the notice and in the
manner provided in the Trust Agreement; provided that, at any time prior to giving such notice
D-18
of such redemption, the Trustee may, upon the Written Request of the Authority, apply moneys
in such Sinking Account to the purchase of Term Bonds of such Series and maturity at public
or private sale, as and when and at such prices (including brokerage and other charges, but
excluding accrued interest, which is payable from the Interest Account), as may be directed by
the Authority, except that the purchase price (excluding accrued interest) shall not exceed the
redemption pnce that would be payable for such Bonds upon redemption by application of such
mandatory sinking account payment. If, during the twelve (12)-month period immediately
preceding said mandatory sinking account payment date, the Trustee has purchased Term Bonds
of such Series and maturity with moneys in such Sinking Account, such Bonds so purchased
shall be applied, to the extent of the full principal amount thereof, to reduce said mandatory
sinking account payment (except to the extent notice of redemption of Bonds for such mandatory
sinking account payment have been sent by the Trustee).
Reserve Fund
All money in the Reserve Fund is required to be deposited with, used and withdrawn by
the Trustee solely for the purpose of funding the Interest Account or the Principal Account, in
that order, in the event of any deficiency in either of such accounts on a principal or interest
payment date, except that so long as the Authority is not in default under the Trust Agreement,
any cash amounts in the Reserve Fund in excess of the Reserve Fund Requirement are required
to be withdrawn from the Reserve Fund and deposited in the Revenue Fund on each Interest
Payment Date. If the Reserve Fund Requirement is satisfied by a surety bond, insurance policy
or letter of credit as provided below (the "Reserve Facility"), the Trustee is required to draw
on such Reserve Facility in accordance with its terms, in a timely manner, to the extent
necessaryto fund any such deficiency in the Interest Account or the Principal Account; provided
that the Trustee is required to apply cash andinvestments in the Reserve Fund prior to a drawing
on any Reserve Facility. In the event there is more than one Reserve Facility, draws on the
Reserve Facilities are required to be made on a pro rata basis (calculated by reference to the
coverage then available under each Reserve Facility) and only after applying all available cash
and investments in the Reserve Fund.
The Authority may satisfy the Reserve Fund Requirement at any time by the deposit with
the Trustee for the credit of the Reserve Fund of a surety bond, an insurance policy or letter of
credit as described below, or any combination thereof.
(a) Surety Bond or Insurance Policy. A surety bond or insurance policy issued to the
Trustee, on behalf of the Bondowners, by a company licensed to issue an insurance policy
guaranteeing the timely payment of the principal of and interest on the Bonds (a "municipal bond
insurer") may be deposited in the Reserve Fund to meet the Reserve Fund Requirement if such
municipal bond insurer shall be rated "Aaa" by Moody's and "AAA" by S&P and Fitch.
If a municipal bond insurer falls below an "Aaa" rating by Moody's or an "AAA" rating
by S&P and Fitch, the Authority is required to use its best efforts to procure replacement surety
bond or insurance policy within thirty (30) days from the date of the decline meeting the
requirements set forth above to the extent that, in the judgment of the Authority, such a
substitute or replacement surety bond or insurance policy is available upon reasonable terms and
at a reasonable cost, or will use its best efforts to deposit into the Reserve Fund a letter of credit
D-19
meeting the requirements of the Trust Agreement in order to provide that there will be on
deposit in the Reserve Fund an amount equal to the Reserve Fund Requirement.
(b) Letter of Credit. A letter of credit may be deposited m the Reserve Fund to meet
the Reserve Fund Requirement, provided that any such letter of credit must be issued or
confirmed by a state or national bank, or a foreign bank with an agency or branch located in the
continental Umted States, which has outstanding an Issue of unsecured long term debt securities
rated at least equal to the second highest rating category (disregarding rating subcategories by
Moody's, S&P and Fitch)
In the event that the rating on the unsecured long-term debt securities of the bank which
has issued or confirmed any letter of credit is withdrawn or reduced by Moody's, S&P or Fitch
to a rate below the requirements set forth above, the Authority is required to use its best efforts
to obtain a substitute or replacement letter of credit within thirty (30) days from the date of such
reduction or withdrawal from a state, national or foreign bank meeting the requirements set forth
above to the extent that, in the judgment of the Authority, such a substitute or replacement letter
of credit is available upon reasonable terms and at a reasonable cost, or will use its best efforts
to deposit into the Reserve Fund a replacement surety bond or insurance policy meeting the
requirements of the Trust Agreement in order to provide that there will be on deposit in the
Reserve Fund an amount equal to the Reserve Fund Requirement.
Unless the Bonds have been fully paid and retired, the Trustee is required to draw the
full amount of any letter of credit credited to the Reserve Fund for such Bonds on the third
Business Day preceding the date such letter of credit (taking into account any extension, renewal
or replacement thereof) would otherwise expire, and is required to deposit moneys realized
pursuant to such draw in the Reserve Fund.
(c) Release of Moneys in Reserve Fund. If the Authority replaces a cash-funded
Reserve Fund with a Reserve Facility meeting the requirements of either (a) or (b) above,
amounts on deposit in the Reserve Fund are required to, upon Written Request of the Authority
to the Trustee, be transferred, subject to the receipt by the Authority and the Trustee of an
Opinion of Counsel that such transfer will not cause the interest on the Bonds or Series thereof,
as appropriate, to be included in gross income for purposes of federal income taxation, to the
Authority and applied for any lawful purpose.
Application of Insurance Proceeds
In the event of any damage to or destruction of any part of the Leased Property covered
by insurance proceeds or condemnation proceeds, the Authority is required to cause such
insurance proceeds or condemnation proceeds to be utilized for the repair, reconstruction or
replacement of the damaged or destroyed portion of the Leased Property, and the Trustee is
required to hold said proceeds in a fund established for such purpose separate and apart from
all other funds, to the end that such proceeds will be applied to the repair, reconstruction or
replacement of the Leased Property to at least the same good order, repair and condition as it
was in prior to the damage or destruction, insofar as the same may be accomplished by the use
of said proceeds. The Trustee is required to invest said proceeds in Permitted Investments
pursuant to the Request of the City, as agent for the Authority under the Sublease, and
D-20
withdrawals of said proceeds shall be made from time to tune upon the filing with the Trustee
of a Written Request of the City, stating that the City has expended moneys or incurred
liabilities in an amount equal to the amount therein stated for the purpose of the repair,
reconstruction or replacement of the Leased Property, and specifying the items for which such
moneys were expended, or such liabilities were incurred, in reasonable detail. The City is
required to file a Certificate of the City with the Trustee that sufficient funds from insurance
proceeds or from any funds legally available to the City, or from any combination thereof, are
available in the event it elects to repair, reconstruct or replace the Leased Property. Any
balance of such proceeds specified by the Authority in writing to the Trustee not required for
such repair, reconstruction or replacement and the proceeds of use and occupancy insurance is
required to be applied as Base Rental Payments and appliedill the manner provided by the Trust
Agreement for Revenues. Alternatively, the City, if the proceeds of such insurance together
with any other moneys then available for such purpose are sufficient to prepay all, in case of
damage or destruction in whole of the Leased Property, or that portion, in the case of partial
damage or destruction of the Leased Property, of the Base Rental Payments and all other
amounts relating to the damaged or destroyed portion of the Leased Property, may elect not to
repair, reconstruct or replace the damaged or destroyed portion of the Leased Property and
thereupon shall cause said proceeds to be used for the redemptionof Outstanding Bonds pursuant
to the applicableprovisions of the Trust Agreement. The City may not apply insurance proceeds
or condemnation proceeds as set forth in this paragraph to redeem the Bonds in part due to
damage or destruction of a portion of the Leased Property unless the Base Rental Payments on
the undamaged portion of the Leased Property will be sufficient to pay the initially-scheduled
principal and interest on the Bonds remaining unpaid after such redemption.
Deposit and Investment of Moneys in Accounts and Funds
Subject to the provisions of the Trust Agreement governing the Rebate Fund, all money
held by the Trustee in any of the accounts or funds established pursuant to the Trust Agreement
shall be invested in Permitted Investments at the Written Request of the Authority or, if no
instructions are received, in money market funds described in paragraph 7 of the defmition of
Permitted Investments. The Trustee may conclusively rely on the written instructions of the
Authority that such investment is a Permitted Investment hereunder. Such investments are
required to, as nearly as practicable, mature on or before the dates on which such money is
anticipated to be needed for disbursement hereunder; provided, however, that moneys in the
Reserve Fund are required to be invested in Permitted Investments with a term not greater than
the fmal maturity date on the Bonds. For purposes of this restriction, Permitted Investments
containing a repurchase option or put option by the investor will be treated as having a maturity
of no longer then such option. Subject to the provisions of the Trust Agreement governing the
Rebate Fund, all interest or profits on any money invested in the funds held hereunder
(excluding the Rebate Fund and the Purchase Fund) are required to be deposited in the Reserve
Fund, to the extent necessary to make amounts on deposit in the Reserve Fund equal to the
Reserve Fund Requirement, and then in the Revenue Fund. The Trustee and its affiliates may
act as principal, agent, sponsor or advisor with respect to any investments. The Trustee is not
liable for any losses on investments made in accordance with the terms and provisions of the
Trust Agreement.
D-21
Investments purchased with funds on deposit in the Revenue Fund are required to mature
not later than the interest payment date or redemption date, as appropriate, when such funds are
expected to be utilized.
