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HomeMy WebLinkAbout2008-11-19 eJ0\y Slim,, r y ORANGE COUNTY SANITATION DISTRICT ovember 13, 2008 Of`Sag THE FM\ 10B44 She Avenue Fountain Valley,CA 92JO9-7D18 Meiling Address P.D.Box8127 NOTICE OF MEETING Fountain Valley.M 927268127 wvrer.ocsd.cone Phone BOARD OF DIRECTORS (7141962-2411 ORANGE COUNTY SANITATION DISTRICT Fall 1714)962U356 WEDNESDAY, NOVEMBER 19, 2008 - 6:30 P.M. serving Aneheim area ADMINISTRATIVE OFFICES Boon Park 10844 Ellis Avenue Lypress Fountain Valley, California 92708 Fountain Valley Fullerton Gerden Grove Handngmn Beach The Regular Meeting of the Board of Directors of the Orange County Sanitation lrvine District will be held at the above location, time and date. La Habra Le Pella ///��� Los Alamitos / I Nawpor[Beech /l/Y/ °e"ge Cleirk of th oard Placanda Sent,Are Seal Beach Stanton rusdn Operations Committee - Wednesday, December 3, 2008 at 5:00 p.m. Villa Perk Yorbe Linda Administration Committee - Wednesday, December 10, 2008 at 5:00 p.m. Cdau,Mae. sander,Dalrl o Steering Committee - Wednesday, December 17, 2008 at 5:30 p.m. Midway Ory Sanitary Oisbyct Irvine Rench Watar Oisbict Ceondy of Orange We protect Public health and Me anmonment by Providing effective wastewater collarbile treatment,end recycling. nm BOARD MEETING DATES `December 17, 2008 January 28, 2009 February 25, 2009 March 25, 2009 April 22, 2009 'May 20, 2009 June 24, 2009 July 22, 2009 August 26, 2009 September 23, 2009 October 28, 2009 'November 18, 2009 "Meetings are being held on the third Wednesday of the month H:`depPgmo\750U51IBBWgendW00B Meeting NotioeMN011.2.dom MINUTES OF THE OPERATIONS COMMITTEE Engineering, Operations & Maintenance, and Technical Services Orange County Sanitation District November 5, 2008—5:00 p.m. A meeting of the Operations Committee of the Orange County Sanitation District was held on November 5, 2008, at 5:00 p.m. in the Sanitation District's Administrative Office. Following the Pledge of Allegiance, a quorum was declared present, as follows: Operations Directors Present: Staff Present: Ken Parker, Chair Nick Arhontes, Dir. of Operations & Maintenance Bill Dalton, Vice Chair Jim Herberg, Director of Engineering Gordon Shanks Ed Torres, Director of Technical Services Don Bankhead Lorenzo Tyner, Director of Finance and Rose Espinoza Administrative Services Patsy Marshall Lille Kovac, Committee Secretary Roy Moore Cana Dillon Joy Neugebauer Chuck Forman David Shawver Tod Haynes Harry Sidhu John Linder Constance Underhill Brian Reed Doug Davert, Board Chair Juanita Skillman Larry Crandall, Board Vice Chair Operations Directors Absent: Others: Don Webb Bob Ooten PUBLIC COMMENTS There were no public comments. REPORT OF COMMITTEE CHAIR Committee Chair Ken Parker reported that Director Dalton was appointed to be the next Operations Committee Chair, and Director Shawver to the position of Operations Committee Vice Chair. REPORT OF GENERAL MANAGER In the General Manager's absence, Director of Engineering Jim Herberg did not give a report. CONSENT CALENDAR (1-8) 1. MOVED, SECONDED, AND DULY CARRIED: Approve the minutes of the October 1, 2008 Operations Committee meeting. Minutes of the Operations Committee November 5, 2008 Page 2 2. OP08-59 MOVED, SECONDED,AND DULY CARRIED: 1)Approve Amendment No. 2 to the Professional Services Consultant Agreement with Dudek&Associates, Inc. for Standard Operating Procedures (SOP) Development, Specification No. CS-2007-322 for an additional amount of$53,800, increasing the total amount from $115,500 to an amount not to exceed $169,300; and, 2)Approve a contingency Increase of$10,500 (10%). 3. OP08-60 MOVED, SECONDED, AND DULY CARRIED: 1)Approve a Professional Services Consultant Agreement with AKM Consulting Engineers for a Full- Time Associate Engineer, Specification No. CS-2008-383BD for an annual amount not to exceed $180,960, and four one-year renewal options; and, 2)Approve a contingency of$18,096 (10%). 4. OPOB-61 MOVED, SECONDED, AND DULY CARRIED: Recommend to the Board of Directors to approve an agreement with Costa Mesa Sanitary District (CMSD) transferring ownership and associated easement rights for six local sewers within the CMSD service area boundaries, in a form approved by General Counsel. 5. OP08.62 MOVED, SECONDED, AND DULY CARRIED: Recommend to the Board of Directors to authorize the General Manager to execute Memoranda of Understanding Establishing A County-wide Area Spill Control Program with Orange County Flood Control District and cities or sanitary districts that own sanitary sewer collection facility pipelines within Orange County Sanitation District service area, in a form approved by General Counsel. 6. OP08-63 MOVED, SECONDED, AND DULY CARRIED: Recommend to the Board of Directors to authorize staff to negotiate a Professional Consulting Services Agreement with Black&Veatch Corporation for construction support services for Central Generation Automation, Job No. J-79-1. 7. OP08-64 MOVED, SECONDED, AND DULY CARRIED: Recommend to the Board of Directors to: 1) Ratify Change Order No.1 to Purchase Order No. 103261OB (SSJ-2008-821), issued to U.S. Peroxide L-C, for the application of a proprietary chemical for the temporary unit gallon price increase for ferrous chloride from $1.25/gallon delivered, plus tax, to$1.75/gallon delivered, plus tax, for a total amount not to exceed $147,000,00,for the period of September 24. 2008, through October 6, 2008, due to a declared Force Majeure; Minutes of the Operations Committee November 5, 2008 Page 3 2)Approve Change Order No.2 to Purchase Order No. 1032610B(SSJ- 2008-821), issued to U.S. Peroxide LLC,for the application of a proprietary chemical for a unit gallon price increase for ferrous chloride from$1.25/gallon delivered, plus tax, to$1.75/gallon delivered, plus tax, for the contract period of December 1, 2008 through June 30, 2009; and, 3)Authorize a 20% unit cost escalation contingency effective December 1, 2008. 8. OP08-65 MOVED, SECONDED, AND DULY CARRIED: 1)Approve a sole source Service Contract Agreement with Jamison Engineering for Plant 'I Headworks Splitter Box Channel Repairs, for an amount not to exceed $98,735.00; and, 2)Approve a 20%contingency($19,747). ACTION ITEMS No items were considered. INFORMATION ITEMS (9) 9. OP08-66 Coyote Hills Golf Course Manhole Access and Odor Control Project, Project No. FE08-04. Mr. Herberg briefly reviewed the project and its environmental Impact requirements, as outlined in the Mitigation Monitoring and Reporting Program Report. The report has been made available on the Sanitation District's website for review. This item will be considered at the November Board meeting for approval. DEPARTMENT HEAD REPORTS Nick Arhontes, Director of Operations and Maintenance, and Brian Reed, Senior Environmental Specialist, briefly presented the wastewater chemical treatment at various locations, odor control program, chemical dousing process and benefits to local residents. Director of Technical Services, Ed Torres, reported that the Sanitation District has been expecting for several years a federal air permit, and recently received the draft Title V permit scheduled to be effective the and of 2008. Mr. Torres also reported that a three-year study by the Southern California Coastal Water Research Project evaluating potential regional impacts on the marine environment from pharmaceuticals and personal care products discharged by sewer and storm water agencies is nearing completion. The results of this comprehensive study will be presented at a conference in Tampa the week of November 170. Minutes of the Operations Committee November 5, 2008 Page 4 Jim Herberg, Director of Engineering, reported that repair work on the exposed SARI line pipe has been completed and under budget. The work was completed as an emergency prior to the rainy season to avoid a possible major spill. Mr. Herberg suggested that the December Operations Committee be held at Plant 2, with a tour of the secondary treatment work completed to date prior to the meeting. CLOSED SESSION CONVENE IN CLOSED SESSION PURSUANT TO GOVERNMENT CODE SECTION 54956.9(b): The Operations Committee convened in closed session at 5:22 p.m. pursuant to Government Cade Section 54956.9(b)to discuss one matter. Confidential minutes of the Closed Session held by the Operations Committee have been prepared in accordance with California Government Code Section 54956.9(b)and are maintained by the Clerk of the Board in the official Book of Confidential Minutes of Board and Committee Closed Meetings. RECONVENE IN REGULAR SESSION: The Committee reconvened in regular session at 5:46 p.m. OTHER BUSINESS, COMMUNICATIONS OR SUPPLEMENTAL AGENDA ITEMS, IF ANY There were none. ADJOURNMENT The Chair declared the meeting adjourned at 5:48 p.m. The next Operations Committee meeting and tour will be held at Plant 2 on Wednesday, December 3, 2008, at 4:15 p.m. Submitted by: Lille (ovac Committee Secretary H:\dephagendMOpem0ons CommiHee\Opemdons 2008\1 108\110105 OpamUons Minutes.docx 1Fl"111 _ .I. MINUTES OF THE REGULAR MEETING OF (r/,y�„•/7� THE ADMINISTRATION COMMITTEE Orange County Sanitation District Wednesday, November 12, 2008, at 6:00 P.M. A meeting of the Administration Committee of the Orange County Sanitation District was held on November 12, 2008, at 5:00 p.m., in the Sanitation District's Administrative Office. Following the Pledge of Allegiance, a quorum was declared present, as follows: ADMINISTRATION COMMITTEE STAFF PRESENT: MEMBERS: Jim Ruth, General Manager Jim Herberg, Director of Engineering DIRECTORS PRESENT: Lorenzo Tyner, Director of Finance and Mark Waldman, Chair Administrative Services Phil Luebben, Vice Chair Life Kovac, Committee Secretary Jim Ferryman Jeff Reed, Human Resources and Employee Relations Don Hansen Manager Darryl Miller Mike White, Controller Chris Norby Wes Bauer Brad Reese Norbert Gaia Christina Shea Juanita Skillman Sal Tinajero Jim Winder Doug Davert, Board Chair OTHERS PRESENT: Larry Crandall, Board Vice Chair Brad Hogin, General Counsel Jennifer Farr DIRECTORS ABSENT: Brian Gruber Jon Dumitru Rich Kikuchi Steven Parker Ed Soong PUBLIC COMMENTS There were no public comments. REPORT OF THE COMMITTEE CHAIR Chair Waldman did not give a report. REPORT OF THE GENERAL MANAGER General Manager, Jim Ruth, did not give a report. Minutes of the Administration Committee + November 12, 2008 Page 2 REPORT OF DIRECTOR OF FINANCE AND ADMINISTRATIVE SERVICES Lorenzo Tyner, Director of Finance and Administrative Services, did not give a report. REPORT OF GENERAL COUNSEL Brad Hogin, General Counsel, did not give a report. CONSENT CALENDAR ITEMS (1 -2) 1. MOVED, SECONDED AND DULY CARRIED: Approve minutes of the November 12, 2008 meeting of the Administration Committee. 2. ADM08-33 MOVED, SECONDED AND DULY CARRIED: Recommend to the Board of Directors to approve the reclassification of four(4) OCSD positions affecting incumbents predicated on employees satisfying position qualifications and the indefinite and ongoing need to accomplish work at the higher level, and creation of a new classification providing for: a) Reclassification of two (2)Administrative Assistant positions PG 67 ($6,185/month)to Contracts/Purchasing Assistant PG 67 ($6,185/month) results in no change in pay; b) Reclassification of a Senior EDM Specialist position PG 80 ($8,121/month)to Senior Information Technology Analyst PG 83 ($8,743/month); c) 1) Reclassification of a Principal Information Technology Analyst position PG 87 ($10,133/month)to Principal Project Controls Analyst PG 87 ($10,133/month) results in no change in pay; and, 2) Creation of a new classification of Principal Project Controls Analyst with pay range placement at PG 87 (Attachment 1). ACTION ITEMS (3 -5) 3. ADM08-34 Mike White, Controller, briefly provided an overview of the Comprehensive Annual Financial Report (CAFR)for year end June 30, 2008 prepared by Mayer Hoffman McCann. Clarifications were made to Directors' questions, and minor typographical errors on the CAFR were noted to be corrected. It was then: Minutes of the Administration Committee November 12, 2008 Page 3 MOVED, SECONDED AND DULY CARRIED: Recommend to the Board of Directors to receive and file: a) Comprehensive Annual Financial Report for the year ended June 30, 2008, prepared by staff and audited by Mayer Hoffman McCann, Certified Public Accountants; b) Report on Compliance and Internal Control for the year ended June 30, 2008; and c) Report on Agreed-Upon Procedures Applied to Appropriations Limit Worksheets. 4. ADM08-35 MOVED, SECONDED AND DULY CARRIED to recommend to the Board of Directors to: 1)Adopt Resolution No. OCSD 08- 20, Authorizing the Execution and Delivery by the District of one or more Installment Purchase Agreements, Trust Agreements, and Continuing Disclosure Agreements in connection with the execution and delivery of Orange County Sanitation District Certificates of Participation, Series 2008C, and B necessary, Series 2009A, Authorizing the Execution and Delivery of such Certificates Evidencing Principal in an Aggregate Amount of Not to Exceed $200,000,000, Approving the Distribution of one more Official Notice Inviting Bids and Official Statements in Connection with the Offerings and Sales of such Certificates and Authorizing the Execution of Necessary Documents and Related Actions; 2) That the Orange County Sanitation District Financing Corporation approve the documents supporting and authorizing the Certificates of Participation, Series 2008C, and if necessary, Series 2009A, in an aggregate amount not to exceed $200 million. Directors expressed concern over the request to execute and deliver one or more installment of certificates of participation without a specific rate or approval process. It was further MOVED, SECONDED AND DULY CARRIED to recommend to the Board of Directors to: 3) Establish a true interest cost target rate of 4.75%with a maximum rate of 5.25%; and, 4) Obtain final approval of the Board Chair and Administration Committee Chair prior to completing subject debt issuances. Mr. Tyner advised the Directors that an additional Rem would be going directly to the Board of Directors in November requesting approval to refund variable rate debt under Certificate Anticipation Notes until rates become more favorable due to the current financial crisis,for a period not to exceed 13 months. Minutes of the Administration Committee November 12, 2008 Page 4 5. ADMOS-36 MOVED, SECONDED AND DULY CARRIED: a) Ratify Change Order No. 1 to P.O. 102681-OA, issued to Clean Harbors Environmental Service, Specification No. S-2006-300,for hazardous waste services for an additional amount of$50,000, for a total contract amount not to exceed $158,150, for the contract period ending December 31, 2008; b) Approve Change Order No. 2 to P.O. 102681-OA, issued to Clean Harbors Environmental Services, Specification No. 5-2006- 300, for hazardous waste services, approving an increase of $51,850, for a total contract amount not to exceed $160,000, for the contract period January 1, 2009 through December 31, 2009, and all subsequent renewal periods; and, c) Approve an annual contingency of$16,000 (10%). END OF CONSENT CALENDAR INFORMATIONAL ITEMS (6) 6. ADM0B-37 Internal Audit Reports Controller Mike White introduced Rich Kikuchi and Brian Gruber of Lance, Sol] & Lunghard, LLP, who then proceeded to review the audits' results which included contract change orders, Integrated Project Management Consultants (IPMC) operating agreement, CIP billing of design and construction progress payments, and travel and expense documentation and controls. (7) CLOSED SESSION There was no closed session. (8) OTHER BUSINESS. COMMUNICATIONS OR SUPPLEMENTAL AGENDA ITEMS, IF ANY There were none. (9) MATTERS WHICH A DIRECTOR MAY WISH TO PLACE ON A FUTURE AGENDA FOR ACTION AND STAFF REPORT There were none. Minutes of the Administration Committee November 12, 2008 Page 5 (10)ADJOURNMENT AND FUTURE MEETING DATES The Chair declared the meeting adjourned at 6:08 p.m. The next regular Administration Committee meeting is scheduled for December 10, 2008, at 5:00 p.m. Submitted by: Lilia Kovac Committee Secretary H:Wept\agendaWdmin Commi8ee12008\1208\111208Admin Minutes.daot ROLL CALL BOARD OF DIRECTORS ORANGE COUNTY SANITATION DISTRICT MEETING DATE &TIME: 11/19/08 Q C (SHANKS) ........................ANTOS ......................... ✓ i (QUIRK) ...........................BANKHEAD...................w (AYER)..............................CRANDALL................... ✓ /S3t(¢ — — ✓ (JONES)............................DALTON....................... _+� 1L2�— (PALMER).........................DAVERT...................... (CAVECCHE)....................DUMITRU ................... 4� CL g� (GOMEZ) ..........................ESPINOZA................... L ✓ — (OOTEN)...........................FERRYMAN.................../ ✓ (HARDY) .........................HANSEN ...................... (NARAIN)..........................LUEBBEN..................... �LP �L (DOW)...............................MARSHALL.................. (REINHART).....................MILLER ......................... (GARCIA)..........................MOORE........................ �_ (KRIPPNER) .....................NEUGEBAUER.............. ✓ — — — _L (NGUYEN) ........................NORBY....................... ✓ ai (DRISCOLL)......................PARKER....................... ✓ ��� �/ (ULMER)...........................REESE .............. ..... _` r (CADENA) .......................SHAWVER.................. (CHOI)...............................SHEA.......................... 44dw- (KRING) .............................8 -.......................�L r (BENAVIDES)...................TINAJERO.................... ✓ v (AGUIRRE) .......................UNDERHILL ................. . -,Z (CHAROEN)......................WALDMAN.................... ✓ ✓ �L (DAIGLE) ..........................WEBB .......................... ✓ v (ANDERSON)...................WINDER ....................../ ✓ — - -� STAFF: - /` tw/ IS/93 IS3i9 /sS9LP Arhontes Ghirelli Herberg Kovac Kyle Ruth Torres Tyner OTHERS: Ho in 11/19/08 H:WepB dmin\BS\DIRECTOR\Directors Rog Call.doc NOVEMBER 2008 COMPENSATION Your November compensation and mileage check will be processed for a pay date of December 3rtl;the District's first pay day in December. Please make any necessary corrections to your time card, sign it, and return it as soon as possible, so we may add any additional meetings to your check. (if you prefer to Fax us your time card, please Fax it to(714) 962-3954, Lenora Crane, Executive Assistant, Finance and Administrative Services. � L �/1 Q q oe Z W S n o � 1 nN ��r�S91Yf� NOVEMBER 2008 COMPENSATION Your November compensation and mileage check will be processed for]]te; the District's first pay day in December. Please make anycorrections to your time card, sign it, and return it os soon as possible, sany additional meetings to your check. (If you prefer to Fax us your timFax it to (714( 962-3954, Lenora Crane, Executive Assistant, Finance and Services. — �, � � M °° �' r C` In � �_ � � � � A T 1 J i November 13, 2008 MEMORANDUM TO: Chair and Members of the Board of Directors Orange ounty Sanitation District FROM: JamaAuth General Manager, Orange County Sanitation District SUBJECT: November Status Report The following status report for the month of November is submitted for your review and consideration. 1. State Budget Crisis Staff continues to monitor the state fiscal crisis and its potential impact on local government. Budget restraints are in place relative to hiring, purchasing, capital improvements, and capital outlay. Staff will keep the Board informed on any potential fiscal impact to OCSD should the legislature take corrective measures. We will continue to oppose vigorously any proposal to take away property tax revenues. 2. Strategic Plan Update Staff incorporated input from our board members at the October 15 workshop into our updated five-year Strategic Plan. Staff proposed five new initiatives and presented through issue papers to the Board by members of the EMT. Staff will submit the updated five-year Strategic Plan to the Board at our November 19 meeting for policy direction and action. There is no increase in cost to the budget should be Board approve the new initiatives. 3. New Board Members Orientation Staff will conduct a new board member workshop on February 4, 2009, from 1-5 p.m. The orientation will cover board policies, procedures, and operations, and will include a facility tour. 4. Sale of Kern County Property Staff has initiated the process to sell 1808 acres of OCSD owned property in Kern County. In order for OCSD to sell its surplus land in Kings County, the District must first comply with the California Surplus Lands Act (Act). The Act requires that before disposing of surplus real property, a district must send a written offer to sell or lease the property to certain local entities within whose jurisdiction the land is located, for the development of: 1) low- or moderate-income housing, 2) park and recreation facilities, or 3)for the creation of open-space purposes. Board of Directors Page 2 November 13, 2008 5. Los Alamitos NAS Bob Ghirelli, Ed Tortes, Mike Moore and I will meet with General Coombs on Wednesday, November 19 at the Los Alamitos Naval Air Station to explore their potential interest in acquiring biosolids for land application purposes. 6. SAWPA Staff contracted with FCS Group to develop user rates for the maintenance, repair, and ultimate replacement of the Santa Ana Regional Interceptor(SARI line) maintained by OCSD. These rates are designed to equitably recover costs from SAWPA for usage and proportionate ownership of the SARI line. The rate study has been completed and our staffs will meet on November 19 to review the study and agree upon a rate structure for the future. 7. Orange County Grand Jury The Orange County Grand Jury visited OCSD October 21 for a briefing and tour of our facilities. Staff provided the Jury members with an overview of our governance structure, operations, and construction program followed by a tour of Plant 1 including the laboratory. OCSD is one of several major county agencies the Grand Jury will visit this year to learn about the services provided to the residents of Orange County. The Grand Jury indicated they would schedule a visit to OCWD and the GWR System in the near future. 8. SARI Line Relocation and Repair The SARI rock repairs were completed with over 1,400 tons of new rock being placed to protect the pipeline. The final cost for this emergency work is $410,600, which is less than the original estimate of$600,000. A meeting with the Colonel from the Corps of Engineers to discuss expending the EIR/EIS is being held on November 20. JDR:gg H1trg0 ItP110MVMURI.wIE�Re 0 BewQ10JB W 3Wu Rg %111WB Mb SWu RapvtEx AGENDA BOARD OF DIRECTORS ORANGE COUNTY SANITATION DISTRICT ADMINISTRATIVE OFFICES 10844 ELLIS AVENUE FOUNTAIN VALLEY, CA 92708 REGULAR MEETING November 19, 2008 — 6:30 P.M. INVOCATION AND PLEDGE OF ALLEGIANCE (Roy Moore - Brea) ROLL CALL PUBLIC COMMENTS REPORTS: The Chair, General Manager and General Counsel may present verbal reports on miscellaneous matters of general interest to the Directors. These reports are for information only and require no action by the Directors. 1. Ratifying payment of claims of the District, by roll call vote, as follows: ALL DISTRICTS 10/15/08 10/31/08 Totals $27,240,361.24 $11,874,779.57 DIRECTORS: Pursuant to Government Cade Section 84308, you are required to disclose any campaign contribution greater than $250 received in the past twelve months from any party to a contract involving OCSD. This requires that you identify the contributor by name. Further, you may not participate in the decision making process to award a contract to such party. For reference, you are directed to the Register of Warrants as to all current contractors/vendors with OCSD. For the specifics of Government Code Section 84308, please see your Director's Handbook or call the office of General Counsel. 11/19/08 Page 2 CONSENT CALENDAR (2-4) Consideration of motion to approve all agenda items appearing on the Consent Calendar not specifically removed from same, as follows: 2. Approve the minutes for the special meeting held on October 15, 2008 and the regular meeting held on October 22, 2008, to be filed and deemed approved, as mailed. 3. a) Approve Plans and Specifications for P1 Miscellaneous Buildings Office Improvements, Project No. FE07-08, on file at the office of the Clerk of the Board; b) Approve Addendum Nos. 1, 2, 3, 4, 5, and 6 to the plans and specifications; c) Receive and file bid tabulation and recommendation; d). Reject bid received from GTA Construction, Inc. in the amount of$635,000; e) Award a contract to Avi-Con, Inc., dba CA Construction, for P1 Miscellaneous Buildings Office Improvements, Project No. FE07-08, for a total amount not to exceed $673,000; and, f) Approve a contingency of$100,950 (15%). 4. a) Approve Plans and Specifications for the P1 Engineering Trailer File Room Improvements, Project No. FE07-12, on file at the office of the Clerk of the Board; b) Approve Addendum Nos. 1 and 2 to the plans and specifications; c) Receive and file bid tabulation and recommendation; and, d) Reject all bids for P1 Engineering Trailer File Room Improvements, Project No. FE07-12. STEERING COMMITTEE(5-6) 5. Approve Steering Committee Minutes for the meeting held on October 22, 2008 to be filed. 6. a) Approve the Five-Year Strategic Plan dated November 2008; and, b) Direct staff to implement the goals and strategies contained in the Plan. 11/19/08 Page 3 OPERATIONS COMMITTEE (7— 13) Consider following item from October 1, 2008 Operations Committee meeting. 7. a) Approve Plans and Specifications for the Area 03 Manhole Access Improvements (3-54), Project No. FE07-01, on file at the office of the Clerk of the Board; b) Approve Addendum No. 1 to the plans and specifications; c) Receive and file bid tabulation and recommendation; d) Reject bid received from Pack Coast Infrastructure,for the amount of$260,200; e) Award a contract to Mike Bubalo Construction Co., Inc.,for the construction of the manhole access improvements for an amount not to exceed $305,500; and, f) Approve a contingency of$106,925(35%). 8. Approve Operations Committee Minutes for the meeting held on November 5, 2008, to be filed. (Minutes to be distributed at the 11119108 Board meeting). 9. Approve an agreement with Costa Mesa Sanitary District(CMSD)transferring ownership and associated easement rights for six local sewers within the CMSD service area boundaries, in a form approved by General Counsel. 10. Authorize the General Manager to execute Memoranda of Understanding Establishing A County-wide Area Spill Control Program with Orange County Flood Control District and cities or sanitary districts that own sanitary sewer collection facility pipelines within Orange County Sanitation District service area, in a form approved by General Counsel. 11. Authorize staff to negotiate a Professional Consulting Services Agreement with Black& Veatch Corporation for construction support services for Central Generation Automation, Job No. J-79-1. 12. a) Ratify Change Order No.1 to Purchase Order No. 1032610E(SSJ-2008-821), issued to U.S. Peroxide LLC, for the application of a proprietary chemical for the temporary unit gallon price increase for ferrous chloride from $1.25/gallon delivered, plus tax, to $1.75/gallon delivered, plus tax, for a total amount not to exceed $147,000,00, for the period of September 24, 2008, through October 6, 2008, due to a declared Force Majeure; b) Approve Change Order No.2 to Purchase Order No. 1032610E(SSJ-2008-821), issued to U.S. Peroxide LLC, for the application of a proprietary chemical for a unit gallon price increase for ferrous chloride from$1.25/gallon delivered, plus tax, to$1.75/gallon delivered, plus tax,for the contract period of December 1, 2008 through June 30, 2009; and, c) Authorize a 20% unit cost escalation contingency effective December 1, 2008. 11/19/O8 Page 4 13. a) Approve a sole source Service Contract Agreement with Jamison Engineering for ` Plant 1 Headworks Splitter Box Channel Repairs, for an amount not to exceed $98,735.00; and, b) Approve a contingency of$19,747 (20%). ADMINISTRATION COMMITTEE(14- 17) 14. Approve Administration Committee Minutes for the meeting held on November 12, 2008, to be filed. (Minutes to be distributed at the 11/19/06 Board meeting). 15. Approve the reclassification of four(4) OCSD positions affecting incumbents predicated on employees satisfying position qualifications and the indefinite and ongoing need to accomplish work at the higher level, and creation of a new classification providing for: a) Reclassification of two(2)Administrative Assistant positions PG 67($6,185/month) to Contracts/Purchasing Assistant PG 67 ($6,185/month) results in no change in pay; b) Reclassification of a Senior EDM Specialist position PG 80 ($8,121/month) to Senior Information Technology Analyst PG 83($8,743/month); c) 1. Reclassification of a Principal Information Technology Analyst position PG 87 ($10,133/month)to Principal Project Controls Analyst PG 87 ($10,133/month) results in no change in pay; and, 2. Creation of a new classification of Principal Project Controls Analyst with pay range placement at PG 87. 16. Receive and file: a) Sanitation District's Comprehensive Annual Financial Report for the year ended June 30, 2008, prepared by staff and audited by Mayer Hoffman McCann, Certified Public Accountants; b) Report on Compliance and Internal Control for the year ended June 30, 2008; and, c) Independent Accountants' Report on Agreed-Upon Procedures Applied to Appropriations Limit Worksheets. 17, a) Adopt Resolution No. OCSD 08-20, Authorizing the Execution and Delivery by the District of one or more Installment Purchase Agreements,Trust Agreements, and Continuing Disclosure Agreements in connection with the execution and delivery of Orange County Sanitation District Certificates of Participation, Series 2008C, and 'd necessary, Series 2009A;Authorizing the Execution and Delivery of such Certificates Evidencing Principal in an Aggregate Amount of Not to Exceed $200,000,000, Approving the Distribution of one or more Official Notice Inviting Bids and Official Statements in Connection with the Offerings and Sales of such Certificates and Authorizing the Execution of Necessary Documents and Related Actions; ' 11/19I08 Page 5 b) Establish a true interest cost target rate of 4.75%with a maximum rate of 5.25%; and, c) Obtain final approval of the Board Chair and Administration Committee Chair prior to completing subject debt issuances. GWR SYSTEM STEERING COMMITTEE (18) 18. Approve Joint Groundwater Replenishment System Steering Committee Minutes for the meeting held on October 13, 2008, to be filed. NON-CONSENT CALENDAR 19. a) Adopt Resolution No. OCSD 08-21, Adopting the Initial Study and Mitigated Negative Declaration for the Coyote Hills Golf Course Manhole Access and Odor Control Project, Contract No. FE08-04; b) Make Certain Findings Relating to Less than Significant Environmental Effects Identified in the Initial Study/Mitigated Negative Declaration; c) Adopt a Mitigation Monitoring and Reporting Program; d) Approve the Coyote Hills Golf Course Manhole Access and Odor Control Project, Contract No. FE08-04; and, e) Authorize the Filing of a Notice of Determination. 20. Adopt Resolution No. OCSD 08-22,Authorizing the Execution and Delivery by the District of an Installment Purchase Agreement, a Trust Agreement, an Escrow Agreement, a Note Purchase Agreement, and a Continuing Disclosure Agreement in connection with the execution and delivery of Orange County Sanitation District Refunding Certificates of Participation, Series 2008D (Certificate Anticipation Notes), such Notes Evidencing Principal in an Aggregate Amount of Not to Exceed $198,000,000, Approving an Official Statement in Connection with the Offering and Sale of such Notes and Authorizing the Execution of Other Necessary Documents and Related Actions. Recess by Board of Directors, Orange County Sanitation District 21. Call to Order, Board of Directors, Orange County Sanitation District Financing Corporation: a. Roll Call 11/19/08 Page 6 b. If no corrections or amendments are made, the minutes for the meetings held on November 28, 2007, May 14, 2008, and August 27, 2008, will be deemed approved and be so ordered by the Chair. C. Report of the Director of Finance d. Adopt Resolution No. FC-08,Authorizing the Execution and Delivery by the Corporation of One or More Installment Purchase Agreements and One or More Trust Agreements in Connection with the Execution and Delivery of Orange County Sanitation District Certificates of Participation, Series 2008C, and if necessary, Series 2009A; Authorizing the Execution and Delivery of Such Certificates Evidencing Principal in an Aggregate Amount of Not to Exceed $200.000.000: and Authorizing the Execution of Necessary Documents and Related Actions. (See Agenda Item No. 17 for report.) e. Adopt Resolution No. FC-09, Authorizing the Execution and Delivery by the Corporation of an Installment Purchase Agreement and a Trust Agreement in Connection with the Execution and Delivery of Orange County Sanitation District Refunding Certificates of Participation, Series 2008D(Certificate Anticipation Notes); Authorizing the Execution and Delivery of Such Notes Evidencing Principal in an Aggregate Amount of Not to Exceed $198,000; and Authorizing the Execution of Necessary Documents and Notes and Related Actions. (See Agenda Item No. 20 for report.) Adjourn, Board of Directors, Orange County Sanitation District Financing Corporation. Reconvene. Board of Directors. Orange County Sanitation District CLOSED SESSION (22) CLOSED SESSION: During the course of conducting the business set forth on this agenda as a regular meeting of the Board, the Chair may convene the Board in closed session to consider matters of pending real estate negotiations, pending or potential litigation, or personnel matters, pursuant to Government Code Sections 54956.8. 54956.9, 54957 or 54957.6, as noted. Reports relating to(a) purchase and sale of real property; (b) matters of pending or potential litigation; (c) employment actions or negotiations with employee representatives; or which are exempt from public disclosure under the California Public Records Act, may be reviewed by the Board during a permitted closed session and are not available for public inspection. At such time as the Board takes final action on any of these subjects, the minutes will reflect all required disclosures of information. Convene in closed session, H necessary 11/19/08 Page 7 22. CONFERENCE WITH LEGAL COUNSEL RE. EXISTING LITIGATION (Government Code Section 54956.9(a)) Lynda Heller (Dec.), Christian Heller (App.)vs. Orange County Sanitation District; Workers Compensation Appeals Board No.: AHM 0098129 Claim No.: 7827-0001-01-0029 Reconvene in regular session Consideration of action, if any, on matters considered in closed session OTHER BUSINESS AND COMMUNICATIONS OR SUPPLEMENTAL AGENDA ITEMS, IF ANY ADJOURNMENT The next Board of Directors regular meeting is scheduled for December 17, 2008, at 6:30 p.m. 11/19/08 f Page 8 Agenda Posting: In accordance with the requirements of California Government Code Section 54954.2,this agenda has been posted in the main lobby of the District's Administrative offices not less than 72 hours prior to the meeting date and time above. All public records relating to each agenda item,including any public records distributed less than 72 hours prior to the meeting to all,or a majority of all,of the members of District's Board,are available for public inspection in the office of the Clerk of the Board,located at 10844 Ellis Avenue, Fountain Valley,California. Items Not Posted: In the event any matter not listed on this agenda is proposed to be submitted to the Board for discussion and/or action,it will be done in compliance with Section 54954.2(b)as an emergency item or because there is a need to take immediate action,which need came to the attention of the Board subsequent to the posting of agenda,or as set forth on a supplemental agenda posted in the manner as above,not less than 72 hours prior to the meeting dale. Public Comments: Any member of the public may address the Board of Directors on specific agenda items or matters of general interest. As determined by the Chair,speakers may be deferred until the specific item is taken for discussion and remarks may be limited to three minutes. Matters of interest addressed by a member of the public and not listed on this agenda cannot have action taken by the Board of Directors except as authorized by Section 54954.2(b). If you wish to speak,please complete a Speakers Forth(located at the table outside of the Board Room)and give it to the Clerk of the Board. Consent Calendar:All matters placed on the Consent Calendar are considered as not requiring discussion or further explanation and unless any particular item is requested to be removed from the Consent Calendar by a Director,staff member or member of the public in attendance,there will be no separate discussion of these items. All items on the Consent Calendar volt be enacted by one action approving all motions.and casting a unanimous ballot for resolutions included on the consent calendar. All items removed from the Consent Calendar shall be considered in the regular order of business. Members of the public who wish to remove an item from the Consent Calendar shall.upon recognition by the Chair, state their name.address and designate by number the item to be removed from the Consent Calendar. The Chair will determine if any items are to be deleted from the Consent Calendar. Items Continued: Items may be continued from this meeting without further notice to a Committee or Board meeting held within five(5)days of this meeting per Government Code Section 54954.2(b)(3). Meeting Adioumment: This meeting may be adjourned to a later time and items of business from this agenda may be considered at the later meeting by Order of Adjoummem and Notice in accordance with Government Code Section 54955(posted within 24 hours). Accommodations for the Disabled: The Board of Directors Meeting Room is wheelchair accessible. If you require any special disability related accommodations, please contact the Orange County Sanitation District Clerk of the Board's ofice at Q74)593.7130 at least 72 hours prior to the scheduled meeting. Requests must specify the nature of the disability and the type of accommodation requested. NOTICE TO DIRECTORS To place items on the agenda for the Regular Meeting of the Board of :Directors. items shall be submitted to the Clerk of the Board no later than the close of business 14 days .preceding the Board meeting. The Clerk of the Board shall include on the agenda all items submitted by .Directors, the General Manager and General Counsel and all formal communications. ;General Manager James D. Ruth (714)593-7110 iMh(fitocsd.com .Assistant General Manager Bob Ghirelli (714)593-7400 rghirelli(@ocsd.com :Clerk of the Board Penny Kyle (714)593-7130 pkvlef6iocsd.com .Director of Engineering Jim Herberg (714)593-7300 jherbergGdocsd.con Director of Fin. 8 Admin Services Lorenzo Tyner (714)593-7550 Ityner(docsd.com Director of Operations& Nick Arhomes (714)593-7210 narilontes(Ocicsd.com Maintenance Director of Technical Services Ed Torres (714)593-7080 etorresittilocsd.com :General Counsel................__._..._._._._.._,__Brad Hoqin_ 714 415-10118 I-IMeptlagenda\Boartl Agendas14008 Board Agendas\111908 agenda.docx BOARD OF DIRECTORS deeNg Date To aC.MDr. llp9/0a AGENDA REPORT Pen,Numbe Iem Numbe 1 Orange county Sanitation District FROM: James D. Ruth, General Manager Originator: Lorenzo Tyner, Director of Finance and Administrative Services SUBJECT: PAYMENT OF CLAIMS OF THE ORANGE COUNTY SANITATION DISTRICT GENERAL MANAGER'S RECOMMENDATION Ratify Payment of Claims of the District by Roll Call Vote. CONFLICT OF INTEREST NOTIFICATION Pursuant to Government Code Section 84308, you are required to disclose any campaign contribution greater than $250 received in the past twelve months from any party to a contract involving the Orange County Sanitation District. Further, you may not participate in the decision making process to award a contract to such party. For reference, you are directed to the Register of Warrants as to all current contractors/vendors with the District. In general, you must disclose the basis of the conflict by identifying the name of the firm or individual who was the contributor. For the specks of Government Code Section 84308, please see your Director's Handbook or call the office of General Counsel. PRIOR COMMITTEE/BOARD ACTIONS N/A ADDITIONAL INFORMATION See attached listing. ATTACHMENTS 1. Copies of Claims Paid reports from 10/01/08 - 10/15/08 and 10/16/08- 10/31/08 Foam N. rnxioz< Agenda Re -Board RMsed: f]i0&08 Pagel Chime Paid From 10/01108 to lOI15108 Warrant No. Vendor Amount Description Account,Payable-Warren 14801 Brown B Caldwell S 149.673.67 Professional Barman;P2-90&Pt-37 14802 Camp Dresser&Makes,Inc. 91,387.38 Professional Services J47 148M Campo Engineers 149,00.22 Professional Services P2-66,P1.71&Research Strategic Plan 14804 CORRPRO Companies,Inc. 37,583.16 Temporary Employment Serrices 14805 Emerson Process Management.L.L.P. 37.977.10 Computer H8rQw8re/Soff she Maintenance Agreement&Support-Machinery Health analyzer 14808 JCI Jones Chemicals.Inc. 111,143.61 Sodium Hypochlorile 14807 Kemiron Companies 9B.304.76 FeMC Chloride 14806 Malcolm Pimle,Inc. 173241.57 Prohsalonal Services P2-80.1-2.4A.&5-M 14808 Mati.ife Life Insurance Company 42,033.84 Group Ufa,Manager Add'I.Lib.Short&Long-Term Disability&Optional Tenn Life Ins. 14810 Maya&Moore Corporate Accounting 28.00G.50 Professional Sermons-Soils,Concrete&Other Malerlels TestIng far Vericua Capital Proleds 14811 Orenge County Water Diattict 106.544.63 Joint GWRS Project J-36 14812 PolyEMe.Inc. 41574.90 Catimic Polymer NO 3.11-92 14813 South Coast Air Quality Management Dist. 47,07.17 Annual Operating&Emissions,&Misc.Fees 14814 Southern California Edison 97,423.88 Power 14815 Syna eo Waal.Inc. 594,074.08 Residuab Removal NO 3-29-95 14816 Tate Ramlu Magan Fame 240,372.09 Residuals Removal MO 3-29-95 14817 US Peroxide,L.L.C. 46,325.31 Odor&Comoaim Control Treatment far Coll.Sys.;hydrogen Peroxide&Famous Chloride 14818 Woodruff Spadlin&Smart 51.653.84 Legal SeMcee MO 7-26-95 14819 J.F.Shea Construction,Inc. 51433,630.26 ConaWdlon P2-9D 14WO Norman A.Olsson Oenstru lson,Inc. 121,295.70 Construction 7.47 14621 Union Bank of California 603,736.70 Umbucilan P2-90,Relenllon 148U AT&T 415.05 Telephone Service 14823 Acoustical Malenal SeMces 504116 Ceiling Tile 14824 Aerate, 20,011.17 Temporary Employment Se ces 14625 ABIMM Technologies,Inc. 935.62 Lab Pans&Supplies 14626 AGX Corporation 76327 Electrical Paris&Supplies 14827 AICHE 221.M Membership IAmencen Inatilule of Chemical Engineers) 14828 Aligns Safety,Inc. 4.827.93 Safety Supplies 148N All American Moment 19.872.00 Manhole Frome and Cover Replacement Services 14830 AIM Performance Systems 100.00 Training Regismatian 14831 American Society For Microbiology 416.00 Membership 14932 American Socby of Mechanical Engineers 134.00 Membership 14833 AnbMr,Inc. 860.60 Small To ow 148U AppbOno Employment Servloe 22,104.33 Temporary Employment Services 14835 Applied Industrial Technology 103.06 Mechanical Parts&Supplies 148M ARS Enterprises,Inc. 78D.00 Service Maintenance Agreemanh-Autoclave, 14837 AT&T 1.237.09 Telephone Service 14M AT&T CalllornhlMCI 3,344.27 Telephone Service 14839 AT&T Long Divorce, 995.43 Telephone Service 14840 AT&T Moblldy 11,L.L.C. 675.34 Telephone Equipment&AcOvation 14MI AT&T Moblldl'11,L.L.C. 9.551.96 Wireless Tehphene Services 14642 Alkimmon,Andelson,Loya.Rudd&Ruud 5,036.31 Legal Services-Employee Relations 14843 Aurom Pbtuas,Inc. 425.00 Safety Videns 14W Authentic Promotions.Com 4,642.00 Promotional Items for FOG(Fats,Oils&Grease)Program-Platinum Cons 14645 Berm Products Company 1.531.60 Safety Supplies 14MO Bask Chemical Solutions,L.L.C. 7,97D.61 Sodium Hydroxide 14647 Berge's Gavemor SeMos 1,676.70 Mechanical Repair&Maintenance Services-Gevemmr 14US Black B Veatch Corpoadon 14,382.73 Professional Bemuses P1-76 14849 BTB Evenb.Inc. 691.10 2008 Harvest Festival-Renal&Set-Up Fees X Wep1an XCEL EbVZ SHMFCIalms PiN Re1v4130paaWm3PakpeWn'AusmmamrF10'1506.40 EXHIBITA nMaM Page i of 13 la72caM Claim.Paid From 10/01/00 to IOil M Warrant No. Vendor Amount Description 14850 C Temp.Inc. 1240.96 Mechanical Pegs&Supplies 14051 Calgomla Recreagon Company 2.637.32 Boat Slip Rental Fees for Ocean Monitoring Vessel Nerissa 148U CCP Industrial 9,927.59 Janttmlal Supplies 1480 Circle,Inc. 2,511.42 Office Supplies-Toner CerMdgw 1411 Chan Harbors Environmental SeMcea 8,558.44 Hacardpus West.Management Services 148M Columbia Aalylical Services,Inc. 3,222.00 Mall of Waetmwmea Industrial Waelewatsr&Biosohns USSIS Consumers Pipe&Supply Co. 2,731.38 Plumbing Paris&Supplies 14557 Corpurafe Business Interiors 1,703.64 Office Modification Services 14US County Wholesale Electric Co. 757.12 Electrical Parts&Supplies 14859 Cram Val Com. 2,436.00 Maintenance Agreement-Only.&Annual lnepections,Cerificaticn&Ouadia lal Teasing 14ND CS-AMSCO 10.290.96 Mechanical Parts&Supplies 14861 CSUF Foundill 15,368.01) Membership-Center for Demographic Research 14662 David GuloB 175.00 Lab Parts&Supplies(Urchin&Kelp Supplies) 14863 Dal Tree Service 4,525.00 Tree Melnt.Service 148U Department of General Seroces 456.81 ConperaOve Purtlrsaing Program-CA Multiple Award Services Discount Fee 14865 Cerebral Instruments Corporation 309.39 Instrument Paris,Supplies&Repairs 14866 Dunn Edwards Corporation 15326 Paint Supplies 14867 Duro-Senor Corpuralien 877.54 Instrument Paris&Supplies 14MB Earth Tell,Inc. 2.077.24 Professional Sernces P1-106 14869 Entach Instruments,Inc. 207.20 Lab Paris&Supplies 14870 Emmunmentel Resource Center 795.00 Training Registration 14871 Environmental Resource Assoclales 1.681 Lab Pane&Supplies 14872 EmAmnmental Water Solutions.Inc. 2,342.74 Plumbing Paris&Supplies 14873 FEDE%Corponstion 74.77 Freight Services 14874 Ferguson Enmrprises,Inc. 368.79 Mechanical Paris&Supplies 14875 Fitter Belts.Inc. 4,732.38 Fitter Press Belts 14876 Fisher Scientific Company,L.L.C. 1.613.14 Lab Pad.&Supplies 14877 Flomaa Penal lc,Inc. 816.85 Mechanical Pads&Supplies 14878 Forked Engineering&Surveying,Inc. 1,P7.50 Surveying Services-Various Capital Projects 14879 Fountain Valley Points,Inc. 378.36 Paint Supplies 14880 Fresco Profiles 20.00 Human Resources Background Checks 14881 Ciyof Fullerton 39.94 Witter Use 14M Gal Lumber Company 279.07 Small Toots 14883 Garrelt Callahan Company 4.415.61 Chemicals&ElaGriwl Parts It Supplies 14W Oaks Fiberglass Intellect 627.75 Repair&Maintenance SeMcas-Impeller 14885 Goldenwest Corp. 415.00 Various Repair&Maintenance Services 14886 Graingso Inc. 1,072.75 Mechanical Supplies&Tool. 14887 Green Riven Goll Club 300.00 Meeting Expenses 241-05 148H HaeinBbn Industrial 2.20.08 Mechanical Parts&Supplies 148N Hall Olmerwions 4W.W On-Sits Employee Health Fair Expanses 14890 HealeO Packets Company 8,886.88 Computer HeMwarel5aflxara-Server 14891 Hill Brothers 4,125.01 Chemicals-Odor&Corrosion Control-Newport Trial 14892 Hilts Boat Service,Inc. 893.79 Oil&Filler Change-Ocean Monitoring Vessel Nedsse 14893 HIM,Inc. 53.77 Electrical Pads&Supplies 148N Hope HealthAl 544.90 Publication-Wellness Newslefien 14895 City of Huntington Beach 13,057.110 Water Use 14896 ID Enhancements,Inc. 1,730.D0 Casi-Ruece I.D.Badges 14897 Insight Public Sector 573.30 Electrical Paris&Supplies 148M Intl.Institute of Municipal Clerks 19U.00 Membership 148N lWynal Inc. 7,121.64 Bunions Maintenance Agreement-Overland Storage Neu 8000 XwBpwe061xCELWc2(MP..kE1Clelma re In A 10.15Aexln E%HIBITA rl u 1pvc Page 2 of 13 t.Mae e _ Calms Palo From 10/U1108 to IOil SAN Warrant No. Vendor Amount Description 14800 Inin min Paris&Services 175.31 Filer 14901 Irvine Ranch Water District 8.57 Water Use 14902 JG Tucker and Son,Inc. 1.595.54 Specially Gaiea 14903 Jamison Engineering Contractors,Inc. 4,996.02 Inselebon&Upgrades of Gas Flaps&Stand Drains-Various Locations 14904 Johnstone Supply 922.W Electrical Pens&Supplies 14905 Kissel Environmenel Lab 100.00 Oulside Laboratory Services 14906 Lab Safety Supply,Mc. 110.67 Waly Supplies 14907 League of Califomia Cities 425.00 Training Registration 14908 DECO Corporation 4.59.41 Lab Pare&Supplies 14M Lorton Education Services &23.0 Trolling Registration 14910 M.J.Schiff and Associates,Inc. 15,1 W.01 Temporary Employment Serviwa 14911 Machado Enviranmenlsl Corp.DBA Atr Dud Cleaning 15,024.01) Atr Duct Cleaning Services 14912 Maledals and Contract Services 5,472.01) Temporary Employment Services 14913 McMaster Cart Supply Co. 537.01 Mechanical Paris&Supplies 14914 Mechanical Seel Roper,.Inc. 64.03 Repeb&Maintenance Somme-Mechanical Seal 14915 Medlin Comma;Co. 2,922.05 Instrument Paris&Supplies 14916 Mid West Assnctetes 14,42828 Pump 14917 Miele,Inc. 2.415.11 Lab Pens&Supplies 14918 Mr.Crane,Inc. 7.371.00 Repair&Maintenance Services-Transportation Vehicle a1 Sunflower Pump Station 14919 National Plant Semcas.Inc. 3.240.00 Polymer Tank Cleaning 149M National Safety Coundl 211.22 Books&PuMlctumns 14921 Neal Supply Do. 1.905.03 Plumbing Suppries 14922 Neutron Products,Inc. 6.2n.34 Anionic Polymer 14923 !heirs Plumbing 278.53 Plumbing Pods&Supplies 14924 Norco Delivery 436.16 Mail Delivery Service 14925 Olin Corporation 15,795.77 Sodium Hydmxee 149N Old Industries 3,334.44 ChamicalOtiolutions 14927 Ormi Dishibulms,Inc. 2.7W.17 Electrical Pane&Supplies 1492E Orange Fluid System Technologies,Inc. 1,016.80 Plumbing Pads&Supplies 149N Oxygen Service Company 955.95 Lab Parts&Supplies 14930 PAWSHER 443.16 Miscellaneous Supples-Liner Bags 14931 PAPA 40.00 Membership 14932 PCS Elryrses,Inc. 239A5 Courier Service 1403 PL Hawn Company,Ina 472.D7 Electrical Pare&Supple. 14934 Pmxeir DuArbution,Inc. 399.11 Lab Pena&Supplies 1405 Primavera Systems.Inc. 12,330.40 SoBwme Maintenance-Prbnavera 14M Progressive Security Technologies,L.L.C. 5.569.18 Soloed,Maintenance Agreement-SCION Lim. 14937 Public Resources Advisory Gmup 4.083.74 Financial Advisory Services 14938 Pump Engineering 652.73 Pump Pans&Supplies 14939 Quicksed Intelligence 3.575.00 Training Ragisimuon 14940 Quinn Group,Inc. 504.36 Air Filled; 14941 Quinn Power System Assoc. 4,160.32 Electrical Repairs&Maintenance Services-Voltage Regulator 14942 RBF Consulting 2,126.W Survaylnp Services-Vancus Locations 14943 RBF Consulting 3,591W Professional Services-SARI Annual Monitoring Survey 14M Restek Corp. 1,552.93 Lab Pans&Supplies 14NS RMS Engineering&Dealgo,Inc. 1,945.00 Engineering Semces-Structural Evaluation of Digealers R&S&Pump Room Roof Deck 14946 Rosemount Analytical,Inc. 1,091.01) Instrument Pavia&Supplies 14947 Royal Whdasale Electric 2.476.55 Mechanical Pens&Supplies 14US Shepard Brothers,Inc. 4,976AS Hydrochloric Add 14949 Selet,,Kk en 170.77 Pane,Washer Lease,&Servica H vtio W%E%CEL.TvMt MSRARENClelma 14M RepaMY000WaImPtlEReµrl.MeNmanl_A_loiMll.alu EXHIBIT rm10nc Page 3 of 13 1OW WOa Claims Pala From 10101108 to 10115108 Warrant No. Vendor Amount Deacrlpeon 14950 SCAMIT 26.92 Social&Publications 14951 City of Seal Beach 366.24 Water Use 14952 Seton Name Plate T03.45 Signs 14953 Sewer Equipment Company of Am.dca 408.81 Hose Paris&Supplies 14954 SGS Teslmm.Inc. 1,53 Telephone Line-District Vehlde SMOG SIalion 14955 Shamrock Supply Co.,Inc. 1,251.36 Paint Supplies&Touts 14956 Sherwm-VWliams Company 302.31 Paint Supplies 14957 Shureluck Saks&Engineering ISOM Mechanical Paris&Supplies 14958 Siemens Energy&Mendelian.Inc. 2.51228 Instrument Pads&Supplies 14959 Siemens Water Technologies Carp. 1295.94 Service Agreement-DI Water Systems at Plank l&2 14980 Skala,Inc. 5.081.25 Lablris0ument Mainlevence Contract-Slala-BODAne,ser 14961 Smith-Emery Company 15,154.42 Soils,Concrete&Other Materials Testing 14982 Trance Company 288.56 Mechanical Paris&Supplies 14963 Southern Counties Wbricanis ll,369.59 Oil 14964 Southwest Concrete ]I11.BT Commit. 14965 Spectrum Systems.Inc. 7,251.30 Software Maintenance Agreement 14966 SPEX CerfiPreP.Inc. 214.63 Lab Pads&Suppliers 14967 SMrkey Steamer International.Inc. 2,199.60 Carpet Cleaning Services 14968 Summit Steel 830.58 Metal 14969 Saraet Industrial Pads 91 Mechanical Pads&Supplies 14WO SYMCAS TSG 1,M8.08 SCADA System VAX SeMce Agreement 14971 Team Tud 4,9M.00 LaMacape Maintenance SeMces 14972 TekSystems 7,51ISM Temporary Employment SeM®s 14973 Tenninix International 954.00 Pest Control 14974 Tana Renewal,L.L.C. 24535.08 Grit&Speenings Removal&Digester Drying Bad Malerial Removal IM75 Tesfarrat Ontario 2.580.00 Analysis of Blosolids 14976 The Bank of New York Mallon 3,151.17 Administratiorifmstee Fees-OCSD-Liberty Mutual OCIP 149" The Bank of New York Mellon 24,822.06 Asset Adminisiabon Quarterly Fees 14978 Theme Electron North America,L.L.C. 514.96 Lab Pads&Supplies 149n Thompson Industrial Supply,Inc. 18239.12 Mechanical Pads&Supplies 14980 Thompson Publishing Group 418.50 Books&Publications 14981 Tiatro Conslrudion 3.840.00 Painting Services-Administration Building 14982 TriCounty Floe 1,001,15 Meint.Agree.for Annual InspecVSersong Fire Extinguishers at File 1&2,Pump Slas.&Fleet Van. 14983 Truck 8 Auk Supply.Inc. 25.19 Automotive Parts&Supplies 14984 Ultra Scieni 21525 Lab Paris&Supplies 14985 UMed Parcel Sei 111.43 Parcal Services 14MG Valm Corporation Z.031.33 Mactranical Supplies 14987 Valley Detroit Diesel Allison 3.045.56 Repair&Maintenance SerWces-Gerieretors 1&2 149M Valley Spacing Co. 2,500.00 Equipment Repair-Cawayor Belt 14M Vapex,Inc. 1,193.50 Instrument Pads&Supplies 14M Varian Assooate.,Inc. 255.91 Lab Pads&Supplies 14991 Ver¢on Caleornie 103M Telephone Services 14992 Vatican Wireless 2,38525 Wretess Telephone Services 14993 Vemas Plumbing 1,3T5.00 Sallee Contract-Test,,Repair&Carl.SeeMlaw Devicas ai Pit .1&2&Pump St.. 14M Vedex Industries.Inc. 2.387.29 Door&Gras Repays-Various Locations 14995 MR Scientific Produces 4,840.29 Lab Pads&Supplies 14996 WEF 346.M Membership-Water Environment Federation 14997 West Coast Lire 2,983.00 Employee Life Insurance 149H West Coast Safety Supply Co. 1.0491 Safely Equipment 14999 West Lila Supply Company,Inc. 344.48 Electoral Pads&Supdies X:WepllaNExCELNV2PAP5XFflE'GM'vro%le qap-mN,91L4'vmPtieRe�IauTmzn�A t0.�5OGslu EXHIBIT.A facto, Page 4 of 13 tpRa9eea Claims Pald From 10/01108 to 1WIS108 Warrant No. Va rdor Amepnl Description 15000 WOdan 6215.00 Engineering Services FEOI-OB 15001 Workplace Reswrce 1.642.11 Offer Furniture&Equipment 15002 Xerox Corporation 83.00 Copier Sens-Equipment Leases.Managed SerNms.B Metered Copy Usage&Charges 15003 Yahoo,Inc. 1244.10 Notices&Ads 15ON Yale/Chase Materials HaMkng.Inc. C101.30 EIeMnO Cart Pads 15005 Orange Comment,6arlk 13,471.30 Conslmclton T<f,Retention 15006 James E.Coh on 300.00 MeelingTraming Expanse Reimbursement 1=7 Kimberly A.Erickson 1,316.91 Meatingfframirg Expanse Reimbursement Isms Elain Gslvea 475.m Meeting/fmining Expense Reimbursement 16009 Vincent S.Lockyar 5119.60, Meetingrfralning Expense Reimbursement 15DIO Lourdes Luna 174.64 MeetingRraining Expanse Reimbursement loll Selwyn D.Mansell 499.m Meahngrfraining Expense Reimbursement IN12 Daniel R.Miranda 610.110 Meeting/Training Expense Reimbursement 15013 Samuel L.Mowbmy W522 MeefingRraining Expense Reimbursement 15014 Joseph W.Park.Jr. 421.60 MeelingRraining Expanse Reimbursement 151H5 JoMny J.Roche 1M.00 M.tirgrtraining E..nse Reimbursement 15016 Camel;Sm th M2 00 Mealingrtraining Expanse Reimbursement IM17 Rkhard L.Spencer 108.910 Meelingrfraining Expense Reimbursement 15018 Phillip J.Sullivan T34.84 Meeting/Training Expense Reimbursement tm19 Robed C.Thompson 295.32 MeetingTraining Expense Reimbursement 15020 Gary J.Tuieaosapo-Kemper 513.20 Meetinglfraining Expense Reimbursement 15021 Michael Vuong 508.38 Meeting/Training Expense Romfl ursemerlt 15022 California DoW,rnant of Fish and Game 2m.01) Permit Fees-lake or Skeambed Alterations-SARI IN23 United States Postal Service S.m0A0 Postage IN24 Voided Check - - IN25 Blue Crass of California 524=27 Medical Insurer.Premium IN26 BP Energy Company W,012.97 Natural Gas-CenGen 1502T Corporate Image Maintenance,Inc. 35.920.010 Custodial Services Spec.No.9NM9 1m28 De0a Dental W.915.14 Dental Insurance Plan 15029 General Petroleum 27.108.59 Engine Oil 15030 HDR Engineering,Inc. 504,344.18 Professional Services P1-101 tm31 JCI Jonas Chemicals,Inc. 103391.35 Sodium Hyporhlonte 15I 32 Kaiser Foundation Heats Plan 91840.32 Medical Insurance Premium ISD33 Liberty Mutual lnsuran.Company 75.322A2 OCIP Insurance-Liability B Workers Comp.Monthly Payment 15034 National Ass00.of Clean Water Agencies 38.028.00 Membership 1Sm5 Shee Homes of Califmoi.Inc. 215.0121 CFCC Credit-Tapestry DevebpmeM,La Habra,CA 15(i36 Walker Centrifuge Serv4ces,L.L.C. 140,15126 Repair&Maintenance Semicas-Cleaning of Digesters at Plants 182 151137 J F Shea Construction,Inc. 1,O07,230.56 Construction 1-10B 15038 Grange County Sanihtion District 26.808.613 Workers Comp.Reimb. 15039 Blackwall PubliskmJ.Ltd DBA John W ley B9.88 Books&Publicadms 15040 Absolute Standards.Inc. 55.00 Lab Parts&Supplies 15041 Adamson Indusbies 735.07 Lab Pads&Supplies 15042 Advance Business Graphics 534.33 Printing Services-810 Envelopes w/Relum Address B Logo 15043 Aemtek 2240.01) Temporary Employment Sand. 150" Arles Safety,Inc. 94.82 Safety Supplies 15D45 MM Consulting Engineers T,021.g2 Pmfessionel Services-Pad-Toe Dig Almt Technician 15046 Alliant Insurance Services,Inc. 100W Excess Liability&Excess Workers Conperuatim Insurance ISD47 Arrllech Elevator Semites 1,40D.00 Monthly Elevator Maintenance at PIh.1&2 1504E Aqua Metric Sales t,003A4 Fire Hydrant Meter 15g49 Aquatic Biosyslems.Inc. 390.5111 Leb Parts&Supplies Yae4�E%eEL EmN3%tPSXTRErLWM1m Pald Repa..C,xnnomdR,ron laNmnl_P_t61508n. EXHISITA Page 50113 04]rzW0 Claims Paid From 10101MB to 1 Oil 5408 WenadNo. Vendor Amount Description Ism Askew Industrial Cory. 161.63 Hardware/Fastuew 15D51 Aul Pipe and Tubing.Inc. 357.73 Tubing 15052 Automation Controls&Compounds,Inc. 137.05 Mechanical Paris&Supplies ISOM AWSI 1,750.00 Oi-SOe Twining-Substance Abuse ISl Bemelead lnlemallinel 97.67 InsWment Repair&Calibration Services-Lab Autocive Data Logger INN Battery Specialties IW.19 Batteries INN Beech War and Cable 975.A3 Computer Hardware-Networking Ores&Cables 15057 Beckman Instruments,Inc. SKOO Instrument Repairs&Maintenance Services IW58 Bee Men Past Control.Inc. 295.00 Pest Cord 15059 Barges GOVernpr Service 5,622.91 Mechanical Pads&Supplies 1506D BHI Management Consulting 1.69D.00 Professional Sears.-Strategic Planning&Faclllleting Services for EMT Retreat&Boad Workshops 15061 Brawn&Caldwell 250.00 Notices&Ads 15062 Cal Glass,Inc. 577.65 Lab Glass Repelrs 15063 California Dept.of Child Support Sennces 1.598.OD Wage Garnishment IN" Cameron Compression Systems 558.11 Mechanical Pam&Supplies Far LSVB Cooper Engines Ism Camp Dresser&McXne,Inc. 22,636.08 Professional Services Pt-97 INN Campbell Window Timing 1.087.00 Wmdow Tilling Beninese IN67 Center Sates&DlshibWon,L.L.C. 348.03 Motor&Mechanical Parts It Supplies INN Cavanaugh Machine Works 1.030.00 Repair&Maintenance Services-Pump Bearing 15069 CEPA Company 25BOD Lab Equipment Mount.Service 15070 Con-Way Western Express 713AI Freight Services 15071 Consumers Ripe If Supply Co. 4,472A4 Plumbing Pads&Supplies IN72 County WhOlesele Etscdc,Co. 3,014.84 Electrical Polls&Supplies 15073 CS-AMSCO 11,995.39 Mechanical If Plumbing Parts&Supplies 15074 CWEA Membership 264.00 Membership(Calif Water Environment Assoc.) 15078 DapPer Ta Co. 3.225.03 Truck Tres 15076 David's Tree Sarvlca 8.395.00 This Man1.Service 1s077 MT Solutions.Inc. 5.773.18 Software Maintenance Agreement-Creole OB Sandal 15078 DLT&V Systems Engineering,Inc. 6,274.62 Software Maintenance-SCADA 15079 Dndek&Aumutes,Inc. 7.307.25 Professional Services 561 15080 Dunn Edwards Corporation 252.27 Paint Supplies 150101 Eagle Protection of California 275.00 Bkg.Seamy Alarm Seances-No.County Yard 15002 Ecology Tire,Inc. 871.50 Waste Management-Tres 15003 Empl"Benefits Specialists,Inc. 12,259.19 Reimbursed Prepaid Employee Medical&Dependent Care ISD84 En Pointe Technologies 70.04 Computer HeMware(Sofiware-Cameras 15085 Enchanter,Inc. 2,280.00 Ocean Monitoring If Cartel?Inspection&Maintenance INN Ewing lingered Industrial 1,620.56 Landscape lnigalion Pads B Supplies INS7 Excelsla Corporation 1,7W.00 Carpel Cleaning Services INN Express Lem Lab 2.843.57 Safety Glasses 15089 FEDEX Corporation 278.29 Freight SeMces INN Fisher Scientific Company,L.L.C. 4.150.12 Lab Parts&Supplies IM91 Rending Environments,Inc. 240.00 Repair&Maintenance Smhces-OveMll Alarm III Flex A Chad 1.730.44 Office SuRdles-(15)T x 4'Dry Eraser BneM9 15093 Franchise Tex Board 5D.W Wage Garnishment 15094 Franklin Covey 303.21 081ce Studlea 15095 Franco,Inc.DBA Fresco Pacifies, 417.10 Human Refinances,Background Chador IW96 FTS Llghfing Services 499.88 Eleddml Pods&Supplies 15097 Genshl Lumber Company 269.36 Toole 15WO Ganait Callahan Company 2,980.87 Instrument Paris&Supplies INN Global Flow DBA ZY-Tech Global Indus. 1,42595 Mechanical Paris&Supplies H WeaVaurE%CEL.Oa00A9SHARElCxxs Pent RepoMN0xTaw raxRwnNtnmmmnl P_101 SuXn EXHIBITA Im4lpec Page 6 of 13 Iryaa liss Claim Paid From 1=1108 to 1/1115108 Wamenl No. Vendor Amoupt Description 1510D Golden State Ovemight Delivery Service 272.62 Courier Service 16101 Goldemveat Corp. 1,225.00 GrouMskeepirlg Services 15102 Grainger,Inc. 772.41 Molar,Tools&Maintenance&Repair Materials 15103 Grayber Electric Company 1.195.19 Elect ical Paris&Supplies 15104 Hach do canton Industries 24.58 Lab Pads&Supplies 15105 Harrington Industrial 4,493.63 Plumbing&Instrument Paris&Supplies 15106 Hayward Gordan Limited 300.56 Mechanical Parts&Su,hrk. 15107 Hill Brothers 11.139.69 Chemicals-Odor&Corrosion Conrd-Newport Trunklinee 151M Hills Brothers Look&Sale 154.00 Gale Repairs at Plant No.2 15109 Hilti,Inc. 528.36 Mechanical Paris&Supplies 15110 HMH Air Conditioning 3.20.00 Professional Services-HVAC Replacement 15111 Home Depot 697.32 Mil.Repair&Maintenance Malarial 15112 Hyed Legal Plans,Inc. 1,082.W Employee Voluntary Legal Plan 15113 IMIene Child Sapporl Bureau M.00 Wage Garnishment 15114 Industrial Dist ibution 180.37 Tools 15115 Insight Public Sector 1,337.70 Electrical Pads&Supplies-UPS 15116 Internal Revenue Service 125.00 Wage Garnishment 15117 Intl.Union of Oper.Eng.AFL CIO Local 501 4.856.51 Dues Deduction 16118 Jamison Engineering Contractors,Inc. 2,780.00 Repair&Maintenance Services-Gas Line 15119 Jays Catering 2,40636 Meeting Expenses 15120 Jahrolone Supply 35361 Electrical ical Pens It Supplies 15121 Keerirs Companies,Inc. 24,893.52 Ferric Chloride 15122 LECO Canporatian 118.32 Lab Paris&Supplies 15123 Court Order 150.00 Wage Garnishment 15124 Los Angeles County 1,84250 Sewer SaMce Conn.Agreement MO 9123198 16126 Deily Pica 50.00 Notices&Ads 151M Luccts Gourmet Footle,Inc 120.68 Meeting Expense 151V Mendic Motors 96.00 Towing Services 15128 MauMUNal Michel Fanatical Group 79.04 Executive Disability Plan Premium 151N Materals and Oonlnct Services 5,780.00 Taerparery Employment Services 1513D Mayer Holleran McCann,PC 20.467.00 Finendal Auditing Services 15131 McMaster Carr Supply Co. 1.671.81 Mechanical Parts&Supplies 15132 McNichols Company M.75 Repair&Maintenance Materials 15133 Court Order 226.W Wage Garnishment 15134 Nabodal Bond&Trust 1,789.95 U.S.Savings Bonds Payroll Deductions 15135 National Notary Aseoctation 8.00 Membership 15136 National Safety Council 295A0 Training Regislralicn 15137 Neal SUPPty Co. 547.97 Plumbing Supplies 15138 Neutron Products,Inc. 3,130.W Anionic Polymer 15139 Nickell Metal Spray 1,210.00 Repair&Maintenance Services 15140 OCB Reprographics 14.363.51 Printing Service-MO 1/ () 15141 OCEA 561.67 Dues Deduction 15142 Olin Corporation 3,688.37 Sodium Hydradtle 15143 Onesoume Distrbutions.Inc. 6,665.13 Elecbical Pads&Supplies 161" United Way 60.00 Employee Coniributione 15145 Orange County Vector Control District 65.79 Pest Contrd 15146 Orange FIUM System Technologies.Ipa. 527.47 Plumbing Pads&Supplies 15147 Oxygen Service Company 103.05 Rebuild Shop Guests&Lab Pads&Supplies 15148 PadBC Mechanical Supply 1,546.89 Plumbing Supplies 15149 Parkhanse Tire,Inc. 2,359.68 Tires H:bapfw XMLd.V20WPSHARE1Lhhm PeMRePa117Wa l.I ,P.WRepoa.MaM.A_tO15pe.rly EXHIBITA andli c Page 7 of 13 102112Ne Claims Paid From IMIMS to 10IMS Warrant No. Vaned, Amount Description Islas Pa.Omcars Cou.Jl of CA 2.014.74 Ouas Deduction,Suparvimrs&Professionals 15151 Perfamence Pipeline Technologles 17.294.70 Sevrerilne Vdeo Inspections-Various 15152 PL Hawn Company.Inc. 481.19 Electrical Paris&Supplies 15163 Plumbers Depot,Inc. 595.13 Mechanical Ports&Supplies 151" oneself,Inc. 113.33 Lab Pens&Supplies 15156 orimroce Ice Co.,Inc. 200.00 Ica For Samples Islas Procare Work Injury Center 280.00 Medical Screenings 15157 Propipe Professional Pipe Servicas 14,946.96 Se lerline Cleaning for City of Team&Unincorporated County Property 15158 Pruden0al Overall Supply 1,573.15 Links &Related Articles Islas Pump Englneadng&rOr Oalr Celif.ola 4,771.17 Air Compressor 01 15160 R L Abbott&Associates 2.000.00 Kam County Slosolids Consulting Services 16161 Restek Carp. 640.38 Lob Pans&Supplies 15162 Rockwell Engineering&Equipment Co. 8A54.W Vaughan Pump Pans 15163 Royale Cleaners 12.00 Dry Cleaning S avices 151" RPM Elemic,Motors SB9.91 Mot.Repaire 15165 SCP Science 3.894.00 Lab Pens&Supplies 151M Sea Bid EleWon..Inc. 1,270.00 Lab Instrument Maintenance&Calibration Services 15167 ShemroW Supply Co.,Inc. 6,020.40 Palm,Cleaners.Sealanis Lu alcants1011s.Tcols,&Lock Supplies 15188 Shureluck Sales&Engineering 2.611.58 Mechanical Pens&Supplies 15169 Sigma-Aldr.h,Inc. 4.216.88 Lab Pane&Supplies 15170 Sign A Remo 1.997.52 Retreclable Benner Stands,Digitally Ponled OCSD Banners.&Cady Cases 15171 Smith Ride&Supply.Inc. 127.68 Landscape Irrigation Supplies 15172 SolidVeppor,Inc. 207.00 Training Reglsaatbn 151M Saudis.Celkams Edison 2,824.06 Power 16174 SoMem Counties Lubricants 1,367.42 Oil 15175 Staining lnakummU.Inc 6.S8S.14 Instrument Parts&Supplies 15176 Spec S mi owi Inc. 6.486.63 Enginmring Services J-33-1 16177 Summit Stsel 197.10 New 15178 Sunset Industrial Pens IN." Mechanical Parts&Supplies 15179 Trim Pacific Fire Protection 1.900.00 0nIyJAnnua1 Fire Sprinkler Inspection.Malnl.&Can.at Pit.1&Ph.2 15180 TDC Group,Inc. 1,750.00 Sc&ware.Maintenance&Suppod-Freeance 15181 Terinsix InternaGonel 2.045.00 Pest Control IS182 Terra Rmewel,U.C. 20.181.78 Gnt&Screenings Removal&Digester Drying Bed Material Removal 15183 Tmlarrerica Ontario 586.00 Analysis of Blosollds 15184 The Standard Insurance Company 5.634.93 Executive Dlsabllky,Insurance MISS Thompson Industrial Supply,Inc. 17,295.20 Mechanical Pans&Supplies Islas Tian Construction 3.261 Painting Seri-Plant No.l Administration Building and MMD Shmothe Electrical Room 15187 Time Warner Communication 51.64 Cable Services 15188 Toms Lack&Safe Service&Sales 664.84 Locks&Keys 15189 Tortuga Pool Services 310.00 Weekly Cleaning of Atrium Pond 1519D TSI,Inc. 8.623.83 Safety Supplies 15191 United Padfic Serums,Inc. 17,067.51 Landscape Maintenance at Plants 1&2 and Pump Stations 15192 Linked Parcel Service 85.64 Parcel SerMces 15193 US Peroxide.L.L.C. 20.468A8 Odor&Comoslen Control Treatmml for Coll.Sy..:Hydrogen Parasite&Famus Chloride 151" V&A Consulting Erlginm s 21.814.03 Prof.Services-Sawadine&Video Inspections 15195 Valin Corporation 2,D35.01 Mechanical Pans&Supplies 16196 Ved2on California 711.58 Telephone Services 15197 Vernal Plumbing 316.35 Seri Contract-Testing,Repair&Can.BackOow Devices at Pls.1&2&Pump Sol 15198 Village Nurseries 304.59 Landscaping Supplies 151N Vision Service Plan CA 9.635.40 Vision Service Premium H Wand WEXCEL EIaMDAPSHAREU.1—Prd Rcrc 20n910.1—Pe'AReWbAnaUmonl A_lateaa tlu EXHIBITA nral.c Page 8 of 13 1N2ggoa ., •1 Claims Paid From 10101 OB to 10115108 Warrant No. Vendor Amouil Description 15200 Vortex Industries.arc. 3.511.00 Dpor Replacement 15201 VWR Scientific Products 3.349.48 Leb Parts 8 SlIPPlias 15202 Wallachs,Inc. 2,016.00 Repair B Maintenance Service,-Showers 15203 Waxie Sanitary Supply 93.10 Janitorial Supplies 15200 WEF 924.W Membershp-Water Environment Federation 15205 Wilson Supply.Inc. WSW Plumbing PaM1S B Supplies 16206 WRiec,Inc. 355.04 Computer HaalwarelSo6wars -Memory Board for CRISP VAX Server 15207 Xerox Corporation 665.82 Copier SePdcas-Equipment Leases,Managed Services.8 Metered Copy Usage 8 Chagas 15206 YesiChnce Materials Handling.Inc. 22.50 Electric Cad Paris 15M Caul Order 912.50 Wage Garnishment 15210 Zimmerman Yacht Maintenance 212.00 Repair B Maintenance Service-G®an Moniloring Vessel Neraca 15211 Juan J.Andmc 248.99 Meelingifrainig Expense Reimbursement 15212 Peter H.Brawn 490.01 Meetingrtraining Expense Reimbursement 15213 Richard A.Ca ldlon 284.45 MeelingRraining Expanse Reimbursement 1M14 Ronald C.Codex 556.40 MeetingRraining Expanse Reimbursement 15215 Sleve Grande 158.76 MeelirgRralmng Expense Reimbursement 16216 Thomas A.Hunt 34427 Meetng?raining Expense Reimbursement 15217 Aurelio Jaime 168.76 Meelingrfraininp Expanse Reimbursement 15218 Paul Ward W8.81 Meeting/framing Expense Reimbursement 15219 Ken H.Wong 475.42 Meeling/Trairdlg Expense Reimbursement 15220 Ma0hew T.WpMy 158.76 Meefing(frehdng Expense Relmbursenwnt 15221 County of Orange Audi ar Controller 195.00 Administration Fee-Adjustment to Properly Tax BIII 15222 Robyn WOoox 1.692.79 Employee Computer Loan Program 15223 Wild Rivers Waterpark 1.461.00 Reimbursed Employee Activities Program 1=4 California Department of Fish and Game 500.00 Application Fees-Amendment of Famed-SARI Emergency Repairs 15225 Stole Water Resources Control Board 261.00 Annual Fee lur Storm Water Permit-SARI 15226 Air Products B Chemicals 26,972.63 O 6 M Agreement Oxy.Gen.Sys.MO B-Mg 15227 Amended Express 33.100.37 Purcheshg Coal Program.Misc.Supplies 8 Services 1522E HEIR Engineering,Inc. 42.237.10 Professional Services P"2 15229 JCI Jones Chemicals,Inc. 109.446.24 Sodium HypocMOMe 15230 Kemlre Companies,Inc. 25.430.55 Fend Chloride 15231 Pdydyn..Inc. 0,191.31 Cationic Polymer MO 3-11-92 15232 Synagro West,Inc. 67.896.24 Recidusd Removal MO 3-29,95 15233 Title RenclaiMagan Farms 344.784.89 Residuals Reademl MO 3.2g95 15234 US Peroxide,L.L.C. 47,614.17 Odor 6 Corrosion Coned Tretimenl fro Coll,By$.:Hydrogen Peroxide 8 Ferrous Cdlerde 15236 First Regional Bank of CA 129.987.59 ConsWdion P2-W 6 P2-91.Retention IN36 Helix Electric,Inc. 135,000.00 Conctmslion Pl-71 15237 J F Shea Construction.Inc. 1,312,651.51 Construction P2-06,Retention 15230 Kiewit Pound Co. 7,352,88510 Construction Pl-1D2 15239 Meon Electric Construction Carp. 111.712.50 Ca ctxm Pt-97 15240 SMmmick Construction Co..Inc. 1,169,888.35 CanlWuction P2408 P2-91 15241 Walls Fargo Bank 816,987.30 Construction Pl-102,Restated 15242 Union Bank of California 69.086.92 Construction P2-66,Relenuon 15243 At,B Waste Management Assoc. 180.00 Membership 152" Aigas Safety,Inc. 40.43 Safety Suppler 15245 Aigas-West 11.10 Laboratory Supplies 15246 Applied Filtar Tectlnology.Inc. 17.428A0 Repair B Maintenance Services-RemavelReplece Made Carbon 15247 AM1 Wireless Operating Compady.Inc. 2587.79 Wireless Services 8 Equipment IU48 Archie ivy.Inc. 4A16.00 Street Repairs-Asphalt B Striping 15249 Ashbro es Corporation 3,803.70 Mechanical Paris 8 Supplies X bMNN\E%CFL LUV2al4PSHAnIF0x—G.I,i R. 1a200xGu1mVd!1F.sm-.xd—rx Iol.8tiv EXHIBITA snc2lesc Page 9 of 13 10@1Me9 Claims Paid From 10/011*8 to 10116106 Warned No. Vendor Amount Description lum AT&T 0,598.61 Telephone Service 15251 Baker Tanks 2,189A0 Tank Rentals 15252 Basic Chemical Widens.L.L.C. 9,009.SC SaElum Hydroxide 15253 Bee Man Pest Control.Inc. 195.00 Peal Contra! 15250 Blue Diamond Car Wash,Inc. 1,155.99 OCSD Vehicle Washing/Waxing Semces 15255 Bush 8 Associates,Inc. 532.00 Surveying Services-Various Locations 15256 CEPA Company 1.715.00 Lab Equipment Mainl.Sal 15257 Charles P.Crowley Co. 6,861.35 Pump,Pump Pans&Supplies 15258 Chat Frohlich Photography 1.305.61 Photography Services-Treatment Plants Sheol On Women 15259 Otyol Westminster 00.88 Water Use 15260 Compressor Components of Calilomia 8,265.00 Mechanical Pans&Supplies 15nd Continuer Protection Technology,Inc. 10.848.75 Quarterly Maintenance of Batteries.Pensive,and UPS System I Comad Chevroletl 236.35 Vehicle Pans&Supplies 15M Consumers No.&Supply Co. 8.186.59 Plumbing Paris&SWplieS 15260 Canecil Engineering 5.666.19 Pump Pans&Supplies 15265 County of Orange Auditor Controller 665.00 Encroachment Pemit-Carbon Canyon Dam Sewer&Pump Station Abandonmenl 15M County of Orange Auditor Controller 260.00 Encroachment Permit-SARI River Floodplain 15267 CS-AMSCO 23,535.69 Mechanical Pans&Supplies 15268 CSMFO 330.00 Membership 15269 CXTEC 599.59 CoinWter HardwarardSoltware-DIP Lamp 15210 Delays Tree Service 3,600.00 Tree Maint.Service 15271 DLT&V Systems Engineering,Inc. 576.69 Professional Services FE07-11 16272 Dudek&Associates.Inc. 6,000.00 Professional Services-Potable Water Assessment at Plant No.1 15273 EaM Tech,Inc. 1.001.30 Pohl Semces P1-106 15270 El6cba Boat,Inc. 2,569.06 Repair&Ma:nenance Services-Child Valve 15275 Employers Group 4.243.63 Legal SemcesnVembership 15276 Emimnmental Resource Associates 1,005.90 Lab Parts&Supplies 152" Equipm Sees&Seri 2.03125 Instrument Pare&Supplies 15278 Ewing Ingation Industrial 1,179.55 "reaches Indulged Parts&Supplies 15279 Easpol Peanuts 12822 Photograph Services 15280 Fedex 37.19 Freight Services 15261 Fisher Scientific Company,L.L.Q. 763.32 Lab Pads&Supples HIM Fishing Boals Unlimited 0,553.71 Repair&Maintenance Services-Coal Monitoring Vessel-Nenssa 15283 Federal Engineering&Surveying.Inc. 800.00 Surveying Services-Various Capital Projects 152M Garrett Callahan Company 5,08928 Chemicals 15285 Cmammenal Accounting Standards Board 226.83 Publication 15286 Goldenwest Corp. 1,220.00 Groundskeep rig Semces 15287 Grainger.Inc. 3,10.19 Eleclncal Parts&Supplies 15288 Graybar Electric Company 7.400.00 Training Registration-Unity BeOwae Ium GTE.NET,L LC (Verimn Online) 99.99 toneless Telephone Services 15290 Guarantee Records Management 500.77 O8-Site Records Storage&Shredding Services 15291 Hill Equipment Company 085.52 Nine.Vehicle,Paris.Repairs&Service 15292 Hach Up Ponton Industries 629.58 Lab Pans&Supplies 15=1 Healer.Inc. 89.43 Software Maintenance Renewal 152Ba Hill Brothers 12.095,70 Chemicals-Odor&Command Control-Newport Tmnklins 15M Hills Brothers Lock&Safe 1.69881 Gate Repairs-Gafield Gate Sensors Ism Home Del 188.15 Misc.Repair&Maintenance Malarial 15297 Hub Auto Supply 1,956.18 Vehicle Paris&Supplies 1520 Industrial Distribution Group 60.68 Toes 15299 IBM 5,907.26 Maintenance Agreement AS400 Xbeprla�CEL.ft PAPSMRRE mmftURepv111�ime Repai.AN�_A_10-1W&AU EXHIBITA .1. Page 10 of 13 10121.009 •. Claims Paid From 10MIM to 1DnS08 Warent No. Vander Amount Descdp6on 15300 Interstate Bananas of ON Coast 778.66 CarWebcle Batteries 15301 JG Tucker Add Son.Im. 2,853,46 Fluorescent Road Cores a ad RepallMelnfenanmaCenifimhion SoMod,-Retdevel Devims 15302 Johnsloru Supply 194.88 Electrical Pans&Supplies 1w03 Jorlink USA,Inc. 95.00 Phone Service&Support 15304 Joshua Color,Corporate Training 1.300.00 On-Site Safety Training 1=5 Kissel Envirmmenlal Lab 100.00 Outside laboratory,Stardoms isms lzwyers Title Company 2.600.00 Title Searches-OCSD Trunk Sewers 16307 Malcolm Pimie,Inc. 15.022.03 Professional Services 5S50 15MB McGraw Hill Companies 82.00 Subscription 15309 McMaster Can Supply Co. 492.86 Mechanical Parts&Supplies 15310 Media Resurfacing Systems,Inc. 3.200.D0 Repairs&Maintenance Services-Belt Press Pans twit MWR Americas,Inc. 4.852.15 Professional Services P2-74 1w12 NASSCOIPACP 8,955.W On-Site Cured-lo-Place Plus Training 1w13 National Institute of Business signs. 47.04) StAacdpmon tw14 Neal Supply Co. 263.45 Pumping Supplies 15315 New Horizons.C.L.C.of Santa Ana 150.00 Talking pagination 15316 Nextat Communications 2.037.53 Air Time 1w17 OCB Reprographics 6.365.67 Printing Service-MO 12S00 1w18 Olin Corporation 3.811.57 Sodium Hydroxide 15319 Olresource Distributors.Inc. 1.496.13 Electrical Pane&Supplies 1w20 Orange County Tax Collector 103.72 Property Taxes-Special Assessment User Fees NorthCounty Yard 16321 Oxygen SeMm Company 1.350.82 Rebuild Shop Gases&Lab Parts&So,ows 15322 Pacific Mechanical Supply 1.147.26 PNmbrrg Supplies 1 w23 PCs Express,Inc. 134.41 Courier Service 15324 Plumbers Depol,Inc. 2,941.58 Sawer Hose 15325 Projectlins Technical Services.Inc. 15.621.10 Profe,sion ll Seddon,-FE Annual Design Services 15326 Rainbow,Dialectal Co. 3,779.48 Trash Remmull iw27 Ramin Instrument,L.L.C. 247.67 Lab Peals&Supplies and Repairs I=5 RBF Consulting 3,752.00 Surveying Services-Venous Locations 1 BUD RBF Consulting 8,261.80 Engineering Services 2-24-1 1533o Resource Environmental,Inc. 4.925.00 Asbestos Debra Clnan-Up-Blower Bldg. 15331 Rockwall Engineering&Equipment Co. 334.09 Freight Charges 15332 So.,Sloset 6,329.55 Pump Paris&Supplies 15333 Scott Speclalty Gases,Inc. W.51 Lab Paris&Supplies 15334 Shamrock Suppty Co..Inc. 53.62 CManeraf0egraeaera&Tools 15335 Shepard Brothers,Inc. 5,681.97 Hydrochloric Acid 15336 Siemens Water Technologies Corp. 3.451.57 Service Agreement-DI Wok it Systems at Plants i&2 1=7 Smith-Emery Company 24.708.75 Sods.Cancmle&Other Material,Testing 1w38 Snap-On Tools,Inc. 1,677.00 Substrate Maintenance Agradmient-Shopkey Web Goyemmant ISMS So Cal Gas Company 52D.07 Natural Gas 15340 SpmNe0, 464.40 Drintirg WaterM ler Raises 15341 Shifts Sound of Equalization 69.45 Underground Pamen m Storage Tank Maintenance Fes 15342 Summit Sleat 1,643.138 Metal 15343 Sunset Industrial Pans 146.51 Mechanical Pon&Supplies 153" Tam Factory 123.14 MisWg Expenses isms TesMmerlm Ontario 16,880.00 Analysis of Moulds 15346 Theme,Election North Americo,L.L.C. 80.49 Lab Pans&Supplies 15347 Thpmpmn Induaidal Suppty,Inc. 1,642.73 Mechanical Pans&Supplies 15346 T-Mobila 106.73 Wireless Air Time 15349 Tonys Lock&Safe Service&Sales 546.24 Locke&Keys RW,xaa1ExLEleui22N^PSHaRMmb Pale Rssomxoawdmsreaaapmavarnmvmp uo-u soar,aa EXHIBIT ryy4lryy Page 11 of 13 1e92200D Claims Paid From 11MIA08 to 1011 MR Warrant No. Vendor Amount Das.Nptlon 16360 TowrueM Public ANaire 7,500.00 Leglslative&Executive AEvocate for Grant Funding 15351 Training Clinic 3.312.87 On-Site Took ins-Leadership Competency Development Ism Truck&Aso Supply,Inc. 310,39 Automotive Paris&Supplies ism ULIm 885.60 Office Supplies 15354 United Feel Services,1.. 4725.00 Landscape Maintenance ion United Parcel Service 91 Parcel Semces low Valley Detroit Diesel Allison 1.735.74 Etacneal Pans Supplies 15357 Voters.Inc. 1.937.09 Computer HardwarelSOBWars Support-Momaring Control Systems.Ozanators,etc. 15358 Vanzen California 72.79 Telephone Services 151 Verson CaBomta 1,462.29 Wireless Services 16360 Viltasa Norman. 97.90 Landscaping Supplies 15361 Vonex Industries,Inc. 14.802.41 Door/Gele Repairk-Various 15362 VWR Scientific 392.42 Lob Para&Supplies 15363 The Wekenhut Corporation 5,834.94 Sewcy Services 15364 Water Policy Report 700.00 Books&PUMioare s loss WEF 812.00 Membership-Water Environment Federation ism Wast Us Supply Company,Inc. 43.89 Electncel Paris&Supplies 15367 Wright Way Developments 381 Instrument Repair B Maintenance Somices 15M VelelChnse Materials Handling,Inc. 124.94 Electric Can Pane ism 1-80g-COMmeri 13.60 Telephone Conference Celle 1070 Orion Construction Corporation 9,000.00 Construdion Pt-101A 15371 Union Bank of California 12A72.50 Construction Pl-97,Retention 16372 JeBrsy L.Armstrong 675.68 MeetingRraiang Expense Reimbursement 15373 I.ayne T.Sk i 311.70 MaefingTreining Expense Reimbursement 15374 David M.Chafe 657.20 Maetingfrooming Expense Reimbursement 15375 Micheal D.Moore 123.00 MartagNesiong Expense Reimbursement 15376 Madenkumar B.Patel 125.00 Meeting/Training Expense Rcmursemenl 16377 Christine M.Thomee 2.133.82 MeebngRralning Expense Reimbursement 15378 Joanne Word 522.19 Meefingrrealning Expense Reimbursement 15379 Aloe-Allied.Inc 7,066.60 Construction SP-98 1538D County of Orange Auditor Connecter 555.00 Adminlehstion Fee-Adjustment to Property Tax Bill 15381 City of Founlein ValNuy, 15.50 Buffalos Permit-Resctivaton Fee for Natural Gas Refuefng Station ism City of Fountain Valleuy 42.50 Plumbing Permit-Readhaton Fee for 3-Inch Natural Gas Liens 15383 City of Fountain Velleuy 27.00 Madraniwl Permit-Reactivation Fee for Pt-40-2 Bldg.6 HVAC 15384 City of painting Voting, 42.60 Electrical Permit-Reactivation Fee for Tamp Transformer and Subpenel 15385 Cly of Fountain Vallouy 115.72 Building Permit-Reactivation Fee for Administration Entrance Awning 15M C)"Fountain Velleuy 291 Seeing Permit-Reactivation Foe for Purchasing Conference Room 15387 City of Fosntafn Velleuy 825.57 Building Permit-Reactivation Fee for Retrofit Warehouse Storage Says Ion City of FountaM Velleuy 221.82 Building Permll-Reactivation Fee for 24'x 60 Engineering Trailer 15389 Orange County Sardu tion Dbtnd 1,017.42 Petry Cash Relmb. 15390 BARBS 510.00 Training Registration Total Accounts Payable-Werrenb Payroll Disbursements 40231- 40260 Employee Paychecks S 4,901 Interim Payroll-ARBN415 Payments(10/01108) 40NI- 40327 Employee Paychecks 122,356.32 Biweekly Payroll(IM8108) 40326. 401 Employee Paychecks 21,402,01 Interim Payroll-Relms(10107108) 181581- 161668 Direct Deposit Statements 36.555.77 Interim Payroll-ARBN415 Payments(10101108) 161661 162249 Direct Deposh Suit ementa I S47.2]5.68 Blweekly Payroll(I010&r08) Total Payroll Disbursements . 52gg N'.Wryenwai EL CeVSdIDSHRRFCICIme Past Rapwmta otairsP¢kgpM shimmer_n_t015O0 W EMISITA OMrMc Page 12 of 13 IeRx[OOa Claims Paid From 10/01/08 to 101151D0 Warrant No. Vendor Amount Conniption Wine Tranafor Pavmente CCSD Payroll Tons B ConDibutlons E )92.01].60 Biweekly Payroll-(t OIOBl08) Deutsche Bank 262,6e4.91 Series 2006 Cerdriwtes of Padidpa0on September Interest Payment Sodete Generale,NY Bnmo 10.720.51 Sedes 1993 Refunding COPS Standby Letter of Credo Commission(OBI01108-0911 NOB) Total WI.Transfer Payments E 1.005.3&1.05 Total Claims Paid 10101/00-10115108 E 2].210.361.20 H.WeammaaceL LNUIDW .ntI ol—PoIO RSr OaelClal=PMdRe,—.. imenl_A_1615Lau. EXHIBIT niultone Page 13 of 13 tnuuXIMS Claims Paid From 10I18I08 to 10/31/08 Warted No. Vendor Amount Description Accounts Pavable-Warrants 15391 ADR Services,Inc. $ 1,635.00 Legal Services-Mediation Gates vs.OCSD 15392 Black&Veatch Cormeatian 340222.30 Professional Services Pt-76,P1-102.&J-33-3 Ism Dudek&Associates,Inc. 25.309A6 Professlonal Services P2-68 1094 Earth Tech,Inc. 33,349.09 Professional Services 3-58 15395 Hewlett Packard Company 76.498." Computer Sof elmel-ardwara-(50)Personal Computers&(50)Monitors 15396 JCI Jones Chemicals,Inc. 63.456.56 Sodium Hypachionte 15397 M.J.Soldiered!Associates,Inc. 35,708.68 Temporary Employment Services 15398 Malcom Pimle,Inc. 54,951.87 Professional Services 1.10 15399 Southern California Edison 495.030.08 Power 15400 Water Environment Ressaroh Foundation 87.630.00 Subscription Renewal-Blowhole Research Collaborative Project 15401 Aanderae Instruments 2,469.00 Instrument Rapers&Maintenance Services-Buoy Repairs 15402 Abel Pumps,Inc. 790.68 Mechanical Pads&Supplies 15403 Able Scale Repair 2,837.12 Repair&Maintenance Services-Loading Scale 15404 Absolute Standards,Inc. 98.00 Lab Pads&Supplies 15405 Acoustical Material Services 206.95 Ceiling Tile 15406 Aerotek 11,111.20 Temporary Employment Services 15407 Ago IndustriesDBA S Cal Sweeping 980.00 Street Sweeping Services 15408 Air Liquids America Corp. 1,152.16 Specialty Gases 16409 Atrgas Safety,Inc. 7. 05.01 Safety Supplies 15410 AIRS Human Capital Solutions,Inc. 3,500.00 Training Registration 15411 American Airlines 4,865.05 Trained Services 15412 Ancon Manna 2,1)1 OCSD's Portion of Spill Response Drill 16413 Applied Induslnal Techrrology 55.62 Mechanical Pads&Supplies 15414 Arnold Orates Design,Inc. 1.620.00 Professional Services-07-08 Annual Report Ad Direction 15415 Ashbrook Corporation 743.36 Mechanical Pads&Supplies 15416 ABBE American Society of Safety Engineers 1.895.00 Trailing Registration 15417 AT&T Mobility I.L.L.C. 259.47 Telephone Equipment&Adivetlon 15418 Atlas Underground.Inc. 4.800.00 Repair&Maintenance Services-Sink Hole 15419 AWSI 750.00 Training Registration 15420 Badger Meter,Inc. 244.44 Flow Meter 15421 Battery Specialties 476.61 Baftenes 15422 BioMedeux Vftek,Inc. 06.69 Lab Pads&Supplies 15423 C&D Technologies all Electrical Pans&Supplies 15424 California Date.of CMW Support 1,596.00 Wage Gamishment 15425 Garold,Edge. 11,159.50 Professional Services-Research Strategic Plan and Engineering Support Services&120'Oudall Repairs 15426 Casual Gourmet 119.60 Meeting Expenses 15427 Charles P.Crowley Co. 2,801.50 Pump 15428 Circle.Inc. 2,903.16 Office Supplies-Toner Cartridges 15429 City of Fountain Valley 795.00 Annual Fire Permit Fee 15M Of,of Garden Grove 10.00 Business Tax Renewal Fee-North County Yard 15431 Communications Supply Corp. 380.48 Computers,SoflwareMardware IM32 Consumers Pipe&Supply Co. 545.28 Plumbing Pans&Supplies 15433 Corporate Express 7,085.41 Office Supplies 15434 Comly Wholesale EtsNd,Co. 235.43 Electrical Pans&Supplies 15435 CR&R,Inc. 945.00 Conformer Rentals&Waste Disposal Service 15436 CS-AMSCO 4,010.42 Mechanical Pads&Supplies 15437 Culligan of Orange County 51.60 Maint.Agreement-Can Gen Water Softener System 15438 CWEA Membership 395.00 Membership(Colic Water Environment Assoc.) H eleiAaa EXCEL dI UMAP5HARIM(tolme Pee Rel1wn3)0rCip sPadRepmbAtleMmeN B IOd10exho EXHIBITS finnlatc Page 1 of 8 III821Ne Clams Paid From 1 Oil WOO to 10131108 warming No. Vendor Amount Description 15439 CXTEC 8.11=5 Computers,Solhvere/Hardware 15440 Deal Pumps&Palls.Inc. M24 Pump Parts&Supplies 15441 Empoyee Benefits Specialists,Inc. 12.250.19 Reimbursed Prepaid Employee Medical&Dependent Care 15442 En Porno Tectoologies 1.389.98 Computers,Solhvare/Hard Ware 15013 Enchanter.Inc. 3.040.00 Ocean Monitoring&Outlall Inspection&Maintenance lf4 Erwwrimentel Water Solutions,Inc. 4.184.74 Pump 15445 FEDEX Corporation 29.67 Freight Services 15446 Ferguson Enterprises.Inc. 239.85 Mechanical Palls&Supplies 15447 First American Real Estate Solutions 73250 On-Line Orange County Property Information 15w Fisher Scientific 238.88 Lab Pals&Supplies 15449 Fishing Boob Unlimited 1.885.63 Lab Paris&Supplies 15450 Five Star Metals.Inc. 1,205.00 Mechanical Parts&Supplies 15451 Franchise Tax Boer! 50.00 Wage Garnishment 15452 Frys Electronics 131.61 Computer Supplies 15453 George Yardtey Co. 327.56 Mechanical Parts&Supplies 15454 Glens Alignment&Brake Servica 234.71 Vehicle Alignment Services 1640 Goldenwesl Corp. 715.00 Groundskeeping&Janitorial Services 15456 Grainger,Inc. 2.033.98 Mechanical Supplies&Tools 15457 Graybar Electric Company 616.27 Electrical Repair&Maintenance Services 15458 Great Western Sanitary Supplies 195.02 Janitoral Supplies 15459 Hach clo Portion Industries 6,69022 Lab&Instru a l Pans&Supplies 15460 Hammon Tedder Technical Servces 5,472.00 Professional Servicae-Elacelral Acceptance Tesling-Various Capital Projects 15401 Hardy&Harper,Inc. 2247.00 Repair&Maintenance Services-Asphalt 15482 Harrington Industrial Plastics,Inc, 4,300.36 Mechanical Pads&Supplies 15463 City of Huntington Beach 40.89 Water Use 16464 Hyatt Legal Plans,Inc. 1.062.00 Employee Voluntary Legal Plan 15465 IECOC 50.00 Membership 154M Indiana Child Support Bureau 290.00 Wage Garnishment 15467 Industrial Disobulon Group 624.37 Mechanical.Tools&Paint Supplies 15468 Intergraph Corporation 5.314.23 Sunni a Mainl.Agreement 15469 Internal Revenue Service 125.00 Wage Garnishment 15470 Intl.Union of Omer.Eng.AFL CID Local 501 4.856.51 Dues Deduction 15471 IPI Grammlech,Inc. 18.906.00 Soovare MainL Agreement 154M Irvine Ranch Water District 4426 Water Use 15473 Jamison Engineering Contractors,Inc. 4,950.00 Repair&Maintenance Services-Scaffolding Installation 15474 Jays Catering 1247.37 Meeting Expanses 15475 Johnstone Supply 1,07821 Mechanical Pads&Supplies 15476 Joshua Casey Comorale Twining 5269.38 On-She Safety Twining 154" JTP.Com Limited 11,947.32 Mechanical Paris&Supplies 15478 Kelly Paper 50.13 Paper IU79 Lab Safety Supply,Inc. 152.60 Lab Parts&Supplies 15480 Court Order 150.00 Wage Garnishment 15481 Marking Smices,Inc. 976.90 Asset Tags 15482 Mail Chlor,Inc. 4.862.70 Mechanical Parts&Supplies 15483 McMaster Can Supply Co. 3.464.98 Mechanical&Lab Parts&Supplies 15484 McNichols Company 1.549.00 Repair&Maintenance Supplies 15485 Mid West Associates 550.71 Mechanical Pans&Supplies 15486 MSA rho MAG Systems 3.986.76 Instrument Pads&Supplies 16487 Mission Abrasive&Janitorial Supplies 12.41 Freight Charges-P.0.68201-OP H Wao%sadkEXCEL EIa12ANPSHARE%0aImn Pahl FaryN WClarnWaldRenMAI &wn1 B 10-31 a.anx EXHIBIT mvtlonc Page 2 of 8 t1l&tNa Claims Paid From 10/16/06 to 10131108 Warrant No. Vendor Amount Description 1548E Mitchell Instrument Co. 3,102.00 Small Tad Expense 15489 Mobile Hose S Hydraulic Supply 4205.49 Repair It Maintenance Services-Hose Replacements 15490 Caud Order 225.00 Wage Garnishment 15491 National Bond&TM51 1,789.95 U.S.Savings Bonds Payroll Deduction 15492 National Safety Council 825.00 Membership 15483 Neutron Products.Inc. 3,123.89 Mbnb Polymer 15494 New Pig 186.66 Spill Absorbent Materials 15495 Newark Electronics 2,023.96 Electrical Pans&Supplies 15496 NRG Engine Services,L.L.C. 3.332.47 Mechanical Pads&Supplies 15497 OCB Reprographics 12,724.19 Printing Service-MO 126100 15496 OCEA 561.67 Dues Deduction 15499 OBice Depot 1,620.31 OBte Supplies 15500 OBiceMax Contrsct,mc/OM Workspace 17,533.35 Installation of Work Stations at Lab Bkg.(7) 16501 Olin Corpwatbn 3,762.88 Sodium Hydroxide ism Orwsource Distributors,Inc. 7,202.25 Electrical Paris S Supplies 15603 Orange County Tax Collector 1,164.96 Spatial Assessment User Fees-810 E.Balboa Blvd.,hempen Beach 1 SEIM Orange County United Way 60.00 Employee Contributions 15505 Orange Fluid System Technologies,Inc. 2.812.35 Plumbing Pans&Supplies 1006 Oxygen Service Company 875.10 tab Pans&Supplies 15507 Peace Officers Council of CA 2.014.74 Dues Deduction,Supervisors&Professionals 15508 Progressive Business Publicegons 230.00 Books&Publications 15508 Prudential Overall Supply 4,997.16 Uniforms&Related Mlcles 15510 Rob Rooter SOC lal Lake Forest 195.50 Plumbing Services-Drains 15511 Royal Wholesale Electric 1,135.89 Electrical Pads S Supplies 15512 Sf A 2,000.00 Pledge for Water Environment Research FoundationlColumbia University Nitrogen Emissions Study 15513 Sea Boats 1,250.00 Maintenance Services-Ocean Monitoring Vessel Neriesa 15514 Shammok Supply Co.,Inc. 2,976.04 Mechanicel,Tools&Paint Supplies 15515 Shimadzu Scientific Instruments,Inc. 4.766.53 Instrument Repair&Maintenance Services-Shir adzu GC47 15516 Shureluck Sales&Engineering 4.257.64 Mechanical Pads&Supplies 15517 SldtiPath Sominars 299.00 Training Registration 15518 So Cal Gas Company 17.742.81 Natural Gas 15519 Southern California Gas Company 5,953.00 Construction P1-82 16520 Special Plastic Systems.Inc, 2,950.65 Mechanical Pads&Supplies 15521 SPEX Certipm,.Inc. 71.12 Lab Parts&Supplies 15522 Stanley Steamer International,Inc. 1,538.40 CarpetiFumlture Cleaning Services 15523 Bummid Steel 4,5D1.69 Metal 15524 Sunset Industrial Pans 326.68 Mechanical Pans&Supplies 16626 SYMCAS TSG 1,598.DB SCADA System VAX Service Agreement 15526 Techno Coatings 2,640.00 Painting Services 15527 Terminix International 770.00 Pest Control 15525 Tens Renewal, L.L.C. 21,527.84 Grid&Screenings Removal&Digester Drying Bed Material Removal 15529 The Laboratory Safety Institute 50.00 Tndining Ru:ghtmlpn 15530 Theme,Electron North America,L.L.C. 061AS Lab Pans&Supplies 1031 Thompson Industrial Supply,Inc. 8,042.57 Mechanical Pads&Supplies 165M Transcat 502.28 Small Tool Expense 15533 Tri-County Fire 1.486.09 Flre Extinguishers 15534 ULine 206.01 Lab Parls&Supplies 15535 Uhm Scientific 739.92 lab Pans&Supplies 15536 Underground Service Mort of So.Calif 1,510.50 Underground Utility IdentificationtD'g Aled Nolilicetion Service ftWaplueTE%LELdifSNNPSHFaEILltlma Part Remm30081pnmWeMR -AU� 111031deXu EXHIBIT MMM. Page 3 of 8 1 uvtma Claims Paid Fmm 10116M to IW31105 Warrant No. Vendor Amount Description 15537 United Parcel Service 2,026.77 Freight Services 155M Valor Corporation %5.87 Oil Drum 15539 Vapex,ft. 2,408.00 Boosler Pumps&Sensors 15540 Veme's Plumbing 525.00 Service Contract-Testing,Repair&Can.Backflow Devices at Plus.1&2&Pump Sta. 15541 Wellex Irsusldes,Inc. 453.08 Door Repairs 15542 V WR Scientific Products 2,883.77 Lab Pads&Supplies 15543 Waxle Sanilory Supply 289.20 Janitorial Supplies 15544 WEF 217.DD MembersMp-Water Environment Federation 15545 West Coast Safety Supply Co. 1,679.16 Safety Supplies/Equipment 15546 West Life Supply Company,Inc. 282.62 Electrical Parts&Supplies 15547 WelLaba,Inc. 1.346.25 Repair,Maintenance&Calibmllon Services 15548 YaIWChsse Materials Handling,Inc. 1,067.54 Electric Carl Paris 15549 Court Order 912.50 Wage Garnishment 1555D tat Run Computer Services,Inc. 5.228.03 Computer SOBwereMartlware-Fulilsu Srannar 15551 Madan M.Men 1,237.00 Meeting/Training Expense Reimbursement 15562 James E.Colston 333.00 Meeting/Imining Expense Reimbursement 15553 Merit A.Esquer 125.00 MeeBng?mining Expense Reimbursemenl 15554 Victoria L.Francis 307.75 MeeengRrainhg Expense Reimbursement 155M Vladimir A.Kagan 572.96 Meating/fralning Expense Reimbursement IWK 6 William S.Malik 195.00 Maefing/freining Expense Reimbursement 15557 Robert D.Michaels 163.72 Meeling/fmining Expense Reimbursement 15558 Leyla Perez 102.72 Meetingandriing Expanse Reimbursement 1059 Lucinda Ellen Ray 992.12 Mesting/Training Expense Reimbursement 15560 Mendrick S.Taylor 308J5 Mee9ng/Training Expense Reimbursement 15561 CMTA Division IX 105.DD Meeting Registration-Dlvislon 220 15562 Susan&Kenneth Sohmaling 9111.57 User Fee Refund Regarding Septic Tanks 15563 Brown&Caldwell 15501.50 Professional Services P2-90 15564 Cardlock Fuel Systems,Inc. 25.236.70 Fuel Card Program-DIaWct Vshic es&Monitoring Vessel 15565 CS-AMSCO 48,328.46 Mechanical Pads&Suppites 15566 HDR Ernimemirg.Inc, b12,180.86 Professional Services P1-101 15567 HIII Brothers 35,702.06 Chemical;-Odor&Corrosion Control-Newpod Tronkfim 15568 Jamison Engineering Contractors,Inc. 318,743.35 ConsWction 241 SI and Repairs io Flow Maier at Seal Beach Pump Station 15569 JCI Jones Chemicals.Inc. 231.781.30 Sodium HyPochlori e 15570 Ken Thompson,Inc. 33,004.82 Repair&Maintenance Services-Sink Hole in City of Yams Linda 15571 Menteys Boller,Inc. 25,U18.75 Repair&Maintenance Services-Pit.2 Bodes 15572 MetUfe Life Insurance Company 42=.15 Group Life,Manager Mon,Life,Short&Long-Term Disability&Optional Term Life Ins. 15573 Orange County Water District 76,978.54 Green Acres Water Pull l(GAP) 15574 Polydre,Inc. 53.034.80 Cationic Polymer MO 3-11-92 15575 Sancon Engineering,Inc. 125,306.00 Repair&Melnlemmos Services-Manhole Rehab.Program&Fold&Reformed PVC Pipe Rehab.Program 15576 Southern Callfomia Edison 92,382.21 Power 15577 Tule RancldMagen Farms 247.020.65 Residuals Removal MO 3.29-95 15578 US Peroxids.L.L.C. 122,39D.50 Odor&Corrosion Control Treatment tie Coll.Sys.;Hydrogen Peroxide&Famous Chloride 15579 Woodruff Spri&Smart 58,03CM Legal Services MO 7-26-95 15M J.F.Shas Construction,Inc. 4,23g132.87 Construction P2-90 75SB7 Km Thompson,Inc. 164.700.00 Construction 2.24-1 15582 Norman A.Olason Conslrudion.Inc. 178,486.20 Construction 747 15583 Union Bank of California 471,014.74 Continuation P2-91D,Retention 15564 Amermn Telephone&Telegraph Corp. 207.60 Telephone Service 15585 ADS Environmental Services 554.40 Professional Services-Temporary Flow Monitoring Study H bapemNf%CfL.Ne1i]WPSMME1LNIme Pad RayrN00TC1x.PxdaepM ArlecM1meM B1OJ1-0B.A. EKHIBITB aeR10c Page 4 of tl?3f200a < Claims Paid F.10116108 to 10131MS Warrant No. Vendor Amount Description 15586 Ames Safety.Inc. 442.83 Safety Supplies 15587 AM Best Company,Inc. a05.00 Books&Publications 15588 American Machinery&Banks.Inc. 167.50 Mechanical Parts&Supplies 15589 Advanced Society of Civil Engineers 249.00 Training Registration 15590 American Society of Safety Engineers 675.00 Training Regleaation 15591 AppleOne Employment Service 17,584.78 Temporary Employment Services 15592 Applied Industrial Technology 791.60 Mechanical Parts&Supplies 15693 Aquatic Bbsyslems,Inc. 393.00 Lab Parts&Supplies 155N ABBE American Society of Safely Engineers 280A0 Membership 16595 AT&T 1.974.20 Telephone Sentice 15596 AT&T CentenniaMlCl 3,257.17 Telephone Service 15597 AT&T Long Distance. 988.85 Telephone Service 15595 AT&T Mobility 11,L.L.C. 398.00 Telephone Equipment&Activation 15599 Atkinson,Andelson,Loys,Rudd&Ruud 5.060.20 Legal Services-Employee Relations 15600 Awards&Trophies Company 134.69 Name Plates 15601 Business&Legal Reports,Inc. 336.83 Beaks&Publications 15602 Bennett Bowen Lighthouse 613.59 Instrument Parts&Supplies 15803 Caffomla Barricade Rentals 1.839.40 Barricade Rental/Pmtedmo 15604 CalBomia Relocation Services,Inc. 652.50 Office Files Moving/Reloca8on Services 15W Cad Warren&Co. 300.00 Insurance Claims Administrator 15606 Carol Engineers 3,031A0 Prod.Sirs.-Investigate Concrete Channel at P-1,Headworks 2,Splinter Box Feeding Primaries for Structural li 15607 CDW Government,Inc. III Computer SollWaleMardware-DLP Projector 15808 Circle,Inc. 1,000.95 Office Supplies-row Cartridges 15609 Columbia Analytical Services,Inc. 870.00 Analysis of Wastawreler,Industrial Washmo ler&9losolids 15610 Consumers Pipe&Supply Co. 22.76 Plumbing Paris&Supplies 15611 Controlled Motion Solutions 225.70 Mechanical Pads&Supplies 15612 Corporate Express 8,813.70 Office Supplies 15613 Cortech Engineering 4.620.04 Pump Supplies 15614 County Of Orange Auditk Conlroller 202.00 Encroachment Permit 15615 CR&R,Inc. 1,260.00 Container Rentals&Waste Disposal Service 15616 CSAC Excess Insurance Authority 3.605.58 Employee Assistance Program 15617 Curtsy Molesale Electric,Inc. 8.603.84 Electrical Paris&Supplies 15618 CWEA Membership 132.00 Membership(Calif.Water Environment Assoc.) 15519 Dapper Tire Co. 281.81 Tmck TIrm 15620 David's Tree Service 3,575.00 Tree Minna.Service 15621 Dennis Greenberger,Ph.D. 1,750.00 Professional Services-Fit for Duty Exam 15622 Dwyer Instruments,Inc. 1,927.75 Instrument Pads&SuppBes 15623 Electra Bond,Inc. 603.43 Repair&Melnlenanca Services-Fusion Bond Coating to Pump Pads 15624 Electronic Balencing Co. 280.00 Repair&Maintenance Services-Balance Impeller&Shaft Assembly 15525 Employee Benefits Specialists,Inc. 803.00 Relmbursed Prepaid Employee Medical&Dependent Care 15620 Employers Gmup 76.00 Training Registration 15627 ENS Resources,Inc. 10,000.00 Professional Services-Legislative Advocate IN28 Environments]Resource Associates 118.50 Lob Pads&Supplies 15629 Ewing Initiation Industrial 279.09 Landscape forgotten Pads&Supplies Isom Fuel American Real Estate Solutions 450.00 On-Line Orange County Property Information 15631 Fleming Environmental,Inc. 383.00 Repair&Maintenance Services-Troubleshoot Veeder RW UST Mimicking System 15632 Franklin Covey 34.44 OMce Supplies 15633 Gates Fiberglass Installed; 5,027.50 Repair&Maintenance Services-Tank 15634 Glenna Alignment&Brake Service 728.96 Repair&Maintenance Services-Vehicle Meal Alignments HMepmME%CELEre1220NP9HAREV]e6m Potl B n)31 Wxsx, EMISIT B MRIMc Page 5 a(8 11AWN00 Claims Paid From 1 Oil WOO to IW31108 Warrant No. Vendor Amount Description 15635 Goodwin Pumps of America,Inc. 3,950.11 Repair&Maintenance Services- Pumping Services 15636 Golden Slate Ovemght Delivery Service 102.90 Ccuner Service 15637 Buchenwald Corp. 1,578.00 Repair&Maintenance Services-Roof Cleanings&Inslallallon of Bud Spikes 156M Grainger,Inc. 3,210.70 Electrical Pads,Supplies&Tools 15M Graybar Electric Comps" 1,142.15 Instrument Repairs 15640 Gyms Systems 23.0491 Scheme Maintenance,Support,&Upgrade;and.Cyrus AIM Om ile Training Package 15641 Hartzell Fen,Inc. 4.835.58 Direct Drive Fiberglass Fan 15642 Howled Packard Company 16,451.74 Computer SoftwareMardwae-Server/Chassis 15643 Home Depot 1.394.73 Mlsc,Repair&Maintenance Material 1560 Hub Auto Supply 4101 Vehicle Paris&Supplies 15645 Humentech,Inc. 15,023b2 01 Industrial Ergonomics Training 15646 City of Huntington Beach 13,945.00 Wale,Use 16647 Inorganic Ventures,Inc. 505.50 Lab Paris&Supplies 15648 International Public Mgml.Assoc. 290.00 Membership 15649 Jays Catering 700.76 Meeting Expenses 15650 Jobster,Inc 395.00 Notices Is Ada 15651 Joshua Casey Corporate Training 4A38.57 On-SBe Safety Tell 166K Kissel Environmental Lab 50.00 Outside Laboratory Services 15653 L.Johnson Painting 6,010.00 Painting Services 15654 Deily Pilot 56.25 Nations&Ads ISMS Lustre-Cal 777.62 OCSD 2009 Truck DecalslSlickers 15656 MT Motor Repair 2.592.81 Moor Repairs 15657 Maintenance Technology Corp. Bill Mechanical Parts&Supplies Ism MassMUNal Michel Financial Group 79.04 Executive Disability Plan Premium 15659 Voided Check - - 15660 MWunkin Red Man Corporation 905.42 Mechanical Parts&Supplies IN61 McMaster Can Supply Co. 668.16 Mechanical Paris&Supplies 15662 Midway Mfg.&Machining Co. 11,721.58 Mechanical Pads,Supplies&Repairs 15663 NATEC International,Inc. 650.00 Training Registration 15864 National Fire Protection Association 150.00 Membership 15665 Neal Supply Co. 2,900.79 Plumbing Supplies 15666 Neutron Products,Inc 3.129.06 Anlonic Polymer 15667 Newark Electronics 402.60 Instrument Supplies 15668 City of Newport Beach 143.32 Water Use 15669 Nmyo&Moore 1.122.00 Professional Services-Soils,Concrete&Other Materials Testing for Various Capital Projects 15670 Norio Delivery 435.16 Mail Delivery Service 15671 OBhce Depot 2,551 Dike Supplies 15672 Olin Corpoation 3.811.57 Sodium Hydroxide 15673 Olsen Technologies,Inc. 1.049.55 Mechanical Paris&Supplies 15674 Onesource Distributors,Inc. 3.342.73 Electrical Parts&Supplies 15675 Creole Corporation 10,940.98 Software License and Maintenance Agreement Renewals 15676 Orange Courier 21.26 Courier Services 15677 Oxygen Service Company 896.25 Rebuild Shop Gases&Lab Paris&Supplies 15678 Pacific Mechanical Supply 121.60 Plumbing Supplies 15679 PCS Express,Inc. 105.04 Courier Service 15880 Portion IMuslries,Inc. 2.689.80 InslrumeN Paris&Supplies 15681 Primary Souroe Office Furnishings.Inc. 3.608.54 Office Furniture&Misc.Equipment 15682 Primrose Ice Co.,Inc. 200.00 Ice for Samples 15583 Procare Work Injury Center 85.00 Medical Screenings H:We 11asdIEXCELd1a1220UP5H0l& Ims Pau B 10-31-06 Mo EXHIBIT antaic Page 6 of 8 r uarzcoe Claims Pald From 10/16108 to 1DO1108 Warrant No. Vendor Amount Description 16684 Process Equipment Company 724.08 Pump Supplies 15685 Propipe Professional Pipe Services 6,293.82 Bandanna,Cleaning for City of Tuedn&Unincorporated County Property 8 Video Inspection 15686 Providence Publications,L.L.C. 427.00 Books&Publications-On-Line 15687 Prudendel Overall Supply 1.708.89 Uniforms&Related Articles 15688 RBF Consulting 10,648.00 Surveying Services-Various Locedons 15689 Roberti Auto Trim Shop 192.71 Upholstery Repair Iwo Sweet Votca&Dena,Inc. 2,284.80 Telephone System Maintenance 15691 SETAC 475.00 Mauling Regisirallon-Division 635 15692 Sewer Equipment Company of Amerce 116.20 Hose Guides 15693 SGS Testcom.Inc. 2.29 Telephone Line-District Vehicle SMOG Station 15694 Shamrock Supply Co.,Inc. 371.09 Locks&Keys 15695 Shureluck Sales&Engineering 10.23 Mechanical Paris&Supplies 15696 Siemens Energy&Automation 15.311.20 Instrument Pads If Supplies 151197 Siemens Water Technologies Cap. 1265.94 Service Agreement-DI Water Systems at Plants 1&2 156M SFJIIPath Seminars 149.00 Training Registration 15699 Smldt-Emery Company 1,742.00 Soils,Concrete&Other Materials Testing 15700 Snap On Tools 828.13 Tools 15701 Snap-On Tools,Inc. 89.00 Tool Repair 15702 South Coast Air Quality Management Dist. 9.024.58 Permit Fees-Annual Emission,Operation&Miac.Fees 157D3 South Coast Air Dually Management Disldcl 4.867.37 SCAOMD Permit-Construction of Temporary Fuel Cell Energy Station at Plant No. 1 157134 Southern Counties Lubricants 5,027AG And-Freeze 157D5 Spar Services,Inc. 6.251.72 Engineering Sevices 7-32-1 15706 Summit Steel 3.156.70 Metal 15707 Sunset Industrial Pans 127.26 Mechanical Pads If Supplies 16708 SupennteManl of Documents 88.00 Books&Publications 15709 TekSystem r 3.496.58 Temporary Employment Services 15710 TermlNx International 495.00 Past Control 15711 Tens Renewal,L.L.C. 16,819.66 Did It Screenings Removal&Digester Drying Bed Material Removal 15712 Testamedce Ontario 538.0D Analysis of Biosolids 15713 The Register 54.80 Noll&Ads 15714 The Standard Insurance Company 2.776.74 Executive Dlsabllily Insurance 15715 Thompson Industrial Supply,Inc. 5.450.59 Mechanical Pans&Supplies 15716 Tian Construction 1.200.00 Painting Services 15717 Time Warner Communication 51.0 Cable Services 15718 Turbine Repair Services 2.618.00 Repair It Maintenance Services-Turbine MIS Uniled Parcel Service 92A1 Freight Services 15720 Utdvemity of New England 199.00 Training Registration 15721 Valid Completion 2.253.36 Mechanical Paris&Supplies 15722 Ve a,Inc. 3.734.00 Pumps 15723 Verson California 102.73 Telephone Services 15724 Venture Plumbing 4,026.00 Repair&Maintenance SeMces-Sink In Lab&BacMlow Device 15725 Vortex Industries,Inc. 295.30 Door Repairs ISM MR Scientific PmducN 347.85 Lab Pans&Supplies 15727 Wakenhut Corporation 13,846.52 Sawriy,Services 15728 Wale,3 Er mantling,Inc. 3.839.79 Englneenng Services-FE Annual Design Services 15729 Waxle Saddlery Supply 1.499.28 Janitorial Supplies 15730 WEF 409.01) Membamhip-Water Environment Federation 15731 West Lite Supply Company.Inc. 11.64 Electrical Paris&Supplies 15732 Weston Solutions,Inc. 16.344.30 Outside Laboratory Services-Coe Ocean Monhodng Program HidepM1610ELALVleNPSNAPE\CIPms Pad neMrQ00rUdM$PadRupM.Aruhmera B 10.31eLtlr[ EXHIBITS a im Page 7of8 11N4e08 Claude Pala From 10/16G8 to 10/31108 Warrant N0. Vander AmWM Description 15733 Wetlabs,Inc. 752.50 Repeir B Calibration Semces-Sensors 15734 Xerox Corporation 21.616.78 Copier Services-Equipment Leases.Managed Sernces.8 Metered Copy Usage 8 Charges 15735 Vale/Chase Matenals Handling.Inc. 125.16 Elecbic Cad Pert 15736 Orange Community Bank 19,831.80 Construction 747,Retention 15737 Jeffrey Brown 1,185.75 MashrupTraming Expense Reimbursement 15738 Moro A.Brown 405.00 Meetingrmining Expense Reimbursement 15739 Terry W.Me 1,134.62 Meetingrtraining Expense Reimbursement 167Q Laura wunnlla 3712D MeetingRraming Expense Reimbursement 15741 Charles F.Wnsor 1.418.98 Meehng/7raining Expense Reimbursement 15742 Brown 8 Caldwatl 250A0 Notices 8 Me 15743 Daisy G.Cavarrubias 81D26 Employee Computer Loan Program 157U County of Orange Auditor Controller 390.00 Administration Fee-Adjustment to Properly Tax Bill 15745 County of Orange Auditor Controller 1.020.00 Administration Fee-Adjustment to Properly Tax Bill 157M Orange County Saturation District 1.290.85 Petty Cash Reimb, 15747 BARBS 1.710.00 Training Registration Total Accounts Payable-Warrants E 9.187.W4.87 PavWli Olebunamanb 40337 - 40393 Employee Paychecks S 122,056.25 Biweekly Payroll(100!108) 40394 - 40403 Employee Paychecks 33,559.36 Interim Payroll-Robes,Retirement.Terminelion(1021G8-1027G8) 40404 - 40430 Employee Paychecks 4.425.08 Interim Payroll-ARSN415 Payments(1 MUGS payments matle on IM1I09) 162250-162822 Direct Deposit Statements 1,342,931.34 Biweekly Payoll(10/22=) 162823-1629M Direct Deposit Statements 24,135.66 Inlenm Payroll-APJW415 Payments(11I01G8 payments Made m l0/31G8) Total Payroll Disbursements S 1.52].107.69 Wire Transfer Pavments OCSD Payroll Taxes 8 Contributions $ 784.631.35 Biweekly Payroll(10127G8) US Bank 395.965.66 Series 2000 A 8 B ReluMhG CeNticates of Paticipabon Oolober InlerestlPrincipal Payments Total Wine Transfer Payments S 1.180.58].01 Total Claims Paid t(/18I03-IDMIMB S 11.8T4]79.57 N WeplasmE%CEl Gbrl2pUP5HAHflClavns Pad RepM20C01WimffieNRep aAlraNmml B 1MI-08. v E)(HIBITB ae21Mc - - tlPage 8 of rvs2opg L_ i Orange County Sanitation District MINUTES SPECIAL MEETING 2009 STRATEGIC PLAN WORKSHOP October 15, 2008 OJN� SAH TATj�Y 4 A �cl�N TG HE ADMINISTRATIVE OFFICES 10844 ELLIS AVENUE FOUNTAIN VALLEY, CALIFORNIA 92708-7018 Minutes for Board Workshop 10/15/08 1- Page 2 ROLL CALL A special meeting of the Board of Directors of the Orange County Sanitation District was held on October 15, 2008 at 5:00 p.m., in the District's Administrative Offices. Active and alternate Directors present were as follows: ACTIVE DIRECTORS ALTERNATE DIRECTORS X Doug Davert, Chair Jim Palmer X Larry Crandall, Vice Chair Gus Ayer X Charles Antos Gordon Shanks X Don Bankhead Sharon Quirk X Bill Dalton X Steven Jones A Jon Dumitru Carolyn Cavecche Rose Espinoza X James Gomez X James M. Ferryman X Bob Ooten X Don Hansen Jill Hardy X Phil Luebben X Prakash Narain A Patsy Marshall Jim Dow X Darryl Miller Douglas Reinhart X Roy Moore X Ron Garcia X Joy Neugebauer X Al Krippner X Chris Norby Janet Nguyen X Ken Parker Catherine Driscoll X Brad Reese W. Richard Ulmer X David Shawver David Cadena X Christina Shea Steven Choi X Harry Sidhu Lucille Kring A Sal Tinailero David Benavides X Constance Underhill Joseph Aguirre X Mark Waldman Henry Charoen X Don Webb Leslie Daigle X Jim Winder John Anderson STAFF MEMBERS PRESENT: Jim Ruth, General Manager, Bob Ghirelli, Assistant General Manager; Penny Kyle, Clerk of the Board; Nick Arhontes; Jim Herberg; Ed Torres; Lorenzo Tyner; Lilia Kovac; Bret Colson; Barbara Collins; Michael Gold; Jeff Reed; Juanita Skillman; Paula Zeller OTHERS PRESENT: Brad Hogin, General Counsel; Brent Ives, BHI Management Consulting Minutes for Board Workshop -r 10/15/08 Page 3 OPENING REMARKS Chair Davert welcomed the Directors to the annual workshop designed to assist in updating the Strategic Plan. General Manager, Jim Ruth, reported that no increase in costs would be necessary for any of the initiatives that are being proposed for consideration. PUBLIC COMMENTS There were no public comments. OVERVIEW Bob Ghirelli, Assistant General Manager, briefly reviewed the Strategic Plan, and noted that staff was able to complete 27% of the five-year goals established last year. Proposed New Goals Proposed new goals for the Strategic Plan update were presented by members of the Executive Management Team on the Groundwater Replenishment System; Disinfection; Environmental Footprint Initiative; Risk Register; and Human Resources Strategic Plan. Staff responded to Directors'questions and received input regarding public perception, biosolids, and public outreach and education. All were in agreement that staff should move forward updating the Strategic Plan to include the recommendations, as follows, and submit the plan to be considered by the Board of Directors at the November 19' board meeting: • Reaffirm Board's commitment to GWR System expansion • Assess modification of current disinfection practices • Pursue Environmental Footprint Initiative • Update Risk Register to reflect all manner of risks • Develop a Human Resources Strategic Plan ADJOURNMENT: The Chair declared the meeting adjourned at 6:08 p.m. Penny M. I� e Clerk of the and Orange County Sanitation District , 1 Orange County Sanitation District MINUTES BOARD MEETING October 22, 2008 oJN q SAHITgl�oy 9 c O y Fir�N HE ENV���� ADMINISTRATIVE OFFICES 10844 ELLIS AVENUE FOUNTAIN VALLEY, CALIFORNIA 92708-7018 , Minutes of Board Meeting 1022/O8 • Page 2 p ROLL CALL A regular meeting of the Board of Directors of the Orange County Sanitation District was held on October 22, 2008 at 6:30 p.m., in the Administrative Offices. Following the Pledge of Allegiance and invocation, the roll was called and the Clerk of the Board reported a quorum present as follows: ACTIVE DIRECTORS ALTERNATE DIRECTORS X Doug Davert, Chair Jim Palmer A Larry Crandall, Vice Chair Gus Ayer )F Charles Antos Gordon Shanks X Don Bankhead Sharon Quirk )F Bill Dalton Steven Jones X Jon Dumitru Carolyn Cavecche X Rose Espinoza James Gomez A James M. Ferryman Bob Ooten X Don Hansen Jill Hardy X Phil Luebben Prakash Narain X Palsy Marshall Jim Dow X Darryl Miller Douglas Reinhart Roy Moore X Ron Garcia -5F Joy Neugebauer AI Krippner X Chris Norby Janet Nguyen A Ken Parker Catherine Driscoll X Brad Reese W. Richard Ulmer X David Shawver David Cadena X Christina Shea Steven Choi A Harry Sidhu Lucille Kring X Sal Tinajero David Benavides X Constance Underhill Joseph Aguirre X Mark Waldman Henry Charoen X Don Webb Leslie Daigle X Jim Winder John Anderson STAFF MEMBERS PRESENT: Jim Ruth, General Manager, Bob Ghirelli, Assistant General Manager; Penny Kyle, Clerk of the Board; Life Kovac; Jim Herberg; Ed Torres; Lorenzo Tyner, Layne Barokti; Larry Gibson; Michael Gold; Ryal Wheeler OTHERS PRESENT: Brad Hogin, General Counsel; Drew Kolosky; Gino Rampagna; Minutes of Board Meeting 10/22/08 Page 3 PUBLIC COMMENTS Drew Kolosky advised that his employer, Liberty Composting, was interested in purchasing the Sanitation District's land in Kings County and was prepared to offer the Sanitation District a proposal of$42/ton of biosolids for four years, with a minimum of 50,000 tons per year. REPORT OF THE CHAIR Chair Davert announced that Vice Chair Crandall was attending the Water Environment Federation conference, participating on a leadership panel and the Utility Executives Forum. He thanked Director Neugebauer and the Midway City Sanitary District's Board of Directors for their resolution of commendation for the Sanitation District receiving the Coastkeeper's Protection Award. Director Luebben reported on his participation on an ocean monitoring demonstration on the Nenssa. It was also reported that the meeting would be adjourned in memory of Cornell Norby ,, Director Norby's father. REPORT OF THE GENERAL MANAGER Jim Ruth, General Manager, delivered a brief overview on the progress on SAWPA and IRWD operational issues; participation on the EnerTech Biosolids first phase commissioning event; chemical scarcity and escalating costs; and delays to the SARI line due to EIR input. REPORT OF THE GENERAL COUNSEL Brad Hogin, General Counsel, did not give a report. RATIFICATION OF PAYMENT OF CLAIMS MOVED, SECONDED AND DULY CARRIED: Ratify payment of claims set forth on Exhibits "A" and °B", attached hereto and made a part of these minutes. ALL DISTRICTS 09/15/08 09/30/08 Totals $16,597,463.11 $22,798,902.71 Director Dumitru abstained from discussion and voting on Warrant No. 14474 and 14730. Director Luebben abstained from discussion and voting on Warrant Nos. 14429, 14557, and 14622. Director Shawver abstained from discussion and voting on Warrant Nos. 14666 and 14474. Directors Hansen and Shea abstained from discussion and voting on all warrants. Abstentions were pursuant to California Government Code Section 84308. Minutes of Board Meeting , 10/22/08 Page 4 CONSENT CALENDAR (2—3) Consideration of motion to approve all agenda items appearing on the Consent Calendar not specifically removed from same, as follows: 2. MOVED, SECONDED AND DULY CARRIED: Approve the minutes for the regular meeting held on September 17, 2008, to be filed and deemed approved, as mailed. 3. MOVED, SECONDED AND DULY CARRIED: Adopt Resolution No. OCSD 08-18, Declaration of Official Intent to reimburse certain of the District's existing capital reserve funds for certain expenditures made in advance of, and in anticipation of, capital improvement expenditures,from proceeds of a future long-term borrowing. STEERING COMMITTEE (4-6) Chair Davert reported that the committee had approved the revised minutes; considered a memorandum of understanding with Republic of South Korea Environmental Management Corporation; and received an update on activities in Sacramento and Washington. The committee also met in closed session for one item. 4. MOVED, SECONDED AND DULY CARRIED: Approve revised Steering Committee Minutes for the meeting held on September 17, 2008 to be filed. 5. MOVED, SECONDED AND DULY CARRIED: Adopt Resolution No. OCSD 08-19, Establishing Award Acceptance Protocols. 6. MOVED, SECONDED AND DULY CARRIED: Approve an Agreement with the City of Fountain Valley for permitting P1 Miscellaneous Buildings Office Improvements, Project No. FE07-08, and authorize payment and development fees for an amount not to exceed $356,835. in a form approved by General Counsel. OPERATIONS COMMITTEE (7—16) Operations Vice Chair, Bill Dalton, reported that Operations Committee Agenda Item No. OP08-51, regarding recommending the board award a contract to Mike Bubalo Construction Co., Inc.for Area 03 Manhole Access Improvements(3-54), Project No. FE07-01, would be considered at the November board meeting. 7. MOVED, SECONDED AND DULY CARRIED: Approve Operations Committee Minutes for the meeting held on October 1, 2008, to be filed. 8. MOVED, SECONDED AND DULY CARRIED: a)Approve Professional Consultant Services Agreement with Butler Engineering, Inc. for Construction Management Services for Newport Trunk Sewer and Force Mains, Bitter Point Pump Station to Coast Trunk Sewer, Contract No. 5-58,for an amount not to exceed $1,810,925; and, b)Approve a contingency of$108,656 (60/6). Minutes of Board Meeting 10/22/08 Page 5 9. MOVED, SECONDED AND DULY CARRIED: a)Approve Professional Design Services Agreement with MWH Americas, Inc. for Solids Thickening and Processing Upgrades, Job No. 132-89, providing for engineering design services for an amount not to exceed $6,983,999; and, b)Approve a contingency of$698,400 (10%). 10. MOVED, SECONDED AND DULY CARRIED: Approve Amendment No. 2 to Cooperative Projects Grants Program Contract No. 0503 with City of Placentia providing for an eight-month time extension. 11. MOVED, SECONDED AND DULY CARRIED: a)Approve Professional Consultant Services Agreement with Black&Veatch Corporation to provide construction support services for the Continuous Emissions Monitoring Systems, Contract No. J-79-1A, for an amount not to exceed $506,680; and, b)Approve a contingency of$50,669 (10%). 12. MOVED, SECONDED AND DULY CARRIED: a)Approve a contingency increase of $243,919(5%)to the Professional Services Agreement with Lee& Ro, Inc.,for the Replacement of the Bitter Point Pump Station, Contract No. 549; Replacement of the Rocky Point Pump Station, Contract No. 5-50; Rehabilitation for the 10 Street Pump Station, Contract No. 551; Rehabilitation of the"A" Street Pump Station, Contract No. 5- 52, for a total contingency of$352,278 (7.22%); and, b)Authorize staff to enter into negotiations with Lee& Ro, Inc.for construction support services for the Replacement of the Bitter Point Pump Station, Contract No. 5-49. 13. MOVED, SECONDED AND DULY CARRIED: Approve a contingency increase of $334,511 (6%)to the Professional Services Agreement with Malcolm Pimie, Inc. for the Replacement of Ellis Avenue Pump Station, Job. No. 1-10,for a total contingency of $611,530(11%). 14. MOVED, SECONDED AND DULY CARRIED: Receive and file the Waste Discharge Requirements Sewer System Management Plan Compliance Status Report dated September 24, 2008. 15. MOVED, SECONDED AND DULY CARRIED: Approve Change Order No. 4 to Purchase Order No. 102354 OB for Purchase of Ferric Chloride, Specification No. C- 2005-247, issued to Kemira Water at an initial unit price of$610 per dry ton delivered, plus applicable tax indexed to Iron Age Scrap Index#1 Bushing Chicago listing benchmark of$635/ton and a pricing correction factor of 34% of the difference of the benchmark and index on a quarterly basis, for an estimated annual contract amount of $4,600,925 for the period December 1, 2008 through November 30, 2009. Minutes of Board Meeting , 10/22/08 Page 6 16. MOVED, SECONDED AND DULY CARRIED: Authorize staff to negotiate a Professional Design Services Agreement with Malcolm Pimie Corporation for Phase 2 Pilot Engine Exhaust Emissions Reduction to furnish, install, and test a pilot system re: Air Quality Improvements, Job No. J-79. ADMINISTRATION COMMITTEE(17) 17. MOVED, SECONDED AND DULY CARRIED: Approve Administration Committee Minutes for the meeting held on October 8, 2008, to be filed. GWR SYSTEM STEERING COMMITTEE (18) 18. MOVED, SECONDED AND DULY CARRIED: Approve Joint Groundwater Replenishment System Steering Committee Minutes for the meeting held on October 8, 2008, to be filed. NON-CONSENT CALENDAR No items were considered. CLOSED SESSION: CONVENE IN CLOSED SESSION PURSUANT TO GOVERNMENT CODE SECTION 54956.8: The Board convened in closed session at 6:55 p.m. pursuant to Government Code Section 54956.8 to discuss one matter(Agenda Item No. 19). Confidential minutes of the Closed Session held by the Board of Directors have been prepared in accordance with California Government Code Section 54957.2 and are maintained by the Clerk of the Board in the official Book of Confidential Minutes of Board and Committee Closed Meetings. RECONVENE IN REGULAR SESSION: The Board reconvened in regular session at 7:05 p.m. ADJOURNMENT: The Chair declared the meeting adjourned in memory of Cornell Norby at 7:07 p.m. Penny M.QjyIe 114 Clerk of the BoardF Orange County Sanitation District Claims Paid Fran 09M1M8 to 09116M8 Warrant No. Vendor Amami Description Ax:eoums Payable-Women 14036 AON Risk Insumnce Services West $ 80,000.00 Excess Liability,Polluter Liability,OCIP Pollution Liability Insurance 14037 Bask Chemical Solutions,L.L.C. 28,899.07 Sodium Hydroxide 14038 Black&Veatch Corporation 191,247.63 Prolessional Services P1-102 14 19 Blue Cross of California 620,414.14 Medical Insurance Premium 14010 County of Orange Auditor Controller 58.460.60 2008-09 M"950r5 Public Attribute Files 14041 Della Centel 65.843.85 Dental Insurance Plan 14042 Earth Tech,Inc. 33,557.11 Professional Services 3-58 14043 JCI Jones Chemicals,Inc. 270.821.82 Sodium Hypochbrite 14044 Kalmar Foundation Health Plan 91.224.08 Medical Insurance Premium 14045 Kemim Companies,Inc. 69A88.40 Femc,Chloride 14046 OmrvJe County Water District 84.417.05 Green Acres Water Project(GAP) 14047 Polytlyne,Inc. 50.627.23 Cationic Polymer MO 3.11-92 14048 SAWPA(Sane Me Water Protection Agency) 885,928.99 CCSD Share of Natural Canserve80n Service Good 2414 14049 Tule Rench/Magan Farms 269.170.21 Residuals Removal MO 3.29-95 14050 Water Environment Research Foundation 40.000.00 BioscMs Research Callabomflve Project 14051 J.F.Shea Construction,Inc. 4,529,517.05 Construction P2-W 14052 Union Bank of Califomia 603279.67 Construction P2-90,Retention 1400 Able Scale Repair 870A0 Repair&Maintenance Services-Loading Scales 14054 Madilula Standards.Inc. 340.00 Lab Pads&Supplies 14055 ADS EnWronmental Services 3.311.60 Professional Services-Temporary Flow Monitoring Slutly 14056 Agllenl Technologies,Inc. 1,611 Lab Pads&Supplies 14057 A"vgas Safely,Inc. 86.86 Safety Supplies 14058 AKM Consulting Engineers 6,081.60 Prolesstonal Services-Assistant Engineer Technician W Manage Dig Alert Utility 14059 ALFA-LAVA-INC. 3,192.12 Electrical Pads is Supplies 14060 Applied Industrial Technology 674.n Mechanical Part&Supplies 14061 AT&T Mobility II,L.LC. 1.191 Telephone Equipment&Activation 14062 Stores&Thornburg 10,500.00 Membership-FWOC 14063 Bee Man Pest Commit,Inc. 175.W Pest Control 140" Berg-Nelson Co..he. 1.OD7.16 Repair&Mainienance Services-Ignition Coil Claims,&Testing 14065 Barge's Govemor Service 3,105.0D Mechanical Repair&Maintenance Services-Govemor 14066 Boyle Ergtrleming Corpumilon 4,219.12 Professional Servicas 1-24 14 7 Brenner-FledWr&Assoc.,Inc. 4.249.66 Atr Compressor 14068 Brown&CaldwMl 10.318.03 Professional Services P2-91 14MB C&D Technologies 217.48 Electrical Pads&Supplies 14070 Califomia Auto Collision 1,456.18 Vehicle Body Repairs-V41484 14071 California Relocation Services,Inc. 1.496.25 Office Files MaWnglRelocabon Servkea 14072 Caddo Engineers 6250A7 Professional Services Pl-71 14W3 Chad..P.Crowley Co. 7.081 Pump 14074 Circle,Inc. 2,95020 Office Supplies-Toner Cedndges 14075 City of Fulledon 1,575.00 Repair&Maintenance-Adjustments W OCSD Manholes to Gmde 14076 Compressor Components of California 17,195.90 Mechanical Pads&Supplies 14077 Computer Protection Technology,Inc. 2.895.38 Quarterly Maintenance of Bahamas,ReOflem.and UPS System 14076 Consumers Pipe&Supply Co. 303.51 Plumbing Pads&Supplies 14079 Corporate Express 1.486.12 Office Supplies 14080 County of Orange Auditor Controller 3,140.00 2008.09 Preliminary Tax Rolls-Assessefs Office Crome-Reference Files 14081 County Wholesale Electric Co. 187.68 Electnom Parts&Supplies 14082 David.Tree Service 3.800.00 Tree Malin.Service HVida&drE%CELL� MI-AflM1dms Pad aepoM]WflClamaPavlFagxl Atlarhmenl A 09-16A8.Yv EXHIBITA mrz1Mc - Page 1 dig 1050,2008 Claims Paid From 09/01/08 to 0911MIS Warrant No. Vendor Amount Descrip0an 14083 Dionax Corporation 3725 Lab Parts&Supplies 14084 OLT Solutions,Inc. 14,305.75 Sollware Maintenance Renswal 140415 Dudek&Assoiates,Inc. 13,477.50 Professional Services-SOP Development 14086 Duke Service Company 106.00 Repair&Maintenance-Coffee Services Equipment 14087 Dunn Edwards Corporation 108.61 Paint Supplies 14068 Eagle Protection of California 275.00 Bldg.Security Afa m Services-No.County Yam 14069 Electra Bond.Inc. 3.070,88 Repair&Maintenance Sennces-Fusion Bond Coaling Digester Deere 14090 Enchanter,Inc. 1.600.00 Coaam Mo a drg&OUHaII Inspection&Mainlenance 14091 ESSCO(Engineering Sales Service) 10,954.94 Pump&Pump Supplies 14092 FEDEX Wit W Freight Bases. 14093 Fisher Scientific Company, L.L.C. 3.357.83 Lab Pads&Supplies 140M Forked Engineering&Surveying.Inc. 1,300.00 SurveNn9 Services-Various Capital Projects 14095 Golden State Water Company 134.88 Water Use 14096 Gafoe mist Corp. 740.00 Various Repair andfor Landscape Maintenance Services 14097 Grainger,Inc. 1,0W.14 Electrical Pads,SUPPIMS&T0015 14098 Guidance Software,Inc. 7.093.11 Software Maintenance Renewal 14099 Hach Go Ponton Industries 1,442.33 Instrument Pads&Supplies 14100 Home Depot 199.68 Misc.Repair&Maintenance Material 14101 City of Huntington Beach 754.78 Water Use 14102 Industrial Distribution 1.931.17 Maintenance Paris&Supplies 14103 Intend Litho 7.775.11 Postage for Community Newsletter Mailing-Summer 2008 141N Inorganic Ventures,Inc. 782.31 Lab Parts&Supplies 14105 Irvine RanMn Water Dead 7.50 Water Use 14106 J.Rdmmac,Inc. 4,630.00 Installation of Off.y Approach to Service(2)Manholes -Cash Mesa 14107 Lab Safety Supply,Inc. 223.85 Ant Bait 141M Lorman Education Services 114.21 Training Registration 141M The Melhwunks,Inc. 1.7W.00 Sunbeam Maintenance-Matlab 14110 Mall Chloq Inc. 1.656.75 Electrical Paris It Supplies 14111 MCMuney-Stem 17.632.21 Service Agreement for Cleric of the Board Mobile File System 14112 Measurement Control Systems,Inc. 2,034.96 Repair&Calibration Services-Rotary Gas Meter 14113 Megger 1,076.47 Repair&Maintenance -Meter 14114 Midway Mfg.&Machining Co. 1.061.34 Mechanical Paris&Supplies 14115 Miele.Inc. 65SAI Lab Paris&Supplies 14116 Mission Abrasive&Jargons!Supplies 163.58 Janitorial Supplies 14117 Mitchell Instrument Co. 767.89 Safety Supplies 14118 Norco Delivery 872.32 Mail Delivery Service 14119 Office Depot 676.26 Office Supplies 14120 Olin Corporation 3.769.84 So0lum Hydroxfoe 14121 Omega Industrial Supply,Inc. 1.465.70 Janitorial Supplies 14122 Onesource Distributors,Inc. 251SA8 Electrical Parts&Supplies 14123 Orange Fluid System Technologies,Inc, 1,602.80 Plumbing Paris&Supplies 14124 Oxygen Service Company 243.87 Rebuild Shop Gases 14M Pacific Mechanical Supply 141.14 Plumbing Supplies 14126 Paldot Video PmducOans 512.43 Video&Editing Services 14127 Pit.Hawn Company,Inc. 1.735.36 Electrical Parts&Supplies 14128 Primrose Ice Co.,Inc, 100.00 Ice For Samples 14129 ProdenOal Overall Supply 5.027.78 Uniforms&Related Articles 14130 Royale Cleamars 6.00 Dry Cleaning Services H'bepv,e CEL dtaV PSHARFMtl Pan!ReMa 11MCkursPa,M ,oft Afta Amem A 09-1&W,Ux EXHIBITA n Q110c Page 2 of 9 1aRM6 Chilies Paid From 09/01/08 to 09115M warned rim Vendor Amourn Description 14131 Smiths Aerospace 268.28 Recoddliation User Fee Refund!Program 14132 Sough Coast Environmental Co. 14.243.70 Ab Oualiy,Mcd o g 14133 SCP Science 556.00 Lab Park&Supplies 14134 Siemens Water Technologies Corp. 61.M Service Agreement-DI Water Systems at Plank 1&2 14135 Snap-On Tack,Inc. 166.19 Took 14136 S06choice Cop. 9.296.76 SoBware Licenses&Upgrades-Adobe Acrobat 14137 Southern Counters Lubricants 953.88 AmBreexe 14138 Sweden. 243.60 Drinking Water/Cooler Radials 14139 Spading Instruments,Inc. 18.364.50 Instrument Pads&Supplies-Flow Meter 14140 SPEX Cediprep.Inc. 51.11 Lab Pads&Supplies 14141 Slate Water Re..urces Control Board 308.00 Annual Fee for Stonn Water Permit-2-24-1 14142 Summit Steel 1.511.22 Metal 14143 Termmix International Pest Control 510.00 Past Control 141" Thermo Electron NOM America,L.L.C. 387.90 Lab Pans&Supplies 14145 Thompson Industrial Supply,Inc. 2,894.61 Mechanical Pads&Supplies 14146 Tony's Lock&Safe Service&Sales 626.40 Lodes&Keys 14147 Tied&Auto Supply.Inc. 169.40 Automotive Pads&Supplies 14148 Tuff Skin 200.00 Repair&Maintenance SeMces-Application of Coaling to Air Compressor 14149 Underground Service Alen of So.Cold 1,587.00 Underground Utility IdentifcaB tg Aled Notification Service 141W United Parcel Service 76.58 Parcel Services 14151 United Pumping Service 543.75 Pumping Service 14152 Valve Automation&Controls 1,A3.00 Repair&Maintenance Services-Actuator 14153 Village Nurseries 95.03 Landscaping Supplies 14154 Vision Service Plan CA 9,603.60 Vision Service Premium 14155 Vote.Industries,Inc, 940.00 Door Repairs 14156 VWR Scientific Products 1.653.73 Lab Paris&Supplies 14157 Water Environment Federation 816.00 Membership 14158 WEF 154.00 Membership-Water Enwromed Federation 14159 West Coast Swltc gear,Inc. 6,138.94 Electrical Repairs&Maintenance SaMme 14160 West Life Supply Oompany,Inc. MO Electrical Pans&Supplies 14161 Mac Analyllca0Waston Solutions,Inc. 2,250.00 OukNe Labora"Semmes-Core Ocean Monitoring Program 14162 Westport Apparatus DBA Breaker Supp. 414.01 Ekclical Parts&Supplies 141M Well-abs,Inc. 1,310.00 Repaif/CalibmtiDn Sen4ces-Fluoromekrs 14164 Atlas-Allied,Inc 6.48720 Conslrudlon SP-98 1410 Layne T.Baroldi 279.00 Meeteng/Tmining Expense Reimbursement 141N Mchael I.God 811.02 Meefing/Tminirg Expense Reimbursement 14167 Thomas A.Hunt 60.19 MeetingRrainirp Expense Reimbursement 14168 Jin H.Kim 125.00 Meetng/fminiig Expanse Reimbursement 14169 Vincent S.Lodyer 701.60 Mcetng/Trainirg Expense Reimbursement 14170 Selwyn D.Merest 691.05 Meeling/Tmining Expense Reimbursement 14171 Samuel L.Mowbray 106.09 Meefing/Tmtrdrg Expense Reimbursement 14172 Samir Patel 130.68 Meefing/Trahni g Expense Reimbursement 14173 James D.Ruth 797.18 MeetMgrrism,Expense Reimbursement 14174 Gregg A.Scott 1.022.40 Meeting/Training Expense Reimbursement 14175 Edward M.Tones 477.15 Mee0ng/Tmming Expense Reimbursement 141M Gary J.Tulasos Kemper 702.17 Meetmg/imining Expense Reimbursement 141" Michael Vuong 810.64 MealmgRmining Expense Reimbursement 14178 Paul were 700A1 Meetmg/Traiming Expense Reimbursement H werearAVEXCEL.eulxlawvSHxmMxwe Pas Repanvamciam+Pamnepnn-nmcnmem a_os ls�Mxsx EXHIBIT A fv✓l100e Page 3 of 9 tmem Claims Paid From 09101/08 to U9115m8 W.rt No. Vendor Amount Description 14179 County of Orange Auditor Controller 225.00 Administration Fee-Adquslmec to Property Tax Bill 14180 Orange County Sanilolion District 1.007.72 Petty Cash Reimb. 14181 Air Products&Chemicals 28.439.48 O&M Agreement Oxy.Can.By .MO 8.9-89 141M Can ilo Engineers 146.371.46 Professional Services P2.66 14183 Corporate Image Maintenance,Inc. 36,045.00 Cusbdial Services Spec.No.9899-09 141N CORRPRO Companies,Inc. 39.170.33 Temporary Employment Services 14185 Grande Tortilla 31.672.53 Reconciliation User Fee Refund Program 14186 HDR Engineering.Inc. 818.717.06 Professional Services Pt-101 14187 Hill Brothers 30.482.18 Chemicals-Oft&CorroSion Control-Newport Trunkkne 14188 JCI Jones Chemicals,Inc. 118.759d2 Sodium HypocNonte 141N Kemimn Companies 77,795b1 Ferric Chloride 14190 Liberty Mutual Insurance Company 75,322.42 OCIP Insurance-Liability&Wohkem'Comp-1st Installment 14191 Malcolm Pimle,Inc. 157.246.84 Professional Services I-10&P2-80 14192 MetLife Life Insurance Company 45,426.54 Group Life,Manager Addl.Life.Shod&Long-Term Disability&Optional Term Life Ins. 14193 National Plant Services,Inc. W.385.00 Repair&Maint.Services-Barecreon Grid Removal 8 Clean Out Drain&Sludge Lines an Primary Basin O 14194 Norman A.Olson Construction,Inc. 325,M.70 Construction 747 14195 Orange Community Bank 36,144.30 Constrecifen 747,Retention 14196 J F Shea Constmak n,Inc. 1,703,528.30 Construction 2418 14197 Ken Thompson,Inc. 662,346.72 Ccestructlan 2-68 14198 First Chnstian Church 48.897.45 Reconciliation User Fee Refund Program 1410 A W Chesterton 2.778.42 Mechanical Pads&Supplies 14200 Absolute Standards,Inc. 85.00 Lab Pads&Supplies 14201 Aemtek 7.617.50 Temporary Employment Services 142M Ago lndusWeSDBA So-Cal Sweeping 860.00 Street Sweeping Services 14M Agreeya Solutions,Inc. 1,326.01) Professional Services-Records Management Study 14204 Aingas Safety,Inc. 2,D97.90 Safety Supplies 14205 Alan Plummer Associates 11,474.00 Professional Services-Superoxygonalion Process Feasibility Study 14206 Allied Packing&Rubber,Inc. 164.84 Mechanical Pads 8 Supplies 14W7 American Full Assurance Company 529.04 Employee Voluntary Cancer Insurance 14208 Amloch Elevator Services 1,400.00 Monthly Elevator Maintenance at Pits. 1 &2 14209 AppleOne Employment Service 2,966.40 Temporary Employment Sarvlces 14210 ARBrPERP-Air Resources Board 1,725.00 Pennil Fee-Portable Equipment Registration Program Certificate 14211 Ashbrook Simon Hadley Operations 5.566.56 Mechanical Pons&Supplies 14212 Askew Industrial Come. 912.97 Fasteners 14213 AT&T 3,94336 Telephone Service 14214 AT&T Mobility I.L.L.C. 188.91 Telephone Equipment&Activation 14215 AT&T Mobility II,L.L.C. 7.522.59 Wireless Telephone Services 14215 AWSI 60.00 Department of Transportation Program Management&Testing 14217 Business&Legal Reports,Inc. 634.95 Books&Publications 14218 Battery Spectators 174.81 Batteries 14219 Banned Bowen Ughlhouse 2.541.52 Instrument Pads&Supplies 14220 Ell 74.00 Books&Publications 14221 BloMedeux Vdek,Inc. 2,374.92 Computer Software/Hardware Maintenance Agreement 14222 Black Box Coryaratlan 204.64 Computer SD&wareMardnare 14223 Calif.Assoc.0 Sanitation Agendas 425.00 Meeting Registration-Division 620 14224 California Dept of Child Support 1.873.50 Wage Garnishment 14225 Cairene.Recreation Company 2,W1.11 Boat Slip Rental Fees for Ocean Monitoring Vessel Nerissa 14226 Callml,Inc. 5,678.45 Mechanical Pads&Supplies H Wpn usE%CEL cle l,20APS-ARFCIahre Paid Rero1?)