NEWISSUE BOOK-ENTRYONLY

In the opinion of Brown & ~ d . San FrancISco, California, and Kennedy & wasserman, Oakland, California, Co-Bond Counsel. based on
eXistingstatutes, regulations, rulings andJudiCial deCISions and assummg compliance by the Agency with certam covenants descnbed herein
and with the reqUIrements of the Internal Revenue Code of 1986. as amended, regarding the use. expenditure and Investment of bond
proceeds and the /lmely payment of certain Investment earnIngs to the United States.Interest on the 1992A Bonds ISnot Includable In the gross
Income of tne owners of the 1992A Bonds for federal ,ncome tax purposes Co-Bond Counsel are further of the opInion that Interest on the
1992ABonds Will not be treated as an Item of tax preference In calcula/lng altema/lve munmumtaxable Income of mdlVlduals and corporations.
however, such Interest Will be Included as an adlustment In the calculation of corporate alterna/lve minimum taxable Income and may therefore
affect a corporeuon: alternative tmmmum tax and enVIronmental tax liabilitIes Co-Bond Counsel are also of the opinion that Interest on the
1992A Bonds ISexempt from present State of CalIfornia personal Income taxes See "TAX EXEMPTION" herem
$53,600,000
Redevelopment Agency of the City of Oakland
Central District Redevelopment Project
Subordinated Tax Allocation Refunding Bonds, Series 1992A
Dated: Date of Delivery Due: september 1, 2019
The bonds whIch cornpnse the Issue descnbedherem(the "1992A Bonds") are bemg Issued by the Redevelopment Agencyof the City of
Oakland(the"Agency") to refunda portion of theAgency'sCentral Dlstllct Redevelopment Project TaxAllocatIonBond, Serres 1989A(the "Pnor
Bond"). The Pnor Bond was ISSUed In September 1989to fmance the Redevelopment Project (as defined herein)
The 1992A Bonds are being ISSUed as $26,800,000 aggregate pnncpat amount of Penodlc Auchon Reset Secuntles (PARSs
M
) and
$26,800.000aggregatepnnopalamount of InverseFloabng RateSecuntles (INFLOS
sM)
Interest on the 1992ABonds Will be payableon August
25. 1992, and generally on eachhfth Tuesday thereafter. subject to eertam excephonsas descnbed In thiSOffiCIal Statement
The 1992A Bonds will be delivered only III fully regIstered form and, when aumenncated, will be regIsteredIn the nameof Cede & Co as
nomineeof The Deposrtory Trust Company. NewYork, New York ("DTC") IndiVIdual purchasesof the 1992ABonds will be madeIn book-entry
formonly In the pnnclpal amount of $100,000 or any Integral mulbplethereof. BenefiCIal Owners (as defllled herein) of the 1992ABonds will not
receve bond cernncates representing their Interests In the 1992A Bonds purchased, but WIll receive a credrt balance on the books of the
norrunees of such purchasers PnnClpal of and Intereston the 1992A Bonds WIll be paid by the Trustee (hereInafter defined) to DTC, which will
Intum remrt such prrnclpal and Interest to the parncipants In DTC for subsequent disbursementto the BenefICial Owners (as defllled herelll) of
the 1992ABonds.
MATURITY SCHEDULE
$26,800,000 PARS due september 1, 2019
$26,800,000 INFLOS due september 1, 2019
(Price: 100%)
The PARSWIll bear Interestfrom therr date of InItial delivery at a rate of 2 60 percentper annum (plus an IlIIllal Service Chargeas defined
InAppendiX D hereto of 0 28 percent per annum) to andIncludIngAugust 24, 1992, payableon August 25. 1992 The INFLOSWill bear IIIterest
fromtheIr dateof Inmaldeliveryat a rate of approximately 8 98 percent per annumto andIncludingAugust 24, 1992, payableonAugust 25, 1992
Fromand after August 25, 1992, for each approximately thirty-five day Rate Pened, as descrrbed herein, the PARS and the INFLOSWIll
bear Interest at the PARS Rate and the INFLOS Rate. respechvely. determined pnor to each such Rate Penod pursuant to the Auction
Procedures descnbed herein, payable on each Interest Payment Date, as descnbed herem Interest on the PARS (lIIcludlng any applICable
SeMCB Charge) may not exceed approximately 11 736 percent per annum Except as descnbed herem, the ServIce Cnarge (Imhally 028
percent per annum) will be deductedfrom each Interestpayment on the PARS by theTrusteeand applied to pay certain fees Aholder of PARS
orINFLOSmay link such PARSor INFLOS wrthan equal pnnclpal amount of INFLOSor PARS, respecltvely, as descnbed hel'e,n The Interest
rate which WIll be paid on PARSor INFLOS which have been Imked WIll be 5 95 percent per annum and no SerYIce ChargeWill be deducted
The 1992A Bonds are subject to redemption prior to maturrty as descnbed herern and the PARS are subject to mandatory tender for
purchaseas desenoed herein See "THE 1992ABONDS-Redemption"
Payment of the pnncipat of and Interest on the 1992A Bonds as the same shall become due (not Including eccelerauon or redemption,
except mandatory smkmgfund redemphon) IS Insured by a fmanelal guaranty Insurance pohcyto be Issued by
MBIA
SImultaneously WIth the deliveryof the 1992A Bonds
The 1992ABonds arehmrted obhqanonsof theAgencyand are secured by a pledgeof SubordinatedTaxRevenues (as defmedherem) and
certain other funds held by FIrst Trust of Cahfomla, NatIonal ASSOCiatIon, as trustee (the "Trustee") under a Trust Indenture, dated as of July
1, 1992 (the "Indenture"), by and between the Agencyand the Trustee
The 1992A Bonds are not a debt of the City of Oakland, the State of California or any of Its political subdiviSIOns, and neither the
City of oakland, the State of Califonria nor any of its political subdiVisions ISliable thereon. In no event shall the 1992ABonds or any
interest or redemption premium thereon be payable out of any funds or properties other than those of the Agency as set forth In the
Indenture. The 1992A Bonds do not constItute an indebtedness within the meanin9 of any constiturtlonal or statutory debt limitation
or restriction.
Tlus cover page containscertain mtormanon for qUick reference only It ISnot a summary of thiSIssue Investors are advisedto read the
enbreOffICIal Statement to obtain mtorrnanon esseonal to the maklllg of an InformedInvestment decrson
The Senes 1992A Bonds are offered when. as and If Issued, sublect to the approval of the legality thereof by Brown & ~ d . San
FranCISCo, California. and Kennedy & wasserman, Oakland. California, Co-Bond Counsel Certam legal matters are sublect to the approval of
Wendel, Rosen. Black, Dean & Levitan. Oakland, California, counsel to the Underwnters Certam legal matters Will be passed upon for the
Agency by Jayne W Williams, City Attorney of the City of Oakland It ISanticipated that the 1992A Bonds Will be aV8llabie for delivery to DTC
on or about July 23, 1992
Goldman, Sachs & Co.
Dated July 9, 1992
Artemis Capital Group, Inc.
Pryor, McClendon & Counts & Co. Inc.
8M PARS and INFL08 are service marks of Goldman, Sachs & Co
THE CITY COUNCIL AND THE REDEVEWPMENT AGENCY
OF THE CITY OF OAKLAND, CALIFORNIA
One City Hall Plaza
Oakland, California 94612
ELlliU M. HARRIS, Mayor/Chairman
LEO BAZILE, Vice Mayor/Vice Chairman
FRANK H. OGAWA
ALETA CANNON
MARGE GIBSON-HASKELL
RICHARD SPEES
NATIIAN MILEY
MARY MOORE
WILSON C. Rll..ES, JR.
HENRY L. GARDNER, City Manager/Agency Administrator
ARRECE JAMESON, City Clerk/Agency Secretary
GARY BREAUX, Director of Finance/Agency Treasurer
JAYNE W. WILLIAMS, City Attorney/Agency Counsel
JULIA BROWN, Director, Office of Economic Development and Employment
ANTOINETTE HEWLETT, Director, Office of Community Development
SPECIAL SERVICES
CO-BOND COUNSEL
Brown & Wood
San Francisco, California
TRUSTEE
Kennedy & Wasserman
Oakland, California
First Trust of California, National Association
San Francisco, California
CD-FINANCIAL ADVISORS
Public Financial Management, Inc.
San Francisco, California
Henderson Capital Partners, Inc.
Oakland, California
No dealer, broker, salesperson or other person has been authorized by the Agency, the
City of Oakland or the Underwriters to give any information or to make any representations,
other than those contained herein, and, if given or made, such other information or represen-
tations 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 1992ABonds by a person in any jurisdiction in which it is unlawful for such
person to make such an offer, solicitation or sale.
This Official Statement is not to be construed as a contract with the purchasers of the
1992A Bonds. Statements contained in this Official Statement that involve estimates, forecasts
or matters of opinion, whether or not expressly so described herein, are intended solely as such
and are not to be construed as representations of fact.
The information set forth herein has been obtained from official sources which are
believed to be reliable, but it is not guaranteed as to accuracy or completeness, and is not to be
construed as a representation by the Underwriters. The information and expressions of opinions
herein are subject to change without notice, and neither delivery of this Official Statement nor
any sale made hereunder shall, under any circumstances, create any implication that there has
been no change in the affairs of the City or the Agency since the date hereof. All summaries
contained herein of the Indenture or other documents are made subject to the provisions of such
documents and do not purport to be complete state
ments of any or all of such provisions.
This Official Statement is submitted in connection with the sale of the 1992A Bonds
referred to herein and may not be reproduced or used, in whole or in part, for any other
purpose.
IN CONNECTION WITH THIS OFFERING, THE UNDERWRITERS MAY
OVERALLOT OR EFFECT TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE
MARKET PRICE OF THE 1992A BONDS AT A LEVEL ABOVE TIlAT WHICH MIGHT
OTHERWISE PREVAIL IN THE OPEN MARKET, AND SUCH STABILIZING, IF
COMMENCED, MAY BE DISCONTINUED AT ANY TIME.
i
TABLE OFCONTENTS
OFFICIAL STATEMENT
INTRODUCTION , 1
THE 1992A BONDS , 3
General: Authority for Issuance 3
Description of the 1992A Bonds , 3
Book-Entry-Only System 4
Description of Terms of PARS and INFLOS 6
General , 6
Interest 7
Lmkage ofINFLOS and PARS 8
Master Purchaser's Letter . . . . . . .. 10
Special Considerations for Purchasers of
PARS and INFLQS ........ 11
Mandatory Tender of PARS 12
Redemption Provisions . . . . . . . . . . " 13
PLAN OF REFUNDING 16
ESTIMATED SOURCES AND USES OF
PROCEEDS OF THE 1992A BONDS " 17
SECURITY FOR THE 1992A BONDS. . . . 17
General 17
Subordinated Tax Revenues " 18
Deposit into 1992A Reserve Account . " 21
Issuance of Parity Obligations 21
Historical and Current Tax Revenues . .. 22
Municipal Bond Insurance . . . . . . . . " 24
DEBT SERVICE SCHEDULE . . . . . . . .. 27
RISK FACTORS 28
LIMITATIONS ON TAX REVENUES AND
POSSIBLE SPENDING LIMITATIONS. 29
Property Tax limitations: Article XIllA. 29
Implementing Legislation 31
Property Tax Collection Procedures . . " 32
Property Tax Admimstranve Costs .... 33
Taxing Entity Revenue . . . . . . . . . . .. 34
Business Inventory Exemption/Special
Subvention . .. .. . .. .. . .. 34
Unitary Property 35
Recent Limitation on Tax Revenues .. " 36
Tax Increment limitation . . . . . . . . " 36
Appropriations Li1Illtations: Article XIIIB of
the Callforma ConstItution 36
Low- and Moderate-Income Housing 37
Limitation on Tax Imposition " 38
ii
THE CITY AND THE AGENCY . . . . . .. 39
The City of Oakland .. . .. . . .. . ... 39
The Redevelopment Agency of the City of
Oakland............. .. .... 4Q
The PCOJect Area and the Projects . . . .. 40
Ln3GATION .................. 42
TAX EXEMPTION ............. " 42
RATINGS 43
VERIFICATION OF MATHEMATICAL
COMPUTATIONS. . . . . . . . . . . . .. 43
APPROVAL OF LEGAL PROCEEDINGS. 43
UNDERWRITING 44
CO-FINANCIAL ADVISORS 44
MISCELLANEOUS 44
APPENDIX A - DESCRIPTION OF 11IE
CITY OF OAKLAND " A-I
APPENDIX B - 11IE REDEVELOPMENT
AGENCY OF THE CITY OF OAKLAND B-1
APPENDIX C - THE REDEVELOPMENT
AGENCY OF THE CITY OF OAKLAND -
AUDITED FINANCIAL STATEMENTS -
FOR THE FISCAL YEAR ENDED
JUNE30, 1991 .............. C-l
APPENDIX D - SUMMARY OF CERTAIN
PROVISIONS OF THE INDENTURE. D-l
APPENDIX E - FORM OF OPINION OF
CO-BOND COUNSEL. . . . . . . .. E-l
APPENDIX F - FORM OF MUNICIPAL
BOND INSURANCE POllCY . . . . .. F-l
APPENDIX G - FORM OF MASTER
PURCHASER'S LETTER G-l
OmCIAL STATEMENT
$53,600,000
Redevelopment Agency of the City of Oakland
Central District Redevelopment Project
Subordinated Tax Allocation Refunding Bonds, Series 1992A
INTRODUCTION
The purpose of this Official Statement, which includes the cover page, table of contents
and appendices hereto (the "Official Statement"), is to provide information about the
$53,600,000 Redevelopment Agency of the City of Oaldand Central District Redevelopment
Project Subordinated Tax Allocation Refunding Bonds, Series 1992A (the "1992A Bonds" or
the "Bonds"), to be issued by the Redevelopment Agency of the City of Oakland (the"Agency")
to refund a portion of the Agency's Central District Redevelopment Project Tax Allocation
Bond, Series 1989A, issued under the Indenture of Trust, dated as of August 1, 1989, by and
between the Agency and Bankers Trust Company of California, National Association, as trustee
(the "1989 Agency Indenture") in the original principal amount of $92,399,272.85 and presently
outstanding in the aggregate original principal amount of $88,359,272.85 (the "Prior Bond").
The Prior Bond was purchased when issued and is currently held by First Trust of
California, National Association (successor to Bankers Trust Company of California, National
Association), as trustee (the" 1989 LGFA Bond Trustee") under the Indenture of Trust, dated
as of August 1, 1989, by and between the Local Government Finance Authority (the "LGFA")
and the 1989 LGFA Bond Trustee (the" 1989 LGFA Bond Indenture"). The payments by the
Agency of principal of and interest on the Prior Bond are the principal security for the 1989
Refunding Revenue Bonds (Redevelopment Agency of the City of Oakland - Central District
Redevelopment Project Subordinate Financing) (the "1989 LGFA Bonds") issued under the 1989
LGFA Bond Indenture. The proceeds of the 1992A Bonds will be applied towards the
redemption of a portion of the Prior Bond. Such amount will in tum be used by the 1989 LGFA
Bond Trustee to redeem a corresponding principal amount of the 1989 LGFA Bonds.
The 1992A Bonds are being issued as $26,800,000 aggregate principal amount of
Periodic Auction Reset Securities (PARS) and $26,800,000 aggregate principal amount of
Inverse Floating Rate Securities (lNFLOS). The 1992A Bonds shall mature in the years and
amounts and bear interest at the rates as set forth on the cover page. See "THE 1992A
BONDS." THE OFFERING OF THE PARS IS CONTINGENT ONTHE OFFERING OF THE
INFLOS.
The City of Oakland (the "City") is located on the east side of San Francisco Bay and
was incorporated as a city in 1854. The City's charter (the "Charter") was substantially revised
in 1969 to take advantage of what is now Section 7 of Article XI of the Constitution of the State
of California. The City, acting pursuant to the California Community Redevelopment Law
(Section 33,000 et seq. of the Health and Safety Code) (the "Redevelopment Law"), created the
Agency in 1956 and, effective December 31, 1975, the City Council of the City (the "City
Council") declared itself to be the Agency. Although the Agency is an entity distinct from the
City, certain City personnel provide staff support for the Agency. For additional information
concerning the City and the Agency, respectively, see "APPENDIX A - DESCRIPTION OF
THE CITY OF OAKLAND" and "APPENDIX B - TIm REDEVELOPMENT AGENCY OF
THE CITY OF OAKLAND. "
Pursuant to the Redevelopment Law, the Agency and the City have adopted a
redevelopment plan (the "Plan") and created the Central District Redevelopment Project (the
"Project"). The Project covers an area of more than 200 blocks located in the central business
district of Oaldand (the "Project Area"). Within the Project Area there are three main
redevelopment activity areas: City Center, Chinatown and Old Oakland, which together comprise
a total of 21 blocks and surround the City's convention center/hotel development.
The 1992A Bonds are being issued pursuant to a Trust Indenture, dated as of July 1,
1992 (the "Indenture"), by and between the Agency and First Trust of California, National
Association, as Trustee (the "Trustee"). The 1992A Bonds are being issued in accordance with
the Redevelopment Law and Article 11 of Chapter 3 of Part 1 of Division 2 of Title 5 of the
California Government Code (commencing at Section 53580; the "Refunding Law") and other
applicable laws and the Constitution of the State of California.
Pursuant to the Redevelopment Law, a portion of all property tax revenues collected by
or for each taxing agency on any increase in the taxable value of certain property within the
Project Area over that shown on the assessment roles for the base year applicable to the Project
Area, may be pledged to the repayment of indebtedness incurred by the Agency in connection
with redevelopment in the Project Area. Under the Indenture, the Agency has pledged
Subordinated Tax Revenues (as defined herein) consisting of a portion of such tax increments
(exclusive of amounts pledged to certain outstanding bonds of the Agency payable prior to the
1992A Bonds and amounts which may be required by the Redevelopment Law to be set aside
for certain low- and moderate-income housing purposes, if any, and special subvention revenue,
if any) to the payment of the principal of, premium, if any, and interest on the 1992A Bonds.
(See "SECURITY FOR TIm 1992A BONDS - Subordinated Tax Revenues" herein.)
Payment of the principal of and interest on the Bonds when due (other than by reason of
any redemption, except for mandatory sinking fund redemptions, or any acceleration of the due
date of principal) will be insured by a financial guaranty insurance policy (the "Bond Insurance
Policy") issued by Municipal Bond Investors Assurance Corporation simultaneously with the
delivery of the Bonds. (See "SECURITY FOR THE 1992A BONDS - Municipal Bond
Insurance" herein.)
Capitalized terms used but not defined herein shall have the respective meanings ascribed
to them in the Indenture. Summaries of the Indenture and other documents contained herein are
subject to the provisions of such documents and do not purport to be complete statements of any
2
or all of such provisions. Reference is hereby made to such documents on file with the Agency
for further information in connection therewith.
THE 1992ABONDS
General: Authority for Issuance
The 1992A Bonds have been authorized by Resolutions adopted by the Agency and the
City Council of the City on June 30, 1992, and are being issued in accordance with the
provisions of the Indenture, the Redevelopment Law, the Refunding Law and other applicable
laws and the Constitution of the State of California.
Description of the 1992ABonds
General. The 1992A Bonds are being issued as $26,800,000 aggregate principal amount
of Periodic Auction Reset Securities (PARS) and $26,800,000 aggregate principal amount of
Inverse Floating Rate Securities (lNFLOS). The 1992A Bonds shall mature i(I the years and
amounts and bear interest at the rates as set forth on the cover page.
Interest on the 1992A Bonds will be payable on August 25, 1992, and generally on each
fifth Tuesday thereafter, subject to certain exceptions as described herein.
The 1992A Bonds are issuable in the form of fully registered bonds without coupons in
the denomination of $100,000 or any integral multiple thereof. The 1992A Bonds, when issued,
will be registered in the name of Cede & Co. as a registered owner and nominee of The
Depository Trust Company, New York, New York ("DTC"). DTC will act as a securities
depository for the 1992A Bonds. Individual purchases may be made in book-entry-only form
only. Purchasers will not receive certificates representing their beneficial ownership interest in
the 1992A Bonds so purchased. So long as Cede & Co. is the registered owner of the 1992A
Bonds, as nominee of DTC, references therein to the Holders or Bondholders shall mean Cede
& Co. and shall not mean the "Beneficial Owners" of the 1992A Bonds (provided that certain
of the terms of the 1992A Bonds relating to the Auction Procedure may involve Beneficial
Owners directly as described in Appendix D hereto). In this Official Statement, the term
"Beneficial Owner" or "purchaser" shall mean the person for whom the DTC participant
acquires an interest in the 1992A Bonds. See "THE 1992A BONDS - Book-Entry-On1y
System" herein.
Place of Payment. Principal and premium, if any, on the 1992A Bonds will be payable
at the corporate trust office of the Trustee in San Francisco, California. Interest on the 1992A
Bonds will be payable to the holders thereof registered as of the close of business on the second
Business Day preceding such Interest Payment Date (the "Record Date") by check mailed to
each holder to the address shown on the registration books maintained by the Trustee. Any
interest not punctually paid shall cease to be payable to the Bondholders on the Record Date and
3
shall be paid to the person whose name is registered on the Special Record Date (as defined in
the Indenture).
Book-Entry-Only System
The 1992A Bonds when executed and delivered will be registered in the name of Cede
& Co., as "Bond Owner" and nominee of The Depository Trust Company, New York, New
York ("DTC"). So long as DTC, or its nominee, Cede & Co., is the registered owner of all
1992A Bonds, all payments on the 1992A Bonds will be made directly to DTC, and
disbursement of such payments, to the hereinafter described DTC Participants will be the
responsibility of DTC, and disbursement of such payments to the persons for whom a DTC
Participant acquires an interest in the 1992ABonds (individually, a "Beneficial Owner") will be
the responsibility of the DTC Participants as more fully described herein.
DTC is a limited-purpose trust company organized under the laws of the State of New
York, a member of the Federal Reserve System, a "clearing corporation" within the meaning
of the New York Uniform Commercial Code and a "clearing agency" registered pursuant to the
provisions of Section 17A of the Securities Exchange Act of 1934, as amended. DTC was
created to hold securities of its participants (the "DTC Participants") and to facilitate the clear-
ance and settlement of securities transactions among DTC Participants in such securities through
electronic book-entry changes in accounts of the DTC Participants, thereby eliminating the need
of physical movement of securities certificates. DTC Participants include securities brokers and
dealers, banks, trust companies, clearing corporations and certain other organizations, some of
whom (or their representatives) own DTC. Access to the DTC system is also available to others
such as banks, brokers, dealers and trust companies that clear through or maintain a custodial
relationship with a DTC Participant, either directly or indirectly.
Ownership interests in the 1992A Bonds may be purchased by or through DTC
Participants. Such DTC Participants and the Beneficial Owners will not receive 1992A Bonds,
but each DTC Participant will receive a credit balance in the records of DTC in the amount of
such DTC Participant's interest in 1992A Bonds, which will be confirmed in accordance with
DTC's standard procedures. Each Beneficial Owner may desire to make arrangements with such
DTC Participant to receive a credit balance in the records of such DTC Participant, and may
desire to make arrangements with such DTC Participant to have all notices of redemption or
other communications to DTC, which may affect such persons, forwarded in writing by such
DTC Participant and to have notification made of all interest payments. NEITHER THE
AGENCY NOR THE TRUSTEE WILL HAVE ANY RESPONSffiILITY OR OBLIGATION
WITH RESPECT TO THE PAYMENTS TO OR THE PROVIDING OF NOTICE FOR SUCH
DTC PARTICIPANTS OR THE PERSONS FOR WHOM THEY ACT AS NOMINEES WITH
RESPECT TO THE 1992ABONDS NOR ANY OBLIGATIONTO MAINTAINDTC'S BOOK
ENTRY SYSTEM. DTC WILL NOT BE DEEMED AN AGENT OF THE AGENCY OR THE
TRUSTEE FOR ANY PURPOSE, AND NEITHER THE AGENCY NOR THE TRUSTEE
WILL BE RESPONSffiLE FOR THE ACTIONS OF DTC.
4
With respect to 1992A Bonds registered in the name of DTC or its nominee, Cede &
Co., neither the Agency nor the Trustee will have any responsibility or obligation to any DTC
Participant or to any person on behalf of whom such a DTC Participant holds an interest in
1992A Bonds. Without limiting the scope of the immediately preceding sentence, the Agency,
the Paying Agent and the Trustee will have no responsibility or obligation with respect to (i) the
accuracy of the records of DTC, Cede & Co. or any DTC Participant with respect to any
ownership interest in the 1992A Bonds, (ii) the delivery to any DTC Participant or any other
person, other than a Bond Owner as shown in the registration books kept by the Trustee, of any
notice with respect to the 1992ABonds, including any notice of redemption, (iii) the selection
by DTC of the beneficial interests in the 1992ABonds to be redeemed, if any, (iv) the payment
to any DTC Participant or any other person, other than a Bond Owner as shown in the
registration books kept by the Trustee, of any amount with respect to the Bonds or (v) any
consent given or other action taken by DTC or Cede & Co. as Owner of the Bonds. The Agency
and the Trustee may treat and consider each Bond Owner as shown in the registration books kept
by the Trustee as the holder and absolute owner of 1992A Bonds registered in such person's
name for the purpose of payment of principal of and interest on such 1992A Bonds, for the
purpose of giving notice of redemption and other matters with respect to such 1992A Bonds, for
the purpose of registering transfers with respect to such 1992A Bonds, and for all other purposes
whatsoever. The Trustee will pay all principal of and interest on and purchase price of the
1992ABonds only to the Bond Owners, as shown in the registration books kept by the Trustee,
and all such payments will be valid and effective to fully satisfy and discharge the Agency's
obligations with respect to payment of principal of and interest on the 1992ABonds to the extent
of the sum or sums so paid.
SOLONG AS CEDE & CO. IS THE REGISTERED OWNER OF THE 1992ABONDS,
AS NOMINEE OF DTC, REFERENCES HEREIN TO A "BOND OWNER" OR "OWNER
OF BONDS" MEAN CEDE & CO. AS AFORESAID, AND SHALL NOT MEAN THE
BENEFICIAL OWNERS OF THE 1992A BONDS.
DTC will receive payments from the Trustee to be remitted to the DTC Participants for
subsequent disbursement to the Beneficial Owners. The ownership interest of each Beneficial
Owner in the 1992A Bonds will be recorded through the records of the DTC Participants, the
ownership interests of which, in tum, are recorded through a computerized book-entry system
operated by DTC.
Upon receipt of moneys, DTC's current practice is immediately to credit the amounts of
the DTC Participants in accordance with their respective holdings shownon the records of DTC.
Payments by DTC Participants to Beneficial Owners will be governed by standing instructions
and customary practices, as is now the case with municipal securities held for the accounts of
customers in bearer form or registered in "street name," and will be the responsibility of such
DTC Participant and not of DTC, the Trustee or the Agency, subject to any statutory and
regulatory requirements as may be in effect from time to time.
5
When reference is made to any action which is required or permitted to be taken by the
Beneficial Owners, such reference shall only relate to action by such Beneficial Owners or those
permitted to act (by statute, regulation or otherwise) on behalf of such Beneficial Owners for
such purposes. When notices are required or deemed appropriate to be given, they will be sent
by the Trustee to DTC only and not to the Beneficial Owners. DTC will forward (or cause to
be forwarded) the notices to the DTC Participants so that DTC Participants may forward (or
cause to be forwarded) the notices to the Beneficial Owners.
Beneficial Owners will receive a written confirmation of their purchase, detailing the
terms of the 1992A Bonds acquired. Transfers of ownership interests in the 1992A Bonds will
be accomplished by book entries made by DTC and by the DTC Participants who act on behalf
of the Beneficial Owners. Beneficial Owners will not receive 1992A Bonds in physical form.
For every transfer and exchange of interest in the 1992A Bonds, the Beneficial Owners
thereof may be charged a sum sufficient to cover any tax, fee or other governmental charge that
may be imposed in relation thereto.
DTC may determine to discontinue providing its services with respect to the 1992A
Bonds at any time by giving notice to the Agency and discharging its responsibilities with respect
thereto under applicable law. Under such circumstances, unless another securities depository is
selected, 1992A Bonds will be made available in physical form. The Beneficial Owners, upon
registration of 1992A Bonds held in their name, will become the Owners of such 1992A Bonds.
The Agency may in its sole discretion determine to discontinue the system of book-entry
transfers through DTC (or a successor securities depository). In such event, the 1992A Bonds
will be made available in physical form.
Description of Terms of PARS and INFLOS
The following description of the PARS and the INFLOS is intended to summarize certain
basic provisions with respect thereto. For a more complete discussion of the PARS and the
INFLOS, including specifically the Auction Procedures, and for definitions of certain capitalized
terms used herein, see Appendix D hereto. The Indenture provides that the rights granted to the
Owners of the PARS and INFLOS therein relating to the Auction Procedures, mandatory tender
provisions and certain other provisions may be exercised by owners of beneficial interests in
such securities. To that extent, each reference herein to the purchase, sale or holding of PARS
and INFLOS shall refer to beneficial interests in PARS and INFLOS, unless the context clearly
requires otherwise.
General
The PARS and INFLOS will be dated their date of delivery, will mature on September I,
2019, and will bear interest from their date payable on each Interest Payment Date. Such Interest
Payment Dates will be (i) August 25, 1992, and (ii) every fifth Tuesday thereafter, the maturity
6
date for any of the PARS and INFLOS and the sinking fund payment date for any of the PARS
or INFLOS called for redemption on such sinking fund payment date; provided, however, that
if any such fifth Tuesday or the Wednesday succeeding such fifth Tuesday is not a Business Day,
then the Interest Payment Date will be the Business Day next preceding such fifthTuesday which
Business Day is followed by a Business Day. The Record Date for each Interest Payment Date
for the PARS and the INFLOS will be the second Business Day immediately preceding such
Interest Payment Date.
Interest
PARS. The PARS will bear interest for each Rate Period at the PARS Rate, which will
be computed on the basis of a 36O-dayyear for the number of days actually elapsed as described
in Appendix D. The PARS Rate will be 2.60 percent per annum plus a Service Charge of 0.28
percent for the Rate Period commencing on the Delivery Date to and including August 24, 1992,
and thereafter will equal the sum of (a) the Auction Rate determined for each Rate Period in
accordance with the Auction Procedures, as described in Appendix D, and (b) the Service
Charge in effect for such Rate Period. Notwithstanding the foregoing, (i) if the Auction Agent
shall have failed to determine the Auction Rate for any Rate Period (including the circumstance
where there is no Auction Agent or no Broker-Dealer), the PARS Rate for such Rate Period
shall be the No Auction Rate determined for such Rate Period plus the Service Charge then in
effect; (ii) if a failure to pay principal, interest or premium on any Bond when due shall have
occurred under the Indenture, the PARS Rate for the Rate Period during which such failure shall
have occurred and each Rate Period thereafter commencing prior to the date on which such
failure shall have ceased to be continuing shall be the Default Rate for such Rate Period plus the
Service Charge; and (iii) in no event shall the PARS Rate exceed the lesser of 11.73698632
percent per annum or the maximum interest rate permitted by applicable law.
Service Charge. The Service Charge with respect to any Auction Date is the sum of the
Auction Agent Fee and the Broker-Dealer Fee with respect to such Auction Date. The Auction
Agent Fee and the Broker-Dealer Fee are payable out of each interest payment on the Regular
PARS and Special Linked PARS and INFLOS. The Owner of each Regular PARS and Special
Linked PARS and INFLOS by its acceptance thereof expressly consents to the deduction by the
Trustee of the Service Charge from the interest payment to be paid to such Owner on each
Interest Payment Date. The Owners of Linked PARS and INFLOS and of Special PARS are not
obligated to pay the Service Charge, and there is no deduction of the Service Charge with
respect to Linked PARS and INFLOS or Special PARS. See "Linkage oflNFLOS and PARS"
below. Each Owner of PARS and INFLOS, by its acceptance thereof, acknowledges that in the
event the Service Charge is not deducted, but is paid to such Owner, in a case in which the
Service Charge is owed, the Broker-Dealers (for themselves and on behalf of the Auction Agent)
are entitled to collect such Service Charge from the Owners who owe such Service Charge.
On each Interest Payment Date, the Trustee is to pay to the Auction Agent and the
Broker-Dealer the Auction Agent Fee and the Broker-Dealer Fee from the Service Charge.
7
The initial Service Charge is 0.28 percent per annum. The Auction Agent Fee Rate and
the Broker-Dealer Fee Rate may beadjusted from time to time with the approval of the Agency
and the Trustee upon a written request of the Auction Agent or a Broker-Dealer, as the case may
be, delivered to the Agency and the Trustee. Pursuant to the Indenture, the Agency and the
Trustee shall approve such a request if they find that the proposed Auction Agent Fee Rate or
Broker-Dealer Fee Rate, as the case may be, equals the prevailing rate received by such entities
for rendering comparable services to others. Notice of any change in the Auction Agent Fee Rate
or the Broker-Dealer Fee Rate is to be mailed to all Owners of PARS and INFLOS by the
Auction Agent at least six Business Days prior to the Submission Deadline for the Auction to
which any such fee is applicable.
Any increase in the Auction Agent Fee Rate or the Broker-Dealer Fee Rate would reduce
the amount of interest payable on the INFLOS. See "Special Considerations for Purchasers of
PARS and INFLOS" below.
INFLOS. The INFLOS will bear interest for each Rate Period at the INFLOS Rate, which
will be computed on the basis of a 365-day year for the number of days actually elapsed. The
INFLOS Rate will be approximately 8.98 percent per annum from the Delivery Date to and
including August 27, 1992 and for each Rate Period thereafter will equal
(a) 11.90 percent per annum minus
(b) the product of (A) the PARS Rate for such Rate Period, and (B) 365/360.
Notwithstanding the foregoing, (i) if the calculation of the INFLOS Rate would produce
an interest rate in excess of the maximum lawful rate of interest, then the INFLOS Rate shall
be equal to such maximum lawful rate of interest, and (ii) the aggregate amount of interest
payable on the INFLOS for any Rate Period shall not exceed twice the Linked Rate minus the
aggregate amount of interest payable on the PARS for such Rate Period.
Linkage of INFLOS and PARS
Linking-Rate Lock Option. An Owner may link INFLOS with an equal principal amount
of Regular PARS or Special PARS by purchasing such INFLOS and Regular PARS or Special
PARS and requesting:
(a) its Direct Participant to deliver such INFLOS and Regular PARS or Special
PARS free of charge by book-entry transfer from such Direct Participant's account at DTC into
the Auction Agent's special account at DTC; and
(b) its Broker-Dealer to deliver a Linkage Request to the Auction Agent.
HOWEVER, EXCEPT ASPROVIDED UNDER "MANDATORYTENDER OFPARS"
BELOW, INFLOS AND REGULAR PARS OR SPECIAL PARS MAY NOT BE LINKED
8
DURING EACH PERIOD (i) COMMENCING IMMEDIATELY PRIOR TO THE OPENING
OF BUSINESS ON THE DELIVERY DATE AND ENDING IMMEDIATELY PRIOR TO
THE OPENING OF BUSINESS ON THE FIRST INTEREST PAYMENT DATE, (ii)
COMMENCING AT 11:00 A.M., NEW YORK CITY TIME, ON THE THIRD BUSINESS
DAY IMMEDIATELY PRECEDING ANY INTEREST PAYMENT DATE AND ENDING
IMMEDIATELY PRIOR TO THE OPENING OF BUSINESS ON SUCH INTEREST
PAYMENT DATE, AND (iii) COMMENCING IMMEDIATELY PRIOR TO THE OPENING
OF BUSINESS ON THE SECOND BUSINESS DAY NEXT PRECEDING THE DATE ON
WHICHA LOTTERY IS HELD TOSELECT PARS AND INFLOS FORREDEMPTION AND
ENDING IMMEDIATELY PRIOR TO THE OPENING OF BUSINESS ON THE DATE
FIXED FOR SUCH REDEMPTION (A "CLOSED PERIOD").
IN ADDmON, IF AT ANY TIME THE INFLOS AND PARS ARE NO LONGER
EACH REPRESENTED BY A GLOBAL BOND REGISTERED IN THE NAME OF DTC OR
ITS NOMINEE, INFLOS AND PARS MAY NOT BE LINKED. ANY LINKED PARS AND
INFLOS AND ANY SPECIAL LINKED PARS AND INFLOS WILL THEREUPON AUTO-
MATICALLY BECOME UNLINKED AND THE SERVICE CHARGE WILL BE ASSESSED
AGAINST EACH PARS.
The Auction Agent is to redeliver free of charge by book-entry transfer to the account
at DTC of the Direct Participant specified in the Linkage Request the INFLOS and Regular
PARS or Special PARS which have been delivered to the Auction Agent for linkage. When such
INFLOS and Regular PARS or INFLOS and Special PARS are redelivered, the beneficial
ownership of the resulting Special Linked PARS and INFLOS and Linked PARS and INFLOS,
respectively, is to berecorded at DTC under separate CUSIP numbers.
Owners of Linked PARS and INFLOS and Special Linked PARS and INFLOS at the
close of business on the Record Date immediately preceding any Auction Date may not partici-
pate (as to such securities) in the Auction held on such Auction Date and are not obligated to
pay the Service Charge with respect to such Auction; provided that Owners of Special Linked
PARS and INFLOS are obligated to pay the Service Charge for the Auction immediately
preceding the date of linkage thereof which Service Charge will bededucted on the first Interest
Payment Date following the date of linkage.
Linked PARS and INFLOS and Special Linked PARS and INFLOS may only be
transferred as linked securities in minimum denominations of $200,000 ($100,000 principal
amount of INFLOS and $100,000 principal amount of PARS) and integral multiples thereof.
Linked PARS and INFLOS and Special Linked PARS and INFLOS are not subject to the
Auction Procedures and therefore are not subject to the transfer restrictions set forth in the
Master Purchaser's Letter. See Appendix G hereto.
Breaking Linkilge of INFLOS and PARS. An Owner of Linked PARS and INFLOS or
Special Linked PARS and INFLOS may break such linkage at any time, other than during a
Closed Period, by requesting:
9
(a) its Direct Participant to deliver such Linked PARS and INFLOS or Special
Linked PARS and INFLOS free of charge by book-entry transfer from such Direct Participant's
account at DTC into the Auction Agent's special account at DTC; and
(b) its Broker-Dealer to deliver a Request to Break Linkage to the Auction Agent.
In addition, prior to the breaking of such linkage, unless already delivered, such Owner or its
Broker-Dealer will be required to sign and deliver a Master Purchaser's Letter to the Auction
Agent. See "Master Purchaser's Letter" below.
The Auction Agent is to redeliver free of charge by book-entry transfer such linked
PARS and INFLOS or Special Linked PARS and INFLOS from its special account at DTC to
the account at DTC of the Direct Participant specified in the Request to Break Linkage. When
such Linked PARS and INFLOS or Special Linked PARS and INFLOS are redelivered, the
beneficial ownership of the resulting Special PARS and INFLOS, and PARS and INFLOS,
respectively, is to be recorded at DTC under a separate CUSIP number.
The Existing Owner of Special PARS will receive interest on such Special PARS for the
Rate Period during which such Special PARS have become unlinked from Linked PARS and
INFLOS at the PARS Rate then in effect without any Service Charge deduction.
Rejecting INFLOS and PARS. If the Auction Agent receives a Linkage Request or a
Request to Break Linkage and does not receive delivery freeof charge of the related INFLOS
and PARS from the Direct Participant identified in such request prior to the beginning of the
Closed Period next following the receipt thereof by the Auction Agent, the Auction Agent is
directed to reject such INFLOS and PARS, thereby effecting the book-entry transfer of such
INFLOS and PARS from the special account of the Auction Agent at DTC into the account of
such Direct Participant at DTC. As a result, the requested linkage or the requested breaking of
linkage, as the case may be, will not be made.
Master Purchaser's Letter
As a condition to purchasing PARS which are not linked to INFLOS, in any Auction or
otherwise, each prospective purchaser of PARS may be required to sign and deliver to a
Broker-Dealer (who will deliver copies thereof to the Auction Agent), a Master Purchaser's
Letter in the form included as Appendix G to this Official Statement.
Linked PARS and INFLOS and Special Linked PARS and INFLOS will not be subject
to the transfer restrictions contained in the Master Purchaser's Letter and may be transferred to
a person who has not signed a Master Purchaser's Letter.
Each prospective purchaser of PARS should ask its Broker-Dealer whether such pro-
spective purchaser should sign a Master Purchaser's Letter. If the Broker-Dealer submits Orders
10
for such prospective purchaser listing the Broker-Dealer as the Existing Owner or the Potential
Owner, a Master Purchaser's Letter signed by such prospective purchaser may not be required.
AN EXECUTIONFORMOF THE MASTER PURCHASER'S LEITER, lWOCOPIES
OF WHICH ARE TO BE SENT TO THE AUCTION AGENT AND ONE COPY OF WIDCH
IS TO BE SENT TO A BROKER-DEALER, IS INCLUDED AS APPENDIX G TO THIS
OFFICIAL STATEMENT. EXECUTION BY A PROSPECTIVE PURCHASER OR ITS
BROKER-DEALER OF A MASTER PURCHASER'S LETTER IS NOT A COMMITMENT
TO PURCHASE PARS IN THE OFFERING BEING MADE HEREBY OR IN ANY
AUCTION, BUT IS A CONDmON PRECEDENT TO PURCHASING PARS.
Special Considerations for Purchasers of PARS and [NFLOS
Prospective purchasers of INFLOS should note the following with respect to the
INFLOS:
Because the interest rate on the INFLOS will be determined by subtracting the
PARS Rate (which includes the Service Charge) from a fixed amount, the interest rate on the
INFLOS will:
decrease as the PARS Rate increases, and increase as the PARS Rate decreases.