Selected Covenants of the Authority
Against Encumbrances. The Authority agrees that it will not make any pledge or
assignment of or place any charge or lien upon the Revenues except as provided in the Trust
Agreement, and will not issue any bonds, notes or obligations payable from the Revenues or
secured by a pledge of or charge or lien upon the Revenues except as provided in the Trust
Agreement.
Tax Covenants: Rebate Fund. The Trustee is required to establish and maintain a fund
separate from any other fund or account established and maintainedunder the Trust Agreement
designated as the Rebate Fund. There is required to be deposited in the Rebate Fund such
amounts provided by the Authority as are required to be deposited therein pursuant to the Tax
Certificate directed in writing by the Authority. All money at any time deposited in the Rebate
Fund will be held by the Trustee in trust, to the extent required to satisfy the Rebate
Requirement (as defmed in the Tax Certificate), for payment to the United States of America.
Notwithstanding the provisions of the Trust Agreement relating to the pledge of Revenues, the
allocation of money in the Revenue Fund, the investments of money in any fund or account, the
application of funds upon acceleration and the defeasance of Outstanding Bonds, all amounts
required to be deposited into or on deposit in the Rebate Fund shall be governed exclusively by
this covenant and by the Tax Certificate (which is incorporated in the Trust Agreement by
reference). The Trustee is deemed conclusively to have complied with such provisions if it
follows the written directions of the Authority, and has no liability or responsibility to enforce
compliance by the Authority with the terms of the Tax Certificate. The Trustee is not
responsible for calculating rebate amounts or for the adequacy or correctness of any rebate
report or rebate calculations.
Notwithstanding any provisions of this covenant, if the Authority shall provide to the
Trustee an Opinion of Counsel that any specified action required under this covenant or the Tax
Certificate is no longer required or that some further or different action is required to maintain
the exclusion from federal income tax of interest on the Bonds, the Trustee and the Authority
may conclusively rely on such opinion in complying with the requirements of this covenant, and,
notwithstanding the provisions of the Trust Agreement governing modification thereof, the
covenants under the Trust Agreement shall be deemed to be modified to that extent.
Amendments to Sublease: Lease. The Authority agrees not to supplement, amend,
modify or terminate any of the terms of the Sublease or Lease, or consent to any such
supplement, amendment, modification or termination, without the prior written consent of the
Trustee, the Bond Insurer and the Liquidity Facility Provider. The Trustee is required to give
such written consent if such supplement, amendment, modification or termination (a) will not
materially adversely affect the interests of the Bondowners or result in any material impairment
of the security hereby given for the payment of the Bonds (provided that such supplement,
amendment or modification shall not be deemed to have such adverse effect or to cause such
material impairment solely by reason of providing for the payment of Additional Bonds as
D-22
required by the Trust Agreement), (b) is to add to the agreements, conditions, covenants and
terms required to be observed or performed thereunder by any party thereto, or to surrender any
right or power therein reserved to the Authority or the City, (c) is to cure, correct or supplement
any ambiguous or defective provision contained therein, (d) is to modify the legal description
of the Leased Property to add or delete property descriptions to reflect accurately the descnption
of the property intended or preferred to be included therein, (t) is necessary to obtain the desired
rating on a Series of Bonds from S&P, Moody's or Fitch, or (g) If the Trustee first obtains the
written consent of the Bondowners of a majority in pnncipal amount of the Bonds then
Outstanding to such supplement, amendment, modification or termination; provided, that no such
supplement, amendment, modification or termination shall reduce the amount of Base Rental
Payments to be made to the Authority or the Trustee by the CIty pursuant to the Sublease, or
extend the time for making such payments, or permit the creation of any lien prior to or on a
parity with the lien created by the Trust Agreement on the Base Rental Payments (except as
expressly provided in the Sublease), in each case without the prior written consent of all of the
Bondowners of the Bonds then Outstanding.
Any supplement, amendment or modification entered into pursuant to clause (a) of the
immediately preceding paragraph shall not, for purposes of this covenant, be deemed to
materially adversely affect the interest of the Bondowners or result in any material impairment
of the security given for the payment of the Bonds so long as (i) all Bonds are supported by a
Bond Insurance Policy, and (ii) the Bond Insurer and Liquidity Facility Provider shall have given
their prior written consent to such supplement, amendment or modification.
Events of Default and Remedies of Bondowners
Events of Default. One or more of the following events shall constitute "events of
default" under the Trust Agreement:
(a) if default shall be made by the Authority in the due and punctual payment of the
interest on any Bond when and as the same shall become due and payable;
(b) if default shall be made by the Authority in the due and punctual payment of the
principal of or redemption premium, if any, on any Bond when and as the same shall become
due and payable, whether at maturity as therein expressed or by proceedings for redemption;
(c) if default shall be made by the Authority in the performance of any of the
agreements or covenants required herein to be performed by the Authority, and such default
shall have continued for a period of thirty (30) days after the Authority shall have been given
notice in wnting of such default by the Trustee and the Bond Insurer,
(d) if the Authority shall file a petition or answer seeking arrangement or
reorganization under the federal bankruptcy laws or any other applicable law of the United States
of America or any state therein, or if a court of competent jurisdiction shall approve a petition
filed with or without the consent of the Authority seeking arrangement or reorganization under
the federal bankruptcy laws or any other applicable law of the United States of America or any
state therein, or if under the provisions of any other law for the relief or aid of debtors any court
D-23
of competent jurisdiction shall assume custody or control of the Authority or of the whole or any
substantial part of its property; or
(e) if an Event of Default has occurred under the Sublease.
Institution of Legal Proceedings by Trustee. If one or more of the events of default shall
happen and be continuing, the Trustee may, with the consent of the Bond Insurer, and upon the
written request of the Bond Insurer or Bondowners of a majority in principal amount of the
Bonds then Outstanding with the consent of the Bond Insurer, and in each case upon being
indemnified to its reasonable satisfaction therefor, is required to proceed vigorously to protect
or enforce its rights or the rights of the Bondowners of Bonds under this Trust Agreement and
under the Sublease by a suit in equity or action at law, either for the specific performance of any
covenant or agreement contained herein, or in aid of the execution of any power herein granted,
or by mandamus or other appropriate proceeding for the enforcement of any other legal or
equitable remedy as the Trustee or such Owner of a majority in principal amount of Bonds shall
deem most effectual in support of any of its rights and duties hereunder.
Non-Waiver. Nothing in the Trust Agreement or in the Bonds shall affect or impair the
obligation of the Authority, which is absolute and unconditional, to pay the interest on and
principal of and redemption premiums, If any, on the Bonds to the respective Bondowners of
the Bonds at the respective dates of maturity or upon prior redemption as provided herein from
the Revenues as provided herein pledged for such payment, or shall affect or impair the right
of such Bondowners, which is also absolute and unconditional, to institute suit to enforce such
payment by virtue of the contract embodied in the Trust Agreement and in the Bonds.
A waiver of any default or breach of duty or contract by the Trustee or any Bondholder
will not affect any subsequent default or breach of duty or contract or impair any rights or
remedies on any such subsequent default or breach of duty or contract. No delay or omission
by the Trustee or any Bondholder to exercise any right or remedy accruing upon any default or
breach of duty or contract will impair any such right or remedy or will be construed to be a
waiver of any such default or breach of duty or contract or an acquiescence therein, and every
right or remedy conferred upon the Bondowners by the Act or by the Trust Agreement may be
enforced and exercised from time to time and as often as shall be deemed expedient by the
Trustee or the Bondowners.
If any action, proceeding or suit to enforce any right or exercise any remedy is
abandoned, the Authority, the Trustee and the Bondholders will be restored to their former
positions, rights and remedies as if such action, proceeding or suit had not been brought or
taken.
Actions by Trustee as Attorney-in-Fact. Any action, proceeding or suit which any
Bondholder shall have the right to bring to enforce any right or remedy hereunder may be
brought by the Trustee for the equal benefit and protection of all Bondowners, whether or not
the Trustee is a Bondholder, and the Trustee is hereby appointed (and the successive
Bondowners, by taking and holding the Bonds issued hereunder, will be conclusively deemed
to have so appointed it) the true and lawful attorney-in-fact of the Bondowners for the purpose
of bringing any such action, proceeding or suit and for the purpose of doing and performing any
D-24
and all acts and things for and on behalf of the Bondowners as a class or classes as may be
advisable or necessary in the opimon of the Trustee as such attorney-in-fact
Remedies Not Exclusive. No remedy conferred upon or reserved to the Bondowners in
the Trust Agreement is intended to be exclusive of any other remedy, and each such remedy will
be cumulative and will be in addition to every other remedy given hereunder or now or hereafter
existing at law or in equity or by statute or otherwise and may be exercised without exhausting
and without regard to any other remedy conferred by the Act or any other law.
Limitation on Bondowners' Right to Sue. No Bondholder of any Bond Issued hereunder
has the nght to institute any suit, action or proceeding at law or equity, for any remedy under
or upon the Trust Agreement, unless (a) such Bondholder shall have previously given to the
Trustee written notice of the occurrence of an Event of Default; (b) the Bondowners of at least
a majonty m aggregate principal amount of all the Bonds then Outstanding shall have made
written request upon the Trustee to exercise the powers hereinbefore granted or to institute such
suit, acnon or proceeding m ItS own name; (c) said Bondowners shall have tendered to the
Trustee the written consent of the Bond Insurer and reasonable security or indemnity against the
costs, expenses and liabilities to be incurred in compliance with such request; and (d) the Trustee
shall have refused or omitted to comply with such request for a period of thirty (30) days after
such request shall have been received by, and said tender of indemnity shall have been made to,
the Trustee.
