HomeMy WebLinkAbout02-10-2016 Administration Committee Agenda Orange County Sanitation District Wednesday, February 10, 2016
Regular Meeting of the - i °; 5:00 P.M.
ADMINISTRATION Administration Building
COMMITTEE Board Room
10544 Ellis Avenue
Fountain Valley, CA
714 593-7433
AGENDA
PLEDGE OF ALLEGIANCE:
DECLARATION OF QUORUM:
PUBLIC COMMENTS: If you wish to address the Board of Directors on any item, please complete a
Speaker's Form (located at the table outside of the Board Room) and submit it to the Clerk of the Board or
notify the Clerk of the Board the item number on which you want to speak. Speakers will be recognized by
the Chairman and are requested to limit comments to three minutes.
REPORTS: The Committee Chair and the General Manager may present verbal reports on
miscellaneous matters of general interest to the Committee Members. These reports are for information
only and require no action by the Committee.
REPORT OF DIRECTOR OF FINANCE AND ADMINISTRATIVE SERVICES:
CONSENT CALENDAR: The Consent Calendar Items are considered to be routine and will be
enacted, by the Committee, after one motion, without discussion. Any items withdrawn from the Consent
Calendar for separate discussion will be conserved in the regular order of business.
1. APPROVAL OF MINUTES (Clerk of the Board)
RECOMMENDATION: Approve Minutes of the December 9, 2015, Administration
Committee Meeting.
02/10/16 Administration Committee Agenda Page 1 of 4
2. COOPERATIVE PROCUREMENT WITH ADMIN MINNESOTA MATERIALS
MANAGEMENT DIVISION (Lorenzo Tyner)
RECOMMENDATION: Recommend to the Board of Directors to: Authorize a
purchase order to procure information technology computer and peripheral
equipment using the Admin Minnesota Materials Management Division contract
release#C-1084(5)through the contract expiration date, December 31, 2016 for a
total amount not to exceed $400,000, with four (4) one-year renewal options, in
accordance with Ordinance OCSD-47, Section 2.03(B) Cooperative Purchases.
3. OUTSIDE ACTIVITIES — EXECUTIVE MANAGEMENT TEAM MEMBER
(Celia Chandler)
RECOMMENDATION: Approve outside activities for one member of the District's
Executive Management Team, in accordance with the employee's At-Will
Employment Agreement.
4. GENERAL MANAGER APPROVED PURCHASES (Lorenzo Tyner)
RECOMMENDATION: Recommend to the Board of Directors to: Receive and
file District purchases made under the General Manager's authority for the period
of October 1, 2015 — December 31, 2015.
5. REPORT OF THE INVESTMENT TRANSACTIONS FOR THE MONTH OF
JANUARY 2016 (Lorenzo Tyner)
RECOMMENDATION: Recommend to the Board of Directors to: Receive and
file the report of the investment transactions for the month of January 2016.
6. CONSOLIDATED FINANCIAL REPORT 2ND QUARTER ENDING
DECEMBER 31, 2015 (Lorenzo Tyner)
RECOMMENDATION: Recommend to the Board of Directors to: Receive and file
Orange County District Second Quarter Financial Report for the period ended
December 31, 2015.
02/10/16 Administration Committee Agenda Page 2 of 4
NON-CONSENT CALENDAR:
7. WASTEWATER REFUNDING REVENUE OBLIGATIONS, SERIES 2016A
(Lorenzo Tyner)
RECOMMENDATION: Recommend to the Board of Directors to:
A. Adopt Resolution No. OCSD16-XX, authorizing the execution and delivery
by the District of an Installment Purchase Agreement, a Trust Agreement,
an Escrow Agreement and a Continuing Disclosure Agreement in
connection with the execution and delivery of Orange County Sanitation
District Wastewater Refunding Revenue Obligations, Series 2016A,
authorizing the execution and delivery of such Revenue Obligations
evidencing principal in an aggregate amountof notto exceed $163,000,000,
approving a Notice of Intention to Sell, authorizing the distribution of an
Official Notice Inviting Bids and an Official Statement in connection with the
offering and sale of such Revenue Obligations and authorizing the
execution of necessary documents and related actions.
RECOMMENDATION: Recommend to the Orange County Sanitation District
Financing Corporation to:
B. That the Orange County Sanitation District Financing Corporation approve
the documents supporting and authorizing the Revenue Obligations in an
aggregate amount not to exceed $163,000,000.
8. CONSIDERATION OF BUDGET ASSUMPTIONS AND BUDGET CALENDAR
FOR PREPARATION OF THE FY 2016-17 AND FY 2017-18 TWO-YEAR
BUDGET (Lorenzo Tyner)
RECOMMENDATION: Recommend to the Board of Directors to:
Approve the FY 2016-17 and FY 2017-18 budget assumptions and direct staff to
incorporate these parameters in the preparation of this two-year budget.
INFORMATION ITEMS:
None.
CLOSED SESSION:
None.
02/10/16 Administration Committee Agenda Page 3 of 4
OTHER BUSINESS AND COMMUNICATIONS OR SUPPLEMENTAL AGENDA ITEMS,
IF ANY:
ADJOURNMENT:
The next Administration Committee meeting is scheduled for Wednesday, March g, 2016
at 5:00 p.m.
Accommodations for the Disabled: Meeting Rooms are wheelchair accessible. If you require any special disability
related accommodations, please contact the Orange County Sanitation District Clerk of the Board's office at
(714)593-7433 at least 72 hours prior to the scheduled meeting. Requests must specify the nature of the disability
and the type of accommodation requested.
Agenda Posting: In accordance with the requirements of California Government Code Section 54954.2,this agenda
has been posted outside the main gate of the Sanitation District's Administration Building located at 10844 Ellis
Avenue, Fountain Valley, California, 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 majority of the Board of Directors,are available for public inspection in the office of the Clerk of the Board.
Agenda Description: The agenda provides a brief general description of each item of business to be considered or
discussed. The recommended action does not indicate what action will be taken. The Board of Directors may take
any action which is deemed appropriate.
NOTICE TO DIRECTORS: To place items on the agenda for the Committee Meeting, items must be submitted to
the Clerk of the Board 14 days before the meeting.
Kelly A.Lore
Clerk of the Board
(714)593-7433
klore(docsd.com
For any questions on the agenda, Committee members may contact staff at:
General Manager James Herberg (714)593-7300 iherbergfiDocsd.com
Assistant General Manager Bob Ghirelli (714)593-7400 rohirelli6ocsd.com
Director of Finance and Lorenzo Tyner (714)593-7550 Itvner(rpomd.com
Administrative Services
Director of Human Resources Celia Chandler 714 593-7202 cchandler ocsd.com
02/10/16 Administration Committee Agenda Page 4 of 4
ITEM NO. 1
MINUTES OF THE
ADMINISTRATION COMMITTEE
Orange County Sanitation District
Wednesday, December 9, 2015, at 5:00 P.M.
A regular meeting of the Administration Committee of the Orange County Sanitation
District was called to order by Committee Chair Curry on December 9, 2015, at 5:01 p.m.,
in the Administration Building of the Orange County Sanitation District.
Director Kim led the Flag Salute.
A quorum was declared present, as follows:
COMMITTEE MEMBERS PRESENT: STAFF PRESENT:
Keith Curry, Chair Jim Herberg, General Manager
Lucille Kring, Vice-Chair Bob Ghirelli, Assistant General Manager
Steven Choi Celia Chandler, Director of Human Resources
James Ferryman Ed Torres, Director of Operations and
Peter Kim Maintenance
Joy Neugebauer Lorenzo Tyner, Director of Finance
Glenn Parker Rob Thompson, Director of Engineering
Teresa Smith Kelly Lore, Clerk of the Board
Sal Tinajero Jennifer Cabral
John Nielsen, Board Chair Rich Castillon
Greg Sebourn, Board Vice-Chair Nina Tran
Richard Spencer
COMMITTEE MEMBERS ABSENT:
Jim Katapodis OTHERS PRESENT:
Greg Mills Brad Hogin, General Counsel
Bill Dennehy, Chandler Asset Management
Mia Corral, Chandler Asset Management
PUBLIC COMMENTS:
Bob Ransom, Brethren Christian Jr./Sr. High School CEO who stated concerns with the
OCSD sewer use fee assessed for the school property. He provided a handout for the
Committee which was received and filed.
Director of Finance, Lorenzo Tyner stated that he will have his staff meet with Mr. Ransom
to assist and evaluate his concerns.
REPORT OF COMMITTEE CHAIR:
Committee Chair Curry did not provide a report.
12/09/2015 Administration Committee Minutes Page 1 of
REPORT OF GENERAL MANAGER:
General Manager, Jim Herberg did not provide a report.
REPORT OF DIRECTOR OF FINANCE AND ADMINISTRATIVE SERVICES:
Director of Finance and Administrative Services, Lorenzo Tyner did not provide a report.
CONSENT CALENDAR:
1. APPROVAL OF MINUTES (Clerk of the Board)
MOVED, SECONDED AND DULY CARRIED TO: Approve Minutes of the
November 11, 2015, Administration Committee Meeting.
AYES: Choi, Curry, Ferryman, Katapodis, Kim, Kring, Nielsen,
Parker, Sebourn, T. Smith and Tinajero
NOES: None
ABSTENTIONS: None
ABSENT: Mills and Tinajero
2. INVEST AND/OR REINVEST DISTRICT'S FUNDS (Lorenzo Tyner)
MOVED, SECONDED AND DULY CARRIED TO: Recommend to the Board of
Directors to:
Adopt Resolution No. OCSD 15-XX, entitled "A Resolution of the Board of
Directors of the Orange County Sanitation District, Authorizing the Orange County
Sanitation District's Treasurer to Invest and/or Reinvest District's Funds; Adopting
District's Investment Policy Statement and Performance Benchmarks for calendar
year 2016; and Repealing Resolution No. OCSD 14-20."
AYES: Choi, Curry, Ferryman, Katapodis, Kim, Kring, Nielsen,
Parker, Sebourn, T. Smith and Tinajero
NOES: None
ABSTENTIONS: None
ABSENT: Mills and Tinajero
3. CONFLICT OF INTEREST CODE (Clerk of the Board)
MOVED, SECONDED AND DULY CARRIED TO: Recommend to the Board of
Directors to:
Adopt Resolution No. OCSD 15-XX entitled, "A Resolution of the Board of
Directors of Orange County Sanitation District adopting a Conflict of Interest Code
which supersedes all prior Conflict of Interest Codes and amendments previously
adopted."
12/09/2015 Administration Committee Minutes Page 2 of 4
AYES: Choi, Curry, Ferryman, Katapodis, Kim, Kring, Nielsen,
Parker, Sebourn, T. Smith and Tinajero
NOES: None
ABSTENTIONS: None
ABSENT: Mills and Tinajero
NON-CONSENT CALENDAR:
None.
INFORMATION ITEMS:
4. INVESTMENT PERFORMANCE RESULTS (Lorenzo Tyner)
Bill Dennehy, Chandler Asset Management, provided an informative PowerPoint
Presentation regarding the OCSD Investment portfolio managed by Chandler and
focused on: Long term and liquid portfolios; annual benchmark comparisons;
issuer report; investment policy compliance; long term performances; annual
timeline of Chandler activities and staff communications. Mr. Dennehy and staff
responded to questions from the Committee.
Director Tinapro arrived at 5:34 p.m.
5. COMMUNITY OUTREACH (Bob Ghirelli)
Assistant General Manager Bob Ghirelli introduced Principal Public Affairs
Specialist, Jennifer Cabral who provided a PowerPoint presentation including the
introduction of the public affairs team and the community relations, public
education and outreach accomplishments for this year including: Sewer science—
Inside the Outdoors; High School PSA Contest; Tour program and speakers
bureau; Community events; and capital project and maintenance outreach. Ms.
Cabral then answered questions from the Committee
Committee Chair Curry thanked Ms. Cabral and staff for the construction outreach
efforts in Newport Beach.
Chair Nielsen also thanked Ms. Cabral and staff for the presentation. He also
inquired about an upcoming ACC-OC meeting with OCSD which Ms. Cabral stated
should be scheduled for January 2016.
CLOSED SESSION:
None.
12/09/2015 Administration Committee Minutes Page 3 of4
OTHER BUSINESS AND COMMUNICATIONS OR SUPPLEMENTAL AGENDA ITEMS,
IF ANY:
Committee Chair Curry addressed a concern from Director Parker regarding the 5:00 p.m.
start time of the Committee meeting. It was the consensus of the Committee to keep the
start time at 5:00 p.m.
ADJOURNMENT:
Committee Chair Curry declared the meeting adjourned at 5:49 p.m. to the next regularly
scheduled meeting of Wednesday, February 10, 2016 at 5:00 p.m.
Submitted by:
Kelly A. Lore
Clerk of the Board
12/09/2015 Administration Committee Minutes Page 4 of 4
ADMINISTRATION COMMITTEE Meng D310 TOBE. Dir.
02/lti10/16 02/24/1Or6
AGENDA REPORT ItemNumber Item Number
z
Orange County Sanitation District
FROM: James D. Herberg, General Manager
Originator: Lorenzo Tyner, Director of Finance and Administrative Services
SUBJECT: COOPERATIVE PROCUREMENT WITH ADMIN MINNESOTA
MATERIALS MANAGEMENT DIVISION
GENERAL MANAGER'S RECOMMENDATION
Authorize a purchase order to procure information technology computer and peripheral
equipment using the Admin Minnesota Materials Management Division contract release
#C-1084(5) through the contract expiration date, December 31, 2016 for a total amount
not to exceed $400,000, with four (4) one-year renewal options, in accordance with
Ordinance OCSD-47, Section 2.03(B) Cooperative Purchases.
SUMMARY
OCSD wishes to select the Admin Minnesota Materials Management Division contract
release#C-1084(5)as established by The Office of Enterprise Technology (OET)and the
Department of Administration, State of Minnesota to standardize specifications for
computer desktops, notebooks, tablets, and peripherals.
Minnesota's Cooperative Purchasing Venture(CPV), established by Minn. Stat. § 16C.03,
subd.10, allows eligible entities to purchase goods, certain services and utilities from
contracts established by the Materials Management Division (MMD) for Minnesota state
agencies. This program creates a legal relationship so that eligible governmental entities
can use these contracts just like state agencies. Minnesota Statutes § 471.59, subd. 1,
known as the Joint Powers Act, defines the governmental entities that may join the CPV
program. They include counties, cities, towns, townships, and school districts, as well as
other entities. Minn. Stat. § 16C.105 adds certain tax-exempt, non-profit entities and
charitable organizations to the list of entities eligible to use these contracts.
BACKGROUND
In order to property maintain and repair Orange County Sanitation District's (OCSD)
facilities, the Information Technology division has needs to purchase computers and
peripheral parts and supplies. Such item requirements have been forecasted based
upon projected obsolete equipment, historical product failure rates, and new items to
address general capacity, redundancy, or security. Since technology changes so
frequently, it is not appropriate to stock these items in OCSD's warehouses.
Page 1 of 3
RELEVANT STANDARDS
• OCSD Ordinance OCSD-47, Section 2.03(B) Cooperative Purchases
PROBLEM
The procurement process on information technology items and services for a local
agency like OCSD involves a lot of efforts and associated costs. IT needs to work
diligently in finding ways to streamline the procurement process while minimizing cost
concomitant of the procurement of technology items.
PROPOSED SOLUTION
OCSD's purchasing power is limited therefore, utilizing other large agencies'
cooperative agreemenf/s who have completed a vetted procurement process is a
viable and economical solution.
TIMING CONCERNS
Existing purchase order to procure Microsoft technology items expired on December
15, 2015. Deployment of new systems using Microsoft tablets and solutions is
imperative to support plant operations and maintenance initiatives.
RAMIFICATIONS OF NOT TAKING ACTION
Increased cost related to the procurement of technology items; increased risk of being
unable to support plant operations and maintenance.
PRIOR COMMITTEE/BOARD ACTIONS:
June 2015: Board Award M.O. 6/24/2015, Item 9
ADDITIONAL INFORMATION
OCSD is using the Microsoft Surface Pro as our standard desktop/notebook replacement.
These devices are being used extensively by field staff to connect to our network while
away from one's desk. These devices are also being deployed to staff in support of the
new Maximo maintenance management system. The State of Minnesota has established
standard specifications for computer desktops, notebooks, tablets, and monitors. Each
State standard specification has a list of upgrade options that allows agencies to
customize configurations for their needs. The Office of Enterprise Technology(OET) and
the Department of Administration have approved the implementation of these standards
as a mandatory requirement for state agencies. OCSD staff has verified that pricing has
been checked for competitiveness based upon volume pricing through this cooperative.
Page 2 of 3
CEQA
N/A
FINANCIAL CONSIDERATIONS
This request complies with authority levels of the Sanitation District's Purchasing
Ordinance OCSD-47, Section 2.03(B) Cooperative Purchases. This item has been
budgeted in the established annual Joint Operating budget.
Page 3 of 3
ADMINISTRATION COMMITTEE Meeting Dare To ad.ofDir.
02 10,16 —
AGENDA REPORT Item Number Item Number
3 —
Orange County Sanitation District
FROM: James D. Herberg, General Manager
Originator: Celia Chandler, Director of Human Resources
SUBJECT: OUTSIDE ACTIVITIES— EXECUTIVE MANAGEMENT TEAM MEMBER
GENERAL MANAGER'S RECOMMENDATION
Approve outside activities for one member of the District's Executive Management Team,
in accordance with the employee's At-Will Employment Agreement.
SUMMARY
BACKGROUND
This agenda item presents information about specific requirements for members of
the Executive Management Team and provides details about the outside activities of
one employee, Assistant General Manager Robert Ghirelli, for approval.
RELEVANT STANDARDS
• Comply with transparency and communication requirements
• Negotiate fair and equitable labor agreements
• Positive employer, employee relations
PROBLEM
All employees of the Orange County Sanitation District(OCSD)are required to declare
and obtain approval for outside remunerative or professional association activities, per
Policy 1.5, Outside Employment and Professional Associations. For members of
OCSD's Executive Management Team (EMT), such activities must be approved by
the Administration Committee.
OCSD's At-Will Employment Agreement for each member of OCSD's EMT specifies
the following in Section 8: "During the period of this At-Will Employment Agreement,
it is agreed that Employee shall devote his full time, skills, labor and attention to said
employment. At no time may Employee undertake outside activities consisting of
consultant work, speaking engagements, writing, lecturing, or other similar
professional activities for money or other consideration without prior approval of
District's Administration Committee."
Assistant General Manager Robert P. Ghirelli is engaged in outside activities as
described above.
Page 1 of 2
PROPOSED SOLUTION
Per the above requirements, the following graphic summarizes the outside activities
for FY 2015-16 that are presented for consideration and approval.
Robert A Ghirelli, Assistant General Mana er
Organization Role & Committee Compensation Time Schedule
Commitment
Typically after hours
Valencia Heights Member, Board of $200/month 2 hours/month or Fridays off.
Water Company Directors Personal leave used
when necessary.
Member, Board of Typically after hours
San Gabriel River Directors (appointment $200/hour 2 hours/month or Fridays off.
Watermaster process pending) Personal leave used
when necessary.
TIMING CONCERNS
Annual approval by OCSD's Administration Committee for the specific activities listed
above is needed to comply with OCSD policy and the employee's At-Will Employment
Agreement. Also, any additional outside activities for this employee or other EMT
members would require approval by OCSD's Administration Committee in the future.
RAMIFICATIONS OF NOT TAKING ACTION
Participation in outside activities by Mr. Ghirelli would be inconsistent with OCSD
policy and his At-Will Employment Agreement if those outside activities are not
approved by the OCSD Administration Committee.
PRIOR COMMITTEE/BOARD ACTIONS
N/A
FINANCIAL CONSIDERATIONS
N/A
ATTACHMENT
The following attachment(s) may be viewed on-line at the OCSD website (www.ocsd.coml with the
complete agenda package:
N/A
Page 2 of 2
ADMINISTRATION COMMITTEE Meng Dat0 TOBE. Dir.
02/lti10/16 02/24/1Or6
AGENDA REPORT ItemNumber Item Number
9
Orange County Sanitation District
FROM: James D. Herberg, General Manager
Originator: Lorenzo Tyner, Director of Finance and Administrative Services
SUBJECT: GENERAL MANAGER APPROVED PURCHASES
GENERAL MANAGER'S RECOMMENDATION
Receive and file District purchases made under the General Manager's authority for the
period of October 1, 2015— December 31, 2015.
SUMMARY
BACKGROUND
Staff provides the Administration Committee and the Board of Directors quarterly
reports of General Manager approved purchases between $50,000 and $100,000.
RELEVANT STANDARDS
• Quarterly Financial Reporting
• Ensure that the public's money is wisely spent
PROBLEM
N/A
PROPOSED SOLUTION
In accordance with Board purchasing policies, Ordinance No. OCSD47, the General
Manager has authority to approve purchases between $50,000 and $100,000. Below
is a summary of General Manager approved purchases, in amounts exceeding
$50,000, for the second quarter of fiscal year 2015-16.
Page 1 of 2
Vendor Name Amount Department Description/Discussion
Repair Services for Manhole
J R FILANC Facilities Support SUN0155-0125
CONSTRUCTION $55,000.00 Services Sole Source Justification# 1340
Reason: Emergency- Critical Time
Sensitive Work
IT Hardware Purchase to Replace
the Obsolete Internal Controls
DATALINK Administrative System Storage Array plus a 3-year
NETWORKS, INC. $76,385.61 Services Support Agreement from 10/30/15 to
10/29/18
GSA/CMAS Contract in Accordance
with Ordinance OCSD-47,2.03(B)
Foul Air Analysis and
ALS 00 Operations & Characterization for Plants 1 & 2
$61,235.
ENVIRONMENTAL Maintenance from 11/1/15 to 6/30/16
Specification No. S-2015-723
Maintenance on Generators at
Plants 1 &2 -Sole Source
QUINN POWER $g340400 Operations& Justification# 1374
, .
SYSTEMS Maintenance Reason: Original Equipment
Manufacturer Parts/Materials
Available from Only One Source
SHIMADZU Operations & Gas Chromatograph with Single
SCIENTIFIC $81,818.17 Maintenance Quadrupole Mass Spectrometer
INSTRUMENT Specification No. E-2015-732
PRIOR COMMITTEE/BOARD ACTIONS
N/A
ADDITIONAL INFORMATION
N/A
CEQA
N/A
ATTACHMENT
The following affachment(s) maybe viewed on-line at the OCSD website (www.ocsd.corn with the
complete agenda package:
N/A
Page 2 of 2
ADMINISTRATION COMMITTEE Meng Dat0 TOBE. Dir.
02/lti10/16 02/24/1Or6
AGENDA REPORT ItemNumber Item Number
s
Orange County Sanitation District
FROM: James D. Herberg, General Manager
Originator: Lorenzo Tyner, Director of Finance and Administrative Services
SUBJECT: REPORT OF THE INVESTMENT TRANSACTIONS FOR THE MONTH
OF JANUARY 2016
GENERAL MANAGER'S RECOMMENDATION
Receive and file the Report of The Investment Transactions for the Month of January 2016.
SUMMARY
BACKGROUND
The CA Government Code requires that a monthly report of investment transactions
be provided to the legislative body. Attached is the monthly report of investment
transactions for the month ended January 31, 2016.
RELEVANT STANDARDS
CA Government Code: Section 53607
PRIOR COMMITTEE/BOARD ACTIONS
N/A
FINANCIAL CONSIDERATIONS
N/A
ATTACHMENT
The following attachment(s) may be viewed on-line at the OCSD website (wwwocsd.com) with the
complete agenda package:
• Report on the Investment Transactions for the Month Ended January 31, 2016.
Page 1 of 1
C." Orange County Sanitation District Consolidated Transaction Ledger
Account#10283 12/31/15 Thru 1/31/16
Transaction Settlement Acq/Disp Interest
Type Date CUSIP Quantity Security Description Price Yield Amount PurlSold Total Amount Gain/Loss
ACQUISITIONS
Purchase 01/02/2016 261908107 74,400.00 Dreyfus Shod IntermediateGov Treasury 1.000 0.09% 74,400.00 0.00 74,400.00 0.00
Cash Management Fd521
Purchase 01/05/2016 261908107 1,232.35 Dreyfus Short-Intermediate Gov Treasury 1.000 0.09% 1,232.35 0.00 1,232.35 0.00
Cash Management Fd521
Purchase 01/05/2016 261908107 895.75 Dreyfus Short-Intermediate Gov Treasury 1.000 0.09% 895.75 0.00 895.75 0.00
Cash Management Fd521
Purchase 01/08/2016 261908107 9,282.28 Dreyfus Short-Intermediate Gov Treasury 1.000 0.09% 9,282.28 0.00 9,282.28 0.00
Cash Management Fd521
Purchase 01/09/2016 261908107 55,000.00 Dreyfus Short-Intermediate Gov Treasury 1.000 0.09% 55,000.00 0.00 55,000.00 0.00
Cash Management Fd521
Purchase 01/12/2016 161571GC2 2,500,000.00 Chase CHAIT Pool#2013-A8 99.965 1.03% 2,499,121.10 1,893.75 2,501,014.85 0.00
1.01%Due 1 011 5/2 01 8
Purchase 01/12/2016 261908107 18,750.00 Dreyfus Short-Intermediate Gov Treasury 1.000 0.09% 18,750.00 0.00 18,750.00 0.00
Cash Management Fd521
Purchase 01/12/2016 261908107 7,500.00 Dreyfus Short-Intermediate Gov Treasury 1.000 0.09% 7,500.00 0.00 7,500.00 0.00
Cash Management Fd521
Purchase 01/14/2016 261908107 48,437.50 Dreyfus Short-Intermediate Gov Treasury 1.000 0.09% 48,437.50 0.00 48,437.50 0.00
Cash Management Fd521
Purchase 01/15Q016 261908107 6,504.56 Dreyfus Short-Intermediate Gov Treasury 1.000 0.09% 6,504.56 0.00 6,504.56 0.00
Cash Management Fd521
Purchase 01/15/2016 261908107 9,375.00 Dreyfus Short-Intermediate Gov Treasury 1.000 0.09% 9,375.00 0.00 9,375.00 0.00
Cash Management Fd521
Purchase 01/15/2016 261908107 2,104.17 Dreyfus Short-Intermediate Gov Treasury 1.000 0.09% 2,104.17 0.00 2,104.17 0.00
Cash Management Fd521
Purchase 01/15Q016 261908107 3,566.67 Dreyfus Short-Intermediate Gov Treasury 1.000 0.09% 3,566.67 0.00 3,566.67 0.00
Cash Management Fd521
Purchase 01/15/2016 261908107 304,297.64 Dreyfus Short-Intermediate Gov Treasury 1.000 0.09% 304,297.64 0.00 304,297.64 0.00
Cash Management Fd521
Purchase 01/15/2016 261908107 1,682.83 Dreyfus Short-Intermediate Gov Treasury 1.000 0.09% 1,682.83 0.00 1,682.83 0.00
Cash Management Fd521
Purchase 01/15Q016 261908107 3,355.33 Dreyfus Short-Intermediate Gov Treasury 1.000 0.09% 3,355.33 0.00 3,355.33 0.00
Cash Management Fd521
Purchase 01/15/2016 261908107 2,585.30 Dreyfus Short-Intermediate Gov Treasury 1.000 0.09% 2,585.30 0.00 2,585.30 0.00
Cash Management Fd521
Purchase 01/15/2016 261908107 24.34 Dreyfus Short-Intermediate Gov Treasury 1.000 0.09% 24.34 0.00 24.34 0.00
Cash Management Fd521
Purchase 01/16/2016 261908107 24,375.00 Dreyfus Short-Intermediate Gov Treasury 1.000 0.09% 24,375.00 0.00 24,375.00 0.00
Cash Management Fd521
Purchase 01/18/2016 261908107 17,850.00 Dreyfus Short-Intermediate Gov Treasury 1.000 0.09% 17,850.00 0.00 17,850.00 0.00
Cash Management Fd521
Ch.ndler Asset Management-CONFIDENTIAL Execution Time:2/JJ20169:55:16 AM
C." Orange County Sanitation District Consolidated Transaction Ledger
Account#10283 12/31/15 Thru 1/31/16
Transaction Settlement Acq/Disp Interest
Type Date CUSIP Quantity Security Description Price Yield Amount PurlSold Total Amount Gain/Loss
ACQUISITIONS
Purchase 01/19/2016 261908107 143,716.76 Dreyfus Shod IntermediateGov Treasury 1.000 0.09% 143,716.76 0.00 143,716.76 0.00
Cash Management Fd521
Purchase 01/19/2016 261908107 1,417.79 Dreyfus Short-Intermediate Gov Treasury 1.000 0.09% 1,417.79 0.00 1,417.79 0.00
Cash Management Fd521
Purchase 01/20/2016 261908107 6,250.00 Dreyfus Short-Intermediate Gov Treasury 1.000 0.09% 6,250.00 0.00 6,250.00 0.00
Cash Management Fd521
Purchase 01/20/2016 261908107 369.88 Dreyfus Short-Intermediate Gov Treasury 1.000 0.09% 369.88 0.00 369.88 0.00
Cash Management Fd521
Purchase 01/20/2016 261908107 303.71 Dreyfus Short-Intermediate Gov Treasury 1.000 0.09% 303.77 0.00 303.77 0.00
Cash Management Fd521
Purchase 01/20/2016 261908107 3,212.81 Dreyfus Short-Intermediate Gov Treasury 1.000 0.09% 3,212.81 0.00 3,212.81 0.00
Cash Management Fd521
Purchase 01/20/2016 261908107 356.33 Dreyfus Short-Intermediate Gov Treasury 1.000 0.09% 356.33 0.00 356.33 0.00
Cash Management Fd521
Purchase 01/20/2016 261908107 1,735.95 Dreyfus Short-Intermediate Gov Treasury 1.000 0.09% 1,736.95 0.00 1,735.95 0.00
Cash Management Fd521
Purchase 01/21/2016 261908107 9,000,000.00 Dreyfus Short-Intermediate Gov Treasury 1.000 0.09% 9,000,000.00 0.00 9,000,000.00 0.00
Cash Management Fd521
Purchase 01/21Q016 261908107 339,949.23 Dreyfus Short-Intermediate Gov Treasury 1.000 0.09% 339,949.23 0.00 339,949.23 0.00
Cash Management Fd521
Purchase 01/22/2016 261908107 65,000.00 Dreyfus Short-Intermediate Gov Treasury 1.000 0.09% 65,000.00 0.00 65,000.00 0.00
Cash Management Fd521
Purchase 01/22/2016 261908107 2,200,000.00 Dreyfus Short-Intermediate Gov Treasury 1.000 0.09% 2,200,000.00 0.00 2,200,000.00 0.00
Cash Management Fd521
Purchase 01/23Q016 261908107 22,500.00 Dreyfus Short-Intermediate Gov Treasury 1.000 0.09% 22,500.00 0.00 22,500.00 0.00
Cash Management Fd521
Purchase 01/25/2016 261908107 141.63 Dreyfus Short-Intermediate Gov Treasury 1.000 0.09% 141.63 0.00 141.63 0.00
Cash Management Fd521
Purchase 01/25/2016 261908107 17,710.91 Dreyfus Short-Intermediate Gov Treasury 1.000 0.09% 17,710.91 0.00 17,710.91 0.00
Cash Management Fd521
Purchase 01/25Q016 261908107 3,188.25 Dreyfus Short-Intermediate Gov Treasury 1.000 0.09% 3,188.25 0.00 3,188.25 0.00
Cash Management Fd521
Purchase 01/25/2016 261908107 24,339.05 Dreyfus Short-Intermediate Gov Treasury 1.000 0.09% 24,339.05 0.00 24,339.05 0.00
Cash Management Fd521
Purchase 01/25/2016 261908107 1,578.86 Dreyfus Short-Intermediate Gov Treasury 1.000 0.09% 1,578.86 0.00 1,578.86 0.00
Cash Management Fd521
Purchase 01/25Q016 261908107 5,766.84 Dreyfus Short-Intermediate Gov Treasury 1.000 0.09% 5,766.84 0.00 5,766.84 0.00
Cash Management Fd521
Purchase 01/25/2016 261908107 1,654.34 Dreyfus Short-Intermediate Gov Treasury 1.000 0.09% 1,654.34 0.00 1,654.34 0.00
Cash Management Fd521
Ch.ndler Asset Management-CONFIDENTIAL Execution Time:=0169:55:16 AM
C." Orange County Sanitation District Consolidated Transaction Ledger
Account#10283 12/31/15 Thru 1/31/16
Transaction Settlement Acq/Disp Interest
Type Date CUSIP Quantity Security Description Price Yield Amount PurlSold Total Amount Gain/Loss
ACQUISITIONS
Purchase 01/25/2016 261908107 760.53 Dreyfus Shod IntermediateGov Treasury 1.000 0.09% 760.53 0.00 760.53 0.00
Cash Management Fd521
Purchase 01/25/2016 261908107 10,291.57 Dreyfus Short-Intermediate Gov Treasury 1.000 0.09% 10,291.57 0.00 10,291.57 0.00
Cash Management Fd521
Purchase 01/25/2016 261908107 5,835.81 Dreyfus Short-Intermediate Gov Treasury 1.000 0.09% 5,835.81 0.00 5,835.81 0.00
Cash Management Fd521
Purchase 01/25Q016 261908107 56.03 Dreyfus Short-Intermediate Gov Treasury 1.000 0.09% 56.03 0.00 56.03 0.00
Cash Management Fd521
Purchase 01/25/2016 261908107 8,220.88 Dreyfus Short-Intermediate Gov Treasury 1.000 0.09% 8,220.88 0.00 8,220.88 0.00
Cash Management Fd521
Purchase 01/25/2016 261908107 1,006.68 Dreyfus Short-Intermediate Gov Treasury 1.000 0.09% 1,006.68 0.00 1,006.68 0.00
Cash Management Fd521
Purchase 01/25Q016 261908107 1,040.44 Dreyfus Short-Intermediate Gov Treasury 1.000 0.09% 1,040.44 0.00 1,040.44 0.00
Cash Management Fd521
Purchase 01/25/2016 261908107 10,630.90 Dreyfus Short-Intermediate Gov Treasury 1.000 0.09% 10,630.90 0.00 10,630.90 0.00
Cash Management Fd521
Purchase 01/25/2016 261908107 1,380.30 Dreyfus Short-Intermediate Gov Treasury 1.000 0.09% 1,380.30 0.00 1,380.30 0.00
Cash Management Fd521
Purchase 01/25Q016 261908107 1,860.83 Dreyfus Short-Intermediate Gov Treasury 1.000 0.09% 1,860.83 0.00 1,860.83 0.00
Cash Management Fd521
Purchase 01/26/2016 261908107 10,000,000.00 Dreyfus Short-Intermediate Gov Treasury 1.000 0.09% 10,000,000.00 0.00 10,000,000.00 0.00
Cash Management Fd521
Purchase 01/27/2016 261908107 12,500.00 Dreyfus Short-Intermediate Gov Treasury 1.000 0.09% 12,500.00 0.00 12,500.00 0.00
Cash Management Fd521
Purchase 01/27/2016 261908107 24,600,000.00 Dreyfus Short-Intermediate Gov Treasury 1.000 0.09% 24,600,000.00 0.00 24,600,000.00 0.00
Cash Management Fd521
Purchase 01/27/2016 261908107 6,073.72 Dreyfus Short-Intermediate Gov Treasury 1.000 0.09% 6,073.72 0.00 6,073.72 0.00
Cash Management Fd521
Purchase 01/28/2016 261908107 77,000.00 Dreyfus Short-Intermediate Gov Treasury 1.000 0.09% 77,000.00 0.00 77,000.00 0.00
Cash Management Fd521
Purchase 01/28/2016 261908107 11,500.00 Dreyfus Short-Intermediate Gov Treasury 1.000 0.09% 11,500.00 0.00 11,500.00 0.00
Cash Management Fd521
Purchase 01/28/2016 261908107 12,900,000.00 Dreyfus Short-Intermediate Gov Treasury 1.000 0.09% 12,900,000.00 0.00 12,900,000.00 0.00
Cash Management Fd521
Purchase 01/29/2016 261908107 4,500,000.00 Dreyfus Short-Intermediate Gov Treasury 1.000 0.09% 4,500,000.00 0.00 4,500,000.00 0.00
Cash Management Fd521
Chmdler Ae &Management-CONFIDENTI4 Execution Time:=0169:55:16 AM
C." Orange County Sanitation District Consolidated Transaction Ledger
Account#10283 12/31/15 Thru 1/31/16
Transaction Settlement Acq/Disp Interest
Type Date CUSIP Quantity Security Description Price Yield Amount PurlSold Total Amount Gain/Loss
ACQUISITIONS
Purchase 01/31/2016 261908107 178,614.16 Dreyfus Shod IntermediateGov Treasury 1.000 0.14% 178,614.16 0.00 178,614.16 0.00
Cash Management Fd521
Purchase 01/31/2016 261908107 7,500,000.00 Dreyfus Shod Intermediate Gov Treasury 1.000 0.14% 7,500,000.00 0.00 7,500,000.00 0.00
Cash Management Fd521
Subtotal 74,757,182.97 74,756,304.07 1,893.75 74,758,197.82 0.00
TOTAL ACQUISITIONS 74,757,182.97 74,756,304,07 1,893.75 74,758,197.82 0.00
DISPOSITIONS
Sale 01/12/2016 261908107 2,501,014.85 Dreyfus Short-Intermediate Gov Treasury 1.000 0.09% 2,501,014.85 0.00 2,501,014.85 0.00
Cash Management FdS21
Subtotal 2,501,014.85 2,501,014.85 0.00 2,501,014.85 0.00
Paydown 01/08/2016 62888UAA8 9,000.04 NCUA Guaranteed Note CM02010-R2Due 100.000 9,000.04 282.24 9,282.28 0.00
11/6/2017
Paydown 01/15/2016 161571GC2 0.00 Chase CHAIT Pool#2013-A8 100.000 0.00 2,104.17 2,104.17 0.00
1.01%Due 10/15/2018
Paydown 01/15/2016 3133TCE95 2,418.00 FHLMC FSPC E3A 100.000 2,418.00 167.30 2,585.30 0.00
2.892%Due 8/15/2032
Paydown 01/15/2016 31348SWZ3 21.38 FHLMC FH 786064 100.000 21.38 5.01 26.39 0.00
2.262%Due 1/1/2028
Paydown 01/15/2016 477877AD6 0.00 John Deere Owner Trust 2014-B A3 100.000 0.00 3,566.67 3,566.67 0.00
1.07%Due 11/15/2018
Paydown 01/15/2016 89231 MAC9 302,374.83 Toyota Auto Receivables Owner 2014-A 100.000 302,374.83 1,922.81 304,297.64 0.00
0.67%Due 12/15/2017
Paydown 01/15/2016 89231TAB6 0.00 Toyota Auto Receivables Owner 2015-C 100.000 0.00 1,682.83 1,682.83 0.00
0.92%Due V15/2018
Paydown 01/15/2016 89236WAC2 0.00 Toyota Auto Receivables Owner 2015-A 100.000 0.00 3,355.33 3,355.33 0.00
1.12%Due 2/15/2019
Paydown 01/19/2016 3837H4NX9 1,385.22 GNMA PooI#2000-9 100.000 1,385.22 32.57 1417.79 0.00
9.5%Due 2 16/2030
Paydown 01/19/2016 43814GAG4 142,460.70 Honda Auto Receivables 2014-2 A3 100.000 142,460.70 1,256.01 143,716,71 0.00
0.77%Due 3/19/2018
Paydown 01/20/2016 36225CAZ9 330.95 GNMA Poo1#G280023 100.000 330.95 38.93 369.88 0.00
2.816%Due 12/20/2026
Chandler Asset Management-CONFIDENTIAL Execution Time:=0169:55:16 AM
C." Orange County Sanitation District Consolidated Transaction Ledger
Account#10283 12/31/15 Thru 1/31/16
Transaction Settlement Acq/Disp Interest
Type Date CUSIP Quantity Security Description Price Yield Amount PurlSold Total Amount Gain/Loss
DISPOSITIONS
Paytlown 01/20/2016 36225CC20 245.60 GNMA Poo1#G2 80088 100.000 245.60 58.17 303.77 Goo
2 817%Due 6/20/2027
Paytlown 01/20/2016 36225CN28 3,061.01 GNMA Poo1#G280408 100.000 3,061.01 151.80 3,212.81 0.00
2.691%Due 5/20/2030
Paytlown 01/20/2016 36225CNM4 338.86 GNMA Poo1#G280395 100.000 338.86 17.47 356.33 0.00
2.877%Due 4/20/2030
Paytlown 01/20/2016 W225DCBB 1,576.43 GNMA Poo1#G280965 100.000 1,576.43 159.52 1,735.95 0.00
2.31%Due 7/20/2034
Paytlown 01/21/2016 43813JAC9 337,863.38 Honda Auto Receivables 2014-1 A3 100.000 337,863.38 2,085.85 339,949.23 0.00
0.67%Due 11121/2 01 7
Paytlown 01/25Q016 03215PFN4 0.00 AMRESCO Residenbal Seventies 1999-1 100.000 0.00 141.63 141.63 0.00
ADue 6/25/2029
Paytlown 01/25Q016 31371NUC7 1,450.11 FNMA FN 257179 100.000 1,450.11 128.75 1,578.86 0.00
4.5%Due 4/1/2028
Paytlown 01/25/2016 31376KT22 4,787.67 FNMA FN 357969 100.000 4,787.67 979.17 5,766.84 0.00
5%Due 9/1/2035
Paytlown 01/25Q016 31381 PDA3 579.22 FNMA FN 466397 100.000 579.22 1,075.12 1,654.34 0.00
3.4%Due 11/1/2020
Paytlown 01/25Q016 3138EG6F6 666.37 FNMA FN AL0869 100.000 666.37 94.16 760.53 0.00
4.5%Due 6/1/2029
Paytlown 01/25/2016 313MJY35 11,801.43 FHLMC FSPC T-5B 2A 100.000 11,801.43 5,909.48 17,710.91 0.00
6.5%Due 9/25/2043
Paytlown 01/25Q016 31397ORED 9,874.84 FNMA FNR 2011-3 FA 100.000 9,874.84 416.73 10,291.57 0.00
0.832%Due 2/25/2041
Paytlown 01/25Q016 31398VJ98 0.00 FHLMC FHMS K006 A2 100.000 0.00 3,188.25 3,188.25 0.00
4.251%Due 1/25/2020
Paytlown 01/25/2016 31403DJZ3 4,908.43 FNMA Pool#745580 100.000 4,908.43 927.38 5,835.81 0.00
5%Due 6/1/2036
Paytlown 01/25Q016 31403GXF4 30.60 FNMA Pool#FN 748678 100.000 30.60 25.43 56.03 0.00
5%Due 10/1/2033
Paytlown 01/25Q016 31406PQYB 6,503.33 FNMA P.I#FN 815971 100.000 6,503.33 1,717.55 8,220.88 0.00
5.47%Due 3/1/2035
Paytlown 01/25/2016 31406XW75 631.88 FNMA P.I#FN 823358 100.000 631.88 374.80 1,006.68 0.00
2.875%Due 2/1/2035
Paytlown 01/25Q016 31407BXH7 866.03 FNMA Pool#FN 826080 100.000 866.03 174.41 1,040.44 0.00
5%Due 7/1/2035
Paytlown 01/25Q016 31410F4V4 8,780.55 FNMA Pool#FN 888336 100.000 8,780.55 1,850.35 10,630.90 0.00
5%Due 7/1/2036
Paytlown 01/25/2016 31417YAY3 1,230.73 FNMA PcoI#FN MA0022 100.000 1,230.73 149.57 1,380.30 0.00
4.943%Due 4/1/2029
Chantller AseM Management-CONFIDENTIAL Execution Time:=0169:55:16 AM
C/" Orange County Sanitation District Consolidated Transaction Ledger
Account#10283 12/31/15 Thru 1/31/16
Transaction Settlement Acq/Disp Interest
Type Date CUSIP Quantity Security Description Price Yield Amount PurlSold Total Amount GainfLoss
DISPOSITIONS
Paydown 01/25/2016 78445JAA5 1,662.87 SLMA 2008-9 ADue 4/25/2023 100.000 1,662.87 197.96 1,860.83 0.00
Paydown 01/25/2016 83611MGS1 24,314.62 Soundview Home Equity Loan Tr.2005- 100.000 24,314.62 24.43 24,339.05 0.00
OPT3 A4Due 11/2 512 0 3 5
Paydown 01/27/2016 31396X305 6,009.39 FNMA FNR 2007-114 A6Due 10/27/2037 100.000 6,009.39 64.33 6,073.72 0.00
Subtotal 885,174.47 885,174.47 34,326.18 919,500.65 0.00
Maturity, 01/21/2016 912796GY9 9,000,000.00 US Treasury Bill 100.000 9,000,000.00 0.00 9,000,000.00 0.00
0.18%Due 1/21/2016
Maturity 01/22r2016 69372AAN2 2,200,000.00 Paccar Financial Discount CP 99.967 2,200,000.00 0.00 2,200,000.00 0.00
0.27%Due 1/22/2016
Malunly 0126/2016 313312SG6 10,000,000.00 FFCB Discount Note 100.000 9,997,763.40 2,236.60 10,000,000.00 0.00
0.23%Due 1/26/2016
Maturity 01272016 313384SH3 13,000,000.00 FHLB Discount Note 100.000 13,000,000.00 0.00 13,000,000.00 0.00
0.195%Due 1/27/2016
Maturity 01272016 313396SH7 9,600,000.00 FHLMC Discount Note 100.000 9,600,000.00 0.00 9,600,000.00 0.00
0.175%Due 1/27/2016
Malunly 01272016 313588SH9 2,000,000.00 FNMA Discount Note 100.000 2,000,000.00 0.00 2,000,000.00 0.00
0.23%Due 1/27/2016
Maturity, 01/282016 30229AAU3 2,000,000.00 Enron Mobil Discount CP 99.954 2,000,000.00 0.00 2,000,000.00 0.00
0.4%Due 1/28/2016
Maturity, 01282016 313396SJ3 900,000.00 FHLMC Discount Note 100.000 900,000.00 0.00 900,000.00 0.00
0.11%Due 1/28/2016
Maturity 01282016 912796GZ6 10,000,000.00 US Treasury Bill 100.000 10,000,000.00 0.00 10,000,000.00 0.00
0.15%Due 1/28/2016
Maturity, 01/292016 06538BAV5 1,200,000.00 Bank of Tokyo Mitsubishi NY Discount CP 99.952 1,200,000.00 0.00 1,200,000.00 0.00
0.44%Due 1/29/2016
Maturity 01292016 313384SK6 3,300,000.00 FHLB Discount Note 100.000 3,300,000.00 0.00 3,300,000.00 0.00
0.125%Due 1/29/2016
Malunly 01/312016 912828B41 7,500,000.00 US Treasury Note 100.000 7,500,000.00 0.00 7,500,000.00 0.00
0.375%Due 1/31/2016
Subtotal 70,700,000.00 70,697,763.40 2,236.60 70,700,000.00 0.00
Security 01/29/2016 261908107 68.300,000.00 Dreyfus Short-Intermediate Gov Treasury 1.000 68,300,000.00 0.00 68,300,000.00 0.00
Withdrawal Cash Management Fd521
Chandler Asset Management-CONFIDENTIAL Execution Tme:2/2r10169:55:16 AM
C/" Orange County Sanitation District Consolidated Transaction Ledger
Account#10283 12/31/15 Thru 1/31/16
Transaction Settlement Acq/Disp Interest
Type Date CUSIP Quantity Security Description Price Yield Amount PurlSold Total Amount Gain/Loss
DISPOSITIONS
Security 01/31/2016 912828WUO 20,072.00 US Treasury Inflation Index Note 99.471 20,072.00 0.00 20,072.00 18779
Withdrawal DA 25%Due 7/15/2024
Subtotal 68,320,072.00 68,320,072.00 0.00 68,320,072.00 187.79
TOTAL DISPOSITIONS 142,406,261.32 142,404,024.72 36,562.78 142,440,587.50 187.79
OTHER TRANSACTIONS
Interest 01/02/2016 073902CD8 3,200,000.00 Bear Stearns Note 0.000 74,400.00 0.00 74,400.00 000
4.65%Due 7/2/2018
Interest 01/09/2016 36962G7MO 5,000,000.00 General Electric Capital Corp Callable Note 0.000 55,000.00 0.00 55,000.00 0.00
1 X 12/9/2019
2.2%Due 1/9/2020
Interest 01/12/2016 3137FADN6 5,000,000.00 FHLMC Note 0.000 18,750.00 0.00 18,750.00 0.00
0.75%Due 1/12/2018
Interest 01/12/2016 36962G6Z2 1,000,000.00 General Electric Capital Corp Note 0.000 7,500.00 0.00 7,500.00 0.00
1.5%Due 7/12/2016
Interest 01/14/2016 3137EADVB 5,000,000.00 FHLMC Note 0.000 23,437.50 0.00 23,437.50 ODD
0.75%Due 7/1412017
Interest 01/14/2016 4581XOCG1 5,000,000.00 Inter-American Day Bank Note 0.000 25,000.00 0.00 25,000.00 0.00
1%Due 7/14/2017
Interest 01/15/2016 912828VL1 3,000,000.00 US Treasury Note 0.000 9,375.00 0.00 9,375.00 ODD
0.625%Due 7/15/2016
Interest 01/15/2016 912828WUO 10,417,368.00 US Treasury Inflation Index Note 0.000 6,504.56 0.00 6,504.56 0.00
0.125%Due 7/15/2024
Interest 01/16/2016 40428HPH9 3,000,000.00 HSBC USA Inc Note 0.000 24,375.00 0.00 24,375.00 0.00
1.625%Due 1/16/2018
Interest 01/18/2016 38141GFG4 600,000ol) Goldman Sachs Group Inc Note 0.000 17,850.00 0.00 17,850.00 ODD
5.95%Due 1/1 812 01 8
Interest 01/20/2016 94974BFL9 1,000,000.00 Wells Fargo Corp Note 0.000 6,250.00 0.00 6,250.00 0.00
1.25%Due 7/20/2016
Interest 01/22/2016 94974BGM6 5,000,000.00 Wells Fargo Corp Note 0.000 65,000.00 0.00 65,000.00 0.00
2.6%Due 7/2212020
Interest 01/23/2016 46625HKA7 2,000,000.00 JP Morgan Chase Callable Note Cant 0.000 22,500.00 0.00 22,500.00 0.00
12/23/2019
2.25%Due 1/23/2020
Chandler Asset Management-CONFIDENTIAL Execution Tux,=0169:55:16 AM
�'" Orange County Sanitation District Consolidated Transaction Ledger
Account#10283 12/31/15 Thru 1/31/16
Transaction Settlement Acq/Disp Interest
Type Date CUSIP Quantity Security Description Price Yield Amount PurlSold Total Amount Gain/Loss
OTHER TRANSACTIONS
Interest 01/272016 3137EADUO 5,000,000.00 FHLMC Note 0.000 12,500.00 0.00 12,500.00 0.00
0.5%Due 1/27/2017
Interest 01/28/2016 064061113X6 1,000,000.00 Bank of New York Note 0.000 11,500.00 0.00 11,500.00 0.00
2.3%Due 7/28/2016
Interest 01/282016 6174MAL3 2,800,000.00 Morgan Stanley Note 0.000 77,000.00 0.00 77,000.00 0.00
5.5%Due 7/28/2021
Interest 01/312016 9128281333 11,000,000.00 US Treasury Note 0.000 82,500.00 0.00 82,500.00 0.00
1.5%Due 1/31/2019
Interest 01/31/2016 9128281341 7,500,000.00 US Treasury Note 0.000 14,062.50 0.00 14,062.50 0.00
0.375%Due 1/312016
Interest 01/312016 912828031 3,500,000.00 US Treasury Note 0.000 801.66 0.00 801.66 0.00
0.374%Due 41302016
Interest 01/312016 912828M6 10,000,000.00 US Treasury Note 0.000 81,250.00 0.00 81,250.00 0.00
1.625%Due 7/312019
Subtotal 90,017,368.00 635,556.22 0.00 635,556.22 0.00
Dividend 01/052016 261908107 14,8B4,900.02 Dreyfus Short-Intermediate Gov Treasury 0.000 895.75 0.00 895.75 0.00
Cash Management Fd521
Dividend 01/052016 261908107 12,950,117.86 Dreyfus Short-Intermediate Gov Treasury 0.000 1,232.35 0.00 1,232.35 0.00
Cash Management Fd521
Subtotal 27,835,017.88 2,128.10 0.00 2,128.10 0.00
TOTAL OTHER TRANSACTIONS 117,852,385.68 637,694.32 0.00 637,694.32 0.00
Chandler Asset Management-CONFIDENTIAL Execution Time:2/2r10169:55:16 AM
ADMINISTRATION COMMITTEE Meng Dat0 TOBE. Dir.
02/lti10/16 02/24/1Or6
AGENDA REPORT Item Item Number
6
Orange County Sanitation District
FROM: James D. Herberg, General Manager
Originator: Lorenzo Tyner, Director of Finance and Administrative Services
SUBJECT: CONSOLIDATED FINANCIAL REPORT FOR THE SECOND QUARTER
ENDED DECEMBER 31, 2015
GENERAL MANAGER'S RECOMMENDATION
Receive and file Orange County Sanitation District Second Quarter Financial Report for
the period ended December 31, 2015.
SUMMARY
BACKGROUND
Included in this consolidated report are the following quarterly financial reports for the
period ended December 31, 2015:
• Second Quarter Budget Review
The Budget Review Summary provides the Directors, staff, and the general public
with a comprehensive overview of the financial results of the Sanitation District
through the second quarter ended December 31, 2015.