As a result, the interest rate on the INFLOS will be approximately zero if the PARS Rate
is equal to 11.73698632 percent per annum.
The PARS Rate may be affected by the ratings assigned by S&P and Moody's to the
1992A Bonds. In the event of a downgrading of the rating on the 1992A Bonds, the Maximum
Rate may increase and the Minimum Rate may increase, which may result in an increase in the
PARS Rate and a decrease in the interest rate on the INFLOS. The PARS Rate may also be
affected by any matter that might cause participants in the PARS Auctions to submit bids for
PARS at higher interest rates.
Except as described under "Mandatory Tender of PARS" below, in order to link
INFLOS with PARS, an Owner of INFLOS must have purchased a like amount of PARS to be
linked. See "Linkage of INFLOS and PARS" above. The Agency is not obligated to provide
PARS to an Owner of INFLOS who desires to link PARS with INFLOS held by such Owner.
An Owner of INFLOS may be able to acquire PARS by bidding in the next succeeding Auction
for the PARS (normally every 35 days), provided that the Existing Owners of the PARS do not
submit Hold Orders covering all of the PARS in the Auction. In such event, no PARS would
be available for purchase at any rate bid by such Owner of INFLOS in that Auction. See
"Auction Procedures" in Appendix D hereto. An Owner of INFLOS might be able to purchase
PARS in the secondary market through a Broker-Dealer prior to the next scheduled Auction for
PARS; however, an active secondary market for PARS is not expected to develop.
11
Initially, Goldman, Sachs & Co. will be the sole Broker-Dealer and has advised the
Agency that it intends initially to make a market for INFLOS and for PARS between Auctions;
however, Goldman, Sachs & Co. is not obligated to make such markets, and no assurance can
be given that secondary markets therefor will develop.
The Indenture provides that the Auction Agent may resign from its duties as Auction
Agent or resign as a Direct Participant in DTC by giving at least 90 days' notice to the Trustee
(who shall give notice of the same to each Broker-Dealer, DTC and the Agency), and does not
require, as a condition to the effectiveness of such resignation, that a replacement Auction Agent
be in place. The Broker-Dealer Agreement provides that the Broker-Dealer thereunder may
resign upon five Business Days notice or immediately, in certain circumstances, and does not
require, as a condition to the effectiveness of such resignation, that a replacement Broker-Dealer
be in place. For any Rate Period during which there is no duly appointed Auction Agent or
during which the Auction Agent shall fail to become a Direct Participant in DTC, or during
which there is no duly appointed Broker-Dealer, it will not be possible to hold Auctions, with
the result that the interest rate on the PARS will be the No Auction Rate plus the Service
Charge. In addition, for any period during which there is no duly appointed Auction Agent or
during which the Auction Agent shall fail to be a Direct Participant in DTC, no linkage or
breaking of linkage of INFLOS and PARS will be possible.
The Service Charge is applied to pay the Auction Agent Fee and the Broker-Dealer Fee.
Such fees are subject to increase as discussed above under "Interest - Service Charge." Any
such increase will be binding upon the Owners of INFLOS and will reduce the amount of
interest to be received by such Owners.
Mandatory Tender of PARS
Any Owner of INFLOS may, at any time and from time to time before the Submission
Deadline for an Auction Date, notify a Broker-Dealer that such Owner intends to submit a Bid
for a specified principal amount of PARS at the Minimum Rate on the next succeeding Auction
Date in order to link the same with such Owner's INFLOS and that if such Bid is unsuccessful,
such Broker-Dealer shall, on behalf of such Owner, require through the Trustee that PARS be
tendered to such Owner for purchase and linkage on the seventh Business Day preceding the next
succeeding Auction Date following the Auction in which such Bid was unsuccessful (a "Tender
Date") at a price equal to the principal. amount of PARS being purchased plus accrued and
unpaid interest to the Tender Date less the amount of the Service Charge for the period to the
Tender Date, in the following manner and with the following effect.
Tender Demand. If such Bid is unsuccessful, in whole or in part, such Broker-Dealer is
to give DTC and the Auction Agent written notice (a "Tender Demand") of such tender stating
that such INFLOS Owner is the Owner of a specified principal amount of INFLOS and that such
Owner wishes to purchase an equal principal amount of PARS on the Tender Date for linkage
with such INFLOS. Any Tender Demand shall be given to DTC no later than the Business Day
following the Auction in which such Bid proved unsuccessfuL
12
Tender Notices. On the second Business Day following the day of DTC's receipt of a
Tender Demand, DTC is to select the PARS to be tendered on such Tender Date by lot and give
the Direct Participant and the Auction Agent written notice (a "Tender Notice") thereof
specifying the Tender Date, the amount of PARS to be tendered by such PARS Owner or
Owners on the Tender Date and the purchase price therefor. Such Tender Notice shall be mailed
to such Direct Participant and the Auction Agent by first class mail, postage prepaid, no later
than the second Business Day following the day of DTC's receipt of such Tender Demand.
Tender and Purchase. DTC is to deliver the PARS specifiedin the Tender Notice against
payment therefor by the Broker-Dealer by book-entry transfer on the Tender Date to the account
of the Broker-Dealer without any action on the part of or on behalf of the Owner or Owners of
the PARS. Upon receipt of such PARS on the Tender Date, the Broker-Dealer is to deliver such
PARS against payment therefor by book-entry transfer to the account of the Direct Participant
specified by the INFLOS Owner if such Direct Participant is not such Broker-Dealer. On such
Tender Date the Owner of such INFLOS is obligated to forward such purchase price to the
Direct Participant of such INFLOS Owner by wire transfer. Upon such purchase, the INFLOS
specified in such Tender Demand and the PARS specified in such Tender Notice will become
Special Linked PARS and INFLOS.
Failed Purchase. In the event that any INFLOS Owner who has submitted a Tender
Demand fails to provide funds for the purchase of the principal amount of the PARS specified
therein on the Tender Date specified therein, the purchase of such PARS shall not take place on
such Tender Date, such INFLOS Owner shall have no liability to the Owner or Owners of the
PARS tendered for purchase on such Tender Date or to any other person for such purchase price
or for any other amount, and such PARS shall be deemed to be subject to a Submitted Sell
Order for purposes of the next succeeding Auction.
Effect of Tender Notice. The giving of a Tender Notice shall supersede any order given
by the Existing Owner or Exisnng Owners of the PARS specified therein with respect to the
Auction occurring on the Auction Date following the Tender Date specified in such Tender
Notice.
Redemption Provisions
Optional Redemption - PARS. The PARS are subject to redemption prior to their stated
maturity, at the option of the Agency, from any source of available funds, as a whole or in part
on any Interest Payment Date, by lot, at a redemption price equal to 100 percent of the principal
amount of the PARS called for redemption, without premium.
13
Optional Redemption - INFLOS. The INFLOS are subject to. redemption prior to their
stated maturity, at the option of the Agency, from any source of available funds, as a whole or
in part on any Interest Payment Date, by lot, on or after September 1, 2002, at the following
redemption prices (computed upon the principal amount of INFLOS called for redemption).:
Redemption Period
(Both Dates Inclusive)
September 1, 2002 to August 31, 2003
September 1, 2003 to August 31, 2004
September 1, 2004 and thereafter
Redemption
Price
104%
102%
100%
Mandatory Redemption - 1992A Bonds. The PARS and INFLOS are subject to
redemption prior to maturity, in part, by lot from sinking fund payments required by the
Indenture at the principal amount thereof, without premium, as shown below:
PARS
Redemption Dates
(September 1)
1993
1994
1996
1998
2000
2002
2003
2005
2007
2009
2010
Principal Amount
of PARS to be
Redeemed
100,000
100,000
100,000
100,000
100,000
100,000
100,000
100,000
100,000
200,000
2,000,000
14
Redemption Dates
(September 1)
2011
2012
2013
2014
2015
2016
2017
2018
2019
Principal Amount
of PARS to be
Redeemed
2,000,000
2,200,000
2,300,000
2,500,000
2,600,000
2,800,000
2,900,000
3,100,000
3,300,000
Final Maturity
INFLOS
Redemption Dates
CSe,ptemberl>
1993
1994
1996
1998
2000
2002
2003
2005
2007
2009
2010
Principal Amount
of INFLOS to be
Redeemed
100,000
100,000
100,000
100,000
100,000
100,000
100,000
100,000
100,000
200,000
2,000,000
Redemption Dates
<September 1)
2011
2012
2013
2014
2015
2016
2017
2018
2019
Principal Amount
of INFLOS to be
Redeemed
2,000,000
2,200,000
2,300,000
2,500,000
2,600,000
2,800,000
2,900,000
3,100,000
3,300,000
Final Maturity
Money in the Principal Account may be used to purchase 1992A Bonds in lieu of
redemption.
Conditions to All Redemptions of PARS and INFLOS. No redemption of PARS or
INFLOS prior to their maturity may occur unless an equal principal amount of both PARS and
INFLOS in denominations of $100,000 or any integral multiple thereof are simultaneously
redeemed or delivered to the Trustee for cancellation.
The aggregate amount of PARS and INFLOS to be redeemed in part shall be selected
from PARS and INFLOS which are linked together and from PARS and INFLOS which are not
linked together proportionately in accordance with the relative amounts of PARS and INFLOS
which are and are not linked together as of a record date to be selected by the Trustee.
PARS and INFLOS cannot be linked or unlinked, as described above under "- Descrip-
tion of Terms of PARS and INFLOS - Linkage of INFLOS and PARS," during the period
commencing at the close of business on the record date selected by the Trustee for redemption
and ending on the date fixed for redemption.
Selection of PARS and INFLOS For Redemption. If less than all of the PARS and
INFLOS shall be called for redemption, the lottery to select the particular PARS and INFLOS
shall be held as follows:
(i) in the case of a mandatory redemption as provided above, on the first Business
Day prior to the September 1 on which such mandatory redemption shall take place; and
15
(ii) in the case of an optional redemptionas provided above, on the first Business
Day prior to the Interest Payment Date preceding the Interest Payment Date on which such
optional redemption shall take place.
Notice of Redemption. Notice will be mailed not less than 30 nor more than 60 days
before the date fixed for redemption (or, if later, as soon as practicable following the selection
of PARS and INFLOS for redemption) to the registeredowners of any 1992ABonds designated
for redemption, but failure to mail such notice or any defect therein with respect to any
particular 1992A Bond will not affect the validity of the proceedings for the redemption of any
other 1992A Bonds. See "THE 1992A BONDS - Book-Entry-Only System." Notice of
redemption shall also be mailed to certain securitiesdepositories and bond information services.
Failure to mail any such notice or any defect therein will not affect the validity of the
proceedings for the redemption of any 1992A Bonds.
PLAN OF REFUNDING
To refund a portion of the Prior Bond in the principal amount of $53,600,000, the
proceeds of the 1992A Bonds and certain amounts to be transferred from the reserve account
established by the 1989 Agency Indenture will be used to purchase direct obligations of, or
obligations which are unconditionally guaranteed by the United States of America (the
"Defeasance Securities"). The principal of and interest on the Defeasance Securities, when due,
will be sufficient to redeem the principal of and accrued interest on, the portion of the Prior
Bonddue on September 1, 2019, in the principal amount of $51,600,000, and to pay, when due,
a portion of the principal of, and interest accrued on, the portion of the Prior Bond due on
September 1, 1992, in the principal amount of $2,000,000 (the "Refunded Portion"). The
Refunded Portion (not otherwise maturing on such date) will be called for redemption on
September 1, 1992, at a redemptionprice of 100% of the principal amount thereof, plus accrued
interest to the redemption date.
The Defeasance Securities will be deposited with the Trustee in accordance with the
provisions of the 1989 Agency Indenture and will be held in trust and utilized by the Trustee to
redeem the Refunded Portion. Upon such deposit, which will be made upon the delivery of the
1992A Bonds, the Refunded Portion will be deemed paid and no longer outstanding under the
1989 Agency Indenture.
16
FSTIMATED SOURCFS AND USFS OF PROCEEDS OF THE 1992A BONDS
The following table presents the estimated sources and uses of funds of the 1992ABonds:
Sources
Par Amount of 1992A Bonds
1989 Reserve Fund
TOTAL
Uses
Deposit to Escrow Account
Deposit to Redevelopment Fund
Underwriters' Discount
Costs of Issuance
TOTAL
SECURITY FOR THE 1992A BONDS
General
$53,600,000.00
4,440,284,87
$58,040,284.87
$55,330,992.90
1,315,673,97
553,688.00
840,000.00
$58,040,284.87
The Redevelopment Law authorizes the financing of redevelopment projects through the
use of tax increment revenues. This method provides that the taxable valuation of the property
within a project area on the property tax roll last equalized prior to the effective date of the
ordinance that adopts the redevelopment plan becomes the base year valuation. Thereafter, the
increase in taxable valuation becomes the increment upon which taxes are levied and allocated
to the applicable agency, Redevelopment agencies have no authority to levy taxes, but must
instead look to this allocation of tax revenues to finance their activities.
Under the Redevelopment Law and Section 16 of Article XVI of the Constitution of the
State of California, taxes on all taxable property in a project area levied by or for the benefit of
the State, any city, county, district or other public corporation (the "Taxing Agencies") when
collected are generally divided as follows:
(i) An amount each year equal to the amount that would have been produced by
the then current tax rates applied to the assessed valuation (including assessed valuation
attributable to business inventory under Statutes of 1980, Chapter 610) of such property within
the project area last equalized prior to the effective date of the ordinance approving the
redevelopment plan will be paid into the funds of the respective Taxing Agencies; and
(ii) Taxes (including all payments, reimbursements and subventions, if any,
specifically attributable to ad valorem taxes lost by reason of tax exemptions and tax rate
limitations) received over and above the amount described in paragraph (i) above are deposited
17
in a special fund of the applicable agency to pay the principal of and interest on loans, moneys
advanced to or indebtedness incurred by the applicable agency to finance or refinance the project.
In 1986 the Agency issued its Redevelopment Agency of the City of Oakland Central
District Redevelopment Project Tax Allocation Refunding Bonds, Series 1986 in the original
principal amount of $91,555,000 (the "Superior Bonds"). The Superior Bonds have a lien on
Gross Tax Revenues prior to that of the 1992A Bonds. The Superior Bonds are currently
outstanding in the amount of $90,582,515.00. In addition, the Prior Bond is payable on a parity
from Subordinated Tax Revenues with the 1992A Bonds and any additional Parity Obligation
issued in accordance with the Indenture. The Prior Bond will be outstanding in the principal
amount of $39,759,277.85 as of the date of delivery of the 1992A Bonds.
The Agency currently has $12,989,659 on deposit in the Redevelopment Fund established
under the 1989 Agency Indenture. The Agency intends to use these moneys on the
redevelopment projects described herein under the caption "THE CITY AND THE AGENCY
- The Project Area and the Projects." As described below, such moneys, so long as they
remain on deposit in the Redevelopment Fund, are pledged to the payment of the principal of
and interest on the 1992A Bonds and the Parity Obligations.
Subordinated Tax Revenues
All Subordinated Tax Revenues and all money in the Special Fund and in the funds or
accounts so specified and provided for in Jhe Indenture (including all amounts in the
Redevelopment Fund established under the 1989 Agency Indenture) are irrevocably pledged to
the punctual payment of the interest on, principal of and redemption premiums, if any, on the
1992A Bonds and all Parity Obligations, and the_Subordinated Tax Revenues and such other
money shall not be used for any other purpose while-the 1992ABonds or the Parity Obligations
remain outstanding except as provided in the Indenture. This pledge constitutes a first and
exclusive lien, subject to certain provisions of the Indenture, on the Subordinated Tax Revenues
and such other money for the payment of the 1992A Bonds and all Parity Obligations in
accordance with the terms thereof. This pledge shall not be deemed to constitute a lien on the
Superior Bonds Tax Revenue, except Superior Bonds Tax Revenue released from the Surplus
Account held under the Superior Bonds Indenture. All the Subordinated Tax Revenues, together
with any interest earned thereon, shall be deposited when and as received by the Agency in the
"Redevelopment Agency of the City of Oakland Central District Redevelopment Project 1989A
Special Fund" (established under the 1989 Agency Indenture and herein called the "Special
Fund"), which is continued by the Agency and which fund the Agency covenants and agrees to
maintain with the Trustee as trustee so long as 1992A Bonds shall be outstanding.
"Subordinated Tax Revenues" means, as defined in the Indenture, for each Bond Year
beginning with the Bond Year ending September 1, 1992, the Gross Tax Revenues, after (i) the
deposit of Superior Bonds Tax Revenue as required under the Superior Bonds Resolution has
been made to the fiscal agent for the Superior Bonds and (ii) provision has been made for the
amount of such taxes required to pay the Housing Set-Aside so long as such Housing Set-Aside
18
is legally required to be paid prior to the payments on the 1992A Bonds or any Parity
Obligations, but such taxes shall be deemed to be Subordinated Tax Revenues for purposes of
the pledge and lien created under the Indenture only up to an amount that is equal to (a) one
hundred fifteen percent (115%) of the Annual Debt Service for the Bond Year (excluding for
purposes of such calculation payments with respect to Superior Bonds but including a credit for
earnings on investments of funds held pursuant to the Indenture) plus (b) amounts, if any,
necessary to be deposited in the 1989A Reserve Account or the 1992A Reserve Account to
maintain the required balance in such accounts during such Bond Year.
The Agency covenants and agrees under the Indenture, that all Subordinated Tax
Revenues when and as received, will be received by the Agency in trust and will be immediately
deposited by the Agency with the Trustee in the Special Fund and will be accounted for through
and held in trust in the Special Fund and the Agency shall have no beneficial right or interest
in any of such money, except only as provided in the Indenture.
All moneys in the Special Fund are set aside by the Trustee in the following respective
special accounts within the Special Fund (each of which is continued or created under the
Indenture and each of which the Agency covenants and agrees to cause to be maintained), in the
following order of priority:
First: On or before each Interest Payment Date commencing on August 25, 1992, the
Trustee shall set aside from the Special Fund and deposit in the Interest Account an amount of
money which, together with any money contained therein, is equal to the aggregate amount of
the interest becoming due and payable on the 1992A Bonds on such Interest Payment Date. No
deposit need be made into the Interest Account if the amount contained therein is at least equal
to the aggregate amount of the interest becoming due and payable on the 1992A Bonds on such
Interest Payment Date. The Trustee shall also set aside any amounts necessary to pay interest
on any Parity Obligations on the applicable interest payment dates for such obligations. All
moneys in the Interest Account shall be used and withdrawn by the Trustee solely for the
purpose of paying interest on the 1992A Bonds (and any Parity Obligations) as it shall become
due and payable (including accrued interest on the 1992A Bonds and any Parity Obligation
purchased or redeemed prior to maturity).
Second: On or before September 1 of each year, commencing September 1, 1993, the
Trustee shall set aside from the Special Fund and deposit in the Principal Account an amount
of money which, together with any money contained therein, is equal to the aggregate amount
of the principal becoming due and payable on the 1992A Bonds and any Parity Obligations on
such September 1 by way of maturity or early redemption.
No deposit need be made into the Principal Account if the amount contained therein is
at least equal to the aggregate amount of the principal of the 1992A Bonds (and any Parity
Obligations) becoming due on such September 1.
19
All money in the Principal Account shall be used and withdrawn by the Trustee solely
for the purpose of making principal payments on the 1992A Bonds and any Parity Obligations.
In the event that there are insufficient moneys in the Special Fund to make in full all principal
payments under the 1992A Bonds and all Parity Obligations required to be made at anyone
time, then the available money shall be applied pro rata to the making of such principal
payments in the proportion which all such principal payments bear to each other.
Third: On or before each Interest Payment Date the Trustee shall set aside from the
Special Fund and deposit in the 1992A Reserve Account an amount necessary to bring the
balance therein up to the Bond Reserve Requirement and any amounts necessary to reimburse
the Reserve Surety for a draw on the Reserve Account Insurance Policy. All money in the
1992A Reserve Account shall be used and withdrawn by the Trustee solely for the purpose of
(i) paying principal, premium, if any, and interest on the 1992A Bonds in the event no other
moneys are available therefor, (ii) reimbursement of the Reserve Surety for draws on the
Reserve Account Insurance Policy and (iii) making the final payment of principal on the 1992A
Bonds, except that for so long as the Agency is not in default hereunder, any amount in the
1992A Reserve Account in excess of the Bond Reserve Requirement may, upon the request of
the Agency, be withdrawn from the Reserve Account by the Trustee and transferred to the
Surplus Account. In addition, the Trustee shall deposit any amounts required to be deposited into
the 1989A Reserve Account pursuant to the 1989 Agency Indenture or any amounts necessary
to maintain a reasonable reserve fund for any Parity Obligations.
Fourth: On May 15 of each year, beginningon May 15, 1993, the Trustee shall set aside
and deposit in the Surplus Account all amounts held in the Special Fund in excess of the sum
of (i) payments of the interest on and principal of the 1989 Agency Bond required to be paid
under the 1989 Agency Indenture on the followingSeptember 1, and (ii) an amount equal to the
principal and interest payable on the 1992A Bonds and any Parity Obligations through and
including the Interest Payment Date next succeeding the following September l, plus (iii) the
amount, if any, necessary to maintain the required balance in the 1989A Reserve Account and
the 1992A Reserve Account, provided that (i) if Subordinated Tax Revenues in an amount equal
to at least one hundred fifteen percent (115%) of Annual Debt Service for the then current Bond
Year (after credit for investment earnings transferred or expected to be transferred to the Special
Fund) plus an amount, if any, necessary to maintain the required balance in the 1989A Reserve
Account and the 1992AReserve Account as of the date of such determination has been deposited
in the Special Fund during such Bond Year, and (ii) if Subordinated Tax Revenues in an amount
equal to at least one hundred fifteen percent (115%) of Annual Debt Service for the next Bond
Year (after credit for investment earnings transferred or expected to be transferred to the Special
Fund) plus an amount, if any, necessary to maintain the required balance in the 1989A Reserve
Account and the 1992A Reserve Account is anticipated to be deposited in the Special Fund
during such Bond Year (as evidenced by a Certificate of the Agency), and (iii) if the Agency is
not then in default hereunder (as evidenced by a Certificate of the Agency), then all such excess
shall be transferred to the Agency for use by it for any lawful purpose and none of such excess
shall be deposited in the Surplus Account. All money in the Surplus Account shall be used and
withdrawn by the Trustee solely for the purpose of replenishing the Interest Account or the
20
Principal Account or the 1989A Reserve Account and the 1992A Reserve Account, in such
order, in the event of any deficiency at any time in any of such accounts, or for the purpose of
paying the interest on or principal of or redemption premiums, if any, on the 1992A Bonds (and
Parity Obligations) in the event that no other money of the Agency is lawfully available therefor,
or for the retirement (together with other available money) of the 1992A Bonds or the 1989
Agency Bond in full. All moneys in the Surplus Account on May 15 of each year in which no
money is required by this paragraph to be deposited in the Surplus Account shall be withdrawn
from the Surplus Account and transferred to the Agency for use by it for any lawful purpose.
Deposit into 1992A Reserve Account
Pursuant to the Indenture, the Agency is required to deposit and maintain in the 1992A
Reserve Account an amount equal to the Bond Reserve Requirement. The Bond Reserve
Requirement may be satisfied by the deposit of a policy of insurance or other credit device
payable in the amount of the Bond Reserve Requirement into the 1992A Reserve Account. See
Appendix D hereto for the definition of "Bond Reserve Requirement." Concurrently with the
delivery of the 1992A Bonds, the Agency intends to deposit a Reserve Account Insurance Policy
payable in an amount equal to the Bond Reserve Requirement into the 1992A Reserve Account.
Such Reserve Account Insurance Policy shall be issued by Municipal Bond Investors Assurance
Corporation ("MBIA"). See "Municipal Bond Insurance" below for a description of MBIA.
Issuance of Parity Obligations
So long as any 1992A Bonds remain Outstanding the Agency shall not issue or incur any
obligations payable from Gross Tax Revenues or the Surplus Account established pursuant to
the Superior Bonds Resolution prior to the 1992A Bonds, other than refunding bonds with
respect to the Superior Bonds (and any refunding of such refunding bonds) which do not result
in increased debt service in any Bond Year (as defined in the Superior Bonds Resolution); and
without limiting the foregoing, so long as any 1992A Bonds remain Outstanding the Agency
shall not issue any Additional Bonds pursuant to the Superior Bonds Resolution, other than such
refunding bonds. The Agency may at any time incur or issue notes, bonds or other obligations
(including reimbursement agreements or other credit facility arrangements) the payments of
which are payable on a parity with the payment by the Agency of the 1992A Bonds from
Subordinated Tax Revenues provided that there is first delivered to the Trustee a Certificate of
the Agency (upon which the Trustee may conclusively rely) stating that, assuming such proposed
Parity Obligation had been incurred as of the first day of the prior Bond Year, Net Subordinated
Tax Revenues received by the Agency in the prior Bond Year would have equalled or exceeded
one hundred twenty percent (120%) of Maximum Annual Debt Service (excluding for purposes
of this calculation payments on Superior Bonds) and provided further that if such Parity
Obligations are variable rate obligations (either direct or derivative), the Agency has obtained
the prior written consent of the Surety. In addition, the Agency may issue refunding obligations
to refund Parity Obligations which do not result in increased debt service in any Bond Year.
21
Historical and Current Tax Revenues
The Agency's primary source of funds to make payments of principal of, premium, if
any, and interest on the Superior Bonds, the Prior Bond and the 1992A Bonds is the Agency's
share of ad valorem property tax revenues which result from the completion of new real estate
developments and a general reassessment of properties within the Project Area.
The purpose of redevelopment is to revitalize deterioratedor underdevelopedareas within
a community. As new construction progresses, property values normally increase and the
ultimate result is a proportionate increase in ad valorem property tax revenues.
The total taxable value of all properties within a given project area on the property
assessment roll last equalized prior to the effective date of the ordinance adopting the
redevelopment plan for such project area establishes a base from which increases in taxable
value are computed. The base so established for the Project Area is the 1968-1969 assessment
roll. When assessment rolls were converted in California to reflect full value assessments, the
base for the Project Area was also converted and is now actually maintained in the 1982-83
assessment roll of the County of Alameda (the "County"). Under the Redevelopment Law,
property taxes levied based upon the amount shown on the base year assessment rolls will
continue to be paid to and retained by all taxing agencies levying property taxes in the Project
Area. Taxes levied by the respective taxing agencies on any increases in taxable value realired
in the Project Area will be allocated to the Agency.
It should be understood that this procedure does not involve the levy of any additional
taxes, but provides that revenues produced by the tax rates in effect from year to year shall be
apportioned to the taxing agencies levying the taxes and to the Agency on the basis described
above. After all loans, advances and other indebtedness, including interest, incurred by the
Agency in connection with the Project Area have been paid, the tax revenues will be paid to and
retained by the respective taxing agencies in the normal manner.
22
Table 1 below presents the taxable value of all property within the Project Area for fiscal
years ended June 30, 1987, through 1991 and estimated taxable value for fiscal year ending
June 30, 1992.
TABLE 1
CENTRAL DIS1'RICT REDEVELOPMENT PROJECT AREA PROPERTY TAXABLE VALUES
(OOO's omitted)
Estimated
1986-87 1987-88 1988-89 1989=90 1990=91 1991-92
Secured Property
Assessed Values:
CountyRolls $1,141,125 $1,319,118 $1,303,255 1,416,321 1,591,203 1,738,238
State Unitary Property' 365,077 363,300 1.275
1
3,223 3,329 3,009
Total Secured
Assessed Values $1,506,202 $1,682,418 $1,304,530 $1,419,544 $1,594,532 $1,741,247
Unsecured Assessed Values $ 234,982 $ 296,860 $ 289.592 $ 318.516 5281.932 $ 280,852
Total Assessed Value $1,741,184 $1,979,278 $1,594,122 $1,738,060 $1,876,464 $2,022,099
Base Year Values:
Secured $ 353,828 $ 353,828 $ 214,107 $ 214,111 $214,111 $214,111
Unsecured 61,017 61,017 61,017 61,130 61,130 61,130
Increase Over
Base-Year Values:
Secured $1,152,374 $1,328,590 $1,090,423 $1,205,433 $1,380,421 $1,527,137
Unsecured 173,965 235,843 228,575 257,386 220,803 219,722
Secured Tax Rate
2
1.2617% 1.2563% 1.2434% 1.2397% 1.2260% 1.2376%
Unsecured Tax Rate
2
1.2725% 1.2617% 1.2563% 1.2434% 1.2397% 1.2260%
1 State UDitary property values are not computed by project area. In 1988-89, the County of Alameda decreased the
assessed value (including BaseYear Value) to exclude the Unitary Property Tax Assessment. The County, however,
makes a payment of tax increment to the Agency which is comparable to the amount formerly received as from the
State UDitary Property Tax .Assessment. (See "LIMITATIONS ON TAX REVENUES AND POSSIBLE SPENDING
LIMITATIONS - Unitary Property. ")
2 Decline in tax rate attributable to payment of debt of entitles within the County of Alameda,
Source: Redevelopment Agency of the City of Oakland.
23
Table 2 below reflects historical Gross Tax R.evenues based on fiscal years ending
June 30, 1985, through 1991 taxable values. To date, the County has paid to the Agency the
full amount of Gross Tax Revenues requested by the Agency, without regard to delinquencies
in tax collections.
TABLE 2
REDEVELOPMENT AGENCY OF THE CITY OF OAKLAND
CENTRAL DISI'RICT REDEVELOPMENT PROJECT AREA TAX REVENUES
Tax Increment, Exduding Subventions
(IlOO's omitted)
Estimated
1985-86 198--87 1987-88 1988=89'- 1989-90 1990-21 1221-22
Tax Increment Revenue:
Secured Property $ 12,593 $ 14,540 $16,691 $ 13,558 $ 14,944 $ 16,924 $ 18,900
Unsecured Property 1,057 2,213 2,976 2,872 3,200 2,737 2,694
Unitary Property
-
- - 3.714 3.224 3.329 3.009
- -
-
Total Tax
Increment Revenue $ 13,650 $ 16,753 $ 19,667 $ 20,144 $ 21,368 $ 22,990 $ 24,603
Includes payment by the County of Alameda to compensate for decreased taxable value due to excluding unitary tax
assessment from assessed value.
Municipal Bond Insurance
The following information has been furnished by Municipal Bond Investors Assurance
Corporation (the "Insurer" or "MBIA") for use in this Official Statement. Reference is made to
Appendix F for a specimen of the Insurer's policy.
The Insurer's policy unconditionally and irrevocably guarantees the full and complete
payment required to be made by or on behalf of the Agency to the Trustee or its successor of
an amount equal to (i) the principal of (either at the stated maturity or by an advancement of
maturity pursuant to a mandatory sinking fund payment) and interest on, the 1992A Bonds as
such payments shall become due but shall not be so paid (except that in the event of any
acceleration of the due date of such principal by reason of mandatory or optional redemption or
acceleration resulting from default or otherwise, other than any advancement of maturity
pursuant to a mandatory sinking fund payment, the payments guaranteed by the Insurer's policy
shall be made in such amounts and at such times as such payments of principal would have been
due had there not been any such acceleration); and (ii) the reimbursement of any such payment
which is subsequently recovered from any owner of the 1992A Bonds pursuant to a final
judgment by a court of competent jurisdiction that such payment constitutes an avoidable
preference to such owner within the meaning of any applicable bankruptcy law (a "Preference").
The Insurer's policy does not insure against loss of any prepayment premium which may
at any time be payable with respect to any 1992A Bond. The Insurer's policy does not, under
any circumstance, insure against loss relating to: (i) optional or mandatory redemptions (other
24
than mandatory sinking fund redemptions); (ii) any payments to be made on an accelerated basis;
or (iii) any Preference relating to (i) and (ii) above. The Insurer's policy also does not insure
against nonpayment of principal or Accreted Value of or interest on the 1992A Bonds resulting
from the insolvency, negligence or any other act or omission of the Trustee or any other paying
agent for the 1992A Bonds.
Upon receipt of telephonic or telegraphic notice, such notice subsequently confirmed in
writing by registered or certified mail, or upon receipt of written notice by registered or certified
mail, by the Insurer or its designee from the Trustee or any owner of a 1992A Bond the
payment of an insured amount for which is then due, that such required payment has not been
made, the Insurer on the due date of such payment or within one business day after receipt of
notice of such nonpayment, whichever is later, will make a deposit of funds, in an account with
Citibank, N.A., in New York, New York, or its successor, sufficient for the payment of any
such insured amounts which are then due. Upon presentment and surrender of such 1992A
Bonds or presentment of such other proof of ownership of the 1992A Bonds, together with any
appropriate instruments of assignment to evidence the assignment of the insured amounts due
on the 1992A Bonds as are paid by the Insurer, and appropriate instruments to effect the
appointment of the Insurer as agent for such owners of the 1992A Bonds in any legal proceeding
related to payment of insured amounts on the 1992A Bonds, such instruments being in a form
satisfactory to Citibank, N.A., Citibank, N.A. shall disburse to such owners or the Trustee
payment of the insured amounts due on such 1992A Bonds, less any amount held by the Trustee
for the payment of such insured amounts and legally available therefor.
MBIA is the principal operating subsidiary of MBIA Inc., a New York Stock Exchange
listed company. MBIA Inc. is not obligated to pay the debts of or claims against MBIA. MBIA
is a limited liability corporation rather than a several liability association. MBIA is domiciled
in the State of New York and licensed to do business in all 50 states, the District of Columbia
and the Commonwealth of Puerto Rico.
As of December 31, 1990, MBIA had admitted assets of $1.5 billion (audited), total
liabilities of $1.2 billion (audited) and total capital and surplus of $579 million (audited)
determined in accordance with statutory accounting practices prescribed or permitted by
insurance regulatory authorities. As of December 31, 1991, MBIA had admitted assets of $2.0
billion (audited), total liabilities of $1.4 billion (audited) and total capital and surplus of $647
million (audited) determined in accordance with statutory accounting practices prescribed or
permitted by insurance regulatory authorities. Copies of MBIA's year end financial statements
prepared in accordance with statutory accounting practices are available from MBIA. The
address of MBIA is 113 King Street, Armonk, New York 10504.
Moody's Investors Service Inc. rates all bond issues insured by MBIA Aaa and short-
term loans MIG 1, both designated to be of the highest quality.
Standard & Poor's Corporation rates all new issues insured by MBIA AAA Prime Grade.
25
The Moody's Investors Service Inc. rating of MBIA should be evaluated independently
of the Standard & Poor's Corporation rating of MBIA. No application has been made to any
other rating agency in order to obtain additional ratings on the 1992A Bonds. The ratings reflect
the respective rating agency's current assessment of the creditworthiness of MBIA and its ability
to pay claims on its policies of insurance. Any further explanation as to the significance of the
above ratings may be obtained only from the applicable rating agency.
The above ratings are not recommendations to buy, sell or hold the 1992A Bonds, and
such ratings may be subject to revision or withdrawal at any time by the rating agencies. Any
downward revision or withdrawal of either or both ratings may have an adverse effect on the
market price of the 1992A Bonds.
In the event MBIA were to become insolvent, any claims arising under a policy of
financial guaranty insurance are excluded from coverage by the California Insurance Guaranty
Association, established pursuant to Article 14.2 (commencing with Section 1063) of Chapter 1
of Part 2 of Division I of the california Insurance Code.
26
DEBT SERVICE SCHEDULE
Table 3 below projects the annual ratios between the Agency's total debt service
(including payments required to be made by the Agency on the 1992A Bonds) and its available
tax increments from the Project Area (excluding the business inventory subvention and the
maximum amount that may be needed for housing set-aside requirements). The table includes
coverage ratios for each year based upon tax increments in each year in the amount received for
fiscal year ending June 30, 1991.
TABLE 3
Gross Tax Net Tax Revenue Debt Service on
Year Revenue (Based (Based Debt Service on Subordmated Senes 1989A Aggregate
Ending on Fiscal Year on Fiscal Year Series 1986 Tax and Series Coverage
June 30 1990-91)1 1990-91)2 Bonds
Revenues)
1992ABonds" Ratto
1993 $22,990,000 $18,392,000 $7,987,515 $10,404,485 $6,972,357 1.49
1994 22,990,000 18,392,000 7,990,065 10,401,935 7,064,242 1.47
1995 22,990,000 18,392,000 7,996,450 10,395,550 6,962,808 1.49
1996 22,990,000 18,392,000 8,010,175 10,381,825 6,947,889 1.49
1997 22,990,000 18,392,000 8,024,300 10,367,700 7,041,433 1.47
1998 22,990,000 18,392,000 8,029,420 10,362,580 6,936,122 1.49
1999 22,990,000 18,392,000 8,049,840 10,342,160 7,028,248 1.47
2000 22,990,000 18,392,000 8,058,000 10,334,000 6,926,544 1.49
2001 22,990,000 18,392,000 8,053,125 10,338,875 7,011,190 1.47
2002 22,990,000 18,392,000 8,067,500 10,324,500 6,916,702 1.49
2003 22,990,000 18,392,000 8,068,500 10,323,500 6,900,780 1.50
2004 22,990,000 18,392,000 8,100,750 10,291,250 6,991,086 1.47
2005 22,990,000 18,392,000 8,120,500 10,271,500 6,894,238 1.49
2006 22,990,000 18,392,000 8,117,000 10,275,000 6,973,534 1.47
2007 22,990,000 18,392,000 8,125,250 10,266,750 6,882,664 1.49
2008 22,990,000 18,392,000 8,162,625 10,229,375 6,960,982 1.47
2009 22,990,000 18,392,000 8,170,000 10,222,000 7,071,808 1.45
2010 22,990,000 18,392,000 6,892,375 11,499,625 7,026,497 1.64
2011 22,990,000 18,392,000 6,913,875 11,478,125 6,926,763 1.66
2012 22,990,000 18,392,000 6,966,875 11,425,125 6,899,130 1.66
2013 22,990,000 18,392,000 7,011,875 11,380,125 7,056,649 1.61
2014 22,990,000 18,392,000 7,052,000 11,340,000 6,984,692 1.62
2015 22,990,000 18,392,000 0 18,392,000 7,051,086 2.61
2016 22,990,000 18,392,000 0 18,392,000 7,001,722 2.63
2017 22,990,000 18,392,000 0 18,392,000 6,970,177 2.64
2018 22,990,000 18,392,000 0 18,392,000 6,948,494 2.65
2019 22,990,000 18,392,000 0 18,392,000 7,012,066 2.62
1 Does not take into account the potential effect on Gross Tax Revenue the Settlement Agreement with respect to
valuation of umtary property. See "RISK FACTORS - Unitary Property."
2 Net Deposit of 209li of Gross Tax Revenues to Low andModerate Income Housing Fund
3 Represents Net Agency Tax Revenue minus Senes 1986 Bonds' Debt Service.
4 Adjusted for Refunded Series 1989A Bonds.
27
RISK FACTORS
Reduction in Taxable Value. Gross Tax Revenues allocated to the Agency are determined
by the amount of incremental taxable value in the project area and the current rate or rates at
which property in the project area is taxed. The reduction of taxable values of property in the
project area caused by economic factors beyond the Agency's control, such as a relocation out
of a redevelopment project area by one or more major property owners, or the complete or
partial destruction of such property caused by, among other eventualities, an earthquake, flood
or other natural disaster, could cause a reduction in the Subordinated Tax Revenues securing the
1992A Bonds. Such reduction of Subordinated Tax Revenues could have an adverse effect on
the Agency's ability to make timely payments of principal of and interest on and purchase price
of the Bonds secured by such Subordinated Tax Revenues. See "SECURITY FOR TIlE 1992A
BONDS - Principal Taxpayers" for a description of the major property taxpayers within the
Redevelopment Project Area.
Estimated Revenues and Investment ofFunds. To estimate the total Gross Tax Revenues
available to pay debt service on the Bonds, the Agency has madecertain assumptions with regard
to present and future assessed valuation in the Project Area, future tax rates, percentage of taxes
collected and the amount of funds available for investment. The Agency believes these
assumptions to be reasonable, but there is no assurance these assumptions will be realized and
to the extent that the assessed valuation, the tax rates, or the amount of the funds available for
investment, the total Gross Tax Revenues available to pay debt service on the Bonds will be less
than those projected and such reduced Gross Tax Revenues may be insufficient to provide for
the payment of principal of, premium (if any) and interest on the 1992A Bonds. (See
"SECURITY FOR TIlE 1992A BONDS - Tax Revenues and Debt Service" herein.)
Change in the Law. In addition to the other limitations on Gross Tax Revenues described
herein under "LIMITATIONS ON TAX REVENUES AND POSSIBLE SPENDING
LIMITATIONS," the California electorate or Legislature could adopt a constitutional or
legislative property tax decrease with the effect of reducing Gross Tax Revenues payable to the
Agency. There is no assurance that the California electorate or Legislature will not at some
future time approve additional limitations that could reduce the Gross Tax Revenues and
adversely affect the security of the 1992ABonds.
Reductions in Inflationary Rate. As described in greater detail below, Article XIIIA of
the California Constitution provides that the full cash value base of real property used in
determining taxable value may be adjusted from year to year to reflect the inflationary rate, not
to exceed a two percent (2%) increase for any given year, or may be reduced to reflect a
reduction in the consumer price index or comparable local data. Such measure is computed on
a calendar year basis. (See "LIMITATIONS ON TAX REVENUES AND POSSIBLE
SPENDING LIMITATIONS" herein.)