Such notification, request, tender of indemnity and refusal or omission are declared, in
every case, to be conditions precedent to the exercise by any Bondholder of Bonds of any
remedy hereunder; it being understood and intended that no one or more Bondowners of Bonds
shall have any right in any manner whatever by his or her or their action to enforce any right
under the Trust Agreement, except in the manner therein provided, and that all proceedings at
law or in equity to enforce any provision of the Trust Agreement are required to be instituted,
had and maintained m the manner therein provided and for the equal benefit of all Bondowners
of the Outstanding Bonds.
The Trustee
Aopointment. The Trustee is appomted the trustee for the Bonds for the purpose of
receiving all money WhICh the Authority is required to deposit with the Trustee under the Trust
Agreement and for the purpose of allocating, applying and using such money as provided therein
and for the purpose of paying the interest on and principal of and redemption premiums, If any,
on the Bonds presented for payment, with the rights and obligations provided in the Trust
Agreement. The Authority agrees that it will at all times maintain a Trustee having a principal
office in California.
Removal. The Authority, unless there exists any Event of Default under the Trust
Agreement, or the Owner of all outstanding Bonds may at any time WIth or without cause
remove the Trustee initially appointed and any successor thereto and may appoint a successor
or successors thereto by an instrument in writing. Any successor Trustee shall be a bank or
banking institution with trust powers, or trust company, having (or whose parent holding
company has) a combined capital (exclusive of borrowed capital) and surplus of at least one
D-25
hundred million dollars ($100,000,000) and subject to supervision or examination by federal or
state authority and acceptable to the Bond Insurer and the Liquidity Facility Provider
Resignation. The Trustee may at any time resign by giving written notice of such
resignation to the Authority, the Bond Insurer and the Liquidity Facihty Provider, and by
maihng by first class mail to the Bondowners notice of such resignation. Upon receiving such
notice of resignation, the Authority shall promptly appoint a successor Trustee by an instrument
in writing. Any removal or resignation of a Trustee and appointment of a successor Trustee
shall become effective only upon the acceptance of appointment by the successor Trustee. The
successor Trustee shall send notice of its acceptance by first class mail to the Bondowners. If,
within thirty (30) days after notice of the removal or resignation of the Trustee no successor
Trustee shall have been appointed and shall have accepted such appointment, the removed or
resigning Trustee may petition any court of competent jurisdiction for the appointment of a
successor Trustee, which court may thereupon, after such notice, if any, as it may deem proper
and prescribe and as may be required by law, appoint a successor Trustee having the
qualifications required by the Trust Agreement.
Performance of Duties The Trustee is required to, prior to an Event of Default, and
after the curing of all Events of Default that may have occurred, perform such duties and only
such duties as are specifically set forth in the Trust Agreement or as expressly directed by the
Owners of a majority in aggregate principal amount of Bonds outstanding and no impliedduties
or obligations shall be read mto the Trust Agreement The Trustee is required to, during the
existence of any Event of Default (that has not been cured), exercise such of the rights and
powers vested in it by the Trust Agreement, and use the same degree of care and skill in their
exercise, as a prudent person would exercise or use under the circumstances in the conduct of
such person's own affairs.
Amendment of the Trust Agreement
The Trust Agreement and the nghts and obligations of the Authority and of the
Bondowners may be amended at any time by a Supplemental Trust Agreement which shall
become bmdmg when the written consents of the Liquidity Facility Provider, the Bond Insurer
and the Bondowners of a majonty in aggregate principal amount of the Bonds then Outstanding,
exclusive of Bonds disqualified as provided in the Trust Agreement, are filed with the Trustee;
provided that if such modification or amendment will, by its terms, not take effect so long as
any Bonds of any particular matunty or Series remain Outstanding, the consent of the Owners
of such Bonds shall not be required and such Bonds shall not be deemed to be Outstanding for
the purpose of any calculation of Bonds Outstanding under this provision. No such amendment
shall (1) extend the maturity of or reduce the interest rate on or amount of interest on or
pnncipal of or redemption premium, if any, on any Bond without the express written consent
of the Bondholder of such Bond, or (2) permit the creation by the Authority of any pledge of
or charge or hen upon the Revenues as provided herein superior to or on a parity with the
pledge, charge and hen created hereby for the benefit of the Bonds, or (3) reduce the percentage
of Bonds required for the written consent to any such amendment, or (4) modify any nghts or
obligations of the Trustee, the Authonty, the Liquidity Facility Provider, the Bond Insurer or
the City without their prior wntten assent thereto, respectively. It shall not be necessary for the
consent of the Bondowners (other than the Liquidity Facility Provider and the Bond Insurer) to
D-26
approve the particular form of any Supplemental Trust Agreement, but it shall be sufficient if
such consent shall approve the substance thereof. Promptly after the execution by the Authority
and the Trustee of any Supplemental Trust Agreement pursuant to this provision, the Trustee
shall mail a notice on behalf of the Authority, setting forth in general terms the substance of
such Supplemental Trust Agreement to the Bondowners, the Bond Insurer and the Liquidity
Facility Provider at the addresses shown on the registration books maintained by the Trustee.
Any failure to give such notice, or any defect therein, shall not, however, in any way impair or
affect the validity of any such Supplemental Trust Agreement.
The Trust Agreement and the rights and obligations of the Authority and of the
Bondowners may also be amended at any time by a Supplemental Trust Agreement which shall
become binding upon adoption with the prior consent of the Bond Insurer and Liquidity Facility
Provider but without the consent of any Bondowners for anyone or more of the following
purposes --
(a) to add to the agreements and covenants required herein to be performed by the
Authority other agreements and covenants thereafter to be performed by the Authority, or to
surrender any right or power reserved in the Trust Agreement to or conferred herein on the
Authority;
(b) to make such provisions for the purpose of curing any ambiguity or of correcting,
curing or supplementing any defective provision contained in the Trust Agreement or in regard
to questions arising under the Trust Agreement which the Authority may deem desirable or
necessary or for any other purpose that will not materially adversely affect the interests of the
Bondowners;
(c) to provide for the issuance of any Additional Bonds and to provide the terms of
such Additional Bonds, subject to the conditions and upon compliance with the procedure set
forth in the Trust Agreement;
(d) to add to the agreements and covenants required in the Trust Agreement, such
agreements and covenants as may be necessary to qualify the Trust Agreement under the Trust
Indenture Act of 1939;
(e) to accommodate an Alternate Liquidity Facility;
(f) to make any changes as are required to implement a book entry only system of
registration and transfer of beneficial ownership interests in the Bonds through a successor
Securities Depository appointed by the Authority; or
(g) to grant to or confer upon the Owners any additional rights, remedies, powers,
authority or security that lawfully may be granted or conferred upon them, or to grant to or to
confer upon the Trustee for the benefit of the Owners any additional nghts, duties, remedies,
power or authority.
D-27
Any Supplemental Trust Agreement entered into pursuant to this provision shall not be deemed,
for purposes of this paragraph, to matenally adversely affect the interest of the Bondowners so
long as (x) all Bonds are supported by a Bond Insurance Policy and a Liquidity Facility, and (y)
the Bond Insurer and the Liquidity Facility Provider shall have given their prior written consents
to such Supplemental Trust Agreement.
Defeasance
If the Authority shall payor cause to be paid or there shall otherwise be paid to the
Bondowners of all Outstanding Bonds the interest thereon and principal thereof and redemption
premiums, if any, thereon including all amounts due with respect to Related Obligations, at the
times and in the manner stipulated herein and therein, and the Authority shall pay in full all
other amounts due hereunder, then the Bondowners of such Bonds shall cease to be entitled to
the pledge of and charge and lien upon the Revenues as provided herein, and all agreements,
covenants and other obligations of the Authority to the Bondowners of such Bonds hereunder
shall thereupon cease, terminate and become void and be discharged and satisfied
Any Outstanding Bonds shall prior to the maturity date or redemption date thereof be
deemed to have been paid within the meaning of and with the effect expressed in the preceding
paragraph if (l) in case any of such Bonds are to be redeemed on any date prior to their maturity
date, the Authority shall have given to the Trustee in form satisfactory to it Irrevocable
mstrucnons to provide notice in accordance with the trust Agreement, (2) there shall have been
deposited with the Trustee (A) money in an amount which shall be sufficient and/or (B)
Government Securities, the interest on and principal of which when paid will provide money
which, together with the money, if any, deposited with the Trustee at the same time, shall be
sufficient, in the opimon of an Independent Certified Public Accountant, to pay when due the
interest to become due on such Bonds on and prior to the maturity date or redemption date
thereof, as the case may be, and the principal of and redemption premiums, if any, on such
Bonds, (3) m the event such Bonds are not by their terms subject to redemption within the next
succeeding sixty (60) days, the Authority shall have given the Trustee in form satisfactory to it
Irrevocable instructions to mail as soon as practicable, a notice to the Bondowners of such Bonds
that the deposit required by clause (2) above has been made WIth the Trustee and that such
Bonds are deemed to have been paid in accordance with this Section and stating the maturity
date or redemption date upon which money is to be available for the payment of the pnncipal
of and redemption premiums, if any, on such Bonds, and (4) in the event the Bonds are Vanable
Rate Bonds or Bonds secured by a Bond Insurance Policy, the Trustee shall have received
written notice from S&P, if S&P is then rating such Bonds, that the rating on such Bonds shall
not be reduced or WIthdrawn
In the event of an advance refunding (i) the Authority is required to cause to be delivered
to the Trustee, on the deposit date and upon any reinvestment of the defeasance amount, a report
of an independent firm of nationally recognized Independently Certified Public Accountants
verifying the sufficiency of the escrow estabhshed to pay the Bonds in full on the maturity date
or redemption date ("Verification"), (ii) the escrow agreement is required to provide that no (A)
substitution of a defeasance obligation shall be permitted except with another defeasance
obligation and upon delivery of a new Verification and (B) reinvestment of a defeasance
obligation shall be permitted except as contemplated by the original Verificauon or upon delivery
D-28
of a new Verification, and (iii) there is required to be delivered to the Trustee and the Authority
an Opinion of Bond Counsel to the effect that the Bonds are no longer "Outstanding" under the
Trust Agreement.