• Quarterly Treasurer's Report
This section reports on financial portfolio performance with respect to the
Sanitation District's funds. Both Long-Term and Liquid Operating Monies Portfolios
are summarized. A performance summary table can be found on page 2 of this
section. The report also contains information on the U.S. and global economic
outlook from the Sanitation District's investment manager, Chandler Asset
Management.
• Certificates of Participation Quarterly Report
The report includes a summary of each outstanding debt issuance and a
comparative chart illustrating the COP rate history.
RELEVANT STANDARDS
• Quarterly financial reporting
Page 1 of 4
PROBLEM
N/A
PROPOSED SOLUTION
N/A
TIMING CONCERNS
N/A
RAMIFICATIONS OF NOT TAKING ACTION
N/A
PRIOR COMMITTEE/BOARD ACTIONS
N/A
ADDITIONAL INFORMATION
The quarterly treasurer's report contained within the Consolidated Financial Reports for
the Second Quarter Ended December 31, 2015 is being submitted in accordance with the
District's investment policy that requires the report be submitted to the governing body
following the end of each quarter and includes the following information:
e Performance results in comparison with the 3- month treasury bill index for the
liquid operating portfolio (and the Merrill Lynch Corp./Gout. 1-5 Year Bond index
for the long term portfolio as identified in the investment policy and the Time-
weighted total rate of return for the portfolio for the prior three months, twelve
months, year to date, and since inception compared to the Benchmark returns for
the same periods:
Portfolio Performance Summary
Quarter Ended December 31,2015
Liquid Operating Monies(%) Long-Term Operating Monies(%)
Total Rate Total Rate of
of Return BenchmadF' Return Benchmark("
3 Months 0.05 0.03 -0.33 .0.56
6 Months 0.11 0.04 0.19 0.12
9 Months 0.16 0.05 0.03 0.11
12 Months 0.23 0.05 0.85 1.07
Since inception 30 Nov.15 0.22 0.05 0.58 0.69
Page 2 of 4
• A listing of individual securities held at the end of each reporting period (See the
detailed listings of each security contained within the report).
• Cost and market values of the portfolios:
Liquid Ober. Long-Term
Cost $131.9 M $316.3 M
MV $132.0 M $314.8 M
• Modified duration of the portfolio compared to Benchmark:
Liquid Ober. Long-Term
B.M. 0.15 2.59
Port. 0.21 2.42
• Dollar change in value of the portfolio for a one-percent (1%) change in interest
rates:
Liquid Oper.- $276,071
Long-Term- $7,612,030
• None of the portfolios are currently invested in reverse repurchase agreements:
• The percent of the Liquid Operating Monies portfolio maturing within 90 days:
69.9%
• Average portfolio credit quality:
Liquid Oper. —AAA/Aal
Long-Terre —AA+/Aa1
• Percent of portfolio with credit ratings below "A" by any rating agency, and a
description of such securities:
Liquid Portfolio- no exceptions
Long Term Portfolio- Percent of portfolio—4.2%
Maturity
Cost Date Moody S&P Fitch
AMRESCO Residential Securities 1999-1 $ 100,432.85 6/25/2029 Not Rated AA+ BBB
Goldman Sachs Group Inc. Note $ 1,995,068.00 3/22/2016 A3 BBB+ A
Bank of America Corp Note $ 4,334,014.00 12/1/2017 Baal BBB+ A
Goldman Sachs Group Inc. Note $ 692,806.00 1/18/2018 A3 BBB+ A
American Express Credit Card Note $ 3,377,385.79 3/19/2018 A3 BBB+ A+
Morgan Stanley Note $ 3,200,848.00 7/28/2021 A3 BBB+ A
Page 3 of 4
• All investments are in compliance with this policy and the California Government
Code, except for the following Lehman Brother holdings that the District is pursuing
collection through the bankruptcy court:
Lehman Brothers Note-Defaulted $600,000 par value purchased 9/18/2008
Lehman Brothers Note-Defaulted $2,000,000 par value purchased 9/18/2008
• Sufficient funds are available for OCSD to meet its operating expenditure
requirements for the next six months.
CEQA
N/A
FINANCIAL CONSIDERATIONS
N/A
ATTACHMENT
The following attachment(s) may be viewed on-line at the OCSD website (www.ocsd.com) with the
complete agenda package:
Consolidated Financial Report for the second quarter ended December 31, 2015.
Page 4 of 4
Orange County Sanitation District
Second Quarter
Financial Report _ - -
for the period ended December 31 , 2015
WI
r►
Orange County,California
Table of Contents
ExecutiveSummary...................................................................................................1
Budget Review
Section 1 — Budget Review Summary...................................................................................1
Section 2—Operating Budget Review
Chart of the Cost per Million Gallons by Department—Budget and Actual..............1
Chart of the Net Expenses by Major Category— Budget and Actual........................1
Divisional Contributions to Cost Per Million Gallons ................................................2
Comparison of Expenses by Department.................................................................3
Summary of Collection, Treatment, and Disposal Expenses by Major Category.....4
Summary of District-Wide Revenues .......................................................................5
Summary of Collection, Treatment and Disposal Revenues....................................5
Summary of Collection, Treatment, and Disposal Expenses by Line Item...............6
Summary of Collection, Treatment, and Disposal Expenses by Process.................8
Chartof Staffing Trends...........................................................................................9
Section 3—Capital Improvement Program Budget Review
Capital Improvement Program Graphs by Type and Funding Source......................1
Summary of Capital Improvement Construction Requirements - Current Year........2
Summary of Capital Improvement Construction Requirements - Project Life..........6
Section 4—Capital Assets Schedule & Debt Service Budget Review
CapitalAssets Schedule ..........................................................................................1
Debt Service Budget Review....................................................................................1
Section 5—Self Insurance Budget Review
General Liability and Property Fund Budget Review................................................1
Workers' Compensation Fund Budget Review.........................................................2
Quarterly Treasurers Repo rt........................................................................................1
QuarterlyCOP Repo rt.................................................................................................1
FY 2015-16 Second Quarter Financial Report
This Page Intentionally Left Blank
Executive Summary
Consolidated Financial Reports
For the Second Quarter Ended
December 31, 2015
Included in this consolidated report are the following quarterly financial reports for the
period ended December 31, 2015:
• Second Quarter Budget Review:
The Budget Review Summary provides the Directors, staff, and the general public
with a comprehensive overview of the financial results of the Sanitation District
through the second quarter ended December 31, 2015.
Contained within this Budget Review is the budget-to-actual status of the
Collections, Treatment and Disposal Operations, the Capital Improvement
Program, the Self-Insurance Program, and Debt Service Outlays. Also included
is a Capital Assets Schedule as of December 31, 2015.
Various detail information can be found in this report. In summary:
a) Most major expense categories are anticipated to be at or below budget.
b) Total revenues approximate the budget at 51.5 percent. Except for Permit
Fees and Interest Earnings, all other major revenue sources are currently
tracking close to or exceeding revenue estimates. Overall, total revenues are
projected to approximate budget at year-end. More detailed information on
District revenues is provided within Section 1 — Pages 3 through 5.
c) Collection, Treatment and Disposal Costs:
As indicated within the Budget Review Summary of this report, the net
operating requirements through the second quarter of $71.9 million is
currently tracking at 48.2 percent of the $149.3 million budget. In addition,
net operating expenses have decreased $1.1 million or 1.5 percent in
comparison with the same period last year. Overall, staff expects the total
operating costs to remain within budget throughout the remainder of the year.
More detailed information on District operating expenses is provided within
Section 1- Pages 1 through 3.
The total cost per million gallons is approximately $2,116.5 based on flows of
184.6 million gallons per day. This is $71.5 per million gallons, or 3.5 percent
higher than the budgeted cost per million gallon per day. A further
description of these costs and benchmarking with other agencies is contained
within Section 1 — Pages 6 through 8.
d) The total projected capital outlay cash flow of the Capital Improvement
Program (CIP) for FY 2015-16 has been revised to $134.7 million, or 71.7
Page 1
FY 2015-16 Second Quarter Review
percent of the board approved cash outlay of$187.8 million. The actual cash
outlay spending through the second quarter is $68.7 million, or 36.6 percent
of the total budgeted outlay. More detailed information on the CIP budget
review can be found in Section 3.
• Quarterly Treasurer's Report;
This section reports on financial portfolio performance with respect to the
Sanitation District's funds. Both Long-Term and Liquid Operating Monies
Portfolios are summarized. A performance summary table can be found on page
2 of this section. The report also contains information on the national economic
outlook from the Sanitation District's money manager, Chandler Asset
Management (Chandler).
Chandler reported that the Long-Term Portfolio returned -33 basis points over the
quarter, outperforming the Bank of America Merrill Lynch 1-5 year AAA U.S.
Corporate and Government Index return of -56 basis points, while the Liquid
Operating Monies Portfolio returned 5 basis over the quarter, outperforming its
benchmark, the three-month Treasury Bill index return of 3 basis points.
Chandler further notes that in December the Federal Open Market Committee
(FOMC) increased the fed funds target rate by 25 basis points. It was the first fed
funds target rate increase since June 2006. Although the Fed took its first step
toward normalizing monetary policy, the tone of the FOMC statement was dovish,
suggesting the pace of additional policy tightening will be slower than historical
Fed tightening cycles. Policymakers' median projection for the fed funds rate at
the end of 2016 is 1.375%. In the longer-run, the target fed funds rate is roughly
3.5%. However, the FOMC has emphasized that monetary policy adjustments will
be gradual and the path of the fed funds rate will depend on the economic
outlook. Notably, the FOMC will continue to reinvest principal payments from its
holdings of Agency and Mortgage-Backed securities and will continue rolling over
maturing Treasury securities until normalization of the fed funds rate is well
underway. Overall, monetary policy remains highly accommodative and the Fed is
proceeding with caution as it moves toward a more normalized policy stance.
Economic data is mixed. Trends in the labor market remain favorable, and
consumer confidence rebounded in December. However, the manufacturing
sector remains weak and housing sector data has been volatile. The ISM
manufacturing index declined to 48.2 in December, to the weakest level since July
2009. In terms of housing, new and existing home sales were recently weaker
than expected, but home prices remain firm. Nevertheless, payrolls have
increased by an average of 284,000 per month over the past three months, with
the unemployment rate at 5.0%, which should provide a strong tailwind for
economic growth this year. Third quarter 2015 GDP grew at an annualized pace
of 2.0%, following growth of 3.9% in the second quarter. Last month, the
consensus forecast called for GDP growth of 2.1% in the fourth quarter of 2015,
Page 2
Executive Summary
but many economists have since lowered their forecast significantly. We are
expecting GDP growth of about 2.0%-2.5% in 2016.
During 2015, 2-year Treasury yields increased nearly 40 basis points, while 10-
year Treasuries increased roughly 10 basis points. This bear flattening (with
short-term rates rising more than long-term rates), is consistent with previous Fed
tightening cycles and we expect this trend to continue. Over much of the past
year, financial market volatility has been elevated due to mixed US economic
data, the uncertain timing of the first rate hike, weak global economic growth,
divergent global central bank monetary policies, turmoil in Asian stock markets,
and geopolitical concerns. Ongoing uncertainty about the future pace of monetary
policy normalization, and how the Fed communicates its economic projections,
will likely continue to fuel financial market volatility.
The yield on the two-year Treasury note rose roughly 12 basis points in
December to 1.05%. Meanwhile, the yield on the ten-year Treasury note rose just
six basis points in December to 2.27%. Overall, the Treasury yield curve flattened
during 2015 in anticipation of monetary policy normalization by the Federal
Reserve and we expect this trend to continue. Looking ahead, we believe the
pace of subsequent rate hikes will be slower than historical Fed tightening cycles,
in light of ongoing sluggishness in the global economy.
Economic Outlook
Chandler anticipates the domestic and global economic backdrop will remain
challenging in the first half of 2016. Although the employment picture in the fourth
quarter was strong, with non-farm payrolls averaging 284k and the unemployment
rate holding steady at 5.0%, other measures of employment are not as robust. In
particular, the US participation rate remains moribund at 62.6% and the U-6
unemployment rate, which includes part-time and marginally attached workers, is
still elevated at 9.9%. Commodity markets remain under pressure, with many
market participants focused on the precipitous drop in the price of oil over the past
year. Until the supply picture clears up, with some producers taking supply off-
line, the price of oil will continue to impact market sentiment to the downside.
Intuitively lower oil prices should be good for the consumer, but retail sales have
been soft and overall investors seem to be more concerned about the lack of
aggregate demand on a global basis. US GDP growth in 2016 is forecasted to be
in a range of 2.0-2.5%, consistent with the past several years, but likely not strong
enough to exert material upward pressure on domestic interest rates. The
Chandler team anticipates the Federal Reserve will not be able to meet their dot
plot forecasts and thus we think it is unlikely the Fed Funds rate will be near 1
318% at year-end 2016.
Chandler is forecasting market volatility to remain elevated, similar to the
experience in the second half of 2015. The FOMC (Federal Open Market
Committee) meetings in March, June, September and December will take on
Page 3
FY 2015-16 Second Quarter Review
heightened importance as the current economic projections by the Federal
Reserve are above market expectations and we would anticipate some
capitulation by the Federal Reserve with the upcoming quarterly updates. Spread
valuations in Corporate and Asset Backed look attractive versus long-term
averages, and the team will look to be opportunistic in both sectors.
• Quarterly Certificates of Participation (COP) Report
The report includes a summary of each outstanding debt issuance and a
comparative chart illustrating the COP rate history.
Page 4
Budget Review Summary
Second Quarter Financial Report
December 31, 2015
Financial Management is pleased to present the FY 2015-16 second quarter financial
report. This report provides a comprehensive overview of the financial condition of the
Sanitation District and reports on the status of all capital projects in progress. A
summary of the sections contained within this report is provided below.
Operating Budget Review., This section reports on collection, treatment and disposal
net operating requirements. At December 31, 2015, 48.2 percent, or $71.9 million of
the FY 2015-16 net operating budget of $149.3 million has been expended. Net
operating expenses decreased from the same period last year by $1.1 million, or 1.5
percent, mainly due to a decrease of $2.8 million in Salaries and Benefits and $45,000
in Research and Monitoring, and an increase of $920,000 in indirect costs allocated out
to capital projects. These cost decreases have been partially offset by increases of
$1.1 million in Repairs and Maintenance, $499,000 in Utilities, $384,000 in Contractual
Services, $245,000 in Professional Services, $206,000 in Operating Materials and
Supplies, $140,000 in Administrative Expenses, and $56,000 in Training and Meetings.
These and other variances that factor into this net increase in expenses are discussed
in more detail below. Overall, staff expects the total operating costs to remain at
budget throughout the remainder of the year.
Significant operating results as of December 31, 2015 include the following:
• Salaries. Wages and Benefits — Personnel costs of $46.2 million are slightly
below target at 48.7 percent of budget through the second quarter of FY 2015-
16. Although the budget is based on a 5 percent vacancy factor, staffing is 51 full-
time equivalents (FTE's), or 8.2 percent below the total 624 FTE's approved in the
FY 2015-16 budget. Salary and benefit costs are 5.7 percent, or $2.8 million lower
than the $49.0 million incurred in the same period last year, mainly due to the
decrease in OCERS retirement of $4.0 million. This decrease is reflective of the
decrease in the employee contribution rate as a result of the $175 million pay down
on the unfunded actuarial accrued liability in fiscal year 2014/15. Net operating
personnel costs are expected to be below budget throughout the remainder of
the year.
• Administrative Expenses — Administrative Expenses totaled $973,000, or 59.9
percent of the $1.6 million budget through December 31. These costs are
$140,000 or 16.9 percent higher at December 31 in comparison with the prior year
mainly due to an increase of $176,000 in purchases of small computer items offset
by a decrease of $63,000 due to the timing in membership payments versus when
these payments are due. It is anticipated that the administrative costs will
approximate budget at year-end.
Section 1 - Page 1
FY 2015-16 Second Quarter Report
• Printing and Publication Expenses — Printing and Publication Expenses totaled
$122,000, or 30.0 percent of the $412,000 budget through December 31. These
costs are $20,000 or 13.9 percent lower at December 31 in comparison with the
prior year, mainly due to the prior year purchase of aluminum prints of the new core
values. It is anticipated that the printing and publication costs will be below
budget at year-end
• Training and Meetings — Training and meetings of $330,000 are below target at
31.4 percent of the $1.1 million budget. This account is lower than the
proportionate budget due to the timing of training throughout the year. These costs
have increased over the same period last year by $56,000 or 20.4 percent. Total
training and meeting costs are anticipated to be below budget at year-end.
• Operating Materials and Supplies — Operating materials and supplies of $8.3
million is slightly below target at 48.2 percent of budget through December 31.
Operating Materials and Supplies have increased from the prior year by $206,000 or
2.6 percent, primarily due to increases in Cogen and Miscellaneous Chemicals of
$128,000, Tools of $88,000, Safety Equipment of $84,000, and Gas, Diesel and Oil
of $18,000, offset by decreases in Odor Control of $42,000 and Disinfection of
$76,000. The increases are mainly brought about by a combined increase in the
advanced purchases for tools and equipment. Based on current processes,
operating materials and supplies are anticipated to approximate budget at
year-end.
• Contractual Services — Contractual services is at target at approximately $11.1
million or 46.3 percent of budget through December 31. Solids Removal costs,
budgeted at $17.6 million, comprise the majority of this expense category. With an
increase of $122,000, or 1.4 percent higher than the prior year, solids removal costs
totaled $8.8 million, or 50.1 percent of budget at December 31. In addition, Other
contractual services increased by $378,000 due to an increase in manhole
rehabilitation projects, sewer line cleaning, and CCTV inspections and Temporary
Services increased by $55,000. These increases were somewhat offset by
decreases of $85,000 in Other Waste Disposal and $84,000 in Oxygen Plant
Operation. Overall, Contractual Services is higher by $384,000, or 3.6 percent, over
the same period last year. Total contractual services costs are anticipated to
approximate budget at year-end.
• Professional Services — Professional services costs totaled $1.3 million or 37.8
percent of the $3.5 million budget through December 31. Most professional
service costs, such as Engineering, Environmental Scientific Consulting, Software
Program Consulting Services, and Other Services, are proportionately low through
December 31 due to a variety of factors such as services being in the planning or
request for proposal stage, services not being needed until later in the fiscal year,
the need for the service is being re-evaluated, or utilization of internal staffing for
projects. These costs are $245,000 or 22.9 percent higher at December 31 in
comparison with the prior year mainly due to an increase in legal services and timing
Section 1 - Page 2
Budget Review Summary
of services performed. It is anticipated that the costs for this category will be
below budget at year-end.
• Research and Monitoring — Research and monitoring costs totaled $310,000, or
37.3 percent of the $831,000 budget through December 31. These costs are
$45,000, or 12.8 percent lower at December 31 in comparison with the prior year,
mainly due to a decrease of $36,000 in Air Quality Monitoring due to the timing of
emissions testing. Total Research and Monitoring costs are anticipated to
approximate or be below budget at year-end.
• Repairs and Maintenance — Repair and maintenance costs totaled $7.0 million,
or 56.8 percent of the $12.4 million budget through December 31. These costs
are $1.1 million, or 19.1 percent higher at December 31 in comparison with the prior
year, mainly due to large current period repair services such as Plant 2 Cengen
engine overhaul, digester C treatment, and Plant 1 primary clarifier effluent piping,
offset by a decrease in prior period materials purchases, such as power packs. It is
anticipated that the costs for this category will approximate or exceed budget
at year-end.
• Utilities — Utilities costs totaled $4.3 million, or 55.7 percent of the $7.8 million
budget through December 31. These costs are $499,000 or 13.0 percent higher at
December 31 in comparison with the prior year, primarily due to an increase in
electricity charges of $489,000 as a result of increased rates and usage primarily
related to increased activity, offset by a decrease in natural gas charges of $23,000
The overall operating philosophy of the Central Generation facilities is to purchase
electricity for power production rather than to purchase natural gas as a supplement
to the digester gas needed to run the Central Generation facilities. This operating
philosophy allows the Central Generation facilities to meet air emission
requirements. It is anticipated that the costs will approximate or exceed budget
at year-end.
• Other Operating Supplies — Other operating supplies costs totaled $1.1 million,
or 63.4 percent of the $1.7 million budget through December 31. Regulatory
Operating Fees comprise the majority of this expense category. These costs are
$36,000 or 6.0 percent higher at December 31 in comparison with the prior year
primarily due to the increases in annual permit fees to State Water Resources
Control Board (SWRCB) and emission fees, annual operation fees, and other
miscellaneous regulatory fees to South Coast Air Quality Management District
(SCAQMD). Miscellaneous Operating Expenses have also increased over the prior
year by $21,000, or 22.5 percent due to the increase in safety supplies. These
increases were somewhat offset by a decrease of $60,000, or 91.0% in outside
equipment rental. It is anticipated that the costs will approximate budget at
year-end.
• Revenues — Service Fees and Property Taxes — Through December 31, revenues
from service fees are at $158.9 million, or 54.0 percent of budget and Property
taxes are $40.0 million, or 45.2 percent of budget. These items comprise the
Section 1 - Page 3
FY 2015-16 Second Quarter Report
majority of the Sanitation District's revenues and are mostly collected by the County
through the property tax roll and distributed to the Sanitation District throughout the
year based on a set distribution schedule that begins in November of each year. An
increase of$10.5 million, or 7.1% in service fee revenue over the prior year is due in
part to an increase in fees of 1.9 percent, timing of customer payments, a decrease
in adjustments, and a decrease of $1.1 million in user fee refunds issued in the
current year. An increase of $3.2 million, or 8.6% in property tax revenues over the
prior year is due to an increase of approximately 2% in property tax rates, higher
construction activities and property values, and timing of taxes collected by the
County. In addition, the Redevelopment Agency pass-through of $1.5 million was
not received until January in the prior year. These revenues are expected to
approximate budget at year-end.
• Revenues — Permittee User Fees — Permittee User Fees are at $4.3 million, or
31.8 percent of the $13.6 million budget. The number of permittees Fluctuates
from year to year as businesses are established or close their operations. The
revenues through the second quarter are $1.1 million or 20.2 percent lower in
comparison with the same period last year due to a decrease in amount of discharge
from the permittees. It is estimated that the permittee user charges will be
below budget at year-end.
• Revenues — Inter District Sewer Use - SAWPA — Inter District Sewer revenues-
SAWPA are at $1.5 million, or 55.6 percent of the $2.7 million budget. This
revenue is derived from charges to the Santa Ana Watershed Protection Agency
(SAWPA) for treatment of flows. These revenues are expected to approximate
budget at year-end.
• Revenues — Intra District Sewer Use — IRWD — Intra District Sewer revenues-
IRWD are at $2.1 million, or 83.2 percent of the $2.6 million budget. This
revenue is derived from charges to the Irvine Ranch Water District (IRWD) for
treatment of flows. The revenues through the second quarter are higher than the
same period last year by $782,000 or 58.4 percent mainly due to an increase in
flows discharged from IRWD and the unit costs of operation and maintenance
charges. These revenues are expected to exceed budget at year-end.
• Revenues - Sludge Disposal- IRWD - Sludge Disposal fees-IRWD are at $5.3
million, or 58.9 percent of the $8.9 million budget. The revenue is derived and
fluctuated from flows discharged from IRWD to Sanitation District for the handling,
treatment and disposal of solids. The revenues through the second quarter are
higher than the same period last year by $643,000 or 14.0 percent. These
revenues are expected to approximate or exceed budget at year-end.
• Revenues — Capital Assessments- IRWD — Capital Assessments-IRWD are at
$1.2 million, or 54.2 percent of the $2.3 million budget. The revenues through
the second quarter are higher than the same period last year by $1.9 million or 292.7
percent mainly due to a reversal of $1.5 million in the prior period for projects that
have been accrued and placed in service during the prior year. Projects that are
Section 1 - Page 4
Budget Review Summary
placed in service are accrued and depreciated at year-end and reversed in the
beginning of the following year. It is estimated that the capital assessments will
approximate budget at year-end.
• Revenues — Capital Facilities, Capacity Charges (CFCC) — CFCC are at $5.9
million, or 54.0 percent of the $11.0 million budget. The revenues through the
second quarter are lower than the same period last year by $3.7 million or 38.6
percent due to lower construction activity than at this time last year. These
revenues are expected to approximate or exceed the budget at year-end.
• Revenues — Interest Earnings — Interest Earnings are at $1.4 million or 22.3
percent of the $6.1 million budget. The revenues through the second quarter are
lower than the same period last year by $634,000 or 31.9 percent due to a lower
interest rate environment than anticipated. It is estimated that the interest
earnings will be below the budget amount at year-end.
• Revenues — Wastehauler — Wastehauler revenues are at $338,000 or 42.7
percent of the $790,000 budget. This revenue is derived from fees charged to
wastehaulers allowing them to dump waste into the Sanitation District's system.
These revenues are expected to approximate budget at year-end.
• Revenues — CNG Sales — CNG Sales revenues are at $221,000 or 55.3 percent
of the $400,000 budget. The revenues through the second quarter are higher than
the same period last year by $8,000 or 4.0 percent. These revenues are expected
to approximate or exceed budget at year-end.
• Revenues - Other — Other revenues are at $872,000 or 145.3 percent of the
$600,000 budget. These revenues consist of charges to Sunset Beach Sanitary
District (SBSD) for treatment of flows and other miscellaneous revenues. The
revenues through the second quarter are higher than the same period last year by
$521,000 or 148.3 percent due to an increase in SBSD revenues and a settlement
received from the County of Orange bankruptcy filing in 1994 of $480,000. These
revenues are expected to exceed budget at year-end.
Section 1 - Page 5
FY 2015-16 Second Quarter Report
Comparison of Second Quarter Cost per
Million Gallon Results with Budget
Last Five Years
2,200 /
2,100 Z,111
076 ,M
2,000 2045
1,900 1951 1s57
1.WI aw
1,800
1,700
1,600
1,500
1,400
1,300
1,200
1,100
1.000
111112 12-13 131314 141415 15-16
2nd Annual 2nd Annual 2nd Annual 2nd Annual 2nd Annual
Qtr Budget Qtr Budget Qtr Budget Qtr Budget Qtr Budget
As demonstrated in the preceding graph for each of the last four fiscal years, the cost
per million gallons at the end of the second quarter has been 0.6 percent to 6.3 percent
lower than the annual budget. The FY 2015-16 second quarter is 3.5 percent higher
when compared with this year's budget. The variance from previous years is primarily
due to a decrease in flows, which are 3.4 percent lower than the same period last year.
Staff believes that overall operating costs will be below budget at year-end.
The total cost per million gallons at December 31 is $2,116.5 based on flows of
184.6 million gallons per day. This is $71.5 per million gallons, or 3.5 percent, higher
than the budgeted cost per million gallons of $2,045. There is an inverse relationship
between the amount of flows and the cost per unit of collection, treatment, and disposal.
Consequently, the higher cost per million gallons is due to flows of 184.6 million gallons
per day being 7.7 percent lower than the budgeted flow of 200 million gallons per day,
which is partially offset by net expenses being 3.7 percent less than the proportionate
budget through December 31.
More detailed information on operating revenues, costs, and related information is
provided within Section 2.
Section 1 - Page 6
Budget Review Summary
Following are data tables showing the last five years of Single Family Residential User
Fees (SFR) and the cost per MG to collect, treat, and dispose of wastewater for OCSD
and for similar agencies. The agencies used in the table were determined to be those
that most closely resembled OCSD in terms of services provided and treatment levels.
The summaries demonstrate that OCSD's SFR and cost per million gallons are each
one of the lowest in their respective group.
Benchmark Study
Five-Year Single Family Rate
Rates as of July
2011 2012 2013 2014 2015
Agency SFR SFR SFR SFR SFR Notes
San Francisco $636.00 $667.92 $701.40 $ 744.83 $ 784.44
City of San Diego $608.04 $572.58 $572.58 $ 572.58 $ 572.58
Vallejo Sanitation/Flood Control District $483.12 $495.12 $507.48 $ 520.20 $ 520.20
Central Contra Costa Sanitary District $341.00 $371.00 $405.00 $ 439.00 $ 471.00
City of Los Angeles $358.66 $391.56 $409.20 $ 435.40 $ 464.04 Note 1
Sacramento County $264.00 $288.00 $312.00 $ 348.00 $ 384.00
Dublin San Ramon Services District $345.06 $355.44 $355.44 $ 372.96 $ 382.38
Union Sanitary District $304.33 $319.55 $337.76 $ 357.02 $ 377.00
East Bay MUD $287.98 $305.10 $331.10 $ 358.14 $ 355.18
City of Hayward $317.64 $327.24 $327.24 $ 337.08 $ 347.16
Orange County Sanitation District $267.00 $294.00 $308.00 $ 316.00 $ 322.00
City of Fresno $299.76 $309.00 $309.00 $ 309.00 $ 309.00
Irvine Ranch Water District $202.80 $206.40 $220.80 $ 246.00 $ 288.60 Note 2
Oro Loma Sanitary District $183.00 $189.00 $195.00 $ 200.00 $ 206.00
Los Angeles County $143.00 $149.00 $150.00 $ 151.00 $ 155.00 Note 3
Notes:
(1)- Data is for the typical SFR customer rate and is not the average rate.
(2)- Data represents the maximum SFR rate and is not the average rate.
(3)- Data for 2013 and 2014 was revised to remove ad valorem monies that were inadvertently included.
Section 1 - Page 7
FY 2015-16 Second Quarter Report
Benchmark Study
Five-Year Cost per MG
FY 10-11 FY 11-12 FY 12-13 FY 13-14 FY 14-15
Agency Sc.Tot. Cost/MG Cost/MG Cost/MG Cost/MG Cost/MG Notes
Central Contra Costa Sanitary District B 5 $3,929.80 $4,203.43 $4,621.84 $5,778.43 $6,280.58
Vallejo Sanitation/Flood Control District B 3 $4,536.00 $5,176.00 $5,435.00 $6,153.00 $5,590.00
San Francisco B 3 $3,857.80 $4,778.96 $5,006.74 $5,400.28 $5,357.97 Note 1
Union Sanitary District B 3 $3,206.10 $3,267.06 $3,805.40 $3,832.47 $3,910.73
City of San Diego B 5 $3,208.48 $3,242.30 $3,340.35 $3,156.43 $3,591.69
East Bay MUD T 4 $2,000.31 $2,320.02 $2,359.40 $2,559.18 $2,727.97
Dublin San Ramon Services District B 5 $1,964.64 $2,009.57 $2,159.49 $2,506.60 $2,522.00
Sacramento County T 3 $1,591.75 $3,312.50 $2,143.16 $2,375.47 $2,494.40 Note
City of Los Angeles B 5 $1,836.00 $1,935.00 $2,062.00 $2,163.00 $2,269.00
Orange County Sanitation District B 3 $1,816.62 $1,871.47 $1,906.01 $1,935.05 $2,070.97
City of Fresno B 3 $1,263.50 $1,383.60 $1,411.89 $1,552.39 $1,628.91
Los Angeles County T 5 $1,078.00 $1,156.00 $1,008.00 $1,223.72 $1,239.40 Note 3
Legend for Service Prodded and Treatment Level:
B-Agee cyoperates both collection and treatment facilities
T-Agency proddes treatment services but not collection
2-Advanced prim aryor primary with some secondary treatment
3-Secondary treatment
4-Advanced secondaryor secondarywith some terbarytreatment
5-Terharytreatment
Notes:
(1)-Beginning in Fiscal Year 2012-13,dataset represents wastewater flows from finalued publicly available audited documents.
(2)-Miles of sewers number changed in 2012 to include parallel force main pipes per the 2011 State of the District Report.
(3)-Does not include source control or overhead costs.
Section 1 - Page 8
Budget Review Summary
Capital Outlay Review:
$200,000,000
$150,000,000 '
$100,000,000
$50,000,000
$0
12/31/15 Actual Projected 2015-16 2015-16 Capital Outlay
capdal Outlay Capdal Outlay Cashfiow Budget
$68.727.285 $134,660,100 $187,825,000
As depicted by the preceding chart, Capital Outlays totaled $68.7 million or 36.6
percent of the capital outlay cash flow budget for FY 2015-16 as of December 31,
2015. Costs are proportionately low through the second quarter as some projects are
still in the design phase or have experienced various delays. Examples as of December
31 are the Newport Force Main Rehabilitation which has a FY15-16 cash flow budget of
$23.4 million but actual costs of only $8.3 million and the Gisler-Redhill Trunk
Improvement, which has a budget of $8.2 million but actual costs of only $176,000.
Overall, the capital outlay costs of the capital improvement program are expected
to approximate $134.7 million, or 71.7 percent of the capital outlay cash flow
budget at year-end.
More detailed information on the capital improvement program is provided within
Section 3.
Capital Assets Schedule and Debt Service Budget Review: Section 4 is the Capital
Assets Schedule and Debt Service Section. This section shows the cost value of the
Sanitation District's capital facilities at December 31, 2015, as well as the debt service
costs resulting from the need to provide funding for the construction of capital facilities.
The majority of principal payments on debt issues are due in August during the first
quarter, and in February during the third quarter of each fiscal year. As of December
31, 2015, 49.2 percent of the principal payments have been made through the end of
the second quarter. Total principal payments are expected to approximate budget at
Section 1 - Page 9
FY 2015-16 Second Quarter Report
year-end. Interest costs are expensed ratably throughout the fiscal year. Interest
expense is anticipated to approximate budget at year-end.
Self-Insurance Budget Reviews: Section 5 is the Self-Insurance Section. Through
December 31, the Self-Insurance Fund revenues totaled $1.0 million or 50.2 percent of
the budget, while expenses were $1.3 million or 50.3 percent of the budget.
Separate fund accounting is used for recording the revenue and expenses incurred in
managing these liability claims. The revenues to these funds represent charges to
operating divisions. Expenses to these funds include actual claims paid, claims
administration, and excess loss policies.
Section 1 - Page 10
Operating Budget Review
Cost per Million Gallons by Department
Budget and Actual
December 31, 2015
$1p00
$1,300
$1,200
$1100
$1,000
$900
$900
$200
$600
$500
$400
$300
1200
$100
$0 _
a Y c w
m N _
E E —
z —
E
w � �Butlgei �Adual
Collection,Treatment, & Disposal Expenses by Major Category
Budget and Actual (in thousands)
December 31, 2015
$70,000
$65,000
$60,000
$55,000
$50,000
$05,000
P0,000
$35,000
$30,000
$25,000
$20,000
$15,000
$10,000
$5.000
$Q
N 2 E F' m O m C 5m
-
vQ
�autlBet �Aclual O
Section 2-Page 1
2015-16 Second Quarter Report
Divisional Contributions to Cost Per Million Gallons
For the Six Months Ended December 31,2015
2015-16
12/31/13 12/31/14 Annual 12/31/15
Actual Actual Budget Actual
Flow in Million Gallons 36,665.15 35,166.23 73,000.00 33,974.26
Flow in Million Gallons per Day 199.27 191.12 200.00 184.64
Executive Management Department
General Management Administration $ 30.66 $ 25.60 $ 40.37 $ 31.50
Board Services 8.70 7.32 6.69 6.67
Public Affairs 7.20 7.93 15.83 13.11
Subtotal 46.56 40.85 62.89 51.28
Human Resources Department
Human Resources 51.07 54.65 64.80 56.17
Risk Management 47.92 48.23 49.02 43.67
Subtotal 98.99 102.88 113.82 99.84
Administrative Services Department
Administrative Services 9.16 9.87 8.37 9.43
Financial Management 40.44 45.60 49.72 46.69
Contracts, Purchasing,&Materials Mgmt. 57.49 62.59 60.09 61.57
Information Technology 125.81 150.60 139.58 157.32
Subtotal 232.90 268.66 257.76 275.01
Facilities Support Services Department
Facilities Support Administration 9.24 9.89 11.26 14.91
Facilities Support 7.17 8.21 - -
Equipment Rebuild 21.49 24.89 - -
Fleet Services 24.65 30.11 28.54 32.14
Collections Engineering 41.18 44.33 38.94 42.60
NPDES Source Inspection 38.19 33.08 32.93 34.61
Odor and Corrosion Control 91.39 104.94 110.91 105.34
Collection Facilities O&M 49.13 60.76 56.10 56.94
Subtotal 282.44 316.21 278.68 286.54
Engineering Department
Engineering Administration 5.72 10.43 5.57 7.75
Planning 50.70 44.49 43.84 50.91
Project Management Office 48.69 52.03 47.85 37.39
Engineering and Construction 123.69 129.56 131.18 140.56
Environmental Compliance 99.67 109.09 85.24 105.11
Subtotal 328.47 345.60 313.68 341.72
Operations&Maintenance Department
Operations&Maintenance Administration 11.47 10.66 12.11 13.23
Plant No.1 Operations 348.32 378.10 398.52 489.49
Plant No.2 Operations 294.42 308.15 318.87 309.99
Building,Grounds&Mechanical Maintenance 183.84 205.58 - -
Instrumentabon&Electrical Maintenance 203.82 215.79 - -
Plant No.1 Maintenance - - 264.27 226.80
Plant No.2 Maintenance - - 145.65 171.72
Environmental Laboratory&Ocean Monitoring 109.50 117.48 110.24 120.34
Subtotal 1,151.37 1,235.76 1,249.56 1,331.57
Total Operating Expenses 2.140.73 2,309.96 2,276.39 2,385.96
Cost Allocation (189.57) (234.13) (231.39) (269.45)
Net Operating Requirements $ 1, 551.16 $ 2,0 55.83 $ 2,045.00 $ 2,116.51
Section 2- Page 2
Operating Budget Review
Comparison of Expenses by Department
For the Six Months Ended December 31, 2015
2015-16
12/31/13 12131/14 Year to Date Budget%
Department and Division Actual Actual Budget 12/31/15 Realized
Executive Management Departmenl
General Management Administration $ 1,124,039 $ 900,333 $ 2,947,170 $ 1,070,092 36.31%
Board Services 319,016 257,548 488,410 226,641 46.40%
Public Affairs 264,011 278,804 1,155,850 445,273 38.52%
Subtotal 1,707,066 1,436,685 4,591,430 1,742,006 37.94%
Human Resources Department
Human Resources 1,872,631 1,921,945 4,730,090 1,908,246 40.34%
Risk Management 1,757,117 1,696,087 3,578,550 1,483,739 41.46%
Subtotal 3,629,748 3,618,032 8,308,640 3,391,985 40.82%
Administrative Services Department
Administrative Services 335,920 347,258 610,710 320,249 52.44%
Financial Management 1,482,644 1,603,533 3,629,380 1,586.133 43.70%
Contracts, Purchasing,&Materials Mgmt. 2,107,831 2,200,926 4,386,540 2,091,743 47.69%
Information Technology 4,613,021 5,296,062 10,189,160 5,344,753 52.46%
Subtotal 8,539,416 9,447,779 18,815,790 9,342,878 49.65%
Facilities Support Services Department
Facilities Support Administration 338,721 347,941 822,330 506,529 61.60%
Facilities Support 262,879 288,601 - - N/A
Equipment Rebuild 787,934 875,449 - - N/A
Fleet Services 903,886 1,058,813 2,083,620 1,091,964 52.41%
Collections Engineering 1,509,783 1,558,758 2,842,880 1,447,182 50.91%
NPDES Source Inspection 1,400,106 1,163,166 2,404,160 1,176,019 48.92%
Odor and Corrosion Control 3,350,867 3,690,482 8,096,320 3,578,950 44.20%
Collection Facilities O&M 1,801,385 2,136,631 4.095,100 1,934,347 47.24%
Subtotal 10,355,561 11,119,841 20,344,410 9,734,991 47.85%
Engineering Department
Engineering Administration 209,698 366,932 406,860 263,193 64.69%
Planning 1,858,747 1,564,599 3,200,230 1,729,470 54.04%
Project Management Office 1,785,386 1,829,753 3,493,120 1,270,433 36.37%
Engineering and Construction 4,535,138 4,556,182 9,576,040 4,775,392 49.87%
Environmental Compliance 3,654,435 3,836,238 6,222,510 3,571,061 57.39%
Subtotal 12,043,404 12,153,704 22,898,760 11,609,549 50.70%
Operations&Maintenance Department
Operations&Maintenance Administration 420,381 374,959 884,100 449,368 50.83%
Plant No. l Operations 12,771,362 13,296,458 29,091,695 16,630,063 57.16%
Plant No.2 Operations 10,795,097 10,836,567 23,277,850 10,531,806 45.24%
Building,Grounds&Mechanical Maintenance 6,740,602 7,229,649 - - N/A
Instrumentation&Electrical Maintenance 7,473,215 7,588,641 - - N/A
Plant No.1 Maintenance - - 19,291,815 7,705,229 39.94%
Plant No.2 Maintenance - - 10,624,840 5,833,922 54.91%
Environmental Laboratory&Ocean Monitoring 4,014,998 4,131,065 8,055,110 4,089,195 50.77%
Subtotal 42,215,655 43,457,339 91,225,410 45,239,583 49.59%
Total Operating Expenses 78,490,850 81,233,380 166,184,440 81,060,992 48.78%
Cost Allocation (6,951,354) (8,234,303) (16,877,500) (9,153,971) 54.24%
Net Operating Requirements $ 71,539,496 $ 72,999,077 $ 149,306,940 $ 71,907,021 48A6%
Section 2-Page 3
2015-16 Second Quarter Report
Summary of Collection, Treatment, &Disposal Expenses by Major Category
For the Six Months Ended December 31, 2015
Expense Expense Increase Increase Percent
Budget Through Through (Decrease) (Decrease) Budget Remaining
Description 2015-16 12131/15 12/31/14 $ % Realized Budget
Salary&Wages $ 66,276,100 32,474,470 31,759,579 $ 714,891 2.25% 49.00% $33.801,630
Employee Benefits 28,526,300 13,709,333 17,187,432 (3,478,099) -20.24% 48.06% 14,816,967
Administrative Expenses 1,624,570 972,801 832,506 140,295 16.85% 59.88% 651,769
Printing&Publication 412,020 121,931 141,552 (19,621) -13.86% 29.59% 290,089
Training&Meetings 1,050,500 329,883 273,892 55,991 20.44% 31.40% 720,617
Operating Materials&Supplies 17,191,000 8,281,648 8,075,408 206,240 2.55% 48.17% 8,909,352
Contractual Services 23,938,480 11,085,727 10,701,665 384,062 3.59% 46.31% 12.852,753
Professional Services 3,476,580 1,315,067 1,070,109 244,958 22.89% 37.83% 2,161,513
Research&Monitoring 831,000 309,764 355,036 (45.272) -12.75% 37.28% 521,236
Repairs&Maintenance 12,362,440 7,023,304 5,896,506 1,126,798 19.11% 56.81% 5,339,136
Utilities 7,787,080 4,337.178 3,838,042 499,136 13.00% 55.70% 3,449,902
Other Materials,Supplies,
and Services 2,708,370 1,099,886 1,101,653 (1,767) .0.16% 40.61% 1,608,484
Net Cost Allocation (16,877,500) (9,153,971) (8,234,303) (919,668) 11.17% 54.24% (7,723,529)
Net Operating Requirements 149,306,940 71,907,021 72,999,077 (1,092,056) .1.50% 48.16% 77,399,919
Gallonage Flow(MG) 73,000.00 33,974.26 35,166.23 (1,191.97) -3.39%
Gallonage Flow(MGD) 200.00 184.64 191.12 (6.48) -3.39%
Gallonage Flow($'a/MG) $2,045000 $2,116.51 $2,075.83 $40.68 1.96%
Section 2-Page 4
Operating Budget Review
Summary of Revenues
For the Six Months Ended December 31, 2015
Revenue Percent Revenue Increase Increase
Budget Through Budget Remaining Through (Decrease) (Decrease)
Description 2015-16 12/31/15 Realized Budget 12(31/14 $ %
Service Fees $294,182,000 $158,887,597 54.01% $135,294,403 $148,404,423 $ 10,483,174 7.06%
Permit Fees 13,555,000 4,314,673 31.83% 9,240,327 5,405,811 (1,091,138) -20.18%
Inter District Sewer Use-SAWPA 2,690,000 1.496.637 55.64% 1,193,363 1,180,194 316,443 26.81%
Intre District Sewer Use-IRWD 2,550,570 2,122,170 83.20% 428,400 1,339,826 782,344 58.39%
Sludge Disposal-IRWD 8,900,000 5.246.103 58.94% 3,653,897 4,603,117 642,986 13.97%
Capital Assessments-IRWD 2,293,000 1,243,250 54.22% 1,049,750 (645,227) 1,888,477 292.68%
Capital Facilities Capacity Charges 11,000,000 5,942,431 54.02% 5,057,569 9,670,609 (3,728,178) .38.55%
Debt Proceeds - - N/A N/A 232,240S91 (232,240,891) -100.00%
Property Taxes 88,527,000 40,033.567 45.22% 48,493,433 36,849,090 3,184,477 8.64%
Interest Earnings 6,064,000 1,352,547 22.30% 4,711,453 1,986,100 (633,553) -31.90%
Wastehauler 790,000 337.513 42.72% 452,487 363,202 (25,689) -7.07%
CNG Sales 400,000 221,094 55.27% 178,906 212,663 8,431 3.96%
Rents 8 Leases 254,000 129,940 51.16% 124,060 127,528 2.412 1.89%
Other 600,000 871,558 145.26% (271,558) 350,999 520,559 148.31%
Power Sales 5,000 7,822 156.44% (2,822) 7,472 350 4.68%
Other Sales 10,000 30,717 307.17% (20,717) 15,203 15,514 102.05%
Total Revenues $431,820,570 $ 222,237,619 51.47% $209,582,951 $442,111,901 $(219,874,282) -49.73%
Section 2-Page 5
2015-16 Second Quarter Report
Summary of Collection,Treatment, &Disposal Expenses by Line Item
For the Six Months Ended December 31,2015
Expense Percent Expense Increase Increase
Budget Through Budget Remaining Through (Decrease) (Decrease)
Description 2015-16 IV31115 Expensed Budget lV31114 $ %
Salaries.Waaes&Benefits
Salaries&Wages $ 66,276,100 $ 32,474,470 49.00% $ 33,801,630 $ 31,759,579 $ 714,891 2.25%
Employee Benefits
Retirement 16,726,300 8,099,396 48.42% 8,626,904 12,114,088 (4,014,692) -33.14%
Group Insurances 9,766,200 4,605,766 47.16% 5,160,434 4,423,795 181,971 4.11%
Tuition&Certification Ralmb 154,500 60,625 39.24% 93,875 67,750 (7,125) -10.52%
Edu.degrees,Can.&Lic. 303.300 157,128 51.81% 146.172 153,037 4,091 2.67%
Unfform Rental 47,400 26,643 56.21% 20,]5] 26,308 335 1.27%
Workers Compensation 1,478,700 739,349 50.00% 739,351 3]],501 361,848 95.85%
Unemployment nsurance 9,200 1,459 15.86% 7,741 4,599 (3,140) -68.28%
EMT Supplemental Benefits 40,700 18,967 46.60% 21,733 20,354 (1,387) -6.81%
Total Benefits 28,526,300 13,709,333 48.06% 14,816,967 17,187,432 (3,478,099)
Salaries,Wages&Benefits 94,802,400 46,183,803 48.72% 4&618,597 4&941,011 (2,763,208) -5.65%
Matt.supply,&Services
Administrative Expanses
Memberships 597,840 343,816 57.51% 254,024 406,810 (62,994) -15.48%
Office Exp-Supplies 68.600 25,970 37.86% 42.630 25.501 469 1.84%
Postage 39,970 14,418 36.07% 25,552 13,316 1,102 8.28%
Books&Publications 38,400 15,459 40.26% 22,941 15,079 380 2.52%
Forms 910 231 25.38% 679 - 231 NIA
Small Computer Items 734.000 804933 68.79% 229,067 328.940 175,993 53.50%
Minor Furniture&Fixtures 144,850 67,974 46.93% ]6,8]6 42,860 25,114 58.60%
Sublotal 1,624,570 972,801 59.88% 651,769 832,506 140,295 16.85%
Printing&Publication
Repro-In-House W9,680 110,407 29.87% 259,273 121,365 (10,958) -9.03%
Printing-Oulside 22,450 6,314 28.12% 16,136 13,592 (7,278) -53.55%
Notices&Ad. 19,620 5,210 26.55% 14,410 6,521 (1,311) -20.10%
Photo Processing 270 0.00% 270 74 (74) -100.00%
Subtotal 412,020 121,931 29.59% 290,089 141,552 (19,621)
Training&Meetings
Meetings 212.620 71,634 33.69% 140.986 58,612 13,022 22.22%
Training 837,880 258,249 30.82% 579,631 215,280 42,969 19.96%
Subtotal 1,050,500 329,883 31.40% 720,617 273,892 65,991 20.44%
operating Met-is&Supplies
Chemical Coagulants 6,012,000 3,001,217 49.92% 3,010,783 3,009,374 (8,157) -0.27%
Odor Control 8,043,200 3,747,900 46.60% 4,295,300 3,789,472 (41,572) -1.10%
Disinfection 154,000 100,885 65.51% 53,115 1]],044 (76,159) 43.02%
Chemicals-Misc&Cogan 547,000 144,253 26.37% 402.747 15.918 128,335 801
Gasoline,Diesel&Oil 705,970 304,595 43.15% 401,375 287,073 17,522 6.10%
Tools 351,400 235,123 66.91% 116,217 146,821 88,302 60.14%
Safety equlpmeninods 169,350 328,389 69.97% 140,961 244,535 83,854 34.29%
Soly,Points&Jon.Supplies 88.320 43,353 49.09% 44.967 44.019 (666) -1.51%
Lab Chemicals&Supplies 641,160 289,837 44.79% 357,323 296,769 (6,932) -2.34%
Other Operating Supplies 155,800 84,203 54.05% ]1,59] 64,383 19,820 30.78%
Property Tax Fees 16,800 1,893 11.27% 14,907 1,893 NIA
Subtotal 17,191,000 8,281,648 48.17% 8,909.352 8,075,408 206,240 2.55%
Contractual Services
Solids Removal 17,607,000 8,826,087 50.13% 8,780,913 8,704,358 121,729 1."%
Other Waste,Disposal 943,220 388,010 41.14% 555.210 472.592 (84,582) -17.90%
Groundskeeping 174,000 69,306 39.83% 104,694 80,071 (10,765) -13.44%
Janitorial 478,340 235,632 49.26% 242,708 244,653 (9,021) -3.69%
Outside Lab Services 280,500 91,956 32.78% 188,544 80,206 11,750 14.65%
Oxygen Plant Oper 274.200 208,302 ]8.9]% 65.898 292.206 (83,904) -28.71%
County Service Fee 706,950 21,229 3.00% 685,121 26,640 (5,411) -20.31%
Temporary Serdces t62,380 203,824 44.08% 258,556 149,281 54,643 36.54%
Security Services 582,000 200,691 34.48% 381,309 188,724 11,967 6.34%
Other 2,429,890 840,690 34.60% 1,589,200 162,9M 377,756 81.60%
Subtotal 23,938,480 11,085,72] 46.31% 12,852,753 10,701,665 384,062 3.59%
(Continued)
Section 2-Page 6
Operating Budget Review
Summary of Expenses by Line Item
For the Six Months Ended December 31,2015
Expense Percent Expense Increase Increase
Budget Through Budget Remaining Through (Decrease) (Decrease)
Description 2015.16 IV31115 Expensed Budget lV31114 $ %
Continued:
Professional Services
Legal 948,200 644,443 67.96% 303,767 415,167 229,276 55.23%
Audit&Accounting 211,250 85,607 40.52% 125,643 101.952 (16,345) -16.03%
Engineering 720,000 91,060 12.65% 628.940 48.974 42,086 85.94%
Enym Scientific Consulting 105,000 37,683 35.89% 67,317 22,108 15,575 70.45%
Software PMm Consulting 308,000 115,713 37.57% 192,287 152,278 (36,565) -24.01%
Advocacy Eforls 247,000 112,456 45.53% 134,544 87,628 24,828 28.33%
Industrial Hygiene Services 100,000 41,635 41.64% 58,365 23.139 18,496 79.93%
Labor Negotiation SerAces 60,000 - 0.00% 60,000 20,178 (20,178) -100.00%
Other 777,130 186,470 23.99% 590,660 198,686 (12,215) -8.15%
Subtotal 3,476,580 1,315,067 37.83% 2,161,513 1,070,109 244,958 22.89%
Research&Monitoring
Environmental Monitoring 345,000 97,857 28.36% 247,143 106,786 (8,928) -8.36%
Air Quality Monitoring 85,000 11,907 14.01% 73,093 48,251 (36,344) -75.32%
Research 401,000 200,000 49S8% 201,000 200.000 0.00%
Subtotal 831,000 309,764 3728% 521,236 355,036 (45,272) -12.75%
Bel&Maintenance
Materials&Services 1013641180 5.756,023 55.54% 4.608,157 4,869,837 8861186 18.20%
Svc.Mtc.Agreements 1,990,260 1,267,281 63.42% 730,979 1,026,669 240,612 23.44%
Subtotal 12,362,440 7,023,304 56.81% 5,339,136 5,896,506 1,126,798 19.11%
D6litiac
Telephone 385,000 151,285 39.29% 233,715 149,089 2,196 1.47%
Diesel For Generators 24,160 5,711 23.64% 18,449 12,673 (6,962) -54.94%
Natural Gas 500,000 242,158 48.43% 257,842 265,093 (22,935) 4.65%
Power 6.319,500 3.623,124 57.33% 2.696,376 3,134,519 488,605 15.59%
Water 558,420 314,900 56.39% 243,520 276,668 38,232 13.82%
Subtotal 7,787,080 4,337,178 55.70% 3,449,902 3,838,042 499,136 13.00%
Other Operating Supplies
Outside Equip Rental 105,970 5,919 5.59% 100,051 65,730 (59,811) -90.99%
Insurance Premiums 32,000 31,386 98.08% 614 31,884 (498) -1.56%
Prop&Gen Llab Insurance 496,000 247,998 50.00% 248,002 250,002 (2,004) -0.80%
Freight 69,070 39,738 57.53% 29,332 31.412 8,326 26.51%
Misr.Operating Expense 289,820 115,106 39.72% 174,714 93,955 21,151 22.51%
Regulatory Operating Fees 708,000 637,582 90.05% 70,418 601,597 35,985 5.98%
Subtotal 1,700,860 1,077,729 63.36% 623,131 1,074,580 3,149 0.29%
General Mgr Contingency
&Reappropriations 904,200 0.00% 904,200 N/A
Other Non-Oper Expense
Others 103,310 22,157 21.45% 81,153 27,073 (4,916) -18.16%
Subtotal 103,310 22,157 21.45% 81,153 27,073 (4,916) -18.16%
Total Materials,
Supplies&Services 71,382,040 34,877,189 48.86% 36,504,851 32,286,369 2,590,820 8.02%
Total Expenditures 166,184,440 81,060,992 48.78% 85,123,448 81,233,380 (172,381 -0.21%
Cost Allocation (16,877,500) (9,153,971) 54.24% (7,723,529) (8,234,303) (919,68t1) 11.17%
Net Operating Requirements $ 149,306,940 $ 71.907,021 48.16% $ 77.399,919 $ 72,899,077 $ (1,092,056)
Section 2-Page 7
2015-16 Second Quarter Report
Summary of Collection,Treatment,8 Disposal Expenses by Process
For the Six Months Ended December 31, 2015
Increase Increase
Actual Actual (Decrease) (Decrease)
12/31/15 12/31114 $ %
Process:
Preliminary Treatment $ 4,356,349 $ 4,491,425 $ (135,076) -3.01%
Primary Treatment 6,049,026 6,620,352 (571,327) -8.63%
Secondary Treatment 3,896,615 4,224,456 (327,841) -7.76%
Cryogenic Plant(Plant 2) 389,023 578,599 (189,576) -32.76%
Ef0uent Disposal 609,674 496,791 112,883 22.72%
Solids Handling 23,627,692 24,592,872 (965,180) -3.92%
Cogeneration 9,009,038 6,963,052 2,045,986 29.38%
Utilities 1,451,895 1,475,355 (23,459) -1.59%
Electrical Distribution 1,065,714 1,058,584 7,130 0.67%
Miscellaneous Buildings 4,240,680 3,875,232 365,448 9.43%
External Location 38,192 49,498 (11,305) -22.84%
Nedssa Vessel 102,352 138,886 (36,534) -26.31%
North County Yard 37,504 11 37,493 340945.36%
Laboratory 6,262,185 6,408,570 (146,385) -2.28%
Collections 10,771,083 12,025,395 (1,254,312) -10.43%
Net Operating Requirements $ 71,907,021 $ 72,999,077 $ (1,092,056) -1.50%
Section 2-Page 8
Operating Budget Review
Staffing Trends
Full Time Equivalents
December 31, 2015
700
650 634 626 624 624 624
600 46 38 36 q4
550
500
450
6/30112 6/30113 6/30/14 6130115 12131/15
8Actua1 8Va.a t
At December 31, 2015,the total head count was 586 employees,ore full time equivalency of 573.