(00mrsPoorl NAvaNmml A_m-15-08 hm EXHIBIT runt. Page 4 or nudes �. Claims Paid From 09MI108 to 0911VOS Warrant No. Vendor Amount Description 14227 Cambridge Integrated Seances Group,Inc. 2.875.00 Professional Services-Workers Compenselion Claims 14228 Cambridge Isotope Labs 766.02 Lab Pads&Supplies 14229 Cards Hurley Dean OBA Dame Pacific 3.874.T7 Crane Rental 14230 Cavanaugh Machine Works 703.0 Repair&Maintenance Semoes-Stuffing Box 142,31 Charles P.Crowley Co. 1.101.63 Pump Pans&SUPPI105 14232 Circle,1., 2,104.95 Office Supplies-Toner Catridges 14M City of Gallen Grove 339.75 Water Use 14234 Clean Harbors Environmental Services 2,011.62 Hazardous Waste Management ServPoes 14235 Womble Analytical Semmes,Inc. 870.00 Alrelysis of Wastewater,Industrial Wastewater&Biosolids 14236 Compressor Components of California 2.685.00 Mechanical Pans&Supplies 14237 Connell CH9vrolenGEO 29720 Vehicle Pads&Supplies 14238 Consumers Pipe&Supply Co. 1.341.53 Plumbing Pans&Supplies 14239 Conveyor Components Company 727.82 Electrical Pans&Supplies 14240 Council on Education in Management 1.945.00 Training Registration 14241 County,of Orange-Health Care Agency 5,493.00 Underground Storage Tank.Hazardous Material,&State Fees 14242 County of Orange-Health Care Agency 5237.00 Urdergrou J Storage Tank,Hazardous Material,&State Fees 14243 County of Orange-Health Care Agency 854.00 Underground Storage Tank,Hazardous Material,&State Fees 14244 County of Orange-Health Care Agency 295.00 Hazadous Materal&State Fees 14245 County of Orange-Health Care Agency 295.00 Hazardous Material&State Fees 14246 County of Orange-Health Care Agency 295.00 Hazardous Material&Stale Fees 14247 Crane Veyor Corp. 716,57 Crone Repairs 14248 CS-AMSCO 16,432.01 Mechanical Pans&Supplies 14249 Celdonia Special District Associefi. 1,500.00 Membership 14250 Culligan of Orange County 675.05 Mont.Agreement-Can Gen Water Softener System 14261 Curley Wholesale Electric,Inc. 8,603.84 Electrical Pads&SUPpfies 14252 CXTEC 1,997.63 Computer Herdwarel5ohware 14253 Do R Right Construction,Inc. 2,800.00 R...VReplacemant of AV Equipment&Existing Wall at Control Center 14254 Dr.Harvey Goldstone 1,260.00 Safety Glasses 14255 Empopes Benefits Specialists,Inc. 14,044.88 Reimbursed Prepaid Employee Medical&Dependent Care 14256 Enlecin Instruments,Inc. 133.93 Lab Paris&Supplies 14267 Environmental&Occupational Risk Mgmt. 1,105.00 Professional Services-Indoor Air Oueety Consulting 14258 Environmental Water Solutions,Inc. 1,529.57 Mechanical Pans&Supplies 14259 FEDEX 85.37 Freight Services 14260 Ferguson Enterprises,Inc. 1.673.29 Mechanical Pans&Supplies 14261 Rsho Scientific Company.L.L.C. 748.45 Lab Paris&Supplies 14262 Filch.Inc. 3,000.00 Annual Surveillance Fee for Series 2000 A&8 Certificates 0 PanMpstion 14M Fleming EmAronmenlal,Inc. 240.00 Repair&Maintenance-Owilow Arm 14264 FLW,Inc. 4.712.40 Mechanical Parts&Supplies 14M Franchise Tax Board 50.00 Wage Garnishment 14266 Franchise Tax Bond 154.00 Wage Garnishment 14257 Franklin Covey 561.18 Office Supplies 14268 Frys Eledrortics 330.67 Computer Supplies 14269 GamaO Callahan Company 2.524.69 Chemicals 14270 Gemini Digital Products Corp. 23.937.00 Computed;-(4)Refurbished VAX CPU Module Workstations 14271 George T.Hall 1,105.73 Electrical Pans&Supplies 14272 G.F.OA.(Government Finance Officers Assoc.) 255.00 Training Registration 14273 Goidenweal Corp. 420.00 Cleaning&Maintenance Services-Storage Shed&A.S.Lab 14274 Govemmsnt Jobs.Com,Inc. 849.00 Training Registration H WepleWE%CEL do=AA MREICWi Pep Relax Vmaclav xditeFxi Atu&mmlA09.1$ Au EXHIBIT RWUMa - - Page 5of9 '(WOKpe Claims Paid From 09MI108 to 08I15/US Warrant No. Vanden Amount D...rlptlon 14275 Graham Corporalion 13.352.83 Vacuum Pump Replacement 14276 Grainger.Inc. 1,644.79 Electrical&Instrument Pats&Supplies 142n Graybar Electric Company 1.81423 Electrical Repair&Maintenance Services 14278 Great Western Sanitary Supplies 313.89 Janitorial Supplies 14279 GTE.NET.L.L.C.(Verimn Online) 99.99 Wireless Telephone Services 14280 Heaker Equipment Company 593.16 Miac.Vehicle,Pats,Repass&Service 14281 Harrington Industrial Plastics,Inc. 1.619.18 Mechanical Pats&Supplies 14282 Heath Saence Associates 1.393.03 Professional Services-Air Moniloring-Gas Compressor Bldg,Basement 14283 HealMpointe Medical Group,Inc. 75.00 Fdress For Duty Evaluation 14284 Home Depot 522.93 Mac.Repair&Maintenance Material 142M Hub Aulo Supply 280.% Vehicle Pats&Supplies 142M City of Huntington Beach 36.32 Water Use 14287 Hyatt Legal Plans,Inc. 1,080.0o Employee Voluntary Legal Plan 142M Idexx Laboratories.Inc. 3.340.25 lab Paris&Supplies 142M Indiana Child Support Bureau 290.00 Wage Garnishment 14290 Industrial Distribution Group 47.83 Miscellaneous Maintenance Materials&Supplies 14291 Industrial Threaded Products,Inc. 578.57 Mechanical Pats&Supplies 14292 Innedine Engineemg 6,722.50 Sewedine Cleaning&Video Inspections 14M Inorganic Ventures,Inc. 98.08 Lab Pats&Supplies 142M Internal Revenue Service 125.00 Wage Garnishment 14295 Internal Revenue Service 1.412.57 Wage Gamishmenl 14296 Inn Union of Oper.Eng.AFL CIO Local 501 4.789.28 Dues Deduction 14297 ISEC.Inc 3.497.00 Repair&Maintenance Services-Lab Bench Relocation 14298 Jamison Engineering CaMradors,Inc. 13.360.00 Repair&Maintenance SeMces-Plant No.2 Sluke Gale Adjustments 14299 Jays Catering 128.82 Meeting Expenses 14300 Joinder.Inc. 395.00 Notices&Ads 14MI Joshua Casay Corporal.Training 1,720.00 Training Registration 14302 Leading True International USA,Inc. 2,000.00 Training Registration 14303 LECO Copm Jkm 459.40 MachanicaVEleclrical Pads&Supplies 14304 The Library Store,Inc. 76.45 Storage Boxes for Library Shop Drawings 14305 Court Order 150.00 Wage Garnishment 14306 Lymtle-ONwey Company,loc. 60.00 Equlpmenl Maintenance&Rep kr Services-DMI Press/Cuter 143D7 Mark Technology,Inc. 1,570.00 Reconciliation User Fee Refund Program 143DB Materials and Contract Services 5,760.00 Temporary Employment Services 14309 Man Chi Inc. 4,296.80 Valves 14310 Mclunkin Red Man Corporation 355.64 Mechanical Pads 8 Supplies 14311 Mdvlasher Can Supply Co. 2,164.08 Mechanical Pats,Supplies&Tools 14312 Meesun menl Conbol Systems.Mc. 678.32 Repelr&C.lituraton Services-Rotary Gas Melor 14313 Court Order 225.00 Wage Garnishment 14314 MSDS Online.Inc. 854.00 Software Maintenance-MSDS Online Web Server 14315 MVA Archtecls 198.57 Professional Services FE07-08 14316 NAFA.Inc. 450.00 Membership 14317 National Bond&Trust 1,789A5 U.S.Savings Bonds Payroll Deductions 14318 Neal Supply Co. 549.06 PWmbing Supplies 14319 Neutron Products,Inc. 6,113.17 Antonio Polymer 14320 Nickell Metal Spray 1,706.75 Repair&Maintenance Services-Shaft 14321 OCB Reprographics 1,461,13 Roiling Service-MO 1126100 14322 OCEA 579.49 Does Deducton Poea1 %CeLdraVNAPSHAREVkN¢PaN RepaTZgp8lrA a6RepanAOedimmlA0415La..dv EXHIBITA Page of .. Claim,Pald From 09101108 to 09115108 Wartant No. Vendor Amount Description 14323 01 AnelyOwl 51SO4 Lab Parts&Supplies 14324 Olen Corporation 3797.66 Sodium Hydroxide 14325 Olympus America 14.854.46 Lab Equipment-Stereo Microscopes 14326 Onesource Dlsbibutors,Inc. 983.29 Electrical Pads&Supplies 14327 Orange County Under Way 60.00 Employee COnldbulmns 14328 Orange Fluid System Technologies.Inc. 3.261.57 Plumbing Parts&Supplies 14329 Oslerbeuer Compressor 12.467.92 All Compressor Paris&Supplies 14330 Oxygen Service Company 1,382.04 Lab Parts&Supplies 14331 PAC 1.020.65 Lab Pads&Supplies 14332 Pacific Mechanical Supply nao Plumbing Supplies 143M PBS&J 10196.61 Professional Servces 3.52 14334 Peace Officros Counul of CA 2,014.74 Dues Deduction,Supervisors If Professionals 14335 Pedolmance Pipeline Technoogi IS 3,255.00 Serwer ine Video Inspections-Various 143M PL Hewn Company.Inc. 614.11 Electrical Pans&Supplies 14337 Prexair,Inc. 70.30 Lab Pads&Suppliers 14338 Primary Source Office Furnishings,Inc. 1,422.30 Repair&Melntanance Se Aces-Olfice WalllCe1t11g Panel translation 14339 Propipe Professional Pipe Services 19,337.84 Sewaline Video Inspections&Sewer firs Cleaning for City of Tustin&Unincorporated County Property 14340 Public Resources Advisory Group 1,124.30 Financial AdWsory Servces 14341 R L Abbott&Assoualos 2.000.00 Kern County Biosolids Consulting SeMces 14342 Rainbow Disposal Co. 3.376.48 Trash Removal 14343 RMS Engineering&Design.Inc. $32.50 Engineering Services FE07-08 14344 Robe lo's Auto Trim Shop 525.43 Upholstery Repairs 14345 Rutland!Tool&Supply 9.89 Small Tools 14348 S&J Supply Cc Inc 2.750.40 Mechanical Paris&Supplies 14347 Sprint PCs Assels,L.L.C. 15,049.27 Refund of Rant Overpayments-Lease Expired 14348 Santa Me Mines Flood Protection Agency 1,100.00 Membership 14349 Sanmlus MechaWnks Cap. 68.40 instrument Pane&Supplies 14350 Suence Appticalmns Intemational 4,844.20 Ocean Monitoring MO 6-8-N 14351 Scott Specialty Gases.Inc. 791.96 Lab Pans&Supplies 14352 Solon Name Plate 303,40 Pipe Marking Tape 14353 Shamrock Supply Co.,Inc 3.716.67 Miscellaneous Maintenance a Safety Suppliers 14354 Shureluck Sales&Engineering 773.13 Mechanical Pans&Supplies 14355 Siemens 2,61272 Instrument Paris If Supplies 14356 Siemens Water Technologies Corp. 5.897.63 Service Agreement-DI Water Systems at Plants 1 If 2 14357 Sigma-Aldrich,Inc. 207.52 Lab Pans&Supplies 14358 SKC West,Inc. 42972 Instrument Raisers&Maintenance 14359 Smith-Emery Company 2,715.68 Soils,Concrete&Other Materials Testing 14360 SD Cal Gas Company 13,600.16 Natural Gas 14361 Voided Check - - 14362 Southern Counties Lubricants 1,BMSS ON 14363 Square D Company 4.300.00 Training Reglakaleon 14364 SST Benefits Consulting&Insurance Servces 15.760.00 Professional Servces-Defended Compensation Programs 14366 Summit Steel 1,879.18 Metal 14306 Sunset Ford 129.28 Vehicle Pans&SeMce 14367 Systems Solution Company 1,654.16 Repairs&Maintenance Services-Access ContmIICCTV Security System 14368 TekSyslems 1,520.00 Temporary Employment SmAces 14369 Tenminix Inlematlonal 59.00 Past Control 14370 Thermo Electron Cap. 12.915.65 Lab Paris&Supplies H WWW1 EXCEL MWAXAPSHARIBCerrs PrN PBmd�300661eimaPeNRgpa.Aydimpnl A_OA?15.ve Xso EXHIBITA av21M Page 7 of 9 low" Calms Paid From 09/01108 to 09115108 Warrant No. Vernier Amount Description 14371 Thermo Flakier Scientific 10,74CM Insmrmad Maintenance Contract-Atlas 14372 Thomas Grey&Assoe. 198.00 Bicsolids AnalysiMAnalyses of Radioadinty Wipe Tests 14373 Osprey Madre Management 1,500.00 Lab Analyses W74 T-Mobile 106.67 Wireless Air Time 14375 Toro Lode&Safe S.M.&Sales 67.34 Looks&Keys 14376 Tortuga Pool Services 310.00 Weekly Cleaning of Akium Penal 143T, TownseM Public Affairs 7,500.00 Legislative&Executive Advarale for Grant Funding 143M Truck&Auto Supply,Inc. 65.99 Aulomdive Paris&Supplies 14379 TuMmt,Inc 343.71 Sales Tax-P.O.68024-OP 14300 UMa Scismifie 347.84 Lab Pads&Supplies 14381 Union Bank Of California 2203.00 Annual Admmistral ne Fee for Series 2003 Certificates of Participation 143K Unis mince Corporation Purchasing 554.86 Office Supplies 14383 United Pacific Services,Inc. 17.067.51 Landscape Maintenance at Plants 1&2 and Pump Stations 14W United Parcel Service 63.83 Parcel Services 14385 Umled Pumping Service 1,352.06 Pumping Service 14386 US Army Corps of Engineers 10.000.W Cultural Mon0edrg Fees-2-24-1 14387 USA Mobility Wireless,Inc. 845.60 Wireless Services-Pagers 14388 Victory Omar,Inc 1,226.84 Reconci11a8on User Fee Refund Program 14389 Vanam.Inc 216.37 Lab Pads&Supplies 14390 Verumn Coldomia 747.06 Telephone Services 14391 Vemes Plumbing 986.47 Plumbing Services-Operations Center 14392 VOdex Industries,Inc. 229.30 Door Repairs 14393 MR Scientific 341.77 Lab Pens&Supplies 14394 Tine Wakenhut Corporation 5,376.04 Securiy,Services 14395 WEF 154.00 Membership-Water Errvhomnanl Federation 14395 West Coast Safety Supply Co. 450.00 Training Registration 14397 Westin Solutions,Inc. 15.611.55 Outside Laboratory Services-Core Ocean Monitoring Program 14398 Wilson Supply,Ina 64.76 Plumbing Parts&Supplies 14M Wumbus Corporation 1.086.63 Safely Video 14400 Xerox Corporation 3.936.00 Cagier Services-Equipment Leases,Managed Services,&Metered Copy Usage&Charges 14401 Court Order 912.50 Wage Garnishment 14402 Layne T.Behold 627.12 MeeBrgRralnmg Expense Reimbursement 14403 James L.Burmr 487.00 Meatlrgflrsinmg Expanse Reimbursement 14404 James Ferryman 199.00 MeefinglTraming Expense Reimbursement 14405 James D.Herberg 722.12 MeeOngRraming Expense Reimbursement 14406 Vlrs imir A.Kogan 494.06 Meetingrlreining Expense Reimbursement 14407 Jeffrey Y.Shubik 513.21 Meetmg/lraming Expense Reimbursement 14408 Roya Sohanakl 12500 MBBtIng/Treining Expense Reimbursement 14409 County of Orange Auditor Controller 390.00 Administration Fee-Adjustment to Property Tax Bill 14410 County of Orange Auditor Controller 345.00 Administration Fee-Adjustment to Property Tax Bill 14411 Philip Luebben 1,034.16 MeatinglTraining Expense Reimbursement 14412 John Meyer&Dell 2.000.00 Employee Computer Loan Program 14413 Orange County Sanitation District 18,894.77 Wmkafs Comp.Rdmb. 14414 BARBS 1,140.W Training Registration 1"15 Dept.of Fish and Game 200.00 Permit Fee-SARI Emergency Repaire 241-5 Total Accounts Payable-Warrants 13,079,060.72 MVerMaNFJIC£L Ne17ZUAP51NRE1Gaim PeM ReporIV0001LIrumPaOlepvnAOadmieon A Ua-1Sa9.4ee EXHIBITA aNZlaly Page 8 of 9 10,60406 .. Claims Paid From MIIIO8 to 09/15108 Warrant No. Vendor Amount Description Payroll Disbursements 40069 - 40098 Employee Paychecks $ 4,905.08 Interim Payroll-All(OE/02108p 40102 - 40165 Employee Paychecks 109.775.67 Biweeky,Payroll(Wit=8) Q166 - 40169 Employee Paychecks 683.80 Interim Payroll-Rebr Payments(09109W) 160338 -160421 Direct Conrail Statements 23.655.66 Interim Payroll-ARSA(OMM8) 16MM -161OD3 Di Daposil Statements 1,358,021.62 Biweekly Payroll(D9/10108) Total Payroll Disbursements 8 . . 1.85 Turned oN M NaM numler wdv an b28M 8 real an ONOM. When Transfer Payments OCSC Payroll Taxes 8 Contributions $ 783.120.90 Biweekly Payroll(09/10IOB) Deutsche Bank 192,570.37 Series 20M CertiOcatea d Participation September Interest Payment Bank of New York 1,095,669.2E Sens 1993 Refunding Certlfiratea of Participation September Interest Payment&Closing Funds Total Mrs Transfer Payments S 2.021.380.56 Total Claims Paid 0g/01108.0911 SNB S 18.597.463.11 H:kerlLadMEL ddaMNPSH IilCldidg Pelf ReridVMa1CIi,—PeidRVNd-AII .-dP ¢9.11. N. EXHIBITA rN21M Pace 9 of 9 rearzada Claims Paid From 09118108 to 09130108 Warrant No. Vendor Amount Description Accounts Payable-Warrants 14416 American Express $ 26,320.11 Purchasing Card Program,Miss.Supplies&Services W17 Black&Veatch Corporation 37.884.67 Professional Services P7-76&J-79-1 14418 Cardlock Fuel Systems,Inc. 31,492.44 Fuel Card Program-DlsMol Vehicles&Monitoring Vessel 14419 Dudek&Associates,Inc. 54,928.00 Professional Services-Potable Water Assessment at Plant No.1 14420 Earth Tach,Inc. 195,294.31 Professional Services 1.2.4&P1-100 14421 Entech Design,Inc. 61.164.89 InstrumentlEleMcal Pads&Supplies-BinMinder Level Ranging System 14422 IPMC No Parsons 1,102,075.00 Engineering Services-Integrated ProgremlProject Management,Temporary Staffing,Mail.&Supplies 14423 Jamison Engineering Contractors,Inc. 79,564.36 Repair&Maintenance Services-Upgrades to Gas Flaps&Primary Influent Pipe Leak 14424 JCI Jones Chemicals,Inc 183,974.04 Sodium Hypuchlorte W25 Kemira Companies,Inc. 68,563.87 Ferric Chloride 14426 RBnyo&Moore 26.842.50 Professional Services-Soils,Concrete&Other Materials Testing for Various Capital Projects 14427 Polydyne,Inc. 56,219.74 Cationic Polymer MO 3.11-92 14428 Propipe Professimel Pipe Services 41,715.13 Sewedine Cleaning for City of Tustin&Unincorporated County Property 14429 Southern California Edison 2D6,564.97 Power 14430 Synagm West,Inc. 391.235.73 Residuals Removal MO 3.29-95 14431 Tole RsncltlMagan Farms 313,814.69 Residuals Removal MO 3.29-95 14432 US Peroxide,L.L.C. 340.944.04 Odor&Corrosion Control Treatment for Coll.Sys.;Hydrogen Peroxide&Ferrous Chloride 14433 First Regional Bank of CA 194,992.93 Construction P2-80&P2-91,Retention 14434 J F Shea Construction,Inc. 933.826.10 Construction P2-66 14435 Kiewil Pacific Co. 7,574,784.30 Construction P1-002 14436 Miron Electric Construction Corp. 182,g12.50 Construction Pi-97 14437 Shimmick Construction Co..Inc. 1.754.936.37 Construction P2.80&P2-91 14438 Walls Fargo Bank 841,642.70 Construction P7-102,Retention 14439 Union Bank of America Escrow 49.148.75 Construction P2�66,Retention 14440 A W Chesterton 3.937.97 Mechanical Parts&Supplies 14441 Advanced Engine Techologies,Inc. 11,583.28 Air Duality Monitoring-RATA Testing 14442 Agllent Technologies,Inc. 564.61 Lab Parts&Supplies 14443 Aigas Safety 6.122.63 Safety Supplies 14 14 Algas-West 11.47 Laboratory Supplies 14445 Alhambra Foundry Co.,Ltd. 4,083.05 Manhole Frames&Covers and Catch Basin Greta 14446 Allied Packing&Rubber,Inc. 728.61 Pump 14447 American Airlines 5.119.30 Travel Services 14448 American Construction Inspectors Assoc. 85.D0 Training Registration 14449 American Seal&Packing 265.07 Mechanical Paris&Supplies 14450 Applied Industrial Technology 159.86 Mechanical Parts&Supplies 14451 Ario .Instrument 1,370.75 Instrument Repairs&Calibration Services 14452 Askew Industrial Cap. 156.67 Fasteners 14453 AT&T 737.20 Telephone Service 14454 AT&T Mobility 11,L.L.C. 1,794.00 Telephone Equipment&Activation 14455 Autodesk University/Enterprise Event 3.690.00 Training Registration 14456 AWSI 259.00 Department of Transportation Program Management It Testing 14457 Basic Chenucal Solutions,L.L.C. 23.924.57 Sodium Hydroxide 14458 Battery Specialties 762.87 Batteries 14459 BC Wire Rope&Rigging 1,634.86 Mechanical Parts&Supplies W60 Banned Bowen Lighthouse 1.071.00 CoiluaBon Gases 14461 SKI Management Consulting 1,842.44 Professional Sew.-Strategic Planning&Facilitating Services for EMT Retreat&Boom Workshops H?bpNWfxCELctd= N "R1BCWims Paid eee3 .q[. EXHIBIT fiN11Mc Pagel of 9 iWcO e Claims Paid From 09/16108 to 09/30/08 Warrant No. Vendor Amount Description 14462 Blue Diamond Car Wash,Inc. 1.416.99 OCSD Vehicle WashingMaxfng Services 14463 Brand Scaffold Rental&Erection,Inc. 225.39 Scaffolding Repairs 14464 California Relocation Services.Inc. 652.50 Office Files Moving/Relocation Services 14465 Center Sales&Distribution,L.L.C. 384.87 Electrical Parts&Supplies 14466 Casual Gourmet 121.76 Mee9ng Expenses 14467 CON Isotopes 210.00 Lab Paris&Supplies 14466 Circle,Inc. 536.94 Office Supplies-Toner Cartridges 14469 Coast Rubber Stamp,Mfg. 226.11 Office Supplies 14470 Construction Book Express 110.40 Publications&Books 14471 Corporate Express 378.34 Office Supplies 14472 County Wholesale Electric Co. 893.85 Electrical Parts&Supplies 14473 C.P.I.International 102.36 Lab Parts&Supplies 14474 CR&R,Inc. 1,314.24 Container Rentals&Waste Disposal Service 14475 Cross Current CDMOMOM 1,200.00 Professional Services-Network Penelretlon Testing 14476 CS-AMSCO 9.063.38 Mechanical Parts&Supplies 14477 Culligan of Orange County 51.80 Maint.Agreement-Can Gen Water Softener System 14478 CWEA Membership 264.00 Membership(Calff.Water Environment Assoc.) 14479 C3S.Inc. 2.190.00 Professional Services-Mortar Testing-Sample from 24'Effluent Wastewater Pipeline 14480 Desed Pumps&Parts,Inc. 507.40 Pump Pads&Supplies 14481 DLT&V Systems Engineering,Inc. 631.60 Professional Services FE07-11 14482 Dunn Edwards Corporation 64.14 Point Supplies 14483 DWG Associates 5,312.50 Professional Services-Oxygen Plant Rehabilitation 14484 Electronic Balancing Co. 595.00 Repair&Maintenance Services-Balance Impeller&Shaft Assembly 14485 Elmo Duddy,Inc. 1.925.48 Expansion Tank 14486 Enlech Instruments,Inc. 1,805.00 Lab Instrument Repairs 14487 Eskel PorterConsulCmg,Inc. 3.272.60 Professional Services-Implementation of Microsoft Customer Relationship Management Application 1088 Ewing Initiation Industrial 440.98 Landscape Irrigation Pads&Supplies 14489 FEDEX Comomfion 30.72 Freight Services 14490 First American Reel Estate Solutions 372.00 On-Line Orange County Property Information 14491 Fisher Scientific Company,L.L.C. 714.29 Lab Pans It Supplies IM92 Ganahl Lumber Company 179.60 Lumben/Hardware 14493 GBC(General Binding Corp) 71.98 Office Supplies 14494 Geary Pacific Supply 3.458.15 Air Conditioner 14495 Giedich Mitchell,Inc. 2.641.12 Mechanical Pads&Supplies 14498 Goldenwesl Corp. 1.628.00 Repair&Maint.Sews,-Install BIM-BGone Bird Spikes at Building M&Leek Repairs at Plant No.1 14497 Grainger,Inc. 1,597.76 Small Tools 14498 Greybar Electric Company 357.98 Mechanical Pads&Supplies 14499 Guaranies Records Management 379.00 Off-Site Records Storage 145M Harrington Industrial PMsucs,Inc. 2,441.16 Mechanics)Pads&Supplies 145D1 Hasler,Inc. 89.43 Meter Rental Charges&Misc.Supplies-Inlelfdouch System Complete Mail System 14502 HDR Engineering,Inc. 14,931.31 Professional Services P1-82&FE0"5 14503 Healthfax,Inc. 5.368.00 Flu Immunization Program 14504 Hill Brothers 14,597.85 Chemicals-Odor&Conocion Control-Newport Tmnkline 14505 Hoerbiger Service,Inc. 310.37 Mechanical Pads&Supplies 14506 Home Depot 658.05 Misc.Repair&Maintenance Material 14507 Informafion Handling Services 3.261.50 Maintenance Agreement-Supportfor NFPA(National Fire Protection Agency)Data Pages 14508 Industrial Threaded Products,Inc. 40.62 Freight Charges-P.O.68272 OP HMep�sS CELdneMMP5HME WIMP ReraMWB�sP ldReral. amen) B 09JOU9.tiv EXHIBITS nnrztunc Page 2 of 9 togtlape Claims Paid From 09/18108 to 09/3D108 Warrard No. Vendor Amount Description 14509 Infrastructure Engineering Corp. 640.69 Professional Services FE07416 14510 Insight Public Sector 17,327.74 Electrical Pads&Supplies-UPS 14511 Interstate Batteries of Cal Coast 636.32 Batteries for Vehicles&Cads M12 Invensys Systems.Inc. 4.535.38 Instrument Pads&Supplies 14513 tromnan Parts&Slimmer 438.33 Filter 14514 Irvine Ranch Water District 49.61 Water Use 14515 Johnstone Supply 530.03 Electrical Paris&Supplies 14516 Learning That,International USA,Inc. 2.0D0.00 Training Registration 14517 Lorman Education Services 578.00 Training Registration MIS Lynde-Ordway Company,Inc. 492.69 Equipment Maintenance&Repair Services 14619 McMaster Cart Supply Co. 204.27 Flag Poles&Flags 14520 Mid West Assodiates 21.955.73 Pump Paris&Supplies 14521 Miele,Inc. 821.19 Lab Pads&Supplies 14522 Minsik 139,12 Instrument Supplies 14523 Mitchell Insbumord Co. 654.08 Small Tads 14524 MWH Americas,Inc. 18.847.10 Professional Services P2.74&Reclaiming SARI Flow Study 14525 N.Glantz&Son,Inc. 1,079.65 Reflective Tape 14526 Neal Supply Co. 2.814.51 Plumbing Supplies 14527 Neutron Products,Inc. 3.138.11 Anionic Potynrer 14528 NRG Engine Services,L.L.C. 6.154.97 Mechanical Parts&Supplies 14529 OCB Reprographics 6,368.08 Printing Service-MO 112B/00 14530 O0ice Depot Business Servlare Division 971.72 Office Supplies 14531 Ofin Corporation 3.762.88 Sodium Hydroxide 14532 Onesouroo Distributors,Inc. 187.74 Electrical Parts&Supplies 14533 Oracle USA.Inc. 20,039.19 Software Update Licenses-JD Edwards 14SM Orange County Chapter-ISCEBS 60.00 Meeting Registration Division 240 14535 Orange Fluid System Technologies,Inc. 688.13 Plumbing Pads&Supplies 14536 Oxygen Service Company 1.292.31 Rebuild Shop Gases&Lab Parts&Supplies 14537 PAC 73.75 Lab Parts&Supplies 14538 Penalties Wiping Materials Co. 494.79 Janitorial Supplies 14539 PenvaNe Peninsula Valve&Fitting 2,010-51 Plumbing Pads&Supplies 14540 PL Hawn Company,Inc. 336.05 Electrical Parts&Supplies 14541 Ouickstart Intelligence 2,275.00 Training Registration 14542 Red Wing Shoes 155.16 Safety Shoes 14643 Restak Corp. 743.94 Lab Paris&Supplies 145" Rockwell Engineering&Equipment Co. 340.54 Freight Charges-P.O.67123 OP 14545 Roto Roofer NOCp11 4.700.00 Plumbng Services-Shower Valves 14546 RatlerM Tool&Supply 173.14 Small Tools 14647 Scott Specialty Gases,Inc. 114.13 Lab Pads&Supplies 14548 SETAC 425.00 Training Registration 14549 Shamrock Supply Co.,Inc. 2,627.26 Paint&Electrical Supplies&Small Tools 14550 Shimadzu Scientific Insbumenis,Inc. 800.00 Instrument Pads&Supplies 14551 Sigma Aldrich,Inc. 78.04 Lab Parts&Supplies 14552 Sign Supply USA.Inc. 1.230.00 Computer Equipment Maintenance Contract-Roland Printer 14653 Smith-Emery Company 23,754.43 Soils,Concrete&Other Materials Testing 14554 Snap On Tools 111.77 Smell Tool Expenses 14555 So Cal Gas Company 5,443.65 Natural Gas n:mpMNFxtELalavzpuPsnxkElcmm Pew RepwNea9wYaMrPaw6epm.aaaanme 009a040.wra EXHIBIT ewemle Page 3 of 9 1.11,0e Claims Paid From 09116/08 to 09130MB Wamant No. Vendor Amount Description 14556 Soltame House International 19,663.30 Software Maintenance&Support-Galaxy 14557 Southern Califomia Edison 1,524.36 Power 14558 Tram Company 4.028.18 Mechanical Parts 8 Supplies 14559 Southern Counties Lubricants 4,676.88 Motor Oil 14560 Soutilem Counties Oil Co. 3.869.90 Diesel Fuel 14551 SPEX Cantors ,Inc. 71.11 Lab Pads&Supplies 14562 Staniey Steamer INamalional,Inc. 2273.85 Carpet Cleaning Services 14563 Stanton Radiator 8,162.17 Radiator Repair 14564 Summit Steel 1,214.60 Metal 14565 Sunset Industrial Pads 1.971.04 Mechanical&Electrical Paris&Supplies 14566 Super Chem Corporation 782.27 Cleaners/Degreasers 14567 Temiinix International 650.00 Pest Control Service 14568 The Register 3,510.16 Notices 8 Ads 14569 Thermo Electron North America,L.L.C. 252.14 Lab Parts&Supplies 14570 Thompson Industrial Supply,Inc. 7.213.09 Mechanical Pads&Supplies 14571 Thom Construction 4.235.00 Repair&Maintenance Services-Sound Panel 14572 Tones Look&Safe Service&Sales 72.00 Locks&Keys 14573 Truck 8 Auto Supply,Inc. 54.98 Aummotive Paris&Supplies M74 Undergound Service Mari of So.Calif 1,474.50 Underground Utility IdentificalloNDig Aled Notification Service 14575 United Direct Marketing $0.39 Public Notice Printing&Distribution Costs for Various Construction Projects 14576 United Parcel Service 192.54 Parcel Services 145" Velin Corporation 413.42 Mechanical Supplies 14578 Valve Automation B Controls 1,193.85 Repair&Maintenance Servlces-Valve Actuator 14579 Venison California 40.60 Telephone Services 14580 Varizon California 1.647.34 Wireless Services 14581 Veme's Plumbing 4,635.00 Service Contract-Testing,Repair&Cert.Backfiaw Devices at Pits.1 &28 Pump Sta. 14582 Vibralign,Inc. 1,942.23 Small Tools 14583 Mlle Prep&Paint 1.720.00 Repair 8 Maintenance Services-Shower Grout 14554 Village Nurseries 366.24 Landscaping Supplies 14585 Vortex Industries,Inc. 1,716.28 Gate,Door&Look Repairs 14586 VWR Scientific Products 4.250.11 Lab Pads&Supplies 14587 Waters Corporation 2,354.23 Lab Paris&Supplies 14588 Waxle Sanitary Supply 1.073.42 Janitorial Supplies 14589 West Lite Supply Company,Inc. 43.89 Electrical Paris&Supplies 14590 Westport Apparatus DBA Breaker Supp. 2,773.64 Electrical Pads 8 Supplies 14591 Yale/Chase Materials Handling,Inc. 643.72 Electric Can Pads 14592 Ydkogawa Intl.Automation NO RM Controls 360.73 InsWment Supplies 14593 1-800-Confrrence(R) 82.71 Telephone Canferenco Calls 14594 Union Bank of Califomia 20,312.50 Construction P7-97,Retention 14595 Men Adams 354.33 MeelingTmining Expense Reimbursement 14598 Jon O.Bradley,Jr. 344.45 Meeting/Training Expense Reimbursement 14597 Patrick B.Carnahan 855.28 Mee6ngrrialning Expense Reimbursement 14598 David P.Francis 105.00 MeetingRraming Expanse Reimbursement 14599 James R.Hams 2,631.79 Meetingri mini g Expanse Reimbursement 14600 Vladimir A.Kogan 420.17 MeelingRraining Expense Reimbursement 14601 Samir Patel 150.00 MeeBngRnaining Expense Reimbursement 14602 Leyte D.Perez 151.78 MeaOng7rainirg Expense Reimbursement a:mplmemFxwLeumuaPsrtnBk�clalm.ran aePvrizaoma.Imrrwaepon.rwa��r a 4sao4e..ax EXHIBIT B aMtgc Page 4 of 9 tov� -I Claim Paid From 09/16/08 to 09130/08 Warrant No. Vendor Amwnt Description 14603 Gm,g A-Scott 393.12 Meeting/Training Expense Reimbursement 14604 Mahin Talebi 1.810.55 MeefingRreining Expense Reimbursement 14605 James G.True 150.00 Meeting/Training Expense Reimbursement 14606 Simon L.Walson 236.25 MeetingTTraming Expense Reimbursement 14607 Pierre Wog 125.00 MemingTTreintng Expense Reimbursement 14608 Joan Parker-Fray and Dell 1.822.50 Employee Computer Loan Program 14609 Voided Check -w - 14610 Orange Cnty Sanitation District Petty Cash Reimb. 14611 PLanetbids.Inc. 625.00 Meeting Registration-Division 230 14612 CA Regional Water Quality Control 500.00 Water Quality Certification Permit Application Fees-SARI Emergency, 14613 Air Products&Chemicals 26.972.63 O&M Agreement Oxy.Gen.Sys.MO 849-89 14614 Black&Veatch Corporation 404720.75 Professional Services P1-102.J-3M&SP-53 14615 Camp Dresser&McKee.Inc. 68,197.39 Professional Services JA7 14616 City of Fountain Valley 39,530.00 Water Use 14617 HUI Brothers 28.460.00 Chemicals-Colo&Corrosion Control-Newport Trunkime 14618 JCI Jones Chemicals,Inc. 183,570.08 Sodium Hypochloite 14619 K 2 General Con rackes,Inc. 49,611.W Professional Services J-96 14620 Kemirs Water Solutions 58,773.62 Ferric Cblorke 14621 Orange Crony Water District 80.743.32 Green Acres Water Project(GAP) 14622 Southern California Edison 289.594.28 Power 14623 Synagro West,Inc. 920.312.98 Residuals Removal MO 3-29-95 14624 Symms Scieng6c,L.L.C. 43.957.96 Instrument Pam&Supplies 14625 US Peroxide.LLC. 215,871.19 Odo&Corrosion Control Treatment for Coll.Sys.;Hydrogen Peroxide&Ferrous Chloride 14626 J F Shoe Construction,Inc. 1,189,209.22 Conviction 1-1013 14627 Ken Thompson,Inc. 735,940.80 Construction P2-68 14628 A W Chesterton 2,198.52 Mechanical Pads&Supplies 14629 Absolute Standards,Inc. 98.00 Lab Parts&Supplies 14630 Agmeya Solutions,Inc. 5.583.00 Professional Services-Records Management Study 14631 Algas Safety,Inc 6,622.35 Safety Supplies 14632 American Construction Inspector Assoc. 2.700.00 Training Registration-Safety Assessment Evaluator Training(SAP) 14633 American Payroll Institute,Inc. 195.00 Membership 14634 AppleOne Employment Service 10.204.93 Temporary Employment Services 14635 Ashbramk Corporation 3,910.38 Mechanical Pans&Supplies 14636 Atkinson,Andelson,Lays,Rudd&Ruud 7,951 Legal Services-Employee Relations 14637 The Austin Company 2.715.54 Professonal Services J-97 14638 Baker Tanks 2,189.00 Tank Rentals 14639 Basic Chemical Solutions,L.L.C. 12,870.88 Sodium Hydroxide 14640 38I43eau Bureaux interiors 380.14 Office Furniture-Chair 14641 BC Wire Reope&Rigging 45.56 Mechanical Pans&Supplies 14642 Beach Wire and Cable 326.82 Computer Hadware-Netwarldng Wires&Cables 14643 Bennett Bowen Lighthouse 301.70 Calibration Gases 14644 Biosphed®I Instruments,Inc. 267.00 Instrument Repairs B Maintenance 14645 Brown&Caldwell 7,800.94 Professional Services P3-91 14646 Columbia Huntington Beach Hospital 646.58 Reconollud.n User Fee Refund Program 14647 Calf.Assoc.of Sanitation Agencies 2.000.00 Legal Fees Pledge/Funding-CBE vs.SCAOMD Amicus Brief 14648 California Department of Fish and Game 150.00 Application Fees-Amendment of Permit-SARI Emergency Repairs 14649 California Dept.of Child Support 1,873.w Wage Garnishment X W,VaxME%CEL ftV APSHARE1Glx.Peid Repan12n081delmePelER¢ynAdeNmenr B 09-30M.tlu EXHIBIT B fim!im Page 5 of 9 1oAVXX8 Claims Paid From 09/16/08 to 09/30108 Warrant No. Vendor Amount Description 14650 Cardomta Relocation Services,Inc. 405.00 Office Files Moving/Relocation Services 14651 CAPPO Conference Registration 340.00 Meeting Registration-Division 230 14652 CAPPO,Inc. 59.00 Meeting Registration-Division 230 14653 Casual Gourmet 115.40 Meeting Expenses 14654 Voided Check - - W55 CDCE.Inc. 4,997.45 Computer Hardware/Software-Small Vehicle Mount 14656 CMAA 120.00 Membership 14657 Compressor Components of California 3,040.00 Mechanical Parts&Supplies 14658 Computer Protection Technology,Inc. 10.785.33 Quarterly Maintenance of Batteries,Rectifiers,and UPS System 14659 Connell ChevmIe0GEO 262.13 Vehicle Parts&Supplies 146N Consolidated Electrical Distributors.Inc. 374.89 Electrical Pads&Supplies 14661 Control Techniques Americas 203.28 Instrument Parts&Supplies 14662 Corporate Express 598.96 Office Supplies 14663 Conherpart Enterprises,Inc. 6.534.87 Mechanical Parts&Supplies 14664 County of Orange Auditor Controller 535.50 Encroachment Permit 2-24.1 14665 County Wholesale Electric Go. 1,49274 Electrical Paris&Supplies 14666 CR&R,Inc. 315.00 Container Rentals&Waste Disposal Service 14667 CS-AMSCO 6.079.83 Mechanical Parts&Supplies 14668 Desed Pumps&Pads,Inc. 4.948.67 Pump Paris&Supplies W69 Dezunk Water Codols 3,825.13 Mechanical Pens&Supplies 14670 Duke Service Company 105.00 Repair&Maintenance-Coffee Services Equipment 14671 Electronic Balancing Co. 195.00 Repair&Maintenance Services-Balance Impeller&Shaft Assembly 14672 Employee Benefits Specialists,Inc. 12.444.38 Reimbursed Prepaid Employee Medical&Dependent Gare 14673 Employment Development Dept. 6,661.00 State Unemployment Tax 14674 Enchanter Inc. 3,040100 Ocean Monitoring&Curtail Inspection&Maintenance 14875 ENS Resources,Inc. 10.000-00 Professional Services-Legislative Advocate 14676 Envtronmenlal Express 4.475.00 Equipment Repairs 14677 Environmental Resource Center 1,244.00 Training Registration 14678 Equipment Specialties Co. 2.475.30 Piranha Submersible Pump 14679 Ewing Irrigation Industrial 506.00 Landscape Irrigation Paris&Supplies 14680 Excelsia Corporation 800.00 Carpet Cleaning Services 14681 FEDEX Corporation 27.28 Freight Services 14682 Ferguson Enterprises,Inc. 347.66 Mechanical Parts&Supplies 14683 First American Real Estate Solutions 450.00 On-Line Orange County Property Information 14684 Fischman Occupatenal&E.,Med.Grp. 4X327 Professional Services-Indoor Ad Quality Consulting 14685 Fisher Scientific Company,L.L.C. 10.1977,46 Lab Pads&Supplies 14686 Flaming Environmental,Inc. 2,657.63 Repair&Maintenance Services-Waste Oil Tank 14687 FLW,Inc. 159.07 Mechanical Parts&Supplies 14688 Franchise Tax Board 50.00 Wage Garnishment 14689 Gadand Manufacturing Co. 1,320.50 Mechanical Pam&Supplies 14690 Getinge Castle 210.24 Lab Pans&Supplies 14691 Government Finance Officare Associated 595.00 Training Registration&Membership 14692 Glandstem Neandross&Associates,L.L.C. 255.00 Meeting Registration-Divisions 610&620 14693 Golden State Overnight Delivery Service 292.55 Counter Services 14694 Goldenvrest Corp. 4,429.00 Landscape Maintenance,Window Washing&Electric Can Detailing 14695 Grainger,Inc. 202.37 Electrical Parts&Supplies 14696 Graybar Electric Company 3,383.27 Electrical Parts&Supplies HMep 15XCEL.UIa12NrOP5HMflLM1Irre EXHIBIT PoNflewflRDJH�RalaePalEflelxxl-AnMmeM_e_00.1P0a.tlu mQUY. Page 8 of 9 lag2wl, Claims Paid From 09116/08 to 09130/09 Warrant No. Vendor Amount Description 14697 Hertington Industrial Plastics,Inc. 555.58 Mechanical Pans&Supplies 14698 Hasler,Inc. 1,94274 Software Maintenance Renewal 14699 Health Science Associates 785.00 Professional Services-Asbestos Study 14700 Home Depot 241.15 Misc.Repair&Maintenance Material 14701 Hub Auto Supply 1.585.50 Vehicle Parts&Supplies 14702 IECOC 35.00 Meeting Registration-Division 620 14703 Indian Child Support Bureau 290.00 Wage Garnishment 14704 Industrial Distrib,bon Group 2.346.52 Mechanical Parts,Supplies&Tools 14705 Inorganic Ventures,Inc. 67.46 Lab Pads&Supplies 14708 Insight Public Sector 24.733.44 Elechical Pans&Supplies-UPS 14707 Internal Revenue Service 125.00 Wage Garnishment 14708 Internal Revenue Service 65.28 Wage Garnishment 14709 Intl.Union of Oper.Eng.AFL CIO Local 501 4.834.10 Dues Deduction 1471D Jamison Engineering Contractors,Inc 727.00 Professional Services-Effluent Inspection 14711 Joshua Casey Corporate Training 2.770.00 Training Registration-Traffic Control Ragger 14712 Labels and Folders.Com 166.34 Office Supplies 14713 Court Older 150.00 Wage Garnishment 14714 Loran Education Services 339.00 Training Registration 14715 Daily Pilot 50.00 Notices&Ads 14716 MCWerizon 1.526.33 Wireless Telephone Services 14717 McMaster Can Supply Co. 3,613.72 Mechanical Pans&Supplies 14718 Mesa Consolidated Water District 36.00 Water Use 14719 MMway Mfg.&Machining Co. 1.74824 Mechanical Pens&Supplies 14720 Court Order 225.00 Wage Garnishment 14721 Municipal Water District of O.C. 16.061.00 Water Use Efficiency Program MID 9.22-99 14722 N.Glantz&Son,Inc. 548A4 Reflective Sheeting 14723 NATEC International.Inc. 395.00 Training Registration 14724 National Bond&Tmst 1,789.95 U.S.Savings Bonds Payroll Deductions 14725 Neutron Products,Inc. 3.091.56 Anionic Polymer 14726 Newark Electronics 1,717.45 Instrument Supplies 14727 Nextel Communications 937.74 Cellular Phones&Air Time 14728 No.Delivery 436.16 Mail Delivery Service 14729 OCB Reprographics 7,379.74 Printing Service-MO 112WO 14730 OCEA 561.67 Dues Deduction 14731 Office Depot 59.72 Office Supplies 14732 Ofin Corporation 3,832.44 Sodum Hydroxide 14733 Omega Industrial Supply,Inc. 1,829.96 Janitorial Supplies 14734 Onesource Distributors,Inc. 1.171.53 Electrical Pens&Supplies 14735 Orange County United Way 60.00 Employee Contributions 14736 ORCO Construction Supply 228.18 Marking Paint 14737 Oxygen Service Company 397.60 Lab Pans&Supplies 14738 Pacific Mechanical Supply 572.36 Plumbing Supplies 14739 Peace Officers Council of CA 2,025.81 Dues Deduction.Supervisors&Professionals 14740 Planelbids,Inc. 7,631.25 Bids Online-Vendor&Bid Management System 14741 Primrose Ice Co.,Inc. 180.00 Ice For Samples 14742 Propipe Professional Pipe Services 7,600.09 Sewerfine Cleaning for City of Tustin&Unincorporated County Property 14743 Prudential Werell Supply 5,022.11 Uniforms&Related Articles H WernbsNF.XCEI..OuwMPS11AREICINma Pail RoPof X)U8yCXwi PaiERepon-AMa menl_B_0 0L6.r1av EXHIBITS snrttofc Page 7 of 9 10A V 200a Claims Paid From 09116108 to 09130/08 Warrant No. Vendor Amount Description 14744 Ragan Communications,Inc. 99.00 Books&Publications 14745 RBF Consulting 1,152.78 Engineering Services 2-24-1 14746 Restek Corp. 671.17 Lab Pads&Supplies 14747 RMS Engineering&Design,Inc. 1.380.00 Facilities Engineering Annual Design Services 14748 Robedo's Auto Trim Shop 436.20 Upholstery Repairs 14749 RPM Electric Motors 2,004.95 Motor Repairs 14750 Schwing Bioset 1.62820 Pump Pads&Supplies 14751 Sce8e1 Voice&Data,Inc. 2284.80 Telephone System Maintenance 14752 Setc n Name Plate 165.86 Pipe Marking Tape 14753 Shamrock Supply Co.,Inc. 751.54 Repair&Maintenance Supplies 14754 Shumluck Sales&Engineering 201.92 Mechanical Pads&Supplies 14755 Siemens Energy&Automation 14,694.03 Instrument Repairs&Maintenance Services 14756 Snap On Tools 716.36 Small Tod Expenses 14757 Snap-On Tads 504.67 Tools 14758 Southern Counties Oil Co.OBA SC Fuels 13,674.20 Diesel Fuel 14759 Sparklers; 1,966.80 DrNkbg Water/Cooler Rentals 14780 Staining Instruments,Inc. 3,948.80 Instrument Pans&Supplies 14761 Slam Morse 6.000.00 Video Production Services 14762 Sunset Ford 341.90 Vehicle Pads&Bernice 14763 Teledyne Analytical 195.06 Instrument Pans&Supplies 14754 Tennnix International 125.00 Pest Commit 14765 Thompson Industrial Supply.Inc. 16.189.16 Mechanical Pans&Supplies 14766 Maw Cmetudion 5.260.00 Repair&Maintenance Services-Painting&Counter Top Modifications 14767 Todd Painting,Inc. 3.952.00 Painting Services 14768 Tri-County Fine 2,009.64 Maint.Agreement- Annual Inspec/Servicing Fire Exting.at Pits.1&2.Pump Stas.&Fleet Vehicles 14769 Truck&Auto Supply,Inc. 3,639.31 Automotive Parts&Supplies 14770 UC Riverside 23.914.05 Professional Services-Strategic Process Study Research Project 14771 UC Regents San Diego 725.00 Training Registration 14772 Ultra Scientific INICS0 Lab Pads&Supplies 14773 United Parcel Service 1,551.55 Parcel Services 14774 VWMC Hospital Corp. 5.80126 Reconciliation User Fee Refund Program 14775 Valin Corporation 786.53 Electrical Pads&Supplies 14A6 Vemes Plumbing 7,430.00 Sarvice Contract-Testing,Repair&Led.Backnow Devices at Pits. 1 &2&Pump Ste. 14777 Vortex Industries,Inc 372.00 Door Repalrs 14778 V WR Scientific Products 3.012.30 Lab Pads&Supplies 14779 Wakenhul Corporation 12.155.30 Security Services 14780 Wells Supply Co. 344.80 Mechanical Paris&Supplies 14781 West Lite Supply Company,Inc. 7.76 Electrical Paris&Supplies 14782 Wed Marine/E&B Discount Marine 316.21 Safety Supplies 14793 Workplace Resource 545.65 Electrical Paris&Supplies 14784 Xerox Corporation 20,825.88 Copier Services-Equipment Leases,Managed Services,and Metered Copy Usage&Charges 14785 Yak lChasa Materials Handling,Inc. 62.56 Electric Cad Pans 14786 Court Order 912.50 Wage Garnishment 14787 James E.Colston 30600 Meeting/7raining Expense Reimbursement 14788 Santiago A.Escobar 590,75 Meeting7rainirrg Expense Reimbursement 14789 Janet L.Gray 996.69 Meefing/Ttaining Expense Reimbursement 14790 David D.Halverson 125.00 Meefingrrmining Expense Reimbursement M1op11u EXCEL dtaVMVDSIIARMWlms PaloRe,PxUXG1C1amsPueRepon#nemmeM_B_Il5-V-08A. EXHIBIT 11rs10m Page 8of9 Claims Paid From 09/16108 to 09/30108 Warrant N. Vendor Amount Description 14791 Todd A.May 280.00 Meeling?rdlning Expense Reimbursement 14792 Thomas J.Mendez 224.18 Meeting/Training Expense Reimbursement 14793 James D.Ruth 3,460.92 Meenng/Dalning Expense Reimbursement 14794 Unit,A.Sullivan 364.63 Meelingri Boning Expense Reimbursement 14795 Simon L.Watson 573.75 Meeling?raining Expense Reimbursement 14796 Mortis C.Yin 126.00 Meeting/Training Expense Reimbursement 14797 County of Orange Auditor Controller 405.00 Administration Fee-A0lustment to Property Tax Bin 14798 County of Orange Auditor Controller 150.00 Administration Fee-Adjustment to Prop"Tex Bill 14799 Linda Losurdo 2,000.00 Employee Computer Loan Program 14800 Orange County Sanitation District 1,021.96 Petty Cash Reimb. Total Accounts Payable-Warrants 5 20.084.194.09 Payroll Disbursements 40170 - 40225 Employee Paychecks 5 119,944.79 Biweekly Payroll(09124/O8) 40226 - 40230 Employee Paychecks 4.430.12 Interim Payroll-Room.Vold Ralaaue(O 123108) 161004 - 161580 Direct Deposil Statements 1,347,903.78 Biweekly Payroll(09124/08) Total Payroll Disbursements 8 1A]2.2B4.89 Wire Transfer PavmenM OCSD Payroll Taxes B Contributions $ 780,544.40 Biweeklyy Payroll-(09124/OB 809/30/08) US Bank 461,879.53 Sod"2000 AB B Refunding Ceriinoates of Padldpalions September lnteresVPdncipal Payment Total Wire Transfer Payments $ 1,242,423.93 Total Claims Paid 09116108-09130108 $ 22.798.902.71 H`AeylbeSEXCEL doi22 NPSMRIBC urre Paid RaoxW00s1CuimePaIdR,x,xdAnarnmenta O 30-08.1 : EXHIBIT B uuusru Page 9 of 9 in odd, BOARD OF DIRECTORS Meeting Date Te6d.or .Dir. 711 AGENDA REPORT gam Number gem Number 3 Orange County Sanitation District Misc.A Support projects FROM: James D. Ruth, General Manager Originator: Jim Herberg, Director of Engineering Project Manager: Derek Davis SUBJECT: P1 MISCELLANEOUS BUILDINGS OFFICE IMPROVEMENTS, PROJECT NO. FE07-08 GENERAL MANAGER'S RECOMMENDATION 1. Approve Plans and Specifications for P1 Miscellaneous Buildings Office Improvements, Project No. FE07-08, on file at the office of the Clerk of the Board; 2. Approve Addendum Nos. 1, 2, 3, 4, 5, and 6 to the plans and specifications; 3. Receive and file bid tabulation and recommendation; 4. Reject bid received from GTA Construction, Inc. in the amount of$635,000; 5. Award a contract with Avi-Can, Inc., dba CA Construction, for P1 Miscellaneous Buildings Office Improvements, Project No. FE07-08, for a total amount not to exceed $673,000; and 6. Approve a contingency of$100,950 (15%). SUMMARY • This project will construct new staff offices, conference room, cubicles, and other minor improvements. These improvements are being built to accommodate moving the District's Information Technology Division to the Administration Building. The project also provides for improvements to the Control Center to accommodate the Americans with Disabilities Act (ADA) requirements, and expands the heating, cooling, and ventilation system to accommodate new offices. • Four sealed bids were received on October 28, 2008. After the evaluation by the Orange County Sanitation District (Sanitation District) Evaluation Team, the lowest bid was determined to be nonresponsive and Avi-Con, Inc., dba CA Construction, was determined to be the lowest "Responsible and Responsive" bidder. Summary information on the bid opening for P1 Miscellaneous Buildings Office Improvements, Project No. FE07-08, is as follows: Page 1 Project Budget: $ 1,429,225 Construction Contract Budget: $ 800,000 Engineer's Estimate: $ 700,000 Lowest Responsive, Responsible Bid: $ 673,000 High Bid: $ 828,994 • The low bid contractor listed seventeen subcontractors in its Bid with subcontracts totaling $474,000 out of the $635,000 (70% of the total Contract Price), which violates Special Provisions SP-1 Percentage of Work Performed by the Contractor. SP-1 requires the Contractor to self perform with its own forces Work amounting to at least 51% of the total Contract Price. The low bidder's bid demonstrates non- compliance with the bid requirements and is therefore deemed nonresponsive. BACKGROUND In December 2000, the Sanitation District proposed a new Administration Building (Project No. J-84). The cost estimate for this new facility was $18,500,000 and included the construction of a three-story building to house Information Technology, Human Resources, and the Finance Departments. Due to the budget constraints, the project was cancelled in 2006. This project provides improvements to the Control Center, Laboratory, and Administration Building to allow Information Technology Staff to be relocated from temporary trailers to the Administration Building. This project also provides needed heating, ventilation, and air conditioning, and handicap access improvements. PRIOR COMMITTEE/BOARD ACTIONS • April 2008 — Reject bids for SP-127, P1 Multiple Locations Office Modifications. (The SPA 27 work has been included with FE07-08). • October 2008—Approve an Agreement with the City of Fountain Valley regarding the permitting for various administrative buildings including $356,835 in development fees. • April 2008 -Approve purchase and installation of modular/systems furniture to Office Max Workspace in the amount of$125,624.40. ADDITIONAL INFORMATION The contractor selection was conducted in accordance with the Sanitation District's adopted policies and procedures. The four bids received were: Page 2 Bidder Amount of Bid GTA Construction, Inc. $635,000.00 Avi-Con, Inc, dba CA Construction $673,000.00 General Consolidated Constructors, Inc. $789,547.07 K-2 General Contractors, Inc. $828,994.00 This Capital Improvement Project complies with authority levels of the Sanitation District's Delegation of Authority. This item has been budgeted (2007-2008 Budget Update, Item No. 87, Page A-10 (FE-P1)). Award Date: 11119108 Contract Amount: $673,000 Contingency: $100,950(15%) SS:DD:ct:gc I gbbBR4 .p �olUtra TEW1 Wm dW ii-,ear.mc Page 3 I BOARD OF DIRECTORS Meeting Date To lid.ofDi,. 11/19/08 AGENDA REPORT Iem Numbe Ren Numbe 4 Orange County Sanitation District Misc.8 Support Projects FROM: James D. Ruth, General Manager Originator: Jim Herberg, Director of Engineering Project Manager: Derek E. Davis SUBJECT: P1 Engineering Trailer File Room Improvements, PROJECT NO. FE07-12 GENERAL MANAGER'S RECOMMENDATION 1. Approve Plans and Specifications for the P1 Engineering Trailer File Room Improvements, Project No. FE07-12, on file at the office of the Clerk of the Board; 2. Approve Addendum Nos. 1 and 2 to the plans and specifications; 3. Receive and file bid tabulation and recommendation; and, 4. Reject all bids for P1 Engineering Trailer File Room Improvements, Project No. FE07-12. SUMMARY • This project will relocate and improve the filing room and file clerk work areas to provide a central file location as recommended by a recent External Audit. • The Orange County Sanitation District (Sanitation District) solicited bids for the work and two sealed bids were received on October 2, 2008. A summary of the bids is tabulated below. • After the evaluation by the Sanitation District Evaluation Team, the lowest bid was deemed invalid due to the contractor's failure to acknowledge receipt of the addenda, and for increasing the bid amount after receipt of bids to include the work associated with the addenda. The second bid is significantly higher than the Engineer's estimate, and the Bid Evaluation Committee recommended rejecting both bids. Page 1 BACKGROUND To meet the recommendations of the audit, the file "room' needs a controlled access which is currently unavailable in the current file area. The proposed improvement work includes moving the document production equipment and work areas to the current file clerk office, electrical modifications and the addition of new data ports, and modifications to the layout of the interior walls and the installation of a new door in order to create a new, secure file room. Work also includes relocating staff into a newly remodeled space that serves as the main access to the new file room and gives the file clerks control of the access to the file room. Since the only responsive, responsible bid is $29,422.50 higher than the Engineer's Estimate, Staff is developing a more cost-effective plan to satisfy our filing requirements. PRIOR COMMITTEEIBOARD ACTIONS N/A ADDITIONAL INFORMATION The contractor selection was conducted in accordance with the Sanitation District's adopted policies and procedures. The two bids received were: Bidder Amount of Bid Texsun Construction' $ 38,680.00 Collins Builders, Inc. $ 79,422.50 'Invalid Bid This Capital Improvement Project complies with authority levels of the Sanitation District's Delegation of Authority. This item has been budgeted (2007-2008 Budget Update, Item No. 87, Page A-10 (FE-P1)). ATTACHMENT None JH:AD:ct KWep11agmdalBwrd AgeMa Repods1 "Board AgeMa Repods\1108Vte 4.F07-12.dmx Page 2 MINUTES OF STEERING COMMITTEE MEETING Orange County Sanitation District Wednesday, October 22, 2008, at 5:30 p.m. A meeting of the Steering Committee of the Orange County Sanitation District was held on Wednesday, October 22, 2008, at 5:30 p.m., in the District's Administrative Office. A quorum was declared present, as follows: STEERING COMMITTEE MEMBERS: STAFF PRESENT: DIRECTORS PRESENT: Doug Davert, Chair Jim Ruth, General Manager Mark Waldman, Administration Committee Bob Ghirelli, Assistant General Manager Chair Nick Arhontes, Director of Oper. &Maintenance Bill Dalton Jim Herberg, Director of Engineering Phil Luebben Ed Torres, Director of Technical Services Lorenzo Tyner, Director of Finance and DIRECTORS ABSENT Administrative Services Larry Crandall, Vice Chair Michael Gold, Legislative Affairs Liaison Ken Parker, Operations Committee Chair Penny Kyle, Clerk of the Board Jim Ferryman OTHERS PRESENT: Ryal Wheeler Layne Baroldi Drew Kolosky, Liberty Composting PUBLIC COMMENTS Drew Kolosky stated that his employer, Liberty Composting, was interested in purchasing the Sanitation District's land in Kings County and was prepared to offer the Sanitation District a proposal of$42/ton of biosolids for four years, with a minimum of 50,000 tons per year. REPORT OF THE COMMITTEE CHAIR Chair Davert reported that the board meeting would be adjourned in memory of Cornell Norby, Director Norby's father. He also reported that Director Crandall was attending the WEFTEC conference in Chicago where he was participating on a leadership panel and also the Utility Executive's Forum. Minutes of the Steering Committee j October 22, 2008 Page 2 REPORT OF GENERAL MANAGER Jim Ruth, General Manager, advised staff was proceeding with preparing the update to the Strategic Plan, and the update would be ready for presentation at the November board meeting. He also provided a brief update on negotiations with SAWPA, a tour of EnerTech in Rialto, and status on SARI line repairs. REPORT OF GENERAL COUNSEL There was no report. ACTION ITEMS (1 -2) 1. MOVED, SECONDED AND DULY CARRIED: Approve minutes of the September 17, 2008 Steering Committee meeting. 2. MOVED, SECONDED AND DULY CARRIED: Recommend to the Board of Directors to approve an agreement with the City of Fountain Valley for permitting Pt Miscellaneous Buildings Office Improvements, Project No. FE07-08, and authorize payment and development fees for an amount not to exceed $356,835, in a forth approved by General Counsel. INFORMATION ITEMS (3 -4) 3. Legislative Affairs Report—Government Affairs Manager, Michael Gold, informed the Committee that the list of state bills being tracked by OCSD was in their packet with the final actions taken by the Governor. Gold mentioned that many of the bills OCSD opposed were vetoed. As a result of the growing state budget deficit, it is likely that a special session will be called by the Governor after the election to deal with the impending crtsis; however, a bright spot in the state's situation was that the Governor was successful in selling about $5 billion in bonds to the public to cover the short-term cash crunch. In Washington, D.C., Gold reported that the likelihood of a stimulus package including infrastructure funding was growing when the Federal Reserve Chairman expressed his support for it. With Bemanke's support, the President signaled he also might be willing to support infrastructure funding. Finally, Gold reported that at the November Steering Committee meeting, the lobbyists would be available to discuss the implications of the election. 4. Republic of(South) Korea Environmental Management Corporation —Jim Herberg, Director of Engineering, noted that the Memorandum of Understanding focuses on key areas of exchange of information, technology,joint research and cooperative projects, and future visits to OCSD. Minutes of the Steering Committee ;✓ October 22, 2008 Page 3 CLOSED SESSION The Steering Committee convened at 5:46 p.m. in Closed Session, pursuant to Government Code Section 54956.8 to discuss one matter. Confidential Minutes of the Closed Session held by the Steering Committee have been prepared in accordance with Government Code Section 54957.2, and are maintained by the Clerk of the Board in the Official Book of Confidential Minutes of Board and Committee Closed Meetings. The Steering Committee reconvened at 5:58 p.m. in regular session. OTHER BUSINESS, COMMUNICATIONS OR SUPPLEMENTAL AGENDA ITEMS, IF ANY There were none. ADJOURNMENT The next Steering Committee meeting is scheduled for Wednesday, November 19, 2008. The Chair declared the meeting adjourned at 5:58 p.m. Submitted by: A Penny M. I s Clerk of the Board STEERING COMMITTEE neew9 Date Toad.of Dir. 11/19/08 11/lg/Oa AGENDA REPORT Item Numbe iem Number 2 6 Orange County Sanitation District FROM: James D. Ruth, General Manager Originator: Robert P. Ghirelli, Assistant General Manager Project Managers: Barbara Collins and Michael Gold SUBJECT: Five-Year Strategic Plan GENERAL MANAGER'S RECOMMENDATION 1) Approve the Five-Year Strategic Plan dated November 2008; and, 2) Direct staff to implement the goals and strategies contained in the Plan. SUMMARY The Strategic Plan has been updated for 2009 and contains a summary of accomplishments over the past year as well as levels of service and new goals. The Plan also includes OCSD's mission, vision and core values and does not carry any additional costs associated with the new goals. PRIOR COMMITTEE/BOARD ACTIONS November 28, 2007: Five-Year Strategic Plan adopted by the Board of Directors ADDITIONAL INFORMATION Strategic Plan Update Process In 2007, the Board of Directors held a series of workshops to develop a Five-Year Strategic Plan containing not only goals and levels of service, but also updated statements of mission, vision and core values. The three month process culminated in the adoption of a new plan on November 28, 2007. To update the Plan for 2009, staff began with internal discussions about continually improving operations and refining the goals and levels of service. In July 2008, the Executive Management Team held a retreat to discuss preliminary ideas and suggestions. These suggested goals were discussed at a joint meeting of department heads, managers and supervisors in August. Following this meeting, the issues were then distilled into five new goals proposed for the next five years. Staff drafted one-page issue papers to be presented to the Board that described the new goals. Board Input On October 15, the Board of Directors participated in a workshop facilitated by Brent Ives to discuss the five new goals. The well-attended meeting generated some comments and questions. While the discussion did not yield any new goals or significant modification of existing plans, several board members had comments and questions. Questions and comments (as well as responses) are below: • To increase GWR flows, the Board asked if staff is researching more opportunities for water recycling and staff responded that it has been looking into it. • Board members asked that OCSD coordinate efforts with Orange County Water District and the Irvine Ranch Water District on the future of the Green Acres Project. • Board members questioned if political and financial risks are included as part of the risk register goal and staff noted these are part of the planning efforts. • Related to political and economic risks, the Board discussed the need to be proactive in our efforts and staff responded that the legislative and risk management programs have been, and will continue to, proactively address political and financial risks. Moreover, the topic was discussed at a recent Administration Committee meeting. • Finally, the Board asked if staff was researching cost effective strategies to reduce infiltration and inflow in the collection systems and staff responded that these would be part of the Engineering Facilities Master Plan. Continual Improvement In addition to the new goals (marked "need') there are some other minor changes from last year's plan. One existing goal and level of service has been refined, but not significantly changed, and the presentation has been changed to help readability. The workplace safety level of service was dropped and replaced by two items: employee participation and lost workday rate. Overall, the updated Strategic Plan continues OCSD's goal of moving from good to great through annual assessments and incremental changes. Each year, the Board will be asked to provide strategic leadership and guidance as District staff sets goals and levels of service. The Steering Committee and Board are asked to adopt the new Five-Year Strategic Plan, which contains no new costs and will help guide the organization and staff. The Operations Committee minutes for the meeting held November 5, 2008 will be distributed at the November 19, 2008 Board of Directors meeting . Once the minutes are finalized , they will also be available on the Sanitation District's website (www.ocsd .com). OPERATIONS COMMITTEE Meeting Date To Be.ofDir. 10/01108 11/19/08 AGENDA REPORT lien,oP08-51 NunsiDer NUM i Orange County Sanitation District ns (�6ociliti s FROM: James D. Ruth, General Manager Originator: Jim Herberg, Director of Engineering Project Manager: Derek E. Davis SUBJECT: AREA 03 MANHOLE ACCESS IMPROVEMENTS (3-54), PROJECT NO. FE07-01 GENERAL MANAGER'S RECOMMENDATION 1. Approve Plans and Specifications for the Area 03 Manhole Access Improvements (3-54), Project No. FE07-01, on file at the office of the Clerk of the Board; 2. Approve Addendum No. 1 to the plans and specifications; 3. Receive and file bid tabulation and recommendation; 4. Reject bid received from Pacific Coast Infrastructure, for the amount of$260,200; 5. Award a contract to Mike Bubalo Construction Co., Inc., for the construction of the manhole access improvements for an amount not to exceed $305,500; and, 6. Approve a contingency of$106,925 (35%). SUMMARY • This project will provide access to two manholes located on the slopes of a Caltrans bridge embankment. The project will include retaining walls, sitework, and manhole reconstruction. All work will take place within Caltrans right of way. • Lee & Ro, Inc. completed the plans and specifications for Area 03 Manhole Access Improvements (3-54), Project No. FE07-01, in March 2008. • Seven sealed bids were received on August 21, 2008. After the evaluation by the Orange County Sanitation District (Sanitation District) Evaluation Team, the lowest bid was determined to be nonresponsive and Mike Bubalo Construction Co., Inc. was determined to be the lowest "Responsible and Responsive" bidder. Summary Page 1 information on the bid opening for Area 03 Manhole Access Improvements (3-54), Project No. FE07-01, is as follows: Project Budget $ 582,530 Contract Budget $ 375,600 Engineer's Construction Estimate $ 313,000 Lowest Responsive, Responsible Bid: $ 305,500 High Bid: $ 553,500 • The low bid contractor did not submit all of the information required in the Bid Documents and was deemed nonresponsive. Subsequently, the low bid contractor attempted to provide the Sanitation District with additional documentation to support its bid after the bids were opened. In accordance with the California Public Contract Code, the Sanitation District informed the contractor that it cannot accept additional information in support of a bid after Bid opening. • The period for written protest began on September 2, 2008, and ended on September 8, 2008. No written protests were submitted during or after the protest period. • The contingency amount was increased to 35% to address the risks inherent with work that is within the Caltrans right-of-way and adjacent to live freeway traffic, a railroad track, and the potential of encountering unknown utilities. The duration of actual construction work is about 90 days. Without sufficient contingency, the project would need to be stopped for additional Board approval. Stopping the project would incur costs for contractor delays. PRIOR COMMITTEE/BOARD ACTIONS N/A ADDITIONAL INFORMATION The contractor selection was conducted in accordance with the Sanitation District's adopted policies and procedures. The seven bids received were: Bidder Amount of Bid Pacific Coast Infrastructure, Inc.' $260,200 Mike Bubalo Construction Co., Inc $305,500 GCI Construction, Inc. $322,800 Bali Construction, Inc. $355,772 Atlas Underground, Inc. $435,725 4-Con Engineering, Inc. $553,500 'Nonresponsive Bid Page 2 d This Capital Improvement Project complies with authority levels of the Sanitation District's Delegation of Authority. This item has been budgeted (2007-2008 Budget Update, Item 37, Page A-7 (FE-C)). Award Date: 11119/0810122108 Contract Amount: $306,600 Contingency: $106,926 (36%) JH:AD:ct R%depnagenda\Boerd Agenda Repons%2008 Beard Agenda Reports\1 f 0a\Item 7FE07-01 to Board on 11-19-M(2).d= Page 3 This Capital Improvement Project complies with authority levels of the Sanitation District's Delegation of Authority. This item has been budgeted (2007-2008 Budget Update, Item 37, Page A-7 (FE-Q. Award Date: 11/1 910 81 012 2/0 8 Contract Amount: $305,50D Contingency: $106,925 (35%) JH:AD:ct KWept,agendalBoard Agenda Repo0s12008 Board Agenda Reports\710BVtw 7.FE07-01 to Board on 11-19-08(2).docx Page 3 OPERATIONS COMMITTEE MeetIng Date To Bd.ofDir. 11/05/08 11/19/08 AGENDA REPORT Item Number Item Number _ OPOS-61 9 Orange County Sanitation District FROM: James D. Ruth, General Manager Originator: Nick Arhontes, Director of Operations and Maintenance SUBJECT: AGREEMENT WITH COSTA MESA SANITARY DISTRICT TO TRANSFER SEWER PIPELINES AND ASSOCIATED EASEMENT RIGHTS GENERAL MANAGER'S RECOMMENDATION Approve an agreement with Costa Mesa Sanitary District (CMSD) transferring ownership and associated easement rights for six local sewers within the CMSD service area boundaries, in a form approved by General Counsel. SUMMARY • CMSD sent a letter to the Orange County Sanitation District (OCSD) dated December 28, 2007 requesting OCSD to transfer six local sewers within the CMSD service area boundaries to CMSD. These six local sewers were identified as sewers that had the potential for future residential and/or commercial connections due to anticipated future development. • OCSD staff, CMSD staff and two Board members from CMSD met in two separate meetings on August 5 and September 17, 2008 to negotiate and discuss the scope, terms and details of the proposed transfer of these six local sewers. It was agreed that from these six local sewers, a total of 57 manholes and 57 separate sewer pipeline segments between manholes comprising 15,842 linear feet of sewer pipes from 8-inches to 18-inches in diameter, should be transferred to CMSD. PRIOR COMMITTEEIBOARD ACTIONS None ADDITIONAL INFORMATION After the proposed transfer of these local sewers is completed, CMSD would be able to charge any future residential, commercial owner, or developers requesting a connection permit from CMSD, the applicable CMSD sewer connection permit fees in existence at that time. In addition, since OCSD will continue to be the regional sewer collection agency, any Form N0.UW102-2 R...0101 P Page 1 and all applicable OCSD Capital Facilities Capacity Charges would still apply and OCSD will be entitled to continue collecting those fees as future development within the CMSD service area occurs. OCSD currently collects no revenue stream for provision of local sewer services in this area. ATTACHMENTS Exhibit A Transfer Area CW:pe/jmf H:Wep0agendat and Agenda Rep nst 008 Board Agenda Repons\1 OBgtw 9_CMSD.dwx Form No.0 1013 amaee avnir9l Page 2 Santa Ana SuntlowerirunN _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ cr - � y 8 Transfer Area 5 _ _ Transfer Area 3 R 405 Transfer Area , Fe Transfer Areal 5 Y 9 A R 9 B R ^J® R+ ® 7 Transfer Area i '.... __._ 405 Fwy _ _ _ _ _ _ _ _ _ _ _ _ Chter-nea Hill fir Costa Mesa } 3� Baker-Gislerinlmcepler - - - ---__-- i ' o R VFi y� 5 I r Transfer Area 6 1 y S Orange County Sanitation District/Costa Mesa Sanitary District Sewer Transfer „i�, mnnr Exhibit o CMSD-Trwsfe� cMso Tn,ner.n Transfer Area ® OC9D�flalalneE OCSD-e.., C ocso oc6D Prepared By;A.Naxaron cip eonnn, Date October 2008 5.MN'M" 1.200 600 0 1,200 Feet Free e..Ma CMSD Sewer Transfers_May 2008_v0l.mxd OPERATIONS COMMITTEE Reefing DaW Te BO.ur Dlr. 11/05/08 11/1g/O8 AGENDA REPORT Rem Number Rem Number OPOS-62 10 Orange County Sanitation District FROM: James D. Ruth, General Manager Originator: Nick Arhontes, Director of Operations and Maintenance SUBJECT: Memorandum of Understanding for County-wide Area Spill Control Program GENERAL MANAGER'S RECOMMENDATION Authorize the General Manager to execute Memoranda of Understanding Establishing a County-wide Area Spill Control Program with Orange County Flood Control District and cities or sanitary districts that own sanitary sewer collection facility pipelines within Orange County Sanitation District service area, in a form approved by General Counsel. SUMMARY During 2007 and 2008, the County of Orange Public Works staff has been meeting on a monthly basis with OCSD staff along with staff from the cities of Orange and Tustin to form a cooperative program called the Countywide Area Spill Control (CASC) Program. This program is designed to share costs and responsibilities and improve the effectiveness for spill response, containment, and cleanup. Any sewage spill that would end up in an Orange County Flood Control District (OCFCD) flood control channel has the potential to impact surface waters. OCSD is only obligated to pay for costs due to spills from its system. OCSD would not be responsible for any costs caused by spills from another city's or agency's system. The County of Orange would like to formalize this CASC Program with an MOU between OCFCD, OCSD, and expand it to include any city or sanitary district that owns sanitary sewer pipelines within the OCSD service area. Two firms have previously been selected through a Request for Proposal (RFP) process to provide services on a time and material basis. They are on call on a 24-hour basis to supply the necessary labor, equipment and materials. The city or agency responsible for the spill pays the costs for the services requested. Staff supports this approach and recommends this action. PRIOR COMMITTEE/BOARD ACTIONS None ADDITIONAL INFORMATION Fain,Nn nW in:':' Rwi OE 01M Page 1 This is an expansion of a previous pilot project developed with the County of Orange and OCSD called The Tustin Area Spill Control (TASC) program. The pilot project started on August 30, 2000. It has served as a statewide model and is also adaptable for non-sewage related events such as firefighting liquid runoff and hazardous materials. The selected firms have had prior experience in oil spill containment and cleanup in harbor situations. Table top and field training exercises have been conducted in the past in areas tributary to upper Newport Bay. The County of Orange is leading out on this effort and wants to establish a separate three-way CASC MOU between OCFCD, OCSD and each city or sanitary district that owns sanitary sewers in close proximity to OCFCD flood control channels within the OCSD service area. The first city that appears to be ready to sign such an MOU is the City of Orange. The County has a plan to eventually sign up all such cities and/or sanitary districts within the OCSD service area. CW:pe/jmf H:Wep(\agendaM3oaN Agenda Reports12008 Board Agenda Reports\710811Iem 10.MOU re Spill Conlrel.docx Fam No Y 102 2 Fmwa ONnxl] Page 2 OPERATIONS COMMITTEE Meeting Date To ad.orar. 11/05/08 11/19/08 AGENDA REPORT Rem Number Rem Number OP08-63 11 Orange County Sanitation District ®P14nt Automation compu on FROM: James D. Ruth, General Manager Originator: Jim Herberg, Director of Engineering Project Manager: David MacDonald SUBJECT: CENTRAL GENERATION AUTOMATION, JOB NO. J-79-1 GENERAL MANAGER'S RECOMMENDATION Authorize staff to negotiate a Professional Consulting Services Agreement with Black & Veatch Corporation for construction support services for Central Generation Automation, Job No. J-79-1. SUMMARY • The project will replace the engine control systems for the Central Generation Systems at Plant No. 1 and Plant No. 2. The project will also provide improved electrical load management, operating communications between Plant No. 1 and Plant No. 2, and improved control of exhaust emissions. • Black & Veatch Corporation has satisfactorily furnished engineering services for the design of the new engine control systems. Black & Veatch Corporation is uniquely qualified to provide engineering services during construction. PRIOR COMMITTEEIBOARD ACTIONS December 2007— Rejected a bid to install new control systems on Central Generation engines at Plant No.1 and Plant No. 2. Authorized staff to implement a market survey which identifies firms that meet the technical requirements of the Project. Authorize staff to pursue qualifications based procurement process with firms who specialize in the engine-generator installation and retrofit field. February 2007—Approve Amendment No. 1 in an amount not to exceed $98,814, to prepare record documents of the existing Central Generation Systems and to design a communication link between the Central Generation Systems at Plant No. 1 and Plant No. 2. I'm No.M 102-2 n =1107 Page 1 February 2005—Approve a Professional Design Services Agreement with Black & Veatch Corporation to prepare plans and specifications for the new engine control systems as part of the Central Generation Automation, Job No. J-79-1, which also included the installation of the Continuous Emissions Monitoring System (CEMS) units, Contract No. J-79-1A. ADDITIONAL INFORMATION The existing engine control systems (En-Tronics FT-100 and FT-210) are aging and are not supported by the original equipment supplier. The existing control systems do not provide feedback signals to control the engine exhaust emissions as required by the new SCAQMD Rule 1110.2. In October 2008, the Orange County Sanitation District (Sanitation District) received proposals to furnish and install new control systems on each engine in the Central Generation Systems at Plant No. 1 and Plant No. 2. Black & Veatch Corporation prepared the preliminary and final design for the upgraded engine control systems, as well as the CEMS units which will be installed on each engine under Contract J-79-11A. The Sanitation District requires engineering services during construction which include clarifications to the plans and specifications, review of submittals, and requests for equipment substitutions. The Consultant will also oversee the engine programming, software development and commissioning of each new control system. This recommendation complies with authority levels of the Sanitation District's Delegation of Authority. This item has been budgeted. (Line item: Section 8, Page 65). Award Date: NIA Contract Amount: NIA Contingency: NIA JH:DM:tic:gc H9dep11agenda%Bwrd Agenda Repods@008 Board Agenda Repodstl OBVIem 11.J-79-1do FOM No.O 102 3 P a5VIW Page 2 OPERATIONS COMMITTEE Meetmg Date T"Bd.of 11/05108 11/19/08 AGENDA REPORT Hwn Number Item Numb& OP08-64 12 Orange County Sanitation District FROM: James D. Ruth, General Manager Originator: Nick Arhontes, Director of Operations and Maintenance SUBJECT: UNIT PRICE INCREASE RE PROPRIETARY CHEMICAL PROCESS FOR ODOR AND CORROSION CONTROL GENERAL MANAGER'S RECOMMENDATION 1. Ratify Change Order No.1 to Purchase Order No. 1032610E (SSJ-2008-821), issued to U.S. Peroxide LLC, for the application of a proprietary chemical for the temporary unit gallon price increase for ferrous chloride from $1.25/gallon delivered, plus tax, to $1.75/gallon delivered, plus tax, for a total amount not to exceed $147,000,00, for the period of September 24, 2008, through October 6, 2008, due to a declared Force Majeure; 2. Approve Change Order No.2 to Purchase Order No. 103261 OB (SSJ-2008-821), issued to U.S. Peroxide LLC, for the application of a proprietary chemical for a unit gallon price increase for ferrous chloride from $1.25/gallon delivered, plus tax, to $1.75/gallon delivered, plus tax, for the contract period of December 1, 2008 through June 30, 2009; and, 3. Authorize a 20% unit cost escalation contingency effective December 1, 2008. SUMMARY • U.S. Peroxide (USP) provides OCSD continuous treatment using peroxide regenerated iron for sulfide control (PRI-SC). This process uses ferrous chloride and hydrogen peroxide. In addition, each of the chemicals may be used alone to control odor and corrosion in the regional trunk sewer system. PRI-SC treatment has been used in the regional trunk system since 2002. • The raw material cost of scrap steel, hydrochloric acid and byproduct pickle liquor used to manufacture ferrous chloride, along with cost of power and transportation, have all been increasing in 2008, and this has resulted in significantly higher unit prices from ferrous chloride producers. These conditions have further accelerated since this contract was implemented. Additionally, because of the volatility in the market, ferrous chloride producers are seeking shorter term pricing agreements, making three to six month price adjustment terms the none compared to annual or multiyear agreements in the past. 10/07/08 r C • Due to the unforeseen and accelerated rate of change in the ferrous chloride market, price conditions since the execution of the current contract, USP is no longer able to supply OCSD with ferrous chloride at the current contract price, and is buying product and has stated that they are selling at a loss to fulfill their obligations under the contract. USP is asking for a price increase from $1.25/gallon to $1.75/gallon. Staff recommends this increase. • The contractor also provides leased equipment and on-going labor for services such as maintenance, remote monitoring of the chemical and feed rates, optimization, and field sampling. Prices for those services remain as is. PRIOR COMMITTEE/BOARD ACTIONS Approved sole-source contract with US Peroxide, LLC on June 25, 2008, item 9(d) ADDITIONAL INFORMATION • Due to these recent events, staff has researched prices for ferrous chloride from alternate sources and offers for other treatment facilities in Southern California. USP's proposed price is equal or lower than prices offered from other suppliers to agencies with similar-sized contracts. • Treatment in the regional trunks provides a secondary benefit of controlling hydrogen sulfide and odors entering the treatment plants. Newly designed capital projects at the treatment plants have been designed based on continuous chemical treatment for odor control in the regional trunks. • Most recently, OCSD has been utilizing solely ferrous chloride as a treatment process chemical and as a baseline for further PRI-SC evaluations. The current volume of ferrous chloride required during these evaluations is significantly higher than the prior process conditions. • The ferrous chloride market has also been in a very tight supply situation in 2008 due to increased demand and limited raw materials supply. In addition, hurricane Ike, which impacted the U. S. gulf coast, has caused an interruption of raw material supply to west coast manufacturers causing at least one ferrous chloride supplier California Water Technologies LLC, (CWf)to claim force majeure status. This has further driven costs and prices up for ferrous chloride on the west coast. While actual production and supply chain conditions will eventually return to normal, the cost pressures on raw materials are expected to continue even after the force majeure status has ended. • In addition, because CWf has not been able to supply all of OCSD's current need for ferrous chloride since August 1, 2008, USP has been forced to buy the product 10/07/08 from Kemira, an alternate supplier, at an increased price due to the current market situation. This action must be approved by the Board of Directors as required by OCSD Delegation of Authority (DOA) levels. This item has been budgeted in Divisions 420, 830, and 840, line item 55. However, budget reappropriations may be necessary due to the extraordinary price increase. Award Date: 6125/08 Contract Amount: $1.25/gal+tax(FeC12) Contingency: 10% $1.59/gal+tax(27% 1-12O2) $2.85/gal+tax(50% H2O2) Award Date: 11/19/08 Contract Amount: $1.75/gal+tax(FeC6) Contingency: 20% $1.59/gal+tax(27% H2O2) $2.85/gal+tax(50% H2O2) KWepllegerxIMBoard Agenda Reporls12008 Board Agenda ReportsN 108Utem 12.US Perotlde.doox 10/07/08 OPERATIONS COMMITTEE ""�1gDa1 TOB° vf' 11/OS/OB 1U39/OB AGENDA REPORT Aem -65e Hem 1 OPou 33 Orange County Sanitation District FROM: James D. Ruth, General Manager Originator: Nick Arhontes, Director of Operations and Maintenance SUBJECT: PLANT NO. 1 HEADWORKS SPUTTER BOX CHANNEL REPAIR SERVICES GENERAL MANAGER'S RECOMMENDATION 1) Approve a sole source Service Contract Agreement with Jamison Engineering for Plant 1 Headworks Splitter Box Channel Repairs, for an amount not to exceed $98,735.00; and, 2) Approve a contingency of$19,747 (20%). SUMMARY • The purpose of this work is to repair leaking joints on the No. 2 channel in the Plant No.1 headworks splitter box, which has been in service 1989. Although this repair is not considered an emergency, it is urgent as the leak is getting worse and it may start to cause undermining of the soils supporting the structure. • While the structure is out of service, the protective coating on the concrete walls will also be repaired. Approximately 800 square feet of coating has failed which is causing the concrete to corrode which can accelerate structural problems. • The work will also make it possible to isolate a section of the plant that has to be taken out of service for an upcoming Capital Improvement Project. PRIOR COMMITTEE/BOARD ACTIONS None ADDITIONAL INFORMATION Jamison Engineering is uniquely qualified as they recently completed a similar type of repair on the No. 1 channel in order to complete an emergency repair on the two 90 inch diameter primary clarifier feed lines that were leaking. Jamison Engineering worked Fm No.M-102-2 R...=W7 Page 1 with staff engineers to develop a long-term repair solution that can be applied to all three-channel joints. The repairs on the No. 3 channel are planned to coincide with the Capital Improvement Project that will require the isolation of that channel. This authorization complies with authority levels of OCSD's Delegation of Authority. This item was not budgeted but funds are currently available in the overall joint operating budget, as other planned maintenance projects of lower risk have not yet been completed. We will manage the budget to possibly perform the planned projects later this fiscal year or defer them to FY 09/10 based on risks. Award Date: 11119/08 Contract Amount: $98,735 Contingency: $19,747(20%) H'.WeptWgenda\Board Agenda Repods@DDB Board Agenda ReporiskllMtcan 13.Jamison Eng.dmx Fam No.M 102 2 11e+vM O IV7 Page 2 The Administration Committee minutes for the meeting held November 12, 2008 will be distributed at the November 19, 2008 meeting . Once the minutes are finalized , they will also be available on the Sanitation District's website (www.ocsd .com). - ADMINISTRATION COMMITTEE MeeNngDate To Bd.01Dill 11/12/08 11/19/08 AGENDA REPORT R m N.mEe, tram Numt�er ADMOS-33 is Orange County Sanitation District FROM: James D. Ruth, General Manager Originator: Lorenzo Tyner, Director of Finance and Administrative Services SUBJECT: MID-YEAR STAFFING MODIFICATIONS - RECLASSIFICATION ADJUSTMENTS GENERAL MANAGER'S RECOMMENDATION Approve the reclassification of four(4) OCSD positions affecting incumbents predicated on employees satisfying position qualifications and the indefinite and ongoing need to accomplish work at the higher level, and creation of a new classification providing for. 1) Reclassification of two (2)Administrative Assistant positions PG 67 ($6,185/month) to Contracts/Purchasing Assistant PG 67 ($6,185/month) results in no change in pay; 2) Reclassification of a Senior EDM Specialist position PG 80($8,121/month)to Senior Information Technology Analyst PG 83($8,743/month); 3) a) Reclassification of a Principal Information Technology Analyst position PG 87($10,133/month)to Principal Project Controls Analyst PG 87 ($10,133/month) results in no change in pay; and, b) Creation of a new classification of Principal Project Controls Analyst with pay range placement at PG 87. SUMMARY In an effort to support OCSD's staffing plan, it is necessary to review and modify job titles and pay grades to address changes in work. This occurs in situations where staffing requirements result in the need for higher levels of skill and knowledge. Furthermore, the need for the higher skill and knowledge levels must be indefinite and ongoing. The Personnel Policies and Procedures Manual Section 2.1, as well as bargaining unit Memorandums of Understanding, address this process. Both state that requests are considered twice per year, once during the annual budgeting process and again in November. During the current period, nine(9) requests were submitted for consideration. The Human Resources Division reviewed each request in detail and discussions ensued with the appropriate supervisor, manager, or department head. Consequently, the Human Resources Division recommends that four(4)of the requests be approved. Four(4)of the nine (9) requests will result in classification changes to positions with incumbents, effective immediately following Board approval. Three (3)of the four(4) classification changes to positions are lateral reclassifications with no change in salary, Fp N. D'N�02.] flevuaE.O301N7 Page 1 only changes in classifications that properly reflect the nature of the work being performed. The remaining classification change is a result of the employee performing a higher level of duties. This employee has met the criteria outlined in the Reclassification Guidelines, which are summarized below: 1. The incumbent has been in the position being considered for reclassification and performing the higher level duties for at least 6 months. 2. The incumbent meets the qualifications for the position being considered for reclassification. 3. The incumbent's classification is not being reclassified from a non-supervisory to a supervisory classification. Detailed information regarding each of the requests is documented in the additional information section. PRIOR COMMITTEEIBOARD ACTIONS N/A ADDITIONAL INFORMATION 230—Contracts. Purchasing. and Materials Management Division Laterally reclassify two(2)Administrative Assistant positions at PG 67($6,185/month)to Contracts/Purchasing Assistant positions at PG 67 ($6,185/month)to properly reflect the nature of the work being performed. These changes place the positions in the proper job family, and will not result in any changes in pay. 740 —Engineering Planning Division and 250—Information Technology (IT) Division Reclassify and transfer position occupied by Doug Rulison from Senior Engineering Data Management Specialist PG 80($8,121/month) in the Engineering Planning Division 740 to Senior Information Technology Analyst PG 83 ($8,743/month) in the Information Technology Division 250. Moving the position from the Engineering Planning Division to the IT Division will increase District effectiveness and efficiency by providing support to the Engineering Department's entire technology portfolios that include enterprise GIS, CAD, and Enterprise Content Management Systems. The IT Strategic Plan stipulates that all enterprise applications and technology solutions will be supported by embedding IT staff in specific business units. The IT Strategic Plan commits to a business-driven consultative approach where senior IT staff is distributed within key business units. With IT support embedded within the Engineering Department, the duties and responsibilities of the incumbent Doug Rulison have broadened in scope to cover managing all technology-related solutions and projects for engineering. In aligning with the IT Strategic Plan, the Enterprise Content Management Systems will envelope several Engineering stand-alone efforts. Form N. OVF102a RwbeO'.owtwl Page 2 750 —Prciect Manaaement Office(Engineering Department) Laterally reclassify position occupied by Robert Thiede from Principal IT Analyst PG 87 ($10,133/month)to Principal Project Controls Analyst PG 87($10,133/month), and will not result in any changes in pay. This change requires creating a new classification of Principal Project Controls Analyst. The Director of Engineering has transferred functions from the vendor, Integrated Project Management Consultants (IPMC), to District staff to reduce District costs. Part of IPMC's responsibility was establishing and managing cost throughout the life cycle of the District's Capital Improvement Program cash outlays. Establishment of this infrastructure was critical to ensure the scopes of the projects were appropriate, and that the cost estimates were accurate. The functions transferred from the vendor provide professional and technical expertise in the following three (3) distinct categories: • Data Management • Construction Scheduling • Cost Estimating Construction scheduling and cost estimating data feed into the data management system from which forecast, trends, and variance analyses, are conducted to assist in management decision-making. Over the past year, Robert Thiede, Principal Information Technology Analyst, has been directed to understand, from a functional and enterprise- wide systems perspective, all aspects of the data management system currently handled by IPMC. Data management is the hub and backbone into which data flows. By laterally reclassifying Robert Thiede to the new classification of Principal Project Controls Analyst, it will more appropriately reflect current functions and responsibilities. RECLASSIFICATION REQUESTS Current Proposed E to a Div Classification Title Reclassification Title Hagerty, Wends 230 Anminlstrstive Assistant Contracta/Purchasing Assistant Evans,Theresa Step 5 PG 67 Step 5 PG 67 (8a.ia8/MoMn) (38.186/1hortn Senior EDM Specialist Senior IT Analyst Rulison, Doug 740 Step 4-PG 80 Step 4-PG 83 From Div 740 To Div 250 88.121/MontM1 811,743/N1orrh Thled., Robert 750 Principal ITAnayat For Project Controls Analyst Step 5-PG 87 Step 5-PG 87 From DN 250 To DN 750 510133/Monih $10,133/MOMM1 NEW CLASSIFICATION REQUEST Proposed Requester Div Job Title Pr Project controls Analyst Englneering Dept 7W PG 87 ($10,133/month) Fam No.[W102.3 �p1p1 Page 3 ADMINISTRATION COMMITTEE meebn9 Dare TOBtl.uf Dh. w. 11/12/OB 11/19/O8 AGENDA REPORT It`n1NO1nbef RmNuinber ADMDB-34 16 Orange County Sanitation District FROM: James D. Ruth, General Manager Originator: Lorenzo Tyner, Director of Finance and Administrative Services SUBJECT: ORANGE COUNTY SANITATION DISTRICT COMPREHENSIVE ANNUAL FINANCIAL REPORT (CAFR) FOR THE YEAR ENDED JUNE 30, 2008 GENERAL MANAGER'S RECOMMENDATION Receive and file the: 1) Sanitation District's Comprehensive Annual Financial Report for the year ended June 30, 2008, prepared by staff and audited by Mayer Hoffman McCann, Certified Public Accountants; 2) Report on Compliance and Internal Control for the year ended June 30,2008; and 3) Independent Accountants' Report on Agreed-Upon Procedures Applied to Appropriations Limit Worksheets SUMMARY The Sanitation District's independent auditors, Mayer Hoffman McCann P.C. (MHM), have completed their examination of the Sanitation District's financial statements for the year ended June 30, 2008, and have issued an unqualified opinion. Each year, the Administration Committee reviews the results of the audit and the corresponding Auditor's report to the Committee. During the audit performed by MHM, no matters involving the internal control over financial reporting and its operations that the auditors consider to be material weakness were noted. Jennifer Farr, Partner, will attend the meeting to respond to any questions of Directors. This year, staff has again prepared the Comprehensive Annual Financial Report that includes the audited financial statements. For the last fourteen years, the Sanitation District has earned the Certificate of Achievement for Excellence in Financial Reporting from the Government Finance Officers Association (GFOA). This year's report will again be submitted to GFOA for their review in anticipation of another award. Fo No.wI-m3 IiwIW.MIV7 Page 1 The Comprehensive Annual Financial Report, including the Auditor's opinion letter, the Auditor's Report to the Committee, the Auditor's Report on Compliance and Internal Control Over Financial Reporting, the Auditor's Appropriations Limit Report, and the Auditor's Single Audit Report are attached. ATTACHMENTS 1. Comprehensive Annual Financial Report for the year ended June 30, 2008. (Separately bound document.) 2. Report on Compliance and Internal Control Over Financial Reporting. 3. Independent Accountants' Report on Agreed-Upon Procedures Applied to Appropriations Limit Worksheets. 4. Report on Required Communication with Those in Governance. Form No.DW�102a F_.0=1101 Page 2 Mayer Hoffman McCann P.C. An Independent CPA firm Conrad Government Services Division 2301 Dupont Drive, Suite 200 Irvine, California 92612 949474�2020 ph 949-263-5520 fz w .rnhrn-pcxom Board of Directors Orange County Sanitation District Fountain Valley,CA In planning and performing our audit of the financial statements of the Orange County Sanitation District ("District") as of and for the year ended June 30, 2008, in accordance with auditing standards generally accepted in the United States of America, we considered Orange County Sanitation District's internal control over financial reporting (internal control) as a basis for designing our auditing procedures for the purpose of expressing our opinion on the financial statements,but not for the purpose of expressing an opinion on the effectiveness of the District's internal control. Accordingly, we do not express an opinion on the effectiveness of the District's internal control. Our consideration of internal control was for the limited purpose described in the preceding paragraph and would not necessarily identify all deficiencies in internal control that might be significant deficiencies or material weaknesses. A control deficiency exists when the design or operation of a control does not allow management or employees, in the normal course of performing their assigned functions, to prevent or detect misstatements on a timely basis. A significant deficiency is a control deficiency, or combination of control deficiencies, that adversely affects the entity's ability to initiate, authorize, record, process, or report financial data reliably in accordance with generally accepted accounting principles such that there is more than a remote likelihood that a misstatement of the District's financial statements that is more than inconsequential will not be prevented or detected by the District's internal control. Matters conforming to this definition are as follows: (1) Capital Asset Deletions The District has good controls to identify and write off old furniture and equipment that has been disposed of. For disposal of larger capital assets (pipelines, facilities), the Project Manager informs the Finance Department of replacement projects when the capital project is established in the accounting system. During our testing of capital asset additions, we noted certain projects that involved replacement of old fully depreciated assets. Since the Finance Department was not made aware of the disposal of old assets, to assets were not removed from the accounting system. The financial impact of removing these assets is $0 because the assets had been fully depreciated. However, it is important that the District's subsidiary listing of capital assets only include assets currently in use. Recommendation We recommend that the District review the capital asset detail for fully depreciated assets that may no longer be in use. These assets should be removed from the District's accounting records. t Orange County Sanitation District Page 2 (2) Adherence to Purchasing Policv The District's purchasing policy requires purchase orders for all goods and services greater than $100. During our test of cash disbursement transactions, we noted that two transactions requiring purchase orders were initiated prior to obtaining the purchase order. This was evidenced by a purchase order date that was later than the date on the vendor invoice. Recommendation We recommend that the District follow the purchasing policy by obtaining purchase orders prior to initiating purchases. (3) System User Access During our review of computer system access controls, we investigated user access for terminated employees. The District's policy is to change a terminated employee's password and disable the account immediately upon termination. After the employees' department is sure there is no pertinent data remaining in the account, the District personnel delete the account. Our review of terminated employees detected that the passwords had been changed; however, user accounts had not been deleted for one former employee who had been terminated for over six months. Recommendation To prevent unauthorized access, we recommend that terminated employees' accounts be disabled immediately upon termination. This communication is intended solely for the information and use of management, Board of Directors and others within the organization, and is not intended to be and should not be used by anyone other than these specified parties. Irvine,California October 30, 2008 i Mayer Hoffman McCann P.C. An Independent CPA Flrm Conrad Government Services Division 2301 Dupont Drive, Suite 200 Irvine,California 92612 949-474-2020 ph 949-263-5520 fx v v.mhm-pc.00m Board of Directors Orange County Sanitation District Fountain Valley, California Independent Accountants' Report on Aereed-Upon Procedures Applied to Appropriations Limit Worksheets We have applied the procedures enumerated below to the appropriations limit worksheets prepared by the Orange County Sanitation District for the year ended June 30, 2008. These procedures, which were agreed to by the Orange County Sanitation District and the League of California Cities (as presented in the League publication entitled Article NUB Appropriations Limitation Uniform Guidelines) were performed solely to assist the Orange County Sanitation District in meeting the requirements of Section 1.5 of Article XMB of the California Constitution. This engagement to apply agreed-upon procedures was performed in accordance with standards established by the American Institute of Certified Public Accountants. The sufficiency of the procedures is solely the responsibility of the specified users of the report. Consequently, we make no representation regarding the sufficiency of the procedures described below either for the purpose for which this report has been requested or for any other purpose. The procedures performed and the results of those procedures were as follows: 1. We obtained the worksheets referred to above and compared the limit and annual adjustment factors included in those worksheets to the limit and annual adjustment factors that were adopted by resolution of the Board of Directors. We also compared the population and inflation options included in the aforementioned worksheets to those that were selected by a recorded vote. Results: No exceptions were noted as a result of our procedures. 2. We recalculated the mathematical computations reflected in the District worksheets. Results: No exceptions were noted as a result of our procedures. t Board of Directors Orange County Sanitation District Page Two 3. We compared the current year information used to determine the current year limit and found that it agreed to worksheets prepared by the District and to information provided by the State Department of Finance. Results: No exceptions were noted as a result of our procedures. 4. We compared the amount of the prior year appropriations limit presented in the worksheets to the amount adopted by the Board of Directors for the prior year. Results: No exceptions were noted as a result of our procedures. We were not engaged to, and did not, perform an audit, the objective of which would be the expression of an opinion on the worksheets referred to above. Accordingly, we do not express such an opinion. Had we performed additional procedures, other matters might have come to our attention that would have been reported to you. No procedures have been performed with respect to the determination of the appropriation limit for the base year, as defined by the League publication entitled Article XIIIB Appropriations Limitation Uniform Guidelines. This report is intended solely for the information and use of the specified users listed above and is not intended to be and should not be used by anyone other than these specified parties. / '� Irvine, California October 30, 2008 Mayer Hoffman McCann P.C. An Independent CPA Firm 2301 Dupont Drive,Suite 200 Irvine,California 92612 949474.2020 ph 949-263-5520 fx www.nnhm-pc.com Administration Committee Orange County Sanitation District Fountain Valley, CA We have audited the financial statements of the Orange County Sanitation District for the year ended June 30, 2008 and have issued our report thereon dated October 30, 2008. Professional standards require that we provide you with the following information related to our audit. Our Responsibility under U.S. Generally Accepted Auditing Standards Our responsibility, as described by professional standards, is to express opinions about whether the financial statements prepared by management with your oversight are fairly presented, in all material respects, in conformity with U.S. generally accepted accounting principles. Our audit of the financial statements does not relieve you or management of your responsibilities. Scope and Timing of the Audit The scope and timing of the audit was communicated to the Chair of the Administration Committee in a separate letter dated May 19, 2008. Significant Audit Findings Qualitative Asoects of Accountine Practices Management is responsible for the selection and use of appropriate accounting policies. We will advise management about the appropriateness of accounting policies and their application. The significant accounting policies used by the District's are described in Note 1 to the financial statements. GASB Statement No. 45 was implemented during the fiscal year ended June 30, 2008. No other new accounting policies were adopted and the application of existing policies was not changed during the fiscal year. We noted no transactions entered into by the District during the year for which there is a lack of authoritative guidance or consensus. There are no significant transactions that have been recognized in the financial statements in a different period than when the transaction occurred. Accounting estimates are an integral part of the financial statements prepared by management and are based on management's knowledge and experience about past and current events and assumptions about future events. Certain accounting estimates are particularly sensitive because of their significance to the financial statements and because of the possibility that future events affecting them may differ significantly from those expected. The most sensitive estimate affecting the financial statements is: Management's judgments concerning which projects should be expensed as ordinary maintenance activities necessary to keep an asset operational for its originally intended useful life versus significant improvement, replacement, and life extending projects that should be r Administration Committee Orange County Sanitation District Page 2 capitalized as additions to capital assets. We select a sample of capital asset additions to determine that management's judgments are reasonable in relation to the financial statements taken as a whole. Difficulties Encountered in Performing the Audit We encountered no difficulties in performing and completing our audit. Corrected and Uncorrected Misstatements Professional standards require us to accumulate all known and likely misstatements identified during the audit, other than those that are trivial, and communicate them to the appropriate level of management. The following adjustments were detected by the audit process: Adjustment to GASB 45 OPEB liability of approximately $1 million to account for changes to the liability balance subsequent to the actuarial valuation date. Management has corrected this misstatement. In addition, District staff chose to account for the following item in a manner that is not in conformance with generally accepted accounting principles due to the lack of materiality to the financial statements taken as a whole. Additional capitalization of interest in accordance with FASB 34 in the amount of$13.8 million to account for interest allocated to capital projects that did not have bond funding. In essence, District staff preferred to immediately recognize interest expense of $13.8 million as opposed to amortizing this expense over the life of the capital projects that did not have bond funding. Disamements with Management For purposes of this letter, professional standards define a disagreement with management as a financial accounting, reporting, or auditing matter, whether or not resolved to our satisfaction, that could be significant to the financial statements or the auditor's report. We are pleased to report that no such disagreements arose during the course of our audit. Management Representations We have requested certain representations from management that are included in the management representation letter dated October 30,2008. Management Consultations with Other Independent Accountants In some cases, management may decide to consult with other accountants about auditing and accounting matters, similar to obtaining a "second opinion" on certain situations. If a consultation involves application of an accounting principle to the District's financial statements or a determination of the type of auditor's opinion that may be expressed on those statements, our professional standards require the consulting accountant to check with us to determine that the consultant has all the relevant facts. To our knowledge,there were no such consultations with other accountants. Administration Committee Orange County Sanitation District Page 3 Other Audit Findings or Issues We generally discuss a variety of matters, including the application of accounting principles and auditing standards, with management each year prior to retention as the District's auditors. However, these discussions occurred in the normal course of our professional relationship and our responses were not a condition to our retention. This information is intended solely for the use of the Administration Committee and management of the District and is not intended to be and should not be used by anyone other than these specified parties. Aur October30,2008 Irvine,California + Meeting Date To ad.of Dir. ADMINISTRATION COMMITTEE 11/12/08 11/19/08 AGENDA REPORT Item Numbfs Item Number ADMOS-35 17 Orange County sanitation District FROM: James D. Ruth, General Manager Originator: Lorenzo Tyner, Director of Finance and Administrative Services SUBJECT: NEW MONEY CERTIFICATES OF PARTICIPATION (COPS) GENERAL MANAGER'S RECOMMENDATION 1) Adopt Resolution No. OCSD 08-20,Authorizing the Execution and Delivery by the District of one or more Installment Purchase Agreements, Trust Agreements, and Continuing Disclosure Agreements in connection with the execution and delivery of Orange County Sanitation District Certificates of Participation, Series 2008C, and if necessary, Series 2009A, Authorizing the Execution and Delivery of such Certificates Evidencing Principal in an Aggregate Amount of Not to Exceed $200,000,000, Approving the Distribution of one more Official Notice Inviting Bids and Official Statements in Connection with the Offerings and Sales of such Certificates and Authorizing the Execution of Necessary Documents and Related Actions; 2) That the Orange County Sanitation District Financing Corporation approve the documents supporting and authorizing the Certificates of Participation, Series 2008C, and 'd necessary, Series 2009A, in an aggregate amount not to exceed $200 million; 3) Establish a true interest cost target rate of 4.75%with a maximum rate of 5.25%; and, 4) Obtain final approval of the Board Chair and Administration Committee Chair prior to completing subject debt issuances. SUMMARY The Administration Committee and the Board of Directors have previously authorized the execution and delivery of$200 million of new Certificates of Participation and approved the financing team consisting of an independent financial advisor, Public Resources Advisory Group, and bond and disclosure counsel, Fulbright&Jaworski. Woodruff, Spradlin & Smart, the District's General Counsel, has also been assisting staff. The purpose of the financing is to provide a portion of the funding required for the capital improvement program of FY 2008-09 and FY 2009-10. None of the proceeds will be used for operations and maintenance needs. This financing is included in the 2008-09 approved budget. The financing is structured as new fixed rate Certificates of Participation that is to be sold in one or more competitive sales. The draft documents will be presented to the Board and the OCSD Financing Corporation on November 19, 2008, for final approval. Staff and consultants will make a brief presentation and provide an overview of the draft documents and the financing schedule at the Administration Committee meeting. A current Financing Schedule is attached. Page 1 PRIOR COMMITTEE/BOARD ACTIONS October 22, 2008: Approved Resolution declaring District's intent to reimburse ourselves for capital outlays from a future long-term financing. October 8, 2008: Directed staff to initiate procedures to issue up to $200 million in new fixed-rate Certificates of Participation (COP) debt. September 12, 2007: Approved a Consulting Services Agreement with Fulbright& Jaworski, L.L.P to provide bond counsel services. ADDITIONAL INFORMATION Strategy The impact of the global financial crisis has also negatively affected the municipal bond market. Immediately following the bankruptcy of Lehman Brothers and the Federal bailout of AIG in mid- September, investor demand for tax-exempt bonds became nearly non-existent, causing tax- exempt interest rates to dramatically increase and primary market bond safes volume to precipitously shrink due to lack of investor demand (and heavy selling by large investors). However, in recent weeks, investors have returned to the municipal bond market, accompanied by lower yields and increasing sales volume. The following charts illustrate the recent volatility of the tax-exempt interest rates and the changes in issuance volume. Bond Buyer Revenue 25 Index (RBI) 7.0 60% 6.5 —RBI Index 50% m Volatility x 6.0 40% mod rn 5.5 30% D v m 5.0 20% > 4.5 10% j 4.0 0% 0 0 0 0 0 0 0 0 0 0 0 0 Municipal Bond Primary Issuance Volume by Week 10 (se 5.5 6 54e 6.5 6 Average = 5.7 $7.56 4.5 2 4 5.22.d6 1.9 1.5 1.0 0 912 919 9116 9123 9130 101`7 10114 10121 10128 These extremely volatile market conditions make it difficult for issuers, like the District, to forecast when may be a good time to enter the market and opportunities may arise suddenly. Page 2 Therefore, it is prudent to provide for maximum flexibility with which to allow for the District's sale of COP debt. Although, today's borrowing costs may not be the most attractive by recent historic standards, by adopting the Resolutions this month, the District would have the ability, but not the obligation, to price its COP debt as soon as early December 2008. With this flexibility, the District could, if market conditions become more favorable, price the COP debt with less than a week's notice to the marketplace. Otherwise, an approval by the Board in December, or later, would delay the earliest pricing date to January 2009 or beyond. Thus, by adopting the Resolutions in November,the District is afforded a larger window of opportunity over which it could price its COPS, and potentially mitigating pressure to sell under unfavorable market conditions. To ensure that the District would be issuing debt when the market conditions are relatively favorable, staff is proposing that an upper limit of 5.75% be set on the true interest cost on the COPS to be issued. Although it is higher than tax-exempt interest rates prior to the current global financial crisis, the proposed limit compares favorably to current long-term proxy indices, such as the Bond Buyer Revenue 25 Index at 6.12% and the higher-rated benchmark Municipal Market Data's AAA GO 20-year index at 5.72%. In addition, bid parameters for the sale will include provisions to allow the District to retain the ability to economically refund the COPS in the event tax-exempt interest rates were to decline in the future, limiting the District's exposure to higher interest cost. Impact on Financing Ratios The most recent Strategic Plan capital improvement program requires approximately $1.074 billion over the next five years, of which approximately$550 million is to be financed through long-term borrowings over the next five years In accordance with the District's long-term debt fiscal policy and cash flow projections. The issuance of$200 million of COP debt this fiscal year is anticipated for a portion of capital improvements to be constructed over the next year. As shown in the report prepared by the District's financial advisor and included as an attachment in the October 8, 2008 Agenda Report, the issuance of$200 million in COP debt will preserve strong financial ratios for the District, including debt service coverage, debt-to-equity ratio, and liquidity ratios. Variable Rate Debt Exposure Another result of the current global financial crisis has been the impact on the financial strength and ratings on various financial institutions which provide bank liquidity facilities used for the issuance of variable rate bonds issued by municipal entities. As a result, these related variable rate bonds have experienced higher than expected interest rate resets, as investors are unwilling to hold bonds secured by these weakening financial institutions. The universe of financial institutions that are not perceived by investors of having financial difficulties is shrinking and these remaining banks have limited ability to service the entire$500 billion tax-exempt variable rate market. The issuance of fixed rate debt will provide the District with a balanced overall debt portfolio consisting of a mix of fixed rate and variable rate debt, while limiting additional exposure in this uncertain market. The District's current variable rate debt exposure includes its outstanding 2006 COPS secured by a liquidity facility from DEPFA Bank plc which is one of the financial institutions experiencing financial difficulties, thus leading to higher than expected rate resets for the District. Staff and the District's consultants have been monitoring this situation and have developed both a short- and a long-tens strategy to manage this exposure. In particular, staff is exploring the optimal method to have the District purchase the 2006 COPS on a temporary basis. (Note that, in response to the recent market dislocations, the Internal Revenue Service (IRS) now allows Page 3 municipal issuers to purchase their own debt obligations without cancellation and without impact ` on the tax-exempt status of such purchased bonds through December 2009.) The optimal method may possibly involve actions by the Orange County Sanitation District Financing Corporation, require amendments to existing bond documents and/or the investment policy of the District. The District's General Counsel is currently reviewing what necessary steps must be taken to allow for these purchases. Prior to the expiry of the December 2009 temporary period allowed by the Internal Revenue Code, it is anticipated that market conditions will normalize making either liquidity facilities or fixed rate bonds less costly. At that time, the 2006 COPs will either be secured by a new liquidity facility or refunded with fixed rate bonds, depending on market conditions. Interest and Issuance Costs The$200 million that is borrowed will be repaid with interest over the next 30 years. The total interest cost is expected to be less than 5.75% (or less than approximately $225 million). Some of the interest cost will be offset by interest earnings while the funds are waiting to be used, and earnings from a debt service reserve fund. The financing of the $200 million of fixed rate COP debt may be completed with more than one issuance. Based on an arbitrage analysis conducted by PRAG in the Capital Improvement Program Financing Plan, dated October 1, 2008, a multi-sale issuance structure would (1) reduce negative arbitrage and (2) mitigate potential size penalties in the current uncertain market resulting in a net savings to the District of approximately$1.5 million. The Consultant Services Agreements with PRAG and Fulbright total a not-to-exceed amount of $185,000 for each series issued under the authorized Resolution, excluding expenses. These and other costs, such as printing the Official Statement, underwriters' discount, rating agency fees and trustee's fees will be paid from the proceeds of each series issued under the authorized Resolution. Legal Authorization and Approvals The Board of Directors and the Financing Corporation will each be required to adopt separate Resolutions to complete this borrowing. Drafts of these two Resolutions are attached for review. A Financing Corporation is required by the structure of the COPS and was formed in April 20D0, solely to satisfy this need. The Board of Directors of the Corporation is the same as the Board of Directors of the District and the Corporation meets after an adjournment of the OCSD Board. The OCSD Resolution authorizes the execution and delivery of certain legal documents and the execution and delivery of Certificates of Participation evidencing principal in an aggregate amount of not to exceed $200,000,000 all as spelled out in the title as follows: "A RESOLUTION OF THE BOARD OF DIRECTORS OF THE ORANGE COUNTY SANITATION DISTRICT AUTHORIZING THE EXECUTION AND DELIVERY BY THE DISTRICT OF ONE OR MORE INSTALLMENT PURCHASE AGREEMENTS, ONE OR MORE TRUST AGREEMENTS,AND ONE OR MORE CONTINUING DISCLOSURE AGREEMENTS IN CONNECTION WITH THE EXECUTION AND DELIVERY OF ORANGE COUNTY SANITATION DISTRICT CERTIFICATES OF PARTICIPATION, SERIES 2008C, AND IF NECESSARY, SERIES 2009A,AUTHORIZING THE EXECUTION AND DELIVERY OF SUCH CERTIFICATES EVIDENCING PRINCIPAL IN AN AGGREGATE AMOUNT OF NOT TO EXCEED$200,000.000,APPROVING ONE OR MORE NOTICES OF INTENTION TO SELL, AUTHORIZING THE DISTRIBUTION OF ONE OR MORE OFFICIAL NOTICES INVITING BIDS AND ONE OR MORE OFFICIAL STATEMENTS IN CONNECTION WITH THE OFFERING AND SALE OF SUCH CERTIFICATES, AND AUTHORIZING THE EXECUTION OF NECESSARY DOCUMENTS AND RELATED ACTIONS." Page 4 The Resolution of the Corporation is somewhat shorter and simpler. It authorizes three actions that are similarly enumerated in the title as follows: "A RESOLUTION OF THE BOARD OF DIRECTORS OF THE ORANGE COUNTY SANITATION DISTRICT FINANCING CORPORATION AUTHORIZING THE EXECUTION AND DELIVERY BY THE CORPORATION OF ONE OR MORE INSTALLMENT PURCHASE AGREEMENTS AND ONE OR MORE TRUST AGREEMENTS IN CONNECTION WITH THE EXECUTION AND DELIVERY OF ORANGE COUNTY SANITATION DISTRICT CERTIFICATES OF PARTICIPATION, SERIES 2008C, AND IF NECESSARY, SERIES 2009A, AUTHORIZING THE EXECUTION AND DELIVERY OF SUCH CERTIFICATES EVIDENCING PRINCIPAL IN AN AGGREGATE AMOUNT OF NOT-TO-EXCEED$200,000,000 AND; AUTHORIZING THE EXECUTION OF NECESSARY DOCUMENTS AND CERTIFICATES AND RELATED ACTIONS." Following is a chart listing the steps to be completed for the initial (if more than one) issuance of the new money COP debt issuance assuming the earliest possible pricing date: ➢ Finalize debt service and cash flow modeling November ➢ Board approval of legal and disclosure documents ➢ Rating Agency Presentations ➢ Marketing and Sale of the COPs through a Competitive Sale Process(depending on market conditions,eadiest possible December pdcing date) ➢ Execute up to$200 million Fixed-Rate COP laws ➢ Investment of Bond Proceeds ➢ Debt Administration ATTACHMENTS 1. District Resolution 2. Corporation Resolution 3. Draft Trust Agreement 4. Draft Installment Purchase Agreement 5. Draft Continuing Disclosure Agreement 6. Draft Preliminary Official Statement 7. Draft Official Notice Inviting Bids 8. Draft Notice of Intention to Sell JDR:LT:MW Page 5 RESOLUTION NO.OCSD 08-20 A RESOLUTION OF THE BOARD OF DIRECTORS OF THE ORANGE COUNTY SANITATION DISTRICT AUTHORIZING THE EXECUTION AND DELIVERY BY THE DISTRICT OF ONE OR MORE INSTALLMENT PURCHASE AGREEMENTS, ONE OR MORE TRUST AGREEMENTS, AND ONE OR MORE CONTINUING DISCLOSURE AGREEMENTS IN CONNECTION WITH THE EXECUTION AND DELIVERY OF ORANGE COUNTY SANITATION DISTRICT CERTIFICATES OF PARTICIPATION, SERIES 2008C, AND IF NECESSARY, SERIES 2009A, AUTHORIZING THE EXECUTION AND DELIVERY OF SUCH CERTIFICATES EVIDENCING PRINCIPAL IN AN AGGREGATE AMOUNT OF NOT TO EXCEED $200,000,000, APPROVING ONE OR MORE NOTICES OF INTENTION TO SELL, AUTHORIZING THE DISTRIBUTION OF ONE OR MORE OFFICIAL NOTICE INVITING BEDS AND ONE OR MORE OFFICIAL STATEMENTS IN CONNECTION WITH THE OFFERING AND SALE OF SUCH CERTIFICATES AND AUTHORIZING THE EXECUTION OF NECESSARY DOCUMENTS AND RELATED ACTIONS WHEREAS,the Orange County Sanitation District(the "District")desires to finance the acquisition, construction and installation of certain improvements to its wastewater system (the "Project"); WHEREAS, to finance the Project, the District desires to purchase the Project from the Orange County Sanitation District Financing Corporation (the "Corporation"), and the Corporation desires to sell the Project to the District, for the installment payments (the "Installment Payments")to be made by the District pursuant to one or more Installment Purchase Agreements (collectively, the "Installment Purchase Agreement"), by and between the District and the Corporation; WHEREAS, the Corporation intends to assign without recourse certain of its rights under and pursuant to each Installment Purchase Agreement to Union Bank of California, N.A., as trustee(the"Trustee"), pursuant to a Trust Agreement among the Trustee,the Corporation and the District (each such Trust Agreement, in the form presented to this meeting, with such changes, insertions and omissions as are made pursuant to this Resolution, being referred to herein collectively as the"Trust Agreement"); WHEREAS, in consideration of such assignment and the execution and delivery of the Trust Agreement, the Trustee intends to execute and deliver Orange County Sanitation District Certificates of Participation, in one or more series (the "Certificates"), evidencing direct, undivided fractional interests in the Installment Payments,and the interest thereon; WHEREAS, the District desires to provide for the public sale of each series of the Certificates in one or more discrete sale transactions; 80341666.4 WHEREAS, a form of the Notice of Intention to Sell to be published in connection with the public offering and sale of the Certificates has been prepared (such Notice of Intention to Sell, in the form presented to this meeting, with such changes, insertions and omissions as are made pursuant to this Resolution, being referred to herein as the"Notice of Intention to Sell"); WHEREAS, a forth of the Official Notice Inviting Bids to be distributed in connection with the public offering and sale of the Certificates has been prepared (such Official Notice Inviting Bids, in the form presented to this meeting, with such changes, insertions and omissions as are made pursuant to this Resolution, being referred to herein as the "Notice Inviting Bids"); WHEREAS, a forth of the Preliminary Official Statement to be distributed in connection with the public offering of the Certificates has been prepared (such Preliminary Official Statement in the form presented to this meeting, with such changes, insertions and omissions as are made pursuant to this Resolution, being referred to herein as the "Preliminary Official Statement'); WHEREAS, Rule 15c2-12 promulgated by the Securities and Exchange Commission under the Securities Exchange Act of 1934, as amended ("Rule 15c2-I2"), requires that the underwriter thereof must have reasonably determined that the District has undertaken in a written agreement or contract for the benefit of the holders of the Certificates to provide disclosure of certain financial information and certain material events on an ongoing basis; WHEREAS, to cause such requirement to be satisfied, the District desires to enter into one or more Continuing Disclosure Agreements (each such Continuing Disclosure Agreement in the form presented to this meeting, with such changes, insertions and omissions as are made pursuant to this Resolution,being referred to herein as the "Continuing Disclosure Agreement'); WHEREAS,there have been prepared and submitted to this meeting forms of (a) the Installment Purchase Agreement; (b) the Trust Agreement; (c) the Notice of Intention to Sell; (d) the Notice Inviting Bids; (e) the Preliminary Official Statement;and (f) the Continuing Disclosure Agreement; WHEREAS, all acts, conditions and things required by the Constitution and laws of the State of California to exist, to have happened and to have been performed precedent to and in connection with the consummation of the financing authorized hereby do exist, have happened and have been performed in regular and due time, form and manner as required by law, and the District is now duly authorized and empowered, pursuant to each and every requirement of law, to consummate such financing for the purpose, in the manner and upon the terms herein provided; 80341666.4 2 NOW, THEREFORE, the Board of Directors of the District DOES HEREBY RESOLVE, DETERMINE AND ORDER: Section 1. All of the recitals herein contained are true and correct and the Board of Directors of the District(the "Board") so finds. Section 2. The Installment Purchase Agreement, in substantially the form submitted to this meeting and made a part hereof as though set forth herein, be and the same is hereby approved. The Chair of the Board, and such other member of the Board as the Chair may designate, the General Manager of the District, the Director of Finance and Administrative Services of the District, and such other officers of the District as the Director of Finance and Administrative Services may designate (the "Authorized Officers") are, and each of them is, hereby authorized and directed, for and in the name of the District,to execute and deliver one or more Installment Purchase Agreements in the form submitted to this meeting, with such changes, insertions and omissions as the Authorized Officer executing the same may require or approve, such requirement or approval to be conclusively evidenced by the execution of such Installment Purchase Agreement by such Authorized Officer; provided, however, that such changes, insertions and omissions shall not result in an aggregate principal amount of Installment Payments in excess of$200,000,000, shall not result in a true interest cost for the Installment Payments in excess of 5.75% and shall not result in a final Installment Payment later than February 1,2039. Section 3. The Trust Agreement, in substantially the form submitted to this meeting and made a part hereof as though set forth in full herein, be and the same is hereby approved. The Authorized Officers are, and each of them is, hereby authorized and directed, for and in the name of the District, to execute and deliver one or more Trust Agreements in the form presented to this meeting, with such changes, insertions and omissions as the Authorized Officer executing the same may require or approve, such requirement or approval to be conclusively evidenced by the execution of the Trust Agreement by such Authorized Officer. Section 4. The execution and delivery of the Certificates evidencing principal in an aggregate amount of not to exceed $200,000,000, payable in the years and in the amounts, and evidencing principal of and interest on the applicable Installment Payments as specified in the applicable Trust Agreement as finally executed, are hereby authorized and approved. The Certificates may be executed and delivered in one or more series, and sold in one or more discrete sale transactions, all as determined by an Authorized Officer. Section 5. The form of Notice of Intention to Sell, in substantially the form submitted to this meeting and made a part hereof as though set forth in full herein, with such changes, insertions and omissions therein as may be approved by an Authorized Officer, is hereby approved,and the use of the applicable Notice of Intention to Sell in connection with the offering and sale of a series of the Certificates is hereby approved. The Authorized Officers are each hereby authorized and directed, for and in the name and on behalf of the District, to cause one or more Notices of Intention to Sell to be published in The Bond Buyer (or in such other financial publication generally circulated throughout the State of California or reasonably expected to be disseminated among prospective bidders for the Certificates as an Authorized Officer shall approve as being in the best interests of the District)at least five days prior to the date set for the opening of bids under the applicable Notice Inviting Bids, with such changes, insertions and 80341666,4 3 omissions therein as an Authorized Officer may require or approve, such requirement or approval to be conclusively evidenced by the publishing of such Notice of Intention to Sell. Section 6. The Notice Inviting Bids, in substantially the form submitted to this meeting and made a part hereof as though set forth herein, with such changes, insertions and omissions therein as may be approved by an Authorized Officer, be and the same is hereby approved, and the use of one or more Notices Inviting Bids in connection with the offering and sale of the Certificates is hereby authorized and approved. The terms and conditions of the offering and sale of a series of the Certificates shall be as specified in applicable Notice Inviting Bids. Bids for the purchase of a series of the Certificates shall be received at the time and place set forth in the applicable Notice Inviting Bids. The Authorized Officers are each hereby authorized and directed, for and in the name and on behalf of the District, to accept the bid for a series of the Certificates with the lowest true interest cost, or to reject all bids therefor, in accordance with the terms of the applicable Notice Inviting Bids. Section 7. The Preliminary Official Statement, in substantially the form presented to this meeting and made a part hereof as though set forth in full herein, with such changes, insertions and omissions therein as may be approved by an Authorized Officer, is hereby approved, and the use of one or more Preliminary Official Statements in connection with the offering and sale of a series of the Certificates is hereby authorized and approved. The Authorized Officers are each hereby authorized to certify on behalf of the District that a Preliminary Official Statement with respect to a series of the Certificates is deemed final as of its date, within the meaning of Rule 15c2-12 (except for the omission of certain information permitted by Rule 15c2-12 to be omitted). The Authorized Officers are each hereby authorized and directed to fumish, or cause to be furnished, to prospective bidders for a series of the Certificates a reasonable number of copies of the applicable Preliminary Official Statement. Section 8. The preparation and delivery of one or more final Official Statements (the "Official Statement'), and their use in connection with the offering and sale of a series of the Certificates, be and the same is hereby authorized and approved. An Official Statement shall be in substantially the form of the applicable Preliminary Official Statement, with such changes, insertions and omissions as may be approved by an Authorized Officer, such approval to be conclusively evidenced by the execution and delivery thereof The Authorized Officers are, and each of them is, hereby authorized and directed to execute a final Official Statement and any amendment or supplement thereto, for and in the name of the District. Section 9. The Continuing Disclosure Agreement, in substantially the form submitted to this meeting and made a part hereof as though set forth herein, be and the same is hereby approved. The Authorized Officers are, and each of them is, hereby authorized and directed, for and in the name of the District, to execute and deliver one or more Continuing Disclosure Agreements in the forth submitted to this meeting, with such changes, insertions and omissions as the Authorized Officer executing the same may require or approve, such requirement or approval to be conclusively evidenced by the execution of such Continuing Disclosure Agreement by such Authorized Officer. 