Concerning the Bond Insurer
General. Notwithstanding anything to the contrary set forth in the Trust Agreement:
(a) The Bond Insurer shall, to the extent it makes any payment of principal of or
interest on the Bonds, become subrogated to the rights of the recipients of such payments in
accordance with the terms of the Bond Insurance Policy.
(b) Amounts paid by the Bond Insurer under the Bond Insurance Policy shall not be
deemed paid for purposes of the Trust Agreement and the Bonds relating to such amounts shall
remain Outstanding and continue to be due and owing until paid in accordance with the Trust
Agreement. The Trust Agreement shall not be discharged unless all amounts due or to become
due to the Bond Insurer have been paid in full.
(c) The Bond Insurer shall be deemed to be the sole holder of the Bonds insured by
it for the purpose of exercising any voting right or privilege or giving any consent or direction
or taking any other action that the holders of the Bonds insured by it are entitled to take pursuant
to the provisions of the Trust Agreement pertaining to defaults and remedies and pertaining to
the Trustee of the Trust Agreement.
THE LEASE
Lease
Pursuant to the Lease, the City leases to the Authority, and the Authority takes and hires
from the City, the Leased Property in consideration of the rents, covenants and agreements, and
upon the terms and conditions, set forth therein, subject to any and all existing encumbrances,
conditions, covenants, easements, restrictions, rights-of-way and all other existing matters of any
nature affecting the Leased Property (in each case whether or not of record) (the "Exceptions").
The parties agree that the Leased Property shall constitute personal property.
Term
The term of the Lease commences on the date of recordation of the Lease or a
Memorandum thereof in the office of the County Recorder of the County of Alameda, State of
California, or on August 1,1998, whichever is earlier, and shall end on August 1,2021 unless
such term is extended or sooner terminated as provided below. If on August 1, 2021, the
Bonds, Related Obligations and all amounts due under the Sublease and under the Trust
Agreement shall not be fully paid, or if the rental or other amounts payable under the Sublease
shall have been abated at any time and for any reason, then the term of the Lease is required
to be extended until all Bonds, Related Obligations and all amounts due under the Sublease and
under the Trust Agreement shall be fully paid, except that the term of the Lease may in no event
D-29
be extended beyond August 1, 2031. If prior to August 1, 2031, the Bonds, Related Obligations
and all other amounts due under the Trust Agreement shall be fully paid, the term of the Lease
shall end sixty (60) days after written notice by the City to the Authority.
Rent
As rental for the Leased Property, the Authority shall pay a sum equal to the net
proceeds of the Bonds, which amount shall be deposited in the funds and accounts established
pursuant to the Trust Agreement
Encumbrances or Sales
Except as to Exceptions and the Sublease, the Authority agrees that it will not create or
suffer to be created any mortgage, pledge, lien, charge or encumbrance upon the Leased
Property or any part thereof. The City agrees that it will not sell or otherwise dispose of the
Leased Property or any property essential to the proper operation of the Leased Property, except
as otherwise provided in the Lease and provided that the Authority may remove or replace the
Leased Property 10 the ordinary course of business or if requested by the City to sell or
exchange any part of the Leased Property pursuant to the Sublease.
Condemnation; Damage or Destruction
In the event of damage or destruction to the Leased Property or any part thereof or in
the event a proceeding in eminent domain or condemnation is instituted against the Leased
Property or any part thereof, the Sublease shall either continue or terminate pursuant to the
terms of the Sublease. If the Sublease does not terminate (the Authority acknowledging that the
City, as sublessee of the Leased Property, shall have the option, at its sole discretion, to exercise
or not exercise any rights contained in the Sublease), the provisions of the Sublease with respect
to repairs or restoration and the allocation of Net Proceeds of any insurance or condemnation
award shall govern.
Assignment and Subletting by the Lessee
Other than as contemplated by the Trust Agreement and the Sublease, the Authority
agrees that it will not, without the prior written consent of the City and the Bond Insurer, which
consents shall not be unreasonably withheld: (i) assign or otherwise transfer this Lease or any
part thereof or interest therein, or permit the same to be assigned or otherwise transferred, or
(ii) enter into sublease(s) for the use and occupancy of the Leased Property or portions thereof,
whether voluntarily or involuntarily, by operation of law or otherwise.
D-30
THE SUBLEASE
Sublease of Leased Property
Under the Sublease, the Authority subleases to the CIty and the City subleases from the
Authority the Leased Property, subject, however, to all Permitted Encumbrances that exist at
the time of the commencement of the term of the Sublease. The City agrees and covenants
during the term of this Sublease that It will use the Leased Property for public purposes so as
to afford the public the benefits contemplated by this Sublease
The Authority and the City agree that the Leased Property shall constitute personal
property.
Term; Occupancy
The term of the Sublease commences on the date of recordation of the Sublease or
memorandum thereof in the office of the County Recorder of the County of Alameda, or on
August 1, 1998, whichever is earlier, and shall end on August 1, 2021, unless such term is
extended or sooner terminated as provided in the Sublease. If on August 1, 2021, the Bonds,
Related Obligations and all amounts due under the Lease and under the Trust Agreement shall
not be fully paid, or if the rental or other amounts payable hereunder shall have been abated at
any time and for any reason, then the term of this Sublease shall be extended until all Bonds,
Related Obligations and all amounts due under the Lease and under the Trust Agreement shall
be fully paid, except that the term of the Sublease shall in no event be extended beyond
August 1,2031 If prior to August 1,2031 all Bonds, Related Obligations and all amounts due
hereunder and under the Trust Agreement shall be fully paid, or provision therefor made in
accordance with the terms and provisions of the Trust Agreement, the term of the Sublease shall
end immediately.
Base Rental Payments
The City agrees to pay to the Authority, as Base Rental Payments for the use and
occupancy of the Leased Property during each Rental Payment Period (subject to certain
provisions of the Sublease), the Base Rental Payments in accordance with the Base Rental
Payment Schedule attached to the Sublease. Base Rental Payments shall be made ill installments,
payable on or before the Base Rental Due Dates in the amount, which amount will vary from
time to time, required by the Authority to pay the principal of and interest on the Bonds and
payments of any Related Obligations due on or before the first (1st) day of the month following
the Base Rental Due Date; provided that the aggregate Base Rental Payment installments for any
Rental Payment Period may not exceed $21,500,000 in any Rental Payment Period (the
"Maximum Annual Rental"); and provided further that to the extent the Authority has received
revenues (including but not lumted to, capitalized interest) available to pay debt service on the
Bonds and any Related Obligations and has deposited such revenues with the Trustee by the
Business Day mediately preceding the Base Rental Due Date, the Lessee shall receive a credit
to the extent of such revenues on the installment of the Base Rental Payment for said month
For the purpose of calculating the amount of Base Rental Payments relating to Bonds and
Related Obligations bearing interest at a variable rate which has not yet been determined an
D-31
interest rate shall be assumed which is equal to 100% of the Bond Market Association Municipal
Swap Index, or its successors or assigns, made available for the week preceding the date of
determination. The Trustee and the Authority are required to notify the City at least two
business days prior to each Base Rental Due Date of the amount of Base Rental Payments which
will be due on the next succeeding Base Rental Due Date.
Additional Payments
The City is required to also pay such amounts (herein called the "Additional Payments")
as shall be required by the Authority for the payment of all amounts, costs and expenses
incurred by the Authority in connection with the execution, performance or enforcement of the
Sublease or any assignment thereof, the Trust Agreement, its interest in the Leased Property and
the sublease of the Leased Property to the City, including but not limited to payment of all fees,
costs and expenses and all administrative costs of the Authority related to the Bonds, any Related
Obligations and the Leased Property, including, without limiting the generality of the foregoing,
insurance, taxes, salaries and wages of employees, all expenses, compensation and
indemnification payable by the Authority to the Trustee under the Trust Agreement andto any
remarketing agent under a remarketing agreement, fees of any tender agent, auditors,
accountants, attorneys or architects, andall other necessary administrative costs of the Authority
or charges required to be paid by it in order to maintain its existence or to comply with the
terms of the Bonds or of the Trust Agreement or of Related Obligations; but not including in
such Additional Payments amounts required to pay the principal of or interest on the Bonds or
payments of Related Obligations (which shall be paid from Base Rental Payments).