Levy and Collection. The Agency has no independent power to levy and collect property
taxes. Any reduction in the tax rate or the implementation of any constitutional or legislative
28
property tax decrease could reduce the Tax Revenues, and accordingly, could have an adverse
impact on the ability of the Agency to pay debt service on the Bonds secured by the
Subordinated Tax Revenues. Likewise, delinquencies in the payment of property taxes could
have an adverse effect of the Agency's ability to make timely debt service payments. However,
it is current County policy to allocate to the Agency and to taxing entities in the County their
proportionate share of property taxes collected County-wide. Therefore, the receipt of property
taxes by the Agency is based on County-wide collections and not on collections in the
Redevelopment Project Area. In addition, it is current County policy to allocate to the Agency
the Agency's proportionate share of delinquent and redemption property payments, penalties and
interest income.
Development Risks. The Agency's ability to make payments on the Bonds will be
dependent upon the economic strength of the Project Area. The general economy of the Project
Area will be subject to all the risks generally associated with real estate development projects.
Projected development within the Project Area may be subject to unexpected delays, disruptions
and changes. Real estate development operations may be adversely affected by changes in
general economic conditions, fluctuations in the real estate market and interest rates, unexpected
increases in development costs and by other similar factors. Further, real estate development
operations within the Project Area could be adversely affected by future governmental policies,
including governmental policies to restrict or control development. If projected development in
the Project Area is delayed or halted, the economy of the Project Areacould be affected causing
a reduction of the Gross Tax Revenues available to repay the Bonds. In addition, if there is a
decline in the general economy of the Project Area, the owners of property within the Project
Area may be less able or less willing to make timelypayments of property taxes causing a delay
or stoppage of Gross Tax Revenues received by the Agency from the Project Area.
LIMITATIONS ON TAX REVENUES AND
POSSIBLE SPENDING LIMITATIONS
Property Tax Limitations: Article XIllA
California voters, on June 6, 1978, approved an amendment (commonly known as both
Proposition 13 or the Jarvis-Garin Initiative) to the Constitution of the State of California. This
amendment, which added Article XIIIA to the California Constitution, among other things,
affects the valuation of real property to mean "the county assessor's valuation of real 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 two percent (2%) per year or any reductions in the consumer price index or
comparable local date, or any reduction in the event of declining property value caused by
damage, destruction or other factors. The amendment further limits the amount of any ad
valorem tax on real property to one percent (1%) of the full cash value except that additional
taxes may be levied to pay debt service on indebtedness approved by the voters prior to July 1,
1978. In addition, an amendment to Article XIII was adopted in June 1986 by initiative which
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exempts any bonded indebtedness approved by two-thirds of the votes cast by the voters for the
acquisition or improvement of real property from the one percent (1%) limitation.
On September 22, 1978, the California Supreme Court upheld the amendment over
challenges on several state and federal constitutional grounds. Amador Valley Joint Union High
School District v, State Board ofRqualizauon (1978) 22 Cal.3d 208. The Court reserved certain
constitutional issues and the validity of legislation implementing the amendment for future
determination in proper cases.
In the general election held November 4, 1986, voters of the State of California approved
two measures, Propositions 58 and 60, which further amend Article XIllA. Proposition 58
amends Article XIllA to provide that the terms "purchase" and "change of ownership," for the
purposes of determining full cash value of property under Article XIllA, do not include the
purchase or transfer of (1) real property between spouses and (2) the principal residence and the
first $1,000,000 of other property between parents and children. This amendment to Article
XIIIA may reduce the rate of growth of local property tax revenues.
Proposition 60 amends Article XllIA to permit the Legislature to allow persons over the
age of 55 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.
Revenue and Taxation Code Section 69.5 implements Proposition 60. As a result of the
Legislature's action, the growth of property tax revenues may decline.
On January 18, 1989, the United States Supreme Court struck down the practice of a
West Virginia county tax assessor of valuing property based on recent purchase prices but
making only minor modifications in the assessment of land not recently sold. Allegheny
Pittsburgh Coal Co. v, County Commission o/Webster County (1989) 488 U.S. 336, 109 S.Ct.
633. The West Virginia Constitution states that "taxation shall be equal and uniform throughout
the State, and all property, both real and personal, shall be taxed in proportion to its value .... "
The court held that the county assessor's undervaluing of comparable property not recently sold
denied equal protection under the law to the petitioners. In a footnote, the Court stated that it
was not deciding whether the same method of valuing property would stand on a different
footing if it were the law of the state, as it is under Article XllIA of the California Constitution,
rather than "the aberrational local enforcement policy it appears to be [in West Virginia]."
109 S.Ct. at 638, n. 4.
Based on the decision in the West Virginia case, property owners in California brought
three suits challenging the acquisition value assessment provisions of Article XIllA. Two cases
involved residential property, and one case involved commercial property. In all three cases,
state trial and appellate courts have upheld the constitutionality of Article XIllA's assessment
rules and concluded that the West Virginia case did not apply to California's laws. Nordlinger
v, Lynch (1990) 225 Cal.App.3d 1259, R. B. Macy & Co. v, Contra Costa County (1990) 226
Cal.App.3d 352, Northwest Financial, Inc. v, State Board 0/ Equalization (1991) 229
Cal.App.3d 198. On June 3, 1991, the U.S. Supreme Court agreed to hear the appeal in R.B.
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Macy & Co., the challenge relating to commercial property, but the plaintiff subsequently
withdrew its case. On October 7, 1991, the U.S. Supreme Court agreed to hear the appeal in
Nordlinger, a challenge relating to residential property. Nordlinger v, Hahn (1991) 112 S.Ct.
49. On June 18, 1992, the Supreme Court upheld the rulings of the State court in Nordlinger
v, Lynch. Nordlinger v, Hahn. - S.Ct. -, 1992 WL 132447, 92 Daily Journal D.A.R. 8196.
Although it appears that constitutional challenges to Article XllIA are exhausted, the Agency
cannot predict what impact any future developments might have on the Agency's receipt of tax
increment funds.
Implementing Legislation
Legislation enacted by the California Legislature to implement Article XllIA (Statutes
of 1978, Chapter 292, as amended) provides that, notwithstanding any other law, local agencies
may not levy any property tax, except to pay debt service on indebtedness approved by the
voters prior to July 1, 1978, and that each county will levy the maximum tax permitted by
Article XIllA of $4.00 per $100 assessed valuation (based on the traditional practice in Cali-
fornia of using twenty-five percent (25%) of full cash value as the assessed value for tax
purposes). The legislation further provides that, for the 1978-79 fiscal year only, the tax levied
by each county was to be appropriated among all taxing agencies within the county in proportion
to their average share of taxes levied in certain previous years.
The apportionment of property taxes in fiscal years after 1918-79 has been revised
pursuant to Statutes of 1979, Chapter 282 which provides relief funds from State moneys
beginning in fiscal year 1918-79 and is designed to provide a permanent system for sharing State
taxes and budget surplus funds with local agencies. Under Chapter 282, cities and counties
receive about one-third more of the remaining property tax revenues collected under Proposition
13 instead of direct State aid. School districts receive a correspondingly reduced amount of
property taxes, but receive compensation directly from the State and are given additional relief.
Chapter 282 does not affect the derivation of the base levy ($4.00 per $100 assessed valuation)
and the bonded debt tax rate.
Effective as of the 1981-82 fiscal year, assessors in California no longer record property
values in the tax rolls at the assessed value of twenty-five percent (25 %) of market values. All
taxable property is shown at full market value. In conformity with this change in procedure, all
taxable property value included in this Official Statement is shown at one hundred percent
(100%) of market value and all general tax rates reflect the $1 per $100 of taxable value. Tax
rates for bond service and pension liability are also applied to one hundred percent (100%) of
market value.
Future assessed valuation growth allowed under Article XIllA (new construction, change
of ownership, two percent (2%) annual value growth) will be allocated on the basis of "situs"
among the jurisdictions that serve the tax rate area within which the growth occurs except for
certain utility property assessed by the State Board of Equalization ("Unitary Property") which
is allocated by a different method as described under "-Unitary Property" below.
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Property Tax Collection Procedures
Classifications. In California, property which is subject to ad valorem taxes is classified
as "secured" or "unsecured." Secured and unsecured property are entered on separate parts of
the assessment roll maintained by the county assessor.
The secured classification includes property on which any property tax levied by the
County becomes a lien on that property sufficient, in the opinion of the county assessor, to
secure payment of the taxes. Every tax which becomes a lien on secured property has priority
over all other liens on the secured property, regardless of the time of the creation of other liens.
A tax levied on unsecured property does not become a lien against the taxes on unsecured
property, but may become a lien on certain other property owned by the taxpayer.
Collections. The method of collection delinquent taxes is substantially different for the
classifications of property.
The taxing authority has four ways of collecting unsecured property taxes in the absence
of timely payment by the taxpayer: (1) a civil action against the taxpayer; (2) filing a certificate
in the office of the county clerk specifying certain facts in order to obtain a judgment lien on
certain property of the taxpayer; (3) filing a certificate of delinquency for record in the county
recorder's office, in order to obtain a lien on certain property of the taxpayer; and (4) seizure
and sale of the personal property, improvements or possessory interests belonging or assessed
to the assessee.
The exclusive means of enforcing the payment of delinquent taxes with respect to
property on the secured roll is the sale of property securing the taxes to the State for the amount
of taxes which are delinquent.
The County currently allocates property taxes to the Agency based on County-wide
property tax collections. As a result, the Agency shares in the burden of delinquent property
taxes but also receives its proportionate share of delinquent and redemption property tax
payments, penalties and interest income.
Current tax payment practices by the County provide for payment to the Agency of Gross
Tax Revenues on a monthly basis although the first payment to the Agency is not made until
November or December. Except for property tax advances made by the County to the Agency
in December and April, actual payments to the Agency are made on the basis of County-wide
property tax collections. Tax increment generated from debt service tax rates is allocated to the
Agency based on one hundred percent (100%) of the calculated tax levy.
Penalties. A ten percent (10%) penalty is added to delinquent taxes which have been
levied with respect to property on the secured roll. In addition, property on the secured roll on
which taxes are delinquent is sold to the State on or about June 30 of the fiscal year. Such
property may thereafter be redeemed by payment of the delinquent taxes and a delinquency
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penalty, plus a redemption penalty of one and one-half percent (l'h %) per month from the date
of sale to the time of redemption. If taxes are unpaid for a period of five years or more, the
property is deeded to the State and then is subject to sale by the county tax collector.
A ten percent (10%) penalty also applies to delinquent taxes on property on the unsecured
roll, and further, an additional penalty of one and one-half percent (Ph %) per month accrues
with respect to such taxes beginning the first day of the third month following the delinquency
date.
AB 2372 (Chapter 1230, Statutes of 1989) provides that each county is to distribute
property tax revenues to local agencies (such as the Agency) in accordance with certain
provisions of the California Revenue and Taxation Code, but that penalties and interest on
property tax delinquencies are to be deposited in the county's general fund.
Delinquencies. The valuation of property is determined as of March 1 each year and
equal installments of taxes levied upon secured property become delinquent on the following
December 10 and April 10. As described above under "Collections," the Agency currently
receives property taxes with a deduction for delinquencies plus the Agency's proportionate share
of delinquent and redemption property payments, penalties and interest income.
Taxes on secured property are due March 1 and become delinquent August 31.
Supplemental Assessments. A bill enacted in 1983, SB 813 (Chapter 498, Statutes of
1983), provides for the supplemental assessment and taxation of property as of the occurrence
of a change in ownership or completion of new construction. Previously, statues enabled the
assessment of such changes only as of the next March 1 tax lien date following the change and
thus delayed the realization of increased property taxes from the new assessments for up to 14
months. As enacted, Chapter 498 provided increased revenue to redevelopment agencies to the
extent that supplemental assessments as a result of new construction or changes of ownership
occur within the boundaries of redevelopment projects subsequent to the March 1 lien date. To
the extent such supplemental assessments occur within the Redevelopment Project Area, Gross
Tax Revenues may increase.
Property Tax Administrative Costs
In 1990, the State Legislature enacted SB 2557 (Chapter 466, Statutes of 1990) which
allows counties to charge for the cost of assessing, collecting and allocating property tax
revenues to local government jurisdictions on a prorated basis. The provisions of SB 2557 are
not clear as to the inclusion of redevelopment agencies as a local government agency which must
share the cost of property tax administration. It has been the practice of most California
counties, including Alameda County, to reduce an agency's tax increment or bill an agency for
its pro rata share of property tax administrative costs.
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Taxing Entity Revenue
Chapter 147, Statues of 1984, modified Section 33676 of the California Community
Redevelopment Law and allows taxing entities to receive additional property taxes in a
redevelopment project area above the base year revenue amount. Section 33676 allows an
affected taxing entity to elect, by resolution prior to the adoption of a redevelopment plan, to
receive property taxes generated from (i) increases in the tax rate levied by the affected entity;
and (ii) annual increases in the real property portion of the base year value up to the in1lation
limit of two percent (2%) provided in Article XllIA of the California Constitution.
Section 33676 provides that each school district shall adopt the resolution and other
taxing entities may adopt the resolution. Alameda County elected to receive such 33676 revenue
in Resolution No. 86-815. Section 33676 is not valid in a project area for any taxing entity
which has entered into an agreement to receive payments of tax increment from a redevelopment
agency as allowed by California Health & Safety Code Section 33401 to alleviate fiscal detriment
resulting from a project area. According to Agency staff, no tax sharing agreements with taxing
entities exist in the Project Area.
Business Inventory Exemption/Special Subvention
Prior Law. Under prior State law, the State reimbursed cities, counties, special. districts
and redevelopment agencies ("local agencies") a portion of taxes which would have been
generated by the exempted portion of business inventory value (50%). In 1979, the Legislature
enacted Assembly Bill 66 (Chapter 1150, Statues of 1979), eliminating the assessment and
taxation of business inventory property and providing for replacement revenue for local agencies,
except redevelopment agencies. In 1980, the Legislature enacted AB 1994 (Chapter 610, Statues
of 1980) providing replacement revenue, in part, for the loss of business inventory revenues by
redevelopment agencies.
Curren: Law. SB 794 (Chapter 447, Statues of 1984) repealed the provision of business
inventory replacement revenue provided in both Chapter 1150 and Chapter 610 for local
agencies. This measure holds redevelopment agencies harmless from the loss of business
inventory replacement revenues through statepayments (special subventions). Under current law,
if redevelopment agencies do not receive sufficient tax revenue generated from the new
supplemental roll, the State pays a special subvention to restore to such agencies the difference
between the level of business inventory subventions which were to be paid under prior law and
the amount of revenue received from taxes on the supplemental roll. Ifin any year, the Agency's
revenues from the supplemental roll exceed the former amount of business inventory replacement
revenues, such excess will be credited against the State special subvention due in future years
until the entire excess has been credited. As a result of these changes, redevelopment agencies
should receive over time approximately the same amounts of revenues as they receive in
1983-84 had business inventory subventions not been terminated.
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AB 160 (Chapter 449, Statutes of 1990) makes several changes with respect to the special
supplemental subvention. First, AB 160 changes the payment schedule for the subvention from
three annual payments on October 31, February 28 and June 30 to two payments on
December 31 and July 1. Second, the December 31, 1990 payment consisted of an amount equal
to twenty-five percent (25%) of the total amount the Agency would otherwise be entitled to
receive in the 1990-91 fiscal year, and the July 1, 1991 payment consisted of an amount equal
to fifty percent (50 %) of the amount the Agency would otherwise be entitled to receive in the
1990-91 fiscal year. Thus, AB 160 cut the special supplemental subvention for the 1990-91
fiscal year by twenty-five percent (25%). Finally, the Agency may not, on or after the effective
date of AB 160, pledge as security for payment of the principal and interest of bonds, any
special supplemental subvention amounts.
Unitary Property
AB 454 (Chapter 921, Statues of 1987) provided that revenues derived from Unitary
Property, commencing with the 1988-89 fiscal year, will be allocated as follows: (1) for
revenues generated from the one percent (1%) tax rate, (a) each jurisdiction, including
redevelopment project areas, will receive a percentage up to one hundred two percent (102%)
of its prior year State-assessed unitary revenue; and (b) if county-wide revenues generated from
Unitary Property are greater than 102% of the previous year's revenues, each jurisdiction will
receive a percentage share of the excess unitary revenues by a specified formula and (2) for
revenue generated from the application of the debt service tax rate to county-wide unitary taxable
value, each jurisdiction will receive a percentage share of revenue based on the jurisdiction's
annual debt service requirements and the percentage of property taxes received by each
jurisdiction from unitary property taxes. This provision applies to all Unitary Property except
railroads whose valuation will continue to be allocated to individual tax rate areas.
The provisions of AB 454 do not constitute an elimination of the assessment of any State-
assessed property nor a revision of the method of assessing utilities by the State Board of
Equalization. Generally, AB 454 allows valuation growth or decline of Unitary Property to be
shared by all jurisdictions in a county.
On February 1, 1991, the Superior Court for the County of Sacramento issued a
Statement of Decision in AT&T Communications of California, et al. v, State Board of
Equalization, which reduced the valuation of certain unitary property owned by AT&T for
property tax purposes. Under the decision, the valuation method used by the Board of
Equalization to value unitary property was declared illegal and a new method of valuation,
resulting in significantly lower values and therefor significantly lower property tax revenues, was
imposed. The effect on AT&T's statewide assessed value was to reduce it from approximately
$1,750,000,000 to approximately $1,100,000,000. The resulting refund ordered by the court
exceeded $9,000,000. The Agency understands that, as a result of this case, the State Board of
Equalization and several other utility companies whose unitary property valuations could be
affected by the principles announced in the Superior Court decision have entered into a
settlement agreement (the "Settlement Agreement"). The Settlement Agreement's effectiveness,
35
however, is dependent on the fulfillment of certain covenants. If effective, the Settlement
Agreement would have only a prospective fiscal impact on utility assessments, which would be
phased down by approximately 10.5% over a three-year period. The Agency estimates that the
portion of tax increment revenues allocable to the Agency with respect to the Project Area and
attributable to unitary property is approximately $9,561,000 for fiscal year 1991-92. The Agency
cannot predict the effect of any future litigation or settlement agreements concerning these
matters on the amount of Gross Tax Revenues received or to be received by the Agency.
Recent Limitation on Tax Revenues
An initiative to amend the California Constitution entitled "Property Tax Redevelopment
Agencies" was approved by California voters at the November 8, 1988 general election. Under
prior law, a redevelopment agency using tax increment revenue receives additional property tax
revenue whenever a local government increases its property tax rate to payoff its general
obligation bonds. This initiative amends the California Constitution to allow the California
Legislature to prohibit redevelopment agencies from receiving any of the property tax revenue
raised by increased property tax rates imposed by local governments to make payments on their
bonded indebtedness. The initiative only applies to tax rates levied to finance bonds approved
by the voters on or after January 1, 1989. AB 89 (Chapter 250, Statutes of 1989) amended
Section 33670 of the Redevelopment Law to implement the amendment to the California
Constitution made by the initiative. Any revenue reduction to redevelopment agencies would
depend on the number and value of the general obligation bonds approved by voters in future
years. The Agency does not currently project receiving any Tax Revenues as a result of general
obligation bonds which may be approved on or after January 1, 1989.
Tax Increment Limitation
Pursuant to SB 690 (Chapter 639, Statutes of 1985), the Agency was required to adopt
a resolution setting forth a limit on the amount of tax increment the Agency may receive with
respect to each of its redevelopment project areas and a time limit as to the incurrence of
indebtedness to be repaid with such tax increment. The maximum amount of tax increment the
Agency may receive from the Project Area was established in the amount of $1,348,862,000 by
resolution adopted on December 16, 1986. Based on Agency records, the Agency has received
approximately $156,400,000 to date from the Project Area.
Appropriations Limitations: Article XIllB of the California Constitution
On November 6, 1979, California voters approved Proposition 4, the so-called Gann
Initiative, which added Article XIIIB to the California Constitution. The principal effect of
Article XllIB is to limit the annual appropriations of the State and 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 rendered
by the government entity. The "base year" for establishing such appropriation limit is 1978-79
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fiscal year and the limit is to be adjusted annually to reflect changes in population, consumer
prices and certain increases in the cost of services provided by these public agencies.
Appropriations subject to Article XIIIB include generally the proceeds of taxes levied by
the State or other entity of local government, exclusive of certain State subventions, refunds of
taxes, and benefit payments from retirement, unemployment insurance and disability insurance
funds. Proceeds of taxes include, but are not limited to, all tax revenues and the proceeds to an
entity of government from (1) regulatory licenses, user charges, and user fees (but only to the
extent such proceeds exceed the costs of providing the service or regulation) and (2) the
investment of tax revenues.
Article XIIIB includes a requirement that if an entity's revenues in any year exceed the
amounts permitted to be spent, the excess would have to be returned by revising tax rates or fee
schedules over the subsequent two years. While the tax rate is assumed. to decline to one percent
(1%) of taxable value and remain constant in subsequent years, current law permits taxing
entities deriving revenues from one percent (1%) rate to reduce their levies under certain
circumstances. It is the apparent intent of the law to insulate the other taxing entities and
redevelopment agencies from the affects of such reductions on their property tax revenues.
Effective September 30, 1980, the California Legislature added Section 33678 to the
Redevelopment Law which provided that the allocation of taxes to a redevelopment agency for
the purpose of paying principal of, or interest on, loans, advances, or indebtedness shall not be
deemed the receipt by such agency of proceeds of taxes levied by or on behalf of the agency
within the meaning of Article XIIIB, nor shall such portion of taxes be deemed receipt of
proceeds of taxes by, or an appropriation subject to the limitation of, any other public body
within the meaning or for the purpose of the Constitution and the laws of the State of California,
including Section 33678 of the Redevelopment Law. The constitutionality of Section 33678 has
been upheld in two California appellate court decisions: Brown v. Community Redevelopment
Agency ofthe City of Santa Ana (1985) 168 Cal.App.3d 1014 and Bell Community Redevelop-
ment Agency v. Woosley (1985) 169 Cal. App. 3d 24. The plaintiff in Brown petitioned the
California Supreme Court for a heanng of this case. The California Supreme Court formally
denied the petition and therefore the earlier court decisions are now final and binding. On the
basis of these court decisions, the Agency has not adopted such an appropriations limit.
Low- and Moderate-Income Housing
Chapter 696, Statutes of 1980, added sections 33486 and 33487 to the Redevelopment
Law, relating to the merger of redevelopment project areas and the requirement that
redevelopment agencies set aside 20% of all taxes which were allocated to the redevelopment
agency for the purposes of increasing and improving the community's supply of low- and
moderate-income housing. Section 33487 requires that (except as provided below) not less than
20% of all taxes which are allocated to the redevelopment agency for merged redevelopment
projects, irrespective of the date of adoption of the final redevelopment plans, must be deposited
by the agency in a low- and moderate-income housing fund. The agency must use the moneys
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in such fund to assist in the construction or rehabilitation of housing units which will be
available to, or occupied by, persons and families of low or moderate income, and very low
income households, for a period of not less than 30 years. The term "construction and
rehabilitation" includes acquisition of land; improvements to land; the acquisition, rehabilitation,
or construction of structures; or the provision of subsidies necessary to provide housing for
persons and families of low or moderate income, and very low income households.
The agency may use the funds set aside as described above, inside or outside the project
area. However, the agency may only use these funds outside the project area upon a resolution
of the agency and the legislative body that such use will be of benefit to the project area.
If moneys deposited in the low- and moderate-income housing fund have not been
committed for the purposes described above for a period of six years following deposit in such
funds, the agency may offer such moneys to the housing authority which operates within the
jurisdiction of the agency, for the purpose of constructing or rehabilitating housing as provided
above. However, if no housing authority operates within the jurisdiction of the agency, the
agency may continue to retain such moneys for use as described above.
Section 33486 provides that if the redevelopment agency has, prior to the merger of
redevelopment project areas, incurred any indebtedness on account of a constituent project area
so merged, taxes attributable to that area which are allocated to the agency must be first used
to comply with the terms of any bond resolution or other agreement pledging such taxes from
the constituent project area. Except as provided in the previous sentence, taxes attributable to
each project area merged pursuant to this provision which are allocated to the redevelopment
agency may be allocated to the entire merged project area for the purpose of paying debt service
on indebtedness incurred by the redevelopment agency to finance or refinance the merged
redevelopment project.
If in any fiscal year, the agency deposits less than 20%of taxes allocated to it into the
low- and moderate-income housing fund because of the provisions described in the previous
paragraph, a deficit is created in the low- and moderate-income housing fund in an amount equal
to the difference between 20% of the taxes allocated to the agency and the amount deposited in
such year. The agency must eliminate the deficit by expending taxes allocated in the years
subsequent to the creation of the deficit and, until such time as such deficit has been eliminated,
an agency may not incur new obligations for purposes other than the assistance of the
construction or rehabilitation of housing units as described above, except to comply with the
terms of any resolution or other agreement pledging such taxes, which existed on the date of the
merger of the project areas.
Limitation on Tax Imposition
A statutory initiative ("Proposition 62") was adopted by the voters voting in the State of
California at the General Election of November 4, 1986, which (i) requires that any tax for
general governmental purposes imposed by local governmental entities be approved by resolution
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or ordinance adopted by two-thirds vote of the governmental entity's legislative body and by a
majority vote of the electorate of the governmental entity, (ii) requires that any special tax
(defined as taxes levied for other than general governmental purposes) imposed by a local
governmental entity be approved by a two-thirds vote of the voters within that jurisdiction, (iii)
restricts the use of revenues from a special tax to the purposes or for the service for which the
special tax was imposed, (iv) prohibits the imposition of ad valorem taxes on real property by
local governmental entities except as permitted by Article XIIIA, (v) prohibits the imposition of
transaction taxes and sales taxes on the sale of real property by local governmental entities and
(vi) requires that any tax imposed by a local governmental entity on or after Mar 1, 1985 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. A recent decision of a State Court of Appeal in the case
of City o/Westminsterv, County of Orange (1985) 204 Cal.App.3d 623. has declared that the
provisions of Proposition 62 requiring majority vote approval of the electorate for general fund
taxes, as referred to in section (vi), are unconstitutional. A petition for review of the decision
was filed with the State Supreme Court on October 21, 1988. The petition was denied by the
Court on December 15, 1988, making the Court of Appeal decision final.
THE CITY AND THE AGENCY
The City of Oakland
The City of Oakland is located on the east side of San Francisco Bay approximately seven
miles from San Francisco via the San Francisco-Oakland Bay Bridge. An area of diverse
character, the City ranges from industrialized lands bordering the Bay to suburban foothills in
theeast. Historically the industrial heart of the Bay Area, Oakland has developed into a major
financial, commercial and governmental center. The City is the hub of an extensive
transportation network which includes a highly developed freeway system and the western
terminals of major railroads and trucking firms, as well as one of the largest container-ship ports
on the West Coast. Oakland supports an expanding international airport and rapid-transit lines
which connect it with most of the Bay Area.
The City was incorporated as a town in 1852, and as a city in 1854, and became a
charter city in 1889. The City's charter (the "Charter") was SUbstantially revised in 1969 to take
advantage of what is now Section 7 of Article XI of the Constitution of the State of California
giving cities home rule as to municipal. affairs. The Charter provides for the election,
organization, powers and duties of the legislative branch, known as the City Council; the powers
and duties of the executive and administrative branches; fiscal and budgetary matters, personnel
administration, franchise, licenses, permits, leases and sales; employees' pension funds; and the
creation and organization for the Port of Oakland.
For additional information concerning the City, its government and its financial affairs,
see "APPENDIX A - DESCRIPTION OF THE CITY OF OAKLAND. "
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The Redevelopment Agency of the City of Oakland
The Redevelopment Agency of the City of Oakland was activated on October 11, 1956,
by action of the Oakland City Council pursuant to the Redevelopment Law. Effective
December 31, 1975, the Oakland City Council declared itself to be the Agency. The Mayor
serves as Chairperson of the Agency.
Agency staff services are provided by City staff under an agreement between the Agency
and the City entered into in December 1975. Such support includes project management, real
estate acquisition and disposition, relocation, engineering and planning, legal, financing and
fiscal services.
The Agency is charged with the responsibility for elimination of blight through the
process of redevelopment. Generally, this process is culminated when the Agency disposes of
land for development by the private sector, but before this can be accomplished, the Agency
must complete the process of acquiring and assembling the necessary sites, relocating residents
and businesses, demolishing the deteriorated improvements, grading and preparing the sites for
purchase by developers and providing or ancillary off-site improvements.
All powers of the Agency are vested in its nine members. The Agency exercises
governmental functions in carrying out projects and has sufficiently broad authority to acquire,
develop, administer and sell or lease property, including the right of eminent domain and the
right to issue bonds and expend their proceeds.
For additional information concerning the Agency and its financial affairs, see
"APPENDIX C - THE REDEVELOPMENT AGENCY OF THE CITY OF OAKLAND
AUDITEDFINANCIALSTATEMENTS FORTIIEFISCALYEAR ENDED JUNE 30, 1991."
The Project Area and the Projects
The Central District Redevelopment Project Area encompasses approximately 200 blocks,
including the entire central business district of the City. Within the Project Area are three major
redevelopment action areas: City Center, Chinatown and Victorian Row. See "APPENDIX B
- THE REDEVELOPMENT AGENCY OF THE CITY OF OAKLAND - The Central District
Redevelopment Project" for a description of the Project Area.
The Agency intends to use proceeds of the 1992ABonds to refund the Refunded Portion
of the Prior Bond, the proceeds of which have been designated for public improvements within
the Project Area. These projects include parking facilities, commercial space, and the
construction and renovation of public buildings. Proposed projects that have been identified by
the Office of Economic Development and Employment and the Office of Community
Development include the following:
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Old Oakland. The Old Oakland project is a major mixed use project of from 300 to 500
residential units, including public and private parking. Commercial space is planned and there
is the possibility of meeting space for the Convention Center.
Civic Center Plaza. This development project is planned to complement the City Hall
Annex buildings, either with or without an underground parking structure.
Rotunda. The Rotunda project is rehabilitation of the structure for occupancy by repairing
earthquake damage.
City Hall Annex. The project is to design, develop, acquire, and prepare the site to
construct a 350,000 square foot City government building.
City Hall Restoration. This project includes facade and public space improvement to
Oakland City Hall.
Chinatown Redevelopment Project. This project involves the construction of 600 City-
owned parking spaces and 24,000 square feet of space for the Asian Cultural Centers (with
tenant improvements) and the Asian library.
Veterans Building. This is a renovation of a senior center.
Fox Theatre. The proposal is the purchase and renovation of the Fox Theatre, a historic
structure in the downtown business area.
Alice Arts Center. A performing arts center and public housing facility is presently under
renovation.
Broadway Garage. This project is a multi-level garage in the central business district.
Site clearing and clean-up has begun.
Franklin Street Parking Garage. The proposal is to acquire the parking garage to
encourage development in the Broadway-Franklin area.
Chinatown Parking. Even after the current Chinatown project is complete, parking will
beinadequate in the Chinatown Area. This project is to acquire and construct another 500 space
parking garage in the Chinatown area.
Multi-Service Center. Renovation is in progress on this low-income housing facility and
service center. The project is jointly owned by the County of Alameda and the City.
Downtown Arena. This project is a proposal to acquire and prepare land for transfer to
a developer.
41
LmGATION
There is no litigation now pending or threatened (i) to restrain or enjoin the issuance or
sale of the 1992A Bonds; or (ii) questioning or affecting the validity of any of the proceedings
for the authorization, sale, execution or delivery of the 1992A Bonds.
The City is involved in certain litigation and disputes incidental to its operations. Upon
the basis of information presently available, the City Attorney believes that there are substantial
defenses to such litigation and disputes and that, in any event, any ultimate liability in excess
of applicable insurance coverage resulting therefrom will not materially adversely affect the
financial position or results of operations of the City.
The City and the Agency are separate legal entities and neither is responsible for the acts
or debts of the other. Should there be an adverse judgment as a result of any litigation against
the City, there would be no effect on the security for the 1992A Bonds and minimal impact, if
any, on the Agency. (See "APPENDIX A - DESCRIPTION OF THE CITY OF OAKLAND
- Litigation" herein.)
TAX EXEMPTION
In the opmion of Brown & Wood, San Francisco, California, and Kennedy &
Wasserman, Oakland, California, Co-Bond Counsel, based on existing statutes, regulations,
rulings and judicial decisions and assuming compliance by the Agency with certain covenants
in the documents and requirements of the Internal Revenue Code of 1986, as amended, regarding
the use, expenditure and investment of bond proceeds and the timely payment of certain
investment earnings to the U.S. Treasury, interest on the 1992A Bonds is not includable in the
gross income of the Owners of the 1992A Bonds for purposes of federal income taxation. Failure
to comply with such covenants and requirements may, however, cause interest on the 1992A
Bonds to be included in gross income for federal income tax purposes retroactively to the date
of delivery of the 1992A Bonds.
Interest on the 1992A Bonds will not be treated as an item of tax preference in
calculating the alternative minimum taxable income of individuals or corporations; however,
such interest will be included as an adjustment in the calculation of corporate alterative minimum
taxable income and may therefore affect a corporation's alternative minimum tax and
environmental tax liabilities.
Ownership of tax-exempt obligations may result in collateral income tax consequences
to certain taxpayers, including, without limitation, financial institutions, property, and casualty
insurance companies, certain foreign corporations doing business in the United States, certain
S Corporations with excess passive income, individual recipients of Social Security or Railroad
Retirement benefits, and taxpayers with outstanding indebtedness to purchase or carry tax exempt
obligations. Co-Bond Counsel express no opinion as to any such collateral federal income tax
42
consequences and, accordingly, prospective purchasers of the 1992ABonds should consult their
tax advisors as to the applicability of any such collateral consequences.
Co-Bond Counsel are also of the opinion that interest on the 1992A Bonds is exempt
from personal income tax imposed by the State of California.
RATINGS
Moody's Investors Service ("Moody's") and Standard & Poor's Corporation ("S&P")
have assigned ratings of "Aaa" and "AAA", respectively, to the 1992A Bonds with the
understanding that upon delivery of the 1992ABonds, a policy insuring the payments when due
represented by the 1992A Bonds will beissued by the Insurer. An explanation concerning the
significance of the rating given by Moody's may beobtained from Moody's at 99 Church Street,
New York, New York 10007, (212) 553-Q470. An explanation of the ratings given by S&P may
be obtained from S&P at 25 Broadway, New York, New York 10004, (212) 208-8000. Certain
information and materials concerning the 1992ABonds, the Agency and the City were furnished
to Moody's and S&P by the Agency and the City. If in the judgment of either of the rating
services, circumstances so warrant, either rating service may raise, lower or withdraw its rating.
If a downward change or withdrawal occurs, it could have an adverse effect on the resale price
of the 1992A Bonds.
VERIFICATION OF MATHEMATICAL COMPUTATIONS
The accuracy of the mathematical computations of the adequacy of the maturing principal
of and interest earned on defeasance obligations to provide for the payment of the principal of,
redemption premium and interest on the Refunded Portion when due, which computations
support the conclusion that the 1992A Bonds are not "arbitrage bonds" under Section 148 of the
Internal Revenue Code of 1986, will be verified by Ernst & Young, Tucson, Arizona,
independent certified public accountants.
APPROVAL OF LEGAL PROCEEDINGS
Certain legal matters incident to the issuance of the 1992A Bonds have been or will be
approved by Brown & Wood, San Francisco, California and Kennedy & Wasserman, Oakland,
California, as Co-Bond Counsel with respect to the 1992A Bonds. Certain legal matters relating
to the issuance of the 1992A Bonds will bepassed upon for the Underwriters by their counsel,
Wendel, Rosen, Black, Dean & Levitan, Oakland, California, and certain legal matters incident
to the issuance of the 1992ABonds will be passed upon for the Agency by its counsel, Jayne W.
Williams, City Attorney of the City of Oakland.
43
UNDERWRITING
The Underwriters have agreed to purchase the 1992A Bonds at a price of $53,046,312.00
(which represents the $53,600,000.00 principal amount of the 1992A Bonds less an
Underwriters' discount of$553,688.00). The Underwriters will purchase all of the 1992A Bonds
if any are purchased, the obligation to make such purchase being subject to certain terms and
conditions contained in a Bond Purchase Agreement and the approval of certain legal matters
by counsel.
The Underwriters may offer and sell the 1992A Bonds to certain dealers and others at
prices lower than the respective public offering prices stated herein. After the initial public
offering, the respective offering prices may be changed from time to time by the Underwriters.
CO-FINANCIAL ADVISORS
The City has retained Public Financial Management, Inc., San Francisco, California and
Henderson Capital Partners, Inc., Oakland, California, as financial advisors (the "Co-Financial
Advisors") in connection with the preparation of this Official Statement and with respect to the
issuance of the 1992A Bonds. The Co-Financial Advisors are not obligated to undertake, and
have not undertaken to make, an independent verification or to assume responsibility for the
accuracy, completeness, or fairness of the information contained in this Official Statement.
Public Financial Management, Inc., is an independent advisory firm and is not engaged in the
business of underwriting, trading, or distributing municipal securities or other public securities.
Public Financial Management, Inc. is a wholly-owned subsidiary of Marine Midland Bank,
N.A., New York, New York. Henderson Capital Partners, Inc. is a municipal securities broker-
dealer which provides financial advisory and underwriting services to state and local
governmental entities.
MISCELLANEOUS
All the summaries contained herein of the Indenture, applicable legislation, agreements
and other documents are made subject to the provisions of such documents respectively and do
not purport to becomplete statements of any or all of such provisions. Reference is hereby made
to such documents on file with the Agency for further information in connection therewith.
Insofar as any statements made in this Official. Statement involve matters of opinion or
of estimates, whether or not expressly stated, they are set forth as such and not as
44
representations of fact. No representation is made that any of such statements made will be
realized, Neither this Official Statement nor any statement that may have been made orally or
in writing is to be construed as a contract with the Owners of the 1992A Bonds.
The execution and delivery of this Official Statement has been duly authorized by the
Agency.
THE REDEVELOPMENT AGENCY OF THE
CITY OF OAKLAND
By: lsI Henry L. Gardner
Henry L. Gardner
Agency Administrator
45
(THIS PAGE INTENTIONALLY LEFf BLANK)
APPENDIX A
DESCRIPI'ION OF THE CITY OF OAKLAND
(THIS PAGE INTENTIONALLY LEFr BLANK)
APPENDlXA
Description of the City of Oakland
GENERAL '" .
Introduction .
City Government .
FINANCIAL INFORMATION .
Ad Valorem PropertyTaxation .
Assessed Valuations .
Tax Levies, Collections and Delinquencies
Tax Rates .................
Principal Taxpayers . . . . . . . . . . . .
Budget Process ...
Fmancial and Accounting Infonnatlon .
Comparative Financial Statements ....
Financial Obligations . . . . . . . . . . .
A-I
A-I
A-I
A-I
A-I
A-2
A-3
A-S
A-6
A-6
A-7
A-9
A-ll
Statement of Direct and Overlapping Debt A-13
Labor Relations . . . . . . . . . . . . .. A-IS
Retirement Programs . . . . . . . . . . .. A-IS
Oakland Hills Fire ............ A-I6
Loma Prieta Earthquake. . . . . . . . .. A-I7
ECONOMIC PROFILE A-I8
I n ~ t i o n A-I8
P ~ o n A-W
Empwyment A-20
Largest Employers A-22
Commercial Activity .. . . . . . . . . .. A-23
Construction Activity . . . . . . . . . . .. A-24
Median Household Income A-24
(THIS PAGE INTENTIONALLY LEFT BLANK)
GENERAL
Introduction
The City of Oakland (the "City") is located in the County of Alameda (the "County")
on the east side of San Francisco Bay, approximately seven miles from San Francisco via 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,
Oakland has developed into a financial, commercial and governmental center. The City is 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. Oakland supports an expanding international airport and rapid-transit lines
which connect it with most of the Bay Area. Oakland is the seat of government for Alameda
County and is the sixth most populous city in the State.
City Government
The City was incorporated as a town in 1852, as a city in 1854 and became a charter 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 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, Director of Finance and City Auditor. The City Council appoints the
City Manager and the City Attorney, and the City Clerk and the Director of Finance are
appointed by the City Manager subject to City Council approval. The Director of Finance serves
as the City's Treasurer. The City Auditor is elected at the same time as the Mayor.
The City provides a full range of services contemplated by statute or charter, 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.
FINANCIAL INFORMATION
Ad Valorem Property Taxation
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. Under California's 1991/92
adopted budget, the County was permitted to pass on costs for certain services provided to local
government agencies including the collection of property taxes. The County has imposed a fee
A-I
on the City based on the County's cost for the previous year. This is a prorated charge to all
jurisdictions based on each jurisdiction's share of property tax receipts.
The valuation of secured property is established as of March 1, and is subsequently
equalized in August, and is payable in two installments of taxes due November 1 and
February 1, respectively. Taxes become delinquent on December 10 and April 10 for each
respective installment. Taxes on unsecured property (personal property and leasehold) are due
on August 31 of each year based on the preceding fiscal year's secured tax rate.
State law exempts $7,000 of the full cash value of an owner-occupied dwelling, but this
exemption does not result in any loss of revenue to local agencies, since the State reimburses
local agencies for the value of the exemptions.
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 institutions.
Future assessed valuation growth allowed under Article xrnA (new construction, certain
changes of ownership, 2% inflation) will be allocated on the basis of "situs" among the
jurisdictions that serve the tax rate area within which the growth occurs. Local agencies and
schools will share 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
resulting from the increase in certain property values.