Section 2-Page 9
2015-16 Second Quarter Report
This Page Intentionally Left Blank
Section 2- Page 10
CIP Budget Review
Capital Improvement Program
By Type and Funding Source
For the Six Months Ended December 31, 2015
eColledons Facllldes: 20 8%
eHeadwwks: 33%
ePraim,Treatment 2.e%
GSecandary Treatment'. 1.6%
eSolids Handling 8 Dlgeston: 47,6%
130cean OUCaII Systems: 6 8%
13tl4lity Systems: 6.3%
ePmess Relatetl Special Projects 0,6%
elnfam,aton Management Systems: 1.0%
eStrategic 8 Master Planning: 0.0%
eWater Management Projects: 1.1%
eSupp id Facilities: 69%
e Pdor Year Treatment Projects: 0.1%
eCapilal Equipment Purcheses: 0.9%
Total Capital Improvement Outlays -$68,727,285
ReplacemenVRehabilitation: 47%
Improved Treatment: 37%
❑Additional Capacity: 11%
■Support: 5%
Total Capital Improvement Outlays -$68,727,285
Section 3- Page 1
FY 2015-16 Second Quarter Report
Summary of Capital Improvement Construction Requirements - Current Year
For the Six Months Ended December 31, 2015
2015-16 2015-16 2015.16
Cashflow Actual at Projected
Budget 1 213112 01 5 Outlay
Collection System Improvement Projects
Collections Facilities
Santa Ana Trunk Sewer Rehab. $ 1,490,918 $ 1,347,168 $ 1,691,300
SARI Realignment 538,848 76,732 157,600
SARI Rock Stabilizers Removal 98,323 137,121 311,100
Newhope-Placentia Trunk Grade Separation Repl. 653,226 360,774 998,300
Newhope-Placentia Trunk Replacement 6,339,297 1,384,513 5,396,000
Lakeview Grade Separation Project 15,836 - 700
Tustin Rose OCTA Grade Separation Project 109,420 176,320 203,100
Seal Beach Pumping Station Rehabilitation 1,278,051 297,114 3,278,600
Rehabilitation of Western Regional Sewers 642,771 209,674 613,900
Newport Force Main Rehabilitation 23,453,907 8,287,655 11,881,000
Dover Drive Trunk Sewer Relief 716,918 1,083,596 1,097,600
District 6 Trunk Sewer Relief 4,049,977 115,399 263,500
Southwest Costa Mesa Trunk 479,304 96,608 383,900
Gisler-Redhill Trunk Improvements, Reach B 8,202,769 175,645 1,509,400
Master Facilities Engineering Projects-Collections 754,631 371,587 758,100
Master Planning Studies-Collections - 37,231 37,300
Bay Bridge Pump Station and Force Mains Rehab Study 469,725 10,143 132,800
Additional Charges to CIP Closed at 6/30/15 (75,473) (75,500)
Subtotal -Collections Facilities 49,293,921 14,091,807 28,638,700
Revenue Area 14
Newport Force Main Rehabilitation (1.88%) 449,382 184,697 253,600
Subtotal -Revenue Area 14 449,382 184,697 253,600
Total Collection System Improvement Projects 49,743,303 14,276,504 28,892,300
(Confined)
Section 3-Page 2
CIP Budget Review
Summary of Capital Improvement Construction Requirements - Current Year
For the Six Months Ended December 31, 2015
2015-16 2015-16 2015.16
Cashflow Actual at Projected
Budget 1 213112 01 5 Outlay
Treatment&Disposal Projects
Headworks
Headworks Rehabilitation and Expansion at Plant 1 5,907,164 1,028,633 4,456,400
Truck Line Odor Control Improvements P1 5,401,072 1,242,737 4,259,800
Subtotal -Headworks 11,308,236 2,271,370 8,716,200
Primary Treatment
Plant 1 Primary Treatment Upgrades 4,535,914 1,413,772 3,171,700
Plant 2 Primary Treatment System Rehabilitation 257,678 491,693 605,600
Primary Treatment Area Rehabilitation Study 128,777
Subtotal -Primary Treatment 4,922,369 1,905,465 3,777,300
Secondary Treatment
Activated Sludge Aeration Basin Deck Repair at P2 174,861 - 274,200
Oxygen Plant Demolition at Plant No. 2 2,624,473 1,066,032 2,227,000
Subtotal -Secondary Treatment 2,799,334 1,066,032 2,501,200
Solids Handling& Digestion
Digester Rehabilitation at Plant 5,242,131 2,648,588 4,535,100
Sludge Dewatedng and Odor Control at Plant 1 50,905,349 24,539,939 36,925,000
Digester Ferric Chloride System Rehabilitation 54,634 1,969 2,000
Solids Thickening and Processing Upgrades 4,644,432 2,561,452 4,813,700
Sludge Dewatering and Odor Control at Plant 2 6,440,708 2,995,239 7,800,800
Subtotal -Solids Handling&Digestion 67,287,254 32,747,187 54,076,600
Ocean Outfall Systems
Final Ef0uent Sampler and Building Area Upgrades 8,399,791 3,395,221 5,272,200
Ocean Outfall System Rehabilitation 3,546,419 1,129,470 2,156,300
Subtotal -Ocean Oulfall Systems 11,946,210 4,524,691 7,428,500
Utility Systems
Cengen Cooling Water System Replacement 50,604 18,699 84,700
Cengen Emissions Control Project 7,209,612 3,576,757 5,265,700
Natural Gas Pipelines Repl at Plant No. 1 and 2 39,509 - 9,000
Plant Water System Rehabilitation at Plant No. 1 1,112,536 42,068 49,300
Plant Water System Rehabilitation at Plant No. 2 870,583 31,445 61,600
Boiler System Rehab&Scrubbers H & I Demolition at P2 333,046 147,388 202,800
Consolidated Demolition&Utility Improvements at P2 1,980,801 499,121 499,200
Plant Air System Master Plan 120,681 46,003 144,100
Subtotal -Utility Systems 11,717,372 4,361,481 6,316,400
(Confined)
Section 3-Page 3
FY 2015-16 Second Quarter Report
Summary of Capital Improvement Construction Requirements - Current Year
For the Six Months Ended December 31, 2015
2015-16 2015-16 2015-16
Cashflow, Actual at Projected
Budget 1 2/3112 01 5 Outlay
Process Related Special Projects
Safety Improvements at Plants Nos. 1 and 2 51,536 - 5,800
Corrosion Management 1,431,191 285,839 930,800
Odor Control Master Plan 403,127 122,674 455,300
Subtotal -Process Related Special Projects 1,885,854 408,513 1,391,900
Information Management Systems
Programmable Control Panel Upgrades 1,635,577 330,598 1,528,600
SCADA System and Network Upgrades 398,034 103,641 1,073,400
Strategic Information Architecture (SIA) 491,921 - 169,100
Internet/Intranet Development 147,884 - 43,000
Geographic Information System 646,806 109,405 249,500
Information Technology Equipment Upgrade 439,179 975 113,600
EAM Software and Process Implementation 995,396 28,803 78,900
PDS2D Software Replacement 140,308 - 15,000
Software and Computer Equipment Repl. Project 849,874 131,614 387,200
Land Records Mgmt System Project 98,849 - -
Communication Radio System Replacement 119,532
Subtotal -Information Management Systems 5,963,360 705,036 3,658,300
Strategic& Master Planning
Master Planning Studies 908,533 1,178 797,200
Stormwater Master Plan 131,110
Subtotal -Strategic&Master Planning 1,039,643 1,178 797,200
Water Management Projects
Effluent Reuse Study 1,206,269 784,284 1,216,500
Subtotal -Water Management Projects 1,206,269 784,284 1,216,500
Support Facilities
Master Facilities Engineering Projects- Plant 5,007,745 1,437,466 3,198,500
Master Small Capital Replacement/Rehabilitation 2,800,792 30,118 1,033,000
Title 24 Access Compliance&Building Rehab Project 5,196,624 2,264,501 6,169,800
South Perimeter Security and Storm Water Impr.at Pl 675,161 125,790 441,000
Headquarters Complex, Site&Security&Entrance Realign. - 69,726 117,200
Site and Security Improvements at Plant No.2 - - 1,300
Administrative Facilities Implementation Planning 5,083 65,470 70,500
Ongoing Small Capital Replacement/Rehabilitation 986,303 769,877 1,200,700
Subtotal -Support Facilities 14,671,708 4,762,948 12,232,000
(Confined)
Section 3-Page 4
CIP Budget Review
Summary of Capital Improvement Construction Requirements - Current Year
For the Six Months Ended December 31, 2015
2015-16 2015-16 2015-16
Cashflow Actual at Projected
Budget 1 2/3112 01 5 Outlay
Others
Future Research Line Item 102,160 269,385 600,700
Capital Improvement Program Mgmt. Services 183,507 (8,841) (8,900)
Subtotal -Others 285,667 260,544 591,800
Additional Charges to CIP Completed at 6/30/15 14,964 15,000
Total Treatment and Disposal Projects 135,033,276 53,813,693 102,718,900
Capital Equipment Purchases 3,048,900 637,088 3,048,900
Total Collection, Treatment and Disposal Projects
and Capital Equipment Purchases $187,825,479 $68,727,285 $134,660,100
Section 3 - Page 5
FY 2015-16 Second Quarter Report
Summary of Capital Improvement Construction Requirements- Project Life
For the Six Months Ended December 31, 2015
Current Total
Approved June 30,2015 Year Projected Remaining
Project Accumulated Projected Cost at Future
Budget Cost Cost June 30,2016 Budget
Collection System Improvement Pro act
Collections Facilities
Santa Ana Trunk Sewer Rehab. 7,676,000 5,016,145 1,691,300 6,707,445 968,555
Raiff and Bristol Street Sewer Extension 5,319,000 259,075 - 259,075 5,059,925
SARI Realignment 11,404,000 5,485,418 157,600 5,643,018 5,760,982
SARI Rock Stabilizers Removal 3,092,000 44,834 311,100 355,934 2,736,066
Taft Branch Improvements 1,928,000 12,083 - 12,083 1,915,917
Newhope-Placentia Trunk Grade Separation Repl. 5,966,000 3,311,872 998,300 4,310,172 1,655,828
Newhope-Placentia Trunk Replacement 104,890,000 2,210,775 5,396,000 7,606,775 97,283,225
Yoffie Linda Pumping Station Abandonment 4,158,000 - - - 4,158,000
Lakeview Grade Separation Project 330,000 68,892 700 69,592 260,408
Tustin Rose OCTA Grade Separation Project 586,000 107,087 203,100 310,187 275,813
Beach Trunk/KnoU Interceptor Sewer Relief 118,678,000 - - - 118,678,000
Seal Beach Pumping Station Rehabilitation 62,041,000 225,706 3,278,600 3,504,306 58,536,694
Rehabilitation of Western Regional Sewers 112,222,000 157,056 613,900 770,956 111,451,044
Newport Force Main Rehabilitation 62,796,800 41,928,209 11,881,000 53,809,209 8,987,591
Dover Drive Trunk Sewer Relief 14,327,000 12,906,754 1,097,600 14,004,354 322,646
Crystal Cove Pumping Station Upgrade and Rehab 10,514,000 - - - 10,514,000
Bay Bridge Pumping Station Rehabilitation 51,010,000 - - - 51,010,000
District 6 Trunk Sewer Relief 7,795,000 1,061,211 263,500 1,324,711 6,470,289
Southwest Costa Mesa Trunk 14,993,000 1,548,343 383,900 1,932,243 13,060757
Gisler-Redhill Trunk Improvements,Reach B 28,143,000 4,101,645 1,509,400 5,611,045 22,531,955
Browning Subtrunk Sewer Relief 16,952,000 - - - 16,952,000
MacArthur Pump Station Rehabilitation 8762,000 - - - 8,762,000
Main Street Pump Station Rehabilitation 37,892,000 - - - 37,892,000
Edinger/Bolsa Chica Trunk Improvements 5,159,000 - - - 5,159,000
Edinger Pumping Station Upgrade and Rehabilitation 8,890,000 - - - 8,880,000
Slater Avenue Pump Station Rehabilitation 9,729,000 - - - 9,729,000
Master Facilities Engineering Projects-Collections 12,192,006 886,245 758,100 1,644,345 10,547,661
Master Planning Studies-Collections - - 37,300 37,300 (37,300)
Bay Bridge Pump Station and Force Mains Rehab Study 725,000 160,334 132,800 293,134 431,866
Additional Charges to CIP Closed at 6130115 (75,500) (75,500) 75,500
Subtotal-Collections Facilities 728,159,806 79,491,684 28,638,700 108,130,384 620,029,422
Revenue Area 14:
Newport Force Main Rehabilitation(1.88%) 1,203,200 803,353 253,600 1,056,953 146,247
Subtotal-Revenue Area 13 1,203,200 803,353 253,600 1,056,953 146,247
Total Collection System Improvement Projects 729,363,006 80,295,037 28,892,300 109,187,337 620,175,669
(Continued)
Section 3-Page 6
CIP Budget Review
Summary of Capital Improvement Construction Requirements - Project Life
For the Six Months Ended December 31, 2015
Current Total
Approved June 30,2015 Year Projected Remaining
Project Accumulated Projected Cost at Future
Budget Cost Cost June 30,2016 Budget
Treatment&Disposal Pro act
Headworks
Headworks Rehabilitation and Expansion at Plant 1 235,273,000 359,971 4,456,400 4,816,371 230,456,629
Truck Line Odor Control Improvements P1 11,170,000 1,626,415 4,259,800 5,886,215 5,283,785
Subtotal-Headworks 246,443,000 1,986,386 8,716,200 10,702,586 235,740,414
Primary Treatment
Primary Scrubber Rehabilitation at Plant 1 94,228,000 - - - 94,228,000
Plant l Primary Treatment Upgrades 10,317,000 5,344,930 3,171,700 8,516,630 1,800,370
Primary Clarifers Repl&Impr at Plant No.1 122,649,044 - - - 122,649,044
Plant 2 Primary Treatment System Rehabilitation 156,029,000 132,951 605,600 738,551 155,290,449
Primary Treatment Area Rehabilitation Study 1,000,000 157,161 157,161 842,839
Subtotal-Primary Treatment 384,223,044 5,635,04E 3,777,300 9,412,342 374,810,702
Secondary Treatment
Activated Sludge Aeration Basin Deck Repair at P2 6,679,009 - 274,200 274,200 6,404,809
Oxygen Plant Demolition at Plant No.2 4,051,000 623,942 2,227,000 2,850,942 1,200,058
Subtotal-Secondary Treatment 10,730,009 623,942 2,501,200 3,125,142 7,604,867
Solids Handling&Digestion
Digester Rehabilitation at Plant 1 64,902,000 53,301,350 4,535,100 57,836,450 7,065,550
Sludge Dewatering and Odor Control at Plant 1 171,978,000 107,446,409 36,925,000 14Q371,409 27,606,591
Digester Ferric Chloride System Rehabilitation 4,449,000 4,409,613 2,000 4,111,613 37,387
Solids Thickening and Processing Upgrades 51,150,000 41,080,729 4,813,700 45,894,429 5,255,571
Plant No.2 Digester Facilities Rehabilitation 47,600,000 152,343 - 152,343 47,447,657
Sludge Dewatering and Odor Control at Plant 2 86,500,000 15,751,351 7,800,800 23,552,151 62,947,849
Subtotal-Solids Handling&Digestion 426,579,000 222,141,795 54,076,600 276,218,395 150,360,605
Ocean Ouffall Systems
Final Effluent Sampler and Building Area Upgrades 15,973,000 3,829,324 5,272,200 9,101,524 6,871,476
Ocean Oudall System Rehabilitation 76,000,000 505,351 2,156,300 2,661,651 73,338,349
Subtotal-Ocean Oulfall Systems 91,973,000 4,334,675 7,428,500 11,763,175 80,209,825
Utility Systems
Cengen Cooling Water System Replacement 11,477,000 11,304,166 84,700 11,388,866 88,134
Cengen Emissions Control Project 24,950,000 17,184,906 5,265,700 22,450,606 2,499,394
UPS System Upgrades 7,891,000 - - - 7,891,000
Digester Gas Facilities Rehabilitation 85,870,000 - - - 85,870,000
Natural Gas Pipelines Repl at Plant No.1 and 2 1,310,017 - 9,000 9,000 1,301,017
Electrical Power Distribution System Improvements 35,081,000 - - - 35,081,000
Plant Water System Rehabilitation at Plant No.1 8,000,000 6,054,513 49,300 6,103,813 1,896,187
(Continued)
Section 3-Page 7
FY 2015-16 Second Quarter Report
Summary of Capital Improvement Construction Requirements - Project Life
For the Six Months Ended December 31, 2015
Current Total
Approved June 30,2015 Year Projected Remaining
Project Accumulated Projected Cost at Future
Budget Cost Cost June 30,2016 Budget
Utility Systems(continued)
Central Generation Rehab at Plant No. 1 35,646,979 - - - 35,646,979
Plant Water System Rehabilitation at Plant No.2 5,070,000 3,621,641 61,600 3,683,241 1,386,759
Boiler System Rehab&Scrubbers H&I Demolition at P2 3,095,000 2,593,983 202,800 2,796,783 298,217
Consolidated Demolition&UOlity Improvements at P2 43,984,000 1,184,290 499,200 1,683,490 42,300,510
Central Generation Rehab at Plant No.2 41,909,015 - - - 41,909,015
Plant Air System Master Plan 340,000 14g100 144,100 195,900
Subtotal-Utility Systems 304,624,011 41,943,499 6,316,400 48,259,899 256,364,112
Process Related Special Projects
Safety Improvements at Plants Nos.1 and 2 1,708,016 - 5,800 5,800 1,702,216
Corrosion Management 24,518,000 10,333,968 930,800 11,264,768 13,253,232
Odor Control Master Plan 1,900,000 933,582 455,300 1,388,882 511,118
Subtotal-Process Related Special Projects 28,126,016 11,267,550 1,391,900 12,659,450 15,466,566
Information Management Systems
Process SCADA Replacement 24,680,000 - - - 24,680,000
Programmable Control Panel Upgrades 3,177,000 706,439 1,528,600 2,235,039 941,961
SCADA System and Network Upgrades 27,839,000 14,464 1,073,400 1,087,864 26751,136
Strategic Information Architecture(SIA) 2,800,000 1,633,349 169,100 1,802,449 997,551
Inlemetllntranet Development 650,000 277,072 43,000 320,072 329,928
Geographic Information System 4,460,000 1,660,579 249,500 1,910,079 2,549,921
Information Technology Equipment Upgrade 4,148,000 3,205,226 113,600 3,318,826 829,174
EAM Software and Process Implementation 7,500,000 4,671,294 78,900 4,750,194 2749,806
PDS2D Software Replacement 525,000 320,388 15,000 335,388 189,612
Software and Computer Equipment Repl.Project 6,576,000 1,790,758 387,200 2,177,958 4,398,042
Land Records Mgmt System Project 600,000 373,951 - 373,951 226,049
Communication Radio System Replacement 750,000 355,645 355,645 394,355
Subtotal-Information Management Systems 83,705,000 15,009,165 3,658,300 18,667,465 65,037,535
Strategic&Master Planning
Master Planning Studies 11,803,111 - 797,200 797,200 11,005,911
Climate Change Impact Study 400,000 - - - 400,000
Stornm ater Master Plan 700,000 700,000
Subtotal-Strategic&Master Planning 12,903,111 797,200 797,200 12,105,911
Water Management Projects
Effluent Reuse Study 3,250,000 521,193 1,216,500 1,737,693 1,512,307
Subtotal-Water Management Projects 3,250,000 521,193 1,216,500 1,737,693 1,512,307
(Continued)
Section 3-Page 8
CIP Budget Review
Summary of Capital Improvement Construction Requirements - Project Life
For the Six Months Ended December 31, 2015
Current Total
Approved June 30,2015 Year Projected Remaining
Project Accumulated Projected Cost at Future
Budget Cost Cost June 30,2016 Budget
Support Facilities
Master Facilities Engineering Projects-Plant 43,325,807 21,111,389 3,198,500 24,309,889 19,015,918
Master Small Capital ReplacementlRehabilitation 15,622,000 - 1,033,000 1,033,000 14,589,000
Title 24 Access Compliance&Building Rehab Project 17,161,000 7,267,147 6,169,800 13,436,947 3724,053
South Perimeter Security and Storm Water Impr.at P1 5,277,000 107,327 441,000 548,327 4,728,673
Headquarters Complex,Site&Security&Entrance Realign. 168,000,000 - 117,200 117,200 167,882,800
Site and Security Improvements at Plant No.2 252,000 227,170 1,300 228,470 23,530
Administrative Facilities Implementation Planning 800,000 716,399 70,500 786,899 13,101
Ongoing Small Capital ReplacementlRehabilitation 21,672,000 19,420,090 1,200,700 20,620,790 1,051,210
Subtotal-Support Facilities 272,109,807 48.819,522 12,232,000 61,081,522 211,028,285
Others
Future Research Line Item 10,440,032 1,264,527 600,700 1,865,227 8,574,805
Capital Improvement Program Mgml.Services 300,000 10,000 (8,900) 1,100 298,900
Subtotal-Others 10,740,032 1,214,52] 591,800 1,866,327 &873,705
Additional Charges to Cl P Completed at 6130115 15,000 15,000 (15,000)
Total Treatment and Disposal Projects 1,875,406,030 353,587,296 102,718,900 456,306,196 1,419,099,834
Capital Equipment Purchases 13,328,984 5,178,339 3,048,900 8,227,239 5,101,745
Total Collection,Treatment and Disposal Projects
and Capital Equipment Purchases $2,618,098,020 $439,060,672 $134,660,100 $573,720,772 $2,044,377,248
Section 3-Page 9
FY 2015-16 Second Quarter Report
This Page Intentionally Left Blank
Section 3- Page 10
Capital Assets Schedule & Debt Service Budget Review
Capital Assets Schedule
For the Six Months Ended December 31, 2015
Capital Facilities Budget Review
Balance Year-to-Date Balance
07/01/15 Additions 12/31/15
CONSTRUCTION IN PROGRESS:
Treatment Plant $ 310,917.052 $ 54,450,781 $ 365,367,833
Collection System 81,292,173 14,276,504 95,568,677
Subtotal 392,209,225 68,727,285 460,936,510
PROPERTY,PLANT&EQUIPMENT(at cost):
Land and Property Rights 15,959,559 - 15,959,559
Collection Lines and Pump Stations 758,158,102 - 758,158,102
Treatment Facilities 2,255,777,614 - 2,255,777,614
Effluent disposal facilities 97,014,820 - 97,014,820
Solids disposal facilities 3,463,236 - 3,463,236
General and administrative facilities 227,945,470 - 227,945,470
Excess purchase price over book value on acquired assets 19,979,000 19,979,000
Subtotal 3,378,297,801 3,378,297,801
Total Property,Plant&Equipment&CIP $ 3,770,507,026 $ 68,727,285 $ 3,839,234,311
Debt Service Budget Review
2015-16 Year-to-Date Remaining
Budget Payments %of Budget Budget
Principal Payments by Debt Issue:
2007A COP 255,000 - 0.00% 255,000
2007B COP 6,775,000 - 0.00% 6,775,000
2008B COP 8,500,000 8,500,000 100.00% -
2009A COP 4,050,000 - 0.00% 4,050,000
2010A BABs - - N/A -
2010C BABs - - N/A -
2011ACOP 9,825,000 9,825,000 100.00% -
2012A COP - - N/A -
2012B COP - - N/A -
2014A COP - - N/A -
2014B CANS 7,827,411 - 0.00% 7,827,411
2015A COP
Subtotal Principal Payments 37,232,411 18,325,000 49.22% 18,907,411
Interest Expense by Debt Issue:
2007A COP 4,114,227 2,059,239 50.05% 2,054,988
2007B COP 12,826,634 5,465,494 42.61% 7,361,140
2008B COP 389,825 153,100 39.27% 236,725
2009A COP 8,825,700 4,412,850 50.00% 4,412,850
2010A BABs 2,897,639 2,108,419 72.76% 789,220
2010C BABs 6,523,780 4,746,908 72.76% 1,776,872
2011A COP 5,398,725 2,822,175 52.27% 2,576,550
2012A COP 3,735,900 1,867,950 50.00% 1,867,950
2012B COP 3,187,400 1,593,700 50.00% 1,593,700
2014A COP - 2,127,250 N/A (2,127,250)
2014B CANS 464,523 2,414,300 519.74% (1,949,777)
2015A COP 6,180,693 3,191,133 51.63% 2,989,560
Subtotal Interest Expense 54,545,046 32,962,518 60.43% 18,592,968
Total Debt Service $ 91,777,457 $ 51,287,518 55.88% $ 37,500,379
Section 4- Page 1
2015-16 Second Quarter Report
This Page Intentionally Left Blank
Section 4 - Page 2
Self Insurance Budget Review
General Liability and Property Fund Budget Review
For the Six Months Ended December 31,2015
Percent
Actual of Budget Remaining Actual
2015-16 Through Through 2015-16 Through Increase
Budget 12/31/15 12/31/15 Budget 12/31/14 (Decrease)
Revenues:
In-Lieu Premiums $ 496,000 $ 247,998 50.00% $ 248,002 $ 250,002 $ (2,004)
Miscellaneous Other Revenue - 14,334 N/A - - 14,334
Service Department Allocations 20,000 2,748 13.74% 17,252 2,748 -
Total Revenues 516,000 265,080 51.37% 265,254 252,750 12,330
Expenses:
Benefits/Claims 75.000 13,549 18.07% 61,451 - 13,549
Contractual Services 200 - 0.00% 200 - -
Legal Services 50,000 28,905 57.81% 21,095 9,578 19,327
Professional Services 2,500 0.00% 2,500
Subtotal 127,700 42,454 33.25% 85,246 9,578 32,876
Policy Premium Expense 1,530,000 580,262 37.93% 949,738 550,936 29,326
Total Expenses 1,657,700 622,716 37.57% 1,034,984 560,514 62,202
Excess Revenue (Expense) (1,141,700) (357,636) $ (769,730) (307,764) (49,872)
Beginning Reserves 56,141,700 56,125,515 56,802,224 (676,709)
Ending Reserves $55, 000,000 $ 55, 667,879 $ 56, 994,460 $ (726,581)
Section 5-Page 1
FY 2015-16 Second Quarter Report
Workers'Compensation Fund Budget Review
For the Six Months Ended December 31, 2015
Percent
Actual of Budget Remaining Actual
2015-16 Through Through 2015-16 Through Increase
Budget 12/31/15 12/31/15 Budget 12/31/14 (Decrease)
Revenues:
In-Lieu Premiums $ 1,478,700 $ 739,350 50.00% $ 739,350 $ 377,500 $ 361,850
Miscellaneous Other Revenue 5,000 - 0.00% 5,000 - -
Service Department Allocations - - N/A - - -
Total Revenues 1,483,700 739,350 49.83% 744,350 377,500 361,850
Expenses:
Benefits/Claims 525,000 433,699 82.61% 91,301 301,605 132,094
Contractual Services - - N/A - - -
Legal Services 130,000 124,201 95.54% 5,799 42,573 81,628
Professional Services 75,000 35,847 47.80% 39,153 15,912 19,935
Subtotal 730,000 593,747 81.34% 136,253 360,090 233,657
Policy Premium Expense 225,000 97,169 43.19% 127,831 111,263 (14,094)
Total Expenses 955,000 690,916 72.35% 264,094 471,353 219,563
Excess Revenue(Expense) 528,700 48,434 $ 480,266 (93,853) 142,287
Beginning Reserves 1,471,300 1,523,264 1,771,820 (248,556)
Ending Reserves $ 2A00,000 _L 1,571.698 $ 1,677,967 $ (106,269)
Section 5-Page 2
a
C�p
January 31, 2016
STAFF REPORT
Quarterly Treasurer's Report
For the Three Months Ended December 31, 2015
SUMMARY
Section 15.0 of the District's Investment Policy includes quarterly reporting requirements
for the District's two investment portfolios. These two funds, the "Liquid Operating
Monies," and the "Long-Term Operating Monies" are managed by Chandler Asset
Management, the District's external money manager.
The ongoing monitoring of the District's investment program by staff and Callan
Associates, the District's independent investment advisor, indicates that the District's
investments are in compliance with the District's adopted Investment Policy and the
California Government Code, and that overall performance has tracked with benchmark
indices. In addition, sufficient liquidity and anticipated revenues are available for the
District to meet budgeted expenditures for the next six months. The District's portfolios
do not include any reverse repurchase agreements or derivative securities.
ADDITIONAL INFORMATION
Performance Reports
The Quarterly Strategy Review, prepared by Chandler Asset Management, and the
Investment Measurement Service Quarterly Review, prepared by Callan Associates, is
attached for reference. Also attached are Long-Term and Liquid Operating Monies
Summary of Performance Data and Portfolio Statistics charts that depict the
performance results, estimated yield and duration, credit quality, and sector
diversification of the District's portfolios, as of December 31, 2015. The Liquid
Operating Monies portfolio, with an average maturity of 77 days, consists entirely of
high quality fixed income investments consistent with the District's investment policy.
Portfolio Performance Summary
The following table presents a performance summary of the District's portfolios as
compared to their benchmarks for the period October 1 through December 31, 2015.
OOSD ♦ P.O.Box 8127 ♦ Fountain Valley,LA 9272B-B127 ♦ (714)962-2411
Quarterly Treasurer's Report
For the Three Months Ended December 31, 2015
Page 2 of 3
Portfolio Performance Summary
Quarter Ended December 31,2015
Liquid Operating Monies %) Long-Tenn Operating Monies °
Total Rate Total Rate of
of Return Benchmark(') Return Benchmark(')
3 Months 0.05 0.03 -0.33 -0.56
6 Months 0.11 0.04 0.19 0.12
9 Months 0.16 0.05 0.03 0A 1
12 Months 0.23 0.05 0.85 1.07
Since inception Nov.30,2014 0.22 0.05 0.58 0.69
Market Value 132.OM 314.8M
Average Quality "AAA"P'Aal" "AN+rAal"
Current Yield(%) 0.5 1.4
Estimated Yield to Maturity(%) 0.4 1.3
Quarterly Deposits(Withdrawals) $88.oM 53.OM
Estimated Annual Income $0.5M $4.1M
(1) Benchmarks:
• Liquid Operating Portfolio: 3-Month Treasury Bill Index
• Long-Teml Operating Portfolio: Merrill Lynch Corp/Govt. 1-5 Year Bond Index
Portfolio Market Values
Comparative marked-to-market quarter-end portfolio values are shown in the following table, and in the
attached bar chart.
Liquid Long-Term
Quarter Operating Operating
Ending Monies($M) Monies($M)
31 Mar.15 49.5 386.8
30 Jun.15 61.8 404.9
30 Sep.15 43.9 262.6
31 Dec.15 132.0 314.8
District's Investment Account Balances as of December 31, 2015
Book Balances Estimated
Investment Accounts December 31, 2015 Yield(%)
Slate of Calif.LAIF $ 42,340,579 0.40
Union Bank Checking Amount 70,860 0.00
Union Bank Overnight Sweep Account 1,713,000 0.01
Union Bank W/C Checking 68,590 0.00
Chandler-Short-term Portfolio 131,826,481 0.49
Chandler-Long-term Portfolio 313,946,130 1.41
Petty Cash 3,000 N/A
BNY Mallon OCIP Reserve 3,602,661 0.25
TOTAL $493.571 301 1.06
Debt Service Reserves w/Tmstees R 32.9.5a_214 1.71
Quarterly Treasurer's Report
For the Three Months Ended December 31, 2015
Page 3 of 3
District's Cost of Funds on Debt Issues as of December 31, 2015
Annual
Cost of Funds Outstanding Intetest
Issue Description COP Bzlance Rate r%)
2007A Fixed $92,140,000 4.50
2007B Fixed 13,885,000 4.71
2008B Fixed 8,815,000 2.96
2009A Fixed 180,235,000 4.72
2010A Fixed 80,000,000 3.68
2010C Fixed 157,000,000 4.11
2011A Fixed 111,465,000 2.61
2012A Fixed 100,645,000 3.54
2012B Fixed 66,395,000 1.50
2014A Fixed 85,090,000 2.34
2014B Fixed 120,850,000 0.35
2015A Fixed 127510.000 3.30
TOTAL $I 144 030 0(I11
Weighted Avg.Cost of Foods 3.24
ATTACHMENTS
1. Chandler Quarterly Report
2. Summary of Performance Data and Portfolio Statistics— Liquid Operating Monies
3. Summary of Performance Data and Portfolio Statistics — L-T Operating Monies
4. Investment Transactions and Balances in LAW
5. Asset Summary by Asset Type— Liquid Operating Portfolio
6. Asset Summary by Asset Type— Long Term Portfolio
7. Asset Summary by Asset Type — Owner Controlled Insurance Program Escrow
Account
8. Investment Listing (Yield Analysis Report).
9. Asset Detail — Consolidated
10. Custody Transaction History -- Consolidated
11. Callan Quarterly Review
12. Chandler Quarterly Review
13. Rating Agency Comparisons
C/" CHANDLER
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December 31, 2015
Mr. Mike White, CPA
Controller
Orange County Sanitation District
10844 Ellis Avenue
Fountain Valley CA 92708-7018
Dear Mike,
Bond Market Recap
As expected, in December the Federal Open Market Committee (FOMC) increased the fed
funds target rate by 25 basis points. It was the first fed funds target rate increase since June
2006. Although the Fed took its first step toward normalizing monetary policy, the tone of the
FOMC statement was dovish, suggesting the pace of additional policy tightening will be slower
than historical Fed tightening cycles. Policymakers' median projection for the fed funds rate at
the end of 2016 is 1.375%. In the longer-run, the target fed funds rate is roughly 3.5%.
However, the FOMC has emphasized that monetary policy adjustments will be gradual and the
path of the fed funds rate will depend on the economic outlook. Notably, the FOMC will continue
to reinvest principal payments from its holdings of Agency and Mortgage-Backed securities and
will continue rolling over maturing Treasury securities until normalization of the fed funds rate is
well underway. Overall, monetary policy remains highly accommodative and the Fed is
proceeding with caution as it moves toward a more normalized policy stance.
Economic data is mixed. Trends in the labor market remain favorable, and consumer confidence
rebounded in December. However, the manufacturing sector remains weak and housing sector
data has been volatile. The ISM manufacturing index declined to 48.2 in December, to the
weakest level since July 2009. In terms of housing, new and existing home sales were recently
weaker than expected, but home prices remain firm. Nevertheless, payrolls have increased by
an average of 284,000 per month over the past three months, with the unemployment rate at
5.0%, which should provide a strong tailwind for economic growth this year. Third quarter 2015
GDP grew at an annualized pace of 2.0%, following growth of 3.9% in the second quarter. Last
month, the consensus forecast called for GDP growth of 2.1% in the fourth quarter of 2015, but
many economists have since lowered their forecast significantly. We are expecting GDP growth
of about 2.0%-2.5% in 2016.
During 2015, 2-year Treasury yields increased nearly 40 basis points, while 10-year Treasuries
increased roughly 10 basis points. This bear flattening (with short-term rates rising more than
long-term rates), is consistent with previous Fed tightening cycles and we expect this trend to
continue. Over much of the past year, financial market volatility has been elevated due to mixed
US economic data, the uncertain timing of the first rate hike, weak global economic growth,
divergent global central bank monetary policies, turmoil in Asian stock markets, and geopolitical
C/" CHANDLER
ASSET
MANAGEMENT
concerns. Ongoing uncertainty about the future pace of monetary policy normalization, and how
the Fed communicates its economic projections, will likely continue to fuel financial market
volatility.
The yield on the two-year Treasury note rose roughly 12 basis points in December to 1.05%.
Meanwhile, the yield on the ten-year Treasury note rose just six basis points in December to
2.27%. Overall, the Treasury yield curve flattened during 2015 in anticipation of monetary policy
normalization by the Federal Reserve and we expect this trend to continue. Looking ahead, we
believe the pace of subsequent rate hikes will be slower than historical Fed tightening cycles, in
light of ongoing sluggishness in the global economy.
2
C/" CHANDLER
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Consumer Prices
In November, the Consumer Price Index (CPI) rose 0.5% on a year-over-year basis, up from
0.2% in October. Year-over-year comparisons have become easier, given the precipitous
decline in energy prices at the end of 2014. Meanwhile, Core CPI (CPI less food and energy)
was up 2.0% in November on a year-over-year basis, vs. up 1.9% in October. The Personal
Consumption Expenditures (PCE) price index was up 0.4% on a year-over-year basis in
November, up from 0.2% in October. Core PCE (excluding food and energy)was unchanged in
November, up 1.3% on a year-over-year basis. Overall, inflation isn't showing signs up
significant upward pressure and remains below the Fed's 2.0% target.
Retail Sales
On a year-over-year basis, retail sales were up 1.4% in November, versus growth of 1.7% in
October. On a month-over-month basis, retail sales rose 0.2% in November, below the
consensus forecast of 0.3%. However, excluding autos and gas, the figure was up 0.5%,
stronger than the consensus forecast. Discretionary categories like restaurants, electronics &
appliances, and clothing & accessories posted healthy gains. Online sales were also strong in
November.
Labor Market
The December employment report was mostly stronger than expected. Nonfarm payrolls rose
by 292,000 in December, above the consensus forecast of 200,000. October and November
payrolls were also revised up by a total of 50,000. The unemployment rate was unchanged at
5.0%. The participation rate inched up to 62.6%from 62.5%. However, wages were flat, missing
expectations for a 0.2% increase. A broader measure of unemployment called the U-6, which
includes those whom are marginally attached to the labor force and employed part time for
economic reasons, was unchanged from November at 9.9%. Over the past three months,
payrolls have increased by an average of 284,000 per month, compared to the trailing six-month
average of 229,000.
Housing Starts
Total housing starts rose 10.5% in November, exceeding expectations. Single-family housing
starts rose 7.6% while multi-family starts rose 16.4%. Housing starts tend to be volatile on a
month-to-month basis, but the trend is favorable. Housing permits rose 11.0% in November,
also exceeding expectations.
3
C/" CHANDLER
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TREASURY YIELDS 12/31/2015 9130/2015 CHANGE
3 Month 0.17 (0.02) 0.15
2 Year 1.05 0.63 0.42
3 Year 1.31 0.90 0.41
5 Year 1.76 1.36 0.40
7 Year 2.09 1.74 0.35
10 Year 2.27 2.04 0.23
30 Year 3.02 2.85 0.17
ECONOMIC INDICATOR CURRENT RELEASE PRIOR RELEASE ONE •
Trade Balance (42.4) $Bin NOV 15 (44.6) $Bln OCT 15 (40.0) $Bln NOV 14
GDP 2.0%SEP 15 3.9%JUN 15 4.3%SEP 14
Unemployment Rate 5.0% DEC 15 5.0% NOV 15 5.6%DEC 14
Prime Rate 3.25% DEC 15 3.25%NOV 15 3.25% DEC 14
CRB Index 176.14 DEC 15 182.54 NOV 15 229.96 DEC 14
Oil (West Texas Int.) $37.04 DEC 15 $41.65 NOV 15 $53.27 DEC 14
Consumer Price Index(y/o/y) 0.5% NOV 15 0.2%OCT 15 1.3% NOV 14
Producer Price Index(y/o/y) (3.2%) NOV 15 (4.1%) OCT 15 1.1% NOV 14
Dollar/EURO 1.09 DEC 15 1.06 NOV 15 1.21 DEC 14
4
C/" CHANDLER
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Performance Attribution
Long-Term Portfolio
The Long-Term portfolio outperformed the benchmark during the quarter, generating a return of
(0.33%) versus (0.56%) for the Bank of America Merrill Lynch 1-5 Year AAA-A US Corporate
and Government Index. The mix of securities in the Corporate allocation positively contributed
to results, even in the face of a modestly lower allocation, as several of the finance names in the
portfolio outperformed. Credit spreads were marginally tighter during the quarter as risk
markets recovered somewhat from the September downdraft. The Treasury positions with
maturities less than one year also positively contributed to results as the move higher in yields
was more pronounced at the two year maturity point and beyond. The Municipal and Agency
allocations were slight detractors from performance as both sectors experienced slight spread
widening during the quarter. Purchased securities added to the portfolio during the quarter were
exclusively in the Treasury, Agency, and Commercial Paper sectors and were predominately at
the short or longer end of the benchmark, with few purchases in the intermediate part of the
maturity distribution. On a net basis $53 million was contributed to the portfolio during the
quarter.
Liquid Portfolio
The Liquidity portfolio outperformed the benchmark during the quarter, generating a return of
0.05% versus 0.03%for the three-month Treasury Bill Index. The portfolio added to exposure in
the Treasury, Agency, Commercial Paper, Negotiable CD, and Corporate sectors of the market
to reinvest to upcoming liquidity needs and to counteract the shortening maturity of the portfolio
due to the passage of time. The overall theme of positioning for upcoming liquidity needs and
out yielding the benchmark with the residual cash remains in place. On a net basis $88 million
was contributed to the portfolio during the quarter.
5
C/" CHANDLER
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Economic Outlook
Chandler anticipates the domestic and global economic backdrop will remain challenging in the
first half of 2016. Although the employment picture in the fourth quarter was strong, with non-
farm payrolls averaging 284k and the unemployment rate holding steady at 5.0%, other
measures of employment are not as robust. In particular, the US participation rate remains
moribund at 62.6% and the U-6 unemployment rate, which includes part-time and marginally
attached workers, is still elevated at 9.9%. Commodity markets remain under pressure, with
many market participants focused on the precipitous drop in the price of oil over the past year.
Until the supply picture clears up, with some producers taking supply off-line, the price of oil will
continue to impact market sentiment to the downside. Intuitively lower oil prices should be good
for the consumer, but retail sales have been soft and overall investors seem to be more
concerned about the lack of aggregate demand on a global basis. US GDP growth in 2016 is
forecasted to be in a range of 2.0-2.5%, consistent with the past several years, but likely not
strong enough to exert material upward pressure on domestic interest rates. The Chandler
team anticipates the Federal Reserve will not be able to meet their dot plot forecasts and thus
we think it is unlikely the Fed Funds rate will be near 1 3/8% at year-end 2016.
Chandler is forecasting market volatility to remain elevated, similar to the experience in the
second half of 2015. The FOMC (Federal Open Market Committee) meetings in March, June,
September and December will take on heightened importance as the current economic
projections by the Federal Reserve are above market expectations and we would anticipate
some capitulation by the Federal Reserve with the upcoming quarterly updates. Spread
valuations in Corporate and Asset Backed look attractive versus long-term averages, and the
team will look to be opportunistic in both sectors.
Strategy
Strategy highlights for the Long-Term Portfolio in coming months:
• Opportunistically increase the Corporate allocation in high quality names to take
advantage of the widening in spreads over the past year. Avoid names predisposed to
M&A activity and sacrificing their balance sheet to the benefit of equity holders.
• Add to the ASS allocation via the new issue market which is typically active in the first
quarter of the year, the current allocation has drifted below our target of 8.0-10.0% of the
portfolio.
• Focus new positions on shorter and longer maturity notes, at the expense of
intermediate maturities, as the curve flattening bias is likely to remain in place.
Strategy highlights for the Liquidity Portfolio in coming months:
• Continue to ladder the Agency discount note exposure to correspond with a portion of
the upcoming liquidity needs.
• Maintain a dedicated allocation to the US Treasury sector of at least 20.0% on an
ongoing basis (current exposure 31.1%).
• After anticipated liquidity needs are met focus on Corporate notes with maturities
between six to twelve months to increase the total return opportunity of the strategy.
6
C/" CHANDLER
ASSET
MANAGEMENT
Compliance Issues
Orange County Sanitation District Long Term
Imo/"
` December 31,2015
COMPLIANCE WITH INVESTMENT POLICY
Assets managed by Chandler Asset Management are in full compliance Wth State lawand Wth the investment policy
Category Standard Comment
Treasury Issues 5 years maximum matunty Complies'
Suprareational "AA"or better by 1 of 3 NRSROs; 30%maximum; 5%max; 5 Complies
years maturity; Includes a*. IADB,IBRD,and IFC per CGC
U.S.Agencies 20%maxissuer, 5yearsmawmunmatunty Complies
U.S.Corporate(MTNs) "A"or better long term rating by 1 of 3 NRSROs; 30%maximum; Complies'
5%max issuer 5 years max maturity
Municipal Securities "A"or higher by l of 3 NRSROS;10%maximum; 5%max issuer, Complies'
5 years maxi mum maturity
Asset Backed/CMOs/ "AA"or better by l of NRSROs; "A"or higher issuer rating by l Complies'
Mortgage-backed of3NRSROs; 20%maximum; 5%maxissuer(excludirg
MBS/ ovtagency);5 ars max maturity
Negotiable CDs "A"or better on its long term debt by l of 3 NRSROs; "A71P7"or Complies
highest short term ratings by 1 of 3 NRSROs; 30%maximum;5%
max issuer, 5 years max maturity
CDs/TDS 5%max issuer; 5 years max maturity Complies
Bankers Acceptances A-1,or equivalent highest short temr rating by l of 3 NRSROS; Complies
40%maximum; 5%max issuer;180 days max maturity
Commercial Paper A-1,or equivalent by l of 3 NRSROS; "A"or better by of Complies
NRSROs,if long temp debt issued; 25%maximum; 5%max
issuer; 270 days max maturity,
Money Market Fund Highest rating by 2 of NRSROs; 20%maximum;10%max issuer Complies
Repurchase Agreements 102%collateralization Complies
Reverse Repurchase 5%maximum,90 days max maturity, Complies
Agreements
LAIF Not used by investment adviser Complies
Avg Duration Not to exceed 60 months - (80%to 120%ofthe benchmark) Complies
Maximum Maturity 5 years maximum maturity Complies'
'The portfolio has twentyaigM(28)securities with maturities greater than 5 years including two(2)ABS,Pao(2)CMOs,lwemyore(21) ABS,one
(1)municipal,one(1)comorate and one(I)treasury. All securities were inherited from the previous manager and complied at time of purchase.
7
C/" CHANDLER
ASSET
MANAGEMENT
CA` Orange County Sanitation District Liquid
December 31,2015
COMPLIANCE WITH INVESTMENT POLICY
Assets managed by Chandler Asset Management are in full compliance wth State lawand win the investment policy
Category Standard Comment
Treasury Issues 1year maximum maturity, Minimum allocation of 10% Complies
Srpransdonal "AA"orbefterbyl of3NRSROs; 30%maximum; 5%max; 1 Complies
armaWri , Includesonl . fADB,IBRD,and IFC erCGC
U.S.Agencies 20%maxissuer, l yearmaximummaturity Complies
U.S.Corporate(MTNs) "A"or better long term rating by 1 of 3 NRSROs;30%maximum; Complies
5%max issuer; 1 year max maturity
Asset Backed/CMOs "AA"or better by l of NRSROs; "A"or higher issuer rating by l Complies
of 3 NRSROs; 20%maximum; 5%max issuer; 1 year max
maturity
Negotiable CDs "A"or better on its long tenn debt by l of 3 NRSROs; "Al/Pl"or Complies
highest short term ratings by 1 of 3 NRSROs; 30%maximum;5%
max issuer,,l year max maturity
CDs/TDS 5%max issuer; l year max maturity Complies
Bankers Acceptances A-1,or equivalent short term rating by l of 3 NRSROS; 40% Complies
maximum; 5%max issuer,180 days max malunifty
Commercial Paper A-1,or equivalent by l of 3 NRSROS; "A"or better by l of 3 Complies
NRSROs,if long tens debt issued; 25%maximum; 5%max
issuer, 270 days max maturity
Money Market Fund Highest rating by 2 of NRSROs; 20%maximum;10%max issuer Complies
Repurchase Agreements 102%collatemlization Complies
Reverse Repurchase 5%maximum,90 days max maturity Complies
Agreements
LAIF Not used by investment adviser Complies
Prohibited Municipal Securities Complies
Prohibited Mortgage Securities Complies
Avg Duration Nottoexceed 180 days; Maxdumtionofl/2 year iComplies
Maximum Maturity 1 year maximum maturity Complies
8
C/" CHANDLER
ASSET
MANAGEMENT
CAI OCSD Lehman Exposure
December 31,2015
COMPLIANCE WITH INVESTMENT POLICY
Assets managed by Chandler Asset Management are in full compliance with State toward Wth the inveshnent policy
Category Standard Comment
Treasury Issues 5 years maximum maturity Complies
Supranalional "AA"or better by 1 of3 NRSROs; 30%maximum; 5%max 5 Complies
years maturity; Includes only. IADB,IBRD,and IFC per CGC
U.S.Agencies 20%maxissuer, 5yearsmaximummatun Com lies
U.S.Corporate(MTNs) "A"or better long term rating by 1 of 3 NRSROs; 30%maximum; Complies*
5%max issuer; 5 years max maturity
Municipal Securities "A"or higher by l of3 NRSROS;10%maximum; 5%max issuer, Complies
5 years maximum maturity
Asset Backed/CMOs/ "AA"or better by l of 3 NRSROs; "A"or higher issuer rating by l Complies
Mortgage-backed of3NRSROs; 20%maximum; 5%maxissuer(excluding
MBS/ owagency);5 ars max maturity
Negotable CDs "A"or better on its long term debt by l of 3 NRSROs; "A11P7"or Complies
highest short term ratings by 1 of 3 NRSROs; 30%maximum;5%
max issuer, 5 years max maturity
CDs/TDS 5%max issuer; 5 years max maturity Complies
Bankers Acceptances A-1,or equivalent highest short ten rating by l of 3 NRSROS; Complies
40%maximum; 5%max issuer 180 days max maturity
Commercial Paper A-1,or equivalent by l of 3 NRSROS; "A"or better by l of 3 Complies
NRSROs,if long term debt issued; 25%maximum; 5%max
issuer; 270 days max maturity
Money Market Fund Highestrabrg by2 of3 NRSROs; 20%maximum;10%maxissuer Complies
Repurchase A reements 102%collateralizabon Complies
Reverse Repurchase 5%maximum,90 days max maturity Complies
Agreements
LAIF 1 Not used by investment adviser Complies
Avg Duration Nottoexceed60mon8e - 80%to120%oftebenchmark Complies
Maximum Maturity 5 years maximun maturity Complies
Account holds,$2 million face said.(cusip 525ESUY6)and$600,000 face value(cusip 525ESC1B7)of setaulteU Lehman Bros Holdings that were
pumbaseL by the pntmous manager. Con,aied at time of purchase.