80341666.4 4 Section 10. The Authorized Officers are, and each of them hereby is, authorized and directed to execute and deliver any and all documents and instruments and to do and cause to be done any and all acts and things necessary or proper for carrying out the execution and delivery of the Certificates and the transactions contemplated by the notices, agreements and documents referenced in this Resolution. Section 11. All actions heretofore taken by the officers and employees of the District with respect to the execution, delivery and sale of the Certificates, or in connection with or related to any of the agreements or documents referenced in this Resolution, are hereby approved,confirmed and ratified. Section 12. This Resolution shall take effect immediately upon its adoption. PASSED AND ADOPTED at a regular meeting held on November 19,2008. Chair ATTEST: Clerk of the Board APPROVED: General Counsel Orange County Sanitation District 80341666.4 5 STATE OF CALIFORNIA ) ss COUNTY OF ORANGE ) 1, Penny M. Kyle, Clerk of the Board of Directors of the Orange County Sanitation District, do hereby certify that the foregoing Resolution No. OCSD 08- was passed and adopted at a regular meeting of said Board on the 191h day of November 2008, by the following vote, to wit: AYES: NOES: ABSTENTIONS: ABSENT: IN WITNESS WHEREOF, I have hereunto set my hand and affixed the official seal of Orange County Sanitation District this 19" day of November 2008. Clerk of the Board of Directors Orange County Sanitation District 803 1666.4 RESOLUTION NO. FC-08 A RESOLUTION OF THE BOARD OF DIRECTORS OF THE ORANGE COUNTY SANITATION DISTRICT FINANCING CORPORATION AUTHORIZING THE EXECUTION AND DELIVERY BY THE CORPORATION OF ONE OR MORE INSTALLMENT PURCHASE AGREEMENTS AND ONE OR MORE TRUST AGREEMENTS IN CONNECTION WITH THE EXECUTION AND DELIVERY OF ORANGE COUNTY SANITATION DISTRICT CERTIFICATES OF PARTICIPATION, SERIES 2008C,AND IF NECESSARY, SERIES 2009A, AUTHORIZING THE EXECUTION AND DELIVERY OF SUCH CERTIFICATES EVIDENCING PRINCIPAL IN AN AGGREGATE AMOUNT OF NOT TO EXCEED $200,000,000 AND AUTHORIZING THE EXECUTION OF NECESSARY DOCUMENTS AND RELATED ACTIONS. WHEREAS,the Orange County Sanitation District(the "District') desires to finance the acquisition, construction and installation of certain improvements to its wastewater system (the "Project'); WHEREAS,to finance the Project, the District desires to purchase the Project from the Orange County Sanitation District Financing Corporation (the "Corporation'), and the Corporation desires to sell the Project to the District, for the installment payments (the "Installment Payments") to be made by the District pursuant to one or more Installment Purchase Agreement (collectively, the "Installment Purchase Agreement'), by and between the District and the Corporation; WHEREAS, the Corporation intends to assign without recourse certain of its rights under and pursuant to each applicable Installment Purchase Agreement to Union Bank of California, N.A., as trustee (the "Trustee"), pursuant to one or more Trust Agreements each among the Trustee, the Corporation and the District (each such Trust Agreement, in the form presented to this meeting, with such changes, insertions and omissions as are made pursuant to this Resolution, being referred to herein collectively as the"Trust Agreement'); WHEREAS, in consideration of such assignment and the execution and delivery of the Trust Agreement, the Trustee intends to execute and deliver Orange County Sanitation District Certificates of Participation in one or more series (the "Certificates"), evidencing direct, undivided fractional interests in the applicable Installment Payments, and the interest thereon; WHEREAS,there have been prepared and submitted to this meeting forms of: (a) the Installment Purchase Agreement;and (b) the Trust Agreement; 803416104 WHEREAS, all acts, conditions and things required by the Constitution and laws of the State of California to exist, to have happened and to have been performed precedent to and in connection with the consummation of the actions authorized hereby do exist, have happened and have been performed in regular and due time, form and manner as required by law, and the Corporation is now duly authorized and empowered, pursuant to each and every requirement of law, to consummate such actions for the purpose, in the manner and upon the terms herein provided; NOW, THEREFORE, the Board of Directors of the Corporation DOES HEREBY RESOLVE,DETERMINE AND ORDER: Section 1. All of the recitals herein contained are true and correct and the Board of Directors of the Corporation(the`Board") so finds. Section 2. The Installment Purchase Agreement, in substantially the form submitted to this meeting and made a part hereof as though set forth herein, be and the same is hereby approved. The President of the Corporation,the Vice-President of the Corporation, the Treasurer of the Corporation and the Secretary of the Corporation, and such other officer of the Corporation as the President may designate (the "Authorized Officers") are,and each of them is, hereby authorized and directed, for and in the name of the Corporation, to execute and deliver one or more Installment Purchase Agreements in the forth submitted to this meeting, with such changes, insertions and omissions as the Authorized Officer executing the same may require or approve, such requirement or approval to be conclusively evidenced by the execution of such Installment Purchase Agreement by such Authorized Officer; provided, however, that such changes, insertions and omissions shall not result in an aggregate principal amount of Installment Payments in excess of$200,000,000, shall not result in a true interest cost for the Installment Payments in excess of 5.75% and shall not result in a final Installment Payment later than February 1,2039. Section 3. The Trust Agreement, in substantially the form submitted to this meeting and made a part hereof as though set forth in full herein, be and the same is hereby approved. The Authorized Officers are, and each of them is, hereby authorized and directed, for and in the name of the Corporation, to execute and deliver one or more Trust Agreements in the form presented to this meeting, with such changes, insertions and omissions as the Authorized Officer executing the same may require or approve, such requirement or approval to be conclusively evidenced by the execution of such Trust Agreement by such Authorized Officer. Section 4. The execution and delivery of Certificates evidencing principal in an aggregate amount of not to exceed $200,000,000, payable in the years and in the amounts, and evidencing direct, undivided fractional interests in the applicable Installment Payments, and the interest thereon, as specified in the applicable Trust Agreement as finally executed, are hereby authorized and approved. Section 5. The officers and agents of the Corporation are,and each of them hereby is, authorized and directed to execute and deliver any and all documents and instruments and to do and cause to be done any and all acts and things necessary or proper for carrying out the 80341610.4 2 execution and delivery of the Certificates and the transactions contemplated by the agreements or documents referenced in this Resolution. Section 6. All actions heretofore taken by the officers and agents of the Corporation with respect to the execution, delivery and sale of the Certificates, or in connection with or related to any of the agreements or documents referenced in this Resolution, are hereby approved,confirmed and ratified. Section 7. This Resolution shall take effect immediately upon its adoption. PASSED AND ADOPTED at a meeting held on November 19,2008. President Orange County Sanitation District Financing Corporation ATTEST: Clerk of the Board of Directors, Orange County Sanitation District Financing Corporation APPROVED: General Counsel, Orange County Sanitation District Financing Corporation 80341610.4 3 STATE OF CALIFORNIA ) as COUNTY OF ORANGE ) I, Penny M. Kyle, Clerk of the Board of Directors of the Orange County Sanitation District Financing Corporation, do hereby certify that the foregoini Resolution No. FC-08, was passed and adopted at a regular meeting of said Board on the 19 day of November 2008, by the following vote,to wit: AYES: NOES: ABSTENTIONS: ABSENT: IN WITNESS WHEREOF, I have hereunto set my hand and affixed the official seal of Orange County Sanitation District Financing Corporation this 190 day of November 2008. Clerk of the Board of Directors Orange County Sanitation District Financing Corporation 80341610.4 Fulbrigbt&Jaworski L.L.P.—Draft 10/31/08 TRUST AGREEMENT by and among UNION BANK OF CALIFORNIA,N.A., as Trustee, ORANGE COUNTY SANITATION DISTRICT FINANCING CORPORATION and ORANGE COUNTY SANITATION DISTRICT Dated as of December I, 2008 Relating to $_,000,000 Orange County Sanitation District Certificates of Participation Series2008C sosaoess.3 ' TABLE OF CONTENTS Pop ARTICLE 1 DEFINITIONS;EQUAL SECURITY Section1.01. Definitions........................................................................................................2 Section 1.02. Definitions in Installment Purchase Agreement..............................................9 Section1.03. Equal Security................................................................................................ 10 ARTICLE 11 TERMS AND CONDITIONS OF CERTIFICATES Section 2.01. Preparation and Delivery of Certificates........................................................ 10 Section 2.02. Denomination,Medium and Dating of Certificates....................................... 10 Section 2.03. Payment Dates of Certificates; Interest Computation.................................... 10 Section2.04. Form of Certificates....................................................................................... 12 Section 2.05. Execution of Certificates and Replacement Certificates.The Certificates shall be executed by the Trustee by the manual signature of an authorized signatory of the Tmstee...................................................... 12 Section 2.06. Transfer and Payment of Certificates;Exchange of Certificates................... 12 Section 2.07. Certificate Registration Books....................................................................... 12 Section2.08. Temporary Certificates.................................................................................. 13 Section 2.09. Certificates Mutilated, Lost,Destroyed or Stolen......................................... 13 Section2.10. Book-Entry System........................................................................................ 13 ARTICLE III PROCEEDS OF CERTIFICATES Section 3.01. Delivery of Certificates.................................................................................. 16 Section 3.02. Deposit of Proceeds of Certificates................................................................ 16 Section3.03. Costs of Issuance Fund.................................................................................. 16 Section 3.04. Use of Moneys in the Acquisition Fund........................................................ 16 ARTICLE IV PREPAYMENT OF CERTIFICATES Section4.01. Optional Prepayment........................................................._.......................... Section 4.02. Mandatory Sinking Account Prepayment...................................................... 17 Section 4.03. Selection of Certificates for Optional Prepayment........................................ 18 Section4.04. Notice of Prepayment.................................................................................... 18 Section 4.05. Partial Prepayment of Certificates................................................................. 19 Section4.06. Effect of Prepayment..................................................................................... 19 ARTICLE V ASSIGNMENT AND PLEDGE;FUNDS AND ACCOUNTS Section5.01. Assignment and Pledge.................................................................................. 19 80340485.3 1 } TABLE OF CONTENTS (continued) Page Section 5.02. Installment Payment Fund.............................................................................20 Section 5.03. Reserve Fund.................................................................................................21 Section5.04. Rebate Fund...................................................................................................22 Section5.05. Investment of Moneys....................................................................................23 Section 5.06. Brokerage Confirmations...............................................................................24 ARTICLE VI COVENANTS Section 6.01. Compliance with Trust Agreement....................................._.........................24 Section 6.02. Compliance with Installment Purchase Agreement.......................................24 Section 6.03. Compliance with Master Agreement.............................................................24 Section 6.04. Observance of Laws and Regulations............................................................24 Section6.05. Other Liens.....................................................................................................24 Section 6.06. Prosecution and Defense of Suits..................................................................25 Section6.07. Accounting Records and Statements.............................................................25 Section6.08. Tax Covenants...............................................................................................25 Section 6.09. Continuing Disclosure ...................................................................................28 Section6.10. Further Assurances.............................................................._.........................29 ARTICLE VII DEFAULT AND LIMITATIONS OF LIABILITY Section 7.01. Action upon Event of Default........................................................................29 Section 7.02. Other Remedies of the Trustee......................................................................29 Section7.03. Non-Waiver....................................................................................................30 Section7.04. Remedies Not Exclusive................................................................................30 Section 7.05. Application of Amounts After Default..........................................................30 Section 7.06. Trustee May Enforce Claims Without Possession of Certificates.................31 Section7.07. Limitation on Suits.........................................................................................31 Section 7.08. No Liability by the Corporation to the Owner...............................................31 Section 7.09. No Liability by the District to the Owners.....................................................32 Section 7.10. No Liability of the Trustee to the Owners.....................................................32 ARTICLE Vlll THE TRUSTEE Section 8.01. Employment of the Trustee;Duties...............................................................32 Section 8.02. Removal and Resignation of the Trustee.......................................................32 Section 8.03. Compensation and Indemnification of the Trustee........................................33 Section8.04. Protection of the Trustee...................................................._..........................34 90340495.3 ii TABLE OF CONTENTS (continued) Page ARTICLE IX AMENDMENT OF OR SUPPLEMENT TO TRUST AGREEMENT Section 9.01. Amendment or Supplement...........................................................................36 Section 9.02. Disqualified Certificates................................................................................36 Section 9.03. Endorsement or Replacement of Certificates After Amendment or Supplement....................................................................................................37 Section 9.04. Amendment by Mutual Consent....................................................................37 ARTICLE X DEFEASANCE Section 10.01. Discharge of Certificates and Trust Agreement.............................................37 Section10.02. Unclaimed Moneys........................................................................................39 ARTICLE XI MISCELLANEOUS Section 11.01. Benefits of Trust Agreement..........................................................................39 Section 11.02. Successor Deemed Included in all References to Predecessor......................39 Section 11.03. Execution of Documents by Owners.............................................................39 Section 11.04. Waiver of Personal Liability..........................................................................40 Section 11.05. Acquisition of Certificates by District...........................................................40 Section 11.06. Content of Certificates...................................................................................40 Section11.07. Funds and Accounts.......................................................................................40 Section 11.08. Article and Section Headings,Gender and References.................................41 Section 11.09. Partial Invalidity.............................................................................................41 Section11.10. California Law...............................................................................................41 Section11.11. Notices...........................................................................................................41 Section 11.12. Effective Date................................................................................................42 Section11.13. Execution in Counterparts..............................................................................42 EXHIBIT A—FORM OF CERTIFICATE 80340495.3 iii TRUST AGREEMENT THIS TRUST AGREEMENT(this "Trust Agreement'), dated as of December I, 2008, by and among UNION BANK OF CALIFORNIA, N.A., a national banking association organized and existing under the laws of the United States of America, as Trustee (the "Trustee"), the ORANGE COUNTY SANITATION DISTRICT FINANCING CORPORATION, a nonprofit public benefit corporation organized and existing under the laws of the State of California (the "Corporation"), and the ORANGE COUNTY SANITATION DISTRICT, a county sanitation district organized and existing under the laws of the State of California(the"District'). WITNESSETH: WHEREAS, the District desires to finance the acquisition, construction and installation of certain improvements to its wastewater system(the"Project'); WHEREAS, in order to finance the Project, the District desires to purchase the Project from the Corporation, and the Corporation desires to sell the Project to the District, for the installment payments (the "Installment Payments") to be made by the District pursuant to the Installment Purchase Agreement, dated as of December 1, 2008 (the "Installment Purchase Agreement'), by and between the District and the Corporation; WHEREAS, the Corporation proposes to assign without recourse certain of its rights under and pursuant to the Installment Purchase Agreement to the Trustee; WHEREAS, in consideration of such assignment and the execution and delivery of this Trust Agreement, the Trustee has agreed to execute and deliver Orange County Sanitation District Certificates of Participation, Series 2008C (the "Certificates"), evidencing direct, undivided fractional interests in the Installment Payments, and the interest thereon; WHEREAS, all acts, conditions and things required by law to exist, to have happened and to have been performed precedent to and in connection with the execution and delivery of this Trust Agreement do exist, have happened and have been performed in regular and due time, form and manner as required by law, and the parties hereto are now duly authorized to execute and deliver this Trust Agreement; NOW, THEREFORE, in consideration of the premises and of the mutual agreements and covenants contained herein and for other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged,the parties hereto do hereby agree as follows: 80340485.3 i ARTICLE I DEFINITIONS; EQUAL SECURITY Section 1.01. Definitions. Except as provided in Section 1.02 hereof or unless the context otherwise requires, the terms defined in this Section shall for all purposes hereof and of any amendment hereof or supplement hereto and of the Certificates and of any certificate, opinion, request or other document mentioned herein or therein have the meanings defined herein,the following definitions to be equally applicable to both the singular and plural forms of any of the terms defined herein: "Acquisition Costs"means all costs of acquiring, constructing and installing the Project, including but not limited to: (a) all costs which the Corporation or the District shall be required to pay to a manufacturer, vendor or contractor or any other Person under the terms of any contract or contracts for the construction,acquisition or installation of the Project; (b) obligations of the Corporation or the District incurred for labor and materials (including obligations payable to the Corporation or the District for actual out-of-pocket expenses of the Corporation or the District) in connection with the construction, acquisition or installation of the Project, including reimbursement to the Corporation or the District for all advances and payments made in connection with the Project prior to or after delivery of the Certificates; (c) the costs of performance or other bonds and any and all types of insurance that may be necessary or appropriate to have in effect during the course of construction, acquisition and installation of the Project (d) all costs of engineering, architectural and other consulting services, including the actual out-of-pocket costs of the Corporation or the District for test borings, surveys, estimates, plans and specifications and preliminary investigations therefor, of development fees and sales commissions, and for supervising the construction, acquisition and installation of the Project, as well as for the performance of all other duties required by or consequent to the proper construction,acquisition and installation of the Project;and (e) any sums required to reimburse the Corporation or the District for advances made by the Corporation or the District for any of the above items or for any other costs incurred and for work done by the Corporation or the District which the Corporation or the District determine are properly chargeable to the construction, acquisition or installation of the Project. "Acquisition Fund" means the fund by that name established in accordance with Section 3.04 hereof. "Authorized Corporation Representative"means the President,the Vice President,the Treasurer and the Secretary of the Corporation, and any other Person authorized by the President 80340485.3 2 of the Corporation to act on behalf of the Corporation under or with respect to this Trust Agreement. "Authorized Denominations"means $5,000 and integral multiples thereof. "Authorized District Representative" means the General Manager of the District, the Director of Finance and Administrative Services of the District,the Controller of the District and any other Person authorized by the Director of Finance and Administrative Services of the District to act on behalf of the District under or with respect to this Trust Agreement. "Beneficial Owners" means those individuals, partnerships, corporations or other entities for which the Participants have caused the Depository to hold Book-Entry Certificates. "Book-Entry Certificates" means the Certificates registered in the name of the nominee of DTC,or any successor securities depository for the Certificates, as the Owner thereof pursuant to the terms and provisions of Section 2.10 hereof. "Business Day" means a day other than (a)Saturday or Sunday, (b)a day on which banking institutions in the city in which the Principal Office is located are authorized or required by law to be closed, and (c)a day on which the New York Stock Exchange is authorized or obligated by law or executive order to be closed. "Cede & Co." means Cede & Co., the nominee of DTC, and any successor nominee of DTC with respect to the Certificates. "Certificate Year" means each twelve-month period beginning on February 2 in each year and extending to the next succeeding February 1, both dates inclusive, except that the first Certificate Year shall begin on the Closing Date and end on February 1, 2009. "Certificates" means the Orange County Sanitation District Certificates of Participation, Series 2008C,executed and delivered by the Trustee pursuant hereto. "Closing Date"means December_, 2008. "Code" means the Internal Revenue Code of 1986. "Continuing Disclosure Agreement" means the Continuing Disclosure Agreement, dated as of the date hereof, by and between the District and Digital Assurance Certification LLC, as originally executed and as it may from time to time be amended in accordance with the terms thereof. "Corporation" means the Orange County Sanitation District Financing Corporation, a nonprofit public benefit corporation organized and existing under the laws of the State. "Costs of Issuance" means all the costs of executing and delivering the Certificates, including, but not limited to, all printing and document preparation expenses in connection with this Trust Agreement, the Installment Purchase Agreement, the Certificates and any preliminary official statement and final official statement pertaining to the Certificates, rating agency fees, 80340485.3 3 market study fees, legal fees and expenses of counsel with respect to the execution and delivery of the Certificates,the initial fees and expenses of the Trustee and its counsel and other fees and expenses incurred in connection with the execution and delivery of the Certificates, to the extent such fees and expenses are approved by the District. "Costs of Issuance Fund" means the fund by that name established in accordance with Section 3.03 hereof. "Depository" means the securities depository acting as Depository pursuant to Section 2.10 hereof. "District" means the Orange County Sanitation District, a county sanitation district organized and existing under the laws of the State,and any successor thereto. "DTC"means The Depository Trust Company,New York,New York and its successors. "Event of Default" shall have the meaning set forth in Section 6.01 of the Installment Purchase Agreement. "Government Obligations" means any of the following which are noncallable by the issuer thereof except to the extent not permitted by the laws of the State as an investment for the moneys to be invested therein at the time of investment: (i) (a)direct general obligations of the United States of America, (b)obligations the payment of the principal of and interest on which are unconditionally guaranteed as to the full and timely payment by the United States of America, or (c)any fund or other pooling arrangement whose assets consist exclusively of the obligations listed in clause(a) or(b) of this clause(i) and which is rated at least "P-1" by Moody's; provided that, such obligations shall not include unit investment trusts or mutual fund obligations; (ii) advance refunded tax-exempt obligations secured by the obligations specified in clause(i) which tax-exempt obligations are rated "Aaa" by Moody's and "AAA"by S&P as a result of such obligations being secured by said obligations; (iii) bonds, debentures or notes issued by any of the following federal agencies: Federal Farm Credit Bank, Federal Home Loan Mortgage Corporation or Federal National Mortgage Association; provided that such bonds, debentures or notes shall be the senior obligations of such agencies (including participation certificates) and rated"Asa" by Moody's and"AAA" by S&P; and (iv) bonds, debentures or notes issued by any Federal agency hereafter created by an act of Congress, the payment of the principal of and interest on which are unconditionally guaranteed by the United States of America as to the full and timely payment; provided, that, such obligations shall not include unit investment trusts or mutual fund obligations. $0340485.3 4 "Installment Payment Fund" means the fund by that name established in accordance with Section 5.02 hereof. "Installment Payments" means the Installment Payments required to be made by the District pursuant to Section 3.02 of the Installment Purchase Agreement. "Installment Purchase Agreement" means the Installment Purchase Agreement, dated as of the date hereof, by and between the District and the Corporation,as originally executed and as it may from time to time be amended in accordance with the provisions thereof "Interest Account" means the account by that name within the Installment Payment Fund established in accordance with Section 5.02 hereof. "Interest Payment Date" means February 1 and August I of each year, commencing February 1, 2009. "Letter of Representations"means the letter of the District delivered to and accepted by the Depository on or prior to the delivery of the Certificates as Book-Entry Certificates setting forth the basis on which the Depository serves as depository for such Book-Entry Certificates, as originally executed or as it maybe supplemented or revised or replaced by a letter to a substitute Depository. "Mandatory Sinking Account Payment" means the amount required to be deposited by the District in the Principal Account for the prepayment of Term Certificates pursuant to Section 4.02 hereof. "Master Agreement" means the Master Agreement for District Obligations, dated as of August 1, 2000, by and between the District and the Corporation,as originally executed and as it may from time to time be amended or supplemented in accordance with the terms thereof "Moody's" means Moody's Investors Service, a corporation organized and existing under the laws of the State of Delaware, its successors and assigns, except that if such corporation shall no longer perform the function of a securities rating agency for any reason, the term "Moody's" shall be deemed to refer to any other nationally recognized securities rating agency selected by the District. "Nominee" means the nominee of the Depository, which may be the Depository, as determined from time to time pursuant to Section 2.11 hereof. "Opinion of Counsel" means a written opinion of Fulbright& Jaworski L.L.P. or any other counsel of recognized national standing in the field of law relating to municipal bonds, appointed and paid by the District. "Outstanding,"when used as of any particular time with reference to Certificates, means (subject to the provisions of Section 9.02 hereof) all Certificates except (a)Certificates previously canceled by the Trustee or delivered to the Trustee for cancellation, (b)Certificates paid or deemed to have been paid within the meaning of Section 10.01 hereof, and sas0485.3 5 (c)Certificates in lieu of or in substitution for which other Certificates shall have been executed and delivered by the Trustee pursuant to Section 2.09 hereof. "Owner" means any Person who shall be the registered owner of any Outstanding Certificate as indicated in the registration books of the Trustee required to be maintained pursuant to Section 2.07 hereof "Participants" means those broker-dealers, banks and other financial institutions from time to time for which the Depository holds Book-Entry Certificates as securities depository. "Participating Underwriter" has the meaning ascribed thereto in the Continuing Disclosure Agreement. "Permitted Investments"means any of the following, except to the extent not permitted by the laws of the State as an investment for the moneys to be invested therein at the time of investment: (1) Government Obligations; (2) Bonds, debentures, notes, participation certificates or other evidences of indebtedness issued, or the principal of and interest on which are unconditionally guaranteed, by the Federal Intermediate Credit Bank, the Federal Home Loan Bank System, the Government National Mortgage Association or any other agency or instrumentality of or corporation wholly owned by the United States of America when such obligations are backed by the full faith and credit of the United States for the full and timely payment of principal and interest; (3) Obligations of any state of the United States or any political subdivision thereof, which at the time of investment are rated "Aa3" or higher by Moody's and "AA-" or higher by S&P; or which are rated by Moody's "VMIGI"or better and by S&P "A-I+" or better with respect to commercial paper, or "VMIGI" and "SP-1", respectively,with respect to municipal notes; (4) Bank time deposits evidenced by certificates of deposit, deposit accounts, and bankers' acceptances, issued by any bank, trust company or national banking association insured by the Federal Deposit Insurance Corporation(including the Trustee); provided that (a) such bank, trust company or national banking association be rated "AO" or better by Moody's and "AA-" or better by S&P; and (b)the aggregate of such bank time deposits and bankers' acceptances issued by any bank, trust company or banking association does not exceed at any one time 10% of the aggregate of the capital stock, surplus and undivided profits of such bank, trust company or banking association and that such capital stock, surplus and undivided profits shall not be less $15,000,000; (5) Repurchase agreements with any bank, trust company or national banking association insured by the Federal Deposit Insurance Corporation (including the Trustee), with subsidiaries (of a parent company), provided the obligations of the subsidiary under the agreement are unconditionally guaranteed by the parent, or with any government bond dealer recognized as a primary dealer by the Federal Reserve Bank of New York, 80340485.3 6 which agreements are fully and continuously secured by a valid and perfected first priority security interest in obligations described in paragraph (1)or(2)of this definition, provided that either such bank, trust company or national banking association which (or senior debt or claims paying ability of the financial entity's guarantor) is rated,at the time of investment,"Aa3"or better by Moody's and "AA-"or better by S&P; (6) Repurchase agreements with maturities of not more than one year entered into with financial institutions such as banks or trust companies organized under state law or national banks or banking associations (including the Trustee), insurance companies or government bond dealers reporting to, trading with, and recognized as a primary dealer by, the Federal Reserve Bank of New York and a member of the Securities Investor Protection Corporation or with a dealer or parent holding company that is rated, at the time of investment, or whose long-teen debt obligations (or senior debt or claims paying ability of the financial entity's guarantor) are rated, at the time of investment, "Aa3" or better by Moody's and"AA-"or better by S&P,provided such repurchase agreements are in writing, secured by obligations described in paragraphs (1) and (2) of this definition having a fair market value, exclusive of accrued interest, at least equal to the amount invested in the repurchase agreements and in which the Trustee has a perfected first lien in,and retains possession of, such obligations free from all third party claims; (7) Investment agreements,forward purchase agreements and reserve fund put agreements with any corporation, including banking or financial institutions, or agreements entered into with subsidiaries(of a parent company),provided the obligations of the subsidiary under the agreement are unconditionally guaranteed by the parent, the corporate debt of which (or senior debt or claims paying ability of the financial entity's guarantor) is rated, at the time of investment, "Aa3" or better by Moody's and "AA-" or better by S&P; (8) Guaranteed investment contracts or similar funding agreements issued by insurance companies, provided that either the long term corporate debt of such insurance company,at the time of investment, is rated, at the time of investment, "Aa3"or better by Moody's and "AA-" or better by S&P or which agreements are fully and continuously secured by a valid and perfected first priority security interest in obligations described in paragraph(1) or (2) of this definition, or that the following conditions are met: (a)the market value of the collateral is maintained at levels acceptable to Moody's and S&P, (b)the Trustee or a third party acting solely as agent for the Trustee has possession of the collateral, (c)the Trustee has a perfected first priority security interest in the collateral, (d)the collateral is free and clear of third-party liens, and (e) failure to maintain the requisite collateral level will require the Trustee to liquidate collateral; (9) Corporate commercial paper rated "P-1"or better by Moody's and "A-1+" or better by S&P at the time of investment; (10) Taxable government money market portfolios restricted to obligations the payment of principal and interest with respect to which is guaranteed by the United States of America or repurchase agreements secured by such obligations, and which are rated So34M5.3 7 "AAAm" or"AAAm-G" by S&P and "P-l" by Moody's (including funds for which the Trustee or an affiliate provides investment advice or similar services); (11) Deposits with the Local Agency Investment Fund of the State, as may otherwise be permitted by law; and (12) Shares in the Franklin Adjustable U.S. Government Securities Fund or any other similar fund having at least $1,000,000,000 in assets and invested solely in securities directly guaranteed by the U.S. government or its agencies and rated "AAAf' by S&P or a comparable rating by Moody's. "Person" means an individual, corporation, limited liability company, firm, association, partnership, trust, or other legal entity or group of entities, including a governmental entity or any agency or political subdivision thereof. "Prepayment Account"means the account by that name within the Installment Payment Fund established in accordance with Section 5.02 hereof. "Principal Account" means the account by that name within the Installment Payment Fund established in accordance with Section 5.02 hereof. "Principal Office" means the Trustee's principal corporate trust office in Los Angeles, California. "Principal Payment Date"means a date on which an Installment Payment evidenced by the Certificates becomes due and payable. "Project"has the meaning ascribed thereto in the recitals hereto. "Rebate Fund" means the fund by that name established in accordance with Section 5.04 hereof. "Rebate Requirement"has the meaning ascribed thereto in the Tax Certificate. "Record Date"means, with respect to the interest payable on any Interest Payment Date, the 15th day of the calendar month immediately preceding such Interest Payment Date, whether or not such day is a Business Day. "Reserve Facility" means any line of credit, letter of credit, insurance policy, surety bond or other funding instrument issued by an entity the long-term unsecured obligations of which are then rated "Aa3" or better by Moody's and "AA-" or better by S&P and deposited with the Trustee pursuant to Section 5.03 hereof. "Reserve Fund" means the fund by that name established in accordance with Section 5.03 hereof. "Reserve Requirement" means, as of any date of calculation, an amount equal to the least of(a) 10% of the original aggregate amount of principal evidenced by the Certificates(or if 80340485.3 8 the amount of original issue discount or premium applicable to the Certificates exceeds 2%,then 10% of the issue price of the Certificates), (b)the maximum amount of remaining Installment Payments,and the interest thereon, coming due in any one Certificate Year, and (c) 125% of the average amount of remaining Installment Payments, and the interest thereon, coming due in each Certificate Year. "S&P" means Standard & Poor's Ratings Services, a division of The McGraw-Hill Companies, Inc., a corporation organized and existing under the laws of the State of New York, its successors and assigns, except that if such entity shall no longer perform the functions of a securities rating agency for any reason, the term "S&P" shall be deemed to refer to any other nationally recognized securities rating agency selected by the District. "State"means the State of California. "Tax Certificate" means the Tax Certificate executed by the District at the time of execution and delivery of the Certificates relating to the requirements of section 148 of the Code, as originally executed and as it may from time to time be amended in accordance with the provisions thereof. "Term Certificates" means Certificates payable at or before their specified maturity date or dates from Mandatory Sinking Account Payments established for that purpose and calculated to retire such Certificates on or before their specified maturity date or dates. "Trust Agreement" means this Trust Agreement,dated as of December 1, 2008, by and among the Trustee, the Corporation and the District, as originally executed and delivered and as it may from time to time be amended or supplemented in accordance with the provisions hereof. "Trustee" means Union Bank of California, N.A., a national banking association duly organized and existing under the laws of the United States of America,or any other bank or trust company which may at any time be substituted in its place as provided in Section 10.02 hereof. "Written Certificate"and "Written Request" mean(a)with respect to the Corporation, a written certificate or written request, respectively, signed in the name of the Corporation by an Authorized Corporation Representative, and (b)with respect to the District, a written certificate or written request, respectively, signed in the name of the District by an Authorized District Representative. Any such certificate or request may, but need not, be combined in a single instrument with any other instrument, opinion or representation, and the two or more so combined shall be read and construed as a single instrument. Section 1.02. Definitions in Installment Purchase Agreement. Except as otherwise herein defined and unless the context otherwise requires, the terms defined in the Installment Purchase Agreement shall for all purposes hereof and of any amendment hereof or supplement hereto and of any report or other document mentioned herein have the meanings defined therein, such definitions to be equally applicable to both the singular and plural forms of any of the terms defined therein. With respect to any defined term which is given a different meaning under this Trust Agreement than under the Installment Purchase Agreement,as used herein it shall have the meaning given herein. 8osaa85.3 9 Section 1.03. Equal Security. In consideration of the acceptance of the Certificates by the Owners, this Trust Agreement shall be deemed to be and shall constitute a contract between the Trustee and the Owners to secure the full and final payment of the interest and principal evidenced by the Certificates which may be executed and delivered hereunder, subject to each of the agreements, conditions, covenants and terms contained herein; and all agreements, conditions, covenants and terms contained herein required to be observed or performed by or on behalf of the Trustee shall be for the equal and proportionate benefit, protection and security of all Owners without distinction, preference or priority as to security or otherwise of any Certificates over any other Certificates by reason of the number or date thereof or the time of execution or delivery thereof or for any cause whatsoever,except as expressly provided herein or therein. ARTICLE 11 TERMS AND CONDITIONS OF CERTIFICATES Section 2.01. Preparation and Delivery of Certificates. The Trustee is hereby authorized, upon the Written Request of the District,to execute and deliver the Certificates in the aggregate principal amount of$_,000,000, evidencing the aggregate principal amount of the Installment Payments and each evidencing a direct, fractional undivided interest in the Installment Payments, and the interest thereon. The Installment Payments evidenced by each Certificate shall constitute the principal evidenced thereby and the interest on such Installment Payments shall constitute the interest evidenced thereby. The Certificates shall be numbered, with or without prefixes,as directed by the Trustee. Section 2.02. Denomination. Medium and Dating of Certificates. The Certificates shall be designated "Orange County Sanitation District Certificates of Participation, Series 2008C" shall be prepared in the form of fully registered Certificates, without coupons, in Authorized Denominations and shall be payable in lawful money of the United States of America. The Certificates shall be dated as of the Closing Date. Each Certificate shall evidence interest from the Interest Payment Date next preceding its date of execution to which interest has been paid in full, unless such date of execution shall be after a Record Date and on or prior to the following Interest Payment Date, in which case such Certificate shall evidence interest from such Interest Payment Date, or unless such date of execution shall be on or prior to January 15, 2009, in which case such Certificate shall represent interest from the Closing Date. Notwithstanding, the foregoing, if, as shown by the records of the Trustee, interest evidenced by the Certificates shall be in default, each Certificate shall evidence interest from the last Interest Payment Date to which such interest has been paid in full or duly provided for. Section 2.03. Payment Dates of Certificates; Interest Computation. (a)Method and Place of Payment. The principal evidenced by the Certificates shall become due and payable, subject to prior prepayment, on February I of the years, in the amounts, and shall evidence interest accruing at the rates per annum set forth below: 803a0495.3 10 Principal Payment Date Principal Interest (February 1) Component Rate Except as otherwise provided in the Letter of Representations, payments of interest evidenced by the Certificates shall be made to the Owners thereof(as determined at the close of business on the Record Date next preceding the related Interest Payment Date) by check or draft of the Trustee mailed to the address of each such Owner as it appears on the registration books maintained by the Trustee pursuant to Section 2.07 hereof, or to such other address as may be furnished in writing to the Trustee by each such Owner. Except as otherwise provided in the Letter of Representations, payment of principal and prepayment premium, if any, evidenced by the Certificates, on their stated Principal Payment Dates or on prepayment in whole or in part prior thereto, shall be made only upon presentation and surrender of the Certificates at the Principal Office. 90340485.3 I 1 (b) Computation of Interest. The interest evidenced by the Certificates shall be payable on each Interest Payment Date to and including their respective Principal Payment Dates or prepayment prior thereto, and shall represent the sum of the interest on the Installment Payments coming due on the Interest Payment Dates in each year. The principal evidenced by the Certificates shall be payable on their respective Principal Payment Dates in each year and shall represent the Installment Payments coming due on the Principal Payment Dates in each year. Interest evidenced by the Certificates shall be computed on the basis of a 360-0ay year consisting of twelve 30-day months. Section 2.04. Form of Certificates. The Certificates shall be in substantially the form of Exhibit A hereto, with necessary or appropriate insertions, omissions and variations as permitted or required hereby. Section 2.05. Execution of Certificates and Replacement Certificates. The Certificates shall be executed by the Trustee by the manual signature of an authorized signatory of the Trustee. The Trustee shall deliver replacement Certificates in the manner and as contemplated by this Article. Such replacement Certificates shall be executed as herein provided and shall be in Authorized Denominations. Section 2.06. Transfer and Payment of Certificates: Exchange of Certificates. Each Certificate is transferable by the Owner thereof, in person or by his attorney duly authorized in writing, at the Principal Office, on the registration books maintained by the Trustee pursuant to the provisions of Section 2.07 hereof, upon surrender of such Certificate for cancellation accompanied by delivery of a duly executed written instrument of transfer in a form acceptable to the Trustee. The Trustee may treat the Owner of any Certificate as the absolute owner of such Certificate for all purposes, whether or not the principal or interest evidenced by such Certificate shall be overdue, and the Trustee shall not be affected by any knowledge or notice to the contrary; and payment of the interest and principal evidenced by such Certificate shall be made only to such Owner, which payments shall be valid and effectual to satisfy and discharge the liability evidenced by such Certificate to the extent of the sum or sums so paid. Whenever any Certificate shall be surrendered for transfer, the Trustee shall execute and deliver a new Certificate or Certificates evidencing principal in the same aggregate amount and having the same stated Principal Payment Date. The Trustee shall require the payment by any Owner requesting such transfer of any tax or other governmental charge required to be paid with respect to such transfer. Each Certificate may be exchanged at the Principal Office for Certificates evidencing principal in a like aggregate principal amount having the same stated Principal Payment Date in such Authorized Denominations as the Owner thereof may request. The Trustee shall require the payment by the Owner requesting such exchange of any tax or other governmental charge required to be paid with respect to such exchange. Section 2.07. Certificate Registration Books. The Trustee shall keep at its Principal Office sufficient books for the registration and transfer of the Certificates, which books shall be available for inspection and copying by the District at reasonable hours and under reasonable conditions; and upon presentation for such purpose the Trustee shall, under such reasonable 80340485.3 12 regulations as it may prescribe, register or transfer the Certificates on such books as hereinabove provided. Section 2.08. Temporary Certificates. The Certificates may be initially delivered in temporary form exchangeable for definitive Certificates when ready for delivery, which temporary Certificates shall be printed, lithographed or typewritten, shall be of such denominations as may be determined by the Trustee, shall be in fully registered form and shall contain such reference to any of the provisions hereof as may be appropriate. Every temporary Certificate shall be executed and delivered by the Trustee upon the same conditions and terms and in substantially the same manner as definitive Certificates. If the Trustee executes and delivers temporary Certificates, it shall prepare and execute definitive Certificates without delay, and thereupon the temporary Certificates may be surrendered at the Principal Office in exchange for such definitive Certificates, and until so exchanged such temporary Certificates shall be entitled to the same benefits hereunder as definitive Certificates executed and delivered hereunder. Section 2.09. Certificates Mutilated, Lost. Destroyed or Stolen. If any Certificate shall become mutilated, the Trustee, at the expense of the Owner thereof, shall execute and deliver a new Certificate evidencing a like principal amount and having the same stated Principal Payment Date and number in exchange and substitution for the Certificate so mutilated, but only upon surrender to the Trustee of the Certificate so mutilated. Every mutilated Certificate so surrendered to the Trustee shall be canceled by it. If any Certificate shall be lost, destroyed or stolen, evidence of such loss, destruction or theft may be submitted to the Trustee, and if such evidence is satisfactory to the Trustee and indemnity satisfactory to the Trustee shall be given, the Trustee, at the expense of the Owner thereof, shall execute and deliver a new Certificate evidencing a like principal amount and having the same stated Principal Payment Date, numbered as the Trustee shall determine, in lieu of and in substitution for the Certificate so lost, destroyed or stolen. The Trustee may require payment of a sum not exceeding the actual cost of preparing each new Certificate executed and delivered by it under this Section and of the expenses which may be incurred by it under this Section. Any Certificate executed and delivered under the provisions of this Section in lieu of any Certificate alleged to be lost, destroyed or stolen shall be equally and proportionately entitled to the benefits hereof with all other Certificates executed and delivered hereunder, and the Trustee shall not be required to treat both the original Certificate and any replacement Certificate as being Outstanding for the purpose of determining the amount of Certificates which may be executed and delivered hereunder or for the purpose of determining any percentage of Certificates Outstanding hereunder, but both the original and replacement Certificate shall be treated as one and the same. Notwithstanding any other provision of this Section, in lieu of executing and delivering a new Certificate for a Certificate which has been lost, destroyed or stolen and which evidences principal that is then payable,the Trustee may make payment of such Certificate to the Owner thereof if so instructed by the District. Section 2.10. Book-Entry System. (a)The Certificates shall be initially executed and delivered as Book-Entry Certificates, and the Certificates for each stated Principal Payment Date shall be in the form of a separate single fully registered Certificate (which may be typewritten). Upon initial execution and delivery, the ownership of each Certificate shall be registered in the 80340485.3 13 registration books maintained by the Trustee in the name of the Nominee, as nominee of the Depository. Payment of principal or interest evidenced by any Book-Entry Certificate registered in the name of the Nominee shall be made on the applicable Interest Payment Date by wire transfer of New York clearing house or equivalent next day funds or by wire transfer of same day funds to the account of the Nominee. Such payments shall be made to the Nominee at the address which is,on the Record Date, shown for the Nominee in the registration books maintained by the Trustee. (b) With respect to Book-Entry Certificates, the District, the Corporation and the Trustee shall have no responsibility or obligation to any Participant or to any Person on behalf of which such a Participant holds an interest in such Book-Entry Certificates. Without limiting the immediately preceding sentence, the District, the Corporation and the Trustee shall have no responsibility or obligation with respect to (i)the accuracy of the records of the Depository, the Nominee or any Participant with respect to any ownership interest in Book-Entry Certificates, (ii)the delivery to any Participant or any other Person, other than an Owner as shown in the registration books maintained by the Trustee, of any notice with respect to Book-Entry Certificates, including any notice of prepayment, (iii)the selection by the Depository and its Participants of the beneficial interests in Book-Entry Certificates to be prepaid in the event Certificates are prepaid in part, (iv)the payment to any Participant or any other Person, other than an Owner as shown in the registration books maintained by the Trustee, of any amount with respect to principal, premium, if any, or interest evidenced by Book-Entry Certificates, or(v) any consent given or other action taken by the Depository as Owner. (c) The District,the Corporation and the Trustee may treat and consider the Person in whose name each Book-Entry Certificate is registered in the registration books maintained by the Trustee as the absolute Owner of such Book-Entry Certificate for the purpose of payment of principal, prepayment premium, if any, and interest evidenced by such Certificate, for the purpose of selecting any Certificates, or portions thereof,to be prepaid, for the purpose of giving notices of prepayment and other matters with respect to such Certificate, for the purpose of registering transfers with respect to such Certificate, for the purpose of obtaining any consent or other action to be taken by Owners and for all other purposes whatsoever, and the District, the Corporation and the Trustee shall not be affected by any notice to the contrary. (d) Reserved. (e) The Trustee shall pay all principal, premium, if any, and interest evidenced by the Certificates to the respective Owner, as shown in the registration books maintained by the Trustee, or his respective attorney duly authorized in writing, and all such payments shall be valid and effective to fully satisfy and discharge the obligations with respect to payment of principal, premium, if any, and interest evidenced by the Certificates to the extent of the sum or sums so paid. No Person other than an Owner, as shown in the registration books maintained by the Trustee, shall receive a Certificate evidencing principal, premium, if any, and interest evidenced by the Certificates. Upon delivery by the Depository to the Owners, the Trustee and the District of written notice to the effect that the Depository has determined to substitute a new 80340485.3 14 nominee in place of the Nominee, and subject to the provisions herein with respect to Record Dates,the word Nominee in this Trust Agreement shall refer to such nominee of the Depository. (f) In order to qualify the Book-Entry Certificates for the Depository's book-entry system, the District shall execute and deliver to the Depository a Letter of Representations. The execution and delivery of a Letter of Representations shall not in any way impose upon the Corporation, the District or the Trustee any obligation whatsoever with respect to Persons having, interests in such Book-Entry Certificates other than the Owners, as shown on the registration books maintained by the Trustee. Such Letter of Representations may provide the time, form, content and manner of transmission, of notices to the Depository. In addition to the execution and delivery of a Letter of Representations by the District,the District,the Corporation and the Trustee shall take such other actions, not inconsistent with this Trust Agreement, as are reasonably necessary to qualify Book-Entry Certificates for the Depository's book-entry program. (g) In the event the District determines that it is in the best interests of the Beneficial Owners that they be able to obtain certificated Certificates and that such Certificates should therefore be made available and notifies the Depository and the Trustee of such determination, the Depository will notify the Participants of the availability through the Depository of certificated Certificates. In such event, the Trustee shall transfer and exchange certificated Certificates as requested by the Depository and any other Owners in appropriate amounts. In the event(i)the Depository determines not to continue to act as securities depository for Book-Entry Certificates, or (ii)the Depository shall no longer so act and gives notice to the Trustee of such determination,then the District shall discontinue the Book-Entry system with the Depository. If the District determines to replace the Depository with another qualified securities depository,the District shall prepare or direct the preparation of a new single, separate, fully registered Certificate for each stated Principal Payment Date of such Book-Entry Certificates, registered in the name of such successor or substitute qualified securities depository or its nominee. If the District fails to identify another qualified securities depository to replace the Depository,then the Certificates shall no longer be restricted to being registered in the registration books maintained by the Trustee in the name of the Nominee, but shall be registered in whatever name or names the Owners transferring or exchanging such Certificates shall designate, in accordance with the provisions of Sections 2.06 and 2.09 hereof. Whenever the Depository requests the District to do so, the District will cooperate with the Depository in taking appropriate action after reasonable notice (i)to make available one or more separate certificates evidencing the Book-Entry Certificates to any Participant having Book-Entry Certificates credited to its account with the Depository, and (ii)to arrange for another securities depository to maintain custody of certificates evidencing the Book-Entry Certificates. (h) Notwithstanding any other provision of this Trust Agreement to the contrary, if DTC is the sole Owner of the Certificates, so long as any Book-Entry Certificate is registered in the name of the Nominee, all payments of principal, premium, if any, and interest evidenced by such Certificate and all notices with respect to such Certificate shall be made and given, respectively, as provided in the Letter of Representations or as otherwise instructed by the Depository. roxsass.s 15 (i) In connection with any notice or other communication to be provided to Owners pursuant to the Trust Agreement by the District, the Corporation or the Trustee, with respect to any consent or other action to be taken by Owners, the Trustee shall establish a record date for such consent or other action and give the Depository notice of such record date not less than 15 calendar days in advance of such record date to the extent possible. Notice to the Depository shall be given only when DTC is the sole Owner of the Certificates. ARTICLE III PROCEEDS OF CERTIFICATES Section 3.01. Delivery of Certificates. The Trustee is hereby authorized to execute the Certificates and deliver the Certificates to the original purchaser thereof upon receipt of a Written Request of the District and upon receipt of the proceeds of sale thereof. Section 3.02. Deposit of Proceeds of Certificates. The net proceeds received by the Trustee from the sale of the Certificates in the amount of$ shall be deposited by the Trustee as follows: (a) the Trustee shall deposit in the Costs of Issuance Fund the amount of$ , (b) the Trustee shall deposit in the Reserve Fund the amount of$ , which is equal to the initial Reserve Requirement; and (c) the Trustee shall deposit in the Acquisition Fund the amount of$ Section 3.03. Costs of Issuance Fund. The Trustee shall establish and maintain a separate special fund to be held by the Trustee known as the Costs of Issuance Fund. There shall be deposited in the Costs of Issuance Fund on the Closing Date the amount required to be deposited therein pursuant to Section 3.02 hereof The Trustee shall disburse moneys from the Costs of Issuance Fund on such dates and in such amounts as are necessary to pay Costs of Issuance, in each case upon the Written Request of the District stating the Person to whom payment is to be made,the amount to be paid, the purpose for which the obligation was incurred and that such payment is a proper charge against the Costs of Issuance Fund. On the date that is six months after the Closing Date, the Trustee shall transfer any amounts then remaining in the Costs of Issuance Fund to the Installment Payment Fund. Upon such transfer, the Costs of Issuance Fund shall be closed. Section 3.04. Use of Moneys in the Acquisition Fund. The Trustee shall establish and maintain a separate special fund to be known as the Acquisition Fond. All moneys in the Acquisition Fund shall be held by the Trustee in trust and applied by the Trustee, as provided in this Section,to the payment of Acquisition Costs. Before any payment is made from the Acquisition Fund by the Trustee, the District shall cause to be filed with the Trustee a Written Request of the District showing with respect to each payment to be made: (a) the item number of the payment; 9034oa853 16 (b) the name of the Person to whom payment is due; (c) the amount to be paid; and (d) the purpose for which the obligation to be paid was incurred. Each such Written Request shall also state, and shall be sufficient evidence to the Trustee, (a) that obligations in the stated amounts have been incurred by the District or the Corporation,and (b)that each item thereof is a proper charge against the Acquisition Fund and is an Acquisition Cost properly allocable to the Project. Each such Written Request shall further specify in reasonable detail the nature of the obligation to be paid. Upon receipt of each such Written Request, the Trustee shall pay the amount set forth in such Written Request as directed by the terms thereof. The Trustee need not make any such payment if it has received written notice of any lien, right to lien or attachment upon, or claim affecting the right to receive payment of, any of the moneys to be so paid, which has not been released or will not be released simultaneously with such payment, unless a payment bond has been posted with the Trustee in the full amount of such lien or claim. Upon the filing with the Trustee of a Written Certificate of the District(i) stating that the Project has been completed and that all costs of the Project have been paid or are not required to be paid from the Acquisition Fund, or (ii) stating that the Project has been substantially completed and that all remaining costs of the Project have been determined and specifying the amount to be retained therefor, the Trustee shall transfer and apply the amount, if any, remaining in the Acquisition Fund (less any such retention) to the Installment Payment Fund. Upon such transfer and the release of any retained funds,the Acquisition Fund shall be closed. ARTICLE IV PREPAYMENT OF CERTIFICATES Section 4.01. Optional Prepayment. The Certificates are subject to optional prepayment prior to their stated Principal Payment Dates,on any date on or after August 1,2018, in whole or in part, in Authorized Denominations, from and to the extent of prepaid Installment Payments paid pursuant to Section 4.01 of the Installment Purchase Agreement or from any other source of available funds, any such prepayment to be at a price equal to the principal evidenced by the Certificates to be prepaid, plus accrued interest evidenced thereby to the date fixed for prepayment, without premium. Section 4.02. Mandatory Sinking Account Prepayment. The Term Certificates maturing on February 1, 20_are subject to prepayment prior to their stated maturity, in part, by lot, on any February 1 on and after February 1, 20_, at the principal amount thereof, plus accrued interest to the date fixed for prepayment, without premium, from Mandatory Sinking Account Payments deposited in the Principal Account. The Term Certificates maturing on February 1, 20_ shall be prepaid (or paid at maturity, as the case may be) by application of Mandatory Sinking Account Payments in the amounts and upon the dates set forth below: 80340485.3 17 Term Certificates Maturing February 1,20 Mandatory Sinking Account Mandatory Payment Dates Sinking Account (February 1) Payments Section 4.03. Selection of Certificates for Optional Prepayment. Whenever less than all the Outstanding Certificates are to be prepaid on any one date pursuant to Section 4.01 hereof, the Trustee shall select the Certificates to be prepaid among Certificates with different Principal Payment Dates as directed in a Written Request of the District. Whenever less than all the Outstanding Certificates with the same stated Principal Payment Date are to be prepaid on any one date pursuant hereto, the Trustee shall select the Certificates with such Principal Payment Date to be prepaid as directed in a Written Request of the District, or at the discretion of the District by lot in any manner that the Trustee deems fair and appropriate,which decision shall be final and binding upon the District and the Owners. The Trustee shall promptly notify the District in writing of the numbers of the Certificates so selected for prepayment on such date. For purposes of such selection, any Certificate may be prepaid in part in Authorized Denominations. Section 4.04. Notice of Preju vment. When prepayment of Certificates is authorized pursuant to Section 4.01 or 4.02 hereof, the Trustee shall give notice, at the expense of the District, of the prepayment of the Certificates. The notice of prepayment shall specify (a)the Certificates or designated portions thereof(in the case of prepayment of the Certificates in part but not in whole) which are to be prepaid, (b)the date of prepayment, (c)the place or places where the prepayment will be made, including the name and address of any paying agent,(d)the prepayment price, (e)the CUSIP numbers assigned to the Certificates to be prepaid, (f)the numbers of the Certificates to be prepaid in whole or in part and, in the case of any Certificate to be prepaid in part only, the principal evidenced by such Certificate to be prepaid, and (g)the interest rate and stated Principal Payment Date of each Certificate to be prepaid in whole or in part. Such notice of prepayment shall further state that on the specified date there shall become due and payable upon each Certificate or portion thereof being prepaid the prepayment price and that from and after such date interest evidenced thereby shall cease to accrue and be payable. With respect to any notice of prepayment of Certificates pursuant to Section 4.01 hereof, unless at the time such notice is given the Certificates to be prepaid shall be deemed to have been paid within the meaning of Section 10.01 hereof, such notice shall state that such prepayment is conditional upon receipt by the Trustee, on or prior to the date fixed for such prepayment, of moneys sufficient to pay for the prepayment price of the Certificates to be prepaid, and that if such moneys shall not have been so received said notice shall be of no force and effect and the District shall not be required to prepay such Certificates.If a notice of prepayment of Certificates contains such a condition and such moneys are not so received,the prepayment of Certificates as 80340485.3 18 described in the conditional notice of prepayment shall not be made and the Trustee shall,within a reasonable time after the date on which such prepayment was to occur, give notice to the persons and in the manner in which the notice of prepayment was given, that such moneys were not so received and that there shall be no prepayment of Certificates pursuant to such notice of prepayment. The Trustee shall, at least 20 but not more than 60 days prior to any prepayment date, give notice of prepayment to the respective Owners of Certificates designated for prepayment by first-class mail, postage prepaid, at their addresses appearing on the registration books maintained by the Trustee as of the close of business on the day before such notice of prepayment is given. The actual receipt by the Owner of any notice of such prepayment shall not be a condition precedent to prepayment, and neither failure to receive such notice nor any defect therein shall affect the validity of the proceedings for the prepayment of such Certificates or the cessation of interest evidenced thereby on the date fixed for prepayment. A certificate by the Trustee that notice of prepayment has been given to Owners as herein provided shall be conclusive as against all parties, and no Owner whose Certificate is called for prepayment may object thereto or object to the cessation of interest evidenced thereby on the fixed prepayment date by any claim or showing that said Owner failed to actually receive such notice of prepayment. Section 4.05. Partial Prepayment of Certificates. Upon surrender of any Certificate prepaid in part only,the Trustee shall execute and deliver to the Owner thereof a new Certificate or Certificates evidencing the unprepaid principal with respect to the Certificate surrendered. Section 4.06. Effect of Prepayment. If notice of prepayment has been duly given as aforesaid and moneys for the payment of the prepayment price of the Certificates to be prepaid are held by the Trustee, then on the prepayment date designated in such notice, the Certificates so called for prepayment shall become payable at the prepayment price specified in such notice; and from and after the date so designated, interest evidenced by the Certificates so called for prepayment shall cease to accrue, such Certificates shall cease to be entitled to any benefit or security hereunder and the Owners of such Certificates shall have no rights in respect thereof except to receive payment of the prepayment price thereof The Trustee shall, upon surrender for payment of any of the Certificates to be prepaid, pay such Certificates at the prepayment price thereof, and such moneys shall be pledged to such payment. All Certificates prepaid pursuant to the provisions of this Article shall be canceled by the Trustee and shall not be redelivered. ARTICLE V ASSIGNMENT AND PLEDGE; FUNDS AND ACCOUNTS Section 5.01. Assignment and Pledge. The Corporation hereby transfers, conveys and assigns to the Trustee, for the benefit of the Owners, all of the Corporation's rights, title and interest in and to the Installment Purchase Agreement (excepting its rights to indemnification thereunder), including the right to receive Installment Payments, and the interest thereon, from 80340485.3 19 the District and the right to exercise any remedies provided therein in the event of a default by the District thereunder. The Trustee hereby accepts said transfer, conveyance and assignment, solely in its capacity as Trustee, for the benefit of the Owners, subject to the provisions of this Trust Agreement. All Installment Payments, and the interest thereon, shall be paid directly by the District to the Trustee, and if received by the Corporation at any time shall be deposited by the Corporation with the Trustee immediately upon the receipt thereof. In order to secure the respective rights of the Owners to the payments required to be made thereto as provided herein, the Corporation and the District hereby irrevocably pledge to the Trustee, for the benefit of the Owners, all of their right, title and interest, if any, in and to all amounts on deposit from time to time in the funds and accounts established hereunder (other than the Rebate Fund). This pledge shall constitute a first lien on the amounts on deposit in such funds and accounts. Section 5.02. Installment Payment Fund. (a)The Trustee shall establish and maintain the Installment Payment Fund until all required Installment Payments, and the interest thereon, are paid in full pursuant to the Installment Purchase Agreement and until the first date upon which the Certificates are no longer Outstanding. The Trustee shall deposit in the Installment Payment Fond all Installment Payments, and the interest thereon, paid by the District and received by the Trustee. The moneys in the Installment Payment Fund shall be held in trust by the Trustee for the benefit of the Owners and shall be used and disbursed only for the purposes and uses herein authorized. (b) The Trustee shall transfer the amounts on deposit in the Installment Payment Fund, at the times and in the manner hereinafter provided, to the following respective accounts within the Installment Payment Fund, each of which the Trustee hereby agrees to establish and maintain until all required Installment Payments, and the interest thereon, are paid in full pursuant to the Installment Purchase Agreement and until the first date upon which the Certificates are no longer Outstanding. The moneys in each of such accounts shall be held in trust by the Trustee for the benefit of the Owners and shall be used and disbursed only for the purposes and uses herein authorized. (i) Interest Account. The Trustee, on each Interest Payment Date, shall deposit in the Interest Account that amount of moneys representing the interest on the Installment Payments coming due on such Interest Payment Date. Moneys in the Interest Account shall be used by the Trustee for the purpose of paying the interest evidenced by the Certificates when due and payable. (ii) Principal Account. The Trustee, on each Principal Payment Date, shall deposit in the Principal Account that amount of moneys representing the Installment Payments coming due on such Principal Payment Date. Moneys in the Principal Account shall be used by the Trustee for the purpose of paying the principal or Mandatory Sinking Account Payments evidenced by the Certificates when due and payable. (iii) Prepayment Account. The Trustee, on the prepayment date specified in the Written Request of the District filed with the Trustee at the time that any prepaid Installment Payment is paid to the Trustee pursuant to the Installment Purchase 80340485.3 20 Agreement, shall deposit in the Prepayment Account that amount of moneys representing such prepaid Installment Payment, the accrued interest thereon to the prepayment date and any premium payable with respect thereto. The Trustee shall deposit in the Prepayment Account any other amounts made available by the District that the District, pursuant to a Written Request of the District, instructs the Trustee to apply to the prepayment of Certificates pursuant to Section 4.01 hereof. Moneys in the Prepayment Account shall be used by the Trustee for the purpose of paying the interest, premium, if any, and principal evidenced by the Certificates to be prepaid pursuant to Section 4.01 hereof Section 5.03. Reserve Fund. (a)The Trustee shall establish and maintain the Reserve Fund until all required Installment Payments,and the interest thereon, are paid in full pursuant to the Installment Purchase Agreement and until the first date upon which no Certificates are Outstanding. The moneys in the Reserve Fund, and any Reserve Facility, shall be held in trust by the Trustee for the benefit of the Owners and shall be used and disbursed only for the purposes and uses herein authorized. There shall be deposited in the Reserve Fund on the Closing Date the amount required to be deposited therein pursuant to Section 3.02 hereof (b) The District may substitute a Reserve Facility for all or a part of the moneys on deposit in the Reserve Fund by depositing such Reserve Facility with the Trustee so long as, at the time of such substitution, the amount on deposit in the Reserve Fund, together with the amount available under such Reserve Facility and any previously substituted Reserve Facilities, shall be at least equal to the Reserve Requirement. Moneys for which a Reserve Facility has been substituted as provided herein shall be transferred, at the election of the District, to the Installment Payment Fund, or upon receipt of an Opinion of Counsel to the effect that such transfer, in and of itself, will not adversely affect the exclusion of interest evidenced by the Certificates from gross income for federal income tax purposes, to a special account to be held by the Trustee and applied to the payment of capital costs of the District,as directed in a Written Request of the District. Any amounts paid pursuant to any Reserve Facility shall be deposited in the Reserve Fund. (c) If, on any Interest Payment Date,the amount on deposit in the Interest Account is insufficient to pay the interest evidenced by the Certificates on such Interest Payment Date, the Trustee shall transfer from the Reserve Fund and deposit in the Interest Account an amount sufficient to make up such deficiency. If a Reserve Facility is credited to the Reserve Fund to satisfy a portion of the Reserve Requirement, the Trustee shall make a claim for payment under such Reserve Facility, in accordance with the provisions thereof, in an amount which, together with other available moneys in the Reserve Fund, will be sufficient to make said deposit in the Interest Account. If, on any Principal Payment Date, the amount on deposit in the Principal Account is insufficient to pay the principal evidenced by the Certificates on such Principal Payment Date, the Trustee shall transfer from the Reserve Fund and deposit in the Principal Account an amount sufficient to make up such deficiency. If a Reserve Facility is credited to the Reserve Fund to satisfy a portion of the Reserve Requirement, the Trustee shall make a claim for payment under such Reserve Facility, in accordance with the provisions thereof, in an amount which, together e030485 3 21 with other available moneys in the Reserve Fund, will be sufficient to make said deposit in the Principal Account. Moneys, if any, on deposit in the Reserve Fund shall be withdrawn and applied by the Trustee for the final payment of principal and interest evidenced by the Certificates. (d) Amounts on deposit in the Reserve Fund which were not derived from payments under any Reserve Facility credited to the Reserve Fund to satisfy a portion of the Reserve Requirement shall be used and withdrawn by the Trustee prior to using and withdrawing any amounts derived from payments under any such Reserve Facility. In order to accomplish such use and withdrawal of such amounts not derived from payments under any such Reserve Facility, the Trustee shall, as and to the extent necessary, liquidate any investments purchased with such amounts. If and to the extent that more than one Reserve Facility is credited to the Reserve Fund to satisfy a portion of the Reserve Requirement,drawings thereunder, and repayment of expenses with respect thereto, shall be made on a pro rata basis (calculated by reference to the policy limits available thereunder). (e) Upon any transfer from the Reserve Fond or the making of any claim under any Reserve Facility, the Trustee shall, within five days thereafter, provide written notice to the District of the amount and the date of such transfer or claim. (t) The Trustee shall, from amounts received from the District pursuant to Section 3.03 of the Installment Purchase Agreement, deposit in the Reserve Fund an amount of money which, together with the amount already on deposit therein and the amounts available under all Reserve Facilities,will be equal to the Reserve Requirement. No deposit need be made in the Reserve Fund so long as there shall be on deposit therein a sum equal to the amount which, together with the amounts available under all Reserve Facilities, is at least the Reserve Requirement. The Trustee shall promptly notify the District in writing if the amount on deposit is less than the Reserve Requirement. (g) If, as a result of the scheduled payment of principal or interest evidenced by the Certificates, the Reserve Requirement is reduced, the Trustee shall transfer an amount equal to the amount of such reduction to the Installment Payment Fund. (h) On any date on which Certificates are defeased in accordance with Article X hereof, the Trustee shall, if so directed in a Written Request of the District,transfer any moneys in the Reserve Fund in excess of the Reserve Requirement resulting from such defeasance to the entity or fund so specified in such Written Request of the District, to be applied to such defeasance. Section 5.04. Rebate Fund. (a) In addition to the other funds and accounts created pursuant hereto, the Trustee shall establish and maintain the Rebate Fund. The District shall deliver to the Trustee for deposit in the Rebate Fund such amounts as are required to be deposited therein pursuant to the Tax Certificate. All money at any time deposited in the Rebate Fund shall be held by the Trustee in trust, to the extent required to satisfy the Rebate Requirement, for payment to the United States of America upon the Written Request of the District Notwithstanding defeasance of the Certificates pursuant to Article X hereof or anything 80340985.3 22 to the contrary contained herein, all amounts required to be deposited into or on deposit in the Rebate Fund shall be governed exclusively by this Section and by the Tax Certificate (which is incorporated herein by reference). The Trustee shall be deemed conclusively to have complied with such provisions if it follows the written directions of the District, and shall have no liability or responsibility to enforce compliance by the District with the terms of the Tax Certificate. The Trustee may conclusively rely upon the District's determinations, calculations and certifications required by the Tax Certificate. The Trustee shall have no responsibility to independently make any calculation or determination or to review the District's calculations. (b) Any funds remaining in the Rebate Fund after payment in full of all of the principal and interest evidenced by the Certificates and after payment of any amounts described in this Section, shall be withdrawn by the Trustee and remitted to the District. Section 5.05. Investment of Moneys. Except as otherwise provided herein, all moneys in any of the funds or accounts established pursuant to this Trust Agreement shall be invested by the Trustee solely in Permitted Investments, as directed by the District pursuant to a Written Request of the District at least two Business Days prior to the making of such investment. Moneys in all funds and accounts held by the Trustee shall be invested in Permitted Investments maturing not later than the date on which it is estimated that such moneys will be required for the purposes specified in this Trust Agreement; provided, however, that Permitted Investments in which moneys in the Reserve Fund are so invested shall mature no later than the final Principal Payment Date of the Certificates. Absent timely written direction from the District, the Trustee shall invest any funds held by it in Permitted Investments described in clause(10) of the definition thereof. Permitted Investments that are registerable securities shall be registered in the name of the Trustee. All interest,profits and other income received from the investment of moneys in any fund or account established pursuant to this Trust Agreement (other than the Reserve Fund) shall be retained therein. All interest, profits and other income received from the investment of moneys in the Reserve Fund shall be deposited in the Installment Payment Fond; provided, however, that,notwithstanding the foregoing, any such transfer shall be made only if and to the extent that, after such transfer, the amount on deposit in the Reserve Fund is at least equal to the Reserve Requirement. Permitted Investments acquired as an investment of moneys in any fund or account established under this Trust Agreement shall be credited to such fund or account. For the purpose of determining the amount in any fund, all Permitted Investments credited to such fund shall be valued by the Trustee at the market value thereof, such valuation to be performed not less frequently than semiannually on or before each January 15 and July 15. The Trustee may act as principal or agent in the making or disposing of any investment. The Trustee shall sell or present for redemption any Permitted Investment whenever it shall be necessary to provide moneys to meet any required payment,transfer,withdrawal or disbursement from the fund or account to which such Permitted Investment is credited, and the Trustee shall not be liable or responsible for any loss resulting from any investment made or sold pursuant to this Section. For purposes of investment, the Trustee may commingle moneys in any of the funds and accounts established hereunder. 803400653 23 The Trustee is hereby authorized, in making or disposing of any investment permitted by this Section, to deal with itself (in its individual capacity) or with any one or more of its affiliates,whether or not such affiliate is acting as an agent of the Trustee or for any third Person or dealing as principal for its own account. Section 5.06. Brokerage Confirmations. The District acknowledges that to the extent regulations of the Comptroller of the Currency or other applicable regulatory entity grant the District the right to receive brokerage confirmations of securities transactions under this Trust Agreement,the District specifically waives receipt of such confirmations to the extent permitted by law. The Trustee is required hereunder to furnish the District with periodic cash transaction statements which include detail for all securities transactions made by the Trustee on behalf of the District hereunder. ARTICLE VI COVENANTS Section 6.01. Compliance with Trust Agreement The Trustee will not execute or deliver any Certificates in any manner other than in accordance with the provisions hereof, and the Corporation and the District will not suffer or permit any default by them to occur hereunder, but will faithfully comply with, keep, observe and perform all the agreements, conditions, covenants and terms hereof required to be complied with,kept, observed and performed by them. Section 6.02. Compliance with Installment Purchase Agreement. The Corporation and the District will faithfully comply with, keep, observe and perform all the agreements, conditions, covenants and terms contained in the Installment Purchase Agreement required to be complied with, kept, observed and performed by them and, together with the Trustee, will enforce the Installment Purchase Agreement against the other party thereto in accordance with its terms. Section 6.03. Compliance with Master Agreement. The Corporation and the District will faithfully comply with, keep, observe and perform all the agreements, conditions, covenants and terms contained in the Master Agreement required to be complied with, kept, observed and performed by them and,together with the Trustee,will enforce the Master Agreement against the other party thereto in accordance with its terms. Section 6.04. Observance of Laws and Regulations. The Corporation and the District will faithfully comply with, keep, observe and perform all valid and lawful obligations or regulations now or hereafter imposed on them by contract, or prescribed by any law of the United States of America or of the State, or by any officer, board or commission having jurisdiction or control, as a condition of the continued enjoyment of each and every franchise, right or privilege now owned or hereafter acquired by them, including their right to exist and carry on their respective businesses,to the end that such franchises, rights and privileges shall be maintained and preserved and shall not become abandoned, forfeited or in any manner impaired. 90340485.3 24 Section 6.05. Other Liens. None of the Trustee, the Corporation or the District shall create or suffer to be created any pledge of or lien on the amounts on deposit in any of the funds or accounts created hereunder,other than the pledge and lien hereof. Section 6.06. Prosecution and Defense of Suits. The District will defend against every action, suit or other proceeding at any time brought against the Trustee or any Owner upon any claim arising out of the receipt, deposit or disbursement of any of the Installment Payments, or the interest thereon, or involving the rights of the Trustee or any Owner hereunder; provided, however, that the Trustee or any Owner at its or his election may appear in and defend any such action,suit or other proceeding. Section 6.07. Accounting Records and Statements. The Trustee will keep proper accounting records in which complete and correct entries shall be made of all transactions made by the Trustee relating to the receipt, deposit and disbursement of the Installment Payments, and the interest thereon, and such accounting records shall be available for inspection by the Corporation and the District at reasonable hours and under reasonable conditions. The Trustee shall not be obligated to provide an accounting for any fund or account that (a)has a balance of $0.00 and (b)has not had any activity since the last reporting date. The Trustee will, upon written request, make copies of the foregoing available to any Owner (at the expense of such Owner). Section 6.08. Tax Covenants. (a) Special Definitions. When used in this Section,the following terms shall have the following meanings: "Code" means the Internal Revenue Code of 1986. "Computation Date" has the meaning set forth in section 1.148-1(b) of the Tax Regulations. "Gross Proceeds" means any Proceeds and any replacement proceeds as defined in section 1.148-1(c)of the Tax Regulations, of the Certificates. "Investment"has the meaning set forth in section 1.148-1(b)of the Tax Regulations. "Nonpurpose Imesiment"means any investment property,as defined in section 148(b)of the Code, in which Gross Proceeds of the issue are invested and that is not acquired to carry out the governmental purposes of that series of Certificates. "Proceeds," with respect to an issue of governmental obligations, has the meaning set forth in has the meaning set forth in section 1.148-1(b)of the Tax Regulations(referring to sales, investment and transferred proceeds but not replacement proceeds). "Rebate Amount"has the meaning set forth in section 1.148-1(b)of the Tax Regulations. "Special Counsel" means Fulbright & Jaworski L.L.P. or any other firm of nationally recognized standing in the field of municipal finance selected by the District. 80340485.3 25 "T= Regulations" means the United States Treasury Regulations promulgated pursuant to sections 103 and 141 through 150 of the Code. "Yield" of any Investment has the meaning set forth in section 1.148-5 of the Tax Regulations; and in respect of the Certificates has the meaning set forth in section 1.1484 of the Tax Regulations. (b) Not to Cause Interest to Become Taxable. The District covenants that it shall not use, and shall not permit the use of, and shall not omit to use Gross Proceeds or any other amounts(or any property the acquisition, construction or improvement of which is to be financed directly or indirectly with Gross Proceeds) in a manner that if made or omitted, respectively, could cause the interest with respect to any Certificate to fail to be excluded pursuant to section 103(a) of the Code from the gross income of the owner thereof for federal income tax purposes. Without limiting the generality of the foregoing, unless and until the Trustee receives a written opinion of Special Counsel to the effect that failure to comply with such covenant will not adversely affect such exclusion of the interest with respect to any Certificate from the gross income of the owner thereof for federal income tax purposes,the District shall comply with each of the specific covenants in this Section. (c) Private Use and Private Payments. Except as would not cause any Certificate to become a "private activity bond" within the meaning of section 141 of the Code and the Tax Regulations, the District shall take all actions necessary to assure that the District at all times prior to the final cancellation of the last of the Certificates to be retired: (i) exclusively owns, operates,possesses and provides any services necessary to allow and maintain each function of every property the acquisition, construction or improvement of which is to be financed or refinanced directly or indirectly with Gross Proceeds of the Certificates and not use or permit the use of such Gross Proceeds (including through any contractual arrangement with terms different than those applicable to the general public) or any property acquired, constructed or improved with such Gross Proceeds in any activity carried on by any person or entity(including the United States or any agency, department and instrumentality thereof) other than a state or local government, unless such use is solely as a member of the general public; and (ii) does not directly or indirectly impose or accept any charge or other payment by or for the benefit of any person or entity (other than a state or local government) who is treated as using any Gross Proceeds of the Certificates or any property the acquisition, construction or improvement of which is to be financed or refinanced directly or indirectly with such Gross Proceeds. (d) No Private Loan. Except as would not cause any Certificate to become a "private activity bond" within the meaning of section 141 of the Code and the Tax Regulations and mlings thereunder, the District shall not use or permit the use of Gross Proceeds of the Certificates to make or finance loans to any person or entity other than a state or local government. For purposes of the foregoing covenant, such Gross Proceeds are considered to be "loaned"to a person or entity if: (i) property acquired,constructed or improved with such Gross Proceeds is sold or leased to such person or entity in a transaction that creates a debt for federal 80340485.3 26 income tax purposes; (ii) capacity in or service from such property is committed to such person or entity under a take-or-pay, output or similar contract or arrangement; or(iii) indirect benefits of such Gross Proceeds, or burdens and benefits of ownership of any property acquired, constructed or improved with such Gross Proceeds,are otherwise transferred in a transaction that is the economic equivalent of a loan. (e) Not to Invest at Higher Yield. Except as would not cause any Certificate to become an "arbitrage bond' within the meaning of section 148 of the Code and the Tax Regulations and rulings thereunder, the District will not, at any time prior to the final cancellation of the last Certificate to be retired,directly or indirectly invest Gross Proceeds of the Certificates in any Investment, if as a result of that investment the yield of any Investment acquired with Gross Proceeds of the Certificates, whether then held or previously disposed of, would materially exceed the yield of the Certificates within the meaning of said section 148. (f) Not Federally Guaranteed. Except to the extent such action or failure to act would not pursuant to section 149(b) of the Code and the Tax Regulations and rulings thereunder, adversely affect the exclusion pursuant to section 103(a) of interest on the Certificates from the gross income of the owners thereof for federal income tax purposes, the District will not take or omit to take any action that would cause any Certificate to be"federally guaranteed' within the meaning of section 149(b) of the Code and the Tax Regulations and rulings thereunder. (g) Information Report. The District will timely file any information necessary to the exclusion pursuant to section 103(a) of the Code of interest on the Certificates required by section 149(e) of the Code with the Secretary of the Treasury on Form 8038-G or such other form and in such place as the Secretary of the Treasury may prescribe. (h) Rebate of Arbitrage Profits. Except to the extent otherwise provided in section 148(f)of the Code and the Tax Regulations: (i) The District shall account for all Gross Proceeds (including all receipts, expenditures and investments thereof) on its books of account separately and apart from all other funds (and receipts, expenditures and investments thereof) and shall retain all records of accounting for at least six years after the day on which the last Certificate is discharged. However, to the extent permitted by law,the District may commingle Gross Proceeds of Certificates with its other monies, provided that it separately accounts for each receipt and expenditure of Gross Proceeds and the obligations acquired therewith. (ii) Not less frequently than each Computation Date (and so long as amounts remain on deposit in the Acquisition Fund,not less fequently than annually),the District shall calculate the Rebate Amount in accordance with rules set forth in section 148(f) of the Code and the Tax Regulations and rulings thereunder. The District shall maintain a copy of the calculation with its official transcript of proceedings relating to the execution and delivery of the Certificates until six years after the final Computation Date. (iii) In order to assure the excludability pursuant to section 103(a) of the Code of the interest with respect to the Certificates from the gross income of the owners thereof smaNss..r 27 for federal income tax purposes, within 60 days of each Computation Date the District shall pay to the United States the amount that when added to the future value of previous rebate payments made for the Certificates equals (i) in the case of the Final Computation Date as defined in section 1.148-3(e)(2) of the Tax Regulations, one hundred percent (100%) of the Rebate Amount on such date; and(ii) in the case of any other Computation Date, ninety percent (90%) of the Rebate Amount on such date. In all cases, such rebate payments shall be made by the District at the times and in the amounts as are or may be required by section 148(f) of the Code and the Tax Regulations and rulings thereunder, and shall be accompanied by Form 8038-T or such other forms and information as is or may be required by section 148(f) of the Code and the Tax Regulations and rulings thereunder for execution and filing by the District. (i) Not to Divert Arbitrage Profits. Except to the extent permitted by section 148 of the Code and the Tax Regulations and rulings thereunder, the District shall not and shall not permit any person to, at any time prior to the final cancellation of the last of the Certificates to be retired,enter into any transaction that reduces the amount required to be paid to the United States pursuant to paragraph (H) of this Section because such transaction results in a smaller profit or a larger loss than would have resulted if the transaction had been at arm's length and had the Yield on the Certificates not been relevant to either party. (j) Certificates Not Hedge Bonds. (i) The District represents that none of the Certificates is or will become a "hedge bond"within the meaning of section 149(g)of the Code. (ii) Without limitation of paragraph (i) above: (A)the District will not execute and deliver the Certificates unless as of the date of execution and delivery of the Certificates the District reasonably expects that at least 85% of the spendable proceeds of the Certificates will be expended within the three-year period commencing on such date of execution and delivery, and (B) no more than 50% of the proceeds of the Certificates will be invested in Nonputpose Investments having a substantially guaranteed yield for a period of four years or more. (k) Elections. The District hereby directs and authorizes any Authorized Representative to make elections permitted or required pursuant to the provisions of the Code or the Tax Regulations, as such Authorized Representative (after consultation with Special Counsel) deems necessary or appropriate in connection with the Certificates, in the Tax Certificate or similar or other appropriate certificate, form or document. (1) Tax Certificate. The District agrees to execute and deliver in connection with the execution and delivery of the Certificates a Tax Certificate as to Arbitrage and the Provisions of Sections 141-150 of the Internal Revenue Code of 1986, or similar document containing additional representations and covenants pertaining to the exclusion of interest with respect to the Certificates from the gross income of the owners thereof for federal income tax purposes (the "Tax Certificate"), which representations and covenants are incorporated as though expressly set forth herein. 80340485.3 28 Section 6.09. Continuing Disclosure. Each of the District and the Trustee will comply with and carry out all of the provisions of the Continuing Disclosure Agreement applicable to it. Notwithstanding any other provision of this Trust Agreement, failure of the District or the Trustee to comply with the Continuing Disclosure Agreement shall not be considered an Event of Default; provided, however, the Trustee may (and, at the request of any Participating Underwriter or the Owners of at least 25% aggregate principal amount of Outstanding Certificates and upon being indemnified to its reasonable satisfaction, shall) or any Owner or Beneficial Owner of Certificates may take such actions as may be necessary and appropriate to compel performance,including seeking mandate or specific performance by court order. Section 6.10. Further Assurances. The District will promptly execute and deliver or cause to be executed and delivered all such other and further assurances, documents or instruments and promptly do or cause to be done all such other and further things as may be necessary or reasonably required in order to carry out the purposes and intentions of this Trust Agreement and for preserving and protecting the rights and interests of the Owners. ARTICLE VII DEFAULT AND LIMITATIONS OF LIABILITY Section 7.01. Action upon Event of Default. An Event of Default under the Installment Purchase Agreement shall constitute an Event of Default hereunder and an Event of Default under the Master Agreement shall constitute an Event of Default hereunder. The Trustee may give notice, as assignee of the Corporation, of an Event of Default under the Installment Purchase Agreement to the District, and shall do so if directed to do so by the Owners of not less than 5% of the aggregate principal evidenced by Certificates then Outstanding. In each and every case during the continuance of an Event of Default, the Trustee may and, at the direction of the Owners of not less than a majority of the aggregate principal evidenced by Certificates then Outstanding, shall, upon notice in writing to the District and the Corporation (a)exercise any of the remedies granted to the Corporation under the Installment Purchase Agreement, (b)exercise any of the remedies granted to the Trustee under the Master Agreement,and (c)take whatever action at law or in equity may appear necessary or desirable to enforce its rights pursuant to this Trust Agreement, the Installment Purchase Agreement or the Master Agreement or to protect and enforce any of the rights vested in the Trustee or the Owners by this Trust Agreement, the Certificates, the Installment Purchase Agreement or the Master Agreement, either at law or in equity or in bankruptcy or otherwise, whether for the specific enforcement of any covenant or agreement or for the enforcement of any other legal or equitable right, including any one or more of the remedies set forth in Section 9.02 hereof. Section 7.02. Other Remedies of the Trustee. Subject to the provisions of Section 7.01 hereof,the Trustee shall have the right: (a) by mandamus or other action or proceeding or suit at law or in equity to enforce its rights against the Corporation or the District or any member, director, officer or employee thereof, and to compel the Corporation or the District or any such member, director, officer or employee to perform or carry out its or his or her duties under law and the agreements and covenants required to be performed by it or him or her contained herein; 80340485.3 29 (b) by suit in equity to enjoin any acts or things which are unlawful or violate the rights of the Trustee;or (c) by suit in equity upon the happening of any Event of Default hereunder to require the Corporation and the District to account as the trustee of an express trust. Section 7.03. Non-Waiver. A waiver of any default or breach of duty or contract by the Trustee or the Owners shall not affect any subsequent default or breach of duty or contract or impair any rights or remedies on any such subsequent default or breach of duty or contract. No delay or omission by the Trustee or the Owners to exercise any right or remedy accruing upon any default or breach of duty or contract shall impair any such right or remedy or shall be construed to be a waiver of any such default or breach of duty or contract or an acquiescence therein, and every right or remedy conferred upon the Trustee or the Owners by law or by this Article may be enforced and exercised from time to time and as often the Trustee shall deem expedient. If any action, proceeding or suit to enforce any right or to exercise any remedy is abandoned or determined adversely to the Trustee or any Owner, then subject to any adverse determination,the Trustee, such Owner, the Corporation and the District shall be restored to their former positions, rights and remedies as if such action, proceeding or suit had not been brought or taken. Section 7.04. Remedies Not Exclusive. Subject to the provisions of Section 7.01 hereof,no remedy herein conferred upon or reserved to the Trustee is intended to be exclusive of any other remedy, and each such remedy shall be cumulative and shall be in addition to every other remedy given hereunder or now or hereafter existing in law or in equity or by statute or otherwise and may be exercised without exhausting and without regard to any other remedy conferred by any law. The assertion or employment of any right or remedy hereunder, or otherwise, shall not prevent the concurrent or subsequent assertion or employment of any other appropriate right or remedy. Section 7.05. Aonlication of Amounts After Default. All damages or other payments received by the Trustee for the enforcement of any rights and powers of the Trustee under this Article shall be deposited into the Installment Payment Fund and as soon as practicable thereafter applied: (a) to the payment of all amounts due the Trustee under Section 8.03 hereof; (b) unless the unpaid Installment Payments, and the interest thereon, shall have become,and shall remain, immediately due and payable pursuant to the Master Agreement: (i) to the payment of all amounts then due for interest evidenced by the Certificates, in respect of which, or for the benefit of which, money has been collected (other than Certificates which have become payable prior to such Event of Default and money for the payment of which is held by the Trustee), ratably without preference or priority of any kind, according to the amounts of interest evidenced by such Certificates due and payable;and 8034N85.3 30 (ii) to the payment of all amounts then due for principal evidenced by the Certificates, in respect of which, or for the benefit of which, money has been collected (other than Certificates which have become payable prior to such Event of Default and money for the payment of which is held by the Trustee), ratably without preference or priority of any kind, according to the amounts of principal evidenced by such Certificates due and payable. (c) if the unpaid Installment Payments, and the interest thereon, shall have become, and shall remain, immediately due and payable pursuant to the Master Agreement, to the payment of all amounts then due for principal and interest evidenced by the Certificates and, if the amount available therefor shall not be sufficient to pay in full the whole amount so due and unpaid, then to the payment thereof ratably, without preference or priority of principal over interest, or of interest over principal, or of any installment of interest over any other installment of interest, or of any Certificate over any other Certificate, to the persons entitled thereto without any discrimination or preference. Section 7.06. Trustee May Enforce Claims Without Possession of Certificates. All rights of action and claims under this Trust Agreement or the Certificates may be prosecuted and enforced by the Trustee without the possession of any of the Certificates or the production thereof in any proceeding relating thereto, and any such proceeding instituted by the Trustee shall be brought in its own name as trustee of an express trust, and any recovery of judgment shall, after provision for the payment of the reasonable compensation, expenses, disbursements and advances of the Trustee, its agents and counsel, be for the ratable benefit of the Owners of the Certificates in respect of which such judgment has been recovered. Section 7.07. Limitation on Suits. No Owner shall have any right to institute any proceeding,judicial or otherwise, with respect to this Trust Agreement, or for the appointment of a receiver or trustee, or for any other remedy hereunder, unless (a)such Owner shall have previously given written notice to the Trustee of a continuing Event of Default hereunder, (b)the Owners of not less than a majority of the aggregate principal evidenced by Certificates then Outstanding shall have made written request to the Trustee to institute proceedings in respect of such Event of Default in its own name as Trustee hereunder, (c) such Owner or Owners shall have afforded to the Trustee indemnity reasonably satisfactory to the Trustee against the costs, expenses and liabilities to be incurred in compliance with such request, (d)the Trustee for 60 days after its receipt of such notice, request and offer of indemnity shall have failed to institute any such proceedings, and(a)no direction inconsistent with such written request shall have been given to the Trustee during such 60-day period by the Owners of a majority of the aggregate principal evidenced by Certificates then Outstanding; it being understood and intended that no one or more Owners of Certificates shall have any right in any manner whatever by virtue of, or by availing of, any provision of this Trust Agreement to affect, disturb or prejudice the rights of any other Owner of Certificates, or to obtain or seek to obtain priority or preference over any other Owner or to enforce any right under this Trust Agreement, except in the manner herein provided and for the equal and ratable benefit of all the Owners of Certificates. Section 7.08. No Liability by the Corporation to the Owner. Except as expressly provided herein, the Corporation shall not have any obligation or liability to the Owners with respect to the payment when due of the Installment Payments, and the interest thereon, by the 80340a85 3 31 s District, or with respect to the performance by the District of the other agreements and covenants required to be performed by it contained in the Installment Purchase Agreement, the Master Agreement or herein, or with respect to the performance by the Trustee of any right or obligation required to be performed by it contained herein. Section 7.09. No Liability by the District to the Owners. Except for the payment when due of the Installment Payments, and the interest thereon, and the performance of the other agreements and covenants required to be performed by it contained in the Installment Purchase Agreement,the Master Agreement or herein,the District shall not have any obligation or liability to the Owners with respect to this Trust Agreement or the preparation, execution, delivery or transfer of the Certificates or the disbursement of the Installment Payments, and the interest thereon, by the Trustee to the Owners, or with respect to the performance by the Trustee of any right or obligation required to be performed by it contained herein. Section 7.10. No Liability of the Trustee to the Owners. Except as expressly provided herein, the Trustee shall not have any obligation or liability to the Owners with respect to the payment when due of the Installment Payments, and the interest thereon, by the District, or with respect to the performance by the Corporation or the District of the other agreements and covenants required to be performed by them, respectively contained in the Installment Purchase Agreement or herein. ARTICLE VIII THE TRUSTEE Section 8.01. Employment of the Trustee, Duties. The Corporation and the District hereby appoint and employ the Trustee to receive, deposit and disburse the Installment Payments, and the interest thereon, to prepare, execute, deliver and transfer the Certificates and to perform the other functions contained herein, all in the manner provided herein and subject to the conditions and terms hereof. By executing and delivering this Trust Agreement, the Trustee accepts the appointment and employment hereinabove referred to and accepts the rights and obligations of the Trustee provided herein, subject to the conditions and terms hereof. Other than when an Event of Default hereunder has occurred and is continuing,the Trustee undertakes to perform such duties and only such duties as are specifically set forth in this Trust Agreement, and no implied covenants or obligations shall be read into this Trust Agreement against the Trustee. In rase an Event of Default has occurred and is continuing, the Trustee shall exercise such of the rights and powers vested in it by this Trust Agreement, and use the same degree of care and skill in their exercise, as a prudent person would exercise or use under the circumstances in the conduct of such person's own affairs. Section 8.02. Removal and Resignation of the Trustee. The Corporation and the District may, by an instrument in writing, remove the Trustee initially a party hereto and any successor thereto unless an Event of Default shall have occurred and then be continuing, and shall remove the Trustee initially a party hereto and any successor thereto if at any time (a)requested to do so by an instrument or concurrent instruments in writing signed by the Owners of a majority of the aggregate principal evidenced by the Certificates at the time Outstanding (or their attorneys duly authorized in writing), or (b)the Trustee shall cease to be 8034M85.3 32 eligible in accordance with the following sentence, and shall appoint a successor Trustee. The Trustee shall be a bank having trust powers or a trust company in good standing in or incorporated under the laws of the United States or any state thereof, having (or if such bank or trust company is a member of a bank holding company system, its parent bank holding company shall have) a combined capital and surplus of at least$75,000,000, and be subject to supervision or examination by federal or state banking authorities. If such bank or trust company publishes a report of condition at least annually,pursuant to law or to the requirements of any supervising or examining authority above referred to,then for the purposes of this Section the combined capital and surplus of such bank or trust company shall be deemed to be its combined capital and surplus as set forth in its most recent report of condition so published. The Trustee may at any time resign by giving written notice of such resignation to the Corporation and the District and by giving notice, by first class mail, postage prepaid, of such resignation to the Owners at their addresses appearing on the registration books maintained by the Trustee. Upon receiving such notice of resignation, the Corporation and the District shall promptly appoint a successor Trustee by an instrument in writing; provided, however,that in the event the District and the Corporation do not appoint a successor Trustee within 30 days following receipt of such notice of resignation, the resigning Trustee may, at the expense of the District, petition the appropriate court having jurisdiction to appoint a successor Trustee. Any resignation or removal of a Trustee and appointment of a successor Trustee shall become effective only upon acceptance of appointment by the successor Trustee. Any successor Trustee appointed under this Trust Agreement shall signify its acceptance of such appointment by executing and delivering to the District and the Corporation and to its predecessor Trustee a written acceptance thereof, and thereupon such successor Trustee, without any further act, deed or conveyance, shall become vested with all the moneys, estates, properties, rights, powers, trusts, duties and obligations of such predecessor Trustee, with like effect as if originally named Trustee herein;but,nevertheless,at the written request of the District or of the successor Trustee, such predecessor Trustee shall execute and deliver any and all instruments of conveyance or further assurance and do such other things as may reasonably be required for more fully and certainly vesting in and confirming to such successor Trustee all the right, title and interest of such predecessor Trustee in and to any property held by it under this Trust Agreement and shall pay over, transfer, assign and deliver to the successor Trustee any money or other property subject to the trusts and conditions herein set forth. Any corporation, association or agency into which the Trustee may be converted or merged, or with which it may be consolidated, or to which it may sell or transfer its corporate trust business and assets as a whole or substantially as a whole,or any corporation or association resulting from any such conversion, sale, merger, consolidation or transfer to which it is a party, provided that such entity meets the combined capital and surplus requirements of this Section, ipeo facto, shall be and become successor trustee under this Trust Agreement and vested with all the trusts, powers, discretions, immunities, privileges and all other matters as was its predecessor, without the execution or filing of any instrument or any further act, deed or conveyance on the part of any of the parties hereto, anything herein to the contrary notwithstanding. Section 8.03. Compensation and Indemnification of the Trustee. The District shall from time to time, subject to any written agreement then in effect with the Trustee, pay the 80340495.3 33 Trustee reasonable compensation for all its services rendered hereunder and reimburse the Trustee for all its reasonable advances and expenditures (which shall not include "overhead expenses" except as such expenses are included as a component of the Trustee's stated annual fees or disclosed transaction fees) hereunder, including but not limited to advances to and reasonable fees and reasonable expenses of accountants, agents, appraisers, consultants or other experts, and counsel not directly employed by the Trustee but an attorney or firm of attorneys retained by the Trustee, employed by it in the exercise and performance of its rights and obligations hereunder, provided, however, that the Trustee shall not have any lien for such compensation or reimbursement against any moneys held by it in any of the funds or accounts established hereunder. The Trustee may take whatever legal actions are lawfully available to it directly against the Corporation or the District. Except as otherwise expressly provided herein, no provision of this Trust Agreement shall require the Trustee to expend or risk its own funds or otherwise incur any financial liability in the performance of any of its duties hereunder or in the exercise of any of its rights or powers hereunder. The District,to the extent permitted by law,agrees to indemnify and save the Trustee, its directors, officers, employees and agents harmless against any liabilities which it may incur in the exercise and performance of its powers and duties hereunder, including but not limited to costs and expenses incurred in defending against any claim or liability, which are not due to its negligence or willful misconduct. Section 8.04. Protection of the Trustee. The Trustee shall be protected and shall incur no liability in acting or proceeding in good faith upon any affidavit, bond, certificate, consent, notice, request, requisition, resolution, statement, waiver or other paper or document which it shall in good faith believe to be genuine and to have been adopted, executed or delivered by the proper party or pursuant to any of the provisions hereof, and the Trustee shall be under no duty to make any investigation or inquiry as to any statements contained or matters referred to in any such instrument, but may accept and rely upon the same as conclusive evidence of the truth and accuracy of such statements. The Trustee shall be under no obligation to exercise any of the rights or powers vested in it by this Trust Agreement at the request or direction of any of the Owners of the Certificates pursuant to this Trust Agreement, unless such Owners shall have offered to the Trustee security or indemnity, reasonably satisfactory to the Trustee, against the reasonable costs, expenses and liabilities which might be incurred by it in compliance with such request or direction. The Trustee may consult with counsel, who may be counsel to the Corporation or the District, with regard to legal questions, and the opinion of such counsel shall be full and complete authorization and protection in respect to any action taken or suffered by it hereunder in good faith in accordance therewith. The Trustee shall not be responsible for the sufficiency of the Certificates or the Installment Purchase Agreement, or of the assignment made to it hereunder, or for statements made in the preliminary or final official statement relating to the Certificates. The Trustee shall not be required to take notice or be deemed to have notice of any default or Event of Default hereunder, except failure of any of the payments to be made to the Trustee required to be made hereunder or under the Installment Purchase Agreement, unless the 90340485.3 34 Trustee shall be specifically notified in writing of such default or Event of Default by the District, the Corporation or the Owners of not less than 5% of the aggregate principal evidenced by the Certificates then Outstanding. Whenever in the administration of its rights and obligations hereunder the Trustee shall deem it necessary or desirable that a matter be proved or established prior to taking or suffering any action hereunder, such matter(unless other evidence in respect thereof be herein specifically prescribed) may be deemed to be conclusively proved and established by a Written Certificate of the District or a Written Certificate of the Corporation, and such certificate shall be full warrant to the Trustee for any action taken or suffered under the provisions hereof upon the faith thereof, but in its discretion the Trustee may, in lieu thereof,accept other evidence of such matter or may require such additional evidence as it deems reasonable. The Trustee may buy, sell, own, hold and deal in any of the Certificates and may join in any action which any Owner may be entitled to take with like effect as if the Trustee were not a party hereto. The Trustee, either as principal or agent, may also engage in or be interested in any financial or other transaction with the Corporation or the District, and may act as agent, depository or trustee for any committee or body of Owners or of owners of obligations of the Corporation or the District as freely as if it were not the Trustee hereunder. The Trustee may, to the extent reasonably necessary, execute any of the trusts or powers hereof and perform any rights and obligations required of it hereunder by or through agents, attorneys or receivers, and shall be entitled to advice of counsel concerning all matters of trust and its rights and obligations hereunder, and the Trustee shall not be answerable for the negligence or misconduct of any such agent, attorney or receiver selected by it with reasonable care; provided, however, that in the event of any negligence or misconduct of any such attorney, agent or receiver, the Trustee shall diligently pursue all remedies of the Trustee against such agent, attorney or receiver. The Trustee shall not be liable for any error of judgment made by it in good faith unless it shall be proved that the Trustee was negligent in ascertaining the pertinent facts. The Trustee shall not he answerable for the exercise of any trusts or powers hereunder or for anything whatsoever in connection with the funds established hereunder, except only for its own willful misconduct, negligence or breach of an obligation hereunder. The Trustee may, on behalf of the Owners, intervene in any judicial proceeding to which the Corporation or the District is a party and which, in the opinion of the Trustee and its counsel, affects the Certificates or the security therefor, and shall do so if requested in writing by the Owners of at least 5% of the aggregate principal evidenced by Certificates then Outstanding, provided the Trustee shall have no duty to take such action unless it has been indemnified to its reasonable satisfaction against all risk or liability arising from such action. 80340485.3 35 ARTICLE IX AMENDMENT OF OR SUPPLEMENT TO TRUST AGREEMENT Section 9.01. Amendment or Supplement. (a)This Trust Agreement and the rights and obligations of the Corporation, the District, the Owners and the Trustee hereunder may be amended or supplemented at any time by an amendment hereof or supplement hereto which shall become binding when the prior written consents of the Owners of a majority of the aggregate principal evidenced by the Certificates then Outstanding, exclusive of Certificates disqualified as provided in Section 9.02 hereof, are filed with the Trustee. No such amendment or supplement shall (i)extend the stated Principal Payment Date of any Certificate or reduce the rate of interest evidenced thereby or extend the time of payment of such interest or reduce the amount of principal evidenced thereby or change the prepayment terms and provisions or the provisions regarding delivery of notice of prepayment without the prior written consent of the Owner of each Certificate so affected, (ii)reduce the percentage of Owners whose consent is required for the execution of any amendment hereof or supplement hereto without the prior written consent of the Owners of all Certificates then Outstanding, (iii)modify any of the rights or obligations of the Trustee without the prior written consent of the Trustee, or (iv)amend this Section without the prior written consent of the Owners of all Certificates then Outstanding. (b) This Trust Agreement and the rights and obligations of the Corporation, the District, the Owners and the Trustee hereunder may also be amended or supplemented at any time by an amendment hereof or supplement hereto which shall become binding upon execution, without the written consents of any Owners, but only to the extent permitted by law and only for any one or more of the following purposes: (i) to add to the agreements, conditions, covenants and terms required by the Corporation or the District to be observed or performed herein other agreements, conditions, covenants and terms thereafter to be observed or performed by the Corporation or the District, or to surrender any right or power reserved herein to or conferred herein on the Corporation or the District; (ii) to make such provisions for the purpose of curing any ambiguity or of correcting, curing or supplementing any defective provision contained herein or in regard to questions arising hereunder which the Corporation or the District may deem desirable or necessary and not inconsistent herewith; (iii) to make such additions, deletions or modifications as may be necessary or appropriate to assure the exclusion from gross income for federal income tax purposes of interest evidenced by the Certificates;or (iv) for any other reason, provided such amendment or supplement does not adversely affect the rights or interests of the Owners. Section 9.02. Disaualifled Certificates. Certificates owned or held by or for the account of the District (but excluding Certificates held in any pension or retirement fund of the District) shall not be deemed Outstanding for the purpose of any consent or other action or any 90340485.3 36 calculation of Outstanding Certificates provided in this Article, and shall not be entitled to consent to or take any other action provided in this Article, and the Trustee may adopt appropriate regulations to require each Owner, before his consent provided for herein shall be deemed effective, to reveal if the Certificates as to which such consent is given are disqualified as provided in this Section. Section 9.03. Endorsement or Replacement of Certificates After Amendment or Supplement. After the effective date of any action taken as hereinabove provided in this Article, the Trustee may determine that the Certificates may bear a notation by endorsement in faun approved by the Trustee as to such action, and in that case upon demand of the Owner of any Outstanding Certificate and presentation of such Certificate for such purpose at the Principal Office a suitable notation as to such action shall be made on such Certificate. If the Trustee shall receive an Opinion of Counsel advising that new Certificates modified to conform to such action are necessary, modified Certificates shall be prepared, and in that case upon demand of the Owner of any Outstanding Certificates such new Certificates shall be exchanged at the Principal Office without cost to each Owner for Certificates then Outstanding upon surrender of such Outstanding Certificates. Section 9.04. Amendment by Mutual Consent. The provisions of this Article shall not prevent any Owner from accepting any amendment as to the particular Certificates owned by such Owner,provided that due notation thereof is made on such Certificates. ARTICLE X DEFEASANCE Section 10.01. Discharge of Certificates and Trust Agreement. (a)If the Trustee shall pay or cause to be paid or there shall otherwise be paid (i)to the Owners of all Outstanding Certificates the interest and principal evidenced thereby at the times and in the manner stipulated herein and therein, and (ii) all other amounts due hereunder and under the Installment Purchase Agreement,then such Owners shall cease to be entitled to the pledge of and lien on the amounts on deposit in the funds and accounts established hereunder, as provided herein, and all agreements and covenants of the Corporation, the District, and the Trustee to such Owners hereunder shall thereupon cease, terminate and become void and shall be discharged and satisfied. (b) Any Outstanding Certificate shall be deemed to have been paid within the meaning and with the effect expressed in this Section when the whole amount of the principal, premium, if any, and interest evidenced by such Certificate shall have been paid or when (i) in case said Certificate or portion thereof has been selected for prepayment in accordance with Section 4.02 hereof prior to its stated Principal Payment Date,the District shall have given to the Trustee irrevocable instructions to give, in accordance with the provisions of Section 4.03 hereof, notice of prepayment of such Certificate, or portion thereof,(ii)there shall be on deposit with the Trustee, moneys, or Government Obligations, or any combination thereof, the principal of and the interest on which when due, and without any reinvestment thereof, will provide moneys which shall be sufficient to pay when due the principal, premium, if any, and interest evidenced by such Certificate and due and to become due on or prior to the prepayment date or its stated 80340S5.3 37 Principal Payment Date, as the case may be, and (iii) in the event the stated Principal Payment Date of such Certificate will not occur, and said Certificate is not to be prepaid, within the next succeeding 60 days, the District shall have given the Trustee irrevocable instructions to give notice, as soon as practicable in the same manner as a notice of prepayment given pursuant to Section 4.03 hereof, to the Owner of such Certificate, or portion thereof, stating that the deposit of moneys or Government Obligations required by clause(ii) of this subsection has been made with the Trustee and that said Certificate, or portion thereof, is deemed to have been paid in accordance with this Section and stating such Principal Payment Date or prepayment date upon which moneys are to be available for the payment of the principal, premium, if any, and interest evidenced by said Certificate,or portion thereof. Neither the moneys nor the Government Obligations deposited with the Trustee pursuant to this Section nor principal or interest payments on any such Government Obligations shall be withdrawn or used for any purpose other than, and shall be held in trust for and pledged to, the payment of the principal, premium, if any, and interest evidenced by said Certificate, or portions thereof. If payment of less than all of the Certificates is to be provided for in the manner and with the effect expressed in this Section, the Trustee or the District, as applicable, shall select such Certificates,or portions thereof, in the manner specified in Section 4.02 hereof for selection for prepayment of less than all of the Certificates, in the principal amounts designated to the Trustee by the District. (c) After the payment of all the interest, prepayment premium, if any, and principal evidenced by all Outstanding Certificates and all other amounts due hereunder and under the Installment Purchase Agreement as provided in this Section, the Trustee shall execute and deliver to the Corporation and the District all such instruments as may be necessary or desirable to evidence the discharge and satisfaction of this Trust Agreement, the Trustee shall pay over or deliver to the District all moneys or securities held by it pursuant hereto which are not required for the payment of the interest, prepayment premium, if any, and principal evidenced by such Certificates and all other amounts due hereunder and under the Installment Purchase Agreement. (d) Prior to any defeasance becoming effective under this Article, the District shall cause to be delivered (i)an executed copy of a report, addressed to the Trustee and the District, in form and in substance acceptable to the Trustee and the District, of a nationally recognized certified public accountant, or firm of such accountants, verifying that the Government Obligations and cash, if any, satisfy the requirements of clause(ii) of subsection(b) of this Section (a"Verification"), (ii)a copy of the escrow deposit agreement entered into in connection with such defeasance, which escrow deposit agreement shall provide that no substitution of Government Obligations shall be permitted except with other Government Obligations and upon delivery of a new Verification and no reinvestment of Govemment Obligations shall be permitted except as contemplated by the original Verification or upon delivery of a new Verification, and (iii)a copy of an Opinion of Counsel, dated the date of such defeasance and addressed to the Trustee and the District, in form and in substance acceptable to the Trustee and the District, to the effect that such Certificates have been paid within the meaning and with the effect expressed in this Trust Agreement, all agreements and covenants of the Corporation, the District and the Trustee to the Owners of such Certificates under this Trust Agreement have ceased,terminated and become void and have been discharged and satisfied. 