Payment Provisions
The Authority agrees that if on any Base Rental Due Date, the amount of Base Rental
Payments available pursuant to the Sublease shall exceed the amount needed by the Authority
to pay the principal of and interest on the Bonds and payments of any Related Obligations
coming due in the succeeding month, the excess amount may be deferred by the Authority, at
its sole option, on such terms and conditions as it shall determine are necessary to protect the
interests of the Owners of the Bonds and the provider of any Related Obligation, and thereupon
such excess amount need not be paid by the Lessee to the Authority at that time, but instead
shall be deferred until such subsequent time within such Rental Payment Period as the Authority
shall have need for such payment; provided that on each July 31 any deferred amount not needed
by the Authority to pay the principal of and interest on the Bonds or payments of any Related
Obligation on the next succeeding August 1 shall be waived by the Authority and such amount
shall no longer be an obligation of the City. If in any month the principal of and interest on the
Bonds or payment of any Related Obligation shall exceed the expected amount of Base Rental
Payments payable by the Lessee to the Authority in such month, the City is required to pay the
difference from rental deferred during the Rental Payment Period in which such month occurs.
Each Base Rental Payment installment or Additional Payment payable under the Sublease
shall be paid in lawful money of the United States of America to or upon the order of the
Authority at the corporate trust office of the Trustee or such other place as the Authority shall
designate. Notwithstanding any dispute between the Authority and the City, the City shall make
all Base Rental Payments, Additional Payments and other payments when due without deduction
D-32
or offset of any kind and shall not withhold any Base Rental Payments or Additional Payments
or other payments pending the final resolution of such dispute. In the event of a determination
that the City was not liable for said payments or any portion thereof, said payments or excess
of payments, as the case may be, are required to be credited against subsequent payments due
hereunder or refunded at the time of such determination. Amounts required to be deposited by
the City with the Trustee pursuant to this provision for payment of Base Rental Payments on any
date shall be reduced to the extent of amounts on deposit in the Revenue Fund and available
therefor.
Appropriations Covenant
The City covenants to take such action as may be necessary to include the Base Rental
Payments and Additional Payments estimated by the City to be payable under the Sublease as
a separate line item in its annual budget, and to make necessary annual appropriations for the
Base Rental Payments and Additional Payments. The City is required to deliver to the Authonty
and the Trustee copies of the portion of its annual budget relating to the payment of Base Rental
Payments and Additional Payments hereunder within thirty (30) days after the filing or adoption
thereof. The covenants on the part of the City contained in the Sublease are deemed to be and
are to be construed to be duties imposed by law and it shall be the duty of each and every public
official of the City to take such action and do such thmgs as are required by law In the
performance of the official duty of such officials to enable the City to carry out and perform the
covenants and agreements In the Sublease agreed to be carried out and performed by the City.
Rental Abatement
The Base Rental Payments due in accordance with the Base Rental Payment Schedule
attached to the Sublease and Additional Payments are required to be abated proportionately,
during any penod in which by reason of any material damage or destruction (other than by
condemnation which is otherwise provided for) there is substantial interference with the use and
occupancy of the Leased Property by the City, In the proportion in which the cost of that portion
of the Leased Property rendered unusable bears to the cost of the whole of the Leased Property
Such abatement is required to continue for the period commencing with such damage or
destruction and ending WIth the substantial completion of the work of repair or reconstruction.
In the event of any such damage or destruction, the Sublease shall continue in full force and
effect and the City waives the benefits of California Civil Code Section 1932(2) and 1933(4) any
and all other rights to terminate the Sublease by virtue of any such damage or destruction or
Interference. Notwithstanding the foregoing, to the extent that moneys are available for the
payment of Base Rental Payments in any of the funds and accounts established under the Trust
Agreement, Base Rental Payments shall not be abated as provided above but, rather, shall be
payable by the City as a special obligation payable solely from said funds and accounts
Insurance Provisions
Hazard Insurance The City, at Its own expense, is required to insure or have Insured
the Leased Property with compames acceptable to the Authonty, the Bond Insurer and the
Liquidity Facility Provider for such amounts and against such hazards as the Authority may
require, including, but not limited to, insurance for damage to the Leased Property, all such
D-33
policies being with companies and on terms satisfactory to the Authority. Such insurance shall
be in an amount equal to the replacement cost (without deduction for depreciation) of all
property constituting any part of the Leased Property, excluding the cost of excavations, of
grading and filling, and of the land of said replacement cost for anyone loss and except that
such other insurance may be subject to deductible clauses for anyone loss of not to exceed two
hundred fifty thousand dollars ($250,000) or a comparable deductible adjusted for inflation), or,
in the alternative, shall be in an amount and in a form sufficient, in the event of total or partial
loss, to enable all Bonds then Outstanding to be redeemed.
As an alternative to providing the insurance described in the previous paragraph, or any
portion thereof, the City may provide a self-insurance method or plan of protection if and to the
extent such self-insurance method or plan of protection shall afford reasonable coverage for the
risks to be insured against in light of all circumstances, giving consideration to cost, availability
and similar plans or methods of protection adopted by public entities in the State other than the
City. Before such other method or plan may be provided by the City, and annually thereafter
so long as such method or plan is being provided to satisfy the requirements of the Sublease,
there is required to be filed with the Trustee a certificate (substantially in the form attached as
an Exhibit to the Sublease) of an Insurance Consultant or other qualified person setting forth the
details of such substitute method or plan and stating that, in the opinion of the signer, the
substitute method or plan of protection is in accordance with the requirements of the Sublease
and, when effective, would affordreasonable protection to the Authority, its members, directors,
officers, agents and employees and the Trustee against loss and damage from the hazards and
risks covered thereby.
In the event of any damage to or destruction of any part of the Leased Property caused
by the perils covered by such insurance or condemnation proceeds, the Authority, except as
hereinafter provided, is required to cause the proceeds of such insurance or condemnation
proceeds to be used for the repair, reconstruction or replacement of the damaged or destroyed
portion of the Leased Property, and the Trustee shall hold said proceeds under the Trust
Agreement separate and apart from all other funds, in a special fund to be designated the
"Insurance and Condemnation Fund," to the end that such proceeds shall be applied to the
repair, reconstruction or replacement of the Leased Property to at least the same good order,
repair and condition as it was in prior to the damage or destruction, insofar as the same may be
accomplished by the use of said proceeds. The Trustee shall withdraw said proceeds from time
to time upon receiving the Written Request of the Authority, stating that the Authority has
expended moneys or incurred liabilities in an amount equal to the amount therein requested to
be paid over to it for the purpose of repair, reconstruction or replacement, and specifying the
items for which such moneys were expended, or such liabilities were incurred, and containing
the additional information required to be included in a Written Request of the Authority prepared
pursuant to the Trust Agreement. Any balance of said proceeds not required for such repair,
reconstruction or replacement shall be treated by the Trustee as Base Rental Payments and
applied in the manner provided by the Trust Agreement Alternatively, the Authority, if the
proceeds of such insurance and any amounts transferable from the Reserve Fund as allocable to
the Bonds to be redeemed, together with any other moneys then available for the purpose are
at least sufficient to redeem an aggregate principal amount of Outstanding Bonds equal to the
amount of Outstanding Bonds attributable to the portion of the Leased Property so destroyed or
damaged (determined by reference to the proportion whichthe cost of such portion of the Leased
D-34
Property bears to the aggregate cost of the Leased Property), may elect not to repair, reconstruct
or replace the damaged or destroyed portion of the Leased Property and thereupon is required
to cause said proceeds to be used for the redemption of Outstanding Bonds pursuant to the
provisions of the Trust Agreement.
The Authority and the City are required to promptly apply for federal disaster aid or
State disaster aid in the event that the Leased Property are damaged or destroyed as a result of
an earthquake or other disaster occurring at any time. Any proceeds received as a result of such
disaster aid shall be used to repair, reconstruct, restore or replace the damaged or destroyed
portions of the Leased Property, or to redeem Outstanding Bonds if such use of such disaster
aid is permitted.
Liabihtv Insurance. Except as provided in the Sublease, the City is required to procure
or cause to be procured and maintain or cause to be maintained, throughout the term of the
Sublease a standard comprehensive general liability insurance policy or policies in protection of
the Authority and its members, directors, officers, agents and employees, and the Trustee,
indemnifying said parties against all direct or contingent loss or liability for damages for
personal injury, death or property damage occasioned by reason of the operation of the Leased
Property, with minimum liability limits of five million dollars ($5,000,000) for personal injury
or death of each person and ten million dollars ($10,000,000) for personal injury or deaths of
two or more persons in each accident or event, and in a minimum amount of seven hundred fifty
thousand dollars ($750,000) for damage to property resulting from each accident or event. Such
public liability and property damage insurance may, however, be in the form of a single limit
policy in the amount of ten million dollars ($10,000,000) covering all such risks. Such liability
insurance may be maintained as part of or in conjuncnon with any other liability insurance
carried by the City.