9
C/" CHANDLER
ASSET
MANAGEMENT
Defaulted Bonds
C/" l1f.Slll nhmanf xlnanr HOId Ings Report
/1t 1.uIINI FI O%tlA
PoMMOH SLOG(
SLHOPNIN 1eAman Boar—IK tbnbn 60.13811 11131127t< H12013 0a3 3B 1.11 16.00% N HIRNR OW
Imp ERLm OM% m136.11 OOJ% . 00344 W) OW
Ow 1p1111p016
Ndlldl 91.7%; 1111% NRINR 0,00
i0111Ganmon 90H 11]SU1 WA "1"13 0-00% 0.00 OI 3400) NR 0,00
N COMPOMLE
606ESCIBI .-I Boall.Ctluld M.WJW 0Ul.0 M 113,003.00 "1 )S1WW 10.66% NRINR 007
Dm 113@010 OW% $72012.00 OW% OW 030,21290) NR OW
126EEWI1 Wlman 5014n NnDaWIM Lro,"U'V 0011B1AM S1TO1 1.
Oe 1d3012MB OW% 1 W9 roll 2i% NRINR 11
% 0AU'llB 06) NR OW
1.pOd 36.00 L1F60.00 a1.01% NRIXR 26
i0Ol O3 Cvpuele 3.800.00N00 WA 1,pOd 36.08 OLO% 0.00 11.a3fiA 16.001 No
0.00
1,BN,3614 IMU"9 100.00% NRINR 31 40
iOIRL Pool 3.331.4fl19 WA LBU,361.4 OLO% 0.00 0.470,22299) NR 0.00
T07ALIMRUTVAWE PLBSRCCRBED D0.09A19
10
OIL CHANDLER
ASSET
MANAGEMENT
Ratings
Orange County Sanitation District Long Term
tlecemEer 31,2015 vs. SepterrW 30,2015
mob
mob
ao.
mo.
0 w M • A M
M M A J NN
1M1n5 13B% 50.6% 8.5% 6.2% 36%
~1 106% Was. 14.1% 12% 5.5%
wn se`w
Orange County Sanitation District Liquid
Decmber 31.W15 vs. Septern0er W.MIS
mob
mob
LL6% IM M .5 <A M
� 1 VIS • e'MP15
AM M A J No
1201n5 63.3% 23.1% 05% 00% 08%
entl15 36.0% 43.5% 18.6% 0.0% 0.0%
Sun:Lellup
tt
C/" CHANDLER
ASSET
MANAGEMENT
OCSD Investment Program
Quarter End Portfolio Value
$600,000,000
Liquid Operating Monies
$500,000,000 •Long-Term Operating Monies
$400,000,000
$300,000,000
$200,000,000
$100,000,000
$- p y Q
@; 4'e
70 7S 10
HISTORICAL YIELD CURVE
4.00%
DEG 15
-::DECNOV 15 3.02%
3.00% — 14 _
2.27%
2.09
2.00% _______________1.76 -----------------------------------
1.31%
1.05%
1.00
0.48%
0.17%
0.00% a�
12
C/" Orange County Sanitation District Liquid Portfolio Summary
Account#10282 As of 12/31/2015
MEMEMEN
PORTFOLIO CHARACTERISTICS ACCOUNTSUMMARY ••
01111110 Beg.Values End Values Issuer %Portfolio
Average Duration 0.21 as of 11/30/15 as of 12/31/15 Government of United States 31.1 %
Average Coupon 0.49% Market Value 43,886,453 131,842,781
Federal Home Loan Bank 19.9
Average Purchase YTM 0.38% Accrued Interest 62,886 118,943 Drefus Treasury MMKT FD 521 9.8%
Averse Market YTM 0.41 % Total Market Value 43,949,339 131,961,724
9 Federal Home Loan Mortgage Corp 9.5%
Average S&P/Moody Rating AAA/Aal Income Earned 11,137 19,115 Federal Farm Credit Bank 8.4%
Average Final Maturity 0.21 yrs COnt1wD 88.000,000 International Finance Corp 1.9%
Average Life 0.14 yrs Par 43,845,962 131,810,118 Paccar Financial 1.7%
Book Value 43,888,182 131,851,241 Bank of Tokyo-Mr UFJ 1.7%
Cost Value 43,948,710 131.909,648 83.9%
• - - • • MATURITY DISTRIBUTION
US 90% AAA
Conxxah` fig 9"a (B7J%)
0.8%)\
6upmnaaonal US
(1.9%) Treasury 1W96
(31.1%)
NegoaaNs
CD
(0.8%) 40%
Money
Market 194%
Fund 20%
Canmercial ID.7%
Paper NR
(6A%) % I (0.8%)
A9�Y o-ss ss-s s-k 1-1,1 ks-z z.zs as-a a. AA A
(39.3%) Maturity fym) (23.1%) (8.5%)
Total Rate of Return Current Latest Year Annualized Since
As of 12/31/2015 Month 3 Months To Date 1 Yr 5 Yrs 10 Yrs 11/30/2014 11/3012014
Orange County Sanitation District Liquid 0.01 % 0.05% 0.23% 0.23% N/A N/A N/A 0.22% 0.23%
BAML 3-Month US Treasury Bill Index 0.03% 0.03% 0.05% 0.05% N/A N/A N/A 0.05% 0.05%
Chandler Asset Management-CONFIDENTIAL Page 1 Ex cugon Time:19I20161:MA6 PM
C/" Orange County Sanitation District Long Term Portfolio Summary
Account#10268 As of 12/31/2015
PORTFOLIO CHARACTERISTICS ACCOUNTSUMMARY ••
Average Duration 2.42 Beg.Values End Values Issuer %Portfolio
as of 11/30/15 as of 12/31/15 Government of United States 35.4%
Average Coupon 1.41 % Market Value 271,387,265 313,753,445
Federal Home Loan Mortgage Corp 9.4%
Average Purchase YTM 1.30% Accrued Interest 1,031,129 1,011,160 Federal National Mortgage Assoc 9.3%
Averse Market YTM 1.32% Total Market Value 272,418,394 314,764,605
9 Federal Home Loan Bank 6.9%
Average S&P/Moody Rating AA+/Aai Income Earned 286,298 311,066 Drefus Treasury MMKT FD 521 4.7%
Average Final Maturity 2.87 yrs COnt/WD 42.695,056 Toyota ASS 2.9%
Average Life 2.53 yrs Par 269,591,639 312,879,297 Toyota Motor Corp 2.6%
Book Value 270,712,823 313,739,280 Honda ASS 1.8%
I Cost Value 271,551,376 314.607,013 73.0%
• - • • MATURITY DISTRIBUTION
US 25% PA
CoPence
(69 9%I
SupranaGa w
(41%) US �q% 195%
Treasury NR
Municipal (35,E%) (3.6%)
Bantle 15% 14.6% 13.5% BBB
money (d.2%)
Madre) to.3%
MBS 10% e.a%
d%) A
Conare.n
Paper ABS 6% 2.a%
CMO (6.0%)
0.5%) %
Agazy 0- 25 s5-.5 5-1 1-3 2-3 3-a a-s s. APA
23.9%)
Maturity(Yrs) (138%))
Total Rate of Return Current Latest Year Annualized Since
As of 12/31/2015 Month 3 Months To Date 1 Yr 5 Yre 10 Yrs 11/30/2014 11/3012014
Orange County Sanitation District Long Tenn -0.12% -0.33% 0.85% 0.85% N/A N/A N/A 0.58% 0.63%
BAML 1-5 Yr US Corporate/Gout Rated AAA-A Index -0.17% -0.56% 1.07% 1.07% N/A N/A N/A 0.69% 0.75%
BAML US 15 Yr US Corp/Govt Rated AAA-BBB Index -0.21 % -0.54% 1.05% 1.05% N/A N/A N/A 0.62% 0.67%
Chandler Asset Maregamert-CONFIDENTIAL Page 1 Execufion Tme:19120161:01:32 PM
Orange County Sanitation District
Investment Transactions and Balances in the
State of California Local Agency Investment Fund
December 31, 2015
Par Value Book Value Market Value Rate Yield
Balance
December 1, 2015 $35,340,579 $35,340,579 $35,340,579 0.40 0.40
Deposits:
12/3/2015 13,500,000 13,500,000 13,500,000 0.40 0.40
12/18/2015 8,500,000 8,500,000 8,500,000 0.40 0.40
Total Deposits 22,000,000 22,000,000 22,000,000 0.40 0.40
Withdrawals:
12/9/2015 (2,100,000) (2,100,000) (2,100,000) 0.40 0.40
12/11/2015 (2,300,000) (2,300,000) (2,300,000) 0.40 0.40
12/17/2015 (3,000,000) (3,000,000) (3,000,000) 0.40 0.40
12/23/2015 (7,600,000) (7,600,000) (7,600,000) 0.40 0.40
Total Withdrawals (15,000,000) (15,000,000) (15,000,000) 0.40 0.40
Balance
December 31, 2015 $42,340,579 $42,340,579 $42,340,579 0.40 0.40
Report ID: GL8251
Asset Summary Bare Cwnener: Can
i
BNY MELLON by Asset Type with Sectors Alternate eaxs Cwren�.
h..&RaW
Exceage ete:
OCS LNQ OF CHANDLER-OCSF07511102 12 3 L 2G 35 Status: FINAL
Net Unrealized
Cost Market Value % of Gain/Loss
Description Shares Per Base Base Total Base
CASH&CASH EQUWALENTS
U.B.DOLLAR
COMMERCIAL PAPER-DISCOUNT 8,400,000.000 8,392,994.11 8,392,994.11 6.36% 0.00
FEDERAL FARM CREDIT BANK- 1 YR OR LESS 11,075,000.000 11,069,575.03 11,069,575.03 8.39% 0.00
FEDERAL HOME LOAN BANK- 1 YR OR LESS 26,285,000.000 26,260,170.38 26,260,170.38 19.90% 0.00
FEDERAL HOME LOAN MORTGAGES- 1 YR OR LESS 12,500,000.000 12,493,492.99 12,493,492.99 9,47% 0.00
FNMA ISSUES- IYR OR LESS 2,000,000.000 1,998,079.56 1,998,079.56 1.51% 0.00
SHORT TERM INVESTMENT FUNDS(US REGULATED) 12,950,117.860 12,950,117.86 12,950,117.86 9.81% 0.00
U.S.TREASURY BILLS- 1 YR OR LESS 19,000,000mo 18,997,191.83 18,997,191.83 14.40% 0.00
INTEREST 135,649.47 135,649.47 0.10% 0.00
U.S.DOLLAR 92,210,119.860 92,297,271.23 92,297,271.23 69.94% 0.00
CASH&CASH EQUIVALERTS 92,210,117.860 92,297,271.23 92,297,271.23 69.94% 0.00
FEWD INCOME SECURITIES
U.S.DOLLAR
BANKING&FINANCE 8,000,000.000 8,052,170.00 8,030,470.00 6.09% -21,700.00
CERTIFICATES OF DEPOSIT 1,000,000.000 999,830.00 1,000,430.00 0,76% 600.00
CHEMICALS 1,000,000.000 1,001,530.00 1,000,050.00 0.96% -1,480.00
FOOD BEVERAGE&TOBACCO 2,000,000.000 2,007,580.00 2,006,180.00 1.52% -1,400.00
INSURANCE 1,000,000.000 1,014,170.00 1,008,500.00 0.96% -5,670.00
OIL&GAS 1,100,000.000 1,116,489.00 1,100,924.00 0.83% -15,565.00
RETAIL 1,000,000.000 1,032,590.00 1,O07,030.00 0.46% -25,560.00
SUPRANATIONAL ISSUES 2,500,000.000 2,498,750.00 2,498,025.00 1.89% -725.00
US GOVERNMENTS 22,000,000.000 22,024,917.45 22,013,250.00 16.68% -11,667.45
U.B.DOLLAR 39,600,000.000 39,748,026.45 39,664,859.00 30.06% -83,167.49
FIRED INCOME SECURITIES 39,60 ,000.000 39,748,026.45 39,664,859.00 30.06% -83,167.45
TOTAL ASSETS-BASE: 131,810,117.860 132,045,297.68 131,962,130.23 100.00% .83,167.46
111912016 6:27.-IOPM EST 1 Workbench
Asset Summary Report ID: GL8251
Base Currenry: Can
BNY MELLON by Asset Type with Sectors Alteesa[e Base Currency:
Exchange Rate:
OCs LONG CHANDLER-OCSF07522202 12 31 2015 Status: FINAL
Net Unrealized
Cost Market Value % of Gain/Loss
Description Shares Par Base Base Total Base
CASH&CASH EQUIVALENTS
U.S.DOLLAR
CASH EQUIVALENTS 68,128.130 104,812.50 28,818.20 0.01% -75,994.30
COMMERCIAL PAPER-DISCOUNT 8,260,000.000 8,248,763.67 8,248,763.67 2.62% 0.00
SHORT TERM INVESTMENT FUNDS(US REGULATED) 14,810,500.020 14,810,500.02 14,810,500.02 4.70% 0.00
PENDING TRADES 19.33 19.33 0.00% 0.00
INTEREST 1,026,642.18 1,026,642.18 0.33% 0.00
U.S.DOLLAR 23,138,628.150 24,190,737.70 24,114,743.40 7.66% -75,994.30
CASH&CASH EQUIVALENTS 23,138,629.150 24,190,737.70 24,114,743.40 7.66% -75,994.30
FRED INCOME SECURITIES
U.S.DOLLAR
ABS-CAR LOANS 14,927,116.970 14,906,508.12 14,894,693.72 4.73% -11,814.40
ASS-EQUIPMENT 4,000,000.000 4,001,875.00 3,981,360.00 1.26% -20,515.00
ASS-HOME EQUITY 177,265.070 138,854.43 167,241.51 0.05% 28,387.08
ASS-SMALL BUSINESS ADMINISTRATION 102,402.160 102,402.16 110,668.06 0.04% 8,265.90
ASS-STUDENT LOANS 43,030.870 42,856.29 43,060.13 0.01% 203.84
BANKING&FINANCE 46,200,000.000 47,032,874.82 44,951,333.00 14,27% -2,081,541.82
FHLMC MULTICLASS 2,059,266.930 2,254,178.80 2,278,466.90 0.72% 24,288A0
FHLMC POOLS 2,640.270 2,575.93 2,732.07 0.00% 156.14
FNMA POOLS 2,016,830.740 2,115,269.83 2,193,132.06 0.70% 77,862.23
FNMA REMIC 587,007.470 580,379.28 591,211.42 0.19% 10,832.14
GNMA MULTI FAMILY POOLS 281,819.150 281,829.21 290,415.66 0.09% 8,586.45
GNMA REMIC 46,276.070 46,276.07 46,542.62 0.01% 266.55
HEALTHCARE 4,000,000.000 4,009,675.00 4,034,400.00 1,28% 24,725.00
OIL&GAS 6,000,000.000 5,963,540.00 5,947,920.00 1.89% -15,620.00
SUPRANATIONAL ISSUES 13,000,000.000 13,035,120.00 12,959,440.00 4.11% -75,680.00
TAXABLE MUNICIPALS 4,240,000.000 4,307,633.89 4,6M,276.40 1.48% 356,642.51
TECHNOLOGY 7,000,000.000 7,003,475.40 6,954,060.00 2.21% -49,415.40
U.S.TIPS 10,417,368.000 10,300,083.89 9,893,686.91 3.14% -406,396.98
US AGENCIES 75,500,000.000 75,304,956.00 75,093,860.00 23.84% -211,096.00
US GOVERNMENTS 101,300,000.000 101,234,290.74 101,250,948.00 32,15% 16,657.26
WHOLE LOAN-CMO-COLLATERALIZED MTG OBLIG 507,773.030 507,770.72 508,580.39 0.16% 809.67
111912016 6:27.-IOPM EST 2 Workbench
Asset Summary Report ID: GL8251
Base Cunenry: USD
BNY MELLON by Asset Type with Sectors Alteesa[e Ease Currency:
Exchange Rate:
OCS LONG CHANDLER-OCSF07522202 12 31 2015 Status: FINAL
Net Unrealized
Cost Market Value % of Gain/Loss
Description Shares Par Base Base Total Base
U.B. DOLLAR 292,408,796.730 293,172,425.58 290,858,028.85 92.34% -2,314,396.73
F D INCOME SECURITIES 292,408,796.730 293,172,425.58 290,858,029.85 92.34% -2,314,396.73
TOTAL ASSETS-BASE: 315,547,424.880 317,363,163.28 314,972,772.25 100.00Y .2,390,391.03
111912016 6:27.-IOPM EST 3 Workbench
Asset Summary Report ID: GL8251
Base Cuuenry: USD
BNY MELLON by Asset Type with Sectors Alteesa[e Ease Currency:
Exchange Rate:
ESCROW ACCOUNT-OCSFOT555502 12 3L 2015 Status: FINAL
Net Unrealized
Cost Market Value % of Gain/Loss
Description Shares par Base Base Total Base
FIXED INCOME SECURITIES
U.S.DOLLAR
US GOVERNMENTS 3,594,000.000 3,603,596.33 3,594,000.00 100.00% -9,596.33
TOTAL ASSETS-BASE: 3,594,000.000 3,603,596.33 3,594,000.00 100.00% -9,596.33
111912016 6:27.-IOPM EST 4 Workbench
Yield Analysis Report ID: RAM234
Base Currency:
TINY MELLON
OCSF07511102 12/31/2015
Liquid Oper-Pimco
Units Held YTM/ Current Moody's Market Total Coat %Type Option
Security ID Security Description can(EOP) Yield Quality Price Market Value %Market Adj
Rating Value Duration
CASH &.TEMPORARY
Sum o(Accouut Receivables - 0.00
SUMRECV 135,649
AGENCY
10,000,000.00 FEDERAL FARM CR BK CONS SYSTEM GAS Asa 99.99 9,997,764 11.59 0.07
313312SG6 0.000%0 1/26/2016 DD 0 1/26/15 9,997,764 7.58
3,300,000.00 FEDERAL HOME LN BK CONS DISC N 0.13 Asa IM.00 3,298,936 3.82 0.08
313384SK6 MAT 01/29/2016 3,298,936 2.50
13,000,000.00 FEDERAL HOME LN BK CONS DISC 0.15 Asa 99.99 12,996,538 15.06 0.06
313384SH3 0.000%01/27/2016 DD 01/27/15 12,996,538 9.85
2,000,000.00 FEDERAL HOME LN BK CONS DISC 0.23 Asa 99.96 1,997,761 2.32 0.10
313384SS9 MAT 02/03/2016 1,997,761 1.51
985,000.00 FEDERAL HOME LN INKS CONS DISC 0.46 Aae 99.73 982,224 1.14 0.46
313384YFO MAT 06/17/2016 982,224 0.74
COMMERCLtL PAPER
2,000,000.00 FEDERAL NATL MTG ASSN DISC 0.06 Ana 100.00 1,998,080 2.32 0.08
313588SH9 0.000%0 1/27/2016 DD 02/02/201 1,998,080 1.51
2,200,000.00 PACCAR FINL CORP DISC 0.29 P-1 99.98 2,199,273 2.55 0.06
69392AAN2 01/22/2016 2,199,273 1.69
1,000,000.00 COOPERAT CENT DISC 0.39 P-1 99.93 998,754 1.16 0.19
21689ACA9 03/10/2016 998,754 0.96
2,000,000.00 EKKON CORP DISC 0.39 P-1 99.97 1,999,089 2.32 0.08
30229AAU3 01/28/2016 1,999,089 1.51
111912016 6:36:37PM EST 1 Source:The Hank o FPew Pork Meilan Communion
Yield Analysis Report ID: RAM234
Ease Currency: Ban
TINY MELLON
OCSF07511102 12/31/2015
Liquid Oper-Pim<o
Units Held YTM/ Current Moody's Market Total Coat %Type Option
Security ID Security Description can(SOP) Yield Quality Price Market Value %Market Adj
Rating Value Duration
1,000,000.00 BANK TOKYO-MITSUB DISC 0.39 0.39 1`-1 99.89 998,700 1.16 0.33
06538BBR3 02/25/2016 998,700 0.96
1,200,000.00 BANK TOKYO-MITSUB DISC 0.41 P-1 99.97 1,199,428 1.39 0.08
06538BAV5 01/29/2016 1,199,428 0.91
1,000,000.00 TOYOTA MTR CR CP DISC 0.45 0.45 P-t 99.97 997,750 1.16 0.50
89233GBN5 02/22/2016 997,750 0.96
1,075,000.00 FEDERAL FARM CR BK CONS SYSTEM 0.63 Aaa 99.92 1,071,811 1.24 0.49
313312YJ3 0.000%06/20/2016 DD 06/22/15 1,071,811 0.81
OTHER
12,950,117.86 DREYFUS TREAS&AGY CSH CSH MG - Aaa 12,950,118 15.01 0.08
996085247 VAR RT 12/31/2049 DO 04/09/97 12,950,118 9.81
TREASURIES AND AGENCIES O
9,600,000.00 FEDERAL HOME LN MTG CORP DISC 0.15 Ana 99.99 9,596,652 11.12 0.08
313396SH7 0.000%01/27/2016 DO 01/27/201 9,596,652 7.27
4,000,000.00 FEDERAL HOME LN BK CONS DISC 0.59 Aaa 99.72 3,988,331 4.62 0.48
313384YN3 MAT 06/24/2016 3,988,331 3.02
TREASURY
9,000,000.00 U S TREASURY BILL 0.08 Ass, 100.00 8,998,744 10.43 0.06
912996GY9 0.000%0 1/21/2016 DD 07/23/15 8,998,744 6.82
10,000,000.00 U S TREASURY BILL 0.11 Aaa 99.99 9,998,448 11.59 0.08
912796GZ6 0.000%01/28/2016 DD 07/30/15 9,998,448 9.58
TOTAL:CASH A.TEMPORARY 0.19 0.02 86,268,401 30000 0.11
86,404,060
FIXED INCOME
111912016 6:36:37PM EST 2 Sourc M,B¢Nc. fNew York Meilan Corporaran
Yield Analysis Report ID: RAM234
Base Currency: Ban
TINY MELLON
OCSF07511102 12/31/2015
Liquid Oper-Pim<o
Units Held YTM/ Current Moody's Market Total Cost %Type Option
Security ID Security Description can(SOP) Yield Quality Price Market Value %Market Adj
Rating Value Duration
AGENCIES is OTHER GOVT OBL
900,000.00 FEDERAL HOME LN MTG CORP DISC 0.13 Aaa 99.99 899,725 1.97 0.08
313396SJ3 0.000%01/28/2016 DO 01/28/15 899,725 0.68
3,000,000.00 FEDERAL HOME LN BK CONS DISC 0.29 Aaa 99.93 2,996,380 6.56 0.24
313384GW7 MAT 03/28/2016 2,996,380 227
2,000,000.00 FEDERAL HOME LN MTG CORD DISC 0.52 Asa 99.92 1,997,116 4.39 0.16
313396TS2 02/26/2016 1,997,116 1.51
RANKS&FDiMCE
1,000,000.00 GENERAL ELECTRIC CAPITAL CORP 0.59 1.49 Al 100.48 1,007,290 2.20 0.53
36962G6Z2 1.500%07/12/2016 DO 07/12/13 1,004,830 0.96
1,000,000.00 BANK OF NEW YORK MELLON CORP/T 0.82 2.28 Al 100.85 1,008,760 2.21 0.57
06406HBX6 2.300%09/28/2016 DO 09/28/11 1,008,470 0.96
1,000,000.00 JPMORGM CHASE&CO 0.82 1.12 A3 100.05 1,002,380 2.19 0.15
46623EJD4 1.125%02/26/2016 DO 02/26/13 1,000,460 0.96
1,000,000.00 BERKSHIRE HATHAWAY INC 0.83 2.18 As2 100.85 1,014,170 2.21 0.61
0846)08133 2.200%08/15/2016 DO 08/15/11 1,008,500 0.76
1,000,000.00 JOHN DEERE CAPITAL CORP 0.90 1.05 A2 100.12 1,001,070 2.19 097
24422ESD2 1.050%10/11/2016 DO 10/11/13 1,001,170 0.76
1,000,000.00 STATE STREET CORD 0.94 2.86 A2 100.35 1,019,240 2.20 0.18
8574]]AH6 2.875%03/07/2016 DD 03/07/11 1,003,520 0.76
1,000,000.00 WELLS FARGO&CO 0.96 1.25 A2 100.16 1,001,870 2.19 0.55
94974BFL9 1.250%07/20/2016 DO 07/29/13 1,001,580 0.76
1,000,000.00 AMERICAN HONDA FINANCE CORP 1.02 1.12 Al 100.08 1,001,660 2.19 0.76
02665WAB7 1.125%10/07/2016 DO 10/10/13 1,000,800 0.76
111912016 6:36:37PM EST 3 Sou¢e:The BaNc. fNeu,Pork Meilan Corporaran
Yield Analysis Report ID: RAM234
Base Currency: Ban
TINY MELLON
OCSF07511102 12/31/2015
Liquid Oper-Pim<o
Units Held YTM/ Current Moody's Market Total Coat %Type Option
Security ID Security Description can(SOP) Yield Quality Price Market Value %Market AQj
Rating Value Duration
1,000,000.00 US BANCORP L09 2.18 Al 100.96 1,009,900 2.21 0.86
91159HHB9 2.200%11/15/2016 DO 11/03/11 1,009,640 0.99
INDUSTRIALS
1,000,000.00 PRAXAIR LNC 0.71 0.95 A2 100.01 1,001,530 2.19 0.14
74005PBE3 0.750%02/21/2016 DO 02/21/13 1,000,050 0.76
1,000,000.00 COCA-COLA CO/THE 0.83 1.79 Aa3 100.64 1,006,450 2.20 0.66
191216AU4 1.800%09/01/2016 DO 08/10/11 1,006,420 0.76
1,000,000.00 PEPSICO INC 0.86 0.90 Al 99.98 1,001,130 2.19 0.15
713448CE6 0.700%02/26/2016 DO 02/28/13 999,760 0.76
1,000,000.00 HOME DEPOT INC/THE 1.16 5.36 A2 100.70 1,032,590 2.20 0.19
437096AP7 5.400%03/01/2016 DO 03/24/06 1,007,030 0.76
1,100,000.00 OCCIDENTAL PETROLEUM CORD L48 2.50 A2 100.08 1,116,489 2.41 0.08
694599BZ9 2.500%02/01/2016 DO 12/16/10 1,100,924 0.83
SUPRANATIONALS
2,500,000.00 INTERNATIONAL FINANCE CORP 0.71 0.50 Ass 99.92 2,498,750 5.47 0.37
45950VCJ3 0.500%05/16/2016 DO 02/22/13 2,498,025 1.89
TREASURIBB
2,000,000.00 U S TREASURY NOTE 0.50 1.74 Aaa 100.52 2,020,007 4.40 0.41
912828QP8 1.750%05/31/2016 DO 05/31/11 2,010,380 1.52
14,000,000.00 U S TREASURY NOTE 0.52 0.50 Aaa 99.99 14,001,609 30.65 0.46
912828VG2 0.500%06/15/2016 DO 06/15/13 13,998,880 10.61
3,000,000.00 U S TREASURY NOTE 0.61 0.62 Aaa 100.01 2,999,541 6.57 0.54
912828VL1 0.625%07/15/2016 DO 07/15/13 3,000,240 2.27
111912016 6:36:37PM EST 4 Sou¢ Ma BaNc. fNew York Meilan Corporaran
Yield Analysis Report ID: RAM234
Base Currency: Ban
TINY MELLON
OCSF07511102 12/31/2015
Liquid Oper-Pim<o
Units Held YTM/ Current Moody's Market Total Coat %Type Option
Security ID Security Description can(SOP) Yield Quality Price Market Value %Market Adj
Rating Value Duration
3,000,000.00 U S TREASURY NOTE O.70 0.89 A. 100.13 3,003,760 6.58 0.90
912828V 7 0.895%09/15/2016 DD 09/15/13 3,003,750 2,28
YANREB BONDS-CORPS
1,000,000.00 COOPERATIEVECENTRALMSTLC/D 0.59 0.72 Aa2 100.04 999,830 2.19 0.35
21684131V0 0916h05/06/2016DDO5/13/14 1,000,430 0.76
TOTAL:FDIED DICOME 0.65 0.98 46,641,248 100.00 0.43
45,558,080
TOTAL:Liquid Oper-Pimco 0.37 0.50 131,909,648 100.00 0.22
131,962,130
111912016 6:36:37PM EST $ Sou¢ Ma BaNc. fNew York M,Oa Corporaran
Yield Analysis Report ID: RAM234
Base Currency:
BNY MELLON
OCSF07522202 12/31/2015
Long Term Oper-Pimeo
Units Held YTM/ Current Moody's Market Total Coat %Type Option
Security ID Security Description can(EOP) Yield Quality Price Market Value %Market Adj
Rating Value Duration
CASH &.TEMPORARY
Sum o(Acmuut Receivables - 0.00
SUMRECV 1,026,662
COMMERCIN,PAPER
5,260,000.00 BANK TOKYO-MITSUB DISC 0.39 0.39 P-1 99.87 5,253,162 22.95 0.33
06538BBR3 02/25/2016 5,253,162 1.67
3,000,000.00 TOYOTA MTR CR CP DISC 0.59 P-1 99.87 2,995,602 12.97 0.22
89233GCM6 03/21/2016 2,995,602 0.95
OTHER
68,128.13 SLH PROXY LONG EXPOSURE - - 104,813 0.12 -
99WAEU30 SLHOPNTA4 28,818 0.01
14,810,500.02 DREYFUS TREAS&.AGY CSH CSH MG - Aaa 14,810,500 64.13 0.08
996085247 VAR RT 12/31/2049 DO 04/09/97 14,810,500 4.90
OS CASH
1.00 USD(UNITED STATES DOLLAR) - - 0 0.00 -
NA9123459 GL PAYABLES RECEIVABLES 0 OMO
TOTAL:CASH&TEMPORARY 0.46 0.39 23,164,076 I60.00 0.16
24,114,743
FIXED INCOME
AGENCIES&OTHER GOW OBL
4,000,000.00 FEDERAL NATL WG ASSN 0.84 1.37 Ana 100.46 4,044,200 1.38 0.87
3135GOES8 1.375%11/15/2016 DID 10/20/11 4,018,560 1.28
111912016 6:36:37PM EST 6 Source:The BaNc. fNew York Mellen Communion
Yield Analysis Report ID: RAM234
Base Currency: Ban
BNY MELLON
OCSF07522202 12/31/2015
Long Term.Opar Pimco
Units Held YTM/ Current Moody's Market Total Cost %Type Option
Security ID Security Description can(SOP) Yield Quality Price Market Value %Market Adj
Rating Value Duration
5,000,000.00 FEDERAL HOME LN MTG CORD 0.88 0.50 Aaa 99.60 4,991,050 1.71 1.07
3137EADU0 0.500%01/27/2017 DD 0 1/16/15 4,979,900 1,58
5,000,000.00 FEDERAL HOME LN BK CONS BD 1.01 1.00 Aaa 99.98 5,025,100 1.71 1.43
313379M4 1.000%06/09/2017 DD 05/10/12 4,998,950 1.59
5,000,000.00 FEDERAL HOME LN MTG CORP 1.11 0.75 Aaa 99.46 4,994,250 1.70 1.52
3137EADV8 0.750%07/14/2017 DD 05/29/15 4,972,850 1.58
5,000,000.00 FEDERAL HOME LN MTG CORP 1.15 0.76 Aaa 99.20 4,967,500 1.70 2.00
3137EADN6 0.750%01/12/2018 DD 11/21/12 4,959,750 1.57
5,000,000.00 FEDERAL HOME LN MTG CORP 1.20 0.88 Aaa 99.30 4,974,100 1.70 2.15
3137EADPl 0.875%03/07/2018 DD 01/17/13 4,964,900 1.58
7,500,000.00 FEDERAL HOME LN BK CONS BD 1.23 1.37 Aaa 100.31 7,544,850 2.58 2.15
313378A43 1.375%03/09/2018 DD 02/13/12 7,523,550 2.39
5,000,000.00 FEDERAL NATL MTG ASSN 1.41 1.13 Aaa 99.17 4,963,950 1.70 2.90
3135GO072 1.125%12/14/2018 DD 11/03/15 4,958,350 1.57
4,000,000.00 FEDERAL HOME LN BK CONS BE, L52 1.50 Ase 99.94 4,043,480 1.37 3.10
3133782M2 1.500%03/08/2019 DO 02/06/12 3,997,400 1.27
5,000,000.00 FEDERAL NATL MTG ASSN L60 1.74 Aaa 100.53 5,021,500 1.72 3.57
3135GOZG1 1.750%09/12/2019 DO 07/28/14 5,026,400 1.60
7,500,000.00 FEDERAL HOME LN MTG CORP 1.63 1.27 Aaa 98.64 7,399,650 2.53 3.66
3157EADM8 L250%10/02/2019 DO 10/02/12 7,397,775 2.35
5,000,000.00 FEDERAL NATL MTG ASSN 1.79 1.52 Aaa 98.76 4,955,650 1.69 4.31
3135GOD75 1.500%06/22/2020 DO 04/27/15 4,937,750 1.57
5,000,000.00 FEDERAL HOME LN BE CONS BD 1.79 1.75 Aaa 99.82 5,008,950 1.71 4.29
313383HU8 1.750%06/12/2020 DD 06/03/13 4,991,000 1.58
111912016 6:36:37PM EST 7 Sourc Ma BaNc. fNew Pork Meilan Corporndon
Yield Analysis Report ID: RAM234
Base Currency: Ban
BNY MELLON
OCSF07522202 12/31/2015
Long Term.Opar Pimco
Units Held YTM/ Current Moody's Market Total Cost %Type Option
Security ID Security Description can(SOP) Yield Quality Price Market Value %Market Adj
Rating Value Duration
7,500,000.00 FEDERAL NATL MTG ASSN L88 1.53 A. 98.22 7,370,726 2.52 4.95
3135GOF93 1.500%11/30/2020 DO 10/19/15 7,366,725 2,34
BMRB&PDIMCE
5,200,000.00 TOYOTA MOTOR CREDIT CORP 0.59 0.65 Aa3 100.03 5,200,000 1.78 0.38
89236TAK1 VAR RT 05/17/2016 DO 05/17/13 5,201,352 1.65
600,000.00 BANK OF AMERICA NA 0.94 0.96 Al 99.95 600,000 0.21 0.10
0605MIJ03 VAR RT 05/08/2017DDOS/08/14 598,518 0.19
500,000.00 WELLS FARGO RANK NA 1.03 0.99 Aa2 99.63 500,000 0.19 0.19
9498832L0 VAR RT 06/15/2017 DO 06/12/14 498,150 0.16
2,000,000.00 GOLDMAN SACHS GROUP INC/THE 1.46 1.04 A3 99.91 1,895,068 0.68 0.22
38141GEG5 VAN RT 03/22/2016 DD 03/22/06 1,998,120 0.63
3,200,000.00 BEAR STEARNS COS LLC/THE L89 4.35 A3 106.99 3,523,520 1.19 2.33
093902CD8 4.650%07/02/2018 DD 06/25/03 3,416,768 1AS
3,000,000.00 HSBC USA INC 1.89 1.63 A2 99.51 3,003,290 1.02 1.99
40428HPH9 1.625%01/16/2018 DD 12/20/12 2,985,150 0.95
2,900,000.00 AMERICM EXPRESS CO 1.99 6.32 A3 110.90 3,377,386 1.10 2.05
025816AY5 T000%03/19/2018 DO 03/19/08 3,216,071 1.02
3,800,000.00 BANK OF"ERICA CORP 2.02 5.38 Baal 106.98 4,334,014 1.39 1.82
060505DP6 5950%12/01/2017 DO 12/04/07 4,065,050 129
600,000.00 GOLDMAN SACHS GROUP INC/THE 2.09 5.52 A3 109.90 692,806 0.22 1.90
38141GFG4 5.950%01/18/2018 DO 01/18/08 646,188 0.21
5,000,000.00 GENERAL ELECTRIC CAPITAL CORP 2.10 2.19 Al 100.39 5,014,950 1.02 3.81
36962G9MO 2.200%01/09/2020 DO 01/09/15 5,018,500 1.59
111912016 6:36:37PM EST 8 Sou¢e:The BaNc. fNew Pork Meilan Corporndon
Yield Analysis Report ID: RAM234
Base Currency: Ban
BNY MELLON
OCSF07522202 12/31/2015
Long Term.Oper-Pimco
Units Held YTM/ Current Moody's Market Total Coat %Type Option
Security ID Security Description can(SOP) Yield Quality Price Market Value %Market AQj
Rating Value Duration
5,000,000.00 JOHN DEERE CAPITAL CORP 2.19 2.29 A2 100.38 5,046,984 1.92 3.54
24422ESS9 2.300%09/16/2019 DO 09/15/14 5,019,000 1.59
5,000,000.00 WELLS FARGO&CO 2.66 2.61 A2 99.94 5,001,650 1.01 4.26
94994BGM6 2.600%07/22/2020 DO 07/22/15 4,987,200 1.58
2,000,000.00 JPMORGAN CHASE&CO 2.67 2.29 A3 98.38 1,994,880 0.67 3.84
46625HEA9 2.250%01/23/2020 DD 01/23/15 1,967,560 0.62
2,800,000.00 MORGAN STANLEY 3.13 4.91 A3 112.04 3,200,848 1.09 4.99
61949WAL3 5.500%07/28/2021 DO 09/28/11 3,137,036 1.00
600,000.00 ESC LEHMAN BRTH HLD ESCROW - - 9.38 372,963 0.02 -
525ESCIB9 0.000%11/24/2013 DD 01/22/08 44,250 0.01
2,000,000.00 LEHMAN BRTH PLO ESC - - 7.38 1,254,976 0.05 -
525ESCOY6 0.000%12/30/2016 DD 10/24/05 147,500 0.05
CMs
3,735,855.55 HONDA AUTO RECEIVABLES 201 A3 0.99 0.67 As, 99.82 3,724,473 1.28 0.16
43813JAC9 0.690%11/21/2017 DO 02/27/14 3,729,131 IA8
3,443,837.52 TOYOTA AUTO RECENABLES 2 A A3 1.03 0.69 Aaa 99.99 3,436,708 1.18 0.50
89231MAC9 0.690%12/15/2017 DD 03/19/14 3,436,571 1.09
2,195,000.00 TOYOTA AUTO RECENABLES C A2A 1.14 0.92 A. 99.85 2,194,824 0.95 0.69
89231TAB6 0.920%02/15/2018 DO 08/26/15 2,191,664 0.70
1,957,423.90 HONDA AUTO RECEIVABLES 20 2 A3 1.17 0.77 Asa 99.92 1,956,048 0.67 0.44
43814GAC4 0.990%03/19/2018 DO 05/21/14 1,951,963 0.62
3,595,000.00 TOYOTA AUTO RECENABLES 2 A A3 1.30 1.12 Asa 99.93 3,594,456 1.23 0.99
89236WAC2 1.120%02/15/2019 DO 03/04/15 3,585,365 1.14
EQUIPMENT LOANS
111912016 6:36:37PM EST 9 Sou¢e:TAe Bank fNew York Meilan Corporndon
Yield Analysis Report ID: RAM234
Base Currency: Ban
BNY MELLON
OCSF07522202 12/31/2015
Long Term.Oper-Pimco
Units Held YTM/ Current Moody's Market Total Cost %Type Option
Security ID Security Description can(SOP) Yield Quality Price Market Value %Market AQj
Rating Value Duration
4,000,000.00 JOHN DEERE OWNER TRUST 20 B A3 1.93 1.08 Aaa 99.53 4,001,875 1.36 0.51
499897AD6 1.070%11/15/2018 DO 09/03/14 3,981,360 1.26
FAHNIE MAB REMIC
133,053.04 FNMA GTD REMIC P/T 07-114 A6 -12.13 0.40 Aaa 99.47 126,567 0.05 0.14
31396X3Q5 VAR RT 10/27/2037 DO 11/30/07 132,345 0.04
453,954.43 FNMA DID REMIC P/T 11-3 FA 0.84 0.89 Aaa 101.08 453,813 0.16 -0.68
31397QRE0 VAR RT 02/25/2041 DO 01/25/11 458,866 0.15
FHLMC
2,640.27 FHLMC POOL#78-6064 L41 2.51 Aaa 103.48 2,576 0.00 L01
31348SWZ3 VAR RT 01/01/2028 DO 12/01/97 2,732 0.00
FHMA
188,421.26 FNMA POOL#0823358 1.34 2.44 Aaa 105.92 186,949 0.09 1.10
31406XWT5 VAR RT 02/01/2035 DO 04/01/05 199,572 0.06
41,857.35 FNMA POOL#0826080 2.18 4.53 Aaa 110.29 44,999 0.02 2.30
31409BXH9 5.000%07/01/2035 DO 06/01/05 46,158 0.01
367,247.75 FNMA POOL#0466397 2.26 3.24 Aaa 104.81 359,300 0.13 4.29
31381PDA3 3.400%11/01/2020 DO 11/01/10 384,905 0.12
6,104.16 FNMA POOL#0748678 228 4.52 Aaa 110.63 6,562 0.00 2.69
31403GXF4 5.000%10/01/2033 DO 10/01/03 6,953 0.00
235,000.56 FNMA POOL#0357969 2.32 4.53 Aaa 110.36 252,626 0.09 2.35
31376XT22 5.000%09/01/2035 DO 09/01/05 259,340 0.08
25,109.80 FNMA POOL#OAL0869 2.36 4.17 Aaa 108.00 26,556 0.01 3.11
3138EG6F6 4.500%06/01/2029 DO 09/01/11 27,119 0.01
111912016 6:36:37PM EST 10 Sou¢e:The HaNc. fNew York M,Fa Corporation
Yield Analysis Report ID: RAM234
Base Currency: Ban
BNY MELLON
OCSF07522202 12/31/2015
Long Term.Opar Pimco
Units Held YTM/ Current Moody's Market Total Coat %Type Option
Security ID Security Description can(SOP) Yield Quality Price Market Value %Market AQj
Rating Value Duration
222,571.65 FNMA POOL#0745580 2.36 4.53 Aaa 110.30 239,265 0.08 2.50
31403DJZ3 5.000%06/01/2036 DD 05/01/06 245,503 0,08
34,333.59 FNMA 1`001,#0257179 2.36 4.10 Aae 108.00 36,311 0.01 3.38
31391NUC9 4.500%04/01/2028 DD 03/01/08 39,081 0.01
39,886.67 FNMA POOL b0MA0022 2.38 4.10 Aaa 108.00 42,184 0.01 3.20
3141�AY3 4.500%04/01/2029 DD 03/01/09 43,079 0.01
444,085.03 FNMA POOL#0888336 2.40 4.54 Aaa 110.21 499,391 0.19 2.62
3141OF4V4 5.000%07/01/2036 DD 04/01/07 489,417 0.16
412,212.92 FNMA POOL#0815971 2.46 4,54 Aaa 110.19 443,129 0.16 2.60
31406PQY8 5.000%03/01/2035 DD 03/01/05 454,205 0.14
FREDDIE MAC MULTICLASS
68,285.40 FFI MC MULTICLASS MTG E3 A 0.97 2.91 Aaa 102.95 68,357 0.02 0.81
3133ME95 VAR RT 08/15/2032 DD 12/01/97 90,298 0A2
900,000.00 FHLMC MULTICLASS MTG K006 A2 2.15 3.95 NR 109.69 951,047 0.33 3.64
31398VJ98 4.251%01/25/2020 DD 04/01/10 969,228 0.31
1,090,981.53 FHLMC MULTICLASS MTG 58 2A 3.41 5.92 Aaa 113.56 1,234,775 0.42 1.46
31394JY35 6.500%09/25/2043 DD 09/01/03 1,238,940 0.39
ONMA
102,092.74 GNMA II POOL s0080965 0.85 1.98 Aaa 103.58 102,029 0.04 0.88
36225DCBB VARRT 04/20/2034DD04/01/04 105,749 0.03
28,749.04 GNMA II POOL#0080023 1.03 1.97 Aaa 104.01 29,225 0.01 1.39
36225CAZ9 VAR RT 12/20/2026 DO 12/01/96 29,902 0.01
11,981.54 GNMA II POOL a0080395 1.40 2.00 Aaa 102.69 11,873 0.00 0.57
36225CNM4 VAR RT 04/20/203ODD04/01/00 12,301 0.00
111912016 6:36:37PM EST 11 Sou¢ Ma HaNc. fNew York Meilan Corporndon
Yield Analysis Report ID: RAM234
Base Currency: Ban
BNY MELLON
OCSF07522202 12/31/2015
Long Term.Oper-Pimco
Units Held YTM/ Current Moody's Market Total Cost %Type Option
Security ID Security Description can(EOP) Yield Quality Price Market Value %Market AQj
Rating Value Duration
104,093.39 GNMA II POOL k080408X 1.42 2.00 A. 102.58 103,036 0.04 0.92
36225CN28 VAR RT 05/20/2030DD05/01/00 106,778 0,03
34,902.44 GNMA lI POOL A080088M 1.46 2.01 Aaa 102.24 35,666 0.01 0.90
36225CC20 VAR RT 06/20/2029DD06/01/97 35,6116 0.01
GNMA REMIC
46,276.07 GNMA GM REMIC P/T 00-9 FH 0.24 0.84 Aes 100.58 46,276 0.02 0.00
3837H4NX9 VAR RT 02/16/2030 46,543 0.01
HOME EQUITY
43,521.78 SOUNDVIEW HOME LOAN TR OPP3 A4 lAo 0.52 - 99.87 38,422 0.01 0.03
83611MGS1 VARRT 11/25/2035DD09/30/05 43,465 0.01
133,743.29 AMRESCO RESIDENTIAL SECURI I A 1.84 1.02 - 92.55 100,433 0.04 -0.30
03215PFN4 VAR RT 06/25/2029 DO 10/20/99 123,777 0.04
INDUSTRIALS
2,000,000.00 INTEL CORP 1.28 1.35 Al 100.13 2,008,280 0.69 1.93
458140AL4 1.350%12/15/2017 DO 12/11/12 2,002,660 0.64
4,000,000.00 CHEVRON CORP 1.49 1.11 Aal 99.31 3,999,200 1.36 1.90
166964AA8 1.104%12/05/2017 DD 12/05/l2 3,972,480 1.26
4,000,000.00 ELI LILLY&CO 1.69 1.93 A2 100.86 4,009,675 1.38 3.09
532457BF4 1.950%03/15/2019 DD 02/25/14 4,034,400 1.28
2,000,000.00 OCCIDENTAL PETROLEUM CORP 2.09 1.52 A2 98.47 1,986,340 0.68 2.09
604599CD5 1.500%02/15/2018 DD 06/22/12 1,975,440 0.63
2,000,000.00 AMERICAN HONDA FINANCE CORP 2.18 2.24 Al 100.25 2,019,540 0.69 3.45
02665WA114 2.250%08/15/2019 DD 09/09/14 2,004,920 0.64
111912016 6:36:37PM EST 12 Sou¢ Ma BaNc. fNew York Meilan Corporndon
Yield Analysis Report ID: RAM234
Base Currency: Ban
BNY MELLON
OCSF07522202 12/31/2015
Long Term.Oper-Pimco
Units Held YTM/ Current Moody's Market Total Cost %Type Option
Security ID Security Description can(SOP) Yield Quality Price Market Value %Market AQj
Rating Value Duration
5,000,000.00 QUALCOMM INC 2,48 2.27 Al 99.03 4,995,195 1.90 4.17
747525AD5 2.250%05/20/2020 DD 05/20/15 4,951,400 1,59
OTHER CMO OOVT AOBNCMS
507,973.03 NCUA GUARANTEED NOTES TR R2 IA 0.57 1.05 Ana 100.16 507,771 0.19 0.02
62888UAA8 VAR RT 11/06/2017 DO 11/17/10 508,580 0.16
102,402.16 SBA GTD PARTN CMS 2001-20C 1 1.30 5.89 Aaa 108.09 102,402 0.04 1.57
83162CWO 6.340%03/01/2021 110,668 0.04
STUDENT
43,030.87 SLM STUDENT LOAN TRUST 200 9 A L95 1.82 Aaa 100.09 42,856 0.01 0.06
98445JAA5 VAR RT 04/25/2023DD08/28/08 43,060 0.01
SUPRANATIONALS
5,000,000.00 INTER-AMERICAN DEVELOPMENT BAN 1.10 1.00 Aaa 99.85 5,019,550 1.01 1.52
4581XOCG1 1.000%07/14/2017 DD 04/30/14 4,992,450 1.59
5,000,000.00 INTERNATIONAL FINANCE CORP 1.12 1.00 Aaa 99.84 5,020,700 1.01 1.30
45950KBS8 1.000%04/24/2017 DD 04/24/12 4,991,950 1.58
3,000,000.00 INTERNATIONAL BANK FOR RECONST 1.35 1.01 Aaa 99.17 2,994,870 1.02 2.42
459058EJ8 1.000%06/15/2018 DD 04/30/15 2,975,040 0.94
TIPS
0.00 US TREAS-CPI INFLAT 1.82 1.09 Aaa 103.10 0 0.00 3.30
912828PP9 1.125%01/15/2021 DO 0 1/15/11 0 O.00
10,417,368.00 US TREAS-CPI INFLAT 2.27 0.13 Aaa 94.99 10,300,084 3.39 5.96
912828W O 0A25%07/15/2024 DO 07/15/14 9,893,687 3A4
TREASURIES
7,500,000.00 U S TREASURY NOTE 0.32 0.37 Aea 100.01 7,512,916 2.57 0.08
9128281341 0.375%01/31/2016 DO 0 1/31/14 7,500,375 2.38
111912016 6:36:37PM EST 13 Sou¢ Ma BaNc. fNew Pork Meilan Corporndon
Yield Analysis Report ID: RAM234
Base Currency: Ban
BNY MELLON
OCSF07522202 12/31/2015
Long Term.Opar Pimco
Units Held YTM/ Current Moody's Market Total Coat %Type Option
Security ID Security Description can(SOP) Yield Quality Price Market Value %Market Adj
Rating Value Duration
3,500,000.00 USTREASURY NOTE 0.59 0.52 A. 100.02 3,500,340 1.20 0.00
91282SD31 VAR RT 04/30/2016DD04/30/14 3,500,790 1.11
12,000,000.00 U S TREASURY NOTE 0.67 0.50 Ann 99.89 11,997,656 4.11 0.66
912828D64 0.500%08/31/2016 DD 08/31/14 11,986,440 3.81
11,000,000.00 U S TREASURY NOTE 0.79 0.50 Ass, 99.93 10,974,972 3.06 0.91
91282SG46 0.500%11/30/2016 DO 11/30/14 10,970,740 3.48
7,500,000.00 U S TREASURY NOTE 0.91 0.88 Asa 99.96 7,500,611 2.57 1.32
912828SSO 0.875%04/30/2017 DO 04/30/12 7,496,775 2.38
10,000,000.00 U S TREASURY NOTE 1.06 0.88 Asa 99.65 9,948,784 3.41 1.85
912828020 0.875%11/15/2017 DD 11/15/14 9,965,200 3.16
11,000,000.00 U S TREASURY NOTE 1.38 1.49 Ass 100.35 11,042,439 3.78 3.00
912828B33 1.500%0 1/31/2019 DD 0 1/31/14 11,038,720 3.50
10,000,000.00 U S TREASURY NOTE 1.49 1.62 Ass 100.45 9,984,307 3.44 3.41
912828WSS 1.625%06/30/2019 DD 06/30/14 10,044,900 3.19
10,000,000.00 U S TREASURY NOTE L52 1.62 Ase 100.35 10,024,777 3.44 3.44
912828W 6 1.625%09/31/2019 DD 09/31/14 10,034,800 3.19
5,800,000.00 USTREASURY NOTE L56 1.74 Asa 100.68 5,873,187 2.00 3.62
912828F39 1.750%09/30/2019 DD 09/30/14 5,839,208 1.85
7,500,000.00 U S TREASURY NOTE 1.61 1.51 Aaa 99.60 7,449,635 2.56 3.81
912828061 1.500%11/30/2019 DD 11/30/14 7,470,150 2.37
5,500,000.00 U S TREASURY NOTE 1.96 1.40 Aaa 98.23 5,424,667 1.85 4.68
912828L99 1.375%10/31/2020 DO 10/31/15 5,402,870 1.72
US TAXABLE MUM BONDS
111912016 6:36:37PM EST 14 Sou¢e:The BaNc. fNew York Meilan Corporndon
Yield Analysis Report ID: RAM234
Ease Currency: ESD
BNY MELLON
OCSF07522202 12/31/2015
Long Term.Oper-Pimco
Units Held YTM/ Current Moody's Market Total Coat %Type Option
Security ID Security Description can(SOP) Yield Quality Price Market Value %Market Adj
Rating Value Duration
2,440,000.00 PORT AUTH OF NEW YORK&NEW JE 2.09 4.94 Aa3 112.04 2,507,634 0.94 3.57
93358WAG9 &309%12/01/2019 DO 07/01/09 2,733,800 0,89
1,400,000.00 NEW YORK CITY NY TRANSITIONAL 2.68 3.83 Ael 106.28 1,400,000 0.51 4.39
64971M5E8 4.075%11/01/2020 DO 11/03/10 1,487,948 0.47
400,000.00 UNIV OF CALIFORNIA CA ROTS RED 2.88 4.55 Aa3 110.63 400,000 0.15 4.75
913366EJ5 5.035%05/15/2021 DO 11/18/10 442,528 0.14
TOTAL:FRIED INCOME 1.45 1.50 293,172,426 100.00 2.47
290,858,029
TOTAL:Long Term Oper-Ponca 1.42 1.48 316,336,502 100.00 2.30
314,972,772
111912016 6:36:37PM EST 15 Sou¢ Ma BaNc. fNew York McOan Corporation
Yield Analysis Report ID: RAM234
Base currency:
BNY MELLON
OCSF07555502 12/31/2015
O.C.S.Escrow Account
Units Held YTM/ Current Moody's Market Total Cost %Type Option
Security ID Security Description can(SOP) Yield Quality Price Market Value %Market Adj
Rating Value Duration
CASH &.TEMPORARY
Sum o(Acmunt Receivables - 0.00
SUMRECV 0
TOTAL:CASH 3:TEMPORARY 0.00 0.00 300.00
0
FIXED INCOME
TREASURIES
3,594,000.00 U S TREASURY NCTE - 0.38 Asa 100.00 3,603,596 100.00 -
912828SK7 0.375%03/15/2015DD03/15/12 3,594,000 100.00
TOTAL:FIXED INCOME 0.00 0.38 3,603,596 100.00
3,594,000
TOTAL:O.C.S.Escrow Account 0.00 0.38 3,603,596 100.00
3,594,000
111912016 6:36:37PM EST 16 Source:The BaNc. fNew York McOm Communion
Asset Detail Report ID: GL8013
�' Base Curtency: USD
BNY ME LLON by Currency Alternate Buse Currency:
Exchange Rate:
OCSWCONSOMDATED-OCSG00030000 12/31/2015 Statue: FINAL
Net Unrealized
Price Cost Market Value % of Gain/Loss
Description Base Shares Par Base Base Total Base
U.S.DOLLAR
CASH a CASH EQUIVALENTS
INTEREST RECEVABLE 1,162,291.65 1,162,291.65 0.260% 0.00
RECEIVABLE FOR INVESTMENTS 19.33 19.33 0.00% 0.00
SOLD
BANK TOKYO-MITSUB DISC 99.9523 1,200,000.000 1,199,428.00 1,199,428.00 0.27% 0.00
01/29/2016
SEC ID:06538BAV5
BANK TOKYO-MITSUB DISC 99.8700 6,260,000.000 6,251,862.00 6,251,862.00 1.39% 0.00
02/25/2016
SEC ID:06538BBR3
COOPERAT CENT DISC 99.8754 1,000,000.000 998,754.17 998,754.17 0,22% 0.00
03/10/2016
SEC ID:2I687ACA9
EXXON CORP DISC 99.9544 2,000,000.000 1,999,088.88 1,999,088.88 0.44% 0.00
01/28/2016
SEC ID:30229AAU3
FEDERAL FARM CR BK CONS SYSTEM 99.9776 10,000,000.000 9,999,96390 9,997,763A0 2,22% 0.00
0.000%01/26/2016 DD 01/26/15
SEC ID:313312SG6
FEDERAL FARM CR BK CONS SYSTEM 99.7034 1,075,000.000 1,071,811.13 1,091,811A3 0,24% 0.00
0.000%06/20/2016 DO 06/22/15
SEC ID:313312YJ3
FEDERAL HOME LN BK CONS DISC 99.9734 13,000,000.000 12,996,538.33 12,996,53&33 2.88% 0.00
0.000%01/27/2016 DD 01/27/15
SEC ID:313384SH3
FEDERAL HOME LN BK CONS DISC N 99.9678 3,300,000.000 3,298,935.89 3,298,935.89 0.93% 0.00
MAT 01/29/2016
SEC ID:313384SK6
FEDERAL HOME LN BK CONS DISC 99.8881 2,000,000.000 1,997,761.11 1,997,761.11 0.44% 0.00
MAT 02/05/2016
SEC ID:313384SS9
FEDERAL HOME LN BK CONS DISC 99.8793 3,000,000.000 2,996,380.00 2,996,380.00 0.67% 0.00
MAT 03/28/2016
SEC ID:313384UW9
FEDERAL HOME LN BKS CONS DISC 99.7182 985,000.000 982,223.94 982,223.94 0.22% 0.00
MAT 06/17/2016
SEC ID:313384YF0
FEDERAL HOME LN BK CONS DISC 99.7083 4,000,000.000 3,988,331.11 3,988,331.11 0.89% 0.00
MAT 06/24/2016
SEC ID:313384YN3
111912016 6:31:47PM EST 1 Workbench
Asset Detail Report ID: GL8013
�' Base Curteney: LED
BNY ME LLON by Currency Alternate Base Currency:
Exchange Rate:
OCSW CONSOLIDATED-OCSW0030000 12/31/2015 Statue: FINAL