80340495.3 38 Section 10.02. Unclaimed Moneys. Any moneys held by the Trustee in trust for the payment and discharge of the interest or principal evidenced by any of the Certificates which remain unclaimed for two years after the date when such interest or principal evidenced by such Certificates have become payable, if such moneys were held by the Trustee at such date, or for two years after the date of deposit of such moneys if deposited with the Trustee after the date when the interest and principal evidenced by such Certificates have become payable, shall be repaid by the Trustee to the District as its absolute property free from trust,and the Trustee shall thereupon be released and discharged with respect thereto and the Owners shall look only to the District for the payment of the interest and principal evidenced by such Certificates. ARTICLE XI MISCELLANEOUS Section 11.01. Benefits of Trust Agreement. Nothing contained herein, expressed or implied, is intended to give to any Person other than the Corporation, the District, the Trustee and the Owners any claim, remedy or right under or pursuant hereto, and any agreement, condition, covenant or term required herein to be observed or performed by or on behalf of the Corporation or the District shall be for the sole and exclusive benefit of the Trustee and the Owners. Section 11.02. Successor Deemed Included in all References to Predecessor. Whenever the Corporation, the District or the Trustee, or any officer thereof, is named or referred to herein, such reference shall be deemed to include the successor to the powers, duties and functions that are presently vested in the Corporation, the District or the Trustee, or such officer, and all agreements, conditions, covenants and terms required hereby to be observed or performed by or on behalf of the Corporation, the District or the Trustee, or any officer thereof, shall bind and inure to the benefit of the respective successors thereof whether so expressed or not. Section 11.03. Execution of Documents by Owners. Any declaration,request or other instrument which is permitted or required herein to be executed by Owners may be in one or more instruments of similar tenor and may be executed by Owners in person or by their attorneys appointed in writing. The fact and date of the execution by any Owner or his attorney of any declaration, request or other instrument or of any writing appointing such attorney may be proved by the certificate of any notary public or other officer authorized to take acknowledgments of deeds to be recorded in the state or territory in which he purports to act that the Person signing such declaration, request or other instrument or writing acknowledged to him the execution thereof,or by an affidavit of a witness of such execution duly sworn to before such notary public or other officer, or by such other proof as the Trustee may accept which it may deem sufficient. The ownership of any Certificates and the amount, payment date, number and date of owning the same may be proved by the registration books maintained by the Trustee pursuant to the provisions of Section 2.07 hereof. 80340485.3 39 Any declaration, request or other instrument in writing of the Owner of any Certificate shall bind all future Owners of such Certificate with respect to anything done or suffered to be done by the Corporation, the District or the Trustee in good faith and in accordance therewith. Section 11.04. Waiver of Personal Liability. Notwithstanding anything contained herein to the contrary, no member,officer or employee of the District or the Corporation shall be individually or personally liable for the payment of any moneys, including without limitation,the interest or principal evidenced by the Certificates, but nothing contained herein shall relieve any member, officer or employee of the District or the Corporation from the performance of any official duty provided by any applicable provisions of law, by the Installment Purchase Agreement or hereby. Section 11.05. Acquisition of Certificates by District. All Certificates acquired by the District, whether by purchase or gift or otherwise, shall be surrendered to the Trustee for cancellation. Section 11.06. Content of Certificates. Every Written Certificate of the District and every Written Certificate of the Corporation with respect to compliance with any agreement, condition,covenant or term contained herein shall include(a)a statement that the Person making or giving such certificate has read such agreement, condition, covenant or term and the definitions herein relating thereto, (b)a brief statement as to the nature and scope of the examination or investigation upon which the statements contained in such certificate are based, (c)a statement that, in the opinion of the signer, the signer has made or caused to be made such examination or investigation as is necessary to enable the signer to express an informed opinion as to whether or not such agreement, condition, covenant or tern has been complied with, and (d)a statement as to whether, in the opinion of the signer, such agreement, condition, covenant or teem has been complied with. Any Written Certificate of the District and any Written Certificate of the Corporation may be based, insofar as it relates to legal matters, upon an Opinion of Counsel, unless the Person making or giving such certificate knows that the Opinion of Counsel with respect to the matters upon which each Person's certificate may be based, as aforesaid, is erroneous, or in the exercise of reasonable care should have known that the same was erroneous. Any Opinion of Counsel may be based, insofar as it relates to factual matters, upon information which is in the possession of the District or the Corporation upon a representation by an officer or officers of the District or the Corporation, as the case may be, unless the counsel executing such Opinion of Counsel knows that the representation with respect to the matters upon which such counsel's opinion may be based, as aforesaid, is erroneous, or in the exercise of reasonable care should have known that the same was erroneous. Section 11.07. Funds and Accounts. Any fund or account required to be established and maintained herein by the Trustee may be established and maintained in the accounting records of the Trustee either as an account or a fund, and may, for the purposes of such accounting records, any audits thereof and any reports or statements with respect thereto, be treated either as an account or a fund, but all such records with respect to all such funds and accounts shall at all times be maintained in accordance with sound accounting practice and with due regard for the protection of the security of the Certificates and the rights of the Owners. The 80340485.3 40 Trustee may establish such funds and accounts as it deems necessary to perform its obligations hereunder. Trustee may commingle any of the moneys held by it hereunder for investment purposes only; provided,however, that the Trustee shall account separately for the moneys in each fund or account established pursuant to this Trust Agreement. Section 11.08. Article and Section Headines. Gender and References. The singular form of any word used herein, including the terms defined in Section 1.01 hereof, shall include the plural, and vice versa, unless the context otherwise requires. The use herein of a pronoun of any gender shall include correlative words of the other genders. The headings or titles of the several Articles and Sections hereof and the table of contents appended hereto shall be solely for convenience of reference and shall not affect the meaning, construction or effect hereof. All references herein to "Articles," "Sections," subsections or clauses are to the corresponding Articles, Sections, subsections or clauses hereof, and the words "hereby," "herein," "hereof," "hereto," "herewith," "hereunder" and other words of similar import refer to this Trust Agreement as a whole and not to any particular Article, Section,subsection or clause thereof. Section 11.09. Partial Invalidity. If any one or more of the agreements, conditions, covenants or terns required herein to be observed or performed by or on the part of the Corporation, the District or the Trustee shall be contrary to law, then such agreement or agreements, such condition or conditions, such covenant or covenants or such term or terms shall be null and void to the extent contrary to law and shall be deemed separable from the remaining agreements, conditions, covenants and terms hereof and shall in no way affect the validity hereof or of the Certificates, and the Owners shall retain all the benefit,protection and security afforded to them under any applicable provisions of law. The Corporation, the District and the Trustee hereby declare that they would have executed this Trust Agreement, and each and every Article, Section, paragraph, subsection, sentence, clause and phrase hereof and would have authorized the execution and delivery of the Certificates pursuant hereto irrespective of the fact that any one or more Articles, Sections, paragraphs, subsections, sentences, clauses or phrases hereof or the application thereof to any Person or circumstance may be held to be unconstitutional, unenforceable or invalid. Section 11.10. California Law. This Trust Agreement shall be governed by and construed in accordance with the laws of the State. Section 11.11. Notices. Any written notice, statement, demand, consent, approval, authorization, offer, designation, request or other communication to be given hereunder shall be given to the party entitled thereto at its address set forth below, or at such other address as such party may provide to the other parties in writing from time to time, namely: If to the District: Orange County Sanitation District I0844 Ellis Avenue Fountain Valley, California 92708 Attention: Director of Finance and Administrative Services 8034e4e5.3 41 If to the Corporation: Orange County Sanitation District Financing Corporation c/o Orange County Sanitation District 10844 Ellis Avenue Fountain Valley,California 92708 Attention: Treasurer If to the Trustee: Union Bank of California,N.A. 120 South San Pedro Street, Suite 400 Los Angeles,California 90012 Attention: Corporate Trust Department Each such notice, statement, demand,consent,approval,authorization, offer, designation, request or other communication hereunder shall be deemed delivered to the party to whom it is addressed (a) if personally served or delivered, upon delivery, (b) if given by electronic communication, whether by telex, telegram or telecopier, upon the sender's receipt of an appropriate answerback or other written acknowledgment, (c)if given by registered or certified mail, return receipt requested, deposited with the United States mail postage prepaid, 72 hours after such notice is deposited with the United States mail, (d)if given by overnight courier, with courier charges prepaid, 24 hours after delivery to said overnight courier, or (e) if given by any other means, upon delivery at the address specified in this Section. Section 11.12. Effective Date. This Trust Agreement shall become effective upon its execution and delivery. Section 11.13. Execution in Counterparts. This Trust Agreement may be simultaneously executed in several counterparts, each of which shall be deemed an original, and all of which shall constitute but one and the same instrument. 80340a353 42 IN WITNESS WHEREOF, the parties hereto have caused this Trust Agreement to be executed by their respective officers thereunto duly authorized, all as of the day and year first written above. ORANGE COUNTY SANITATION DISTRICT FINANCING CORPORATION By: Treasurer ORANGE COUNTY SANITATION DISTRICT By: Chair of the Board of Directors (SEAQ Attest: By: Clerk of the Board of Directors UNION BANK OF CALIFORNIA,N.A., as Trustee By: Authorized Officer sowoass 3 43 EXHIBIT A FORM OF CERTIFICATE No. R— ***$*** Unless this Certificate is presented by an authorized representative of The Depository Trust Company to the Trustee for registration of transfer, exchange or payment, and any Certificate executed and delivered is registered in the name of Cede & Co. or such other name as requested by an authorized representative of The Depository Trust Company and any payment is made to Cede & Co., ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL inasmuch as the Registered Owner hereof, Cede &Co.,has an interest herein. ORANGE COUNTY SANITATION DISTRICT CERTIFICATE OF PARTICIPATION SERIES 2008C PRINCIPAL PAYMENT DATE INTEREST RATE DATED DATE CUSIP December_, 2008 REGISTERED OWNER: Cede&Co. PRINCIPAL AMOUNT: DOLLARS THIS IS TO CERTIFY that the Registered Owner of this Certificate of Participation (this "Certificate"), as identified above, is the owner of a direct, fractional undivided interest in certain installment payments ("Installment Payments"), and the interest thereon, payable under and pursuant to the Installment Purchase Agreement, dated as of December 1, 2008 (the "Installment Purchase Agreement"), by and between the Orange County Sanitation District (the "District"), a county sanitation district organized and existing under the laws of the State of California, and the Orange County Sanitation District Financing Corporation (the "Corporation"), a nonprofit public benefit corporation organized and existing under the laws of the State of California. Certain of the rights of the Corporation under the Installment Purchase Agreement, including the right to receive the Installment Payments, and the interest thereon, have been assigned without recourse by the Corporation to Union Bank of California, N.A., a national banking association duly organized and existing under the laws of the United States of America, as trustee (the "Trustee") under the Trust Agreement, dated as of December 1, 2008 (the "Trust Agreement"), by and among the Trustee, the District and the Corporation. Capitalized undefined terms used herein shall have the meanings ascribed thereto in the Trust Agreement. 80340495.3 A-1 The District has executed and delivered the Master Agreement for District Obligations, dated as of August 1, 2000 (the "Master Agreement), by and between the District and the Corporation, pursuant to which the District establishes and declares the conditions and terms upon which obligations such as the Installment Purchase Agreement, and the Installment Payments and the interest thereon,will be incurred and secured. This Certificate is one of the duly authorized Orange County Sanitation District Certificates of Participation, Series 2008C (the "Certificates") evidence principal in the aggregate amount of$_,000,000, executed pursuant to the terms of the Trust Agreement. The Certificates evidence direct, fractional undivided interests in the Installment Payments, and the interest thereon, payable under the Installment Purchase Agreement. The Certificates are executed and delivered to refinance certain improvements to the wastewater collection, treatment and disposal facilities of the District(the"Wastewater System"),to finance a reserve fund for the Certificates,to pay the costs of issuance incurred in connection therewith and to pay certain other related costs. The Installment Payments,and the interest thereon,are to be paid by the District pursuant to the Installment Purchase Agreement in consideration for the purchase of certain improvements to the Wastewater System and for the other agreements and obligations undertaken by the Corporation under the Installment Purchase Agreement and the Trust Agreement. The income and revenue received by the District from the operation of the Wastewater System remaining after the payment of maintenance and operation or ownership costs of the Wastewater System (as more fully described in the Installment Purchase Agreement, the "Net Revenues") are, pursuant to the Master Agreement, pledged to the payment of the Senior Obligations and Reimbursement Obligations with respect to Senior Obligations (as such terms are defined in the Master Agreement). The Installment Purchase Agreement constitutes a Senior Obligation and, as such, shall be subject to the provisions of the Master Agreement, and shall be afforded all of the advantages, benefits, interests and security afforded Senior Obligations pursuant to the Master Agreement. The Installment Purchase Agreement is payable on a parity with the other existing Senior Obligation. The District may at any time incur Senior Obligations in addition to existing Senior Obligations and the Installment Purchase Agreement payable from Net Revenues as provided in the Master Agreement on a parity with all other Senior Obligations theretofore incurred, but only subject to the conditions and upon compliance with the procedures set forth in the Master Agreement. The District is not required to advance any moneys derived from any source of income other than Net Revenues and the other funds provided in the Installment Purchase Agreement for the payment of the Installment Payments, and the interest thereon, and other payments required to be made by it under the Installment Purchase Agreement, or for the performance of any agreements or covenants required to be performed by it contained therein. The obligation of the District to pay the Installment Payments, and the interest thereon, and other payments required to be made by it under the Installment Purchase Agreement is a special obligation of the District payable, in the manner provided in the Installment Purchase Agreement, solely from such Net Revenues and other funds provided for therein, and does not constitute a debt of the District or of 80340485.3 A-2 the State of California, or of any political subdivision thereof, in contravention of any constitutional or statutory debt limitation or restriction. Reference is hereby made to the Master Agreement, the Installment Purchase Agreement and to the Trust Agreement and any and all amendments thereof and supplements thereto for a description of the terms under which the District's obligation to pay the Installment Payments, and the interest thereon, is incurred, the Certificates are executed and delivered, the provisions with regard to the nature and extent of the Net Revenues, and the rights of the Owners of the Certificates. All of the terms of the Master Agreement,the Installment Purchase Agreement and the Trust Agreement are hereby incorporated herein. The Trust Agreement constitutes a contract among the District, the Corporation and the Trustee for the benefit of the Owners of the Certificates, to all the provisions of which the Owner of this Certificate, by acceptance hereof, agrees and consents. The Registered Owner of this Certificate is entitled to receive, subject to the terms of the Trust Agreement and any right of prepayment as provided herein or therein, on the Principal Payment Date set forth above, upon presentation and surrender of this Certificate at the principal corporate trust office of the Trustee in Los Angeles, California (the "Principal Office"), the Principal Amount specified above, evidencing the Owner's interest in the Installment Payments coming due on the Principal Payment Date, and to receive on February 1 and August I of each year, commencing on February 1, 2009 (the "Interest Payment Dates"), interest accrued thereon at the Interest Rate specified above, computed on the basis of a 360-day year consisting of twelve 30-day months, until said Principal Amount is paid in full, evidencing the Registered Owner's interest in the interest evidenced by the Installment Payments coming due on each of said dates. This Certificate shall evidence interest from the Interest Payment Date next preceding its date of execution to which interest has been paid in full, unless such date of execution shall be after the 15th day of the month next preceding an Interest Payment Date, whether or not such day is a business day (each such date, a "Record Date"), and on or prior to the following Interest Payment Date, in which case this Certificate shall evidence interest from such Interest Payment Date, or unless such date of execution shall be on or prior to the first Record Date, in which case this Certificate shall evidence interest from the Dated Date specified above. Notwithstanding the foregoing, if, as shown by the records of the Trustee, interest evidenced by the Certificates shall be in default,this Certificate shall evidence interest from the last Interest Payment Date to which interest has been paid in full or duly provided for. Payments of interest evidenced by the Certificates shall be made to the Owners thereof (as determined at the close of business on the Record Date next preceding the related Interest Payment Date) by check or draft of the Trustee mailed to the address of each such Owner as it appears on the registration books maintained by the Trustee pursuant to the Trust Agreement, or to such other address as may be furnished in writing to the Trustee by such Owner. Payment of principal and prepayment premium, if any, evidenced by the Certificates,on their stated principal payment dates or on prepayment in whole or in part prior thereto, shall be made only upon presentation and surrender of the Certificates at the Principal Office. All such amounts are payable in lawful money of the United States of America. 8034W853 A-3 The Certificates are authorized to be executed and delivered in the form of fully registered certificates in denominations of$5,000 or any integral multiple thereof("Authorized Denominations'). This Certificate may be transferred or exchanged by the Registered Owner hereof, in person or by his attorney duly authorized in writing, at the Principal Office, but only in the manner, subject to the limitations and upon payment of the charges provided in the Trust Agreement. The Trustee shall not be required to transfer or exchange any Certificate during the period commencing on the date five days before the date of selection of Certificates for prepayment and ending on the date of mailing of notice of such prepayment, nor shall the Trustee be required to transfer or exchange any Certificate or portion thereof selected for prepayment from and after the date of mailing the notice of prepayment thereof. The Trustee may treat the Registered Owner hereof as the absolute owner hereof for all purposes, whether or not the principal or interest evidenced by this Certificate shall be overdue, and the Trustee shall not be affected by any knowledge or notice to the contrary; and payment of the principal and interest evidenced by this Certificate shall be made only to such Registered Owner, which payments shall be valid and effectual to satisfy and discharge the liability evidenced by this Certificate to the extent of the sum or sums so paid. The Certificates are subject to prepayment prior to their stated Principal Payment Dates in accordance with the Trust Agreement. To the extent and in the manner permitted by the terms of the Trust Agreement,the Trust Agreement and the rights and obligations of the Corporation, the District, the Owners and the Trustee under the Trust Agreement may be amended or supplemented at any time by an amendment or supplement thereto which shall become binding when the prior written consents of the Owners of a majority of the aggregate principal evidenced by the Certificates then outstanding, exclusive of Certificates disqualified as provided under the Trust Agreement, are filed with the Trustee. No such supplement or amendment shall (a) extend the stated Principal Payment Date of any Certificate or reduce the rate of interest evidenced thereby or extend the time of payment of such interest or reduce the amount of principal evidenced thereby or change the prepayment terms and provisions or the provisions regarding delivery of notice of prepayment without the prior written consent of the Owner of each Certificate so affected, (b) reduce the percentage of Owners whose consent is required for the execution of any amendment of or supplement to the Trust Agreement without the prior written consent of the Owners of all Certificates then outstanding, (c) modify any of the rights or obligations of the Trustee without the prior written consent of the Trustee, or(d)amend the amendment provisions of the Trust Agreement without the prior written consent of the Owners of all Certificates then outstanding. To the extent and in the manner permitted by the terms of the Trust Agreement,the Trust Agreement and the rights and obligations of the Corporation, the District, the Owners and the Trustee under the Trust Agreement may also be amended or supplemented at any time by an amendment or supplement thereto which shall become binding upon execution, without the 80340485.3 A-4 written consents of any Owners, but only to the extent permitted by law and only(a)to add to the agreements, conditions, covenants and terms required by the Corporation or the District to be observed or performed under the Trust Agreement other agreements, conditions, covenants and terms thereafter to be observed or performed by the Corporation or the District, or to surrender any right or power reserved therein to or conferred therein on the Corporation or the District,and which in either case shall not adversely affect the rights or interests of the Owners, (b)to make such provisions for the purpose of curing any ambiguity or of correcting, curing or supplementing any defective provision contained in the Trust Agreement or in regard to questions arising thereunder which the Corporation or the District may deem desirable or necessary and not inconsistent therewith, (c)to make such additions, deletions or modifications as may be necessary or appropriate to assure the exclusion from gross income for federal income tax purposes of interest evidenced by the Certificates, or (d)for any other reason, provided such amendment or supplement does not adversely affect the rights or interests of the Owners. THE DISTRICT HAS CERTIFIED that all acts, conditions and things required by the statutes of the State of California and by the Trust Agreement to exist, to have happened and to have been performed precedent to and in connection with the execution and delivery of this Certificate do exist, have happened and have been performed in regular and due time, form and manner as required by law, and that the Trustee is duly authorized to execute and deliver this Certificate. 80340485.3 A-5 IN WITNESS WHEREOF, this Certificate has been executed by the manual signature of an authorized signatory of the Trustee as of the date set forth below. Date: UNION BANK OF CALIFORNIA,N.A., as Trustee By: Authorized Officer 90340485.3 A-6 ASSIGNMENT For value received, the undersigned do(es) hereby sell, assign and transfer unto the within-mentioned Certificate and hereby irrevocably constitute(s) and appoint(s) attorney, to transfer the same on the books of the Trustee with full power of substitution in the premises. Dated: Note: The signature(s)on this Assignment must correspond with the name(s)as written on the face of the within registered Certificate in every particular, without alteration or enlargement or any change whatsoever. Tax I.D. #: Signature Guaranteed: Note: Signatures)town be guaranteed by an eligible Now: The sigoalme(s)on this Assignment must correspond guarantor. with the nanw(s)as written on the face ofthe within Cenificste in every Particular without attention m enlargement or my change whatsoever. sosaoaas.n A-7 Fulbright&Jaworski L.L.P.— Draft 10/31/08 INSTALLMENT PURCHASE AGREEMENT by and between ORANGE COUNTY SANITATION DISTRICT and ORANGE COUNTY SANITATION DISTRICT FINANCING CORPORATION Dated as of December 1,2008 Relating to $_,000,000 Orange County Sanitation District Certificates of Participation Series2008C soxoes2.2 TABLE OF CONTENTS Page ARTICLE 1 DEFINITIONS.................................................................................................2 Section1.01. Definitions............................................................................................2 Section 1.02. Definitions in Master Agreement and Trust Agreement......................3 ARTICLE 11 PURCHASE OF PROJECT BY,AND SALE THEREOF TO,THE CORPORATION;PAYMENT OF PURCHASE PRICE...............................3 Section 2.01. Acquisition,Construction and Installation of the Project....................3 Section2.02. Changes to the Project.........................................................................4 Section 2.03. Payment of Purchase Price...................................................................4 ARTICLE III PURCHASE OF PROJECT BY,AND SALE THEREOF TO,THE DISTRICT;INSTALLMENT PAYMENTS...................................................4 Section 3.01. Purchase and Sale of Project................................................................4 Section 3.02. Installment Payments...........................................................................4 Section 3.03. Reserve Fund Payments.......................................................................6 Section 3.04. Obligation Absolute.............................................................................6 Section 3.05. Nature of Agreement...........................................................................6 ARTICLE W PREPAYMENT OF INSTALLMENT PAYMENTS;DISCHARGE............6 Section 4.01. Prepayment of Installment Payments...................................................6 Section4.02. Notice...................................................................................................7 Section 4.03. Discharge of Obligations.....................................................................7 ARTICLE COVENANTS.................................................................................................7 Section 5.01. Compliance with Master Agreement...................................................7 Section 5.02. Compliance with Installment Purchase Agreement.............................7 Section 5.03. Protection of Security and Rights........................................................9 Section 5.04. Indemnification of Corporation...........................................................8 Section5.05. Further Assurances...............................................................................8 ARTICLE VI EVENTS OF DEFAULT AND REMEDIES OF THE CORPORATION.............................................................................................8 Section 6.01. Events of Default.................................................................................8 Section6.02. Remedies on Default............................................................................9 Section6.03. Non-Waiver..........................................................................................9 Section 6.04. Remedies Not Exclusive.................................................................... 10 ARTICLE VII AMENDMENTS........................................................................................... 10 Section 7.01. Amendments...................................................................................... 10 ARTICLE VIII MISCELLANEOUS...................................................................................... I I Section 8.01. Liability of District Limited............................................................... I I Section 8.02. Limitation of Rights........................................................................... l l Section8.03. Assignment........................................................................................ 11 Section8.04. Notices............................................................................................... 11 Section 8.05. Successor Is Deemed Included in all References to Predecessor...... 12 Section 8.06. Waiver of Personal Liability.............................................................. 12 e034as2.3 _i_ r TABLE OF CONTENTS , (continued) Page Section 8.07. Article and Section Headings,Gender and References..................... 12 Section 8.08. Partial Invalidity................................................................................. 13 Section 8.09. Governing Law.................................................................................. 13 Section 8.10. Execution in Counterparts.................................................................. 13 EXHIBIT A DESCRIPTION OF PROJECT........................................................A-1 BM04923 -11- INSTALLMENT PURCHASE AGREEMENT THIS INSTALLMENT PURCHASE AGREEMENT (this "Installment Purchase Agreement"), dated as of December 1, 2008, is by and between the ORANGE COUNTY SANITATION DISTRICT, a county sanitation district organized and existing under the laws of the State of California (the "District'), and the ORANGE COUNTY SANITATION DISTRICT FINANCING CORPORATION, a nonprofit public benefit corporation organized and existing under the laws of the State of California(the"Corporation"). WITNESSETH: WHEREAS, the District desires to finance the acquisition, construction and installation of certain improvements to its wastewater system (the"Project'); WHEREAS, in order to finance the Project, the District desires to purchase the Project from the Corporation, and the Corporation desires to sell the Project to the District, for the installment payments (the "Installment Payments") to be made by the District pursuant to the Installment Purchase Agreement, dated as of December 1, 2008 (the "Installment Purchase Agreement), by and between the District and the Corporation; WHEREAS, pursuant to the Master Agreement for District Obligations, dated as of August 1, 2000, by and between the District and the Corporation,the District has established and declared the conditions and terms upon which obligations such as this Installment Purchase Agreement, and the Installment Payments, and the interest thereon, are to be incurred and secured; WHEREAS, the Corporation proposes to assign without recourse certain of its rights under and pursuant to this Installment Purchase Agreement to Union Bank of California,N.A.,as trustee(the"Trustee'); WHEREAS, in consideration of such assignment and the execution and delivery of the Trust Agreement, dated as of the date hereof, by and among the Trustee,the Corporation and the District, the Trustee has agreed to execute and deliver the Orange County Sanitation District Certificates of Participation, Series 2008C (the "Certificates"), evidencing direct, undivided fractional interests in the Installment Payments,and the interest thereon,payable hereunder; WHEREAS, all acts, conditions and things required by law to exist, to have happened and to have been performed precedent to and in connection with the execution and delivery of this Installment Purchase Agreement do exist, have happened and have been performed in regular and due time, form and manner as required by law, and the parties hereto are now duly authorized to execute and enter into this Installment Purchase Agreement; NOW, THEREFORE, in consideration of the covenants and provisions herein set forth and for other good and valuable consideration the receipt and sufficiency of which is hereby acknowledged,the parties hereto do hereby agree as follows: 80340482.3 ARTICLE 1 DEFINITIONS Section 1.01. Definitions. Except as provided in Section 1.02 hereof or unless the context otherwise requires, the terms defined in this Section shall for all purposes hereof and of any amendment hereof or supplement hereto and of any report or other document mentioned herein or therein have the meanings defined herein, the following definitions to be equally applicable to both the singular and plural forms of any of the terms defined herein: "Acquisition Fund" means the fund by that name established in accordance with the Trost AgreemenL "Business Day" means a day other than (a) Saturday or Sunday, (b) a day on which banking institutions in the city in which the Principal Office is located are authorized or required by law to be closed, and (c) a day on which the New York Stock Exchange is authorized or obligated by law or executive order to be closed. "Certificates" means the Orange County Sanitation District Certificates of Participation, Series 2008C, executed and delivered under and pursuant to the Trost Agreement. "Closing Date"means December_,2008. "Corporation" means the Orange County Sanitation District Financing Corporation, a nonprofit public benefit corporation organized and existing under the laws of the State, and any successor thereto. "District" means the Orange County Sanitation District, a county sanitation district organized and existing under and by virtue of the laws of the State,and any successor thereto. "Event of Def mie,means an event described in Section 6.01 hereof. "Installment Payments" means the Installment Payments required to be made by the District pursuant to Section 3.02 hereof. "Installment Payment Date"means each February 1,commencing February 1,2010. "Installment Purchase Agreement" means this Installment Purchase Agreement, dated as of December 1, 2008, by and between the District and the Corporation, as originally executed and as it may from time to time be amended or supplemented in accordance with the teens hereof. "interest Payment Date' means February 1 and August I of each year, commencing February 1, 2009. "Master Agreement" means the Master Agreement for District Obligations, dated as of August 1, 2000, by and between the District and the Corporation, as originally executed and as it may from time to time be amended or supplemented in accordance with the terms thereof. 80340482.3 2 "Person" means an individual, corporation, limited liability company, firm, association, partnership, trust, or other legal entity or group of entities, including a governmental entity or any agency or political subdivision thereof. "Principal Office" means the Trustee's principal corporate trust office in Los Angeles, California. "Project" means the improvements to the Wastewater System to be acquired, constructed and installed pursuant to this Installment Purchase Agreement, as described in Exhibit A hereto. "Trust Agreement" means the Trust Agreement, dated as of December 1, 2008, by and among the Trustee, the Corporation and the District, as originally executed and as it may from time to time be amended or supplemented in accordance with its terms. "Trustee" means Union Bank of California, N.A., a national banking association duly organized and existing under the laws of the United States of America, or any other bank or trust company which may at any time be substituted in its place as provided in the Trust Agreement. Section 1.02. Definitions in Master Agreement and Trust Agreement. Except as otherwise herein defined and unless the context otherwise requires, the terms defined in the Master Agreement or the Trust Agreement shall for all purposes hereof and of any amendment hereof or supplement hereto and of any report or other document mentioned herein have the meanings defined therein, such definitions to be equally applicable to both the singular and plural forms of any of the terms defined therein. With respect to any defined term which is given a different meaning under this Installment Purchase Agreement than under the Master Agreement or the Trust Agreement, as used herein it shall have the meaning given herein. ARTICLE II PURCHASE OF PROJECT BY,AND SALE THEREOF TO,THE CORPORATION; PAYMENT OF PURCHASE PRICE Section 2.01. Acquisition. Construction and Installation of the Project. The Corporation hereby agrees to cause the Project to be acquired, constructed and installed by the District, as agent of the Corporation. The District shall enter into contracts and provide for, as agent of the Corporation, the complete acquisition, construction and installation of the Project. The District hereby agrees that it will cause the acquisition, construction and installation of the Project to be diligently performed. It is hereby expressly understood and agreed that, except to the extent of proceeds of the Certificates which are deposited in the Acquisition Fund, the Corporation shall be under no liability of any kind or character whatsoever for the payment of any Acquisition Costs. In the event the proceeds of the Certificates deposited in the Acquisition Fund are insufficient to complete the acquisition,construction and installation of the Project, the District shall cause to be applied from and to the extent of other available District funds, an amount equal to that necessary to complete the acquisition, construction and installation of the Project. 9OMN82.3 3 Section 2.02. Changes to the Project. The District may make any changes in the composition and description of the Project or any component thereof whenever the District deems such changes to be necessary and appropriate; provided, however, that no such change shall impair the ability of the District to make the Installment Payments or cause to be included in the Project any property not constituting property useful in the performance of the District's powers, projects and purposes. Any such change shall be implemented by the District's filing with the Corporation and the Trustee a description of such change and, upon such filing, the description of the Project contained in Exhibit A shall be deemed to have been modified in accordance therewith. No such change shall constitute an amendment, change, modification or alteration of this Installment Purchase Agreement. Section 2.03. Payment of Purchase Price. On the Closing Date, the Corporation shall pay to the District, as the purchase price of the Project, the amount of $_,000,000, which amount shall be paid from the proceeds of the Certificates. ARTICLE III PURCHASE OF PROJECT BY,AND SALE THEREOF TO,THE DISTRICT; INSTALLMENT PAYMENTS Section 3.01. Purchase and Sale of Project. The District hereby purchases from the Corporation, and the Corporation hereby sells to the District, the Project in accordance with the provisions of this Installment Purchase Agreement. All right, title and interest in and to the Project shall immediately vest in the District on the Closing Date without further action on the part of the District or the Corporation. Section 3.02. Installment Payments. The District shall, subject to any rights of prepayment provided in Article N hereof, pay to the Corporation, solely from Net Revenues and from no other sources, the purchase price of the Project in Installment Payments, with interest thereon, as provided herein. The Installment Payments shall be in the aggregate principal amount of$_,000,000, and shall be payable on the Business Day immediately preceding each of the Installment Payment Dates in the principal amounts and shall accrue interest at the rates per annum set forth in the following schedule: SONNS2.3 4 Installment Payment Date (February I) Installment Payment Interest Rate The Installment Payments shall accrue interest from the Closing Date, at the rates set forth above, payable on the Interest Payment Dates in each year. Such interest shall accrue on the basis of a 360-day year consisting of twelve 30-day months. Each Installment Payment, and each payment of interest thereon, shall be deposited with the Trustee, as assignee of the Corporation, no later than the Business Day next preceding the Installment Payment Date or Interest Payment Date on which such Installment Payment or payment of interest is due, in lawful money of the United States of America, in immediately available funds. If and to the extent that, on any such date, there are amounts on deposit in the Installment Payment Fund established under the Trust Agreement, or in any of the accounts therein, which amounts are not being held for the payment of specific Certificates, such amounts shall be credited against the Installment Payment,or payment of interest thereon,as applicable,due on such date. 8034N82.3 5 Section 3.03. Reserve Fund Payments. The District shall maintain or cause to be maintained in the Reserve Fund established under the Trust Agreement an amount equal to the Reserve Requirement; provided, however,that any replenishment thereof shall be payable solely from Net Revenues. On or before the last Business Day of each month, commencing on or before the last Business Day of each month during which an event occurs that causes the amount on deposit in the Reserve Fund to be reduced below, or further below, the Reserve Requirement, the District shall transfer, from Net Revenues, to the Trustee for deposit in the Reserve Fund, 1/12 of the amount of such reduction, except that no such transfer to the Trustee and deposit in the Reserve Fund need be made if the amount available and contained therein is at least equal to the Reserve Requirement. Section 3.04. Obligation Absolute. The obligation of the District to make the Installment Payments, and payments of interest thereon, and other payments required to be made by it under this Article, solely from Net Revenues, is absolute and unconditional, and until such time as the Installment Payments, payments of interest thereon, and such other payments shall have been paid in full (or provision for the payment thereof shall have been made pursuant to Article IV), the District shall not discontinue or suspend any Installment Payments, or payments of interest thereon, or other payments required to be made by it hereunder when due, whether or not the Project or any part thereof is operating or operable or has been completed, or its use is suspended, interfered with, reduced or curtailed or terminated in whole or in part, and such Installment Payments, payments of interest thereon, and other payments shall not be subject to reduction whether by offset or otherwise and shall not be conditional upon the performance or nonperformance by any party of any agreement for any cause whatsoever. Section 3.05. Nature of Agreement. This Installment Purchase Agreement constitutes a Senior Obligation and, as such, shall be subject to the provisions of the Master Agreement and shall be afforded all of the advantages, benefits, interests and security afforded Senior Obligations pursuant to the Master Agreement. ARTICLE IV PREPAYMENT OF INSTALLMENT PAYMENTS; DISCHARGE Section 4.01. Prepayment of Installment Payments. (a)Installment Payments shall be subject to prepayment prior to their respective Installment Payment Dates, at the option of, and in the amounts directed by, the District, from any source of available funds, in whole or in part (in an amount equal to $5,000 or an integral multiple thereof) on any date on or after August 1, 2018, at the principal amount thereof and accrued interest thereon to the date fixed for prepayment,without premium. (b) The District may prepay, from any source of available funds, all or any portion of the Installment Payments by depositing with the Trustee moneys or securities as provided, and subject to the tems and conditions set forth, in Article X of the Trust Agreement sufficient to pay such Installment Payments, and the interest thereon, when due or to pay such Installment Payments, and the interest thereon, through a specified date on which the District has a right to prepay such Installment Payments pursuant to subsection (a) of this Section, and to prepay such 803e0492.3 6 Installment Payments on such prepayment date, at a prepayment price determined in accordance with subsection(a)of this Section. (c) If less than all of the Installment Payments are prepaid pursuant to this Section then,as of the date of such prepayment pursuant to subsection (a)of this Section,or the date of a deposit pursuant to subsection (b) of this Section, the schedule of Installment Payments shall be recalculated in order to take such prepayment into account. (d) Prepayments of Installment Payments made pursuant to this Section shall be applied to the prepayment of Certificates as provided in Section 4.01 of the Trust Agreement. Section 4.02. Notice. The District shall give written notice to the Trustee specifying the date on which the prepayment will be made prior to making any prepayment pursuant to this Article, which date shall be not less than 30 nor more than 60 days from the date such notice is given to the Trustee,unless such time period shall be waived by the Trustee. Section 4.03. Discharge of Obligations. If all Installment Payments, and the interest thereon, shall be paid as and when due in accordance with the terms hereof, or prepaid in accordance with Section 4.01 hereof, and if all Certificates shall be fully paid, or provision therefor made in accordance with Article X of the Trust Agreement, and the Trust Agreement shall be discharged by its terms, then all agreements, covenants and other obligations of the District hereunder shall thereupon cease, terminate and become void and be discharged and satisfied. ARTICLE V COVENANTS Section 5.01. Compliance with Master Agreement. The District will faithfully observe and perform all the agreements,conditions, covenants and terms contained in the Master Agreement required to be observed and performed by it and will not cause, suffer or permit any default to occur thereunder. Section 5.02. Compliance with Installment Purchase Agreement. The District will punctually pay the Installment Payments, and interest thereon, and other payments required to be made by it hereunder in strict conformity with the terms hereof, and will faithfully observe and perform all the agreements, conditions, covenants and terms contained herein required to be observed and performed by it, will not cause, suffer or permit any default to occur hereunder and will not terminate this Installment Purchase Agreement for any cause including, without limiting the generality of the foregoing, any acts or circumstances that may constitute failure of consideration, destruction of or damage to the Project, commercial frustration of purpose, any change in the tax or other laws of the United States of America or of the State or any political subdivision of either or any failure of the Corporation to observe or perform any agreement, condition, covenant or term contained herein required to be observed and performed by it, whether express or implied, or any duty, liability or obligation arising out of or connected herewith or the insolvency, or deemed insolvency, or bankruptcy or liquidation of the Corporation or any force majeure, including acts of God, tempest, storm, earthquake, war, 80340482.3 7 rebellion, riot, civil disorder, acts of public enemies, blockade or embargo, strikes, industrial disputes, lock outs, lack of transportation facilities, fire, explosion, or acts or regulations of governmental authorities. Section 5.03. Protection of Security and Rights. The District will preserve and protect the security hereof and the rights of the Trustee, as assignee of the Corporation, to the Installment Payments, and interest thereon, and other payments required to be made by the District hereunder and will warrant and defend such rights against all claims and demands of all Persons. Section 5.04. Indemnification of Corporation. To the extent permitted by law, the District hereby agrees to indemnify and hold the Corporation and its members and officers harmless against any and all liabilities which might arise out of or are related to the Project, this Installment Purchase Agreement or the Certificates, and the District further agrees to defend the Corporation and its members and officers in any action arising out of or related to the Project, this Installment Purchase Agreement or the Certificates. Section 5.05. Further Assurances. The District will adopt, deliver, execute and make any and all further assurances, instruments and resolutions as may be reasonably necessary or proper to carry out the intention or to facilitate the performance hereof and for the better assuring and confirming unto the Corporation, or unto the Trustee, as assignee of the Corporation, the rights and benefits provided herein to the Corporation, or to the Trustee, as assignee of the Corporation. ARTICLE VI EVENTS OF DEFAULT AND REMEDIES OF THE CORPORATION Section 6.01. Events of Default. The following shall be Events of Default under this Installment Purchase Agreement, and "Event of Default' shall mean any one or more of the following events: (a) if default shall be made by the District in the due and punctual payment of or on account of any Senior Obligation as the same shall become due and payable; (b) if default shall be made by the District in the performance of any of the agreements or covenants required herein, in the Trust Agreement or in the Master Agreement to be performed by it (other than as specified in (a) above), and such default shall have continued for a period of 30 days after the District shall have been given notice in writing of such default by the Corporation or the Trustee;provided,however,that the party or parties giving such notice may agree in writing to a reasonable extension of such period prior to the expiration of such 30 day period and, provided further, that if the District shall proceed to take curative action which, if begun and prosecuted with due diligence, cannot be completed within such a period of 30 days, then such period shall be increased without such written extension to such extent as shall be necessary to enable the District to diligently complete such curative action and such default shall not become an Event of Default for so long as shall be necessary to diligently complete such curative action; or 8034w83.3 8 (c) if the District shall file a petition or answer seeking arrangement or reorganization under the federal bankruptcy laws or any other applicable law of the United States of America or any state therein, or if a court of competent jurisdiction shall approve a petition filed with or without the consent of the District seeking arrangement or reorganization under the federal bankruptcy laws or any other applicable law of the United States of America or any state therein, or if under the provisions of any other law for the relief or aid of debtors any court of competent jurisdiction shall assume custody or control of the District or of the whole or any substantial part of its property. Section 6.02. Remedies on Default. Upon the occurrence of an Event of Default, the Trustee,as assignee of the Corporation,shall have the right: (a) by mandamus or other action or proceeding or suit at law or in equity to enforce its rights against the District and to compel the District to perform and carry out its duties under applicable law and the agreements and covenants required to be performed herein; (b) by suit in equity to enjoin any acts or things which are unlawful or violate the rights of the Trustee, as assignee of the Corporation; (c) by suit in equity require the District to account as the trustee of an express trust; and to have a receiver or receivers appointed for the Wastewater System and of the issues, earnings, income, products and profits thereof, pending such proceedings, with such powers as the court making such appointment shall confer. Section 6.03. Non-Waiver. Nothing in this Article or in any other provision hereof shall affect or impair the obligation of the District, which is absolute and unconditional, to pay the Installment Payments,and the interest thereon, to the Trustee,as assignee of the Corporation, at the respective due dates from the Net Revenues and the other funds herein committed for such payment, or shall affect or impair the right of the Trustee, as assignee of the Corporation, which is also absolute and unconditional, to institute suit to enforce such payment by virtue of the contract embodied herein. A waiver of any default or breach of duty or contract by the Trustee, as assignee of the Corporation, shall not affect any subsequent default or breach of duty or contract or impair any rights or remedies on any such subsequent default or breach of duty or contract. No delay or omission by the Trustee, as assignee of the Corporation,to exercise any right or remedy accruing upon any default or breach of duty or contract shall impair any such right or remedy or shall be construed to be a waiver of any such default or breach of duty or contract or an acquiescence therein,and every right or remedy conferred upon the Trustee, as assignee of the Corporation, by applicable law or by this Article may be enforced and exercised from time to time and as often as shall be deemed expedient by the Trustee,as assignee of the Corporation. If any action,proceeding or suit to enforce any right or exercise any remedy is abandoned or determined adversely to the Trustee, as assignee of the Corporation, the District and the Trustee, as assignee of the Corporation, shall be restored to their former positions, rights and remedies as if such action,proceeding or suit had not been brought or taken. 9034W82.3 9 Section 6.04. Remedies Not Exclusive. No remedy herein conferred upon or reserved to the Trustee, as assignee of the Corporation, is intended to be exclusive of any other remedy, and each such remedy shall be cumulative and shall be in addition to every other remedy given hereunder or now or hereafter existing in law or in equity or by statute or otherwise and may be exercised without exhausting and without regard to any other remedy conferred by law. ARTICLE Vll AMENDMENTS Section 7.01. Amendments. (a) This Installment Purchase Agreement and the rights and obligations of the District, the Corporation and the Trustee, as assignee of the Corporation, may be amended or modified from time to time and at any time by a written amendment hereto executed by the District, the Corporation and the Trustee, as assignee of the Corporation, with the written consent of the Owners of a majority of the aggregate principal evidenced by Certificates then Outstanding. No such amendment shall (i) extend the payment date of any Installment Payment or reduce the amount of any Installment Payment, or the interest rate applicable thereto, without the prior written consent of the Owner of each affected Certificate,or (ii) reduce the percentage of Owners of the Certificates whose consent is required to effect any such amendment or modification, without the prior written consent of the Owners of all Certificates then Outstanding. (b) This Installment Purchase Agreement and the rights and obligations of the District, the Corporation and the Trustee, as assignee of the Corporation, may be amended or modified from time to time and at any time by a written amendment hereto executed by the District, the Corporation and the Trustee, as assignee of the Corporation, without the written consents of any Owners of the Certificates, but only to the extent permitted by law and only for any one or more of the following purposes: (i) to add to the agreements, conditions, covenants and terms required by the District, the Corporation or the Trustee, as assignee of the Corporation, to be observed or perforated herein other agreements, conditions, covenants and terms thereafter to be observed or performed by the District,the Corporation or the Trustee, as assignee of the Corporation, or to surrender any right or power reserved herein to or conferred herein on the District,the Corporation or the Trustee,as assignee of the Corporation; (ii) to make such provisions for the purpose of curing any ambiguity or of correcting, curing or supplementing any defective provision contained herein or in regard to questions arising hereunder which the District,the Corporation or the Trustee, as assignee of the Corporation, may deem desirable or necessary and not inconsistent herewith; (iii) to make such additions, deletions or modifications as may be necessary or appropriate to assure the exclusion from gross income for federal income tax purposes of interest on the Installment Payments;and 9034N82 3 10 (iv) to make such other changes herein or modifications hereto as the District, the Corporation or the Trustee, as assignee of the Corporation, may deem desirable or necessary,and which shall not materially adversely affect the interests of the Owners of the Certificates. ARTICLE Vill MISCELLANEOUS Section 8.01. Liability of District Limited. Notwithstanding anything contained herein to the contrary,the District shall not be required to advance any moneys derived from any source of income other than Net Revenues and the other funds provided herein for the payment of the Installment Payments, and the interest thereon, and other payments required to be made by it hereunder, or for the performance of any agreements or covenants required to be performed by it contained herein. The District may, however, but in no event shall be obligated to, advance moneys for any such purpose so long as such moneys are derived from a source legally available for such purpose and may be legally used by the District for such purpose. The obligation of the District to pay the Installment Payments, and the interest thereon, and other payments required to be made by it hereunder is a special obligation of the District payable, in the manner provided herein, solely from Net Revenues and other funds provided for herein, and does not constitute a debt of the District or of the Stale, or of any political subdivision thereof, in contravention of any constitutional or statutory debt limitation or restriction. Neither the faith and credit nor the taxing power of the District or the State, or any political subdivision thereof, is pledged to the payment of the Installment Payments, or the interest thereon,or other payments required to be made hereunder. Section 8.02. Limitation of Rights. Nothing in this Installment Purchase Agreement expressed or implied is intended or shall be construed to give to any Person other than the District, the Corporation and the Trustee, as assignee of the Corporation, any legal or equitable right, remedy or claim under or in respect of this Installment Purchase Agreement or any covenant, condition or provision therein or herein contained, and all such covenants, conditions and provisions are and shall be held to be for the sole and exclusive benefit of the District, the Corporation and the Trustee,as assignee of the Corporation. Section 8.03. Assignment. The District and the Corporation hereby acknowledge the transfer, conveyance and assignment by the Corporation to the Trustee of all of the Corporation's rights, title and interest in and to this Installment Purchase Agreement (excepting its rights to indemnification hereunder), including the right to receive Installment Payments, and the interest thereon,from the District, pursuant to the Trust Agreement. Section 8.04. Notices. Any written notice, statement, demand, consent, approval, authorization, offer, designation, request or other communication to be given hereunder shall be given to the party entitled thereto at its address set forth below, or at such other address as such party may provide to the other parties in writing from time to time,namely: 80340482.3 11 If to the District: Orange County Sanitation District 10844 Ellis Avenue Fountain Valley,California 92708 Attention: Director of Finance and Administrative Services If to the Corporation: Orange County Sanitation District Financing Corporation c/o Orange County Sanitation District 10844 Ellis Avenue Fountain Valley,California 92708 Attention: Treasurer If to the Trustee: Union Bank of California,N.A. 120 South San Pedro Street, Suite 400 Los Angeles, California 90012 Attention: Corporate Trust Department Each such notice, statement,demand, consent, approval, authorization,offer,designation, request or other communication hereunder shall be deemed delivered to the party to whom it is addressed (a) if personally served or delivered, upon delivery, (b) if given by electronic communication, whether by telex, telegram or telecopier, upon the sender's receipt of an appropriate answerback or other written acknowledgment, (c) if given by registered or certified mail, return receipt requested, deposited with the United States mail postage prepaid, 72 hours after such notice is deposited with the United States mail, (d) if given by overnight courier,with courier charges prepaid, 24 hours after delivery to said overnight courier, or (e) if given by any other means,upon delivery at the address specified in this Section. Section 8.05. Successor Is Deemed Included in all References to Predecessor. Whenever the District or the Corporation is named or referred to herein, such reference shall be deemed to include the successor to the powers, duties and functions that are presently vested in the District or the Corporation, and all agreements and covenants required hereby to be performed by or on behalf of the District or the Corporation shall bind and inure to the benefit of the respective successors thereof whether so expressed or not. Section 8.06. Waiver of Personal Liability. No official, officer or employee of the District shall be individually or personally liable for the payment of the Installment Payments, or the interest thereon, or other payments required to be made by the District hereunder,but nothing contained herein shall relieve any official, officer or employee of the District from the performance of any official duty provided by any applicable provisions of law or hereby. Section 8.07. Article and Section Headings. Gender and References. The headings or titles of the several Articles and Sections hereof and the table of contents appended hereto shall be solely for convenience of reference and shall not affect the meaning, construction or effect hereof, and words of any gender shall be deemed and construed to include all genders. All references herein to "Articles," "Sections" and other subsections or clauses are to the corresponding articles, sections, subsections or clauses hereof; and the words"hereby," "herein," "hereof.. "hereto," "herewith" and other words of similar import refer to this Installment Purchase Agreement as a whole and not to any particular Article, Section, subdivision or clause hereof. 80340492.3 12 Section 8.08. Partial Invalidity. If any one or more of the agreements or covenants or portions thereof required hereby to he performed by or on the part of the District or the Corporation shall be contrary to law, then such agreement or agreements, such covenant or covenants or such portions thereof shall be null and void and shall be deemed separable from the remaining agreements and covenants and portions thereof and shall in no way affect the validity hereof. Section 8.09. Governine Law. This Installment Purchase Agreement shall be construed and governed and construed in accordance with the laws of the State. Section 8.10. Execution in Counterparts. This Installment Purchase Agreement may be executed in several counterparts, each of which shall be deemed an original, and all of which shall constitute but one and the same instrument. 9034M2.3 13 IN WITNESS WHEREOF, the parties hereto have executed this Installment Purchase Agreement by their officers[hereunto duly authorized as of the day and year first written above. ORANGE COUNTY SANITATION DISTRICT By: Chair of the Board of Directors (SEAL) Attest: By: Clerk of the Board of Directors ORANGE COUNTY SANITATION DISTRICT FINANCING CORPORATION By: Treasurer 80340482.3 14 EXHIBIT A DESCRIPTION OF PROJECT The Project is consists of the acquisition, construction and installation of certain improvements to the Wastewater System,including the following Project components: 80340482.3 A_1 Fulbright&Jaworski L.L.P.— Draft 10/31/08 CONTINUING DISCLOSURE AGREEMENT by and between ORANGE COUNTY SANITATION DISTRICT and DIGITAL ASSURANCE CERTIFICATION LLC, as Dissemination Agent Dated as of December 1, 2008 Relating to $_,000,000 Orange County Sanitation District Certificates of Participation Series 2008C 80340497 3 CONTINUING DISCLOSURE AGREEMENT THIS CONTINUING DISCLOSURE AGREEMENT (this "Disclosure Agreement"), dated as of December 1, 2008, is by and between the ORANGE COUNTY SANITATION DISTRICT, a county sanitation district organized and existing under the laws of the State of California (the "District"), and DIGITAL ASSURANCE CERTIFICATION LLC, as Dissemination Agent(the"Dissemination Agent"). WITNESSETH: WHEREAS, the District has caused to be executed and delivered Orange County Sanitation District Certificates of Participation, Series 2008C (the "Certificates"), evidencing principal in the aggregate amount of$_,000,000, pursuant to a Trust Agreement, dated as of the date hereof (the "Trust Agreement"), by and among Union Bank of California, N.A., as trustee (the "Trustee"), the Orange County Sanitation District Financing Corporation (the "Corporation')and the District;and WHEREAS, this Disclosure Agreement is being executed and delivered by the District and the Dissemination Agent for the benefit of the owners and beneficial owners of the Certificates and in order to assist the underwriters of the Certificates in complying with the Rule (as defined herein); NOW, THEREFORE, for and in consideration of the mutual promises and covenants herein contained,the parties hereto agree as follows: Section 1. Definitions. Capitalized undefined terms used herein shall have the meanings ascribed thereto in the Trust Agreement or, if not defined therein, in the Master Agreement, dated as of August 1, 2000, by and between the District and the Corporation. In addition,the following capitalized terms shall have the following meanings: "Annual Report"means any Annual Report provided by the District pursuant to,and as described in,Sections 2 and 3 hereof. "Annual Report Date" means the date in each year that is eight months after the end of the District's fiscal year,which date,as of the date of this Disclosure Certificate, is March 1. "Disclosure Representative" means the Director of Finance and Administrative Services of the District, or such other officer or employee of the District as the District shall designate in writing to the Dissemination Agent and the Trustee from time to time. "Dissemination Agent" means an entity selected and retained by the District, or any successor thereto selected by the District. The initial Dissemination Agent shall be Digital Assurance Certification LLC. "Listed Events"means any of the events listed in subsection (a)of Section 4 hereof. 80340497.3 1 "National Repository" means any Nationally Recognized Municipal Securities Information Repository for purposes of the Rule. As of the date hereof, the National Repositories approved by the Securities and Exchange Commission are identified at http://www.sec.gov/info/municipal/nrmsir.htm. "Official Statement" means the Official Statement, dated December _, 2008, relating to the Certificates. "Participating Underwriter" means any of the original underwriters of the Certificates required to comply with the Rule in connection with the offering of the Certificates. "Repository"means each National Repository and each State Repository. "Rule" means Rule 15c2-12 adopted by the Securities and Exchange Commission under the Securities Exchange Act of 1934,as the same may be amended from time to time. "State Repository" means any public or private repository or entity designated by the State of California as a state repository for the purpose of the Rule and recognized by the Securities and Exchange Commission. As of the date of this Disclosure Agreement, there is no State Repository. Section 2. Provision of Annual Reports. (a) The District shall provide, annually, an electronic copy of the Annual Report to the Dissemination Agent, together with a copy for the Trustee, not later than 15 days prior to the Annual Report Date. Promptly upon receipt of an electronic copy of the Annual Report, the Dissemination Agent shall provide an Annual Report to each National Repository and the State Depository(if any)not later than March 1 after the end of each fiscal year of the District, commencing with the fiscal year ending June 30, 2009. The Annual Report may be submitted as a single document or as separate documents comprising a package, and may cross reference other information as provided in Section 3 of this Disclosure Agreement. If the District's fiscal year changes, it shall give notice of such change in the same manner as for a Listed Event under subsection (f)of Section 4 hereof. (b) If on the fifteenth (15th) day prior to the Annual Report Date, the Dissemination Agent has not received a copy of the Annual Report, the Dissemination Agent shall contact the Disclosure Representative by telephone and in writing (which may be by e-mail) to remind the District of its undertaking to provide the Annual Report pursuant to Section 2(a). (c) If the Dissemination Agent has not received an Annual Report by 12:00 noon on the first business day following the Annual Report Date for the Annual Report, the District irrevocably directs the Dissemination Agent to immediately send a notice to each National Repository or the MSRB and the State Depository (if any) in substantially the form attached as Exhibit A. (d) The Dissemination Agent shall: (i) determine each year prior to the date for providing the Annual Report the name and address of each National Repository and each State Repository, if any; and 80340497 3 2 (ii) file a report with the District and (if the Dissemination Agent is not the Trustee)the Trustee certifying that the Annual Report has been provided pursuant to this Disclosure Agreement, stating the date it was provided and listing all the Repositories to which it was provided. Section 3. Content of Annual Reoorts. The District's Annual Report shall contain or incorporate by reference the following: (a) Audited financial statements prepared in accordance with generally accepted accounting principles as promulgated to apply to governmental entities from time to time by the Governmental Accounting Standards Board. If the District's audited financial statements are not available by the time the Annual Report is required to be filed pursuant to subsection (a) of Section 2 hereof, the Annual Report shall contain unaudited financial statements in a format similar to the financial statements contained in the Official Statement, and the audited financial statements shall be filed in the same manner as the Annual Report when they become available. (b) The following information with respect to the Certificates: (i) The principal evidenced by the Certificates Outstanding as of the January 1 next preceding the Annual Report Date and the principal amount of other Senior Obligations outstanding as of the January I next preceding the Annual Report Date. (ii) The balance in the Reserve Fund, and a statement of the Reserve Requirement,as of the January 1 next preceding the Annual Report Date. (c) A summary report showing in reasonable detail Revenues, Operating Revenues, Maintenance and Operation Costs,Net Revenues, Net Operating Revenues and debt service with respect to the Senior Obligations for the fiscal year ended the June 30 next preceding the Annual Report Date. (d) An update, for the fiscal year ended the June 30 next preceding the Annual Report Date, of the information contained in the Official Statement in Table Nos. 2, 4, 6 (only with respect to information on Table No. 6 under the headings Fiscal Year and Sewer Service Charge), 8 (not to include projections),9, 10, 11, 12, 13, 14 and 16. (e) In addition to any of the information expressly required to be provided under subsections (a), (b), (c) and (d) of this Section, the District shall provide such further information, if any, as may be necessary to make the specifically required statements, in the light of the circumstances under which they are made,not misleading. Any or all of the items listed above may be included by specific reference to other documents, including official statements of debt issues of the District or related public entities, which have been submitted to each of the Repositories or the Securities and Exchange Commission. If the document included by reference is a final official statement, it must be available from the Municipal Securities Rulemaking Board. The District shall clearly identify each such other document so included by reference. 80340497.3 3 Section 4. Reporting of Significant Events. (a) Pursuant to the provisions of this Section, the District shall give, or cause to be given, notice of the occurrence of any of the following events with respect to the Certificates, if material: (1) Principal and interest payment delinquencies. (2) Non-payment related defaults. (3) Unscheduled draws on debt service reserves reflecting financial difficulties. (4) Unscheduled draws on credit enhancements reflecting financial difficulties. (5) Substitution of credit or liquidity providers, or their failure to perform. (6) Adverse tax opinions or events affecting the tax-exempt status of the security. (7) Modifications to rights of security holders. (8) Contingent or unscheduled Certificate calls. (9) Defeasances. (10) Release, substitution, or sale of property securing repayment of the securities. (I1) Rating changes. (b) The District shall, within one business day of obtaining actual knowledge of the occurrence of any of the Listed Events, contact the Disclosure Representative, inform such person of the event, and request that the District promptly notify the Dissemination Agent in writing whether or not to report the event pursuant to subsection(0 of this Section. (c) Whenever the District obtains knowledge of the occurrence of a Listed Event, whether because of a notice from the Dissemination Agent pursuant to subsection (b) of this Section or otherwise, the District shall as soon as possible determine if such event would be material under applicable Federal securities law. (d) If the District has determined that knowledge of the occurrence of a Listed Event would be material under applicable Federal securities law, the District shall promptly notify the Dissemination Agent in writing. Such notice shall instruct the Dissemination Agent to report the occurrence pursuant to subsection (f)of this Section. (e) If in response to a request under subsection (b) of this Section, the District determines that the Listed Event would not be material under applicable Federal securities law, 80340497,3 4 the District shall so notify the Dissemination Agent in writing and instruct the Dissemination Agent not to report the occurrence pursuant to subsection(f)of this Section. (f) If the Dissemination Agent has been instructed by the District to report the occurrence of a Listed Event,the Dissemination Agent shall file a notice of such occurrence with the Municipal Securities Rulemaking Board and each Repository. Notwithstanding the foregoing, notice of Listed Events described in paragraphs (8) and (9) of subsection (a) of this Section need not be given under this subsection any earlier than the notice (if any) of the underlying event is given to holders of affected Certificates pursuant to the Trust Agreement. Section 5. Electronic Filing. Submission of Annual Reports and notices of Listed Events to DisclosurcUSA.org or another "Central Post Office" designated and accepted by the Securities and Exchange Commission shall constitute compliance with the requirement of filing such reports and notices with each Repository hereunder, and the District may satisfy its obligations hereunder to file any notice, document or information with a Repository by filing the same with any dissemination agent or conduit, including DisclosureUSA.org or another"Central Post Office" or similar entity, assuming or charged with responsibility for accepting notices, documents or information for transmission to such Repository, to the extent permitted by the Securities and Exchange Commission or Securities and Exchange Commission staff or required by the Securities and Exchange Commission. For this purpose, permission shall be deemed to have been granted by the Securities and Exchange Commission staff if and to the extent the agent or conduit has received an interpretive letter, which has not been revoked, from the Securities and Exchange Commission staff to the effect that using the agent or conduit to transmit information to the Repository will be treated for purposes of the Rule as if such information were transmitted directly to the Repository. Section 6. Termination of Reporting Obligation. The District's obligations under this Disclosure Agreement shall terminate upon the legal defeasance, prior redemption or payment in full of all of the Certificates. If such termination occurs prior to the final maturity of the Certificates, the District shall give notice of such termination in the same manner as for a Listed Event under subsection(f)of Section 4 hereof. Section 7. Dissemination Agent. The District may, from time to time, appoint or engage another Dissemination Agent to assist it in carrying out its obligations under this Disclosure Agreement, and may discharge any such Dissemination Agent, with or without appointing a successor Dissemination Agent. If at any time there is not any other designated Dissemination Agent, the Trustee shall be the Dissemination Agent; provided it shall receive written notice of such designation at the time of such designation. Section 8. Amendment: Waiver. Notwithstanding any other provision of this Disclosure Agreement, the District and the Dissemination Agent may amend this Disclosure Agreement (and the Dissemination Agent shall agree to any amendment so requested by the District), and any provision of this Disclosure Agreement may be waived, provided that the following conditions are satisfied: (a) if the amendment or waiver relates to the provisions of subsection (a)of Section 2 hereof, Section 3 hereof or subsection (a)of Section 4 hereof, it may only be made in connection 80340497.3 5 with a change in circumstances that arises from a change in legal requirements,change in law,or change in the identity, nature or status of an obligated person with respect to the Certificates, or type of business conducted; (b) the undertakings herein, as proposed to be amended or waived, would, in the opinion of nationally recognized bond counsel, have complied with the requirements of the Rule at the time of the primary offering of the Certificates, after taking into account any amendments or interpretations of the Rule, as well as any change in circumstances; and (c) the proposed amendment or waiver (i) is approved by holders of the Certificates in the manner provided in the Trust Agreement for amendments to the Trust Agreement with the consent of holders, or(ii) does not, in the opinion of the Trustee and nationally recognized bond counsel, materially impair the interests of holders. If the annual financial information or operating data to be provided in the Annual Report is amended pursuant to the provisions hereof, the annual financial information containing the amended operating data or financial information shall explain, in narrative form, the reasons for the amendment and the impact of the change in the type of operating data or financial information being provided. If an amendment is made to the undertaking specifying the accounting principles to be followed in preparing financial statements, the annual financial information for the year in which the change is made shall present a comparison between the financial statements or information prepared on the basis of the new accounting principles and those prepared on the basis of the former accounting principles. The comparison shall include a qualitative discussion of the differences in the accounting principles and the impact of the change in the accounting principles on the presentation of the financial information, in order to provide information to investors to enable them to evaluate the ability of the District to meet its obligations. To the extent reasonably feasible, the comparison shall be quantitative. A notice of the change in the accounting principles shall be sent to the Repositories. Section 9. Additional Information. Nothing in this Disclosure Agreement shall be deemed to prevent the District from disseminating any other information, using the means of dissemination set forth in this Disclosure Agreement or any other means of communication, or including any other information in any Annual Report or notice of occurrence of a Listed Event, in addition to that which is required by this Disclosure Agreement. If the District chooses to include any information in any Annual Report or notice of occurrence of a Listed Event in addition to that which is specifically required by this Disclosure Agreement, the District shall have no obligation under this Disclosure Agreement to update such information or include it in any future Annual Report or notice of occurrence of a Listed Event. Section 10. Default. In the event of a failure of the District or the Dissemination Agent to comply with any provision of this Disclosure Agreement, the Trustee may (and, at the written direction of any Participating Underwriter or the holders of at least 25% of the aggregate amount of principal evidenced by Outstanding Certificates and upon being indemnified to its reasonable satisfaction, shall), or any holder or beneficial owner of the Certificates may, take such actions as may be necessary and appropriate, including seeking mandate or specific 90340997.3 6 performance by court order,to cause the District,Trustee or the Dissemination Agent, as the case may be, to comply with its obligations under this Disclosure Agreement. A default under this Disclosure Agreement shall not be deemed an Event of Default under the Trust Agreement, and the sole remedy under this Disclosure Agreement in the event of any failure of the District, the Trustee or the Dissemination Agent to comply with this Disclosure Agreement shall be an action to compel performance. Section 11. Duties. Immunities and Liabilities of Trustee and Dissemination ent. Article VIII of the Trust Agreement is hereby made applicable to this Disclosure Agreement as if this Disclosure Agreement were (solely for this purpose) contained in the Trust Agreement. Neither the Trustee nor the Dissemination Agent shall be responsible for the form or content of any Annual Report or notice of Listed Event. The Dissemination Agent shall receive reasonable compensation for its services provided under this Disclosure Agreement. The Dissemination Agent (if other than the Trustee or the Trustee in its capacity as Dissemination Agent) shall have only such duties as are specifically set forth in this Disclosure Agreement, and the District agrees to indemnify and save the Dissemination Agent, its officers, directors, employees and agents, harmless against any loss, expense and liabilities which it may incur arising out of or in the exercise or performance of its powers and duties hereunder, including the costs and expenses (including attorneys fees) of defending against any claim of liability, but excluding liabilities due to the Dissemination Agent's negligence or willful misconduct. The obligations of the District under this Section shall survive resignation or removal of the Dissemination Agent and payment of the Certificates. Section 12. Beneficiaries. This Disclosure Agreement shall inure solely to the benefit of the District, the Trustee, the Dissemination Agent, the Participating Underwriter and holders and beneficial owners from time to time of the Certificates,and shall create no rights in any other person or entity. Section 13. Counterparts. This Disclosure Agreement may be executed in several counterparts, each of which shall be an original and all of which shall constitute but one and the same instrument. 803404973 IN WITNESS WHEREOF,the parties hereto have executed this Disclosure Agreement as of the date first above written. ORANGE COUNTY SANITATION DISTRICT By: Lorenzo Tyner Director of Finance and Administrative Services DIGITAL ASSURANCE CERTIFICATION LLC, as Dissemination Agent By: Authorized Representative Acknowledged and Accepted: UNION BANK OF CALIFORNIA, N.A., as Trustee By: Authorized Officer 80340497.3 8 EXHIBIT A NOTICE TO MUNICIPAL SECURITIES RULEMAKING BOARD OF FAILURE TO FILE ANNUAL REPORT Name of Issuer: Orange County Sanitation District Name of Issue: Orange County Sanitation District Certificates of Participation, Series 2008C Date of Issuance: ,2008 NOTICE IS HEREBY GIVEN that the Orange County Sanitation District (the"District') has not provided an Annual Report with respect to the above-named Certificates as required by Section 6.09 of the Trust Agreement, dated as of December 1, 2008, by and among Union Bank of California,N.A.,as Trustee,the Orange County Sanitation District Financing Corporation and the District. [The District anticipates that the Annual Report will be filed by .] Dated: ORANGE COUNTY SANITATION DISTRICT By: cc: Trustee Dissemination Agent 80340897.3 Fulbright&Jaworski L.L.P.—Draft 11/5/08 g PRELIMINARY OFFICIAL STATEMENT DATED NOVEMBER_,2008 NEW ISSUE—BOOK-ENTRY-ONLY RATINGS: Zs S&P: " Oo N " i (See-RATINGS-hereto) In the opinion of Fulbright& Jaworskt LLP., Los Angeles, Cdtfornia, Special Counsel, under existing v low the Interest Component of each Installment Payment, and the allocable portion thereof distributable in respect f any pt f�p� ! ! ! 8 compliance y c o Cerd c�te, w exam and income!axes a the Store o Cdt ornia old, assuming tom mote rvith the tar coverrmns described herein, the Interest Component of each Installment Payment, and the allocable portion thereof distributable in respect of arty Certificate, is excluded pursuant to section 103(a) of the Internal Revenue 0 9 Code of 1986(the "Code")from the grows income ofthe mvners lhereaffwfederd income tax purposes and is not an item of tarprtterence under section 57(a)of the Code for purposes of thefediaral dternmtve minimum lax. See go "TAXMATTERS"herein. S1 F s ]District Logo] $_,000,000' ]DAC Login .;� ORANGE COUNTY SANITATION DISTRICT 0 5 CERTIFICATES OF PARTICIPATION,SERIES 2008C S: o Dated: Date of Delivery Due: February 1,as shown below The $ ,000,000. Orange County Sanitation District Certificates of Participation, Series 2008C (the "Certificates")evidence direct,factional undivided interests of the Owners thereof in the installment payments(the 5 "Installment Payments-), and the interest thereon, to be made by the Orange County Sanitation District (the "District") pursuant to the Installment Purchase Agreement, dated as of December 1, 2008 (the "Installment 5 Purchase Agreement"), by and between the District and the Orange County Sanitation District Financing Corporation(the"Corporation"). Pursuant to the Master Agreement for District Obligations,dated as of August 1, 8 2000 (the "Master Agreement'), by and between the District and the Corporation, the District has established conditions and terms upon which obligations such as the Installment Payments and the interest thereon, will be e incurred and secured. Installment Payments under the Installment Purchase Agreement are payable solely from Net Revenues (as more fully described in the Master Agreement. the "Net Revenues") as provided in the Installment p^ Purchase Agreement,consisting primarily of all income and revenue received by the District from the operation or ownership of the Wastewater System of the District (the "Wastewater System") remaining after payment of 2 Maintenance and Operation Costs,as further described in"SECURITY AND SOURCES OF PAYMENT FOR THE .E.9 CERTIFICATES"herein. The Installment Purchase Agreement provides that the obligation of the District to pay the Installment Payments, and payments of interest thereon, and certain other payments required to be made in g z accordance with the Installment Purchase Agreement.solely from Net Revenues,is absolute and unconditional. See ? "SECURITY AND SOURCES OF PAYMENT FOR THE CERTIFICATES"herein. €'o The proceeds of the Certificates will be used to(i)finance certain improvements to the Wastewater System, 6 00 fund a reserve fund for the Certificates and (iii)pay the costs incurred in connection with the execution and c delivery of the Certificates. See"PLAN OF FINANCE"herein. ca Interest evidenced by the Certificates will be payable semiannually on February I and August 1 of each , o year, commencing on February 1, 2009. See "THE CERTIFICATES" herein The Certificates initially will be delivered only in book-entry form and will be registered in the time of Cede&Co.,as nominee of The Depository �.o Treat Company, New York, New York ("DTC"), which will act as securities depository for the Certificates. Individual purchases of the Certificates will be made in book-entry form only. Purchasers of Certificates will not N receive physical certificates representing their ownership interests in the Certificates purchased. The Certificates zi will be delivered in denominations of$5,000 and any integral multiple thereof. Payments of principal and interest evidenced by the Certificates are payable directly to DTC by Union Bank of California, N.A., as trustee (the o 2 "Trustee"). Upon receipt of payments of such principal and interest, OTC will in turn distribute such payments to C the beneficial owners of the Certificates. See APPENDIX E—"BOOK-ENTRY SYSTEM"herein. it Ea $ Preliminary,subject to change. 8033%11.6 THE OBLIGATION OF THE DISTRICT TO PAY THE INSTALLMENT PAYMENTS, AND THE INTEREST THEREON, AND OTHER PAYMENTS REQUIRED TO BE MADE BY IT TINDER THE INSTALLMENT PURCHASE AGREEMENT IS A SPECIAL OBLIGATION OF THE DISTRICT PAYABLE, IN THE MANNER PROVIDED IN THE INSTALLMENT PURCHASE AGREEMENT, SOLELY FROM NET REVENUES AND OTHER FUNDS PROVIDED FOR IN THE INSTALLMENT PURCHASE AGREEMENT,AND DOES NOT CONSTITUTE A DEBT OF THE DISTRICT OR OF THE STATE OF CALIFORNIA,OR OF ANY POLITICAL SUBDIVISION THEREOF,IN CONTRAVENTION OF ANY CONSTITUTIONAL OR STATUTORY DEBT LIMITATION OR RESTRICTION. NEITHER THE FAITH AND CREDIT NOR THE TAXING POWER OF THE STATE OF CALIFORNIA, OR ANY POLITICAL SUBDIVISION THEREOF, IS PLEDGED TO THE PAYMENT OF THE INSTALLMENT PAYMENTS, OR THE INTEREST THEREON, OR OTHER PAYMENTS REQUIRED TO BE MADE UNDER THE INSTALLMENT PURCHASE AGREEMENT. SEE 'SECURITY AND SOURCES OF PAYMENT FOR THE CERTIFICATES"HEREIN. This cover page contains information intended for quick reference only. It is not a summary of this issue. Investors must read the entire Official Statement to obtain information essential to making an informed investment decision. BIDS FOR THE PURCHASE OF THE CERTIFICATES WILL BE RECEIVED BY THE DISTRICT UNTIL 10:30 A.M.NEW YORK TIME ON DECEMBER 3,2008 UNLESS POSTPONED OR CANCELLED AS SET FORTH IN THE OFFICIAL NOTICE INVITING BIDS. The Cenjficales are offered when, as and if executed and delivered and received by as the Initial Purchaser, subject to the approval of Pnlbrighi& Jmvorski L.L.P., Los Angela, Californta, Special Counsel to the District, and certain other conditions. Certain legal matters will be passed upon for the District and the Corporation by Woodruff Sprodlin & Smarr, a Professional Corporation, Costa Mesa, California. Public Ravurces Advisory Group,Los Angeles, California, has served as financial adviser to the District in connection with the exemnon and delivery of the Certifncaret. It is anticipated that the Cerilfncmer In de.,yinitiveform will be available for deliver),through the book-enrryfacilitter of DTC on or about December 2008. Dated: December_,2008 9033MI 1.6 MATURITY SCHEDULE Maturity Principal Interest Price or CUSIP (February 1) Amount Rate Yield 684( 28Pt) t CUSIP numbers herein are provided by Standard & Poor's CUSIP Service Bureau and are for convenience of reference only. The District does not assume any responsibility for the accuracy of such numbers. CUSIPe is a registered trademark of the American Bankers Association Copyright® 1999-2008 Standard&Poor's.a Division of The McGraw-Hill Companies,Inc. All rights reserved. 90336611.6 ill eau�ue ORANGE COUNTY SANITATION DISTRICT Board of Directors Doug Davert(Chair)— Tustin Larry Crandall—(Vice Chair)—Fountain Valley Harry Sidhu—Anaheim Jon Dumitru—Orange Roy Moore—Brea Constance Underhill—Placentia Patsy Marshall—Buena Park Sal Tinajero—Santa Ana Phil Luebbeo—Cypress Charles Antos—Seal Beach Don Bankhead—Fullerton David Shawver—Stanton Bill Dalton—Garden Grove Brad Reese— Villa Park Don Hansen—Huntington Beach Jim Winder— Yorba Linda Christina Shea—Irvine James Ferryman—Costa Mesa Sanitary District Rose Espinoza—La Habra Darryl Miller—Irvine Roach Water District Mark Waldman—La Palma Joy L. Neugebouer—Midway City Sanitary District Ken Parker—Los Alamitos Chris Norby—Member of tire Orange County Don Webb—Newport Beach Board of Supervisors Executive Management of the District James D. Ruth,General Manager Robert P.Ghirelli,Ph.D.,Assistant General Manager Lorenzo Tyner,Director oJFinance and Administrative Services James Herberg,Director of Eagineering Ed Torres,Director of Technical Services Nick Arhontes,Director of Operations&Maintenance Special Services Special Counsel and Disclosure Counsel Fulbright&Jaworski L.L.P. Los Angeles,California District General Counsel Bradley R. Hogin Woodmff,Spradlin&Smart,a Professional Corporation Costa Mesa,California Financial Advisor Public Resources Advisory Group Los Angeles, California Trustee Union Bank of California,N.A. Los Angeles,Califomia 80336611,6 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 Certificates by any person in any jurisdiction in which it is unlawful for such person to make such an offer,solicitation or sale. The information set forth herein has been provided by the District and other sources that are believed by the District to be reliable. No dealer, broker, salesperson or other person has been authorized to give any information or to make any representations other than those contained in this Official Statement. If given or made, such other information or representations must not be relied upon as having been authorized by the District, the Corporation or the Initial Purchaser in connection with any reoffering. This Official Statement is not to be construed as a contract with the purchasers of the Certificates. Statements contained in this Official Statement which involve estimates,projections, forecasts or matters of opinion, whether or not expressly so described herein, are intended solely as such and are not to be construed as representations of facts. The information and expressions of opinion herein are subject to change without notice and neither delivery of this Official Statement nor any sale made hereunder shall, under any circumstances, create any implication that there has been no change in the affairs of the District or the Corporation since the date hereof. This Official Statement is submitted with respect to the sale of the Certificates referred to herein and may not be reproduced or used,in whole or in part,for any other purpose,unless authorized in writing by the District. All summaries of the documents and laws are made subject to the provisions thereof and do not purport to be complete statements of any or all such provisions. Preparation of this Official Statement and its distribution have been duly authorized and approved by the District and the Corporation. In connection with the offering of the Certificates,the Initial Purchaser in connection with any reoffering may over-allot or effect transactions which stabilize or maintain the market price of the Certificates at a level above that which might otherwise prevail in the open market. Such stabilizing, if commenced, may be discontinued at any time. The Initial Purchaser in connection with any reoffering may offer and sell the Certificates to certain dealers,institutional investors and others at prices lower than the public offering prices stated on the inside cover page hereof and such public offering prices may be changed from time to time by the Initial Purchaser. Certain statements included or incorporated by reference in this Official Statement constitute forward-looking statements. Such statements are generally identifiable by the terminology used such as "plan,""expect,""estimate,""budget"or other similar words. The achievement of certain results or other expectations contained in such forward-looking statements involve known and unknown risks, uncertainties and other factors which may cause actual results,performance or achievements described to be materially different from any fmure results, performance or achievements expressed or implied by such forward-looking statements. 80336611.6 TABLE OF CONTENTS Pare INTRODUCTION......................................................................................................................... 1 General............................................................................................................................... l TheDistrict........................................................................................................................2 Security and Sources of Payment for the Certificates.......................................................2 Continuing Disclosure.......................................................................................................3 Miscellaneous....................................................................................................................3 PLAN OF FINANCE.................................._..................................................................._............4 ESTIMATED SOURCES AND USES OF FUNDS......................................................._............4 THECERTIFICATES..................................................................._................................_............4 General..............................................................................._................................_............4 PrepaymentProvisions.......................................................................................................5 SECURITY AND SOURCES OF PAYMENT FOR THE CERTIFICATES...............................7 InstallmentPayments.........................................................................................................7 NetRevenues....................................................................._..............................................8 Rate Stabilization Account................................................................................................9 Allocation of Revenues......................................................................................................9 RateCovenant.......................:.......................................................................................... 10 ReserveFund................................................................................................................... I Limitations on Issuance of Additional Obligations......................................................... 12 Insurance.......................................................................................................................... 14 Allocationof Installment Payments......................................................................_......... 15 THEDISTRICT.............................................................................._.......................................... 16 Background...................................................................................................................... 16 Organizationand Administration......................._............................................................ 17 Services.............................................................._............................................................ 18 ServiceArea..................................................................................................................... Is Employees........................................................................................................................ 19 RetirementPlan................................................................................................................20 Other Post-Employment Benefits....................................................................................21 RiskManagement............................................................................................................22 ExistingFacilities.............................................................................................................22 Permits,Licenses and Other Regulations........................................................................23 CapitalImprovement Program.........................................................................................24 Groundwater Replenishment System...............................................................................27 Preferred Level of Treatment...........................................................................................28 Biosolids Management.....................................................................................................28 UrbanRunoff...................................................................................................................29 IntegratedEmergency Response Program.......................................................................30 90336611.6 i TABLE OF CONTENTS (continued) pmm DISTRICTREVENUES..............................................................................................................31 SewerService Charges....................................................................................................31 AdditionalRevenues........................................................................................................33 Wastewater Treatment History........................................................................................35 Customers........................................................................................................................35 AssessedValuation..........................................................................................................37 Tax Levies and Delinquencies.........................................................................................38 BudgetaryProcess..............................................._...........................................................39 Reserves...........................................................................................................................40 Summary of Operating Data............................................................................................41 ProjectedOperating Data.................................................................................................41 Management's Discussion and Analysis of Operating Data_..........................................43 Investment of District Funds............................................................................................44 FINANCIAL OBLIGATIONS........................................................_..........................................45 ExistingIndebtedness......................................................................................................45 VariableRate Obligations................................................................................................46 AnticipatedFinancings....................................................................................................46 Direct and Overlapping Bonded Debt..............................................................................46 THECORPORATION................................................................................................................48 LIMITATIONS ON TAXES AND REVENUES........................................................................49 Article XIIIA of the California Constitution...................................................................49 Legislation Implementing Article XIIIA.........................................................................49 Article XIIIB of the California Constitution....................................................................49 PropositionIA.................................................................................................................50 Proposition62..................................................................................................................51 Article XIIIC and Article XHID of the California Constitution......................................51 OtherInitiative Measures.................................................................................................53 LEGALMATTERS.....................................................................................................................53 FINANCIAL ADVISOR..............................................._............................................................ 54 ABSENCE OF LITIGATION........................................................»...........................................54 FINANCIALSTATEMENTS.....................................................................................................54 TAXMATTERS..........................................................................................................................54 CONTINUINGDISCLOSURE...................................................................................................57 RATINGS....................................................................................................................................57 PURCHASEAND REOFFERING............................................................................................. 57 MISCELLANEOUS....................................................................................................................58 SM6611.6 ii TABLE OF CONTENTS (continued) Psee APPENDIX A - COMPREHENSIVE ANNUAL FINANCIAL REPORT OF THE ORANGE COUNTY SANITATION DISTRICT FOR FISCAL YEAR ENDED JUNE 30.2008....................................................................................A-1 APPENDIX B - THE COUNTY OF ORANGE-ECONOMIC AND DEMOGRAPHIC INFORMATION................................................................................................B-1 APPENDIX C - SUMMARY OF PRINCIPAL LEGAL DOCUMENTS....................................C-1 APPENDIX D - FORM OF CONTINUING DISCLOSURE AGREEMENT.............................D-1 APPENDIX E - BOOK-ENTRY SYSTEM.................................................................................E-1 APPENDIX F - FORM OF APPROVING OPINION OF SPECIAL COUNSEL......................F-1 8033661L6 111 OFFICIAL STATEMENT S_,000,000- ORANGE COUNTY SANITATION DISTRICT CERTIFICATES OF PARTICIPATION,SERIES 2008C INTRODUCTION This introduction contains only a brief summary of certain of the terms of the Certificates being offered and a brief description of the O,fFcial Statement. All statements contained in this introduction are quaked in their entirety by reference to the entire Official Statement. References to, and summaries of, provisions of the Constitution and laws of the State of California (the "State') and any documents referred to herein do not purport to be complete and such references are qualified in their entirety by reference to the complete provisions. All capitalised terms used in this Official Statement and not otherwise defined herein have the meanings set forth in the Trust Agreement, the Installment Purchase Agreement and the Master Agreement (each, as hereinafter defined). See APPENDIX C— "SUMMARY OF PRINCIPAL LEGAL DOCUMENTS—Definitions"herein. General This Official Statement, including the cover page and all appendices hereto, provides certain information concerning the sale and delivery of$_,000,000+aggregate principal amount of the Orange County Sanitation District Certificates of Participation, Series 2008C (the "Certificates") evidencing direct, tractional undivided interests in the Installment Payments (the `Installment Payments") and the interest thereon, to be made by the Orange County Sanitation District (the "District") pursuant to the Installment Purchase Agreement, dated as of December 1,2008(the "Installment Purchase Agreement"), by and between the District and the Orange County Sanitation District Financing Corporation (the "Corporation"). Pursuant to the Master Agreement for District Obligations, dated as of August 1, 2000 (the "Master Agreement"), by and between the District and the Corporation, the District has established and declared the conditions and terms upon which obligations such as the Installment Purchase Agreement, and the Installment Payments and the interest thereon, will be incurred and secured. Installment Payments under the Installment Purchase Agreement are payable solely from Net Revenues (as defined hereinafter) as provided in the Installment Purchase Agreement, consisting primarily of all income and revenue received by the District from the operation or ownership of the Wastewater System of the District(the "Wastewater System") remaining after payment of Maintenance and Operation Costs, as further described in "SECURITY AND SOURCES OF PAYMENT FOR THE CERTIFICATES" herein. The Certificates are to be executed and delivered pursuant to a Trust Agreement, dated as of December 1, 2008 (the"Trust Agreement"), by and among the District,the Corporation and Union Bank of California, N.A., as trustee (the "Trustee"). Proceeds from the sale of the Certificates will be used to (i)finance certain improvements to the Wastewater System, (ii)fund a reserve fund for the Certificates and (iii)pay the costs incurred in connection with the execution and delivery of the Certificates. See "PLAN OF FINANCE"herein. ' Preliminary,subject to change. 80336611.6 The Certificates will be executed and delivered in the form of fully registered certificates, dated as of the date of initial delivery thereof and will mature on February 1 in each year as set forth on the inside cover page hereof. Interest evidenced by the Certificates will be payable semiannually on February 1 and August 1 of each year, commencing on February 1, 2009. See`THE CERTIFICATES" herein. The Certificates initially will be delivered only in book-entry form and will be registered in the name of Cede & Co., as nominee of The Depository Trust Company, New York, New York ("DTC"), which will act as securities depository for the Certificates. The Certificates will be delivered in denominations of$5,000 and any integral multiple thereof. So long as the Certificates are in the DTC book-entry system, the interest, principal, purchase price and prepayment premiums, if any, due with respect to the Certificates will be payable by the Trustee, or its agent, to DTC or its nominee. DTC, in turn, will make payments pursuant to its procedures as described under APPENDIX E — "BOOK— ENTRY SYSTEM"herein. The District The District is a public agency responsible for regional wastewater collection, treatment and disposal. The District is the sixth largest wastewater discharger in the United States. The District provides service to an area with a population of more than 2.5 million people in the northern and central portion of the County of Orange (the "County"), in a service area of approximately 471 square miles, treating 221 million gallons per day ("mgld") of wastewater in Fiscal Year 2007-08. See "THE DISTRICT,""DISTRICT REVENUES"and"FINANCIAL OBLIGATIONS"heroin. Security and Sources of Payment for the CerllBentes The Certificates evidence direct, fractional undivided interests in the Installment Payments, and the interest thereon,paid by the District pursuant to the Installment Purchase Agreement. The obligation of the District to pay the Installment Payments and the interest thereon and other payments required to be made by it under the Installment Purchase Agreement is a special obligation of the District payable, in the manner provided under the Installment Purchase Agreement, solely from Net Revenues, and other funds as provided in the installment Purchase Agreement. Net Revenues generally consist of all income and revenue received by the District from the operation or ownership of the Wastewater System remaining after payment of Maintenance and Operation Costs,all as further provided in the Master Agreement. The Installment Purchase Agreement constitutes a Senior Obligation and, as such, is subject to the provisions of the Master Agreement and is afforded all of the advantages, benefits, interests and security afforded Senior Obligations pursuant to the Master Agreement. The District currently has Outstanding Senior Obligations payable from Net Revenues on a parity with the Installment Payments under the Installment Purchase Agreement. See "PLAN OF FINANCE," ESTIMATED SOURCES AND USES OF FUNDS," "FINANCIAL OBLIGATIONS — Existing Indebtedness" and "THE DISTRICT' herein and APPENDIX C — "SUMMARY OF PRINCIPAL LEGAL DOCUMENTS — Master Agreement" attached hereto. The District has no Subordinate Obligations currently outstanding. 80336611.6 2 Pursuant to the Master Agreement,the District will,to the extent permitted by law, fix, prescribe and collect fees and charges for the services and facilities of the Wastewater System which will be at least sufficient to yield during each Fiscal Year (a)Net Revenues equal to 125% of Debt Service on Senior Obligations for such Fiscal Year and (b)Net Operating Revenues equal to 100% of Debt Service on all Obligations for such Fiscal Year. The District may make adjustments from time to time in such fees and charges and may make such classification thereof as it deems necessary, but shall not reduce the fees and charges then in effect unless the Revenues and Net Revenues from such reduced fees and charges will at all times be sufficient to meet the requirements of the Master Agreement. See "SECURITY AND SOURCE OF PAYMENT FOR THE CERTIFICATES—Rate Covenant"herein. The obligation of the District to pay the Installment Payments and the interest thereon,and other payments required to be made by it under the Installment Purchase Agreement is a special obligation of the District payable, in the manner provided in the Installment Purchase Agreement, solely from Net Revenues and other funds provided for in the Installment Purchase Agreement,and does not constitute a debt of the District or of the State, or of any political subdivision thereof, in contravention of any constitutional or statutory debt limitation or restriction. Neither the faith and credit nor the taxing power of the District or the State or any political subdivision thereof, is pledged to the payment of the Installment Payments, or the interest thereon, or other payments required to be made under the Installment Purchase Agreement. The Installment Purchase Agreement constitutes a Senior Obligation and, as such, is subject to the provisions of the Master Agreement and is afforded all of the advantages, benefits, interests and security afforded Senior Obligations pursuant to the Master Agreement. See"SECURITY AND SOURCES OF PAYMENT FOR THE CERTIFICATES" herein. Continuing Disclosure The District has covenanted for the benefit of holders and beneficial owners of the Certificates (a)to provide certain financial information and operating data (the "Annual Report") relating to the District and the property in the District not later than eight months after the end of the District's Fiscal Year(which currently would be March 1). commencing with the report for the 2008-09 Fiscal Year, and (b)to provide notices of the occurrence of certain enumerated events, if material. The specific nature of the information to be contained in the Annual Report or the notices of material events is set forth in the Continuing Disclosure Agreement. See "CONTINUING DISCLOSURE" herein and APPENDIX D — "FORM OF CONTINUING DISCLOSURE AGREEMENT." Miscellaneous The descriptions herein of the Trust Agreement, the Master Agreement,the Installment Purchase Agreement and any other agreements relating to the Certificates are qualified in their entirety by reference to such documents. Copies of the documents are on file and available for inspection at the corporate tout office of the Trustee at Union Bank of California, N.A., 120 South San Pedro Street, Suite 400, Los Angeles,California 90012,Attention: Corporate Trust. 90336611.6 3 PLAN OF FINANCE Proceeds from the sale of the Certificates will be used to(i)finance the acquisition, construction and installation of certain improvements to the wastewater collection,treatment and disposal facilities of the District(the"Wastewater System"),(ii) fund a reserve fund for the Certificates, and (iii)pay costs of issuance of the Certificates. In particular, the Project is expected to include the financing of improvements to the Wastewater System including particularly, but without limitation, the District's collection system, two wastewater treatment plants, and Ocean Outfall, and further as follows: the acquisition,construction,installation,rehabilitation,replacement,or repair of the Westside Pump Station, Ellis Avenue Pump Station, Bitter Point Pump Station, Bitter Point Force Main Rehabilitation, College Ave. Pump Station,Coast Trunk Sewer, Headworks at Plant 2,Primary Treatment System Rehabilitation at Plata 2, New Secondary Treatment System at Plant 1, Trickling Filters at Plant 2, North County Collections Yard, Sludge Dewatering& Odor Control at Plant 1, Primary Sludge Feed System Project at Plant 2,Central Generation Automation,and 66KV Substation at Plant 1. From time to time projects which are undertaken are delayed, redesigned or deferred by the District for various reasons and no assurance can be given that a project summarized above or designated in the District's current Capital Improvement Program will be completed in accordance with its original schedule or that any project will be completed as currently planned. See "TIE DISTRICT — Capital Improvement Plan"herein. ESTIMATED SOURCES AND USES OF FUNDS The estimated sources and uses of funds and other amounts in connection with the delivery of the Certificates are presented below. Sources Certificate Proceeds $ Net Original Issue Premium/Discoum Total Sources $ Uses Reserve Fund S Initial Purchaser's Discount Costs of Issuance.. Total Uses $ 1 Costs of Issuance include,among other things,fees of rating agencies, Special Counsel fees and expenses and the initial fees of the Trustee. THE CERTIFICATES General The Certificates will be prepared in the form of fully registered certificates in denominations of $5,000 and any integral multiple thereof. The Certificates will be dated as of the date of initial delivery thereof and will mature on February 1 in each year as set forth on the inside cover page hereof Interest evidenced by the Certificates will be payable semiannually on February 1 and August 1 of each year, commencing on February 1,2009. See"THE CERTIFICATES"herein. The Certificates initially will be delivered only in book-entry form and will be registered in the name of Cede&Co.,as nominee of The 80336611.6 4 Depository Trust Company, New York, New York ("DTC"), which will act as securities depository for the Certificates. Individual purchases of the Certificates will be made in book-entry form only. Purchasers of Certificates will not receive physical certificates representing their ownership interests in the Certificates purchased. The interest evidenced by the Certificates shall be payable on each Interest Payment Date to and including their respective Principal Payment Dates or prepayment prior thereto, and shall represent the sum of the interest on the Installment Payments coming due on the Interest Payment Dates in each year. The principal evidenced by the Certificates shall be payable on their respective Principal Payment Dates in each year and shall represent the Installment Payments coming due on the Principal Payment Dates in each year. Each Certificate shall evidence interest from the Interest Payment Date next preceding its date of execution to which interest has been paid in full, unless such date of execution shall be after a Record Date and on or prior to the following Interest Payment Date, in which case such Certificate shall evidence interest from such Interest Payment Date, or unless such date of execution shall be on or prior to January 15, 2009, in which case such Certificate shall represent interest from its date of initial delivery. Notwithstanding, the foregoing, if, as shown by the records of the Trustee, interest evidenced by the Certificates shall be in default,each Certificate shall evidence interest from the last Interest Payment Date to which such interest has been paid in full or duly provided for. Interest evidenced by the Certificates shall be computed on the basis of a 3604ey year consisting of twelve 30-day months. See APPENDIX C —"SUMMARY OF PRINCIPAL LEGAL DOCUMENTS—Trust Agreement" Payments of principal and interest evidenced by the Certificates are payable directly to DTC by Union Bank of California,N.A.,as trustee. Upon receipt of payments of such principal and interest, DTC will in turn distribute such payments to the beneficial owners of the Certificates. So long as the Certificates are held in the DTC book-entry system,the interest,principal,purchase price and prepayment premiums,if any,due with respect to the Certificates will be payable by the Trustee, or its agent,to DTC or its nominee. DTC, in turn, will make payments pursuant to its procedures as described under APPENDIX E-"BOOK-ENTRY SYSTEM"herein. Prepayment Provisions Optionaf Prepayment The Certificates are subject to optional prepayment prior to their stated Principal Payment Dates, on any date on or after August 1, 2018, in whole or in part, in Authorized Denominations, from and to the extent of prepaid Installment Payments paid pursuant to the Installment Purchase Agreement or from any other source of available funds, any such prepayment to be at a price equal to the principal evidenced by the Certificates to be prepaid plus accrued interest evidenced thereby to the date fixed for prepayment. Mandatory Sinking Account Prepayment, The Tenn Certificates maturing on February 1, 20_ are subject to prepayment prior to their stated maturity, in part, by lot, on any February 1 on and after February I, 20_, at the principal amount thereof, plus accrued interest to the date fixed for prepayment, without premium, from Mandatory Sinking Account Payments deposited in the Principal Account. The Term Certificates maturing on February 1,20_shall be prepaid(or paid at maturity,as the case may be) by application of Mandatory Sinking Account Payments in the amounts and upon the dates set forth below: Preliminary:subject to change. 