As an alternative to providmg the insurance described in the previous paragraph, or any
portion thereof, the City may provide a self-insurance method or plan of protection if and to the
extent such self-insurance method or plan of protection shall afford reasonable protection to the
Authority, its members, directors, officers, agents and employees and the Trustee, in light of
all circumstances, giving consideration to cost, availability and similar plans or methods of
protection adopted by public entities in the State other than the City. Before such other method
or plan may be provided by the City, and annually thereafter so long as such method or plan is
being provided to satisfy the requirements of this Sublease, there is required to be filed with the
Trustee a certificate (substantially in the form attached hereto as an Exhibit to the Sublease) of
an Insurance Consultant or other qualified person setting forth the details of such substitute
method or plan and stating that, in the opinion of the signer, the substitute method or plan of
protection is m accordance With the requirements of the Sublease and, when effective, would
afford reasonable protection to the Authority, its members, directors, officers, agents and
employees and the Trustee against loss and damage from the hazards and risks covered thereby.
Rental Interruption or Use and Occupancy Insurance. The City is required to procure
or cause to be procured and mamtain or cause to be mamtamed throughout the term of the
Sublease, to the extent such insurance IS commercially available, rental interrupnon or use and
occupancy insurance to cover loss, total or partial, of the rental income from or the use of the
Leased Property as the result of any of the hazards covered by the insurance required by the
D-35
Sublease and descnbed above, in an amount sufficient to pay Base Rental Payments (assuming
a 12% interest rate on the Bonds) for a three-month period except that such insurance may be
subject to a deductible clause of not to exceed an amount equal to 30 days of Base Rental
Payments for the portion of the Leased Property damaged or destroyed. Any proceeds of such
insurance and any amounts transferred from the Reserve Fund shall be used by the Trustee to
reimburse to the City any rental theretofore paid by the City under the Sublease attributable to
such structure for a period of tune during which the payment of rental under this Sublease is
abated, and any proceeds of such insurance not so used shall be applied as provided in the
Sublease to make Base Rental Payments (to the extent so required) and to make Additional
Payments (to the extent so required).
Worker's Compensation. The City is required to also maintain worker's compensation
insurance issued by a responsible carrier authorized under the laws of the State to Insure its
employees against liability for compensation under the Worker's Compensation Insurance and
Safety Act now in force in California, or any act hereafter enacted as an amendment or
supplement thereto As an alternative, such insurance may be maintained as part of or in
conjunction with any other insurance carried by the City. Such insurance may be maintained
by the City in the form of self-insurance.
Insurance Proceeds; Form of Policies. All policies of hazard insurance and rental
interruption insurance are required to be provided by an insurance company with a clauns paying
ability rated at least "A" by Moody's and S&P (unless the Bond Insurer shall approve an
insurance company With a lower rating) and are required to provide that all proceeds thereunder
shall be payable to the Trustee pursuant to a lender's loss payable endorsement substantially in
accordance with the form approved by the Insurance Services Office and the California Bankers
Association. The Trustee shall collect, and receive all moneys which may become due and
payable under any such policies, maycompromise any and all claims thereunder and shall apply
the proceeds of such insurance as provided in the Sublease. All policies of insurance required
by the Sublease are required to provide that the Trustee shall be given thirty (30) days' notice
of each expiration thereof or any intended cancellation thereof or reduction of the coverage
provided thereby. The Trustee shall not be responsible for the sufficiency of any insurance
herem required or if forms of endorsement or policies comply with the provisions of this
Sublease and shall be fully protected in accepting payment on account of such insurance or any
adjustment, compromise or settlement of any loss agreed to by the Trustee. The City IS required
to pay when due the premiums for all insurance policies required by the Sublease, and is
required to promptly furnish evidence of such payments to the Authority.
Defaults and Remedies
If the City shall fail to pay any Base Rental Payment, Additional Payment or other
amount payable under the Sublease when the same becomes due and payable, time being
expressly declared to be of the essence of the Sublease, or the City shall fail to keep, observe
or perform any other term, covenant or condition contained in the Sublease to be kept or
performed by the City for a period of thirty (30) days after notice of the same has been given
to the City by the Authority, the Bond Insurer or the Trustee or for such additional time as is
reasonably required, in the discretion of the Trustee (with the consent of the Bond Insurer), to
correct the same, or upon the happening of any of the events described in the following
D-36
paragraph (any such case above being an "Event of Default"), the City shall be deemed to be
in default under the Sublease and it shall be lawful for the Authority to exercise any and all
remedies granted pursuant to the Sublease. Upon any such default, the Authority may without
terminating the Sublease, collect each Base Rental Payment and Additional Payment installment
and other amounts as they become due and enforce any other terms or provision hereof to be
kept or performed by the City, regardless of whether or not the City has abandoned the Leased
Property. In such event, the City shall remain liable and agree to keep or perform all covenants
and conditions herein contained to be kept or performed by the City and to pay the full amount
of the Base Rental Payments, Additional Payments and other amounts to the end of the term of
the Sublease and further agrees to pay said rent and other amounts punctually at the same time
and in the same manner as hereinabove provided for the payment of Base Rental Payments,
Additional Payments and other amounts hereunder (without acceleration).
If (1) the City'S interest in the Sublease or any part thereof be assigned or transferred,
either voluntarily or by operation of law or otherwise, without the prior written consent of the
Authority, the Bond Insurer and the Liquidity Facility Provider, or (2) the City or any assignee
shall file any petition or institute any proceeding under any act or acts, State or federal, dealing
with or relating to the subject or subjects of bankruptcy or insolvency, or under any amendment
of such act or acts, either as a bankrupt or as an insolvent, or as a debtor, or in any similar
capacity, wherein or whereby the City asks or seeks or prays to be adjudicated a bankrupt, or
is to be discharged from any or all of the City's debts or obligations, or offers to the City's
creditors to effect a composition or extension of time to pay the City's debts or asks, seeks or
prays for reorganization or to effect a plan of reorganization, or for a readjustment of the City's
debts, or for any other similar relief, or if any such petition or any such proceedings of the same
or similar kind or character be filed or be instituted or taken against the City, or if a receiver
of the business or of the property or assets of the City shall be appointed by any court, except
a receiver appointed at the instance or request of the Authority, or if the City shall make a
general or any assignment for the benefit of the City's' creditors, or if (3) the City shall abandon
or vacate the Leased Property, then the Lessee shall be deemed to be in default hereunder
The Authority shall in no event be in default in the performance of any of its obligations
hereunder or imposed by any statute or rule of law unless and until the Authority shall have
failed to perform such obligations within thirty (30) days or such additional time as is reasonably
required to correct any such default after notice by the City to the Authority properly specifying
wherein the Authority has failed to perform any such obligation. In the event of default by the
Authority, the City shall be entitled to pursue any remedy provided by law.
Upon the occurrence of an event of default as described above, the Authority shall
proceed to protect and enforce the rights vested in the Authority by the Sublease. The
provisions of the Sublease and the duties of the City and of its trustees, officers or employees
shall be enforceable by the Authority by mandamus or other appropriate suit, action or
proceeding in any court of competent jurisdiction. Without limiting the generality of the
foregoing, the Authority may bring the following actions:
(a) Accounting. By action or suit in equity to require the City and its trustees,
officers and employees and their assigns to account as the trustee of an express trust.
D-37
(b) Injunction. By action or SUIt in equity to enjoin any acts or things which may be
unlawful or in violation of the rights of the Authority.
(c) Mandamus. By mandamus or other suit, action or proceeding at law or in equity
to enforce the Authority's rights against the City (and its board, officers and employees) and to
compel the City to perform and carry out its duties and obligations under the law and its
covenants and agreements with the Authority as provided in the Sublease.
The exercise of any rights or remedies under the Sublease do not permit acceleration of Base
Rental Payments and are subject to the terms and provisions of the Trust Agreement, including
the right of the Bond Insurer to direct all remedies under the Sublease.
Each and all of the remedies given to the Authority under the Sublease or by any law
now or hereafter enacted are cumulative and the single or partial exercise of any right, power
or privilege hereunder shall not impair the right of the Authority to the exercise of any or all
other rights, powers or privileges. If any statute or rule of law validly shall limit the remedies
given to the Authority hereunder, the Authority nevertheless shall be entitled to whatever
remedies are allowable under any statute or rule of law.
Failure of the Authority to take advantage of any default on the part of the City shall not
be, or be construed as, a waiver thereof, nor shall any custom or practice which may grow up
between the parties in the course of administering the Sublease be construed to waive or to
lessen the right of the Authority to insist upon performance by the Lessee of any term, covenant
or condition hereof, or to exercise any rights given the Authority on account of such default.
A waiver of a particular default shall not be deemed to be a waiver of the same or any
subsequent default. The acceptance of rent under the Sublease shall not be, or be construed to
be, a waiver of any term, covenant or condition of the Sublease
Eminent Domain
If the whole of the Leased Property or so much thereof as to render the remainder
unusable for the purposes for which it was used by the City shall be taken under the power or
threat of eminent domain, the term of the Sublease shall cease as of the day that possession shall
be so taken. If less than the whole of the Leased Property shall be taken under the power or
threat of eminent domain and the remainder is usable for the purposes for which it was used by
the City at the time of such taking, then the Sublease shall continue in full force and effect as
to such remainder, and the parties waive the benefits of any law to the contrary, and m such
event there shall be a partial abatement of the rental due under the Sublease in an amount
equivalent to the amount by which the annual payments of principal of and interest on the Bonds
then Outstanding Will be reduced by the application of the award in eminent domain to the
redemption of Outstanding Bonds. So long as any of the Bonds shall be Outstanding, any award
made in eminent domain proceedings for taking the Leased Property or any portion thereof IS
required to be paid to the Trustee and applied to the prepayment of the Base Rental Payments.