Net Unrealized
Price Cost Market Value % of Gain/Loss
Description Base Shares Par Base Base Total Base
FEDERAL HOME LN MTG CORP DISC 99.9651 9,600,000.000 9,596,651.88 9,596,651.88 2.13% 0,00
0,000%01/27/2016 DO 01/27/201
SEC ID:313396SH9
FEDERAL HOME LN MTG CORP DISC 99.9694 900,000.000 899,725.00 899,725.00 0.20% 0.00
0,000%01/28/2016 DO 01/28/15
SEC ID:313396W3
FEDERAL HOME LN MTG CORP DISC 99.8558 2,MO,000.000 1,997,116.11 1,997,116.11 0.44% 0.00
02/26/2016
SEC ID:313396TS2
FEDERAL NATL MEG ASSN DISC 99.9040 2,000,000.MO 1,998,079.56 1,998,079.56 0.44% 0.00
0.000%01/27/2016 DD 02/02/201
SEC ID:3I3588SH9
PACCAR FINL CORP DISC 99.9670 2,200,000A00 2,199,273.06 2,199,273.06 0.49% 0.00
01/22/2016
SEC ID:69392AAN2
TOYOTA MEE CR CP DISC 99.9950 Ip00,000A00 997,750.00 997,750.00 0.22% 0.00
02/22/2016
SEC ID:89233GBN5
TOYOTA MEE CR CP DISC 99.8534 3,000,000A00 2,995,601.67 2,995,601.67 0.66% 0.00
03/21/2016
SEC ID:89233GCM6
U S TREASURY BILL 99.9860 9,000,000.MO 8,998,743.50 8,998,743.50 2.00% 0.00
0.000%01/21/2016 DD 07/23/15
SEC ID:912796GY9
U S TREASURY BILL 99.9845 10p00,000A00 9,998,448.33 9,998,448.33 2.22% 0.00
0.000%01/28/2016 DD 09/30/15
SEC ID:912796GZ6
DREYFUS TREAS B AGY CSH CSH MG 100.0000 27,760,617.880 27,760,617.88 29,960,6IT88 6.16% 0.00
VAR RT 12/31/2049 DO 04/09/97
SEC ID:996085247
SLH PROXY LONG EXPOSURE 0.4230 68,128.130 104,612.50 28,818.20 0.01% -75,994.30
SLHOPNTA4
SEC ID:99WAEU30
TOTAL CASH a CASH EQ=ALENTS 115,348,746.010 116,488,008.93 116,412,014.63 25.84% -75,994.30
FLUID INCOME SECURITIES
AMERICAN EXPRESS CO 110.8990 2,900,000.000 3,377,385.79 3,216,071.00 0.91% -161,314.79
7.000%03/1912 01 8 DO 03/19/08
SEC ID:025816AY5
AMERICAN HONDA FINANCE CORP 100.0800 1,000,000.000 1,001,660.00 1,000,800A0 0.22% -860.00
1.125% 10/07/2016 DO 10/10/13
SEC ID:02665WAB7
111912016 6:31:47PM EST 2 Workbench
Asset Detail Report ID: GL8013
�' Base Curtency: LED
BNY ME LLON by Currency Alternate Buse Currency:
Exchange Rate:
OCSD CONSOMDATED-OCSW0030000 12/31/2015 Statue: FINAL
Net Unrealized
Price Coat Market Value % of Gain/Loss
Description Base Shares Par Base Base Total Base
AMERICAN HONDA FINANCE CORP 100.2460 2,000,000.000 2,019,540,00 2,004,920.00 0.45% -14,620,00
2,250%08/15/2019 DO 09/09/14
SEC ID:02665WAH4
AMRESCO RESIDENTW,SECURI I A 92.5480 133,743.290 100,432.85 123,776.74 0.03% 23,343.89
VAR RT 06/25/2029 DD 10/20/99
SEC ID:03215PFN4
BANK OF AMERICA CORP 106.9750 3,800,000.000 4,334,014.00 4,065,050.00 0.90% -268,964.00
5.950% 12/01/2017 DD 12/04/07
SEC ID:06U505DP6
BANK OF AMERICA NA 99.7530 600,000.000 600,000.00 598,518.00 0.13% -1,482.00
VAR RT 05/08/2017 DD 05/08/14
SEC ID:06050TLX8
BANK OF NEW YORK MELLON 100.8470 1,000,00OA00 1,008,760.00 1,008,470.00 0.22% -290.00
CORP/T
2.300%07/28/2016 DO 09/28/11
SEC ID:06406HHX6
BEAR STEARNS COS LLC/THE 106.9940 3,200,000.000 3,523,520.00 3,416,968.00 0.96% -106,752.00
4.650%07/02/2018 DO 06/25/03
SEC ID:073902CD8
BERKSHIRE HATHAWAY INC 100.8500 1,000,000.000 1,014,170.00 I,008,500.00 0,22% -5,670.00
2.200%08/15/2016 DO 08/15/11
SEC ID:084670BB3
CHEVRON CORP 99.3120 4,000,000.000 3,999,200.00 3,992,480.00 0,88% -4,720.00
1.104% 12/05/2017 DD 12/05/12
SEC ID: 166764AA8
COCA COLACO/THE 100.6420 1,000,000.000 1,006,450.00 1,006,420.00 0,22% -30.00
1.800%09/01/2016 DD OS/10/11
SEC ID: 191216AU4
COOPERAT[EVE CENTRAL INSTL C/D 100.0430 1,000,000.000 999,830.00 I,000,430.M 0.22% 600.00
0.716%05/06/2016 DD 05/13/14
SEC ID:21684BWO
JOHN DEERE CAPITAL CORP 100.1170 1,000,000.000 1,001,070.00 1,001,170.00 0.22% 100.00
1.050% 10/11/2016 DD 10/11/13
SEC ID:24422ESD2
JOHN DEERE CAPITAL CORP 100.3800 5,000,000.000 5,046,984.00 5,019,000.M 1.11% -29,984.00
2.300%09/16/2019 DD 09/15/14
SEC ID:24422ESS9
FEDERAL HOME LN BK CONS BD 99.9350 4,000,000.000 4,043,480.00 3,997,400.M 0.89% -46,080.00
1.500%03/0812019 DD 02/06/12
SEC ID:3133782M2
FEDERAL HOME LN BK CONS BD 100.3140 7,500,000.000 7,544,850.00 7,523,550.00 1.69% -21,300.00
1.375%03/0912 01 8 DD 02/13112
SEC ID:313378A43
111912016 6:31:47PM EST 3 Workbench
Asset Detail Report ID: GL8013
�' Base Curtency: LED
BNY ME LLON by Currency Alternate Base Currency:
Exchange Rate:
OCSD CONSOLIDATED-0CSW0030000 12/31/2015 Statue: FINAL
Net Unrealized
Price Cost Market Value % of Gain/Loss
Description Base Shares Par Base Base Total Base
FEDERAL HOME LN BE CONS BD 99.9790 5,000,000.000 5,025,100.00 4,998,950.00 1.11% -26,150,00
1.000%06/09/2017 DD 05/10/12
SEC ID:313399FW4
FEDERAL HOME LN BE CONS BD 99.8200 5,000,000.000 5,008,950.00 4,991,000.00 1.11% -17,950.00
1.750%06/12/2020 DD 06/03/13
SEC ID:313383HU8
FHLMC MULTICLASS MTG E3 A 102.9480 68,285.400 68,356.82 70,298.45 0.02% 1,941.63
VAR RE 08/15/2032 DD 12/O1/97
SEC ID:3133ME95
FHLMC POOL#98-6064 103.4090 2,640.270 2,575.93 2,732.07 0.00% 156.14
VAR RT 01/01/2028 DD 12/O1/97
SEC ID:31348SWZ3
FEDERAL NATL MEG ASSN 98.7550 5,000,OOOAOU 4,955,650.00 4,937,750.00 1.10% -17,900.00
1.500%06/22/2020 DD 04/27/15
SECID:3135GOD75
FEDERAL NATL MEG ASSN 100.4640 4,000,000.000 4,044,200.00 4,018,560.00 0.89% -25,640.00
1.395% 11/15/2016 DD 10/20/11
SECID:3135GOESS
FEDERAL NATL MEG ASSN 98.2230 7,500,000AOU 7,370,726.00 7,366,725.00 1.64% -4,001.00
1.500% 11/30/2020 DD 10/19/15
SECID:3135GOF73
FEDERAL NATL MEG ASSN 99.1670 5,000,000.000 4,963,950.00 4,958,350.00 1.10% -5,600.00
1.125% 12/14/2018 DD 11/03/15
SEC ID:3135GOG72
FEDERAL NATL MEG ASSN 100.5280 5,000,000.000 5,021,500.00 5,026,400.00 1.12% 4,900.00
1.950%09/12/2019 DD 09/28/14
SEC ID:3135GOZG1
FNMA POOL#0257179 108.0030 34,333.590 36,311.14 37,081.31 0.01% 710.17
4.500%04/01/2028 DD 03/O1/08
SEC ID:31371NUC7
FNMA POOL#0357969 110.3570 235,000.560 252,625.61 259,339.59 0.06% 6,713.96
5.000%09/01/2035 DD 09/O1/05
SEC ID:31376=2
FEDERAL HOME LN MEG CORP 98.6370 7,500,000.000 7,399,650.00 9,399,996.00 1164% -1,875.00
1.250% 10/02/2019 DD 10/02/12
SEC ID:3137EADM8
FEDERAL HOME LN MEG CORP 99.1950 5,000,000.000 4,967,500.00 4,959,950.00 1110% -7,750.00
0.950%01/12/2018 DD 11/21/12
SEC ID:3137EADN6
FEDERAL HOME LN MEG CORP 99.2980 5,000,000.000 4,974,100.00 4,964,900M0 1.10% -9,200.00
0.875%03/07/2018 DD 01/17/13
SEC ID:3139EADP1
111912016 6:31:47PM EST 4 Workbench
Asset Detail Report ID: GL8013
�' Base Curtency: LED
BNY ME LLON by Currency Alternate Base Currency:
Exchange Rate:
OCSD CONSOLIDATED-OCSW0030000 12/31/2015 Statue: FINAL
Net Unrealized
Price Cost Market Value % of Gain/Loss
Description Base Shares Par Base Base Total Base
FEDERAL HOME LN MTG CORP 99.5980 5,000,000.000 4,991,050,00 4,979,900.00 1.11% -11,150,00
0,500%01/27/2017 DD 01/16/15
SEC ID:3139EADU0
FEDERAL HOME LN MTG CORP 99.4570 5,000,000.000 4,994,250.00 4,972,850.00 1.10% -21,400.00
0.950%09/14/2017 DD 05/29/15
SEC ID:3139EADV8
FNMA POOL#0466397 104.8080 367,247.750 359,300.29 384,905.02 0.09% 25,604.93
3.400% 11/01/2020 DD I1/01/10
SEC ID:313811`1)A3
FNMA POOL#0A10869 108.0030 25,109.800 26,556.08 27,119.34 0.01% 563.26
4.500%06/01/2029 DD 09/01/I I
SEC ID:3I38EG6F6
FHLMC MULTICLASS MEG 58 2A 113.5620 1,090,981.530 1,234,795.10 1,238,940.45 0.27% 4,165.35
6.500%09/25/2043 DD N101103
SEC ID:3I394JY35
FNMA GTD REMIC P/T 09-114 A6 99.4680 133,053.040 126,566.71 132,345.20 0.03% 5,778.49
VAR RE 10/27/2037 DD 11/30/07
SEC ID:3I396X3Q5
FNMA GTD REMIC P/T 11-3 FA 101.0820 453,954.430 453,812.57 458,866.22 0.10% 5,033.65
VAR RE 02/25/2Ml DD 01/25/11
SEC ID:31399QRE0
MIMIC MULTICLASS MEG X006 A2 107.6920 900,000.000 951,046.88 969,228.00 0.22% 18,181.12
4.251%01/25/2020 DD 04/01/10
SEC ID:31398VJ98
FNMA POOL#0745580 110.3030 222,571.650 239,2M.52 245,503.21 0.05% 6,238.69
5.000%06/01/2036 DD 05/01/06
SEC ID:31403DJM
FNMA POOL#0748678 110.6250 6,104A60 6,561.98 6,95233 0.00% 190.75
5.000% 10/01/2033 DD 10/01/03
SEC ID:31403GXF4
FNMA POOL#0815971 110.1870 412,212.920 443,128.90 454,20505 0,10% 11,076.15
5.000%03/01/2035 DD 03/01/05
SEC ID:3I406PQY8
FNMA POOL#0823358 105.9180 188,421.260 186,949.22 199,592.03 0.04% 12,622.81
VARRT 02/01/2035DD04/01/05
SEC ID:31406X 5
FNMA POOL#0826080 110.2740 41,857.350 44,996.64 46,157.99 0.01% 1,161.13
5.000%07/01/2035 DD 06/01/05
SEC ID:314071KXH7
FNMA POOL#0888336 110.2080 444,085.030 477,391.41 489,41Z23 0.11% 12,025.82
5.000%07/01/2036 DD 04/01/07
SEC ID:3141OF4V4
111912016 6:31:47PM EST 5 Workbench
Asset Detail Report ID: GL8013
�' Baae Curtency: LED
BNY ME LLON by Currency Alternate Base Currency:
Exchange Rate:
OCSD CONSOLIDATED-OCSG00030000 12/31/2015 Status: FINAL
Net Unrealized
Price Coat Market Value % of Gain/Loss
Description Base Shares Par Base Base Total Base
FNMA POOL k0MA0022 108.0030 39,886,670 42,184,04 43,078S0 0.01% 894.96
4,500%04/01/2029 DO 03/01/09
SEC ID:3141YYAY3
GNMA II POOL#0080023 104.0110 28,749.O4() 29,225.20 29,902.16 0.01% 676.96
VAR RT 12/20/2026 DO 12/01/96
SEC ID:36225CAZ9
GNMA II POOL A080088M 102.2440 34,902.440 35,665.94 35,685.65 0.01% 19.71
VAR RT 06/20/2027 DO 06/01/97
SEC ID:36225CC20
GNMA II POOL 8080408X 102.5790 104,093.390 103,036.20 106,999.96 0.02% 3,741.76
VAR RT 05/20/203ODD05/01/00
SEC ID:36225CN28
GNMA II POOL#0080395 102.6680 11,981.540 11,872.93 12,301.21 0.00% 428.28
VAR RT 04/20/203ODD04/01/00
SEC TO 36225CNM4
GNMA II POOL#0080965 103.5810 102,092.740 102,028.94 105,748.68 0.02% 3,719.74
VAR RT 07/20/2034 DO 07/01/04
SEC TO 36225DCB8
GENERAL ELECTRIC CAPITAL CORP 100.4830 1,000,000A00 1,007,290.00 1,004,830.00 0.22% -2,460.00
1.500%09/12/2016 DD 09/12/13
SEC ID:36962G6Z2
GENERAL ELECTRIC CAPITAL CORP 100.3700 5,000,000.MO 5,014,950.00 5,018,500.00 1.11% 3,550.00
2.200%01/09/2020 DD 01/09/15
SEC ID:36962G9MO
GOLDMAN SACHS GROUP INC/THE 99.9060 2,000,000.MO 1,895,068.00 1,998,120.00 0.44% 103,052.00
VAR RT 03/22/2016 DO 03/22/06
SEC ID:38141GEG5
GOLDMAN SACHS GROUP INC/THE 107.6980 600,000.000 692,806.00 646,188.00 0.14% -46,618.00
5.950%01/18/2018 DO 01/18/08
SEC ID:38141GFG4
GNMA GM REMIC P/T 00-9 FH 100.5760 46,276.070 46,276.07 46,542.62 0,01% 266.55
VAR RT 02/16/2030
SEC ID:3837114NX9
HSBC USA INC 99.5050 3,000,000.000 3,003,290.00 2,985,150.00 0.66% -18,140.00
1.625%01/16/2018 DO 12/20/12
SEC ID:40428HPH9
HOME DEPOT INC/THE 100.7030 1,000,000.000 1,032,590.00 1,009,030.00 0,22% -25,560.00
5.400%03/01/2016 DO 03/24/06
SEC ID:437096AP7
HONDA AUTO RECEIVABLES 20 1 A3 99.8200 3,735,855.550 3,724,472.87 3,729,131.01 0,83% 4,658.14
0.670% 11/21/2017 DO 02/27/14
SEC ID:43813dAC9
111912016 6:31:47PM EST 6 Workbench
Asset Detail Report ID: GL8013
�' Base Curtency: LED
BNY ME LLON by Currency Alternate Base Currency:
Exchange Rate:
OCSD CONSOMDATW-OCSW0030000 12/31/2015 Statue: FINAL
Net Unrealized
Price Cost Market Value % of Gain/Loss
Description Base Shares Par Base Base Total Base
HONDA AUTO RECENABLES 20 2 A3 99.7210 1,957,423.900 1,956,047.59 1,951,962.69 0.43% -4,084,90
0,770%03/19/2018 DD 05/21/14
SEC ID:43814GAC4
INTEL CORP 100.1330 2,000,000.000 2,008,280.00 2,002,660.00 0.44% -5,620.00
1.350% 12/15/2017 DD 12/1 t/12
SEC ID:458140AL4
INTER-AMERICAN DEVELOPMENT 99.8490 5,000,000AW 5,019,550.00 4,992,450.00 1.11% -27,100.00
BAN
1.000%07/14/2017 DD M/30/14
SEC ID:4581XOCG1
INTERNATIONAL BANK FOR RECONST 99.1680 3,000,000.000 2,994,870.00 2,975,040.M 0.66% -19,830.00
1.000%06/15/20I8 DD M/30/15
SEC ID:459058EJ8
INTERNATIONAL FINANCE CORP 99.8390 5,000,000.000 5,020,700.00 4,991,950.00 1.11% -28,750.00
1.000%M/24/2019 DD M/24/12
SEC ID:45950KBS8
INTERNATIONAL FINANCE CORP 99.9210 2,500,000.000 2,498,750.00 2,498,025.00 0.55% -725.00
0.500%05/16/20I6 DD 02/22/13
SEC ID:45950VCJ3
JPMORGAN CHASE&CO 100.0460 1,000,000.000 1,002,380.00 1,000,460.00 0,22% -1,920.00
1.125%02/26/2016 DD 02/26/13
SEC ID:46623EJU4
JPMORGAN CHASE&CO 98.3780 2,000,000.000 1,994,880.00 1,969,560.00 0.44% -27,320.00
2.250%01/23/2020 DD 01/23/15
SEC ID:46625HKA7
JOHN DEERE OWNER TRUST 20 B A3 99.5340 4,000,000.000 4,001,875.00 3,981,360.00 0,88% -20,515.00
1.090% 11/15/2018 DD 09/03/14
SEC ID:4]]877AD6
LEHMAN BRTH HLD ESC 7.3750 2,000,000.000 1,254,976.13 147,500.00 0.03% -1,107,476.13
0.000% 12/30/2016 DD 10/24/05
SEC ID:525ESCOY6
ESC LEHMAN BETH HLD ESCROW 7.3750 600,000.000 372,962.90 44,250.00 0.01% -328,712.90
0.000% 11/24/2013 DD 01/22/08
SEC ID:525ESCIB7
ELI LILLY&CO 100.8600 4,000,000.000 4,009,675.00 4,034,400A0 0.90% 24,725.00
1.950%03/15/2019 DD 02/25/14
SEC ID:532457BF4
MORGAN STANLEY 112.0370 2,800,000.000 3,200,848.00 3,137,036.00 0.90% -63,812.00
5.500%07/2812021 DD 07/28/11
SEC ID:61747WAL3
NCUA GUARANTEED NOTES TR R2 lA 100.1590 507,793.030 507,770.72 508,580.39 0.11% 809.67
VARRT 11/06/201]DD11/1]/10
SEC ID:62888UAA8
111912016 6:31:47PM EST 7 Workbench
Asset Detail Report ID: GL8013
�' Bese Curteney: LED
BNY ME LLON by Currency Alternate Base Currency:
Exchange Rate:
OCSD CONSOLIDATED-OCSW0030000 12/31/2015 Statue: FINAL
Net Unrealized
Price Cost Market Value % of Gain/Loss
Description Base es Par Base Base Total Base
NEW YORK CITY NY TRANSITIONAL 106.2820 1,400,000.000 1,400,000,00 1,487,948.00 0.33% 87,948,00
4.075% 11/01/2020 DD 11/03/10
SEC ID:64971M5E8
OCCIDENTAL PETROLEUM CORD 100.0840 1,100,000.000 1,116,489.00 1,100,924.00 0.24% -15,565.00
2.500%02/01/2016 DD 12/16/10
SEC ID:674599BZ9
OCCIDENTAL PETROLEUM CORD 98.9920 2,000,000.000 1,986,340.00 1,975,440.00 0.44% -10,900.00
1.500%02/15/2018 DD 06/22/12
SEC ID:694599CD5
PEPSICO INC 99.9760 I,000,000.000 1,001,130.00 999,760.00 0.22% -1,370.00
0.700%02/26/2016 DD 02/28/13
SEC ID:913448CE6
PORT AUTH OF NEW YORK&NEW JE 112.0410 2,440,000A00 2,507,633.89 2,733,800.40 0.61% 226,166.51
5.309% 12/01/2019 DD 07/01/09
SEC ID:93358WAG9
PRAXAIR INC 100.0050 1,000,000A00 1,001,530.00 1,000,050.00 0.22% -1,480.00
0.950%02/21/2016 DD 02/21/13
SEC ID:94005PBE3
QUALCOMM INC 99.0280 5,000,000.000 4,995,195.40 4,951,400.00 1.10% -43,795.40
2.250%05/20/2020 DD 05/20/15
SEC ID:949525AD5
SLM STUDENT LOAN TRUST 200 9 A 100.0680 43,030.870 42,856.29 43,060.13 0.01% 203.84
VAR RT 04/25/2023 DD 08/28/08
SEC ID:78445JAA5
SBA GTD PARTN CTFS 2001-20C 1 108.0720 102,402.160 102,402.16 110,668.06 0.02% 8,265.90
6.340%03/01/2021
SEC ID:83162CWO
SOUNDVIEW HOME LOAN TR OPT3 A4 99.8690 43,521.780 38,421.58 43,464.99 0.01% 5,043.19
VAR RT 11/25/2035DD09/30105
SEC ID:83611MGS1
STATE STREET CORP 100.3520 1,000,000.000 1,019,240.00 1,003,520.00 0,22% -15,720.00
2.895%03/07/2016 DD 03/09/11
SEC ID:8574]]AH6
TOYOTA AUTO RECENABLES 2 A A3 99.7890 3,443,837.520 3,436,707.70 3,436,591.02 0.96% -136.68
0.690% 12/15/2017 DD 03119/14
SEC ID:89231MAC9
TOYOTA AUTO RECENABLES C A2A 99.8480 2,195,000.000 2,194,823.52 2,191,663.60 0,49% -3,159.92
0.920%02/15/2018 DD 08126/15
SEC ID:89231TAB6
TOYOTA MOTOR CREDIT CORP 100.0260 5,200,000.000 5,200,000.00 5,201,352.00 1.15% 1,352.00
VAR RT 05/17/2016 DD 05/17/13
SEC ID:89236TAK1
111912016 6:31:47PM EST $ Workbench
Asset Detail Report ID: GL8013
�' Base Curtency: LED
BNY ME LLON by Currency Alternate Base Currency:
Exchange Rate:
OCSD CONSOLIDATED-OCSW0030000 12/31/2015 Statue: FINAL
Net Unrealized
Price Cost Market Value % of Gain/Loss
Description Base Shares Par Be" Base Total Base
TOYOTA AUTO RECEWABLES 2 A A3 99.7320 3,595,000,000 3,594,456.44 3,585,365.40 0.80% -9,091 04
1.120%02/15/2019 DD 03/04/15
SEC ID:89236WAC2
US BANCORP 100.9640 I,000,000.000 1,009,900.00 1,009,640.00 0.22% -260.00
2.200% 11/15/2016 DD 11/03/11
SEC ID:91159HHB9
U S TREASURY NOTE 100.3520 11,000,000.000 11,042,439.19 11,038,720.00 2.45% -3,719.19
1.500%01/31/2019 DD 01/31/14
SEC ID:912828B33
U S TREASURY NOTE 100.0050 7,500,000.000 7,512,915.75 7,500,375.00 1.66% -12,540.75
0.375%01/31/2016 DD 01/31/14
SEC ID:9I2828B41
U S TREASURY NOTE 100.0220 3,500,000A00 3,500,340.41 3,500,990.00 0.78% 429.59
VAR RT 04/30/2016 DD 04/30/14
SEC ID:9I2828D31
U S TREASURY NOTE 99.8870 12,000,000A00 11,997,656.25 11,986,440.00 2.66% -11,216.25
0.500%08/31/2016 DD 08/31/14
SEC ID:9I2828D64
U STREASURY NOTE 100.6760 5,800,000.000 5,873,186.87 5,839,208.00 1.30% -33,978.87
1.950%09/30/2019 DD 09/30/14
SEC ID:912828F39
U S TREASURY NOTE 99.6520 10,000,000.000 9,948,783.50 9,965,200.00 2.21% 16,416.50
0.895% 11/15/2017 DD 11/15/14
SEC ID:912828G20
U STREASURY NOTE 99.7340 1Ip00,000AW 10,974,971.74 10,990,940.00 2.44% -4,231.74
0.500% 11/30/2016 DD 11/30/14
SEC ID:912828046
U STREASURY NOTE 99.6020 7,500,000.000 7,449,634.50 9,490,150.00 1.66% 20,515.50
1.500% 11/30/2019 DD 11/30/14
SEC ID:912828G61
U S TREASURY NOTE 98.2340 5,500,000.000 5,424,666.87 5,402,890.00 1,20% -21,796.87
1.395% 10/31/2020 DD 10/31/15
SEC ID:9I2828L99
U S TREASURY NOTE 100.5190 2,000,000.000 2,020,006.70 2,010,380.00 0,45% -9,626.70
1.750%05/31/2016 DD 05/31/11
SEC ID:912828QP8
U S TREASURY NOTE 100.0000 3,594,000.000 3,603,596.33 3,594,000.00 0,80% -9,596.33
0.395%03/15/2015 DD 03/15/12
SEC ID:912828SK7
U S TREASURY NOTE 99.9570 7,500,000.000 7,500,611.06 7,496,775.00 1.66% -3,836.06
0.875%04/30/2017 DD 04/30/12
SEC ID:912828SSO
111912016 6:31:47PM EST 9 Workbench
Asset Detail Report ID: GL8013
�' Base Curtency: LED
BNY ME LLON by Currency Alte ne[e Base Currency:
Exchange Rate:
OCSD CONSOLIDATED-OCSGOOOl0O00 12/31/2015 Statue: FINAL
Net Unrealized
Price Coat Market Value % of Gain/Loss
Description Base Shares Par Base Base Total Base
U STREASURY NOTE 99.9920 14,000,000.000 14,001,609,40 13,998,880A0 3.11% -2,729.40
0,500%06/15/2016 DO 06/15/13
SEC ID:912828VG2
U S TREASURY NOTE 100.0080 3,000,000.000 2,999,541.30 3,000,240.00 0.67% 698.70
0.625%09/15/2016 DD 09/15/13
SEC ID:912828VL1
U S TREASURY NOTE 100.1250 3,000,000.000 3,003,760.05 3,003,750.00 0.67% -10.05
0.875%09/15/2016 DD 09/15/13
SEC ID:912828VW9
U S TREASURY NOTE 100.4490 10,000,000.000 9,984,307.20 10,044,900.00 2.23% 60,592.80
1.625%06/30/2019 DO 06/30/14
SEC ID:9I2828WS5
US TREAS-CPI INFLAT 94.9730 10,414,368A00 10,300,083.89 9,893,686.91 2.20% -406,396.98
0.125%07/15/2024 DD 07/15/14
SEC ID:912828WUO
U S TREASURY NOTE 100.3480 10,000,000A00 10,024,999.40 10,034,800.00 2.23% 10,022.60
1.625%07/31/2019 DD 07/31/14
SEC ID:9I2828W W6
UNIV OF CALIFORNIA CA RGTS MED 110.6320 400,000.000 400,000.00 442,528.00 0.10% 42,528.00
5.035%05/15/2021 DD IT/18/10
SEC ID:913366EJ5
WELLS FARGO&CO 100.1580 1,000,000.000 1,001,870.00 1,001,580.00 0.22% -290.00
1.250%07/20/2016 DD 09/29/13
SEC ID:94974BFL9
WELLS FARGO&CO 99.7440 5,000,000A00 5,001,650.00 4,989,200.00 1.11% -14,450.00
2.600%07/22/2020 DD 07/22/15
SEC ID:94974BGM6
WELLS FARGO BANK NA 99.6300 500,000.000 500,000.00 498,15000 0.11% -1,850.00
VAR RT 0 6/1 512 017 DD 06/12/14
SEC ID:94988J2L0
TOTAL=D INCOME SECURITIES 335,602,796.730 336,524,048.36 334,116,887.89 74.16% -2,407,160.51
TOTAL ASSETS U.S.DOLLAR 450,951,542.740 453,012,057.29 450,528,902.48 LOUD % -2,483,154.81
TOTAL ASSETS-BASE: 450,951,942.740 453,012,057.29 450,528,902.48 100.001/e .2,483,154.81
111912016 6:31:47PM EST 10 Workbench
3► Transaction Report Report ID: TX8355
BUY MELLON Base Ctura.ry: USD
OCSD-CONSOLIDATED -OCSGOOOl0O00 12/I/2015 - 12/31/2015 Status: FINAL
Trade Date Investment Investment Settle Date Currency Currency
Tran Effective Date Amount Cost Gain/Loss Amount Cost Gain/Loss
Code Settle Date Shares/Par Base Base Base Base Base Base
RECEIPTS AND DISBURSEMENT TRANSACTIONS
CASH/SECURITIES RECEIVED FROM PLAN ADMINISTRATOR
U.S.DOLLAR
RECD FROM PLAN ADMIN
CD 12/3/2015 0.000 12,700,000.00 0.00 0.00 12,700,000.00 0.00 0.00
0CSF07522202 OCS LONG CHANDLER
CD 12/18/2015 0.000 88,000,000.00 0.00 0.00 88,000,000.00 0.00 0.00
0CSF07511102 OCS LIQ OF CHANDLER
CD 12/18/2015 0.000 30,000,000.00 0.00 0.00 30,000,000.00 0.00 0.00
OCSF07522202 OCS LONG CHANDLER
130,700,000.00 0.00 0.00 130,700,000.00 0.00 0.00
0.001 0.00 T
0.00 C 0.00 S
TOTAL U.S.DOLLAR: 130,7W,000.00 0.00 0.00 130,7W,000.00 ow 0.00
0.001 0.00 T
0.00 C 0.008
TOTAL CASH/SECURITIES RECEIVED 130,700,000.00 0.00 0.00 130,700,000.00 0.00 0.00
FROM PLAN ADMINISTRATOR: 0.001 0.00 T
0.00 C 0.00 S
MISCELLANEOUS INCOME
U.B.DOLLAR
H,H INFLATION ADJUSTMENTS US TREAS-CPI INFLAT
SEC ID:912828WO
Sw 12/1/2015 -520.000 0.00 -520.00 0.00 0.00 0.00 0.00
OCSF07522202 OCS LONG CHANDLER
Sw 12/2/2015 -104.000 0.00 -104.00 0.00 0.00 0.00 0.00
OCSF00522202 OCS LONG CHANDLER
Sw 12/3/2015 -208.000 0.00 -208.00 0.00 0.00 0.00 0.00
OCSF00522202 OCS LONG CHANDLER
Sw 12/4/2015 -416.000 0.00 -416.00 0.00 0.00 0.00 0.00
OCSF00522202 OCS LONG CHANDLER
Sw 12/9/2015 -208.000 0.00 -208.00 0.00 0.00 0.00 0.00
OCSF00522202 OCS LONG CHANDLER
Sw 12/8/2015 -104.000 0.00 -104.00 0.00 0.00 0.00 0.00
OCSF01522202 OCS LONG CHANDLER
Sw 12/9/2015 -104.000 0.00 -104.00 0.00 0.00 0.00 0.00
OCSF01522202 OCS LONG CHANDLER
Sw 12/10/2015 -208.000 0.00 -208.00 0.00 0.00 0.00 0.00
OCSF07522202 OCS LONG CHANDLER
111912016 6:38:25PM EST I 'Pending S 0.e nt Workbench
3► Transaction Report Report ID: TX8355
BUY MELLON Base Cu.renoy: USD
OCSD-CONSOLIDATED -OC8G00030000 12/I/2015 - 12/31/2015 Status: FINAL
Trade Date Investment Investment Settle Date Currency Currency
Tran Effective Date Amount Cost Gain/Loss Amount Coat Gain/Loss
Code Settle Date Shares/Par Base Base Base Base Base Base
SW 12/11/2015 -416.000 0.00 -416.00 0.00 0.00 0.00 0.00
OCSF07522202 OCS LONG CHANDLER
Sw 12/14/2015 -208.000 0.00 -208.00 0.00 0.00 0.00 0.00
OCSF07522202 OCS LONG CHANDLER
Sw 12/15/2015 -104.000 0.00 -104.00 0.00 0.00 0.00 0.00
OCSF07522202 OCS LONG CHANDLER
Sw 12/16/2015 -208.000 0.00 -208.00 0.00 0.00 0.00 0.00
OCSF07522202 OCS LONG CHANDLER
Sw 12/17/2015 -104.000 0.00 -104.00 0.00 0.00 0.00 0.00
OCSF07522202 OCS LONG CHANDLER
Sw 12/18/2015 -416.000 0.00 -416.00 0.00 0.00 0.00 0.00
OCSF07522202 OCS LONG CHANDLER
Sw 12/21/2015 -208.000 0.00 -208.00 0.00 0.00 0.00 0.00
OCSF07522202 OCS LONG CHANDLER
Sw 12/22/2015 -104.000 0.00 -104.00 0.00 0.00 0.00 0.00
OCSF07522202 OCS LONG CHANDLER
Sw 12/23/2015 -208.000 0.00 -208.00 0.00 0.00 0.00 0.00
OCSF07522202 OCS LONG CHANDLER
Sw 12/24/2015 -416,000 0.00 -416.00 0.00 0.00 0.00 0.00
OCSF07522202 OCS LONG CHANDLER
Sw 12/28/2015 -312.000 0.00 -312.00 0.00 0.00 0.00 0.00
OCSF07522202 OCS LONG CHANDLER
Sw 12/29/2015 -208.000 0.00 -208.00 0.00 0.00 0.00 0.00
OCSF07522202 OCS LONG CHANDLER
Sw 12/30/2015 -104.000 0.00 -104.00 0.00 0.00 0.00 0.00
OCSF07522202 OCS LONG CHANDLER
Sw 12/31/2015 -104.000 0,00 -104.00 0,00 0.00 0.00 0.00
OCSF07522202 OCS LONG CHANDLER
0.00 -4,992.00 0.00 0.00 0.00 0.00
0.001 0.00 T
0.00 c 0.008
TOTAL U.S.DOLLAR: 0.00 -4,992.00 0.00 0.00 0.00 0.00
0.001 0.00 T
0.00 C 0.00 S
TOTAL MISCELLANEOUS INCOME: 0.00 -4,992.00 0.00 0.00 O.GO 0.00
0.001 0.00 T
0.00 C 0.008
TOTAL RECEIPTS AND DISBURSEMENT 130,700,000.00 -4,992.00 0.00 130,700,000.00 0.00 0.00
TRANSACTIONS: 0.001 0.00 T
0.00 C 0.00 S
PURCHASES
111912016 6:38:25PM EST 2 'Pending S 0.e nt Workbench
3► Transaction Report Report ID: TX8355
BUY MELLON Base Ctura.ry: USD
OCSD-CONSOLIDATED -OCSG00030000 12/1/2015 - 12/31/2015 Status: FINAL
Trade Date Investment Investment Settle Date Currency Currency
Tran Effective Date Amount Cost Gain/Loss Amount Cost Gain/Loss
Code Settle Date Shares/Par Base Base Base Base Base Base
CASH e.CASH EQUIVALENTS
U.S.DOLLAR
BANK TOKYO-MITSUB DISC 01/29/2016
SEC ID:06538BAV5
B 12/21/2015 1,200,000.000 -1,199,428.00 1,199,428.00 0.00 -1,199,428.00 0.00 0.00
12/21/2015
OCSF07511102 OCS LIQ OF CHANDLER
DREYFUS TREAS 14 AGY CSH CSH MG VAR RT 12/31/2049 DD 04/09/97
SEC ID:996085247
B 12/1/2015 174,019.800 -174,019.80 174,019.80 0.00 -174,019.80 0.00 0.00
12/1/2015
OCSF07522202 OCS LONG CHANDLER
B 12/2/2015 0.960 -0.96 0.96 0.00 -0.96 0.00 0.00
12/2/2015
OCSF07511102 OCS LIQ OF CHANDLER
B 12/2/2015 44.110 -44.17 44.17 0.00 -44.11 0.00 0.00
12/2/2015
OCSF07522202 OCS LONG CHANDLER
B 12/3/2015 12,700,000.000 -12,700,000.00 12,700,000.00 0.00 -12,700,000.00 0.00 0.00
12/3/2015
OCSF07522202 OCS LONG CHANDLER
B 12/4/2015 1,004,250.000 -1,004,250.00 1,004,250.00 0.00 -1,004,250.00 0.00 0.00
12/4/2015
OCSM7511102 OCS LIQ OF CHANDLER
B 12/7/2015 1,003,250.000 -1,003,250.00 1,003,250.00 0.00 -1,003,250.00 0.00 0.00
12/T/2015
OCSF07511102 OCS LID OF CHANDLER
B 12/7/2015 22,080.000 -22,080.00 22,080.00 0.00 -22,080.00 0.00 0.00
12/T/2015
OCSF07522202 OCS LONG CHANDLER
B 12/8/2015 11,168.900 -11,168.90 11,168.90 0.00 -11,168.90 0.00 0.00
12/8/2015
OCSF07522202 OCS LONG CHANDLER
e 12/9/2015 25,000.000 -25,000.00 25,000.00 0.00 -25,000.00 0.00 0.00
12/9/2015
OCSF07522202 OCS LONG CHANDLER
B 12/14/2015 43,750,000 43,750.00 43,750.00 0.00 -43,750.00 0.00 0.00
12/14/2015
OCSF07522202 OCS LONG CHANDLER
B 12/15/2015 6,007,500.000 -6,007,500.00 6,007,500.00 0.00 -6,007,500.00 0.00 0.00
12/15/2015
OCSF07511102 OCS LID OF CHANDLER
B 12/15/2015 5,345,724.040 -5,345,724.04 5,345,724.04 0.00 -5,345,724.04 0.00 0.00
12/15/2015
OCSF07522202 OCS LONG CHANDLER
111912016 6:38:25PM EST 3 'Pending S 0.e nt Workbench
3► Transaction Report Report ID: TX8355
BUY MELLON Base Cu.renoy: USD
OCSD-CONSOLIDATED -OC8G00010000 12/1/2015 - 12/31/2015 Status: FINAL
Trade Date Investment Investment Settle Date Currency Currency
Tran Effective Date Amount Coat Gain/Loss Amount Cost Gain/Loss
Code Settle Date Shares/Par Base Base Base Base Base Base
B 12/18/2015 86,000,911.120 -86,000,911.12 86,000,911.12 0.00 -86,000,911.12 0.00 0.00
12/18/2015
OCSF07511102 OCS LIQ OF CHANDLER
B 12/18/2015 30,043,859.430 -30,043,859.43 30,043,859.43 0.00 -30,043,859.43 0.00 0.00
12/18/2015
OCSF07522202 OCS LONG CHANDLER
e 12/22/2015 41,388.730 A1,388.73 41,388.73 0.00 -41,388.73 0.00 0.00
12/22/2015
OCSF07522202 OCS LONG CHANDLER
B 12/28/2015 76,124,870 -76,124.87 76,124.87 0.00 -76,124.87 0.00 0.00
12/28/2015
OCSF07522202 OCS LONG CHANDLER
B 12/31/2015 81,250.000 -81,250.00 81,250.00 0.00 -81,250.00 0.00 0.00
12/31/2015
OCSF07522202 OCS LONG CHANDLER
-142,580,322.02 142,580,322.02 0.00 -142,580,322.02 0.00 0.00
0.001 0.00 T
0.00 C 0.008
EXXON CORP DISC 01/28/2016
SEC ID:30229AAU3
B 12/18/2015 2,000,000.000 -1,999,088.88 1,999,088.88 0.00 -1,999,088.88 0.00 0.00
12/18/2015
OCSF07511102 OCS LIQ OF CHANDLER
FEDERAL FARM CR BK CONS SYSTEM 0.000%01/26/2016 DD 01/26/15
SEC ID:313312SG6
B 12/22/2015 10,000,000.000 -9,997,763.90 9,997,763.90 0.00 -9,997,763.90 0.00 0.00
12/22/2015
OCSF07511102 OCS LIQ OF CHANDLER
FEDERAL FARM CR BK CONS SYSTEM 0.000%06/20/2016 DO 06/22/15
SEC ID:313312YJ3
B 12/22/2015 1,075,000.000 -1,071,811.13 1,071,811.13 0.00 -1,071,811.13 0.00 0.00
12/22/2015
OCSF07511102 OCS LIQ OF CHANDLER
FEDERAL HOME LN BK CONS DISC 0.000%01/27/2016 DO 01/27/15
SEC ID:313384SH3
B 12/21/2015 12,000,000.000 -11,996,793.33 11,996,793.33 0.00 -11,996,793.33 0.00 0.00
12/21/2015
OCSF07511102 OCS LIQ OF CHANDLER
FEDERAL HOME LN BK CONS DISC MAT 06/24/2016
SEC ID:313384YN3
B 12/29/2015 4,000,000.000 -3,988,331.11 3,988,331.11 0.00 -3,988,331.11 0.00 0.00
12/29/2015
OCSF07511102 OCS LIQ OF CHANDLER
FEDERAL HOME LN BKS CONS DISC MAT 06/1S/2016
SEC ID:313384YF0
111912016 6:38:25PM EST 4 'Pending SM0.e ut Workbench
3► Transaction Report Report ID: TX8355
BUY MELLON Base Ctuta.ry: USD
OCSD-CONSOLIDATED -OCSG00010000 12/1/2015 - 12/31/2015 Status: FINAL
Trade Date Investment Investment Settle Date Currency Currency
Tran Effective Date Amount Cost Gain/Loss Amount Cost Gain/Loss
Code Settle Date Shares/Par Base Base Base Base Base Base
B 12/22/2015 985,000.000 -982,223.94 982,223.94 0,00 -982,223.94 0.00 0,00
12/22/2015
OCSF07511102 OCS LIQ OF CHANDLER
FEDERAL HOME LN MTG CORD DISC 0.000%01/27/2016 DO 01/27/201
SEC ID:3I3396SH7
B 12/21/2015 2,200,000.000 -2,199,366.88 2,199,366.88 0.00 -2,199,366.88 0.00 0.00
12/21/2015
OCSFO7511102 OCS LIQ OF CHANDLER
PACCAR FINL CORP DISC 01/22/2016
SEC ID:69372AAN2
B 12/21/2015 1,200,000.000 -1,199,626.67 1,199,626.67 0.00 -1,199,626.67 0.00 0.00
12/21/2015
OCSF07511102 OCS LIQ OF CHANDLER
TOYOTA MTR CR CP DISC 03/21/2016
SEC ID:89233GCM6
B 12/21/2015 3,000,000.000 -2,995,601.67 2,995,601.67 0.00 -2,995,601.67 0.00 0.00
12/21/2015
OCSF07522202 OCS LONG CHANDLER
U S TREASURY BILL 0.000%01/21/2016 DD 07/23/15
SEC ID:912996GY9
B 12/23/2015 9,000,000.000 -8,998,743.50 8,998,743.50 0.00 -8,998,743.50 0.00 0.00
12/24/2015
OCSF07511102 OCS LIQ OF CHANDLER
U S TREASURY BILL 0.000%01/28/2016 DO 07/30/15
SEC ID:912796GZ6
B 12/21/2015 10,000,000.000 -9,998,448.33 9,998,448.33 0,00 -9,998,448.33 0.00 0.00
12/21/2015
OCSF07511102 OCS LID OF CHANDLER
TOTAL SETTLED U.S.DOLLAR: ,199,207,549.36 199,207,549.36 0.00 -199,207,549.36 0.00 0.00
0.001 0.00 T
0.00 C coos
TOTAL SETTLED CASH A CASH -199,207,549.36 199,207,549.36 0.00 -199,207,549.36 0.00 0.00
EQUIVALENTS: 0.001 0.00 T
0.00 C 0.008
F=D INCOME SECURITIES
U.S.DOLLAR
AMERICAN HONDA FINANCE CORP 1.125% 10/07/2016 DO I0/10/13
SEC ID:02665WAB7
B 12/21/2015 1,000,000.000 -1,001,660.00 1,001,660.00 0.00 -1,001,660.00 0.00 0.00
12/24/2015
OCSFO7511102 OCS LIQ OF CHANDLER
BANK OF NEW YORK MELLON CORP/T 2.300%07/28/2016 DO 07/28/11
SEC ID:06406HBX6
111912016 6:38:25PM EST 5 'Pending S 0.e nt Workbench
3► Transaction Report Report ID: TX8355
BUY MELLON Base Cu.renoy: USD
OCSD-OONSOLIDATED -OCSG00010000 12/1/2015 - 12/31/2015 Status: FINAL
Trade Date Investment Investment Settle Date Currency Currency
Tran Effective Date Amount Cost Gain/Loss Amount Coat Gain/Loss
Code Settle Date Shares/Par Base Base Base Base Base Base
B 12/21/2015 1,000,000.000 -1,008,760.00 1,008,760.00 0,00 -1,008,760.00 0.00 0.00
12/24/2015
OCSF07511102 OCS UQ OF CHANDLER
COCA-COLACO/THE 1.800%09/01/2016DDOB/l0/11
SEC ID: 191216AU4
B 12/21/2015 1,000,000.000 -1,006,450.00 1,006,450.00 0.00 -1,006,450.00 0.00 0.00
12/24/2015
OCSF07511102 OCS LIQ OF CHANDLER
COOPERATIEVE CENTRAL INSTL C/D 0.916%05/06/2016 DD 05/13/14
SEC ID:21684BWO
B 12/22/2015 1,000,000.000 -999,830.00 999,830.00 0.00 -999,830.00 0.00 0.00
12/23/2015
OCSF07511102 OCS UQ OF CHANDLER
FEDERAL HOME LN MTG CORP 1.250%10/02/2019 DO 10/02/12
SEC ID:3137EADM8
B 12/18/2015 4,500,000.000 -4,436,460.00 4,436,460.00 0.00 -4,436,460.00 0.00 0.00
12/21/2015
OCSF07522202 OCS LONG CHANDLER
FEDERAL NATL MTG ASSN 1.125% 12/14/2018 DO 11/03/15
SEC ID:3135GOG12
B 12/18/2015 5,000,000.000 -4,963,950.00 4,963,950.00 0.00 -4,963,950.00 0.00 0.00
12/21/2015
OCSF07522202 OCS LONG CHANDLER
FEDERAL NATL MTG ASSN 1.500%11/30/2020 DO 10/19/15
SEC ID:31350OF73
B 12/15/2015 4,400,000.000 -4,325,596.00 4,325,596.00 0.00 -4,325,596.00 0.00 0.00
12/16/2015
OCSF07522202 OCS LONG CHANDLER
B 12/16/2015 3,100,000.000 -3,045,130.00 3,045,130.00 0.00 -3,045,130.00 0.00 0.00
12/17/2015
OCSF07522202 OCS LONG CHANDLER
-9,370,926.00 7,370,726.00 0.00 -7,370,726.00 0.00 0.00
0.001 0.00 T
0.00 C 0.008
INTERNAUONAL FINANCE CORP 0.500%05/16/2016 DO 02/22/13
SEC ID:45950VCJ3
B 12/29/2015 2,500,000.000 -2,498,750.00 2,498,750.00 0.00 -2,498,750.00 0.00 0.00
12/30/2015
OCSF07511102 OCS UQ OF CHANDLER
JOHN DEERE CAPITAL CORP 1.050% 10/11/2016DD10/11/13
SEC ID:24422ESD2
B 12/21/2015 1,000,000.000 -1,001,070.00 1,001,070.00 0.00 -1,001,070.00 0.00 0.00
12/24/2015
OCSF07511102 OCS UQ OF CHANDLER
U STREASURY NOTE 0.500%06/15/2016 DO 06/15/13
SEC ID:9I2828VG2
111912016 6:38:25PM EST 6 'Pending S 0.e nt Workbench
3► Transaction Report Report ID: TX8355
BUY MELLON Base Cu.renoy: USD
OCSD-CONSOLIDATED -OC8G00010000 12/1/2015 - 12/31/2015 Status: FINAL
Trade Date Investment Investment Settle Date Currency Currency
Tran Effective Date Amount Cost Gain/Loss Amount Coat Gain/Loss
Code Settle Date Shares/Par Base Base Base Base Base Base
B 12/21/2015 10,000,000.000 -10,000,814.75 10,000,814.75 0.00 -10,000,814.75 0.00 0.00
12/22/2015
OCSF07511102 OCS LIQ OF CHANDLER
B 12/30/2015 4,000,000.000 -4,000,794.65 4,000,794.65 0.00 -4,000,794.65 0,00 0.00
12/31/2015
OCSF07511102 OCS LIQ OF CHANDLER
-14,001,609.40 14,001,609.40 0.00 -14,001,609.40 0.00 0.00
0.001 0.00 T
0.00 C 0.00 S
U S TREASURY NOTE 0.625%07/15/2016 DO 07/15/13
SEC ID:9I2828VL1
B 12/15/2015 3,000,000.000 -2,999,541.30 2,999,541.30 0.00 -2,999,541.30 0.00 0.00
12/16/2015
OCSF07511102 OCS LIQ OF CHANDLER
U S TREASURY NOTE 0.895%04/30/2017 DO 04/30/12
SEC ID:912828SSO
B 12/22/2015 7,500,000.000 -7,500,611.06 7,500,611.06 0.00 -7,500,611.06 0.00 0.00
12/23/2015
OCSF07522202 OCS LONG CHANDLER
U S TREASURY NOTE 0.875%09/15/2016 DO 09/15/13
SEC ID:9I2828V W]
B 12/15/2015 3,000,000.000 -3,003,760.05 3,003,760.05 0.00 -3,003,760.05 0.00 0.00
12/16/2015
OCSM7511102 OCS LIQ OF CHANDLER
U S TREASURY NOTE 1.375% 10/31/2020 DO 10/31/15
SEC ID:912828L99
B 12/22/2015 3,000,000.000 -2,955,713.18 2,955,713.18 0.00 -2,955,713.18 0.00 0.00
12/23/2015
OCSF07522202 OCS LONG CHANDLER
USTREASURYNOTE 1.500%O1/31/2019DD01/31/14
SEC ID:91282BB33
B 12/22/2015 6,500,000.000 -6,528,713.18 6,528,713.18 0.00 -6,528,713.18 0.00 0.00
12/23/2015
OCSF07522202 OCS LONG CHANDLER
B 12/29/2015 4,500,000.000 -4,513,726.01 4,513,726.01 0.00 -4,513,726.01 0.00 0.00
12/30/2015
OCSF07522202 OCS LONG CHANDLER
.11,042,439.19 11,042,439.19 0.00 -11,042,439.19 0.00 0.00
0.001 0.00 T
0.00 C 0.008
US BANCORP 2.200%11/15/2016 DO 11/03/11
SEC ID:91159HHB9
B 12/21/2015 1,000,000.000 -1,009,900.00 1,009,900.00 0.00 -1,009,900.00 0.00 0.00
12/24/2015
OCSF07511102 OCS LIQ OF CHANDLER
111912016 6:38:25PM EST 7 'Pending S 0.e nt Workbench
3► Transaction Report Report ID: TX8355
BUY MELLON Base Ctura.ry: USD
OCSD-CONSOLIDATED -OCSG00010000 12/1/2015 - 12/31/2015 Status: FINAL
Trade Date Investment Investment Settle Date Currency Currency
Tran Effective Date Amount Cost Gain/Loss Amount Cost Gain/Loss
Code Settle Date Shares/Par Base Base Base Base Base Base
WELLS FARGO&CO 1.250%07/20/2016 DO 07/29/13
SEC ID:94994BFL9
B 12/21/2015 1,000,000.000 -1,001,870.00 1,001,870.00 0.00 -1,001,870.00 0,00 0.00
12/24/2015
OCSF07511102 OCS LIQ OF CHANDLER
TOTAL SETTLED U.B.DOLLAR: -67,803,300.18 67,803,300.18 0.00 -67,803,300.18 0.00 0.00
0.001 0.00 T
0.00 C 0.008
TOTAL SETTLED F=D INCOME -67,803,300.18 67,803,300.18 0.00 -67,803,300.18 0.00 0.00
SECURITIES: 0.001 0.00 T
0.00 C 0.008
TOTAL SETTLED PURCHASES: -269,010,649.54 267,010,649.54 0.00 .267,010,6,19.54 0.00 0.00
0.001 0.00 T
0.00 C 0.00 S
SALES
CASH&CASH EQUNALENTS
U.S.DOLLAR
DREYFUS TREAS&AGY CSH CSH MG VAR RT 12/31/2049 DO 04/09/97
SEC ID:996085247
8 12/16/2015 -6,017,782.440 6,017,782.44 -6,017,782.44 0.00 6,017,782.44 0.00 0.00
12/16/2015
OCSF07511102 OCS LIQ OF CHANDLER
S 12/16/2015 -4,327,052.060 4,327,052.06 -4,327,052.06 0.00 4,327,052.06 0.00 0.00
12/16/2015
OCSF07522202 OCS LONG CHANDLER
S 12/17/2015 -3,047,325.830 3,047,325.83 -3,047,325.83 0.00 3,047,325.83 0.00 0.00
12/17/2015
OCSF07522202 OCS LONG CHANDLER
S 12/21/2015 -26,593,663.210 26,593,663.21 -26,593,663.21 0.00 26,593,663.21 0.00 0.00
12/21/2015
OCSF07511102 OCS LIQ OF CHANDLER
S 12/21/2015 -12,140,489.110 12,140,489.11 -12,140,489.11 0.00 12,140,489.11 0.00 0.00
12/21/2015
OCSF07522202 OCS LONG CHANDLER
S 12/22/2015 -22,053,570,000 22,053,570.00 -22,053,570.00 0.00 22,053,570.00 0.00 0.00
12/22/2015
0CSF07511102 OCS LIQ OF CHANDLER
S 12/23/2015 -1,000,765.100 1,000,765.10 -1,000,765.10 0.00 1,000,765.10 0.00 0.00
12/23/2015
OCSF07511102 OCS LIQ OF CHANDLER
111912016 6:3&25PM EST 8 'Pending S 0.e nt Workbench
3► Transaction Report Report ID: TX8355
BUY MELLON Base Cu.renoy: USD
OCSD-CONSOLIDATED -OCSG00010000 12/1/2015 - 12/31/2015 Status: FINAL
Trade Date Investment Investment Settle Date Currency Currency
Tran Effective Date Amount Cost Gain/Loss Amount Coat Gain/Loss
Code Settle Date Shares/Par Base Base Base Base Base Base
8 12/23/2015 -14,080,864.000 14,080,864.00 -14,080,864.00 0.00 14,080,864.00 0.00 0.00
12/23/2015
OCSF07522202 OCS LONG CHANDLER
S 12/24/2015 -15,055,697.250 15,055,697.25 -15,055,697.25 0.00 15,055,697.25 0.00 0.00
12/24/2015
OCSF07511102 OCS LIQ OF CHANDLER
S 12/29/2015 -3,988,331.110 3,988,331.11 -3,988,331.11 0.00 3,988,331.11 0.00 0.00
12/29/2015
OCSF07511102 OCS LIQ OF CHANDLER
S 12/30/2015 -2,500,277.780 2,500,277.78 -2,500,277.78 0.00 2,500,277.78 0.00 0.00
12/30/2015
OCSF07511102 OCS LIQ OF CHANDLER
S 12/30/2015 -4,535,497.020 4,535,497.02 -4,535,497.02 0.00 4,535,497.02 0.00 0.00
12/30/2015
OCSF07522202 OCS LONG CHANDLER
S 12/31/2015 -4,001,668.970 4,001,668.97 -4,001,668.97 0.00 4,001,668.97 0.00 0.00
12/31/2015
OCSF07511102 OCS LIQ OP CHANDLER
119,342,983.88 -119,342,983.88 0.00 119,342,983.88 0.00 0.00
0.001 0.00 T
0.00 C 0.008
TOTAL SETTLED U.B.DOLLAR: 119,342,983.88 -119,342,983.88 0.00 119,342,983.88 0.00 0.00
0.001 0.00 T
0.00 C coca
TOTAL SETTLED CASH 8:CASH 119,342,983.88 -119,342,983.88 0.00 119,342,983.88 0.00 0.00
EQUIVALENTS: 0.001 0.00 T
0.00 C 0.003
TOTAL SETTLED SALES: 119,342,983.88 -119,342,983.88 0.00 119,342,983.88 0.00 0.00
0.001 0.00 T
0.00 C 0.00 8
PRINCIPAL PAYMENTS
FLCED INCOME SECURITIES
U.B.DOLLAR
FHLMC POOL#78-6064 VAR RT 01/01/2028 DO 12/01/97
SEC ID:313485WZ3
PC 11/1/2015 -24.470 24.47 0.00 0.00 24.47 0.00 0.00
12/15/2015
OCSF07522202 OCS LONG CHANDLER
. PD 12/1/2015 -19.330 19.33 -18.86 0.47 0.00 0.00 0.00
12/1/2015 0.491 0.00 T
OCSF07522202 OCS LONG CHANDLER 0.00 C 0.00 S
111912016 6:38:25PM EST 9 'Pending S 0.e nt Workbench
3► Transaction Report Report ID: TX8355
BUY MELLON Base Cu.renoy: USD
OCSD-CONSOLIDATED -OCSG00030000 12/1/2015 - 12/31/2015 Status: FINAL
Trade Date Investment Investment Settle Date Currency Currency
Tran Effective Date Amount Cost Gain/Loss Amount Cost Gain/Loss
Code Settle Date Shares/Par Base Base Base Base Base Base
24.47 0.00 0.00 24.47 0.00 0.00
0.001 0.00 T
0.00 c 0.008
FHLMC MULMCLASS MTG 58 2A 6.500%09/25/2043 DD 09/01/03
SEC ID:31394JY35
PD 12/1/2015 -3,828.390 3,828.39 -4,332.98 -504.59 3,828.39 0,00 0.00