90336611.6 5 Tenn Certificates Maturing February 1, Mandatory Sinking Account Mandatory Payment Dates Sinking Account (February 1) Payments Maturity. Sefecdon ojCarr#Icares jor Prepayment Whenever less than all the Outstanding Certificates are to be prepaid on my one date pursuant to provisions of the Trust Agreement with respect to optional prepayment of Certificates,the Trustee shall select the Certificates to be prepaid among Certificates with different Principal Payment Dates as directed in a Written Request of the District. Whenever less than all the Outstanding Certificates with the same stated Principal Payment Date are to be prepaid on any one date in accordance with the Trust Agreement, the Trustee shall select the Certificates with such Principal Payment Date to be prepaid as directed in a Written Request of the District, or at the discretion of the District by lot in any manner that the Trustee deems fair and appropriate, which decision shall be final and binding upon the District and the Owners. The Trustee shall promptly notify the District in writing of the numbers of the Certificates so selected for prepayment on such date. For purposes of such selection, any Certificate may be prepaid in part in Authorized Denominations. Notice of Prepayment When prepayment of Certificates is authorized pursuant to the Trust Agreement, the Trustee shall give notice, at the expense of the District, of the prepayment of the Certificates. The notice of prepayment shall specify(a)the Certificates or designated portions thereof(in the case of prepayment of the Certificates in part but not in whole)which are to be prepaid(b)the date of prepayment,(c)the place or places where the prepayment will be made, including the name and address of any paying agent, (d)the prepayment price, (e)the CUSIP numbers assigned to the Certificates to be prepaid (f)the numbers of the Certificates to be prepaid in whole or in part and in the case of any Certificate to be prepaid in part only,the principal evidenced by such Certificate to be prepaid,and(g)the interest rate and stated Principal Payment Date of each Certificate to be prepaid in whole or in part. Such notice of prepayment shall further state that on the specified date there shall become due and payable upon each Certificate or portion thereof being prepaid the prepayment price and that from and after such date interest evidenced thereby shall cease to accrue and be payable. With respect to any notice of optional prepayment of Certificates, unless at the time such notice is given the Certificates to be prepaid shall be deemed to have been paid within the meaning of the Trust Agreement,such notice shall state that such prepayment is conditional upon receipt by the Trustee, on or prior to the date fixed for such prepayment, of moneys sufficient to pay for the prepayment price of the Certificates to be prepaid, and that if such moneys shall not have been so received said notice shall be of no force and effect and the District shall not be required to prepay such Certificates. In the event a notice of prepayment of Certificates contains such a condition and such moneys are not so received the prepayment of Certificates as described in the conditional notice of prepayment shall not be made and the Tr stce shall, within a reasonable time after the date on which such prepayment was to occur, give notice to the persons and in the manner in which the notice of prepayment was given,that such moneys were not so received and that there shall be no prepayment of Certificates pursuant to such notice of prepayment. The Trustee shall,at least 20 but not more than 60 days prior to any prepayment date,give notice of prepayment to the respective Owners of Certificates designated for prepayment by first-class mail, 80336611.6 6 postage prepaid, at their addresses appearing on the registration books maintained by the Trustee m of the close of business on the day before such notice of prepayment is given. The actual receipt by the Owner of any notice of such prepayment shall not be a condition precedent to prepayment,and neither failure to receive such notice nor any defect therein shall affect the validity of the proceedings for the prepayment of such Certificates or the cessation of interest evidenced thereby on the date fixed for prepayment. Effect of Prepayment. If notice of prepayment has been duly given as aforesaid and moneys for the payment of the prepayment price of the Certificates to be prepaid are held by the Trustee,then on the prepayment date designated in such notice, the Certificates so called for prepayment shall become payable at the prepayment price specified in such notice; and from and after the date so designated interest evidenced by the Certificates so called for prepayment shall cease to accrue, such Certificates shall cease to be entitled to any benefit or security hereunder and the Owners of such Certificates shall have no rights in respect thereof except to receive payment of the prepayment price thereof.The Trustee shall, upon surrender for payment of any of the Certificates to be prepaid, pay such Certificates at the prepayment price thereof,and such moneys shall be pledged to such payment All Certificates prepaid pursuant to the provisions of the Trust Agreement shall be canceled by the Trustee and shall not be redelivered. SECURITY AND SOURCES OF PAYMENT FOR THE CERTIFICATES Installment Payments Pursuant to the Installment Purchase Agreement,the Project will be acquired by the District from the Corporation.The District has covenanted to,subject many rights of prepayment under the Installment Purchase Agreement, pay to the Corporation, solely from Net Revenues and from no other sources, the Purchase Price in Installment Payments, with interest thereon, as provided in the Installment Purchase Agreement. Pursuant to the Master Agreement. the District has established and declared the conditions and terns upon which obligations such as the Installment Purchase Agreement, and the Installment Payments and the interest thereon payable under the Installment Purchase Agreement, will be incurred and secured. The obligation of the District to make the Installment Payments, and payments of interest thereon, and other payments required to be made by it under the Installment Purchase Agreement, solely from Net Revenues, is absolute and unconditional, and until such time as the Installment Payments, payments of interest thereon, and such other payments shall have been paid in full (or provision for the payment thereof shall have been made pursuant to the Installment Purchase Agreement),the District has covenanted that it will not discontinue or suspend any Installment Payments when due,whether or not the Project or any part thereof is operating or operable or has been completed or its use is suspended interfered with, reduced or curtailed or terminated in whole or in part, and such Installment Payments, payments of interest thereon, and other payments shall not be subject to reduction whether offset or otherwise and shall not be conditional upon the performance or nonperformance by any party of any agreement or any cause whatsoever. The District's obligation to make Installment Payments from Net Revenues is on a parity with the District's obligation to make payments with respect to its Outstanding Senior Obligations. See'—Net Revenues"below. Pursuant to the Trust Agreement, the Corporation has assigned to the Trustee for the benefit of the Owners of the Certificates substantially all of its rights, title and interest in the Installment Purchase Agreement, including its right to receive Installment Payments and the interest thereon. The District has certain Existing Senior Obligations Outstanding payable from Net Revenues on a parity with the Installment Payments under the Installment Purchase Agreement. The term "Existing Senior Obligations"as used in this Official Statement refers to the 2000 Installment Purchase Agreement, the 2003 Installment Purchase Agreement the 2006 Installment Purchase Agreement, the 80336611.6 7 2007A Installment Purchase Agreement, the 2007B Installment Purchase Agreement, the 2008A Installment Purchase Agreement, the 2008B Installment Purchase Agreement and the term "Senior Obligations" as used in this Official Statement refers to the Existing Senior Obligations and any additional Senior Obligations, such as the Installment Purchase Agreement,that may be made payable on a parity basis to the Installment Payments as provided in the Master Agreement. Senior Obligations, together with any Subordinate Obligations payable on a subordinate basis to the Installment Payments executed and delivered as provided in the Master Agreement, are referred to collectively as the "Obligations." The District has no Subordinate Obligations currently outstanding. See "FINANCIAL OBLIGATIONS—Existing Indebtedness"herein and APPENDIX C—"SUMMARY OF PRINCIPAL LEGAL DOCUMENTS—Master Agreement"attached hereto. The obligation of the District to pay the Installment Payments,and the interest thereon, and other payments required to be made by it under the Installment Purchase Agreement and Master Agreement,is a special obligation of the District payable, in the =mer provided in the Installment Purchase Agreement, solely from Net Revenues and other funds provided for in the Installment Purchase Agreement,and does not constitute a debt of the District,the State or of any political subdivision thereof, in contravention of any constitutional or statutory debt limitation or restriction. Neither the faith and credit our the taxing power of the District,the State or any political subdivision thereof, is pledged to the payment of the Installment Payments, or the interest thereon, or other payments required to be made under the Installment Purchase Agreement. The Installment Purchase Agreement constitutes a Senior Obligation and, as such, is subject to the provisions of the Master Agreement and is afforded all of the advantages, benefits, interests and security afforded Senior Obligations pursuant to the Master Agreement. See"SECURITY AND SOURCES OF PAYMENT FOR THE CERTIFICATES"herein. Net Revenues The District is obligated to make Installment Payments solely from Net Revenues as provided in the Master Agreement,which consist of Revenues remaining after payment of costs paid by the District for maintaining and operating the Wastewater System ("Maintenance and Operation Costs"). Revenues are defined in the Master Agreement to mean, for any period, all income and revenue received by the District during such period from the operation or ownership of the Wastewater System, determined in accordance with generally accepted accounting principles,including all fees and charges received during such period for the services of the Wastewater System, investment income received during such period (but only to the extent that such investment income is generally available to pay costs with respect to the Wastewater System, including Maintenance and Operation Costs),Net Proceeds of business interruption insurance received during such period,ad valorem taxes received during such period,payments under the Agreement Acquiring Ownership Interests, Assigning Rights and Establishing Obligations, entered into on February 13, 1986, and amendment No. I thereto dated December 10, 1986, by and between predecessor County Sanitation District No. 14 of Orange County and the Irvine Ranch Water District(the "IRWD Agreement") received during such period and all other money received during such period howsoever derived by the District from the operation or ownership of the Wastewater System or arising from the Wastewater System (including any standby or availability charges), but excluding (a)Capital Facilities Capacity Charges,(b)payments received under Financial Contracts,and(c)refundable deposits made to establish credit and advances or contributions in aid of construction (which, for purposes of the Master Agreement, shall not include payments under the IRWD Agreement); provided, however, that (i)Revenues shall be increased by the amounts, if any, transferred during such period from the Rate Stabilization Account to the Revenue Account and shall be decreased by the amounts,if any,transferred during such period from the Revenue Account to the Rate Stabilization Account, and(ii)Revenues shall include Capital Facilities Capacity Charges collected during such period to the extent that such Capital Facilities Capacity Charges could be properly expended on a Capital Facilities Capacity Charge Eligible Project for which the proceeds of Subject Obligations were used or are available to be used. See "DISTRICT REVENUES—Additional Revenues"herein. 80336611.6 8 The District's obligation to make the Installment Payments from its Net Revenues is on a parity with the District's obligation to make payments with respect to its other outstanding obligations described as Senior Obligations and all Reimbursement Obligations with respect to Senior Obligations,as provided in the Master Agreement. The Installment Purchase Agreement constitutes a Senior Obligation and, w such, is subject to the provisions of the Master Agreement and is afforded all of the advantages, benefits, interests and security afforded Senior Obligations pursuant to the Master Agreement. Pursuant to the Master Agreement, the District pledges all Net Revenues to the payment of the Senior Obligations and Reimbursement Obligations with respect to Senior Obligations,and the Net Revenues will not be used for any other purpose while any of the Senior Obligations or Reimbursement Obligations with respect to Senior Obligations remain unpaid; provided, however, that out of the Net Revenues there may be apportioned such sums for such purposes as are expressly permitted by the Master Agreement This pledge constitutes a first lien on the Net Revenues for the payment of the Senior Obligations and Reimbursement Obligations with respect to Senior Obligations. The term Senior Obligations, generally means all revenue bonds or notes(including bond anticipation notes and commercial paper)of the District authorized,executed,issued and delivered under and pursuant to applicable law,the Installment Purchase Agreement and all other contracts (including financial contracts) or leases of the District authorized and executed by the District under and pursuant to applicable law, the installment, lease or other payments under which are,in accordance with the provisions of the Master Agreement,payable from Net Revenues on a parity with the payments under the Master Agreement. The District may at any time incur Subordinate Obligations payable on a subordinate basis to the Installment Payments executed and delivered as provided in the Master Agreement; provided, however, that prior to incurring such Subordinate Obligations,the District will have determined that the incurrence thereof will not materially adversely affect the District's ability to comply with the requirements of the Master Agreement The District may at any time incur Reimbursement Obligations with respect to Subordinate Obligations. For a description of the District's Outstanding Senior Obligations and Subordinate Obligations, see "FINANCIAL OBLIGATIONS — Existing Indebtedness" herein. There are currently no Subordinate Obligations or Reimbursement Obligations with respect to Subordinate Obligations outstanding. The District may, in connection with the incurrence of Subordinate Obligations, pledge Net Revenues to the payment of Subordinate Obligations and Reimbursement Obligations with respect to Subordinate Obligations; provided, however, that such pledge, and any lien created thereby, shall be junior and subordinate to the pledge of,and lien on,Net Revenues for the payment of Senior Obligations and Reimbursement Obligations with respect to Senior Obligations. Rate Stabilization Account To avoid fluctuations in its fees and charges of the Wastewater System, from time to time the District may deposit in the Rate Stabilization Account from Net Revenues such amounts as the District deems necessary or appropriate. From time to time,the District may also transfer moneys from the Rate Stabilization Account to the Revenue Account to be used by the District,first to pay all Maintenance and Operations Costs as and when the same shall be due and payable. In addition, any such amount transferred from the Rate Stabilization Account to the Revenue Account by the District is included as Revenues for any period, but such transferred amount is excluded from determining Operating Revenues for any period. Revenues will be decreased by the amounts,if any,transferred from the Revenue Account to the Rate Stabilization Account. There are presently no funds in the Rate Stabilization Account. Allocation of Revenues To carry out and effectuate the pledge of Net Revenues under the Master Agreement as described above, the District agrees and covenants that all Operating Revenues received by the District will be deposited when and as received in the Revenue Account. Additionally,amounts may, from time to time 8033MI1,6 9 as the District deems necessary or appropriate, be transferred from the Rate Stabilization Account and deposited in the Revenue Account, as described above under Rate Stabilization Account." The District will pay from the Revenue Account all Maintenance and Operations Costs (including amounts reasonably required to be set aside in contingency reserves for Maintenance and Operations Costs, the payment of which is not immediately required)as and when the same shall be due and payable. After having paid, or having made provisions for the payment of, Maintenance and Operations Costs, the District shall set aside and deposit or transfer, as the case may be, from the Revenue Account such amounts at such times as provided in the Master Agreement in the following order of priority: (1) Senior Obligation Payment Account; (2) Senior Obligation Reserve Funds; (3) Subordinate Obligation Payment Account; (4) Subordinate Obligation Reserve Funds;and (5) Rate Stabilization Account. Amounts required or permitted to be deposited or transferred as described in items 2, 3, 4 and 5 above, shall not be so deposited or transferred unless the District shall have determined that there will be sufficient Net Revenues available to make the required deposits or transfers on the dates on which such deposits or transfers are required to be made as described above. So long as the District has determined that Net Revenues will be sufficient to make all of the deposits or transfers required to be made pursuant to items 1, 2, 3, 4 and 5 above, on the dates on which such deposits or transfers are required to be made, Net Revenues on deposit in the Revenue Account may from time to time be used for any purpose for which the District funds may be legally applied. For additional information, see APPENDIX C — "SUMMARY OF PRINCIPAL LEGAL DOCUMENTS—Master Agreement." Rate Covenant Pursuant to the Master Agreement,the District will,to the extent permitted by law,fix,prescribe and collect fees and charges for the services of the Wastewater System which will be at least sufficient to yield during each Fiscal Year(a)Net Revenues equal to 125% of Debt Service on Senior Obligations for such Fiscal Year and (b)Net Operating Revenues equal to 100% of Debt Service on all Obligations for such Fiscal Year. The District may make adjustments from time to time in such fees and charges and may make such classification thereof as it deems necessary, but will not reduce the fees and charges then in effect unless the Revenues and Net Revenues from such reduced fees and charges will at all times be sufficient to meet the requirements of the Master Agreement. In addition, the District has covenanted in the Master Agreement to prepare and adopt an annual budget for the Wastewater System for each Fiscal Year. Such budget will set forth in reasonable detail the Revenues anticipated to be derived in such Fiscal Year and the expenditures anticipated to be paid or provided for therefrom in such Fiscal Year, including,without limitation,the amounts required to pay or provide for the payment of the Obligations during such Fiscal Year, the amounts required to pay or provide for the payment of Maintenance and Operations Costs during such Fiscal Year and the amounts required to pay or provide for the payment of all other claims or obligations required to be paid from Revenues in such Fiscal Year,and will show that Revenues and Net Revenues will be at least sufficient to satisfy the requirements of the Master Agreement. On or before September I of each Fiscal Year, the District will file with the Trustee a copy of the adopted budget for such Fiscal Year. See APPENDIX C — "SUMMARY OF PRINCIPAL LEGAL DOCUMENTS — Master Agreement" for additional information. 80336611.6 10 Reserve Fund The Trust Agreement provides for the funding of the Reserve Fund in an amount equal to the "Reserve Requirement,"which is defined as an amount,as of any date of calculation,equal to the least of (a) 10% of the original aggregate amount of principal evidenced by the Certificates (or if the amount of original issue discount or premium applicable to the Certificates exceeds 2%,then 10%of the issue price of the Certificates), (b)the maximum amount of remaining Installment Payments, and the interest thereon, coming due in any one Certificate Year, and (c) 125% of the average amount of remaining Installment Payments, and the interest thereon, coming due in each Certificate Year. Amounts in the Reserve Fund may be used to pay principal and interest evidenced by the Certificates to the extent that amounts in the Principal Account and Interest Account are insufficient therefor. The Trustee shall establish and maintain the Reserve Fund until all required Installment Payments, and the interest thereon, are paid in full pursuant to the Installment Purchase Agreement and until the first date upon which no Certificates are Outstanding. The Reserve Fund will be funded with a portion of the net proceeds of the Certificates in the amount of S , which amount is sufficient to satisfy the Reserve Requirement See"ESTIMATED SOURCES AND USES OF FUNDS." The District may substitute a Reserve Facility for all or a part of the moneys on deposit in the Reserve Fund by depositing such Reserve Facility with the Trustee so long as, at the time of such substitution, the amount on deposit in the Reserve Fund, together with the amount available under such Reserve Facility and any previously substituted Reserve Facilities, shall be at least equal to the Reserve Requirement. Moneys for which a Reserve Facility has been substituted as provided in the Trust Agreement shall be transferred, at the election of the District, to the Installment Payment Fund, or upon receipt of an Opinion of Counsel to the effect that such transfer, in and of itself, will not adversely affect the exclusion of interest evidenced by the Certificates from gross income for federal income tax purposes, to a special account to be held by the Trustee and applied to the payment of capital costs of the District,as directed in a Written Request of the District. Any amounts paid pursuant to any Reserve Facility shall be deposited in the Reserve Fund. If a Reserve Facility is credited to the Reserve Fund to satisfy a portion of the Reserve Requirement,the Trustee shall make a claim for payment under such Reserve Facility,in accordance with the provisions thereof, in an amount which, together with other available moneys in the Reserve Fund, will be sufficient to make said deposit in the Interest Account or Principal Account The moneys in the Reserve Fund and any Reserve Facility, shall be held in bust by the Trustee for the benefit of the Owners and shall be used and disbursed only for the purposes and uses authorized in the Trust Agreement. Moneys, if any, on deposit in the Reserve Fund shall be withdrawn and applied by the Trustee for the final payment of principal and interest evidenced by the Certificates. Amounts on deposit in the Reserve Fund which were not derived from payments under any Reserve Facility credited to the Reserve Fund to satisfy a portion of the Reserve Requirement shall be used and withdrawn by the Trustee prior to using and withdrawing any amounts derived from payments under any such Reserve Facility. In order to accomplish such use and withdrawal of such amounts not derived from payments under any such Reserve Facility, the Trustee shall, as and to the extent necessary, liquidate any investments purchased with such amounts. If and to the extent that mom than one Reserve Facility is credited to the Reserve Fund to satisfy a portion of the Reserve Requirement, drawings thereunder, and repayment of expenses with respect thereto, shall be made on a pro-rata basis(calculated by reference to the policy limits available thereunder). The Trustee shall, from amounts received from the District pursuant to the Installment Purchase Agreement,deposit in the Reserve Fund an amount of money which,together with the amount already on deposit therein and the amounts available under all Reserve Facilities, will be equal to the Reserve Requirement. No deposit need be made in the Reserve Fund so long as there shall be on deposit therein a 9033"11.6 11 sum equal to the amount which, together with the amounts available under all Reserve Facilities, is at least the Reserve Requirement. The Trustee shall promptly notify the District in writing if the amount on deposit is less than the Reserve Requirement. If, as a result of the scheduled payment of principal or interest evidenced by the Certificates, the Reserve Requirement is reduced, the Trustee shall transfer an amount equal to the amount of such reduction to the Installment Payment Fund. See APPENDIX C—"SUMMARY OF PRINCIPAL LEGAL DOCUMENTS—Trust Agreement." Limitations on ISSaaaCC of Additional Obligations Senior Obligations. The District may at any time incur Senior Obligations in addition to the Existing Senior Obligations payable from Net Revenues as provided in the Master Agreement on a parity with all other Senior Obligations theretofore incurred but only subject to the following conditions under the Master Agreement: (1) Upon the incurrence of such Senior Obligations, no Event of Default will be continuing under the Master Agreement;and (2) Subject to the provisions of the Master Agreement,the District will have received either one of the following: (i) A Written Certificate of the District certifying that, for a 12 consecutive calendar month period during the 24 consecutive calendar month period ending in the calendar month prior to the incurrence of such Senior Obligations (which 12 consecutive calendar month period will be specified in such certificate or certificates): (A) Net Revenues,as shown by the books of the District,will have amounted to at least 125% of Maximum Annual Debt Service on all Senior Obligations to be outstanding immediately after the incurrence of such Senior Obligations,and (B) Net Operating Revenues,as shown by the books of the District,will have amounted to at least 1000/6 of Maximum Annual Debt Service on all Obligations to be outstanding immediately after the incurrence of such Senior Obligations. For purposes of demonstrating compliance with the foregoing,Net Revenues and Net Operating Revenues may be adjusted for(x)any changes in fees and charges for the services of the Wastewater System which have been adopted and are in effect on the date such Senior Obligations are incurred, but which, during all or any part of such 12 consecutive calendar month period, were not in effect, (y)customers added to the Wastewater System subsequent to such 12 consecutive calendar month period but prior to the date such Senior Obligations are incurred, and (z) the estimated change in available Net Revenues and Net Operating Revenues which will result from the connection of existing residences or businesses to the Wastewater System within one year following completion of any project to be funded or any system to be acquired from the proceeds of such Senior Obligations;or 8033b811.6 12 (if) A certificate or certificates from one or more Consultants which, when taken together, project that, for each of the two Fiscal Years next succeeding the incurrence of such Senior Obligations: (A) Net Revenues will amount to at least 125% of Maximum Annual Debt Service on all Senior Obligations to be outstanding immediately after the incurrence of such Senior Obligations,and (B) Net Operating Revenues will amount to at least 100% of Maximum Annual Debt Service on all Obligations to be outstanding immediately after the incurrence of such Senior Obligations. For purposes of demonstrating compliance with the foregoing,Net Revenues and Net Operating Revenues may be adjusted for(x)any changes in fees and charges for the services of the Wastewater System which have been adopted and are in effect on the date such Senior Obligations are incurred or will go into effect prior to the end of such two Fiscal Year period, (y)customers expected to be added to the Wastewater System prior to the end of such two Fiscal Year period and (z) the estimated change in available Net Revenues and Net Operating Revenues which will result from the connection of existing residences or businesses to the Wastewater System within one year following completion of any project to be funded or any system to be acquired from the proceeds of such Senior Obligations. For purposes of preparing the certificate or certificates described above,the Consultant may rely upon financial statements prepared by the District that have not been subject to audit by an independent certified public accountant if audited financial statements for the period are not available. See, also "FINANCIAL OBLIGATIONS — Existing Indebtedness" herein. The provisions described above in paragraph(2)need not be complied with if the Senior Obligations being incurred are Short-Term Obligations excluded from the calculation of Assumed Debt Service pursuant to clause(H)of the definition thereof. See APPENDIX C — "SUMMARY OF PRINCIPAL LEGAL DOCUMENTS — Definitions"herein. The determination of Net Revenues for use in the calculation described above is more fully described in APPENDIX C — "SUMMARY OF PRINCIPAL LEGAL DOCUMENTS — Master Agreement—Senior Obligations"attached hereto. The provisions described in paragraph(2)above need not be complied with for such portion of such Senior Obligations incurred for the purpose of providing funds to refund or refinance such Obligations if(i)a portion(which may be all)of the Senior Obligations are incurred for the purpose of providing funds to refund or refinance any Obligations, (ii)upon such refunding or refinancing, debt service on such refunded or refinanced Obligations, or debt service on bonds,notes or other obligations of an entity other than the District, the debt service on which is payable from Obligation Payments for such Obligations(the"Related Bonds"), will no longer be included in the calculation of Assumed Debt Service either because such Obligations, or the Related Bonds of such Obligations,will have been paid in full or because such debt service is disregarded pursuant to clause (L) of the definition of Assumed Debt Service, and (iii)Assumed Debt Service in each Fiscal Year for the portion of such Senior Obligations incurred for the purpose of providing funds to refund or refinance such Obligations is less than or equal to 105% of Assumed Debt Service in such Fiscal Year for such Obligations being refunded or refinanced(assuming for such purposes that debt service on such refunded or refinanced Obligations, or debt service on the Related Bonds of such Obligations, is not disregarded pursuant to clause(L)of the definition of Assumed Debt Service). See APPENDIX C—"SUMMARY OF PRINCIPAL LEGAL DOCUMENTS — Master Agreement' attached hereto for additional information. 80336611.6 13 The District may at any time incur Reimbursement Obligations with respect to Senior Obligations. Subordinate Ob/igadans. The District may at any time incur Subordinate Obligations upon satisfaction of the conditions provided in the Master Agreement. See APPENDIX C—"SUMMARY OF PRINCIPAL LEGAL DOCUMENTS—Master Agreement'herein for a description of such conditions. Insurance The District will procure and maintain or cause to be procured and maintained casualty insurance on the Wastewater System with responsible insurers,or provide self insurance(which may be provided in the form of risk-sharing pools), in such amounts and against such risks (including accident to or destruction of the Wastewater System) as are usually covered in connection with facilities similar to the Wastewater System. The District will procure and maintain such other insurance which it will deem advisable or necessary to protect its interests and the interests of the Corporation. See"THE DISTRICT —Risk Management' and APPENDIX C—"SUMMARY OF PRINCIPAL LEGAL DOCUMENTS— Master Agreement"herein. [Remainder of page intentionally left blank.] 90336611.6 14 Allocation of Installment Payments Table I below sets forth the estimated Installment Payments with respect to the Certificates. Also set forth are the payments due on Outstanding Senior Obligations. Table 1 Estimated Installment Payments of the District Installment Payments Outstanding Senior Fiscal Year Relating to Certificates Obligation Payments Ending June 30 Principal Interest Principal Interese" Total 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 2031 2032 2033 2034 2035 2036 2037 Total Assumes per annum interest rate of 3.75% for all variable rate obligations. See "FINANCIAL. OBLIGATIONS—Existing Indebtedness"and APPENDIX A—"COMPREHENSIVE ANNUAL FINANCIAL REPORT OF THE ORANGE COUNTY SANITATION DISTRICT FOR FISCAL YEAR ENDED JUNE 30, 2008"herein 80336611.6 l5 THE DISTRICT Background The Orange County Sanitation District is a public agency responsible for regional wastewater collection, treatment and disposal. The District is the sixth largest wastewater discharger in the United States. The District provides service to an area with a population of more than 2.5 million people in the northern and central portion of the County by treating 221 mg/d of wastewater in Fiscal Year 2007-08. The District serves approximately 81% of the County population in approximately 471 square miles, or 59%of the County. The service area which comprises the District was originally formed in 1954 pursuant to the County Sanitation District Act, as amended, Section 4700 at seq. of the Health and Safety Code of the State. The District's service area originally consisted of seven independent special districts in the County which were each responsible for matters relating to their individual districts. These special districts were jointly responsible for the treatment and disposal facilities which they each used. The seven independent districts were successors to the Joint Outfall Sewer Organization, which was formed in 1923 among the Cities of Anaheim, Santa Ana, Fullerton, and Orange, and the sanitary districts of Placentia, Buena Park, La Habra, and Garden Grove. The Joint Outfall Sewer Organization constructed a treatment plant and outfall in the early 1920's to serve its members. It was reorganized in 1947 and 1948 into seven county sanitation districts - District Nos. 1, 2, 3, 5, 6, 7 and 11. These prior districts were formed based on engineers' analyses of the gravity flows in the service area. District No. 13 was formed in 1985 and District No. 14 was added in 1986. These districts were co-participants in a Joint Agreement which provided for the joint construction,ownership,and operation of the prior districts'joint facilities. In April 1998, at the request of the District's Board of Directors (the "Board of Directors"), the Board of Supervisors of the County of Orange (the "County Board") passed Resolution No. 98-140 approving the consolidation of the then existing nine special districts into a new,single sanitation district, to be known as the Orange County Sanitation District. This action was designed to simplify governance structures, reduce the size of the Board of Directors, ease administrative processes, streamline decision- making and consolidate accounting and auditing processes. The consolidation was effective on July 1, 1998. Pursuant to the Resolution and Government Code Section 57500, the prior districts transferred and assigned all of their powers, rights, duties, obligations, functions and properties to the District, and the District assumed all obligations of the prior districts which were several and not joint including, without limitation, their obligations to repay the then outstanding certificates of participation. See "FINANCIAL OBLIGATIONS—Existing Indebtedness"herein. The boundaries of the nine predecessor special districts were initially used by the District to delineate separate revenue areas (the "Revenue Areas") for budgeting and accounting purposes and in order to facilitate the imposition of fees and charges imposed by the District. See"DISTRICT REVENUES—Sewer Service Charges"herein. The District is managed by the Board of Directors,whose members are appointed by twenty-five member cities and agencies which are serviced by the District. The District is responsible for construction and maintenance of a major portion of the wastewater collection, treatment and disposal facilities within its boundaries. Revenue Area No. 7 is responsible for approximately 152 miles of local sewers in its service area, whereas local sanitary districts, water districts and cities are responsible for local sewers in the remainder of the District's service area. 90336611.6 16 Organimtion and Administration The District is independent of and overlaps other political jurisdictions. There are many governmental entities, including the County,that operate within the District's jurisdiction. These entities are exclusively responsible for the administration of their own fiscal affairs,and the District is not entitled to operating surpluses of,or responsible for operating deficits of,any of the other entities. The twenty-five member Board of Directors is comprised of representatives from twenty-one cities, unincorporated areas of the County and three special districts,including mayors of cities,members of city councils, directors of independent special districts and one member from the County Board of Supervisors. Several board committees, made up of members of the Board of Directors, consider topics for action by the Board of Directors and make recommendations to the Board of Directors. The Chair and the Vim Chair of the Board of Directors sue elected every year by a majority of the Board of Directors, and serve at the pleasure of the majority of the Board of Directors. The District has a general manager, general counsel, administrative and operating staff, with offices located at Reclamation Plant No. I in Fountain Valley, California. The District currently employs an administrative and operating staff of over 600 under the direction of its General Manager, James D. Ruth. James D. Ruth is the District's General Manager, and has served in that capacity since December 2005. Prior to that time, from January 2003 to October 2004, Mr. Ruth served as Chief Executive Officer for the County of Orange. Mr. Ruth had previously provided 22 years of service to the city of Anaheim as parks and recreation director, deputy city manager, assistant city manager and chief executive officer,a post he held for 11 years. Robert P. Ghimili, Ph.D. is the District's Assistant General Manager, and has served in that capacity since July 2006. Mr.Ghirelli previously served as Director of Technical Services for the District since his joining the District in 1998. Prior to joining the District, Mr. Ghirelli served for just over a year as managing principal of the Los Angeles office of a national environmental consulting firm, served 20 years in supervisory positions with the State and Regional Water Boards,with 13 years Executive Officer of the California Regional Water Quality Control Board,Los AngelesfVentura Region. Lorenzo Tyner is the District's Director of Finance and Administrative Services. In September 2005, Mr. Tyner joined the District with nearly 15 years of public finance and budgeting experience,most recently serving as the Los Angeles Unified School District Budget Director and Deputy Chief Financial Officer. Mr. Tyner previously worked in large government organizations including the City of Los Angeles and the Los Angeles County Metropolitan Transportation Authority and private sector companies IBM Global Services and Northrop. James Herberg, P.E. is the District's Director of Engineering, and has served in that capacity since November 2006. Prior to becoming Director of Engineering, he was the District's Director of Operations and Maintenance. Mr. Herberg has over twenty years of experience in water and wastewater including project management, construction management, design, strategic planning, and operations & maintenance. Ed Torres is the District's Director of Technical Services for the District. He has served in this position since November 2006. Prior to joining the District in 1991, Mr. Torres served in a professional capacity for the California State University System and TRW Electronics and Defense Sector. Mr.Torres has twenty-four years of public and private sector experience in protecting public health and the environment. 80336611.E 1 Nick Arhonies, P.E. is the District's Director of Operations and Maintenance and has served the District since 1988. W. Arhontes has over 30 years of experience managing various engineered systems in the private and public sectors regionally,nationally,and internationally. Services The District owns and operates regional wastewater collection, treatment, and disposal facilities for the metropolitan area in the northern and central portion of the County. The District receives wastewater from the collection systems of the cities, sanitary districts and unincorporated areas of the County located within the District. See"TIE DISTRICT—Service Areas"herein. Generally, local agency systems collect wastewater from residential and industrial customers and convey the wastewater to District trunk sewer pipelines for conveyance to the District's wastewater treatment plants. The District's staff is responsible for operating and maintaining the District's infrastructure, although some operations are provided by external contractors. Currently, the District has established supply contracts for all chemicals necessary to the operation and maintenance of the facilities of the District. The District has sufficient standby systems in the event of equipment failures or system outages. Service Area The map on the inside cover of this Official Statement shows the District's boundaries and selected cities located within the District District boundaries were originally established in 1947 and 1948 based on drainage basins. As the existing cities have grown and new areas have incorporated, city limits have come to overlap District boundaries. The District currently serves an approximately 471 square-mile area including 23 of the County's 33 cities and unincorporated areas of the County. The District serves a population of more than 2.5 million residents and owns sanitary sewerage facilities with a replacement value of approximately S6.26 billion. [Remainder of page intentionally left blank.] 90336611.6 18 Table 2 below sets forth the estimated populations of cities and unincorporated areas served by the District as of January I,2008. Table 2 Estimated Populations of Cities and Unincorporated Areas Served by the Orange County Sanitation District As of January 1,2008 Citv Population Anaheim 346,823 Brea 40,001 Buena Park 82,768 Costa Mesa 113,955 Cypress 49,541 Fountain Valley 57,925 Fullerton 137,437 Garden Grove 173,067 Huntington Beach 201,993 Irvine 209,806 La Habra 629635 La Palma 16,176 Los Alamitos 12,191 Newport Beach 84,554 Orange 1409849 Placentia 51,727 Santa Ana 353,184 Seal Beach 25,986 Stanton 39,276 Tustin 74,218 Villa Park 6,259 Westminster 93,027 Yorba Linda 68312 Cities Subtotal 2,441,790 Unincorporated Areas 81,000 (estimated) Total 2,522,790 Sources: State of California Department of Finance, Demographic Research Unit for city population data: Orange County Sanitation District for population of unincorporated areas. Employees As of November 1,2008,the District had full-time equivalent ("FTE") staff positions. Most of the employees who occupy these positions are represented by recognized employee organizations, which include the following: the Orange County Employees Association ("OCEA"), the International Union of Operating Engineers — Local 501 ("Local 501"), the Supervisor Croup, and the Professional Croup. As of November I,2008,the District had 604 represented and non-represented employees. Total represented employees as of November 1, 2008 numbered_, as follows: _were represented by the OCFA,_were represented by focal 501 and were represented by the Supervisor and Professional Groups. New agreements with each of these employee organizations took effect on July 1, 2007. The OCEA and Local 501 agreements are in effect through June 30, 2011; the Supervisor and Professional 803366116 19 Group agreements are in effect through June 30,2010.The OCEA has represented administrative/clerical, technical services and engineering employees since 1979. Local 501 has represented operations and maintenance employees since October 1985. The Supervisor and Professional Groups have represented supervisory and professional employees since 1991. The District has historically enjoyed a good working relationship with the employee organizations and has experienced no work stoppages by represented personnel in the past. For a description of the Orange County Employee's Retirement System, in which the District participates, and the District's deferred compensation plan, see "Retirement Plan" below and Note 7 to the Comprehensive Annual Financial Report of the Orange County Sanitation District for Fiscal Year Ended June 30,2008,set forth in Appendix A. Retirement Plan The District participates in the Orange County Employee's Retirement System ("OCERS"), a cost-sharing multiple-employer, defined benefit pension plan which is governed and administered by a nine-member Board of Retirement. OCERS was established in 1945 under the provisions of the County Employees Retirement Law of 1937,and provides members with retirement,death,disability,and cost of- living benefits. All District full-time employees participate in OCERS. The amount of the retirement allowance is based upon the member's age at retirement, the member's "final compensation" as defined in Section 31462 of the Retirement Law of 1937, the total years of service under OCERS, and the employee's classification as a Tier I or Tier 11 member. As of July 1, 2006, the formula to calculate retirement benefits was enhanced to 2.5%at age 55,or employees retiring at age 55 or older receive 2.5% of their average salary for every year of service. Average salary is the highest consecutive 12 months of compensation for Tier I employees and the highest consecutive 36 months of compensation divided by three for Tier II employees. Benefits fully vest under the OCERS retirement plan on reaching five years of service. Employees who retire at or after age 50 with ten or more years of service are entitled to an annual retirement allowance. OCERS also provides death and disability benefits. As a condition of participation under the provisions of the County Employees Retirement Law of 1937, members are required to contribute a percentage of their annual compensation to OCERS. The District is required to make periodic contributions to OCERS in amounts that are estimated to remain a constant percentage of covered employees' compensation such that, when combined with covered employees' contributions,will fully provide for all covered employees'benefits by the time they retire. A current comparison of OCERS costs for Fiscal Years 2003-04 through 2007-08 and projected costs for Fiscal Years 2008-09 through 2009-10 is shown in the following table. 90336611.6 20 Table 3 Orange County Sanitation District Comparison of OCERS Costs for Fiscal Years 2003-04 through 2007-N and Projected Costs for Fiscal Years 2008-09 through 2009-10 Fiscal Year Rate01 Cose1 2003-04 9.15% $ 3,668,650 2004-05 1237 5,524,673 2005-06 15.21 7,416,556 2006-07 19.78 9,848,854 2007-08 20.47 10,877,737 20019-On' 2134 12,392,491 2009-10131 2134 13,221,264 1' Req�on as a percent of covered payroll. includes amortization of Unfunded Acmarial Accrued Liability. 1't Amounts represents employer contributions made by the District. 01 Projected. Source: Orange County Sanitation District. For Fiscal Years 2003-04 through 2007-08, the District's required contribution was equal to the contribution that the District actually made. As noted the required contribution set forth above includes amortization of Unfunded Actuarial Accrued Liability ("UAAL"). For the Fiscal Year ended June 30, 2008, total payroll costs of employees covered by OCERS was $53,148,097. As of the December 31, 2007 valuation, OCERS has an aggregate UAAL ratio of 72.9%, for a total UAAL of$2.71 billion. The District expects the next OCERS valuation to occur on or about December 31,2008. For more information regarding OCERS and the District's retirement plan as of June 30, 2008, see Note 7 to the Comprehensive Annual Financial Report of the Orange County Sanitation District for Fiscal Year Ended June 30,2008 set forth in Appendix A. The Comprehensive Annual Financial Reports of the Orange County Employees Retirement System are available on the OCERS website at http://rvwlv.ocers.org. The information on such website is not incorporated herein by such reference or otherwise. Other Post-Employment Benefits The Governmental Accounting Standards Board ("GASB") in April 2004 issued Statement No.43, which requires state and local governmental employers to determine, on an actuarial basis, the total liability of post-employment benefits other than pension benefits(known as other post-employment benefits or 'WEB"), including healthcare and life insurance expenses and related liabilities, and an annual required contribution to fund such liabilities. In June 2004, GASB issued Statement No.45, which requires state and local governmental employers to fund the actuarially determined annual required contribution ("ARC")for its OPEB or record the entire amount of the unfunded liability of its OPEB in its financial statements. The District was required to implement GASB Statement No.43 for the Fiscal Year ended June 30, 2007, and was required to implement GASB Statement No.45 for the Fiscal Year ended June 30,2008. The District's OPEB program currently includes medical and prescription drug benefits and a program of cash payments, known as Additional Retiree Benefit Account ("ARBA") benefits. Benefits vest upon retirement after qualifying public service often years. Most of the District's retirees under the age of 65 are covered under the same medical and prescription drug plans as active employees of the District,but an additional retiree-only fee for service plan called"Blue Card"is also available. ae336611.6 21 According to the District's actuary, Demsey Fiiliger Associates (the "Actuary'), the unfunded OPEB liability as of July 1,2007 is approximately$17.4 million. The ARC is$1,764,000 for Fiscal Year 2008-09. Calculation of the ARC is based on the present value of benefits accruing in the current year,a 30-year amortization of the unfunded OPEB liability and an assumed rate of return on investments in the retiree fund of 5% per annum. The District does not believe that its OPEB liability will have a material impact on its operational results. Risk Management As of the date hereof, the District has in force basic all risk property and casualty insurance, including theft, fire, flood, terrorism and boiler and machinery losses to the Wastewater System. The District is self-insured for portions of workers' compensation,property damage and general liability. The self-insurance portion of workers' compensation is $500,000 per person per occurrence with outside excess insurance coverage to the statutory limit. The self-insured portion for property damage covering fire and other disasters is $25,000 per occurrence with outside excess insurance coverage to $1 billion. The self-insured portion for property damage covering flood is $100,000 per occurrence with outside excess insurance coverage to $300 million. The District is self-insured for all property damage from the perils of earthquakes. See "DISTRICT REVENUES — Reserves." The District also maintains outside comprehensive boiler and machinery insurance, including business interruption insurance, with a $100 million limit with deductibles ranging from $25,000 to $350,000. The District is self-insured for general liability coverage up to$250,000 per occurrence,with excess general liability coverage up to$25 million. During the past three fiscal years there have been no settlements in excess of covered amounts. Claims against the District are processed by outside insurance administrators. The District believes that there are no unrecorded claims as of June 30, 2008 that would materially affect the financial position of the District. For more information regarding the District's insurance coverage as of June 30, 2008, see Note I to the Comprehensive Annual Financial Report of the Orange County Sanitation District for Fiscal Year Ended June 30,2008 set forth in Appendix A. Existing Facilities The District's Wastewater System presently consists of two wastewater treatment plants, an influent metering and diversion structure, 16 off-plant pump stations, various interplant pipelines and connections, and the ocean outfall facilities. The District's Wastewater System includes approximately 568 miles of sewers within 12 trunk sewer systems, 152 miles of local sewers located within Revenue Area No. 7, two treatment plants, two discharge outfalls and two emergency weir outlets. The existing treatment plants have a rated primary treatment capacity of 372 mg/d, including standby capacity. Treatment Plant No. 1 ("Plant No. I") is located in the City of Fountain Valley, about four miles from the coast, adjacent to the Santa Ana River. Secondary treatment capabilities are provided by a trickling filter plant and a conventional air activated sludge plant. Up to 105 mg/d of secondary treated effluent is conveyed to an Orange County Water District(the"OCWD")plant for tertiary treatment prior to reclamation and ground water recharge. Treatment Plant No. 2("Plant No. 2")is located in the City of Huntington Beach, 1,500 feet from the ocean,at the mouth of the Santa Ana River. Secondary treatment capabilities are provided by a pure oxygen activated sludge plant. The District employs several phases in the treatment of wastewater. The first phase, preliminary treatment,removes debris such as eggshells,sand and other non-biodegradable items. See also"Preferred Level of Treatment" and `Biosolids Management" below. In the next phase, primary treatment, 80336611.6 22 wastewater is pumped to large settling basins. The liquids are separated from the remaining solids which settle or float as the wastewater passes through large settling basins called clarifiers. The settled solids are sent to solids treatment facilities. Approximately 25 percent of the primary treated wastewater flows into the ocean outfall pumping station where it is blended with secondary treated wastewater before being discharged into the ocean. The other 75 percent is sent to secondary treatment for further processing. During secondary treatment, the wastewater is placed in aeration basins to which naturally occurring bacteria are used to remove most of the remaining dissolved and suspended microscopic organic solids. The treated wastewater from both plants is mixed together at Plant No.2,where it is then pumped through the ocean outfall pipe that extends five miles offshore. Table 4 below sets forth the treatment plants' approximate current and future treatment capacities. Table 4 Wastewater System Treatment Capacities (mgld) 2007-08 Existing Primary Total Planned Actual Treatment Existing Secondary Secondar�l Flows Ca aci Treatment Catracity Capacity Plant No. 1 92 204 110 170 Plant No. 2 129 168 90 150 Aggregate Treatment 221 372 200 320 Plant Facilities The Dunned Total Capacity' is based on the Strategic Plan for planned capacity by 2020, which estimated the District's requirements to meet future expected primary and secondary capacity demands. Source: (range County Sanitation District. The District also has the capability to divert a portion of the influent flow from Plant No. t to Plant No. 2 through interplant connections. A portion of the flow destined for Plant No. 2 can also be diverted to Plant No. 1. Another interplant facility allows gas generated during solids treatment to be transported between Plant No. 1 and Plant No. 2 and allows digester gas(which is used as fuel for many of the facilities' engines)from one plant to be used at the other to balance the supply and demand which results in efficient gas utilization.. Permits,Licenses and Other Regulations The Wastewater System is subject to regulations imposed by the 1972 Clean Water Act, Public Law 92-500 (the "Clean Water Act"), the California Environmental Quality Act of 1970, as amended ("CEQA") and the Federal Clean Air Act. The regulatory requirements are administered by the United States Environmental Protection Agency(the"EPA")and the California Regional Water Quality Control Board("RWQCB"). Regulations of these agencies deal primarily with the quality of effluent which may be discharged from the treatment plants and the nature of waste material discharged into the collection system. The Clean Water Act directs the EPA to monitor and to regulate the discharge of pollution into navigable waterways and to enforce the requirements that all wastewater treatment plants in the nation provide full secondary treatment for sewage. In 1977, Congress amended the Clean Water Act to allow waivers of secondary treatment standards for certain ocean dischargers if they can demonstrate, to the satisfaction of the EPA, that significant adverse environmental impacts would not occur. The District currently has all applicable permits and licenses necessary to operate its facilities. 8033MI 1.6 23 The District has discharged treated wastewater into the Pacific Ocean under a permit issued by the EPA and the RWQCB. The discharge permit included a waiver under the 301(h) provisions of the Clean Water Act, allowing for less than full secondary treatment based on an ocean discharge of sufficient depth, distance and dilution. The permit was initially issued in 1985 and was the first modified Section 301(h) permit issued to a major wastewater treatment facility. The District's permit, which included the Section 301(h)waiver of secondary treatment requirements, was issued on May 6, 1998 and expired on June 8,2003. In July 2002, the Board of Directors approved a change from the existing level of treatment, a blend of 500/. advanced primary and 50% secondary treated wastewater, to full secondary treatment standards. See "Preferred Level of Treatment" and "Urban Runoff' below. As a result, the District established a policy to subject all wastewater discharges into the ocean to secondary treatment standards. See "Preferred Level of Treatment' below. To implement this policy, District staff was directed to immediately proceed with the planning, design, and implementation of treatment methods with the expressed purposes of eliminating the need for the permit wavier received under Section 301(h). Following determination by the Board of Directors in July 2002 to implement full secondary standards, staff prepared the Secondary Treatment National Pollutant Discharge Elimination System ("NPDES") Permit Application that was required to be submitted to the regional office of the EPA and the RWQCB in December 2002. The NPDES Permit is separate and apart from the permit waiver received under Section 301(h), and once awarded would negate any necessary waiver. Achieving secondary treatment standards was originally projected to take six years to complete, with completion expected in December 2012. Because ocean discharge permits are issued for only five years, and the EPA has no authority to waive the discharge limits requirements or grant a longer permit (except in accordance with See.301(h)),the District decided to voluntarily seek a consent decree concurrently with the issuance of the new ocean discharge permit. This negotiated consent decree (the "Consent Decree") approves the schedule and decrees that no penalties will be imposed for discharges that exceed the secondary treatment limits during the period of construction. The Consent Decree was signed by the District, the EPA and the RWQCB and filed with the U.S. District Court on November 15, 2004. The District is in compliance with the decree and has successfully completed four of the seven milestones within the specified deadlines required by the deem. The South Coast Air Quality Management District ("AQMD') is the regional governmental agency charged with implementing the Federal Clean Air Act. AQMD permits are required before a sewage treatment improvement project can be constructed Such permits are project specific and contain construction process requirements, required equipment and standards for predicted air quality. Aftw construction is completed,the AQMD issues an operation permit. These permits are also project specific and contain air quality standards and other appropriate operational guidelines. Most of the District's facilities are enclosed in order to trap emissions,which are cleaned by air scrubbers that remove odors. In addition,the District has implemented an air quality risk reduction program which includes a 20-year plan to improve treatment plant operations and reduce industrial toxic pollutants. The District currently has all necessary AQMD permits to operate the Wastewater System. Capital Improvement Program The Master Plan. The District's 1989 master plan consisted of a 30-year plan of action for managing wastewater activities to the year 2020, entitled "2020 Vision, Action Plan for Wastewater Management and Environmental Protection 1990-2020"(the"Master Plan"). The Master Plan integrated research facilities planning, environmental analysis, toxic control, water conservation and reclamation, sludge reuse, other wastewater programs and financial planning into a single unified approach. In connection with the preparation of the Master Plan,an in-depth land use study was performed,resulting in the creation of a uniform land use classification system and a map of the District's service area. Land use designations and unit flow factors were used to project wastewater flows in the District's trunk sewers for 90336611.6 24 then present conditions, through the year 2020. These flows were included in a computer model of the District's Wastewater System which identified future sewer capacity improvements. A thirty-year capital improvement program was developed to implement the required sewer capacity improvements. This land use study included the collection and compilation of the latest available land use plans, reports, maps and studies from the cities within the District and the County, and interviews with the planning directors or key staff within the District. Land use planning within the District's service area is the responsibility of the County for unincorporated areas and cities for areas within their boundaries. The California Coastal Commission has some land use authority within the District's coastal areas. The Strategic Plan. In October 1999, the District updated the Master Plan with a strategic plan (the "Strategic Plan"). The Strategic Plan updated the planning process set forth in the Master Plan through the year 2020 and defined the District's goals, responsibilities, and requirements over the then following twenty years, including projections through the assumed "build-out" of the District's service area to the year 2050. In addition to updating the population and flow assumptions, the Strategic Plan provided for an operations and financial plan, including a review of the collection,treatment and disposal facilities, and the District's ocean curtails. Studies on a preferred level of wastewater treatment and in- sourcing of the ocean monitoring program were prepared and incorporated in the Strategic Plan. Water and air regulatory agencies require that all wastewater facilities be designed to meet the needs of anticipated growth and provide a reasonable reserve capacity. With the adoption of the Strategic Plan,the District's planning process met these requirements by shifting its approach for the development of master plans from a"sin and build"approach to a broad-based multi-agency cooperative evaluation process. Many of the assumptions used to develop the Strategic Plan, such as inflation, the projected service population, the level of building activity, and the volume of wastewater treated, were quite different from what was assumed ten years earlier under the Master Plan. Critical factors such as population growth, new construction, the volume of wastewater delivered to the plants and viable water conservation and reclamation programs were reevaluated. Interim Strategic Plan. In June 2002, an Interim Strategic Plan Update (the "Interim Strategic Plan")was completed to further update and revise many of the assumptions used to develop the District's previous planning documents,including population and land-use projections,the level of building activity in the District's service area and the volume of wastewater to be treated. The Interim Strategic Plan also provides for an operations and financial plan including a review of the District's collection,treatment and disposal facilities, and a study of the District's ocean outfall system. In addition,potential changes in the regulatory climate for the beneficial reuse of biosolids were also considered. On July 17, 2002, the Board of Directors approved Resolution No. OCSD 02-14, "Establishing the Policy for Level of Treatment of Wastewater Discharged into the Ocean." This resolution established the District's policy to treat all wastewater discharges into the ocean to secondary treatment standards thereby providing for continued public safety, marine ecosystem protection, and water reclamation opportunities. To implement this policy, the District staff was directed to immediately proceed with the planning, design, and implementation of treatment methods that will allow the agency to meet Clain Water Act secondary treatment standards. The District currently estimates that it will take approximately four years (through December 2012) and total capital improvement costs of $630.6 million to reach secondary treatment discharge standards. In the interim,the District will operate the plants to maximize available secondary treatment and to reduce effluent biochemical oxygen demand and suspended solid discharges below currently allowed limits. The then current 50% secondary portion would increase incrementally as operations change and new facilities are constructed and placed in service. See "Preferred Level of Treatment"below. The District's planning process for development of the Interim Strategic Plan incorporated an analysis of population growth, dry weather and peak wet weather flows and the maximum use of existing facilities. The population of the District's service area was projected to grow to 2.7 million by the year 80336611.6 25 2020. Average flow rates at both treatment plants were projected to increase to 278 mg/d by 2020 (134 mg/d of treatment at Plant No. I and 144 mg/d at Plant No.2), up 26% from the Fiscal Year 2007-08 flow. In combination with the Interim Strategic Plan, the District developed its current Capital Improvement Program ("CIP"). The District expects to meet future demands on the Wastewater System through the CIP. This program has been developed to satisfy anticipated regulatory requirements, increased population,additional treatment requirements, conservation, energy and other resource savings considerations, odor control improvements,and air quality protection needs. Through 2020,the District's CIP is scheduled to accomplish: • Major rehabilitation of the existing headworks, primary treatment, secondary treatment, outfall pumping,and solids handling facilities at both treatment plants; • Replace and rehabilitate 16 of the District's outlying pumping stations, and 44 trunk sewer improvement projects; • Reduce fence line odor to levels that do not generate odor complaints; • Disinfect the District's ocean discharge to reduce bacterial levels below State bathing standards; • Reclaim 70 mg/d of the District's effluent, or nearly one-third of the total daily flow (Groundwater Replenishment System);and • Achieve full secondary treatment standards. CIP Validation Study. In preparation of each year's Budget,the District conducts an annual CIP validation study to ensure that all projects are necessary and that most recent cost estimates are accurate. As identified in the Interim Strategic Plan, and verified through the 2008 CIP Validation Study and Secondary Treatment Review, $456.1 million of additional capital improvements over the next four years (through December 2012)are needed to reach full secondary standards. The 2008 CIP Validation Study resulted in proposed revisions to the CIP. The proposed CIP now consists of 114 individual capital projects through Fiscal Year 2020-21 at a total cost of$2.48 billion, approximately $1 billion of which has been spent to date. The bulk of construction is scheduled during the next six years, with average annual expenditures of$200 million. Implementation of full secondary treatment standards is scheduled to be completed on or before December 31, 2012. A summary of total estimated capital costs for the proposed CIP for Fiscal Years 2008-09 through 2020-21 is set forth in Table 5 below. 80336611.6 26 Table 5 Capital Improvement Program —Estimated Costs Fiscal Years 2008-09 through 2020-21 Proieet Cost Collection System Capacity $ 142,693,300 Collection System Repair,Rehabilitation,Replacement 194,679,8W Treatment Plant Capacity 113,537,750 Additional Secondary Treatment 50,561,150 Groundwater Replenishment System,Phase 1 2,766,000 Improved Treatment 506,800,400 Treatment Plant Repair,Rehabilitation,Replacement 415,743,500 Support Facilities 47,904,100 Total Validated Capital Improvement Program $IA74-686-000 Source: Orange County Sanitation District. The proposed CIP contemplates expenditures of$373.7 million in Fiscal Year 200". Of this total, the largest cash outlay within the plant facilities category is $100.1 million for a new secondary treatment system at Reclamation Plant No. 1, with a total project cost of$265.9 million. New trickling filters at Treatment Plant No.2 will require$73.7 million in Fiscal Yea 2008-09,with a total project cost of$221.2 million. Another $25.8 million is required for Headworks improvements at Treatment Plant No.2,with a total project coat of$254.5 million. The proposed CIP contemplates expenditures of$228.9 million in Fiscal Yew 2009-10. Of this total,the largest expenditure within the plant facilities category is $56.9 million for new trickling filters at Treatment Plant No.2. The new secondary treatment system at Reclamation Plant No. 1 is expected to require $21.5 million in Fiscal Year 2009-10. Another $13.2 million during this period is proposed for Headworks replacement at Treatment Plant No.2. The proposed CIP's largest collection system project for Fiscal Year 2008-09 is$22.4 million for the Bitter Point Force Main Rehabilitation project. For Fiscal Year 2009-10, the three largest projects include$18.0 million for replacement of the Rocky Point Pump Station, $13.1 million for replacement of the Bitter Point Pump Station and $7.1 million for the Gisler-Redhill System Improvements, Reach B project The total budgets for these three projects are $31.0 million, $36.5 million and $9.4 million, respectively. Groundwater Replenishment System The District has taken a multi-jurisdictional approach to planning for capital facilities because many of the methods for reducing or managing flows involve other jurisdictions. One such project is the Groundwater Replenishment System (•'GWRS"). In March 2001, the District entered into an agreement with the OCWD to design and construct Phase I of the GWRS. The cost of this Phase is to be paid equally (50% shares) by each agency. The GWRS is a joint effort by the two agencies to provide reclaimed water for replenishment of the Orange County Groundwater Basin and to augment the seawater intrusion barrier. The GWRS is planned for phased expansions. Phase 1 recently commenced and once it becomes fully operational Phase 1 is expected to produce approximately 72,000 acre-feet per year of recycled water. Future phases will be funded solely by OCWD and could expand capacity up to 145,600 acre-feet per year. With the completion of Phase 1,the GWRS has the capacity to divert up to 100 mg/d of flow from the District's ocean discharge. $0336611.6 27 As of June 30, 2008, the total estimated cost of GWRS Phase I was $496.8 million. Of this amount, approximately $90.0 million has been reimbursed through grants from the U.S. Environmental Protection Agency,the U.S. Bureau of Reclamation,the State Water Resources Control Board and others. The District's estimated share is $248.4 million. Costs incurred by the District through June 30, 2008 total $204.1 million. As noted above, Phase I of the GWRS has commenced operations and the GWRS will require a cash outlay of$2.8 million in Fiscal Yea 200"to complete construction,commissioning and contract closeout retention payments. Preferred Level of Treatment In July 2002, the Board of Directors approved a change from the existing level of treatment, a blend of 50% advanced primary and 50916 secondary treated wastewater, to full secondary treatment standards. The reasoning behind the decision to move to full secondary standards included (1)the possibility (no matter how remote) that bacteria from the ocean outfall may at times reach the shoreline, (2)upgraded treatment will aid additional water reclamation with the Orange County Water District, (3)and the public clearly stated preference for upgrading wastewater treatment at the time. In an effort to eliminate most bacteria from being released from the ocean outfall, in 2002 the District began to use chlorine bleach to disinfect the effluent and then apply sodium bisulfate to remove remaining chlorine prior to releasing the treated wastewater to the ocean. The District continues to take measures to limit the chlorine residual to a very low level prior to release. This mode of disinfection is expected to continue while the District studies, designs and constructs permanent facilities, and considers alternate disinfection technologies. Beginning in Fiscal Year 2006-07, the addition of disinfection treatment required an annual outlay of$7.2 million for additional chemicals from the operating budget of the District. Following determination by the Board of Directors in July 2002 to implement full secondary standards, staff prepared the Secondary Treatment NPDES Permit Application that was required to be submitted to the regional office of EPA and the RWQCB in December 2002. An NPDES permit has been issued to the District and the District is currently operating under the Consent Decree. See 'THE DISTRICT—Permits,Licenses and Other Regulations." Currently, the District estimates that it will take approximately four years and require additional capital improvement costs of approximately $456.1 million to add additional secondary treatment capacity to the Wastewater System,with completion expected in December 2012. In addition,operating costs will increase by approximately $7.2 million annually upon completion of facilities necessary to meet secondary treatment sandar& In the interim, the District will operate the plants to maximize available secondary treatment and to reduce effluent biochemical oxygen demand and suspend solid discharges below those currently allowed limits. The District expects its secondary treatment capacity to increase incrementally each year as operations change and new facilities are constructed and placed in service. Biosolids Management The District produces approximately 650 tons per day(tpd) of digested and dewatered biosolids. By 2012, when new secondary treatment processes are expected to be fully operational, the District's biosolids production is projected to increase to 830 tpd, though with the planned installation of centrifuges, such production is expected to decrease to 750 tpd in 2014 and 700 tpd in 2016. The District relies on the following technologies and locations for the management of its biosolids: land application of biosolids in Arizona, land composting to high-grade soil amendment in Riverside County, Kent County and La Paz County,Arizona,and landfilling of biosolids in Yuma County,Arizona. 90336611.6 28 Counties throughout Cafifomia and Arizona have developed, or are in the process of developing, ordinances that severely restrict or ban the land application of biosolids. In June 2006, Kern County voters approved an anti-sludge initiative that bans the land application of biosolids. It has become clear that certain land application options currently available to the District are anticipated to be eliminated in the near future due to these developments. The District,and most of California's wastewater agencies,is working to develop sustainable products and management locations for its biosolids. The dynamic regulatory issues, land application ordinances and bans, and public perception challenges prompted the District, with the help of CH2MHill, to develop a Long-Range Biosolids Management Plan ("LRBMP"). This LRBMP was approved by the Board in December 2003. The goal of the LRBMP was to develop a sustainable, reliable, and economical program for long-range biosolids management providing environmentally sound practices that meet the stringent federal, state, and local regulatory requirements. The LRBMP recommendations included new in-plant technologies to reduce the volume of biosolids, explore the production of high-grade biosolids products, and move into the energy and fuel production and compost markets. As a result of the LRBMP recommendations,the existing Synagro biosolids management contract was amended in April 2004 to have 250 tons per day of the District's biosalids composted at Synagro's South Kern Compost Manufacturing Facility. This composting facility is receiving its full allocation of contracted biosolids. In May 2006,the District entered into a contract with EnerTech Environmental,Inc. to convert 225 tons of biosolids per day to a renewable fuel at EnerTech's proposed facility in Rialto, California. The EnerTech solution is a relatively new,patented heat treatment process that increases the ability to dewater biosolids in order to maximize the efficiency of the production of fuel. By decreasing the moisture content of biosolids prior to drying, a smaller dryer is needed, thus reducing capital and energy consumption. The fuel product will be recycled and reused, under agreements with area cement kilns and other fuel users. Residual ash from the fuel combustion becomes part of the cement product, resulting in no residual waste product liability. The EnerTech facility began receiving biosolids from the District in November 2008. Currently, the balance of the bioolids not managed by either Synagro or EnerTech are being managed by Tole Ranch pursuant to a fivo-year contract by either land application or landfill disposal in Arizona. The District anticipates releasing a Request for Proposals for long-term biosolids management for the remainder of the biosolids not managed via existing long-term contracts by either Synagro or EnerTech by June 2009. As a result of the transition to biosolids-based compost and energy products the cost to the District for biosolids management has increased. The Fiscal Year 2006-07 management budget for biosolids was $12.8 million. The Fiscal Year 2007-08 management budget for biosolids was $14.3 million. The actual cost of biosolids management in Fiscal Year 2006-07 and Fiscal Year 2007-08 was $11.7 million and $13.5 million,respectively. The Fiscal Year 2008-09 biosolids management budget is $19.9 million. Urban Runoff In June 2002, legislation was passed that allows the District's charter to include permissive language authorizing the diversion and management of dry weather urban runoff flows. This legislation allows the District to acquire,construct,operate,maintain,and famish facilities for the diversion of urban runoff from drainage courses within the District,the treatment of the urban runoff,the return of the water to the drainage courses,or the beneficial use of the water. The legislation allows the District to divert up to 10 million gallons a day and consider more extensive options, such as building artificial wetlands that would naturally filter the runoff, or building a 80336611.6 29 runoff treatment plant, similar to a $9.5 million facility built in Santa Monica that recycles 500,000 gallons of runoff a day. The County's beaches have been affected by storm water and urban runoff pollution. As a result, the Santa Ana Regional Quality Control Board has taken direct action to control discharge of pollutants to tributaries and recreational water bodies in the County by issuing a Storm Water Permit to the County and cities. In order to comply with the provisions of the permit, the County and cities have increased resources to fund municipal storm water/urban runoff management and treatment services. However,this effort has been difficult to sustain given the complexity of the program and the competing demands on limited resources. The District, the County and other local agencies, are currently considering whether to explore public support for levying a fee to property owners to fund regional storm water/urban runoff management and treatment services within the County. Integrated Emergency Response Program In recognition of the potential damage which could occur in the event of a major earthquake, flood or other disaster, the District has implemented an Integrated Emergency Response Program (the "IERP") in 1979. The IERP is a two-volume plan which contains policies, plans and procedures preparing for, and responding to, emergencies. The District also analyzed disaster preparedness issues and policies within the Master Plan, and within a 1994 document titled Fault Rupture Hazard Investigation-Wastewater Treatment Plant No. 2. According to the Master Plan, earthquakes are considered to be the most potentially devastating natural disaster events which confront the District. The disaster preparedness plan included in the Master Plan reviewed two possible major earthquake scenarios: an 8.3 Richter magnitude ("M") earthquake on the southern San Andreas fault system and an M 7.0 earthquake 7.0 Newport-Inglewood fault zone,which includes Plant No. 2. An M 8.3 earthquake on the southern San Andreas fault,while on the whole more destructive than the M 7.0 Newport-Inglewood fault even, would probably result in less damage to the District's service area due to the distance of the fault from most of the service area. However, the 1989 Master Plan stated that damage from such a major earthquake on the San Andreas fault would be extensive. Also, the Master Plan indicated that an M 7.0 earthquake on the Newport-Inglewood fault within five miles of the District's sewerage facilities could cause major destruction to those facilities. The disaster preparedness plan in the Master Plan indicated that it would not be economically feasible to upgrade all of the existing sanitary sewerage facilities to survive an earthquake of this magnitude along the Newport-Inglewood fault. The IERP outlines the policies and employee actions to be taken before, during and after an earthquake,earthquake response guidelines and damage assessment procedures. The Master Plan analyzed the vulnerability of the sanitary sewerage facilities and operations of the District and planned a risk reduction program wherein the vulnerability of many of the District's sanitary sewerage facilities to an earthquake could be reduced by recommended retrofit construction measures. The Master Plan also recommended that designs of existing major structures which were constructed prior to development of current seismic design standards be reviewed and the structures strengthened,if necessary. Since the 1989 Master Plan and the 1994 Report, the District has completed retrofitting where deemed appropriate. Pursuant to the Master Plan, all recent and future projects have been, and will be, designed to the same high earthquake code standards as set for other essential services, such as hospitals and fire stations. Many of the older buildings analyzed in the Master Plan have been replaced by structures built after 1989. 80336611.6 30 The Army Corps of Engineers' "All-River Plan" has mitigated any future flooding of the Santa Ana River system and potential threats to the District's Wastewater System. Also, both Plant No. I and Plant No.2 are surrounded by three-foot to six-foot high walls,built to federal standards. The disaster preparedness plan in the Strategic Plan investigates the damage potential posed by coastal flooding,tsunamis(large ocean waves generated by seismic activity) and windstorms. However, based on available information, the District does not believe that any of such events would have a material adverse impact on the Wastewater System. The Strategic Plan also makes recommendations regarding fire protection of the Wastewater System and most of the structures at Plant No. 1 and Plant No. 2 are constructed of fire-resistant materials. The IERP describes the procedures needed to respond to a possible disaster. For more infornation regarding emergency response policies, the disaster preparedness plan described in the Strategic Plan and the IERP can be reviewed at the District's office. DISTRICT REVENUES Sewer Service Charges General. The District has the power to establish fees and charges for services of the Wastewater System. Such fees and charges are established by the District's Board of Directors and are not subject to review or approval by any other agencies. In Fiscal Year 1997-98, a Rate Advisory Committee (the "RAC") was established comprised of representatives from industrial, commercial and residential users. The goal of the RAC was to examine the then current rate structure and, if needed, develop recommendations for change. The RAC analyzed the District's rate structure to determine whether its then current sewer service user fees (now known as "Sewer Service Charges") were equitable among residential and industrial customers. This review resulted in a proposal to expand the number of non-residential user categories from one to twenty-three and to provide for gradual rate increases in seven of the nine Revenue Areas. The increase in the number of categories provided a more equitable fee structure and also provided for furore reductions in single- family residential Sewer Service Charges. The Sewer Service Charges for those categories were based on the average flow and strength of wastewater discharged for each property type and remain currently in use. The Board of Directors establishes the annual sanitary sewer service charges by ordinance. The sanitary sewer service charge ordinances are adopted by a two-thirds vote of the Board of Directors as required under law after conducting a noticed public hearing in compliance with Proposition 218. See "LIMITATIONS ON TAXES AND REVENUES — Article XIIIC and Article XIIID of the California Constitution." In May 2002,the Board of Directors adopted District Ordinance No.OCSD 18(the"2002 Ordinance") which was effective on July 1, 2002. The 2002 Ordinance included a single family residential ("SFR") rate increase, the underlying basis for all sanitary sewer service charges including sanitary sewer rates for multi-family residential units as well as most commercial and industrial properties, of $7.50 per year, or 9.4%, to $87.50 per year. In June 2003, the Board of Directors authorized a Proposition 218 notice on proposed"not to exceed"rate increases for each year over the next five years. Each year thereafter,the Board of Directors has ratified the next year's actual rate. The District collects Sewer Service Charges from property owners through the semi-annual property tax bill distributed by the County throughout the District, except in Revenue Area No. 14. Pursuant to the IRWD Agreement, the District receives quarterly fee payments from the Irvine Ranch Water District (the "IRWD") which directly collects fees from customers through a monthly billing procedure in Revenue Area No. 14. 8033M 11.6 31 The District has covenanted in the Master Agreement to fix, prescribe and collect fees and charges to satisfy certain coverage requirements as further described under "SECURITY AND SOURCES OF PAYMENT FOR THE CERTIFICATES—Rate Covenant"herein. Residentlat and Cornmerclat Sewer Service Charges. Pursuant to the 2002 Ordinance, the District established residential Sewer Service Charges upon a rational basis between the fees charged each customer and the services and facilities provided to each customer of the District, except those located in Revenue Area No. 14. The noticed public hearing held in connection with the 2002 Ordinance considered increases in the amount of the annual charges by approximately 20% per year for each of the then following five years. In May 2005, the Board of Directors adopted Ordinance No. OCSD-26 increasing the Fiscal Year 2005-06 single family residential rate, the underlying basis for all sewer service charges, by 31%, from $115.00 to $151.00 for all ratepayers, except those located in Revenue Area No. 14. In June 2007, the Board of Directors adopted Ordinance No.OCSD-32 increasing the Fiscal Year 2007-08 single family residential rate by 9.8%. On February 27, 2008, the Board of Directors approved increases in its sanitary sewer service charges for all single family and multi-family residential units, and for all commercial properties. The Board increased the single family residential rate,which is the basis for all of the District's sewer service charges, by 10.5% for Fiscal Year 2008-09, 10% for Fiscal Year 2009-10, 10% for Fiscal Year 2010-11, 9.8%for Fiscal Year 2011-12 and 9.8%for Fiscal Year 2012-13. Table 6 below sets forth the annual ordinance adoptions following the last Proposition 218 notice and presents a five-year comparison of the Sewer Service Charge rate for single-family residences. Table 6 Annual Sewer Service Charges Single Family Residence Rate Five Year Rate Schedule Fiscal Years 2004-05 through 2008-09 Effective Sewer Service Percent Fiscal Year Ordinance No. Date Charee rune ease 2004-05 OCSD-20 07/01/04 $115.00 15.0% 2005-06 OCSD-26 07/01/05 151.00 31.3 2006-07 OCSD-30B 07/01/06 165.80 9.8 2007-08 OCSD-32 07/01/07 182.00 9.8 2008-09 OCSD-35 07/01/08 201.00 10.5 Source: Orange County Sanitation District. Table 7 below sets forth total average annual Sewer Service Charge for single-family residences within the District,together with comparable total average annual changes for wastewater service within the jurisdictions of certain other cities and districts within the State as of July 1, 2008. The District's projected SFR rate of S293 in Fiscal Year 2012-13 remains below the current average annual sewer rate of $406 according to a Fiscal Year 2007-08 survey of 726 agencies encompassing all 58 counties in California conducted by the State Water Resources Control Board. 8033MI1.6 32 Table 7 Comparison of Total Sewer Service Charges For Single-Family Residences As of July 1,2008 Average Dry Annual Weather Sewer Property Flow Service Treatment Collection Tax PI nl IrlPl P) P) Entity (me/d) Charge Level Responsibility Income City of San Diego 168 $531 2 Yes No City of Los 428 360 4 Yes No Angeles East Bay MUD so 247 4 No Yes Sacramento 140 237 3 No Yes Orange County 233 201 2 No Yes Sanitation District Los Angeles 497 117 4 No Yes County Somc�ormation obtained from respective entities listed. RI Treatment Level Categories: "1"—Primary treatment. "2"—Advanced primary or primary with some secondary treatment. 113 Secondary treatment. "4"—Advanced secondary or secondary with some tertiary treatment. 1» " "5 —Tertiary treatment. Soma: 2007-08 Wastewater User Charge Survey Report by the California State Water Resources Control Board. Industrial Sewer Service Charges. The District charges industrial Sewer Service Charges to customers discharging high-strength or high-volume wastes into the sewer systems. Customers subject to industrial Sewer Service Charges are billed directly by the District. The fee charged to each customer is based on the customer's sewage volume, the concentration of suspended solids and biochemical oxygen demand. Pursuant to the 2002 Ordinance, rates for each component factor were revised for certain industrial users in order to be consistent with the rates charged to residential users. Total industrial Sewer Service Charges in Fiscal Year 2007-08 were approximately $12 million. Industrial Sewer Service Charges are applied to both operating and capital funds. The Sewer Service Charge increases described above are necessary to meet the District's cash flow needs arising from the addition of disinfection treatment and other operating requirements. As discussed under the caption "THE DISTRICT — Capital Improvement Program," the CIP Validation Study in the Spring of 2005 (as further updated in the 2008 CIP Validation Study) developed a capital improvement program to meet secondary treatment standards as quickly as possible while providing for increased flows and rehabilitation and refurbishment of existing facilities.As projected out to Fiscal Year 2020-21 the cash flow needs of the CIP total approximately $2.48 billion, approximately $1 billion of which has been spent to date. The bulk of construction is scheduled during the next six years, with average annual expenditures of$200 million. 80336611.6 33 Additional Revenues The District has several sources of additional revenue, including property taxes,Capital Facilities Capacity Charges,capacity rights,permit and inspection fees and interest earnings. Properly Taxes. The District receives approximately 2.5%of the one percent County ad valorem property tax levy, based on the allocation procedure under State law. Property tax revenues were $44.6 million in Fiscal Year 2002-03,$46.9 million in Fiscal Year 2003.04, $35.8 million in Fiscal Year 2004- 05, $40.0 million in Fiscal Year 2005-06, 560.6 million in Fiscal Year 2006-07 and $65.2 million in Fiscal Yew 2007-08. The $11.2 million decrease in property tax revenues from Fiscal Year 2003-04 to Fiscal Year 2004-05 is reflective of the State of California's then current fiscal crisis and the implementation of the first year of a two-year 40% secured property tax shift away from independent special districts. During the 2004-05 State Budget process, the State Legislature and the Governor enacted Senate Bill 1096 and Assembly Bill 2115, effectively shifting an additional $1.3 billion in local property tax revenues from counties, cities, special districts and redevelopment agencies to schools and community colleges. This shift was effective for Fiscal Year 2004-05 and Fiscal Year 2005-06,resulting in a 40% secured property loss for the District. See"LIMITATIONS ON TAXES AND REVENUES — Proposition IA."This 40% reduction for Fiscal Year 2004-05 was somewhat offset by the than existing strength in the real estate market. Total assessed valuations increased in the 2005-06 Fiscal Year by 10.3%over the 2004-05 Fiscal Year,and the full value of these increases was received on all non-secured property tax distributions. The District received property tax revenues in its full allotment (no State property tax shift)of$65.2 million in Fiscal Year 2007-08. The District expects its property tax receipts to be approximately 5% in Fiscal Year 2008-09. See Table 11 below. The District currently projects its property tax receipts to increase by 5%each year thereafter. This projection reflects the fact that declines in the market value of property in the County do not necessarily result in decreased property tax revenue in the new tern because of the limiting effect of Proposition 13 on assessed valuations and other factors. The apportionment of the ad valorem tax is pursuant to a revenue program adopted by the District in April 1979 to comply with EPA and RWQCB mandates, legal and contractual requirements and Board of Directors policy. Capital Facilities Capaciy Charger. Capital Facilities Capacity Charges (formerly known as connection fees) are one-time fees with two components, paid at the time property is developed and connected to the Wastewater System. The fees are imposed by the District pursuant to Section 5471 of the Colifonria Health and Safety Code and are levied to pay a portion of the District's capital costs and for access to capacity in the Wastewater System. Currently, the District has Capital Facilities Capacity Charges of $4,517 per residential unit (three-bedroom); however, under the current industrial use ordinance, additional Capital Facilities Capacity Charges can be imposed on industrial users who place larger than average demand on the Wastewater System. Member cities and sanitary districts collect Capital Facilities Capacity Charges for the District when building permits are issued. Capital Facilities Capacity Charges are reviewed annually to reflect the changes in the value of the Wastewater System to which a new customer is connecting. On December 15, 1999, the Board of Directors approved District Ordinance No. OCSD 99-11 (the"1999 Ordinance")which established a comprehensive Capital Facilities Capacity Charge. The 1999 Ordinance, effective as of January 1, 2000, renamed connection fees as Capital Facilities Capacity Charges and provided a more equitable schedule of fees among industrial, commercial and residential users. Pursuant to the 1999 Ordinance,Capital Facilities Capacity Charges were revised for high demand industrial users in five incremental increases from 1999 through 2001. For a summary of historical and projected revenues derived from Capital Facilities Capacity Charges, see Table 14 and Table 15 below. Pursuant to an agreement with the IRWD, the IRWD is not required to pay Capital Facilities Capacity Charges and in exchange,the IRWD provides funding to the District for the construction costs of certain wastewater collection, transmission, treatment and disposal facilities to be used by the IRWD 90336611.6 34 n and is obligated to make certain payments to the District for certain services arising from the Wastewater System(including any standby or availability charges). Sale of Capacity. The District has entered into agreements with the Santa Ana Watershed Project Authority ("SAWPA") whereby wastewater from Upper Santa Ana River Basin dischargers can be transported through the District's Santa Ana River Interceptor to the District's wastewater treatment facilities. This program was developed in the early 1970's.The agreements establish control mechanisms regarding the quality of wastes deposited into the Wastewater System. At the present time, SAWPA has purchased and paid for 30 mg/d of capacity rights in the District's Santa Ana River Interceptor and 17 mg/d of capacity in the District's wastewater treatment plants. Additional treatment plant capacity can be purchased in increments at the District's current replacement cost. The Santa Ana River Interceptor Line ("SARI") was built in the Chino Basin Preserve Area in order to remove dairy farm wastes and accommodate future urban development. Salts in the wastewater generated from the cleaning of cows and milking equipment were leaching into the groundwater in the Chino Basin and the SARI was built to divert the washwater from this area. However, due to the nature of the Chino Basin Preserve,the development of any infrastructure in the area to accommodate the SARI was limited. The current SARI multi-phase project is designed to connect several dairies to the SARI. Future expansions of this project could include connecting other dairies and other waste streams with the SARI line. See"THE DISTRICT—Capital Improvement Program"herein. Wastewater Treatment History The average yearly influent flow to the District has remained relatively stable for the preceding four years. The wastewater flow for Fiscal Year 2004-05 was 243 mg(d,for Fiscal Year 2005-06 was 235 mg/d, for Fiscal Year 2006-07 was 229 mg/d and for Fiscal Year 2007-09 was 221 mg/d. The highest flow rate experienced was during El Nmo storm periods. Peak flows of 500 mg/d were recorded in December 1997 and February 1998. There were no sewer failures or overflows during these events. Customers The historical number of customers served by the District for the Fiscal Years 2003-04 through 2007-08 and the projected number of customers served by the District for the Fiscal Years 2008-09 through 2012-13, identified in Equivalent Dwelling Units ("EDUs"), am set forth in Table 8 below. As discussed below, sewer service charges are based on the expected amount of wastewater flow for a single family dwelling. This base amount is considered the"equivalent dwelling wit." The EDUs ad forth in Tables 8 and 9 below equate to total Sewer Service Charge levies. 90336611.6 35 9 Table 8 Historical and Projected Equivalent Dwelling Units Fiscal Years 2003-04 through 2012-13 Historical Projected Fiscal Year EDUs Fiscal Year EDUs01 2093_04121 884,169 2008-09 914,677 2004-051r1 893,501 2009-10 918,336 2005-06 910,469 2010-11 922,009 2006-07 907,986 2011-12 925,697 2007-08 911,033 2012-13 929,400 EDP U growth during the projection period is estimated at approximately 0.4%per annum. m With respect to such Fiscal Years, presentation in the Statistical Section of the District's Comprehensive Annual Financial Report set forth in Appendix A includes EDUs that equate to total Sewn Service Charge collections rather than levies. Source: Orange County Sanitation District. Table 9 below shows the number of residential and commercial customers and industrial customers and the approximate percentages of Sewer Service Charge revenues derived from the combined residential and commercial use and industrial use for the last five fiscal years. Table 9 Number of Accounts and Revenues by Customer Class for the Fiscal Years 2003-04 through 2007-08 ($in Millions) Residential/Commercial Industrial Number of Percentage Percentage Equivalent of Sewer of Sewer Single- Service Number of Service Family Total Charge Customer Total Charge Fiscal Year Dwellings Revenue Revenues Accounts Revenue Revenues 2003-041n 860,156 $ 86.0 92% 530 $ 7.5 8% 2004-05(" 860,634 99.0 90 5" 10.5 10 2005.06 872,859 132.0 92 557 12.2 8 2006-07 867,035 143.8 91 531 13.4 9 2007-08 875,824 159.4 93 520 12.1 7 With respect to such Fiscal Years, presentation in the Statistical Section of the Comprehensive Annual Financial Report set forth in Appendix A includes EDUs that equate to total Sewer Service Charge collections rather than levies. Source:Orange County Sanitation District. The ten largest principal sewer service customers of the District for the Fiscal Year ended June 30, 2009 are shown in Table 10 below. These principal sewer service customers paid a total of $5,711,033 for wastewater service from the District. 80336611.6 36 Table 10 Largest Principal Sewer Service Customers of the District for the Fiscal Year Ended June 30,2008 Percentage of Total Sewer Service Sewer Service User Charges Charge Revenues Kimberly-Clark Worldwide, 0.56% Inc. $1,032,500 Alstyle Apparel—A&G Inc. 1,023,517 0.56 MPC Foods,Iaa 798,449 0.43 Stremicks Heritage Foods, 037 LLC 689,749 House Foods America Corp. 525,676 0.29 Ameripec Inc. 414,671 0.23 Pepsi-Cola Bottling Group 384371 0.21 Seven-Up Bottling Company 304,864 0.17 Van Law Food Products Inc. 2729011 0.15 Nor-Cal Beverage Co. Inc. 268.225 0.15 TOTAL $5,7119033 3.12% Source: Orange County Sanitation District. Assessed Valuation The assessed valuation of property in the County is established by the County Assessor, except for public utility property which is assessed by the State Board of Equalization. Due to changes in assessment required under State Constitution Article XIIIA, the County assessment roll no longer purports to be proportional to market value. See "LIMITATIONS ON TAXES AND REVENUES" herein. Generally, property can be reappraised to market value only upon a change in ownership or completion of new construction. The assessed value of property that has not incurred a change of ownership or new construction must be adjusted annually to reflect inflation at a rate not to exceed 2% per year based on the State consumer price index. In the event of declining property value caused by substantial damage, destruction, economic or other factors, the assessed value must be reduced temporarily to reflect market value. For the definition of full cash value and more information on property tax limitations and adjustments,see"LIMITATIONS ON TAXES AND REVENUES"herein. The County Assessor determines and enrolls a valtre for each parcel of taxable real property in the County every year. The value review may result in a reduction in value. Taxpayers in the County also may appeal the determination of the County Assessor with respect to the assessed value of their property. Table I I below shows a five-year history of assessed valuations in the District since Fiscal Year 2004-05. 90336611.6 37 Table Il Assessed Valuations of Property in the District Fiscal Years 2004-05 through 2008-09 ($in Billions) Fiscal Year Value %Change 2004-05 $219.3 8.85% 2005-06 241.8 10.30 2006-07 270.7 11.93 2007-08 292.7 8.13 2008-09 307.6 5.09 Source: County of(range Auditor-Controller. Prior to 2006, the housing market in Southern California experienced significant price appreciation and accelerated demand. During this period, many homebuyers financed the purchase of their now homes using non-conventional loans. Such loans were made with little or no down payment and included adjustable interest rates subject to being reset at higher rates on a specified date or upon the occurrence of specified conditions. In addition, many of these loans allow the borrower to pay interest only for an initial period, in some cases up to ten years. Starting in 2006, housing developers, appraisers and real estate consultants began to report weakening of prices for single-family homes. There has been tightening of underwriting criteria for mortgage loans such that most lenders now require down payments,stricter verification,higher income to loan ratios,higher credit ratios or some combination of such factors. These factors have contributed to a decrease in home sales as prospective purchasers are unable to qualify for loans. Declining home sales in some areas of Southern California have resulted in a decrease in home prices. As home values decline, homebuyers may not be able to obtain replacement financing because the outstanding low balances exceed the value of their homes. Due to the limiting effect of Proposition 13 on assessed valuations, declines in the market value of property in the Comfy will not necessarily result in decreased property tax revenue in the near term. In fact, assessed valuations of property in the District for Fiscal Year 2008-09 have increased by $14.9 billion, or 5.09%, over Fiscal Year 2007-08 valuations. Under certain circumstances, however, the County may reduce assessed valuations as a result of decreases in market value,leading to decreased property tax collections. Tax Levies and Delinquencies Property taxes are based on assessed valuation which is determined as described under "DISTRICT REVENUES—Assessed Valuation"herein. In accordance with the California Revenue and Taxation Code,the County tax collector collects secured tax levies for each Fiscal Year. Property taxes on the secured roll are due in two installments, on November 1 and February 1. The District currently participates in the Comty's Teeter Plan order which the District receives annually 100a/a of the secured property tax levies and Sewer Service Charges to which it otherwise is entitled,regardless of whether the Comfy has actually collected the levies. This alternative method provides for fording each taxing entity included in the Teeter Plan with its total secured property taxes during the year the taxes are levied, including any amount uncollected at fiscal year end. Under this plan,the District's general fund receives the full amount of secured property taxes levied each year on its behalf and for so long as such plan remains in effect, the participating entities, such as the District, no longer experience delinquent taxes. The County's general fund is the designated recipient of future collections of penalties and interest on all delinquent taxes collected on behalf of participants in this alternative method of apportionment. In recent 80336611.6 38 years, the County has experienced delinquencies of Sewer Service Charges in the District of approximately 2%. Unpaid taxes become delinquent after December 10 and April 10, respectively, and a 10"/u penalty attaches to any delinquent payment. In addition, property on the secured roll with respect to which taxes are delinquent is declared tax-defaulted on or about June 30. Such property may thereafter be redeemed by payment of the delinquent taxes and the delinquency penalty, plus costs and redemption penalty of one and one-half percent per month to the time of redemption. If taxes are unpaid for a period of five years or more,the tax-defaulted property is subject to sale by the County Treasurer-Tax Collector. Property taxes on the unsecured roll are due as of the January 1 lien date and become delinquent, if unpaid, on August 31. A 10% penalty attaches to delinquent taxes on property on the unsecured roll and an additional penalty of one and one-half percent per month begins to accrue on November 1. 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 certain property of the taxpayer; (3) filing a certificate of delinquency for recordation in the County Recorder's office in order to obtain a lien on certain property of the taxpayer, and(4)seizure and sale of personal property,improvements or possessory interests belonging or assessed to the taxpayer. Table 12 below presents a five-year history of the District's ad valorem total property tax and Sewer Service Charge levies. Table 12 Total Property Tax and Sewer Service Charge Levies in the District for Fiscal Years 2003-04 through 2007-08 (In Thousands) Total Tax and Sewer Fiscal Year Service Charge Lew 2003-04 $134,132 2004-05 152,745 2005-06 191,290 2006-07 209,206 2007-08 228,622 Source: Orange County Auditor-Controller's Office. Budgetary Process The District's operating fund budget relies on revenues from property taxes and Sewer Service Charges, both of which are collected on the property tax bill. See "DISTRICT REVENUES — Sewer Service Charges"and"—Additional Revenues." The District receives tax revenues from the County in eight allocations,with the largest receipts in December and April. The District operates on a Fiscal Year beginning each July 1. The operating fund budgets include funds to cover the dry period of each tax year, i.e., the period from the beginning of the Fiscal Year until the first taxes are received. The dry-period requirement is budgeted at one-half of the annual operating fund budgeted expenditures. The District uses the accrual method of accounting in its budgets. The District has conformed to its budgets for the last five fiscal years and is conforming to its budget for the current fiscal year. 80336611.6 39 The District's annual budget preparation process begins in January of each year and concludes in June upon its adoption. The General Manager reviews the final operating budgets and then distributes them to the Directors and District Committees for consideration. The Board of Directors then adopts the proposed annual budgets,with any revisions,in June of each year. Budgetary control is exercised at the individual Department level and administrative policies provide guidelines on budget transfers and the authorization necessary to implement transfers. A budget adjustment is a transfer which does not change the total appropriated amount and does not require Board of Directors action. Approval may be granted by the General Manager or the Department Head in certain circumstances. Department Heads have the discretion to reapportion funds between certain line items within a division but may not exceed total appropriated amounts for each department. They may also transfer staff across divisional lines. The General Manager and Board of Directors must approve additional capital outlay items. A budget amendment is an adjustment to the total appropriated amount which was not included in the original budget. These supplemental appropriations require formal action by the Board of Directors. Prior year reserves or fund balances may be appropriated to fund items not previously included in the adopted budget. Reserves or fund balances exceeding minimum amounts required by fiscal policies may be appropriated if it is determined to be in the best interest of the District. Directors may also appropriate reserves in case of emergencies or unusual circumstances. Reserves The District has an established reserve policy with eight separate categories for its reserve funds. The following table sets forth actual reserves at June 30, 2008, projected reserves at June 30, 2009, and proposed reserves at June 30, 2010, for each fund. Reserve levels are calculated in accordance with the District's reserve policy. Table 13 Actual and Projected Reserves June 30,2008 through 2010 (In Millions) June 30,2007 June 30,2008 June 30,2009trr Cash Flow Requirements Reserve— Operating Expenses $110 $ 70 $73 Certificates of Participation Payments - 65 84 Operating Contingencies Reserve 22 14 15 Capital Improvement Program Reserve 51 165 83 Catastrophe and Self Insurance 57 57 58 Capital Replacement and Refurbishment 53 54 55 Debt Service Required Reserves 79 108 133 Total $372 $533 $501 projc_ Source: Orange County Sanitation District. The Cash Flow Requirements Reserve was established to fund operation, maintenance and certificates of participation debt service expenses for the first half of the fiscal year,prior to the receipt of the first installment of the property tax allocation and sewer service user fees which are collected as a separate line item on the property tax bill. The level of this reserve is established as the sum of an amount equal to six months operations and maintenance expense and the total of certificates of participation debt service expenses due in the subsequent fiscal year. The Operating Contingencies Reserve was established 90336611.6 40 to provide for non-recurring expenditures that were not anticipated when the annual budget and Sewer Service Charges were adopted. The level of this reserve is equal to 10%of the District's annual operating budget. The Capital Improvement Program Reserve was established to fund annual increments of the Capital Improvement Program with a target level at one-half of the average annual Capital Improvement Program through the year 2020. Levels higher and lower than the target can be expected while the long- term financing and capital improvement programs are being finalized. The Catastrophic boss, or Self. Insurance Reserve is established for property damage including fire, flood and earthquake, general liability and workers' compensation. The level of reserve in this fund is maintained at a level to fund the District's non-reimbursed costs which are estimated to be $57 million. The Capital Replacement and Refurbishment Reserve was established to provide 30%of the funding to replace or refurbish the current collection,treatment and disposal facilities. The current replacement value of these facilities is estimated to be approximately $6.26 billion. The initial reserve level for this fund was established at $50 million and is augmented by interest earnings and a portion of the annual Sewer Service Charges. Debt Service Required Reserves(or Obligation Reserve Funds as defined in the Master Agreement)are controlled by a trustee pursuant to the provisions of certificates of participation issues and are not available for the general needs of the District. The Rate Stabilization Reserve accumulates all available funds which exceed the targets for all other reserves. The Rate Stabilization Reserve is a separate fund from the Rate Stabilization Account established under the Trust Agreement. These funds are applied to future years' needs and must be maintained at specified levels. There is currently no established target for this reserve and because the reserves of all other funds have not been exceeded,the reserve level for this reserve fund is zero for Fiscal Years 2005-06 through 2008-09. See APPENDIX A — "COMPREHENSIVE ANNUAL FINANCIAL REPORT OF THE ORANGE COUNTY SANITATION DISTRICT FOR FISCAL YEAR ENDED JUNE 30,2008"herein. Summary of Operating Data Set forth in Table 14 below is a summary of historic operating results for the District for Fiscal Years 2003-04 through 2007-08. The District's CIP cash flow budget for Fiscal Year 2007-08 is$302.7 million, an increase of$36.6 million from the prior year total, for the financing of joint works treatment and disposal system improvement projects,and collection system improvement projects. This increase is attributable to the additional infrastructure creeds identified in the Interim Strategic Plan and in the CIP Validation Study. The information presented in the summary should be read in conjunction with the financial statements and notes. See APPENDIX A — "COMPREHENSIVE ANNUAL FINANCIAL REPORT OF THE ORANGE COUNTY SANITATION DISTRICT FOR FISCAL YEAR ENDED JUNE 30,2008"herein. 80336611.6 41 Table 14 Summary of Historical District Revenues and Expenses and Other Financial Information For Fiscal Years 2003-04 through 2007-08 is in Millions) 2003-04 2004-05 2005-06 2006-07 2007-08 Revenues: Sewer Service Charges(" $86.0 $ 99.0 $ 132.0 $143.8 $159.4 Industrial Sewer Service Charges 7.5 10.5 12.2 13.4 12.1 Revenue Area No. 14 Fees 5.8 6.9 5.3 5.2 7.1 Ad Valorem Taxes 46.9 35.8 40.0 60.6 65.2 Interest Earnings 6.8 15.1 10.4 22.2 20.2 Capital Facilities Capacity Charges ("CFCC") 9.0 9.8 15.6 313 19.8 Other Revenues 4.0 6.1 9.2 8.3 6.9 Total Revenues $166.0 $183- $224.7 $284.8 $290.7 Operations and Maintenance Expensex121 $95.4 $101.8 $105.6 $112.2 $131.9 Net Revenues(31 $61.6 $ 71.6 S103$ SL41.3 $139.0 Debt Service UM $ 37.2 � $ 48-6 LAA Coverage Ratios") 2.17x 1.89x 2.47x 2.91x 3.25x CIP Outlay 5142 $187.9 $26R8 S28M gjj5,g Ending Reserves(" 551U $407.0 $40" MU $434.0 Net of rebates,if any,to commercial users. t't Excludes depreciation and amortization expenses. 14' Calculated in accordance with the Master Agreement,which excludes CFCC from Net Revenues. Excludes debt service reserves in accordance with the District's reserve policy. Source: Orange County Sanitation District. Projected Operating Data Set forth in Table 15 below are projected operating results for the District for Fiscal Years 2008- 09 through 2012-13. These projections assume the number of projects and scheduled build out set forth in the CIP Validation Study,and reflect Board-approved annual increases in sewer service rates of 10.5%, 100/6, 10%, 9.8% and 10.5% over this five-year period. Principal expenditure components of these projections are derived from the CIP Validation Study, which identified 114 large capital projects managed by the Engineering Department through 2020-21 at a total cost of$2.48 billion, and currently projected to include over $1.1 billion in the next five years. The District's CIP cash flow budget for Fiscal Year 2008-09 is $373.7 million, an increase of$94.4 million from the prior year estimated total. This CIP budget finances joint works treatment and disposal system improvement projects, and collection system improvement projects. This increase is attributable to the additional infrastructure needs identified in the CIP Validation Study. The preparation of such projections was based upon certain assumptions and certain forecasts with respect to conditions that may occur in the future. While the District believes that these assumptions and forecasts are reasonable for the purposes of the projected selected operating data,it makes no representations that they will in fact occur. To the extent that actual future conditions differ from those assumed herein,the data will vary. 80336611.6 42 Table 15 Summary of Projected District Revenues and Expenses and Other Financial Information for Fiscal Years 2008-09 through 2012-13 ($in Millions) 2008-09 2009-10 2010-11 2011-12 2012-13 Revenues: Residential&Commercial Sewer Service Charges $191.3 $211.3 $234.2 $257.4 $284.7 Industrial Sewer Service Charges 9.5 10.4 11.5 12.6 13.8 Revenue Area No. 14 Fees 30.2 17.3 20.3 21.2 23.1 Ad Valorem Taxes 64.9 68.2 71.6 75.2 78.9 Interest Earnings 19.2 18.6 19.5 20.6 21.8 Capital Facilities Capacity Charges("CFCC") 21.7 22.9 24.2 25.6 27.0 Other Revenues 19.2 15.2 18.0 18.2 18.9 Total Revenues $356.0 $363.9 $399.3 $430.8 $468.2 Operations and Maintenance Expenses 146.8 154.0 184.1 199.7 216.9 Net Revenues.. $187.5 $187.0 $191.0 $205.5 $224.3 Debt Proceeds $200.0 $120.0 $ 90.0 $ 60.0 $ 80.0 Debt Service $ 74.6 $ 84.3 $ 91.2 $ 95.8 $100.5 CIP Outlays $373.7 $228.9 $182.5 $169.8 $188.6 Ending Reserves") $333.9 $341.4 $365.0 $385.8 $421.6 Coverage Ratios1n 2.51x 2.22x 2.09x 2.15x 2.23x Caic�accordance with the Trust Agreement,which excludes CFCC from Net Revenues. Irl Excludes debt service reserves in accordance with the District's reserve policy. al Calculated in accordance with the Master Agreement,which excludes CFCC from Net Revenues. Assumptions: (a) Annual growth in equivalent dwelling units is projected to increase 0.4%over the next five years. (b)The Residential and Commercial Sewer Service Charge and the Industrial Sewer Service Charges are forecasts are based on the total projected equivalent dwelling units, the actual 10.5% increase for 2008-09, and the approved rate increases of 10.0%, 10.0% and 9.8%, respectively, for the following three fiscal years. (c) The Capital Facilities Capacity Charge forecast is based on the total projected equivalent dwelling units along with a 5.0%project annual increase in the rate. (d) Revenue Area No. 14 fees are derived based on the projected contribution of sewage flows to the District from the Irvine Ranch Water District (e) Ad valorem tax revenues are projected to increase at 5.0%per year. (f) Interest eamings are projected as 4.0%of average annual cash balances. (g) Operating and Maintenance Expenses are projected to increase 7.0%per year. (h) Annual CIP Outlays is based on the cash Flow projections developed from the CIP Validation Study. Source: Orange County Sanitation District Management's Discussion and Analysis of Operating Data The District's Fiscal Year 2008-09 total operating and capital improvement budget is $601.0 million, a 17.1% increase over the prior year budget of$513.2 million. The District's Fiscal Year 2008- 09 budget includes $72.3 million in capital improvement outlays as the District moves towards reaching secondary treatment standards by the target date of December 31, 2012, as specified by the Board of Directors'July 2002 resolution and in keeping with the terms and conditions of its ocean discharge permit and related Consent Decree. 8033W L6 43 The Fiscal Year 2008-09 operations budget for the collection, treatment, and disposal of wastewater is $148.8 million, an $6.2 million increase from the prior year budget of$142.6 million. This increase is primarily attributable to the proposed increase in personnel costs due mostly to the current capital improvement program, totaling $2.48 billion over the next ten years. Personnel costs increased $3.9 million, or 4.9%. The contractual services budget increased $7.1 million, or 33.1%. The major component of this category is biosolids removal and transport costs. Contracts have been executed with firths for agricultural reuse of residual solids. The utility budget decreased by $0.2 million, or 2.0%, primarily as a result of utility rates not increasing as much as anticipated. Electricity is the largest utility cost incurred by the District and is used to run the plant processes. The Fiscal Year 2008-09 budget reflects an increase in imported electricity because new government regulations on air emission limits has forced a reduction in electrical power production at the District's central generation facilities, a process that converts methane gas into electricity. The Fiscal Year 2008-09 CIP cash flow budget was approved at $373.7 million an increase of $94.4 million from the prior year estimated total. In preparation of the Fiscal Year 2006-07 and 2007-08 budgets, the Board of Directors established a CIP Oversight Committee to review the CIP program and stairs annual validation effort of the CIP to ensure that the scope of the projects was appropriate and that the cost estimates were accurate, and to gain an understanding of the impact from the CIP to the current rate structure. The Fiscal Year 2008-09 CIP includes 86 large capital projects and 28 special projects with a projected 15-year cash outlay of$1.47 billion. Over this time period,the CIP will accomplish: • Rehabilitation of the existing headworks, primary treatment, secondary treatment, outfall pumping,and solids handling facilities at both treatment plants; • Replacement and rehabilitation of nine of the District's outlying pumping stations, and rehabilitation and upgrade of 29 trunk sewer improvement projects; • Optimization of the production of"power"and"biosolids"at each of the treatment plants; • Reclamation of 70 mg/d of the District's effluent, or nearly one-third of the total daily flow through the Groundwater Replenishment System;and • Achieve secondary treatment standards by December 2012. A review completed by the CIP Oversight Committee in Fiscal Year 2006-07 reaffirmed the need for further rate increases in future years. Annual increases are ordered to be subject to reaffirmation by the affirmative vote of two-thirds of the members of the Board of Directors prior to implementation of any such charge for each fiscal year. Based on the results of the CIP Oversight Committee, the Board of Directors adopted Ordinance No. OCSD-35 increasing the sanitary sewer service charges by approximately 10.5% for Fiscal Year 2008-09. This action increased the single family residence user rate, the basis for all sewer user fee rates, from $182 to $201. See "DISTRICT REVENUES — Sewer Service Charges." Investment of District Funds State statutes authorize the District to invest in obligations of the United States Government,state and local governmental agencies, negotiable certificates of deposits, bankers acceptances, commercial paper, reverse repurchase agreements and a variety of other investment instruments which are allowable under California Government Code Section 53600 at seq. All District funds, except for Obligation Reserve Funds controlled by a bank trustee pursuant to the provisions of Existing Senior Obligations, are managed by an external money manager, Pacific Investment Management Company ("PIMCO"). Mellon Trust ("Mellon Trust") serves as the District's 90336611.6 44 independent custodian bank for its investment program. Callen Associates ("Callan") serves as the District's independent advisor. At June 30, 2008, the District's externally managed fund consisted of short-term investment portfolio of$98,300,000 with an average maturity of 73 days, and a long-term investment portfolio of $313,700,000 with average maturities of 2.3 years. Investments consist of United States government securities, corporate bonds and commercial paper. The District's portfolio contains no structured investment vehicles(SIV s)or reverse repurchase agreements. Deposits in banks are maintained in financial institutions which provide deposit protection on the bank balance from the Federal Deposit Insurance Corporation. The California Government Code requires State banks and savings and loans to secure local government deposits by pledging govemment securities equal to 1100/6 of the deposits or by pledging first trust deed mortgage notes equal to 150% of the deposits. The District's Investment Policy requires that the District invest public funds in a manner which ensures the safety and preservation of capital while meeting reasonable anticipated operating expenditure needs, achieving a reasonable rate of return and conforming to all state and local statutes governing the investment of public funds. The primary objectives, in order of the District's investment activities are safety,liquidity and return on investments. FINANCIAL OBLIGATIONS Existing Indebtedness Currently the District has Senior Obligations Outstanding payable on a parity with the Installment Payments under the Installment Purchase Agreement.The table below describes the District's outstanding certificates of participation as of December 1, 2008. The payment obligations in connection with each series of these certificates constitute Senior Obligations, subject to the provisions of the Master Agreement and shall be afforded all of the benefits, interests and security afforded Senior Obligations pursuant to the Master Agreement. The District has no outstanding general obligation bonds. Table 16 Outstanding Certificates of Participation Debt As of December 1,2008 Original Principal Issue Outstanding Fitwl Amount Date Balance Maturl 2000 Certificates $218,600,000 08/13/00 S 195,800,000 09/01/30 2003 Certificates 280,000,000 08/26/03 191,500,000 02/01/33 2006 Certificates 200,000,000 03/08/06 196,600,000 02/01/36 2007A Certificates 95,180,000 05/22/07 93,655,000 02/01/30 2007B Certificates 300,000,000 12/20/07 300,000,000 02/01/37 2009A Certificates 77,615,000 05/29/08 61,665,000 08/01/13 2008B Certificates 27,900,000 09/11/08 27.800.000 09/01/16 Total Long-Term Debt $1,067,020,000 80336611.6 45 In connection with the execution and delivery of the above-referenced outstanding certificates of participation, the district entered into certain installment purchase agreements, or equivalent documents providing for the payment of installment payments or similar payments. Variable Rate Obligations In August 2000, the District caused the execution and delivery of the Orange County Sanitation District Refunding Certificates of Participation, Series 2000-A (the "2000-A Certificates") and the Orange County Sanitation District Refunding Certificates of Participation, Series 2000-B (the "2000-B Certificates"and,together with the 2000-A Certificates,the"2000 Certificates")in the original aggregate principal amount of$218,600,000, of which $195,900,000 will be outstanding as of December 1, 2008. In connection with the execution and delivery of the 2000 Certificates, the District entered into an installment purchase agreement(the"2000 Installment Purchase Agreement")and a Standby Agreement, dated as of August 1,2000(the"2000 Standby Agreement"),by and among the District,the Trustee and Dexia Credit Local,acting through its New York Agency. In March 2006, the District mused the execution and delivery of the Orange County Sanitation Refunding Certificates of Participation, 2006 Series (the "2006 Certificates") in the original aggregate principal amount of$200,000,000, of which $196,600,000 will be outstanding as of December 1, 2008. In connection with the execution and delivery of the 2006 Certificates,the District and the Corporation entered into an installment purchase agreement (the "2006 Installment Purchase Agreement") and the District entered into a Standby Certificate Purchase Agreement, dated as of March 1, 2006 (the "2006 Standby Agreement'), with DEPFA Bank plc, acting through its New York Branch, to provide for payment of the purchase price of tendered and unremarketed 2006 Certificates. The 2000 Standby Agreement and the 2006 Standby Agreement each constitutes a Credit Facility Agreement and a Credit Facility under the Master Indenture. The obligation of the District to repay amounts drawn on or paid under these agreements,to pay interest on such amounts and to pay any other amounts in connection with such draw or payment constitutes a Reimbursement Obligation, each with respect to a Senior Obligation. Anticipated Financings From time to time the District expects to deliver other obligations to finance and refinance portions of the CIP. In Fiscal Year 2008-09 the District expects to incur Additional Senior Obligations (including the principal amount of the Certificates) in an aggregate principal amount of approximately S200 million. Over the next four years, the District expects to incur Additional Senior Obligations in an aggregate principal amount of approximately$350 million. Direct and Overlapping Bonded Debt Table 17 below presents the aggregate direct and overlapping bonded debt of the District as of June 30,2008. 8033661 L6 46 Table 17 Direct and Overlapping Bonded Debt of the District as of June 30,2008 2007-08 Assessed Valuation(Land&Improvements Only): $294733,304,931 Redevelopment Incremental Valuation: 35,564345,092 Adjusted Assessed Valuation, S257.168,959,859 OVERLAPPING TAX AND ASSESSMENT DEBT (Based on redevelopment adjusted all property assessed valuation of S264.164343.096): Tot[Debt District's Shire of 6/30/08 %Applicable fll Debt 6/30109 Orange County Teeter Plan Obligations $123,725.000 71.841% $ 38"277 The Metropolitan Water District of Southern California 327215,000 14.941 4SA9,193 Coast Community College District 347,758,867 99.495 346.004695 North Orange County Joint Community College District 233,349,001 %.922 226.166,519 Rancho Santiago Community College District 321,779339 93.363 316,511,911 Brea-Olinda and Laguna Beach Unified School Districts 59,649,029 99.936&12.793 29.155,237 Newport Mesa Unified School District 168,563,480 100. 169,563.490 Placentia-Yorba Linda Unified School Disaicl 169,069,034 99.707 166,884971 Saddleback Valley Unified School District 142,490,000 11.915 16.976,492 Santa Ana Unified School District 126,037,965 100. 126,037,965 Tustin Unified School District School Facilities Improvement District No,2002-1 43,693.929 99.010 4325I,458 Anaheim Union High School District 123,493.955 100. 123,493,955 Fullerton Joint Union High School District 61552,910 90240 55,545.346 Huntington Beach Union High School District 232274,998 98.919 229,764,105 School Districts 236,130,071 97.319-100. 236.344957 City of Anaheim 5,220,000 99.083 5,172,133 Wine Ranch Water District improvement Districts 271,221,669 Various 271,137,342 Rossmoor Community Services District Special Tao Obligations 625.000 100. 625,000 Bonita Canyon Community Facilities District No.99.1 42,619.000 100. 42.615,000 Irvine Unified School District Community Facilities Districts 266,430,000 99.998-100. 266,428.353 Tustin Unified School District Community Facilities Districts 232.730,345 100. 232,730,345 Orange County Community Facilities District No.874 59,984929 99.905 59,826,039 Other Community Facilities Districts 402,455,000 Various 402,358,006 Orange County Assessment Districts 119,048,296 100. 118,04U% City of Irvine 1915 Act Bonds 905,675,000 100. 905.675.000 City of Tustin 1915 Act Bonds 52,442,000 100. 52,442,0W Other 1915 Act bonds 20,306,000 100. 20306.W0 TOTAL OVERLAPPING TAX AND ASSESSMENT DEBT S4,599,822,965 Total Debt Distid's Share of DIRECT AND OVERLAPPING GENERAL FUND DEBT: 6/30/08 %Apoliceble(I Debt 6/30/09 Onstage County General Fund Obligations S532326,000 71.941% $ 382,428,322 Orange County Pension Obligations 72.729,967 71.841 52249,864 Orange County Board of Education Certificates of Participation 195901000 71.841 14.073,652 South Orange County Community College District Certificates of Participation 34.945,000 35.613 12,444,963 BresOlinda Unified School District Certificates of Participation 29.800.000 99.936 29,780,928 Orange Unified School District Certificates of Participation 49,326,604 96.966 49.326.604 Placentin-Ymba Linda Unified School District Certificates of Participation 86,810,315 98.639 85,629,827 Santa Are Unified School District Certificates of Participation 64,855,%S 100. 64,855,968 Otbm Unified School District Certificates of Participation 39,317,502 Various 38,998,126 Union High School District Certificates of Participation 117.751,090 Various 114,970,458 School District Certificates of Participation 59.%01000 Various 59,650,779 City of Anaheim General Fund Obligations 679,632.465 99.093 673,400,235 City of Coals Mesa General Fond Obligations 45,970,000 100. 45,970.000 City of Fullerton General Fund Obligations 28,302,784 100. 28302.784 City of Huntington Beach General Fund and Judgment Obligations 76,300,000 99.980 76,284,740 City of Wine General Fund Obligations 24,170,000 100. 24,170,000 City of Santa Ann General Fund Obligations 116,220,000 100. 116.220,000 Other City General Fund Obligations 172,570,000 Various 145,890,247 Oraage County Saoltation District Certifirmes of Participation 0 100. 