Any such award made after all of the Base Rental Payments and Additional Payments have been
fully paid, or provision therefor made, will be paid to the City.
D-38
The City covenants that it will not take the Authority's interest 10 the Leased Property
under the power or threat of eminent domain unless the City prepays all Base Rental Payments.
Prepayment
The City 1S required to prepay on any date from insurance and eminent domain proceeds,
to the extent provided in the Sublease (provided, however, that in the event of partial damage
to or destruction of the Leased Property caused by perils covered by insurance, if in the
judgment of the Authority the insurance proceeds are sufficient to repair, reconstruct or replace
the damaged or destroyed portion of the Leased Property, such proceeds shall be held by the
Trustee and used to repair, reconstruct or replace the damaged or destroyed portion of the
Leased Property, pursuant to the procedure set forth in the Sublease for proceeds of insurance),
all or any part (10 an integral multiple of $5,000 principal component) of Base Rental Payments
then unpaid so that the aggregate annual amounts of Base Rental Payments which shall be
payable after such prepayment date shall be as nearly proportional as practicable to the aggregate
annual amounts of Base Rental Payments unpaid prior to the prepayment date, at a prepayment
amount equal to the principal of and interest on the Bonds to the date of redemption of the
Bonds.
The City may prepay, from any source of available funds, all or any portion of Base
Rental Payments by (i) depositing with the Trustee moneys or securities as provided in the Trust
Agreement sufficient to retire or redeem Bonds corresponding to such Base Rental Payments
when due or redeemable, and (ii) satisfying the other requirements of the Trust Agreement and
satisfying the requirements of any Related Obligations. The City agrees that if following such
prepayment the Leased Property is damaged or destroyed or taken by eminent domain, it 1S not
entitled to, and by such prepayment waives the right of, abatement of such prepaid Base Rental
Payments and shall not be entitled to any reimbursement of such Base Rental Payments.
Option to Purchase; Sale of Property
The City has the option to purchase the Authority's interest in any part of the Leased
Property upon payment of an option price consisting of moneys or securities of the category
specified in clause (1) of the definition of the term Permitted Investments (not callable by the
issuer thereof prior to maturity) in an amount sufficient (together with the earnings and interest
on such securities) to provide funds to pay the aggregate amount for the entire remaining term
of the Sublease of the part of the total rent hereunder attributable to such part of the Leased
Property (determined by reference to the proportion which the cost of such part of the Leased
Property bears to the cost of all of the Leased Property). Any such payment is required to be
made to the Trustee and shall be treated as Base Rental Payments and shall be applied by the
Trustee to pay the principal of and interest on the Bonds and to redeem Bonds if such Bonds are
subject to redemption pursuant to the terms of the Trust Agreement. Upon the making of such
payment to the Trustee and the satisfaction of all requirements set forth in the Trust Agreement
relating to defeasance of the Bonds, (a) the Base Rental Payments thereafter payable under the
Sublease shall be reduced by the amount thereof attributable to such part of the Leased Property
and theretofore paid as described in this paragraph, (b) the provisions of the Sublease described
in this paragraph and the provision relating to rental abatement shall not thereafter be applicable
to such part of the Leased Property, (c) the insurance required by the Sublease (other than
D-39
workers' compensation insurance) need not be maintained as to such part of the Leased Property,
and (d) the Authority's leasehold interest in such part of the Leased Property shall terminate
pursuant to the Lease and the term of the Sublease shall end as to the Leased Property.
The City, in its discretion may request the Authonty to sell or exchange any part of the
Leased Property, and to release said part of the Leased Property from the Sublease, if (a) in the
opinion of the City the property so sold or exchanged is no longer required or useful in
connection with the operation of the Leased Property, and (b) the consideration to be received
from the property is of a value substantially equal to the value of the property to be released or
the property is being replaced with property which is part of the City's sewer system and is of
equal or greater value. In the event of any such replacement of property, the additional property
shall become part of the LeasedProperty under the Sublease. In the event of any such sale, the
full amount of the money or consideration received for the personal property so sold and
released is required to be paid to the Authority and is required to, so long as the City is not in
default under any of the provisions of the Sublease, be used upon the Written Request of the
City to purchase additional property, which is part of the City's sewer system, which property
shall become a part of the Leased Property under the Sublease.
Selected Covenants
Liens. In the event the City shall at any time during the term of the Sublease cause any
changes, alterations, additions, improvements or other work to be done or performed or
materials to be supplied upon the Leased Property, the City is required to pay, when due, all
sums of money that may becomedue for, or purporting to be for, any labor, services, materials,
supplies or equipment furnished or alleged to have been furnished to or for the City upon or
about the Leased Property and is required to keep the Leased Property free of any and all
mechanics' or materialmen's liens or other liens against the Leased Property or the Authority's
interest therein. In the event any such lien attaches to or is filed against the Leased Property
or the Authority's interest therein, the City is required to cause each such lien to be fully
discharged and released at the time the performance of any obligation secured by any such lien
matures or becomes due, except that if the City desire to contest any such lien it may do so in
good faith. If any such lien shall be reduced to final judgment and such judgment or such
process as may be issued for the enforcement thereof is not promptly stayed, or if so stayed and
said stay thereafter expires, the City is required to forthwith pay and discharge said judgment.
The City agrees to and is required to, to the maximum extent permitted by law, indemnify and
hold the Authority, the Bond Insurer, and the Trustee and their respective members, directors,
agents, successors and assigns, harmless from and against, and defend each of them against, any
claim, demand, loss, damage, liability or expense (including attorney's fees) as a result of any
such lien or claim of lien against the Leased Property or the Authority's interest therein.
Subleasing. The City acknowledges that:
(a) The Leased Property may not be subleased by the City, and the City covenants
that it will not permit any sublease of its rights or duties hereunder, except as provided in
subparagraph (b) below.
D-40
(b) The Leased Property may be subleased by the City, with the prior written consent
of the Authority and the Bond Insurer, provided that such sublease complies with each of the
following conditions:
(a) This Sublease, and the obligations of the City thereunder, shall at all times during
the term of the Sublease be and remain the continuing obligations of the City,
notwithstanding any such sublease;
(b) The City is required to furnish a copy of each such sublease to the Authority and
the Trustee; and
(c) No sublease by the City shall cause the Leased Property to be used for any
purpose which would violate any provision of the Sublease or the Trust Agreement or
the Constitution or laws of the State of California or cause the interest on the Bonds to
be included in gross income for federal income taxation.
Tax Covenants. The City and the Authority are required to at all times do and perform
all acts and thmgs permitted by law which are necessary or desirable in order to assure that the
interest on any Series of Bonds issued as tax-exempt Bonds will be excluded from gross income
for federal income tax purposes under Section 103 of the Code and are required to take no action
that would result in such interest not being excluded from gross income for federal income tax
purposes.
Net-Net-Net Sublease. The Sublease shall be deemed and construed to be a "net-net-net
Sublease" and the City agrees that the rentals and other payments provided for herein shall be
an absolute net return to the Authority, free and clear of any expenses, charges or set-offs
whatsoever.
Taxes. The City is required to payor cause to be paid all taxes and assessments of any
type or nature charged to the Authority or affecting the Leased Property or the respective
interests or estates therein; provided, that with respect to special assessments or other
governmental charges that may lawfully be paid in installments over a period of years, the City
shall be obligated to pay only such installments as are required to be paid during the term of this
Sublease as and when the same become due.
The City may, at its expense and in its name, in good faith contest any such taxes,
assessments and other charges and, in the event of any such contest, may permit the taxes,
assessments or other charges so contested to remain unpaid during the period of such contest and
any appeal therefrom unless the Authority or the Trustee shall notify the City that, in the opinion
of independent counsel, by nonpayment of any such items, the interest of the Authority in the
Leased Property will be materially endangered or the Leased Property, or any part thereof, will
be subject to loss or forfeiture, in which event the City is required to promptly pay such taxes,
assessments or charges or provide the Authority with full security against any loss which may
result from nonpayment, in form satisfactory to the Authority and the Trustee.
D-41
THIS PAGE INTENTIONALLY LEFf BLANK
APPENDIX E
SPECIMEN BOND INSURANCE POLICY
APPENDIX F
PROPOSED FORM OF OPINION OF CO-BOND COUNSEL
[Closmg Date]
Oakland Joint Powers Financmg Authority
Oakland, California
Oakland Jomt Powers Fmancmg Authonty
Lease Revenue Bonds, 1998 Senes A
(Fmal Opimon)
Ladies and Gentlemen:
We have acted as bond counsel in connection with the issuance by the Oakland
JOInt Powers Financmg Authority (the "Authonty") of $ aggregate principal amount of
Oakland JOInt Powers Financing Authonty Lease Revenue Bonds, 1998 Series A (the "Bonds"),
consisting of Oakland Joint Powers Financing Authonty Lease Revenue Bonds, 1998 Series A-I
and Oakland Joint Powers Financmg Authonty Lease Revenue Bonds, 1998 Series A-2, Issued
pursuant to Article 4 of Chapter 5 of Division 7 of Title 1 of the Government Code and a trust
agreement, dated as of July 1, 1998 (the "Trust Agreement"), between the Authonty and U.S.