12/28/2015 -504,59 1 0.00 T
OCSF07522202 OCS LONG CHANDLER 0.00 C 0.00 S
FHLMC MULTICLASS MTG E3 A VAR RT 08/15/2032 DD 12/01/97
SEC ID:3133TCE95
PD 11/1/2015 -2,614.850 2,614.85 -2,617.59 -2.74 2,614.85 0.00 0.00
12/15/2015 -2.94 1 0.00 T
OCSF07522202 OCS LONG CHANDLER 0.00 C 0.00 S
FNMA POOL#0257179 4.500%04/01/2028 DD 03/01/08
SEC ID:31391NUC7
PD 12/1/2015 -261.380 261.38 -276.43 -15.05 261.38 0.00 0.00
12/28/2015 -15.051 0.00 T
OCSF07522202 OCS LONG CHANDLER 0.00 C 0.00 S
FNMA POOL#0357969 5.000%09/01/2035 DD 09/01/05
SEC ID:31396ET22
PD 12/1/2015 -1,888.780 1,888.78 -2,030.44 -141.66 1,888.78 0.00 0.00
12/28/2015 -141,661 0.00 T
OCSF07522202 OCS LONG CHANDLER 0.00 C 0.00 S
FNMA POOL80466397 3.400% 11/01/2020 DD 11/01/10
SEC ID:31381PDA3
PD 12/1/2015 -625.880 625.88 -612.34 13.54 625.88 0.00 0.00
12/28/2015 13.541 0.00 T
OCSF07522202 OCS LONG CHANDLER 0.00 C 0.00 S
FNMA POOLA0945580 5.000%06/01/2036DD05/01/06
SEC ID:31403DJ23
PD 12/1/2015 -4,887.670 4,887.67 -5,254.25 -366.58 4,887.67 0.00 0.00
12/28/2015 -366.581 0.00 T
OCSF07522202 OCS LONG CHANDLER 0.00 C 0.00 S
FNMA POOL#0748678 5.000% 10/01/2033 DD 10/01/03
SEC ID:31403GXF4
PD 12/1/2015 -25.790 25.79 -27.72 -1.93 25.79 0.00 0.00
12/28/2015 -1.931 0.00 T
OCSF07522202 OCS LONG CHANDLER 0.00 C 0.00 S
FNMA POOLA0815971 5.000%03/01/2035DD03/01/05
SEC ID:31406PQY8
PD 12/1/2015 -12,354,310 12,354.31 -13,280.88 -926.57 12,354.31 0.00 0.00
12/28/2015 -926.57 1 0.00 T
OCSF07522202 OCS LONG CHANDLER 0.00 C 0.00 S
FNMA POOL#0823358 VAR RT 02/01/2035 DO 04/01/05
SEC ID:31406XWT5
111912016 6:38:25PM EST 10 'Pending S 0.e nt Workbench
3► Transaction Report Report ID: TX8355
BUY MELLON Base Cu.renoy: DSD
OCSD-CONSOLIDATED -OCSG00030000 12/1/2015 - 12/31/2015 Status: FINAL
Trade Date Investment Investment Settle Date Currency Currency
Tran Effective Date Amount Cost Gain/Loss Amount Coat Gain/Loss
Code Settle Date Shares/Par Base Base Base Base Base Base
PO 12/1/2015 -629.640 629.64 -624.92 4.92 629.64 0.00 0.00
12/28/2015 4.921 0.00 T
OCSF07522202 OCS LONG CHANDLER 0.00 C 0.00 S
FNMA POOLn0826080 5.000%09/01/2135DD06/01/05
SEC ID:31400BXH9
PD 12/1/2015 -915.620 915.62 -984.29 -68.67 915.62 0.00 0.00
12/28/2015 -68.67 1 0.00 T
OCSF07522202 OCS LONG CHANDLER 0.00 C 0.00 S
FNMA POOL#0888336 5.000%07/01/2036 DO 04/01/07
SEC ID:31410F4V4
PD 12/1/2015 -10,151.780 10,151.78 -10,913.16 -761.38 10,151.78 0.00 0.00
12/28/2015 -761,38 1 0.00 T
OCSF00522202 OCS LONG CHANDLER 0.00 C 0.00 S
FNMA POOL A0AL08694.500%06/O1/2029 DO 09/O1/11
SEC ID:3138EG6F6
PD 12/1/2015 -412.750 412.75 -436.52 -23.77 412.75 0.00 0.00
12/28/2015 -23,771 0.00 T
OCSF07522202 OCS LONG CHANDLER 0.00 C 0.00 S
FNMA POOL XOMA00224.500%04/01/2029 DO 03/01/09
SEC TO 314IYYAY3
PD 12/1/2015 -682.030 682.03 -721.31 -39.28 682.03 0.00 0.00
12/28/2015 -39,281 0.00 T
OCSF00522202 OCS LONG CHANDLER 0.00 C 0.00 S
FNMA GM REMIC P/T 09-114 A6 VAR RT 10/27/2037 DO 11/30/07
SEC ID:31396X3Q5
PD 12/25/2015 -6,055.740 6,055.74 -5,760.52 295.22 6,055.74 0.00 0.00
12/30/2015 295,221 0.00 T
OCSF00522202 OCS LONG CHANDLER 0.00 C 0.00 S
FNMA GTD REMIC P/T 11-3 FA VAR RT 02/25/2041 DD O1/25/11
SEC ID:31399QRE0
PD 12/25/2015 -7,545.010 7,545.01 -7,542.65 2.36 7,545.01 0.00 0.00
12/28/2015 2,361 0.00 T
OCSF07522202 OCS LONG CHANDLER 0.00 C 0.00 S
GNMA GM REMIC P/T 00-9 PH VAR RT 02/16/2030
SEC ID:3839114NX9
PD 12/16/2015 -1,449.560 1,449.56 -1,449.56 0.00 1,449.56 0.00 0.00
12/16/2015
OCSF07522202 OCS LONG CHANDLER
GNMA II POOL#0080023 VAR RT 12/20/2026 DO 12/O1/96
SEC ID:36225CAZ9
PD 12/1/2015 -217.850 217.85 -221.46 -3.61 217.85 0.00 0.00
12/21/201$ -3.61 1 0.00 T
OCSF09522202 OCS LONG CHANDLER 0.00 C 0.00 S
GNMA 11 POOL#0080395 VAR RT 04/20/2030 DO 04/01/00
SEC ID:36225CNM4
111912016 6:38:25PM EST 11 'Pending S 0.e nt Workbench
3► Transaction Report Report ID: TX8355
BUY MELLON Base Cu.renoy: USD
OCSD-CONSOLIDATED -OCSG00030000 12/1/2015 - 12/31/2015 Status: FINAL
Trade Date Investment Investment Settle Date Currency Currency
Tran Effective Date Amount Cost Gain/Loss Amount Cost Gain/Loss
Code Settle Date Shares/Par Base Base Base Base Base Base
PO 12/1/2015 -59.690 59,69 -59.15 0.54 59.69 0.00 0.00
12/21/2015 0.541 0.00 T
OCSF07522202 OCS LONG CHANDLER 0.00 C 0.00 S
GNMA II POOL#0080965 VAR RT 07/20/2034 DO 07/01/04
SEC ID:36225DCB8
PD 12/1/2015 -391.260 391.26 -391.02 0.24 391.26 0.00 0.00
12/21/2015 0.241 0.00 T
OCSF07522202 OCS LONG CHANDLER 0.00 C 0.00 S
GNMA 11 POOL N080088M VAR RT 06/20/2027 DO 06/01/97
SEC 1D:36225CC20
PD 12/1/2015 -264.650 264.65 -270A4 -5.79 264.65 0.00 0.00
12/21/2015 -5.79 1 0.00 T
OCSF07522202 OCS LONG CHANDLER 0.00 C 0.00 S
GNMA 11 POOL N080408X VAR RT 05/20/2030 DO 05/01/00
SEC 1D:36225CN28
PD 12/1/2015 -1,219.720 1,219.72 -1,207.33 12.39 1,219.72 0.00 0.00
12/21/2015 12,391 0.00 T
OCSF07522202 OCS LONG CHANDLER 0.00 C 0.00 S
HONDA AUTO RECENABLES 20 1 A3 0.670%11/21/2017 DO 02/27/14
SEC 1D:4381WAC9
PD 12/21/2015 -264,144.450 264,144.45 -263,339.63 804.82 26,L144.45 0.00 0.00
12/21/2015 804,821 0.00 T
OCSF07522202 OCS LONG CHANDLER 0.00 C 0.00 S
HONDA AUTO RECENABLES 202 A3 0.990%03/19/2018 DO 05/21/14
SEC 1D:43814GAC4
PD 12/18/2015 -42,516.100 42,576.10 -42,546.16 29.94 42,576.10 0.00 0.00
12/18/2015 29,941 0.00 T
OCSF07522202 OCS LONG CHANDLER 0.00 C 0.00 S
NCUA GUARANTEED NOTES TR R2 IA VAR RT 11/06/2019 DO 11/17/10
SEC ID:62888UAA8
PD 12/5/2015 -10,901.600 10,901.60 -10,901.55 0.05 10,901.60 0.00 0.00
12/8/2015 0.051 0.00 T
OCSF07522202 OCS LONG CHANDLER 0.00 C 0.00 S
SOUNDVIEW HOME LOAN TR OPT3 A4 VAR RT 11/25/2035 DO 09/30/05
SEC ID:83611MGS1
PD 12/25/2015 -14,700.940 14,700.94 -12,978.17 1,722.77 14,700.94 0.00 0.00
12/28/2015 1,722.791 0.00 T
OCSF07522202 OCS LONG CHANDLER 0.00 C 0.00 S
TOYOTA AUTO RECENABLES 2 A A3 0.690% 12/15/2017 DD 03/19/14
SEC ID:89231MAC9
PD 12/15/2015 -296,707.570 296,707.57 -296,093.29 614.28 296,707.57 0.00 0.00
12/15/2015 614.281 0.00 T
OCSF07522202 OCS LONG CHANDLER 0.00 C 0.00 S
111912016 6:38:25PM EST 12 -Pending S 0.e nt Workbench
3► Transaction Report Report ID: TX8355
BUY MELLON Ease Ctura.ry: USD
OCSD-CONSOLIDATED -OCSGOOOl0O00 12/I/2015 - 12/31/2O15 Status: FINAL
Trade Date Investment Investment Settle Date Currency Currency
Tran Effective Date Amount Cost Gain/Loss Amount Cost Gain/Loss
Code Settle Date Shares/Par Base Base Base Base Base Base
TOTAL SETTLED U.S.DOLLAR: 685,537.48 .684,873.56 639.45 685,537.48 0.00 0.00
639.451 0.00 T
0.00 C coca
TOTAL SETTLED FIXED INCOME 685,537.48 -684,B73.56 639.45 685,537.48 0.00 0.00
SECURITIES: 639.451 0.00 T
0.00 C 0.008
TOTAL SETTLED PRINCIPAL PAYMENTS: 685,537.48 -684,873.56 639.45 685,537.48 0.00 0.00
639.451 0.00 T
0.00 C 0.008
MATURITIES
FIXED INCOME SECURITIES
U.S.DOLLAR
CHARLES SCHWAB CORP/THE 0.850%12/04/2015 DD 12/06/12
SEC ID:808513AH8
MT 12/4/2015 -1,000,000.000 1,000,000.00 -1,002,700.00 -2,700.00 1,000,000.00 0.00 0.00
OCSF07511102 OCS LIQ OF CHANDLER -2,700.001 0.00 T
0.00 C O.00 5
COSTCO WHOLESALE CORP 0.650% 12/07/2015 DD 12/07/12
SEC ID:22160KAD7
MT 12/7/2015 -1,000,000.000 1,000,000.00 -1,001,340.00 -1,340.00 1,000,000.00 0.00 0.00
OCSF07511102 OCS LIQ OF CHANDLER -1,340.00 1 0.00 T
0.00 C 0.00 S
U S TREASURY NOTE 0.250% 12/15/2015 DD 12/15/12
SEC ID:912828UC2
MT 12/15/2015 -5,000,000.000 5,000,000.00 -4,998,649.56 1,350.44 5,000,000.00 0.00 0.00
OCSF07522202 OCS LONG CHANDLER 1,350.441 0.00 T
0.00 C 0.00 S
MT 12/15/2015 -6,000,000.000 6,000,000.00 -6,004,004.48 -4,004.48 6,000,000.00 0.00 0.00
OCSF07511102 OCS LIQ OF CHANDLER -4,004.48 1 0.00 T
0.00 C 0.00 S
11,000,000.00 -11,002,654.04 -3,654.04 11,000,000.00 0.00 0.00
.2,654.041 0.00 T
0.00 C 0.00 S
TOTAL U.S.DOLLAR: 13,000,000.00 -13,006,694.04 -6,694.04 13,000,000.00 0.00 0.00
-6,694.041 0.00 T
0.00 C 0.008
TOTAL F=D INCOME SECURITIES: 13,OOaO0uOO -13,006,694.04 -6,694.04 13,000,000.00 0.00 0.00
-6,694.04 I 0.00 T
0.00 C 0.00 S
111912016 6:38:25PM EST 13 'Pending SMU.m ut Workbench
3► Transaction Report Report ID: TX8355
BUY MELLON Base Ctura.ry: USD
OCSD-CONSOLIDATED -OC8G00030000 12/I/2015 - 12/31/2015 Status: FINAL
Trade Date Investment Investment Settle Date Currency Currency
Tran Effective Date Amount Cost Gain/Loss Amount Cost Gain/Loss
Code Settle Date Shares/Par Base Base Base Base Base Base
TOTAL 14ATURITIES: 13,000,000.00 .13,006,694.04 -6,694.04 13,000,000.00 0.00 0.00
-6,694.04 1 0.00 T
0.00 C 0.005
CORPORATE ACTIONS
U.S.DOLLAR
GE EQUIPMENT TRANSPORTATI 1 A3 1.280%02/25/2019 DD 03/04/15
SEC ID:36164EAC9
CAL 12/23/2015 -2,955,000.000 2,955,000.00 -2,954,564.14 435.86 2,955,000.00 0.00 0.00
12/23/2015 435.861 0.00 T
OCSF07522202 OCS LONG CHANDLER 0.00 C 0.00 S
GRAND TOTAL ACTIVITY: -327,128.18 131,016,541.92 -5,618.73 -327,128.16 0.00 0.00
-6,618.73 1 0.00 T
0.00 C 0.00 S
111912016 6:38:25PM EST 14 'Pending S 0.e nt Workbench
Callan
December 11,2015
Orange County Sanitation District
Investment Measurement service
Quarterly Review
The holder, aided waa prepared by Callan Associates Inc. ("CAI"I using Information from sources that include the following: fund thusands); fund
dietodian(s);Investment managaidel CAI computer service;CAI investment manager and fund sponsor database;third party data vendors;and other outside
sources as directed by the client CAI assumes no responsibility for the accuracy or completeness of the information provided,or methodologies employed,by
any information providers external to CAI.Reasonable care has been taken to assure the accuracy of the CAI database and computer software.Callan does
not provide advice reversing, nor shall Callan be responsible for,the purchase,sale, hedge or holding of individual securities, including,without limitation
cuticles of the client(i.e. company stock)or derivatives in the clients accounts.In preparing the following report CAI has not reviewed the risks of individual
cunt,holdings or the conformity of individual seventy holdings with the client's Investment policies and guidelines,nor has it assumed any responsibility to do
a.Advice pertaining to Me medic of individual securities and derivatives sal be discussed with a Mind party securities expert.Copyright 2016 by Callan
Associates mr.
Table of Contents
December 31, 2015
Capital Markel Review 1
Active Management Overview
Market Overview 8
Domestic Fixed Income 9
Asset Allocation
Investment Manager Asset Allocation 11
Investment Manager Returns 12
Asset Class Risk and Return 16
Manager Analysis
Chandler-Long Term Operating Fund 18
Chandler-Liquid Operating Money 22
Callan Research/Education 24
Definitions 27
Disclosures 32
Callan
Orange County Sanitation District
Executive Summary for Period Ending December 31, 2015
Asset Allocation
December 31, 2015
Market Value Weiaht Net New Inv.
Dameac Fixed Imme
Long Tenn operating Fund' 314,972,772 70A7% 531000.000
Total FuM $446.934,902 100.0% $141,000,000
Performance
Last Last Last
Last Last 3 5 7
Quarter Year Years Years Years
Domestic Fixed Income
Long Term Operating FundA (0.33%) 0.85% 0.34% 1.72% 2.64%
Chandler (0.33%) 0.85% - - -
Barclays Gool Cred 1-5 Year ldx (0.57%) 0.97% 0.89% 1.61% 2.38%
ML 15 GwtlCorp (0.54%) 1.05% 0.96% 1.68% 2.49%
Liquid Operating Monies- 0.05% 0.22% 0.15% 0.17% 0.24%
Chandler 0.05% 0.22% - - -
Citlaroup 3-Month Treasury Bill 0 01% 0 03% 0 04% 0.05% 0 08%
Total Fund (0.27%) 0.80% 0.33% 1.47% 2.23%
Target' (0.43%) 0.85% 0.77% 1.36% 2.00%
Current Quarter Target=80.0%ML 1-5 GaNCorp and 20.0%3mo T-Bills.
^Assets were trensfened In kind to Chandler on 12/1/2014.Previous performance reflects PIMCO.
Recent Developments
During the quarter, $141 million was added to the total portfolio. $53 million came from the
Long Term Operating Fund and $88 million from the Liquid Operating Monies.
Organizational Issues
N/A
Manager Performance
Interest rates saw an overall upward trend throughout the quarter. The yield curve shifted
upward and Flattened. The 10-year U.S. Treasury note began the quarter at 2.05% and
climbed steadily to end the quarter at 2.27%. The 30-year Treasury bond, which started the
quarter at 2.85% also rose and ended the quarter at 3.01%. The Barclays Aggregate index
fell 0.57%. Spreads on corporates and mortgages compressed, and although real return was
negative they managed to outperform like-duration U.S. Treasuries by 0.50% and 0.61%,
respectively. High yield bond spreads widened and were the worst performing debt category,
sliding 2.07% on an absolute basis for the quarter and underperforming like-duration
treasuries by 1.19% (Barclays High Yield Index).
Callan Orange Uunty Sanilatm Dinnd
January 29,2016
The Long Term Operating Portfolio was down 0.33% in the quarter, slightly outperforming the
ML 1-5 Govt/Corp Index (-0.54%) and ranking in the W percentile versus peers. Securities
were transferred in-kind from PIMCO to Chandler in December of 2014. Since assuming this
portfolio in late 2014 Chandler has been re-positioning the portfolio in a manner they believe
to be consistent with OCSD's objectives. This has resulted in some legacy securities being
sold, making a decision to allow some legacy securities to mature, and in some cases
considering legacy securities as core holdings of the portfolio. The portfolio is still
transitioning making it difficult to assess Chandlers relative performance. The Portfolio had
less than 30% invested in credit and less than the permitted 20% invested in the combination
of asset-backed securities, commercial mortgage backed securities, and CMOs as of
December 31, 2015 (see page 21).
The Liquid Operating Portfolio returned 0.01% (after fees) in the quarter, which was even
with the return of the 3-Month Treasury Bill (+0.01%). Throughout the quarter, interest rates
rose on the short end of the yield curve. The Portfolio returned 0.07% (after fees) for the
trailing year.
Gordon M. Weightman, CFA
Vice President
2
Capital Market Review
CALLAN
INVES
Callan INST TUTENTS
lit
CMR
Preview
Fourth Quarter 2015
This "Preview" contains excerpts from the upcoming Capital Broad Market Quarterly Returns
Market Review (CMR) newsletter, which will be published at
the and of the month. U.S.Egolry(Russell 3000)-6 V%
Non-uS.Equity(MSCI ACWI ex USA)-3 30%
-0.57%1 U.S.Flxetl(Bamlays Agg�ale)
Back in Black -1.38% M Non-Us Fi.0(CM Non-Us)
U.S. EQUITY I Lauren Mathias,CFA Cash(ag-Day T-Bills) 003%
Soumu Bamlays,01lgmup,.¢ 11 1n6,.111,WoellImestmenl Group
Although it was the strongest quarter of the year, the journey
was volatile.October proved to be a welcome turnaround after a
stumbling third quarter as U.S.indices landed one of their stron- Onwards and Upwards
gesl single months since the financial crisis (S&P 500 Index:
+8.44%).yet a slowing Chinese economy,other weak emerging U.S. FIXED INCOME I Kevin Nagy
markets,commodity price declines,and the strength of the U.S.
Yields rose in the fourth quarter as the Federal Reserve raised
dollar led to a middling November and disappointing December.
interest rotes for the first time in needy a decade.The yield curve
Despite this, the U.S. Federal Reserve deemed the U.S.Soon- flattened, though the effect on spreads was mixed: investment
omy to be in a strong enough position for a rate increase,citing
grade credit and mortgage backed security (MBS) spreads
Continued an pg.2
Continued on pg.4
Tech Takes Over
NON-U.S. EQUITY I Irina Sushch .Slip `n Slide
Surging merger activity, robust tech sector gains,and stronger NON-U.S. FIXED INCOME I Kyle Fekele
than expected Corporate profits drove a positive fourth quarter The Citl Non-U.S. World Government Bond Index declined
for non-U.S. markets (MSCI ACWI ex USA Index: +3.30%). 1,38% for the quarter and 5.54% for the year.As the U.S. dol-
Total global M&A volume in 2015 surpassed $4.3 trillion, lar continued to appreciate, the Index's hedged equivalent
breaking the previous record set in 2007. Companies were inched ahead 0.58%for the quarter and 1.55%for the year.The
persuaded to sign deals by the availability of cheap debt and yield on 10-year German bunds was volatile throughout 2015:
the desire to stay Competitive and efficient in a slow-growth it started off the year at 0.54%, sank to 0.18% on March 31,
environment.The strengthening dollar boosted returns of inter- climbed to 0.76% on June 30, and eventually ended at 0.63%.
national export-oriented Companies. Adding to the noise of 2015, German debt with maturities as
far out as seven years provided negative yields, indicating
As in the U.S.,growth (MSCI ACWI ex USA Growth: +5.61%) bond investors would have to pay to own before adjusting for
fared better than value (MSCI ACWI ex USA Value: +2.17%).
Continued on pg.3 Continued on pg.5
Knowledge.Experience.Integrity.
U.S. Equity: Back in Black Quarterly Performance of Select Sectors
Continued from pg. 1
0Russe111000 0Russe112000
improved labor market conditions and subdued inflation.Third-
quarter U.S. GDP growth of 2.0% looked strong compared to 1
I I I I I
other developed coumriss,but fell below predictions(2.1%)and 1
far short of the second quarter(3.9%).The price of oil continued 4.61%
to decline, but consumer confidence remained above average I I I I
and provided some tailwind to the market I I I I
I I I I
Growth continued to build its lead on value in the fourth quar- H.IM are Technology consumer Energy
ter (Russell 1000 Growth Index: +7.31% and Russell 1000 olscre6onarr,
Value Index: +5.64%); over the year the difference was pro- source:Eosee11 inve ent croup
found (+5.66% vs. -3.83%, respectively).All U.S. equity indi-
ces posted positive results, but larger proved better(Russell
Madcap Index: +3.62%, Russell 2000 Index: +3.59%, and
Russell Microcap Index:+3.74%).The Russell Top 501ndex Rolling One-Year Relative Returns (vs.Russell 1000)
led the way gaining 9.34%.
e Russe111000 Growth a Ruew111000 Value a Russell 1000
An extremely narrow market led to wide dispersion in large 90%
cap sector performance. Energy advanced just 20 bps, while
Materials, Information Technology, and Health Care nearly 20%- - ----- --------- - - - - - - - - - - -
-
reached double digits. Small cap saw similar results—Energy
loos_ _ __ _ _ _ _ _ _ _ _ _
trailed significantly while only Health Care produced a strong
positive result.Commodity price declines and slow global growth 0%
were major factors behind Energy's stumble.Biotech companies
led small cap Health Care. Active managers struggled again, -10%
especially in large cap where the S&P 500 Index total annual -20%- - ----- ------------- - - - - - - - -
return(with dividends)would have been negative without three
stocks: Amazon, Microsoft, and GE. Investors preferred the -39061"6,94 W99 1W0l 04 W66 9O 1'1'2
13 16 15
safety of these and other large cap companies. Equity volatility source:Wessell Inrasenent Group
as measured by the VIX increased during the quarter but ended
the year below average.Assets continued to flow into passive
funds and ETFs,further challenging active managers.
The U.S. equity market was generous in the fourth quarter,
but for the full year four stocks were down for every three that
rose (in the S&P 500). Despite this, broad market valuations
remain above average, leading to questionable prospects as
we enter 2016.
2 1 Callan
Non-U.S. Equity: Tech Takes Over Rolling One-Year Relative Returns
Continued from pg. 1 (vs.MSCI World ex USA,USD hedged)
The MSCI Emerging Markets Index(+0.73%)delivered paltry a MSCI Padfi a MSCI Eumpe a MSCI Word as USA
40%
returns in comparison to its developed market counterpart the 30%
MSCI World ex USA Index(+3.91%).Small cap outpaced large 20%
cap once again due to fewer Energy holdings (MSCI ACWI ex
tors_
USA Small Cap Index: +5.28%).Among sectors, Information 0%
Inv
Technology(+8,40%)was the darling,while Industrials(+4.67%)
_ _ _ _ -
and Consumer Discretionary (+4.59%) helped with high M&A
activity. Energy (-0.43%) and Materials (+0.36%) have now
lagged for two straight quarters.Crude oil ended die year below
-40rc .......L..L..I
$40 per barrel, down 17.85% for the quarter, due to crude's 96 W 98 69 00 01 02 03 04 05 06 el 08 09 10 11 13 13 14 15
unrelenting excess of supply over global demand. souma:MSCI
on Industrials and Materials.Australia thrived (+9,96%)on a
European stocks were up for the first two months of the quar- strong financial sector;the IargestAussie banks raised home-
ter due to investor expectations of amplified European Central loan interest rates during the fourth quarter.
Bank (ECB) stimulus measures. Investors were disappointed
in December when the central bank cuts its deposit rate and Emerging market countries produced a spectrum of returns,
extended its bond-buying program by six months. Returns fal- but closed slightly ahead (+0.73%). Information Technology
tered,yet the MSCI Europe Index ended the quarter up 2.49%. (+6.46%) buoyed returns. Insecurities about U.S. monetary
policy were assuaged by the U.S. Federal Reserve raising
Japanese stocks closed the year on a high note (MSCI rates. China (+4.03%) was more even-tempered than last
Japan: +9.34%;YTD: +9.57%).The weak yen boosted auto- quarter. Its central bank cut interest rates once again, part
mobile companies, and health care companies fared well of an ongoing stream of stimulus measures to fuel consump-
due to robust drug pipelines.The country also completed the tion. China's currency, the renminbi,will join the dollar, sure,
largest state asset sale since 1987 with the privatization of pound, and yen in the International Monetary Fund's basket
Japan Post Holdings accompanied by ramped up stimulus of reserve currencies later this year. The rest of emerging
measures. The remainder of Southeast Asia and the Pacific Asia also had a positive quarter (MSCI Emerging Markets
also enjoyed gains during the fourth quarter(MSCI Pacific ex Asia Index: +3.53%). Indonesia gained 20.87%,with signifi-
Japan Index:+8,29%).New Zealand led the pack,up 18.15%, cant advances in all sectors, thanks to progressive policies
due to increased tourism and the subsequent positive impact and reforms pursued by the government.
Regional Quarterly Performance (U.S.Dollar) On the negative end, Greece's financial woes continued
(-18.99%). Russian stocks declined 3.99% as the economy
MSCI Japan 9.34% deteriorated further. Emerging Europe sank 5.13% in the
MSLI Padfic ex Japan - 8.29% fourth quarter. The Middle East did not fare well amid ongo-
MSCI word ex USA - 3.91% ing political turbulence and declining oil prices. South Africa
MSCI ACWI ex USA - 3.30% plummeted 10.51% with losses in the financials sector and
MSCI Europe -2.49% ongoing political instability. Latin America (-2.61%) had
MSCI Emereing Murals E 0.73% another miserable quarter.Brazil dropped 3.16%,and its debt
rating was cut to below investment grade.
Source:MSCI
Knowledge.Experience.Integrity. 1 3
U.S. Fixed Income: Onwards and Upwards
Continued from pg. 1 High yield corporate bonds slumped as the Barclays Corporate
High Yield Index ended the quarter down 2.07%. The Index
tightened while asset-backed (ABS), commercial MSS, and receded 4.47%for the year and underperformed Treasuries by
high yield spreads widened. The Barclays Aggregate Index 5.77%. New issuance was $35.6bn for the quarter, down from
dropped 0.57%. $42.8bn. New issue activity for 2015 was$260.5 billion, 16.3%
lower than 2014.
According to the Fed,the economy showed signs of moderate
growth, driven by fixed investment from businesses, house-
hold spending, and a strengthening housing sector. Inflation Historical 10-year Yields
remained below the Fed's 2%target.
eu.S.10-YearTreasuryYkld e10-Year TIPS Meld eBreakeven Inflation Rate
After months of restraint,the Fed raised the federal funds rate
band by 0.25%to 0.250/-0.50%. The Fed cited a strong labor 6%
market as a key reason behind the decision.The 10-year U.S. 5%
Treasury yield increased to 2,27%.The breakeven inflation rate 4%_ _ _ _ _ _ _____________ _ _ _ _ _ _ _ _ .
(the difference between nominal and real yields) on 10-year
Treasuries increased from 1.43% to 1.58% as TIPS outper-
formed nominal Treasuries.This measure rebounded from last
quarter,when it reached its lowest level since 2008(1.43%). 1%- - - - - - - --- --------- - - - -
-
o%
Every sector in the Barclays Aggregate posted negative returns
-1%I
on the quarter. Relative to like-duration Treasuries, the strop- os o] oa os 10 n 12 13 14 u
gest performer was U.S. MSS which, although down 0.10%, source:Bloomberg
beat Treasuries by 0.61%. Credit (-0.52%)was the only other
sector to outperform Treasuries, buoyed by strong performance U.S.Treasury Yleld Curves
in Financials(+1.09%relative to Treasuries).Both ABS and U.S.
agencies outperformed like-duration Treasuries for the year, •December 31,2015 •sapernM1erso,2als •Decamber31,2g14
despite trailing in the quarter. 5%
Fixed Income Index Quarterly Returns 4%
Absolub Retum 3%
Aggregate 4.5]%- - - - - - - - - - - - - - - - - --
Sandman B xclays Treasury -0.BC% - - - --
_ _ _ _ _ _ _ _ __ _ _ _____ 2% _ _ _ _ _ _
earclaya Agendem -0.a4%
_ _ _____
Barclays CUBS -02lX
BercleysABa -0.5]X
% -
6arcleys MBS -0.i M6
Barclays Credit -0.52X ___ 0% . . , I ' ' ' ' I ' ' ' ' I . . . . I ' ' ' ' I
_ _ _ _ _ _ _ _ _ _ _ _ _ _ _
Barclays Corr.High YMtl -2A]% 0 5 10 15 20 25 30
Malunty(Year3)
Source:Barclays source:Bloomberg
4 1 Callan
Non-U.S. Fixed Income: Slip `n Slide Emerging Spreads Over Developed (By Region)
Continued from pg. 1
•Emerging,mama, a Emerging EMEACmpe,Mldllece Anr) a Emergingema
Inflation.Approximately a third of the debt issued by European B%
governments had negative yields at the end of the year. U.K.
sovereigns lagged their European counterparts as the 10-year 6% _ ______
gilt fell 1,36%, pushing yields higher than the 10-year German
bund. The Bank of England continued to battle weak inflation Ors
and held interest rates at an all-time low throughout the year.
The Japanese 10-year bond declined to 0.27%,the lowest since 2% _ _ _ _ _ ________-
January.The country dodged a recession as GDP growth was
revised upwards to 1%through September;the original calcula- o% , . , ,
n tz 13 14 rs
tion had it contracting by 0.8%.
soMme:aamiaya
In December, the ECB lowered its deposit rate to -0.3% and
extended its quantitative easing program out to March 2017. 10-Year Global Government Bond Yields
Propelled by the ECBS monetary policy and investors'hunt for
yield, European periphery countries outperformed their core- 0U.S.Treasury eG ddgr eu.K. 0Canada eJMpeo
6%
eurozone counterparts. Italian and Spanish 10-year bonds
returned 1.82%and 1.43%, respectively. Both countries confln- s%nl
- - - - - - - - - - - - - - -------
ued their recovery from record-long recessions as unemplcy- arcment dropped to a three-year low. a%2% _ _ _Emerging markets were mired by political and economic strife.The dollar-denominated JPM EMBI Global Diversified Index 1%--------- - ------ ---
gained 1.25%, outperforming emerging local currencydenom- o%i 1 1 1 . . . i I I . I . . . i . . . . . . . . . i . . . . . . . .
meted sovereign debt. The negative currency effect pulled the oa w os os to n 12 13 14 18
JPM GBI-EM Global Diversified Index down 0.01%. Change in 10-YearYlelds from 3O15 to 4015
U.S.Treasury -0.23%
The South African 10-year bond declined 7.26% (on a dollar- Germany =0.04%
denominated basis)over worries that the country's political and
U.K. -0.20%
economic turmoil could result in a downgrade to junk status. a.a%= Canada
Investors responded harshly after President Jacob Zuma fired ,g.eg%I— Japan
Finance Minister Nhlanhla Nene and hired an unknown candi-
date for the job.Additionally,the rand's exchange rate dropped Soume:Bloomiderg
to record lows against major currencies. The local currency-
denominated South African 10-year bond plummeted 28.22%
in 2015.Brazilian debt declined 30.69%in 2015 on a local cur-
rency basis, in the midst of a corruption scandal and President
Rousseffs possible impeachment. Brazil remains in a steep
recession after being cut to below investment grade by Standard
&Poor's earlier in the year.
Knowledge.Experience.Integrity. 5
Active Management Overview
Market Overview
Active Management vs Index Returns
Market Overview
The charts below illustrate the range of returns across managers in Callan's Separate Account database over the most
recent one quarter and one year time periods. The database is broken down by asset class to illustrate the difference in
returns across those asset classes.An appropriate index is also shown for each asset class for comparison purposes.As an
example, the first bar in the upper chart illustrates the range of returns for domestic equity managers over the last quarter.
The triangle represents the S&P 500 return. The number next to the triangle represents the ranking of the S&P 500 in the
domestic equity manager database.
Range of Separate Account Manager Returns by Asset Class
One Quarter Ended December 31,2015
10%
8%
sl
6%
E 4q (48)
o fi)F1
2%
0% (66)
(2%) D
(4%) Domestic Non-US Domestic Non-US Real Cash
Equity Equity Fixed Income Fixed Income Estate Equivalents
e va
S&P No MSCI EAFE Barclays Age,ad Cie Non-US Gov NCREIF Index 3 Mon T4flii.
10ih Percentile 7.65 e42 (0.19) 041 dA8 0.11
25m PercenLle 8.38 588 (0.36) (0,81) 3.58 0.08
Median 472 465 (045) 118 295 0.04
75th Percentile 2]] 3, ((0.6577 1.3fi 2.09 0.01
90ih Percentile 0.91 259 (0.8]) 1.88 0.32 (0.01)
Index • T04 471 (0.57) (1,38) 3.09 0,03
Range of Separate Account Manager Returns by Asset Class
One Year Ended December 31,2015
25%
20%
15%
c 10%
5%
32
0% •
(5%)
(10%)
(15%) Domestic Non-US Domestic Non-US Real Cash
Equity Equity Fixed Income Fixed Income Estate Equivalents
vs ex vs
5&P No MSCI EAFE Barclays Ager Bd Citi Non-US Gov NCREIF Index 3 Mon T-Bills
10MPercantile 5.66 5.50 1.51 3.58 20.50 0.]2
251h Percentile 2.09 2]6 1.13 0.84 15.86 0.63
Median ((ou) ((11.82)) 0.82 5.89 12.]0 0.39
75ih Percentile (j.65� (d.95) (0.06) 9 2 441 80 0.12
28
90th Percentile
'�
Index • in (0di) 0.55 (5.5a) 13.52 0.05
CallanChange County Sanitation District 6
Domestic Fixed Income
Active Management Overview
Yields rose throughout the 4th quarter as investors grew increasingly certain that the Fed would hike rates before year-end.
Sentiment proved correct as the Fed raised the fed funds target from its 7-year"near zero" target to 0.25%-0.50% at its
December meeting.The yield on the 10-year Treasury rose 21 bps over the quarter and closed the year at 2.27%,up 11 bps
from 12/31/2014. The Barclays Aggregate Index was down modestly for the quarter (-0.6%) but up slightly for the year
(+0.5%). Investment grade credit and mortgages outperformed like-duration US Treasuries for the quarter but
underperformed for the full year. However, declining commodity prices and negative sentiment continued to take a toll on
high yield corporates. The Barclays High Yield Index was down 2.1% for the quarter bringing its 2015 loss to 4.5%. The
Energy component,which comprises 11% of the Index, bore the brunt of the pain with returns of-12.9%for the quarter and
-23.6%for the full year.
Longer duration managers underperformed intermediate and short duration strategies in the 4th quarter. The median
Extended Maturity manager returned-0.8%while the median Intermediate manager posted a-0.5% return and the median
Defensive manager returned-0.2%.
Barclays Universal: (0,55%)
Barclays Aggregate: (05T%)
Separate Account Style Group Median Returns Barclays GoWCretli[ (074%)Barclays Modgage: (0.10%)
for Quarter Ended December 31,2015 Barclays High Yield: (2.07%)
1% Barclays US TIPS: (0.m%)
0.04%
0%
0.16%)
(0.24%)
ga (O.dB%) (045%) (0.51%)
(t%1 _______________________(0.82%L
(1.62%)
(2%)
Active Defensive Interracial Care Core E,dended Bank Mortgage High
Cash Bond Plus Maturity Loans Backed YI.H
Barclays Universal: 0.43%
Barclays Aggregate: 0.55%
Separate Account Style Group Median Returns Barclays GoWCretli[ 0,15%Barclays Mortgage: 1.51%
for One Year Ended December 31,2015 Barclays High Yield: (4.47%)
4% Barclays US TIPS: (144%)
2% _______________________________�.yjy______
1.28%
0.58% 0�919e 0.82% O.TT%
0.20%
as
0%
E
as
(2%) is 34y-----------------------a-------
0%) (3.10%)
(6%)
Ad. Defensive Interracial Care Core Extended Bank Mortgge a High
/'�,,11,,M Cash Band Plus Maturity Loans Backaal Yield
L.A3 L Orange County Sanitation District g
Asset Allocation
Investment Manager Asset Allocation
The table below contrasts the distribution of assets across the Fund's investment managers as of December 31, 2015,with
the distribution as of September 30,2015.The change in asset distribution is broken down into the dollar change due to Net
New Investment and the dollar change due to Investment Return.
Asset Distribution Across Investment Managers
December 31,2015 September 30,2015
Market Value Weight Net New Inv. Inv.Return Market Value Weight
Domestic Fixed Income
Long Term Operating Fund' 314,972.772 7047% 63,000,000 (918,191) 262.690.963 85.68%
liquid Ooeratina Monies' 131,962,130 29.53% 88,000,000 28,627 43,933,504 14.32%
Total Fund 8446,934.902 100.0% $141,000,000 81889,565) 8108.824.487 100.0%
'Chandler replaced PIMCO during the 4th quarter of 2014.Assets were transferred In+lnd as of 100112014.
Callan coerce County Sanitation District „
Investment Manager Returns
The table below details the rates of return for the Fund's investment managers over various time periods ended December
31, 2015. Negative returns are shown in red, positive returns in black. Returns for one year or greater are annualized. The
first set of returns for each asset class represents the composite returns for all the fund's accounts for that asset class.
Returns for Periods Ended December 31,2015
Last Last Last
Last Last 3 5 7
Quarter Year Years Years Years
Domestic Fixed Income
Long Term Operating Fund^ (0.33%) 0.85% 0.34% 1.72% 2.64%
Chandler (0.33%) 0.85% - -
Barclays GovUCred 1-5 Year Idx (0.57%) 0.97% 0.89% 1.61% 2.38%
ML 1-5 GovUCorp (0.54%) 1.05% 0.96% 1.68% 2.49%
Liquid Operating Monies^ 0.05% 0.22% 0.15% 0.17% 0.24%
Chandler 0.05% 0.22% - - -
Citigroup 3-Month Treasury Bill 0.01% 0.03% 0.04% 0,05% 0,08%
Total Fund (0.27%) 0.80% 0.33% 1.47% 2.23%
Target* (0,43%) 0.85% 0.77% 1.36% 2,00%
Current Quarter Target=80.0%ML 1-5 Govt/Corp and 20.0%3mo T-Bills.
Callan
were transferred in kind to Chandler on 12/1/2014.Previous performance reflects PIMCO.
Callan Oran,County Sandarinn Distnd 12
Investment Manager Returns
The table below details the rates of return for the Fund's investment managers over various time periods ended December
31, 2015. Negative returns are shown in red, positive returns in black. Returns for one year or greater are annualized. The
first set of returns for each asset class represents the composite returns for all the fund's accounts for that asset class.
Returns for Periods Ended December 31,2015
Last Last Last
10 15 20.1/4
Years Years Years
Domestic Fixed Income
Long Term Operating Fund^ 3.53% 3.91% 4.62%
Barclays Govt/Cred 1-5 Year Idx 3.32% 3.78% 4.41%
ML 1-5 GovUCorp 3.35% 3.77% 4.44%
Liquid Operating Monies^ 1,42% 1.80% 2.80%
Citigroup 3-Month Treasury Bill 1.17% 1.52% 2.47%
Total Fund 3.16% 3.57% 4.35%
Target` 2.91% 3.32% 4.05%
Current Quarter Target=80.0%ML 1-5 Govt/Corp and 20.0%3mo T-Bills.
Callan
were transferred in kind to Chandler on 12/1/2014.Previous performance reflects PIMCO.
Callan Oran,County Santlerinn Distnd 13
Investment Manager Returns
The table below details the rates of return for the Fund's investment managers over various time periods. Negative returns
are shown in red, positive returns in black. Returns for one year or greater are annualized. The first set of returns for each
asset class represents the composite returns for all the fund's accounts for that asset class.
2015 2014 2013 2012 2011
Domestic Fixed Income
Long Term Operating Fund^ 0.85% 1.98% (1.77%) 3.06% 4.59%
Chandler 0.85% - - - -
Barclays Govl/Cred 1-5 Year Idx 0.97% 1.42% 0.28% 2.24% 3.14%
ML 1-5 Govt/Corp 1.05% 1.51% 0.32% 2.47% 3.10%
Liquid Operating Monies^ 0.22% 0.09% 0.13% 0.17% 0.24%
Chandler 0.22% - - -
Citiarouo 3-Month Treasury Bill 0.03% 0.03% 0.05% 0.07% 0.08%
Total Fund 0.80% 1.73% (1.49%) 2.70% 3.70%
Target* 0.85% 1.21% 0.26% 1.99% 2.49%
*Current Quarter Target=80.0%ML 1-5 Govt/Corp and 20.0%3mo T-Bills.
Callan
were transferred in kind to Chandler on 12/1/2014.Previous performance reflects PIMCO.
Callan Orarryre County Santlerinn DisNtl 14
Investment Manager Returns
The table below details the rates of return for the Fund's investment managers over various time periods. Negative returns
are shown in red, positive returns in black. Returns for one year or greater are annualized. The first set of returns for each
asset class represents the composite returns for all the fund's accounts for that asset class.
2010 2009 2008 2007 2006
Domestic Fixed Income
Long Term Operating Fund^ 4.42% 5.52% 5.37% 7.21% 4.41%
Barclays Govt/Cred 1-5 Year Idx 4.08% 4.62% 5.12% 7.27% 4,22%
ML1-5 Govt/Corp 4.17% 4.88% 4.65% 7.27% 4.26%
Liquid Operating Monies- 0.25% 0.58% 2.40% 5.25% 5,05%
Citigroup 3-Month Treasury Bill 0.13% 0.16% 1.80% 4.74% 4.76%
Total Fund 3.68% 4.65% 4.61% 6.841/6 4.60%
Target` 3.36% 3.93% 4.08% 6.76% 4.36%
Current Quarter Target=80.0%ML 1-5 Govt/Corp and 20.0%3mo T-Bills.
^Assets were transferred in kind to Chandler on 12/1/2014.Previous performance reflects PIMCO.