For assessment and collection purposes, property is classified as either "secured" or
"unsecured" and is listed accordingly on separate parts of the assessment roll. The "secured
roll" is that part of the assessment roll containing State-assessed property and real property
having a tax lien which is sufficient, in the opinion of the assessor, to secure payment of the
taxes. Unsecured property comprises all property not attached to land such as personal property
or business property. Boats and airplanes are examples of unsecured property. Unsecured
property is assessed on the "unsecured roll."
The passage of AB 454 in 1987 changed the manner in which unitary and operating
nonunitary property is assessed by the State Board of Equalization. The legislation deleted the
formula for the allocation of assessed value attributed to such property and imposed a State-
mandated local program by requiring the assignment of the assessment value of all unitary and
operating nonunitary property in each county of each State assessee other than a regulated
railway company. The legislation established formulas for the computation of applicable
countywide 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
A-2
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 nonunitary property.
The following table represents a six-year history of assessed valuations in the City:
CITY OF OAKLAND
ASSESSED VALUATIONS'
Fiscal
Year Local Secured Utihty Unsecured Total
1986/87 $ 8,861,815,756 $883,599,960 $1,410,875,331 $11,156,291,047
1987/88 9,574,894,509 953,123,290 1,487,663,988 12,015,681,787
1988/89 10,134,786,232 54,229,801
2
1,516,573,931 11,705,589,964
1989/90 11,153,589,360 56,118,189 1,582,277,848 12,791,985,393
1990/91 12,211,539,476 51,665,856
2
1,557,854,483 13,821,059,815
1991/92 13,045,041,452 56,668,15g2 1,193,649,163 14,295,378,774
1 Before redevelopment tax allocation increment deduction
2 Reflects implementation of AB 454
Source: Alameda County Auditor-Controller
Tax Levies, Collections and Delinquencies
Taxes are levied for each fiscal year on taxable real and personal property which is
situated in the City as of the preceding March 1. A supplemental roll is developed whenproperty
changes hands which produces additional revenue.
A ten percent penalty attaches to any delinquent payment for secured roll taxes. In
addition, property on the secured roll with respect to which taxes are delinquent becomes tax-
defaulted. Such property may thereafter be redeemed by payment of the 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 lien 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 in 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 record in the County Recorder's office in order to obtain a lien on
A-3
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 prior voter-approved indebtedness) and
collects all property taxes for property falling within that county's taxing boundaries. The
secured tax levy and year-end delinquencies for the City for the five most recent fiscal years are
shown in the table below:
CITY OF OAKLAND
SECURED AND UNSECURED TAX LEVY AND DELINQUENCIES
Apportioned
Amount Delinquent as % Del. Secured Tax
Xm!:
Secured Tax Levv' of June 30 June 30 Collectiorr
1986/87 $199,856,503 $7,338,604 6.12% $30,082,473
1987/88 127,733,624 7,118,021 5.57 31,701,308
1988/89 126,097,763 7,008,343 5.56 34,108,364
1989/90 135,197,368 8,462,045 6.26 36,751,879
1990/91 146,349,421 9,920,924 6.78 39,751,879
1991/92 143,248,355' N/A N/A 40,803,034
1 All taxes collected by the County within the City.
2 Does not include tax increments paid to the Redevelopment Agency of the City of Oakland.
3 Partial year as of April 30, 1992
Source: City of OakJand, Office of Finance.
A-4
TaRates
The City is divided into 33 Tax Rate Areas. This figure includes one special Tax Rate
Area comprised of aircraft taxable within the City. The largest Tax Rate Area within the City
is TaxRate Area 17-001 which has a total assessed valuation of $10,408,557,955 or 70.9% of
the City's total assessed valuation. A five-year history of the tax components within this Tax
Rate Area is shown below:
CITY OF OAKLAND
TAX RATE AREA1''-1
SUMMARYOF TAX RATES
(Pen:ent of Property Assessed Value)
Tax Agepcy 1286187 1987188 1988189 1989190 1290191
Countywide TaxI 1.0000% 1.0000% 1.0000% 1.0000% 1.0000%
Oakland Unified School District 0.0295 0.0236 0.0216 0.0184 0.0166
Peralta ColDIDUIIity CoUege 0.0163 0.0131 0.0126 0.0111 0.0109
District
OaIdlllld Unified School Districr 0.0140 0.0120 0.0114 0.0108 0.0109
BayArea Rapid TtlDSit District 0.0390 0.0372 0.0319 0.0250 0.0251
East BayReaioual Park District 0.0000 0.0000 0.0047 0.0032 0.0028
City of 0aIdanct' 0.1575 0.1575 0.1575
~
Q..l1ll
Combined Tax Rates 1.2563% 1.2434% 1.2397% 1.2260% 1.2376%
1 Maximnm rate for purposes other tbm paying debt service in accordance with Article XllIA of the
State of Constitution.
2 Represents tax levied UDder Education Code Section 16090.
3 Represents tax levied to correct underfundedobligations in the Police andFire Retirement System.
Source: AlomedaCoIl1lty Auditor-ConlTOUer.
A-5
Principal Taxpayers
The following table lists the major taxpayers in the City in terms of their 1991/92
assessed valuation:
CITY OF OAKLAND
20 LARGESI' LOCALLY SECUREDTAXPAYERS FOR 1991/92
1991-92 Assessed
Property Owner Valuation
1. Eleven Eleven Associates
2. State of California Public Employees Retirement System
3. Kauer Foundation Health Plan, Inc.
4. Clorox Company
5. Samuel Merritt Hospital
6. Ordway Associates
7. Abmanson Commercial Development Company
8. Lake Merritt Plaza
9. Bramelea Limited and City Square One
10. Kaiser Center, Incorporated
11. Owens Dlinois Glass Container Incorporated
12. Webster Street Partners Limited
13. CF Oakland Associates Limited
14. Sparknight
15. FI' International Incorporated and Toyomura Fumi
16._Safeway Stores, Incorporated
17. Felschmann's Yeast Incorporated
18. Springwood Investment
19. Argonaut Financial Services Incorporated
20. Silberblatt 5.5. Incorporated and Oakland Associates
Total-Top Twenty
Percent of Total City-wide Assessment: 9.81 ~
Source: California Municipal Stalistics, Inc.
Budget Process
The City's budget is developed on a cash basis.
$127,949,526
101,225,400
95,527,525
93,915,380
87,460,445
85,527,148
83,034,523
79,899,484
77,910,351
76,269,775
63,761,774
59,206,558
43,026,154
33,498,132
32,687,861
30,106,112
28,337,627
27,625,451
26,763,117
26,245,364
$1,279,971,687
The budget process begins in the fall of each year with staff developing broad guidelines
for the subsequent year's budget preparation. These are presented to and discussed with the city
Council and finalized.
Internal budget hearings are held between the City Manager and heads of each department
to discuss resources and funding for the following year; concurrently, City Council members
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meet with departments and review their requests. Formal public hearings are held for each
departmental budget during May and June.
At least 30 days prior to the beginning of the fiscal year, the Mayor submits the proposed
budget to the City Council and the time is then set by the city Council for public hearings. Upon
conclusion of the public hearings, the City Council may make necessary revisions.
The operating budget is adopted by the City Council on or before June 30 of each year.
It contains appropriations for all funds and all first year appropriations for capital improvements.
The City Manager employs an independent certified public accountant who, upon request,
but at least annually, examines books, records, inventories and reports of all offices and
employees who receive, control, handle or disburse public funds, and those ofany other officers,
employees or departments as the City Manager directs.
Within a reasonable period following the fiscal year-end, the accountant submits the final
audit to the City Council. The City then publishes the financial statements as of the close of the
fiscal year.
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 separateset of self-balancing accounts that comprise its assets, liabilities, fund equity,
revenues, and expenditures, or expenses, as appropriate. Government resources are allocated to
and accounted for in individual funds based on the purposes for which they are to be spent and
the means by which spending activities are controlled. The various funds are grouped into 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 is
used to account for all financial resources except those required to be accounted for in
another fund.
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.
Debt Service Funds. Debt service funds are used to account for the accumulation
of resources for, and the payment of, the principal of and interest on general obligation
long-term debt, and related costs.
A-7
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 (a) 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 publicon a continuing basis be financed or recoveredprimarily
though user charges; or (b) where the governing body has decided that periodic
determination of revenuesearned, expenses incurredand/or net income is appropriatefor
capital maintenance, public policy. management control, accountability, or other
purposes.
Internal Service Funds. Internal servicefundsare usedto account for thefinancing
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.
Fiduciary Funds:
Trust and Agency Funds. Trust and agency funds are used to account for assets
held by theCity in a trusteecapacity or as anagent for individuals, private organizations,
other governments and/or other funds.
All government funds are accounted for using the modified accrual basis of accounting.
Their revenuesare recognized whentheybecomemeasurable and availableas net current assets.
Taxpayer-assessed income, gross receipts and other taxes are considered "measurable" when in
the hands of intermediary collecting governments and are recognized as revenue at that time.
Anticipatedrefunds of such taxesare recorded as liabilitiesandreductions of revenue when they
are measurable and their validity seems certain.
Expenditures are generally recognized under the modified accrual basis of accounting
when the related fund liability is incurred. Exceptions to this general rule include:
(1) accumulated unpaid vacation, sickpay, and other employee amounts which are not accrued;
and (2) principal and interest on general long-term debt which is recognized when due.
All proprietary funds are accounted for using the accrual basis of accounting. Their
revenues are recognized when they are incurred.
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Comparative Financial Statements
The following table reflects the City's general fund audited financial statements for the
fiscal years 1986/87 through 1990/91 actual revenues, expenditures and fund balances:
CITY OF OAKLAND
GENERAL FUND
REVENUES, EXPENDITURES AND OPERATING SURPLUSES
1986/87 THROUGH 1990/91
(OOO's)
Total Revenues and Actual Actual Actual Actual Actual
Expenditures 1986/87 1987/88 1988/89 1989/20 1990/9
1
REVENUES
Taxes $146,150 $155,403 $174,712 $170,084 $177,768
Permits and Licenses 9,484 4,775 4,946 5,518 6,610
Traffic fines and various
penalties 4,623 4,787 6,423 7,117 7,420
Interest and rental income 8,920 10,017 16,582 12,852 12,015
Revenue from cunent
services 7,038 15,105 16,987 17,619 22,105
Grant revenue 2,026 2,619 1,057 10,395 6,230
Other revenue
~ ~
3,472 6.629 7,802
TOTAL REVENUES $178,277 $193,149 $224,179 $230,214 $239,500
EXPENDITURES
General government $ 19,993 $ 18,092 $ 21,696 $ 26,993 $ 27,893
Public safety 84,932 88,122 103,163 130,420 143,287
Office of public works 12,731 13,456 17,256 20,598 27,026
Office of general services 3,885 4,519 6,196 5,890 5,006
Parks, Recreation and
Cultural 22,108 23,818 26,515 18,616 16,579
Economic, Community and
Social Programs 4,829 3,514 3,858 6,485 6,579
Nondepartmental! 18,692 16,701 7,445 11,216 15,243
Debt Service
~ ~ -ill
__0 __0
TOTAL EXPENDITURES $167,295 $168,347 $186,254 $220,218 $241,613
(2,113)
(9,581)
(46,271)
$ 61,903
9,996
24,857
26,185
$119,868
37,925
(50,517)3
365
$ 58,830
24,802
(16,839)3
13,461
$ 60,357
Excess (defiClency) of
Revenues over Expenditures 10,982
Operating Transfers (15,321)
Combined Adjustmentr (11,172)
Ending Balance $ 38,933
1 Includes rent payable on lease obhgations.
2 Includes audit reclassifications and net residual equity transfers.
3 Operating transfers related to the refundmg of City and Various Properties Certificates of
Participation (1988/89) and the Certificates of Participation related to the Oakland Museum
(1987/88). These financings liquidated and transferred various restricted investments from the
General Fund Group to other Fund Groups.
Source: City of Oakland Audited Financial Statements.
A-9
The following table reftects the City's revenues, expenditures and operating surpluses for
the general purpose fund for fiscal years 1987/88 through 1990/91:
CITY OF OAKLAND
GENERAL PURPOSE FUND
REVENUES, EXPENDITURES AND OPERATING SURPLUSES
1987/88 THROUGH 1990/91 ACTUAL
1991/92 ADOPI'ED BUDGET
(OOO's)
Adopted
Actual Actual Actual Actual Budget
Total RevenUes and Expenditures 1987/88 1988/89 1989190 1990/91 1991192
REVENUES
Taxes $155,403 $174.712 $170,084 $77,768 $185,690
Permits and Licenses 4,775 4,946 5,518 6.610 7,720
Traffic fines and vanous penalties 4.787 6.423 7,117 7,420 6,630
Interest and rental income 10,017 16.582 12,852 12.015 7.140
Revenue from current services 15.105 16.987 17.619 22,105 17.390
Grant revenue 2,619 1.057 10.395
1
6,230 10,440
Other revenue
-.ill
3.472 6,629 20,63@ 8,880
TOTAL REVENUES $193,149 $224,179 $230,214 $252,334 $243,890
EXPENDITURES
General government $ 18.092 $ 21.696 $ 26.993 $ 27.893 $ 30.190
Public safety 88.122 103.163 130,420 143.287 138,400
Office of pubhc works 13,456 17,256 20,598 27,026 25,150
Office of general services 4.519 6,196 5,890 17.43:z3 4.320
Parks. Recreation and Cultural 23,818 26.515 18.616 16.579 22,370
Economic, Community and Social
Programs 3.514 3.858 6.485 6,579 6.050
Nondepartmental 16,826 7.510 9,510 11.172 17,700
Capital Improvement 0 0 1,706 4,071 1,150
Interdepartmental Transfers 16,8392 50.517 (24,851) 9.581 (1.540)
TOTAL EXPENDITURES $185,186 $236,771 $195,361 $263,620 $243,790
Excess (deficiency) of Revenues over
Expenditures $ 7.963 $(12.592) $ 34,853 $(11,286) 100
1 Increase reflects anticipated re1.1Dbursement from the Federal Emergency Management Assistance program
for earthquake related expenses,
2 Operating transfers related to the refunding of City and Various Properties Certificates of Participation
(1988/89) and the Certificates of Participation related to the Oakland Museum (1987/88),
3 Includes amounts from llAD,
Source: City of Ookltmd 1991/92 Adopted Policy Budget, City of Oakland Financial Statements.
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Financial Obligations
Shott-Term. The City of Oakland implemented a short-term financing program in 1981
to finance general fund cash flowdeficits during the fiscal year (July 1 through June 30). Shown
below are the short-term borrowings for each year since. The City has never defaulted on the
payment of any of these notes.
The 1991/92 notes were issued in the principal amount of $35,000,000 on November 26,
1991. The notes will become due November 25, 1992 and bear interest at a rate of 4.75%
(priced to yield 4.15%). According to the terms of issuance, the City has pledged to set aside
certain receipts from taxes, revenues and other moneys which are received by the City for the
City's general fund sufficient to pay principal and interest on the notes. Such receipts are to be
from moneys received during fiscal year 1991/92 and will be set aside on certain dates all prior
to June 30, 1992.
CITY OF OAKLAND
SHORT-TERM BORROWING
FAYear
1981/82
1982/83
1983/84
1984185
1985/86
1986/87
1987/88
1988/89
1989/90
1990/91
1991192
Source: City of Oakland, Ojfice ofFinance.
Amount
$16,000,000
16,000,000
26,000,000
29,800,000
35,700,000
39,000,000
26,000,000
30,000,000
22,500,000
27,500,000
35,000,000
Lease Obligations. Since 1982, the City has entered into four separate sale- leaseback
arrangements involving City property. Certificates of participation were issued by the Civic
Improvement Corporation to finance the acquisition and construction of capital improvements
to twenty-three City properties, and by the Oakland Redevelopment Agency for the acquisition
and improvements to the Henry J. Kaiser Convention Center, the George F. Scotian Memorial
Convention Center, and the Oakland Museum. Because the certificates in each case are
ultimately secured by lease payments from the City to various nonprofit corporations, the
certificates are recorded as direct obligations of the City.
Long-Term Borrowings. In 1988, the City issued revenue refunding bonds in the amount
of $209,835,000 which mature from 1993 to 2021. Such bonds are payable solely from the
proceeds of guaranteed annuity contracts held in trust with PFRS (as defined below at
A-ll
"Retirement Programs") 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.
In addition, the Oakland Redevelopment Agency has issued three series of Tax Allocation
Bonds for two redevelopment project districts. In each case, the Tax Allocation Bonds are
limited obligations of the Agency and are solely payable from and secured by a pledge of an
incremental portion of tax revenues assessed on property within each respective project district.
For fiscal year 1990/91, the redevelopment tax increment within the City is valued at
$1,696,107,000.
Special Assessment Debt. In April 1989, the City issued $4,365,000 of Medical Hill
Parking District Refunding Improvement Bonds. Such bonds are payable from additional
property tax assessments levied against property owners in the Medical Hill Parking District.
In the event of continuing delinquencies in the payment of the property owners' installments, the
City, in the absence of any other bidder, is obligated to purchase at delinquent assessment sales
and pay future delinquent installments of assessments and interest thereon until the land is resold
or redeemed.
Internal Service Fund Long-Term Obligations. In 1980, the Oakland Redevelopment
Agency purchased and leased back City Hall West to the City. In 1988, the Agency issued 1988
City Hall West Lease Revenue and Refunding Bonds. The bonds are payable from and secured
by a pledge of annual lease rentals to be received from the City.
Enterprise Funds Long-Term Obligations. Numerous revenue bonds and certificates of
indebtedness have been issued by the Port of Oakland and the Acorn Mortgage Program. In the
case of the Port of Oakland, the outstanding balance for such obligations was determined to be
$292,231,000 as of June 30, 1990. The Port operates on an enterprise basis in that debt service
for Port bonds is not payable from general City revenues. In the case of the Acorn Mortgage
Program, the outstanding balance for such obligations was determined to be $9,045,000 as of
June 30, 1990. Such obligations are secured by a pledge of FHA insured mortgage loans issued
from the related bond proceeds to developers in the Acorn Redevelopment Project Area.
Oakland-Alameda County Coliseum. Oakland-Alameda County Coliseum, Inc. is a non-
profit corporation managed by a self-appointed Board of Directors. The Board manages the fiscal
affairs and policies of the corporation at its own discretion. The corporation has issued bonds
which are payable from the operating revenues of the Corporation. Currently, the City and
County lease the Coliseum Complex from the Corporation. The lease obligates the City and the
County to make annual rent payments of $750,000 each. The lease terminates in 2006.
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In the fiscal years 1991/92 through 1995/96, the City of Oakland will be making
combined lease payments from its general fund as shown below:
CITY OF OAKLAND
GENERAL FUND LEASEOBLIGATIONS
Henry J. G.F. Scot1aD
Kaiser Memorial Civic
Convention Convention Improvement Oakland
tmm: ~ Corporation Mil,.,.
F1scaI Year
1992
1993
1994
1995
1996
Balance Duel
$4,339,313
4,339,313
4,339,313
4,704,312
5,069,313
$43,500,000
$3,895,000
3,895,000
3,895,000
4,200,000
4,502,238
$38,000,000
$7,017,000
6,909,000
6,894,000
6,867,000
6,735,000
$52,300,000
$1,902,713
3,072,648
3,192,828
3,192,240
$9,408,025
fill!
$15,251,313
17,046,026
18,200,961
18,964,140
19,498,791
$173,208,000
1 Principal be1ance as of July 1, 1991.
SoIlTCe: City ofOa1cland, Office ofFinance.
The City has never defaulted on the payment of principal or interest on any of its
indebtedness or lease obligations.
Statement of 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 is
shown below. Self-supporting revenue bonds, tax allocation bonds and nonbonded capital lease
obligations are excluded from the debt statement.
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CITY OF OAKLAND
STATEMENT OF DIRECT AND OVERLAPPING DEBT
1990/91 Assessed Valuation: 512,976,386,744
(after deducting SI,858,l2S,758 redevelopment incremental valuation)
Direct and Overlapping Bonded Debt .. Applicable
San Francisco Bay Area Rapid Transit District 7.8649'
Alameda-Contra Costa Transit District Cert. of Part. 22.467
Oakland-Alameda CollDty Cohseum 60.188
Alameda County Board of Education Public Facilities Corp. 20.376
Alameda County Authority and Cert. of Part. 20.376
East Bay Municipal Utility District 21.290
East Bay Municipal Utihty District, Special Distnct #1 53.954
East Bay RegIonal Park Distnct 11.722
Bay Area Pollution Control Authority 3.645
Peralta Community College District 56.194
Oakland Unified School District 99.996
Oakland Unified School District Cert. of Part. 99.996
San Leandro Unified School District Cert. of Part. 14.492
Castro Valley Unified School District and Cert. of Part. 0.008-0.120
City of Oakland 100
City of Oakland Building Authonties 100
City of Oakland 1915 Act Bonds 100
Debt 5/1/92
$ 24,803,056
6,284,020
8,191,587
1,591,366
50,016,763
9,511,308
16,571,971
6,821,032
4,192
1,933,074
16,109,356
49,468,021
315,926
192
12,000,000
381,185,000'
3,990,000
$588,796,864
2
9,511,308
16,571,971
8,191,687
$554,521,998
TOTAL GROSS DIRECT AND OVERLAPPING BONDED DEBT
Less: East Bay Municipal Utility District (100 9' self-supporting)
East Bay M.U.D., Special District #1 (1009' self-supporting
Oakland-A1ameda County Coliseum (1009' self-supporting)
TOTAL NET DIRECT AND OVERLAPPING BONDED DEBT
1 Excludes refunding Certificates of Participation 1992 Series A.
2 Excludes tax and revenue antlcipation notes, revenue, mortgage revenue and tax allocation bonds and
nonbonded capital lease obligations.
RATIOS TO ASSESSED VALUATION:
Gross Direct Debt ($399,990,000)
Net Direct Debt ($393,185,000)
Total Gross Debt
Total Net Debt
3.089'1
3.039'
4.54%
4.279'
STATE SCHOOL BUILDING AID REPAYABLE AS OF 6/30/91:
!
General Obligation Bonds
Lease Revenue Bonds and Cert. of Part.
Share of Oakland Alameda County Coliseum
Lease-Revenue Bonds
Source: CaliforniaMunicipal Statistics, Inc.
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$10,722,154
$ 12,000,000
381,185,000
6.805.000
$399,990,000
Labor Relations
City employees are represented by five labor unions and associations, described in the
table below, the largest one being Service Employees United Public Employees (Local 790)
which represents approximately 49 percent of all City employees. Approximately 72 percent of
all City employees are covered by negotiated agreements.
CITY OF OAKLAND
LABOR RELATIONS
Employee Organization Nwnber of Employees
Oakland Public Officers Association 743
United Public Employees (Local 790) 2,690
International Brotherhood of Electrical WoIkers 26
International Association of Firefighters 32
(Local #557)
Western Council of Engineers 95
Source: City of Oa1dlJnd. Office of Personnel Resources Managemelll
Retirement Programs
Contract Expiration Date
June 30, 1992
June 30, 1994
June 30, 1994
Negotiations underway
June 30, 1994
The Police and Fire Retirement System (PFRS) is a defined benefit plan administered by
a Board of Trustees and covers uniformed employees hired prior to July 1, 1976. As of June 30,
1991, PFRS covered 457 current employees and 1,525 retired employees. E1fectiveJuly 1, 1976,
the City began providing for and funding an amount equal to the annual normal service cost of
all PFRS participants and the amortization of unfunded benefits accumulated as of that date over
a forty year period. On June 7, 1988, voters approved a City measure to extend the amortization
period of the unfunded benefits to fifty years. In accordance with these voter approved measures,
the City annually levies an ad valorem tax on all property within the City subject to taxation by
the City to help fund the accumulated unfunded benefits. For fiscal year 1991, the City levied
a tax of .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 June 30, 1990 by approximately $702.6 million. E1fective July 1, 1985, the City's
contributions to PFRS have been at the rate of 76 percent of all uniformed employees'
compensation subject to retirement contribution.
The City's annual contribution to PFRS is determined by calculating the total pension
liability for public safety employees under both PFRS and the Public Employees Retirement
System (PERS). The amount to be contributed to both plans is allocated between years such that
a level percentage of payroll (61.04% in 1991) will amortize the unfunded liabilities by 2026
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and 2000 of PFRS and PERS, respectively. Contributions to PERS are deducted and the
difference is contributed to PFRS.
For the fiscal year ended June 30, 1991, contributions to PFRS totaling $31.4 million
($28.9 million employer and $2.5 million employee) were made in accordance with aetuarially
determined contribution requirements. Employer and employee contributions equaled 105% and
19%, 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.
Oakland Municipal Employees' Retirement System (OMERS) is administered by the City
and covers three nonuniformed employees hired prior to September 1, 1970 who have not
elected to transfer to the PERS as well as 416 retired employees. For the year ended June 30,
1991, the City, in accordance with aetuarially determined contribution requirements, did not
make contributions to OMERS as the plan is fully funded.
PERS is a defined benefit plan administered 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, 1991, the unfunded pension
benefit obligation under PERS was $13.1 million.
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'S contribution rates for the fiscal year ended lune 30, 1991, were 7.9% and 7.3% for
each group, respectively. The City pays the entire amount of the miscellaneous employees'
annual contribution (7 %) to PERS. The remaining portion of the required employee contribution,
if any, is paid by the City.
PERS uses an actuarial method which takes into account those benefits that are 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 period of the
unfunded actuarial liability ended lune 30, 1990.
Oakland Hills FIre
On October 20, 1991, a fire damaged the Oakland Hills. None of the property damaged
by the fire is located in the Central District Reducement Project Area. An estimated 1,990 acres
of forest and residential property were damaged. 2,354 homes and 456 apartment units were
destroyed in the fire, most of which were in Oakland. An additional 87 homes were damaged.
Property destroyed in the fire has been subject to lower assessed valuations. After rebuilding
substantially the same as the previous home, the value assigned to the new home will be the
same as the Proposition 13 value of the home on the Assessor's file prior to the fire.
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The City has spent $35 million responding to the fire. The State has approved assistance
to the City and the City fully expects 100% of this cost to be reimbursed by the Federal
Emergency Management Agency (FEMA). Additionally, the fire represents a $1.1 million loss
from property taxes or approximately 1% of the City's total property tax. There is legislation
pending to reimburse the City for lost property taxes as a result of the fire.
The City has completed its debris clean up and erosion control measures. 90% of the
private lots have been cleared of debris. There have been no major slides in the burn area. The
erosion control program has cost $5 million and will be reimbursed by FEMA. The debris
cleanup program will be funded jointly by FEMA, the State and insurance companies at an
estimated cost of $20 million.
Litigation. Although only one suit arising out of the Oakland Hills Fire has been filed to
date against the City, over 500 individuals have filed prelitigation damage claims, many of which
are part of a class action, against the City and other local governments seeking damages in
excess of $2 billion. These claims include wrongful death, real property damage, personal
property damage and personal injury claims. These claims are based on several legal theories
including dangerous condition of public property, breach of mandatory duty, special relationship
and negligence in fire fighting. The six-month period for filing damage claims against the City
pursuant to the California Government Code has expired, however, there is a possibility that
subrogation claims by insurers may be made in the future without regard to the expired six-
month limit. Claimants have six months to file suit from the date the City mails a rejection letter
or, if the City does not formally reject the claims within forty-five (45) days of receipt thereof,
the claimants have two years from the date the claim is filed to file suit. The City has not
completed an evaluation of these claims, its defenses thereto and its potential liability therefor.
The City is unable to determine at this time the extent to which the amounts claimed realistically
represent the ultimate liability of the City to claimants should the claims be rejected and
litigation ensue.
The City and the Agency are separate legal entities and neither is responsible for the acts
or debts of the other. Should there be an adverse judgment against the City, there would be no
effect on the security for the 1992A Bonds and minimal impact, if any, on the Agency.
Lorna Prieta Earthquake
The October, 1989 Lorna Prieta earthquake damaged a number of old structures in the
downtown district of Oakland. Of the 24 major commercial buildings that sustained damage,
eight have been renovated and reopened. A number of the buildings which remain closed are
single-room occupancy hotels which served low income residents. Due to the age and historical
nature of some of these structures, and the effects of the current economic recession, the
commercial owners have not secured the necessary loans to repair these buildings. The City has
been working with these hotel owners to arrange financing from FEMA, the State and the
Oakland Redevelopment Agency.
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ECONOMIC PROFILE
Introduction
Founded in 1852, Oakland occupies 53.8 square miles, with 19 miles of coastline on the
San Francisco Bay in northern California. It is the seat of government of Alameda County, one
of nine counties comprising the San Francisco Bay region, and the center of commerce for the
Bay Area. The Bay Area has a population of over 6,000,000 people. A large number of public
entities are headquartered in Oakland, including the Bay Area Rapid Transit District (BART),
East Bay Municipal Utility District, Association of Bay Area Governments (ABAG), Alameda
County Transportation Authority, and the University of California Board of Regents. The
California Department of Transportation (Caltrans) will be completing its headquarters building
in 1992 and the U.S. General Services Administration will complete its twin towers in 1993.
Oakland's population exceeds 376,700, making it the sixth largest city in California and
the third largest Bay Area city. The 1990 census figures demonstrate that Oakland is one of the
most ethnically diverse city in the country, with 81 different languages and dialects spoken. The
City's workforce is both sizable and multi-skilled. More than half of its residents are between
the ages of 25 and 49, while almost 35 percent live in households with income levels of $35,000
or more.
The East Bay economy (Alameda and Contra Costa Counties), which accounted for 39
percent of all new job growth in the Bay Area in the 1980s and 30.2 percent in 1990, will
continue to be the primary engine of growth for the Bay Area of the 199Os. Sales and Marketing
Management Magazine estimates that the value of goods and services will increase by 66 percent
by the year 2000. With $38.3 billion in buying power and nearly $16.2 billion in retail sales in
1990, the two-countyarea is one of the highest spending markets in the nation. Projections made
by ABAG indicate that Oakland's employment growth between the years 1985 to 1995 will be
12.5 percent or over 23,000 jobs.
Historically, the City'S economic base has been largely industrial, and the City retains
a strong manufacturing sector. Over 700 manufacturing firms are located in the City with an
increasing commercial and service sector presence. According to the Oakland Chamber of
Commerce there is approximately 12 million square feet of office space Within the City, and
about 50% of that is in Class A office buildings. Oakland's vacancy rate for office space was
14.5% at the end of the first quarter of 1992, while its Class A office vacancy rate was 13.7%.
Two major office buildings and one parking garage are under construction. An increasing
number of major retailers have opened locations in Oakland and there are several
commercial/shopping districts emerging in the City.
Much of the City's economic strength is attributable to its extensive transportation
system. The Port of Oakland is one of the busiest container facilities in the nation and Oakland
International Airport offers service to more than 150 cities. Nine major U.S. and California
highways converge in Oakland, providing convenient travel throughout the Bay Area and direct
A-18
access to other regions of the country. High speed rail transportation to San Francisco and
throughout the East Bay is offered by the Bay Area Rapid Transit District (BARn and local bus
service is provided by AC Transit. Additionally, ferry service is available to San Francisco.
Services and other important resources are extensive and locally provided. Eight major
hospitals with over 1,700 beds are located in the City and serve City residents. There are more
than 170 public and private schools which provide educational opportunities to the City's young
people on the elementary and secondary levels. Utility services are provided by East Bay
Municipal Utility District, Pacific Gas and Electric, and Pacific Bell. In addition to other Bay
Area media, the City has its own regional newspaper, radio stations, and a television station.
Having begun its development as a commercial and transportation center with the Gold
Rush in 1849, Oakland is today recognized as the center of commerce for the entire Bay Area.
It is also one of the main sea terminals for cargo moving between the Western United States and
the Pacific Rim, latin America and Europe. Since 1960, Oakland International Airport, operated
by the Port of Oakland, has developed into a major regional center of air passenger and cargo
jet operations. last year it was one of the fastest- growing airports in the nation in number of
passengers served. It currently provides 56 percent of the Bay Area's cargo flights. The City's
foreign trade zone is the largest in the Bay Area with the number of goods flowing through the .
zone having doubled in 1990, and revenues in excess of $25 million.
Over the last 25 years, there have been significant gains in diversifying the City's
economic base. While manufacturing jobs have decreased, the economy now offers a balanced
mixture of trade, government, financial and service-oriented occupations, and has a growing
skilled crafts sector. The City's abandoned warehouses, foundries, and long silent cigar,
macaroni and tent factories are being rapidly converted into live/work studios for crafts people.
Less obvious to people passing through Oakland are the City's increasingly robust
neighborhood retail areas such as Glenview, Lakeshore and Grand Avenue, Piedmont Avenue,
Fruitvale, Montclair Village, Rockridge and Chinatown. In fact it was because of the activity
in these commercial/shopping districts that the City did not suffer a significant decline in sales
tax revenue despite temporary closure of several major retail stores after the 1989 Loma Prieta
earthquake.
Development of Oakland's downtown has long been a primary thrust of city planning.
Over the past two decades, the central business district (extending to Lake Merritt) has
undergone a dramatic physical renaissance. New office and retail buildings, refurbished public
facilities, renovated historical buildings, a new convention center, transportation improvements,
parking facilities, luxury hotels, park enhancements and outdoor art have created a cosmopolitan
environmental enhancing the City's status as the hub of the Bay Area.
The quality of life in the City is enhanced by abundant opportunities for recreation,
entertainment and culture. The City has a moderate climate and has 64 parks within its borders
including Lake Merritt which is located downtown. The Oakland-Alameda County Coliseum
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hosts concerts and other special events, and is the home to Oakland A's baseball and Golden
State Warriors basketball. A variety of museums, music, dance and theater groups, both amateur
and professional, perform regularly in the City.
Population
The City is the sixth largest in the State of California. Between 1980 and 1991, the City's
population increased by a total of 11%or 37,412. The County has experienced steady population
growth since 1960, and it is estimated that population has grown by 187,621 or 17% since 1980.
The fastest growing cities are located in the southern and eastern portions of the County. The
County is the second most populous in the Bay Area and the sixth most populous in the State.
CITY OF OAKLAND AND ALAMEDA COUNTY
POPULATION
Xm
City of Oakland Alameda County
1960 367,548 908,209
1970 358,486 1,064,049
1980 339,288 1,105,379
1990 372,242 1,279,182
1991 376,700 1,293,000
Source: Statisticsfor 1991 are State Department ofFinance estimates as ofJanuary 1. The 1960,
1970, 1980 and 1990 totals are U.S. Censusfigures.
Employment
During the past seven years of economic expansion, Alameda County's labor force has
grown steadily. It is expected that the County will continue to experience moderate job growth
with approximately 82,000 more jobs in the County by 1996 than in 1989. This represents an
increase of 13.8 percent or an average of 2.0 percent per year. Reflecting the national recession
in 1990 and 1991, local job growth was slower at that time than during the preceding several
years. As the overall economy recovers, job growth in the County will also accelerate. Federal
government employment will increase in 1993 when the new Oakland federal building is
completed. At this time, the various military bases in the County are not slated for closure.
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The following table represents the labor patterns in the County for 1987 through 1990
and for February 1991 and February 1992 and civilian labor force figures for the City for the
same period:
CIVILIAN LABOR FORCE, EMPLOYMENT AND UNEMPLOYMENT
ANNUAL AVERAGES
(000')
ALAMEDA COUNTY
February February
1987 1988 1989 1990
mf 1m
Civilian Labor Force 639.9 667.6 685.6 675.7 675.5 688.3
Employment 607.3 636.9 656.5 647.6 639.0 646.2
Unemployment 32.6 30.7 29.1 28.1 36.5 42.1
Unemployment Rate
5.1"
4.691i
4.2"
4.291i 5.491i 6.191i
Wage and Salary Employment"
5.1 "
4.6%
4.2" 4.2" 5.4% 6.191i
Total All Industries 552.2 573.3 598.7 608.6 N/A N/A
Agriculture 1.8 1.9 1.859 1.5 N/A N/A
Nonagriculture 550.4 571.4 6.9 607.1 N/A N/A
Mining & CoDstruction 28.8 30.5 31.7 31.4 N/A N/A
Manufacturing 74.7 80.4 83.3 81.9 N/A N/A
Transportation & Public Utilities 35.7 36.5 38.8 40.5 N/A N/A
Wholesale Trade 36.3 37.6 40.9 40.8 N/A N/A
Retail Trade 100.1 102.9 106.1 108.3 N/A N/A
Finance, Insurance & Real Estate 29.2 29.6 30.4 30.8 N/A N/A
Services 127.4 134.1 143.3 149.6 N/A N/A
Government 118.2 119.8 122.4 123.8 N/A N/A
Civilian Labor Foree (2) 181.1 187.3 195.2 190.5 191.4 195.1
Employment 168.3 175.3 183.7 179.5 177.1 179.2
Unemployment 12.8 12.0 11.4 11.0 14.3 16.5
Unemployment Rate 7.09li 6.491i
5.9"
5.891i 7.591i 8.491i
1 Monthly labor force figwes are Dot directly comparable to annual averages. The annual average for 1991
will be available by June 1992. Wage andsalary information is Dot available on a month to month basis
for the County.
2 Based on place of residence.
3 Based on place of work.
Soun:e: California Employment Development Department
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Largest Employers
The following tables represent the largest public and private employers in the City of
Oakland:
Public Entity
CITY OF OAKLAND
LARGESI' PUBLIC EMPLOYERS
Product/Seryi
ce
AC Transit Distnct
Alameela County
Bay Area Rapid Tnmsit District
East Bay MUDlcipal Utility Distnct
High1aDd Hospital Oakland
City of Oakland
Naval Hospital Oakland
Oakland Public Schools
Oakland Army Base
Penlta CoIll1DUllity College
US Navy Supply Center
US Post Office
Source: Oakland CIuunber of COI7IInQce
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Pubhc Transportation
Governmental Operations
Public Transportation
UtilitylWater
County Medical Center
Governmental Operations
Hospital-Medical Center
Education
Military Traffic Management/Cargo Control
Education
Government Installation
Postal Services
Company
CITY OF OAKLAND
LARGESI' PRIVATE EMPLOYERS
ProdudlService
AmericanPresident Companies, Inc.
American Protective Services
AT&T
Blue Cross
Children's Hospital
Citicorp Savings
Clorox Company
Emporium
GnmnyGoose
ICF-Kaiser Engineers
Kaiser Foundation Health Plan
Kilpatricks Bakery
Mother's Cake & Cookie Co.
Oakland Scavenger
Owens-Dlinois
Pacific Bell
Pacific Gas & Electric
Safeway Stores, Inc.
SanFrancisco French Bread Co.
Scott Co.
Southern Pacific Transportation
Summit Mechcal Center
Sunshine Biscuits
The Tnbune
World Savings and Loan
Source: DokJand ChombeTof Commerce.
Commercial Activity
Ocean Shipping
Security
Communications
Health Care Insurer
Hospital Service
Banking
Household Products
Department Store
Food Products
Aluminum ProductslEngineering
Hospital Services
Bakery Products
Bakery Products
Garbage Collection
Glass Container
Public Utility
Public Utility
Grocery Stores
Bakery Products
Mechanical
Transportation
Hospital Services
Bakery Products
Newspaper
Banking
A six-year history of retail sales for the City is shown in the following table:
CITY OF OAKLAND
TAXABLE TRANSACTIONS 1986-1991
Retail Sales
1986
1987
1988
1989
1990
1991 (9 months)
$2,366,556,000
2,352,164,000
2,472,515,000
2,530,690,000
2,447,917,000
1,770,548,000
Source: StDle Board of Equaliztztion, Departmen: ofResearch and
Statistics.
A-23
Xrm:
1986
1987
1988
1989
1990
1991
Construction Activity
A six-year history of building permits and valuation appears in the following table:
CITYOF OAKLAND
BUILDING PERMITS AND VALUATIONS 1'86-1991
Residential Residential Valuation Nonresidential Valuation
Permits <In Thn"pmk) <In Thn",,!nck)
820 $144,902 $104,596
650 101,383 82,709
612 106,892 92,260
505 73,941 57,776
336 71,399 49,284
762 113,323 89,982
SoIl1'Ct!: 1986: "Ctzlifornia Construelion Trends, Security PacificBank. 1987 tMollg1l1991:
"California BuildingPermit Activity, EconomicScie1lCt!S Corporation.
Median Household Income
Effective Buyer Income (EBI) is defined as personal income less personal income tax and
nontax 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
MEDIANHOUSEHOLD EFFECTIVE BUYING INCOME
1985-l9H Median EBI
Xrm:
City of QakJand
Alameda County California United Slates
1985 $20,712 $28,037 $26,557 $23,680
1986 21,960 29,756 28,227 24,632
1987 23,028 31,220 30,537 25,888
1988 22,927 30,984 30,088 24,488
1989 23,257 31,440 30,713 25,976
1990 25,306 34,211 33,342 27,912
Note: Beginning in 1988, metlwdoJogy usedto calculateMedian EBI dilfen from t'hat in previous
yean.
Source: "S/lIWY ofBuying Power, Sales andMarketing MQ1I(Jgement Magazine.
A-24
APPENDIXB
THE REDEVEWPMENT AGENCY OF THE CITY OF OAKLAND
(THIS PAGE INTENTIONALLY LEFT BLANK)
APPENDIX B
THE REDEVELOPMENT AGENCY OF THE CITY OF OAKLAND
Members, Authority and Personnel
The Redevelopment Agency of the City of Oakland (the "Agency") was activated on
October 11, 1956, by action of the Oakland City Council pursuant to the California Community
Redevelopment Law. Effective December 31, 1975, the City Council declared itself to be the
Agency. The members of the Agency include the Mayor, Elihu M. Harris, as Chairman of the
Agency, and the other members of the City Council of the City of Oakland: Leo Bazile,
Frank H. Ogawa, Aleta Cannon, Marge Gibson-Haskell, Nathan Miley, Mary Moore, Wilson C.