Bank Trust National Association, as trustee (the "Trustee"). Capitalized terms not otherwise
defined herein shall have the meanings set forth in the Trust Agreement.
In such connection, we have reviewed a lease, dated as of July 1, 1998 (the
"Lease"), between the City of Oakland (the "City"), as lessor, and the Authority, as lessee; a
sublease, dated as of July 1, 1998 (the "Sublease"), between the City, as lessee, and the
Authority, as lessor; the Trust Agreement; the Tax Certificate of the Authority dated as of the
date hereof (the "Tax Certificate"); opimons of counsel to the Authority, the City and the
Trustee; certificates ofthe Authority, the CIty, the Trustee and others, and such other documents,
opinions and matters to the extent we deemed necessary to render the opinions set forth herem.
The mterest rate mode and certam agreements, requirements and procedures
contained or referred to in the Trust Agreement, the Lease, the Sublease, the Tax Certificate and
other relevant documents may be changed and certam actions (including, without Iimitanon,
defeasance of the Bonds) may be taken or omitted under the circumstances and subject to the
terms and conditions set forth in such documents. No opiruon is expressed herem as to any Bond
or the mterest thereon If any such change occurs or action is taken or omitted upon the advice or
approval of counsel other than ourselves.
The opinions expressed herem are based on an analysis of existing laws,
regulations, rulmgs and court decisions and cover certam matters not directly addressed by such
A \#273929 vi - OAKLAND JPA LSE REV BONDS 98A FINAL OPINION doc
Oakland Jomt Powers Financing
Authonty
Page Two
___,,1998
authorities. Such opinions may be affected by actions taken or omitted or events occurring after
the date hereof. We have not undertaken to determine, or to inform any person, whether any
such actions are taken or omitted or events do occur. Our engagement WIth respect to the Bonds
has concluded with their issuance, and we disclaim any obligation to update this letter. We have
assumed the genuineness of all documents and signatures presented to us (whether as originals or
as copies) and the due and legal execution and delivery thereof by, and vahdity against, any
parties other than the Authority and the City. We have not undertaken to verify independently,
and have assumed, the accuracy of the factual matters represented, warranted or certified m the
documents, and of the legal conclusions contained in the opinions, referred to in the second
paragraph hereof. Furthermore, we have assumed compliance with all covenants and agreements
contained in the Lease, the Sublease, the Trust Agreement and the Tax Certificate, including
(without hrmtation) covenants and agreements compliance with which is necessary to assure that
future actions, omissions or events will not cause interest on the Bonds to be included in gross
income for federal income tax purposes.
We call attention to the fact that the rights and obligations under the Bonds, the
Lease, the Sublease, the Trust Agreement and the Tax Certificate may be subject to bankruptcy,
insolvency, reorgamzation, arrangement, fraudulent conveyance, moratorium and other laws
relating to or affectmg creditors' rights, to the application of equitable principles, to the exercise
of judicial discretion in appropriate cases, and to the limitations on legal remedies agamst jomt
powers authorities and cities in the State of California. We express no opinion with respect to
any mdemnification, contribution, penalty, choice of law, choice of forum or Waiver provisions
contained in the foregoing documents nor do we express any opinion with respect to the state or
quality of title to any of the real or personal property described in or subject to the hen of the
Lease, the Sublease or the Trust Agreement or the accuracy or sufficiency of the description of
any such property contained therein. Finally, we undertake no responsibility for the accuracy,
completeness or fairness of the Official Statement or other offering material relatmg to the Bonds
and express no opmion WIth respect thereto.
Based on and subject to the foregoing, and in rehance thereon, as of the date
hereof, we are ofthe following opinions:
1. The Bonds constitute the valid and binding limited obligations of the
Authority.
2. The Trust Agreement has been duly executed and delivered by the
Authority and, assuming due authorization, execution and delivery by the Trustee, constitutes a
A \#273929 vi - OAKLAND JPA LSE REV BONDS 98A FINAL OPINION doc
Oakland Joint Powers Fmancing
Authority
_----,-_' 1998
Page Three
vahd and bmdmg obligation of the Authonty The Trust Agreement creates a valid pledge, to
secure the payment of the principal of and mterest on the Bonds, of the Revenues and any other
amounts (including proceeds of the sale of the Bonds) held by the Trustee in any fund or account
established pursuant to the Trust Agreement, except the Rebate Fund, subject to the provisions of
the Trust Agreement perrmttmg the application thereof for the purposes and on the terms and
conditions set forth therem.
3. The Lease and the Sublease have been executed and delrvered by, and
constitute the valid and binding obligations of, the City and the Authority.
4. The Bonds are not a debt, habilrty or obligation of the City or of any of the
public agencies which are parties to the joint powers agreement creating the Authority. Neither
the faith and credit nor the taxmg powers of the City, the State of California or any political
subdivision thereof IS pledged to the payment of the pnncipal of, or redemption premium, if any,
or interest on, the Bonds.
5. Interest on the Bonds IS excluded from gross income for federal income
tax purposes under Section 103 of the Internal Revenue Code of 1986 and IS exempt from State
of California personal income tax. Interest on the Bonds is not a specific preference item for
purposes of the federal individual or corporate alternative mimmum taxes, although we observe
that It is included III adjusted current earmngs when calculating corporate alternative minimum
taxable income. We express no opinion regarding other tax consequences related to the
ownership or disposition of, or the accrual or receipt of interest on, the Bonds.
Faithfully yours,
ORRICK, HERRINGTON & SUTCLIFFE LLP
per
A \#273929 vi OAKLAND JPA LSE REV BONDS 98A FINAL OPINION doc
THIS PAGE INTENTIONALLY LEFT BLANK
APPENDIX G
CERTAIN INFORMATION CONCERNING THE BANK
THIS PAGE INTENTIONALLY LEFT BLANK
APPENDIX G
CERTAIN INFORMATION CONCERNING THE BANK
Commerzbank Aktlengesellschaft IS the third largest publicly-held banking Institution In terms of
assets in Germany. Commerzbank and its consolidated subsidiaries are engaged in a broad range of
commercial and investment banking services and related activities In Germany and around the world.
Commerzbank functions as a full service commercial and investment bank In certain specialized areas,
such as mortgage lending, leasing, asset management, fund management, real estate activrties and equity
participation, Commerzbank provides services through its subsidiaries, As of December 31, 1997,
Commerzbank had total assets of US. $287 billion (U.S.$I = DM 1.7987 closing price as of December
31,1997 Bloomberg) Commerzbank's capital stock is publicly held by more than 190,000 shareholders
and is quoted on all eight German stock exchanges as well as on the stock exchanges of Amsterdam,
Antwerp, Barcelona, Basel, Berne, Brussels, Geneva, Lausanne, London, Luxembourg, Madrid, Milan,
Paris, Tokyo, Vienna and ZUrich. There is also a sponsored-ADR program In the USA.
In Germany, Commerzbank operates 940 branches that provide banking services to three million
private customers. Abroad, Commerzbank maintains nearly 80 offices In 35 countries. Commerzbank
is directly represented In all major financial and industrial centers with its own subsidiaries, branches or
representative offices and employs approximately 1,600 staff abroad. It also has numerous holdmgs In
leading local and regional financial institutions.
Commerzbank conducts extensive banking business m the Umted States, concentratmg primanly
in corporate lending, letter of credit and bankers acceptance facilities, participation in syndicated loan
transactions and treasury operations including foreign exchange transactions. Commerzbank has branches
in New York, Chicago and Los Angeles and has an agency office in Atlanta.
For further information on the Commerzbank Group, a copy ofCommerzbank's annual report can
be obtained by contacting Karin Rapaglia at 2 World Financial Center, New York, New York 10281
Under the banking laws of the Federal Republic of Germany, all German banks are subject to
supervision by the Federal Banking Supervisory Office (Bundesaufsichtsamt fur das Kreditwesen), the
Federal Securities Trading Supervisory Commission (Bundesaufsichtsamt fur den Wertpapierhandel), and
by the German Central Bank (Deutsche Bundesbank) The Federal Banking Supervisory Office has the
power, inter alia, to issue and revoke licenses, to issue regulations on capital and liquidity requirements,
to demand the removal of members of the bank's management, to inspect books and records, to designate
the contents required m reports on financial matters by banks and to take action where deposrts are
considered to be at risk. Bank lending activities In the Federal Republic of Germany are regulated closely
under the German Banking Law (Kreditwesengesetz) (the "Banking Law"), as amended most recently on
October 24, 1994 The Banking Law and directrves of the European Union, of which Germany IS a
member, contain provisions on solvency, long-term lending and investments The Banking Law also
contains hrmts on large loans to individual borrowers Compliance with and enforcement of these
regulations are supervised through extensive reportmg requirements In addition, Commerzbank is subject
to extensive regulation by the countnes In which It operates.
The Los Angeles branch of Commerzbank IS licensed by the Commissioner of Financial
Institunons (t1te "Commissroner"), is subject to the banking laws of the State of California and is examined
by the State of California Department of Financial Institutions. Commerzbank's branches in Chicago and
New York are subject to similar regulation by the states in which they operate. In addition to being
subject to state laws and regulations, Commerzbank is also subject to federal regulation under the
International Banking Act and, through the International Banking Act, the Bank Holding Company Act
THIS PAGE INTENTIONALLY LEFT BLANK