Callan Orarq,e County SantlerinnDlsNct ,s
Asset Class Risk and Return
The charts below show the seven year annualized risk and return for each asset class component of the Total Fund.The first
graph contrasts these values with those of the appropriate index for each asset class.The second chart contrasts them with
the risk and return of the median portfolio in each of the appropriate CAI comparative databases. In each case, the
crosshairs on the chart represent the return and risk of the Total Fund.
Seven Year Annualized Risk vs Return
Asset Classes vs Benchmark Indices
3.0%
2.5%
2.0%
1.5%
N
K
1.0%
05%
00%
0.0% 0.2% 0.4% 0.6% 0.8% 10% 1.2% 1.4% 1.6% 1.8%
Standard Deviation
Seven Year Annualized Risk vs Return
Asset Classes vs Asset Class Median
2.5%
20%
1.5%
v
,o%
0.5%
0.0% '
0.0% 0.2% 04% 06% 01% 1.0% 1.2% 14% 1.6% 1.8%
/'�,, 1,, Standard Deviation
Callan Omrr County Sandation Oistnd 16
Manager Analysis
Chandler-Long Term Operating Fund
Period Ended December 31, 2015
Investment Philosophy
Chandler Asset Management's Short Term Bond strategy is driven by quantitative models and focuses on active duration
management,sector selection and term structure.The strategy seeks to achieve Consistent above-benchmark returns with
low volatility relative to the style's performance benchmark. The firm has a unique focus on high quality fixed income
management, and places risk control as a higher objective than return. Assets were transferred in kind to Chandler on
12/l/2014.Previous performance reflects PIMCO.
Quarterly Summary and Highlights Quarterly Asset Growth
• Long Term Operating Fund's portfolio posted a (0.33)% Beginning Market Value $262,890,963
return for the quarter placing it in the 68 percentile of the CAI Net New Investment $53,000,000
Defensive Fixed-Inc Style group for the quarter and in the 68 Investment Gains/(Losses) $-918,191
percentile for the last year.
• Long Term Operating Fund's portfolio outperformed the ML Ending Market Value $314,972,772
1-5 Govt/Corp by 0.21%for the quarter and underperformed
the MIL 1-5 Govt/Corp for the year by 0,20%.
Performance vs CAI Defensive Fixed-Inc Style(Gross)
6%
5% (
4% ( )2])�B(245) )
3% (( 31) 1A(3 )
2% A(u 3
6( 261®F�2
1% 20)Rmao 0)® 5)®B(5 )
0% •A( )
9])�B 9
(P%) Last ptr CM1arater Lead Leal3 Yrs Laat 5Ym Last 7Ym Laat10Yra Last19.75Yrs
Inception Yr
I MPOrcentlle (015) 1.13 1,13 1,33 223 4.09 317 457
250,Percentile 3018) 102 1.02 1.00 1.72 2.95 3.40 4A6
Mac 0.24 0.91 0.91 0.90 1.45 2.27 3.05 4.13
75M Percentile 0.36 0.75 0.75 0.73 1.10 1.75 2.79 4.01
90M Percentile (0A3) 082 0a2 0,62 0.93 1.41 2.53 382
Long Term
Operating Fund *A (0.33) 0.85 0.85 ou 1.72 2.64 3.0 4.62
Barclay.GOWCIed
1-5 Year lux IN B (0.57) 0.97 0.97 0.89 1.61 2.38 3.32 4.41
AL 1-5 G.WCorp ♦ (0.54) 105 1.05 0.96 1.68 2.49 3.35 4.44
CAI Defensive Fixed-Inc Style(Gross)
Relative Return vs MIL 1-5 GovtlCorp Annualized Seven Year Risk vs Return
2.0% 5.5%
5% _ 50%
__ __ __ __ __ ___ 4.5%
E t.o% __ __ __ __
-- 4.0%
V 05% _ __ _ __ ____ E3.5%
Of
e 0 3.0%
0.0% N
2.5%
en
W (9S%) __ __ __ __ ____ 2.0% -
__ __ __
1.0%
0.5%
2009 2010 2011 2012 2013 2014 2015 00 0.5 10 15 20 2.5 3.0 3.5 4.0
0 Long Term Operating Fund
Standard Deviation
C/'�,�11,..
aMaiM r L Orange County sanitation District 18
Long Term Operating Fund
Return Analysis Summary
Return Analysis
The graphs below analyze the manager's return on both a dsk-adjusted and unadjusted basis.The first chart illustrates the
manager's ranking over different periods versus the appropriate style group.The second chart shows the historical quarterly
and cumulative manager returns versus the appropriate market benchmark. The last two charts illustrate the manager's
ranking relative to their style using various risk-adjusted return measures.
Assets were transferred in kind to Chandler on 12M/2014. Previous performance reflects PIMCO.
Performance vs CAI Defensive Fixed-Inc Style(Gross)
20%
15% (( $y ( ( )
15% B A ]®A 1 �•B 1]b�Bl VI-®B( 9 g( O) H( 55-fTBf i)
o%(5%) 0 )
(10%) 2015 M14 2013 2012 2011 2010 2009 2008 2007 2000
10th Pemen8le 1.13 1.50 1.20 446 2.]2 4.]1 13.]4 fi 63 ].03 5.11
25th Pamanole 1.02 1.2] 0.80 2.60 2.28 4.02 6.60 584 fi.83 4.B4
Median 0.91 1.11 055 101 1.81 3.19 set 338 845 4.61
75th Pemee!a O.75 0..87 0,41 14. 6 1..65 2.72 253 (0.17) 5s6 4426
9h PMe 062 070 a3 092 44 241 1.82 (3.47) 375 4.3 Long Term
0pem8n9 Fund aA 0.05 1.98 (117) 306 4.59 442 5.52 537 7.01 441
Barclays Gov1/Cred
1-5 Year I& ■B 0.97 1.42 0.28 224 3.14 4.06 4.62 5.12 ].2] 4.22
ML1-5
GOWCOT ♦ 1.05 1.51 0.32 2A7 3.10 4.17 4.88 4.65 ].2] 4.26
Cumulative and Quarterly Relative Return vs MIL 1-5 Govt/Corp
6%
m
4%
2% --- --- -------- -- - - --- -- - ---
d
K
a 0%
a (2%)
K
(4%) --- --- -------- --- -- _ -
(6%)
2006 2007 2008 2009 2010 2011 2012 2013 2014 2015
Long Term cramming Funtl 0 Barclays GcWCred 15 Year Idx 0 CAI Defensive F-1 Slyte
Risk Adjusted Return Measures vs ML 1-5 Govt/Corp
Rankings Against CAI Defensive Fixed-Inc Style(Gross)
Seven years Ended December 31,2015
4 ® .� BA
]s
• . ® �
0 9fi
5
2 10O1 A10 ) B(65
0 A10 15
01 Alpha Treyrwr 20 Warmatlon Sharpe Excess Return
RNIO RMie RMie Ratio
t on Percentile 1.06 3.72 loth Percentile 1.38 2.07 0.89
251h Percentile 038 3.33 25th Percentile 1.10 1.94 0.45
Median 0.47 3.05 Median 074 1.79 (0.27)
751h Percentile 0.2] 2.76 7511 Percentile 0.42 1.63 1.02
son Percentile 0.05 2.47 son Percentile 0.13 1.45 1.33
Long Term Long Term
Opereting Fund •A (046) 2.01 Operating Fund *A (0.53) 1.27 0.16
Barclays GowcrW Barclays GOWCred
1-5 Year Idx ■B (0 o4) 2.35 1-5 Year Idx •B (0.28) 1.63 in.]9)
Callan orange County Sanitation Distdd 19
Long Term Operating Fund
Bond Characteristics Analysis Summary
Portfolio Characteristics
This graph compares the managers portfolio characteristics with the range of characteristics for the portfolios which make up
the manager's style group. This analysis illustrates whether the manager's current holdings are Consistent with other
managers employing the same style.
Fixed Income Portfolio Characteristics
Rankings Against CAI Defensive Fixed-Inc Style
as of December 31,2015
35
3.0 (9)
2.5 (6)♦ (15)
(31)
�(ml
z6
1 s (39)L(77)
(85)
1.0
9.s
0.6
(0.$) A-90 asset a Coupon CA
Duration 'it. Yield Rate cra vealty
101h Pemenole 2.40 2.T3 3.00 3.11 0.08
25ih Percengle 1.89 2.14 1.88 2.50 004
Median 1.T9 1.95 1.61 1.83 0."
75th Pemen9le 1.0 1.84 1.32 1.61 001
got Pemenole 1.55 173 1.19 1.34 (0.02)
Long Term
Operating Fund • 2.42 2.0 1.30 1.41 -
BamlaysGovl/Cred1-5 Ye ♦ 2.69 2.82 1.65 2.23 rod
Sector Allocation and Quality Ratings
The first graph compares the managers sector allocation with the average allocation across all the members of the
manager's style.The second graph compares the manager's weighted average quality rating with the range of quality ratings
for the style.
Sector Allocation Quality Ratings
December 31,2016 vs At Defensive Fixed-Inc Style
�s They
US Tray A�
aa.a
US RMBS7. 41%
s Con,(US$denom) �� Ma (24)
30)
OtherUS ABSCashUS MuniAaus CMBS Weighted Average
Quality Rating
US CMOsI in Percentile251h Percentile Mt
Median M
Gov Rel(US$denom) 951h Percentile M-
861hPercentile A4
0% 10% 20% 30% 60% 50% 60% 70% 80% Long Term
Long Term Operating Fund CAI Cefenarva Fieetl-Inc Syla Operating Fund • Ma
Bamlays G naVCmd 1-5 Ye Bamlays
/'�,, 1,, GoWCred 1-SYe ♦ Ma
Callan Charge County Sanitation Oiatdct 20
Long Term Operating Fund
Portfolio Characteristics Summary
As of December 31, 2015
Portfolio Structure Comparison
The charts below compare the structure of the portfolio to that of the index from the three perspectives that have the greatest
influence on return. The first chart compares the two portfolios across sectors. The second chart Compares the duration
distribution.The last chart compares the distribution across quality ratings.
Sector Allocation
US Trsy US Troy
35% 60%
US CMOs
U6 ABS
6%
CasM1
5%
S RMBS
7%Oth 26%
US Muni Gav Rel(USE tlenom)
1% 13%
Carp( % enormCMe, Corp(9%tlenom)
US1%
1
Long Term Operating Fund Barclays GoWCredit 1.5 Year
WeigMetl Average: Duration
Duration Distribution Lmg Term Operating Fund 2.42
50% Sandi GoWCredit 1-5 Year: IN
p 40% ———— ———— ———— ———— ——31. —————————— ————
36.5% 35jilillilloir,
6
a __________ ____
20.9%
m 8%
N
R 3.6%
0% 0.0% 0.0% U 0.0% 0.0% 0.0% 0.0%
<o 0-1 1-2 2-3 3-5 5-7 7-10 N0
Years Duration
W elgMetl Average: Quality
Quality Distribution Lon,Term Operating Fund AAe
100% ■ Bard.,GoWCredit 1-5 Year: AAe
p 80% _Coax ee.ex__ _ ___ ___ __ ___ ___ ___ __ ___ ___
40%
o% _ L
___
a zg% ,�
APA M A BBB o.ouBe .axB naCCCx a.ax cox tin. in, a.axD NIR x
Quality Rating
Callan Oran,County Sanitation DisMd 21
Chandler-Liquid Operating Money
Period Ended December 31, 2015
Investment Philosophy
Assets were transferred in kind to Chandler on 12/1/2014. Previous performance reflects PIMCO.
Quarterly Summary and Highlights Quarterly Asset Growth
• Liquid Operating Money Net's portfolio posted a 0,01% Beginning Market Value $43.933,504
return for the quarter placing it in the 94 percentile of the MF Net New Investment $88,000,000
- Money Market Funds Database group for the quarter and Investment Gains/(Losses) $28,627
in the 99 percentile for the last year.
• Liquid Operating Money Net's portfolio outperformed the Ending Market Value $131,962,130
Citigroup 3-Month Treasury Bill by 0.00%for the quarter and
outperformed the Citigroup 3-Month Treasury Bill for the
year by 0.04%.
Performance vs MF-Money Market Funds Database(Gross)
4.0%
3.5%
3.o%
2.5% ( 00)♦ (95
2.0%-
1.s%
%
( 00)♦ �(10
0. )
.5%
0.0% 0
(0.5%) "at ptr Chandler Last Last 3 Yra Last 5Yrs Last 7Yrs Last 10 Yrs Last 19.75 Yrs
Inception Yr
10T Percentile 021 088 0,88 0,95 1,02 1.11 209 3,15
25th Percentile 0.ifi 0,67 0,67 0.70 0.72 0.75 1.85 3.01
Median 0.12 049 0,49 0.49 0.50 0.53 1.69 2.92
75M Percentlle 008 085 0,35 0.36 0.38 0.41 156 281
90T Percentile 005 024 0,24 0,23 0.26 0.32 146 273
Liquid Operating
Money Net 0 001 007 0,07 (0,00) 0,02 009 127 285
Citigroup 3-Month
Treasury Bill ♦ 0.01 003 0.03 0.04 0.05 0.08 1.17 2.47
Relative Returns vs Cumulative Returns vs
Citigroup 3-Month Treasury Bill Citigroup 3-Month Treasury Bill
0.14% o.45%
- Liquid Operating Money Net
0.12% -- -- -- -- -- ---- ,a 0.40% - Money Market Fds DB --- -
0.10% _ __ __ __ __ ____ E 0.35% -
E 0.08% oao%
006% v . __ __ _ ____ __
Of 'n 0.25%
_
-
0.04% a
> dc 0.20%
fii 0.02% to
tY 0.00% 0.15%
(002%) __ _ __ __ E 0.10%
(0.04%) U 0,05%
(0.06%) 0.00%
2009 2010 2011 2012 2013 2014 2015 2009 2010 2011 2012 2013 2014 2015
/'�,, 1,, Liquid Operating Money Net
Callan Orange County Sanitation Dissid 22
Liquid Operating Money Net
Return Analysis Summary
Return Analysis
The graphs below analyze the manager's return on both a risk-adjusted and unadjusted basis.The first chart illustrates the
manager's ranking over different periods versus the appropriate style group.The second chart shows the historical quarterly
and cumulative manager returns versus the appropriate market benchmark. The last two charts illustrate the manager's
ranking relative to their style using various risk-adjusted return measures.
Assets were transferred in kind to Chandler on 12/1/2014. Previous performance reflects PIMCQ.
Performance vs MF-Money Market Funds Database(Gross)
]%
6%
5% 952, 99rPi92
4%
2% VQ]3
6]
1% 90
0%
(1%) 2015 M14 2013 2012 2011 2010 2009 2008 2007 2006
101M1 Percentile odd 102 104 136 1.06 1.19 1.32 322 549 5.21
25th PecenUe 0.67 0.73 080 087 0.84 085 ow 301 545 5.18
Median 0.49 0.52 0.52 058 0.56 0.60 0.74 2.68 5.35 5.14
75th Percentile 0.35 cm 0.36 039 0.38 0.42 0.59 2.19 5.20 5.06
Ruth Percentie 024 0.24 024 030 0.29 0.33 Odd V] 4.93 4.93
Liquid Operating
Money Net a 0.07 (0.06) (0.02) 0 r2 0.09 0.10 o`t3 2.25 5.09 4.89
Citigroup 3-MoMM1
Treasury6111 ♦ 0.03 0.03 0.05 007 0.08 0.13 0.16 1.80 4.74 4.76
Cumulative and Quarterly Relative Return vs Citigroup 3-Month Treasury Bill
1.s%
10% ___ ___ ____
E
i 05%
w
o.o%
a
in.5%)
pr%)
2006 2007 2008 2009 2010 2011 2012 2013 2014 2015
Liquid Operating Money Net MMocey MaMH Poe Da
Risk Adjusted Return Measures vs Citigroup 3-Month Treasury Bill
Rankings Against MF-Money Market Funds Database(Gross)
Seven years Ended December 31,2015
12 50
40-
0 20
08 30
06 20
0.4
o.z 10
o.o 0
(0.2) Alpha Ttvymr (10) IMonna[ion Shame Exceaa ReturnRMIo Ratio Ratio RMIO
1 on Percentile 1.04 0.60 10th Percentile 2373 43.86 22.70
250 Percentile Us 0.38 25n Percentile 16.54 18.43 15.98
Median 045 0.26 Median 10.55 9.17 10.17
15 h Percentile o.34 0.19 75th Percentile 4.69 3.61 4.59
90th Percentile 0.24 0.12 90th Percentile 2.36 1.94 2.21
Liquid Operating Liquid Operating
Callan
• torn) (0.06) Money Nat • (0.11) (0.14) 0.15
Cellar l Orange County Sandation DiaNct 23
Callen Research/Education
CALLAN
INVESTMENTS
Callan INSTITUTE 4th Quarter 2015
Education
Research and Educational Programs
The Callan Investments Institute provides research that keeps clients updated on the latest industry trends while helping them learn
through carefully structured educational programs.
Recent Research
Please visit www.callan.com/research to see all of our publications.
Video:The Education of Beta In this brief video,Eugene Podka- The Department of Labor Weighs in on ESG: Key Takeaways
miner describes the reasons he decided to explore the°smart beta" from Interpretive Bulletin 2015-01A summary of the DOCsIin-
topic in detail. terpretive Bulletin 2015-011,relating to the fiduciary standard un-
der ERISA considering economically targeted investments(ETIs),
2015 Alternative Investments Survey Our and the implications for investors.
2015 Alternative Investments Survey pro-
vides instilWonal investors a wment report on Hedge Fund Monitor, 3rd Quarter 2015 Author Jim McKee
asset allocation trends and investor practices. provides quarterly performance and a snapshot of the asset
class.This quarter's cover story:"Beyond the Glitter and Regret:
Inside Callan's Database, 3rd Quarter 2015 This report graphs Reassessing Hedge Funds'Role in Asset Allocation."
performance and risk data from Callan's proprietary database
alongside relevant market indices. Video:In the Spotlight-Target Date Funds Lod Lucas discuss-
es some of the trends that are causing target date funds to have
Capital Market Review,3rd Quarter 2015 Insights on the econo- lower fees.
my and recent performance in equities,fixed income,alternatives,
real estate,and more. ESG Interest and Implementation Survey Results of Callan's
third annual survey to assess the status of ESG factor Integra-
Market Pulse Flipbook,3rd Quarter 2015 Aquarterly market ref- tion in the U.S.institutional market.
erence guide covering investment and fund sponsor trends in the
U.S.economy,U.S.and non-U.S.equities and fixed income,alter- DC Observer,3rd Quarter 2015 Cover story:Meeting the Chal-
natives,and defined contribution. large of Managed Account Selection and Evaluation.
a.....t ESG Factors: U.S. Investor Usage Grading the Pension Protection Act, Ten Years Later: Sue-
-_LL-s�� ,J Crystalizes This charticle looks at ESG cess Stories and Near Misses Callan grades the performance
- Y _ from the perspectives of U.S.asset owners of nine key PPA provisions over the past decade, listing them
and global investment managers, revealing from least to most effective.
°s
growing incorporation of ESG factors in
investment decision making. Private Markets Trends, Fall 2015 Gary Robertson summa-
-- rizes the market environment, recent events, performance, and
=�—a• other issues involving private equity.
The Center for Investment Training
Events Educational Sessions
Miss out on a Callan conference or workshop? Event summa- The Center for Investment Training, better known as the "Callan
des and speakers' presentations are available on our websile: College;provides a foundation of knowledge for industry profes-
https://w ..cullan.com/education/Cll/ sionals who are involved in the investment decision-making pro.
The National Conference,to be held January 25-27 in San Fran- cess.It was founded in 1994 to provide clients and non-dients alike
dsco,consists of general sessions with presentations by world,po- with basic to inteonediale-level instruction.Our next session is:
10ical,arts,science,and investment industry speakers.The general Introduction to Investments
sessions are followed by smaller breakout sessions on timely in. Atlanta, GA,April 19-20, 2016
dustry topics led by Callan specialists.Attendees include plan/fund San Francisco, CA,July 19-20, 2016
sponsors,investment managers,and Callan associates. Chicago,IL, October 18-19, 2016
Save the date for our Regional Workshops:June 28 in Atlanta, This session familiarizes fund sponsor trustees, staff, and asset
June 29 in San Francisco,October 25 in New York,and October management advisors with basic investment theory,terminology,
26 in Chicago.Also mark your calendars for our fall Investment and practices. It lasts one-and-a-half days and is designed for in-
Manager Conference,September 11-13. dividuals who have less than two years of experience with asset.
management oversight and/or support responsibilities.Tuition for
For more information about research or educational events, the Introductory "Callan College" session is $2,350 per person.
please contact Anna West:415.974.5060/institute@cal lan.com Tuition includes instruction, all materials, breakfast and lunch on
each day,and dinner on the first evening with the instructors.
Customized Sessions
The "Callan College" is equipped to customize a curriculum to
meet the training and educational needs of a specific organization.
These tailored sessions range from basic to advanced and can
take place anywhere evenat your office.
Learn more at hnps:IAw .callan.com/education/college/or
contact Kathleen Currie:415.274.3029/cunnie@callan.com
Education: By the Numbers
500 Attendees(on average)of the 50+ Unique pieces of research the
Institutes annual National Conference Institute generates each year
300 Total attendees of the'Callan 1980 Year the Callan Investments
p College since 1994 Institute was founded
"We think the best way to learn something is to teach it.
Entrusting client education to our consultants and specialists
ensures that they have a total command of their subject
matter. This is one reason why education and research have
been cornerstones of our firm for more than 40 years."
Ron Peyton,Chairman and CEO
Callan Callan Investments Institute and the"Callan College"
Definitions
Risk/Reward Statistics
The risk statistics used in this report examine performance characteristics of a manager or a portfolio relative to a benchmark
(market indicator) which assumes to represent overall movements in the asset class being considered. The main unit of
analysis is the excess return, which is the portfolio return minus the return on a risk free asset (3 month T-Bill).
Alpha measures a portfolio's return in excess of the market return adjusted for disk. It is a measure of the manager's
contribution to performance with reference to security selection. A positive alpha indicates that a portfolio was positively
rewarded for the residual risk which was taken for that level of market exposure.
Beta measures the sensitivity of rates of portfolio returns to movements in the market index. A portfolio's beta measures the
expected change in return per 1% change in the return on the market. If a beta of a portfolio is 1.5,a 1 percent increase in
the return on the market will result,on average, in a 1.5 percent increase in the return on the portfolio. The converse would
also be true.
Downside Risk stems from the desire to differentiate between "good risk" (upside volatility) and "bad risk" (downside
volatility). Whereas standard deviation punishes both upside and downside volatility, downside risk measures only the
standard deviation of returns below the target. Returns above the target are assigned a deviation of zero. Both the frequency
and magnitude of underperformance affect the amount of downside risk.
Excess Return Ratio is a measure of risk adjusted relative return. This ratio captures the amount of active management
performance (value added relative to an index) per unit of active management risk (tracking error against the index.) It is
calculated by dividing the managers annualized cumulative excess return relative to the index by the standard deviation of
the individual quarterly excess returns. The Excess Return Ratio can be interpreted as the manager's active risk/reward
tradeoff for diverging from the index when the index is mandated to be the"nskless"market position.
Information Ratio measures the manager's market risk-adjusted excess return per unit of residual risk relative to a
benchmark. It is computed by dividing alpha by the residual risk over a given time period. Assuming all other factors being
equal, managers with lower residual risk achieve higher values in the information ratio. Managers with higher information
ratios will add value relative to the benchmark more reliably and consistently.
R-Squared indicates the extent to which the variability of the portfolio returns are explained by market action. It can also be
thought of as measuring the diversification relative to the appropriate benchmark. An r-squared value of.75 indicates that
75% of the fluctuation in a portfolio return is explained by market action. An r-squared of 1.0 indicates that a portfolio's
returns are entirely related to the market and it is not influenced by other factors. An r-squared of zero indicates that no
relationship exists between the portfolio's return and the market.
Relative Standard Deviation is a simple measure of a managers risk(volatility)relative to a benchmark. It is calculated by
dividing the manager's standard deviation of returns by the benchmark's standard deviation of returns. A relative standard
deviation of 1.20,for example, means the manager has exhibited 20% more risk than the benchmark over that time period.
A ratio of .80 would imply 20% less risk. This ratio is especially useful when analyzing the risk of investment grade
fixed-income products where actual historical durations are not available. By using this relative risk measure over rolling
time periods one can illustrate the "implied" historical duration patterns of the portfolio versus the benchmark.
Residual Portfolio Risk is the unsystematic risk of a fund,the portion of the total risk unique to the fund(manager)itself and
not related to the overall market. This reflects the"bets"which the manager places in that particular asset market. These
bets may reflect emphasis in particular sectors, maturities (for bonds), or other issue specific factors which the manager
considers a good investment opportunity. Diversification of the portfolio will reduce or eliminate the residual risk of that
portfolio.
Callan
28
Risk/Reward Statistics
Sharpe Ratio is a commonly used measure of risk-adjusted return. It is calculated by subtracting the "risk-free" return
(usually 3 Month Treasury Bill)from the portfolio return and dividing the resulting"excess return" by the portfolio's risk level
(standard deviation).The result is a measure of return gained per unit of risk taken.
Sortino Ratio is a downside risk-adjusted measure of value-added. It measures excess return over a benchmark divided by
downside risk. The natural appeal is that it identifies value-added per unit of truly bad risk. The danger of interpretation,
however, lies in these two areas: (1)the statistical significance of the denominator,and (2) its reliance on the persistence of
skewness in return distributions.
Standard Deviation is a statistical measure of portfolio risk. It reflects the average deviation of the observations from their
sample mean. Standard deviation is used as an estimate of risk since it measures how wide the range of returns typically is.
The wider the typical range of returns,the higher the standard deviation of returns,and the higher the portfolio risk. If returns
are normally distributed (ie. has a bell shaped curve distribution) then approximately 2/3 of the returns would occur within
plus or minus one standard deviation from the sample mean.
Total Portfolio Risk is a measure of the volatility of the quarterly excess returns of an asset. Total risk is composed of two
measures of risk: market(non-diversifiable or systematic)risk and residual(diversifiable or unsystematic) risk. The purpose
of portfolio diversification is to reduce the residual risk of the portfolio.
Tracking Error is a statistical measure of a portfolio's risk relative to an index. It reflects the standard deviation of a
portfolio's individual quarterly or monthly returns from the index's returns. Typically,the lower the Tracking Error, the more
"Index-like"the portfolio.
Traynor Ratio represents the portfolio's average excess return over a specified period divided by the beta relative to its
benchmark over that same period. This measure reflects the reward over the risk-free rate relative to the systematic risk
assumed.
Note:Alpha,Total Risk,and Residual Risk are annualized.
Callan
29
Fixed Income Portfolio Characteristics
All Portfolio Characteristics are derived by first calculating the characteristics for each security, and then calculating the
market value weighted average of these values for the portfolio.
Allocation by Sector- Sector allocation is one of the tools which managers often use to add value without impacting the
duration of the portfolio. The sector weights exhibit can be used to contrast a portfolio's weights with those of the index to
identity any significant sector bets.
Average Coupon-The average coupon is the market value weighted average coupon of all securities in the portfolio. The
total portfolio coupon payments per year are divided by the total portfolio par value.
Average Moody's Rating for Total Portfolio- A measure of the credit quality as determined by the individual security
ratings. The ratings for each security, from Moody's Investor Service, are compiled into a composite rating for the whole
portfolio. Quality symbols range from Aaa+ (highest investment quality-lowest credit risk)to C (lowest investment quality-
highest credit risk).
Average Option Adjusted(Effective)Convexity-Convexity is a measure of the portfolio's exposure to interest rate risk. It
is a measure of how much the duration of the portfolio will change given a change in interest rates. Generally,securities with
negative convexities are considered to be risky in that changes in interest rates will result in disadvantageous changes in
duration. When a security's duration changes it indicates that the stream of expected future cash-flows has changed,
generally having a significant impact on the value of the security. The option adjusted convexity for each security in the
portfolio is calculated using models developed by Lehman Brothers and Salomon Brothers which determine the expected
stream of cash-flows for the security based on various interest rate scenarios. Expected cash-flows take into account any
put or call options embedded in the security, any expected sinking-fund paydowns or any expected mortgage principal
prepayments.
Average Option Adjusted(Effective)Duration- Duration is one measure of the portfolio's exposure to interest rate risk.
Generally, the higher a portfolio's duration, the more that its value will change in response to interest rate changes. The
option adjusted duration for each security in the portfolio is calculated using models developed by Lehman Brothers and
Salomon Brothers which determine the expected stream of cash-flows for the security based on various interest rate
scenarios. Expected cash-flows take into account any put or call options embedded in the security, any expected
sinking-fund paydowns or any expected mortgage principal prepayments.
Average Price-The average price is equal to the portfolio market value divided by the number of securities in the portfolio.
Portfolios with an average price above par will tend to generate more current income than those with an average price below
par.
Average Years to Expected Maturity- This is a measure of the market-value-weighted average of the years to expected
maturity across all of the securities in the portfolio. Expected years to maturity takes into account any put or call options
embedded in the security, any expected sinking-fund paydowns or any expected mortgage principal prepayments.
Average Years to Stated Maturity- The average years to stated maturity is the market value weighted average time to
stated maturity,for all securities in the portfolio. This measure does not take into account imbedded options, sinking fund
paydowns,or prepayments.
Current Yield-The current yield is the current annual income generated by the total portfolio market value. It is equal to the
total portfolio coupon payments per year divided by the current total portfolio market value.
Callan
30
Fixed Income Portfolio Characteristics
Duration Dispersion- Duration dispersion is the market-value weighted standard deviation of the portfolio's individual
security durations around the total portfolio duration. The higher the dispersion, the more variable the security durations
relative to the total portfolio duration ('barbellness"), and the smaller the dispersion, the more concentrated the holdings'
durations around the overall portfolio's ('bulletness"). The purpose of this statistic is to gauge the 'bulletness' or
'barbellness'of a portfolio relative to its total duration and to that of its benchmark index.
Effective Yield-The effective yield is the actual total annualized return that would be realized if all securities in the portfolio
were held to their expected maturities. Effective yield is calculated as the internal rate of return, using the current market
value and all expected future interest and principal cash flows. This measure incorporates sinking fund paydowns,expected
mortgage principal prepayments,and the exercise of any"in-the-money"imbedded put or call options.
Weighted Average Life-The weighted average fife of a security is the weighted average time to payment of all remaining
principal. It is calculated by multiplying each expected future principal payment amount by the time left to the payment. This
amount is then divided by the total amount of principal remaining. Weighted average life is commonly used as a measure of
the investment life for pass-through security types for comparison to non-pass-through securities.
Callan
31
Disclosures
Callan ll
Quarterly List as of
December 31, 2015
List of Callan's Investment Manager Clients
Continental—For Callan Client Use Only
Callan takes its fiduciary and disclosure responsibilities to clients very seriously.We recognize that there are numerous potential conflicts of interest
encountered in the investment consulting industry and that it is our responsibility to manage those conflicts effectively and in the best interest of our
clients. At Callan,we employ a robust process to Identify,manage,number and disclose potential conflicts on an oni basis.
The list below is an important component W our conflicts management and disclosure process. It identifies those investment managere that pay Callan
fees for educational,consulting,software,database or repaNng products and services. We update the list quarterly because we believe that our fund
sponsor clients should know the investment managers that do business with Callan,particularly those investment manager clients that the fund sponsor
clients may be using or considering using.Please refer to Callan's ADV Part 2A for a more detailed description of the services and products that Callan
makes available to investment manager clients through our Institutional Consulting Group,Independent Adviser Group and Fund sponsor Consulting
Group. Due to the complex contends and organizational ownership stroclures W many investment management firms,parent and affiliate firm
relationships are not indicated on our list.
Fund sponsor clients may request a copy of the mast currently available list a any time.Fund sponsor clients may also request specific information
regarding the fees paid In Callan by particularfund manager clients. Per company policy,information requests regarding fees are handled exclusively
by Callan'a Compliance Department.
Manager Name Manager Name —
1607 Capital Partners,LLC Calamos Advisi '
Aberdeen Asset Management Capital Group
Acadian Asset Management,Inc. CastleAik Management,LLC (—
Advisory Research Causeway Capital Management
Affiliated Managers Group Champlain Investment Partners
AllianceBernstein Charming Capital Management,LLC
Allianz Global Investors U,S,LLC Charles Schwab Investment Management
Alllanz Life Insurance Company of North Amedoa Churl Investment Partners
AlphaOne Investment Services ClearBridge Investments,LLC(fka ClearBridge Advisors)
American Century Investment Management Cohen&Steers
Analytic Investors Columbia Management Investment Advisors,LLC
Apollo Global Management Columbus Circle Investors
AOR Capital Management Corbin Capital Partners
Area Management Cornerstone Investment Partners,LLC
Adel Investments Cmmer Rosenthal McGlynn,LLC
Aristotle Capital Management Crawford Investment Council
Artisan Partners Limited Credit Suisse Asset Management
Atlanta Cal Management Co.,L.L.C. Crestline Investors
AXA Rosenberg Investment Management Cutwater Asset Management
Babson Capital Management LLC DDJ Capital Management
Ballard DE Shaw Investment Management LLC
Baillie GfioN Overseas Limited Delaware Investments
Baird Advisors DePrince,Race&Zdlo,Inc.
Bank of America Deutsche Asset &Wealth Management
Baring Asset Management Diamond Hill Investments
Baron Capital Management Duff&Phelps Investment Mel
BlackRock Eagle Asset Management,Inc.
Blue Vista Capital Management EARNEST Partners,LLC
BMO Asset Management Eaton Vance Management
BNP Paribas Investment Partners EnTrust Capital Inc.
BNV Mellon Asset Management Epech Investment Partners
Boston Company Asset Management,LLC(The) Fayez Sarofim 8 Company
Boston Partners Federated Investors
Brandea Investment Partners,L.P. Fidelity Institutional Asset Management
Brandywine Global Investment Management,LLC First Eagle Investment Management
Brown Brothers Hammed&Company First Hawaiian Bank Wealth Management Division
Cade Investments Cadence Capital Management First State Invesents i
Callan I Knowledge.Experience.Integrity. Page 1 of 2
Manager NaI Manager Name
Fisher Investments Norman Trust Asset Management
FLAG Capital Management Nu wo Investments Institutional Services Group LLC
Fort Washington Investment Advisors,Inc. Old Mutual Asset Management
Franklin Templeton ' OppenheimerFunds,Inc.
Fred Alger Management Co.,Inc. Pacific Investment Management Company
Fuller&Thaler Asset Management Palisade Capital Management LLC
GAM(USA)Inc. Pani Asset Management
GE Asset Management Paradigm Asset Management
Goldman Sachs Asset Management Parametric Portfolio Associates
Grandi Capital Management Peregrine Capital Management,Inc.
GMO(fka Grantham,Mayo,Van Grouch&Co.,LLC) PineBridge Investments(formerly AIG)
Gresham Investment Management,LLC Pinnacle Asset Management
Guggenheim Investments Asset Management(fka Security Global) Pioneer Investment Management,Inc.
Harbor Capital PNC Capital Advisors,LLC(&a Allegiant Asset Mgmt)
Harding Loevner LP Principal Global Investors
Hanson Street Real Estate Capital Private Advisors
Hartford Funds Prudential Investment Management,Inc.
Hartford Investment Management Co. Putnam Investments,LLC
Henderson Global Investors Pymmis Global Advisors
Hotchkis&Wiley Pzena Investment Management,LLC
HSBC Global Asset Management BBC Global Asset Management HJ 5.)Inc.
Income Research&Management Regions Financial Corporation
Insight Investment Management Riverbridge Partners LLC
Institutional Capital LLC Rothschild Asset Management,Inc.
INTECH Investment Management Royce&Associates
Invasion IRS Investments
Invested Asset Management Russell Investment Management
Janus Capital Group(@a Janus Capital Management,LLC) Santander Global Faciliges
Jensen Investment Management Schroder Investment Management North America Inc.
J.P.Morgan Asset Management Scout Investments
K,Corp SEI Investments
Kopernik Global Investors SEIX Investment Advisors,Inc.
Lazard Asset Management Smith Graham and Company
LMCG Investments(fka Lee Monitor Capital Group) Smith Group Asset Management
Legal&General Investment Management America Standard Life Investments
Lincoln National Corporation Standish(fka,Standish Mellon Asset Management)
Logan Circle Partners,L.P. Slate Street Global Advisors
The London Company Stone Harbor Investment Partners,L.P.
Longview Partners Systematic Financial Management
Loomis,Bayles&Company,L.P. T.Rowe Price Associates,Inc.
Lord Abbott&Company Taplin,Canida&Habacht
Los Angeles Capital Management TIAA-CREF
LSV Asset Management TOW Asset Management Company
Lyncal Partners Tocqueville Asset Management
MacKay Shields LLC UBS Asset Management
Man Investments Van Eck
Manulife Asset Management Versus Capital Group
Martin Currie Victory Capital Management Inc.
Marvin&Palmer Associates,Inc. Vontobel Asset Management
MFS Investment Management Voya Investment Management(fka ING)
MidFirst Bank Waddell&Reed Asset Management Group
Millstreet Capital Management WCM Investment Management
Mondrian Investment Partners Limited WEDGE Capital Management
Montag&Caldwell,Inc. Wellington Management Company,LLP
Morgan Stanley Investment Management Wells Capital Management
Mountain Lake Investment Management LLC Wells Fargo Private Bank
MUFG Union Bank,N.A. Western Asset Management Company
Neuberger Berman,LLC(fka,Lehman Brothers) Westwood Management Corp.
Newton Capital Management William Blair&Go.,Inc.
Norman Lights Capital Group
Callan I Knowledge.Experience.Integrity. Page 2 of 2 December 31,2015
Investment Report
Orange County Sanitation District
Period Ending
December 31 , 2015
Diego, 0
All Table of Contents
SECTION 1 Economic Update
SECTION 2 Account Profile
SECTION 3 Consolidated Information
SECTION 4 Portfolio Holdings
SECTION 1
Economic Update
o.
C1111 Economic Update
■ As expected, in December the Federal Open Market Committee (FOMC) increased the fed funds target rate
by 25 basis points. It was the first fed funds target rate increase since June 2006.Although the Fed took its first
step toward normalizing monetary policy, the tone of the FOMC statement was dovish, suggesting the pace of
additional policy tightening will be slower than historical Fed tightening cycles. Policymakers' median
projection for the fed funds rate at the end of 2016 is 1.375%. In the longer-run, the target fed funds rate is
roughly 3.5%. However, the FOMC has emphasized that monetary policy adjustments will be gradual and the
path of the fed funds rate vdll depend on the economic outlook. Notably, the FOMC will continue to reinvest
principal payments from its holdings of Agency and Mortgage-Backed securities and will continue rolling over
maturing Treasury securities until normalization of the fed funds rate is well underway. Overall, monetary policy
remains highly accommodative and the Fed is proceeding with caution as it moves toward a more normalized
policy stance.
■ Economic data is mixed. Trends in the labor market remain favorable, and consumer confidence rebounded in
December. However, the manufacturing sector remains weak and housing sector data has been volatile. The
ISM manufacturing index declined to 48.2 in December, to the weakest level since July 2009. In terms of
housing, new and existing home sales were recently weaker than expected, but home prices remain firm.
Nevertheless, payrolls have increased by an average of 284,000 per month over the past three months,with the
unemployment rate at 5.0%,which should provide a strong tailwind for economic growth this year. Third quarter
2015 GDP grew at an annualized pace of 2.0%, following growth of 3.9% in the second quarter. Market
participants are forecasting GDP growth of about 1.4% in the fourth quarter of 2015. We are expecting GDP
growth of about 2.0%-2.5% in 2016.
■ During 2015, 2-year Treasury yields increased nearly 40 basis points, while 10-year Treasuries increased
roughly 10 basis points. This bear flattening (with short-term rates rising more than long-term rates), is
consistent with previous Fed tightening cycles and we expect this trend to continue. Over much of the past year,
financial market volatility has been elevated due to mixed US economic data, the uncertain timing of the first
rate hike,weak global economic growth, divergent global central bank monetary policies,turmoil in Asian stock
markets, and geopolitical concerns. Ongoing uncertainty about the future pace of monetary policy
normalization, and how the Fed communicates its economic projections, will likely continue to fuel financial
market volatility.
Cjjjj Employment
Nonfarm Payroll (000's) Unemployment Rate
450 15.0%
14.0% —UM—PI.ymentR-(U6)
400 13 0% —Unempbymenc Rate(w)
m 350
12.0%
g 300 11.0%
a
c 250 y 10.0%
w
c 200 9.0%
V 8.0%
S 150
7.0%
100
6.0
50 5.0%
0 %
4.0
6h70 v.19 9 � C�q 4kle le 164le Okle O 70 441,
7A 11,,4 I4 1%,1s �270 7s %7s
Scurtn:us Ue dm n(&Labw Soule:US Ceps wto LaG r
The December employment report was mostly stronger than expected. Nonfarm payrolls rose by 292,000 in December, above
the consensus forecast of 200,000. October and November payrolls were also revised up by a total of 50,000. The
unemployment rate was unchanged at 5.0%.The participation rate inched up to 62.6% from 62.5%. However,wages were flat,
missing expectations for a 0.2% increase.A broader measure of unemployment called the U-6,which includes those whom are
marginally attached to the labor force and employed part time for economic reasons, was unchanged from November at 9.9%.
Over the past three months, payrolls have increased by an average of 284,000 per month, compared to the trailing six-month
average of 229,000.
GIII I Consumer
Retail Sales YOY % Change Consumer Confidence
&0% 110
5.0% 105
100
w 4.0% M
i
U 3.0%
X x 85
T a
uj 2.0% 80
]5
1.0%
]0
0.0% 65
061 11.4
Itk
13 441�4 �F 14 041 IV 7S 1S 7S 73 F9 74 74 {' 41.1,
7S 7S ��S %�S
soon:US Nua 'a Cone„. Souse:r arai Reserve
On a year-over-year basis, retail sales were up 2.2% in December, versus growth of 1.6% in November. On a month-over-
month basis, retail sales fell 0.1% in December, below the consensus forecast for sales to be flat. Excluding autos and gas, the
figure was flat, still weaker than the consensus estimate of 0.3%. Overall, consumer spending trends have been disappointing.
The consumer confidence index rebounded to 96.5 in December after declining to 92.6 in November. We believe ongoing
improvement in the labor market, low gas prices, and relatively strong consumer confidence should benefit consumer spending
this year.
GRI Economic Activity
Leading Economic Indicators (LEI) Chicago Fed National Activity Index
1.2%
(CFNAI)
oso
1.0% 0.40
0.8% 0.30
C °
° 0.6% � 0.20
c �
0.4% a
it c 0.10
c
0 0.2% °
f 0.00
ew
Se
0.0%
42% 420
-04% -Q30
N°k'D 'R 9pdh'A N..S- S-� N°k� 's h76 9.. 'S 1'°k's 11470 �'9 41e17
4 q. 7r 11kIV �'S 2>eh'S -q.5.'S "k,7&
Source:ID COMerence BoM Soma.'Fe ml Reserve Bank of CFica
The index of leading economic indicators rose 0.4% in November, following a 0.6% increase in October. This index points to
modest economic activity in the months ahead. The Chicago Fed National Activity Index (CFNAI) 3-month moving average
declined to -0.20 in November from -0.18 in October. Overall, this index is indicative of below-average economic activity. A
reading below -0.70 on a 3-month moving average basis has historically corresponded with the onset of a recession, so
fortunatelythe CFNAI remains safely above that level.
Q111 Housing
Housing Starts S&P/CaseShiller20 City Composite Home
140o 18.0% Price Index
•Mull Fa Mly Housing SYa,b
1200 •siogie Family Hoasogsraro; 14.0%
u 1000 12.0%
g W 10.0%
800 5C
r u 8.0%
600 a'
0 6.0%
c 400 ) 4.0%
U
200 2.0%
a
0 0.0%
ti T 4� ti T a,� ro 4 `�,, "t� 4 •4�, 4, IflK 44
okJiy �1R a'k1A '�r ok1A �)S y`7$ ly. �k7y '7` >R "A 7A ')A 7S 7$ 7S
Souse:US Censw Bureau Saumm S&P
Total housing starts rose 10.5% in November, exceeding expectations. Single-family housing starts rose 7.6% while multi-
family starts rose 16.4%. Housing starts tend to be volatile on a month-to-month basis, but the trend is favorable. Housing
permits rose 11.0% in November,also exceeding expectations. However, new and existing home sales were both weakerthan
expected in November. Pricing has remained firm, which may be keeping some first-time home buyers on the sidelines. The
S&P Case-Shiller home price index was up 5.5%year-over-year in October.
Cjjjj Manufacturing
Institute of Supply Management Capacity Utilization
Purchasing Manager Index 80.0%
60
e:panemy 79.5%
58
79.0%
56
78.5%
54 X
78.0%
sz 8
]].5%
50 77.0%
LenVaUing
48 76.5%
46 76.0%
O�0 7
4 ✓G�7V aL' '4 0�74 7S 7S IS Q Is Q 70 7V ]F ]A O��I I& 7S S 'S' %7$
Sourceansfdufe Supply Management S Sourt :Fe mlRRe—
In December, the Institute for Supply Management(ISM) manufacturing index declined to 48.2 from 48.6 in November. Overall,
manufacturing trends remain under pressure. A reading below 50.0 suggests the manufacturing sector is contracting. The index
fell below 50.0 in November 2015,for the first time since November 2012. Notably, a reading above 43.1 over a period of time
is generally indicative of overall economic expansion, based on the historical relationship between the indexand GDP growth.
Meanwhile, capacity utilization, which is production divided by capacity, declined to 76.5% in December from 76.9% in
November. The capacity utilization rate is lower than the long-run average of 80.1% (1972-2014), suggesting there is excess
capacity in the industrial sector. Overall,growth in the US manufacturing sector continues to be hindered by the strong US dollar
and a sluggish global economy.
iv
�jjjj Gross Domestic Product (GDP)
Gross Domestic Product(GDP)
5.0%
Personal Consumption Expenditures 2.9% 1.2% 2.4% 2.0% 40%
3.0%
Gross Private Domestic Investment 0.4% 1.4% 0.9% -0.1%
2.0%
Net Exports and Imports -0.9% -1.9% 0.2% -0.3% 1.0%
0.0%
Federal Government Expenditures -0.4% 0.1% 0.0% 0.D% -1.0%
-20% =GDP COO%Cron,
State and total[Consumption and Gross 0.2% -0.1% 0.5% 0.3% -310% GDP YOY%Change
Investment)
-4.0% y� 44
2.1% 0.7% 3 C c y Total .9% 2.0% y2, ya, ya, `�, ` , tea, a, `Seq
�O`gyp,YO �) �S`y2,�3 )y �4 'S`So a�S
Source: US Dep.rt I.[Com- Source: US Deponent of Cenvnv e
Third quarter GDP grew at an annualized pace of 2.0% (revised down from the second estimate of 2.1%, and up from the
advance estimate of 1.5%).This follows growth of 3.9% in the second quarter. Market participants are forecasting GDP growth
of about 1.4% in the fourth quarter of 2015.
iiiiii■
GRI Inflation
Consumer Price Index(CPI) Personal Consumption Expenditures
3.0% (PCE)
�CPIYOY%Cflenga 3.0%
2.5% Core CPI YOY%CM1ange 25% —PCEP aWOaor YOY%Cflange
—PCE Care Deflator YOY%CSmge
2.0% 0 2.0%
c O1
5%
1.0% 1.0%
O 0.5% }
0.5%
0.0% 0.0%
-0.5% -0.5%
ryok�3 116�'9 7
4 9.. 71 tiOk70 ?e Q98h7
S $ tigk7e ti01
10 IV
41 'Vp4& �76 '}fdh1& H.. le $
Source:US Department oLLaW S Source:US Department&LaO r 'A
In November, the Consumer Price Index (CPI) rose 0.5% on a year-over-year basis, up from 0.2% in October. Year-over-year
comparisons have become easier, given the precipitous decline in energy prices at the end of 2014. Meanwhile, Core CPI
(CPI less food and energy) was up 2.0% in November on a year-over-year basis, vs. up 1.9% in October. The Personal
Consumption Expenditures (PCE) price index was up 0.4% on a year-over-year basis in November, up from 0.2% in October.
Core PCE (excluding food and energy)was unchanged in November, up 1.3%on a year-over-year basis. Overall, inflation isn't
showing signs up significant upward pressure and remains below the Fed's 2.0%target.
CillI Bond Yields
US Treasury Note Yields US Treasury Yield Curve
3.5% 3.5%
2-veer �0aot5
Se
SYear
3.0% � m-rear 3.0% � n-15
—oec-ta
2.5% NO'N
X 2.0% a' 2.0%
a y
5: 1.5% 5: 1.5%
1.0% 1.0%
0.5% 0.5%
0.0% 0.0%
S. e mba sources etoomaerp
The yield on the two-year Treasury note rose roughly 12 basis points in December to 1.05%. Meanwhile, the yield on the ten-
year Treasury note rose just six basis points in December to 2.27%. Overall, the Treasury yield curve Flattened during 2015 in
anticipation of monetary policy normalization by the Federal Reserve and we expect this trend to continue. Looking ahead, we
believe the pace of subsequent rate hikes will be slower than historical Fed tightening cycles, in light of ongoing sluggishness in
the global economy.
. S=
Account Profile
011 Objectives
Investment Objectives
The investment objectives of the Orange County Sanitation District are first, to provide safety of principal to
ensure the preservation of capital in the overall portfolio; second, to provide sufficient liquidity to meet all
operating requirements; and third, to earn a commensurate rate of return consistent with the constraints
imposed by the safety and liquidity objectives.
Chandler Asset Management Performance Objective
Liquid Operating Monies—will be compared to the 3-month T-Bill rate and operate with a maximum maturity
of one year.
Long-Term Operating Monies—will be compared to the Bank of America Merrill Lynch 1-5 Year Corporate
Government Rated AAA—A Index.
Strategy
In order to achieve these objectives, the portfolio invests in high quality fixed income securities consistent
with the investment policy and California Government Code.
Compliance
C/" Orange County Sanitation District Long Term
December 31,2015
COMPLIANCEPOLICY
Assets managed by ChandlerAsset Management are in full compliance with State lawand win to investment policy
Category Standard Comment
Treasury issues 5 years maw mum maturity Complies'
Supmnational "AA"or batter by of 3 NRSROs; 30%maximum; 5%max; 5 Complies
years maturity Includes on . IADB,SRD,and IFC per CGC
U.S.Agencies 20%max issuer, 5 years maximum maturity Complies
U.S.Corporate(MTNs) "A"or better long term rating by l of 3 NRSROs; 30%platinum; Complies'
5%maxissuer; 5 years max maturly
Municipal Securities "A"or higher by l of 3 NRSROS;10%maximum; 5%max issuer, Complies'
5 years maximum maturity
Asset Backed/CMOs/ "AA"or better by l of 3 NRSROs; "A"or higher issuer rating by l Complies'
Mortgage-backed of 3 NRSROs; 20%maximum; 5%max issuer(excluding
MBS/l pearl S Were max maturity
Negotiable CDs "A"or better on its long tens debt by l of 3 NRSROs; "Al/Pill"or Complies
highest start term but rgs by 1 of 3 NRSROs; 30%maximum;5%
max issuer; 5 years max maturty
CDs/TDS 5%max issuer; 5 years max maturity Complies
Bankers Acceptances A-1,orequvalent highest short term rating by l of 3 NRSROS; Complies
40%ma)dmum, 5%maxissuer,180daysmax,naturilp,
Commercial Paper A-1,orequivalent by l of 3 NRSROSp "A"or better by l of 3 Complies
NRSROs,if long term debt issued; 25%maximum; 5%max
issuer, 270 days max maturity
Money Markel Fund Highest rating by2 of 3 NRSROs; 20%maximu ;10%maxissuer Complies
Repurchase Agreements 102%collateralietion Complies
Reverse Repurchase 5%maximum,90 days max mal Complies
Agreements
LAIF Not used by investment adviser Complies
Avg Duration Nott exceed 60 months - (80%t 120%of the benchmark) Complies
Maximum Maturity 5 years maximum maturity Complies"
'The portrolpo has twenty-eight(2e)secunles with matudtles greater than 5 years pncludhg Nm(2)ABS,two(2)CMCa,twenty-one(21)MBS,one
(1)municipal,me(1)corporate ano one(1)treasury. All humnRiea were inne letl from the all manager and complied al time 0 purchase.
IA Account Profile
Portfolio Characteristics
Orange County Sanitation District Long Term
12/31/2015 09/30/2015
Benchmark` Portfolio Portfolio
Average Maturity(yrs) 2.75 2.87 3.11
Modified Duration 2.59 2.42 2.50
Average Purchase Yield n/a 1.30 % 1.31
Average Market Yield 1.45 % 1.32 % 1.04 %
Average Quality— AAA AA+/Aar AA/Aa1
Total Market Value 314,764,605 262,620,099
'BAML 1-5 Yr US Corporate/Gout Rated AAA-A Index
Benchmark is a blended rating of S&P,Moodys,and Fitch.PoMolio is S&P and Moody's respectively.
Multiple securities were purchased across the Treasury, Agency and Commercial Paper sectors of the market to keep the
portfolio structure in line with Chandler objectives. The purchased securities ranged in maturity from February 2016 to
November 2020. Over the course of the quarter a net$53 million was contributed to the portfolio.
�J" Sector Distribution
Orange County Sanitation District Long Term
December 31, 2015 September 30, 2015
Suprenabonal Supranabonal
41% us 5.0% us
Corporate coryaae
Municipal 19.8% Municipal M.8%
Bonds Bands
15% 1.9%
Money Money
Markel Market
Fuck Fund ..