0(2) Wine Ranch Water District Certificates of Participation 38,800,000 89.621 34,772.948 Municipal Water District of Orange County Water Facilities Corporation 19.295.000 66.611 12,852592 (Confirmed on neat page.) 80336611.6 47 (Continued from previous page.) Total Debt Giants'.Share of DIRECT AND OVERLAPPING GENERAL FUND DEBT: 6/30109 Applicable fU Debt 6130/08 Varian Linde County Weser District Ce tilasam of Participation 9.860,000 97.773 9.640.418 German County Fire Authority 10,365.000 50.310 5,214,632 TOTAL GROSS OVERLAPPING GENERAL FUND DEBT $2.077,117.097 Leas: Santa Am Unified School District self-supporting Qualified Zone Academy Bonds 2,042,300 City of Armloim self-supporting obligations 650.281.304 Other City ad6auppmting obligations 30,162.670 MWDOC Wares Facilities Corporation(100%self-supporting) 12,852,592 TOTAL NET OVERLAPPING GENERAL FUND DEBT S1.381,778.221 GROSS COMBINED TOTAL DEBT S6,676.940,052(2) NET COMBINED TOTAL DEBT $5.981,601,186 (1) Percentage of overlapping agency's redevelopment adjusted all property assessed valuation 1$264.164.343,096)located vvindn boundaries of the district. (2) Excludesw hew lammmu ifi=mofpmticipation. Previouslyclassifiedce ificmaofpmticipetimhavebeenteclassified as district revenue supported issues and ere no longer included as direct debt in the debt statement. (3) Excludes tax and revenue anticipation notes,enterprise revenue,mortgage revoaue and tax allocation bonds and non-bonded capital k ern obligations. Ralf to: 2007-08 Land and improvement Aseased Valuation Total Overlapping Tea and Assessment Debt 1.57% Adjusted Adjusted All Property Load&Imorovemrnl Assessed Volatile Gross Combined Total Debt 2.60% 2.33% Net Combined Total Debt 2.33% 2.26% STATE SCHOOL BUILDING AID REPAYABLE AS OF : SO Source: California Municipal Statistic THE CORPORATION The Corporation was organized June 19, 2000 as a nonprofit public benefit corporation pursuant to the Nonprofit Public Corporation law of the State. The Corporation's purpose is to render assistance to the District in its acquisition of equipment, real property and improvements on behalf of the District Under its articles of incorporation,the Corporation has all powers conferred upon nonprofit public benefit corporations by the laws of the State,provided that it will not engage in any activity other than that which is necessary,or convenient for,or incidental to the purposes for which it was formed The Corporation is a separate legal entity from the District. It is governed by a twenty-five member Board of Directors. The Corporation has no employees. All staff work is performed by employees of the District. The members of the Corporation's Board of Directors are the Board of Directors of the District. The District's Director of Finance and Administrative Services and other District employees are available to provide staff support to the Corporation. The Corporation has not entered into any material financing arrangements other than those referred to in this Official Statement. Further information concerning the Corpomfion may be obtained from the Orange County Sanitation District office at 10844 Ellis Avenue, Fountain Valley, California, 92708-7018. 80336613.6 48 LIMITATIONS ON TAXES AND REVENUES Article XIIIA of the California Constitution On June 6, 1978, California voters approved Proposition 13 ("Proposition 13"), which added Article XIIIA to the State Constitution("Article XIIW). Article XlUA, as amended, limits the amount of any ad valorem tax on real property to one percent of the full cash value thereof,except that additional ad valorem taxes may be levied to pay debt service on (i)indebtedness approved by the voters prior to July 1, 1978,(ii)(as a result of an amendment to Article XIIIA approved by State voters on June 3, 1986) on bonded indebtedness for the acquisition or improvement of real property which has been approved on or after July 1, 1978 by two-third of the voters on such indebtedness, and (iii)bonded indebtedness incurred by a school district or community college district for the construction, reconstruction, rehabilitation or replacement of school facilities or the acquisition or lease of real property for school facilities, approved by 55% of the voters of the district, but only if certain accountability measures are included in the proposition. Article XIIIA defines full cash value to mean "the county assessor's valuation of real property as shown on the 1975-76 tax bill under `Yell cash value," or thereafter, the appraised value of real property when purchased, newly constructed, or a change in ownership has occurred after the 1975 assessment." The full cash value may be adjusted annually to reflect inflation at a rate not to exceed 2%per year or to reflect a reduction in the consumer price index or comparable data for the area under the taxing jurisdiction, or reduced in the event of declining property values caused by substantial damage, destruction, or other factors. Legislation enacted by the State Legislature to implement Article XIIIA provides that notwithstanding any other law, local agencies may not levy any ad valorem property tax except to pay debt service on indebtedness approved by the voters as described above. Legislation Implementing Article XIIIA Legislation has been enacted and amended a number of times since 1978 to implement Article XII1A. Under current law,local agencies are no longer permitted to levy directly any property tax(except to pay voter-approved indebtedness). The one percent property tax is automatically levied by the County and distributed according to a formula among taxing agencies. The formula apportions the tax roughly in proportion to the relative shares of taxes levied prior to 1989. Increases of assessed valuation resulting from reappraisals of property due to new construction, change in ownership or from the 2% annual adjustment are allocated among the various jurisdictions in the `taxing area" based upon then respective "situs." Any such allocation made to a local agency continues as part of its allocation in future years. Beginning in the 1981-82 fiscal year, assessors in the State no longer record property values on tax rolls at the assessed value of 25%of market value which was expressed as$4 per$100 assessed value. All taxable property is now shown at fall market value on the tax rolls. Consequently, the tax rate is expressed as $1 per$100 of taxable value. All taxable property value included in this Official Statement is shown at 100% of market value (unless noted differently) and all tax rates reflect the $1 per $100 of taxable value. Article XIIIB of the California Constitution An initiative to amend the State Constitution entitled"Limitation of Government Appropriations" was approved on September 6, 1979, thereby adding Article XIUB to the State Constitution ("Article XIIIB"). Under Article XUIB,the State and each local governmental entity has an annual"appropriations limit" and is not permitted to spend certain moneys that are called "appropriations: subject to limitation" (consisting of tax revenues, state subventions and certain other £ands) in an amount higher than the appropriations limit. Article XIIIB does not affect the appropriations of moneys that are excluded from 80336611.6 49 the definition of"appropriations subject to limitation," including debt service on indebtedness existing or authorized as of January 1, 1979, or bonded indebtedness subsequently approved by the voters. In general terms, the appropriations limit is to be based on certain 1978-79 expenditures, and is to be adjusted annually to reflect changes in consumer prices, populations, and services provided by these entities. Among other provisions of Article XIIIB, if these entities' 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. "Appropriations subject to limitation" are authorizations to spend 'proceeds of taxes," which consist of tax revenues, state subventions and certain other funds, including proceeds from regulatory licenses, user charges or other fees to the extent that such proceeds exceed"the cost reasonably home by such entity in providing the regulation,product or service," but"proceeds of taxes" excludes tax refunds and some benefit payments such as unemployment insurance. No limit is imposed on appropriations of funds which are not"proceeds of taxes," such as reasonable user charges or fees, and certain other non- tax funds. Not included in the Article XIIIB limit are appropriations for the debt service costs of bonds existing or authorized by January 1, 1979, or subsequently authorized by the voters, appropriations required to comply with mandates of courts or the federal government and appropriations for qualified capital outlay projects. The appropriations limit may also be exceeded in certain cases of emergency. The appropriations limit for the District in each year is based on the District's limit for the prior year, adjusted annually for changes in the cost of living and changes in population, and adjusted, where applicable, for transfer of financial responsibility of providing services to or from another unit of government. The change in the cost of living is,at the District's option,either(1)the percentage change in State per capita personal income, or (2) the percentage change in the local assessment roll on nonresidential property. Either test is likely to be greater than the change in the cost of living index, which was used prior to Proposition 111. Change in population is to be measured either within the jurisdiction of the District or the County as a whole. As amended by Proposition 111, the appropriations limit is tested over consecutive two-year periods. Any excess of the aggregate "proceeds of taxes" received by a District over such two-year period above the combined appropriations limits for those two years is to be returned to taxpayers by reductions in tax rates or fee schedules over the subsequent two years. As originally enacted in 1979,the District's appropriations limit was based on 1978-79 authorizations to expend proceeds of taxes and was adjusted annually to reflect changes in cost of living and population (using different definitions, which were modified by Proposition 111). Starting with Fiscal Year 1990-91,the District's appropriations limit was recalculated by taking the actual Fiscal Year 1986.87 limit,and applying the annual adjustments as if Proposition III had been in effect. The District does not anticipate that any such appropriations limitations will impair its ability to make Installment Payments as required by the Installment Purchase Agreement. Proposition IA Proposition IA ("Proposition IA"), proposed by the Legislature in connection with the 2004-05 Budget Act and approved by the voters in November 2004,restricts State authority to reduce major local tax revenues such as the tax shifts permitted to take place in Fiscal Years 2004-05 and 2005-06. Proposition lA provides that the State may not reduce any local sales tax rate, limit existing local government authority to levy a sales tax rate or change the allocation of local sales tax revenues, subject to certain exceptions. Proposition I A generally prohibits the State from shifting to schools or community colleges any share of property tax revenues allocated to local govemments for any fiscal yew,as set forth under the laws in effect as of November 3, 2004. Any change in the allocation of property tax revenues 80336611.6 50 among local governments within a county must be approved by two-thirds of both houses of the Legislature. Proposition I provides, however,that beginning in Fiscal Year 2008-09, the State may shift to schools and community colleges up to 8%of local government property tax revenues,which amount must be repaid, with interest, within three years, if the Governor proclaims that the shift is needed due to a severe state financial hardship, the shift is approved by two-thirds of both houses and certain other conditions are met. Such a shift may not occur more than twice in any ten-year period. The State may also approve voluntary exchanges of local sales tax and property tax revenues among local governments within a county. Proposition ]A also provides that if the State reduces the vehicle license fee ("VLF") rate currently in effect, 0.65% of vehicle value, the State must provide local governments with equal replacement revenues. Further, Proposition ]A requires the State to suspend State mandates affecting cities, counties and special districts, excepting mandates relating to employee rights, schools or community colleges, in any year that the State does not fully reimburse local governments for their costs to comply with such mandates. Proposition 62 On November4, 1996, California voters adopted Proposition 62, a statutory initiative which amended the California Government Code by the addition of Sections 53720-53730. Proposition 62 requires that(i)any local tax for general governmental purposes(a "general tax")must be approved by a majority vote of the electorate;(ii)any local tax for specific purposes(a"special tax")most be approved by a two-thirds vote of the electorate; (iii)any general tax must be proposed for a vote by two-thirds of the legislative body; and(iv)proceeds of any tax imposed in violation of the vote requirements must be deducted from the local agency's property tax allocation. Provisions applying Proposition 62 retroactively from its effective date to 1985 are unlikely to be of any continuing importance;certain other restrictions were already contained in the Constitution. Most of the provisions of Proposition 62 were affirmed by the 1995 California Supreme Court decision in Santa Clara County Local Transportation Authority v. Guardino,which invalidated a special sales tax for transportation purposes because fewer than two-thirds of the voters voting on the measure had approved the tax. The District has not imposed any taxes subject to the provisions of Proposition 62 and believes that it will not impair its ability to make its Installment Payments as required by the Installment Purchase Agreement. The requirements of Proposition 62 have generally been superseded by the enactment of Article XIIIC of the Constitution(Proposition 218)in 1996. Article XIIIC and Article XIIID of the California Constitution Proposition 218, a State ballot initiative known as the "Right to Vote on Taxes Act," was approved by the voters on November 5, 1996. The initiative added Articles XIIIC and XIIID to the California Constitution, creating additional requirements for the imposition by most local governments of "general taxes,""special taxes,""assessments,""fees,"and"charges." Proposition 218 became effective, pursuant to its terns, as of November 6, 1996, although compliance with some of its provisions was deferred until July 1, 1997, and certain of its provisions purport to apply to any tax imposed for general governmental purposes(i.e., "general taxes") imposed,extended or increased on or after January 1, 1995 and prior to November 6, 1996. Article XIIID imposes substantive and procedural requirements on the imposition, extension or increase of any "fee"or"charge"subject to its provisions. A "fce" or"charge"subject to Article XIIID includes any levy,other than an ad valorem tax, special tax or assessment, imposed by an agency upon a parcel or upon a person as an incident of property ownership. Article XIIID prohibits, among other 80336611.6 51 things, the imposition of any proposed fee or charge, and, possibly, the increase of any existing fee or charge, in the event written protests against the proposed fee or charge are presented at a required public hearing on the fee or charge by a majority of owners of the parcels upon which the fee or charge is to be imposed. Except for fees and charges for water, sewer and refuse collection services, the approval of a majority of the property owners subject to the fee or charge,or at the option of the agency,by a two-thirds vote of the electorate residing in the affected area,is required within 45 days following the public hearing on any such proposed new or increased fee or charge. The California Supreme Court decisions in Richmond v. Shasta Community Services District, 32 Cal.4th 409 (2004) ("Richmond'), and Bighorn- Desert View Water Agency v. VeOUI, 39 CalAth 205 (2006) ("Bighorn") have clarified some of the uncertainty surrounding the applicability of Section 6 of Article XIIID to service fees and charges. In Richmond, the Shasta Community Services District charged a water connection fee, which included a capacity charge for capital improvements to the water system and a fire suppression charge. The Court held that both the capacity charge and the fire suppression charge were not subject to Article XIIID because a water connection fee is not a property-related fee or charge because it results from the property owner's voluntary decision to apply for the connection. In both Richmond and Bighorn, however, the Court stated that a fee for ongoing water service through an existing connection is imposed "as an incident of property ownership" within the meaning of Article XIIID, rejecting, in Bighorn, the water agency's argument that consumption-based water charges are not imposed "as an incident of property ownership"but as a result of the voluntary decisions of customers as to how much water to use. Article XIIID also provides that"standby charges"are considered"assessments"and must follow the procedures required for "assessments" under Article XIIID and imposes several procedures requirements for the imposition of any assessment, which may include (1) various notice requirements, including the requirement to mail a ballot to owners of the affected property; (2) the substitution of a property owner ballot procedure for the traditional written protest procedure,and providing that"majority protest" exists when ballots (weighted according to proportional financial obligation) submitted in opposition exceed ballots in favor of the assessments; and (3) the requirement that the levying entity "separate the general benefits from the special benefits conferred on a parcel"of land. Article XIIID also precludes standby charges for services that are not immediately available to the parcel being charged. Article XIIID provides that all existing, new or increased assessments are to comply with its provisions beginning July 1, 1997. Existing assessments imposed on or before November 5, 1996, and "imposed exclusively to finance the capital costs or maintenance and operations expenses for [among other things] water" are exempted from some of the provisions of Article XIIID applicable to assessments. Article XIIIC extends the people's initiative power to reduce or repeal existing local taxes, assessments, fees and charges. This extension of the initiative power is not limited by the terms of Article XIIIC to fees, taxes, assessment fees and charges imposed after November 6, 1996 and absent other authority could result in retroactive reduction in any existing taxes, assessments, fees or charges. In Bighorn, the Court concluded that under Article XIIIC local voters by initiative may reduce a public agency's water rates and delivery charges. The Court noted however, that it was not holding that the authorized initiative power is free of all limitations, stating that it was not determining whether the electorate's initiative power is subject to the public agency's statutory obligation to set water service charges at a level that will "pay the operating expenses of the agency, . .. provide for repairs and depreciation of works,provide a reasonable surplus for improvements,extensions,and enlargements,pay the interest on any bonded debt, and provide a sinking or other fund for the payment of the principal of such debt as it may become due." The District implemented a five-year plan beginning in Fiscal Year 2002-03 which included a rate increase of$7.50 per year,or 9A%, for all ratepayers to$87.50 per year. In May 2003,the Board of Directors approved consideration of a 15%rate increase a year,for each year,over the then following five years, upon 213 vote of the Board of Directors after conducting a noticed public hearing in compliance 90336611.6 52 with Article XIIID. The Board of Directors considered this increase necessary to provide needed capital improvements,to cover additional treatment and disinfection costs,and to minimize rate increases over an extended period of time. On July 2, 2003, the Board of Directors adopted Ordinance No. OCSD-20 increasing sanitary sewer service charges for all single family and multi-family residential units as well as most commercial and industrial properties. The Ordinance was adopted by a 2/3 vote of the Board of Directors as required under law after conducting a noticed public hearing in compliance with all laws. The Ordinance increases the amount of the annual charges by approximately 15%per year for each of the following five years, commencing with Fiscal Year 2003-04, thereby raising the single family residence user rate from the then current$87.50 to$100.00, $115.00,$132.00,$152.00, and$175.00 annually. The Ordinance discounted by 5%the annual increases which were the subject of the required protest hearings on the fee increase as described above. After the completion of the CIP Validation Study for Fiscal Year 2005.06 that increased its ten year CIP cash flow projects to $2.2 billion, or an average of$220 million per year, the Board of Directors adopted Ordinance No. OCSD-26 increasing the Fiscal Year 2005-06 single family residential rate 31%,from $115 to$151 for such year. In May 2006,the Board of Directors adopted Ordinance No. OCSD-30B increasing the Fiscal Year 2006.07 single family residential rate 9.8%, from $151.00 to$165.80 for such year, except those located in Revenue Area 14. These increases represented the increase permitted under the protest hearings on the fee increase which was held in 2003. In June 2007,the Board of Directors adopted Ordinance No.OCSD-32 increasing the Fiscal Year 2007- 08 single family residential rate by 9.8%. In February 2008, after a noticed public hearing, the Board of Directors adopted Ordinance No.OCSD-35, which provides for annual increases in the single family residential rate of 10.5%, 10%, 10%, 9.8% and 9.8%, respectively, for Fiscal Years 2008-09 through 2012-13. Pursuant to the Master Agreement,the District will,to the extent permitted by law, fix,prescribe and collect fees and charges for the services of the Wastewater System which will be at least sufficient to yield during each Fiscal Year(a)Net Revenues equal to 125%of Debt Service on Senior Obligations for such Fiscal Year, and(b)Net Operating Revenues equal to 100% of Debt Service on all Obligations for such Fiscal Year. The District may make adjustments from time to time in such fees and charges and may make such classification thereof as it deems necessary, but will not reduce the fees and charges then in effect unless the Revenues and Net Revenues from such reduced fees and charges will at all times be sufficient to meet the requirements of the Master Agreement. In the event that service charges are determined to be subject to Article XIIID,and proposed increased service charges cannot be imposed as a result of a majority protest, such circumstances may adversely effect the ability of the District to generate revenues in the amounts required by the Master Agreement, and to make Installment Payments as provided in the Installment Purchase Agreement. No assurance may be given that Articles XIIIC and XIIID will not have a material adverse impact on Net Revenues. Other Initiative Measures Articles XIIIA, XIIIB, XIIIC and XIIID were adopted pursuant to California's constitutional initiative process. From time to time other initiative measures could be adopted by California voters, placing additional limitations on the ability of the District to increase revenues. LEGAL MATTERS The validity of the Certificates and certain other legal matters are subject to the approving opinion of Fulbright& Jaworski L.L.P., Los Angeles, California, Special Counsel to the District. A complete copy of the proposed form of Special Counsel opinion is attached as Appendix F hereto. Special Counsel, in its capacity as Special Counsel to the District, undertakes no responsibility for the accuracy, completeness or fairness of this Official Statement. Certain legal matters will be passed upon for the District and the Corporation by Woodruff, Spradlin & Smart, a Professional Corporation, Costa Mesa, California, and for the District by Fulbright& Jaworski L.L.P. as Disclosure Comsat to the District. 90336611.6 53 FINANCIAL ADVISOR The District has retained Public Resources Advisory Group as financial advisor(the "Financial Advisor") in connection with the execution and delivery of the Certificates. The Financial Advisor has not been engaged,nor have they undertaken,to audit,authenticate or otherwise verify the information set forth in the Official Statement,or any other related information available to the District, with respect to accuracy and completeness of disclosure of such information. The Financial Advisor has reviewed this Official Statement but makes no guaranty, warranty or other representation respecting accuracy and completeness of the information contained in this Official Statement. ABSENCE OF LITIGATION There is no action,suit,proceeding,inquiry or investigation,at law or in equity,before or by any court, regulatory agency, public board or body, pending or, to the best knowledge of the District, threatened against the District affecting the existence of the District or the titles of its directors or officers to their offices or seeking to restrain or to enjoin the sale or delivery of the Certificates,the application of the proceeds thereof in accordance with the Trust Agreement, or in any way contesting or affecting the validity or enforceability of the Certificates, the Trust Agreement,the Master Agreement,the Installment Purchase Agreement or any action of the District contemplated by any of said documents, or in any way contesting the completeness or accuracy of this Official Statement, or contesting the powers of the District or its authority with respect to the Certificates or any action of the District contemplated by any of said documents,nor,to the knowledge of the District is there any basis therefor. There is no action, suit,proceeding, inquiry or investigation,at law or in equity,before or by any court, regulatory agency, public board or body pending or, to the best knowledge of the District, threatened against the District contesting or affecting the ability of the District to collect amounts from which Installment Payments are payable,or which would have a material adverse effect on the District's ability to make Installment Payments. FINANCIAL STATEMENTS The basic financial statements of the District included in Appendix A to this Official Statement have been audited by Mayer Hoffman McCann P.C., independent certified public accountants. See APPENDIX A—"COMPREHENSIVE ANNUAL FINANCIAL REPORT OF THE ORANGE COUNTY SANITATION DISTRICT FOR FISCAL YEAR ENDED JUNE 30, 2008" herein. The District has received the Government Finance Officer's Association Certificate of Achievement for "Excellence in Financial Reporting"for 13 consecutive years. The audited financial statements, including the footnotes thereto, should be reviewed in their entirety. Mayer Hoffman McCann P.C. has consented to the inclusion of its report as Appendix A but has not undertaken to update its report or to take any action intended or likely to elicit information concerting the accuracy, completeness or fairness of the statements made in this Official Statement,and no opinion is expressed by Mayer Hoffman McCann P.C. with respect to any event subsequent to its report dated ,2008. TAX MATTERS The internal Revenue Code of 1986(the"Code'),imposes certain requirements that must be met subsequent to the issuance and delivery of the Certificates for the interest component of each Installment Payment (the "Interest Component'), and the allocable portion thereof distributable in respect of each Certificate (the "Certificate Interest Distribution"), to be and remain excluded from the gross income of the owner of such Certificate for federal income tax purposes. Noncompliance with such requirements could cause such amounts to be included in gross income for federal income tax purposes retroactive to the date of delivery of the Installment Purchase Agreement and the Certificates. The District and the Corporation have covenanted in the Installment Purchase Agreement and in the Trust Agreement to 90336611.6 54 maintain the exclusion pursuant to section 103(a) of the Code of the Interest Component from the gross income of the District and its assigns, and of the Certificateholders, respectively, for federal income tax purposes. Upon the delivery of the Certificates, Fulbright & Jaworski L.L.P., Los Angeles, California, Special Counsel, will deliver its opinion that, under existing law, and assuming compliance with the aforementioned covenants,the Interest Component allocable to and the Certificate Interest Distributions in respect of a Certificate are excluded pursuant to section 103(a) of the Code from the gross income of the owner of the Certificate for federal income tax purposes; inasmuch as the Installment Purchase Agreement is not a"specified private activity bond"within the meaning of section 57(ax5)of the Code, neither the Interest Component nor any Certificate Interest Distribution is an item of tax preference for purposes of computing the alternative minimum tax imposed by section 55 of the Code. It is noted that the Interest Component allocable to and Certificate Interest Distributions in respect of a Certificate owned by a corporation for federal income tax purposes may affect the computation of the alternative minimum taxable income, upon which the alternative minimum tax is imposed to the extent that such amounts are taken into account in determining the adjusted earnings of that corporation(75%of the excess(if any)of such adjusted current earnings over the alternative minimum taxable income being an adjustment to the alternative minimum taxable income(determined without regard to the adjustment or to the alternative tax net operating loss deduction)). Further, on that same day Special Counsel will render its opinion, based solely on the foregoing, and upon existing provisions of the laws of California, that such Interest Component and Certificate Interest Distributions are exempt from personal income taxes of the State of California. To the extent that a purchaser of a Certificate acquires that Certificate at a price that exceeds the aggregate amount of scheduled distributions(other than distributions of qualified stated interest within the meaning of section 1.1273-1 of the Treasury Regulations)to be made on the Certificate (determined in the case of a prepayable Certificate, under the assumption described below) (the "Stated Redemption Price at Maturity"), such excess will constitute "bond premium" under the Code. Section 171 of the Code, and the Treasury Regulations promulgated thereunder, provide generally that bond premium on a tax-exempt obligation most be amortized on a constant yield economic accrual, basis; the amount of premium so amortized will reduce the owner's basis in such obligation for federal income tax purposes, but such amortized premium will not be deductible for federal income tax purposes. In the case of a purchase of a Certificate that is subject to prepayment, the determination whether there is amortizable bond premium, and the computation of the accrual of that premium, most be made under the assumption that the Certificate will be prepaid on the permitted date that would minimize the purchaser's yield on the Certificate (or that the Certificate will not be prepaid prior to the stated maturity date in respect of that Certificate if that would minimize the purchaser's yield). The rate and timing of the amortization of the bond premium and the corresponding basis reduction may result in an owner realizing a taxable gain when a Certificate owned by such owner is sold or disposed of for an amount equal to or in some circumstances even less than the original cost of the Certificate to the owner. The excess, if any,of the Stated Redemption Price at Maturity of a Certificate of a maturity over the initial offering price to the public of the Certificates of that stated maturity set forth on the inside cover page of this Official Statement is"original issue discount." Such original issue discount accruing in respect of a Certificate is treated for federal income tax and California personal income tax purposes as additional interest in respect of that Certificate and is excluded from the gross income of the owner thereof for federal income tax purposes and exempt from the California personal income tax. Original issue discount accruing in respect of any Certificate purchased at such initial offering price and pursuant to such initial offering will accrue on a semiannual basis over the tern to the stated maturity date in respect of the Certificate on the basis of a constant yield method and,within each semiannual period,will accrue on a ratable daily basis. The amount of original issue discount in respect of such a Certificate accruing during each period is added to the adjusted basis of such Certificate to determine taxable gain upon disposition (including upon sale, prepayment or payment on maturity) of such Certificate. The 90336611.6 55 Code includes certain provisions relating to the accrual of original issue discount in the case of a purchaser of a Certificate who purchases that Certificate other than at the initial offering price and pursuant to the initial offering of that Certificate. Any person considering purchasing a Certificate at a price that includes bond premium should consult his or her own tax advisors with respect to the amortisation and treatment of such bond premium, including, but not limited to,the calculation of gain or loss upon the sale,prepayment or other disposition of the Certificate. Any person considering purchasing a Certificate of a maturity in respect of which there is original issue discount should consult his or her own tax advisors with respect to the tax consequences of ownership of such Certificate, including the treatment of a purchaser who does not purchase in the original offering and at the original offering price of that Certificate,the allowance of a deduction for any loss on a sale or other disposition, and the treatment of accrued original issue discount in respect of such Certificate under federal individual and corporate alternative minimum taxes. Special Counsel has not undertaken to advise in the fidure whether any events after the date of delivery of the Installment Purchase Agreement and the Certificates may affect the tax status of the Interest Component and Certificate Interest Distributions. No assurance can be given that future legislation, or amendments to statutes of the State of California or of the United States, if enacted into law, will not contain provisions that could directly or indirectly reduce the benefit of the exemption of such amounts from personal income taxes of the State of California or of the exclusion of such amounts from the gross income of the owners of Certificates for Federal income tax purposes. Furthermore, Special Counsel will express no opinion as to any federal, state, or local tax law consequences with respect to the Installment Purchase Agreement, Certificates, Interest Component, or Certificate Interest Distributions, if any action is taken with respect to the Installment Purchase Agreement, the Certificates, or the proceeds thereof, or the Trust Agreement permitted or predicated upon the advice or approval of counsel if such advice or approval is given by counsel other than Fulbright&Jaworski L.L.P. Although Special Counsel is of the opinion that Interest Component and Certificate Interest Distributions in respect of a Certificate are exempt from state personal income taxation and excluded from the gross income of the owner thereof for federal income tax purposes, an owner's federal, state or local tax liability may be otherwise affected by the ownership or disposition of the Certificate. The nature and extent of these other tax consequences will depend upon the owner's other items of income or deduction. Without limiting the generality of the foregoing,prospective purchasers of Certificates should be aware that: (i) section 265 of the Code denies a deduction for interest on indebtedness incurred or continued to purchase or carry the Certificates or, in the case of financial institution, that portion of an owner's interest expense allocated to the Certificates; (ii) with respect to insurance companies subject to the tax imposed by section 831 of the Code, section 832(bx5XBxi) reduces the deduction for loss reserves by 15% of the sum of certain items, including Interest Component and Certificate Interest Distributions in respect of Certificates owned by such companies;(iii)Interest Component and Certificate Interest Distributions accrued in respect of Certificates owned by certain foreign corporations doing business in the United States for federal income tax purposes could be subject to a branch profits tax imposed by section 884 of the Code; (iv)passive investment income, including Interest Component and Certificate Interest Distributions accrued in respect of Certificates,accming to a Subchapter S corporation that at the close of a taxable year has Subchapter C earnings and profits may be subject to federal income taxation under section 1375 of the Code if greater than 25% of the gross receipts of such Subchapter S corporation in passive investment income; (v)section 86 of the Code requires recipients of certain Social Security and certain Railroad Retirement benefits to take into account, in determining the taxability of such benefits, Installments Interest and Certificate Interest Distributions accrued in respect of Certificates owned by such recipients for federal income tax purposes; and (vi) under section 32(i) of the Code, receipt of investment income, including Interest Component and Certificate Interest Distributions accrued in respect of Certificates, may disqualify the owner thereof from obtaining the earned income credit. Special Counsel has expressed no opinion regarding any such other tax consequences. 80336611.6 56 Special Counsel's opinion is not a guarantee of a result, but represents its legal judgment based upon its review of existing statutes, regulations, published rulings and court decisions and the representations and covenants of the District and the Corporation described above. No ruling has been sought from the Internal Revenue Service (the "Service") with respect to the matters addressed in the opinion of Special Counsel,and Special Counsel's opinion is not binding on the Service. The Service has an ongoing program of auditing the tax-exempt status of the interest on municipal obligations. If an audit of the Certificates is commenced, under current procedures the Service is likely to treat the District as the "taxpayer," and the Owners would have no right to participate in the audit process. In responding to or defending an audit of the tax-exempt status of the interest with respect to the Certificates,the District may have different or conflicting interest from the Owners. Further,the disclosure of the initiation of an audit may adversely affect the market price of the Certificates,regardless of the final disposition of the audit. The proposed form of opinion of Special Counsel is attached hereto as Appendix F. CONTINUING DISCLOSURE The District has covenanted for the benefit of holders and beneficial owners of the Certificates (a)to provide certain financial information and operating data (the "Annual Report") relating to the District and the property in the District not later than eight months after the end of the District's Fiscal Year(which currently would be March 1). commencing with the report for the 2008-09 Fiscal Year, and (b)to provide notices of the occurrence of certain enumerated events,if material. The Annual Report will be filed by the Trustee on behalf of the District, with each Nationally Recognized Municipal Securities Information Repository and with each State Repository, if my. The notices of material events will be filed by the Trustee on behalf of the District with the Municipal Securities Rulemaking Board and with each State Repository,if any. The specific nature of the information to be contained in the Annual Report or the notices of material events is set forth in the Continuing Disclosure Agreement. See APPENDIX D — "FORM OF CONTINUING DISCLOSURE AGREEMENT." These covenants have been made in order to assist the Initial Purchaser in complying with S.E.C. Rule 15c2-12(the "Rule"). During the past five years, the District has never failed to comply in all material respects with any previous undertaking with respect to the Rule to provide annual reports or notices of material events. RATINGS The Certificates will be rated " " by Standard & Poor's Ratings Services, a Division of The McGraw-Hill Companies, Inc. ("S&P"), and"_" by Fitch Ratings ("Fitch"). Such ratings reflect only the views of the rating agencies, and do not constitute a recommendation to buy, sell or hold the Certificates. Explanation of the significance of such ratings may be obtained only from the respective organisations at: Standard & Poor's Ratings Group, 55 Water Street, New York, New York 10041 and Fitch Ratings, One State Street Plaza,New York, New York 10004. There is no assurance that any such ratings will continue for any given period of time or that they will not be revised downward or withdrawn entirely by the respective rating agencies, if in the judgment of any such rating agency circumstances so warrant. Any such downward revision or withdrawal of such ratings may have an adverse effect on the market price of the Certificates. PURCHASE AND REOFFERING (the 'Initial Purchaser") has purchased the Certificates from the District at a competitive sale for a purchase price of$ (representing the aggregate principal amount of the Certificates, less a net original issue discount of$ , and less an Initial Purchaser's discount of $ ). The public offering prices may be changed from time to time by the Initial Purchaser. The Initial Purchaser may offer and sell Certificates to certain dealers and others at prices lower than the offering prices shown on the inside cover page hereof. 80336611.6 57 MISCELLANEOUS Included herein are brief summaries of certain documents and reports, which summaries do not purport to be complete or definitive, and reference is made to such documents and reports for full and complete statements of the contents thereof. Any statements in this Official Statement involving matters of opinion, whether or not expressly so stated, are intended as such and not as representations of fact. This Official Statement is not to be construed as a contract or agreement between the District and the purchasers or Owners of any of the Certificates. The execution and delivery of this Official Statement has been duly authorized by the District. ORANGE COUNTY SANITATION DISTRICT By: Chair of the Board of Directors 90336611.6 58 APPENDIX A COMPREHENSIVE ANNUAL FINANCIAL REPORT OF THE ORANGE COUNTY SANITATION DISTRICT FOR FISCAL YEAR ENDED JUNE 30,2008 BMW 1.6 A-1 APPENDIX B THE COUNTY OF ORANGE-ECONOMIC AND DEMOGRAPHIC INFORMATION 80336611.6 B_j APPENDIX C SUMMARY OF PRINCIPAL LEGAL DOCUMENTS 9033661 L6 (]_] APPENDIX D FORM OF CONTINUING DISCLOSURE AGREEMENT THIS CONTINUING DISCLOSURE AGREEMENT(this"Disclosure Agreement"), dated as of December 1, 2008, is by and between the ORANGE COUNTY SANITATION DISTRICT, a county sanitation district organized and existing under the laws of the State of California (the "District"), and DIGITAL ASSURANCE CERTIFICATION LLC,as Dissemination Agent(the"Dissemination Agent"). WITNESSETH: WHEREAS, the District has caused to be executed and delivered Orange County Sanitation District Certificates of Participation, Series 2008C (the "Certificates"), evidencing principal in the aggregate amount of$_,000,000,pursuant to a Trust Agreement,dated as of the date hereof(the"Trust Agreement"), by and among Union Bank of California, N.A., as trustee (the "Trustee"), the Orange County Sanitation District Financing Corporation(the"Corporation")and the District;and WHEREAS, this Disclosure Agreement is being executed and delivered by the District and the Dissemination Agent for the benefit of the owners and beneficial owners of the Certificates and in order to assist the underwriters of the Certificates in complying with the Rule(as defined herein); NOW, THEREFORE, for and in consideration of the mutual promises and covenants herein contained,the parties hereto agree as follows: Section 1. Definitions. Capitalized undefined terms used herein shall have the meanings ascribed thereto in the Trust Agreement or, if not defined therein, in the Master Agreement, dated as of August 1, 2000, by and between the District and the Corporation. In addition, the following capitalized terms shall have the following meanings: "Annual Report" means any Annual Report provided by the District pursuant to, and as described in, Sections 2 and 3 hereof. "Annual Report Date" means the date in each year that is eight months after the end of the District's fiscal year,which date,as of the date of this Disclosure Certificate,is March 1. "Disclosure Representative" means the Director of Finance and Administrative Services of the District, or such other officer or employee of the District as the District shall designate in writing to the Dissemination Agent and the Trustee from time to time. "Dissemination Agent" means an entity selected and retained by the District, or any successor thereto selected by the District. The initial Dissemination Agent shall be Digital Assurance Certification LLC. "Listed Events"means any of the events listed in subsection(a)of Section 4 hereof. "National Repository" means any Nationally Recognized Municipal Securities Information Repository for purposes of the Rule. As of the date hereof, the National Repositories approved by the Securities and Exchange Commission are identified at http://www.sec.govrinfo/mmicipal/ r ir.htm. 80336611.6 D-I "Official Statement" means the Official Statement, dated December_, 2008, relating to the Certificates. "Participating Underwriter" means any of the original underwriters of the Certificates required to comply with the Rule in connection with the offering of the Certificates. "Repository"means each National Repository and each State Repository. "Rule" means Rule 15c2-12 adopted by the Securities and Exchange Commission under the Securities Exchange Act of 1934,as the same may be amended from time to time. "State Repository" means any public or private repository or entity designated by the State of California as a state repository for the purpose of the Rule and recognized by the Securities and Exchange Commission. As of the date of this Disclosure Agreement,there is no State Repository. Section 2. Provision of Annual Reports. (a) The District shall provide, annually, an electronic copy of the Annual Report to the Dissemination Agent, together with a copy for the Trustee, not later than 15 days prior to the Annual Report Date. Promptly upon receipt of an electronic copy of the Annual Report,the Dissemination Agent shall provide an Annual Report to each National Repository and the State Depository (if any) not later than March 1 after the end of each fiscal year of the District, commencing with the fiscal year ending June 30, 2009. The Annual Report may be submitted as a single document or as separate documents comprising a package, and may cross reference other information as provided in Section 3 of this Disclosure Agreement. If the District's fiscal year changes, it shall give notice of such change in the same manner as for a Listed Event under subsection(f)of Section 4 hereof. (b) If on the fifteenth (15th) day prior to the Annual Report Date, the Dissemination Agent has not received a copy of the Annual Report, the Dissemination Agent shall contact the Disclosure Representative by telephone and in writing (which may be by e-mail) to remind the District of its undertaking to provide the Annual Report pursuant to Section 2(a). (c) If the Dissemination Agent has not received an Annual Report by 12:00 noon on the first business day following the Annual Report Date for the Annual Report,the District irrevocably directs the Dissemination Agent to immediately send a notice to each National Repository or the MSRB and the State Depository(if any)in substantially the form attached as Exhibit A. (d) The Dissemination Agent shall: (i) determine each year prior to the date for providing the Annual Report the time and address of each National Repository and each State Repository, if any;and (ii) file a report with the District and(if the Dissemination Agent is not the Trustee) the Trustee certifying that the Annual Report has been provided pursuant to this Disclosure Agreement, stating the date it was provided and listing all the Repositories to which it was provided. Section 3. Content of Annual Reports. The District's Annual Report shall contain or incorporate by reference the following: (a) Audited financial statements prepared in accordance with generally accepted accounting principles as promulgated to apply to governmental entities from time to time by the Governmental Accounting Standards Board. If the District's audited financial statements are not available by the time 80336611.6 D-2 the Annual Report is required to be filed pursuant to subsection(a)of Section 2 hereof,the Annual Report shall contain unaudited financial statements in a format similar to the financial statements contained in the Official Statement, and the audited financial statements shall be filed in the same manner as the Annual Report when they become available. (b) The following information with respect to the Certificates: 0) The principal evidenced by the Certificates Outstanding as of the January I next preceding the Annual Report Date and the principal amount of other Senior Obligations outstanding as of the January 1 next preceding the Annual Report Date. (ii) The balance in the Reserve Fund,and a statement of the Reserve Requirement,as of the January 1 next preceding the Annual Report Date. (c) A summary report showing in reasonable detail Revenues, Operating Revenues, Maintenance and Operation Costs,Net Revenues, Net Operating Revenues and debt service with respect to the Senior Obligations for the fiscal year ended the June 30 next preceding the Annual Report Date. (d) An update,for the fiscal year ended the June 30 next preceding the Annual Report Date, of the information contained in the Official Statement in Table Nos. 2, 4, 6 (only with respect to information on 6 under the headings Fiscal Year and Sewer Service Charge), 8 (not to include projections),9, 10, 11, 12, 13, 14 and 16. (e) In addition to any of the information expressly required to be provided under subsections (a), (b). (c) and(d) of this Section,the District shall provide such further information, if any, as may be necessary to make the specifically required statements, in the light of the circumstances under which they are made,not misleading. Any or all of the items listed above may be included by specific reference to other documents, including official statements of debt issues of the District or related public entities, which have been submitted to each of the Repositories or the Securities and Exchange Commission. If the document included by reference is a final official statement, it must be available from the Municipal Securities Rulemaking Board. The District shall clearly identify each such other document so included by reference. Section 4. Reporting of Significant Events. (a) Pursuant to the provisions of this Section, the District shall give, or cause to be given, notice of the occurrence of any of the following events with respect to the Certificates,if material: (1) Principal and interest payment delinquencies. (2) Non-payment related defaults. (3) Unscheduled draws on debt service reserves reflecting financial difficulties. (4) Unscheduled draws on credit enhancements reflecting financial difficulties. (5) Substitution of credit or liquidity providers,or their failure to perform. 8033M 11.6 D-3 (6) Adverse tax opinions or events affecting the tax-exempt status of the security. (7) Modifications to rights of security holders. (8) Contingent or unscheduled Certificate calls. (9) Defeasances. (10) Release, substitution, or sale of property securing repayment of the securities. (11) Rating changes. (b) The District shall, within one business day of obtaining actual knowledge of the occurrence of any of the Listed Events, contact the Disclosure Representative, inform such person of the event, and request that the District promptly notify the Dissemination Agent in writing whether or not to report the event pursuant to subsection(f)of this Section. (c) Whenever the District obtains knowledge of the occurrence of a Listed Event, whether because of a notice from the Dissemination Agent pursuant to subsection (b)of this Section or otherwise, the District shall as soon as possible determine if such event would be material under applicable Federal securities law. (d) if the District has determined that knowledge of the occurrence of a Listed Event would be material under applicable Federal securities law, the District shall promptly notify the Dissemination Agent in writing. Such notice shall instruct the Dissemination Agent to report the occurrence pursuant to subsection(f)of this Section. (e) If in response to a request under subsection (b) of this Section, the District determines that the Listed Event would not be material under applicable Federal securities law, the District shall so notify the Dissemination Agent in writing and instruct the Dissemination Agent not to report the occurrence pursuant to subsection(f)of this Section. (f) If the Dissemination Agent has been instructed by the District to report the occurrence of a Listed Event, the Dissemination Agent shall file a notice of such occurrence with the Municipal Securities Rulemaking Board and each Repository. Notwithstanding the foregoing, notice of Listed Events described in paragraphs(8) and(9) of subsection (a) of this Section need not be given under this subsection any earlier than the notice (if any) of the underlying event is given to holders of affected Certificates pursuant to the Trust Agreement. Section 5. Electronic Filing. Submission of Annual Reports and notices of Listed Events to DisclosureUSA.org or another "Central Post Office" designated and accepted by the Securities and Exchange Commission shall constitute compliance with the requirement of filing such reports and notices with each Repository hereunder, and the District may satisfy its obligations hereunder to file any notice, document or information with a Repository by filing the same with any dissemination agent or conduit, including DisciosureUSA.org or another"Central Post Office"or similar entity,assuming or charged with responsibility for accepting notices,documents or information for transmission to such Repository,to the extent permitted by the Securities and Exchange Commission or Securities and Exchange Commission staff or required by the Securities and Exchange Commission. For this purpose, permission shall be deemed to have been granted by the Securities and Exchange Commission staff if and to the extent the 80336611.6 D-4 agent or conduit has received an interpretive letter, which has not been revoked, from the Securities and Exchange Commission staff to the effect that using the agent or conduit to transmit information to the Repository will be treated for purposes of the Rule as if such information were transmitted directly to the Repository. Section 6. Termination of Reporting Obligation. The District's obligations under this Disclosure Agreement shall terminate upon the legal defeasance, prior redemption or payment in full of all of the Certificates. If such termination occurs prior to the final maturity of the Certificates,the District shall give notice of such termination in the same manner as for a Listed Event under subsection (f) of Section 4 hereof. Section 7. Dissemination Agent. The District may, from time to time, appoint or engage another Dissemination Agent to assist it in carrying out its obligations under this Disclosure Agreement, and may discharge any such Dissemination Agent,with or without appointing a successor Dissemination Agent. If at any time there is not any other designated Dissemination Agent, the Trustee shall be the Dissemination Agent; provided it shall receive written notice of such designation at the time of such designation. Section 8. Amendment; Waiver. Notwithstanding any other provision of this Disclosure Agreement, the District and the Dissemination Agent may amend this Disclosure Agreement (and the Dissemination Agent shall agree to any amendment so requested by the District), and any provision of this Disclosure Agreement may be waived,provided that the following conditions are satisfied: (a) if the amendment or waiver relates to the provisions of subsection(a)of Section 2 hereof, Section 3 hereof or subsection(a)of Section 4 hereof,it may only be made in connection with a change in circumstances that arises from a change in legal requirements, change in law, or change in the identity, nature or status of an obligated person with respect to the Certificates,or type of business conducted; (b) the undertakings herein, as proposed to be amended or waived would, in the opinion of nationally recognized bond counsel, have complied with the requirements of the Rule at the time of the primary offering of the Certificates, after taking into account any amendments or interpretations of the Rule,as well as any change in circumstances;and (c) the proposed amendment or waiver (i) is approved by holders of the Certificates in the manner provided in the Trust Agreement for amendments to the Trust Agreement with the consent of holders,or(ii) does not,in the opinion of the Trustee and nationally recognized bond counsel,materially impair the interests of holders. If the annual financial information or operating data to be provided in the Annual Report is amended pursuant to the provisions hereof, the annual financial information containing the amended operating data or financial information shall explain, in narrative form, the reasons for the amendment and the impact of the change in the type of operating data or financial information being provided. If an amendment is made to the undertaking specifying the accounting principles to be followed in preparing financial statements, the annual financial information for the year in which the change is made shall present a comparison between the financial statements or information prepared on the basis of the new accounting principles and those prepared on the basis of the former accounting principles. The comparison shall include a qualitative discussion of the differences in the accounting principles and the impact of the change in the accounting principles on the presentation of the financial information, in order to provide information to investors to enable them to evaluate the ability of the District to meet its aa336611.6 D_$ obligations. To the extent reasonably feasible, the comparison shall be quantitative. A notice of the change in the accounting principles shall be sent to the Repositories. Section 9. Additional Information. Nothing in this Disclosure Agreement shall be deemed to prevent the District from disseminating any other information, using the means of dissemination set forth in this Disclosure Agreement or any other means of communication, or including any other information in any Annual Report or notice of occurrence of a Listed Event, in addition to that which is required by this Disclosure Agreement. If the District chooses to include any information in any Annual Report or notice of occurrence of a Listed Event in addition to that which is specifically required by this Disclosure Agreement, the District shall have no obligation under this Disclosure Agreement to update such information or include it in any future Annual Report or notice of occurrence of a Listed Event. Section 10. Default. In the event of a failure of the District or the Dissemination Agent to comply with any provision of this Disclosure Agreement,the Trustee may(and, at the written direction of any Participating Underwriter or the holders of at least 25% of the aggregate amount of principal evidenced by Outstanding Certificates and upon being indemnified to its reasonable satisfaction,shall), or any holder or beneficial owner of the Certificates may, take such actions as may be necessary and appropriate, including seeking mandate or specific performance by court order, to cause the District, Trustee or the Dissemination Agent, as the case may be, to comply with its obligations under this Disclosure Agreement. A default under this Disclosure Agreement shall not be deemed an Event of Default under the Trust Agreement, and the sole remedy under this Disclosure Agreement in the event of any failure of the District. the Trustee or the Dissemination Agent to comply with this Disclosure Agreement shall be an action to compel performance. Section 11. Duties, Immunities and Liabilities of Trustee and Dissemination Aeent. Article VQI of the Trust Agreement is hereby made applicable to this Disclosure Agreement as if this Disclosure Agreement were (solely for this purpose) contained in the Trust Agreement. Neither the Trustee nor the Dissemination Agent shall be responsible for the form or content of any Annual Report or notice of Listed Event. The Dissemination Agent shall receive reasonable compensation for its services provided under this Disclosure Agreement. The Dissemination Agent (if other than the Trustee or the Trustee in its capacity as Dissemination Agent)shall have only such duties as are specifically set forth in this Disclosure Agreement, and the District agrees to indemnify and save the Dissemination Agent, its officers, directors, employees and agents,harmless against any loss, expense and liabilities which it may incur arising out of or in the exercise or performance of its powers and duties hereunder, including the costs and expenses (including attorneys fees) of defending against any claim of liability, but excluding liabilities due to the Dissemination Agent's negligence or willful misconduct. The obligations of the District under this Section shall survive resignation or removal of the Dissemination Agent and payment of the Certificates. Section 12. Beneficiaries. This Disclosure Agreement shall inure solely to the benefit of the District, the Trustee, the Dissemination Agent, the Participating Underwriter and holders and beneficial owners from time to time of the Certificates,and shall create no rights in any other person or entity. Section 13. Counterparts. This Disclosure Agreement may be executed in several counterparts, each of which shall be an original and all of which shall constitute but one and the same instrument. 80336611.6 D-6 IN WITNESS WHEREOF,the parties hereto have executed this Disclosure Agreement as of the date first above written. ORANGE COUNTY SANITATION DISTRICT By: Lorenzo Tyner Director of Finance and Administrative Services DIGITAL ASSURANCE CERTIFICATION LLC, as Dissemination Agent By: Authorized Representative Acknowledged and Accepted: UNION BANK OF CALIFORNIA,N.A., as Trustee By: Authorized Officer 80336611.E D-7 EXHIBIT A NOTICE TO MUNICIPAL SECURITIES RULEMAKING BOARD OF FAILURE TO FILE ANNUAL REPORT Name of Issuer: Orange County Sanitation District Name of Issue: Orange County Sanitation District Certificates of Participation, Series 2008C Date of Issuance: December ,2008 NOTICE IS HEREBY GIVEN that the Orange County Sanitation District(the"District')has not provided an Annual Report with respect to the above-named Certificates as required by Section 6.09 of the Trust Agreement, dated as of December 1, 2008, by and among Union Bank of California, N.A., as Trustee, the Orange County Sanitation District Financing Corporation and the District [The District anticipates that the Annual Report will be filed by .] Dated: ORANGE COUNTY SANITATION DISTRICT By: cc: Trustee Dissemination Agent 80336611.6 D-8 APPENDIX E BOOK-ENTRY SYSTEM The description that follows of the procedures and recordkeeping with respect to beneficial ownership interests in the Certificates payment of principal and interest evidenced by the Certificates to Participants or Benficial Owners, confirmation and transfer of beneficial ownership interests in the Certificates, and other Certificate-related transactions by and between DTC, Participants and Beneficial Owners, is based on information furnished by DTC which the District and the Corporation each believes to be reliable, but the District and the Corporation take no respomsibillty for the completeness or accuracy thereof. The Depository Trust Company—Book-Entry System The Depository Trust Company("DTC"),New York,NY,will act as securities depository for the securities (the "Certificates"). The Certificates will be issued as fully-registered securities registered in the name of Cede & Co. (DTC's partnership nominee) or such other time as may be requested by an authorized representative of DTC. One fully-registered Certificate will be issued for the Certificates in the aggregate principal amount of such issue,and will be deposited with DTC. DTC is a limited-purpose trust company organized under the New York Banking Law, a "banking organization" within the meaning of the New York Banking Law, a member of the Federal Reserve System, a "clearing corporation" within the meaning of the New York Uniform Commercial Code, and a "clearing agency" registered pursuant to the provisions of Section 17A of the Securities Exchange Act of 1934. DTC holds and provides asset servicing for over 3.5 million U.S. and non-U.S. equity issues, corporate and municipal debt issues, and money market instruments (from over 100 countries) that DTC's participants ("Direct Participants") deposit with DTC. DTC also facilitates the post4mde settlement among Direct Participants of sales and other securities transactions in deposited securities,through electronic computerized book-entry transfers and pledges between Direct Participants' accounts. This eliminates the need for physical movement of securities certificates. Direct Participants include both U.S. and non-U.S. securities brokers and dealers, banks, trust companies, clearing corporations,and certain other organizations. DTC is a wholly-owned subsidiary of The Depository Trust & Clearing Corporation ("DTCC"). DTCC is the holding company for DTC, National Securities Clearing Corporation and Fixed Income Clearing Corporation, all of which are registered clearing agencies. DTCC is owned by the users of its regulated subsidiaries. Access to the DTC system is also available to others such as both U.S. and non-U.S.securities brokers and dealers,banks, trust companies, and clearing corporations that clear through or maintain a custodial relationship with a Direct Participant, either directly or indirectly ('Indirect Participants"). DTC has Standard & Poor's highest rating: AAA. The DTC Rules applicable to its Participants are on file with the Securities and Exchange Commission. More information about DTC can be found at www.dtcc.com and www.dtc.org. The information on such websites is not incorporated herein by such reference or otherwise. Purchases of Certificates under the DTC system must be made by or through Direct Participants, which will receive a credit for the Certificates on DTC's records. The ownership interest of each actual purchaser of each Certificate ("Beneficial Owner") is in tun to be recorded on the Direct and Indirect Participants' records. Beneficial Owners will not receive written confirmation from DTC of their purchase. Beneficial Owners are,however,expected to receive written confirmations providing details of the transaction, as well as periodic statements of their holdings, from the Direct or Indirect Participant through which the Beneficial Owner entered into the transaction. Transfers of ownership interests in the Certificates are to be accomplished by entries made on the books of Direct and Indirect Participants acting on behalf of Beneficial Owners. Beneficial Owners will not receive certificates representing their 9033MI L6 E-1 ownership interests in the Certificates, except in the event that use of the book-entry system for the Certificates is discontinued. To facilitate subsequent transfers, all Certificates deposited by Direct Participants with DTC are registered in the time of DTC's partnership nominee, Cede & Co. or such other name as may be requested by an authorized representative of DTC. The deposit of Certificates with DTC and their registration in the name of Cede & Co. or such other nominee do not effect any change in beneficial ownership. DTC has no knowledge of the actual Beneficial Owners of the Certificates; DTC's records reflect only the identity of the Direct Participants to whose accounts such Certificates are credited,which may or may not be the Beneficial Owners. The Direct and Indirect Participants will remain responsible for keeping account of their holdings on behalf of their customers. Conveyance of notices and other communications by DTC to Direct Participants, by Direct Participants to Indirect Participants, and by Direct Participants and Indirect Participants to Beneficial Owners will be governed by arrangements among them, subject to any statutory or regulatory requirements as may be in effect from time to time. Beneficial Owners of Certificates may wish to take certain steps to augment transmission to them of notices of significant events with respect to the Certificates, such as prepayments,tenders,defaults,and proposed amendments to the security documents. For example, Beneficial Owners of Certificates may wish to ascertain that the nominee holding the Certificates for their benefit has agreed to obtain and transmit notices to Beneficial Owners, in the alternative,Beneficial Owners may wish to provide their names and addresses to the registrar and request that copies of the notices be provided directly to them. Prepayment notices shall be sent to DTC. If less than all of the Certificates within an issue are being prepaid DTC's practice is to determine by lot the amount of the interest of each Direct Participant in such issue to be prepaid. Neither DTC nor Cede&Co. (nor such other DTC nominee)will consent or vote with respect to the Certificates unless authorized by a Direct Participant in accordance with DTC's MMI Procedures. Under its usual procedures, DTC mails an Omnibus Proxy to the District as soon as possible after the record date. The Omnibus Proxy assigns Cede & Co.'s consenting or voting rights to those Direct Participants to whose accounts the Certificates are credited on the record date (identified in a listing attached to the Omnibus Proxy). Prepayment proceeds, distributions, and dividend payments on the Certificates will be made to Cede&Co.,or such other nominee as may be requested by an authorized representative of DTC. DTC's practice is to credit Direct Participants' accounts, upon DTC's receipt of funds and corresponding detail information from the District or the Trustee on payable date in accordance with their respective holdings shown on DTC's records. Payments by Participants to Beneficial Owners will be governed by standing instructions and customary practices, as is the case with securities held for the accounts of customers in bearer form or registered in "street name," and will be the responsibility of such Participant and not of DTC, nor its nominee,the Trustee, or the District, subject to any statutory or regulatory requirements as may be in effect from time to time. Payment of prepayment proceeds, distributions, and dividend payments to Cede &Co.(or such other nominee as may be requested by an authorized representative of DTC) is the responsibility of the District or the Trustee, disbursement of such payments to Direct Participants will be the responsibility of DTC, and disbursement of such payments to the Beneficial Owners will be the responsibility of Direct and Indirect Participants. 90336611.6 E-2 DTC may discontinue providing its services as securities depository with respect to the Certificates at any time by giving reasonable notice to the District or the Trustee. Under such circumstances, in the event that a successor securities depository is not obtained,Certificates are required to be printed and delivered. The District may decide to discontinue use of the system of book-entryonly transfers through DTC (or a successor securities depository). In that event. Certificates will be printed and delivered to DTC. The information in this section concerning DTC and DTC's book-entry system has been obtained from sources that the District believes to be reliable, but the District takes no responsibility for the accuracy thereof. Discontinuance of DTC Services In the event(i)DTC determines not to continue to act as securities depository for the Certificates, (ii)DTC shall no longer act and give notice to the Trustee of such determination or (iii)the District determines that it is in the best interest of the Beneficial Owners that they be able to obtain Certificates and delivers a written certificate to the Trustee to that effect, DTC services will be discontinued. If the District determines to replace DTC with another qualified securities depository, the District shall prepare or direct the preparation of a new single,separate,fully registered Certificate for each of the maturities of the Certificates,registered in the name of such successor or substitute qualified securities depository or its nominee. If the District fails to identify another qualified securities depository to replace DTC then the Certificates shall no longer be restricted to being registered in the certificate registration books in the time of Cede&Co.,but shall be registered in such names as are requested in a certificate of the District, in accordance with the Taut Agreement. All Certificates may be presented for transfer by the Owner thereof, in person or by his attorney duly authorized in writing, at the Principal Office of the Trustee, on the books required to be kept by the Trustee pursuant to the provisions of the Trust Agreement, upon surrender of such Certifications for cancellation accompanied by delivery of a duly executed written instrument of transfer in a form acceptable to the Trustee. The Trustee may treat the Owner of any Certificate as the absolute owner of such Certificate for all purposes, whether or not such Certificate shall be overdue, and the Trustee shall not be affected by any knowledge or notice to the contrary; and payment of the interest and principal evidenced by such Certificate shall be made only to such Owner, which payments shall be valid and effectual to satisfy and discharge the liability evidenced by such Certificate to the extent of the sum or sums so paid. Whenever any Certificates shall be surrendered for transfer, the Trustee shall execute and deliver new Certificates representing the same principal amount in Authorized Denominations. The Trustee shall require the payment of any Owner requesting such transfer of any tax or other governmental charge required to be paid with respect to such transfer. Certificates may be presented for exchange at the Principal Office of the Trustee for a like aggregate principal amount of Certificates of other Authorized Denominations. The Trustee shall require the payment by the Owner requesting such exchange of any tax or other governmental charge required to be paid with respect to such exchange. The Trustee shall not be required to transfer or exchange any Certificate during the period in which the Trustee is selecting Certificates for prepayment, nor shall the Trustee be required to transfer or exchange any Certificate or portion thereof selected for prepayment from and after the date of mailing the notice of prepayment thereof. 90376611.6 B_9 APPENDIX F FORM OF APPROVING OPINION OF SPECIAL COUNSEL Upon the execution and delivery of the Certificates, Fulbright& Jaworski L.L.P., Los Angeles, California, Special Counsel to the District, will render its final approving opinion with respect to the Certificates in substantially the following form: [Date of Delivery] Orange County Sanitation District IOW Ellis Avenue Fountain Valley,California 92708-7018 $_,000,000 Orange County Sanitation District Certificates of Participation Series 2008C Ladies and Gentlemen: We have acted as Special Counsel in connection with the $_,000,000 aggregate principal amount of Orange County Sanitation District Certificates of Participation, Series 2008C (the "Certificates") which evidence direct, fractional undivided interests of the Owners thereof in the installment payments (the "Installment Payments"), and the interest thereon, to be made by the Orange County Sanitation District (the -District") pursuant to the Installment Purchase Agreement, dated as of December 1, 2008 (the "Installment Purchase Agreement"), by and between the District and the Orange County Sanitation District Financing Corporation(the"Corporation"). Pursuant to the Master Agreement for District Obligations, dated as of August 1, 2000 (the "Master Agreement'), by and between the District and the Corporation, the District has established conditions and terms upon which obligations such as the Installment Payments and the interest thereon, will be incurred and secured. Installment Payments under the Installment Purchase Agreement are payable solely from Net Revenues as provided in the Installment Purchase Agreement, consisting primarily of all income and revenue received by the District from the operation or ownership of the Wastewater System of the District (the "Wastewater System")remaining after payment of Maintenance and Operation Costs. Capitalized terms used and not otherwise defined herein shall have the meanings ascribed to such terms in the Installment Purchase Agreement, The Certificates are to be executed and delivered pursuant to a Trust Agreement, dated as of December 1, 2008 (the "Trust Agreement"),by and among the District,the Corporation and Union Bank of California,N.A., as trustee (the "Trusted'). Proceeds from the sale of the Certificates will be used to (i)finance certain improvements to the Wastewater System, (ii)fund a reserve fund for the Certificates and(iii)pay the costs incurred in connection with the execution and delivery of the Certificates. As Special Counsel,we have examined copies certified to us as being true and complete copies of the Master Agreement,the Trust Agreement and the Installment Purchase Agreement and the proceedings of the District in connection with the execution and delivery of the Certificates. We have also examined 80336611.6 F-I such certificates of officers of the District, the Corporation and others as we have considered necessary for the purposes of this opinion. Based upon the foregoing,we are of the opinion that: I. The Master Agreement, the Installment Purchase Agreement and the Trust Agreement each has been duly and validly authorized,executed and delivered by the District and assuming the Master Agreement, the Installment Purchase Agreement and the Trust Agreement each constitutes the legally valid and binding obligation of the other parties thereto, enforceable against such parties in accordance with its respective terms, each constitutes the legally valid and binding obligation of the District, enforceable against the District in accordance with its respective terns. 2. The obligation of the District to pay the Installment Payments, and the interest thereon, and other payments required to be made by it under the Installment Purchase Agreement is a special obligation of the District payable, in the manner provided in the Installment Purchase Agreement, solely from Net Revenues and other funds provided for in the Installment Purchase Agreement lawfully available therefor. 3. Assuming due authorization, execution and delivery of the Trust Agreement and the Certificates by the Trustee,the Certificates are entitled to the benefits of the Trust Agreement. 4. The Internal Revenue Code of 1986 (the "Code") imposes certain requirements that most be met subsequent to the execution and delivery of the Certificates for the component of each payment designated as interest in the Installment Purchase Agreement (the "Payment Interest'), and the allocable portion thereof distributable in respect of each Certificate (the "Certificate Interest Distribution'), to be and remain excluded from the gross income of the owner thereof for federal income tax purposes. Noncompliance with such requirements could cause such amounts to be included in gross income of such owner for federal income tax purposes retroactive to the date of delivery of the Certificates. The Corporation and the District have covenanted in the Trust Agreement, and the District has covenanted in the Installment Purchase Agreement, to maintain the exclusion pursuant to section 103(a) of the Code of the Payment Interest from the gross income of the owners thereof for federal income tax purposes. In our opinion, under existing law, and assuming compliance with the aforementioned covenant, the Payment Interest allocable to and the Certificate Interest Distributions in respect of a Certificate are excluded pursuant to section 103(a) of the Code from the gross income of the owner thereof for federal income tax purposes; inasmuch as the Installment Purchase Agreement is not a "specified private activity bond" within the meaning of section 57(a)(5) of the Code, neither the Payment Interest nor any Certificate Interest Distribution is an item of tax preference for purposes of computing the alternative minimum tax imposed by section 55 of the Code. It is noted that the accrual of Payment Interest allocable to and Certificate Interest Distributions in respect of a Certificate owned by a corporation may affect the computation of income, upon which the alternative minimum tax is imposed, to the extent that such amounts are taken into account in determining the adjusted earnings of that corporation (75% of the excess (if any) of such adjusted current earnings over the alternative minimum taxable income being an adjustment to the alternative minimum taxable income(determined without regard to the adjustment or to the alternative tax net operating loss deduction)). Further, based solely on the foregoing, and upon existing provisions of the California Revenue and Taxation Code, we are of the opinion that Payment Interest allocable to and the Certificate Interest Distributions in respect of a Certificate are not subject to taxation under the California personal income tax. 90336611.6 F-2 We have not undertaken to advise in the future whether any events after the date of delivery of the Installment Purchase Agreement may affect the tax status of the Payment Interest or Certificate Interest Distributions. No assurance can be given that future legislation, if enacted into law, will not contain provisions that could directly or indirectly reduce the benefit of the exclusion of such amounts from the gross income of the owner of Certificates for federal income tax purposes. Furthermore, we express no opinion as to any federal, state, or local tax law consequences with respect to the Installment Purchase Agrcement,Certificates, Payment Interest, or Certificate Interest Distributions, if any action is taken with respect to the Installment Purchase Agreement,the Master Agreement,the Trot Agreement,the Certificates,or the proceeds thereof, permitted or predicated upon the advice or approval of counsel if such advice or approval is given by counsel other than us. Except as stated in the preceding three paragraphs, we express no opinion as to any federal or state tax consequences of the ownership or disposition of the Installment Purchase Agreement or the Certificates. We have not been requested to express, and do not express, any view as to the compliance by any person with federal and state securities laws. With the exception of the opinions expressed above, we have not been requested to express and do not express, any opinion as to any matter affected by any taxing or other law of the State of California. The rights of the owners of the Certificates and the enforceability of the Certificates, the Master Agreement, the Trust Agreement and the Installment Purchase Agreement may be subject to bankruptcy, insolvency, reorganization, moratorium and other similar laws affecting creditors' rights heretofore or hereafter enacted and may also be subject to the exercise of judicial discretion in appropriate cases. The enforceability of the Certificates, the Master Agreement, the Trust Agreement and the Installment Purchase Agreement is subject to the effect of general principles of equity, including, without limitation, concepts of materiality, reasonableness, good faith and fair dealing, to the possible unavailability of specific performance or injunctive relief, regardless of whether considered in a proceeding in equity or at law,and to the limitations on legal remedies against governmental entities in California. No opinion is expressed herein on the accuracy, completeness or fairness of the Official Statement or other offering material relating to the Certificates. Our opinions are based on existing law, which is subject to change. Such opinions are further based on our knowledge of facts as of the date hereof. We assume no duty to update or supplement our opinions to reflect any facts or circumstances that may hereafter wine to our attention or to reflect any changes in any law that may hereafter occur or become effective. Moreover, our opinions are not a guarantee of result and are not binding on the Internal Revenue Service; rather, such opinions represent our legal judgment based upon our review of existing law that we deem relevant to such opinions and in reliance upon the representations and covenants referenced above. Respectfully submitted 9033MI L6 F_3 Fulbright&Jaworoki L,L.P.—Draft 1115108 OFFICIAL NOTICE INVITING BIDS $_000 0W ORANGE COUNTY SANITATION DISTRICT CERTIFICATES OF PARTICIPATION SERIES 2008C (Book-Entry-Only) NOTICE IS HEREBY GIVEN that bids will be received by the Orange County Sanitation District (the"District") for the purchase of$_,000,000' original principal amount of Orange County Sanitation District Certificates of Participation, Series 2008C(the"Certificates'). Bids for less than all of the Certificates will not be accepted The bids will be received in the form,at the place,and up to the time specified below(unless postponed w described herein): Date: Wednesday,December 3,2008 10:30 a.m.,New York Time Place: Orange County Sanitation District 10844 Ellis Avenue Fountain Valley,CA 92708-7018 Electronic Bids: As an accommodation to bidders, electronic proposals may be submitted to Ipreo LLC; at www.newissuehome.i-deal.com and the Parity bid delivery system (the "Electronic Service"). The Electronic Service will act as agent of the bidder and not of the District in connection with the submission of bids and the District assumes no responsibility or liability for bids submitted through the Electronic Service. See "Information Regarding Electronic Proposals"herein. No Facsimile Bids: No bids will be accepted by facsimile. Terms of the Certificates The Preliminary Official Statement for the Certificates,November. 2008, including the cover page and all appendices thereto (the "Preliminary Official Statement"), provides certain information concerning the sale and delivery of $_,000,000* aggregate principal amount of the Certificates evidencing direct, undivided fractional interests in the Installment Payments (the "Installment Payments"), and the interest thereon, payable by the District pursuant to the Installment Purchase Agreement, dated as of December 1, 2008 (the"Installment Purchase Agreement"), by and between the District and the Orange County Sanitation District Financing Corporation (the "Corporation'). Each bidder must have obtained and reviewed the Preliminary Official Statement prior to bidding for the Certificates. This Official Notice Inviting Bids contains certain information for quick reference only, is not a summary of the issue and governs only the terms of the sale of, bidding for and closing procedures with respect to the Certificates. Bidders must read the entire Preliminary Official Statement to obtain information essential to making an informed investment decision. Pursuant to the Master Agreement for District Obligations, dated as of August 1, 2000 (the "Master Agreement"), by and between the District and the Corporation, the District has established and declared the conditions and terms upon which obligations such as the Installment Purchase Agreement, Preliminary,subject to change. ao 04%.e , J and the Installment Payments and the interest thereon,will be incurred and secured. Installment Payments under the Installment Purchase Agreement are payable solely from Net Revenues, as provided in the Master Agreement and the Installment Purchase Agreement, consisting primarily of all income and revenue received by the District from the operation or ownership of the Wastewater System of the District (the"Wastewater System")remaining after payment of Maintenance and Operation Costs. The Issue The proceeds from the sale of the Certificates will be used to: (i)finance certain improvements to the Wastewater System, (ii)fund a reserve fund for the Certificates and (iii)pay costs of execution and delivery of the Certificates. The Certificates are to be executed and delivered pursuant to a Trust Agreement, dated as of December 1, 2008 (the "Trust Agreement"), by and among the District, the Corporation and Union Bank of California,N.A.,as trustee(the"Trustee"). Capitalized terms not defined herein shall have the same definitions as used in the Trust Agreement or the Master Agreement. Authorization On November 19,2008,the District and the Corporation authorized the execution and delivery of the Installment Purchase Agreement and the Trust Agreement in connection with the execution and delivery of the Certificates. Outstanding Senior Obligations The District has outstanding Senior Obligations payable on a parity with the Installment Payments under the Installment Purchase Agreement. The term "Existing Senior Obligations"as used in the Preliminary Official Statement refers to the 2000 Installment Purchase Agreement, the 2003 Installment Purchase Agreement, the 2006 Installment Purchase Agreement, the 2007A Installment Purchase Agreement, the 2007B Installment Purchase Agreement, the 2008A Installment Purchase Agreement and the 2008E Installment Purchase Agreement. Security and Source of Payments The Certificates evidence direct, undivided fractional interests in the Installment Payments, and the interest thereon, paid by the District pursuant to the Installment Purchase Agreement The obligation of the District to pay the Installment Payments and the interest thereon and other payments required to be made by it under the Installment Purchase Agreement is a special obligation of the District payable,in the manner provided under the Installment Purchase Agreement, solely from Net Revenues and other funds as provided in the Installment Purchase Agreement. Net Revenues generally consist of all income and revenue received by the District from the operation or ownership of the Wastewater System remaining after payment of Maintenance and Operation Costs,all as father provided in the Master Agreement. The District's obligation to make Installment Payments from Net Revenues is on a parity with the District's obligation to make payments with respect to its other outstanding obligations described as Senior Obligations and all Reimbursement Obligations with respect to Senior Obligations, as provided in the Master Agreement. The Installment Purchase Agreement constitutes a Senior Obligation and is subject to the provisions of the Master Agreement and is afforded all of the advantages, benefits,interests and security for Senior Obligations pursuant to the Master Agreement Pursuant to the Master Agreement, the District pledges all Net Revenues to the payment of the Senior Obligations and Reimbursement Obligations with respect to Senior Obligations,and the Net Revenues will not be used for any other purpose while any of the Senior Obligations or Reimbursement Obligations with respect to Senior Obligations remain unpaid; provided, however, that out of the Net Revenues there may be 80340496.4 2 V apportioned such sums for such purposes as are expressly permitted by the Master Agreement. This pledge constitutes a first lien on the Net Revenues for the payment of the Senior Obligations and Reimbursement Obligations with respect to Senior Obligations. The term Senior Obligations, generally means all revenue bonds or notes(including bond anticipation notes and commercial paper)of the District authorized,executed, issued and delivered under and pursuant to applicable law,the Installment Purchase Agreement and all other contracts (including financial contracts) or leases of the District authorized and executed by the District under and pursuant to applicable law, the installment, lease or other payments under which are,in accordance with the provisions of the Master Agreement,payable from Net Revenues on a parity with the payments under the Master Agreement. The District may at any time incur Subordinate Obligations; provided, however, that prior to incurring such Subordinate Obligations,the District will have determined that the incurrence thereof will not materially adversely affect the District's ability to comply with the requirements of the Master Agreement. The District may at any time incur Reimbursement Obligations with respect to Subordinate Obligations. For a description of the District's outstanding Senior Obligations and Subordinate Obligations, see "FINANCIAL OBLIGATIONS — Existing Indebtedness" in the Preliminary Official Statement. The District may, in connection with the incurrence of Subordinate Obligations, pledge Net Revenues to the payment of Subordinate Obligations and Reimbursement Obligations with respect to Subordinate Obligations; provided, however, that such pledge, and any lien created thereby, shall be junior and subordinate to the pledge of, and lien on,Net Revenues for the payment of Senior Obligations and Reimbursement Obligations with respect to Senior Obligations. Pursuant to the Master Agreement, the District is required, to the extent permitted by law,to fix, prescribe and collect fees and charges for the services and facilities of the Wastewater System which will be at least sufficient to yield during each Fiscal Year(a)Net Revenues equal to 125%of Debt Service on Senior Obligations for such Fiscal Year and (b)Net Operating Revenues equal to 100% of Debt Service on all Obligations for such Fiscal Yew.The District may make adjustments from time to time in such fees and charges and may make such classification thereof as it deems necessary, but shall not reduce the fees and charges then in effect unless the Revenues and Net Revenues from such reduced fees and charges will at all times be sufficient to meet the requirements of the Master Agreement. See "SECURITY AND SOURCES OF PAYMENT FOR THE CERTIFICATES— Rate Covenant" in the Preliminary Official Statement. The Trust Agreement provides for the funding of the Reserve Fund in an amount equal to the "Reserve Requirement,"which is defined as an amount,as of any date of calculation,equal to the least of (a) 10% of the original aggregate amount of principal evidenced by the Certificates (or if the amount of original issue discount or premium applicable to the Certificates exceeds 2%, then 10%of the issue price of the Certificates), (b) the maximum amount of remaining Installment Payments, and the interest thereon, coming due in any one Certificate Year, and (c) 125% of the average amount of remaining Installment Payments, and the interest thereon, coming due in each Certificate Year. Amounts in the Reserve Fund may be used to pay principal of and interest evidenced by the Certificates to the extent that amounts in the Principal Account and Interest Account are insufficient therefore. A portion of the proceeds of the Certificates and, at the District's option, certain other available monies of the District, in an amount equal to the Reserve Requirement will be deposited into the Reserve Fund. 80340496.4 3 U Additional Obligations In addition to the Existing Senior Obligations, the District may at any time incur Obligations payable on a parity or on a subordinate basis to the payment by the District of the Installment Payments upon satisfaction of conditions provided in the Master Agreement. See "SECURITY AND SOURCES OF PAYMENT FOR THE CERTIFICATES—Limitations on Issuance of Additional Obligations"in the Preliminary Official Statement. Book-Entry-Only The Certificates will be executed and delivered in the form of fully registered certificates payable in lawful money of the United States of America.The Certificates will be initially delivered only in book- entry form and will be registered in the name of Cede & Co., as nominee of The Depository Trust Company, New York, New York ("DTC"), which will act as securities depository for the Certificates. Individual purchases of the Certificates will be made in book-entry form only. Purchasers of Certificates will not receive physical certificates representing their ownership interests in the Certificates purchased. The Certificates will be delivered in Authorized Denominations of $5,000 and any integral multiple thereof. Payments of principal and interest evidenced by the Certificates are payable directly to DTC by the Trustee. Upon receipt of payments of such principal and interest, DTC will in turn distribute such payments to the beneficial owners of the Certificates. So long as the Certificates are in the DTC book- entry system,the interest,principal and prepayment premiums, if any,due with respect to the Certificates will be payable by the Trustee,or its agent,to DTC or its nominee. Principal and Interest Payments The Certificates will be dated as of the date of initial delivery and will evidence interest from that date (computed on the basis of a 360-day year of twelve 30day months). Interest evidenced by the Certificates is payable semiannually on February 1 and August I of each year, commencing on February 1, 2009. Payment of principal and prepayment premium, if any, evidenced by the Certificates will be paid in lawful money of the United States of America upon presentation and surrender thereof at the Principal Office of the Trustee. Principal Amortkation The Certificates will be executed and delivered in the approximate aggregate original principal amount of $ ,000,000' and will be subject to principal amortization through serial maturities on February I in the years 20_though 20_in the amounts set forth in the Official Bid Form. Mandatory Sinking Account Prepayment If the successful bidder designates principal amounts to be combined into one or more term maturities, each such term maturity shall be subject to mandatory sinking account payments commencing on February I of the first year which has been combined to form such term maturities and continuing on February I in each year thereafter until the stated maturity date of that term maturity, provided that no term maturity maturing on or after February 1, 20—may have sinking fund payments prior to February 1, 20 . The prepayment price will be equal to the principal amount for such year set forth in the Official Bid Form, plus accrued interest evidenced thereby to the date fixed for prepayment, without premium. The amount of each such prepayment shall be reduced in the event and to the extent that Installment Preliminary,subject to change. 803404964 4 V Payments payable on the corresponding Installment Payment Date are prepaid pursuant to provisions of the Installment Purchase Agreement governing optional prepayment. Optional Prepayment The Certificates with stated Principal Payment Dates prior to February 1, 20 are not subject to optional prepayment prior to their stated Principal Payment Dates. The Certificates with stated Principal Payment Dates on or after February 1, 20_ are subject to optional prepayment prior to their stated Principal Payment Dates, on any date on or after February 1, 20_, in whole or in part, in Authorized Denominations, from and to the extent of prepaid Installment Payments paid pursuant to the Installment Purchase Agreement or from any other source of available funds, any such prepayment to be at a price equal to the principal evidenced by the Certificates to be prepaid,plus accrued interest evidenced thereby to the date fixed for prepayment,without premium. Selection of Certificates for Prepayment Whenever less than all the Outstanding Certificates are to be prepaid on any one date pursuant to provisions of the Trust Agreement with respect to optional prepayment of Certificates, the Trustee shall select the Certificates to be prepaid among Certificates with different Principal Payment Dates as directed in a Written Request of the District. Whenever less than all the Outstanding Certificates with the same stated Principal Payment Date are to be prepaid on any one date pursuant to the Trust Agreement, the Trustee shall select the Certificates with such Principal Payment Date to be prepaid as directed in a Written Request of the District, or at the discretion of the District by lot in any manner that the Trustee deems fair and appropriate, which decision shall be final and binding upon the District and the Owners. The Trustee shall promptly notify the District in writing of the numbers of the Certificates so selected for prepayment on such date. Notice of Prepayment The Trustee shall,at least 20 but not more than 60 days prior to any prepayment date,give notice of prepayment to the respective Owners of Certificates designated for prepayment by first-class mail, postage prepaid at their addresses appearing on the registration books maintained by the Trustee as of the close of business on the day before such notice of prepayment is given. The actual receipt by the Owner of any notice of such prepayment shall not be a condition precedent to prepayment,and neither failure to receive such notice nor any defect therein shall affect the validity of the proceedings for the prepayment of such Certificates or the cessation of interest evidenced thereby on the date fixed for prepayment. Interest Rates,Reoffering Prices,and Premium or Discount Bids Bidders must bid to purchase all and not part of the Certificates and must submit their bids on the Official Bid Fom. Bidders must specify a rate of interest for each maturity of the Certificates. The rates of interest must be expressed in multiples of one-eighth ('/r) or one-twentieth (r/m)of one percent (1%), and no interest rate can exceed 7.00% per annum. All Certificates of the same maturity must evidence interest at the same rate. The successful bidder will,within 30 minutes after being notified of the award of the Certificates, advise the District of the initial bona fide public reoffering prices of each maturity of the Certificates on the date of award. The successful bidder will also be required, prior to delivery of the Certificates, to famish to the District a certificate("Bidder's Certificate") acceptable to Special Counsel and taking into account any post bid adjustment of the principal amount of any of the maturities of the Certificates,which smtes with respect to each maturity of the Certificates that such successful bidder either(A)has purchased the applicable maturity of the Certificates for its own account and not with a view to distribution or resale 90340496A 5 V and not in the capacity of a bond house,broker or other intermediary and the price at which such purchase was made,or(B)(1)has made a bona fide public offering to the public of each applicable maturity of the Certificates at the prices indicated in the information supplied on the date of the award,and(2)an amount at least equal to 10 percent of each such maturity of the Certificates was sold to the public at the prices indicated on the date of the award, with the exception of those maturities, if any, identified in such Bidder's Certificate,as to which such certificate shall explain the reasons why at least 10 percent of each such maturity was not sold to the public at the price indicated for each such maturity on the date of the award. For the purposes of the information submitted on the date of the award and the Bidder's Certificate,the"public" does not include bond houses, brokers or similar persons or organizations acting in the capacity of underwriters or wholesalers. In making such representations,the successful bidder must reflect the anticipated existence, if any, of a "derivative product" (e.g., a tender option) offered or to be offered by the bidder or its affiliate in connection with the initial sale of any of the Certificates. The successful bidder may also be asked by Special Counsel to clarify any discrepancies between the Bidder's Certificate and publicly available information relating to trades of the Certificates and to explain the failure to sell at least 10%of each maturity to the public at the prices indicated on the date of the award. Bidders may bid to purchase Certificates from the District at a discount or with a premium; however, no bid will be considered if the bid is to purchase Certificates at an aggregate price less than 990A or more than [103]%of the aggregate principal amount of the Certificates.The reoffering price for each maturity of the Certificates maturing in 2019 and thereafter shall not be less than 97%of the principal amount of such maturity. No difference greater than 3%will be permitted between the highest and lowest rates of interest specified. No bid will be accepted which contemplates the waiver of any interest or other concession by the bidder as substitute for payment in full of the purchase price. Bids which do not conform to the terns of this section may be rejected. See"Right to Reject Bids, Waive Irregularities"below. Insurance The successful bidder may purchase municipal bond insurance,if available,for some or all of the Certificates. However, the delivery of the Certificates shall not be conditioned upon the issuance of any such insurunce.The District makes no representation as to whether the Certificates qualify for insurance. Payment of any insurance premium and satisfaction of any conditions to the issuance of a municipal bond insurance policy,including payment for any legal opinion to be delivered to any insurer, shall be the sole responsibility of the bidder. In particular, the District, at its option, may not enter into any additional agreements with respect to the provision of any such insurance. FAILURE OF THE INSURANCE PROVIDER TO ISSUE ITS POLICY SHALL NOT JUSTIFY FAILURE OR REFUSAL BY THE SUCCESSFUL BIDDER TO ACCEPT DELIVERY OF, OR PAY FOR THE CERTIFICATES. Each successful bidder most provide the District with the municipal bond insurance commitment, if any, including the amount of the policy premium, and information with respect to the municipal bond insurance policy and insurance provider for the inclusion in the final Official Statement within one business days following the award of the bid by the District.The successful bidder will be required,prior to the delivery of the Certificates, to furnish to the District a certificate acceptable to Special Counsel, Fulbright&Jaworski L.L.P.,stating that,in its opinion,the amount of the premium paid for the municipal bond insurance policy is not in excess of the present value of the expected interest savings as a result of such policy. Form of Bid BIDS FOR LESS THAN ALL OF THE CERTIFICATES WILL NOT BE ACCEPTED. Each bid most be on the Official Bid Form. All electronic proposals shall be deemed to incorporate the 3034N964 6 d provisions of the Official Bid Form and must be unconditional and irrevocable. Except for proposals submitted in accordance with the following paragraph, each bid must be accompanied by the applicable bid check or Surety Bond described under the caption "Bid Check" below. In addition, each bidder is requested to supply an estimate of the true interest cost resulting from its bid computed as prescribed below under the caption "Award, Delivery and Payment,"which shall be considered as informative only and not binding on either the bidder or the District. Each bid must be in accordance with the terms and conditions set forth in this Official Notice Inviting Bids. The District will make its best efforts to accommodate the electronic bids; however,the District, the Financial Advisor(Public Resources Advisory Group) and Special Counsel assume no responsibility for any error contained in any electronic bid, or for the failure of any electronic bid to be transmitted or received at the official time for receipt of such bids. The official time for receipt of bids will be determined by the District at the place of the bid opening, and the District shall not be required to accept the time kept by Electronic Service as the official time. The District assumes no responsibility for informing any bidder prior to the deadline that its bid is incomplete,or not received. If multiple timely bids are received from a single bidder the District shall accept the best of such bids and each bidder agrees that by submitting any bid to be bound by its best bid. Information Regarding Electronic Proposals Electronic proposals must be submitted through the Electronic Service. If any provision of this Official Notice Inviting Bids conflicts with information provided by the Electronic Service,this Official Notice Inviting Bids shall control. The District is not responsible for the proper operation of and shall have no liability for any delays or interruptions of or any damages caused by the Electronic Service.The District is using the Electronic Service as a communication mechanism and not as the District's agent to conduct electronic bidding for the Certificates. The District is not bound by any advice of or determination by the Electronic Service to the effect that any particular bid complies with the terms of this Official Notice Inviting Bids. All costs and expenses incurred by prospective bidders in connection with their submission of bids through the Electronic Service are the sole responsibility of such bidders and the District is not responsible for any such costs or expenses. Further information about the Electronic Service, including any fee charged, may be obtained from Ipreo LLC, 1359 Broadway, Second Floor, New York NY 10019 (212-849-5021). The District assumes no responsibility or liability for bids submitted through the Electronic Service.The District shall be entitled to assume that any bid submitted through the Electronic Service has been made by a duly authorized agent of the bidder. Bid Check Each bidder most provide with its bid a certified or cashier's check payable in same day or next day funds drawn on a responsible bank having an office in Orange County, California equal to $ .00("Bid Check Amount")payable to the order of"Orange County Sanitation District,"and delivered to the following address: Orange County Sanitation District, 10944 Ellis Avenue, Fountain Valley, CA 92708-7018, Attention: Lorenzo Tyner. Bid checks will be held by the District, un-cashed until the Certificates are awarded to the successful bidder. Any check accompanying an unaccepted bid will be returned promptly to the unsuccessful bidder by the District. Alternatively, the bidder may provide its bid with a financial surety bond ("Surety Bond") in the amount of the Bid Check Amount issued by an insurance company rated AAA by Standard & Poor's and licensed to issue such a bond in the State of California,naming the District as the beneficiary and identifying the bidder whose deposit is guaranteed by the Surety Bond. If the successful bidder has provided a Surety Bond, such bidder shall wire transfer to the District the amount of the Bid Check Amount in immediately available federal funds not later than 3:00 p.m. (New York Time) on the business day next succeeding the day of acceptance of W the proposal which amount shall be deposited in an escrow fund or account or a similar fund and applied to the purchase price of the Certificates. If the District has not received such federal funds wire transfer by the time stated, the District may draw upon the Surety Bond to satisfy the successful bidder's deposit requirements.The check accompanying any accepted proposal shall be cashed and deposited in an escrow fund or account or a similar fund and applied to the purchase price of the Certificates at the time of delivery of the Certificates. If after the award of the Certificates, the successful bidder fails to complete the purchase on the terms stated in its proposal, unless such failure of performance shall be caused by any act or omission of the District, any amount received from such bidder by the District, whether by paid check or pursuant to the Surety Bond procedure set forth above, shall be retained by the District as stipulated liquidated damages.No interest will be paid upon the deposit made by any bidder. Official Statement The District has approved a Preliminary Official Statement for the Certificates, dated the date of this Official Notice Inviting Bids, which the District has "deemed final" for purposes of Rule I5c2-12 promulgated by the Securities and Exchange Commission, as amended (the "Rule"), although subject to revision,amendment and completion in conformity with the Rule.The District will provide the successful bidder such reasonable number of printed copies of the final Official Statement as such bidder may reasonably request no later than seven business days after the day the Certificates are awarded. Up to 250 copies of the final Official Statement will be furnished without cost to the successful bidder and further copies, if desired, will be made available at the successful bidder's expense. The successful bidder shall file the final Official Statement with a nationally recognized mmicipal securities information repository on a timely basis. The successful bidder shall, by accepting the award agree at all times to comply with the provisions of the Rule and with all applicable rules of the Municipal Securities Rulemaking Board. Award, Delivery and Payment If satisfactory bids are received, the Certificates will be awarded to the highest responsible bidder not later than 24 hours after the time established for the receipt of bids. The highest bidder shall be the bidder submitting the best price for the Certificates,which best price shall be that resulting in the lowest true interest cost with respect to the Certificates.The true interest cost shall be computed by doubling the semi-annual interest rate (compounded semi-annually) necessary to discount the debt service payments from their respective payment dates to the date of the Certificates and to the price bid. If two or more bidders have bid the same true interest cost,the award shall be made at the sole discretion of the District. Delivery of the Certificates is expected to occur on or about December_,2008. The Certificates will be delivered through the facilities of DTC,New York,New York.The successful bidder shall pay for the Certificates on the date of delivery in Los Angeles, California in immediately available federal funds. Any expenses of providing federal funds shall be home by the purchaser. Payment on the delivery date shall be made in amount equal to the price bid for the Certificates less the amount of the good-faith deposit. Right to Reject Bids,Waive Irregularities The District reserves the right to reject any and all bids and to the extent permitted by law to waive any irregularity or informality in any bid. CUSIP Numbers It is anticipated that CUSIP numbers will be printed on the Certificates, but the District will assume no obligation for the assignment or printing of such numbers on the Certificates or for the s03404%.4 8 rtl correctness of such numbers,and neither the failure to print such numbers on any Certificate nor any error with respect thereto shall constitute cause for a failure or refusal by the purchasers thereof to accept delivery of and make payment for the Certificates.The cost for the assignment of CUSIP numbers to the Certificates will be the responsibility of the successful bidder. California Debt and Investment Advisory Commission The successful bidder will be required to pay all fees due to the California Debt and Investment Advisory Commission ("CDIAC")under California law. CDIAC will invoice the successful bidder after the delivery of the Certificates. Legal Opinions The District will furnish to the successful bidder at the closing of the Certificates, the legal opinion of Special Counsel to the effect that,in the opinion of Special Counsel,based upon an analysis of existing laws, regulations, rulings and court decisions, and assuming, among other matters, the accuracy of certain representations and compliance with certain covenants, the interest component of each Installment Payment and the allocable portion thereof distributable in respect of each Certificate is excluded from gross income for federal income tax purposes under section 103 of the Internal Revenue Code of 1986 and is exempt from State of California personal income taxes, and that in the further opinion of Special Counsel the interest component of each Installment Payment and the allocable portion thereof distributable in respect of each Certificate is not a specific preference item for purposes of the federal individual or corporate alternative minimum taxes, although Special Counsel observes that such interest is included in adjusted current earnings when calculating corporate alternative minimum taxable income. Special Counsel will express no opinion regarding any other tax consequences related to the ownership or disposition of,or the accrual or receipt of interest on,the Certificates. Change in Tax Exempt Status At any time before the Certificates are tendered for delivery,the successful bidder may disaffirm and withdraw its proposal if the interest on the same type and character as that evidenced by the Certificates (as determined by Special Counsel)shall be declared to be includable in gross income under federal income tax laws, either by a ruling of the Internal Revenue Service or by a final decision of any federal court, or shall be declared taxable by the temus of any federal income tax law enacted subsequent to the date of this Official Notice Inviting Bids. Closing Documents The District will furnish to the successful bidder at the time of delivery of the Certificates: (1)a certificate certifying (i) that as of and at the time of delivery of the Certificates, there is no action, suit, proceeding or investigation, pending or, to the best knowledge of the District, threatened against or affecting the District, (A)which affects or seeks to prohibit, restrain or enjoin the execution and delivery of the Certificates or the Trust Agreement, (B) in any way contesting the validity of the Certificates, the Installation Purchase Agreement or the Trust Agreement or the powers of the District to enter into or perform its obligations under such documents to which it is a party or the existence of the District, or (C)wherein an unfavorable decision,ruling or finding would materially and adversely affect the District, or the validity or enforceability of the Certificates, the Installation Purchase Agreement or the Trust Agreement or the ability of the District to perform its obligations under such documents to which it is a party, (ii)that the Preliminary Official Statement did not on the date of sale of the Certificates and the Official Statement does not on the date of delivery contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements contained therein, in the light of the 80340496.4 9 0 circumstances under which they were made,not misleading,and(2)a receipt of the District showing that the purchase price of the Certificates has been received by the District. Continuing Disclosure To assist the successful bidder in complying with the Rule, the District will undertake, pursuant to the Continuing Disclosure Agreement, to provide certain annual financial information, and notices of the occurrence of certain events, if material. A description of the Continuing Disclosure Agreement is set forth in the Preliminary Official Statement and will be set forth in the final Official Statement. Additional Information Electronic copies of the Trust Agreement, the Installment Purchase Agreement, the Master Agreement, this Official Notice Inviting Bids, the Official Bid Form, and the Preliminary Official Statement will be furnished to any potential bidder upon request made to the District's Financial Advisor at: Public Resources Advisory Group, 11845 West Olympic Boulevard, Suite 640, Los Angeles, CA 90064, 310-477-8487,via e-mail at bsiembieda@pmgla.com. Right to Modify or Amend The District reserves the right to modify or amend this Official Notice Inviting Bids, including but not limited to the right to adjust and change the principal amount of the Certificates being offered; provided,however,that such notifications or amendments shall be made not later than December 2,2008, by 3:00 p.m., New York Time and communicated through Thomson Municipal Market Monitor (available at http:11w .tm3.com)and by facsimile transmission to any qualified bidder timely requesting such notice. Bidders are required to bid upon the Certificates as so modified. Cancellation or Postponement The District reserves the right to cancel or postpone, from time to time, the date established for the receipt of bids for any reason at any time. Any such postponement will be announced by Thomson Municipal Market Monitor. If any date fixed for the receipt of bids and the sale of the Certificates is postponed, any alternative sale date will be announced via Thomson Municipal Market Monitor at least 24 hours prior to such alternative sale date and will be provided by facsimile transmission to any qualified bidder timely requesting such notice. On any such alternative sale date, any bidder may submit a sealed bid for the purchase of the Certificates in conformity in all respects with the provisions of this Official Notice Inviting Bids except for the date of sale and except for the changes announced by Thomson Municipal Markel Monitor at the time the sale date and time are announced. Dated: November ,2008 80340496.4 10 0 e OFFICIAL BID FORM $ ,00o,000 ORANGE COUNTY SANITATION DISTRICT CERTIFICATES OF PARTICIPATION SERIES 2008C December_,2008 Orange County Sanitation District 10844 Ellis Avenue Fountain Valley,CA 92708.7018 Attn: Lorenzo Tyner Ladies and Gentlemen: We hereby offer to purchase all of the $ ,000,000+ aggregate principal amount of the Orange County Sanitation District Certificates of Participation Series 2008C (the "Certificates"), more particularly described in your Official Notice Inviting Bids dated November_,2008,which is incorporated herein by reference, and made a part thereof,at a purchase price of$ (which purchase price is not less than 99% or more than [103]% of the aggregate principal amount of the Certificates). This offer is for Certificates evidencing interest at the rates and in the form of serial maturities as set forth in the table on the following page. The bid is subject to acceptance not later than 24 hours after the expiration of the time established for the final receipt of bids. Our calculation of the true interest cost, which is considered to be informative only and not a part of the bid, is %. (PLEASE CHECK ONE OF THE FOLLOWING TWO PARAGRAPHS) [ ] There is enclosed herewith a certified check or cashier's check for $ drawn on a responsible bank having an office in Orange County,California payable in same day or next day funds to the order of the Orange County Sanitation District(the"District"). [ j A surety bond has been provided to the District in the amount of$ issued by an insurance company rated AAA by Standard & Poor's and licensed to issue such a bond in the State of Califomia, naming the District as beneficiary and identifying the bidder whose deposit is guaranteed by the surety bond. We have noted that payment of the purchase price is to be made in immediately available Federal Funds at the time of delivery of the Certificates.If we are the successful bidder,we will(1)within one hour after being notified of the award of the Certificates, advise the District of the initial public offering prices of the Certificates, (2) prior to delivery of the Certificates, famish a certificate, acceptable to Special Counsel, Fulbright& Jaworski L.L.P., as to the "issue price" of the Certificates within the meaning of Section 1273 of the Internal Revenue Code of 1986; and (3) if municipal bond insurance has been purchased for some or all of the Certificates, prior to delivery of the Certificates famish a certificate, , Preliminary,subject to change. 90340,196.4 0 a acceptable to said Special Counsel, as to the present value of the expected interest savings as a result of such insurance. Maturity Principal Interest (February I1 Amount Rate Total We represent that we have full and complete authority to submit this bid on behalf of our bidding syndicate and the undersigned will serve as the lead manager for the group if the Certificates are awarded pursuant to this bid. We certify (or declare) under penalty of perjury under the laws of the State of California that this proposal is genuine, and not a sham or collusive, nor made in the interest of or on behalf of any person not herein named, and that the bidder has not directly or indirectly induced or solicited any other bidder to put in a sham bid or any other person, firm or corporation to refrain from bidding, and that the bidder has not in any manner sought by collusion to secure for himself an advantage over any other bidder. Respectfully Submitted, Account Manager. By: Address(for Return of Unsuccessful Bid Check): City: State: Telephone: Following(or attached)is a list of the members of our account on whose behalf this bid is made. Preliminary,subject to change. SON0496.4 2 v 0 NOTICE OF INTENTION TO SELL $_,000,000- Orange County Sanitation District Certificates of Participation Series 2008C NOTICE IS HEREBY GIVEN that the Orange County Sanitation District(the"District") intends to receive sealed bids and electronic bids until 10:30 a.m., New York time, on Wednesday, December 3,2008, through the use of an electronic bidding service offered by Ipreo LLC; at www.newissuehome.i- deal.com and the Parity bid delivery service, for the purchase of all of the District's Certificates of Participation, Series 2008C (the "Certificates"), dated as of the date of initial delivery, and maturing on such dates as described in the related Official Notice Inviting Bids (the "Notice"). No bids will be accepted by facsimile. Bids for less than all of the Certificates will not be accepted. The District reserves the right to postpone the date established for the receipt of bids as more fully described under the paragraph"Cancellation or Postponement"in the Notice. NOTICE IS HEREBY FURTHER GIVEN that electronic copies of the Notice and the Preliminary Official Statement issued in connection with the sale of the Certificates may be obtained from the District's financial advisor, Public Resources Advisory Group, 11845 West Olympic Blvd., Suite 640, Los Angeles, California 90064, 310-477-8487, via e-mail: bsiembieda@pragla.com. Orange County Sanitation District Dated: November—,2008 ' Preliminary,subject to change. 80342394.3 Preliminary Subject to Approval MINUTES GROUNDWATER REPLENISHMENT SYSTEM STEERING COMMITTEE STEERING COMMITTEE Monday, October 13, 2008, 5:30 p.m. Committee Members Philip L. Anthony OCWD Director, Chairman .....................Present Jim Ferryman OCSD Director,Vice Chairman...............Present Kathryn Barr OCWD Director .......................................Present Larry Crandall OCSD Director ........................................Present Roger Yoh OCWD Director................................ Not Present Don Bankhead OCSD Director .................................Not Present Alternates Jan Debay OCWD Director(No. 1)............................Present Darryl Miller OCSD Director (No. 1).....................Not Present Denis Bilodeau OCWD Director(No. 2).....................Not Present Mark Waldman OCSD Director (No.2) ....................Not Present Steve Sheldon OCWD Director(No. 3).................... Not Present Don Webb OCSD Director (No. 3) ....................Not Present Other Directors Present OCWD—Wes Bannister, Iry Pickier and Claudia Alvarez Staff/Consultants Present Michael R. Markus, OCWD Jim Ruth,OCSD Mike Wehner, OCWD Joel Kuperberg, Rutan 3 Tucker Wendy Sevenandt, OCSD Ingrid Hellebrand, OCSO Eleanor Torres, OCW D Debbie Burris DDB Engineering, Inc. CONSENT CALENDAR(ITEM NO.1) MonoWVoTE ACTION TAKEN 1. MINUTES OF PREVIOUS MEETING ANTHONY— AYE RECOMMENDATION:Approve Minutes of the September 8, 2008 FERRYMAN—SECOND,AYE APPROVED Groundwater Replenishment System BARR— AYE Steering Committee Meeting as mailed CRANDALL— MOTION,AYE DEBAY— AYE MATTERS FOR CONSIDERATION 2. REQUEST FOR PROPOSALS:GWR SYSTEM BRANDING ANTHONY— AYE PACKAGE FERRYMAN—SECOND,AYE APPROVED RECOMMENDATION:Agendize for October 15 OCWD Board BARR— AYE meeting: Authorize Issuance of Request for CRANDALL— MOTION,AYE Proposals for the design and DEBAY— AYE Implementation of a GWRS System Branding Package INFORMATIONAL ITEMS 3. GWR SYSTEM REGULATORY UPDATE INFORMATIONAL - 1 - Preliminary Subject to Approval 4. GAR SYSTEM OPERATIONAL PROGRESS INFORMATIONAL 5. STATUS REPORT INFORMATIONAL • Grants and Loans Update • Public information and education update DIRECTORS'ANNOUNCEMENTS/REPORTS GENERAL MANAGERS'REPORTS CONFERENCE WITH GENERAL COUNSEL—ANTICIPATED COMMITTEE ACTION: LITIGATION-Initiation of Litigation AGENDIZE FOR (GOVERNMENT CODE SECTION 54956.9(c)] One(l)case: OCTOBER 15 Damage to OCWD pipeline due to SR-22 construction CLOSED SESSION ADJOURNMENT } 130ARD OF DIRECTORS I 11/19/OB AGENDA REPORT ID" N °g 10a 19 19 Orange County Sanitation District FROM: James D. Ruth, General Manager Originator: Jim Herberg, Director of Engineering SUBJECT: COYOTE HILLS GOLF COURSE MANHOLE ACCESS AND ODOR CONTROL PROJECT, CONTRACT NO. FE08-04 GENERAL MANAGER'S RECOMMENDATION 1. Adopt Resolution No. OCSD 08-21, Adopting the Initial Study and Mitigated Negative Declaration for the Coyote Hills Golf Course Manhole Access and Odor Control Project, Contract No. FE08-04; 2. Make Certain Findings Relating to Less than Significant Environmental Effects Identified in the Initial Study/Mitigated Negative Declaration; 3. Adopt a Mitigation Monitoring and Reporting Program; 4. Approve the Coyote Hills Goff Course Manhole Access and Odor Control Project, Contract No. FE08-04; and, 5. Authorize the Filing of a Notice of Determination. SUMMARY • The IS/MND for the Coyote Hills Golf Course Manhole Access and Odor Control Project, Contract No. FEOB-04 (Project) was presented to the Operations Committee prior to consideration for adoption by the Orange County Sanitation District's (Sanitation District) Board of Directors (Board) on November 19, 2008. A copy of the IS/MND was posted on the Board's website for review. • Pursuant to the provisions of the California Environmental Quality Act(CEQA), this proposed project requires passage of a Resolution by the Sanitation District Board, certifying compliance with the provisions of CEQA for the Project, and indicating the Board's approval to proceed with the Project. • The Project includes improving access to several manholes and the potential for an odor control dosing station within the Coyote Hills Golf Course. The manholes are within a protected habitat area that encroaches into the Golf Course. The collection system odor control dosing station is proposed for a disturbed area adjacent to the Golf Courses maintenance yard that is outside the designated habitat. • The Coyote Hills Golf Course is located in the City of Fullerton adjacent to the City of Brea. The area is primarily open space. The open space area is protected and operated by the Center for Natural Lands Management(CNLM). Fmm N0.DW1022 Rw, EO 10I Page 1 T • Sanitation District staff has met with the Golf Course's management and the CNLM. The Sanitation District will be contracting with the CNLM for habitat protection and restoration services as part of the Project, as they are the manager of the protected habitat proposed to be disturbed. The total habitat area to be disturbed is 0.094 acres and will be replaced at up to 5 to 1 ratio as required by the Federal Endangered Species Act. • The IS/MND was circulated for a 30-day public review in September. At the time of this writing, no substantive comments have been received for the Project. PRIOR COMMITTEE/BOARD ACTIONS None. ADDITIONAL INFORMATION The impact analysis concluded that the Project would have no significant unavoidable impacts with the mitigation measures proposed for the Project. The primary mitigation measure is the replacement of protected habitat to be disturbed during the Project. Because the CNLM manages the habitat protection area, the Sanitation District will be contracted with them for construction monitoring and habitat restoration services required by the Federal Endangered Species Act. At the time of this writing, the following agencies sent acknowledgement comment letters on the IS/MND: County of Orange, California Department of Transportation, Department of Toxic Substances Control, and Governor's Office of Planning and Research. This action complies with authority levels of the Sanitation District's Delegation of Authority. This item has been budgeted. (Line item: Section 8, Page 38). ATTACHMENTS 1. Resolution 2. ExhibitA— MMRP JB:MG:sa H:tntBlobaMpenda Draft ReporlsZoard of DirerdorsTE08-04-Board M MND.dw Form No IM4 Rw owrm• Page 2 RESOLUTION NO. OCSD 08-21 MAKING CERTAIN FINDINGS RELATING TO LESS THAN SIGNIFICANT ENVIRONMENTAL EFFECTS IDENTIFIED IN THE INITIAL STUDY/MITIGATED NEGATIVE DECLARATION FOR THE COYOTE HILLS GOLF COURSE MANHOLE ACCESS AND ODOR CONTROL PROJECT, CONTRACT NO. FEOM4; ADOPTING THE INITIAL STUDYIMITIGATED NEGATIVE DECLARATION AND MITIGATION MONITORING AND REPORTING PROGRAM FOR THE PROJECT; APPROVING SAID PROJECT; AND AUTHORIZING THE FILING OF A NOTICE OF DETERMINATION FOR SAID PROJECT WHEREAS, the Board of Directors of the Orange County Sanitation District (Sanitation District), ("Board of Directors"), is considering the approval of the Coyote Hills Golf Course Manhole Access and Odor Control Project("Project), Contract No. FE08- 04 to provide access to six manholes and install an odor control facility at an additional manhole within the Coyote Hills Golf Course, in the City of Fullerton; and, WHEREAS,the existing manholes require access for routine manhole maintenance and odor control improvements are needed to control odors within the Sanitation District Collection System; and, WHEREAS, because the Sanitation District will be undertaking the Project, the Sanitation District is the lead agency for the Project pursuant to the California Environmental Quality Act of 1970("CEQA") (Public Resources Code §21000 at. seq.), as amended, and the CEQA Guidelines ("CEQA Guidelines") (14 Cal. Code Regs. § 15000 at. seq.); and, WHEREAS, pursuant to the CEQA and the CEQA Guidelines, the Sanitation District staff prepared an Initial Study/Mitigated Negative Declaration to assess the potentially-significant environmental impacts and recommend mitigation measures associated with the Project; and, WHEREAS, in accordance with CEQA Guidelines 15070, Sanitation District staff determined that an Initial Study/Mitigated Negative Declaration resulted in a determination that there were only less than significant impacts associated with the proposed Project if certain mitigation measures were implemented, therefore an Initial Study/Mitigated Negative Declaration was prepared; and, WHEREAS, the Sanitation District has consulted with other public agencies and the general public, giving them an opportunity to comment on the Initial Study/Mitigated Negative Declaration, as required by CEQA; and, WHEREAS, the Sanitation District has objectively evaluated, received, and filed comments from public agencies and persons who reviewed the Initial Study/Mitigated Negative Declaration; and, WHEREAS, the comments and recommendation received on the Initial Study/Mitigated Negative Declaration, either in full or in summary, related to significant environmental concerns raised in the review, have been included in the record of proceeding; and, WHEREAS, Sanitation District staff presented to the Board the Initial Study/Mitigated Negative Declaration for review and consideration prior to the final approval of, and commitment to, the Initial Study/Mitigated Negative Declaration for the Coyote Hills Golf Course Manhole Access and Odor Control Project; and, WHEREAS, Sanitation District has prepared a Mitigation Monitoring and Reporting Program,designed to ensure that the approved mitigation measures are implemented during the Project's design, construction, and operation. NOW, THEREFORE, the Board of Directors hereby resolves, determines and finds that: 1. Changes or alterations have been required in, or incorporated into, the proposed Project, before the proposed Initial Study/Mitigated Negative Declaration was released for public review, which avoid or mitigate significant environmental effects or substantially lessen the significant effects of the Project identified in the Initial Study/Mitigated Negative Declaration; and, 2. There is no substantial evidence that the Project will have a significant impact on the environment; and, 3. The Initial Study/Mitigated Negative Declaration reflects the Sanitation District's independent judgment and analysis; and, 4. The documents and other materials that constitute the record of proceedings upon which the Sanitation District's decision is based are located at the Orange County Sanitation District, 10844 Ellis Avenue, Fountain Valley, California, 92708. The custodian of the record of proceedings is the Sanitation District Clerk of the Board. Project files are located in the Sanitation District Engineering Planning Division. 