Riles, Jr., and Richard Spees.
Agency staff services areprovided by City staff under an agreement between the Agency
and the City entered into in December 1975. Such support includes project management, real
estate acquisition and disposition, relocation, engineering and planning, legal, financing and
fiscal services.
Henry L. Gardner serves as City Manager and Agency Administrator. He was appointed
to these positions in 1981. He formerly served as Assistant City Manager and has been employed
by the City since 1971.
Jayne W. Williams serves as City Attorney and Agency Counsel. She was appointed to
these positions in 1987.
Gary Breaux serves as Agency Treasurer. He also serves as City Director of Finance.
He was appointed to these positions in 1991.
Arrece Jameson serves as Secretary to the Agency, as well as City Clerk. Ms. Jameson
has held the position of Secretary to the Agency since 1977 and has been employed by the City
since 1950.
Julia T. Brown, Director of the Office of Economic Development and Employment, was
appointed in 1990.
Antoinette Hewlett, Director of the Office of Community Development, was appointed
in 1979.
Administration of the Agency's projects is a staff function within the City organizational
framework and has been a shared responsibility of the Office of Economic Development and
Employment (Commercial/Industrial Projects) and Office of Community Development (Housing
Projects).
B-1
Powers
All powers of the Agency are vested in its nine members. They are charged with the
responsibility of eliminating blight through the process of redevelopment. Generally, this process
is culminated when the Agency disposes of land for development by the private sector. In order
to accomplish this the Agency has broad authority to acquire, develop, administer, sell or lease
property, including the right of eminent domain and the authority to issue bonds and expend
their proceeds.
Prior to this, the Agency must complete the process of acquiring and assembling the
necessary sites, relocating residents and businesses, demolishing the deteriorated improvements,
complete environmental mitigation, grade and prepare the site for purchase, and in connection
with any development can cause streets, highways and sidewalks to be constructed or
reconstructed and public utilities to be installed.
Redevelopment in the State of California is carried out pursuant to the Community
Redevelopment Law (Section 33000 et seq. of the Health and Safety Code). Section 33020 of
the Law defines redevelopment as the planning, development, replanning redesign, clearance,
reconstruction or rehabilitation, or any combination of these, of all or part of a survey area and
the provision of such residential, commercial, industrial, public or other structures or spaces as
may be appropriate or necessary in the interest of the general welfare, including recreational and
other facilities incidental or appurtenant to them.
The Agency may, out of the funds available to it for such purposes, pay for all or part
of the value of the land and the cost of buildings, facilities, structures or other improvements
to be publicly owned and operated to the extent that such improvements are of benefit to the
project area and not other reasonable means of financing is available.
The Agency must sell or lease remaining property within a project area for
redevelopment by others in strict conformity with the redevelopment plan, and may specify a
period within which such redevelopment must begin and be completed.
In accordance with these criteria the Agency has adopted Redevelopment Plans in
designated project areas that authorize the use of the redevelopment process and procedures.
Besides the Central District Redevelopment Project, the active projects include two designated
projects and three proposed projects (see below for descriptions).
Agency Ymances
The Agency's audited financial statements for the fiscal year ending June 30, 1991, are
found in Appendix C.
B-2
The Central District Redevelopment Project
The Central District Redevelopment Project Area encompasses an area of 200 City
blocks, including the entire Central Business District. The Project Area is the economic and
transportation hub of the East Bay portion of the San Francisco-Qaldand Metropolitan Area. It
contains nearly 40 major office buildings of over 30,000 square feet each with approximately
9 million square feet of rentable office space. The class A buildings currently have a vacany rate
of approximately 13.7%. This vacancy rate exists predominantly in the older office buildings
and in the portion of new buildings still under construction.
The Project Area is at the heart of the BART transit system, having three stations located
within its boundaries. More than forty bus lines connect the Project Area with other parts of
Qaldand and nearby communities. Freeway access to the Project Area is excellent, and was
significantly enhanced with the completion of the John B. Williams Freeway in 1985.
Within the Project Area are three major redevelopment action areas: City Center,
Chinatown and Victorian Row. These three action areas surround the Oakland Convention
CenterlParc Oakland Hotel Complex, which was developed with Agency financial assistance.
A second hotel/garage project is in progress and will be developed with Agency financial
assistance. The Agency owns and operates the Housewives Market and is continuing with plans
to develop new retail business in the Central District.
City Center. The City Center action area is a major mixed-use multipurpose development
on a 15 block site assembled by the Agency. It consists of three major elements: (1) the ten
blocks being developed and/or managed by Bramalea Pacific Inc.; (2) the two blocks being
developed by DWA-Fed Oak for the General Services Administration's Oakland Federal
Building; and (3) the three blocks of Preservation Park.
Chi1Ultown. The Chinatown action area is a multi-phased development on a four block
site assembled by the Agency. The first phase consisted of a six story podium covering one city
block, with the lower floors designed for commercial, retail and restaurant use and the upper
floors for office use. Construction was completed in late 1982.
Viaorian Row. Victorian Row, started in 1978, consists of the rehabilitation/restoration
of eleven mid to late nineteenth century Victorian commercial structures in three phases, and
new construction in a fourth phase, for office and commercial uses.
B-3
Special Programs
In addition to undertaking redevelopment activity within the three major action areas, the
Agency has initiated three other programs in the Central District Project Area.
The Cultural Development Program provides grants and technical assistance to local non-
profit arts organizations, producing a wide array of arts activities and assisting in marketing
Central District activities through technical assistance, advertising and promotion.
The Employment and Training Program provides assistance to employers in accessing
employment and training resources, and by providing a work force trained to the employer's
specifications. Over 750 high school students are presently enrolled in the program.
The Drug Nuisance Abatement Housing Program is designed to eradicate drug dealing
and use in Oakland's low- and moderate-income residences. The program places the duty to
abate drug related nuisances on the property owners in conjunction with the Oakland Police
Department.
Controls, Land Use and BuDding Restrictions
The Central District Urban Renewal Plan (the "Plan") designates six major use areas that
cover the entire Project Area: commercial core, peripheral commercial, civic and institutional,
residential (apartment), residential (neighborhood), and general industrial. The Plan outlines
guidelines for predominant and secondary uses in each area, residential development densities
and floor areas, off-street parking requirements, and off-street loading requirements. The Plan
is intended to provide the framework for the Agency's planning and execution of renewal
activities. The Agency's formal land use control powers are limited, however, to approved
rehabilitation, activity, and acquisition areas within the Project Area, as described below. City
codes, including the zoning regulations of the City of Oakland and other Oakland municipal
codes and ordinances apply throughout the Project Area.
The Plan provides for the establishment of rehabilitation, acquisition and activity areas
within the Project Area in which the Agency is empowered to employ various urban renewal
techniques and to exercise special land use controls as authorized by the Redevelopment Law.
These areas can be established only by resolution of the City Council based on recommendations
by the City Planning Commission. Three such action areas (described earlier) have been
established. Pursuant to state law requirements, environmental impact data have been completed
for each action area.
For each of these areas, the Plan sets forth land use controls, enforceable by the Agency,
related to: primary and secondary uses, size and operating characteristics of acceptable use,
design standards, building requirements, off-street parking and loading requirements, sign
control, utilities undergrounding, circulation and other obligations to be imposed on
redevelopers. The Plan provides that no building, sign, or structure be constructed and no
B-4
existing improvement be rehabilitated within established rehabilitation, acquisition, or activity
areas except in accordance with architectural, landscape, and site plans submitted to and
approved in writing by the Agency.
Under certain circumstances, the Agency is authorized to permit a variation from the
limits, restrictions and controls established by the Plan. However, no variation shall be granted
which changes a basic land use or which permits other than a minor departure from the Plan
provisions. In permitting a variation, the Agency is required to impose such conditions as are
necessary to protect the public health, safety or welfare, and to assure compliance with the
purposes of the Plan. Any variation permitted by the Agency is not to supersede any other
approval required under City codes and ordinances.
Other Projects
In addition to the Central District Redevelopment Project two designated redevelopment
projects and three proposed projects are briefly described below.
Acorn Project. Redevelopment began the Acorn Project in 1962 on a 50-block area west
of downtown Oakland. Approximately 610 structures were acquired, the occupants relocated,
the buildings demolished and the sale of assembled land to private non-profit developers who
built over 1,000 low-moderate income residential units. A 23-block area at the southern edge
of the project contains industrial and commercial development where more than 20 new firms
have bought land and built new facilities.
Oak Censer Project. Oak Center is a 56-block residential community in West Oakland,
adjacent to downtown and the Acorn Project, mainly composed of Victorian structures. These
structures were preserved through may efforts and a variety of financing techniques. Those that
were unfeasible for renovation were demolished and the vacant land made available for future
development.
Martin Luther King, Jr. Community Plaza. This is a proposed mixed use development
located at the Old Merritt College Campus in North Oakland which will consist of office, retail,
civic activities and residential space.
Coliseum Area Project. This is a proposed 4,100 acre redevelopment project in East
Oaldand with the objective of economically revitalizing the area and increase jobs for Oakland
residents. Activities will include commercial and industrial rehabilitation, public improvements,
acquisitionand assemblage of marketable parcels of land and construction of low and moderate-
income housing.
West Oakland Area Project. This program proposes to alleviate blight in West Oakland
through housing development, commercial revitalization and aesthetic improvement.
B-5
Litigation and Claims
There is no litigation pending, or to the knowledge of officials of the Agency, threatened,
against or affecting the Agency, seeking to restrain or enjoin the issuance of the 1992A Bonds
or the application of the proceeds thereof to payment of the Prior Bond, or in which an
unfavorable decision, ruling or finding would adversely affect the validity or enforceability of
the 1992ABonds, .the Indenture, or the transactions contemplated thereby.
B-6
APPENDIXC
THE REDEVELOPMENT AGENCY OF THE CITY OF OAKLAND
AUDITED FINANCIAL STATEMENTS
FOR THE FISCAL YEAR ENDED JUNE 30, 1991
(THIS PAGEINTENTIONALLY LEFI' BLANK)
WILLIAMS. ADLEY & COMPANY
REDEVELOPMENT AGENCY OF
THE CITI' OF OAKLAND
Flnancial Statements and
Supplemental Information
June 30, 1991
(With Independent Auditors' Report Thereon)
REDEVELOPMENT AGENCY OF 1HE emOF OAKLAND
TABLE OF CONTENTS
June 30. 1991
Independent Auditors' Report
CoI:lbined Financial Statements:
1
Combined Balance Sheer- All Fund Types
and Account Group 2
Combined Statement of Revenues, Expenditures
and Changes in Fund Balances All Governmental
Fund Types 4
Statement of Revenues. Expenses and Changes in
Retained Earnings Enterprise Fund 5
Statement of Cash Flows - Enterprise Fund 6
Notes to Combined Financial Statements 7
Supplemental Financial Information:
Combining Balance Sheet - Capital Project
Funds by Action Area 29
Combining Statement of Revenues. Expenditures
and Changes in Fund Balances Capital
Project Funds by Action Area 30
Schedule of Capital Project Expenditures
Central District 31
Combining Balance Sheer- Debt Service Funds 32
Combining Statement of Revenues, Expenditures and
Changes in Fund Balances - Debt Service Funds 33
Combining Balance Sheet - City-Agency
Lease Financing Debt Service Funds 34
Combining Statement of Revenues, Expenditures
and Changes in Fund Balances - City-Agency
Lease Financing Debt Service Funds 35
Independent Auditors' Report on Compliance of
California Redevelopment Agencies 36
WilliAMS. ADLEY& COMPANY
Cer:.f!!,; :>-"bile Accountants
INDEPENDENT AUDITORS' REPORT
To the Members of the Redevelopment Agency
of the City of Oakland:
We have audited the combined component unit financial statements of the Redevelopment
Agency of the City of Oakland (the Agency) as of and for the year ended June 30, -1991 as
listed in the accompanying table of contents. These financial statements are the
responsibility of the Agency's management. Our responsibility is to express an opinion on
these financial statements based on our audit.
We conducted our audit in accordance with generally accepted auditing standards. Those
standards require that we plan and perform the audit to obtain reasonable assurance about
whether the financial statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial statement
presentation. We believe that our audit provides a reasonable basis for our opinion.
In ocr opinion, the financial statements referred to above present fairly, in all material
respects, the financial position of the Redevelopment Agency of the City of Oakland at June
30, 1991 and the results of its operations and the changes in financial position of the
Enterprise Fund for the year then ended in conformity with generally accepted accounting
prizc.ples.
Our audit was made for the purpose of forming an opinion on the combined financial
statements taken as a whole. The supplemental financial information as listed in the
accompanying table of contents are presented for purposes of additional analysis and are
not a required part of the combined financial statements. Such information has been
subjected to the auditing procedures applied in the audit of the combined financial
statements and, in our opinion, is fairly presented in all material respects in relation to the
comb.ned financial statements taken as a whole.
(
wru.u.. \tS, ADLEY' &C({MPANY
October 31, 1991
1330 Broadwa, SUIte 1825 Oakland. CA 94612
.
(415) 893-8114 Fax 8932603
AGENCY OF THE CI1Y OF OAKLANI)
Combined Rulunce Sheet All fund TYllCS nnd Account Group
June 30. 1"91
Proprietary
Goyernmental Fund TWes Fund Type Account Group
General Totals
Capital Debt Enterprise I,ong-Term (Memorandum

Project Service Administrative fund Obligations Only)

Cash S 2,418,711 5 100 S 2.418.811
Restricted cash and investments with
fiscal agent 75,073.387 $ 49,023,939 s 885.413 124.982,739
Pooled cash and investments:
Cash Overdraft (708,639) (708.639)
Accrued intcrest receivable 818,503 818,503
N
Investments 73,305,000 73,305.000
Discount on investments (565,578) (565,578)
Less: Other funds interests (72,849.28()) (72,849,286)
Equity in pooled cash and investments 54,410.429 803.951 17,634,906 72,849.286
Due from other Redevelopment Agency funds 730,000 730,000
Due from City of Oakland 12,256.162 850,000 13,106,162
Due from U.S. General Services Adminlstration 292,806 292,806
Direct financing lease
receivables- City of Oakland 39,270,000
Accounts receivable (net of 5200,000
allowance for doubtful accounts) 3,008,680 62,315 3,070,995
Accrued interest receivable 2,279,607 2,279,607
NOles receivable 22,468,263 81,520,223 8,462,538 112,451,024
Property held for resale 9,251,123 9,251,123
Amount avaihtblc in Debt Service Fund S 4S,243.26S 4S,243,26S
Amount to he provided for retirement of
general long-term obligations 264,290,115 264,290,115
Total assets 5IB2,189Jg $,1
5.l,485,0Q2
52.3
47
,25
1 5J.09,533,32 $690.235,933
IUtlllVKLOltMENT AGENCY OF THE CITY OF OAKlAND
Combined n:tlnnce Sheet - All FundType.c; and Account Group, Continued
June 30, 1991
l)ropricl:uy
GuVCrtlJOOl.lUI Fund1'>!l!CS_-"_ Fund L\ccuun' GWlll!
General Totuls
Capital Debt Enterprise Long-Term (Memorandum
Liabilities Project Service Administrative
Fun'"
Obligations Only)
Accrued debt service s4,511,601 s 144,613 s 4,656,214
Ccniticates of participation $116,810,000 116,810,000
Tax allocation refunding bonds payable 179,709,273 t 79,709,273
Lease revenue refunding bonds payable 3,960,000 3,960,000
Mortgage revenue bonds payable 8,895,000 8,895.000
Due to other Redevelopment Agency funds s 730,000 730,000
Due to City of Oakland s 1,832,327 1,832,327
Advances from Cityof Oakland 9,054,107 9,054.107

Deferred revenue 24,194,576 120,919,556 120,000 145,234.132

Refundable deposits 487,637 36,467 524,104
Accrued liabilities 898,991 898,991
Other Ii..bilities
6,006 6,006
Total liabilities 27,413,531 125,437,163 886,467 9,039,613 309,533,380 472,310,154
fund Balance
Retained earnings 308,338 308,338
Fund balances:
Reserved for debt service 45,243,265 45,243,265
Reserved for property held for resale 9,251,123 9,251,123
Reserved for long-term loans 730,000 730,000
Reserved for future projects 145,524,514 '6,86N,53? I62,J93.053
Total fund equity 154.775.637 45,243,265 17.598.532 308.338 217.925,779
Total liabilities and fund equity $18.485.006 $2,347951.
REDEVELOPMENT AGENCY OF THE CITY OF O ~ D
Combined Statement of Revenues, Expenditures and Changes in Fund Balances-
All Governmental Fund Types
Year ended June 30, 1991
Governmental Fund Types
Totals-
Capital Debt (Memorandum
~ ~
Administrari\e Only)
Revenues:
Tax il:crement S 25,125,670 S 672;127 S 25,797$1
CitygraJIts 442,587 442,587
lDterest on restricted cash and investments
v.Uh fiscal agent 6,475.130 3,.520,556 9,995,686
lDteresl on pooled cash and investments 4.182,264 54,737 S U34,375 5,471,376
Interest on notes receivable 1,526.182 8,137,377 9,663,559
lDteresl on direct liDlmciDg lease receivables
City of Oakland 2,797$l7 2,797$l7
Sale of real property 1,467,751 1.467,751
Rents :LIId reimbursements 819,939 819,939
Other 1911.580 150
488 2.062068
TOlal revenues 41,951.103 15.l82,774 l.384,863 58,518,740
Expenditures:
Debt Senice:
RetiremeJ1t of long-term debt 12,S15,000 12,S15,000
IDtcresl 23,706,022 23,706,022
Operation and m
anagemeJ1t
of acquired property 531,378 531,378
Site dearaDc:e and toxic remediation 6,883,802 6,8Il3,802
Ptojeet improwments 2l,02S,349 2}.025,349
General aDd administrative 9,68l,968 9,681,968
Cost of property sold 1.410,000 1.4'70,000
Other 1.644.340 14.829 134000 1.793169
Talai expcuditures 41216831 36.235851
134000
7760668l\
Excess (Deficiency) of revenues over expenditures 714,266 (21.053,077) USO,863 (19,087,948)
Other 6nanciD{ sonrces (uses):
Operating transfers in 12,418,663 30,258,166 42,736,829
Operating transfers out (38.786,914) (3,599,117) (350,195) (42,I36,829)
Proceeds from insurance 3,300,000 3,300,000
Loan proceeds 9000000 9.OQQQQQ
Tou! Olhcr liDlmciDg sources (uses> (l7.308.251) 29952049 ( J50798) '21QQQQQ
Ex=ss of revenues and other
fuuncing sources over
cxpcuditurcs and other financiag uses (16,593,985) 8,905,972 900,Q65 (6.781,948)
Fund balances at begiuuiug of year 171.369,622 36.331,293 16698,474 224,405.389
Fund balances ;H end of year $154,775,637
$45,243'265 $\7598.539 $211617441
4
REDEVELOPMENT:AGENCY OF ras CI1Y OF OAKLAND
Statement of Revenues, Expenses and Changes in
R e t a i n ~ Earnings. Enterprise Fund
Year ended June 30, 1991
Revenues:
Interest on cash with fiscal agent
Interest on notes receivable
Total revenues
Expenses:
Interest
Other
Total expenses
Net Income
Retained earnings at beginning of year
Retained earnings at end of year
S 105,141
791.796
896,937
879,675
l3,643
893,318
3.619
304,719
5308,338
See accompanying notes to combined financial statements.
5
REDEVELOPMENT AGENCY OF THE CITY OF OAKLA.'iD
Statement or Cash Flows
Enterprise. Fund
Year ended June 30, 1991
Cash flows from operating activities:
Cash provided by operations:
Net income
Decrease in notes receivable
Decrease in accrued interest receivable
Net cash provided by operating activities:
Cash flows from non-capital financing activities:
Principal payments on bonds
Decrease in accrued interest payable
Net cash used for non-capital financing activities:
Increase in cash
Balance of cash with fiscal agent at beginning of year
S 3,619
134,140
72.540
210,899
150,000
2.336
152.336
58,563
826.850
Balance of cash with fiscal agent at end of year
See accompanying notes to combined financial statements.
6
REDEVELOPMENT AGENCY OF THE crrv OF OAKLAND
Notes to Combined Financial Statements
June 30, 1991
(1) Activities of the Redevelopment A2ency of the City of Oakland
The Redevelopment Agency. a component unit of the City of Oakland (the Agency).
was activated on October 11. 1956 for the purpose of redeveloping certain areas of
the City of Oakland (City) designated as project areas. Its principal activities are the
acquisition of real property for the purpose of removing or preventing blight,
providing for the construction of improvements thereon and the rehabilitation and
restoration of existing properties.
The principal sources of funding for the Agency's activities have been:
Bond issues. notes and other financing sources.
Advances. loan and grants-in-aid from the City.
Property tax revenue attributable to increases in the assessed valuations in the
associated project areas.
Grants received from the U.S. Depanment of Housing and Urban
Development under the Urban Renewal Program, Neighborhood
Development Program and Community Development Block Grant Program
(through the City of Oakland), as well as Section 312 rehabilitation loans.
Generally, funding from bond issues, notes, loans and City advances are eventually
repayable from incremental property tax revenue. The Agency has entered into
repayment agreements with the City or is obligated to do so under the terms of
funding agreements. The amount of incremental property tax revenue received is
dependent upon the local property tax assessments. and rates, which are outside of
the control of the Agency. Accordingly, the length of time that will be necessary to
repay the City is not readily determinable.
The Agency has undertaken seven projects to date which consist of the Central
District (which is segmented into several action areas including Chinatown, City
Center and Victorian Row), Acorn, Elmhurst, Oak Center, Peralta College,
Stanford/Adeline and the 77th Avenue Industrial areas. The Elmhurst, Oak Center
and Stanford/Adeline projects are substantially complete. The Peralta College
project has been completed. The 77th Avenue Industrial project is inactive.
The Central District Redevelopment Project, the Agency's primary project, provides
for the development and rehabilitation of commercial and residential structures for
approximately 200 blocks of Oakland's downtown area.
7
REDEVELOPMENT AGENCY OF THE CITY OF OAKLAND
Notes to Combined Financial Statements
June 30, 1991
(1) Activities of tbe Redevelopment Aaen" of tbe Cit] of Oakland, <Cont'd,)
The Agency has also purchased from and leased back to the City certain major
properties including the HJ. Kaiser Convention Center, George P. ScotIan
Memorial-Oakland Convention Center (Scotian ConventionCenter) andthe Oakland
Museum.
c: -.'
SummaI)' of Sienificant Accounting Policies
Basis Qf Presentation - Fund Accounting
The accounts of the Agency are organized on the basis of funds or 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. The various funds are summarized
by type in the financial statements. Fund types and the account group used by
the Agency are described below.
Governmental Fund TWes:
<&pital PrQjects Fund - The Agency is organized into project areas which
constitute separate accounting entities within the Agency. The operations of
each project area are accounted for through a Capital Projects Fund. The
Capital Projects Fund accounts for financial resources to be used for the
acquisition, construction or improvement of major capital facilities.
Debt ServiceFunds - The Debt Service Funds account for the accumulation of
resources for, and the payment of, general long-term obligation principal,
interest and related costs.
Administrative Fund - The balances related to activities that are not directly
associated with a specific project area as well as activities of the Agency's
pooled investments are accounted for through the Administrative Fund.
ProprietaQ' Fund TWe:
Enterprise Fund - The Enterprise Fund is used to account for operations of the
Acorn Mortgage Revenue Bondprogram where the intent of the Agency is that
the costs of providing services to the public on an on-going basis be financed
or recovered primarily through user charges.
8
REDEVELOPMENT AGENCY OF THE CITY OF OAKLAND
Notes to Combined Financial Statements
June 30, 1991
(2) Summan of SiiDificant Accountin2 Policies. (Cont'd.)
Basis Qf PresentatiQn - Fund AccQunting (Cont'd.)
Account Group:
General Long-Term QbligatiQns Account GrQup - The General Long-Term
Obligations Account Group is established to account for the Agency's
long-term obligations expected to be financed by governmental funds.
Basis of AccQunting
MQdified Accrual Basis Qf Accounting:
The modified accrual basis of accounting is followed in the governmental fund
types. Revenues are recorded when susceptible to accrual, that is, both
measurable and available. "Measurable" means the amount of the transactions
can be determined and "available" means collectible within the current period
or SOQn enough thereafter to be used to pay liabilities of the current period
Expenditures are recorded when the related fund liability is expected to be
liquidated with expendable available resources, Principal and interest on
general long-termobligations are recorded as fund liabilities when due or when
amounts have been accumulated in the Debt Service Funds for payments to be
made early in the following year.
Accrual Basis of Accounting:
The accrual basis of-accounting is utilized in the proprietary fund t)'PC. Under
the accrual basis of accounting, revenues are recognized when earned and
expenses are recorded when incurred.
Measurement Focus
The accounting and reponing treatment applied to a fund is determined by its
measurement focus. All government funds are accounted for on a funds flow
measurement focus. Qnly current assets and current liabilities are generally included
on their balance sheets. Governmental fund operating statements present increases
(revenues and other financing sources) and decreases (expenditures and other
financing uses) in net current assets.
9
REDEVELOPMENT AGENCY OF THE crrr OF OAKLAND
Notes to Combined Financial Statements
June 30, 1991
(2) Summary of Siwiticant A c c o u n t i n ~ Policies, (Cont'd.)
Measurement Focus. (Cont'd.)
The proprietary fund is accounted for on a capital maintenance measurement focus.
Assets and liabilities (whether current or non-current) associated with this activity are
included on their balance sheets.
Investments
Investments held directly by the Agency are stated at amortized cost. Amortization
of investment premiums and discount is recorded in interest income. Securities held
by Fiscal Agents are stated at purchase cost.
Investment earnings are accrued as they are measurable and available.
Restricted Cash and Investments with Fiscal Agents
Proceeds from debt and other funds which are restricted for the payment of debt and
held by fiscal agents by agreement are classified as restricted assets,
Land Held for Resale
Property held for resale and/or lease is recorded at lower of cost or estimated
conveyance value, with an equal amount recorded as a reservation of fund balance,
Direct Financing Lease Receivables
The Agency accounts for its long-term direct financing leases (Debt Service Fund)
on the modified accrual basis wherein the present value of the minimum lease
paynien1s is capitalized and reduced as payments are received. Capital leases are
offset by deferred revenue. Revenue is recognized as payments are received.
Fund Equity
Reservations of fund balances indicate those portions of fund equity which are not
available for appropriation or expenditure or which have been legally restricted to
a specific use.
10
REDEVELOPMENT AGENCY OF mE CITY OF OAKLAND
Notes to Combined Financial Statements
June 30, 1991
(2I Summary of Simificant Accognting Policies. (Cont'd.)
The Agency has reserved fund balance as follows:
Reserved for debt service - To comply with debt covenants, these monies are set
aside and held by a fiscal agent for future payment of debt service principal and
interest.
Reserved for land held for resale - To account for assets acquired with certain funds
granted to the Agency not available for appropriation.
Reserved for future projects - To account for assets set aside for future
redevelopment projects.
Tax Increment Revenue
Tax increment revenues are recognized when measurable and available from local
taxing authorities.
Pooled Cash and Investments
Advances are made to a common cash and investment pool maintained by the
Agencyto pool assets for investment purposes. Income on pooled assets is allocated
to the individual funds based on the fund's average daily balance in relation to total
pooled assets.
Budgetarv Data
The Agency operates on a project basis. Annual budgetary data is not presented as
it would not provide a meaningful comparison to actual revenues and expenditures.
Total (Memorandum Only) Columns on Combined Statements
Total columns on the combined statements are presented to aggregate financial data.
Data in these columns does not present financial position or results of operations in
conformity with .generally accepted accounting principles, nor is such data
comparable to a consolidation. Eliminations of interfund activity have not been
made between fund types.
11
REDEVEWPMENf AGENCY OF THE CI1Y OF OAKLAND
Notes to Combined Financial Statements
June 30, 1991
(3-' Transactions with the CUyor Oakland
The Agency and the City are closely related but are separate legal entities. The City
Council members serve as the governing board for the Agency. The Agency does not
have any employees nor does it have facilities separate from the City. A substantial
portion of the Agency's expenditures represents reimbursement to the City.
The City provides administrative services and materials related to the various
projects, as well as advances and loans. For certain projects, as described below, the
Agency has entered into repayment agreements to reimburse the City for all amounts
advanced for those projects. .
At June 30, 1991, the following amounts were due from or to the Oty:
Direct Financing Lease Receivables City of Oakland:
Oakland Museum direct financing lease receivable
in semiannual installments ranging from $2,794,632
to $4,037,625 through March 15,2012, with interest
imputed at 8.04%
City Hall West direct financing lease receivable in
semiannual installments of $194,000 through October
31, 2010, with interest imputed at 8.20%
Due from City of Oakland:
Reimbursements to the City for various redevelopment
loans made by the City in connection with the Central
Central District Urban Renewal Project. The City will
reimburse the Agency as amounts are collected on the
underlying loans.
Various Agency advances to the City currently receivable.
Due to City of Oakland:
Various City advances on Agency projects currently
payable.
12
Amount
$35,310,000
3.960J)OO
$12,309,924
796.238
$ 1 3 , 1 0 6 , 1 ~
REDEVELOPMENT AGENCYOF TIlE CITY OF
Notes to Comblced Financial Statements
June 30, 1991
(3) Transactions with the Cih of Oakland (Cont'd.)
A summary of future minimum lease payments from the above-mentioned direct
financing lease receivables follows:
Year June 30
1992
1993
1994
1995
1996
Thereafter
City Hall Oakland
West Museum TOtal
s388,000 s 2,988,432 S 3.376.432
388,000 3,246,872 3,634,87i
388,000 3,244,682 3,632,682
388,000 3,257,852 3,645,852
388,000 3,261,132 3,649,132
5.626.000 60.506.437 66.132.437
Total future minimum
lease payments
receivable 7,566,000
Less amounts representing
interest (3.606,000)
Present value of future
minimum lease payments
receivable $3.960,000
(4) Cash and Investments
76,505,407
(41.195,407)
S35310.QQ5J
84,071,407
(44,801.407)
The Agency maintains a common cash and investment pool for use by all funds. Each
fund's portion of this pool is classified in the combined balance sheet as equity in
pooled assets. Additionally, cash and investments in the Debt Service and Enterprise
Funds are separately held by the Agency's fiscal agents.
Agency investments are categorized by type to give an indication of the level of
credit risk assumed at year-end. Category 1 includes investments that are insured or
registered or for which the securities are held by the Agency or its agent in the
Agency's name. Category 2 includes uninsured and unregistered investments for
which the securities are held by the Agency's custodian in the Agency's name.
13
REDEVELOPMENT AGENCY OF THE CITY OF OAKLAND
Notes to Combined Financial Statements
June 30, 1991
t4, Cash and Investments (CQnt'd.>
At June 30, 1991, the carrying value, market value and category of credit risk of the
Agency's cash and investments are as follows:
Cash
Restricted cash and investments
with fiscal agents:
Cash
Certificates of deposit
U.S. Treasury securities
U.S. government agency securities
Government money market fund
Pooled cash and investments:
Certificates of deposit
U.S. Treasury securities
U.S. government agency securities
Purchase agreements
Municipal Securities
Commercial paper
Bankers' acceptances
Net
Carrying
Value
$ l.7IQ.m
$ 18,769
8,780
101,320,205
378,837
23.256,148
$124.982,739'
s 200,000
4,932,020
27,092,635
2,519,491
1,794,246
9,055,911
27,145,119
$72.739,422
Market
Value
$ 1.110.172
s 18,769
8,780
99,929,617
382,538
23.256,148
$123595.852
s 200,000
4,874,195
27,382,323
2,519,491
1,785,000
9,019,473
27.145,119
$72.925,601
Risk
C a t e ~ o O '
1
2
2
1
2
2
2
2
2
California Government Code requires collateral for demand deposits and certificates
of deposit at 110% of all deposits not covered by federal deposit insurance. Since
the Agency uses only authorized public depositories, all funds deposited with
financial institutions are fully insured or collateralized.
California statutes authorize Agency officials to invest pooled funds in United States
bonds and obligations, guaranteed United States agency issues, bank certificates of
deposit, bankers' acceptances, repurchase agreements and prime commercial paper
issues.
For the purpose of the Statement of Cash Flows, cashequivalents consist of cash and
certificates of deposit in the amount of $10,828 and U.S, Treasury securities and U.S,
Agency securities with maturities of 6 months or less of $874,585.
14
REDEVELOPMENT AGENCY OF THE CITY OF OAKLAND
Notes to Cemblned Financial Statements
June 30, 1991
(5) Notes Receivable
Notes receivable consisted of the following at June 30, 1991:
Amount
Acorn Project Mortgage Loans
Note receivable related to the sale of
the HJ. Kaiser Convention Center
Note receivable related to the sale of
the G.P. Scotlan Memorial Convention Center
Other Agency Redevelopment Project
Construction and Rehabilitation Loans
15
$ 8,462,538
43,518,102
38,002,120
22.468.264
$112.451,024
REDEVELOPMENT AGENCY OF THE CITY OF OAKLAND
Notes to Combined Financial Statements
June 30, 1991
(51 Notes Receivable (Cont'd.)
Acorn Project Mortgage Loan
Pursuant to a building loan agreement dated May 30, 1980 and amended April 23,
1981 the Agency has agreed to provide a developer of property within the Acorn
Redevelopment Project up to $9,319,200 in FHA-insured mortgage loans from the
proceeds of Agency Mortgage Revenue Bond issues (see note 7). The funds
advanced to the developer are secured by a deed of trust on the property being
developed and are repayable in monthly installments of 583,256 including interest at
10.125% per annum with the remaining balance due on October 1,2010.
HJ. Kaiser Convention Center
In connection with the purchase and sale of the HJ. Kaiser Convention Center (see
note 7), the Agency has an installment sale agreement with Associates Limited
Partnership (Oakter). Under the terms of the agreement, Oakter agreed to pay the
Agency $37,196,298 for the Convention Center. Oakter paid $1,204,849 in cash with
the $35,991,449 balance payable in sixty semiannual principal and interest
installments ranging from $2,169,656 to $2,534,656. Interest not covered by the
semiannual payments has been deferred and added to the outstanding note
receivable balance. Principal reductions are scheduled to begin on April 1, 1995.
This installment sale agreement has an effective interest rate of 9.97% per annum
and is secured by a deed of trust and the Partnership's rights in its lease agreement
with the City.
G.P. Scotian Memorial Convention Center
In connection with the purchase and sale of the Scotian Convention Center (see note
7), the Agency has an installment sale agreement with the OCCEN Corporation
Limited Partnership (OCCEN). Under the term- of the agreement, OCCEN agreed
to pay the Agency 539,410,926 for the Convention Center. OCCEN paid 51,410,926
in cash and the $38,000,000 balance including deferred interest of 51,201 is payable
in sixty-one semiannual installments which commenced on September 1, 1984.
Payments range from $1,947,500 to $2,252,876 with principal reductions beginning on
March 1, 1995. This installment sale agreement has an effective interest rate of
10.25% per annum and IS secured by a deed of trust and the Partnership's rights in
its lease agreement with the City.
16
REDEVEWPMENT AGENCY OF THE CITY OF OAKLAND
Notes to Combined Financial Statements
June 30, 1991
m Notes Receivable (Coot'd.)
Project Construction and Rehabilitation Loans
The Agency has made advances to developers of various other Agency
redevelopment projects. These advances are evidenced by a note or loan receivable
as follows:
East Bay Asian Local Development Company, bearing interest
at 6%, through September 1, 1989 and zero interest there-
after, principal and interest due March 2, 1992 or earlier
upon the receip.t of Department of Housing and Urban
Development Grant Funds from the City.
Greater Emrnanual Housing Development Corporation, bearing
interest at 9%, interest payable monthly, principal and
interest due December 29, 1992 or earlier under certain
provisions of the note.
Cahon, Inc., bearing interest at 9%, principal and interest
due December 1, 1991 or earlier under certain provisions
of the note.
Preservation Venture, bearing interest at 1/2% over the Bank
of America reference rate, principal and interest due
August 31, 1993.
Mar Associates, bearing interest at 9q>(, principal and interest
due January 10, 1991. (Due date in process of being
extended).
San Antonio Terrace Associates, bearing 9%, interest at
principal and interest due December 31, 1991 or earlier under
certain provisions of the note.
Touraine Partners bearing interest at 6%, principal and interest
due September 22, 1991.
Oaks Associates, bearing interest at 6%, principal and interest due
May 2, 1991. (Due date in process of being extended).
17
S 339,349
565,000
1,100,000
4,577,594
5,070,595
631,009
1.333,846
566,031
REDEVELOPMENT AGENCY OF THE CITY OF OAKLA.'iD
Notes to Combined Financial Statements
June JO, 1991
( ~ ) Notes Receivable (Cont'd.)
Slim Jenkins Court Associates, bearing interest at 9%, principal
and interest due March 29, 1991. (Due date in process of
being extended).
Pacific Renaissance Associates II , bearing interest at 10%,
principal and interest due July 30, 2015.
Other notes receivable
18
943,774
7,000,000
)41.066
S22.48.264
REDEVELOPMENT AGENCY OF TIlE CI1Y OF OAKLA.1\\D
Notes to Combined Financial Statements
June 30, 1991
(6) Property Held for Rt!sale
Property held for resale at June 30, 1991 consisted of the following:
Chinatown
City Center
Housewives Market
Acorn Plaza Shopping Center
Oak Center
(i) L o D l ~ Term Obligations
General Long-Term Obligations
$ 2,100,000
3,335,988
1,610,963
2,105,000
99,172
$9,251,123
The following is a summary of changes in the General Long-Term Obligations
Account Group for the year ended June 30, 1991:
Retirements
Balance and Balance
July 1. 1990 Additions Decreases June 30, 1991
Certificates of
participation s 116,810,000 s 116,810.000
Tax allocation
bonds
payable 183,224,273 3,515,000 179,709,273
Lease revenue
refunding bonds 3,960,000 3.960,000
Advances from City
of Oakland 8,883,744 485.546 315,183 9,054,107
$312,878,017 $485.546 $3,830,183 $309.533,380
19
REDEVELOPMENT AGENCY OF THE CI1Y OF OAKLAND
Notes to Combined Financial Statements
June 30, 1991
n Long-Term Obligations (Cont'd.)
General Loni-Term Obliiations (Cont'd.)
Long-term obligations consist of the following:
Certificates of Panicipation:
HJ. Kaiser Convention Center
HJ. Kaiser Convention Center
G.P. ScotIan Memorial
Oakland Museum 1987 Series A
Oakland Museum 1987 Series A
Oakland Museum 1987 Series A
Maturity
2002
2014
2014
1992-2002
2007
2012
Interest
~
9.875%
10.00%
10.25%
6.200/0-7.85%
8.10%
8.125%
Balance at
June 30. 1991
S 8.550.000
34.950,000
38.000,000
9,850.000
10.115,000
15345.000
116,810,000
Tat Allocation Bonds:
Central District Refunding
Series 1986:
Serial bonds
Term bonds
Acorn
Refunding 1988:
Serial bonds
Term bonds
Central District
Series 1989:
Serial bonds
Capital Appreciation Bonds
Term Bonds
1991-2000 5.250/0-7.5%
2001-2014 7.5%
1993-2000 6.30-7.00%
2007 7.40%
1993-2000 5.750/0-6.55%
2001-2009 6.60/0-6.65%
2010-2019 7.125%
19,560.000
66,375,000
85,935,000
1,300,000
2.075.000
3.375,000
26,900.000
11.899.273
51,600,000
90.399,273
Lease Revenue Refunding Bonds 1999-2010 5.20%-7.375%
Advances from the City of Oakland
Total General Long-Term Obligations
20
179,709,273
3,960.000
9.054.107
s399,533,380
REDEVELOPMENT AGENCY OF THE CITYOF OAKLA. 1\D
Notes to Combined Financial Statements
June 30, 1991
(1) Lon2-Term Obli2ations, (Cont'd.)
H.I. Kaiser Convention Center
Concurrently with the issuance of the certificates dated September 1, 1982, the
Agency purchased the HJ. Kaiser Convention Center from the City and sold the
facility to a partnership which then leased the facility back to the City. The
certificates are special limited obligations of the Agency payable solely from
payments made to the Agency by the partnership under the terms of an installment
sale agreement between the Agency and the partnership (see note 5).
The Certificates of Participation have mandatory sinking fund requirements
commencing April 1, 1995 and are subject to prior redemption,
George F. ScotIan Memorial Convention Center
Concurrently with the issuance of the certificates dated December 1, 1983, the
Agency purchased the Scotian Convention Center from the City and sold the facility
to a partnership which then leased the facility back to the City. The certificates are
special limited obligations to the Agency payable solely from payments made to the
Agency by the partnership under the terms of an installment sale agreement between
the Agency and the partnership (see note 5).
The Certificates of Participation have mandatory sinking fund requirements
commencing April 1, 1995 and are subject to prior redemption.
Oakland Museum
Concurrently with the issuance of the certificates dated September 1, 1987 the
Agency purchased the Oakland Museum from a partnership and then leased the
facility to the City. The certificates are special limited obligations to the Agency
payable solely from payments made to the Agency by the City under the terms of the
related Master Lease Agreement (see note 3).
The term Certificates of Participation mature in 2007and 2012 and have mandatory
sinking fund requirements beginning in April I, 2003 and are subject to prior
redemption.
Tax Allocation Bonds
In fiscal year 1987 the Central District Redevelopment Project Tax Allocation
Refunding Bonds, Series 1986 were used to defease the Central District
Redevelopment Project Tax Allocation Bonds, Series A and Series B.