5. The Board of Directors adopts the Initial Study/Mitigated Negative Declaration; and, 6. The Sanitation District will implement the mitigation measures recommended in the Initial Study/Mitigated Negative Declaration to reduce the significant impacts of the Project to a less than significant level; and, 7. The Board of Directors approves the mitigation measures, and adopts the Mitigation Monitoring and Reporting Program for the Project, attached hereto as"Exhibit A" and incorporated herein by reference,to ensure that all mitigation measures are implemented; and, • 8. The Board of Directors hereby approves the Coyote Hills Goff Course Manhole Access and Odor Control Project, Contract No. FE08-04; and, 9. The Board of Directors authorizes and directs the Clerk of the Board to file the Notice of Determination and any other documents in accordance with the requirements of CEQA and the District's CEQA Procedures. PASSED AND ADOPTED at a regular meeting held November 19, 2008. Chair ATTEST: Clerk of the Board TABLE A-1 Mdigation Monitoring and Reporting Program for the Coyote Hills Gott Course Manhole Access and Odor Control Project Biological Resources Impact B-1: The proposed Project could impact nesting birds,including the California Gnatcatcher(PoHoptile califomics)and the Least Bell's Vireo(Vireo belle pusillus). Mitigation Measure B-1: Vegetation removal and project construction will take dace outside the active bird nesting season,Including the California Gnatcatcher breeding season(February 1 to August 30),and a qualified biologist will be present during vegetation removal to ensure that the impacts are restricted to the areas identified and that no gnalcatchers are injured or killed during the vegetation removal. Implementation Procedures Actions Responsibility Schedule 1. Ensure vegetation removal is Document date of vegetation removal Sanitation District, CNLM, USFWS During Construction outside the active bird nesting activities for administrative record. season. 2. Retain a qualified biologist to Maintain monitoring notes of the Sanitation District, CNLM, USFWS During Construction monitor vegetation removal. qualified biologist for administrative record. Impact B-2: The proposed Project would permanently impact coastal sage scrub,which is habitat for the federally-threatened,California Gnatcatcher(Pohopfila celffomica),and the federally-endangered,Least Bell's Vireo(Vireo bellff pusillus). Mitigation Measure B-2: The permanent 0.071 acre impact to coastal sage scrub vegetation at Site 2 and the permanent 0,006 acre impact to low lying native vegetation,including black sage(Salvia spp.),coastal goldenbush(Isocome menziessr),and mule fat(Baccharis selicifolie),at Site 1 (both within the HCP),will be mitigated at a ratio of 5:1,consistent with the USFWS prior approval of the Minor Amendment to the HCP). The permanent 0.017 acre impact to native vegetation,including mule fat(Beccharis salfcifolia)and buckwheat(Enogonum hasciculatum),at Site 3(outside the HCP)will be mitigated at a ratio of 3:1. Specifically,0.44 acre of non-native grassland and Italian thistle-dominated habitat will be converted to Ventumn-Diegan coastal sage scrub. A Mitigation Plan has been prepared by the Sanitation District and approved by the Center for Natural Lands Management(CNLM)and the U.S. Fish and Wildlife Service(USFWS). The Mitigation Plan includes provisions for the Sanitation District to fund CNLM for the purpose of implementing this mitigation. All work specific to the implementation of this mitigation will be performed by CNLM staff or contractors hired by CNLM. The Mitigation Plan details implementation requirements,which at a minimum include: • Pre-implementation funding:Funding will be provided prior to any groundcleanng by the Sanitation District. Wdhin 30 days of funding the restoration account by the Sanitation District, CNLM will submit a Draft Restoration Plan detailing the location, process,and success criteria for the restoration program. • Year 1:During the first growing season,the 0.44 acre will receive intensive weed control. This will involve a combination of herbicide application and hand or mechanical removal,and at the completion of this phase the site will have exposed sails. It is anticipated that prior to this site preparation, the Sanitation District will begin clearing access to these manholes. All surface soils removed from the access paths will be conserved and later spread onto the enhancement site;if the site is not prepared when the Sanitation District has removed the topsoil from the access paths,than the Sanitation District will stockpile the soils in a location selected by CNLM. Seeds from native shrubs will be collected from elsewhere in the Coyote Hills East Preserve,and these seeds will be imprinted into the exposed sills of the entire 0.44 acre. No irrigation will be used to assist germination. Throughout the growing season,weed control efforts will be applied as necessary. Five permanent transacts will be established within the restoration site in a stratified distribution;the plant community will be monitored on these transacts annually for a minimum of five years to assess the success of the restoration program. Photodocumentation will also serve to visually monitor the success of the restoration effort;one photo will be captured annually from the leading end of each transect. A progress report will be submitted to USFWS by the end of the first calendar year. • Year 2-5:Weed control volt continue as necessary. Erosion control may be needed due to exposure of soils,but the need will diminish with each successive year as native vegetation establishes. Vegetation monitoring transacts and photodocumentation points will be samples annually in March and April. A progress report will be submitted to USFWS at the and of each year. Any patches within the restoration area that do not demonstrate growth of native vegetation will receive focused enhancement efforts,including supplemental seeding with seed collected elsewhere on the preserve. • Year 6+:If any funds remain in the restoration account established by the Sanitation District,those funds will be used to continue habitat enhancement activities on the 0.44 scre. This is likely to consist of follow-up weed control. Once the Sanitation District contribution is expended,any weed control or habitat enhancement efforts will be funded through the existing endowment. Implementation Procedures Actions Responsibility Schedule 1. Issue pne implements ion funding Document date and record of funding Sanitation District,CNLM Prior to Commencement of from Sanitation District to CNLM. transfer for administrative record. Construction Activities 2. Draft Restoration Plan submitted Maintain copy of Draft Restoration Sanitation District, CNLM Within 30 Days of Funding the by CNLM. Plan for administrative record. Restoration Account 3. Execute Year 1 restoration Maintain monitoring notes, Sanitation District,CNLM,USFWS End of First Calendar Year activities. photodocumradation,and progress report,for administrative record. 4. Execute Year 2-5 restoration Maintain monitoring notes and Sanitation District,CNLM End of Year 2-5 Calendar Year activities, photodocumentation for administrative record. 5. Execute Year 6+restoration Maintain record of any continued Sanitation District,CNLM Year 6+ activities. habitat enhancement activities. Impact B-2a: The proposed Project would permanently remove native vegetation from the HCP. Mitigation Measure S-2: (Refer to Mitigation Measure B-2, Biological Resources). Implementation Procedures Actions Responsibility Schedule 1. Refer to Mitigation Measure B-2 Refer to Mitigation Measure B-2 Refer to Mitigation Measure B-2 Refer to Mitigation Measure B-2 Impact B-3: The proposed Project would conflict with an applicable habitat consmwafion plan. Mitigation Measure B-3: Prior to initiating proposed Project activities within the HCP area,the HCP may be amended as agreed to with the U.S. Fish and Wildlife Service and CNLM so that the proposed Project will not conflict with the HCP. Implementation Procedures Actions Responsibility Schedule 1. Acquire agreement from USFWS Retain agreement from USFWS for Sanitation District, USFWS,CNLM Prior to Commencement of and CNLM for activities within the administrative record. Construction Activities HCP area. Hazards and Hazardous Materials Impact H-1: The proposed Project would include transport,storage,and use of odor control compounds that could cause a spill or accidental release hazard. Mitigation Measure H-1: Transportation,storage and use of hazardous materials will comply with state and federal regulations and storage and dispensing permits will be obtained as necessary Mitigation Measure H-2: The Sanitation District will follow procedures to ensure proper handling and storage of hazardous materials and reduce potential for spills impacting the public or the environment. At a minimum,the procedures will include: • Obtain a permit to store hazardous material from the local fire department; • Provide notification to the Orange County Health Care Agency of the odor control facility; • Equip chemical delivery trucks with spill cleanup equipment to contain and dean up any spills; • Provide chemical storage tanks with adequate secondary containment; • Modify the Sanitation District's Spill Prevention Containment and Countermeasure(SPCC)Plan to include the odor control facility or ensure that transport contractors have adequate SPCC Plans in place covering the odor control facility. The SPCC Plan will cover chemical transfer activities (Including DOT requirements),public notification and placarding requirements,secondary containment,emergency spill response actions,routine site access control,and site management and maintenance procedures. The c ntractor's SPCC Plan would require approval by the Sanitation District's Safety Division. Mitigation Measure 143: The Sanitation District shall require that all personnel working with hazardous chemicals have health and safety training. This is a legal OSHA requirement under the Worker Right to Know regulations in the Federal Code of Regulations,The 29. The training shall include.at a minimum, the proper use of safety equipment,hazard identification, and proper handling and disposal of spilled hazardous materials. Mitigation Measure H<: Access to the odor control facility will be controlled to allow access only to authorized personnel. Implementation Procedures Actions Responsibility Schedule 1. Comply Wth applicable legal Maintain record of compliance, Sanitation District Prior to Operation of Odor Control requirements and regulations and including permits,for administrative Facility acquire appropriate permits. record. 2. Ensure SPCC Plan in place Retain copy of SPCC Plan applicable Sanitation District Prior to Operation of Oda Control applicable to Odor Control Facility. to Odor Control Facility fa Facility administrative record. 3. Ensure that Odor Control Facility Document that Odor Control Facility Sanitation District Prior to Operation of Odor Control access is controlled to only allow access is controlled to only allow Facility access for authorized personnel access for authorized personnel for administrative record. Hydrology and Water Quality Impact W-1: The proposed Project could violate rater quality standards or waste discharge requirements during construction. Mitigation Measure W-1: Prior to the initiation of ground-disturbing activities,the Sanitation District(or its designee)will obtain approval from the State Water Resources Control Board(SWRCB)under the National Pollutant Discharge Elimination System(NPDES)General Permit(Water Quality Order 99-08-DWQ) for Discharges of Storm Water Associated Wth Construction Activity(General Permit). This includes submitting a Notice of Intent(NOI)to the SWRCB and developing and implementing a Storm Water Pollution Prevention Plan(SWPPP). The SWPPP will identify potential sources of sediment and other pollutants that could affect the quality of the stormwater discharge,and will specify best management practices(BMPs)to prevent or minimize the introduction of sediment and pollutants into surface waters from the construction site. BMP methods of erosion and sediment control could include straw bales,silt fences, and other control techniques. Monitoring and maintenance requirements shall be specified in the SWPPP. Implementation Procedures Actions Responsibility Schedule 1. Submit NOI to SWRCB and Maintain record of NOI and SWPPP Sanitation District Prior to Commencement of develop and implement a SWPPP for administrative record. Construction Activities Impact W-2: The proposed Project could violate water quality standards orwaste discharge requirements during operations. Mitigation Measure H-2: (Refer to Mitigation Measure H-2,Hazards and Hazardous Materials). Mitigation Measure H-3: (Refer to Mitigation Measure H-3,Hazards and Hazardous Materials). Implementation Procedures Actions Responsibility Schedule 1. Refer to Mitigation Measure's H-2 Refer to Mitigation Measure's H-2 and Refer to Mitigation Measure's H-2 and Refer to Mitigation Measure's H-2 and and H-3 H-3 H-3 H-3 Land Use and Planning Impact L-1: The proposed Project would conflict with an applicable habitat conservation plan. Mitigation Measure B-3: (Referto Mitigation Measure B-3,Biological Resources). Implementation Procedures Actions Responsibility Schedule 1. Refer to Mitigation Measure&3. Refer to Mitigation Measure B-3. Refer to Mitigation Measure&3. Refer to Mitigation Measure B-3. BOARD OF DIRECTORS mee&V Date Toad.dob. 11/19/aB AGENDA REPORT ""nN nhe 1Oe NM b' zo Orange County Sanitation District FROM: James D. Ruth, General Manager Originator: Lorenzo Tyner, Director of Finance and Administrative Services SUBJECT: REFUNDING CERTIFICATES OF PARTICIPATION, SERIES 2008D (CERTIFICATE ANTICIPATION NOTES) GENERAL MANAGER'S RECOMMENDATION 1) Adopt Resolution No. OCSD 08-22,Authorizing the Execution and Delivery by the District of an Installment Purchase Agreement, a Trust Agreement, an Escrow Agreement, a Note Purchase Agreement, and a Continuing Disclosure Agreement in connection with the execution and delivery of Orange County Sanitation District Refunding Certificates of Participation, Series 2008D (Certificate Anticipation Notes), such Notes Evidencing Principal in an Aggregate Amount of Not to Exceed $198,000,000, Approving an Official Statement in Connection with the Offering and Sale of such Notes and Authorizing the Execution of Other Necessary Documents and Related Actions; and, 2) That the Orange County Sanitation District Financing Corporation approve the documents supporting and authorizing the Refunding Certificates of Participation, Series 2008D (Certificate Anticipation Notes) in an amount not to exceed $198,0D0,000. SUMMARY The current global financial crisis has negatively impacted the financial strength and ratings of many financial institutions that provide bank liquidity facilities securing variable rate bonds issued by municipal entities. Variable rate issues secured by banks with the least favorable investor perception have experienced higher than expected interest rate resets as investors are less willing to hold bonds secured by these weakening banks. In many cases, investors have tendered the bonds to the banks(Bank Bonds)to preempt any possibility of the liquidity bank not being able to provide funds in the future. The District's current variable rate debt exposure includes its outstanding Certificates of Participation, Series 2006 ("2006 COPS") secured by a liquidity facility from DEPFA Bank pic ("DEPFA°)which is one of the banks experiencing financial difficulties, thus leading to higher than expected rate resets in general and more specifically Bank Bonds for the District. The current Bank Bond rate is based on the Prime Rate (currently 4%)with the rate increasing by an additional 0.75% beginning in January. Although the Bank Bond rate is less than current fixed rates, it is significantly higher than the recent variable rates the District is paying on its 2000 COPS (averaging less than 1%). As discussed in the Administration Committee Agenda Report on New Money Certificates of Participation (COPS) dated November 12, 2008, staff and the District's consultants have been monitoring this situation and began the process of requesting approval to use District funds to temporarily purchase the 2006 COPs. The temporary purchase of the 2006 COPS would provide the maximum F.N..DMIM AWft Re -a W Renfetl: lVNI 8 Page 1 r flexibility to the District in anticipation of better liquidity bank pricing or lower fixed rate debt costs. More recently, the current market yields on short-term securities issued in anticipation of permanent financing (Bond/Certificate Anticipation Notes or BANS) have significantly lowered in cost to issuers. In the current market, 13-month tax-exempt BANS are yielding less than 2%. Instead of using District funds to temporarily purchase Bank Bonds, the District could issue BANs to redeem the DEPFA Bank Bonds at a cost of less than 2%while waiting for the markets to stabilize. The District's 2006 COPS debt was issued in 2006 as daily variable rate debt and has averaged 3.25%to date. However, the current Bank Bond characteristics have increased recent costs to over 4.00%. Options Available to the District 1. Do Nothing Since the issuance of the 2006 COPs, the District has benefited from an average interest rate of 3,25%. The liquidity fee charged by DEPFA is only 11 basis points and is effective until March 2013. If the perception of DEPFA's financial condition improves, the 2006 COPS may once again be remarketed at market rates. However, if the District takes no action at this time, the current Bank Bond rate of 4.00%will Increase by 0.75% in January. Also, the Bank Bond rate may further increase should DEPFA experience additional financial distress and its borrowing cost from other banks rise. In addition, the District will be required to start repaying principal to DEPFA starting in 2013 (District can pay interest only through 2013). 2. Replace DEPFA with New Bank The replacement of DEPFA with a stronger bank might allow the 2006 COPs to be remarketed at current attractive levels(recent rates on the 2000 COPS are averaging 0.90%). Due to the liquidity crisis facing many banks, there are a limited number of banks willing to provide credit facilities to municipalities, even highly rated issuers such as the District. The few banks willing to extend credit in the current market are requesting annual fees in excess of 100 basis points per year for no more than three years with relatively onerous terms and conditions. As a point of reference, the District's most recent Request of Proposals for banks in October 2007 resulted in two banks offering liquidity at ten basis points for three- year facilities. The District will be subject to unknown bank renewal or replacement risk upon the expiration of the liquidity facility. Meanwhile, the District would be subject to the risk of the creditworthiness of the replacement bank. It is important to recognize there are no assurances that even today's strongest financial institution will retain its financial strength for any extended period of time. Fo1m No.O -102 Agenda Ra —Board Revised: 1MO ift Page 2 i Y The following is a cost comparison verses Option 1 (Do Nothing) over the next year: 0.9000/0 COP Series 2000 Current Daily Rate 0.239% One Month Delay (Liquidity documentation negotiations) 1.125% Assumed Replacement Liquidity Fee 0.050% Remarketing Fee 0.033% Costs of Issuance 0.000% Underwriter Costs (0.160%) less Liquidity and Remarketing Fees (Option 1) (4.750%) less Assumed Bank Rate (Option 1) 2.5630,E or$5.1 Million of savings compared to Option 1 3. Refund the 2006 COPS with Fixed Rate Debt The issuance of fixed rate refunding bonds will eliminate variable rate risks and financial exposure to DEPFA. After issuance, the District will not be subject to changing market conditions. The long average fife of the 2006 COPS (21.2 years)would result in a fixed rate borrowing cost of approximately 5.30% in the current market. In addition, recent demand for long municipal bonds has been spotty and the District may cannibalize market access for its $200 million of fixed rate new money COPS with a fixed rate refunding of$196 million of 2006 COPS. The following is a cost comparison verses Option 1 (Do Nothing) over the next year 5.300% Assumed Average Fixed Rate 0.000% One Month Delay (Liquidity documentation negotiations) 0.000% Assumed Replacement Liquidity Fee 0.000% Remarketing Fee 0.015% Costs of Issuance ($375,000 amortized over fife of COPS) 0.040% Underwriter Costs ($980,000 amortized over fife of COPS) (0.160%) less Liquidity and Remarketing Fees (Option 1) (4.7500%) less Assumed Bank Rate (Option 1) 0.445% or$880,000 more costly than Option 1 (over first year only) 4. Refund the 2006 COPS with BANS The current market rate for BANs is less than 2.00%. The issuance of BANS to temporarily fix the rate at a low interest cost will allow the District to wait for a more attractive opportunity to structure a longer term solution for the 2006 COPS. The BAN structure will eliminate exposure to DEPFA and variable rate risks over the next year. Although current variable rates are low(Option 2), it is unknown whether rates will be expected to stay below 1.00%. A comparison of the economics of this BAN structure to Option 2 shows that unknown variable rates must average less than 0.593% over the next year for Option 2 to generate a better net economic result. Form No.M-102 Ageoda Repel-BoaN ReYisetl'. 11x18/00 Page 3 The major risk with a BAN structure occurs W the District does not have market access to remarket the BANS at maturity. However, if the District currently contemplates using a portion of its reserves to temporarily redeem the 2006 COPS, the issuance of BANs allows the District to defer such action for approximately one year. Interest rates could be substantially higher upon maturity, but it is expected that the District would carefully monitor the market over the next year to take advantage of any low rate opportunities. The following is a cost comparison verses Option 1 (Do Nothing) over the next year: 1.750% Assumed One-Year Rate 0.000°k One Month Delay (Liquidity documentation negotiations) 0.0D0% Replacement Liquidity Fee 0.0D0% Remarketing Fee 0.164% Costs of Issuance($325,000 amortized over one year) 0.126% Underwriter Costs ($250,000 amortized over one year) (0.160%) less Liquidity and Remarketing Fees(Option 1) (4.750%) less Assumed Bank Rate (Option 1) (2.870%) or$5.7 million of savings compared to Option 1 Staff is recommending Option 4 the refunding of the 2006 COPS with BANS that enables the District to lock-in a low rate for approximately one year without encumbering its cash reserves. If the District pursues Option 4 given the large single maturity, BANs are best sold in this uncertain market on a negotiated basis. Staff is recommending Banc of America Securities LLC to serve as underwriter on the BANS for the following reasons: 1) First firm to propose BAN concept for the 2006 COPS and has provided frequent updates. 2) Remarketing performance on 2000 COPS: a. Average rate of 2.10°/6 since taking over the program from UBS in August 2008. b. Average rate of 0.71%in November 2008. 3) Dexia Credit Local is the liquidity bank on the 2000 COPS and many remarketing agents have tendered Dexia-backed bonds. Staff and consultants will make a brief presentation and provide an overview of the draft documents and the financing schedule at the Board meeting. PRIOR COMMITTEEIBOARD ACTIONS N/A ADDITIONAL INFORMATION The Board of Directors and the Financing Corporation will each be required to adopt separate Resolutions to complete this refinancing. Drafts of these two Resolutions are attached for review. A Financing Corporation is required by the structure of the COPS and was formed in April 2000, to satisfy this need. The Board of Directors of the Corporation is the same as the Board of Directors of the District and the Corporation meets after an adjournment of the OCSD Board. Form No M-102 A d.Repm—B.W ReWgl: 1NOBI08 Page 4 The OCSD Resolution authorizes the execution and delivery of certain legal documents and the execution and delivery of Refunding Certificates of Participation, Series 2008D (Certificate Anticipation Notes)evidencing principal in an aggregate amount of not to exceed $198,000,000 all as spelled out in the title as follows: "A RESOLUTION OF THE BOARD OF DIRECTORS OF THE ORANGE COUNTY SANITATION DISTRICT AUTHORIZING THE EXECUTION AND DELIVERY BY THE DISTRICT OF AN INSTALLMENT PURCHASE AGREEMENT, A TRUST AGREEMENT, AN ESCROW AGREEMENT,A NOTE PURCHASE AGREEMENT, AND A CONTINUING DISCLOSURE AGREEMENT IN CONNECTION WITH THE EXECUTION AND DELIVERY OF ORANGE COUNTY SANITATION DISTRICT REFUNDING CERTIFICATES OF PARTICIPATION, SERIES 2008D (CERTIFICATE ANTICIPATION NOTES), SUCH NOTES EVIDENCING PRINCIPAL IN AN AGGREGATE AMOUNT OF NOT TO EXCEED $198,000,000,APPROVING AN OFFICIAL STATEMENT IN CONNECTION WITH THE OFFERING AND SALE OF SUCH NOTES, AND AUTHORIZING THE EXECUTION OF OTHER NECESSARY DOCUMENTS AND RELATED ACTIONS." The Resolution of the Corporation is somewhat shorter and simpler. It authorizes three actions that are similarly enumerated in the title as follows: "A RESOLUTION OF THE BOARD OF DIRECTORS OF THE ORANGE COUNTY SANITATION DISTRICT FINANCING CORPORATION AUTHORIZING THE EXECUTION AND DELIVERY BY THE CORPORATION OF AN INSTALLMENT PURCHASE AGREEMENT AND A TRUST AGREEMENT IN CONNECTION WITH THE EXECUTION AND DELIVERY OF ORANGE COUNTY SANITATION DISTRICT REFUNDING CERTIFICATES OF PARTICIPATION, SERIES 2008D (CERTIFICATE ANTICIPATION NOTES);AUTHORIZING THE EXECUTION AND DELIVERY OF SUCH NOTES EVIDENCING PRINCIPAL IN AN AGGREGATE AMOUNT OF NOT-TO-EXCEED $198,000,000 AND; AUTHORIZING THE EXECUTION OF NECESSARY DOCUMENTS AND NOTES AND RELATED ACTIONS." Following is a chart listing the remaining steps to be completed for the issuance of the COP Series 2008D(Certificate Anticipation Notes) debt issuance: ➢ Board approval of legal and disclosure documents November ➢ Receive Ratings from Bond Rating Agencies ➢ Negotiated Pricing December ➢ Closing ➢ Redemption Notice ATTACHMENTS (The following attachments will be available prior to the board meeting.) 1. District Resolution 2. Corporation Resolution 3. Draft Trust Agreement 4. Draft Installment Purchase Agreement 5. Draft Continuing Disclosure Agreement 6. Draft Preliminary Official Statement 7. Draft Note Purchase Agreement 8. Draft Escrow Agreement F.W p 16f Age Repot-BwM RBWe41y 36 Page 5 Y Orange County Sanitation District Financing Corporation MINUTES November 28, 2007 SANlTgl�Oy Q. 9 ¢ co O y �WY r�cl'H H �NV`�p0 ADMINISTRATIVE OFFICES 10844 ELLIS AVENUE FOUNTAIN VALLEY, CALIFORNIA 92708-7018 v Orange County Sanitation District Financing Corporation MINUTES November 28, 2007 3 Aro1 Tgr�oy c 9 VWY ADMINISTRATIVE OFFICES 10844 ELLIS AVENUE FOUNTAIN VALLEY, CALIFORNIA 92708-7018 A OCSD Finance Corporation 111 07 ORANGE COUNTY SANITATION DISTRICT FINANCING CORPORATION , ROLL CALL A regular meeting of the board of Directors of the Orange County Sanitation District Financing Corporation (OCSDFC)was called to order on November 28, 2007 at 7:05 p.m., in the District's Administrative Offices. The roll was called, and the Clerk of the Board reported a quorum present as follows: ACTIVE DIRECTORS ALTERNATE DIRECTORS X James M. Ferryman, Chair Bob Dolan X Doug Davert, Vice Chair Jim Palmer Steve Anderson X Tom Beamish X Charles Antos Gordon Shanks X Don Bankhead Sharon Quirk X Steven Choi Sukhee Kang X Larry Crandall Gus Ayer X Bill Dalton Mark Rosen A Jon Dumitru Carolyn Cavecche X Richard Freschi Brad Reese X Cathy Green Don Hansen X Phil Luebben Prakash Narain X Patsy Marshall Jim Dow A Darryl Miller Douglas Reinhart X Roy Moore Ron Garcia X Joy Neugebauer All Krippner X Chris Norby Janet Nguyen X Ken Parker Catherine Driscoll X David Shawver David Cadena X Harry Sidhu Lucille Kring A Sal Tinajero David Benavides X Constance Underhill Joseph Aguirre X Mark Waldman Ralph Rodriguez X Don Webb Leslie Daigle X Jim Winder John Anderson STAFF MEMBERS PRESENT: Jim Ruth, General Manager, Bob Ghirelli, Assistant General Manager; Penny Kyle, Clerk of the Board; Nick Arhontes;Jim Herberg; Ed Torres; Lorenzo Tyner; Bret Colson; Life Kovac; Bob Bell; Jim Burror, Rich Castillon; Bob Chenowith; Barbara Collins; Marc Dubois; Norbert Gaia; Michael Gold; Gary Prater, Jeff Reed; Juanita Skillman; Rob Thompson; Simon Watson; Ryal Wheeler; Paula Zeller OTHERS PRESENT: Brad Hogin, General Counsel; Alternate Director All Krippner; Gino Rampagna; Cory Morales;Jan Vandersloot ti OCSD Finance Corporation 11/28/07 b. MOVED, SECONDED AND DULY CARRIED: Order the minutes for the meeting held on April 25, 2007, to be filed and deemed approved, as mailed. C. Lorenzo Tyner, Director of Finance, reported that the Financing Corporation would need to adopt the following resolution in order to proceed with issuance of Certificates of Participation, Series 2007B. d. MOVED, SECONDED AND DULY CARRIED: Adopt Resolution No. FC-05, Authorizing the Execution and Delivery by the Corporation of an Installment Purchase Agreement and a Trust Agreement in connection with the execution and delivery of Orange County Sanitation District Certificates of Participation, Series 2007B, Authorizing the Execution and Delivery of such Certificates Evidencing Principal in an Aggregate Amount of Not to Exceed $300,000,000, and Authorizing the Execution of Necessary Documents and Related Actions. ADJOURNMENT: The Chair declared the meeting of the Orange County Sanitation District Financing Corporation adjourned at 7:08 p.m. 1 • Penny M. Ule Clerk of the Board Orange County Sanitation District Financing Corporation Orange County Sanitation District Financing Corporation MINUTES May 14, 2008 SANITgT� 9 c ?' � ca O -1 ADMINISTRATIVE OFFICES 10844 ELLIS AVENUE FOUNTAIN VALLEY, CALIFORNIA 92708-7018 OCSD Finance Corporation May 14, 2008 Page 2 ORANGE COUNTY SANITATION DISTRICT FINANCING CORPORATION ROLL CALL A special meeting of the Board of Directors of the Orange County Sanitation District Financing Corporation (OCSDFC)was called to order on May 14, 2008 at 5:15 p.m., in the District's Administrative Offices. The roll was called, and the Associate Clerk of the Board reported a quorum present as follows: ACTIVE DIRECTORS ALTERNATE DIRECTORS X James M. Ferryman, Chair Bob Dolan X Doug Davert,Vice Chair Jim Palmer X Charles Antos Gordon Shanks T Don Bankhead Sharon Quirk T Larry Crandall Gus Ayer 73F Bill Dalton Steven Jones T Jon Dumitru Carolyn Cavecche A Rose Espinoza James Gomez X I Richard Freschi Brad Reese X Don Hansen Jill Hardy X Phil Luebben Prakash Narain A Patsy Marshall Jim Dow X Darryl Miller Douglas Reinhart X Roy Moore Ron Garcia X Joy Neugebauer AlKdppner X Chris Norby Janet Nguyen X Ken Parker Catherine Driscoll X Christina Shea Steven Choi T David Shawver David Cadena A Harry Sidhu Lucille Kring A Sal Tinajero David Benavides -3F Constance Underhill Joseph Aguirre X Mark Waldman Henry Charoen A Don Webb Leslie Daigle X Jim Winder John Anderson STAFF MEMBERS PRESENT: Jim Ruth, General Manager; Bob Ghirelli, Assistant General Manager, Lllia Kovac, Associate Clerk of the Board; Nick Arhontes; Lorenzo Tyner; Norbert Gaia; Gail Garrett; Bob Gaggle; Randy Kleinman; Jeff Reed; Juanita Skillman OTHERS PRESENT: Brad Hogin, General Counsel; Al Krippner; Don McLean OCSD Finance Corporation May 14, 2008 Page 3 Lorenzo Tyner, Director of Finance, reported that the Financing Corporation would need to adopt the following resolution in order to proceed with refunding of Certificates of Participation, Series 2008A. MOVED, SECONDED, AND DULY CARRIED: Adopt Resolution No. FC-06, Authorizing the Execution and Delivery by the Corporation of an Installment Purchase Agreement, a Trust Agreement, and a Continuing Disclosure Agreement in connection with the execution and delivery of Orange County Sanitation District Certificates of Participation, Refunding Series 2008A,Authorizing the Execution and Delivery of such Certificates Evidencing Principal in an Aggregate Amount of Not to Exceed $85,000,000, Authorizing the Distribution of an Official Notice Inviting Bids and an Official Statement in Connection with the Offering and Sale of such Certificates and Authorizing the Execution of Necessary Documents and Related Actions. ADJOURNMENT: The Chair declared the meeting of the Orange County Sanitation District Financing Corporation adjourned at 5:20 p.m. Life Kovac Associate Clerk of the Board Orange County Sanitation District Financing Corporation HAdeptagendMoard Minutest2008 Swrd Minutes%051408 OCSD Fina .do= OCSD Finance Corporation May 14, 2008 Page 3 Lorenzo Tyner, Director of Finance, reported that the Financing Corporation would need to adopt the following resolution in order to proceed with refunding of Certificates of Participation, Series 2008A. MOVED, SECONDED, AND DULY CARRIED: Adopt Resolution No. FC-06, Authorizing the Execution and Delivery by the Corporation of an Installment Purchase Agreement,a Trust Agreement, and a Continuing Disclosure Agreement in connection with the execution and delivery of Orange County Sanitation District Certificates of Participation, Refunding Series 2008A, Authorizing the Execution and Delivery of such Certificates Evidencing Principal in an Aggregate Amount of Not to Exceed $85,000,000, Authorizing the Distribution of an Official Notice Inviting Bids and an Official Statement in Connection with the Offering and Sale of such Certificates and Authorizing the Execution of Necessary Documents and Related Actions. ADJOURNMENT: The Chair declared the meeting of the Orange County Sanitation District Financing Corporation adjourned at 5:20 p.m. J Lilia Kovac Associate Clerk of the Board Orange County Sanitation District Financing Corporation H4depC genda\Board Minutes\2008 Board Minutes\051508 OCSO Finanmdxx a y Orange County Sanitation District Financing Corporation MINUTES August 27, 2008 SARITgt� 9 9 ¢ ci O y ��cT�NC TH ENV`��0 ADMINISTRATIVE OFFICES 10844 ELLIS AVENUE FOUNTAIN VALLEY, CALIFORNIA 92708-7018 OCSD Finance Corporation August 27, 2008 t Page 2 A special meeting of the Board of Directors of the Orange County Sanitation District Financing Corporation (OCSDFC)was called to order on August 27, 2008 at 7:22 p.m. in the District's Administrative Offices. The roll was called, and the Clerk of the Board reported a quorum present as follows: ACTIVE DIRECTORS ALTERNATE DIRECTORS X Doug Davert, Chair Jim Palmer X Larry Crandall, Vice Chair Gus Ayer X Charles Antos Gordon Shanks )F Don Bankhead Sharon Quirk 5F Bill Dalton Steven Jones )F Jon Dumitru Carolyn Cavecche _jF Rose Espinoza James Gomez X James M. Ferryman Bob Ooten X Don Hansen Jill Hardy X Phil Luebben Prakash Narain X Patsy Marshall Jim Dow X Darryl Miller Douglas Reinhart X Roy Moore Ron Garda X Joy Neugebauer AI Krippner X Chris Norby Janet Nguyen A Ken Parker Catherine Driscoll X Brad Reese W. Richard Ulmer )F David Shawver David Cadena X Christina Shea Steven Choi X Harry Sidhu Lucille Kring A Sal Tinajero David Benavides X Constance Underhill Joseph Aguirre X Mark Waldman Henry Charoen 5F Don Webb Leslie Daigle X Jim Winder John Anderson STAFF MEMBERS PRESENT: Jim Ruth, General Manager, Bob Ghirelli, Assistant General Manager; Penny Kyle, Clerk of the Board; Jim Herberg; Lille Kovac; Ed Torres; Lorenzo Tyner; Carla Dillon; Bret Colson; Michael Gold; Linda Kirshner, Ryal Wheeler, Paula Zeller OTHERS PRESENT: Brad Hogin, General Counsel; Bob Ooten, Gino Rampagna; Ed Soong; David Moshier OCSD Finance Corporation August 27, 2008 Page 3 b. Director of Finance, Lorenzo Tyner, reported that the refinancing of refunding of COPS requires the Financing Corporation approval. C. MOVED, SECONDED AND DULY CARRIED: Adopt Resolution No. FC-07, a Resolution of the Board of Directors of the Orange County Sanitation District Finance Corporation Authorizing the Execution and Delivery by the Corporation of an Installment Purchase Agreement, a Trust Agreement, and a Continuing Disclosure Agreement in connection with the execution and delivery of Orange County Sanitation District Certificates of Participation, Refunding Series 2008B, Authorizing the Execution and Delivery of such Certificates Evidencing Principal in an Aggregate Amount of Not to Exceed $32,000,000,Authorizing the Distribution of an Official Notice Inviting Bids and an Official Statement in Connection with the Offering and Sale of such Certificates and Authorizing the Execution of Necessary Documents and Related Actions. ADJOURNMENT: The Chair declared the meeting of the Orange County Sanitation District Financing Corporation adjourned at 7:22 p.m. Penny ) e 49, Clerk of the Board Orange County Sanitation District Financing Corporation H:Wepragenda\Board Mlnutest20D8 Board Minutes\082708 OCSD Finanmd= 4 y ,W - _ 3 �. Orange County Sanitation District Five - Year Strategic Plan TABLE OF CONTENTS OCSD BOARD OF DIRECTORS STRATEGIC PLAN PROJECT TEAM MESSAGE FROM THE GENERAL MANAGER EXECUTIVE SUMMARY iv A UNIFIED STRATEGIC PLAN 5 OVERVIEW 6 MISSION STATEMENT 7 VISION STATEMENT 8 CORE VALUES 9 STRATEGIC GOALS & LEVELS OF SERVICE 10 Environmental Stewardship 12 Business Principles 14 Wastewater Management 16 Workplace Environment 18 APPENDIX A: ISSUE PAPERS 20 APPENDIX B: PREVIOUS ISSUES PAPERS 26 APPENDIX C: GLOSSARY 32 OCSD BOARD OF DIRECTORS Chair Doug Davert Vice Chair Larry Crandall — City Active Director Anaheim Harry Sidhu - Brea Roy Moore Buena Park Patsy Marshall Cypress Phil Luebben - Fountain Valley Larry Crandall Fullerton Don Bankhead Garden Grove Bill Dalton - Huntington Beach Don Hansen Irvine Christina Shea La Habra Rose Espinoza - La Palma Mark Waldman Los Alamitos Ken Parker Newport Beach Don Webb Orange Jon Dumitru Placentia Constance Underhill Santa Ana Sal Tinajero - Seal Beach Charles Antos Stanton David Shawver Tustin Doug Davert - Villa Park Brad Reese Yorba Linda Jim Winder - Sanitary/Water Districts Costa Mesa Sanitary District James M. Ferryman Midway City Sanitary District Joy L. Neugebauer - Irvine Ranch Water District Darryl Miller Orange County Board of Supervisors Chris Norby — STRATEGIC PLAN PROJECT TEAM James D. Ruth General Manager _ Robert P.Ghirelli Assistant General Manager Nick Arhontes Director of Operations and Maintenance James Herberg Director of Engineering Edward Torres Director of Technical Services - Lorenzo Tyner Director of Administrative Services Barbara Collins Principal Analyst Michael Gold Government Affairs Manager r Brent Ives BHI Consulting ad ii - MESSAGE FROM THE GENERAL MANAGER — Throughout our distinguished history,the Orange County Sanitation District has protected public health and the environment by providing the highest levels of service,maintaining excellent relationships with our member cities and agencies, and ratepayers and regulators,while spending public dollars wisely.We are proud to be an internationally recognized leader in our industry. The OCSds success is due to the strength of people serving this fine organization:our Board of Directors provides strategic leadership and our staff make every day possible. Following our successful Strategic Plan adopted by the Board of Directors in November 2007, 1 am proud to present this plan that continues charting our course for the next five years.The mission,vision,and core values adopted as part of the last plan form the building blocks for a continuation of our efforts. In the past year alone,we completed nearly 30 percent of the goals,yet we are not content to maintain the status quo.As I step back and look over our accomplishments of the past year:passing a sound financial plan for five years,an aggressive capital improvement program injecting$1 million per day into Orange Countys economy,and the successful dedication of the Groundwater Replenishment System, I am confident that our Board and staff will continue to strive for excellence and maintain an eye towards future challenges. Moving forward,this strategic plan adds five new goals that are as diverse as the population we serve and I am pleased that initial implementation of these goals will add no new costs to the budget. I look — forward to a thoughtful discussion with staff and the Board of Directors on these important issues. With significant challenges ahead, I am confident that this strategic plan charts a course for success over the next year and beyond. I am grateful to the Board of Directors for their leadership and support and also to our staff for their dedication. Respectfully submitted, James D. Ruth General Manager iii EXECUTIVE SUMMARY r In November 2007,the Board of Directors adopted a new comprehensive strategic plan to drive OCSD's efforts and engage the organization to envision service and operations for the next five years. r This year,the Strategic Plan is being updated to continue looking at a five-year horizon. Following a similar process to last years plan,the General Manager's Office initiated the planning effort with the r Executive Management Team,then solicited input and Ideas from managers and supervisors. In October 2008,the staff-generated ideas were presented to the Board of Directors during a workshop, where - Board Members discussed and deliberated changes and additions to the plan. r Driven by our mission,vision and core values,this Strategic Plan, updated for 2009,continues our aggressive efforts to meet the sanitation, health,and safety needs of the more than 2.5 million people we serve while protecting the environment where we live. In the past year, nearly 30 percent of the goals were completed. For 2009,this Strategic Plan presents five new goals and maintains the high standards set in the past plan. These new goals were discussed at the October 15 Board of Directors workshop and include the r following: • Reaffirming OCSD's commitment to expand the Groundwater Replenishment System, including completion of the Steve Anderson Lift Station and studying the potential to include flows from the r Santa Ana River Interceptor. • Analyzing whether adding chlorine to disinfect effluent into the ocean is cost-effective in comparison to other alternatives that maintain protection of public health and safety. • Evaluating and promoting OCSD's environmental initiatives and seeking additional opportunities to utilize emerging technologies. • Continuing to assess and identify risks to OCSD, including political and financial risks, and developing mitigation strategies. • Developing a comprehensive human resources strategic plan to connect employees with the overall mission,values,and vision of the organization and preparing employees for future leadership r opportunities. This Strategic Plan continues to chart a focused roadmap of success for the future of the Orange County Sanitation District. It addresses critical operations and construction issues,financial and budgeting - challenges,and gives clear and concise direction to staff, ratepayers, regulatory agencies, the public,and r our Board of Directors. r r ry r A UNIFIED STRATEGIC PLAN _ In creating this document,a considerable amount of thought was given to how a variety of existing planning resources would be used to create a unified Strategic Plan.The graphic below shows the relationship of these resources and how they relate to the overall structure and execution of the plan. Board of Directors — Mission Vision Core Values Five-Year Strategic Plan Goals Levels of Service Assessment of Risks Annual Business Plans Business Accountability Charters Staffing Plan Financial Plan Facilities Master Plan Asset Management Plan S OVERVIEW Since 1954,the Orange County Sanitation District has provided wastewater treatment to the residents and businesses of northern and central Orange County and is the third largest wastewater treatment agency west of the Mississippi River.During fiscal year 2007-08,OCSD collected,treated and disposed of 221 million gallons of wastewater every day.OCSD also recycled 100 percent of its biosolids and reclaimed 17 percent of its treated wastewater,with a future goal of 40 percent. In July 2002,the Board approved disinfecting the effluent _ and proceeding with the planning,design,and construction of facilities that will ultimately allow OCSD effluent to meet Federal Clean Water Act secondary treatment standards. _ The current disinfection program includes nearly$5 million annually for chemicals,while the estimated capital construction cost to meet secondary treatment standards is $649 million.OCSD is currently in the midst of a$2.6 billion, 20-year capital improvement program with an annual capital budget of nearly$300 million. ,. Reclamation Mn,No. I in Founuin Valk, In addition to the OCSD's partnership in the Groundwater Replenishment System and secondary treatment expansion, our capital improvement program includes critical rehabilitation of aging collection systems and treatment plant facilities,and upgrades to provide enhanced odor �. control and reduced air emissions. — Against this backdrop of challenging issues,and to meet the large and complex needs of providing services to over 2.5 million people in the most effective and efficient way possible,the strategic planning process began in 2D07 to T,� P,,,,,N. 2 Bead, continually map a five-year strategy. Beginning with gathering input from the staff,with the leadership of the Board of Directors,OCSD " developed its mission,vision,and values to allow all levels of the organization to take ownership in the stratgeic planning process. The original plan,along with OCSD's mission,vision and values was adopted in November 2007.For this update,the Executive Management Team once again developed ideas seeking input from _ managers and supervisors and presented five new goals for discussion by the Board of Directors. In the past year,several goals were completed by staff in the areas of climate change,engine emissions, _ information technology, biosolids,and leadership development. r 6 r OCSD MISSION STATEMENT The Mission Statement is the basic foundation that defines why we exist. "We protect public health and the environment by providing effective wastewater collection, treatment, and recycling." i t. OCSD VISION STATEMENT The Vision Statement supports the Mission Statement by expressing a broad philosophy of what the Orange County Sanitation District strives to achieve now and in the future in the delivery of services to our customers,vendors,other agencies,the general public,and each other. The Orange County Sanitation District is committed to: Making decisions in an open and honest way ' r to produce optimum financial, environmental ' and societal results. e. �- Cooperating with other stakeholders to protect W the ocean and regional water resources for the people we serve. _ r Beneficially recycling wastewater, biosolids and _ other resources using safe and effective processes and systems. r Developing the best possible workforce by providing employees with opportunities to _ advance their careers through enhanced growth, responsibility, and professional development. r w r e r CORE VALUES The Core Values support the Mission and Vision Statements by expressing the values,beliefs,and philosophy that guides our daily actions.They help form the framework of our organization and — reinforce our professional work ethic. Honesty, Trust and Respect We aspire to the highest degree of integrity, honesty,trust, and respect in our interaction with each other,our suppliers, our customers,and our community. Teamwork and Problem Solving We strive to reach OCSD goals through cooperative efforts and collaboration with each other and our constituencies.We work to solve problems in a creative,cost-effective and safe manner,and we acknowledge team and individual efforts. Leadership and Commitment .. We lead by example,acknowledging the value of our resources and using them wisely and safely to achieve our objectives and goals. We are committed to act in the best interest of our employees, our organization,and our community. Learning and Teaching—Talents, Skills and Abilities We continuously develop ourselves,enhancing our talents,skills,and _ abilities, knowing that only through personal growth and development will we continue to progress as an agency and as individuals. Recognition/Rewards We seek to recognize,acknowledge,and reward contributions to OCSD by our many talented employees. 9 STRAGEGIC GOALS & LEVELS OF SERVICE - On the following pages are the strategic goals and levels of service for the next five years. New goals for — this report are noted and all goals include projected completion time.The levels of service standards are measures of service that are seen by our customers as high priorities.Goals and levels of service are divided into four areas: • Environmental Stewardship • Business Principles • Wastewater Management — • Workplace Environment 1A — 1 6 � All = .' - 10 Goals Completed in the Past Year During the past year,the following goals were completed: Environmental Stewardship Management System for Environmental Compliance • Implement a management control system for environmental compliance information that Incorporates a dashboard-style report. Engine Emission Compliance • Complete study to evaluate alternatives for complying with lower emission limits in the South Coast Air quality Management's Rule 1110.2. Initiate planning and design of demonstration testing of the most promising technology(s)identified in the study. Climate Change/Greenhouse Gasses • Complete development of statewide emission inventory protocol for publicly-owned treatment works and submit mandatory emission inventory to the California Air Resources Board for Fiscal Year 2007-08. Business Principles Enterprise Information Technology Strategic Plan • Complete a District-wide information technology strategic plan. Wastewater Management Sustainable Biosollds Program • Evaluate the feasibility of deep injection/methane recovery including commissioning a study of the geological formations below Plants 1 and 2,and availability and acceptability of any existing wells. • Evaluate option of processing some biosolids at the City of Los Angeles Terminal Island demonstration well. • Complete new in-county Compost Take-Back Program Plan strategy. Workplace Environment Succession Plan • Implement the succession management plan including management training and the creation of a Leadership Academy. ECAP Dashboard xa uanrP �OnsAW ar Conldfe Vs Environmental Compliance Awareness ;`�°•r Program ..�ru°"'1B1e ecneimu.i.eeuero oA.a..n xso mn.a.. rrUerm ,veoow".v^m"„".cn:.a.i'r e�n�a..er xso:si�:ia�e„.e.. air ra�mr ya•. ran W n®rrwrr�a..nn e.rtrt sronim.-.ku:.auo onN ar Gwl w r.ne. cr..r rwi Q a � eo.am e o ca..rum.,.• s ua..s.wm su..on s.m. o o o II Environmental Stewardship Goals OCSD participates collaboratively in the protection of regional water resources for the benefit of the people we serve. _ Goals and Targeted Completion Date Santa Ana River Interceptor Line Relocation • Work in conjunction with the County of Orange and the Federal Government to relocate the - Santa Ana River Interceptor Line by March 2012. _ Targeted for completion in FY 11-12 Management System for Environmental Compliance • Implement management control system for the scope of environmental requirements Targeted for completion in FY9-10 Contaminants of Potential Concern(CPC) • Complete three phase testing and analysis of 550+CPC, prepare report on findings and recommendations, develop Initial source control strategy if there are CPCs identified that r. require control. Targeted for completion in FY09-10 Engine Emission Compliance • Complete demonstration testing and negotiate engine emission limits and schedule with SCAC MD. r Targeted for completion in FY 10-11 • Implement capital improvements or operations modifications in order to achieve compliance. Targeted for completion in FY 13-14 Reclaiming SARI Line Flows • Meet with stakeholders,develop a list of obstacles that need to be overcome to reclaim the SARI Line and develop a strategy to obtain regulatory approval of reclaiming SARI Line flows. Targeted for completion in FY 09-10 Environmental Footprint Initiative(new) • Determine environmental footprint for both treatment plants Targeted for completion 09-10 • Develop outreach materials describing initiatives already undertaken by OCSD that have r reduced our environmental footprint Targeted far completion in 09-10 • Conduct research on emerging technologies and evaluate additional initiatives that should be ti considered by the Board Ongoing goal to be completed annually • Maximize the use of digester gas Targeted for completion in 10-11 r 12 Environmental Stewardship Levels of Service OCSD will protect public health and the environment FY 07-08 FY 08-09 Results Target Provide capacity to collect and treat dry weather urban runoff 1.65 mgd Up to 4 mgd � Moxlmum 10mgdby 2020 .. Maximum off-site odor impact . Reclamation Plant No. 1 42 D/T 42 D/T la 0/rby 2016 . Treatment Plant No.2 48 D/T 48 D/T 120/Tby2016 Air emissions health risk to community and employees, < 10 < 10 per one million people(for each treatment plant) Permit compliance (air, land,and water) 100% 100% OCSD will be a good neighbor FY 07 08 FY 08 09 Results Target Odor complaint response: . Treatment Plants within 1 hour 100% 100% . Collections System within 1 working day 100% 100% Number of odor complaints: . Reclamation Plant No. 1 34 32 . Treatment Plant No.2 8 4 . Collection System 21 34 Restore collection service to customer within 8 hours 100% 100% Respond to collection system spills within 1 hour 100% 100% r 13 Business Principles OCSD makes every decision based on short and long-term environmental,societal,and financial impacts (the triple bottom line). Goals and Targeted Completion Date Strategic Business Plan • With Board concurrence,annually update and implement the Strategic Plan and Business Plan. r Ongoing goal to be completed annually Review Interagency Agreements • Conduct a comprehensive review of agreements with the Santa Ana Watershed Project Authority,and, if appropriate, reopen for discussion. _ Targeted for completion in FY 09-10 • Conduct a comprehensive review of agreements with the Irvine Ranch Water District and, if appropriate,reopen for discussion. Targeted for completion in FYII-12 r Complete Facilities Master Plan Update • Complete a comprehensive update of the Facilities Master Plan and obtain Board approval. Targeted for completion in FY 09-10 ., Sewer Rate for Green Development • Submit for board approval an amendment to sewer rate ordinance with incentives for green r developments. Targeted for completion in FY 09-10 Business Accountability Charters • Create Business Accountability Charters for each department consistent with those developed by managers and supervisors. r Ongoing goal to be completed annually Local Sewer Services • Implement the Board's four recommendations based on findings of staffs revenue adequacy report.Continue to seek an asset transfer to other agencies.Also transfer other local assets back to cities that are not serving a true regional purpose. Ongoing goal to be completed in FY 11-12 Updating OCSD's Risk Register(new) • Review and update OCSD's risk register to include an assessment of technical, regulatory, financial,and political risks(among others)and possible mitigation strategies. Targeted for completion in FY 10-11 Ir 14 Business Principles Levels of Service OCSD will exercise sound financial management FY 07-08 FY 08-09 Results Target COP service principle and interest <0&M expenses <0&M expenses Annual user fees Sufficient Sufficient to cover all O&M requirements _ Actual annual increase in collection,treatment, and disposal costs per million gallons in comparison with the 4.3% <10% budget Annual variance from adopted reserve policy 128.50% >95% OCSD will be responsive to our customers FY 07-08 FY 08-09 Results Target _ Respond to public complaints or inquires regarding 100% >90% construction projects within 1 working day New connection permits processed within 92 4% >90% one working day �5 Wastewater Management .. OCSD beneficially reuses and recycles water and other resources using safe and effective wastewater systems. r Goals and Targeted Completion Date Sustainable Biosolids Program • Monitor both opposition to land application in Kern County and Arizona,and availability of �+ sustainable cost-effective alternatives and provide management and Board with recommendation on whether to pursue proposal for selecting a technology to manage the remaining one-third of our biosolids capacity �+ • Ongoing goal to be completed annually • Develop agreement Targeted for completion in FY 10-11 • Implement management option. r Targeted for completion in FY 11-12 • Monitor City of Los Angeles'deep injection project and evaluate the regulatory and public r relations components of undertaking the project. Ongoing goal to be completed annually r • Conduct research to reduce the amount of biosolids produced. Ongoing goal to be completed annually r Implement Energy Master Plan • After the completion of the plan,assess final recommendations to ensure adequate power resources and energy management. Ongoing goal to be completed annually Odor Control r • Implement Odor Control Projects at Plant 1(trickling filters)and Plant 2(solids loading facility) by 2016. _ Targeted for completion in FY IS-16 Groundwater Replenishment System(new) _ • Maximize the production of GWR System product water to augment and protect the Orange County groundwater basin with a goal of 70 mgd. Targeted far completion in FY 09-10 Disinfection of Final Effluent(new) • Develop a cost effective program to sustain protection of public health associated with bacteria `. in the effluent and gain acceptance of any changes in the program by the public, regulators and other stakeholders. Targeted for completion in FY 09-10 r L• 16 r war Wastewater Management Levels of Service OCSD will provide a safe reliable effluent for recycling FY 07-08 FY 08-09 Results Target Concentration of emerging chemical constituents 30 NDMA< 150 plat of concern in Plant No. 1 secondary effluent 1.6 1,4-Dioxane< 2 ppb Thirty-day geometric mean of total coliform bacteria in effluent 266 < 1,000 mpn after initial dilution of 180:1 Industry compliance with permits to discharge into OCSO sewers 100% 100%permit compliance BOD 45 mg/L BOD 100 mg/L r 80030mgA by 2012 Meet secondary treatment standards TSS 33 mg/L TSS 55 mg/L TSS 30 molt by 2012 rlia OCSD will manage flows reliably FY 07-08 FY 08-09Results Target Frequency of use of emergency one-mile(78-inch diameter) 0 per year during outfall 0 dry weather less than once per 3 years In peak wet weather .. Sanitary sewer spills per 100 miles 0.9 < 2.1 Contain sanitary sewer spills within 5 hours 100% 100% OCSD's effluent will be recycled FY 07.08 FY 08-09 Results Target _ Provide up to 104 mgd specification effluent to the 35.3 mgd 104 mgd Groundwater Replenishment System during Initial start-up year OCSD will Implement a sustainable biosolids management FY 07-08 FY 08-09 program Results Target wa National Biosolids Partnership Certification for Biosolids Recertified Maintain Environmental Management System July 2008 certification Percent of biosolids recycled 100%recycled >95%recycled 0%landfill <5%landfill r 17 r r Workplace Environment r OCSD provides an environment of partnership,growth,opportunity,responsibility and accountability. Goals and Targeted Completion Date Space Planning Study Recommendations • Complete relocation of staff housed in Information Technology Trailers,Administration Building,Control Center and Building 6. r Targeted for completion in FY 09-10 - North County Yard r • Open the North County Yard and training facility and complete the relocation of selected staff and equipment to the facility. Implement flex space for added agency-wide needs as _ appropriate. Targeted for completion in FY 09-10 Safety and Health Strategic Plan • Develop and implement a Safety and Health Strategic Plan for all OCSD activities. Targeted for completion in FY09-10 Human Resources Strategic Plan (new) • Design,develop and implement human resources policies, practices systems and tools to r ensure OCSD has a workforce that meets future needs of OCSD and the public it serves. Targeted for completion in FY09-10 r r ti r r r la r Workplace Environment Levels of Service OCSD will take care of Its people FY 07-08 FY 08-09 Results Target Training hours per employee 42.04 45 per year District 5.8 Industry Employee injury incident rate O&M 2.6 average 5.2 Mandatory OSHAtraining requirements 14% 100% Hours worked since last lost work day NA* 1,000,000 Lost work day rate NA* 3.2 *Results not available because these are new levels of service. 19 r APPENDIX A: ISSUE PAPERS In preparation for the October 15,2008 Board Workshop to discuss the proposed goals for 2009,staff prepared five issue papers related to the new goals.These papers are attached for your reference.The appendix includes issue papers on the following topics: • Groundwater Replenishment System ,r • Disinfection of Final Effluent • Environmental Footprint Initiative - • Updating OCSD's Risk Register r • Human Resources Strategic Plan A Groundwater ` 4 Replenishment System w . GWR System Commissioning DOicauon on January 25.2008 r 20 Groundwater Replenishment System Why is this issue important to OCSD? The Orange County Sanitation District(OCSD) has shared in construction costs for Phase 1 of the + Groundwater Replenishment(GWR)System with the Orange County Water District(OCWD), each agency paying equal shares of 50 percent.The first phase has been constructed to reclaim up to 70 million gallons per day(mgd) of water, and will defer the need for OCSD to construct a new ocean + outfall. Ultimate planning for the GWR System allows for reclaiming up to 130 mgd.The major GWR System pipelines and other components have been sized to accommodate this expansion; however, the advanced water purification facilities are sized for 70 mgd.OCSD has not committed additional funding + for expanding the GWR System beyond the present phase. The GWR System began operation in January 2008,and is presently producing about 45 mgd of product + water, reducing OCSD's ocean discharge flow from 225 mgd to 180 mgd. Completion of the Steven Anderson Lift Station (formerly Ellis Avenue Pump Station)will increase the amount of treated secondary effluent(specification water) available to the OCWD, allowing GWR System production to increase to near 70 mgd. Goals + ➢ Continue to strive for 104 mgd supply of specification water for reclamation with no planned OCSD capital cost contribution for expansion of the GWR System; + ➢ Complete construction of Steven Anderson Lift Station in the fourth quarter of FY 2008-09 and Y Continue to study the potential for treating flow from the Santa Ana River Interceptor at Reclamation Plant No. 1 to increase the supply of specification water for reclamation. Desired Outcome + Y Maximizing the production of GWR System product water to augment and protect the Orange County groundwater basin with a goal of 70 mgd of product water by the end of FY 2008-09. + 21 Disinfection of Final Effluent Why is this issue important to OCSD? OCSD began disinfection of our treated effluent in 2002 in response to two factors: • concern from the public that our effluent might be the cause or contributing to elevated bacteria levels in Huntington State Beach and • ocean monitoring data suggesting that on at least one occasion our effluent plume had come to within Y mile of the Newport Pier. Since 2002 evidence has shown that OCSD's effluent was not the source of shoreline bacteria in r Huntington Beach and that our plume is not coming to shore and creating a public health concern. The annual budget for adding chlorine to the effluent for disinfection and sodium bisulfite to remove most of the chlorine before discharging to the ocean is approximately$7.0 million.Since OCSD's r facilities were not originally designed with disinfection in mind,there are physical constraints to operating in an efficient manner. In 2006,staff believed that it was prudent to have an independent review of our disinfection program to ` determine if it is meeting the intended purpose of protecting public health in a cost-effective manner and not increasing risks to the marine environment.The independent review panel was composed of nine members including a medical doctor, a wastewater engineer,a marine ecologist,a regulator,and a ` chemist among others. Goals ➢ Through the National Water Research Institute (NWRI),commission a panel of experts to review OCSD's disinfection program and provide feedback and recommendations; Obtain final recommendations from the N W RI Panel on the appropriateness of our current disinfection program and alternatives that should be considered and ➢ Develop and implement strategies for responding to the recommendations including demonstration testing, regulatory approval and outreach to stakeholders. Desired Outcome ➢ Cost effective program to sustain protection of public health associated with bacteria in our ` effluent and ➢ Acceptance of any changes to our disinfection program by regulators, public and stakeholders r r 22 Environmental Footprint Initiative _ Why is this issue important to OCSD? The issue of global climate change is gaining considerable interest from both the public and policy makers.As a public agency chartered with the mission to protect public health and the environment, OCSD should demonstrate leadership in this area. Moreover,wastewater operations consume large amounts of energy and produce green house gases(GHG). Despite the scientific disagreements about climate change,policy makers are addressing the issue.There are many opportunities for OCSD to also address these issues and shrink our environmental footprint. Goals Y Calculation of the environmental footprint of OCSD's facilities; Y Develop outreach materials describing green initiatives undertaken by OCSD; Y Evaluate additional initiatives that the OCSD Board should consider; Y Evaluate information from OCSD's research program on emerging green technologies and Y Maximize the use of renewable fuels(digester gas). Desired Outcomes Greater awareness of OCSD's sustainable initiatives; Y Reduction in OCSD's environmental footprint through immediate greenhouse gas reduction measures and Y A plan for implementing future sustainable initiatives. 23 Updating OCSD's Risk Register r Why is this issue important to OCSD? Many leading organizations are formally applying risk management processes to identify and manage r risks across many aspects of their business.The formalization of risk management processes is a logical step towards increased accountability and transparency placed on the Board and District management. In February 2006,strategic level risk assessment and mitigation workshops were completed by OCSD's Executive Management Team and District Managers. In May 2008, the register was updated to include additional information and to ensure alignment with current strategic plan. r Assessment of these risks and their potential impacts must be identified, reviewed and mitigated in alignment with OCSD's Strategic Plan. r Goals r Identify and assess strategic and organization-wide risks facing OCSD(including technical, regulatory,financial,and political(and to develop a high level risk register; r Identify mitigation measures that OCSD currently has in place; : Propose additional mitigation measures that OCSD considers appropriate to manage; r : Review of risk register to ensure it represents a balanced portfolio of the risks and that the mitigation strategies are appropriate; : Develop a plan to monitor the effect of mitigation strategies to ensure that controls are in place and effective; Develop a formal reporting process to the Board that includes possible revisions to the overall risk profile; o- Develop protocols to provide assurance to stakeholders that in the annual strategic business plan processes are in place to manage risks organization wide and _ : Develop an action plan of responsibilities and timeframes for follow-up. Desired Outcome : An update of the Risk Register including mitigation strategies(current and proposed) responsibilities,and timeframes r 24 r Human Resources Strategic Plan Why is this issue important to OCSD? r Human Resources(HR) management has become more complex,evolving from primarily processing employee transactions to serving as a business partner, change agent and leader. r OCSD's most Important asset is its workforce.As a generation of this workforce retires,OCSD must be prepared to fill vacancies and prepare the next generation for opportunities, including leadership continuity. The HR strategic plan provides the focus for HR,the outcomes to be achieved and the associated roles and competencies needed. It creates clarity for planning and allocating resources.A long-range HR r strategy will assure that actions are aligned with OCSD's overall vision, mission,values,and strategies. Goals r Y Improve HR processes, systems and infrastructure to provide high levels of efficiency, quality, customer service and cost-effectiveness. ➢ Develop leading practices in the recruitment, retention and development of our workforce. ➢ Support and promote the health and well-being of the workforce. ➢ Foster and maintain a working and learning environment that is inclusive, supportive and free from discrimination. D Provide for organizational change initiatives through labor relations program that have been Identified by management to grow a performance-based culture. D Focus the HR community on the needs of its customers through programs such as recognition and succession management. Desired Outcome ➢ Design,develop,fund and implement HR policies,strategies, practices,systems,and tools to ensure OCSD has a workforce that meets the future needs of OCSD and the public it serves. 25 APPENDIX B: PREVIOUS ISSUE PAPERS Due to the complex nature of many of the challenges that went into the preparation of this Strategic Plan, a series of position papers were created to assist in better understanding the issues currently facing the Orange County Sanitation District. Included in appendix are position papers on the following subjects: _ • Blosolids Management • Groundwater Replenishment System • Air Quality _ • Odor Control • Proposition 218 Notification - r r r r r 1 r srl Initial mechanical sgrs-up of EnerTmhi Regional B—ol ids Processing Faolny m Rolm on October I6.2008. 26 Setting OCSD's Level of Service for Biosolids Management November 2007 Policy Issue for LOS Determination: Recognizing the Board's Resolution(OCSD 06-10)that supports blosolids _ reuse and encourages its member agencies to use compost made from blosolids,should OCSD continue to pursue our beneficial reuse policy or Include disposal options for the remaining 1/3 of Its non-contractually committed blosolids production? Staff Recommendation: OCSD should continue to pursue beneficial reuse of the remaining 1/3 of Its blosolids production.Staff will continue to utilize cost-effective land application reuse options In Kern County and Arizona for as long as possible(anticipated to be less than five years)while pursuing a blosolids-to-energy alternative for the balance of Its blosolids production. Analysis: OCSD currently produces 650 tons of blosolids per day,by 2012 when the new secondary treatment processes are fully operational,blosolids production Is projected to Increase by approximately 30%to 840 tons per day.OCSD currently manages its blosolids as follows via two contracts using five options: • 24 percent is land applied as Class A biosollds in Kern County($43.07/ton) • 26 percent is land applied as Class B blosolids In Yuma County,Arizona($45.44) • 38 percent is composted to Class A in Kern County($63.09) • 12 percent is composted to Class A La Paz County,Arizona($49.74) • 3 percent is land filled in Yuma County,Arizona($45.44) • In 2003,OCSD adopted the Long-Range Biosolids Master Plan(Plan).The main policy recommendations from the Plan were: • Obtain at least three diverse blosolids management options • Limit participation in any market to one-half of the blosolids produced • Limit contracts to one-third of total blosolids production • Strive for Increased blosolids-based compost use in Orange County • Since the completion of the Plan,OCSD has entered Into two long-term contracts that will service approximately two-thirds of OCSD's blosolids production. • EnerTech:225 tons/day of blosolids-to-fuel in Rialto($72.40) _ (on line 12/08) • Synagro:250 tons/day of blosolids composting in Kern County($63.09) _ Staff is primarily investigating biosolids-to-energy technologies and markets for the remaining one-third of OCSD's blosolids production because of our concern that blosolids composting markets are being saturated which could result in de-valuing of the product,making it non-sustainable.The private sector has already significantly Invested In developing blosolids-to-energy technologies which enables wastewater agencies to participate In proven and sustainable markets.Staff will also be Investigating biosolids management via deep-well Injection and methane production which is currently being evaluated by the City of Los Angeles. Alternatives: OCSD will pursue long term contracts if possible for non-beneficial reuse landfill disposal. Cost Implications for the remaining 1/3 of OCSD's biosolids(2007 dollars): Energy Production: $85/ton—Annual cost=$7.8M Deep Well Injection: $40/ton—Annual cost=$3.7M Landfill Disposal: $60/ton—Annual cost=$5.5M 27 r Setting OCSD's Level of Service •+ for the Groundwater Replenishment System November 2007 r Policy Issue for LOS Determination: The Orange County Sanitation District(OCSD)has shared in construction costs for Phase 1 of the Groundwater Replenishment(GWR)System with the Orange County Water District (OCWD),with each agency paying equal shares of 50%.Phase 1 will reclaim up to 70 million gallons per day(mgd) r of water,and will defer the need for OCSD to construct a new ocean outfall estimated at$200 million. Ultimate planning for the GWR System allows for reclamation up to 130 mgd.The major GWR System pipelines and other components have been sized to accommodate this expansion;however,the advanced water purification facilities r are sized for 70 mgd.OCSD has not committed additional funding for expanding the GWR System beyond the present phase. r Staff Recommendation: OCSD will maintain its commitment for Phase 1 of the GWR System.This commitment for Phase 1 of GWR System includes the following: r • Providing OCWD with secondary effluent to produce 70 mgd of reclaimed water • Providing 50 percent of capital costs($250 million)for Phase 1 • Providing 50 percent of O&M costs($500,000 per year)to remove 1,4-Dioxane and NOMA r • In addition to the commitment for Phase 1,staff recommends exploring"low cost"or"no cost"options to expand water availability for the GWR System,including: • Revisiting the potential use of the SARI with the Department of Health Services r • Considering grant funding of future sewer diversion projects Analysis: In 1999,the OCSD Board of Directors(Board)approved Phase 1 of the GWR System,a joint funded r, project of OCSD and OCWD.The objective of Phase 1 is to maximize the use of treated effluent for water recycling and to manage OCSD's peak flow,deferring the construction of a second ocean outfall beyond 2020. r The GWR System is anticipated to be fully operational in November 2007.Currently,OCSD Reclamation Plant No.1 has sufficient wastewater to allow the GWR System to produce about 55 mgd of reclaimed water for the first year of operations.When the new Ellis Pump Station is completed in 2009,there will be sufficient flow to operate the r GWR System at its full 70 mgd capacity. Even though sufficient flows will be available for Phase 1 of the GWR System,the daily low flow period(1:00 am to r 8:00 am)will limit water availability for expansion of the System beyond Phase 1.Camp Dresser and McKee(CDM) has analyzed options to pump additional flows to Plant No.1,segregating reclaimable and non-reclaimable(SAWPA flows)wastewater streams,and constructing separate treatment plants.In light of the benefits of the current level r of service versus the high costs of making future flow available for the GWR System,staff recommends that OCSD continue to work with OCWD to study lower cost options to maximize the amount of water that can be reclaimed. r Alternatives: OCSD will be directing all available reclaimable flows to Plant No. 1 to maximize reclamation. In the future,as OCSD flows increase substantially,staff will recommend implementation of the most feasible and cost- effective options for increasing the quantity of flow available for reclamation. W Estimated Cost Implications for Future Phases: • OCSD Diversions and Infrastructure—up to$700 million r • Expansion of OCWD Advanced Water Purification Facilities—about$150 million • Every$1 million in OCSD expenditures increases single family user rates by$1.13 per year. r 28 r Setting OCSD's Level of Service for Air Quality November 2007 Policy Issue: OCSD expects the South Coast Air Quality Management District to amend existing regulations to require significant reductions in common pollutants(smog,visibility impairment)in December 2007.A secondary public health benefit of this regulation is the reduction in air toxic emissions.The estimated capital improvement cost to meet the new requirements is$31 million. • If the new regulations are not approved then OCSD will be required by 2012,under the existing regulations,to notify all affected residents and business surrounding our facilities of health risks associated _ with our emissions. • OCSD can avoid issuing notifications by proactively installing air pollution control equipment to reduce the air toxic emissions below the notification level. Analysis: Currently,State law and the South Coast Air Quality Management District require facilities to inventory their air toxic emissions and conduct a Health Risk Assessment of the health risk impact of their emissions to surrounding residents and businesses. ,. Public notification is required if the cancer risk exceeds 10 in one million and non-cancer risk exceeds 1.This means that 30 out of 1 million residents exposed to District air emissions,over a 70-year period,can contract cancer. It is anticipated that after completion of full secondary facilities in 2012,OCSD will exceed the threshold established by South Coast Air Quality Management District and OCSD will be required to notify affected communities. New regulations proposed by the South Coast Air Quality Management District would require OCSD to make significant reductions in common pollutants. The most technically feasible and lowest cost solution will be to add air pollution controls to the existing engines, which would provide the added benefit of reducing air toxic emissions below levels that require public notification. Alternatives(if the new regulations are not enacted): • Notify the affected public of the potential health risk from OCSVs toxic air emissions.OCSO would notify the public via direct mailings to the residents,businesses,and schools followed by public meetings. The corresponding materials will also be listed on the SCAQMD Web site and, possibly,printed in local newspapers. • Add air pollution controls to reduce risk to community below public notification level. Staff Recommendation: OCSD should apply feasible and cost-effective controls in order to reduce the air toxic emissions below the health risk notification level to the surrounding community and OCSD employees. 29 r Setting OCSD's r Level of Service for Odor Control November 2007 r Policy Issue: Thousands of homes surround OCSD's two treatment plants.Under current operating procedures, OCSD's goal Is to contain odor nuisances within our property boundary.Historically,OCSD based our Level of Service on meeting hydrogen sulfide levels at the exhaust of odor control equipment within the treatment plant r and at the fenceline of our property.Through significant study,staff has determined that hydrogen sulfide is not the best indicator of odor due to the presence of other odorous compounds.To gauge accurately odor nuisances, OCSD is changing to a scientifically based method of odor detection to determine accurately the Level of Service It r' wishes to achieve for communities surrounding our treatment plants.The Board must then choose the desired LOS. r Analysis: In 2002,OCSD completed the Odor Control Master Plan,which provided specific recommendations and measures to control and reduce odors.Staff conducted an extensive evaluation of OCSD facilities by collecting and analyzing odor samples from the plant processing equipment.OCSD used a panel of 6-8 people,with average r olfactory sensitivity,to determine the odor detection thresholds scientifically based on the number of times the sample needed to be diluted before the panelist detected odor.Staff then assigned an odor unit to the sample- the higher the number of dilutions needed to achieve the threshold,the stronger the odor.Staff then fed the data r Into a computer model to predict the impact to the community. r With the modeling analyses completed,staff concluded that under normal operation conditions,by using a guideline of 10 D/T(dilutions to threshold)OCSD would eliminate odor to the surrounding community.OCSD currently meets a 40-50 D/T,which is 4 to 5 times greater than 10 D/T.After the currently approved CIP projects r are constructed,OCSD is estimated to reach a level of 25-30 D/T(2.5 to 3 times greater than 10 D/T). Alternatives: r Adopt a treatment plant LOS of 25-30 dilutions/threshold. LOS will be achieved when the projects approved in the current CIP are constructed.Design and construct all future projects to a service level that will keep odors from that project on District property.Staff believes this level is 10 D/T but case-by-case modeling for the r projects will be required.The result is no cost Impact to the current approved CIP. • Adopt a treatment plant and future project design and construction LOS for odor control of 30 dilutions/threshold(within the fence line of OCSD)and Incorporate four additional odor control projects into r the CIP.The result Is an increase of$69.6 million to the CIP and$648,000 for O&M. Staff Recommendation: Establish OCSD odor standard based on total odor(D/T).Design all new processes, r structures and equipment at the wastewater treatment plants so that odors remain within treatment plant boundaries.Add two additional odor control projects(Plant 1 trickling filters and Plant 2 blosolids truck loading)to the CIP.The result Is an Increase of$17.6 million to the CIP and$300,000 annually for O&M.Conduct research on " cost-effective alternatives to control odors from the primary treatment facilities at both plants and report back to the Board on future staff recommendations for any further odor control. r r 30 Proposition 218 Notices for Annual Sewer Service User Fees November 2007 Proposition 218 was a constitutional initiative governing the establishment of any new taxes,property-related fees or assessments.This initiative was approved by the state's voters in November 1996 and applies to each of California's nearly 7,000 cities,counties,special districts,schools,community college districts,redevelopment agencies,and regional organizations. In order to raise a new tax,assessment,or property-related fee,or to increase an existing one,local governments must comply with Proposition 218 regulations. In general,these requirements are that local governments may use assessments and property-related fees only to finance projects and services that directly benefit property and that most revenue-raising measures be approved in an election. Sewer service user fees are specifically exempted from some of the requirements of Proposition 219.Most notably,they are exempt from the election requirements,but not the requirement that fees cannot exceed the reasonable cost of service. The Board has agreed with staff,however,that we will comply with all of the rest of the requirements,in a spirit of good governance.A notice of rate changes is mailed to every property owner whenever the rates are proposed to increase. Based on the approval to charge for local sewer services,a second(separate)Proposition 218 notice would be Included.The rates are adopted through the ordinance process,and that requires a public hearing,two Board meetings and a 2/3 majority approval of the Board. Proposition 218 Notices notify the property owners of the public hearing that coincides with the second reading of the ordinance.Notices must be mailed to property owners 45 days before the public hearing. Mailing of Proposition 218 notices requires significant Sanitation District resources and staff time as staff works with all stakeholders to ensure that notices are printed correctly and mailed to over 550,000 property owners. Additional temporary staff is needed to answer phone calls from customers. Historically,three OCSD staff and two temporary staff answer phone calls for a minimum of four weeks.In addition to written responses(including email),phone calls are also noted and tallied by city of residence.This information is made available to the Directors prior to the public hearing. 31 APPENDIX C: GLOSSARY Activated-sludge process—A secondary biological wastewater treatment process where bacteria reproduce at a high rate with the introduction of excess air or oxygen,and consume °1 dissolved nutrients in the wastewater. Biochemical Oxygen Demand SOD —The amount of(SOD) oxygen used when organic matter undergoes decomposition by microorganisms.Testing for BOD is done to assess the amount of organic matter in water. Biosolids—Biosolids are nutrient rich organic and highly treated solid materials produced by the wastewater treatment process.This high-quality product can be recycled as a soil amendment on farm land or further processed as an earth-like product for commercial and home gardens to improve and maintain fertile soil and stimulate plant growth. Business Accountability Charters—A business unit strategic plan. Capital Improvement Program(CIP)—Projects for repair, rehabilitation,and replacement of assets.Also .. includes treatment improvements, additional capacity, and projects for the support facilities. Coliform bacteria—A group of bacteria found in the intestines of humans and other animals, but also occasionally found elsewhere used as indicators of sewage pollution. E.coil are the most common bacteria in wastewater. Collections system—In wastewater,it is the system of typically underground pipes that receive and convey sanitary wastewater or storm water. Certificate of Participation(COP)—A type of financing where an investor purchases a share of the lease revenues of a program rather than the bond being secured by those revenues. Contaminants of Potential Concern(CPC)—Pharmaceuticals, hormones,and other organic wastewater contaminants. Dashboard—A computer based business tool used to visually track performance. r Dilution to Threshold (D/T)—the dilution at which the majority of the people detect the odor becomes the D/T for that air sample. 1,4-Dioxane—A chemical used in solvents for manufacturing,fumigants and automotive coolant. Like NDNIA,it occurs in the Groundwater Replenishment System water and is eliminated with hydrogen peroxide and additional ultra-violet treatment. Greenhouse gases—In the order of relative abundance water vapor,carbon dioxide, methane, nitrous oxide,and ozone gases that are considered the cause of global warming("greenhouse effect'). 32 GLOSSARY continued Groundwater Replenishment(GWR)System—A joint water reclamation project that proactively responds to Southern California's current and future water needs.This joint project between the Orange County Water District and the Orange County Sanitation District will provide 70 million gallons a day of drinking quality water to replenish the local groundwater supply. Levels of Service(LOS)—Goals to support environmental and public expectations for performance. Million gallons per day(mgd)—A measure of flow used in the water industry. Most Probable Number(MPN)—Number of organisms per 100 ml that would yield a test result or the observed test result with the greatest frequency.Commonly used for coliform bacteria. NDMA—N-Nitrosodimethylamine is an N-nitrosoamine suspected cancer-causing agent. It has been found in the Groundwater Replenishment System process and is eliminated using hydrogen peroxide with extra ultra-violet treatment. National Biosolids Partnership(NBP)—An alliance of the National Association of Clean Water Agencies (NACWA) and Water Environment Federation(WEF),with advisory support from the U.S. Environmental Protection Agency(EPA). NBP is committed to developing and advancing environmentally sound and sustainable biosolids management practices that go beyond regulatory compliance and promote public participation in order to enhance the credibility of local agency biosolids programs and improved communications that lead to public acceptance. O&M—Operations and maintenance of the treatment plants facilities and collections system. Publicly-owned Treatment Works(POTW)—Municipal wastewater treatment plant. Recycling—The conversion of solid and liquid waste into usable materials or energy. Risk Register—An internal document that describes vulnerabilities of the Sanitation District. Santa Ana River Interceptor(SARI) Line—A regional brine line designed to convey 30 million gallons per day(MGD)of non-reclaimable wastewater from the upper Santa Ana River basin to the ocean for disposal,after treatment. Sanitary sewer—Separate sewer systems specifically for the carrying of domestic and industrial wastewater.Combined sewers carry both wastewater and urban run-off. .. South Coast Air quality Management District(SCAQMD)—Regional regulatory agency that develops plans and regulations designed to achieve public health standards by reducing emissions from business and industry. Secondary treatment—Biological wastewater treatment, particularly the activated-sludge process, where bacteria and other microorganisms consume dissolved nutrients in wastewater. 33 GLOSSARY continued Sludge—Untreated solid material created by the treatment of wastewater. r Total suspended solids)TSS)—The amount of solids floating and in suspension in wastewater. Trickling filter—A biological secondary treatment process in which bacteria and other microorganisms, - growing as slime on the surface of rocks or plastic media,consume nutrients in wastewater as it trickles over them. r Urban run-off—Water from city streets and domestic properties that carry pollutants into the storm drains, rivers, lakes,and oceans. r Wastewater—Any water that enters the sanitary sewer. r Watershed—A land area from which water drains to a particular water body.OCSD's service area is in the Santa Ana River Watershed. r r r r r 34 ORANGE COUNTY SANITATION DISTRICT 10844 Ellis Avenue Fountain Valley, California 92708-7018 (714) 962-2411 www.ocsd.com Imw IMPROVING OUR ENVIRONMENT ONE MILESTONE AT A TIME COMPREHENSIVE ANNUAL FINANCIAL REPORT for the Fiscal Year Ended June 30, 2008 ORANGE COUNTY SANITATION DISTRICT, CALIFORNIA ORANGE COUNTY SANITATION DISTRICT ORANGE COUNTY, CALIFORNIA COMPREHENSIVE ANNUAL FINANCIAL REPORT FOR THE YEAR ENDED JUNE 30, 2008 d Prepared By: Administrative Services Department Financial Management Division Michael D.White, CPA Controller (THIS PAGE LEFT INTENTIONALLY BLANK) I II�.I W IL' 4I1I IWI IWI IWI IWI W ORANGE COUNTY SANITATION DISTRICT Comprehensive Annual Financial Report r Table of Contents For the Year Ended June 30, 2008 Pace ,r INTRODUCTORY SECTION: Letterof Transmittal..................................................................................................................... i GFOA Certificate of Achievement................................................................................................ vill Boardof Directors........................................................................................................................ ix OrganizationChart....................................................................................................................... x Mapof Service Area..................................................................................................................... A FINANCIAL SECTION: Independent Auditors'Report....................................................................................................... 1-2 Management's Discussion and Analysis—Required Supplementary Information....................... 3-8 Basic Financial Statements: Statementof Net Assets...................................................................................................... 10 Statement of Revenues, Expenses, and Changes In Net Assets...................................... 11 Statementof Cash Flows.................................................................................................... 12 Notes to Basic Financial Statements................................................................................... 13-35 Supplementary Information: Scheduleof Net Assets....................................................................................................... 38 Schedule of Revenues, Expenses, and Changes in Net Assets ........................................ 39 rSchedule of Cash Flows...................................................................................................... 40 STATISTICAL SECTION: Net Assets by Component—Last Eight Fiscal Years................................................................... 42 Revenues and Gross Capital Contributions by Source—Last Ten Fiscal Years......................... 43 Expenses by Type—Last Ten Fiscal Years................................................................................. 44 Change in Net Assets—Last Eight Fiscal Years.......................................................................... 45 Cash and Investment Reserve Balances—Last Ten Fiscal Years.............................................. 46 Sewer Service Fees—Last Nine Fiscal Years& Next Fiscal Year.............................................. 47 Number of Accounts and Revenues by Customer Class—Last Ten Racal Years...................... 48 Principal Sewer Service Customers—Current Fiscal Year and Nine Years Ago......................... 49 r Ratio of Annual Debt Service to Total Expenses—Last Ten Fiscal Years.................................. 50 Debt Coverage Ratios—Last Ten Fiscal Years........................................................................... 51 Computation of Direct and Overlapping Debt—Current Fiscal Year........................................... 52 Ratios of Outstanding Debt—Last Ten Fiscal Years................................................................... 53 r Comparison of the Volume of Wastewater Treated—Last Ten Fiscal Years.............................. 54 Authorized Full-time Equivalents by Function—Last Ten Fiscal Yom....................................... 55 Biosolids Produced—Last Ten Fiscal Years................................................................................ 56 r Capital Asset Statistics—Last Ten Fiscal Years.......................................................................... 57 Demographic Statistics—Last Ten Fiscal Years.......................................................................... 58 Estimated Populations Served by Orange County Sanitation District—Current Fiscal Year....... 59 Principal Orange County Employers—Current Fiscal Year and Nine Years Ago........................ 60 OperatingIndicators..................................................................................................................... 61 OTHER DATA&TRENDS: Cash and Investment Portfolio—Current Fiscal Year.................................................................. 64 Property Tax Rates—Direct and Overlapping Governments—Last Ten Fiscal Years................ 66 Assessed and Estimated Actual Value of Taxable Property—Last Ten Fiscal Years................. 66 Property Tax and User Fee Levies and Collections—Last Ten Fiscal Years.............................. 67 Property Value and Construction—Last Ten Fiscal Years........................................................... 68 Insurance in Force—Next Fiscal Year ........................................................................................ 69 u u (THIS PAGE LEFT INTENTIONALLY BLANK) I I u u u u u u u ll U L.I L OCSD Introductory Section 3 O a c a 0 Q Q n at O AN r4Tr ORANGE COUNTY SANITATION DISTRICT 90 n raa the Ee4�eaW October 25, 2008 10844 Ellis ANenue —Fpanreln vegar,r The Board of Directors of the 92]09-]01e Orange County Sanitation District, Meiling Address Orange County, California P.O.Box 9127 �Poan.In Vegay.CA,92]28-Bt 2] Submitted herewith is the Comprehensive Annual Financial Report of the Orange County Sanitation District, Orange County, California for the fiscal year ended June 30, 2008. This report includes the www.acad.aom financial position and activity of individual revenue areas, as described within the Governmental Phi Structure below, as of June 30, 2008 and was prepared by the Financial Management Division of the (714)962-2411 Sanitation District's Administrative Services Department. Fax Responsibility for both the accuracy of the data, and the completeness and fairness of the (]141962{1366 p Y p presentation, including all disclosures, rests with the Sanitation District. To the best of our knowledge and belief, the enclosed data is accurate in all material respects and is reported in a manner designed sang to present fairly the financial position and results of operations of the Sanitation District. All disclosures necessary to enable the reader to gain an understanding of the agency's financial activities Anaheim have been included. area B.N.Pare Included within the accompanying financial statements are all of the organizations, activities, and gpre� functions controlled by the Sanitation District's Board of Directors in accordance with the Foameln u Iley Governmental Accounting Standards Board Statement Number 14, 'The Financial Reporting Entity'. For the purpose of this evaluation, control was determined by the Board's responsibility for: (1) wne,mn adoption of the budget and user charges, (2) taxing authority, and (3) establishment of policies. The Sardan crora reporting entity and its services are described in further detail in Note 1 of the financial statements. Hundn9.n Beech rmna An audit of the books, financial records and transactions of the Sanitation District is conducted annually by independent certified public accountants. The Sanitation District selected the accounting La Hebre firm of Mayer Hoffman McCann P.C. to perform the audit for the year ended June 30, 2008. The L.Palma auditors' report on the Sanitation District's basic financial statements and supplementary information is too Alad sda located on page 1 within the financial section of this report. This report renders an unqualified opinion nlsapon Beanh on the Sanitation District's basic financial statements for the year ended June 30, 2008. Orange Management's discussion and analysis (MDBA) immediately follows the independent auditor's report Plecenda and provides a narrative introduction, overview, and analysis of the basic financial statements. The San.Ana MDBA complements this letter of transmittal and should be read in conjunction with it. Seal Beech SisnLit GOVERNMENTALSTRUCTURE Tustin Was Park The Orange County Sanitation District encompasses the Northern section of Orange County. The rorba Linda Sanitation District provides wastewater treatment for an area of the County covering 471 square miles and serving a population of approximately 2.5 million, or 81 percent of the County's population. The cos.Masa Sanitation District was originally incorporated in 1954 as nine separate public corporations, or districts. Sandary Olsi ct In April of 1998, at the Sanitation District's request, the Board of Supervisors of the County of Orange M11idi 04 passed Resolution No. 98-140 ordering the consolidation of these nine Count Sanitation Districts into Seni.ry0isbiR p 9 Y a new, single sanitation district, to be known as the Orange County Sanitation District, effective July 1, 1n oshn.,`hc 1998. This action was recommended to the Board by the Local Agency Formation Commission in C W,of Orange order to simplify governance structures, reduce the size of the Board, ease administrative processes, streamline decision-making and consolidate accounting and auditing processes. The boundaries of the nine previous districts had remained intact for the purpose of collecting sewer user fees at the i We pra.c4 public health and the em.nmena by nowner,effective waaLa.wr collection, deavnea.and recycling. f� U previously established rate schedules, and were referred to as nine individual revenue areas through June 30, 2000. Effective July 1,2003, all Revenue Areas, except Revenue Area 14, consolidated user I fee rates and all enterprise fund accounting and budgeting activities and are now known as the u Consolidated Revenue Area. The Sanitation District is managed by an administrative organization composed of directors appointed by the agencies or cities which are serviced by the Sanitation District. Each of the two remaining tJ Revenue Areas, the Consolidated Revenue Area and Revenue Area 14, has its own budget and is responsible for the construction and maintenance of its own collection system. All Revenue Areas, except Revenue Area 14 and the portion of the Consolidated Revenue Area previously known as Revenue Area 13, receive their own share of the one-percent ad valorem property tax levy. In addition, all Revenue Areas except Revenue Area 14, collect user fees from property owners. Revenue Area 14 receives all of its revenues from service charges to the Irvine Ranch Water District. The purpose of the Sanitation District's wastewater management program is to protect the public's health, preserve the beneficial uses of the coastal waters, and maintain air quality. The objectives of operating the treatment plants are to process and dispose of the treated wastewater and the separated u solids in accordance with Federal, state, and local laws including the Environmental Protection Agency. The Sanitation District sewerage system includes approximately 568 miles of sewers that convey Ll wastewater generated within the Sanitation District's boundaries to the Sanitation District's two wastewater treatment plants, Reclamation Plant No. 1 located in the City of Fountain Valley, and Treatment Plant No. 2 located in the City of Huntington Beach. Plants No. 1 and No. 2 have primary treatment capacities, including standby, of 204 million gallons per day (mgd) and 168 mgd, respectively. In fiscal year 2007-08, approximately 73 percent of the ) advanced primary effluent also received secondary treatment. Both plants are master-planned for a u future primary and secondary treatment capacity of 235 mgd for a combined total of 470 mgd by the year 2070. Outflows of treated wastewater from the two plants are combined and discharged to the ocean off the Ilt Huntington Beach coast through an outfall pipe that is 120 inches in diameter and approximately five miles long. The last mile of the outfall pipe is a diffuser that dilutes the wastewater with seawater in a I ' ratio of 148 parts seawater to one part treated wastewater at an average depth of 185 feet. ECONOMIC CONDITIONS AND OUTLOOK In June 2008, the Anderson Center for Economic Research at Chapman University forecasted a decline in total payroll employment for Orange County of 1.2 percent in 2008. or the loss of 18,000 payroll jobs, and a 0.9 percent growth in 2009, or the creation of 14,200 additional new jobs. This projection is a decline from the actual job growth of 0.0 percent and 2.0 percent in 2007 and 2006, respectively. The major factor that lead to net job losses was a sharp drop in jobs in construction and n in financial services. The weakness in these two sectors has negatively impacted the retail and IL.II professional and business services sectors leading to a broad-based slowdown as Orange County entered into a recession, defined as two consecutive quarterly job losses, in the second half of 2007. In addition, the unemployment rate for Orange County increased to 5.3 percent in fiscal year 2007-08 I I from the 3.9 percent in the prior year. Personal income in Orange County is expected to increase by u 2.9 and 3.7 percent in 2008 and 2009, respectively, that is expected to keep pace with inflation rates. Following increases of 8.7 percent and 7.4 percent in 2004 and 2005, respectively, taxable sales have L.I fallen steadily to projected increases of 1.2 percent and 3.4 percent in 2008 and 2008, respectively. According to Chapman University, these projections are the result of the impact of the recessionary forces and in the anemic growth in jobs and income that will reduce consumer spending in 2008, and I ii uu • Implementation of a management control system for environmental compliance • Completion and submittal of an emission inventory to the California Air Resources Board • Developing alternatives for South Coast Air Quality Management lower emission limits • Annual update of the strategic and business plan • Completion of Departmental Business Accountability Charters • Completion of feasibility study on deep injection and methane recovery options for biosclids • Evaluation of processing biosolids at the City of Los Angeles Terminal Island injection well • Completion of in-county Compost Take-Back Program Plan strategy • Implementation of the District's Succession Management Plan r In addition, five new goals were identified and incorporated into the ongoing Five-Year Strategic Plan including: .. • Expansions to the Groundwater Replenishment System. • Re-evaluation of current disinfection practices. • Identify and assess current and future risks and mitigation measures. • Develop Human Resources Strategic Plan. Identify current sustainable environmental practices, evaluate alternatives, and maximize the use of renewable fuels to minimize impact on the environment. SERVICE EFFORTS AND ACCOMPLISHMENTS .. Pioneering work to develop the world's largest water purification plant for groundwater recharge has earned the Orange County Water District and the Orange County Sanitation District, California, USA, the 2008 Stockholm Industry Water Award. The Stockholm Industry Water Award honors and r encourages business sector contributions to sustainable development in the water sector and is presented each August at the World Water Week in Stockholm. It was established in 2000 by the Stockholm Water Foundation in collaboration with the Royal Swedish Academy of Engineering r Sciences and the World Business Council for Sustainable Development. In July 2008, the Sanitation District received a Gold `Peak Performance" Award from the National Association of Clean Water Agencies. This prestigious award recognizes the Sanitation District's r outstanding work in protecting the nation's water resources. The award recognizes both the Sanitation District's Reclamation Plant No. 1 and Treatment Plant No. 2 for 100 percent compliance with its National Pollutant Discharge Elimination System permit for an entire year. ACCOUNTING AND BUDGETARY CONTROLS r The Sanitation District's accounting records are maintained on the accrual basis. In developing and evaluating the Sanitation District's accounting system, consideration is given to the adequacy of internal accounting controls. Internal accounting controls are designed to provide reasonable, but not absolute, assurance regarding: (1) the safeguarding of assets against loss from unauthorized use or disposition; and (2)the reliability of financial records for preparing financial statements and maintaining accountability for assets. The concept of reasonable assurance recognizes that (1) the cost of a .• control should not exceed the benefits likely to be derived; and (2) the evaluation of costs and benefits requires estimates and judgments by management. We believe that the Sanitation District's internal accounting controls adequately safeguard assets and provide reasonable assurance of proper recording of financial transactions. r r v 4.n Each year the Sanitation District's Board of Directors adopts an annual operating plan. A joint works budget is first prepared that identifies the specific capital projects and operating activities to be undertaken by the Sanitation District during the year. The budgetary level of control, the level at which iy expenses cannot exceed budget, is exercised at the individual district, or fund level. The Sanitation District has adopted a Uniform Purchasing Policy that identifies the agreed upon purchasing standards. i u CASH MANAGEMENT The Sanitation District's investment portfolio, except for the Sanitation District's debt service reserves, investments with the State Local Agency Investment Fund, and overnight repurchase agreements of idle cash within the Sanitation District's general bank account, are managed by an outside money L manager, Pacific Investment Management Company (PIMCO), who performs the daily investment activities, and by Mellon Trust, who serves as the Sanitation District's independent custodian bank. This externally managed portfolio consists of a short tens investment pool of$97,962,000 at June 30, 2008 that has average maturities out to 60 days, and a long-term investment pool of$311,244,000 that L has average maturities out to 2.3 years. Investments of this externally managed investment portfolio consist of U.S. Government securities, corporate bonds, commercial paper, and money market mutual funds. Investments of the Sanitation District's debt service reserves totaling $98.6 million consist of Lr bank investment contracts of $47.8 million and U.S. Govemment securities and open-ended mutual funds of$50.7 million. The Bank Investment Contracts are with AIG ($2.7 million maturing in 2016, but was subsequently terminated by mutually agreement between AIG and the Sanitation District and invested in an open-ended mutual fund on September 30,2008), Bayerische Landesbank Girozentrale Li ($17.3 million maturing in 2016). MBIA Inc. ($18.3 million maturing in 2036), and FSA Capital Management Services LLC ($9.5 million maturing in 2030). ;" Investment income includes changes in the fair value of investments. Increases or decreases in fair L value during the current year do not necessarily represent trends that will continue; nor is it always expected that such amounts will be realized, especially in the instance of temporary changes in the fair value of investments. L Investment earnings for the year were $20,235,000, a decrease of $2,009,000 from the prior fiscal I', year total of $22,244,000. This decrease in investment and interest income is attributable to lower V yields earned on investments, as investments earnings yielded 4.8 percent, a decrease from the prior year earnings rate of 5.5 percent. The decrease in the yields earned on investments can also be partially attributed to the change in unrealized gains and losses from year-to-year. As of June 30, 2008, the Sanitation District went from an unrealized gain on investments of$16,000 at June 30, 2007 r to an unrealized loss of$1,312,000, or a total decrease in market value on investments of$1.328.000. However, the Sanitation Districts investment policy is structured conservatively towards liquidity to avoid having to sell investments at a loss and having unrealized losses actually becoming realized losses. As of June 30, 2008, the Sanitation District's designated net assets totaled $533 million, and have been earmarked for the following specific purposes in accordance with the Sanitation District's reserve V policy: Designated For Cash Flow Contingency $149 million L Designated For Self-Insurance 57 million Designated For Capital Improvements 219 million Designated For Debt Service Requirements 108 million I W Total Designated Net Assets $533 million L vi L RISK MANAGEMENT For the year ended June 30, 2008, the Sanitation District was self-insured for a portion of workers' compensation and property damage. The self-insured portion for workers' compensation was $500,000 per person per occurrence with outside excess insurance coverage to $300 million. The self-insured portion for property damage covering fire, and other perils other than flood and earthquake was $25,000 per occurrence with outside excess insurance coverage to$1.0 billion. The self-insured portion for property damage covering flood was $100,000 per occurrence with outside excess insurance coverage to $300 million. The Sanitation Distrct was self-insured for all property damage from the perils of earthquakes. The Sanitation District also maintained outside comprehensive boiler and machinery insurance with a $100 million per occurrence combined limit with deductibles ranging from $25.000 to$350,000. The Sanitation District was insured for general liability up to$25 million per occurrence with a self-insured portion of$250,000. The self-insurance portion of the pollution liability exposure is $100,000 per the loss deductible under the outside pollution liability insurance coverage up to$10 million. Sanitation Distrct management believes that there are no outstanding claims as of June 30, 2008 that would materially affect the financial position of the Sanitation District. CERTIFICATE OF ACHIEVEMENT FOR EXCELLENCE IN FINANCIAL REPORTING The Government Finance Officers' Association of the United States and Canada (GFOA) awarded a Certificate of Achievement for Excellence in Financial Reporting to the Orange County Sanitation District for the Sanitation District's comprehensive annual financial report for the year ended June 30, 2007. This was the fourteenth consecutive year that the Sanitation District has received this award. In order to be awarded a Certificate of Achievement, a governmental unit must publish an easily readable and efficiently organized comprehensive annual financial report, whose contents conform to program standards. Such reports must satisfy both generally accepted accounting principles and applicable legal requirements. A Certificate of Achievement is valid for a period of one year only. We believe that our current comprehensive annual financial report continues to meet the Certificate of Achievement Program requirements and we are submitting it to GFOA to determine its eligibility for another certificate. ACKNOWLEDGMENTS '^ This report could not have been accomplished without the dedicated services of the Financial Management Division staff, and I would like to especially express my appreciation to those who assisted in its preparation. I would also like to thank the Sanitation District's Board of Directors, the General Manager, and the Director of Finance and Administrative Services for their interest and support in conducting the financial operations of the Sanitation District in a responsible and progressive manner. Res `nyitted / 44- 'V- Michael D.White, CPA Controller vii L L L Certificate of Achievement L for Excellence in Financial Reporting L Prasemted to Orange County Sanitation L District, California L For its Comprehensive Annual Financial Report for the Fiscal Year Ended L June 30.2007 A Certificate of Achievement for Excellence in Financial L Reporting is presented by the Oovemmmt Finance Officers Awociation ofthe United stares and Canada to govemment win and public camloyee retirement -- systems whose c:omprebemive avmal fimnciel 1 I repent;(CAFR L s)achieve the highest standards in goveramCat accounting and financial rcporong. — 1 /J �t V i President L ��1l8r� L Executive Director F V L L L Viii L r ORANGE COUNTY SANITATION DISTRICT Board of Directors As of June 30, 2008 ALTERNATE r AGENCY ACTIVE DIRECTOR DIRECTOR Cities: r Anaheim Harry Sidhu Lucille Kring Brea Roy Moore Ron Garcia r Buena Park Patsy Marshall Jim Dow Cypress Phil Luebben Prakash Narain Fountain Valley Larry Crandall Gus Ayer Fullerton Don Bankhead Sharon Quirk Garden Grove Bill Dabon Steve Jones r Huntington Beach Don Hansen Jill Hardy Irvine Christina Shea Steven Choi La Habra Rose Espinoza James Gomez r La Palma Mark Waldman Henry Charoen Los Alamitos Ken Parker Catherine Driscoll r Newport Beach Don Webb Leslie Daigle Orange Jon Dumitru Carolyn Cavecche Placentia Constance Underhill Joseph Aguirre r Santa Ana Sal Tinajero David Benavides Seal Beach Charles Antos Gordon Shanks r Stanton David Shawver David Cadena Tustin Doug Davert Jim Palmer Villa Park Brad Reese Rich Ulmer r Yorba Linda Jim Winder John Anderson Sanitary/Water Districts: Costa Mesa Sanitary District James M. Ferryman Robert Ooten Midway City Sanitary District Joy L. Neugebauer Allan P. Kdppner r Irvine Ranch Water District Darryl Miller Douglas Reinhart County Areas: Member of the Board of Supervisors Chris Norby Janet Nguyen ix L I�, ORANGE COUNTY SANITATION DISTRICT Lt Organizational Chart As of June 30, 2008 I Li L E D OF DIRECTORS .-. V GENERAL GENERAL L MANAGER COUNSEL GENERAL OFFICE MANAGEMENT ADMINISTRATION V ADMINISTRATIVE TECHNICAL OPERATIONS Ga w SERVICES SERVICES ENGINEERING AND Monagemem MAINTENANCE mministration Y/ Assistiml Gemml Amrctlgafis0 Techrkal Sewes 6gimeAnp Opemtioma Plant No.I ly Manager Satins AGNnnivretion B Maint, n AEminWnW. AaNaalaCn Research Adrrd n Adminatration Oparenm BnrE SaX26 Flnaga Em"vonmenlM Collenon Fatllt4ec Plant No.2 L Complialrea P4nnirg OpeiaUmsB OpemGom Repumory Afl®n mmnkmnre Public Info maial comm" Ensnonmemal Prc a Faatities MaAankal8 V ORm PUMaahp6 Labaamrya Mam in Maim nanma RMMOiM1ry Seni�es Mlllllsls MpnL Oman mmimAng OMm Flea Services _ 1 FnBMeainp ertl Prooem Im merww L Sally adllmM Mpllm Ralourtes 5aAcoCalha ConeblKlion E�imrYg Elecirml Maimemnm L In0or11101ion Fetlfitlas Tennobpy Enpimainp 4 V V V L x V ORANGE COUNTY SANITATION DISTRICT Map of Service Area As of June 30, 2008 105 ANGELES COUNTv S 9H Qry0 O C Ly _ F.y i •.•... e.e.. YORBALINDA Tl 1 PLACENTIA 4 0 FP �o e C0 f Los 9 BEAD AANA 1 + Pad K) a.m. OCSD Reclamation Plant No.t .. ItlValE S l ODSD Traalment Plant No.2 N °'...� a L 2 }iu ocs0 Pumpawmpe ml Orange County Sanitation Di (OCSD) O❑ Orange CAA 2008 u.Kmpmaw awao-wNl Rev.2008 xi u u u u (THIS PAGE LEFT INTENTIONALLY BLAND u (u iJ U JG IW' u I�I IWI W xii r r r r r r r OCSD Financial Section r r w r r U li L r� U T_ � r, � IWI 3 C7 y ' N L.I N n 3 u t� t� L 11 l� u u Mayer Hoffman McCann P.C. An Incepentlent CPA Firm Conrad Government Services Division 2301 Dupont Drive, Suite 200 Irvine.California 92612 949 474-2020 ph 949 263-5520 fa vmw.mhm-pc.com Board of Directors Orange County Sanitation District Fountain Valley, California Independent Auditors' Report We have audited the accompanying basic financial statements of the Orange County Sanitation District ("District"), as of and for the year ended June 30, 2008, as listed in the table of contents. These financial statements are the responsibility of the management of the District. Our responsibility is to express an opinion on these financial statements based on our audit. The prior year partial comparative information has been derived from the financial statements of the District for the year ended June 30, 2007 and, in our report dated October 25, 2007,we expressed an unqualified opinion on those financial statements We Conducted our audit in accordance with auditing standards generally accepted in the United States of America and the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United Stales. 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 our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of the District, as of June 30, 2008. and the changes in financial position and cash Bows of the District for the year then ended in Conformity with accounting principles generally accepted in the United States of America. As described further in note t to the financial statements, the District changed its method of accounting for post employment benefits for fiscal years ending on or after June 30,2008. The information identified in the accompanying table of contents as management's discussion and analysis is not a required part of the basic financial statements, but is supplementary information required by accounting principles generally accepted in the United Stales of America. We have applied certain limited procedures, which consisted principally of inquiries of management regarding the methods of measurement and presentation of the required supplementary information. However, we did not audit the information and express no opinion on it. Our audit was conducted for the purpose of forming an opinion on the financial statements that Collectively comprise the District's basic financial statements. The introductory section, supplementary information, statistical tables and other data and trends are presented for purposes of additional analysis and are not a required part of the basic financial statements. The supplementary information has been subjected to the auditing procedures applied in the audit of the basic financial statements, and in our opinion, is fairly staled in all material respects in relation to the basic financial statements taken as a whole. The introductory section, statistical tables and other data and trends have not been subjected to the auditing procedures applied in the audit of the basic financial statements and, accordingly, we express no opinion on them. t L Board of Directors L Orange County Sanitation District Page 2 L In accordance with Government Auditing Standards, we have also issued a report dated October 30, 2008 on our consideration of the Orange County Sanitation District's internal control over financial reporting and our tests of its compliance with certain provisions of laws, regulations, contracts, grant LW agreements, and other matters. The purpose of that report is to describe the scope of our testing of internal control over financial reporting and compliance and the results of that testing, and not to provide an opinion on the internal control over financial reporting or on compliance. That report is an integral part L of an audit performed in accordance with Government Auditing Standards and should be considered in assessing the results of our audit. 1&e / L Irvine, California I V October 30,2008 L L L L L L L+ 6W LI L I ' L+ 2 L Management Discussion and Analysis June 30,2008 This section of the financial statements of the Orange County Sanitation District (Sanitation District) is management's narrative overview and analysis of the financial activities of the Sanitation District for the fiscal year ended June 30, 2008. The information presented here is to be considered in conjunction with additional information provided within the letter of transmittal located in the Introductory Section of this report. Financial Highlights • As of June 30, 2008, the assets of the Sanitation District exceeded its liabilities by $1,276.0 million (net assets). Of this amount, $420.3 million (unrestricted net assets) may be used to meet the Sanitation District's ongoing obligations to citizens and creditors. • The Sanitation District's total net assets increased$86.3 million, or 7.2 percent over the prior year. .. • Net Capital Assets, consisting of non-depreciable capital assets and depreciable capital assets net of accumulated depreciation, increased$227.8 million, or 14.2 percent over the prior year. • Net Assets invested in capital assets, net of related debt decreased$34.1 million, or 3.8 percent. • Unrestricted Net Assets increased$120.9 million,or 40.4 percent from the prior year. Overview of the Basic Financial Statements The Sanitation District operates as a utility enterprise and presents its financial statements using the economic resources measurement focus and the full accrual basis of accounting. As an enterprise fund, the Sanitation District's basic financial statements are comprised of two components:financial statements w. and notes to the financial statements. This report also contains other supplementary information in addition to the basic financial statements themselves. In accordance with Governmental Amounting Standards Board (GASB) Statement No. 34, the Sanitation District's financial statements include a statement of net assets, statement of revenues, expenses and changes in net assets, and a statement of cash flows. The statement of net assets includes all of the Sanitation District's assets and liabilities and provides information about the nature and amounts of investments in resources (assets) and the obligations to Sanitation District creditors (liabilities). It also provides the basis for computing the rate of return, evaluating the capital structure of the Sanitation District, and assessing the liquidity and financial flexibility of the Sanitation District. The statement of revenues, expenses, and changes in net assets amounts for the current year's revenues and expenses. This statement measures the success of the Sanitation District's operations over the past year and can be used to determine the Sanitation District's creditworthiness. It also �., highlights the Sanitation District's dependency on property tax revenues in supplementing user fees and other charges for recovering total costs. The final required financial statement is the statement of cash flows. The statement reports cash receipts, cash payments, and net changes in cash resulting from operations and investments during the reporting period. .. Net Assets As previously stated, net assets increased $86.3 million, or 7.2 percent to $1,276.0 million in FY 2007-08 over the prior year. In comparison, net assets increased $100.6 million, or 9.2 percent, to $1,189.7 million in FY 2006-07 over FY 2005-06. 