21
REDEVELOPMENT AGENCY OF THE CITY OF OAKLA."D
Notes to Combined Financial Statements
June 30, 1991
til Long-Term Obligations, (Cont'd,)
Tax Allocation Bonds. (Cont'd.)
The outstanding balance at June 30, 1991 of the defeased bonds was $63,915,000.
The Central District Redevelopment Project Tax Allocation Refunding Bonds are
payable from and secured by a pledge of incremental property taxes resulting from
the increase in assessed valuations within the Central District RedevelopmentProject
subsequent to the adoption of the related redevelopment plan. The Agency must set
aside from incremental tax revenue received from the Central District an amount
equal to 125% of the annual debt service requirement for the ensuing fiscal year.
Such amounts are held by the fiscal agent.
The term bonds are subject to mandatory redemption requirements beginning
February 1, 2001.
The Acorn Redevelopment Project 1988 Tax Allocation Refunding Bonds were used
to advance refund $2,895,000 of outstanding Acorn Redevelopment Project Tax
Allocation Refunding Bonds (prior bonds) with an average coupon rate of 11.84%.
As a result, the prior bonds are considered to be defeased and the liability of the
prior bonds has been removed from the general long-term obligations account group.
The Acorn Redevelopment Project 1988 Tax Allocation Refunding Bonds are
payable from and secured by a pledge of incremental property taxes allocated to the
Agency resulting from the increased in assessed valuation of properties within the
Acorn Redevelopment Project.
Bonds maturing in 2007 are subject to mandatory sinking fund requirements
commencing May 1, 2001 and are subject to prior redemption.
22
REDEVELOPMENT AGENCY OF THE CITY OF OAKlAl'I;"D
Notes to Combined Financial Statements
June 30, 1991
(i) Long-Term Obligations, (Cont1d,)
Tax Allocation Bonds. (Cont' d.)
On August 1, 1989, the Central District Redevelopment Project Tax Allocation Bond,
Series 1989A ('Tax Allocation Bond"), was issued by the Agency. The Agency will
use the net proceeds of the Tax Allocation Bond to finance projects and related
improvements in the Central District Redevelopment Project Area. The Tax
Allocation Bond is a limited obligation of the Agency and is 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.
The lien created by the pledge of the tax revenues is subordinate to a lien on tax
revenues in favor of the Agency's Central District Redevelopment Project Tax
Allocation Refunding Bonds, Series 1986. The Agency may only incur additional
indebtedness payable from subordinated tax revenues on a parity with the Tax
Allocation Bond when set subordinated tax revenues received by the Agencyin the
prior year equals or exceeds 120% of maximum annual debt service, excluding debt
service on the Series 1986 bonds.
The Term Bonds are subject to optional redemption in whole or in part on any
interest payment date, in such amounts as directed by the Agency. The Term Bonds
are, also, subject to mandatory sinking fund redemption in whole, or in part by lot,
on September 1 in each year commencing September 1, 2010.
Lease Revenue Refunding Bonds Payable
In 1988, the Agency defeased the 1980 City Hall West Lease Revenue and Refunding
Bonds byplacing the proceeds of the 1988City Hall West Lease Revenue Refunding
Bonds in an irrevocable trust to provide for all future debt service payments on the
defeased bonds. Accordingly the trust account assets and the liability for the
defeased bonds were not included in the Agency's financial statements. During this
year these bonds were retired.
The 1988 Lease Revenue Refunding Bonds are special limited obligations of the
Agency payable solely from payments made to the Agency by the City under the
terms of the related City Hall West Lease Agreement (see note 3).
23
REDEVELOPMENT AGENCY OF THE CITY OF OAKLA.'1iD
Notes to Combined Financial Statements
June 30, 1991
(7) LoD2-Tenn Obli2ations, (Cont'd.)
Lease Revenue Refunding Bonds Payable (Cont'd.)
On October 17, 1989, the City Hall West building which secures payment on the
Lease Revenue Refunding Bonds, suffered significant damage in the Loma Prieta
Earthquake. The City maintained earthquake and business interruption insurance
on the building and, during 1991, the Agency received $3,300,000 (in addition to the
$5,000,000 received in 1990) in proceeds from the insurance policies. These proceeds
have been reported as other financing sources in the financial statements.
Since the 1988 Refunding Bonds continue to remain outstanding .and since the
Agency meets its Debt Service requirements with lease revenues received from the
City, the Agency has two legal options it may pursue with regards to the insurance
proceeds. The Agency may either (a) repair, replace, or reconstruct City Hall West
with such insurance proceeds, or (b) cause such insurance proceeds to be used for
the redemption of all outstanding bonds at a redemption price of 100% of the
principal amount. plus accrued interest.
The City has hired a consultant to do a comprehensive study of City office space
needs and until a decision is made as to whether the City Hall West site is a
preferred site for a new City office building,the Agency has not chosen either option
stated above. In the interim, the City has agreed to make lease payments on City
Hall West so that the Agency can continue to meet the Debt Service requirements
on the outstanding bonds.
Advances from City to the Redevelopment Agency
The City has made various advances to the Agency for redevelopment projects. The
advances are payable principally from future tax increment revenues. Approximately
$8,000,000 of the advances bear interest at 6% per annum. The remaining advances
are non-interest bearing.
Defeasance of Vanous Properties Debt
In 1985, the City sold buildings and improvements of City Hall and Various
Properties to the Agency. The City concurrently leased back the Properties in a sale
leaseback transaction.
The Agency issued 1985 Certificates of Participation totaling $221.540,000 with an
average yield of 8.95% in order to finance the acquisition of the Properties.
24
REDEVELOPMENT AGENCY OF THE CITY OF OAKLAND
Notes to Combined Financial Statements
June 30, 1991
I;') Lone-Term Obli2ations. (Cont'd.)
Defeasance Qf VariQus PrQperties Debt CCQnt'd.)
In 1988, Special Revenue Refunding Bonds were sold by tbe City with an average
yield of 7.35%. The proceeds were used to repay the City'S capital lease obligation
for City Hall and Various Properties to the Agency and provide sufficient funds to
defease the 1985 Certificates. The outstanding balance at June 30, 1991 of the
defeased certificates amount to $ 193,490,000.
Enterprise Fund Oblig:a1iQns
Enterprise fund obligations at June 30, 1991 are as follows:
198Q.AcQrn Mortgage Revenue Bonds
1981Acorn Mortgage Revenue Bonds
Maturity
2011
2001
Interest
~
8.875%
11.80%
Balance at
June 30.1991
S 6,220,000
2.675.000
sU95,()QQ
The Acorn Mortgage Revenue Bonds are payable from and secured by a pledge of
FHA insured mortgage loans issued from the related bond proceeds to the owner of
Acorn I housing in the Acorn Redevelopment Project Area. (See note 9)
Bond Indentures
There are a number of limitations and restrictions contained in the various bond
indentures. The Agency believes it is in compliance with all significant limitations
and restrictions.
25
REDEVELOPMEl''T AGENCY OF THE CITY OF OAKlAND
Notes to Combined Financial Statements
June 30, 1991
m
Long-Term Obligations. <Cont'd.)
Annual Future Payments
The following table presents the Agency's aggregate annual amount of future
payments required to amortize the outstanding certificates ofpanicipation bonds, and
long-term liabilities to the City of Oakland as of June 30, 1991.
General
Year ending Enterprise Long-Term
June 30
B!m1
Obligations
I21al
1992 $1,027.676 $ 27.058,256 S 28.085,932
1993 1,027,306 27,439,554 28,466,860
1994 1,025.604 27.526.642 28.552,246
1995 1,032,426 28,197,639 29,230,065
1996 1,031,735 28,891.579 29,923,314
Thereafter 1?,432,277 560,948.122 576.,380,399
Amounts with
unspecified payment
dates (advances from
City of Oakland) 9,054,107 9,054,107
Totals 20.577,024 709,115,899 729,692,923
Less amounts
representing
interest (11.682,024) (399,582,519) (411.264,543)
Liability at
June 30, 1991 $ 8.895'()OO S 309533.380 S ll.428,J.80
26
REDEVELOPMENT AGENCY OF THE CI1Y OF OAKLA.1IliD
Notes to Combined Financial Statements
June 30, 1991
tS} Commitments and Contin&encies
As of June 30. 1991. the Agency has entered into contractual commitments of
approximately $826.000 for materials and services relating to various projects. These
commitments and future costs will be funded by currently available funds, tax
increment reve-nue and other sources.
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.
In connection with the sale of land in the Central District project, the Agency
entered into an agreement to place $1,000.000 of the sales proceeds in escrow
pending the removal of hazard substances and contamination. The developer filed
claims amounting to $2,700.000 which were rejected by the Agency. In accordance
with the agreement, the Agency filed for arbitration with the American Arbitration
Association, and as a result has paid $184,439 in the fiscal year. On October 1,1991
the Agency negotiated an agreement in principal to pay an additional amount up to
$1,300.000 in settlement of the claim which is pending ratification by the parties
involved.
At June 30, 1991, the Agency was committed to fund $6,096,000 in loans and had
issued $6,442.000 in repayment guarantees and letters of credit in connection with
several low and moderate income housing projects. These commitments were made
to facilitate the construction of low and moderate income housinz within the City of
- .
Oakland.
27
REDEVELOPMENT AGENCY OF THE CI1Y OF OAKLA."D
Notes to Combined Financial Statements
June 30, 1991
(9) Subsequent Events
On July 9, 1991 the Agency sold the Acorn Shopping Center for $1,910,000. As a
result the U.S. Economic Development Administration (EDA), which provided a
$1,234,000 grant to construct the Center, has claimed that S6OO.122 of the sales
precedes, less a pro rata deduction for customary expenses of sale, should be paid
to them. The Agency is in negotiation with EDA and expects that no payment will
be made. Because of this claim, the Agency has agreed to indemnify the Title
Company up to $1,400,000. This amount of the sales proceeds have been set aside
until the EDA matter is resolved.
On August 25, 1991 the Department of Housing and Urban Development (HUD)
took control of the Acorn I housing. Effective August 1, 1991, HUD stopped making
rent subsidy payments to the owner to force long-deferred maintenance and repairs.
As a result, the owner is in default on the mortgage loan and foreclosure is in
process. The Acorn Mortgage Revenue Bonds, which are payable from mortgage
loan payments, are in default and will be retired from the mortgage insurance in the
next few months. The Agency's liability on the bonds is limited to the revenues and
other assets pledged under the bond indenture and held by the Trustee.
28
REDEVELOPMENT AGENCY OF THE CI1Y OF OAK.LAXD
Combining Balance Sheet - Capital Project Funds by Action Area
June 30, 1991
Central Other

Acorn District Protects Total

Cash 51,118,699 s 1,307,198 5 (7,186) 5 2,418,711
Restricted cash and investments with
fiscal agent 75,CJ73.)frl 75,073,387
Equity in pooled cash and investments 2,264,221 53,744,854 54,410,429
Due from other Redevelopment Agency funds 730,000 730,000
Due frem City of Oakland 10,489,183 1,766,979 12,256,162
Due ircm U.s. General Services Administration 292,806 292,806
Accounts receivable (net of $200,000 allowance
for doubtful accounts) 119,691 2,282,053 606,936 3,008,680
NOles receivable 13,451,983 22,468,263
Accrue': interest receivable 99,465 1,046,873 1,133,269 2,279,607
Propertyheld for resale 2105.QQQ 5.435.988 1.710.135 9251.123
Total assets 55.707,076 $163.854325 $12.627767 $182.189.168
Liabilities
Due to City of Oakland 5 13,633 s 1,388,007 5 430,687 5 1,832,327
Deferred revenue 22,865,782 1,328,m 24,194,576
Refund:lble deposits 8,880 478,227 530 487,637
Accrue': liabilities 61.971 837020
--
898.991
Total liabilities 84,484 25,569,036 1,760,011 27,413,531
Fund Balances
Reserved for Property held for resale 2,105,000 5,435,988 1,710,135 9,251,123
Unreserved fund balances 3517.592 132.849.301 9,157.621 145524514
Total fund balance 5622592 138285289 10867756
154 775.637
Total liabilities and fund balances 55.707.076 5163:8543 25 512627,767
$182189.168
29
REDEVELOPMEl\1'f AGENCY OF THE CITY OF OAKLA.:.'iD
Combining Statement of Revenues, Expenditures and Changes in Fund Balances -
Capital Project Funds by Action Area
Year ended June 30, 1991
Central Other
&2m
District PrQjegs
Revenues;
Tax increment 5844,471 $24,281,199 $25,125,670
Federal grants-in-aid W ~ 442,587
Interest on restricted cash and investments
with fiscal agents 6,475,130 6,475,130
Interest on pooled cash and investments 186,683 4,135,110 (139.519) .4,182,264
Interest on notes receivable 491,168 835,030 1,326,198
SaIe of real property 1,467,751 1,467,751
Rents and reimbursements 268,304 551,635 819,939
Other
4,095 1,267.286 839,483 211lS6i
Total revenues 1,303,553 38,669,979 1,977,571 41,951,103
Expenditures:
Operation and management of acquired property 127,792 400,173 3,413 531,378
Site clearance and toxics remediation 6,883,802 6,883,802
PrQject improvements 16,750,094 4,275,255 21,025,349
General and administrative 111,729 8,118,976 1.,451,263 9,681,968
Cost of property sold 1,470,000 1,470,000
Other 1.644.340 1.644.340
Total expenditures 239521 35.267.385 5,729.931 41236.837
Excess (deficiency) of revenues
over expenditures 1,064,032 3,402,594 (3,752,360) 714,266
Other financing sources (uses):
Operating transfers in 71,324 6,512,801 5.894.538 12,478,663
Operating transfers out (1,486,698) (37,300,216) (38,786,914)
Proceeds from issuance of bonds 1.(J()() 000 8,000000 9000000
Total other financing (uses) sources ( 415374) ( 22787.415)
5894"38 (17 308 251)
Excess (deficiency) of revenues
and other financing sources
over (under) expenditures and
other financing uses 648,658 (19,384,821) 2,142,178 (16,593,985)
Fund balances at beginning of year 4.973934
157.670,113 8,725.575 171.369.622
Fund balances at end of year
$5,622592 $138.285,292 $19 867,753 $154.775,637
30
REDEVELOPMENT AGENCY OF THE crrr OF OAKLAl,D
Schedule of Capital Project Expenditures - Central District
Year ended June 30, 1991
City Center Chinatown Other Total
Expenditures:
Operation and management of acquired property s 153 s 88,214 s 311,806 $ 400,173
Site clearance and toxies remediation 5,904,046 979,756 6,883,802
Project improvements 1,904,032 10,154,276 4.691.786 16,750,094
General and administrative 971,576 787,8fJ7 6,359,533 8,118,976
Cost of property sold 1.470.000 1,470,000
Other
1.54
7 272 1.642.521 1.644.340
Total expenditures $8.
78
1354 $12,010.385 $14,475.646 $35,267.385
31
REDEVELOPMEl\'T AGENCY OF TIlE CITY OF OAKL\.. ,"D
Combining Balance Sheet - Debt Service Funds
June 30, 1991
Assets
Tax
Allocation
IktU
City-Agency
Lease
Financing
Restricted cash and investments
with fiscal agent
Equity in pooled
cash and investments
Direct financing lease
receivables City of Oakland
Accounts receivable
Notes to receivable
Total assets
Liabilities
Accrued debt service
Deferred revenue
Other liabilities
Total liabilities
Fund balances - reserved
for debt service
$35,806,157 $13,217,782 S49,023,939
803,951 803,951
39,270,000 39,270,000
62,315 62,315
81.520.223 81.520.223
$1M..QQ.,OQ5
$ 4,511,601 S 4,511,601
$120,919,556 120,919,556
6,006 6,006
4,511,601 125,437,163
32.160,822 13,082,443- 45.243.265
Total liabilities and fund
balance $36.672,423
32
$134.008.005 S170,680,428
REDEVELOPMENT AGENCY OF THE CITY OF O A K L A . ~ D
Combining Statement of Revenues, Expenditures and
Changes in Fund Balances
Debt Service Funds
June 30, 1991
Revenues:
Tax increment
Interest on restricted cash and
investments with fiscal agent
Interest on pooled cash and
and investments
Interest on notes receivable
Interest on direct financing
lease receivables - City of Oakland
Total revenues
Tax
Allocation
Debt
s 672,227
2,619,151
54,737
3,346,115
City-Agency
Lease
Financing
S 672,227
s 901,405 3,520,556
54,737
8,137,377 8,137,377
2.797,877 2,797,877
11,836,659 15,182,774
Expenditures:
Debt Service:
Retirement of long-term obligations
Interest
Other
Total expenditures
Excess (Deficiency) of revenues
over expenditures
Other financing sources (uses):
Operating transfer in (out) - net
Proceeds from insurance settlement
Total other financing uses
Excess of revenues and other
financing sources over
expenditures and other
financing uses
expenditures and other
financing uses
Fund balances at beginning of year
Fund balances at end of year
12,515,000
12,401,703
24,916,703
(21,570,588)
26,801,773
26,801.773
5,231,185
26,929,637
$32160,822
33
11,304,318
14,830
11,319,148
517,511
(142,724)
3.300,000
3,157,276
3,674,787
9,407,656
SI3,082,44J
12,515,000
23,706,021
14,830
36,235,851
(21,053,077)
26,659,049
3,300,000
29,959,049
8,905,972
36.337,293
S4524J265
REDEVELO'-MENT AGENCV OF THE CITY OF OAKLAND
Combining Balance Sheet - City-Agency Lease Flnaneing Deht Service Funds
June 30, 1991
AGENCY OF CI'I'V or OAKIJANI)
Slah.'menl of Revenues, EXI.cmUltircs :nul (
ill I,'mld Ualallccs - City-Agcncy tense FimUicing Dchl Service
Year ended June 30. 1991
HJ. Kaiser Scotian
City Hall Convention Convention Oakland
West Center Center Museum
Revenues:
Interest on restricted cash and investments
with fiscal agent s498,200 $ 14,437 s 3,216 S 385,552 S 901,405
Interest on notes receivable 4,239,877 3,897,500 8,137,377
Interest on direct financing lease recelvables -
City of Oakland 388.000
2.409,877 2,79Z877
Total revenues 886,200 4,254,314 3,900,716 2,795,429 11,836,659
Expenditures:
I.H
Debt Service:
V\
Interest 275,375 4,339,313 3,895,000 2,794,631 11,304,319
General and administrative
--
12329 2,500 14.829
Total expenditures 275.315 4,351.642 3,897.500 2.794.631 11.319.148
Excess (deficiency) of revenues
over (under) expenditures 610.825 (97,328) 3,216 798 517,s11
Other financing sources (uses):
Operating transfers in (out) net (142,724) (142,724)
Proceeds from insurance settlement 3.300.000 3.300.000
Total other finuncing sources .,JJS7.276
--_.
..J.1ID11l
ElCCCS\ (deficiency) of revenues and
other financing sources over
expenditures and other financing uses 3,768,101 ( 97,328) 3,216 798 3,674,787
Fund balances at beginning of year 5.335.627 135,202 875 3.935.952 9.407.656
Fund balances at end of year S 9.103,728 S 37.874 S 4,091 S 3.936.750 $13.082.443
35
WILLIAMS. ADLEY & COMPANY
8ertlfled Public Accountants
INDEPENDENT AUDITORS' REPORT ON COMPLlA.'1CE OF
CALIFORNIA BEDEVELOPMEl\'T AGENCIES
To the Members of the City of Oakland
Redevelopment Agency:
We have audited the combined component unit financial statements of the
Redevelopment Agency of the City of Oakland (the Agency) as of and for the year
ended June 30, 1991 and have issued our report thereon dated October 31, 1991.
We conducted our audit in accordance with generally accepted auditing standards.
Section 33080.1(a) of the Health and Safety Code of the State of California. and the
procedures contained in the Controller of the State of California Guidelines for
Compliance Audits of California Redeyelwment Agencies. Those standards require that
we plan and perform the audit to obtain reasonable assurance about whether the unit
financial statements are free of material misstatement.
Compliance with laws, regulations and administrative requirements applicable to the
Agency, is the responsibility of the management of the Agency. As part of obtaining
reasonable assurance about whether the unit financial statements are free of material
misstatement, we performed tests of the Agency's compliance with certain provisions of
laws, regulations and administrative requirements. However, our objective was not to
provide an opinion on overall compliance with such provisions.
The results of our tests indicate that, with respect to the items tested, the Agency
complied in all material respects, with the provisions referred to in the preceding
paragraph. With respect to items not tested, nothing came to our attention that caused
us to believe that the Agency had not complied, in all material respects, with those
provisions.
This report is intended for the information of the management and others within the
Agency and officials of the State of California Controller's Office. This restriction is not
intended to limit the distribution of this report, which is a matter of public record.

WILLIAMS, ADLEY"'&1:0MP
October 31, 1991
36
1330 Broadway, Suite 1825

Oakland. CA 94612 (415) 893-8114 Fa. 893-2603
APPENDIXD
SUMMARY OF CERTAIN PROVISIONS OF THE INDENTURE
(THIS PAGE INTENTIONALLY LEFI' BLANK)
APPENDIX D
SIIIfARY OF CERTAIN PROVISIONS OF THE INDENTURE
The following is a brief summary of the provisions of the Indenture. This summary IS not
intended to be comprehensive or definitive. Reference is made to the actual Indenture for the
complete terms thereof This Appendix IS divided into two sections: the first section concerns
the general provisions of the Indenture and the second section concerns the provisions of the
Indenture relating more specifically to the terms of the PARS and INFLOS and the Auction
Procedures. The I992A Bonds are referred to as the "Bonds" in this Appendix D.
SlIIWlY OF GENERAL PROVISIONS OF THE INDENTURE
DEFINITIONS
"Annual Debt Service"; ''Maximum Annual Debt Service" means, for each
Bond Year, the sum of (1) the interest falling due on (A) the Bonds in such
Bond Year, assuming that all Principal Installments are paid as scheduled,
and (B) all Parity Obligations and Superior Bonds in such Bond Year,
assuming that Parity Obligations and Superior Bonds in the nature of serial
bonds are retired as scheduled and that Parity Obligations and Superior
Bonds in the nature of term bonds, are redeemed f rom a sinking account as
may be scheduled, (2) the principal amount of the Bonds, Parity Obligations
and Superior Bonds in the nature of serial bonds, if any, falling due by
their terms in such Bond Year, and (3) the minimum amount; of the Bonds,
Parity Obligations and Superior Bonds in the nature of term bonds required
to be paid or called and redeemed in such Bond Year, together wi th the
redemption premiums, if any, thereon. The term ''Maximum Annual Debt
Service" means the largest Annual Debt Service during the period from the
date of such determination through the last maturity date of the Bonds, any
Parity Obligations or any Superior Bonds. For purposes of the definitions
of "Annual Debt Service" and "Maximum Annual Debt Service," all variable
rate Parity Obligations shall be assumed to bear interest at a rate of
interest equal to the greater of (a) 110% of the average rate thereon for
the most recent Bond Year, or if there is no such prior Bond Year for such
variable rate Parity Obligations, at a rate of interest equal to 110% of the
average rate that would have been borne by such variable rate Parity
Obligations had they been outstanding during such Bond Year, as estimated by
an independent financial consultant acceptable to the Trustee and (b) the
lowest rate which in the written opinion of Standard & Poor's is necessary
so that the credit quality of the 1989 Agency Bond or the Bonds is not
impaired to such an extent that the rating on the 1989 Agency Bond or the
Bonds by Standard & Poor's, if it were so rated w i ~ h o u t any credit
enhancement, would be lowered or withdrawn solely as a result of the
issuance of such variable rate Parity Obligations.
D-l
"Bond Reserve Requirement" means a sum computed by the Agency equal to
the lesser of (i) ten percent (10%) of the proceeds of the Bonds, (H) the
maximum annual debt service requirements on all Bonds Outstanding in the
current or any future Bond Year, or (iii) 125% of the average amount of debt
service due on all Bonds Outstanding in the current or any future Bond Year,
calculated under the assumption that the principal amount of the Bonds are
paid in accordance with Mandatory Sinking Fund Payments; provided that prior
to the retirement of the 1989 Agency Bond, the "Bond Reserve Requirement"
described above shall be calculated with respect to the combined debt
service requirement of the 1989 Agency Bond and the Bonds and reduced by the
amount on deposit in the 1989A Reserve Account.
"Bond Year" means the period commencing on September 2 to and including
September 1 of the following calendar year.
"Fiscal Year" means the period commencing on July 1 of each year and
terminating on the next succeeding June 30, or any other twelve-month period
hereafter selected and designated as the official fiscal year period of the
Agency.
"Gross Tax Revenues" means taxes (including all payments, reimbursements
and subventions, if any, specifically attributable to ad valorem taxes lost
by reason of tax exemptions and tax rate limitations) eligible for
allocation to the Agency pursuant to the Law as provided in the
Redevelopment Plan without any reduction by reason of Article XIIIB of the
Constitution of the State of California.
"Holder" or "Bondholder" whenever used herein with respect to a Bond
means the person in whose name such Bond is registered.
"Housing Set-Aside" means amounts not exceeding 20% of Gross Tax
Revenues which may be required by the Law to be set aside for certain low
and moderate income housing purposes.
"Investment Securities" means any of the following which at the time of
investments are legal investments under the laws of the State for the moneys
proposed to be invested therein:
(1) direct obligations of the United States of America (including
obligations issued or held in book-entry form on the books of the
Department of the Treasury of the United States of America) or those for
which the faith and credit of the United States of America are pledged
for the payment of principal and interest;
(2) any of the following direct or indirect obligations of the
following agencies of the United States of America and government
sponsored entities: (L) direct obligations of the Export-Import Bank;
(it) certificates of beneficial ownership issued by the Farmers Home
Administration; (Hi) participation certificates issued by the General
Services Administration; (iv) mortgage-backed bonds, pass-through
D-2
obligations or any evidences of indebtedness issued and guaranteed by
the Government National Mortgage Association. the Federal National
Mortgage Association. the Federal Home Loan Mortgage Corporation or the
Federal Housing Administration; (v) project notes issued by the United
States Department of Housing and Urban Development; and (vi) public
housing notes and bonds guaranteed by the United States of America; and
(3) registered State warrants or treasury notes or bonds of the
State. including bonds payable solely out of the revenues from a
revenue-producing property owned. controlled or operated by the State or
by a department. board. agency or authority thereof. and bonds. notes,
warrants or other evidences of indebtedness of any governmental body the
interest on which is excluded from gross income for federal income tax
purposes and for which the payment of cash or obligations described in
clause (1) or (2) of this definition in an amount sufficient to pay the
principal of. premium, if any, and interest thereon when due has been
irrevocably deposited with a trustee or other fiscal depository;
provided that all such obligations shall be rated in the highest rating
category by one Rating Agency.
(4) interest-bearing demand or time deposits (including certifi-
cates of deposit) in federal or state chartered savings and loan associa-
tions or in federal or state banks (including the Trustee or affiliate),
provided that: (i) in the case of a savings and loan association. such
demand or time deposits shall be fully insured by the Federal Savings
and Loan Insurance Corporation, or the unsecured obligations of such
savings and loan association shall be rated "A" or better by each Rating
Agency; and (ii ) in the case of a bank, such demand or t!me depos i ts
shall be fully insured by the Federal Deposit Insurance Corporation, or
the unsecured obligations of such bank (or the unsecured obligations of
the parent bank holding company of which such bank is the lead bank)
shall be rated "A" or better by each Rating Agency;
(5) commercial paper rated "P-l" or higher by Moody's and "A-I" or
higher by Standard &Poor's;
(6) obligations issued by any corporation organized and operating
within the United States of America having assets in excess of
$500,000,000 which obligations are rated "A" or better by each Rating
Agency;
(7) money market funds rated in the highest Rating Category by
Standard & Poor's or Moody's or money market funds the assets of which
are invested solely in Securities described in paragraphs (1), (2) or
(3) above and repurchase agreements fully secured by Securities
described in paragraphs (1). (2) or (3) above;
(8) collateralized mortgage obligations rated "A" or better by
each Rating Agency and approved by the Surety;
D-3
(9) investment agreements with respect to funds allocable to the
Bonds approved by the Surety; and
(10) repurchase agreements which provide for the transfer of
securities from a dealer bank or securities firm (seller/borrower) to a
municipal entity (buyer/lender), and the transfer of cash from a
municipal entity to the dealer bank or securities firm with an agreement
that the dealer bank or securities firm will repay the cash plus a yield
to the municipal entity in exchange for the securities at a specified
date.
Repurchase Agreements (nReposn) must satisfy the following criteria or
be approved by the Surety.
1. Repos must be between the !Dlmicipal entity (or its agent) or the
Trustee and a dealer bank or securities firm
a. Primary dealers on the Federal Reserve reporting dealer list,
or
b. Banks rated nAn or above by S&P and Moody's.
2. The written Repo contract must include the following:
a. Securities which are acceptable for transfer are:
(1) Direct U.S. governments, or
(2) Federal agencies backed by the full faith and credit of
the U.S. government
b. The term of the repo may be up to 18 months
c. The collateral must be delivered to the municipal entity,
trustee (if trustee is not supplying the collateral) or third
party acting as agent for the trustee (if the trustee is
supplying the collateral) before/simultaneous with payment
(perfection by possession of certificated securities).
d. Valuation of Collateral
(1) The securities must be valued weekly, marked-to=market at
current market price ~ accrued interest
(a) The value of collateral must be equal to 1021 of the
amount of cash transferred by the municipal entity
to the dealer bank or security firm under the Repo
plus accrued interest. If the value of securities
held as collateral slips below 1021 of the value of
the cash transferred by municipality, then
additional cash and/or acceptable securities must be
transferred.
D-4
2. Legal Qpinion which must be delivered tQ the municipal entity:
a. RepQ meets guidelines under state law fQr legal investment Qf
public funds.
(11) any Qther investment apprQved in writing by the Surety.
"l.m!:" means the CQDDIlunity RedevelQpment Law of the State of Ca1ifQrnia
(being Part 1 of Division 24 of the Health and Safety CQde of the State of
CalifQrnia, as amended), and all laws amendatory thereQf or supplemental
theretQ.
"LGFA" means the Local Government Finance
Government Finance Joint PQwers Authority) ,
agency existing under the laws of the State Qf
Authority (formerly the Local
a joint exercise of powers
California.
"Moody's" means Moody's Investors Service, a corporation organized and
existing under the laws of the State of Delaware, its successors and their
assigns.
''Net Subordinated Tax ReVenues" means, for each Bond Year, Subordinated
Tax Revenues less that amount of Subordinated Tax Revenues attributable to
payments, reimbursements and subventions, if any, specifically attributable
to ad valorem taxes lost by reason of tax exemptions and tax limitations.
"1989 AgencY Bond" means the Redevelopment Agency of the City of Oakland
Central District Redevelopment Project Tax Allocation Bond, Series 1989A,
initially issued in the principal amount of $92,399,272.85.
"1989 AgencY Bond Indenture" means that certain Indenture of Trust,
dated as of August I, 1989, by and between the Agency and the 1989 Agency
Bond Trustee relating to the 1989 Agency Bond.
"1989 LGFA Bond Indenture" means that certain Indenture of Trust, dated
as of August 1, 1989, by and between Bankers Trust Company of California,
National Association, as trustee and the LGFA relating to the 1989 LGFA
Bonds.
"1989 LGFA Bond Trustee" means First Trust of California, National
Association (as successor to Bankers Trust Company of California, National
Association), as trustee under the 1989 LGFA Bond Indenture.
"1989 LGFA Bonds" means the Local Government Finance Authority 1989
Refunding Revenue Bonds (Redevelopment Agency of the City of Oakland _
Central District Redevelopment Project Subordinate Financing) initially
issued in the p r i n ~ i p a 1 amount of $92,399,272.85.
"1989A Reserve Account" means the reserve account established under the
1989 Agency Bond Indenture with respect to the 1989 Agency Bond.
D-5
"1992A Reserve ACCQwt" means the account by that name established
pursuant to the Indenture.
"Parity Obligations" means the 1989 Agency Bond and any other
indebtedness Qr other obligations of the Agency payable on a parity with the
Bonds and the 1989 Agency Bond from SubQrdinated Tax Revenues which
indebtedness or other obligations are identified as Parity Obligations in
the instrument or document representing such indebtedness or other
obligations and in the resolution or ordinance of the Agency authorizing the
same.
"Projects" means the wdertaking of the Agency pursuant to the
Redevelopment Plan and the Law for the redevelopment of the Project Area.
"Project Area" means the project area described in the Redevelopment
Plan.
"Rating Agency" means each of the following rating agencies which, as of
the date of any determination wder the Indenture, then maintains a rating
on the Bonds: (a) Moody's Investors Service, Inc , , its successors and
assigns; and (b) Standard & POQr's Corporation, its successors and assigns.
"Rating Category" means one of the general rating categories of either
Moody's or S&P, without regard to any refinement or graduation of such
rating category by a numerical modifier or otherwise.
"Redevelopment Plan" means the redevelopment plan for the Central
District Redevelopment Project of the Agency in Oakland, California, titled
"Central District Urban Renewal Plan," adopted and approved as the
Redevelopment Plan for the Project by Ordinance No. 7987, adopted by the
Council of the City of Oakland, California on June 12, 1969, as amended,
together with all further amendments thereto made in accordance with the Law.
" ~ " means Standard & Poor's Corporation, a corporation organized and
existing wder the laws of the State of New YQrk, its successors and assigns.
"Special Subvention Revenue" means subventions received by the Agency
pursuant to Sections 16112.5 and 16112.7 of the California Government Code.
"Subordinated Tax Revenues" means, for each Bond Year beginning with the
Bond Year ending September 1, 1992, the Gross Tax Revenues, after (i) the
deposit of Superior Bonds Tax Revenue as required under the Superior Bonds
Resolution has been made to the fiscal agent for the Superior Bonds,
(ii) provision has been made for the amount of such taxes required to pay
the Housing Set-Aside so long as such Housing Set-Aside is legally required
to be paid prior to the payments on the Bonds or any Parity Obligations, and
(iii) the deduction of Special Subvention Revenue, but such taxes shall be
deemed to be Subordinated Tax Revenues for purposes of the pledge of the
Indenture and the deposit of moneys with the Trustee only up to an amormt
that is equal to (a) one hwdred fifteen percent (115%) of the Annual Debt
D-6
Service for the Bond Year (excluding for purposes of such calculation
payments with respect to Superior Bonds but including a credit for
investment earnings transferred to the Special Fund pursuant to the
Indenture) plus (b) an amount , if any, necessary to be deposited in the
1992A Reserve Accormt and the reserve account established for any Parity
Obligations to maintain the required balance therein during such Bond Year.
"Superior Bonds" means, at any time upon determination thereof, all
bonds at such time of determination outstanding tmder the Superior Bends
Resolution including any bond issued exclusively for the purpose of
reftmding any outstanding Superior Bonds as permitted by the Indenture.
"Superior Bonds Resolution" means Resolution No. 86-30 of the Agency,
adopted on Jtme 3, 1986, and pursuant to which the Superior Bonds are issued.
"Superior Bonds Tax Revenue" means, for each Fiscal Year beginning with
the Fiscal Year ending Jrme 30, 1987, the first taxes (inclUding all
payments, reimbursements and subventions, if any, specifically attributable
to ad valorem taxes lost by reason of tax exemptions and tax rate
limitations) eligible for allocation to the Agency pursuant to the Law as
provided in the Redevelopment Plan, up to an amotmt that is equal to (i) one
htmdred twenty-five percent (125%) of the Annual Debt Service (as defined in
the Superior Bonds Resolution) for the next ensuing Fiscal Year plus (ii) an
amount, if any, necessary to be deposited in the Reserve Accotmt held
pursuant to the Superior Bonds Resolution to maintain the required balance
therein during such Fiscal Year, without any reduction by reason of Article
XIIIB of the Constitution of the State of California.
PARITY OBLIGATIONS
So long as the Bonds remain outstanding the Agency shall not issue or
incur any obligations payable from Gross Tax Revenues or the Surplus Accotmt
established pursuant to the Superior Bonds Resolution prior to the Bonds,
other than refunding bonds with respect to the Superior Bonds (and any
refunding of such reftmding bonds) which do not resul t in increased debt
service in any Bond Year (as defined in the Superior Bonds Resolution); and
without limiting the foregoing, so long as the Bonds remain outstanding the
Agency shall not issue any Additional Bonds pursuant to the Superior Bonds
Resolution, other than such reftmding bonds. The Agency may at any time
incur or issue notes, bonds or other obligations (Lncl.uddng reimbursement
agreements or other credit facility arrangements) the payments of which are
payable on a parity with the payment by the Agency of the Bonds from
Subordinate Tax Revenues provided that there is first delivered to the
Trustee a Certificate of tae Agency (upon which the Trustee may conclusively
rely) stating that, assuming such proposed Parity Obligation had been
incurred as of the first day of the prior Bond Year, Net Subordinated Tax
Revenues received by the Agency in the prior Bond Year would have equalled
or exceeded one htmdred twenty percent (120%) of Maximum Annual Debt Service
(excluding for purposes of this calculation payments on Superior Bonds), and
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provided further that if such Parity Obligations are variable rate
obligations (either direct or indirect), (i) the Agency has obtained the
prior written consent of the Surety. In addition, the Agency may issue
refunding obligations to refund Parity Obligations which do not result in
increased debt service in any Bond Year.
TAX REV.IN1IES
Pledge of SubordiDated Tax B.eveIlues; Special Fund
All the Subordinated Tax Revenues and all money in the Special Fund and
in the funds or accounts so specified and provided for in the Indenture are
irrevocably pledged to the punctual payment of the interest on and principal
of and redemption premiums, if any, on the Bonds and all Parity Obligations,
and the Subordinated Tax Revenues and such other money shall not be used for
any other purpose while the Bonds or any Parity Obligations remain
outstanding except as provided in the Indenture. The Indenture states that
the foregoing pledge constitutes a first and exclusive lien subject to the
provisions of the Indenture on the Subordinated Tax Revenues and such other
money for the payment of the Bonds and all Parity Obligations in accordance
with the terms thereof. This pledge shall not be deemed to constitute a
lien on the Superior Bonds Tax Revenue, except Superior Bonds Tax Revenue
released from the Surplus Account held under the Superior Bonds Indenture.
All the Subordinated Tax Revenues, together with any interest earned
thereon, will, so long as the Bonds remain outstanding under the Indenture,
be deposited when and as received by the Agency in the "Redevelopment Agency
of the City of Oakland Central District Redevelopment Project 1989A Special
Fund" (the "Special Fund").
Receipt and Deposit of SubordiDated Tax Revenues
The Agency covenants and agrees in the Indenture that all Subordinated
Tax Revenues when and as received, will be received by the Agency in trust
and will be immediately deposited by the Agency with the Trustee in the
Special Fund and will be accounted for through and held in trust in the
Special Fund, and the Agency shall have no beneficial right or interest in
any of such money, except only as in the Indenture provided.
Establism.ent and Maintenance of Accounts for Use of Money in the Special
Fund
All money in the Special Fund is required to be set aside by the Trustee
in the following respective special accounts within the Special Fund in the
following order of priority:
(a) Interest Account;
(b) Principal Account;
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(c) Reserve Account; and
(d) Surplus Account.
All money in each of such accounts will be held in trust by the Trustee and
applied as follows:
(1) Interest Account. On or before each Interest Payment Date,
the Trustee shall set aside from the Special Fund and deposit in the
Interest Account an amount of money which, together with any money
contained therein, is equal to the aggregate amount of the interest
becoming due and payable on the Bonds on such Interest Payment Date (and
any Parity Obligations on their relevant interest payment dates). No
deposit need be made into the Interest Account if the amount contained
therein is at least equal to the aggregate amormt of the interest
becoming due and payable on the Bonds on such Interest Payment Date (and
any Parity Obligations on their relevant interest payment dates).
(2) Principal Account. On or before September 1 of each year,
commencing September 1, 1993. the Trustee shall set aside from the
Special Frmd and deposit in the Principal Accormt an amormt of money
which. together with any money contained therein, is equal to the
aggregate amormt of the principal becoming due and payable on the Bonds
and any Parity Obligations on such Interest Payment Date by way of
maturity or early redemption.
(3) 1992A Reserve Accormt. On or before each Interest Payment
Date the Trustee shall set aside from the Special Frmd and deposit in
the 1992A Reserve Accormt an amount necessary to bring the balance
therein up to the Bond Reserve Requirement and any amormts necessary to
reimburse the Reserve Surety for a draw on the Reserve Accormt Insurance
Policy. All money in the 1992A Reserve Accormt will be used and
withdrawn by the Trustee solely for the purpose of (i) paying principal,
premium, if any, and interest on the Bonds in the event no other moneys
are available therefor, (11) reimbursement of the Reserve Surety for
draws on the Reserve Accormt Insurance Policy and (iii) making the final
payment of principal on the Bonds, except that for so long as the Agency
is not in default under the Indenture, any amormt in the Reserve Accormt
in excess of the Bond Reserve Requirement may, upon the written request
of the Agency, be withdrawn from the Reserve Accormt by the Trustee and
transferred to the Surplus Account. In addition, the Trustee shall
deposit any amormts required to be deposited into the 1989A Reserve
Accormt or any amount necessary to maintain a reserve frmd for any
Parity Obligations.
The Agency may satisfy the Bond Reserve Requirement, with the prior
consent of the Surety, by depositing a policy of insurance issued by a
municipal bond insurance company, the claims paying ability of which is
rated in the highest Rating Category of Moody's and S&P, or by
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depositing a letter of credit or other credit facility issued by a bank
or other financial institution the obligations of which are rated in not
lower than the two highest Rating Categories of Moody's and S&P, into
the 1992A Reserve Account.
(4) Surplus Account. On May 15 of each year, beginning on May IS,
1993, the Trustee shall set aside and deposit in the Surplus Account all
amounts held in the Special Fund in excess of the sum of (i) payments of
the interest on and principal of the 1989 Agency Bond required to be
paid under the 1989 Indenture, and (ii) an amount equal to the principal
and interest payable on the Bonds and any Parity Obligations through and
including the Interest Payment Date next succeeding the following
September I, plus (iii) the amount, if any, necessary to maintain the
required balance in the 1989A Reserve Account and the 1992A Reserve
Account (and the reserve account established for any other Parity
Obligations), provided that (i) if Subordinated Tax Revenues in an
amount equal to at least one hundred fifteen percent (lIS%.) of Annual
Debt Service for the then current Bond Year (after credit for investment
earnings transferred or expected to be transferred to the Special Fnnd)
plus an amount, if any, necessary to maintain the required balance in
the 1989A Reserve Account and the 1992A Reserve Acconnt (and the reserve
account established for any other Parity Obligations) as of the date of
such determination was deposited in the Special Fund during such Bond
Year, and (d i ) if Subordinated Tax Revenues in an amount equal to at
least one hundred fifteen percent (lIS%.) of Annual Debt Service for the
next Bond Year (after credit for investment earnings transferred or
expected to be transferred to the Special Fund) plus an amount, if any,
necessary to maintain the required balance in the 1989A Reserve Account
and the 1992A Reserve Account (and the reserve account established for
any other Parity Obligations) as of the date of such determination has
been deposited into the Special Fund during such Bond Year (as evidenced
by a certificate of the Agency), and (iii) if the Agency is not then in
default under the Indenture, then all such excess shall be transferred
to the Agency for use by it for any lawful purpose and none of such
excess shall be deposited in the Surplus Account. All money in the
Surplus Account shall be used and withdrawn by the Trustee solely for
the purpose of replenishing the Interest Account or the Principal
Account or the 1989A Reserve Account and the 1992A Reserve Account (and
the reserve account established for any other Parity Obligations), in
such order, in the event of any deficiency at any time in any of such
accounts, or for the purpose of paying the interest on or principal of
or redemption premiums, if any, on the Bonds (and Parity Obligations) in
the event that no other money of the Agency is lawfully available
therefor, or for the retirement (together with other available money) of
the Bonds or the 1989 Agency Bond in full. All moneys in the Surplus
Account on May 15 of each year in which no money is required by this
paragraph to be deposited in the Surplus Account will be withdrawn from
the Surplus Account and transferred to the Agency for use by it for any
lawful purpose.
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Deposit and InvestaeDt of Money in FUDds and AcCOUDts
All money held by the Agency or the Trustee in any of the funds or
accounts under the Indenture is required to be invested in Investment
Securities. The Investment Securities in which money in the Special Fund,
the Interest Account, the Principal Account, the 1992A Reserve Account or
the Surplus Account is so invested are required to mature prior to the date
on which such money is estimated to be required to be paid out under the
Indenture. Any interest, income or profits from the deposits or investments
of all funds and accounts is required to be deposited in the Special Fund.
The Trustee is required to value all investments in the funds or accounts
held under the Indenture at their market value not less than one time during
each Fiscal Year or upon request of the Agency.
conrwr.rs OF TIlE AGENCY
The Agency will not mortgage or otherwise encumber, pledge or place any
charge upon any of the Subordinated Tax Revenues, except as provided in the
Indenture, and will not issue any obligation or security superior to or on a
parity with the Bonds payable in whole or in part from the Subordinated Tax
Revenues (other than Parity Obligations).
Pa,.ent of ClaiJu
The Agency will pay and discharge any and all lawful claims for labor,
materials or supplies which, if unpaid, might become a lien or charge upon
the properties owned by the Agency or upon the Subordinated Tax Revenues or
any part thereof, or upon any funds in the hands of the Trustee, or which
might impair the security of the Bonds; provided that the Agency is not
required to make any such payments so long as the Agency in good faith shall
contest the validity of any such claims.
Books and AccOUDts; Financial and Project Statements
The Agency is required to keep proper books of record and accounts,
separate from all other records and accounts of the Agency, in which
complete and correct entries shall be made of all transactions relating to
the Projects and the Special Fund. Such books of record and accounts shall
at all times during business hours be subject to the inspection of the
Trustee or of the Holders or their representatives authorized in writing.
FiDancing the Projects
The Agency will continue the financing of the Projects to be aided with
the proceeds of the 1989 Agency Bond with all practicable dispatch, and such
financing will be accomplished and completed in a sound, economical and
expeditious manner and in conformity with the Redevelopment Plan (including
D-ll
without limitation Section 600(c) of the Redevelopment Plan which includes
limitations with respect to tax increment and debt relating to that portion
of the Project Area added to the plan boundaries after June 12, 1979) and
the Law so as to complete the Projects as soon as possible.
Taxation of :Leased Property
Whenever any property in the Projects is redeveloped by the Agency
subsequent to the date of the Indenture and thereafter is leased by the
Agency to any person or persons, or whenever the Agency leases any real
property in the Projects to any person or persons for redevelopment (except
for property to be used for public streets or public off-street parking
facilities or easements or rights of way for public utilities, or other
similar uses), the property shall be assessed and taxed in the same manner
as privately-owned property (in accordance with the Law), and the lease or
contract shall provide (1) that the lessee shall pay taxes upon the assessed
value of the entire property and not merely upon the assessed value of the
leasehold interest. and (2) that if for any reason the taxes paid by the
lessee on such property in any year during the term of the lease shall be
less than the taxes that would have been payable upon the entire property if
the property were assessed and taxed in the same manner as privately- owned
property, the lessee shall pay such difference to the Agency within thirty
(30) days after the taxes for such year become payable. and in any event
prior to the delinquency date of such taxes established by law, which such
payments shall be treated as Gross Tax Revenues and shall be deposited by
the Agency as required by the Indenture and the Superior Bonds Resolution.
D i s p o s i ~ i O D of lroperty in Project Area
The Agency will not authorize the disposition of any real property in
the Project Area to anyone which will result in such property becoming
exempt from taxation because of public ownership or use or otherwise (except
for public ownership or use contemplated by the Redevelopment Plan in effect
on the date of the Indenture. or property to be used for public streets or
public off-street parking facilities or easements or rights of way for
public utilities. or other similar uses) if such dispositions, together with
all similar prior dispositions on or subsequent to the effective date of the
Indenture. shall comprise more than ten per cent (10'1) of the land area in
the Project Area. If the Agency proposes to make any such disposition
which. together with all similar dispositions on or subsequent to the
effective date of the Indenture. shall comprise more than ten per cent (10%)
of the land area in the Project Area, it shall appoint an independent
redevelopment consultant meeting the requirements of the Indenture (an
"Independent Redevelopment Consultant") and direct such consultant to submit
a report on the effect of such proposed disposition, and will apply to the
Trustee for approval of such proposed disposition. If the report concludes
that the Subordinated Tax Revenues for the then current Bond Year. adjusted
to give effect to the disposition. will not be less than 115'1 of Maximum
Annual Debt Service (which for purposes of this calculation shall exclude
payments on the Superior Bonds), the Trustee shall approve such proposed
D-12
disposition. If the Consultant's Report concludes that Subordinated Tax
Revenues (as adjusted) will be less than such amount, the Trustee shall
disapprove such proposed disposition unless such new owner or owners shall
either:
(l) undertake, in a wri t ing recorded in the real property records
of the County, to pay to the Trustee or the trustee for Superior Bonds,
so long as the Superior Bonds are outstanding, an amount equal to the
amount that would have been received by such trustees as Gross Tax
Revenues if such property were assessed and taxed in the same manner as
privately-owned non-exempt property, which payment shall be made within
thirty (30) days after taxes for each year would become payable to the
taxing agencies for non-exempt property and in any event prior to the
delinquency date of such taxes established by law; or
(2) pay to the Trustee or the trustee for Superior Bonds, so long
as the Superior Bonds are outstanding, a single sum equal to the amount
estimated by such trustees (who may request and rely upon a Consultant's
Report with respect to such estimate) to be receivable from taxes on
such property from the date of such payment to the maturity date of the
Bonds, less a reasonable discount value;
in either of which cases the Trustee shall approve such disposition.
All such payments to the Trustee or the trustee for Superior Bonds in
lieu of taxes will be treated as Gross Tax Revenues and are required to be
deposited by such trustees as required by the Indenture and the Superior
Bonds Resolution.
Aaenclment of Redevelo.,.eDt Plan
If the Agency proposes to amend the Redevelopment Plan (except for any
amendment to grant eminent domain powers to the Agency for the Projects), it
is required to appoint an Independent Redevelopment Consultant and direct
such consultant to submit a Consultant's Report on the effect of such
proposed amendment, and is required to apply to the Trustee for approval of
such proposed amendment. If the Consultant's Report concludes that the
Subordinated Tax Revenues eligible for allocation to the Agency under the
Law will not be reduced to an amount less than 115'1 of the Maximum Annual
Debt Service (which for purposes of this calculation shall exclude payments
on Superior Bonds) for the next ensuing Bond Year following such proposed
amendment, the Trustee may approve such amendment. If the Consultant's
Report concludes that the Subordinated Tax Revenues eligible for allocation
to the Agency under the Law will be reduced by such amount by such proposed
amendment, the Trustee shall disapprove such proposed amendment.
D-13
Tax Revenues
The Agency covenants in the Indenture to comply with all requirements of
the Law to insure the allocation and payment to it of the Gross Tax
Revenues, including without limitation the timely filing of any necessary
statements of indebtedness with appropriate officials of Alameda County, in
order to assure the prompt and timely payment of principal of and interest
on the Bonds.
AMEdDMil'tt OF TIll IlOlElmJRB
The Indenture and the rights and obligations of the Agency and of the
Holders of the Bonds and of the Trustee may be modified or amended from time
to time and at any time by an indenture or indentures supplemental thereto,
which the Agency and the Trustee may enter into when the written consent of
the Surety and the Holders of a majority in aggregate principal amount of
the Bonds then Outstanding shall have been 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 maturity remain Outstanding, the
consent of the Holders 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. No such modification or amendment shall (1) extend the
fixed maturity of any Bond, or change the method of determining the rate of
interest thereon (other than as provided herein), or reduce the amount of
principal of any Bond, or extend the time of payment or reduce the amount of
any Mandatory Sinking Fund Payment provided in the Indenture for the payment
of any Bond, or reduce the rate of interest thereon, or extend the time of
payment of interest thereon, or reduce any premium payable upon the
redempt ion thereof, without the consent of the Holder of each Bond so
affected, or (2) reduce the aforesaid percentage of Bonds the consent of the
Holders of which is required to effect any such modification or amendment,
or permit the creation of any lien on the Subordinated Tax Revenues and
other assets pledged under the Indenture prior to or on a parity with the
lien created by the Indenture (except as expressly provided in the
Indenture), or deprive the Holders of the Bonds of the lien created by the
Indenture on such Subordinated Tax Revenues and other assets (except as
expressly provided in the Indenture), without the consent of the Holders of
all of the Bonds then Outstanding. Notwithstanding the foregoing the
Appendix of the Indenture concerning Auction Procedures may be amended by
separate procedures described below under "SUMMARY OF PROVISIONS OF THE
INDENTURE RELATING TO PARS AND INFLOS AND AUCTION PROCEDURES - Amendment of
Auction Procedures."
If at any time the Agency shall request the Trustee to enter into any
supplement or amendment to the Indenture, at the expense of the Agency,
cause notice of the proposed execution of such supplement or amendment to be
mailed by first-class mail, postage prepaid, to all Bondholders of record at
their addresses appearing on the bond registration books maintained by the
Trustee. Such notice shall briefly set forth the nature of the proposed
D-14
supplement or amendment and shall state that copies thereof are on file at
the principal corporate trust office of the Trustee for inspection by all
Bondholders.
Whenever, at any time within one year after the date of the mailing of
such notice, the Agency shall deliver to the Trustee an instrument or
instruments in writing purporting to be executed by the Holders of not less
than a majority in aggregate principal amount of the Bonds then Outstanding,
which instrument or instruments shall refer to the proposed supplement or
amendment described in such notice and shall specifically consent to and
approve the execution thereof in substantially the form of the copy thereof
referred to in such notice, thereupon, but not otherwise, the Trustee may
execute such supplement or amendment in substantially such form, without
liability or responsibility to any Holder of any Bond, whether or not such
Holder shall have consented thereto.
If the Holders of not less than a majority in aggregate principal amount
of the Bonds Outstanding at the time of the execution of such supplemental
agreement shall have consented to and approved the execution thereof as
herein provided, no Holder of any Bond shall have any right to object to the
execution of such supplement or amendment, or to object to any of the terms
and provisions contained therein or the operation thereof or in any manner
to question the propriety of the execution thereof, or to enjoin or restrain
the Trustee or the Agency from executing the same or from taking any action
pursuant to the provisions thereof.
The Indenture and the rights and obligations of the Agency, of the
Trustee and of the Holders of the Bonds may also be modified or amended from
time to time and at any time by an indenture or indentures supplemental
thereto, which the Agency and the Trus tee may enter into wi th the prior
written consent of the Surety, but without the consent of any Bondholders,
but only to the extent permitted by law and only for anyone or more of the
following purposes:
(1) to add to the covenants and agreements of the Agency in the
Indenture other covenants and agreements thereafter to be observed, to
pledge or assign additional security for the Bonds (or any portion
thereof), or to surrender any right or power therein reserved to or
conferred upon the Agency, provided, that no such covenant, agreement,
pledge, assignment or surrender shall materially adversely affect the
interests of the Holders of the Bonds;
(2) to make such provisions for the purpose of curing any
ambiguity, inconsistency or omission, or of curing or correcting any
defective provision, contained in the Indenture, or in regard to matters
or questions arising under the Indenture, as the Agency may deem
necessary or desirable and not inconsistent with the Indenture, and
which shall not materially adversely affect the interests of the Holders
of the Bonds;
D-15
(3) to modify, amend or supplement the Indenture in such manner as
to permit the qualification thereof under the Trust Indenture Act of
1939, as amended, or any similar federal statute hereafter in effect,
and to add such other terms, conditions and provisions as may be
permitted by said act or similar federal statute, and which shall not
materially adversely affect the interests of the Holders of the Bonds;
(4) to provide for the issuance of coupon Bonds, if at such time
federal law shall permit the issuance of coupon Bonds; provided that
prior to such issuance the Agency shall have obtained the opinion of
nationally recognized bond counsel to the effect that such issuance will
not affect the exclusion of the interest on the Bonds from gross income
of the Holders for purposes of federal income taxation;
(5) to
excluded from
taxation;
preserve the status of the interest on the Bonds as
gross income of the Holders for purposes of federal income
(6) to provide for Substitute Bond Insurance Policy.
The Trus tee may consul t wi th counsel, who may be counsel of or to the
Agency, prior to entering into any supplemental indenture with respect to a
purpose described in the foregoing paragraph, and the opinion of such
counsel shall be full and complete authorization and protection in respect
of the execution and delivery by the Trustee of any such supplemental
indenture in good faith in accordance therewith.
EVENTS OF DEFAULT AND REMEDIES OF THE HOLDER
The Indenture contains the following events of default ("Events of
Defaul t"):
(a) default, after demand of the Surety for performance on the
Bond Insurance Policy, in the due and punctual payment of the principal
or Redemption Price of any Bond when and as the same shall become due
and payable, whether at maturity as therein expressed, by proceedings
for redemption, by declaration or otherwise;
(b) default, after demand of the Surety for performance on the
Bond Insurance Policy, in the due and punctual payment of any
installment of interest on any Bond when and as such interest
installment shall become due and payable;
(c) default by the Agency in the observance of any of the other
covenants, agreements or conditions on its part in this Indenture or in
the Bonds contained, if such default shall have continued for a period
of sixty (60) days after written notice thereof, specifying such default
and requiring the same to be remedied, shall have been given to the
Agency by the Trustee, or to the Agency and the Trustee by the Holders
of not less than twenty-five per cent (25%) in aggregate principal
amount of the Bonds at the time Outstanding;
D-16
(d) If the Agency shall file a petition or answer seeking
reorganization or arrangement under the federal bankruptcy laws or any
other applicable law of the United States of America, or if a court of
competent jurisdiction shall approve a petition, filed with or without
the consent of the Agency, seeking reorganization under the federal
bankruptcy laws or any other applicable law of the United States of
America, or if, under the provisions of any other law for the relief or
aid of debtors, any court of competent jurisdiction shall assume custody
or control of the Agency or of the whole or any substantial part of its
property.
If an Event of Default shall occur, then, and in each and every such
case during the continuance of such Event of Default, the Trustee may, and
upon the written direction of the Holders of not less than a majority in
aggregate principal amount of the Bonds at the time Outstanding shall, upon
notice in writing to the Surety and the Agency, declare the principal of all
of the Bonds then Outstanding, and the interest accrued thereon, to be due
and payable immediately, and upon any such declaration the same shall become
and shall be immediately due and payable, anything in the Indenture or in
the Bonds contained to the contrary notwithstanding; provided that no such
acceleration may occur without the prior written consent of the Surety.
DEFEASANCE
The Bonds may be paid by the Agency in any of the following ways,
provided that the Agency also pays or causes to be paid any other sums
payable hereunder by the Agency and related to such Bonds:
(a) by paying or causing to be paid the principal or Redemption Price
of and interest on Outstanding Bonds, as and when the same become due and
payable;
(b) by depositing
moneys or securities,
Accountant delivered to
with the Trustee, in trust, at or before maturity,
in the amount necessary in the opinion of an
the Trustee to payor redeem Outstanding Bonds; or
(c) by delivering to the Trustee, for cancellation by it, all
Outstanding Bonds.
If the Agency shall pay all Outstanding Bonds and shall also payor
cause to be paid all other sums payable hereunder by the Agency, then and in
that case, at the election of the Agency (evidenced by a Certificate of the
Agency, filed with the Trustee, signifying the intention of the Agency to
discharge all such indebtedness and the Indenture), and notwithstanding that
any Bonds shall not have been surrendered for payment, the Indenture and the
pledge of Subordinate Tax Revenues and other assets made under the Indenture
and all covenants, agreements and other obligations of the Agency under the
Indenture shall cease, terminate, become void and be completely discharged
and satisfied (except with respect to the transfer or exchange of Bonds
provided for herein or therein and the mandatory sinking fund redemption of
the Bonds).
D-17
Upon the deposit with the Trustee. in trust. at or before maturity. of
money or securities in the amount necessary to payor redeem any Outstanding
Bond (whether upon or prior to its maturity or the redemption date of such
Bond). provided that. if such Bond is to be redeemed prior to maturity.
notice of such redemption shall have been given as provided in the Indenture
or provision satisfactory to the Trustee shall have been made for the giving
of such notice. the Indenture may be released and discharged in accordance
with the provisions thereof but the liability of the Agency in respect of
such Bonds shall continue. provided that thereafter the Holder thereof shall
be entitled only to payment out of such money or securities deposited with
the Trustee as aforesaid for their payment.
D-18
stlMARY OF PROVISIONS OF TIlE IImENTOIlE
RELATING TO PAIS AIm INFLOS .AIm AUCTION PB.OCED1JIlES
The Indenture provides that the rights granted to the Owners of the PARS
and INFLOS therein relating to the Auction Procedures, mandatory tender
prov1s10ns and certain other provisions may be exercised by owners of
beneficial interests in such securities. To that extent, each reference in
this Appendix D to the purchase, sale or holding of PARS and INFLOS shall
refer to beneficial interests in PARS and INFLOS, unless the context clearly
requires otherwise.
DEFINITIONS
"Auction" means each Periodic implementation of the Auction Procedures.
"Auction A&ent" means the auction agent acting pursuant to the
Indenture, initially The Bank of New York, a New York banking corporation.
"Auction A&ent Fee" means, with respect to any Auction Date, the fee to
be paid from the interest payable on the Regular PARS and Special Linked
PARS and INFLOS to the Auction Agent on the second Interest Payment Date
succeeding such Auction Date for conducting an Auction for the benefit of
the Owners of Regular PARS and Special Linked PARS and INFLOS on such
Auction Date, as determined in accordance with the Indenture.
"Auction A&ent Fee Rate" means, with respect to any Auction Date, the
rate per annum to be used in computing the Auction Agent Fee to be paid to
the Auction Agent for the services rendered by it with respect to such
Auction Date, which rate shall equal .03 of 1 percent per annum until
changed in accordance with the Indenture, and thereafter shall equal the
rate per annum most recently determined pursuant to the Indenture.
"Auction A&reement" means the Auction Agreement, dated as of July 1,
1992, between the Auction Agent and the Trustee and all amendments thereto
and any other agreement entered into by the Trustee and any successor
Auction Agent in lieu of the original Auction Agreement and all amendments
thereto.
"Auction Date" means, during any period in which the Auction Procedures
are not suspended in accordance with the provisions of the Indenture, the
Business Day next preceding each Interest Payment Date for the PARS (whether
or not an Auction shall be conducted on such date); provided, however, that
the last Auction Date shall be the Business Day next preceding the Interest
Payment Date next preceding the final maturity date of the PARS.
"Auction Procedures" means the procedures for conducting Auctions for
PARS set forth in the Indenture.
D-19
"Auction Rate" means, for each Rate Period, (i) if Sufficient Clearing
Bids exist, the Winning Bid Rate; (ii) if Sufficient Clearing Bids do not
exist (other than because all of the PARS are either the subject of
Submitted Hold Orders or were Linked PARS and INFLOS or Special Linked PARS
and INFLOS at the close of business on the immediately preceding Record
Date), the Maximum Rate; or (iii) if all of the PARS are the subject of
Submitted Hold Orders or were Linked PARS and INFLOS or Special Linked PARS
and INFLOS at the close of business on the immediately preceding Record
Date, the No Auction Rate.
"Available PARS" means, on each Auction Date, the aggregate principal
amount of Regular PARS and Special PARS at the close of business on the
immediately preceding Record Date that are not the subject of Submitted Hold
Orders.
"Bidder" means each Existing Owner and Potential Owner who places an
Order.
"Broker-Dealer" means any broker-dealer or other entity that is
permitted by law to perform the functions required of a Broker-Dealer in the
Indenture on behalf of Existing Owners and Potential Owners of PARS that is
a Direct Participant in the Securities Depository, that has been selected by
the Agency and that is a party to a Broker-Dealer Agreement with the Auction
Agent that remains effective.
"Broker-Dealer Agreement" means an agreement between the Auction Agent
and a Broker-Dealer pursuant to which such Broker-Dealer agrees to follow
the procedures specified in the Indenture, as such agreement may from time
to time be amended or supplemented, and also means the Broker-Dealer
Agreement, dated as of July 1, 1992, between the Auction Agent and Goldman,
Sachs &Co. and all amendments thereto.
"Broker-Dealer Fee" means, with respect to any Auction Date, the fee
from the interest payable on the Regular PARS and the Special Linked PARS
and INFLOS to be paid to the Broker-Dealer on the second Interest Payment
Date succeeding such Auction Date for its services for the benefit of the
Owners of the Regular PARS and Special Linked PARS and INFLOS relating to
the Auction conducted on such Auction Date, as determined in accordance with
the Indenture.
"Broker-Dealer Fee Rate" means, with respect to any Auction Date, the
rate per annum to be used in computing the Broker-Dealer Fee to be paid to
the Broker-Dealer for the services rendered by it with respect to such
Auction Date, which rate shall equal .25 of 1 percent per annum until
changed in accordance wi th the Indenture, and thereaf ter shall equal the
rate per annum most recently determined pursuant to the Indenture.
"Business Day" means any day except Saturday, Sunday or any day on which
banking institutions located in the States of New York or California are
required or authorized to close or on which the New York Stock Exchange is
closed.
D-20
"Closed Period" means each period (i) commencing immediately prior to
the opening of business on the Delivery Date and ending immediately prior to
the opening of business on the first Interest Payment Date, (ii) commencing
at 11:00 a.m., New York City time, on the third Business Day immediately
preceding any Interest Payment Date and ending immediately prior to the
opening of business on such Interest Payment Date, and (iii) commencing
immediately prior to the opening of business on the second Business Day next
preceding the date on which a lottery is held to select PARS and INFLOS for
redemption and ending immediately prior to the opening of business on the
date fixed for redemption.
"Default Rate" means, in respect of any Rate Period, 265 percent of the
PARS Index determined on the Auction Date next preceding the first day of
such Rate Period; provided, however, that in no event shall the Default
Rate, when added to the Service Charge, exceed the lesser of 11.7369863
percent per annum or the maximum rate permitted by applicable law, anything
in the Indenture or herein to the contrary notwithstanding.
"Delivery Date" means the date of initial delivery of the Bonds.
"Direct Participant" means the member of, or the participant in, the
Securities Depository that will act on behalf of a Bidder and is identified
as such in such Bidder's Master Purchaser's Letter.
"IrIQ." shall mean The Depository Trust Company or any substitute
depository appointed pursuant to the Indenture.
"Existing Owner" means a person who has signed a Master Purchaser's
Letter and is listed as the Owner of PARS or is listed as a beneficial owner
of PAPS in the records of the Auction Agent.
"Index Agent" means the index agent appointed in accordance with the
Indenture, initially Kenny S&P Evaluation Services, a division of Kenny
Information Systems, Inc.
"INFLOS" means the Inverse Floating Rate Securities (INFLOS) issued
under the Indenture, as shown on the cover page of this Official Statement.
"INFLOS Rate" means the rate of interest to be borne by the INFLOS for
each Rate Period which shall be the rate per annum indicated on the cover
page of this Official Statement for the Rate Period commencing on the
Delivery Date and thereafter shall equal (i) 11.90 percent per annum minus
(ii) the product of (A) the PARS Rate for such Rate Period and (B) 365/360,
all as determined in accordance with the Indenture. Notwithstanding the
foregoing, (i) if the calculation of the INFLOS Rate would produce an
interest rate in excess of the maximum lawful rate of interest, then the
INFLOS Rate shall be equal to such maximum lawful rate of interest, and (ii)
the aggregate amount of interest payable on the INFLOS for any Rate Period
shall not exceed twice the Linked Rate minus the aggregate amount of
interest payable on the PARS for such Rate Period.
D-21
"Interest Payment Date" means (A) August 25. 1992. and (B) every fifth
Tuesday thereafter. the maturity date for any of the PARS and INFLOS and the
sinking fund payment date for any of the PARS or INFLOS called for
redemption on such sinking fund payment date; provided. however. that if any
such fifth Tuesday or the Wednesday succeeding such fifth Friday is not a
Business Day, the Interest Payment Date shall be the Business Day next
preceding such fifth Tuesday which Business Day is followed by a Business
Day.
"Linkage Request" means a request to link Regular PARS and INFLOS or
Special PARS and INFLOS by a person who is an Existing Owner of Regular PARS
or Special PARS and who is an Owner of INFLOS. which shall be delivered by
such person's Broker-Dealer to the Auction Agent in substantially the form
attached to the Broker-Dealer Agreement.
"Linked PARS and INFLOS" means (i) Regular PARS and INFLOS of equal
principal amount which are linked pursuant to the prov1s1ons of the
Indenture from and after the first Auction Date succeeding the date of
linkage (assuming such linkage still exists on such Auction Date) to and
until the date linkage is broken pursuant to the provisions of the
Indenture, and (ii) Special PARS and INFLOS of equal principal amount which
are linked pursuant to the provisions of the Indenture from and after the
date of linkage to and until the date linkage is broken pursuant to the
provisions of the Indenture.
"Linked Rate" means 5.951. percent per annum computed on the basis of a
360-day year of twelve 30-day months.
''Master Purchaser's Letter" means a letter substantially in the form
attached to the Broker-Dealer Agreement addressed to a Broker-Dealer. among
others, in which a person agrees. among other things. to offer to purchase,
to purchase. to offer to sell and/or to sell PARS as set forth in the
Indenture.
''Maximum Rate" means. as of any Auction Date. the product of the PARS
Index multiplied by the PARS Multiple; provided. however. that in no event
shall the Maximum Rate, when added to the Service Charge, exceed the lesser
of 11. 7369863 percent per annum and the maximum interest rate permitted by
applicable law, anything in the Indenture or herein to the contrary
notwithstanding.
''Minimum Rate" means, as of any date of determination thereof. 75
percent of the PARS Index.
''Moody's'' means Moody's Investors Service, Inc., a corporation organized
and existing under the laws of the State of Delaware, its successors and
assigns. and, for the purposes of the Auction Procedures. if such
corporation shall be dissolved or liquidated or shall no longer perform the
functions of a securities rating agency, ''Moody' s" shall be deemed to refer
to any other nationally recognized securities rating agency designated by
D-22
the Agency by notice to the Trustee, the Auction Agent, the Index Agent and
the Broker-Dealers; provided, however, that such notice shall not be
effective unless accompanied by a consent of a majority of the
Broker-Dealers.
"No Auction Rate" means, as of any Auction Date, the r'at.e- determined by
multiplying the percentage of the PARS Index set forth below, based on the
Prevailing Rating of the PARS in effect at the close of business on the
Business Day immediately preceding such Auction Date, by the PARS Index:
Prevailing Bating
AAA/Aaa ..................
AA./Aa " " " "" ..
AIA " ..
BBB/Baa " " ..
Below BBB/Baa
Percentage
of PARS Index
90%
95%
100%
110%
120%
provided, however, that in no event shall the No Auction Rate, when added to
the Service Charge, exceed the lesser of 11.7369863 percent and the maximum
interest rate permitted by applicable law, anything in the Indenture or
herein to the contrary notwithstanding.
" ~ " means, as the context requires, a Hold Order, a Bid or a
Sell,Order. "Owner" means a registered owner of any of the Bonds.
"WS" means the Periodic Auction Reset Securities (PARS) issued under
the Indenture, as shown on the cover page of this Official Statement.
"PARS Multiple" means, as of any Auction Date, the percentage of the
PARS Index determined as set forth below, based on the Prevailing Rating of
the PARS in effect at the close of business on the Business Day immediately
preceding such Auction Date:
AAA./Aaa ..
AA/Aa .................
A/A .................
BBB/Baa .................
Below BBB/Baa .........
Percentage
of PARS Index
140%
150%
165%
180%
265%
"PARS Rate" means the rate of interest (compounded on the basis of a
360-day year for the actual number of days elapsed) to be borne by the PARS
for each Rate Period which shall be the rate per annum indicated on the
cover page of this Official Statement (including the Service Charge) for the
Rate Period commencing on the Delivery Date and thereafter shall equal the
sum of the Auction Rate for each Rate Period plus the Service Charge then in
D-23
effect for such Rate Period, all as determined in accordance with the
Indenture; provided, however, that if the Auction Agent shall have failed to
determine the Auction Rate for any Rate Period (including, without
limitation, the circumstance where there is no Auction Agent or no
Broker-Dealer), the PARS Rate for such Rate Period shall be the No-Auction
Rate determined for such Rate Period plus the Service Charge then in effect;
and provided, further, that, if a failure to pay principal, interest or
premium on any Bond when due shall have occurred, the PARS Rate for the Rate
Period during which such failure shall have occurred and each Rate Period
thereafter commencing prior to the date on which such failure shall have
ceased to be continuing shall be the Default Rate for such Rate Period plus
the Service Charge then in effect; and provided, further, that in no event
shall the PARS Rate exceed the lesser of 11.7369863 percent per annum or the
maximum interest rate permitted by applicable law.
"Potential Owner" means any person, including any Existing Owner, (L)
who shall have executed a Master Purchaser's Letter, and (ii) who may be
interested in acquiring PARS or, in the case of an Existing Owner, an
additional principal amount of PARS.
"Prevailing Rating" means (i) AAA/Aaa, if the PARS shall have a rating
of AAA or better by S&P and a rating of Aaa or better by Moody's, (ii) if
not AAA/Aaa, then AA/AA if the PARS shall have a rating of AA- or better by
S&P and a rating of Aa3 or better by Moody's, (iii) if not AAA/Aaa or AA/AA,
then A/A if the PARS shall have a rating of A- or better by S&P and a rating
of A3 or better by Moody's, (iv) if not AAA/Aaa, AA/AA or A/A, then BBB/Baa
if the PARS shall have a rating of BBB- or better by S&P and a rating of
Baa3 or better by Moody's, and (v) if not AAA/Aaa, AA/AA, A/A or BBB/Baa,
then below BBB/Baa, whether or not the PARS are rated by any securities
rating agency. For purposes of this definition, S&P's rating categories of
AAA, AA-,A- and BBB-, and Moody's rating categories of Aaa, Aa3, A3 and
Baa3, shall be deemed to refer to and include the respective rating
categories correlative thereto in the event that either or both of such
Rating Agencies shall have changed or modified their generic rating
categories or if any successor thereto appointed in accordance with the
definition thereof shall use different rating categories.
"Rate Period" means the period from and including each Interest Payment
Date for the PARS and INFLOS to and including the day (whether or not a
Business Day) preceding the next succeeding Interest Payment Date; provided,
however, that the first Rate Period shall be the period from and including
the Delivery Date to and including the day next preceding the first Interest
Payment Date.
"Rating Agency" means Moody' s or Standard & Poor's and their respective
successors and assigns.
"Record Date" means the second Business Day immediately preceding an
Interest Payment Date.
D-24
"Regular PARS" means PARS which are not Special PARS, Linked PARS and
INFLOS or Special Linked PARS and INFLOS.
"Request to Break Linkage" means an Owner's request to break linkage of
Linked PARS and INFLOS or Special Linked PARS and INFLOS, which shall be
delivered by such Owner's Broker-dealer to the Auction Agent in
substantially the form attached to the Broker-Dealer Agreement.
"Securities DepQsitQry" means DTC or any othar securities depos Lt ory
selected by the Agency which agrees tQ fQllQW the procedures required to be
fQllQwed by such securities depositQry in cQnnectiQn with the BQnds.
"Service Charge" means, with respect to an Auet Lon Date, the sum of the
Auction Agent Fee and the Broker-Dealer Fee payable out; of the interest
payable Qn the Regular PARS and Special Linked PARS and INFLOS with respect
tQ such AuctiQn Date.
"Special. Linked PARS and INFLOS" means Regular PARS and INFLOS of equal
principal amounts which are linked pursuant to the prOV1S1ons of the
Indenture from and after the date of linkage tQ and until the earlier Qf (i)
the first Auction Date succeeding the date of linkage, and (Ld ) the date
linkage is broken pursuant to the provisions of the Indenture.
"Special PARS" means PARS which become WIlinked from Linked PARS and
INFLOS pursuant to the provisions of the Indenture from and after the date
linkage is broken to and untdl the earlier of (i) the first Auction Date
succeeding the date linkage is broken, and (ii) the date linkage is
reestablished with an INFLOS pursuant to the prQvisions of the Indenture.
"Standard & Poor's" Qr " ~ " means Standard and Poor I s Corpor'at.Lon , a
cQrporation organized and existing under the laws of the State Qf New York,
its succeasozs and assigns and, for purposes of the Auction Pzocedures , if
such corporation shall be dissolved or liquidated or shall no lQnger perform
the functions of a securities rating agency, "Standard and Poor t s and "S&P"
shall be deemed to refer to any other natiQnally recognd.sed securities
rating agency designated by the Agency by nQtice to the Trustee, the Auction
Agent, the Index Agent and the Broker-Dealers; provided, however, that such
notice shall not be effective unless accQmpanied by a consent of a majority
of the Broker-Dealers.
"Submission Deadline" means 1:00 p.m., New York City time, on any
AuctiQn Date or such Qther time as shall be specified from time to time by
the AuctiQn Agent pursuant co the Auct Lon Agreement as the time by which
Broker-Dealers are required tQ submit Orders to the Auction Agent.
"Sufficient Clearing Bids" means, with respect to any Auction, there are
Sufficient Clearing Bids if the aggregate principal amount of PARS that are
the subject of Submitted Bids by Potential Owners specifying one or more
rates not higher than the Maximum Rate is not less than the sum Qf (i) the
aggregate principal amount of PARS that are the subject of Submitted Bids by
D-25
Existing Owners specifying rates higher than the Maximum Rate. and (ii) the
aggregate principal amount of PARS that are the subject of Submitted Sell
Orders (other than because all PARS are either subject to Submitted Hold
Orders or were Linked PARS and INFLOS or Special Linked PARS and INFLOS at
the close of business on the immediately preceding Record Date).
''Winning Bid Rate" means the lowest rate specified in any Submitted Bid
which if selected by the Auction Agent as the Auction Rate would cause the
aggregate principal amount of PARS that are the subject of Submitted Bids
specifying a rate not greater than such rate to be not less than the
aggregate principal amount of Available PARS.
AUCTION lJlOCBDtJIlES
The following is a summary of the procedures to be used in conducting
Auctions. As a summary, it does not purport to be complete and is qualified
in its entirety by reference to the Auction Procedures set forth in the
Indenture, the Auction Agreement and the Broker-Dealer Agreements.
Orders by Existing Owners and Potential. Owners. Prior to the Submission
Deadline on each Auction Date:
(i) each Existing Owner may submit to a Broker-Dealer, in writing
or by such other method as shall be reasonably acceptable to such
Broker-Dealer, information as to:
(A) the principal amount of PARS, if any, held by such
Existing Owner which such Existing Owner desires to continue to
hold for the next succeeding Rate Period without regard to the rate
determined by the Auction Procedures for such Rate Period;
(:8) the principal amount of PARS, if any, held by such
Existing Owner which such Existing Owner desires to continue to
hold for the next succeeding Rate Period if the rate determined by
the Auction Procedures for such Rate Period shall not be less than
the rate per annum then specified by such Existing Owner (and which
such Existing Owner desires to sellon the next succeeding Interest
Payment Date if the rate determined by the Auction Procedures shall
be less than the rate per annum then specified by such Existing
Owner); and/or
(c) the principal amount of PARS, if any. held by such
Existing Owner which such Existing Owner offers to sell on the next
succeeding Interest Payment Date without regard to the rate
determined by the Auction Procedures for the next succeeding Rate
Period; and
(ii) for the purpose of implementing the Auctions and thereby to
achieve the lowest possible interest rate on the PARS, the
Broker-Dealers will contact Potential Owners (including persons who are
D-26
Existing Owners), by telephone or otherwise, to determine the principal
amount of PARS, if any, which each such Potential Owner offers to
purchase if the rate determined by the Auction Procedures for the next
succeeding Rate Period is not less than the rate per annum specified by
such Potential Owner.
For the purposes hereof, an Order containing the information referred to
in clause (L) (A) above is referred to as a "Bold Order," an Order
containing the information referred to in clause (i)(B) or (Ld ) above is
referred to as a "Bid" and an Order containing the information referred to
in clause (i)(C) above is referred to as a "Sell Order."
A Bid by an Existing Owner shall constitute an irrevocable offer to sell:
(A) the principal amount of PARS specified in such Bid if the rate
determined by the Auction Procedures on such Auction Date shall be less than
the rate specified therein; or
(B) such principal amount or a lesser principal amount of PARS to be
determined as set forth in clause (iv) of the first paragraph of the section
below entitled "Allocation of PARS" (the Allocation Provisions) if the rate
determined by the Auction Procedures on such Auction Date shall be equal to
such specified rate; or
(c) a lesser principal amount of PARS to be determined as set forth in
clause (iii) of the second paragraph of the Allocation Provisions if such
specified rate shall be higher than the Maximum Rate and Sufficient Clearing
Bids do not exist.
A Sell Order by an Existing Owner shall constitute an irrevocable offer
to sell:
(A) the principal amount of PARS specified in such Sell Order; or
(B) such principal amount or a lesser principal amount of PARS as set
forth in clause (iii) of the second paragraph of the Allocation Provisions
if Sufficient Clearing Bids do not exist.
A Bid by a Potential Owner shall constitute an irrevocable offer to
purchase:
(A) the principal amount of PARS specified in such Bid if the rate
determined by the Auction Procedures on such Auction Date shall be higher
than the rate specified therein; or
(B) such principal amount or a lesser principal amount of PARS as set
forth in clause (v) of the first paragraph of the Allocation Provisions if
the rate determined by the Auction Procedure on such Auction Date shall be
equal to such specified rate.
D-27
Anything contained in the Indenture or herein to the contrary
notwithstanding:
(i) for purposes of any Auction, any Order which specifies PARS to
be held, purchased or sold in a principal amount which is not $100,000
or an integral multiple thereof shall be rounded down to the nearest
$100,000, and the Auction Agent shall conduct the Auction Procedures as
if such Order had been submitted in such lower amount;
(di ) for purposes of any Auction, any portion of an Order of an
Existing Owner which relates to a PARS which has been called for
redemption on or prior to the Interest Payment Date next succeeding such
Auction shall be invalid with respect to such portion and the Auction
Agent shall conduct the Auction Procedures as if such portion of such
Order had not been submitted;
(iii) for purposes of any Auction, no portion of a PARS which has
been called for redemption on or prior to the Interest Payment Date next
succeeding such Auction shall be included in the calculation of
Available PARS;
(Lv) the Auction Procedures shall be suspended during the period
commencing on the date of the Auction Agent's receipt of notice from the
Trustee of the failure to pay principal, interest or premium on any Bond
when due but shall resume with the next Auction to occur on the next
regularly scheduled Auction Date which occurs at least two Business Days
after the Auction Agent receives a notice from the Trustee that such
failure has been waived or cured;
(v) Owners of Linked PARS and INFLOS and Special Linked PARS and
INFLOS at the close of business on the Record Date immediately preceding
any Auction Date are not Existing Owners for purposes of the Auction
Procedures and may not participate in the Auction held on such Auction
Date with respect to such PARS. An Existing Owner of Regular PARS or
Special PARS who is also the Owner of Linked PARS and INFLOS or Special
Linked PARS and INFLOS at the close of business on the immediately
preceding Record Date may not submit Orders in an Auction with respect
to such Linked PARS and INFLOS or Special Linked PARS and INFLOS, and
such Linked PARS and INFLOS or Special Linked PARS and INFLOS will not
be included in the gate principal amount of PARS held by such Existing
Owner for the purposes of the Auction Procedures. If any Owner of
Linked PARS and INFLOS or Special Linked PARS and INFLOS at the close of
business on the immediately preceding Record Date submits a Bid with
respect to such Linked PARS and INFLOS or Special Linked PARS and
INFLOS, such Bid will be invalid, and the Auction Agent shall conduct
the Auction Procedures as if such Order had not been submitted; and
(vi) the giving of a Tender Notice with respect to Regular PARS or
Special PARS shall supercede any Order given by the Existing Owner of
such PARS with respect to such PARS for the Auction occurring on the
Auction Date following the Tender Date specified in such Tender Notice.