3 L (Dollars in thousands) L Percentage June 30, June 30, Increase Increase L 2008 2007 (Decrease) (Decrease) Assets Current and other assets $ 599,545 $ 438,055 $ 161,490 36.9% l Capital assets, net 1,829,383 1,601,621 227,762 14.2% V Total assets 2.428,928 2,039,676 389,252 19.1% Liabilities u Current liabilities 84,087 76,544 7,543 9.9% Noncurrent liabilities 1,068,854 773,395 295,459 38.2% L Total liabilities 1,152,941 $49,939 303,002 35.6% Net assets: Investment in capital assets, I net of related debt 852,385 886,463 (34,078) -3.8% Lr Restricted 3,311 3,904 (593) -15.2% Unrestricted 420,291 299,370 120,921 40.4% L Total not assets $ 1,275,967 $ 1,189,737 $ 86,260 7.2% Current and other assets increased $161.5 million, or 36.9 percent, due primarily to the issuance of L $300.0 million in certificates of participation (COP) debt financing issued in December 2007, net cash provided by operations of$71.8 million, and net non-operating revenues of$64.9 million. These increases were partially offset by the funding of$275.4 million in capital improvements. Capital assets, net increased $227.8 million, or 14.2 percent, due primarily to the ongoing capital L improvement program which generated capital outlays of$275.5 million in FY 2007-08 that was partially offset by depreciation of$47.7 million. Included in total capital outlays was the Headworks Improvements L at Plant No. 2. This project is replacing the existing headworks due to failing gates and the ineffectiveness of the bar screens and grit chambers that are allowing grit screenings to pass through into the downstream processes causing increased operating costs. This project is to include an influent diversion and metering structure, bar screens, influent pump station, vortex grit chambers, primary L influent spli0er and metering structure,ferric chloride feed facilities, headworks and trunk line odor control facilities, screenings handling building including a washer/compactor, grit handling building, and an electrical building that includes standby power. In IY 2007-08, $53.5 million of the estimated $257.8 million was trimmed bringing the total outlay to$203.2 million with completion expected in FY 2011-12. Another major project underway is the expansion of the secondary treatment facilities at Plant No. 1. This project is one of several capital improvements that are necessary to achieve secondary treatment standards by December 31, 2012 in accordance with a consent decree signed by EPA and filed with the u U.S. District Court. This project Includes construction of aeration basins, clarifiers, a blower building, and waste sludge pumping stations, that will provide additional secondary treatment capacity of 60 million gallons per day at Plant No. 1. Capital outlays of $53.3 million were incurred in FY 2007-08 with total project outlays to date of $71.9 million. The total projected cost is $265.9 million with completion expected in FY 2011-12. The completion of the Groundwater Replenishment System (GWRS)was another project with significant capital outlays in FY 2007-08. A 50:60 joint cost sharing effort between the Orange County Sanitation District and the Orange County Water District, GWRS has initially provided 72,000 acre-feet per year of reclaimed water for replenishment of the Orange County Groundwater Basin and has augmented the L seawater intrusion barrier at a total project cast of$492.2 million. The Sanitation District incurred $14.7 million in construction during FY 2007-08 on this project bringing the Sanitation District's share of total project cost-to-0ate to$201.1 million. L 4 L See page 7 for the Schedule of Capital Assets and a listing of the other major capital additions for FY 2007-08. r Net assets invested in capital assets, net of related debt decreased$34.1 million, or 3.8 percent over the prior year primarily as a result of the $300 million of new money COP debt proceeds that was mostly offset by the $227.8 million increase in net capital assets, a $4 million increase in deferred charges, a �+ $14.3 million increase in debt service reserves,and debt service principal payments of$8.9 million. Unrestricted net assets increased $120.9 million, or 40.4 percent over the prior year, and is primarily due r to the overall increase in net assets of$86.3 coupled with the reduction in Investments invested in capital assets net of related debt of$34.1 million. Changes in Net Assets r Net assets increased $86.3 million in FY 2007-08, a 7.2 percent increase over the prior year. r (Dollars in thousands) Percentage June 30, June 30, Increase Increase r 2008 2007 (Decrease) (Decrease) Revenues: r Operating revenues Service Charges $ 184.180 $ 167,790 $ 16,390 9.8% Permit and inspection fees 1,196 1,866 (670) -35.9% Total operating revenues 185,376 169,656 15,720 9.3% Nonvperating revenues Property taxes 65,210 60,565 4,645 7.7% Investment and interest income 20,235 22,244 (2,009) -9.0% r Capital facilitites capacity charges 19,816 31,278 (11.462) -36.6% Other 13 1,068 (1,055) 98.8% Total non-operating revenues 105,274 115,155 (9,881) -8.6% r Total revenues 290,650 284,811 51839 2.1% Expenses: r Operating expense other than depreciation and amortization 131,890 112,155 19.736 17.6% Depreciation and amortization 47,767 53,111 (5,344) -10.1% Non-operating expense 40,334 37,837 2,497 6.6% r Total expenses 219,991 203,103 16,888 8.3% Income before capital contributions 70,659 81,708 (11,049) -13.5% Capital contributions (distributions), net 15,592 18,929 (3,337) -17.6% Increase in net assets 86.251 100,637 (14,386) -14.3% Beginning net assets 1,189,736 1,089,099 100,637 9.2% Ending net assets $ 1,275,987 $ 1,189,736 $ 86,251 7.2% r 5 Sources of Revenue Functional Expenses June 30,2008 June 30.2008 ®Collections 7% 8% @Treatment& Dlnlerest 22% TY. Disposal MUser Fees 10% Mepreclation 8 Amortization OTaxes Levied ❑Other 22% Dlnterest Expense ■Other As previously stated, an enterprise fund is used to account for the operations of the Sanitation District, which is financed and operated in a manner similar to private business enterprises. This allows the Sanitation District to determine that the costs (expenses, including depreciation and amortization) of providing wastewater management services on a continuing basis are financed or recovered primarily through user charges. Sewer service user fees are evaluated annually based primarily on budget requirements for total operation, maintenance and capital expenditures for providing wastewater management services. Property tax revenues are dedicated for the payment of debt service. In FY 2007-08, operating revenues increased $15.7 million, or 9.3 percent over the prior year that is predominately reflective of the $16.4 million, or 9.8 percent increase in service charges. The increase in service charges is primarily due to the 9.8 percent increase in the average sewer user fee rate over the prior year. The$9.9 million, or 8.6 percent decrease in non-operating revenues consists of an$11.5 million, or 36.6 percent decrease in capital facilities capacity charges, a $2.0 million, or 9.0 percent decrease in investment and interest income, and a $1.1 million, or 98.8 percent decrease in other non-operating revenues. These decreases are partially offset by a $4.6 million, or 7.7 percent increase in property tax revenues. The decrease in capital facilities capacity charges is reflective of the decrease in total building permit valuations in calendar year 2007 of 19.5 percent and a projected decrease of 22.0 percent in calendar year 2008. The decrease in investment and interest income is attributable to the lower yields earned on investments over the prior year that were somewhat offset by higher average rash and investment balances. Yields earned on investments decreased from 5.5 percent in FY 2006-07 to 4.8 percent in FY 2007-08. However, cash balances increased during this same time period from $372 million to $533 million. The decrease in other non-operating revenues is primarily reflective of the one- time $747,000 grant reimbursement received in the prior year from the Natural Resources Conservation Services of the U.S. Department of Agricultural. Property tax revenue increases are primarily the result of the total assessed valuation increase of 8.1 percent over the prior year due to the upturn in the real estate market during this time period. Of the$19.7 million, or 17.6 percent increase in operating expense before depreciation and amortization, operating salaries and benefits, totaling $67.6 million, increased $9.8 million, or 17.0 percent over the prior year. These operating salaries and benefits cost are part of the overall increase of$12.0 million in total salaries and benefits when including the salaries and benefits capitalized within capital improvement program. Overall, total Sanitation District salaries and benefits were $83.5 million, a 16.7 percent increase over the prior year total of$71.6 million. This increase is mostly attributable to the $5.9 million recognition of net benefit obligation owed by the District under the Additional Retirement Benefit Account (AREA) pension program. ARBA was previously administered by the Orange County Retirement System. The administration of ARBA was brought in-house during FY 2007-08 as a result of the drop-off in 6 r pension investment earnings and the underfunding of the net benefit obligation. There was also a $2.5 million increase in regular salaries, or 5.9 percent, that was primarily driven by existing bargaining agreements as total authorized staffing levels were reduced by 10 full time equivalent positions to 634. r The remaining $3.6 million increase is attributable to increases in retirement premiums and Insurance benefit costs. Supplies, repairs and maintenance operating expense increased $4.9 million, or 23.4 percent due to a '+ $4.1 million increase in repairs and maintenance expenses. These expenses are attributed to maintenance on aging equipment and infrastructure including co-generation engine overhauls and the cleaning of digesters. Contractual services operating expense increased $3.2 million, or 15.7 percent r over the prior year primarily due to the$2.6 million increase in biosolid and other waste disposal. Biosolid cost increase is due to the approximate 15 percent increase in biosolid hauling costs and to a small increase in the volume of biosolids. The volume of biosolids will continue to grow as the District moves r towards full secondary treatment standards by December 2012. Capital Assets r At June 30, 2008, the Sanitation District had a net investment of $1.829 billion in capital assets. This amount represents a net increase (including additions and deletions) of $227.8 million, or 14.2 percent over the prior year. r Schedule of Capital Assets (Net of Depreciation and Amortization) (Dollars in thousands) r Percentage June 30, June 30, Increase Increase 2008 2007 (Decrease) (Decrease) r Land $ 13,021 $ 13,021 $ - 0.0% Construction in Progress 937,487 803,680 133,807 16.6% r Sewage collection facilities 301,564 301,458 106 0.0% Sewage treatment facilities 436,896 351,379 85,517 24.3% Effluent disposal facilities 49,940 52,324 (2,384) 4.6% Solids disposal facilities 384 - 384 0.0% General and administrative facilities 84,581 73,592 10,98g 14.9% Assets acquired in excess of book value 5,510 8,187 857 -10.7% r Capital assets, net 1,829,383 1,8 2-1 227,782 14.2% Major capital asset additions for the current fiscal year included the following: r . $53.5 million-Headworks Replacement at Plant No. 2 • $53.3 million-New Secondary Treatment Systems at Plant No. 1 . $37.1 million-Replacement of Ellis Avenue Pump Station • $36.8 million-New Trickling Filters at Plant No. 2 . $14.7 million-Ground Water Replenishment System • $ 9.3 million-Primary Treatment Rehabilitation at Plant No. 2 r $ 6.8 million -New Primary Sludge Feed System at Plant No. 2 • $ 6.2 million-Expansion of Reclamation Electrical Service Main to 66kV at Plant No. 1 More detailed information about the Sanitation District's capital assets is provided in Notes 1 and 3 of r Notes to the Financial Statements. 7 b L L Debt Administration At June 30, 2008, the Sanitation District had $1.08 billion outstanding in COP debt, a net increase of $280.6 million, or 35.0 percent over the prior year. This increase is primarily due to the$300.0 million of I new COP fixed rate debt issued in December 2007(COP Series 2007B)to assist in the $275.5 million in LI capital outlays that had taken place during the year and to assist in the $373.7 million scheduled to be spent in the FY 2008-09. In addition, a second fixed rate COP debt issuance of$77.2 million was made in May 2008 (COP Series 2008A) to refund the $85.5 million outstanding principal balance of the COP V Series 1992 synthetic variable-to-fixed rate debt. The Sanitation District achieved a rating of AAA from Standard and Poor s Corporation, and has maintained ratings of AA from Fitch and Aa3 from Moody's Investor Services. The Sanitation District's L long-range financing plan is designed to maintain these high ratings. Over the next ten years, the Sanitation District is projecting an additional $2.0 billion in future treatment plant and collection system capital improvements. In accordance with the Sanitation District's long-term debt fiscal policy, the L Sanitation District will restrict long-term borrowing to capital improvements that cannot be financed from current revenue. In September 2008, COP Series 2008B fixed rate debt in the amount of $27.8 million was issued to L refund the $26.8 million outstanding principal balance of the COP Series 1993 synthetic variable-to-fixed rate debt. In December 2008, the Sanitation District is scheduled to issue $200 million of new COP fixed rate debt. L A total of$550 million in COP debt issuance is being proposed over the next five years. These financings are needed early in the 10-year capital improvement program because the bulk of the construction is scheduled during the next six years. V For more information on long-term debt activities, see Note 4 of the Notes to Basic Financial Statements. Economic Factors and Next Year's Budgets and Rates • The unemployment rate within the County of Orange is currently 5.3 percent, which is an increase from a rate of 3.9 percent a year ago. V • Inflation for Orange County in 2007 increased 3.3 percent based on the 2007 actual percentage change in the consumer price index according to the June 2008 Economic and Business Review I' report prepared by Chapman University. L • The actual rate of return on investments decreased from the 5.5 percent earnings rate in FY 2006-07 to 4.8 percent for FY 2007-08. 1 L. All of these factors were considered in preparing the Sanitation District's two-year budget for FY 2008-09 and FY 2009-10. L The Sanitation District's user fee schedule was increased by 10.4 percent for FY 2008-09 over the prior year. The annual fee applicable to the Sanitation District's largest customer base and the underlying _ basis for all other user rates: the single-family residential fee, increased by $19.00, from $182.00 to j $201.00. This rate increase was necessary to finance the Sanitation District's cash flow needs as capital L improvement outlays alone are projected to be $373.7 million in FY 2008-09 and are projected to total $2.0 billion over the next 10 years in order to rehabilitate and upgrade existing facilities and provide for full secondary treatment standards. L Requests for Information The financial report is designed to provide a general overview of the Sanitation District's finances. i Questions concerning any of the information provided in this report or requests for additional financial j.+ information should be addressed to the Financial Management Division, Orange County Sanitation District, P.O. Box 8127, Fountain Valley, CA 92728-8127. L 8 L ORANGE COUNTY SANITATION DISTRICT BASIC FINANCIAL STATEMENTS r .J 9 .y L ORANGE COUNTY SANITATION DISTRICT Statement of Net Assets L June 30, 2008 (Wirth Comparative Data for June 30, 2007) 2008 2007 L Current assets: Cash and cash equivalents $ 104,012,814 $ 55,472,715 Investments 330,161.649 231,710,077 L+ Accounts receivable, net of allowance for uncollectibles 11,805.761 12.703,227 Accrued interest receivable 2,855,232 2815784 L Due from other governmental agencies 5,025,176 6:332:508 Connection fees receivable 1.286,927 962.764 Property tax receivable 3.296,089 2,459,657 Inventories 4,985,388 4,834.811 L Prepaid expenses 814,3D4 1,281,524 Total current assets 464,243,340 318,573,057 Noncurrent assets: L Restricted: Cash and cash equivalents 50.737,114 23,946,510 Investments 47,829,179 60,776,180 Accrued interest receivable 386.960 567,380 Unrestricted: L Non-Depreciable capital assets 950,506,192 816,701.436 Depreciable capital assets, net of accumulated depreciation 876,875,030 784.919.903 Deferred charges 8,269,966 4.277,005 Other noncurrent assets, net 28,078.450 29,914,713 LI Total noncurrent assets 1.964,684,891 1,721,103,127 Total assets 2,428,928,231 2,039,676,184 Current liabilities: L Accounts payable 27,577,766 18,966,641 Accrued expenses 8,894,308 15,084.007 I Retentions payable 7,786,756 6.959,199 L Interest payable 12.107,963 7,023.945 Current portion of long-tenn obligations 27.720.592 28.510,896 Total current liabilities 84.087,385 76.544,688 L Noncurrent liabilities: Noncurrent portion of long-term obligations 1,068,853.560 773,394,732 V Total liabilities 1,152,940.945 849.939.420 Net assets: L Invested in capital assets, net of related debt 852,384.563 886,462.675 Restricted for debt service 3,311,187 3.904,212 Unrestricted 420,291,536 299,369977 Total net assets $ 1,275,987,286 $ 1,189,736,764 V See Accompanying Notes to Basic Financial Statements. r.r L 10 L ORANGE COUNTY SANITATION DISTRICT Statement of Revenues, Expenses, and Changes in Net Assets .. For the Year Ended June 30, 2008 (With Comparative Data for the Year Ended June 30, 2007) 2008 2007 Operating revenues: Service charges $ 184,180,220 $ 167,789,660 r Permit and inspection fees 1,196,320 1,866,411 Total operating revenues 185,376,540 169,656,071 Operating expenses other than depreciation and amortization: Salaries and benefits 67,628,651 57,802,102 ,y Utilities 8.092,317 8,072,262 Supplies, repairs and maintenance 25,970,799 21,050.912 Contractual services 23,687,835 20,389.454 Directors'fees 144,117 131,750 r Meetings and training 1,007.255 1,124,852 Other 5,458,868 3,583,792 r„ Total operating expenses other than depreciation and amortization 131,889,842 112,155,124 Operating income before depreciation r and amortization 53.486,698 57,500,947 Depreciation and amortization 47,766,956 53,110,609 �+ Operating income 5,719,742 4,390,338 Non-operating revenues: Property taxes 65,209.461 60,565,308 r Investment and Interest income 20,235,214 22.243,554 Capital facilities capacity charges 19,816.293 31,277,647 Other 12,773 1,067,794 r Total non-opereting revenues 105,273,741 115,154,303 Non-operating expenses: Interest 22,517,174 21,746,852 Feasibility studies 12,994,472 11.128,105 Capital greens to member agencies 1,769,894 2,127,154 r Other 3,053,282 2,834,392 Total non-operating expenses 40,334,822 37,836,503 r Income before capital contributions 70,658,661 81,708,138 Capital contributions from other agencies 15,591,861 18,929,179 Change in net assets 86,250.522 100,637,317 Total net assets-beginning 1,189,736,764 1.089,099,447 Total net assets-ending $ 1,275,987,288 $ 1.189.736.764 r See Accompanying Notes to Basic Financial Statements. r 11 L ORANGE COUNTY SANITATION DISTRICT Statement of Cash Flows For the Year Ended June 30,2008 (With Comparative Data for the Year Ended June 30,2007) 611 2008 2007 Cash flows from operating activities: u Receipts from customers and users $ 192,439,636 $ 183.133,202 Payments to employees (58,897,860) (59,691,912) Payments to suppliers (61,79D,653) (40,809,378) Net cash provided by operations 71,751,123 82.632,002 Li Cash flows from noncepital financing activities. Proceeds from property taxes 64.373,029 59,989,588 Capital grants to member agencies (1,769,894) (2,127,154) L Net cash provided by noncepital financing activities 62,003,135 57,862.412 Cash flows from capital and related financing activities: Capital facilities capacity charges 19,492,120 31,650,082 Additions to property,plant and equipment (275,406,057) (281,135,639) Arbitrage payment (307.934) (53.100) Interest paid (31,78%973) (35.250,887) Principal payments on certificates of participation (96,530,000) (101,965.000) Ir Proceeds from certificates of participation issuance 378.898.828 89,818.081 Certificates of participation issuance costs (675.401) (319,695) Proceeds from capital contributions 10,750.712 14.163,356 Net cash provided(used)by capital and related financing activities 4,433,095 (283.092.825) Cash flows from investing activities: Proceeds from the sale of investments 3,793,917,222 5,282,384,356 Purchases of investments (3,8111I.M,353) (5,204,660,027) L Interest mcelved 23,359.481 24,647,8a2 Net cash provided(used)by investing schvitles (83,456,650) 102.372,011 Net increase(decrease)in cash and cash equivalents 75.330.703 (40,226,400) II Cash and cash equivalents,beginning of year 79,419.225 119.645,625 Cash and cash equivalents,end of year $ 154,749.928 $ 79.119.225 Reconciliation of operating income to net cash provided by operating activities: V Operating income $ 5.719.742 $ 4.390,338 Adjustments to reconcile operating income to net cash provided by operations: - Depreciation and amortization 47,766,9% 53,110,609 Bad debt"Parise (4,376) (67.284) v Other non-operating revenues and expenses (289.933) 1.488.143 (Increaseydecrease in operating assets: Accounts receivable 2.022,391 5,604,862 Y4 Due from other governmental agencies 5.027,932 6.804.565 Inventories (264.741) (284,670) Prepaid and other assets 467,220 10,052,412 Increasel(decrease)in operating liabilities: LI Accounts payable 8,611.125 (2,777,150) Accrued expenses (6,189,699) 6.639.768 Retentions payable 827,557 (2,286,374) ' Penslon1OPEB payable 6,261,477 - y Compensated absences 545,278 311,438 Claims and judgments 1,250.194 (364.655) Net cash provided by operations S 716751=123 $ 32,632.002 W Noncash Activities: Unrealized gain(loss)on the fair value of investments S (1,311,560) $ 16,429 Net disposal of assets with no cash effect (1,973,078) (3,243.743) Certificates of participation issuance cost-underwriters fee (3,995.218) (468,044) L Capital contributions from other agencies 4,841,149 4,765,823 Certificates of participation original issue premium 14.051.290 183,654 Feasibility studies with no cash effect (12,994,472) (11,128,105) See Accompanying Notes to Basic Financial Statements. 12 ORANGE COUNTY SANITATION DISTRICT Notes to Basic Financial Statements For the Year Ended June 30, 2008 (11 Summary of Significant Accounting Policies Reporting Entitv The Orange County Sanitation District(OCSD) is a public agency which owns and operates certain wastewater facilities in order to provide regional wastewater collection, treatment, and disposal services to approximately 2.5 million people in the northern and central portion of the County of Orange, California. OCSD is managed by an administrative organization comprised of directors appointed by the agencies and cities which are serviced by OCSD. OCSD's service area was originally formed in 1954 pursuant to the County Sanitation District Act and consisted of seven independent special districts. Two additional districts were formed and additional service areas were added in 1985 and 1986. These special districts were jointly responsible for the treatment and disposal facilities which they each used. In April of 1998, the Board of Supervisors of Orange County passed Resolution 98.140 approving the consolidation of the existing nine special districts into a new, single sanitation district. This action was taken in order to simplify the governance structures, reduce the size of OCSD's Board of Directors, ease administrative processes, streamline decision-making and consolidate accounting and auditing processes. Pursuant to the Resolution and Government Code Section 57500, the predecessor special districts transferred and assigned all of their powers, rights, duties, obligations, functions and properties to OCSD, including all assets,liabilities, and equity. Effective July 1, 1998, the organization became known as the Orange County Sanitation District. The boundaries of one of the previous districts, now known as Revenue Area No. 14, have been maintained separately because their use of OCSD's collection, treatment, and disposal system is funded by the Irvine Ranch Water District. The boundaries of the other eight districts have been consolidated and are collectively referred to as the Consolidated Revenue Area. OCSD utilizes joint operating and capital outlay accounts to pay joint treatment, disposal, and construction costs. These joint costs are allocated to each revenue area based on gallons of sewage flow. The supplemental schedules and statements show Internal segregations and are not intended to represent separate funds for presentation as major or non-major funds in the basic financial statements. The accompanying financial statements present OCSD and its blended component unit, the Orange County Sanitation District Financing Corporation. The Corporation is a legally separate entity although in substance it is considered to be part of OCSD's operations. OCSD is considered to be financially accountable for the Corporation which Is governed by a board comprised entirely of OCSD's board members. There is no requirement for separate financial statements of the Corporation; consequently, separate financial statements for the Corporation are not prepared. �+ The Corporation had no financial activity during the fiscal year ended June 30, 2008, other than principal and interest payments on outstanding certificates of participation (see Note 4). r, OCSD is independent of and overlaps other formal political jurisdictions. There are many governmental entities, Including the County of Orange, that operate within OCSD's jurisdiction; however, financial information for these entities is not included in the accompanying financial statements in accordance with the provisions of Governmental Accountng Standards Board (GASS)Statement 14. Measurement Focus and Basis of Accounting OCSD operates as an enterprise activity. Enterprise funds account for operations that are financed and operated in a manner similar to private business enterprises, where the intent of the Board of Directors is that the costs(expenses, including depreciation and amortization)of providing services 13 ORANGE COUNTY SANITATION DISTRICT Notes to Basic Financial Statements L For the Year Ended June 30, 2008 L to the general public on a continuing basis be financed or recovered primarily through user charges. Basis of accounting refers to when revenues and expenses are recognized in the accounts and L reported in the financial statements. Enterprise funds are accounted for on the flow of economic resources measurement focus and use the accrual basis of accounting, whereby revenues are recognized when earned and expenses are recognized when incurred, regardless of the timing of related cash flows. OCSD applies all GASS pronouncements currently in effect as well as Financial Accounting Standards Board Statements and Interpretations, Accounting Principal Board Opinions and Accounting Research Bulletins of the Committee on Accounting Procedure issued on or before November 30, 1989, unless those pronouncements conflict with or contradict GASS L pronouncements. Ooeratino Plans L Each year, OCSD staff prepares an annual operating plan which is adopted by the Board of Directors. The annual operating plan is used to serve as a basis for monitoring financial progress, estimating the levy and collection of taxes, and determining future service charge rates. During the year, these plans may be amended as circumstances or levels of operation dictate. Cash Equivalents Investments with original maturities of three months or less are considered to be cash equivalents. Investments I All investments are stated at fair value (the value at which a financial instrument could be 60 exchanged in a current transaction between willing parties, other than in a forced or liquidation sale). Changes in fair value that occur during the fiscal year are reported as part of investment and interest income. Investment and interest income includes interest earnings and realized and unrealized changes in fair value. Accounts Receivable L Accounts receivable is shown net of the allowance for uncollectible receivables which was $189,391 at June 30, 2008. Any unbilled sewer service receivables are recorded at year-end. Inventory Inventory is stated at cost, which approximates market, on a weighted-average basis. Capital Assets Outlays for property, plant, equipment, and construction in progress are recorded in the revenue area which will use the asset. Such outlays may be for individual revenue area assets or for a L revenue area's share of joint assets. Capital assets of property, plant, and equipment are defined as assets with an initial, individual cost of more than $5,000 and an estimated useful life of at least three years. Such assets are recorded 4 at cost, except for assets acquired by contribution, which are recorded at fair market value at the time received. Cost includes labor; materials; outside services; vehicle and equipment usage; allocated indirect charges such as engineering, purchasing, supervision and other fringe benefits; L and certain administrative and general expenses. Net interest costs are capitalized on projects. During the fiscal year ended June 30, 2008, net interest costs of$13.25 million were capitalized. W 14 U ORANGE COUNTY SANITATION DISTRICT Notes to Basic Financial Statements For the Year Ended June 30.2008 r Depreciation of plant and equipment is provided for over the estimated useful lives of the assets using the straight-line method. OCSD generally follows the guidelines of estimated useful lives as recommended in the State of California Controller's Uniform System of Accounts for Waste .. Disposal Districts, which range from 3 to 75 years. The following are estimated useful lives for major classes of depreciable assets: Sewage collection facilities — 50 years, Sewage treatment facilities — 40 years, Sewage disposal facilities — 40 years, and General plant and administrative facilities—11.5 years. Amortization Amortization of the excess purchase price over the book value of assets acquired is provided using the straight-line method over an estimated useful life of 30 years. Discounts and defamed charges on the certificates of participation are amortized to interest expense over the respective terms of the installment obligations based on their effective interest rates (note 4). _ Restricted Assets Certain assets are classified as restricted because their use is limited by applicable debt covenants. Specifically, the assets are restricted for installment payments due on certificates of participation or are maintained by a trustee as a reserve requirement for the certificates of participation. When both restricted and unrestricted resources are available for use, it is OCSD's policy to use restricted resources first, then unrestricted resources as they are needed. Compensated Absences OCSD's employees, other than operations and maintenance personnel, are granted vacation and sick leave in varying amounts with maximum accumulations of 200 hours and 560 hours for vacation and sick days earned but unused, respectively. Operations and maintenance personnel accrue between 80 and 220 personal leave hours per year depending on years of service. Personal leave can be accumulated up to a maximum of 440 hours. r Vacation and sick leave benefits and personal days are recorded as an expense and liability when earned by eligible employees. In determining the estimated sick leave liability at June 30 of each year, OCSD assumes that all employees' accumulated sick leave balances will ultimately be paid out at 35 percent of the ending balance. The distribution between current and long-term portions of r the liability is based on historical trends. Claims and Judgments OCSD records estimated losses, net of any insurance coverage under Its self-insurance program when it is probable that a claim liability has been incurred and when the amount of the loss can be reasonably estimated. Claims payable includes an estimate for incurred but unreported claims. r The distribution between current and long-term portions of the liability is based on historical trends. Property Taxes .+ The County is permitted by State law (Proposition 13) to levy taxes at one percent of full market value (at time of purchase) and can increase the assessed value no, more than two percent per year. OCSD receives a share of this basic levy, proportionate to what was received in the 1976 to 1978 period. r Property taxes attach as an enforceable lien on property as of January 1. Taxes are levied on July 1 and are payable in two installments which become delinquent after December 10 and April 10. 15 I : L ORANGE COUNTY SANITATION DISTRICT L Notes to Basic Financial Statements For the Year Ended June 30,2008 L The County bills and collects the property taxes and remits them to OCSD in installments during the year. Property tax revenues are recognized when levied to the extent that they are available to finance current operations. The Board of Directors has designated property tax revenue to be used for the annual debt service requirements prior to being used as funding for current operations. v Capital Facilities Capacity Charges Capital facilities capacity charges represent fees imposed at the time a structure is newly V connected to the District's system, directly or indirectly,or an existing structure or category of use is increased. This charge is to pay for District facilities in existence at the time the charge is imposed or to pay for new facilities to be constructed that are of benefit to the property being charged. L Capital Contributions Capital contributions consist of charges to certain special districts and agencies for their agreed- L upon share of additions to capital assets. Operating and Non-operating Revenues and Expenses L Operating revenues and expenses result from collecting, treating, and disposing of wastewater and inspection and permitting services. OCSD's operating revenues consist of charges to customers for the services provided. Operating expenses include the cost of providing these services, administrative expenses, and depreciation and amortization expenses. All revenues and expenses L not meeting these definitions and which are not capital in nature are reported as non-operating revenues and expenses. Construction Commitments L OCSD has active construction projects to add additional capacity, improve treatment, or replace/rehabilitate existing assets. At June 30, 2008, the outstanding commitments with L contractors totaled$424 million. Self-Insurance Plans i , For the year ended June 30, 2008, OCSD was self-insured for portions of workers' compensation, V property damage, and general liability. The self-insurance portion of the workers' compensation exposure is the$500,000 deductible per occurrence below the outside excess insurance coverage to $300 million. The self-insurance portion of the property damage exposure covering fire and L other perils is the $25,000 per occurrence deductible (for most perils) under the outside excess property insurance coverage to $1 billion. The self-insurance portion of the property damage exposure covering flood is the $100,000 per occurrence deductible with outside excess property insurance coverage to$300 million. OCSD is self-insured for virtually all property damage from the v peril of earthquake. The self-insurance portion of the boiler& machinery exposure is the deductible ranging from $26,000 to $350,000 under the outside excess boiler & machinery insurance coverage to$100 million per occurrence combined limit. The self-insurance portion of the general V liability exposure is the $250,000 per occurrence deductible ($500,000 for employment practices liability) under the outside excess liability coverage to $25 million per occurrence and aggregate. The self-insurance portion of the pollution liability exposure is the $100,000 per loss deductible under the outside pollution liability insurance coverage to $10 million. The significant changes in W insurance coverage during the fiscal year ended June 30, 2008 are as follows: • The excess insurance coverage for workers'compensation increased from $200 million to V $300 million. W 16 W ORANGE COUNTY SANITATION DISTRICT Notes to Basic Financial Statements For the Year Ended June 30,2008 During the past three fiscal years there have been no settlements in excess of covered amounts. Claims against OCSD are processed by outside insurance administrators. These claims are charged to claims expense based on amounts which will ultimately be paid. Claims incurred but not yet reported have been considered in determining the accrual for loss contingencies. OCSD management believes that there are no unrecorded claims as of June 30, 2008 that would materially affect the financial position of OCSD. Deferred Compensation Plan OCSD offers its employees a deferred compensation plan established in accordance with Internal Revenue Code Section 457. The plan permits all employees of OCSD to defer a portion of their salary until future years. The amount deferred is not available to employees until termination, retirement, death or for unforeseeable emergency. The assets of the plan are held in trust for the exclusive benefit of the participants and their beneficiaries. Since the plan assets are administered by an outside party and are not subject to the claims of OCSD's general creditors, in accordance with GASB Statement 32, the plan's assets and liabilities are not included within OCSD's financial statements. .. Pension Accounting OCSD has two pension programs: a pension plan and additional retirement benefit account (ARBA). The pension plan, which is administered by the Orange County Employees' Retirement System (OCERS), has been reported since GASB Statement No. 27, 'Accounting for Pensions by State and Local Governmental Employers" was established. The ARBA plan has been administered by OCERS in the past; in the current fiscal year it was brought in-house and is now directly administered by OCSD. Since an actuarial study has assigned a value to the liabilities of s the program, the ARBA benefit is row recognized on OCSD's statements and reported in note 7. OPEB Accountinc OCSD adopted GASS Statement No. 45, Accounting and Financial Reporting by Employers for Postemployment Benefits Other Than Pensions." Issued in June 2004, this statement addresses how state and local governments should account for and report their costs and obligations related to postemployment healthcare and other nonpension benefits, collectively referred to as other postemployment benefits (OPEB). The statement generally requires that state and local governmental employers account for and report the annual cost of OPEB and the outstanding obligations and commitments related to OPEB in essentially the same manner as they currently do for pensions. OCSD adopted Statement 45 as a 'Phase I Agency", required to implement for the fiscal year beginning July 1, 2007. (2) Cash and Investments Cash and investments as of June 30, 2008 are classified within the accompanying Statement of .. Net Assets as follows: r 17 r ORANGE COUNTY SANITATION DISTRICT I Notes to Basic Financial Statements L For the Year Ended June 30, 2008 L Statement of Net Assets: Current, Unrestricted: Cash and cash equivalents $ 104,012,814 L; Investments 330,161,649 Subtotal -current, unrestricted 434,174,463 Restricted: Cash and cash equivalents 50,737,114 I" Investments 47,829,179 Subtotal -restricted 98,566,293 L Total cash and cash equivalents and investments $532,7 00,756 Cash and investments consist of the following as of June 30, 2008: I Ir Cash on hand $ 2,0W Deposits with financial institutions 3,209,284 Investments 430,963,179 L Monies held by trustees: Investments $50,737,114 Investment contracts 47,829,179 L Subtotal -monies held by trustees 98,566,293 Grand total cash and investments $ 532 740,756 L Investments Authorized by the California Government Code and OCSD's Investment Policy The table below identifies the investment types that are authorized by the California Government Code and OCSO's investment policy. The table also identifies certain provisions of either the California Government Code or OCSD's investment policy (whichever is more restrictive) that L address interest rate risk, credit risk, and concentration of credit risk. A separate table addresses investments of debt proceeds that are held by trustees. Those I investments are governed by the provisions of the debt agreements rather than the general LW of the California Govemment Code or OCSD's investment policy. L+ V L L L 18 L ORANGE COUNTY SANITATION DISTRICT Notes to Basic Financial Statements For the Year Ended June 30,2008 Authorized Maximum by OCSD's Maximum Investment Investment Type-Authorized by the Investment Maximum Percentage in Single California Government Code Policy? Maturity ln(3) of Portfolio(1) Issuer(1) Local Agency Bonds Yes 5years None None U.S.Treasury Obligations Yes 5 years None None California State TreasuryObligations g ations Yes 5 years None None U.S.Agency Securities Yes 5 years None None Banker's Acceptances Yes 180 days 40% 30% Commercial Paper Yes 270 days/31 days 15%125% 10% Negotiable Certificates of Deposit Yes 5 years 30aA None Repurchase Agreements Yes 1 year None None Reverse Repurchase Agreements Yes 90 days al 5%p) None Corporate Medum-Teml Notes Yes 5 years 30% None Mutual Funds Yes N/A 15%(2) 10% Money Market Mutual Funds Yes N/A 15%(2) None Mortgage Pass-Through Securitles/CMO Yes 5 years 20% None County Investment Pools Yes N/A None None Local Agency Investment Fund(LAIF) Yes N/A None None r Notes (1)Restrictions are in accordance with the Calitomia Govemment Code unless indicated othermse. r (2)The resinction is in accordance with 0050's Imostmerd Policy whits is more restrictive Nan the California Government Code. (3)As allowed by California Gmemmem Code Section 536()1,the Board!of Dimcbms has adopted a policy of no madmum maturity for investments purchased by OCSD's exlemal money manager for the tong-tern investment portfolio. Nome er.the duration of the long-term investment pomoho can never exceed so months. Investments purchased for Me shod-tetm portfolio are r subject to the maturity restrictions noted in this table. Investments Authorized by Debt Agreements r The investment of debt proceeds held by trustees is governed by provisions of the debt agreements, rather than the general provisions of the California Government Code on OCSD's investment policy. The table below identifies the investment types that are authorized for investments held by OCSD's trustees. The table also identifies certain provisions of these debt agreements that address interest rate risk, credit risk, and concentration of credit risk. 19 L ORANGE COUNTY SANITATION DISTRICT Notes to Basic Financial Statements For the Year Ended June 30,2008 L Maximum Maximum Investment Investment Type -Authorized by the Maximum Percentage in a Single L California Government Code Maturity of Portfolio Issuer State and Local Agency Bonds 5 years None None U.S. Treasury Obligations 5years None None L U.S. Agency Securities 5 years None None Bankefs Ameptances 180 days 40% 10% Commercial Paper 270 days/31 days 15%/30% 10% Negotiable Certificates of Deposit 5 years 30% 10% Repurchase Agreements tyear None None Corporate Medium-Term Notes 5 years 30% None Mutual Funds N/A 20% 10% Money Market Mutual Funds WA 20% None Local Agency Investment Fund (LAIF) WA None None L Guaranteed Investment Contracts N/A None None Disclosures Relatina to Interest Rate Risk L Interest rate risk is the risk that changes in market interest rates will adversely affect the fair value of an Investment. Generally, the longer an investment has before maturity, the greater the sensitivity of its fair value to changes in market interest rates. One of the ways that OCSO L manages its exposure to interest rate risk is by purchasing a combination of shorter term and longer term investments and by timing cash flows from maturities so that a portion of the portfolio is maturing or coming close to maturity evenly over time, as necessary to provide the cash Flow and liquidity needed for operations. L OCSD monitors the interest rate risk inherent in its managed portfolio by measuring the modified duration of Its portfolio. The duration of monies held for shorter term purposes is recommended by L OCSD's Treasurer and is based on OCSD's cash flow requirements in meeting current operating and capital needs. The average duration of monies invested for shorter term purposes may never exceed 180 days. The duration of monies held for longer term purposes is recommended annually by OCSD's Treasurer and is based on OCSD's five-year cash Flow forecast. The average duration may not exceed 120 percent nor be less than 80 percent of the recommended duration. The average duration of monies Invested for longer term purposes may never exceed 80 months.There is no stated maturity for the Money Market Mutual Funds. Following is a table which summarizes OCSD's investments by purpose with the modified duration. Ir L L L L 20 L ORANGE COUNTY SANITATION DISTRICT Notes to Basic Financial Statements For the Year Ended June 30,2008 Modified Modified Duration Duration Investment Type Fair Value in ears in months Short-Term Portfolio: U.S.Treasury Bills $ 7,262.825 0.121 1.47 U.S.Agency Securities 55,445,452 0.253 3.08 Commercial Paper 12,461,899 0.058 0.71 Corporate Medium-Term Notes 3.474,048 0.442 5.38 Negotiable Certificates of Deposit 3,500,000 0.210 2.56 Repurchase Agreements 15,700,000 - - Money Market Mutual Funds 116,265 0.083 1.01 Short-term portfolio subtotal $ 97,960,489 0.761 9.26 Long-Term Portfolio: U.S.Treasury Notes $ 56,992,380 2.241 27.27 U.S.Agency Securities 177,253.171 3.383 41.16 d U.S. Govt. Backed Mortgage Pools 869,787 3.658 44.51 Commercial Paper 4,780,667 0.042 0.51 Corporate Medium-Term Notes 66,297,290 2.162 26.30 .,, Money Market Mutual Funds 354,139 0.083 1.01 Mortgage Pass-Through Securities/CMO 4,696.419 1.204 14.65 Long-term portfolio subtotal $ 311,243,853 2.901 35.30 r OCSD monkas the interest rate risk inherent in its other investments using specific identification of the investments. Following is a table of these investments as of fiscal year end. Fair Value Maturities Investments hell by fiscal agents: Money Market Mutual Funds: Fidelity Treasury Class 111 Fund 696 $ 2,517,905 WA First American Treasury Obligation 998,821 WA Blackrock Institutional Funds 19,370,367 N/A GS Financial Square Treasury Obligations 45,541 N/A Blackrock Institutional T-Fund 429 WA Blackrock Institutional T-Fund 20,021,082 N/A a+ First American Government Obligation 7,782,969 N/A Guaranteed Investment Agreements: AIG- 1993 COP 2,690,000 July 14, 2018 ..� Bayedsche Landesbank Girozentrale-2000 COP 17,311,427 August 1,2016 MBIA Inc. -2006 COP 18,309,752 February 1,2036 FSA Capital Management Services LLC-2007A COP 9,518,000 January 30, 2030 Loral Agency Investment Fund (LAIF) 17,992,592 212 day average Fair Value of Other Investments $ 116,558,885 21 L ORANGE COUNTY SANITATION DISTRICT L Notes to Basic Financial Statements For the Year Ended June 30, 2008 L Investments with Fair Values Highly Sensitive to Interest Rate Fluctuations OCSD's investments (including investments held by trustees)include the following investments that are highly sensitive to interest rate Fluctuations (to a greater degree than already indicated in the L information provided above): • Mortgage-backed securities: These securities are subject to early payment in a period of L declining interest rates. The resulting reduction in expected total cash flows affects the fair value of these securities, making them highly sensitive to change in interest rates. At fiscal year end,the fair value of investments in mortgage-backed securities totaled$43,527,568. L Disclosures Relatino to Credit Risk Generally, credit risk is the risk that an issuer of an investment will not fulfill its obligation to the y holder of the investment. This is measured by the assignment of a rating by a nationally recognized statistical rating organization. The following table presents the minimum rating as required by the California Government Code, OCSD's investment policy, or debt agreements, and the actual rating as of year-end for each investment type: L L L L LI L 1 L+ L L L L L ORANGE COUNTY SANITATION DISTRICT Notes to Basic Financial Statements For the Year Ended June 30,2008 Investment Type and the Lowest Rating Reported at Year End Fair Value Investments with no legal minimum rating&no required disclosure: U.S.Treasury Obligations $ 68.021,450 ,r U.S.Agency Securities-GNMA 869,787 Subtotal $ 68.891,237 Investments with no legal minimum rating: U.S.Agency Securities(other than GNMA): Rating of AAA(Filch) 82.206.032 Rating of AGY(Standard &Pooes) 150,492.591 Negotiable Certificates of Deposit se Not rated at fiscal year end 3.500,000 Repurchase Agreements: Not rated at fiscal year end 15,700,000 r Local Agency Investment Fund (LAIF): Not rated at fiscal year end 17,992,592 Investments with fiscal agents-Guaranteed Investment Contracts: Not rated at fiscal year end 47,829,179 Subtotal 317.720,394 Investments with a legal minimum rating(or its equivalent)of A: Commercial Paper. Rating of A-1 (Standard&Poor's) 3.795,783 Rating of P-1 (Moody) 13,446,783 Corporate Medium-Tenn Notes: Rating of A+(Standard&Poor's) 8,047,465 Rating of A(Standard&Pooes) 10.749,798 Rating of At (Moody) 1,166,244 Rating of A2(Moody) 8,790,018 Rating of AA+(Standard&Pooes) 826.200 Rating of AA-(Fitch) 8,166.837 Rating of AA(Fitch) 4.679,603 Rating of AA2(Moody) 6.191,278 Rating of AA3(Moody) 12,743,487 Rating of AAA(Standard&Poor's) 4,452,D05 Rating of BAA1 (Moody)* 1266,989 Rating of BBB(Standard&Poofsr 897.606 Rating of BBB-(Standard&Pooes)* 1.793,808 Money Market Mutual Funds: Rating of AAA(Standard&Poots) 470,404 Invested with fiscal agents: Rating of Aaa(Moody) 50,737,114 Not rated at fiscal year end .. Subtotal 138.221,422 Investments with a legal minimum rating for its equivalent)of AA: Mortgage Pass-Through Securities/CMO: r Rating of AAA(Standard&Poor's) 726,813 Rating of AGY(Standard&Pooes) 3,969.606 Not rated at fiscal year end - Subtotal 4,696.419 r Total $529.529,472 Invesment was in compliance with legal requmMents at the time it was purchased 23 L ORANGE COUNTY SANITATION DISTRICT L Notes to Basic Financial Statements For the Year Ended June 30, 2008 L Concentration of Credit Risk Limitations on the amount that OCSD is allowed to invest in any one issuer have been identifed y previously in the section, 'Investments Authorized by the California Government Code and OCSD's Investment Policy' and in the section, 'Investments Authorized by Debt Agreements.' OCSD follows whichever guideline is the most restrictive. As of fiscal year end, OCSD has investments in L the following types of securities, each of which represents more than 5 percent of OCSD's investments: Federal Home Loan Bank(U.S.Agency Securities),totaling$56,319,421 L • Federal Home Loan Mortgage Corporation(U.S.Agency Securities),totaling$72.764,762 Federal National Mortgage Association (U.S.Agency Securities),totaling$103,297.068 Custodial Credit Risk L Custodial credit risk for deposits is the risk that in the event of the failure of a depository financial L institution, a government will not be able to recover its deposits or will not be able to recover collateral securities that are in the possession of an outside party. The California Government Code and OCSD's investment policy contain legal requirements that limit the exposure to custodial credit risk for deposits as follows: a financial institution must secure deposits made by state or I local governmental units by pledging securities in an undivided collateral pool held by a depository y regulated under state law (unless so waived by the governmental unit). The market value of the pledged securities in the collateral pool must equal at least 110% of the total amount deposited by the public agencies. California law also allows financial institutions to secure deposits by pledging first trust deed mortgage notes having a value of 150% of the secured public deposits. Custodial credit risk for investments is the risk that in the event of the failure of the counterparty (e.g., broker-dealer) to a transaction, a government will not be able to recover the value of its investment or collateral securities that are in the possession of another parry. The California Government Code and OCSD's investment policy do not contain legal or policy requirements that would limit the exposure to custodial credit risk for investments. V As of June 30, 2008, OCSD's investments in the following investment types were held by the fiscal agent's safekeeping department of the broker-dealer(counterparty)used to buy the securities. Money market mutual funds $ 50,737,114 `. Guaranteed investment contracts 47,829,179 Total 598.E 223 L Investment in State Investment Pool OCSD is a voluntary participant in the Local Agency Investment Fund (LAIF) that is regulated by California Government Code Section 16429 under the oversight of the Treasurer of the State of California. The fair value of OCSD's investment in this pool is reported in the accompanying financial statements at amounts based upon OCSD's pro-rata share of the fair value provided by LAW for the entire LAW portfolio (in relation to the amortized cost of that portfolio). The balance V available for withdrawal is based on the accounting records maintained by IAIF, which are recorded on an amortized cost basis. Included in LAIF's investment portfolio are mortgage-backed securities, other asset-backed securities, loans to certain state funds, securities with interest rates L that vary according to changes in rates greater than a one-tor-one basis,and structured notes. L 24 L ORANGE COUNTY SANITATION DISTRICT Notes to Basic Financial Statements For the Year Ended June 30, 2008 r (3) Capital Assets Capital asset activity for the year ended June 30,2008 is as follows: r Balance at Balance at June 30,2007 Additions Deletions June 30,2008 Capital assets not depreciated: r Cost: Land If 13,021,400 $ - $ - It 13,021,480 Construction In progress 803,679,056 275,529.104 (141.722.348) 937,486,712 r Total nondepreciable assets 816,701,438 275.5294104 (141,722,348) 950,508.192 Depreciable capital assets: Cost Sewage collection facilities 503,914,944 9.674.711 - 513,609,655 r Sewage treatment facll9les 764,870,945 109.904.220 - 874.865,165 Effluent disposal facilities 97,014.520 - - 97,014,820 Solids disposal facilities 3,W4,494 388,742 3,483,236 General and administrative facilities 173218.585 21,854,878 (241,257) 194.642.004 Excess purchase price over book value on acquired assets 19,979,000 - - 19.979.000 Subtotal 1.662.072.788 141,722,349 (241,257) 1.703.553.800 r Accumulated depreciation: Sewage collection facilities (202,457,199) (8,588,753) - (212,025,952) Sewage treatment facilities (413,492,082) (24,476,784) - (437,esa.m) Effluent disposal facilities (44,690,679) (2,384.536) - (47,075,215) r Solids disposal facilities (3.074,493) (4,012) - (3,078.505) General and administrative facilities (99,626,563) (10,675,182) 240,991 (110,000.754) Excess purchase price over book value on acquired assets (13,811,889) (e57,709) - (14,489.598) Subtotal (777.152.885) (47,766,956) 240,991 824,678,850 Net depreciable assets 784.919.903 93.955,393 (266) 878,875.030 sr Net capital assets $ 1,601,621,339 $ 369,484,497 $ (141,]22,614) $ 1,829,353,222 (4) Lono-Term Liabilities The following is a summary of the changes in long-term liabilities for the year ended June 30, 2008: Certificates ,r Arbitrage Comilsnsated Claims and of Net Pension Net OPEB Payable Absences Judgments Parlicipafion Obligation Obligation Totals Balance,July $ 340,100 $ 5.885,818 $ 1.025,195 $ 801,785,000 $ 5,493,378 $ - $ 814.529,491 Additions 663,300 6,059,694 1.631,080 377,185,000 657,552 941.961 387,118,587 Oelellons (307,900) (5,514,416) (380,888) (96,530,000) (230,330) (601,084) (103.564.616) Balance,June 30 695,500 6,431.095 2,275.389 1.082.420,000 5,920,600 340,877 1,098,083,482 Due whin one year 239,900 5,741,602 284.010 21.455.000 27,720,592 Unamortized discount (premium) - (13,629.542) Unamortized deferred amount on refundings - - 15,138,652 - - 15.138.852 Long-Term amount 8 455,600 $ 689,414 $ 1,991,379 $ 1,059,455,690 8 5,920,600 $ 3/0,877 $ 1,068,853,560 25 r L ORANGE COUNTY SANITATION DISTRICT Notes to Basic Financial Statements For the Year Ended June 30, 2008 I Lr Arbitrage Payable The Tax Reform Act of 1986 (the Act) requires OCSD to calculate and remit rebatable arbitrage earnings to the Internal Revenue Service. Certain of OCSD's debt and interest earnings on the proceeds thereof are subject to the requirements of the Act. OCSD's liability at June 30, 2008 is $455.600 for future years'remittances. Comoensated Absences OCSD's policies related to compensated absences are described in Note 1. OCSD's liability at June 30, 2008 is $6,431,095 with an estimated $5,741,682 to be paid or used within the next fiscal L year. Claims and Judgments Payable OCSD is self-insured in a number of areas as described in Note 1. The following is a summary of low the claims and judgments payable as of June 30, 2008 and 2007: 2007-08 2DO6.07 L Claim s and judgments payable at July 1 $1,025,195 $1.379.850 Claims incurred during the fiscal year 87,463 222,771 Adjustments to the prior year 1,543,617 (278,374) L Payments on claims during the fiscal year (380,886) 299.052 Claims and judgments payable at Ju ne 30 2.275.389 1.025,195 Less: current portion (284,010) (340.480 L Total long-term claims and judgments payable $1,991.379 $ 684,715 i Certificates of Participation OCSD issues certificates of participation in order to finance construction of the treatment facilities. Each certificate of participation represents a direct and proportionate interest in the semi-annual interest payments. Installment payments for the issues are payable from any source of lawfully available funds of OCSD. Certificates of participation at June 30, 2008 are summarized as follows: Amount I 1993 refunding certificates of participation $ 26,900.000 Ir 2000 refunding certificates of participation 196,600,000 2003 certificates of participation 191,500,000 2006 certificates of participation 196,600,000 L 2007A refunding certificates of participation 93,655,000 2007B certificates of participation 300,000,000 2008A refunding certificates of participation 77,165,000 L Total certificates of participation payable $ 1,082,420,000 L Outstanding Certificates of Participation All of the outstanding debt of OCSD is senior lien debt with rate covenants that require a L minimum coverage ratio of 1.25. The minimum coverage ratio is the ratio of net annual revenues available for debt service requirements to total annual debt service requirements. As of June 30, 2008, the coverage ratio for senior lien debt was 3.25. L 26 L ORANGE COUNTY SANITATION DISTRICT Notes to Basic Financial Statements For the Year Ended June 30,2008 September 1993 Refundina Certificates of Participation On September 2, 1993, OCSD completed the sale of $46,000,000 of refunding certificates of participation. The certificates were issued to refund $39,740,000 of the outstanding principal balance of the 1990-92 Series B certificates of participation. The interest rate on the refunding certificates is adjusted by the remarketing agent daily based on market Interest rates. The weighted average interest rate for the fiscal year ended June 30, 2008 was 3.53 percent. On September 1, 1993, OCSD and a brokerage company entered into an Interest rate exchange swap agreement (Note 5). Annual principal payments are due on August 1, beginning August 1, 1995. The trust agreement for the certificates requires the establishment of a reserve which was funded from certificate proceeds. The June 30, 2008 reserve of $2,690,000 is held by the r trustee,JPMorgan, and meets the reserve requirement. August 2000 Refunding Certificates of Participation On August 31, 2000, OCSD completed the sale of $218,600,000 of refunding certificates of participation. The certificates were issued to refund the remaining outstanding principal balance of the 1990-92 Series A, B, and C certificates of participation and to reimburse OCSD for improvements made to the wastewater system. The interest rate on the refunding certificates is adjusted by the remarketing agent daily based on market interest rates. The weighted average interest rate for the fiscal year ended June 30, �+ 2008 was 2.72 percent. Annual principal payments are due on August 1, beginning August 1, 2001. .. The trust agreement for the certificates requires the establishment of a reserve which was funded from certificate proceeds. The June 30, 2008 reserve of $18,055,366 is held by US Bank,the trustee, and meets the reserve requirement. r August 2003 Certificates of Participation On August 26, 2003, OCSD completed the sale of$280,000,000 of certificates of participation. The certificates were Issued to finance and to reimburse OCSD for the acquisition, .. construction, and installation of additional improvements made to the wastewater system. The interest rate on the certificates is fixed and ranges from 5.00 percent to 5.25 percent. Annual principal payments are due on February 1, beginning February 1,2021. The trust agreement for the certificates requires the establishment of a reserve which was funded from certificate proceeds. The June 30, 2008 reserve of$19,369,619 is held by Union Bank,the trustee, and meets the reserve requirement. r March 2006 Certificates of Participation On March 8, 2006, OCSD completed the sale of$200,000,000 of certificates of participation. �+ The certificates were issued to finance and to reimburse OCSD for the acquisition, construction, and installation of additional improvements made to the wastewater system. The interest rate on the refunding certificates is adjusted by the remarketing agent daily based on market interest rates. The weighted average interest rate for the fiscal year ended June 30, 2008 was 2.74 percent. Annual principal payments are due on February 1, beginning February 1, 2022. 27 L ORANGE COUNTY SANITATION DISTRICT L Notes to Basic Financial Statements For the Year Ended June 30, 2008 L The trust agreement for the certificates requires the establishment of a reserve which was funded from certificate proceeds. The June 30, 2008 reserve of $18,309,753 is held by Deutsche Bank,the trustee,and meets the reserve requirement. V May 2007 Certificates of Participation On May 22. 2007, OCSD completed the sale of $95,180,000 of refunding certificates of V participation. The certificates were issued to refund $88,500,000 of the outstanding principal balance of the 2003 Series certificates of participation (see above) . The interest rate on the refunding certificates is fixed and ranges from 4.00 percent to 4.5 percent. Annual principal payments are due on February 1, beginning February 1, 2008. i.. The trust agreement for the certificates requires the establishment of a reserve which was funded from certificate proceeds. The June 30, 2008 reserve of$9,518,014 is held by Union L Bank, the trustee, and meets the reserve requirement. December 2007 Certificates of Participation L On December 20, 2007, OCSD completed the sale of $300,000,000 of certificates of participation. The certificates were issued to finance and to reimburse OCSD for the acquisition, construction, and installation of additional improvements made to the wastewater i system. The interest rate on the refunding certificates is fixed and ranges from 4.00 percent to Li 5.25 percent. Annual principal payments are due on February 1, beginning February 1, 2008. The trust agreement for the certificates requires the establishment of a reserve which was V funded from certificate proceeds. The June 30, 2008 reserve of$19,982,813 is held by Union Bank, the trustee, and meets the reserve requirement. May 2008 Certificates of Participation On May 29, 2008, OCSD completed the sale of $77,165,000 of refunding certificates of participation. The certificates were issued to refund the $85,505,000 outstanding principal balance of the 1992 Series certificates of participation. The interest rate on the refunding �+ certificates is fixed and ranges from 2.95 percent to 4.0 percent. Annual principal payments are due on February 1, beginning February 1, 2009. The aggregate difference in debt service between the refunding debt and the refunded debt is a positive amount of approximately $6.3 million. The total future payments for the new debt provides a net present value loss of approximately $1.0 million to refund the old debt in payments. The trust agreement for the certificates requires the establishment of a reserve i.. which was funded from certificate proceeds. The June 30, 2008 reserve of$7,716,500 is held by US Bank, the trustee, and meets the reserve requirement. Annual Amortization Reouirements The annual requirements to amortize all debt related to certificates of participation as of June 30, 2008, are as follows: v 28 u ORANGE COUNTY SANITATION DISTRICT r Notes to Basic Financial Statements For the Year Ended June 30,2008 r Estimated Year Interest Rate Ending Estimated Swaps, Net June 30, Principal Interest (See Note 5) Total 2009 $ 21,455,000 $ 37.379,800 $ (117.755) $ 58,717,045 2010 21,540,000 36.559,822 (117,095) 57,982,727 2011 22,455,000 35,693.097 (116.435) 58,031,662 2012 23,065,000 35,087,525 (115,775) 58,036,750 2013 24,090,000 34,444,312 (114.913) 58,419,399 r 2014-2018 159,020,000 158,052,381 (241.450) 316,830.931 2019-2023 176.660,000 137,565,749 - 314,225,749 2024-2028 212,460,000 103,349,842 - 316,809,842 r 2029-2033 300.120,000 56,904,524 - 357,024.524 2034-2037 121,555,000 8.T74.730 130,M730 Total $ 1,082,420,000 $643.811.782 $ (823,423) $ 1.725,408,359 r (5) Interest Rate Swaps on Certificates of Participation r As indicated in Note 4, OCSO has entered into an interest rate swap agreement in connection with the 1993 Refunding Certificates of Participation. r Objective: The objective of the Interest rate swap is to lower OCSD's borrowing costs when compared against fixed-rate bonds at the time of issuance. The swap effectively changes OCSD's variable interest rate to a synthetic fixed rate of 4.56 percent on the 1993 Refunding Certificates of Participation. r 1993 Refunding Certificates of Participation Terms of the Swap: On September 1, 1993, OCSD and a brokerage company entered into an .+ interest rate exchange swap agreement pursuant to which OCSD will pay a fixed interest rate of 4.56 percent. OCSD will receive a variable interest rate equal to the interest paid to the holders of the certificates which is based on a tax exempt daily interest rate as determined by the remarketing agent on an initial notional amount of $46,000,000. The notional value of the swap declines in tandem with the principal amount of the associated debt. This interest rate swap agreement is accounted for as a hedge, and the associated interest rate differential to be paid or received is charged to interest expense as interest rates change. The 22-year swap agreement matures on August 1, 2016. Fair Value: Because interest rates have declined since execution of the swap agreement, the swap had an estimated negative fair value of $2.86 million as of June 30, 2008. Because the '+ variable-rate certificates adjust to changing interest rates, the certificates do not have a corresponding fair value increase. The fair value was estimated using the zero-coupon method. This method calculates the future net settlement payments required by the swap, assuming that ,. the current forward rates implied by the yield curve correctly anticipate future spot interest rates. These payments are then discounted using the spot rates implied by the current yield curve for hypothetical zero coupon bonds due on the date of each future net settlement on the swap. !' Credit Risk: As of June 30, 2008. OCSD was not exposed to credit risk because the swap had a negative fair value. However, should interest rates change, and the fair value of the swap become positive, OCSD would be exposed to credit risk in the amount of the swap's fair value. The swap's r 29 ORANGE COUNTY SANITATION DISTRICT Notes to Basic Financial Statements For the Year Ended June 30, 2008 L counterparty, Societe Generale Bank, was rated AA- by Standard & Pools and Aa2 by Moodys Investors Service as of June 30, 2008. To mitigate the potential for credit risk, it the counterpartys - credit quality falls below AA- by Standard & Poor's or Aa3 by Moodys Investors Service, the fair value of the swap (if the swap has a positive fair value)will be collateralized by the counterparty as L follows: 1) with securities issued or guaranteed by the United States Government equaling 106 percent of the fair value, or 2) with securities issued by the Federal Home Loan Mortgage Corporation, the Federal National Mortgage Association, or the Government National Mortgage 61 Association equaling 108 percent of the fair value, or 3) other securities to be agreed upon and in an amount to be agreed upon by OCSD, the counterparty, and the Swap Insurer. The collateral would be held by a third-party custodian. I Basis Risk: The swap does not expose OCSD to basis risk because the variable-rate interest paid Ir to the certificate holders is equal to the variable-rate interest earned on the notional amount of the swap. Termination Risk: OCSD or the counterparty may terminate the swap if the other party fails to perform under the terms of the contract. In the event of termination due to default, the defaulting i party will pay to the non-defaulting party the excess (if any) of the sum of the settlement amount 6+ and the unpaid amounts owed less the unpaid amounts due from the non-defaulting parry. The swap may be terminated by OCSD if the counterpartys credit quality rating falls below AA- by Standard & Poor's or Aa3 by Moodys Investors Service. If the swap is terminated, the variable- y rate certificates of participation would no longer carry a synthetic interest rate. (6) Net Assets i The difference between assets and liabilities is reported as net assets. Net assets are classed as L, restricted, unrestricted, or invested in capital assets, net of related debt. Net assets at June 30, 2008 consisted of the following: r June 30, 2008 Invested in capital assets, net of related debt: Capital assets, net of accumulated depreciation $ 1,829,383,222 Outstanding debt issued to acquire capital assets, net of: unamortized bond discount, deferred amount on refundings, and unspent proceeds (985,268,625) Unamortized deferred charges of debt issued to acquire capital assets 8,269,966 r Subtotal 852,384,563 Restricted by debt covenants for debt service on certificates of participation 3,311,187 v Unrestricted 420,291,536 Total Net Assets $ 1,275,967,286 I (7) Pension Benefits IL OCSD has two pension plans for retirees: a defined benefit pension plan maintained through and L+ by the Orange County Employees' Retirement System(OCERS)and the Additional Retiree Benefit Account(ARBA)administered directly by OCSD. 30 L ORANGE COUNTY SANITATION DISTRICT r Notes to Basic Financial Statements For the Year Ended June 30,2008 Pension Plan OCSD participates in the Orange County Employee's Retirement System (OCERS), a cost-sharing r multiple-employer, defined benefit pension plan which is governed and administered by a nine member Board of Retirement. OCERS was established in 1945 under the provisions of the County Employees Retirement Law of 1937, and provides members with retirement, death, disability, and r cost-of-living benefits. OCERS issues a stand-alone comprehensive annual financial report which can be obtained from OCERS at 2223 Wellington Avenue, Santa Ana, California 92701. Benefits: All OCSD employees except for interns participate in OCERS. Employees who retire at .+ or after age 50 with ten or more years of service are entitled to an annual retirement allowance. The amount of the retirement allowance is based upon the member's age at retirement, the member's "final compensation" as defined in Section 31462 of the Retirement Law of 1937, the total years of service under OCERS,and the employee's classification as a Tier I or Tier II member. Benefits full vest on reaching five y g years of service. OCERS also provides death and disability benefits. r Contributions: As a condition of participation under the provisions of the County Employees Retirement Law of 1937, members are required to contribute a percentage of their annual compensation to OCERS. Tier I and Tier II covered employees are required to contribute 9.72% - 14.14% and 9.30% - 14.14%, respectively, of their annual compensation to OCERS. OCSD is required to make periodic contributions to OCERS in amounts that are estimated to remain a constant percentage of covered employees'compensation such that, when combined with covered employees' contributions, will fully provide for all covered employees' benefits by the time they ,r retire. For the fiscal years ended June 30,2008,2007, and 2006, the required contribution equaled the contribution actually made. Required contributions,which are actuarially determined,are set by OCERS. The following table provides salary and contributions requirements for the two previous fiscal years and the current year. ,r For the Fiscal Year Ending June 30.2006 June 30.2007 June 30, 2008 Total Payroll Costs $ 51,589,226 $ 53,175,199 $ 56.671.683 Payroll Costs of Employees Covered by OCERS 48,761,087 49,788,835 53,576,940 r Contributions Requirements: Contributed by Employees 3,095.591 3,513,302 3,753,147 Contributed by the District on Behalf of Employees 1,717,959 1,732,296 1851089 �+ Total Employee Required Contribution 4,813,550 5,245,598 5.604,236 District Required Contribution 7,416,556 9,848,854 11011693 Total Contribution $ 12,230.106 $ 15,094,452 $ 16.615.929 r Total Actual Contribution as a Percent of Required Contribution 100.00% 100.00% 100.00% r Employee Required Contribution as a Percent of Covered Payroll 9.87% 10.54% 10.46% District Required Contribution as a Percent of Covered Payroll 15.21% 19.78% 20.55% Total Contribution as a Percent of all Participating Entides'Contributions 5.98% 5.51% ( 1 31 r L ORANGE COUNTY SANITATION DISTRICT L Notes to Basic Financial Statements For the Year Ended June 30, 2008 L Additional Retiree Benefit Account(ARBAI The OCSD AREA plan is a single-employer defined benefit plan which was administered by OCERS unfil February 29, 2008, when OCSD began direct administration. This benefit was established by the OCSD Board of Directors on October 25, 1992. It provides a monthly payment to retirees towards the premium costs of health insurance for the retiree and eligible dependents. L, The retiree is not required to use this amount for health insurance premium or to remain on the OCSD medical plan. The plan is currently paying benefits to 113 retirees. The plan is included in OCSD's financial statements;stand-alone financial statements are not issued for the plan. Benefits: Employees who refire receive $10 per month for every year of service up to a maximum of 25 years, or $250 per month. This amount is independent of salary and is fixed at retirement. Because the District cannot ensure the use of the benefit for payment of eligible health insurance expenditures, the benefit is taxable to the retiree. Survivor benefits are provided in the event that a retiree pre-deceases his/her spouse. For retirees hired prior to July 1, 1988,OCSD provides health insurance for coverage for 2% months per year of service. AREA benefits begin immediately after this benefit ends. For those hired on or after July 1, 1988, ARBA benefits begin immediately upon 1r retirement and continue for life. Funding: There are no employee contributions for this plan; OCSD covers 100% of the cost. An L actuarial evaluation was performed as of June 30, 2007, using the Projected Unit Credit Cost method. This method represents the present value of benefits earned to date assuming that an employee eams benefits ratably over his/her career. An investment rate of return of 6.0% per year was used, and no cost of living or salary adjustment was used due to the flat dollar nature of the v benefit. The unfunded actuarial liability was amortized on a level dollar basis over 30 years. OCSD utilizes a pay-as-you-go method for funding the plan. L The annual pension cost and net pension obligation for the year ended June 30, 2006, 2007 and 2008 were as follows. For the Fiscal Year Ending L June 30,2006 June 30, 2007 June 30, 2008 Annual required contribution $ 710,336 $ 727.037 $ 727,037 Interest on net pension obligation 277,493 303.663 329,603 L Adjustment to annual required contribution (335,993) (367,680) 399,088 Annual pension cost 651,836 663,020 657,552 Contributions made (215.670) (230,698) 230,330 L Increase in net pension obligation 436,166 432,322 427,222 Net pension obligation, beginning of year 4,624,890 5,061,056 5,493,378 Net pension obligation, end of year $ 5,061,056 S 5,493,378 $ 5,920,600 L (8) Other Postemolovment Benefits OCSD offers medical insurance to active and retired employees, as well as their qualified L, dependents. This is a single-employer defined benefit plan administered by OCSD. All retirees may choose coverage in an OCSD medical plan, with retirees paying the full premium. However, for employees hired prior to July 1, 1988, medical benefits begin immediately at retirement with OCSD paying 2.6 months of premium for each year of continuous service toward the cost of 6' coverage under OCSD medical plans. At the termination of this period the retiree may elect to continue coverage at his/her own expense. This plan was established and may be modified only by L 32 64 ORANGE COUNTY SANITATION DISTRICT Notes to Basic Financial Statements For the Year Ended June 30, 2008 action of the OCSD Board of Directors. The plan is included in the OCSD financial statements; stand-alone financial statements are not issued. As of the date of the actuarial valuation, there were 585 active employees, 158 retirees paying premiums, and 44 retirees whose premium is fully paid by OCSD. Premiums ranged between $322.69 and$1,587.96 per month, depending on the plan and number of dependents covered. Funding Policy: OCSD funds the plan on a pay-as-you-go basis. For fiscal year 2007-08. OCSD contributed$601.084 and retirees contributed $209,702 to cover current year expenditures. r Annual OPEB Cost and Nei OPEB Obligation: The annual OPEB cost is calculated based on the annual required contribution of the employer (ARC), an amount actuarially determined in accordance with the parameters of GASS Statement 45. The ARC represents a level of funding that, if paid on an ongoing basis, is projected to cover normal cost each year and amortize the r unfunded actuarial liabilities over 30 years. The following OPEB cost and net OPEB obligation was determined for the year ended June 1, _ 2008: Net OPES obligation as of June 30, 2007 $ - Annual OPEB cost for the fiscal year ended June 30, 2008 941,961 Contributions made in the fiscal year ended 601,084 Net OPEB obligation as of June 30, 2008 $ 340.877 Funded Status and Progress: The funding status of the plan as of the most recent actuarial valuation date is as follows: Unfunded AAL r Actuarial as a Actuarial Actuarial Accrued Unfunded Percentage of Valuation Value of Liability AAL Funded Covered Covered ,r Date Assets (AAL) (UAAL) Ratio Payroll Payroll 7/1/2007 9,949,638 9,949,638 ON 49,788,835 19.98% Actuarial valuations of an ongoing plan involve estimates of the value of reported amounts and assumptions about the probability of occurrence of events far into the future. Examples include assumptions about future employment, mortality, and the healthcare cost trend. Actuarially determined amounts are subject to continual revision as actual results are compared with past expectations and new estimates are made about the future. The schedule of funding progress, presented as required supplementary information following the notes to the financial statements, compares whether the actuarial values of plan assets are increasing or decreasing over time relative to the actuarial liabilities for benefits. r Actuarial methods and assumptions: Projections of benefits for financial reporting purposes are based on the substantive plan (the plan as understood by the employer and plan members) and include the types of benefits provided at the time of each valuation and the historical pattern of sharing the benefit costs between the employer and plan members to that point. The actuarial methods and assumptions used include techniques that are designed to reduce the effects of short-tern volatility in actuarial accrued liabilities and the actuarial value of assets, consistent with r the long-term perspective of the calculations. 33 L ORANGE COUNTY SANITATION DISTRICT L Notes to Basic Financial Statements For the Year Ended June 30,2008 L The ARC for the current year was determined as part of the 7/t/07 actuarial valuation using the Projected Unit Credit cost method. The actuarial assumptions include a 6% investment rate of return and an annual healthcare cost bend rate of 9% reduced by decrements of 1°/ per year to an L ultimate rate of 5% after the 6P year. The UAAL is being amortized ratably over 30 years. Inflation assumptions are included as part of the healthcare cost trend. L (9) Transactions with Irvine Ranch Water District—Revenue Area No. 14 Formation of Revenue Area No. 14&Excess Purchase Price Over Book Value of Acquired Assets LY On July 1, 1985, Revenue Area No. 14 was formed as an independent special district as a result of a negotiated agreement between OCSD and Irvine Ranch Water District (IRWD). At the time of Revenue Area 14's creation, OCSD consisted of eight independent special districts (see Note 1 — Reporting Entity). The eight existing districts sold a portion of the joint treatment facilities and land u to the newly created district and recorded capacity rights revenue at the time of the sale. In accordance with the negotiated agreement between OCSD and IRWD, IRWD paid OCSD Lr $34,532,000 for an initial 15,000,000 gallons per day capacity in OCSD's joint treatment facilities (with an ultimate collection capacity of 32,000,000 gallons per day)and for a pro-rata interest in real property(based on flow of 32,000,000 gallons per day). The book value of the assets acquired was I determined to be $14,553.000 as of June 30, 1986; these assets were recorded at book value in L Revenue Area 14. The excess of the purchase price over the assets' book value was $19.979,000 and was recorded as an intangible asset in Revenue Area No. 14. The excess of the purchase price over the assets' book value is being amortized over the remainder of the useful lives of the L original assets acquired. As of June 30, 2008, after recognizing current year amortization of $657,709, the unamortized amount of the excess of purchase price over the assets' book value was$5,509,402, 1 V Annual Transactions IRWD entered into a separate agreement with Revenue Area No. 14 whereby IRWD agreed to 1 annually fund payment of Revenue Area No. 14's proportionate share of OCSD's joint capital outlay L revolving fund budget requirements and certain capital improvements during the term of the agreement,which contribution amounted to$15,591,861 in 2008. (10) Commitments L' Groundwater Replenishment System: In March 2001, OCSD entered Into an agreement with the Orange County Water District, California, to design and construct Phase 1 of the "Groundwater Replenishment System'(GWRS). OCSD has no explicit, measurable equity interest in GWRS. No separate financial statements are prepared for GWRS. The cost of this project is to be paid equally(50 percent shares) by each agency. The GWRS is a joint effort by the two agencies to provide reclaimed water for replenishment of the Orange County Groundwater Basin and to augment the seawater intrusion barrier. The first phase of the GWRS became operational in January 2008 with an annual production goal of approximately 72,000 acre- L feet per year of recycled water.Future phases of the GWRS will be built in increments over the next 20-25 years based on availability of wastewater flows to a planned built-out capacity of 145,600 acre-feet per year. Following the completion of Phase 1, the GWRS will have the capacity to divert up to 100 million gallons per day of flow from OCSD's ocean discharge for peak flow storm relief. Lr As of June 30, 2008, the total estimated cost of GWRS Phase 1 was $496.80 million. Of this L amount, up to $92.50 million may be reimbursed through grants from the U.S. Environmental 34 Li ORANGE COUNTY SANITATION DISTRICT ,. Notes to Basic Financial Statements For the Year Ended June 30,2008 Protection Agency, the U.S. Bureau of Reclamation,the State Water Resources Control Board, and others. OCSD's estimated gross and net share is$248.40 million and$202.15 million, respectively. Costs incurred by OCSD through June 30, 2008 total$201.08 million. Secondary Treatment: On July 17, 2002, the Board of Directors Approved Resolution No. OCSD- 14, "Establishing the Policy for Level of Treatment of Wastewater Discharged into the Ocean". This resolution established OCSD's policy to treat all wastewater discharges into the ocean to secondary treatment standards thereby providing for continued public safety, marine ecosystem protection, and water reclamation opportunities. To Implement this policy, OCSD staff was directed to Immediately proceed with the planning, design, and implementation of treatment methods that will ,r allow the agency to meet Federal Clean Water Act secondary treatment standards. OCSD estimates that it will take a total of approximately eleven years and additional capital Improvement costs of$631 million to reach secondary treatment discharge standards. Secondary treatment discharge standards are scheduled to be reached at the end of 2012. In the interim, OCSD will operate the plants to maximize available secondary treatment and to reduce effluent biochemical oxygen demand and suspended solid discharges below currently allowed limits. r r r r r r r r r 35 r u u u u u u u u (THIS PAGE INTENTIONALLY LEFT BLANK) Iu W u u u u u u u u 36 I Ytl �1 ORANGE COUNTY SANITATION DISTRICT SUPPLEMENTARY INFORMATION J J r 37 L ORANGE COUNTY SANITATION DISTRICT Schedule of Net Assets June 30,2008 V With Comparative Totals for June 30,2007 V Revenue Consolidated Totals Area No.14 Revenue Area Eliminations 2008 2007 Current assels: L Cash and cash equivalents $ - $ 104.012,814 $ - $ 104,012,814 $ 55,472,715 Investments - 330.161.649 - 330.161,649 231.710,077 Due from other Revenue Area - 5,695,020 (5,595,020) - - Accounts receivable, net of allowance L for uncollectibles - 11,805,761 - 11,805,761 12.703.227 Accrued interest receivable 162,748 2,692,484 - 2,855,232 2,816.784 Due from other governmental agencies 5.025,176 - - 5.025,176 6,332.508 1 Connection fees receivable - 1.286,927 - 1,286,927 962,754 'y Property tax receivable 101,072 3,195.017 - 3,296.089 2,459.657 Inventones 286.854 4.698,534 - 4.985.388 4,834.811 Prepaid expenses 46,418 767,886 - 814.304 1.281,524 L Total current assets 5.622,268 464,216,092 (5.595,020) 464,243.340 318.573.057 Noncurrent assets: Restricted: Cash and cash equivalents - 50,737,114 - 50.737.114 23.946.510 Investments - 47,829,179 - 47,829.179 60,776180 Accrued interest receivable - 386.960 - 386.960 567:380 L Unrestricted: Non-depreciable capital assets 52,828,079 897.680,113 - 950,508.192 816,701.436 Depreciable capital assets,net of accumulated depreciation 59.674.092 819.200,938 - 878.875.030 784.919.903 Deferred charges - 8-69.966 - 8.209,966 4,277,005 Other noncurrent assets,net 1.610,894 26.467.5% M078.450 29.914,713 I Total noncurrent assets 114,113,065 1,850,571,826 1,964,684 L ,891 1,721,103,127 Total assets 119,735.333 2.314.787,918 (5,595,020) 2,429,928,231 2,039,676,184 Current liabilities: Accounts payable 1,565,096 26.011.670 - 27.577.766 18.966,641 Accrued expenses 413.627 8,480,681 - 8.894,308 15.054.007 Due to other Revenue Area 5,595.020 - (5,595,020) - - Retentions payable 453,959 7,332,797 - 7,786,756 6.959.199 L Interest payable - 12,107,963 - 12,107,963 7,023,945 Current portion of long-tens obligations 361,264 27.359.328 27.720.592 28,510.696 L Total current liabilities 8.389,956 81.292.439 (5,595.020) 84.087,386 76,544,688 Noncurrent liabilities: L Nonwmant portion of long-term obligations 511,847 1,068,341,713 1.068.853.560 773.394,732 Total liabilities 8,901.813 1.149.634,152 (5,595,020) 1.152.940.945 849,939,420 V Net assets: Invested in capital assets, L ne(of related debt 112,502,171 739,88 852 2,392 - ,384,563 886.462,57s Restricted for debt service - 3.311.187 - 3.311.187 3,904,212 Unrestricted (1,658,651) 421,960.187 420.291.536 299,369.977 Total net assets $110.833,520 $1,165,153.766 $ $1.275.987,286 $1,189,736.764 L w L r ORANGE COUNTY SANITATION DISTRICT Schedule of Revenues,Expenses,and Changes In Net Assets For the Year Ended June 30,2008 With Comparative Totals for June 30,2007 r Revenue Consolidated Totals Area No. 14 Revenue Area 2008 2007 Operating revenues: r Service charges $ 5,071,634 It 179,108,586 $ 184,180,220 $ 167,789.660 Permit and inspection fees 38,604 1,157,710 1,196,320 1,866.411 r Total operating revenues 5,110,238 180,266,302 186,376,540 169,656,071 Operating expenses other than depreciation and amortization: r Salaries and benefits 3,414,669 64,213,982 67,628,651 57,802,102 Utilities 517,346 7,574,971 8,092,317 8,072,262 Supplies,repairs and maintenance 1.247,208 24,723,591 25,970,799 21.050,912 Contractual services 1,174,173 22,413,682 23.687.835 20.389,454 Directors'feas 31,980 112,137 144,117 131,750 Meetings and training 58,845 948,410 1.007,255 1.124.852 Other 287,918 5,170,950 5,458,11W 3,583,792 Total operating expenses other than depreciation and amortization 6,732,139 125,157,703 131,889,842 112,155,124 Operaft Income(loss)before depreciation and amortization (1,621,901) 55,108,599 53.486,698 57,500,947 Depreciation and amortization 4,033,482 43,733.474 47,766,956 53,110,609 Operating Income(low) (5,655,383) 11,375,125 5,719,742 4,390,338 Non-operating revenues: Property tense 1.947,311 63,262,15D 65,209.461 60.565.308 Investment and interest income(loss) 15,110 20,220,098 20,235.214 22.243,554 Capital facilities capacity charges - 19,816.293 19,816.293 31,277.647 Other 12,773 12,773 1,067.794 r Total norwPeretin9 revenues 1,975.200 103.298.541 105.273J41 115,154,303 Non-operating expenses: r Interest 389,027 22,128,147 22,517.174 21,746.852 Feasibllity studies 748,222 12,246.250 12.994.472 11,128,105 Capital grants to member agencies - 1,769,894 1,769.894 2,127.154 r Other 73,724 2,979,558 3,053,282 2,834,392 Total non-operating expenses 1,210,973 39,123,849 40.334,822 37,836,503 Income(loss)before capital contributions (4,891.156) 75.549.817 70,658,661 81,708,138 Capital contributions from other agencies 15,591,861 15,591,861 18,929,179 Change in net assets 10,700.705 75,549,817 86.250.522 10D,637,317 Total net assets-beginning 1110,132,815 1,089.603,949 1.189.736.764 1,089,090,447 r Total net assets-ending $ 110.833,520 $ 1.165.153,766 $ 1,275,987286 $ 1,189,736,784 39 ORANGE COUNTY SANITATION DISTRICT V Schedule of Cash Flows For the Year Ended June 30,2008 With Comparative Totals for June 3Q 2007 1.1 Revenue Consolidated Totals Area No.14 Revenue Area Eliminations 2008 2007 V Cash tows from operating customers and ius PaymRentseents to mployesand users S 10,972.758 $ 181,484,876 E - S 192,439,638 $ IW,133,292 Payments to suppliers (2,9R,901) (55.925,359) - (56.89]p80) (59.891,912) Payments to suppliers 13.082.937I (58.]2].718) (81,]9D.853) I40.809.3781 r Net man provitletl by operations 4,939.320 66.611.803 71.751.123 82.632.002 Cash flows from rencapital finandng activitles: Proceeds Bons property taxes 1,916.734 62.456295 - ".373,029 59.989.586 Grants to member agencies (1,769,894) 0.769,8941 (2127,154) V Net cash provided by non api al Gnanung activities 1,916,734 60.686.401 62, 03.135 57,862,412 Cash Dews from capital and related financing advities: I Capital facilitiescapadry classes - 19.492.120 - 19.492,120 31,650,062 L Additions to promrty.plant and equipment (17.203.458) (259.412,922) 1,210,330 (275,406.057) (281.135,639) Disposal of property.plant,and equipment - 1,210,330 (1210,330) - Arbllregepayment (307.934) - (307.934) (53.100) Additions to other assets (15,733) - 45,733 - - Disposalofotherassets - 45.733 (45.733) - �t Interest paid (389,027) 131.399.946) - (31.788.973) (35,250,887) principal payments on certificates of mNcipallon - (98,53l,000) - (98,630.000) (101.965,000) proceeds from ceNficates of participation issuance - 378,898628 - 378.898,628 89,616,08' Certificates of paNclpation issuance costs (675,401) - (675.401) (319.898) W proceeds from capital contrbutors 10.780.712 10.750.712 14.183,358 Net cash provided(used)by capital and related finapscng activities (6AB7.008) 11,320,601 4.433.095 (283,092.1l Cash sows from investing activitles: V Proceeds from the sale of investments 3.793.917,222 - 3,793,917.222 5,282,384.356 Purchasas of investments (3.880,733.353) - (3,880,733.353) (5.204,060,027) Interestre .d 31.452 23.328.029 23.359.481 24.647,682 Nei cash provided(used)by investing activities 31.452 (63,406,1021 (63,456.6501 102,372,011 Net increase(decrease)in cash and cash equivalerts - 75,330,703 - 75.330,703 (40228400) Cash and cash equivalents,beginning of year - 79,419,225 79,419.225 119.645.825 I Cash and man equivalents.erM of year E S 154.749.928 S $ 154,749,928 S ]9,119.225 Yrl Reconciliation of operating income(Ion)to net cash provided by operating activities: Operating income(loss) S (5.655.383) S 11,375.125 $ - E 5,719.742 E 4.390.338 Adjustments to reconcile operating Income(loss)to net .an provided by operations: Depredation and amortization 4,033,482 43.733,474 - 47,768,968 53,110.609 Bad debt expense 990 (5,36(1) - (4.376) (67.284) Ir1 Other nonoperatirg revenues and expenses 11206 (301,139) - (289.933) 1.4 .143 (Increasaydecrease In operating assets: Due from other Revenue Area - 411.905 (411,905) - Accountsreceivable 1.235.720 786.671 - 2A22,391 1.604,862 Isr Duefrom other governmental agencies 5.027.932 - - 5,027.932 6,804,585 Inventories 16.818 (281.559) - (264.741) (254,6]0) Prepaid and other risers 35.085 432.135 - 4672M 10,052.412 Increasel(demase)in operating liabilities: Accounts payable 468.140 8,142,985 - 8.611,125 (2.777,150) )r. Accrued expenses (293.132) (5,896,587) (6,189A9) 6.639.768 Due to other Revenue Area (411,905) 411,905 - Retentions payable 36,797 790,700 - 827A57 (2,286,374) l PensloniOpEB payable 356.904 5,900,573 - 6261,477 law absences 12,171 533.107 - 545218 311.438 Claims and judgments Si 1,195.6% 121 181 (354,60) Net msh provided by operations 5 4.939,320 S 66.811,803 E - S 71751,123 S 52A32.002 Nmncash Activities: V Unrealized gain(ion)on the fair value of investments S S (1,311,550) E - $ (1,311,56(l) E 16.429 Nei disposal of assets with no man effect (65.308) (1.907.770) - (1,973.078) (3243.743) ( .. Candidates of paNdpation issuance msl-anderwnte(s lee - (3,995,219) - (3,995218) (488,044) Capital contributions from other agendas 4,841149 - - 4,841.149 4,785,823 V Certificates of participation anginal issue premium - 14.051.290 - 14,051= 183954 Feentalily trudges with no cash effect (748.222) (12.246,250) - (12,994,472) (11.128.105) 40 r r r J r r OCSD Statistical Section r r r r r r r r ti r V ,� U U u u u u u �. u = u A � u O 3 L t11 Li r ORANGE COUNTY SANITATION DISTRICT STATISTICAL SECTION r This part of the comprehensive annual financial report of the Orange County Sanitation District(OCSD) presents detailed information as a context for understanding what the information in the financial statements, note disclosures, and required supplementary information says about OCSD's overall financial health. r Contents Paces Financial Position and Trends These schedules contain current and trend information to help the reader understand OCSD's financial position and how OCSD's financial performance and well-being have changed overtime. 42-46 Revenue Capacity These schedules contain information to help the reader assess OCSD's most .. significant revenue source of sewer service fees. 47-49 Debt Capacity These schedules present information to help the reader assess the affordability of OCSD's current levels of outstanding debt and OCSD's ability to issue additional debt in the future. All of OCSD's debt is recorded in a proprietary fund; consequently,many 50-53 r of the schedules which are applicable to governmental funds are not presented. Operating Information These schedules contain data to help the reader understand how the information in r OCSD's financial report relates to the services it provides and the activities it performs. 54-57 r Demographic and Economic Factors These schedules offer demographic information to help the reader understand the environment within which OCSD's financial activities take place. 58-61 r r r 41 ORANGE COUNTY SANITATION DISTRICT Net Assets by Component - (Dollars in Thousands) Last Eight Fiscal Years(Note 1) - $1,40D,000 $1,200,000 $1,000,000 $800,000 $600.000 No— $400,000 $200,000 bu 2000-01 2001-02 2002-03 2003-04 2004-05 2005-06 2006-07 2007-08 Dinvested In capital Assets,Net of Related Debt aResbiMel for Debt Service 8 Capital Aceuieiii. ` DunresNned Invested in Restricted for Capital Assets, Debt Service Net of Related & Capital Fiscal Year Debt Acquisition Unrestricted Total Net Assets 2000-01 $463,935 $36,468 $446,558 $ 946,961 2001-02 501.997 36,070 435,906 973,973 2002-03 578,647 35,182 396,518 1,010,347 2003-04 418,267 88,519 517,346 1,024,132 2004-05 558,391 64,514 418,342 1,041,247 2005-06 664,060 3,003 422,036 1,089,099 — 2006-07 886,463 3,904 299,370 1,189,737 2007-08 852,385 3,311 420,291 1,275,987 Note 1: Net Assets are calculated as a result of GASB 34,which was implemented in FY 2001-2, retrospective to 2000-01. Ten years data will eventually be presented as data is accumulated. - Source: Orange County Sanitation District's Financial Management Division. r 42 ORANGE COUNTY SANITATION DISTRICT Revenues and Gross Capital Contributions by Source (Dollars in Thousands) Last Ten Fiscal Years $188,768 $165,172 $141,576 $117,980 $94.384 $70,788 $47,192 $23.596 $0 1998-99 1999-00 2000-01 2001-02 2002-03 2003-04 2004-05 2005-06 2006-07 2007-OB oO,m ,pnavema eNon rating Rewme OCwinMed Caplal Capacity Operating Revenue Non-Operating Revenue Rights 8 Permit& Cap.Facilities Total Capital Fiscal service Inspection Total Property Capacity Non- Contrib- Year Charges Fees Operating Taxes Interest Charges Other Operating utions 1998-99 $ 69,453 7 423 $ 69,876 $ 32,836 $ 17,944 $ 8,751 $ 3,332 $ 62,863 $ 141 1999-00 81,241 396 81,637 35,557 20,836 7,867 2,573 66,933 4,589 2000-01 72,566 688 73,254 38,411 39,868 7,332 1,835 87,446 1,271 2001-02 79,609 396 80,005 41,140 28,073 10,560 2.202 81,975 8,603 2002-03 88,640 524 89,164 44,591 25,889 10,146 706 81,332 3,166 2003-04 101,995 332 102,327 46,943 6,786 8,998 928 63,655 9,245 2004-05 120,917 498 121,415 35,764 15,118 9,814 1,051 61,747 9,536 2005-06 154,291 874 155,165 39,958 10,426 15,632 3,477 69,493 17,358 2006-07 167,790 1,866 169,656 60,565 22,243 31,278 1,068 115,154 18,929 2007-06 184,180 1,196 185,376 65,210 20,235 19,816 13 105,274 15,592 Source: Orange County Sanitation DistricCs Financial Management Division. 43 ORANGE COUNTY SANITATION DISTRICT Expenses by Type r (Dollars in Thousands) Last Ten Fiscal Years r r $180,000 $170,000 $160,000 r $150,000 $140.000 $130,000 $120,000 r $110,000 $100,000 $90.000 r $80.000 , $70.000 $60,000 $50,000 r $40,000 $30,000 $20,000 +' $10,000 $0 1998-99 1999-00 2000-01 2001-02 2002-03 2003-04 2004-05 2005-M 2006-07 2007-08 r e0p 0,Eegme ONon Opemb,eveme Operating Non-Operating r Fiscal Personnel Maint 8 Depr& Total Interest Total Non. Year Services Utilities Other Amort Operating Expense Other(1) Operating 1998-99 $ 28.809 $ 3,320 $ 22,546 $ 42,470 $ 97.145 $ 18,359 $ 92 $ 18,451 ee 1999-00 33,581 3.621 22.213 36,333 95.748 18,151 23,123 41,274 2000-01 33.734 5,524 23,062 42,797 105,117 17,923 1,479 19.402 2001-02 35,629 4,967 27,967 45,703 114,266 14,406 8,896 23,302 2002-03 38.733 4,622 36,314 41,966 121,635 12,731 2,922 15,653 r 2003-04 48,711 5.408 41,284 44.412 139,815 15.524 6,102 21.626 2004-05 53,048 6.473 42,325 48,095 149.941 17.470 8,172 25,642 2005-06 53,246 7,563 44,823 49,887 155.519 20,078 18,567 38,645 r 2006-07 57,802 8,072 46,281 53.111 165,266 21,747 16,089 37,836 2007-08 67,629 8.092 56,169 47.767 179,657 22,517 17,618 40,335 r Notes (1) - For FY 1999-00, Other Non-Operating Expense includes $22,994,647 for the loss on investment in the r Orange County Investment Pool. Source: Orange County Sanitation District's Financial Management Division. r� 44 r _ ORANGE COUNTY SANITATION DISTRICT Change in Net Assets (Dollars in Thousands) Last Eight Fiscal Years (Note 1) $1,400,000 $1.200,000 $1,000,000 $800,000 $600,000 $400,000 $200,000 _ $0 2000-01 2001-02 2002-03 2003-04 2004-05 2005-06 2006-07 2007-08 Ending Net Assets by Fiscal Year Fiscal Total Total Change in Beginning Ending Year Revenues Expenses Net Assets Net Assets Net Assets _ 2000-01 $161,971 $ 133,543 $ 28,428 $ 918,533 $ 946.961 2001-02 164,580 137,568 27,012 946,961 973,973 2002-03 173,662 137,288 36,374 973,973 1,010,347 2003-04 175,226 161,441 13,785 1,010,347 1,024,132 2004,05 192,698 175,583 17.115 1,024,132 1,041,247 2005-06 242,016 194,164 47,852 1,041,247 1,089,099 2006-07 303,740 203,102 100,638 1,089,099 1,189,737 2007-08 306,242 219,992 86,250 1,189,737 1,275,987 Note 1: Net Assets are calculated as a result of GASS 34, which was implemented in FY 2001-02, retrospective to 2000-01. Ten years information will eventually be presented as data is accumulated. Source: Orange County Sanitation District's Financial Management Division. 45 L ORANGE COUNTY SANITIATION DISTRICT L Cash and Investment Reserve Balances (Dollars in Millions) Last Ten Fiscal Years La Capital Debt Cash Flaw Self- Improvement Service Fiscal Year Contingency Insurance Program Requirements Total 1998-99 $ 56 $ 54 $ 233 $ 33 $ 376 1999-00 60 57 284 32 433 u 2000-01 77 56 311 33 477 2001-02 70 57 303 35 465 2002-03 100 57 237 33 427 Lj 2003-04 71 57 390 88 606 2004-05 71 57 242 65 472 2005-06 92 57 257 84 490 L 2006-07 139 57 91 85 372 2007-08 191 57 186 99 533 L Notes: L The Cash Flow Contingency Reserve is to fund operations,maintenance,and certificates of participation debt service expenses for the first half of the fiscal year,prior to the receipt of the first installment of the property tax allocation and sewer service user fees. L.1 The Self-Insurance Reserve is to provide requirements for property damage including fire,flood and earthquake,general liability and workers'compensafion. j The Capital Improvement Program Reserve is to fund annual increments of the capital improvement program with a Ir target level at one half of the average annual capital Improvement program through the year 2020. The Debt Service Required Reserves are monies held and controlled by a trustee pursuant to the provisions of certificates of participation issues, and the monies are not available for the general needs of the District. I w I L L i Source: Orange County Sanitation District's Financial Management Division. LI L L 46 i _ ORANGE COUNTY SANITATION DISTRICT Sewer Service Fees Single Family Residence Rate Last Nine Fiscal Years and Next Fiscal Year r Sewer service fees are comprised of three categories: residential customers, commercial customers, and industrial customers. Although the majority of sewer service fee revenues are from residential and commercial customers(see the schedule of Number of Accounts and Revenues by Customer Class), the fee paid by each residential and commercial customer is less than the individual fees paid by industrial customers. The rates for commercial and industrial customers are derived from the base sewer service fee charged for a single-family residence and are based on the type of business and the strength and volume of waste that is discharged Into the sewer system. Due to the complexity of the rate structure for commercial and industrial customers and since the rates are derivatives of the single-family residence rate, only the single-family residence rate is presented within the statistical section. Sewer Service Fiscal Year Charge 1999-00 $ 81.02 2000-01 78.00 2001-02 80.00 2002-03 87.50 2003-04 100.00 2004-05 115.00 2005-06 151.00 2006-07 165.80 2007-08 182.00 2008-09 201.00 Annual Sewer Service Fees Single Family Residence r 250 2 200 LL C 150 C a K H 100 50 0 1999-00 2000-01 2001-02 2002-03 2003-04 2004-05 2005-06 2006-07 2007-08 2008-09 Fiscal Year Source: Orange County Sanitation District's Financial Management Division. 47 ORANGE COUNTY SANITATION DISTRICT Number of Accounts and Revenues by Customer Class r (Dollars in Millions) Last Ten Fiscal Years Residential/Commercial Industrial Number of Total Percentage Total Percentage Equivalent Sewer Svc. of Sewer Number of Sewer Svc. of Sewer Single-Family Charge Service Charge Customer Charge Service Charge Fiscal Year Dwellings Revenue Revenues Amounts Revenue Revenues 1998-99 882,103 $61.6 89% 678 $7.8 11% 1999-00 919,072 72.0 89% 649 9.1 11% r 2000-01 883,603 64.5 91% 596 6.6 9% 2001-02 898,031 70.3 90% 573 7.5 10% 2002-03 897,757 77.0 92% 603 6.3 8% r 2003-04 860,156 86.0 92% 530 7.5 8% 2004-05 860,634 99.0 90% 568 10.5 10% 2005-06 872,859 132.0 92% 557 12.2 8% 2006.07 867,035 143.8 91% 531 13.4 9% 2007-08 875,739 159.4 93% 517 12.1 7% r $200.000.000 $180,000,000 Will $160.000,000 $140,000,000 V $120,000,000 - 6. $100,000.000 - - $80,000,000 $60,000.000 y $40,000.000 V $20,000.000 tual $0 r 1998-99 1999-00 2000-01 2001-02 2002A3 2003-04 200405 2005-08 2006-07 2007-08 eRasltleMYYCamnrtMUesn er,60Ml Uten I he Source:Orange County Sanitation District's Financial Management Division. ✓r 48 r ORANGE COUNTY SANITATION DISTRICT Principal Sewer Service Customers For the Current Racal Year and Nine Years Ago r Fiscal Year Ended 6130108 Fiscal Year Ended 6130/99 Industrial Industrial Permittee %to Total Permittee %to Total r Service Service Charge Service Service Charge User Charges Rank Revenue Charges Rank Revenue Kimberly-Clark Worldwide, Inc. $1,032,500 1 0.56% $518.458 1 0.75% r Alstyle Apparel-A&G Inc. 1.023.517 2 0.56% Disneyland Resort 874,942 3 0.47% 193,851 5 0.28% MCP Foods, Inc. 798,44g 4 0.43% 291,377 3 0.42% Stremicks Heritage Foods, LLC 689,749 5 0.37% Disneyland California Adventure 623,095 6 0.34% House Foods America Corp. 525,676 7 0.29% Ameripeo Inc. 414,671 8 0.23% r Pepsi-Cola Bottling Group 381,371 9 0.21% Seven-Up Bottling Company 304,864 10 0.17% Adohr Farms 358,870 2 0.62% Favorite Foods 208,902 4 0.30% AERA Energy 144,871 6 0.21% Rockwell Semiconductor 134.148 7 0.19% Sunder Brands 110,108 8 0.16% Knotts Berry Farm Foods 109,216 9 0.16% Dean Foods 100,716 10 0.15% ,r $6,668,734 3.63% $2,170,517 3.14% ,r Although the majority of sewer service fee revenues are from residential and commercial customers (see the schedule of Number of Accounts and Revenues by Customer Class), the fee paid by each residential and commercial customer is less than the individual fees paid by industrial customers. Consequently, this schedule shows the largest sewer service fee customers. r r Source: Orange County Sanitation District's Financial Management Division. r 49 ORANGE COUNTY SANITATION DISTRICT Ratio of Annual Debt Service to Total Expenses - (Dollars in Thousands) Last Ten Fiscal Years - 60.0% 50.0% 40.0% - 30.0% 20.0% 10.0% 0.0% 199899 1999-00 4000-01 2001.02 200203 200304 20D405 200506 2006-07 2007L8 Ratio of Debt Total Service to Total Fiscal Principal Total Debt Operating Operating Year 1111 Interest Service(3) Expenses(2) Expenses 1998-99 $ 12,120 $ 18,475 $ 30,595 $ 54,675 55.96% 1999-00 12,880 17,169 30,049 59,415 50.57 2000-01 13,790 16,690 30,480 62,320 48.91 2001-02 10,370 13,051 23,421 68,563 34.16 `. 2002-03 11,025 11,433 22,458 79,669 28.19 2003-04 11,610 22,508 34,118 95,403 35.76 2004-05 12,040 25,871 37,911 101,846 37.22 2005-06 12,755 19,636 32,391 105,632 30.66 2006-07 13,465 21,438 34,903 112,155 31.12 2007-08 11,025 21,724 32,749 131,890 24.83 - Notes (1)-Excludes principal reductions due to advanced refunding. V (2)-Excludes depreciation and amortization expense. (3)-Al debt consists of certificates of participation. L 1w Source: Orange County Sanitation District's Financial Management Division. l 50 ORANGE COUNTY SANITATION DISTRICT Debt Coverage Ratios (Dollars In Millions) Last Tan Fiscal Years The Orange County Sanitation District has no legal debt limits as imposed by Slate legislation. The District does have contractual covenants within the existing Certificates of Participation indenture agreements which require minimum coverage ratios of 1.25. The coverage ratio is calculated as the ratio of net annual revenues available for debt service payments to total annual debt service requirements. 4.00 3.50 3.00 2.50 2.00 _ 1.50 1.00 0.50 1998-99 1999.00 2000.01 2001-02 2002-03 2003-04 200445 20054)6 200647 2007-08 Fiscal Year Ending June 30, 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 Operating 8 Non-operating Revenues: Service Charges,Net of Refunds $ 61.6 $ 72.0 $ 64.5 S 70.3 $ 77.0 $ 86.0 $ 99.0 $ 132.0 $ 143.8 $ 159.4 Industrial Sewer Service Charges 7.8 9.1 6.6 7.5 6.3 7.5 10.5 12.2 13.4 12.1 Revenue Area No.14 Fees 0.7 2.2 2.0 2.2 3.2 5.8 6.9 5.3 5.2 7.1 Ad Valorem Taxes 32.8 35.6 38.4 41.1 44.6 46.9 35.8 40.0 80.6 65.2 Interest Earnings 17.9 20.5 39.4 27.8 25.9 6.8 15.1 10.4 22.2 20.2 Capital Facilities Capacity Charges 9.5 7.9 7.3 10.6 10.1 9.0 9.8 15.6 31.3 19.8 Other Revenues 2.4 1.2 2.5 2.5 3.4 4.0 6.1 9.2 8.3 6.9 Total Revenues 132.7 148.5 160.7 162.0 170.5 166.0 183.2 224.7 284.8 290.7 _ Operating Expenses(1) 54] 59A 62.3 68.6 79.7 95.4 101.8 105.6 112.2 131.9 Net Revenues $ 78.0 $ 89.1 $ 98.4 S93.4 $ 90.8 $ 70.6 S 81.4 $ 119.1 $ 172.6 $ 156.8 Debt Service Requirements Principal Payments 12.1 12.9 13.8 10.4 11.0 11.6 12.0 12.8 13.5 11.0 Interest Payments 18.5 17.2 16] 13.0 11.7 16.8 25.9 29.1 35.1 31.8 Total Debt Service Requirements $ 30,6 $ 30.1 $=0.5 $®3.4 $�2.7 $28.4 $37.9 $ 41.9 $ 48.6 $ 42.8 Coverage Ratios(2) 224 2.70 2.99 3.54 3.56 2.17 1.89 2.47 2.91 3.25 Ending Reserves(3) $ 343.0 $ 401.0 $ 444.0 $ 430.0 $ 394.0 $ 518.0 $407V $ 406.0 $ 287.0 $ 434.0 Notes (1)-0perating expenses exclude depreciation and amortization expenses. (2)-Calculated In accordance with the Debt Service Master Agreements. (3)-Ending reserve balances exclude monies in debt service hinds, Source:Orange County Sanitation Districts Financial Management Division. 51 L ORANGE COUNTY SANITATION DISTRICT Computation of Direct and Overlapping Debt June 30,2008 2 M-08 Assured Valuation(Lnnd R lmpmvemens Only): S21T,168.959.859(a8er dedecting535,564,)4S.092 redaveepmmt ineamansel Valuation) OVRRLappM[TAX ANO AeSESSMFNT pFBT(Bored on mdevelopmenl a4j..d all nucleus,mined valuatbn of$264.164,343.06): l TOW Debt Dierd'e5hueof less 6(]0lfl$ %Aeefindalef11 Deb,6410,01, Graters,Conner Tenor Pia Oblipticus SIMMS,= 71.041% S II11,885375 Meuenolien Water District of9umhem Gluons 327215,000 14.941 48.889,193 Comm Community College Diestin 30.758.867 "As 346A02,685 Noll Grantee Canty Joint Communiq Collette Diwin 233349A01 K922 226,166,519 Reaches Sonuga Community College Mmtet 321.7N,339 98.M3 316,511.811 Bm-OlinN sued IANna Bunch Unified Schm1 Minieu 59,1019A29 99.936A 12J83 29,15S237 Pannone Mm Unified!Sehool District 1611,363,480 IN.. 168.50.480 Meceoue-Yobs,Linda Unified School District 169,069AN IMM Ifte2,971 Soddlcbre4 Vale,Unifid School District 142A1110.000 11.913 16,976,492 W Sense Me Unified Schm1 Dimnct 126,037.965 IN. 126dD37. M Tustin United Sclwd Manuel SCSool Facilities lmpmvementWrct No.2000-1 43,683,929 99.010 43251,458 Attention Union Hip Sehuul Diar4t 123,483.955 IN. 123,483,955 Failure.Joint Union High School comet 61,552.910 90.240 55.6452d6 Humd.gmn Be rat Union High Sehool Menkt 232274,998 98.919 229,764,105 Seheol Must. 236.130.071 97.319.100. 236342,957 CiyofAMhNm 5220,W0 99.M3 5,172,133 IDiw Rauh Water District lmpmvemem Dieree 271221,669 VMoue 271,137,342 Rossmoor Communiq Services District Special Tax Obliptiam 6260M IN. 62SA00 Borden Cagan Community Facilities Disrrt No.9M1 42,615,000 IN. 42AI5000 Irvine Unified Sclmol Disrts Community Facilities Oimicn 266430.00) 99.998-I0D. 266p26313 Tustin Unified School District Community Futilities Mereu 232.73045 IN. 232,736145 Oren,Cowry Community Facilities Metric.No.874 59,882928 99.M5 $9,826039 Color Communiq Facilities Dioncte 402A55,000 Vdms 402,358,006 Omnp Canny Aeeeamem Districts 118A462915 100. 118.048,296 4 City oflevime 1915 Act BmMs 905A75,000 100. 905.675,W0 City ofTustin 1915 Act Honda 52A42,000 IN. 52,442,000 Oeea 1915 MI bon& 26306000 IN. 20.306000 TOTAL OVERLAPPING TAX AND ASSESSMENT DEBT $4,599.822,910 DIRECT AND OVERLAPPING GENERAL tND DEBT: Gaup County General Fund Ob0gmlons $532326000 71.841% S 38L42U22 Coup County Pension Glut iactions M.M9,867 71.11,11 52,249.864 0.,crony Boom of Education Cerileme,ofPertin'tut. 19."Rom 71.841 14,073,652 South Creole Court,Community College Ground Carfake of Panidpada. M.M3,0M 35.613 12,4,4,963 L Bona-Olide UniOd School Dianna Canitkalw afpeAcipmion 29,g %m 99.936 29,Tg0,928 (Andorra,Unlfld School Disral Cerifcarts ofParucipation 49,326, 04 96966 49,326,604 Plecenlia,YorM Linda Untried School Disnia Caufwtes offeaud,smn, MA10215 99639 85,629,1127 Sense An UMfid School District CarOessea of Participation M.M01968 IN, M,855,968 L OIhe ULifd School Guarico fentflcate ofPelictmum 39217,502 Venous 38,90.126 Union High Sdmol NMd Cerefwlas ofPutieinrtim 111,751,W0 Vdme 114,970,458 School Desrct Ceufirela of Participation 59,9M,OM van. 591656T9 City ofAmebeim Demand Fund Obligations 6WA32,465 99.03 673.4N235 Cis,ofCoua M.Gewrad Fund Obldµimu M.W0,00) IN. 45,9MdMD j Chy 9fFalermn Geural Fund Obliµi. 28,302,1114 IN. 28,3M,7M L Cis,of Medellin Bench Gewral Fund and Judigmmnt Obliptimu 76,30MM 99.990 T62114,740 Cis,of lrvive Garsal Fund Obllgatiom 24,I70.000 IN. N,IMJ)R) Cis,of Serb Me General Fund OEliamiaw 116220A00 IN. 1162M,000 Other Ciy Geeral Fund Old ficaut 1722T6W0 Venoms 145,890247 j Onnga County Sanitation Courts CertBcew ofPeNctµlon 0 IN. 0 (2) 1.1, Irvine Reach Water District Candlemas of Partieiptiou 39.110,000 89.621 34,772,9411 Mmidpel Water District ofOrcep County Water FacidiOa Corporation I9295,00o 66.611 12,852,592 Y�ore bN tide Country nry Water District Certificates efPauticips6an 9,860,000 97.773 9,W,418 Oseoge CmOq Fire Authouty 10,365.000 50.310 5214612 TOTAL GROSS OVERLAPPING GENERAL FIND DEBT SILM7.I17,087 Lars,: Sure Am Unified School Mason,velf.,cminnB QddiOed taw Acedamy Bolls 2,W;M0 ICI City of Maladies self-supporting obligations 650291,34 Otircr Cdq sed6supwing cbligafow 3616216T0 MWDOC Water Facilities Continuative(IM m1f-empnring) 12SSLSM TOTAL NET OVERI.3PPIHG GENERAL FUND DEBT S1,981,778221 GROSS COMBINED TOTAL DEBT M.6T6946052 p) W NET COMBINED TOTAL DEBT M,981.601,186 O) PorwnupofoveMpping 4ancye rtdevelopm<matl)tend tllpmperry wend wluation(f2M,1M2q,0M)Ioestedw1e10 bandanas ofeM dbrn. (2) Esau criinvaterrcvewet dibttuWofprtciduuon. Prcvimrly deuifdcerilesea ofparkiletim love bum rtdml0dutldenct rtvaue wppord 6mesand lust w Imgm indudd ea direct Lab on Ns,debt eaem,re (]) Exaluda sex end revenue enlicipnion nomv,<memdrt rtvenw,mmgepe revenue and sex allocation horde and non-bonded capital cater abliplions. BMIOLr: Tate Overlannino Tax and Aevncmenl Debt Gass Combined Total Debt Net Cmmbind Total Deb Lend ell lmpmvemem Maresca Valuation 1.5N6 2,60% 2.33% 6Y1 All Property Mvesd Valuation NIA 2.53% 2.26% STATEcurce:SCHOOL OCalifornis BUILDING red AID REPAYABLE AS OF 613MS: M W 52 L ORANGE COUNTY SANITATION DISTRICT Ratios of Outstanding Debt Last Ten Fiscal Years (5) Debt as a .. Total (3) Percentage Outstanding Median of Median (4) Debt Fiscal COP Family Family Population per Year Debt Income(1) Income Estimate(2) Capita 1998-99 $ 374,135,000 $ 63,478 0.017% 2,386,375 $ 156.78 1999-00 361,255.000 69,310 0.019% 2,213,925 163.17 2000-01 386,370,D00 70,577 0.018% 2.400,425 160.96 2001-02 376,000,000 72,998 0.019% 2,336,400 160.93 _ 2002-03 364,975,000 73,572 0.020% 2,408,050 151.56 2003-04 633,365,000 70,900 0.011% 2,441,350 259.43 2004-05 621.325,000 73,545 0.012% 2,467,850 251.77 ., 2006-06 808,570,000 76,443 0.009% 2,481,540 325.83 2006-07 801,785,000 78.960 0,010% 2,505,180 320.05 2007-08 1,082,420.000 83,015 (e) 0.008% 2.522,820 429.05 Notes &Data Sources (1) -Data is for the entire County of Orange. (2)-Data is for the estimated population served by the Orange County Sanitation District. (3)-Data Source: Center for Economic Research, Chapman University. (4)-Data Source: Demographic Research Unit,California Department of Finance. (5)-Data Source: Orange County Sanitation District. (6)-Forecasted number. r 53 LL ORANGE COUNTY SANITATION DISTRICT I Comparison of the Volume of Wastewater Treated V With Revenues and Expenses Last Ten Fiscal Years V Millions of Gallons of Collection, Waste- Treatment water &Disposal Total Total Total Total L Treated Cost per Operating Non-Opera ding Operating Non-Operating _ Fiscal Per Million costs costs Revenues Revenues Year Day Gallons (In Thousands) (In Thousands) _ (In Thousands) Dn Thousands) Lr 1998-99 241 580.06 $ 97,145 $ 18,451 $ 69,876 $ 62,863 1999-00 241 620.42 95,748 41,274 81,637 66,833 2000-01 246 647.46 105,117 19,402 73,254 87,446 L 2001-02 234 794.05 114,266 23,302 80,005 81,975 2002-03 239 880.25 121,635 15.653 89,164 81,332 2003-04 238 1,068.43 139.815 21.626 102,327 63,655 L 2004-05 243 11095.79 149,941 25,642 121,415 61.747 2005-D6 235 1,216.77 155,519 38,645 155,165 69,493 2006-07 229 1,268.38 165,266 37,836 169,656 115,154 2007.08 221 1,541.18 179,657 40,335 185,376 105.274 V An Interim Strategic Plan Update to the year 2020 was completed in September 2002 that projects wastewater treatment flows to increase to 284 millions of gallons per day(mgd)in 2010, to 302 mgd In 2015,and to 321 mgd in the year 2020. In order to manage the anticipated increase in wastewater flows,the District has Identified a$2.4 billion capital expansion plan through 2020. - Total expenses in FY 2007-08 Increased$104.4 million, or 90.3 percent since FY 1998-99, primarily as a result of(1) V OCSD's decision beginning in FY 2002-03 to maximize existing secondary treatment facilities as OCSD moves from a _ 50/50 mix of primary and secondary effluent treatment to meeting secondary treatment standards by December 31, 2012,and(2)OCSD's decision to eliminate most bacteria from the ocean outfall discharge by disinfecting the effluent `j beginning in FY 2002-03 at an additional cost in chemicals of$7 million annually. Maintenance, chemicals,utililuts, and other operating costs represent 37 percent of the Increase, primarily due to the increase In the levels of treatment referred to above. Depreciation expense represents another 5 percent c the Increase as a result of the previous expansion in capital facilities and the financing associated with the expansion. in FY 2007-08, personnel expenses rose 17.0 percent over the prior year. This increase is mainly due to recognition of net pension and OPEB obligations as well as increases in health insurance and retirement premiums;the full-time V equivalent positions authorized decreased by 10 In FY 2007-08. As depicted from the chart above,actual wastewater treatment flows have generally remained between 234 mgd and 244 mgd in the past,other than in FY 2000-01 which reached 246 mgd. Due to unusually dry weather conditions during the last two years, FY 2006-07 and FY 2007-08 had flows of only 229 mgd and 221 mgd respectively. 4 Source: Orange County Sanitation District I Lr 54 ORANGE COUNTY SANITATION DISTRICT Authorized Full-time Equivalents by Function Last Ten Fiscal Years 350 300 250 200 150 100 50 0 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 OGeneral Management NAdministraOve Services 12Te06o1 Servims OEngmeenng sogerations and Maintenance Fiscal Year Ending June 30, 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 General Management 15 13 12 17 17 17 17 2 25 30 _ Administrative Services 81 87 88 97 107 116 123 145 102 98 Technical Services 93 88 87 95 94 100 112 114 119 109 Engineering 67 75 73 104 79 80 95 99 98 104 Operations and Maintenance 286 255 250 261 272 285 282 284 300 293 Total FTE's 542 518 510 574 569 598 629 644 644 634 Source: Orange County Sanitation District's Financial Management Division. 55 ORANGE COUNTY SANITATION DISTRICT Bicsolids Produced Last Ten Fiscal Years 55,000 r sa.oao 45,000 40,000 r 35.000 30.000 r 25,000 r� r 20,000 0199b99 •199940 e20W 01 0200142 5200243 r .2003-04 020W45 0205&06 820W-07 .200706 r Fiscal Year Tonnage 1998-99 41,127 r 1999-00 42,831 2000-01 42,254 r 2001-02 42,505 2002-03 47,631 _ 2003-04 50,519 2004-05 51,700 2005-06 49,554 2006-07 49,184 2007-08 50,884 r r Source: Orange County Sanitation District's Environmental Compliance&Regulatory Affairs Division. r 56 ORANGE COUNTY SANITATION DISTRICT r Capital Asset Statistics Last Ten Fiscal Years r Miles of Number Primary Secondary Trunk& of Treatment Treatment Fiscal Subtrunk Pump Capacity Capacity r Year Sewers Stations (1) (1) 1998-99 650 22 276 200 1999.00 650 20 276 200 2000-01 650 20 266 200 2001-02 650 20 276 200 2002-03 650 20 276 200 r 2003-04 650 20 276 170 2004-05 620 18 306 170 2005-06 584 16 366 200 r 2006-07 581 16 372 200 2007-08 568 17 372 200 Notes (1)-C-Capacity is presented as million gallons treated per day. r r r r Source: Orange County Sanitation District r 57 ORANGE COUNTY SANITATION DISTRICT Demographic Statistics Covering The Entire County of Orange(1) Last Ten Fiscal Years W Total (4) (6) (2) Personal Per Capita Median Public (6) Fiscal Population Income Personal Family School Unemployment Year Estimates (in thousands) Income Income Enrollment Rate u 1998-99 2,776,000 $ 96,288,099 (3) $ 34,686 $ 63,478 471,000 2.6% 1999-00 2,828,000 106,003,904 (3) 37,484 69,310 483,000 2.9% -- 2000-01 2,880,000 109,010,278 (3) 37,851 70,577 494,000 3.0% V 2001-02 2,940,000 111,750,294 (3) 38,010 72,998 503,000 4.1% 2002-03 2,979,000 117,722,500 (3) 39,517 73,572 512,000 4.0% - 2003-04 3,017,000 125.798,400 (4) 41,697 70,900 517,000 3.6% L 2004-05 3,047,000 135,687,900 (4) 44,499 73,545 514,000 3.9% 2005-06 3,072,000 143,949,000 (4) 46,858 76,443 510,114 3.7% - - 2006-07 3,098,000 150,271,700 (4) 48,506 78,950 503,955 3.9% V 2007-08 3,090,000 154,665.000 (4),(7) 50.053 83,015 (7) 503,492 5.3% W Notes and Data Sources (1) - The Orange County Sanitation District services 471 square miles or 59% of the total 799 square miles that Lj make up the boundaries of the County of Orange. (2)-Data Source:Demographic Research Unit, California Department of Finance. 1 W (3)-Data Source:Bureau of Economic Analysis, U.S. Department of Commerce (4)-Data Source:Anderson Center for Economic Research,Chapman University. L' (5)-Data Source:California Department of Education, Educational Demographics Unit. i u (6)-Data Source:State of California, Employment Development Department as of June 30 of each fiscal year. (7)-Forecasted number. L u Li i W 58 L ORANGE COUNTY SANITATION DISTRICT Estimated Populations Served by the Orange County Sanitation District June 30, 2008 Population _ as of January 1,2008 Anaheim 346.820 Brea 40.080 Buena Park 82,770 Costa Mesa 113,960 _ Cypress 49,540 Fountain Valley 57,930 Fullerton 137.440 _ Garden Grove 173,070 Huntington Beach 201,990 Irvine 209,810 La Habra 62,640 ' La Palma 16,180 Los Alamitos 12,190 Newport Beach 84,550 Orange 140,850 Placentia 51,730 Santa Ana 353,180 Seal Beach 25,990 Stanton 39,280 Tustin 74,220 �+ Villa Park 6,260 Westminister 93,030 Yorba Linda 68,310 Subtotal City(1) 2.441.820 Estimated Population Served in Unincorporated Areas(2) 81,000 2,522,820 Data Sources: (1) Demographic Research Unit, California Department of Finance. (2)Orange County Sanitation District Financial Management Division. 59 ORANGE COUNTY SANITATION DISTRICT I Principal Orange County Employers(1) W For the Current Fiscal Year and Nine Years Ago tl Fiscal Year Ended 6/30/08 Fiscal Year Ended 6/30/99 Percentage of Percentage of Number of Total County Number of Total County (r Employers Employeas(2) Rank Employment(3) Employees (2) Rank Employment(4) Walt Disney Co. 20,000 1 1.29% 13,300 2 0.94% - County of(range 18.748 2 1.20% 15,408 1 1.09% L University of California,Irvine 17.579 3 1.13% 12,861 3 0.91% St.Joseph Health System 10.047 4 0.65% 8,150 5 0.58% Boeing Co. 9,961 5 0.64% 12,000 4 0.85% YUM!Brands Inc. 7,200 6 0.46% u AT 8 T, Inc. 6,000 7 0.39% California State University,Fullerton 5.634 8 0.36% Home Depot 5,450 9 0.35% Bank of America Corp. 5,000 10 0.32% 4.843 9 0.34% American Stores Co. 7,543 6 0.53% Tenet Healthcare Corp. 7,221 7 0.51% Ralphs Grocery Co. 5,000 8 0.35% Tricon Global Restaurants, Inc. 4,820 10 0.34% Total 105,619 6.79% 91,146 6.445 y L Notes& Data Sources (1)- Data is for Me entire County of Orange. (2)- Data Sources:Orange County Business Journal Book of Lists,County of Orange L (3)-Data Source: State of California,Employment Development Department. -Percentage is calculated by dividing employees by total employment of 1,555,900 as of June 2008. (4)-Data Source:State of California, Employment Development Department. I -Percentage is calculated by dividing employees by total employment of 1,417,300 as of June 1999. I� L U L L 60 i ORANGE COUNTY SANITATION DISTRICT Operating Indicators June 30, 2008 r District Organization: The Orange County Sanitation District is one consolidated district made up of two revenue areas which service unincorporated county areas and twenty-three cities and related special districts, as follows: r Consolidated Revenue Area County of Orange(unincorporated areas) Cities: Anaheim Huntington Beach Santa Ana Brea Irvine Seal Beach Buena Park La Habra Stanton Costa Mesa La Palma Tustin r Cypress Los Alamitos Villa Park Fountain Valley Newport Beach Westminster Fullerton Orange Yorba Linda Garden Grove Placentia r Special Districts: Midway City Sanitary District Costa Mesa Sanitary District r Revenue Area No. 14 County of Orange (unincorporated areas) r Cities: Irvine Orange Tustin r Special District: Irvine Ranch Water District Governing Body: 25-member Board of Directors Authorized Full-Time Equivalent Employees: 634 Operational Date: July 1, 1954 r Authority: California Health 8 Safety Code Section 4700 at. seq. Services: Wastewater collection, treatment, and disposal Service Area: 471 square miles Population Served: 2.5 million r Total Miles of Sewers(Including force mains): 568 miles Number of Pumping Stations: 17 r Wastewater System Treatment Capacities(Million Gallons per Day) Existing Primary Existing Secondary Planned Secondary Actual Flows Treatment Capacity Treatment Capacity Capacity by 2020 r Plant 1 92 204 110 170 Plant 2 119 168 9Q 150 Total �], ',ijy 2aQ Source: Orange County Sanitation DistricCs Financial Management Division. 61 u u u u u u u Ma PAGE INTENTIONALLY LEFT BLANK) IWl IW� iUI IWI W I� W W 62 u r r OCSD Other Data & Trends Section r r r ORANGE COUNTY SANITATION DISTRICT OTHER DATA&TRENDS r Information within this section consists of other data and trends including additional annual disclosures as required by the Sanitation District's Certificates of Participation r debt covenants beyond what is allowed to be reported in the Statistical Section. r r r r r 63 ORANGE COUNTY SANITIATION DISTRICT Cash and Investment Portfolio L+ as of June 30,2008 I Cost Markel Value Net Unmalized Gain/Loss V Shares Par Be" Base %&TOW Base Imma menl Portfolio: Cash and Cash Equivalents(U.S.Dollar): V Pending Trades $ - $ (4,111.B1376) S (4,111,813.76) .1.0DYo S - Cash - 1,338A0 1.338.00 0.00% - Certifirateso/Deposit-Domestic 3.50 .000.00 3.500,000.0D 3,500,000.00 eaS% - CommeroalPaper-Discount 17,400,00000 17242.565.21 17242.55521 4.18% - L Fed Hm Loan Bulk-Less man l Year 1821)0.000.00 18,099,449.67 18,099,449.67 4.38% - Federzi Home loan Mortgage-Less Than 1 Yr 40,800,000.00 40,618714.11 40,618,774.11 9.84% - FNMA Issues-Less Than 1 Year 15.771.000.01) 15,634,62B.W 15,634,628.35 3.79% - Mutual Funds 470,403.61 47g403.61 41M. 61 0.11% - V Repurchase Agreements 15.700.000.00 15,mat)(1.00 15,700,000.00 3.SD% Treasury Bills-Less Than 1 Year 7,300,000.00 7262,824.84 7262,824.84 1.M% Sutural 119,141,403.61 114,418,170.03 114,418,170.03 2771% Feed Income Securities(U.S.Dollar): L( Asxt Barked Secvnlies-Home Equity 808,974.48 796.33427 726,B1a01 all (a8,521.26) Alessi Backed Securities-Small Bus Admin 1.812.621.80 1,812,621.80 1,873,36429 0.45% 60.742.49 Banking B Finance 67250.00DD0 87078,B28.O0 66,M7,727.W 16.09% (631,100.M) Collateralized Mortgage Obligation 661,301.37 6F7901.96 683,656.96 0.17% 5.755.00 V FHLMC Muaidass 1295.629.41 1282.683.50 1,300,635.98 0.31% 17,952.48 FHLMC Pools 24,344,943.64 24,486,055.95 24,305,127.37 5.89% (1813,928.48) FNMA Pools 17.818.1211kI 18.115.02128 17,734,586.86 429% (380'434.42) FNMA Femic 389,810.46 375.611.80 385.480.93 O.M 9,869.13 LI GNMA Multi Family Pools 880,845.48 859,3T7.70 886,506.46 021% 7,128.78 GNMA Single Family Pools 3.156.66 3.313.01 3.280.18 D.OD% (32,83) PVT Placements-Mare Than I Year 752,000.00 826,199M 826,199.84 020% U.S.Agencies 116,471,848.29 1M,M,497.22 121I.W.584.89 29.21% (143.912.33) L U.S.Governments 59710,000.00 60,988,826.50 60758,625.13 14.71% (230201.37) Utility-Electric 900.000.00 9DO.000.00 897.606.00 0.22% (2,394.00) Uglily-Telephone 700.00D.00 700.000.00 699.S59.00 0.17% (441.00) Subtotal 293.800251.63 299,693=13 298,155,754.58 72.20% (1,537,518.15) V Convertible Smuddes(U.S,Dollar): Convertible Bonds 400.000.00 400200.00 398,000.00 0.10% (2200.00) Subtotal 4004000.00 4002ilaw 398,000.00 0.10% (2=,00) L Tobe InvestmentP rae 842lio S 413.Ml.655.24 414,511. .76 412,971,924.61 100.00% S (1,539,718.15) Demand Cash Accounts 3,209,948.00 3209,946.00 Monies Held Wlh Fiscal Agents 98.566.293.00 98,566,293.00 Monies with the Loral Agency Investment Fund 17,993,487.50 174992,51 1.7fi Total Cash and Investments S 534281.36928 S 532,740,755.37 y 1 W L has LL Source: Mellon Trust and the Orange County Sanitation District's Financial Management Division. Yd 64 I 61 ORANGE COUNTY SANITATION DISTRICT Property Tax Rates-Direct and Overlapping Governments Last Ten Fiscal Years Tax Rate OCSD 1958 OCSD's General Average Fiscal Basic Obligation Total Share of Year Levy Bonds Tax Rate Basic Levy 1908-99 1.00% 0.02% 1.02% 2.80% 1999-00 1.00% 0.00% 1.00% 2.80% 2000-01 1.00% 0.00% 1.00% 2.80% r' 2001-02 1.00% 0.00% 1.00% 2.80% 2002-03 1.00% 0.00% 1.00% 2.80% 2003-04 1.00% 0.00% 1.00% 2.80% 2004-05 1.00% 0.00% 1.00% 1.60% 2005-06 1.00% 0.00% 1.00% 1.60% 200647 1.00% 0.00% 1.00% 2.80% 2007-08 1.00% 0.00% 1.00% 2.80% Nola In 1978, California voters passed Proposition 13 which set the property tax rate at a 1.00% fixed amount of assessed value. This 1.00% is shared by all taxing agencies within which the subject property resides. In addition to the 1.00% fixed amount, r property owners were charged taxes as a percentage of assessed property values for the payment of OCSD general obligation bonds (which were paid in full in fiscal year 1998-99). Source:County of Orange Auditor-Controller's Office. r r ti 65 ORANGE COUNTY SANITATION DISTRICT Assessed and Estimated Actual Value of Taxable Property Last Ten Fiscal Years swomomo sxm.000.000 smo,wa wo sxian mo he nmwa.mo I '. sxiob om y r so '� � zmou emus zmzm sooiw zaw.m zms.w zro.oz zmz� ss--] aUri e.ure � Percent Changein Fiscal Assessed Year Secured Unsecured Total Value 1998-99 131,295,000 3,394,000 134.689.000 2.21% 1999-00 142,126,000 3,507,000 145,633,000 8.13% 2000-01 155,544,000 3,778,000 159.322.000 9.40% �► 2001-02 189,357,000 4,OB6.000 173,423,000 8.85% 2002-03 183.223.000 5.657,000 188,880.000 8,91% 2003-04 197,143.000 4,309,000 201,452,000 6.66% 2004-05 214,529,000 4,743,000 219,272,000 8.85% 2005-06 236,826,573 5,023,423 241,849,995 10.30% 2006-07 264.241,033 6,452,111 270,693,144 11.93% 2007-08 288.051,467 4.681.838 292.733.305 8.14% In 1978,the voters of the State of California passed Proposition 13 which limited property taxes to a total maximum rate of 1% based upon the assessed value of the property being taxed. Each year, the assessed value of property may be increased by an inflation factor which is limited to a maximum increase of 2%. With few exceptions, property is only reassessed at the time that it is sold to a new owner. At that point,the new assessed value in reassessed at the purchase price of the property sold. The assessed valuation data shown above represents the only data currently available with respect to the actual market value of taxable property and is subject to the limitations described above. Consequently,the assessed and estimated values are the same. Source: Orange County Auditor-Controller's Office. 66 ORANGE COUNTY SANITATION DISTRICT Property Tax and User Fee Levies and Collections (Dollars in Thousands) Last Ten Fiscal Years $250,000 $200,000 $150,000 $100,000 $50,000 s- 1998.99 1999.00 2000-01 2001-02 2002.03 2003-04 2004-05 2005-06 2006.07 2007-08 CTMel Te.ene uen Poe Levy STOW T..WW U..r Fe.C.Ilecnon Current Total Tax %of Total Tax Tax and Percent of Delin- and User %of Total D/S Delinquen- Flscal and User ERAF III User Fee Levy quent Fee Collection Delinquen- ties to Tax Year Fee Levy Deduction Collection Collected Collection Collection to Levy Cleo Levy 1998-99 $98,557 $ - $ 98.267 99.71 $ 74 $ 98,341 99.78 $ 291 0.30 _ 1999-00 107,948 - 107,794 99.86 72 107,866 99.92 154 0.14 2000-01 105.890 - 105,646 99.77 94 105,740 99.86 245 0.23 2001-02 112,419 - 112,087 99.70 83 112,170 99.78 332 0.30 2002-03 122,450 - 122,210 99.80 98 122.308 99.88 241 0.20 2003-04 134,389 - 134.132 99.81 94 134,226 99.88 257 0.19 2004-05 153,187 (16,198) 152,745 99.71 92 152.837 99.77 442 0.29 2005-06 191,711 (16,198) 191,290 99.78 122 191,412 99.84 421 0.22 2006-07 209,766 - 209.206 99.73 215 209,421 99.64 560 0.27 2007-08 228.622 - 228,635 100.01 329 228,964 100.15 (13) (0.01) Source:Orange County Auditor-Controller's Office, 67 L ORANGE COUNTY SANITATION DISTRICT Property Value and Construction V Covering The Entire County of Orange(1) (Dollars In Thousands) Last Ten Fiscal Years Non- Assessed Residential Residential Property Value(2) Conatr.(3) Construction(3) Total Fiscal Calendar No.of Construction Year Value Year Value Units Value Value(3) L 1998-99 $ 192,625,739 1999 $ 1,614,422 12,348 $2,262,492 $ 3.876,914 1999-00 209,136.472 2000 1,762,142 12.367 2,210.775 3972917 i 1 2000-01 228,548,301 2001 1,349,607 8.646 1,905,321 3:254:928 LI 2001-02 248,966,581 2002 1,208,626 12,020 2,328,123 3,536.749 2002-03 269,684,864 2003 1.005,547 9,311 2,076,976 3,082,523 2003-04 287,923,828 2004 1,132,848 9,322 2,243,642 3.376.490 L 2004-05 311,802,395 2005 1,494,759 7,206 2,100.436 3,595,1195 2005-M 342,576,859 2006 2,400,589 8,371 2,316,948 4,717 L 617 I 2006-07 381.007,391 2007 2,005,173 7,070 1.791.488 3,796:001 2007-08 412.669,779 2008 (4) 1,465.990 5,824 1,494,697 2,960,687 Notes and Data Sources L (1) - The Orange County Sanitation District services 471 square miles or 59% of the total 799 square miles that make up the boundaries of the County of Orange. (2)-Data Source-Orange County Auditor-Controlter's Office. L (3)-Data Source-'The Chapman University Economic&Business Review." (4)-Forecasted numbers. L L, L L W L L 68 ORANGE COUNTY SANITATION DISTRICT Insurance in Force As of July 1,2008 Type Insurer Deductible Limit All-Risk ProuerN Fire and Other Penis Public Entity Property $25.000 per $1 billion/occurrence Insurance Program occurrence (Lexington and others) Flood Public Entity Property $100.000 per $300 million/occurtence Insurance Program occurrence Earthquake Not Applicable Not Applicable Self-insured Boiler& Machinery Public Entity Property $25,000 to $100 million/accurrence Insurance Program $350,000 (Lexington and others) Employee Dishonesty/ National Union Fire $25.000 $1 millionAoss: Faithful Performance/ $4 million excess policy Errors&Ommissions Excess Everest National Insurance Go. $250,000 $30 millionloccumence General LlebilFN (first$10 million layer): $500.000 for and annual aggregate American Merchants Casualty EPLI Ins.Co.($20 million layer excess$10 million) Travel &Accident Chubb Group of Insurance None Accidental Death 8 Dismemberment: Companies Class 1: Elected Officials, $500,000 per occurrence Class 2:Employees, 1OX annual salary, up to$500,000 per occur. Excess Workers' CSAC Excess Insurance $500,000 Unlimited statutory coverage Compensation Authority Each Accident each accident, each employee $5 million employers liability Pollution Liability CSAC Excess Insurance $100,000 $10,000,000 per loss Authority Watercraft Liability Northern Assurance Co.of Am. $15.000 $10 million Hull &Machinery Northern Assurance CA.of Am. $15.000 $1.3 million Pollution Liability Great American Ins.Co, None $5 million OCIP Main Basket COCIP"=Owner Contolled Ins. Program for Constructicn) .. Workers Comp. Liberty Mutual $250.000/occur. Unlimited statutory coverage General Liability Liberty Mutual $250,000/occur. $2 million/occumence;$4 million egg. OCIP Excess Liability AIG $10,000 $100 million OCIP Pollution Liablllty Liberty Surplus $250,000 $15 million Source: Orange County Sanitation District's Risk Management Office. 69 u u ' u � u u u u u (THIS PAGE INTENTIONALLY LEFT BLANK) u U L U u u u u u u 70 I j ORANGE COUNTY SANITATION DISTRICT Financial Management Division 10844 Ellis Avenue Fountain Valley, California 92708-7018 (714) 962-2411 www.ocsdxom 6/30/08