D-28
Sw-ission of Orders by Broker-Dealers to Auction Agent. Each
Broker-Dealer will submit to the Auction Agent, in writing or by such other
method as shall be reasonably acceptable to the Auction Agent, prior to the
Submission Deadline on each Auction Date, all Orders obtained by such
Broker-Dealer and specifying with respect to each Order:
(i) the name of the Bidder placing such Order;
(ii) the aggregate principal amount of PARS that are the subject of
such Order;
(iii) to the extent that such Bidder is an Existing Owner:
(A) the principal amount of PARS, if any, subject to any Hold
Order placed by such Existing Owner;
(B) the principal amount of PARS, if any, subject to any Bid
placed by such Existing Owner and the rate specified in such Bid;
and
(c) the principal amount of PARS, if any, subject to any Sell
Order placed by such Existing Owner; and
(iv) to the extent such Bidder is a Potential Owner, the rate
specified in such Bid.
The Auction Agent shall be entitled to rely upon the terms of any Order
submitted to it by a Broker-Dealer.
If any rate specified in any Bid contains more than three figures to the
right of the decimal point, the Auction Agent shall round such rate up to
the next highest one thousandth of one percent (0.0011).
If an Order or Orders covering all of the PARS held by an Existing Owner
is not submitted to the Auction Agent prior to the Submission Deadline, the
Auction Agent shall deem a Hold Order to have been submitted on behalf of
such Existing Owner covering the principal amount of PARS held by such
Existing Owner and not subject to Orders submitted to the Auction Agent.
If one or more Orders covering in the aggregate more than the principal
amount of PARS held by any Existing Owner are submitted to the Auction
Agent, such Orders shall be considered valid as follows and in the following
order of priority:
(i) all Hold Orders shall be considered valid, but only up to and
including in the aggregate the principal amount of PARS held by such
Existing Owner;
(ii) (A) any bid of an Existing Owner shall be considered valid as
a Bid of an Existing Owner up to and including the excess of the
principal amount of PARS held by such Existing Owner over the principal
amount of PARS subject to Hold Orders referred to in paragraph (i) above;
D-29
(B) subject to clause (A), if more than one Bid with the same rate
is submitted on behalf of such Existing Owner and the principal amount
of PARS subject to such Bids is greater than such excess of the
principal amount of PARS held by such Existing Owner over the principal
amount of PARS subject to Hold Orders referred to in paragraph (d )
above, such Bids shall be considered valid up to the amount of such
excess;
(C) subject to clause (A), if more than one Bid with different
rates is submitted on behalf of such Existing Owner. such Bids shall be
considered Bids of an Existing Owner in the ascending order of their
respective rates up to the amount of the excess of the principal amount
of PARS held by such Existing Owner over the principal amount of PARS
held by such Existing Owner subject to Hold Orders referred to in
paragraph (i) above; and
(D) the principal amount, if any, of such PARS subject to Bids not
considered to be Bids of an Existing Owner under this paragraph (Ld )
shall be treated as the subject of a Bid by a Potential Owner; and
(iii) all Sell Orders shall be considered Sell Orders, but only up
to and including a principal amount of PARS equal to the excess of the
principal amount of PARS held by such Existing Owner over the sum of the
principal amount of the PARS considered to be subject to Hold Orders
pursuant to paragraph (L) above and the principal amount of PARS
considered to be subject to Bids of such Existing Owner pursuant to
paragraph (ii) above.
If more than one Bid is submitted on behalf of any Potential Owner, each
Bid shall be considered a separate Bid with the rate and the principal
amount of PARS specified therein.
Any Bid submitted by an Existing Owner or a Potential Owner specifying a
rate lower than the Minimum Rate shall be treated as a Bid specifying the
Minimum Rate.
None of the Agency, the Trustee or the Auction Agent shall be
responsible for the failure of any Broker-Dealer to submit an order to the
Auction Agent on behalf of any Existing Owner or Potential Owner.
DeteraiDatioo of PARS Bate. Not later than 9:30 a.m., New York City
time, on each Auction Date the Auction Agent shall advise the Broker-Dealers
and the Trustee by telephone of the Minimum Rate, the Maximum Rate and the
PARS Index.
Promptly after the Submission Deadline on each Auction Date, the Auction
Agent shall assemble all valid Orders submitted or deemed submitted to it by
the Broker-Dealers (each such Order as submitted or deemed submitted by a
Broker-Dealer being hereinafter referred to as a "Submitted Hold Order," a
D-30
"Submitted Bid" or a "Submitted Sell Order," as the
collectively as "Submitted Orders") and shall determine:
PARS; (dL) whether there are Sufficient Clearing Bids;
Rate; and (iv) the Service Charge.
case may be, and
(L) the Available
(iii) the Auction
Promptly after the Auction Agent has made the determinations set forth
in the preceding paragraph, the Auction Agent shall advise the Trustee and
the Agency by telephone (promptly confirmed in writing) or facsimile
transmission of the Auction Rate and the Service Charge for the next
succeeding Rate Period.
Allocation of PARS. In the event of Sufficient Clearing Bids, subject
to the further provisions described below. Submitted Orders shall be
accepted or rejected as follows in the following order of priority:
(i) the Submitted Sell Order of each Existing Owner shall be
accepted and the Submitted Bid of each Existing Owner specifying any
rate that is higher than the Winning Bid Rate shall be rejected, thus
requiring each such Existing Owner to sell the PARS that are the subject
of such Submitted Sell Order or Submitted Bid;
(ii) the Submitted Bid of each Existing Owner specifying any rate
that is lower than the Winning Bid Rate shall be accepted, thus
requiring each such Existing Owner to continue to hold the PARS that are
the subject of such Submitted Bid;
(iii) the Submitted Bid of each Potential Owner specifying any rate
that is lower than the Winning Bid Rate shall be accepted, thus
requiring each such Potential Owner to purchase the PARS that are the
subject of such Submitted Bid;
(iv) the Submitted Bid of each Existing Owner specifying a rate
that is equal to the Winning Bid Rate shall be accepted. thus requiring
each such Existing Owner to continue to hold the PARS that are the
subject of such Submitted Bid, but only up to and including the
principal amount of PARS obtained by multiplying (A) the aggregate
principal amount of PARS which are not the subject of Submitted Hold
Orders described in paragraph (vi) below or of Submitted Bids described
in paragraphs (Li.) or (iii) above by (B) a fraction, the numerator of
which shall be the principal amount of PARS held by such Existing Owner
subject to such Submitted Bid and the denominator of which shall be the
aggregate principal amount of PARS subject to such Submitted Bids made
by all such Existing Owners that specified a rate equal to the Winning
Bid Rate, and the remainder. if any. of such Submitted Bid shall be
rejected. thus requiring each such Existing Owner to sell any excess
amount of PARS;
(v) the Submitted Bid of each Potential Owner specifying a rate
that is equal to the Winning Bid Rate shall be accepted, thus requiring
each such Potential Owner to purchase the PARS that are the subject of
D-31
such Submitted Bid, but only in an amount equal to the principal amount
of PARS obtained by multiplying (A) the aggregate principal amount of
PARS which are not the subject of Submitted Hold Orders described in
paragraph (vi) below or Submitted Bids described in paragraphs (ii),
(iii) or (iv) above by (B) a fraction, the numerator of which shall be
the principal amount of PARS subject to such Submitted Bid and the
denominator of which shall be the sum of the aggregate principal amount
of PARS subject to such Submitted Bids made by all such Potential Owners
that specified a rate equal to the Winning Bid Rate, and the remainder,
if any, of such Submitted Bid shall be rejected;
(vi) the Submitted Hold Order of each Existing Owner shall be
accepted, thus requiring each such Existing Owner to continue to hold
the PARS that are the subject of such Submitted Hold Order; and
(vii) the Submitted Bid of each Potential Owner specifying any rate
that is higher than the Winning Bid Rate shall be rejected.
If Sufficient Clearing Bids have not been made (other than because all
of the PARS are either subject to Submitted Hold Orders or were Linked PARS
and INFLOS or Special Linked PARS and INFLOS at the close of business on the
immediately preceding Record Date), subject to the further provisions
described below, Submitted Orders shall be accepted or rejected as follows
and in the following order of priority:
(i) the Submitted Bid of each Existing Owner specifying any rate
that is not higher than the Maximum Rate shall be accepted, thus
requiring each such Existing Owner to continue to hold the PARS that are
the subject of such Submitted Bid;
(ii) the Submitted Bid of each Potential Owner specifying any rate
that is not higher than the Maximum Rate shall be accepted, thus
requiring each such Potential Owner to purchase the PARS that are the
subject of such Submitted Bid;
(iii) the Submitted Sell Orders of each Existing Owner shall be
accepted as Submitted Sell Orders and the Submitted Bids of each
Existing Owner specifying any rate that is higher than the Maximum Rate
shall be deemed to be and shall be accepted as Submitted Sell Orders, in
both cases 'only up to and including the principal amount of PARS
obtained by multiplying (A) the aggregate principal amount of PARS
subject to Submitted Bids described in paragraph (ii) above by (B) a
fraction, the numerator of which shall be the principal amount of PARS
held by such Existing Owner subject to such ,Submitted Sell Order or such
Submitted Bid deemed to be a Submitted Sell Order and the denominator of
which shall be the principal amount of PARS subject to all such
Submitted Sell Orders and such Submitted Bids deemed to be Submitted
Sell Orders, and the remainder of each such Submitted Sell Order or
Submitted Bid shall be deemed to be and shall be accepted as a Hold
Order and each such Existing Owner shall be required to continue to hold
such excess amount of PARS;
D-32
(iv) the Submitted Hold Order of each Existing Owner shall be
accepted, thus requiring each such Existing Owner to continue to hold
the PARS that are the subject of such Submitted Hold Order; and
(v) the Submitted Bid of each Potential Owner specifying any rate
that is higher than the Maximum Rate shall be rejected.
If, as a result of the procedures described above, any Existing Owner or
Potential Owner would be required to purchase or sell an aggregate principal
amount of PARS which is not an integral multiple of $100,000 on any Auction
Date, the Auction Agent shall by lot, in such manner as it shall determine
in its sole discretion, round up or down the principal amount of PARS to be
purchased or sold by any Existing Owner or Potential Owner on such Auction
Date so that the aggregate principal amount of PARS purchased or sold by
each Existing Owner or Potential Owner on such Auction Date shall be an
integral multiple of $100,000, even if such allocation results in one or
more of such Existing Owners or Potential Owners not purchasing or selling
any PARS on such Auction Date.
If, as a resul t of the procedures described above, any Potential Owner
would be required to purchase less than $100,000 in principal amount of PARS
on any Auction Date, the Auction Agent shall by lot, in such manner as it
shall determine in its sole discretion, allocate PARS for purchase among
Potential Owners so that the principal amount; of PARS purchased on such
Auction Date by any Potential Owner shall be an integral multiple of
$100,000, even if such allocation results in one or more of such Potential
Owners not purchasing PARS on such Auction Date.
Notice of PARS Bate. On each Auction Date, the Auction Agent shall
notify by telephone or other telecommunication device or in writing each
Broker-Dealer that participated in the Auction held on such Auction Date of
the following:
(i) the PARS Rate determined on such Auction Date for the
succeeding Rate Period;
(ii) whether Sufficient Clearing Bids existed for the determination
of the Winning Bid Rate;
(iii) if such Broker-Dealer submitted a Bid or a Sell Order on
behalf of an Existing Owner, whether such Bid or Sell Order was accepted
or rejected, in whole or in part, and the principal amount of PARS, if
any, to be sold by such Existing Owner;
(iv) if such Broker-Dealer submitted a Bid on behalf of a Potential
Owner, whether such Bid was accepted or rejected, in whole or in part,
and the principal amount of PARS, if any, to be purchased by such
Potential Owner;
D-33
(v) if the aggregate principal amount of PARS to be sold by all
Existing Owners on whose behalf such Broker-Dealer submitted Bids or
Sell Orders is different from the aggregate principal amount of PARS to
be purchased by all Potential Owners on whose behalf such Broker-Dealer
submitted a Bid, the name or names of one or more Broker-dealers (and
the Direct Participant, if any, of each such other Broker-Dealer) and
the principal amount of PARS to be (A) purchased from one or more
Existing Owners on whose behalf such other Broker-Dealers submitted Bids
or Sell Orders, or (B) sold to one or more Potential Owners on whose
behalf such other Broker-Dealers submitted Bids; and
(vi) the immediately succeeding Auction Date.
On each Auction Date, each Broker-Dealer that submitted an Order on
behalf of any Existing Owner or Potential Owner shall (d ) advise each
Existing Owner and Potential Owner on whose behalf such Broker-Dealer
submitted an Order as to: (A) the PARS Rate determined on such Auction Date;
(B) whether any Bid or Sell Order submitted on behalf of each such Existing
Owner or Potential Owner was accepted or rejected; and (C) the immediately
succeeding Auction Date; (ii) instruct each Potential Owner on whose behalf
such Broker-Dealer submitted a Bid that was accepted, in whole or in part,
to instruct such Potential Owner's Direct Participant to pay to such
Broker-Dealer (or its Direct Participant) through the Securities Depository
the amount necessary to purchase the principal amount of PARS to be
purchased pursuant to such Bid against receipt of such PARS; and (iii)
instruct each Existing Owner on whose behalf such Broker-Dealer submitted a
Sell Order that was accepted or a Bid that was rejected, in whole or in
part, to instruct such Existing Owner's Direct Participant to deliver to
such Broker-Dealer (or its Direct Participant) through the Securities
Depository the principal amount of PARS to be sold pursuant to such Bid or
Sell Order against payment therefor.
The Auction Agent. The Auction Agent will enter into an agreement with
the Trustee. The Auction Agent shall be (a) a bank or trust company
organized under the laws of the United States or any state or territory
thereof having a combined capital stock, surplus and undivided profits of at
least $30,000,000, or (b) a member of the National Association of Securities
Dealers Inc , , or any successor self-regulatory organization (the "NASD"),
having a capitalization of at least $30,000,000 and, in either case,
authorized by law to perform all the duties imposed upon it by the Indenture
and a Direct Participant in the Securities Depository. The Auction Agent
may at any time resign and be discharged of the duties and obligations by
giving at least 90 days notice to the Trustee who shall give notice of the
same to the Agency, each Broker-Dealer and the Securities Depository. The
Auction Agent may be removed at any time by the Trustee by written notice
delivered to the Auction Agent, each Broker-Dealer and the Agency. Upon any
such resignation or removal, the Trustee shall appoint a successor Auction
Agent meeting the requirements of the Indenture. If no successor Auction
Agent meeting the requirements referred to above is appointed, the Trustee
shall petition a court of competent jurisdiction to appoint a successor
D-34
Auction Agent having such qualifications as such court shall prescribe. In
the event of the resignation or removal of the Auction Agent, the Auction
Agent shall pay over, assign and deliver any moneys and PARS held by it in
such capacity to its successor or to the Trustee if no successor has been
appointed.
Broker-Dealers. At the time of the
Sachs &Co. will be the sole Broker-Dealer.
time that additional firms must be allowed
in Auctions for the PARS.
issuance of the PARS, Goldman,
The Agency may stipulate at any
to participate as Broker-Dealers
The Broker-Dealer Agreements provide that a Broker-Dealer may submit
Orders in Auctions for its own account. If a Broker-Dealer submits an Order
for its own account in any Auction, it might have an advantage over other
Bidders in that it would have knowledge of Orders placed through it in, that
Auction; such Broker-Dealer, however, would not have knowledge of Orders
submitted by other Broker-Dealers in that Auction. In the Broker-Dealer
Agreements, Broker-Dealers agree to handle customer orders in accordance
with their respective duties under applicable securities laws and rules.
PARS Index. The PARS Index on any Auction Date will be the arithmetic
average of the interest rates per annum on variable rate demand obligations
or similar obligations quoted to the Index Agent at the time of the
determination of the PARS Index by at least five members of the NASD, each
of which must be actively engaged in the remarketing of such obligations and
is acting as a remarketing agent or in a similar capacity in respect of such
issue of obligations the interest rate on which is so quoted to the Index
Agent. For purposes of the foregoing, (L) each issue of such obligations
shall be rated by either Moody's or S&P in its highest short-term rating
category (without regard to pluses or minuses or numerical designations
within a rating category), (ii) the owners of such obligations shall have
the right to demand the purchase thereof upon seven days' notice, (iii) the
interest rate on such obligations shall be predetermined weekly, (dv ) the
interest rate on such obligations shall generally become effective on
Wednesday or each calendar week, (v) the interest on such obligations shall
be excluded from gross income for purposes of federal income taxation and
shall not constitute an item of tax preference subject to the federal
alternative minimum tax (unless at the time of determination of the PARS
Index interest on the PARS shall be such an item), and (vi) if there shall
be more than one such interest rate quoted to the Index Agent by any such
member of the NASD, the highest of such quoted interest rates shall be used
in the determination of the PARS Index.
If for any reason on any Auction Date the number of members of the NASD
which shall have quoted interest rates to the Index Agent is less than five,
the PARS Index will be the arithmetic average of (L) the interest rates
which have been so quoted, if any, and (ii) the interest rates per annum on
variable rate demand obligations or similar obligations having the terms and
characteristics set forth in clauses (L) , (ii) and (v) of the immediately
preceding paragraph quoted to the Index Agent at the time of the
D-35
determination of the PARS Index by members of the NASD as that interest rate
which, if borne by such obligations, would be the minimum interest rate
necessary in order for such member, acting as principal in the ordinary
course of its business, to be willing to buy such obligations at par on such
Auction Date. Such members of the NASD shall be (L) not fewer in number
than the difference between five and the number of members of the NASD which
shall have quoted interest rates provided as described in the immediately
preceding paragraph, and (ii) actively engaged in the remarketing of
variable rate demand obligations or similar obligations.
If for any reason on any Auction Date the PARS Index cannot or shall not
be determined as provided above, the PARS Index shall be determined by the
Index Agent and shall be 80 percent of LIBOR. For this purpose, "LIBOR"
means, on any day, the average (rounded to the next higher 1/16 of 1
percent) of the respective rates per annum quoted by each of the principal
London offices of Bankers Trust Company, The Bank of Tokyo, Ltd., Swiss Bank
Corporation and National Westminister Bank PLC, or their respective
successors (the "Reference Banks"), at which United States dollar deposits
for a one-month period in the amount of u.S. $10,000,000 are offered by such
Reference Banks to leading banks in the London interbank market at
approximately 11:00 a.m., London time, on such day, or if such day is not a
day on which dealings in deposits in United States dollars are transacted in
the London interbank market, then on the text preceding day on which such
dealings were transacted in such market. If any Reference Bank does not
quote a rate required to determine LIBOR, LIBOR shall be determined in the
basis of the quotation or quotations furnished by the remaining Reference
Banks and any Substitute Reference Bank or Banks (as defined below) selected
by the Index Agent to provide such quotation or quotations not being
supplied by Reference Banks or, if the Index Agent does not select any
Substitute Reference Bank, by the remaining Reference Banks. For the
purposes of this definition, "Substitute Reference Bank" means the principal
London office of The Chase Manhattan Bank National Association, Deutsche
Bank Aktiengesellschaft or Morgan Guaranty Trust Company of New York or
their respective successors, or, if none of such Substitute Reference Banks
is engaged in dealings in United States dollars in the London interbank
market, then a bank or banks selected by the Index Agent engaged in dealings
in United States dollars in the London interbank market.
If for any reason on any Auction Date the PARS Index cannot or shall not
be determined as provided in the preceding paragraphs, the PARS Index shall
be determined by the Index Agent and shall be 90 percent of the average of
the per annum yield to maturity applicable to the most recently auctioned
thirteen-week United States Treasury Bills, based on bids as of 3:30 p.m.,
New York City time, on the last Business Day prior to the Auction Date, as
quoted to the Index Agent by at least three recognized government securities
dealers in New York City selected by the Index Agent.
If for any reason on any Auction Date the PARS Index shall not be
determined as hereinabove provided, the PARS Index shall be the PARS Rate
for the Rate Period ending on such Auction Date.
D-36
The determination of the PARS Index as provided in the Indenture shall
be conclusive and binding upon the Owners of the Bonds.
of Auction Procedures. With the consent of the Insurer, the
provisions of the Indenture concerning the Auction Procedures including the
mandatory tender provisions and the definitions applicable thereto,
including without limitation, the definitions of Default Rate, Maximum Rate,
Minimwo Rate, No Auction Rate, PARS Index, PARS Multiple and Auction Rate,
may be amended (d ) by obtaining the consent of the Trustee if the Trustee
determines that such amendment does not materially adversely affect the
rights of any Bondholder or (ii) by obtaining the consent of the registered
owners of all PARS and 51% in aggregate principal amount of the INFLOS or
(iii) in the event that all of the PARS and INFLOS are Linked PARS and
INFLOS, by obtaining the consent of the registered owners of at least 51% in
aggregate principal amount of the Linked PARS and INFLOS. In the second
event, if on the first Auction Date occurring at least 40 days after the
date on which the Trustee mailed notice to the registered owners of the
Bonds as required by the Auction Agreement, Sufficient Clearing Bids have
been received or all of the PARS are subject to Submitted Hold Orders, the
amendment shall be deemed to have been consented to by the owners
of all PARS. As a condition precedent to any amendment of the Indenture
referred to in this paragraph, there shall be delivered to the Trustee and
the Agency an opinion of nationally recognised bond counsel to the effect
that such amendment will not adversely affect the validity of the Bonds or
any exemption from federal income taxation to which the interest on the
Bonds would otherwise be entitled.
histing Owners. The Auction Agent is required to maintain a list of
Existing Owners. The Auction Agent may rely upon, as evidence of the
identities of the Existing Owners, a list of the initial Existing Owners
provided by the Broker-Dealers, the results of Auctions, notices from the
Securities Depository, regarding the results of mandatory tenders and the
results of linkage and breaking of linkage, and notices from any Existing
Owner, the Direct Participant of any Existing Owner or the Broker-Dealer for
any Existing Owner with respect to such Existing Owner's transfer of PARS to
another person only if such transfer is made to a person that has delivered
a signed Master Purchaser's Letter to the Auction Agent and if (i) such
transfer is pursuant to an Auction, or (ii) the Auction Agent has been
notified in writing (A) by such Existing Owner or its Direct Participant or
Broker-Dealer of such transfer, or (B) by a Broker-Dealer of any person that
purchased or sold such PARS in an Auction of the failure of such PARS to be
transferred as a result of the Auction. The Auction Agent will not be
required to accept any notice delivered after 3:00 p.m., New York City time,
on the Business Day next preceding an Auction Date.
Index Agent. The Index Agent shall perform the functions specified in
the Indenture and described herein as an agent of the Trustee. The Index
Agent will for each Rate Period determine the PARS Index in accordance with
the Indenture as of each Auction Date, ::lnd notify the Trustee and the
D-37
Auction Agent of each such PARS Index on the date of determination thereof.
Subject to any applicable governmental restrictions, the Index Agent may be
or become the owner of or trade in Bonds with the same rights as if it were
not the Index Agent.
Qualificatioas of 1Ddez: Agent; Resigoation; a-wal. The Index Agent
shall be a nationally recognized municipal securities evaluation service
authorized by law to perform all the duties imposed upon it by the
Indenture. The Index Agent may at any time resign and be discharged of the
duties and obligations created by the Indenture by giving at least 60 days'
notice to the Agency, each Broker-Dealer, the Trustee and the Auction
Agent. The Index Agent may be removed at any time by an instrument, signed
by the Trustee and delivered to the Index A g e n t ~ each Broker-Dealer, the
Agency and the Auction Agent. Upon any such resignation or removal, the
Trustee shall appoint a successor Index Agent meeting the requirements
described under this heading.
D-38
APPENDIXE
FORM OF OPINION OF CO-BOND COUNSEL
(THIS PAGE INTENTIONALLY LEFT BLANK)
July _, 1992
Redevelopment Agency of
the City of Oakland
Oakland, California
Re: $, --=
Redevelopment Agency of the City of Oakland
Central District Redevelopment Project
Subordinated Tax Allocation Refunding Bonds,
Series 1992A
Ladies and Gentlemen:
We have acted as co-bond counsel to the Redevelopment
Agency of the City of Oakland (the "Agency") in connection with
the issuance of its Redevelopment Agency of the City of Oakland
Central District Redevelopment Project Subordinated Tax
Allocation Refunding Bonds, Series 1992A in the principal
amount of $ (the "Bonds"). The Bonds are being
issued under the provisions of the Community Redevelopment Law
of the State of California (being Part 1 of Division 24 of the
Health and Safety Code of the State of California) and Chapter
3 of Part 1 of Division 2 of Title 5 of the Government Code of
the State of California (collectively, the "Law"), and pursuant
to a Trust Indenture, dated as of July 1, 1992 (the "Trust
Indenture"), by and between the Agency and First Trust of
California, National Association, as trustee (the "Trustee").
In our capacity as co-bond counsel, we have reviewed the
Law and a certified copy of the record of proceedings relating
to the issuance of thp Bonds, including the Trust Indenture,
certifications of the Agency, the City of Oakland, the Trustee,
and others, opinions of counsel to the Agency and the Trustee,
and such other documents, opinions and instruments as we deemed
necessary to render the opinions set forth herein. Capitalized
terms not otherwise defined herein shall have the meanings
ascribed thereto in t h ~ Trust Indenture.
1
Certain requirements and procedures contained or referred
to in the Trust Indenture and other relevant documents may be
changed and certain actions 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. No opinion is
expressed herein as to any Bond or the interest thereon if any
such change occurs or action is taken or omitted upon the
advice or approval of counsel other than ourselves.
We have assumed the genuineness of all documents and
signatures presented to us. We have not undertaken to verify
independently, and have assumed, the accuracy of the factual
matters represented, warranted or certified in the documents.
Furthermore, we have assumed compliance with all covenants and
agreements contained in the Trust Indenture, including (without
limitation) 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. In addition, we call
attention to the fact that the rights and obligations under the
Bonds and the Trust Indenture are subject to bankruptcy,
insolvency, reorganization, arrangement, moratorium and other
similar laws affecting creditors' rights, to the application of
equitable principles, to the exercise of judicial discretion in
appropriate cases and to the limitations on legal remedies in
the State of California.
Based on and subject to the foregoing, and in reliance
thereon, as of the date hereof, we are of the following
opinions:
(1) The Agency has, and the proceedings show, lawful
authority for the issuance of the Bonds under the laws of
the State of California now in force, and the Bonds
constitute valid, legal and binding special obligations of
the Agency payable solely from the Subordinated Tax
Revenues and monies in certain funds and accounts as
specified in the Trust Indenture, subject to the
limitations set forth therein.
(2) The Trust Indenture has been duly executed and
delivered by the Agency and, assuming due authorization,
execution and delivery by the Trustee, constitutes the
valid and binding obligation of the Agency. The Bonds and
all Parity Obligations are secured by a pledge of, and
charge and lien upon, the Subordinated Tax Revenues and
monies in certain funds and accounts as specified in the
Trust Indenture, and the Subordinated Tax Revenues and such
monies constitute a trust fund for the security and payment
of the interest on and principal of the Bonds and all
Parity
2
(3) The Agency has issued, and the Trust Indenture
provides that the Agency may hereafter issue, additional
bonds, payable from the Subordinated Tax Revenues and
secured by a charge and lien upon the Subordinated Tax
Revenues equal to the charge and lien securing the Bonds,
upon the terms and subject to the conditions set forth in
the Trust Indenture.
(4) The Bonds are not a debt of the City of Oakland,
the State of California, or any of its political
subdivisions (other than the Agency), and neither the City
of Oakland, the State of California, nor any of its
political subdivisions (other than the Agency) is liable
for them, nor in any event shall the Bonds be payable out
of any funds or properties other than those of the Agency
as set forth in the Trust Indenture.
(5) Based on existing statutes, regulations, rulings
and judicial decisions and assuming compliance by the
Agency with certain covenants in the Trust Indenture and
requirements of the Internal Revenue Code of 1986, as
amended, regarding the use, expenditure and investment of
Bond proceeds and the timely payment of certain investment
earnings to the United States Treasury, interest on the
Bonds is not includable in the gross income of the owners
of the Bonds for purposes of federal income taxation.
Interest on the Bonds will not be treated as an item of tax
preference in calculating the alternative minimum taxable
income of individuals or corporations; however, interest on
the Bonds will be included as an adjustment in the
calculation of corporate alternative minimum taxable income
and may therefore affect a corporation's alternative
minimum tax and environmental tax liabilities. We express
no opinion regarding other income tax consequences caused
by ownership of, or receipt of interest on, the Bonds.
(6) Interest on the Bonds is exempt from personal
income tax imposed by the State of California.
Respectfully submitted,
3
(THIS PAGE INTENTIONALLY LEFT BLANK)
APPENDIXF
FORM OF MUNICIPAL BOND INSURANCE POLICY
(THIS PAGE INTENTIONALLY LEFT BLANK)
A1BIA
APPENDIX F
FlNANCIAL GUARANIT INSURANCE POLICY
Municipal Bond Investors Assurance Corporation
Armonk. New York 10504
PolICY No XXXXXX
MunICipal Bond Inves.ors Assurance Ccnporallon (the "Insurer' I, m conS1denhon of the I"'ymen. of .he premIum and sub!Cc. 10 the Ie""" of thl<
pchcy. hereby uncondtllonally and "revo<ably ,uanntee. to any owner. IS defmed of the follm'''"1 descrIbed obh,al1ons the fuJI and
complete p.ymen. requIred '0 be mode by or on of the I..uer 10 [pAYING AOENT) or .Luc....or (.he "P.ymg Agenl") of on ,mounl
equal 10 (I) the: ptU1Clpol of (eIther al the: .lated matonty or by any advancemeDl of _lunty punultlt 10 m__cwy ......mg fund p.ymenU ...d
mlere" on. the Obll,.lIons (as that "rm .. defined below) as .uch p.yments .holl become due buhall nUl be so p.,d Cexcepllhat In the event of
any ....lenllon of the due dale of .uch prtnClpol by re..on of mand.tory or optional redemption or eeeeI...tion re.uh.n, from default or
otherw.se, other .hIn .ny advltl<:<men. of mltunty punlllll' '0 mltldatory ......mg fund I"'yment. the I"'y....nts guoran.eed hereby .hall be made
In sech and at SItch tunes as such p.ymenu of pnnctp.J would have been due had there not been any :such acceleration), and (II) the
rermber""men' of .ny .lIob poymenl whICh " .uboeq....lly recov.red from any owner punu.n0 a fin.1 Judgment by coun of ccmeeteer
run,dlCl,Oft that such payment constitutes .. avoidable preference to such owner within the ftlCMlDI of _Y IpPhcablc bankruptcy 1..... The
amounL. refersed \0 In el..... (I) and (ii) of the preced.ng sen"'", .hall be referred 10 herem collecl1vdy ., .he "In,ured Amounts"
shall mean
(PARAMOum]
(J,.EOAL TIlLE OFISSUE)
Upon re"lpl of "'lephonlC or "'legrophlC nol",", ouch notlC< ou"",,,quently confirmed .n wntlftg by reg....red or ee..lfied m'''. or upon recetpl of
wrrtten nonce by reg,,"'red or ....di.d m..l, by the Insurer from the PaY'"I Agent or ony owner of on Obbg."on the payment of an Insured
Amount for which 1'1i then due. that such reqUired payment not been made. the In..,urer on the due date of such payment or wldun one busll"IeS$
day .. reectpt of not1ee of such ftonplynte.ftt. whu:hever ,c, later. w,lI make a depostt of funcIs. 1ft U\ account w"h C"'bank. N A . In New York.
New York or tis eeee........ufficlent for the: poyment of .ny ,.ch Insured Amounts whK:h are .hen due Upon p"'..n....n.1tld ,urrendor of weh
Oblt,allon' or pre..entmenl of such other proof of ownership of the Obltg.hOllS. IOS.ther wllb ony oppropn... ,ns.rumenL< of ....'nmonl 10
evsdeeee the assignment of the Insured Amounca due on the Obligations as are pAId by the Insurer. and appropnate InstrumenL.. to effect the
appotnllnent of .he In.urer as ...nt for .uch owners of the: Obltg.II01lS In any Iegol proceeding rela..d ." p.yment of Insured AmounL' on the
Oblig."onsuch iJI.uvments bemg m form 1I...fllCtcwy to Clllbank. N.A.. C'tIibaDk. N.A. ahall dI.burse 10 .uch owne... or the Poy.ng Agenl
payment of the Insured Amounts due on such Oblt,allons...... any amount held by .he Poymg Agent for the p.yment of such Insured Amounts
.nd legally .v.tllble therefor Th.. polley doe. nUl mo.re aga.nst 1_ of any prep.ymen. premt.m wluch m.y any lane be p.y.ble with
re<pOcl.o .ny Obllgal'on
As u<ed herem. the term 'owner" ....nmean the ""mered eweer of any ObltgatlOtl .. mdlClled m the boob m.mlamed by the PaYIng Agent. the
....Uet. or any de',g_ of the Issuer for .uch purpose 1he term o.....r .hall not UK:lude the Issuer or my patty whose .greernent w,th the Is.uer
con.lIlUlC. the underly.ng ..cun.y for the: Obllg.lIons
Any tvICe of process on the Insurer m.y be mode '0 .he In.urer II tis offices Ioc..,d 113 Katg S.....t. Armonk. New Yorit 10504and .uch
""tvIC. of proe<.. shall be v.11dItld blnd.ng
Th" policy " nOIK.....n.bIe for my reason. 1he premIum on th.. polICY .. not ",fund.bl. for any "'UOlI ,ncludmg the paymenl pnor 10
malunty of the Obllg."ons
In .he even. the In....r were '0 become OISolv...t. any clallftS ItISmg .nder a polICY of fa.......1guannty IJISIJtIrK:< ate excluded from coverage
by the Caltfom.. Insurance Guaranty Assoc'ItIOl\, eatabltshed p....ont to ArtJcIo 14.2 (commencing WIth Secl1011 1(63) of o.apler I of P,n 2 of
D,vlSlon I of.he CoI.fomia 1n.1I11lIIC< Code
IN WrINESS WHEREOF. the Insurer has c.used this policy 10 be .xecuted In f..sande on lISbehalf by its duly .uthon:oed off"""" th.. [DAYJ
d.y of [MO!'n'Hj. 1991
MUNICIPAL BOND INVESTORS
ASSURANCE CORPORATION
Aaoar:
(THIS PAGE INTENTIONALLY LEFI' BLANK)
APPENDIXG
FORM OF MASTER PURCHASER'S LETTER
(TIDS PAGE INTENTIONALLY LEFI' BLANK)
APPENDIX G:
FORM OF MASTER PURCHASER'S LEI I'ER
Relating to Securities Involving Rate Settings Through Auctions
THE COMPANY
THE AUCTION AGENT
A BROKER-DEALER
AN AGENT MEMBER
OTHER PERSONS
Dear Sirs:
1. This letter is designed to apply to publicly or privately offered debt or equity
securities ("Securities") of any issuer ("Company") which are described in any final prospectus,
private placement memorandum or other offering materials relating to such Securities as the
same may be amended or supplemented (collectively, with respect to the particular Securities
concerned, the "Prospectus"), and which involve periodic rate settings through auctions
("Auctions"). This letter shall be for the benefit of any Company or auction agent ("Trust
Company"), broker-dealer, agent member, securities depository or other interested person in
connection with any Securities and related Auctions (it being understood that such persons may
be required to execute specified agreements and nothing herein shall alter such requirements).
The terminology used herein is intended to be general in its application and not to exclude any
Securities in respect of which (in the Prospectus or otherwise) alternative terminology is used.
2. We may from time to time offer to purchase, purchase, offer to sell and/or sell
Securities of any Company as described in the Prospectus relating thereto. We agree that this
letter shall apply to all such purchases, sales and offers and to Securities owned by us. We
understand that (a) the dividend/interest rate on Securities may be based from time to time on
the results of Auctions as set forth in the Prospectus, (b) a component to each such dividendI
interest rate on Securities may include fees and charges owed to the Trust Company or other
interested person, including a broker-dealer, and (c) such fees and charges may be deducted
prior to receipt of such dividend/interest rate. We agree that in the event any such fee or charge
is not so deducted and is paid to us in a circumstance in which it is owed to any Trust Company
or other interested person, we are not relieved of our liability to such Trust Company or other
interested person for payment of any such fee or charge and we shall make such payment
promptly upon notice delivered to us that such payment is due. We agree that the Trust
Company or other interested person may collect such fees and charges on its or all interested
parties' behalf.
3. We agree that any bid or sell order placed by us shall constitute an irrevocable offer
by us to purchase or sell the Securities subject to such bid or sell order, or such lesser amount
of Securities as we shall be required to sell or purchase as a result of such Auction, at the
applicable price, all as set forth in the Prospectus, and that if we fail to place a bid or sell order
with respect to Securities owned by us with a broker-dealer on any auction date, or a broker--
dealer to which we communicate a bid or sell order fails to submit such bid or sell order to the
Trust Company concerned, we shall be deemedto have placed a hold order with respect to such
o-i
Securities as described in the Prospectus. We authorize any broker-dea.ler that submits a bid or
sell order as our agent in Auctions to execute contracts for the sale of Securities covered by such
bid or sell order. We recognize that the payment of such broker-dealer for Securities purchased
on our behalf shall not relieve us of any liability to such broker-dea1er for payment for such
Securities.
4. We agree that, dunng the applicable period as described in the Prospectus dispositions
of Securities can be made only in the denominations set forth in the Prospectus and we will sell,
transfer or otherwise dispose of any Securities held by us from time to time only pursuant to a
bid or sell order placed in an Auction, to or through a broker-dealer or when permitted in the
Prospectus, to a person that has signed and delivered, or caused to be delivered on its behalf,
to the applicable Trust Company a letter substantially in the form of this letter (or other
applicable purchaser's letter), provided that in the case of all transfers other than pursuant to
Auctions we or our broker-dea1er or our agent member shall advise such transfer. We under-
stand that a restrictive legend will be placed on certificates representing the Securities and stop--
transfer instructions will be issued to the transfer agent andlor registrar, all as set forth in the
Prospectus. We agree to comply with any other transfer restrictions or other related procedures
as described in the Prospectus.
5. We agree that, during the applicable period as described in the Prospectus, ownership
of Securities shall be represented by one or more global certificates registered in the name of
the applicable Bond Depository or its nominee, that we will not be entitled to receive any
certificate representing the Securities and that our ownership of any Securities will be maintained
in a book-entry form by the securities depository for the account of our agent member, which
in tum will maintain records of our beneficial ownership. We authorize and instruct our agent
member to disclose to the applicable Trust Company such information concerning our beneficial
ownership of Securities as such Trust Company shall request.
6. We acknowledge that partial deliveries of Securities purchased in Auctions may be
made to us and such deliveries shall constitute good delivery as set forth in the Prospectus.
7. This letter is not a commitment by us to purchase any Securities.
8. This letter supersedes any prior-dated version of this master purchaser's letter, and
supplements any prior or post-dated purchaser's letter specific to particular Securities; any
recipient of this letter may rely upon it until such recipient has received a signed writing
amending or revoking this letter.
9. The description of Auction procedures set forth in each applicable Prospectus are
incorporated by reference herein and, in case of any conflict between this letter and any such
description, such description shall control.
10. Any photocopy or other reproduction of this letter shall be deemed of equal effect
as a signed original.
11. Our agent member of The Depository Trust Company currently is
12. Our personnel authorized to place orders with broker-dealers for the purposes set
forth in the Prospectus in Auctions currently is/are, , telephone
number L) ~ .
13. Our taxpayer identification number is _
G-2
14. We agree that, during the applicable periods described in the Prospectus, if we
decide to link: our beneficial ownership of any Securities which permit such linkage with our
beneficial ownership of other debt or equity securities which pennit such linkage of the
Company, or if we decide to break any linkage, we will instruct our agent member and our
broker-dealer to link: such beneficial ownership or break such linkage in accordance with the
procedures set forth in the Prospectus, and we acknowledge that such instructions must be
submitted through the applicable Trust Company and may not be given during certain periods
described in the Prospectus.
15. We acknowledge that the Securities may be subject to mandatory tender by us as
described in the Prospectus. We further agree that if we should receive any payment in
connection with any tender transaction to which we are not entitled (as a result of failure of
another security holder to provide the tender price or otherwise), we will take such actions
(including return of funds and repayment of interest to any party who provided funds to us which
they were not obligated to provide) so that all interested parties (including any broker-dealer)
are restored to the positions which would have obtained if the tender transaction were effected,
or not effected, as the case may be, in accordance with the provisions set forth in the
Prospectus.
Dated:
Mailing address of purchaser
(Name of Purchaser)
By:
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Printed Name
Title
0-3
(TInS PAGE INfENTIONALLY LEFt' BLANK)