Mas MBS
Mas 8%
Cmvrw Commercial Pe
Paper Paper
2.8% Tn 2.9% US
Treasury Treasury
CMO 35.4% CMC 35.4°5
0.5% � 0]%
Agency Agency
23.9% 19.4%
ASS ASS
CID% 8.7%
The sector allocation changed moderately during the quarter. The two largest adjustments were the 4.5% increase in
the Agency allocation to 23.9% of the portfolio, partially offset by the 4.0% decline in the Corporate allocation, to 19.8%
of the portfolio.
Issuers
Gilt OrangeCounty Sanitation District Long Term Issuer Report
Account#10268 As of 12131=15
Name Inwstmerit Type %Portfolio
Govemmem of UNmd Slams CS lroavnv 35.39%
Federal llome Loan MmwfCory ARemv 8.69%
Federal National Mortgage Asaovb0on Apse, 837%
Federal Home Loan Bank Alai 6.85%
Dmfus Treasury MMKT FD 521 Money Mmket FuM FI 4.71%
Toyom AM AM 2.93%
HoMa ABS ABS 1.81%
Welk Fargo Corp US Caporate 1.76%
JP Morgan Chase&Co US Corp... 1.74%
Be of Tokyi,Mit UFJ Commercial Paper 1.67%
Toyota Motor Corp US Cmporale 1.65%
General Electric Co US Cmpordle 1.61%
Deere&Company US Corpora , 1.61%
Inner American Dev Dank Supram0onal 1.59%
Immmioml Ensure Carp Supranxtional 1.59%
Quakomm hm US Came.. 1.58%
Bank of Americo Cory US Camara. 1.49%
Eli Lilly&Co US Corporate 1.29%
John Deere AM AM 1.27%
ChevmnTexam Carp US Coporate 1.26%
American Express Credit US Caere. 1.04%
Mown Stanley US Coporate 1.02%
HSBC USA Corp US Coporate 0.96%
Toyma Mmm Corp Commercial Paper 0.95%
InO Bank pecan coal Development Supranatlonal 0.95%
Port AuOndry of New York anal New Jersey Municipal Bonds 0.87%
Goldman Sxhs Inc US Corporate 0,85%
Federal National Mortgage A lation MBS 0.84%
Hmala Moor Corpmtton US Corp... o6 %
Intel Corp US Corporate o"%
Occidental Petroleum Coryormon USCoryom. 0.0%
New York Ciry Transitional Finance Amhoriry Municipal Bonds 0.48%
Federal Home Loan Mortgage Cwp MBS 0.40%
0111 Issuers Continued
C/" Orange County Sanitation District Long Term Issuer Report
Amount#10266 As of 1 213112 01 5
Federal Home Loan Mortgage Corp CIVIC) 0.33%
NCOA Gumemeed Notes CMO 0.16%
Unlvemityof Califomia Mwicipal Bonds 0.14%
GNMA MBS 0.11%
Fedeml National Mortgage Ax iafion CMO 0.04%
AMRESCO Resldental Sewdll s Corp MBS 0.04%
Small Bumom Admin teation ABS 0.04%
Soundvlew Home Equity Loan Trust MBS 0.01%
SLM Carp ABS 0.01%
Total 100.00%
Quality Distribution
Orange County Sanitation District Long Term
December 31, 2015 vs. September 30, 2015
m0.0%
80.0%
80.0% —
40.0%
20.0% —
0.0%
AAA M A A NR
1M1/15 9/30/15
AAA AA A <A NR
12/31/15 13.8% 69.9% 8.5% 4.2% 3.6%
9/30/15 10.6% 68.6% 14.1 % 1.2% 5.5%
Sourm:S&P Ratings
AR Duration Distribution
Orange County Sanitation District Long Term
December 31, 2015 vs. September 30, 2015
25.0%
20.0%
15.0%
10.0%
5.0%
0.0%
0-0.25 025-0.50 0.50-1 1-2 2-3 3-4 4-5 5,
1MIM15 =W-WA15
0-0.25 0.25-0.50 0.50-1 1 -2 2-3 3-4 4-5 5+
12131/15 13.8% 1.2% 11.1 % 20.9% 13.8% 23.4 % 12.2% 3.6 %
9130115 10.2% 2.9% 9.3% 19.4 % 20.9% 21.8 % 10.4% 5.1 %
" Duration Distribution
Orange County Sanitation District Long Term
Portfolio Compared to the Benchmark as of December 31, 2015
35.0%
30.0%
25.0%
20.0%
15.0%
d4�
10.0%
5.0%
0.0%
0-0,25 0.25-0.50 0.50-1 1-2 2-3 3-4 4-5 5+
= Pa dio 201 eenchmerk'
0-0.25 0.25-0.50 0.50-1 1 -2 2-3 3-4 4.5 5+
Portfolio 13.8% 1.2% 11.1 % 20.9% 13.8% 23.4% 12.2% 3.6%
Benchmark' 0.4% 0.1 % 3.7% 31.3% 28.1 % 22.1 % 14.4% 0.0%
'BAML 1-5 Vr US Corporate/Govt Rated AAA-A Index
The duration of the portfolio contracted moderately, currently 2.42 versus 2.50 at the end of the prior quarter.
Chandler's current outlook calls for longer term interest rates to remain contained in the face of potential monetary policy
lightening later in the year, thus the overall duration of the portfolio is likely to remain close to the benchmark in the
coming quarter.
-j Investment Performance
Orange County Sanitation District Long Term
Period Ending
December 31, 2015
Total Rate of Return
Annualized Since Inception
November 30,2014
1.20%
1.00%
0.a0%
060%
0.40%
0.20%
0.00%
12 mumhe 2 team 3 years 5 years 10 years Since Inception
Orange County Sanitation District Lang Term = SAW 1-5 Yr US CorpowadGM Rated AAA-A Index
Annualized
3 months 12 months 2 years 3 years 5 years 10 years Since Inception
Orange County Sanitation District Long Term -0.33% 0.85% N/A N/A N/A N/A 0.58%
BAML 1-5 Yr US Corporate/GoN Rated AAA-A Index -0.56% 1.07% N/A N/A N/A N/A 0.69%
Total rate of return:A measure of a portfolio's performance over time. It is the internal rate of return,which equates the beginning value of the portfolio with the ending value;it
includes interest earnings, realized and unrealized gains and losses in the portfolio.
Compliance
0
" Orange County Sanitation District Liquid
December 31,2015
COMPLIANCE WITH INVESTMENT POLICY
Assets managed by Chandler Asset Management are in full compliance wan State lawand wth the investment policy
Category Standard Comment
Treasury Issues l year maximum maturity, Minimum allocation of 10% Complies
Supranabonal "AA"or better by of 3 NRSROs; 30%maximum; 5%max; 1 Complies
year maturity, Includes only: ADS,IBRD and IFC perCGC
U.S.Agencies 20%max issuer, l year maximum maturity Complies
U.S.Corporate(MTNs) "A"or better long term rating by l of NRSROs;30%maximum; Complies
5%max issuer, 1 war max maturity
Asset Backed/CMOs "AA"or better by l of 3 NRSROs; 'A"or higher issuer rating by l Complies
of 3 NRSROs; 20%maximum; 5%max issuer; 1 year max
maturity
Negotiable CDs "A"or better on its long tam debt by l of 3 NRSROs; "A11P1"or Complies
highest short term ratings by 1 of 3 NRSROs; 30%maximum;5%
max issuer;) year max maturity
CDs/TDS 5%max issuer, l year max maturity Complies
Bankers Acceptances A-1,or equivalent short tens rating by l o1`3 NRSROS; 40% Complies
maximum; 5%max issuer; 180 days max maturity
Commercial Paper A-1,or equivalent by l o1`3 NRSROS; "A"or better by of Complies
NRSROs,if long term debt issued; 25%maximum; 5%max
issuer; 270 days max maturity
Money Market Fund Highest rating by 2 of 3 NRSROs; 20%maximum;10%max issuer Complies
Repurchase Agreements 102%collatemlimtion Complies
Reverse Repurchase 5%maximum,90 days max maturity Complies
Agreements
LAIF Not used by investment adviser Complies
Prohibited Municipal Securities Complies
Prohibited Mortgage Securities Complies
Avg Duration Nottoexceed 180 days; Max duration of 1/2 year Complies
Maximum Maturity 1 year maximum maturity Complies
11% Account Profile
Portfolio Characteristics
Orange County Sanitation District Liquid
12/31/2015 09/30/2015
Benchmark` Portfolio Portfolio
Average Maturity(yrs) 0.16 0.21 0.28
Modified Duration 0.15 0.21 0.28
Average Purchase Yield n/a 0.38 % 0.29 %
Average Market Yield 0.07 % 0.41 % 0.26 %
Average Quality— AAA AAA/Aa1 AA+/Aa1
Total Market Value 131,961,724 43,933,491
'BAML 3-Month US Treasury Bill Index
Benchmark is a blended rating of S&P,Moodys,and Fitch.POMolio is S&P and Moody's respectively.
Many securities were purchased across the Treasury,Agency, Commercial Paper, Negotiable CD, and Corporate sectors
of the market to reinvest nine maturing notes and to account for the $88 million contribution into the portfolio in December
2015. The purchased securities ranged in maturity from January 2016 to November 2016.
IJ" Sector Distribution
Orange County Sanitation District Liquid
December 31, 2015 September 30, 2015
Money
Market Money
comrrercial Fund Market us
Paper Fi Fund corporate
6.4%\ �, 9.8% FI 232%
8.4%
NegobaMe
CD
0.8% commercial
Paper
4.5%
Suprenabonal
1.9%
Agency / Agency
393% / 38.4%
DS
0
Corporate
10.8%
us
us Treasury
Treasury 27.4%
31.1%
The sector allocation changed materially due to the large contribution into the portfolio. The two largest changes were
the 12.4%decline in the Corporate allocation to 10.8%of the portfolio partially offset by the 3.7% and 2.9% increase in
the Treasury and Agency allocation, to 31.1%and 39.3%of the portfolio, respectively.
Issuers
Orange County Sanitation District Liquid Issuer Report
Account#10282 As of 1213112015
Cwernment of United States US Treasury 31.10%
Federal Hmne Luan Bank Agency 19.90%
Drol.Treasury MMKT FD 521 Money Market Fund FI 9.81%
Federal Home Loan Mortgage Carp Agency 9.47%
Federal Farm Credit Bank Agency 8.39%
International Finance Corp Supranallonal 1.89%
Paccar Financial Commercial Paper 1.67%
Bank ofT.kyo-Ml(UFJ Commercial Paper 1.67%
Federal National Mongage Association Agency L52%
Eaxon Mobil Corp Commercial Paper 1.52%
Occidental Petroleum Corporation US Corporate 0.84%
Home Depm US Corporate 0.78%
Bank of New York US Corporate 0.77%
Berkshire Hathaway US Corporate 0.77%
State Street Bank US Corporate 0.77%
US Bancorp US Corporate 0.77%
C.Cola Co. US Corporate 0.77%
General Eleodc Co US Corporate 0.77%
Wells Fargo Corp US Corporate 0.76%
JP Morgan Chace&Co US Corporate 0.76%
Deere&Company US Corporate 0.76%
Honda Motor Corporation US Corporate 0.76%
Prumir US Corporate 0.76%
Pao.Inc US Corporate 0.76%
RaWbank Nederland NV NY Negotiable CD 0.76%
Tryout Motor Corp Commercial Paper 0.76%
liahohark NederlaM NV NY Commercial Paper 076%
Total 100.00%
Quality Distribution
Orange County Sanitation District Liquid
December 31, 2015 vs. September 30, 2015
m0.0%
80.0%
60.0% —
40.0%
20.0%
0.0%
AAA AA A <A NR
12131/15 9/30/15
AAA AA A <A NR
12/31/15 67.7% 23.1 % 8.5% 0.0% 0.8%
9/30/15 38.0% 43.5% 18.6% 0.0% 0.0%
Source:S&P Ratings
AR Duration Distribution
Orange County Sanitation District Liquid
December 31, 2015 vs. September 30, 2015
600%
60.0%
40.0%
20.0% In,
0.0%
0-0.25 025-0.50 0.50-1 1-1.5 1.5-2 2-2.5 2.5-3 3+
1MIM15 M 9062015
0-0.25 0.25-0.50 0.50-1 1 -1.5 1.5-2 2-2.5 2.5-3 3+
12131/15 69.9% 19.4% 10.7% 0.0% 0.0% 0.0% 0.0% 0.0%
9/30115 54.0% 36.7% 9.2% 0.0% 0.0% 0.0% 0.0% 0.0%
" Duration Distribution
Orange County Sanitation District Liquid
Portfolio Compared to the Benchmark as of December 31, 2015
120.0%
100.0%
KID%
60.0%
40.0%
20.0%
0.0%
0-0.25 0.25-050 0.50-1 1-1.5 1.5-2 2-2.5 2.5-3 3+
=Povdio Benchmark'
0-0.25 0.25-0.50 0.50-1 1 -1.5 1.5-2 2-2.5 2.5-3 3+
Portfolio 69.9% 19.4% 10.7% 0.0% 0.0% 0.0% 0.0% 0.0%
Benchmark' 100.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0%
`BAML 3-Month US Treasury BIII Index
The duration of the portfolio contracted moderately, currently 0.21 versus 0.28 at the end of the prior quarter. The
portfolio has a large liquidity need at the end of January,thus a portion of the new money invested into the portfolio was
invested into late January, leading to a lower duration on a quarter over quarter basis.
-j Investment Performance
Orange County Sanitation District Liquid
Period Ending
December 31, 2015
Total Rate of Return
Annualized Since Inception
November 30,2014
0.25%
0.20%
0.15%
0.10%
0.05%
0.00%
12 mantra 2 years 3 years 5 years 10 years Since Incepbon
Orange County Sanitation District Liquid BAML 3Montr US Treasury Bill Index
Annualized
3 months 12 months 2 years 3 years 5 years 10 years Since Inception
Orange County Sanitation District Liquid 0.05% 0.23% N/A N/A N/A N/A 0.22%
BAML 3-Month US Treasury Bill Index 0.03% 0.05% N/A N/A N/A N/A 0.05%
Total rate of retum:A measure of a portfolio's performance over time. It is the internal rate of return,which equates the beginning value of the portfolio with the ending value;it
includes interest earnings, realized and unrealized gains and losses in the portfolio.
Compliance
C/" OCSD Lehman Exposure
December 31,2015
COMPLIANCE WITH INVESTMENT POLICY
Assets managed by Chandler Asset Management are in full compliance o th State lawand wth the investment policy
Category Standard Comment
Treasury issues 5 years maximum maturity Complies
Supranational "AA"orbetterbylof3NRSROS; 30%maximum; 5%max; 5 Complies
yeamsmatunty, lincludesonly, IADB,IBRD,and IFC erCGC
U.S.Agencies 20%max issuer, 5 years maximum maturity Complies
U.S.Corporate(MTNs) "A"or better long term rating by 1 of 3 NRSROs; 30%maximum; Complies'
5%max issuer; 5 were max maturity
Municipal Securities "A"or higher by l of NRSROS;10%maximum; 5%max issuer; Complies
5 were maximum matui
Asset Backed/CMOs/ "AA"or better by l of 3 NRSROs; "A"or nigher issuer rating by l Complies
Mortgage-backed of NRSROs; 20%maximum; 5%max issuer(excluding
MBS/ ovtenemy) 5 were max maturity
Negotiable CDs "A"or better on its bng term debt by l of 3 NRS ROS; 'Al/P1"or Complies
highest short term ratings by 1 of 3 NRSROs; 30%maximum;5%
max issuer 5 years max maluri
CDs/TDS 5%max issuer, 5 we.max mosturity Complies
Bankers Acceptances A-1,or equivalent highest short teon rating by l of 3 NRSROS; Complies
40%maximum; 5%max issuer,180 days max matunly
Commercial Paper A-1,or equivalent by l of NRSROS; "A"or better by l of 3 Complies
NRSROs,if big tens debt issued; 25%maximum; 5%max
issuer, 270 days max maturity
Money Market Fund Highest rating by 2 of 3 NRSROs: 20%hall mun;10%max issuer Complies
Repurchase A reements 102%collateralieation Complies
Reverse Repurchase 5%maximum,90 days max matuity, Complies
Agreements
LAIF Not used by investment adviser Com lies
A Duration Not to exceed 60 months - 80%to 120%of the benchmark Com lies
Maximum Maturity 5 years maximum maturity Complies
Acoeunt holds$2 million race lue d Ud1525ESCOVa)and$000,000 toe value(ousip 525ESC1B]l of defaulted umne n Bros Rddings that xere
purchased by the median transfer. Complied at time of pumhase.
IS Account Profile
Portfolio Characteristics
OCSD Lehman Exposure
1213112015 09/30/2015
Portfolio Portfolio
Average Maturity(yrs) 21.40 21.02
Modified Duration 0.00 0.00
Average Purchase Yield 0.00 % 0.00 %
Average Market Yield 0.00 % 0.00 %
Average Quality— NR/NR NR/NR
Total Market Value 170,034 231,783
SECTION 3
i
Consolidated Information
IA Account Profile
Portfolio Characteristics
Orange County Sanitation District Consolidated
12/31/2015 09/30/2015
Portfolio Portfolio
Average Maturity(yrs) 2.09 2.72
Modified Duration 1.77 2.18
Average Purchase Yield 1.02 % 1.15 %
Average Market Yield 1.05 % 0.93 %
Average Quality— AA+/Aai AA+/Aa1
Total Market Value 446,896,363 306,785,374
J�" Sector Distribution
Orange County Sanitation District Consolidated
December 31, 2015 September 30, 2015
Supranatonal Supranational
35% US 43% US
Negotiable Corporate Municipal Corporak
CD 1 17.1% Bontls M.7%
02%
Municipal 1.6%
Bonds Money
0% Market
Money Fund
Mallet
Fund MBS
1.5%
MBS
1.0% Common
Common Stack
Sto k 0.0%
0.0% US Comer US
Commercial / 'Treasury Paper Treasury
Paper � / 34.1% 3.1%CMO 39.3%
17%
CMO 0.6%
0.4%
Agency Agency
28.4% 21.8%
ABS ABS
43°o 7.5%
SECTION 4
Portfolio Holdings
C�" Orange County Sanitation District Long Term Holdings Report
Account g70268 As of 12/31/15
Purchase Da:a Cost Va:u: Mkt Price Market Value %of Pod. MoodyIS&P Maturity
CUSIP Security Description Par Value/Units Book Yie d Book Va Mkt YTM Accrued Int. Gain/Loss Fitch Duration
ASS
43813JAC9 Honda Auto Receivables 2014-1 A3 3,735,855.55 01/22/2015 3,724,472.87 99.82 3,729,138.48 1.18% Aaa INR 1.89
0.67%Due 11/21/2017 0.90% 3,730,033.00 1.04% 695.28 (894.52) AAA 0.49
89231 MAC9 Toyota Auto Receivables Owner 2014-A 3,443,837.52 01/21/2015 3,436,707.70 99.78 3,436,564.14 1.09% Aaa IAAA 1.96
0.67%Due 1211512017 0.90% 3,440,065.23 1.08% 1,025.50 (3,501.09) NR 0.51
89231TAB6 Toyota Auto Receivables Owner 2015-C 2,195,000.00 0811812015 2,194,823.52 99.85 2,191,665.80 0.70% Ass IAAA 2.13
0.92%Due 2/15/2018 0.93% 2,194,848.51 1.14% 897.51 (3,182.71) NR 0]1
43814GAC4 Honda Auto Receivables 20142 A3 1,957,423.90 04/08/2015 1,956,047.59 99.72 1,951,962.69 0.62% Aaa I AAA 2.22
0.77%Due 3/19/2018 0.83% 1,956,520.14 1.21% 544.27 (4,557.45) NR 0.64
4778T/AD6 John Deere Owner Trust 2014-S A3 4,000,000.00 02IM12015 4,001,875.00 99.53 3,981,364.00 1.27% Aaa/NR 2.88
1.07%Due 1111512018 1.05% 4.001,269.80 1.53% 1,902.22 (19,905.80) AAA 1.01
89236WAC2 Toyota Auto Receivables Owner 2015-A 3,695,000.00 02/24/2016 3,594,456.44 99.73 3,685,372.59 1.14% Aaa/AAA 3.13
1.12%Due 2116019 1.13% 3,594,609.08 1.31% 1,789.51 (9,239.49) NR 1A2
83162CLJO Small Business Administration 2001-20C 102,402.16 03/1)6/2001 102,402.16 1WA5 108,697.84 0.04% Aaa/AA+ 5.17
sM%Due WW21 sm% 102,402+16 3.96% 2,1WO 6,295.68 AAA 2.50
78445JAA5 SLMA 2008-9A 43,030,90 0812212008 42,856.32 100.07 43,060.25 0.01 % Aaa/AA+ 9.32
1.823%Due 4/2512023 1.91 % 42,996.30 1.09% 148.17 63.95 AAA 0.06
19,053,641.60 19,027,825.79 6.05% Aaa I AAA 2.44
Total ABS 19,072,550.03 1.00% 19,062,744.22 1.25% 9,166.56 (34,918.43) Aaa 0.83
AGENCY IM
3135GOES8 FNMA Note 4,000,000.00 W/11/2015 4,044,200.00 1W.46 4,018,572.00 1.28% Ann/AA+ 0.88
1.375%Due 11/15Y 016 0.60% 4,027,011.11 0.84% 7,027.78 (8,439.11) AAA 0.87
3137EADUO FHLMC Note 5,000,000.00 01/16/2015 4,991,050.00 Saw 4,979,880.00 1.59% Aaa/AA+ 1.08
0.5%Due 1/2T/2017 0.59% 4,995,Z46.07 0.88% 10,694.44 (15,366.07) AAA 1.06
313379FW4 FHLB Note 5,000,000.00 051UI2015 5.025,100.00 99.98 4,998,970.00 1.59% Aaa/AA+ 1.44
1%Due 6/9/2017 0.75% 5.017,687.92 1.01% 3,055.56 (18,717.92) AAA 1.42
3137EADVB FHLMC Note 5,000,000.00 06/25/2015 4,994,250.00 W." 4,972,850.00 1.59% Aaa/AA+ 1.54
0.T5%Due]114/201T 0.81 % 4,995,700.93 1.11% 22,083.33 (22,850.93) AAA 1.52
3137EADN6 FHLMC Note 5,000,000.00 0112312015 4,967,500.00 99.20 4,959,760.00 1.58% Ass/AA- 2.04
0.75%Due 1/1212018 0.97% 4.977,712.57 1.15% 17,604.17 (17,952.57) AAA 2.00
3137EADPI FHLMC Note 5,000,000.00 01/13/2015 4,974,100.00 99.30 4,964,915.00 1.58% Aaa/AA+ 2.18
0.875%Due 39/2018 1.04% 4,982,041.46 L20% 13,854.17 (17,126.46) AAA 2.15
313378A43 FHLB Note 7,500,000.00 02/11/2015 7,544,850.00 100.31 7,523,557.50 2.40% Aaa/AA+ 2.19
1.375%Due W912018 1,18% 7,531,927.12 1.23% 32,083.33 (8,369.62) AAA 2.14
3135GOG72 FNMA Note 5,000,000.00 1211812015 4.963,950.00 99.17 4,958,345.00 1.58% Aaa/AA+ 2.96
1.125%Due 12/14WB 1.37% 4,964,314.14 1.41% 2,656.25 (5,969.14) AAA 2.89
3133782M2 FHLB Note 4,000,000.00 04/ ,IW5 4,043,480.00 99.94 3,987,408.00 1.28% Aaa/AA+ 3A9
1.5%Due 3/8/2019 1.21 % 4,035,807.06 1.52% 18,833.33 (38,399.%) AAA 3.09
3135GOZG1 FNMA Note 5,000,000.00 1211 W2014 5,021,500.00 1D0.53 5,026,395.00 1.61 % Aaa/AA- 3.70
1.75%Due 9/1212019 1.66% 5,016,767]6 1.60% 26,493.06 9,617.24 AAA 3.55
Chandler Asset Man,ameM-CONFIDENTIAL 37
C�" Orange County Sanitation District Long Term Holdings Report
Account g70268 As of 12/31/15
Purchase Da:a Cost Va:u: Mist Price Market Value %of Pod. MoodyIS&P Maturity
CUSIP Security Description Par Value/Units Book Yie d Book Va Mkt YTM Accrued Int. Gain/Loss Fitch Duration
"CT •
3137EADM8 FHLMC Note 7,500,000.00 Various 7,399,650.00 98.64 7397,767.50 2.36% Ann/AA+ 3.76
1.25%Due 10/2/2019 1.61 % 7,401,174.98 L63% 23,177.08 (3,407.48) AAA 3.64
313383HU8 FHLB Note 5,000,000.00 O1/13/2015 5,008,950.00 99.82 4,991,010.00 1.59% Ma/AA+ 4.45
1.75%Due 611212020 1.71 % 5,008,239+68 1.19% 4,618A6 (17,229.68) NR 4.26
3135GOD75 FNMA Note 5,000,000.00 1111612015 4.955,650.00 98.75 4,937,740.00 1.57% Aaa/AA+ 4.48
1.6%Due 6/22/2020 1.70% 4,956,838.65 1.79% 1,875.00 (19,098.65) AAA 4.30
3135GOFT3 FNMA Note 7,500,000.00 Various 7,370,726.00 Wu 7,366,762.50 2.34% Aaa/AA+ 4.92
1.5%Due 1113012020 1.87% 7,371,838.O7 1.88% 9,681.50 (5,075.57) AAA 4.71
75,304,956.00 75,091 23.92% Me I AA+ 2.87
Total Agency 75,500,000.00 1.26% 75,282,307.52 1.39% 193,743.06 (188,385.02) Me 2.78
6288BUAA8 NCUA Guaranteed Note CMO 2010-R2 507,772.30 1111012010 507,769.99 100.16 508,577.63 0.16% Asai 1.85
0.798%Due 11/6/2017 0.00% 507,769.99 0.69% 218.76 807.64 NR 0.01
31398VJ98 FHLMC FHMS K006 A2 900,000.00 1112312010 951,046.88 1O7.69 969,230.70 0.31 % Ma/AA+ 4.O7
4.251%Do.112512020 3.02% 922,668.84 2.13% 637.65 46,561.86 AAA 3.59
3133TCE95 FHLMC FSPC E3A 68,285.40 03/11/1998 68,356S2 104.54 71,384.26 0.02% Ma/AA+ 16.64
2.954%Due 811512032 2.92% 68,320+00 1.50% 168.10 3,064.26 AAA 1.88
313961 FNMA FNR 2007-114 A6 133,053.04 0111012008 126,566.71 99.47 132,344.93 0.04% Asia/AA- 21.84
0.622%Due 10Y 712037 0.97% 128,300.69 1.12% 9.19 4,0ki AAA 0.35
1,653,740.40 1,681,537.52 0.0% Ma I AA+ 5.33
Total CMO 1,609,110.74 1.91% 1,627,059+52 1.59% 1,033.70 54,478+00 Ass 2.18
COMMERCIAL PAPER
061 Bank of Tokyo Mitsubishi NV Discount 5,260,000.00 10/27/2015 5,253,162,00 99.94 5,256,865.92 1.67% P-1 /A-1 0.15
CP 0.40% 5,256,865.92 0.40% 0.00 0.00 F-1 0.15
0.39%Due 2/25/2016
89233GCM6 Toyota Motor Credit Discount CP 3,000,000.00 1212112015 2,995,601+67 99.87 2,996,133.34 0.95% P-1IA-1+ 0.22
0.58%Due 312112016 0,59% 2,996,133.34 059% 0.00 0,00 F-1+ 0.22
8,248,763.67 8,252,999.26 2.62% P-1IA-1 0.18
Total Commercial Paper 8,260,000.00 0.4T% 8,252,999,26 047% 0.00 0,00 F-1+ oA8
MBS
31381PDA3 FNMA FN 466397 367,247,73 12/01/2010 359,30027 104.81 384906.10 0.12% Ass IAA+ 4.84
3.4%Due 11/V2020 3,80% 363,368+46 2.31 % 242.79 21,537.64 AAA 4.26
36225CAZ9 GNMA Pooh G280023 28,749.10 08I08I1997 29,225.26 104.01 29,902.31 0.01 % Ma/AA+ 10.98
1.625%Due 1MQQ026 1.52% 28,927.22 1.62% 38.93 975.09 AAA 4.58
36225CC20 GNMA Pi G280068 34,902.51 OB/11/1997 35,666G1 102.24 35,685.86 0.01 % Ma/AA+ 11.48
2%Due 612012027 1.86% 35,196+10 1.69% 58.17 489.76 AAA 5.24
Cheadle,Asset Mene,anni-CONFIDENTIAL 38
C�" Orange County Sanitation District Long Term Holdings Report
Account#10268 A.of 12/31/15
Purchase Do:a Cost Va:u: Mid Price Market Value %of Pod. MoodyIS&P Maturity
CUSIP Security Description Par Value/Units Book Yie d Book Va Mkt Y7M Accrued Ind. Gain/Loss Fitch Duration
MBS
31348SWZ3 FHLMC FH 786064 2,640.61 02/18/2000 2,576.30 103.48 2,732.42 0.00% Ann/AA+ 12.01
2.617%Due 11112028 2.81 % 2,612.90 2.29% 5.76 119.52 AAA 0.94
31371NUC7 FNMA FN 257179 34,333.63 12/05/2011 36,311+18 108.00 37,081.25 0.01 % Aaa/AA+ 12.26
4.5%Due 4/l/2028 3.72% 35,819+37 2.05% 128.75 1,261.88 AAA 3.50
3141TAV3 FNMA Pool#FN MA0022 39,886,66 1210512011 42,184A3 108.00 43,078.67 0.01 % Aae/AA+ 13.26
4.5%Due 4/1/2029 3.76% 41,645.67 2.15% 149.57 1,433.00 AAA 3.62
3138EG6F6 FNMA FN AL0869 25,109.83 12/052011 26,556Al 108.00 27,119.29 0.01 % Aaa/AA+ 13A3
4.5%Due 6/1/2029 3.77% 26,220.44 2.13% 21.97 898.85 AAA 3.43
03215PFN4 AMRESCO Residential Securities 1999-1 133,743.29 OW2012011 100,432+85 86.85 116,293.80 ON% NR I AA+ 13.49
A 4.86% 108,918.01 2.67% 35.42 7,375.79 BBB 11.04
1.362%Due 612512029
3837H4NX9 GNMA PooI#2000-9 46,275.99 01242000 46,275S9 100.37 46,445.82 0.01 % Aaa/AA+ 14.14
0.86%Due 2116IM30 0.86% 46,275+99 0.71% 30.W 169.83 AAA 0.03
36225CNM4 GNMA Pool#G280395 11,981.52 031IW2000 11,872.91 102.67 12,301.22 0.00% Asa/AA+ 14.31
1.75%Due 412012030 1.81% 11,929.59 1.58% 17.47 371.63 AAA 4.75
36225CN28 GNMA Pool#G280408 104,093.42 03/192000 103,036.23 102.58 106,778.20 0.03% Aaa/AA+ 14.39
1.75%Due 5/20/2030 1.81 % 103,586.40 1.65% 151.80 3,191.80 AAA 5.46
31403GXF4 FNMA Pool#FN 748678 6,10,115 0611012013 6,561.97 110.0 6,752.74 0.00% Aaa/AA+ 17.76
5%Due 101112033 4.18% 6,506.16 2.06% 25.43 246.58 AAA 3.65
36225DCB8 GNMA Pool#G280965 102,092.75 07119/2004 102,028.95 103.58 105,749.00 0.03% Aaa/AA+ 18.56
1.875%Due 712012OU 1.88% 102,063.17 1.50% 159.52 3,695.83 AAA 4.83
31406XWT5 FNMA Pcol#FN 8233M 188,421.24 01/11/2006 186,949.20 105.92 199,571.26 0.06% Aaa/AA+ 19A0
2.283%Due 21112035 2.34% 187,453+17 0.36% 358.47 12,118+09 AAA 0.85
31406POV8 FNMA Pool#FN 815971 412,212.93 0611012013 443,128.91 110.19 454,207.12 0.14% Ass/AA+ 19.18
5%Due 311/2035 4.21 % 439,606.39 2.21% 1,717.55 14,600.73 AAA 3.85
31407BXH7 FNMA Pcol#FN 826080 41,857.37 M/10/2013 44,996S7 110.27 46,157.63 0.01 % Aaa/AA+ 19.51
5%Due 7/l/2035 4.22% 44,6"A2 2.22% 174.41 1,513.21 AAA 3.87
31376KT22 FNMA FN 357969 235,000.60 0611012013 252,625+65 110.36 259,339.14 0.08% Aaa/AA+ 19.68
5%Due 911=35 4.22% 250,663.19 2.23% 228.47 8,675.95 AAA 3.88
83611MGS1 Soundvlew Home Equity Loan Tr.2005- 43,521.78 09/13/2011 38,421.58 99.61 43,349.87 0.01 % NR/AAA 19.92
OPTS A4 1.80% 39,327.12 3.94% 6.11 4,022.75 A 0.12
0.722%Due 11/25/2035
31403DJZ3 FNMA Poo14745580 222,571.65 0611012013 239,264.52 110.30 245,503.43 0.08% Aaa/AA+ 20.43
5%Due 611W36 4.26% 237,466.80 2.24% 927.38 8,036.63 AAA 3.89
3141OF4V4 FNMA Pool#FN 8883M 444,085.02 W/1012013 477,391.40 110.21 489,415.44 0.16% Aaa/AA+ 20.52
5%Due 111/2036 4.25% 4T3,81 T.33 2.23% 1,850.35 16,598.11 AAA 3.88
31397OREO FNMA FNR 2011-3 FA 453,954.45 12/20/2010 453,812.59 101.15 459,165.85 0.15% Aaa/AA+ 25.17
1.102%Due 212512041 1.10% 453,835+82 0.80% 83.37 5,330.03 AAA 0.09
Chandler Asset Mana9emeM-CONFIDENTIAL 39
C�" Orange County Sanitation District Long Term Holdings Report
Account#10268 As of 12/31/15
Purchase Da:a Cost Va:u: Mid Price Market Value %of Pod. MoodyfS&P Maturity
CUSIP Security Description Par Value/Units Book Yie d Book Va Mkt YTM Accrued Ind. Gain/Loss Fitch Duration
MBS
313NJY35 FHLMC FSPC T-582A 1,090,981.53 06/09/2011 1,235,536.56 116.17 1,267,415.06 0.40% Ann/AA- 2775
6.5%Due 9/25/2043 5.40% 1,215,160.81 3.42% 1,181.90 52,254.25 AAA 5.14
4,274,155.14 4,418,951.48 1.41 % Aaa I AAt 20.64
Total MBS 4,069,767.76 3.89% 41 2.31% 7,593.65 163,916.95 As. 3.92
MONEY MARKET FUND Fit MEW
261908107 Dreyfus Short Intermediate Gov Treasury 14,810,500.02 Various 14,810,500,02 1.00 14,810,500.02 4.71 % Aso/AAA 000
Cash Management Fd521 0.09% 14,810,500,02 0.09% 0.00 0.00 AAA 0.00
14,810,500.02 14,810,500.02 4.71 % Aaa I AAA 0.00
Total Money Market Fund FI 14,810,500.02 0.09% 14,810,500.02 0.09% 0.00 0.00 Me 0.00
MUNICIPAL BONDS
73358WAG9 Pon Authority of NY&NJ TE-REV 2,440,000.00 Various 2,501 Ill.% 2,731,775.20 0.87% Aa3/AA- 3.92
5.309%Due 12/1/2019 4.97% 2,465,428+56 2.11 % 10,794.97 266,346.64 AA- 3.56
64971M5E8 New York NY TE-REV 1,400,000.00 10/27/2010 1.400,000.00 106.49 1,490,874.00 0.48% Aal/AAA 4.84
4.075%Due 11/l/2020 4.08% 1.400,000.00 2.64% 9,508.33 90,874.00 AAA 4.37
913361 Univ of California Rots Med TE-REV 400,000.00 11/09/2010 400,000.00 111.28 445,108.00 0.14% Aa3/AA- 5.38
5.035%Due 5/15/2021 5.04% 400,000.00 236% 2,573.44 45,108.00 NR 4.72
4,307,633.89 4,667,757.20 1.49% Aa2/AA 4.35
Total Municipal Bonds 4,240,000.00 4.68% 4,265,420.56 2.34% 22,876.74 402,328.64 AA 3.93
SUPRANATIONAL
4595OK3S8 International Finance Corp Note 5,000,000.00 03/16/2015 5,0201 Will 4,991,925.00 1.59% Aaa/AAA 1.32
1%Due 4/24/2017 0.80% 5,012,893.76 1.12% 9,305.56 (20,968.76) NR 1.30
4581XOCGI IMer-American Dev Bank Note 5,000,000.00 0612212015 5.019,550.00 99.85 4,992,430.00 1.59% Aaa/AAA 1.54
1%Due 7/14/2017 0.81 % 5.014,558.51 1.10% 23,191 (22,128.51) AAA 1.51
4590MEJB Intl.Bank Recon&Development Note 3,000,000.00 04/22/2015 2,994,870.00 99.17 2,975,034.00 0.95% Aaa/AAA 2.46
1%Due 6/15/2018 1.06% 2,995,975.06 1.35% 1,333.33 (20,941.06) AAA 2.41
13,035,120.00 12,959,381 4.13% Mal AAA 1.66
Total Supranational 13,000,000.00 0.86% 13,023,427.33 1.17% 33,833.33 (64,038.33) Me 1.64
US CORPORATE
38141GEG5 Goldman Sachs Group Inc Note 2,000,000.00 01/04/2011 1,895,068.00 99.91 1,998,112.00 0.63% A3/BBBa 0.22
1.036%Due 3/22/2016 2.09% 1,995,528.94 1.45% 575.28 2,583.06 A 0.23
891 Toyota Motor Credit Corp Note 5,200,000.00 OW14IM13 5,200,000+00 100.03 5,201,331.20 1.65% Aa3/AA- 0.38
0.657%Due 5/17/2016 0.66% 5,200,000.00 0.59% 4,176.24 1,331.20 A 0.13
Chandler Asset Man,ameM-CONFIDENTIAL 40
OROrange County Sanitation District Long Term Holdings Report
Account#10268 As of 12/31/15
Purchase Da:a Cost Vs:u: Mid Price Market Value %of Pod. MoodyIS&P Maturity
CUSIP Security Description Par Value/Units Book Yie d Book Vs Mkt YlrM Accrued Int. Gain/Loss Fitch Duration
US CORPORATE
0605OTLXB Bank of America Note 600,000.00 05/01/2014 600,000.00 99.75 598,518.00 0.19% Al/A 1.35
0.➢61%Due 518/2017 0.76% 600,000.00 0.95% 672.57 (1,482.00) NR 0.10
94988J210 Wells Fargo Bank Callable Note Ghly 500,000.00 0610512014 W0,000.00 99.63 498,150.50 0.16% Aa2/AA- 1.46
6/15/2016 0.79% W0,000.00 1.04% 174.61 (7,848.50) AA 0.21
0.786%Due 611512017
060505DP6 Bank of America Corp Note 3,800,000.00 01/15/2014 4,334,014.00 106.98 4,065,050.00 1.W% Baal/BBB+ 1S2
5.75%Due 121112017 1.95% 4,065,113.33 2.02% 18,200.33 (63.33) A 1.82
166764AA8 Chevron Corp Callable Note Cant 4,000,000.00 121N12014 3,977,200+00 99.31 3,972,496.00 1.26% Art/AA 1.93
11AV17 1.30% 3.985,301.10 1.48% 3,189.33 (12,805.10) NR 1.82
1.104%Due 121512017
458140AL4 Intel Corp Note 2,000,000.00 01/26/2015 2,008,280.00 100.13 2,002,660.00 0.64% At/A+ 1.96
1.35%Due 12/15/2017 1.20% 2,005,625.04 1.28% 1,200.00 (2,965.04) A+ 1.92
40428HPH9 HSBC USA Inc Note 3,000,000.00 Various 3,003,290+00 99.50 2,985,141.00 0.96% A2IA 2.05
1.625%Due 111612018 1.59% 3.002,251.77 1.87% 22,343.75 (17,110.77) AA- 1.98
38141 GFG4 Goldman Sachs Group Inc Note 600,000.00 Various 692,806.00 107.70 646,186.20 0.21 % A31 BBB+ 2.05
5.95%Due 1/18/2018 2.72% 636,732.71 2.09% 16,164.17 9,453.49 A 1.89
674599CD5 Occidental Petroleum Callable Note Cant 2,000,000.00 01/0612015 1,986,340.00 98.T/ 1,975,436.00 0.63% A2/A 2.13
1/15/18 1.73% 1,990,W+17 2.12% 11,333.33 (15,208.17) A 1.99
1.5%Due 2/15/2018
025816AV5 American Express Credit Note 2,900,000.00 Various 3.377,385.79 110.90 3,216,076.80 1.04% A3/BBB+ 2.22
7%Due 3/192018 4.29% 3,048,896.25 1S5% 57,516.67 167,180.55 A+ 204
073902CD8 Bear Stearns Note 3,200,000.00 0111512014 3,523,520+00 106.T, 3,416,768.00 1.11 % MINR 2.50
4.65%Due 712/2018 2,25% 3,381,992.46 1.87% 73,986.67 34,]]5.54 A. 2.32
532457BF4 Ell Lilly 8 Co Note 4,000,000.00 Various 4.009,675.00 100.86 4,034,404.00 1.29% A2/AA- 3.21
1.95%Due 3/15/2019 1.89% 4,007,26]]1 1.67% 22,966.67 27,136.29 A 3.08
02665WAH4 American Honda Finance Note 2,000,000.00 03/1312015 2,019,540.00 100.25 2,004,922.00 0.64% Al/A+ 3.62
2.25%Due BIIW2019 2.02% 2,016,034.69 2.18% 17,000.00 (11,112.69) NR 3.43
24422ESS9 John Deere Capital Corp Note 5,000,000.00 Various 5,046,984.00 100.38 5,019,010.00 1.61 % A21 A 3.71
2.3%Dua 9/16/2019 2.07% 5,039,754.92 2.19% 33,541.67 (20,744.92) NR 3.51
36962G7MO General Electric Capital Corp Callable 5,000,000.00 Various 5,014,960.00 100.37 5,018,520.00 1.61 % At/AA+ 4.03
Note 1X 1MI2019 2.13% 5,012,450.43 2A0% 52,555.55 6,069.67 NR 3.72
2.2%Due 1/9/2020
46625HKA7 JP Morgan Chase Callable NOW Cant 2,000,000.00 021MIN15 1,994,880.00 96.38 1,967,562.00 0.63% A3/A- 4.07
12/23/2019 2.30% 1.995,998.03 2.69% 19,750.00 (28,236.03) A+ 3.81
2.25%Due 1/23/2020
747525AD5 Oualcomm Inc Note 5,000,000.00 05/1912015 4,995,195.40 99.03 4,951,405.00 1.58% Al/A+ 4.39
2.25%Due 5/20/2020 2.27% 4,995,785.11 2.48% 12,812.51 (44,380.11) NR 4.14
94974BGM6 Wells Fargo Corp Note 5,000,000.00 0711612015 5,001,650.00 99.74 4,987,190.00 1.60% A2/A 4.56
2.6%Due 7/22/2020 2.59% 5.001,502.79 2.66% 57,416.67 (14,312.79) AA- 4.22
Chandler Asset Nfim,amem-CONFIDENTIAL 41
C�" Orange County Sanitation District Long Term Holdings Report
Account#10268 As of 12/31/15
Purchase Da:a Cost Va:u: Mid Price Market Value %of Pod. Ml Maturity
CUSIP Security Description Par Value/Units Book Yie d Book Va Mkt YTM Accrued Int. Gain/Loss Fitch Duration
US CORPORATE
61747WAL3 Morgan Stanley Note 2,800,000.00 06/06/2014 3,200,848.00 112.04 3,137,Wsh 1.02% A3IBBB+ 5.58
5.5%Due]/28/2021 3.24% 3,113,258.71 3.13% 65,450.00 23,782.89 A 4.75
62,381,626.19 61,695,980.30 19.76% A2/A+ 2.92
Total US Corporate 60,600,000.00 2.05% 61,593,938.16 1.96% 491,034.02 102,042.14 A+ 2.68
US TREASURY
912828MI US Treasury Note 7,500,000.00 01/13/2015 7,512,91535 1N.01 7,500,375.00 2.39% Ass/AA+ 0.08
0.375%Due 113112016 0.21 % 7,501,014.33 0.32% 11,769.70 (639.33) AAA 0.08
91282BD31 US Treasury Note 3,500,000.00 OW2812014 3,500,340.41 100.02 3,500,784.00 1.11 % Aaa/AA- 0.33
0.089%Due 4/30/2016 0.08% 3.500,058.27 0.02% 527.68 725.73 AAA 0.08
912828DM US Treasury Note 12,000,000.00 0910812014 11,997,656.25 99.89 11,986,404A0 3.81 % Aaa/AA+ 0.67
0.5%Due&31/2016 0.51 % 11,999,211.18 0.67% 20,274.73 (12,807.18) AAA 0.66
91282BG46 US Treasury Note 11,000,000.00 Various 10,974,971.75 99.73 10,970,784.00 3.49% Aaa/AA+ 0.92
0.5%Due 11IN12016 0,62% 10,988,301.00 0.79% 4,808.74 (17,517.00) AAA 0.91
912828SS0 US Treasury Note 7,500,000.00 121UI2015 7.500,611.06 99.96 7,496,775.00 2.39% Aaa/AA+ 1.33
0.875%Due 4/30/2017 0.87% 7,500,599.93 0.91% 11,177.88 (3,824.93) AAA 1.32
91282BG20 US Treasury Note 10,000,000.00 Various 9,948,783.50 99.65 9,965,230.00 3.17% Aaa/AA+ 1.88
0.875%Due 11/15/2017 1.05% 9,967,089.66 1.06% 11,298.00 (1,859.66) AAA 1.85
912828B33 US Treasury Nate 11,000,000.00 Various 11,042,439.19 100.35 11,038,676A0 3.53% Aaa/AA+ 3.09
1.5%Due 1/31/2019 1.37% 11.042,187.17 1.38% 69,WSSI (3,511.17) AAA 2.99
912828WS5 US Treasury Note 10,000,000.00 Various 9,984,307.21 100.45 10,044,920.00 3.19% Aaa/AA+ 3.50
1.625%Due 6/30/2019 1.66% 9,988,885.23 1A9% 446.43 56,034.77 AAA 3.39
912828WW6 US Treasury Note 10,000,000.00 Various 10,024,777.40 1W.35 10,034,770.01 3.21 % Aaa/AA+ 3.58
1.625%Due 7/31/2019 1,57% 10,017,878.39 1.52% 68,002.72 16,891.62 AAA 3.45
912828F39 US Treasury Note 5,800,000.00 10/27/2014 5.873,186.87 100.68 5,839,196.40 1.86% Aaa/AA+ 3.75
1.75%Due 9/30/2019 1.48% 6.866,683.89 1.66% 25,790.98 (16,487.49) AAA 3.60
91282BG61 US Treasury Note 7,500,000.00 12/19/2014 7,449,634.50 99.60 7,470,120.00 2.38% Aaa/AA+ 3.92
1.5%Due 11/30/2019 1.64% 7,460,104.05 1.61% 9,8W.07 10,015.95 AAA 3.78
91282BL99 US Treasury Note 5,500,000.00 Various 5,424,666.87 98.23 5,402,892A0 1.72% Aaa/AA- 4.84
1.375%Due 10/31Q020 1.67% 5.425,862.81 1.76% 12,881.18 (22,970.81) AAA 4.64
Chandler Asset Management-CONFIDENTIAL 42
C�" Orange County Sanitation District Long Term Holdings Report
Account#10268 As of 12/31/15
Purchase Da:a Cost Va:u: Mild Price Market Value %of Pod. MoodyIS&P Maturity
CUSIP Security Description Par Value/Units Book Yie d Book Va Mkt YTM Accrued Ind. Gain/Loss Fitch Duration
US TREASURY
912828WUO US Treasury Inflation Index Note 10,417,368.00 Various 10,302,585.00 94.97 9,893,655.66 3.15% Ann/AA- 8.55
0.125%Due 7/15/2024 0.24% 10,318,964.54 013% 6,015.47 (425,308.88) AAA 8.46
111,536,876.76 111,1",582.07 35.39% Ass I AA+ 2.84
Total US Treasury 111,717,368.00 1.00% 111,565,840.45 1.08% 251,878.57 (421,258.38) As. 2.76
314,607,012.67 313,753,445.14 100.00% Aai I AA+ 2.87
TOTAL PORTFOLIO 312,879,296.55 1.30% 313,739,279.S7 1.32% 1,011,159.63 14,165.57 Aaa 2.42
TOTAL MARKET VALUE PLUS ACCRUED 314,784,604.77
Chandler Asset Management-CONFIDENTIAL 43
Orange County Sanitation District Liquid Holdings Report Accountg10282 As of 12/31/15
Purchase D.:o Cost V.:u: Nut Price Market Value %of Pod. Moodl Maturity
CUSIP Security Description Par Value/Units Book Yie d Book Va Mkt YTM Accrued Int. Gain/Loss Fitch Duration
AGENCY Im
313312SG6 FFCB Discount Note 10,000,000.00 12/22/2015 9,997,763.90 99.98 9,998,402.79 7.58% P-1IA-1+ 0.07
0.23%Due 1/26/2016 0.46% 9,998,402.79 0.46% 638.89 0.00 F-1+ 0.07
313588SH9 FNMA Discount Note 2,000,000.00 0813112015 1,998,079.56 Was 1,999,664.89 1.52% P-1IA-1+ 0.07
0.23%Due 112712016 0.24% 1,899,664.89 0.24% 0.00 0.00 F-1+ 0.07
313396SH9 FHLMC Discount Note 9,600,000.00 Various 9.596,651.88 99.99 9,598,715.88 7.27% P-1/A-1+ 0.07
0.185%Due 112712016 0.19% 9,598,715.88 0.19% 0.00 0.00 F-1+ 0.07
313384SH3 FHLB Discount Note 13,000,000.00 Various 12,996,538.33 99.99 12,997,849.16 9.85% P-1/A-1+ 0.07
0.25%Due 112712016 0.25% 12,997,649.16 0.25% 0.00 0.00 F-1+ 0.07
313396SJ3 FHLMC Discount Note 900,000.00 1012012015 899,725.00 99.99 899,925.75 0."% P-1 I A-1+ 0.08
0.11%Due 1/2612016 0.11% 899,925.75 0.11% 0.00 0.00 F-1+ 0.08
313384SK6 FHLB Discount Note 3,300,00D00 Various 3.298,935.89 99.99 3,299,690.44 2.W% P-1/A-1+ 0.08
0.123%Due 112912016 0.12% 3,299,690.44 0.12% 0.00 0.00 F-1+ 0.08
313384SS9 FHLB Discount Note 2,000,000.00 09/032015 1,997,761.11 99.97 1,999,494.44 1.52% P-11A-1+ 0.10
0.26%Due 2152016 0.26% 1,999,494.44 0.26% 0.00 0.00 F-1+ 0.10
313396TS2 FHLMC Discount Note 2,000,000.00 0910312015 1.997,116.11 99.95 1,999,049.d4 1.51 % P-1 IA-1+ 0.16
0.29%Due 2I29I2016 0.29% 1,999,049.44 0.29% 0.00 0.00 F-1+ 0.16
313384UW7 FHLB Discount Note 3,000,000.00 09/29/2015 2,996,380.00 99.94 2,998,260.00 2.27% P-1IA-1+ 0.24
0.24%Due 312812016 0.24% 2,998,260.00 0.24% 0.00 0.00 F-1+ 0.24
3133MYFO FHLB Discount Note 985,000.00 121KI2015 882,223.94 99.73 982,379.90 0.74% P-11A-1+ 0.46
0.57%Due 611712016 1.14% 982,379.90 1.14% 155.96 0.00 F-1+ 0.46
313312YJ3 FFCB Discount Note 1,075,000.00 12I22I2015 1,071,811.13 99.72 1,071,987.31 0.81 % P-1IA-1+ 0.47
0.59%Due 6/20/2016 1.18% 1,071,987.31 lA8% 176.18 0.00 F-1+ 0.47
313384YN3 FHLB Discount Note 4,000,000.00 1212912015 3,988,331+11 99.71 3,988,527.78 3.02% P-1IA-1+ 0.48
0.59%Due 6/2412016 060% 3,988,52778 060% 0.00 0.00 F-1+ 048
51,821,317.96 51,833,747.78 39.28% P-11A-1+ 0.13
Total Agency 51,860,000.00 0.33% 51,833,747.78 0,33% 971.03 0,00 F-1+ 0,13
COMMERCIAL PAPER
69372AAN2 Paccar Financial Discount CP 21200,000.00 Various 2.199,273+06 99,98 2,199,64417 1.67% P-1/A-1 0.06
0.277%Due 112212016 0.28% 2,199,644.17 028% 0.00 0.00 NR 0.06
30229AAU3 Exxon Mobil Discount CP 2,000,000.00 12/18/2015 1,999,088.88 99.97 1,999,399.99 1.52% P-1/A-1+ 0.08
0.4%Due 1/28/2016 0.41 % 1,999,399.99 0.41% 0.00 0.00 NR 0.08
0653BBAV5 Bank of Tokyo Mitsubishi NY Discount 1,200,000.00 1212112015 1,199,428.00 99.97 1,199,589.33 0.91 % P-1/A-1 0.08
CP 0,45% 1,199,589.33 0.45% 0.00 0.00 F-1 0.08
D."%Due 1IN12016
89233GBN5 Toyota Motor Credit Discount CP 1,000,000.00 W/26/2015 997,750.00 99.94 999,350.00 0.76% P-1IA-1+ 0.16
0.45%Due 2222016 0.46% 999,350.00 OAS% 0.00 0.00 F-1+ 0A4
0653BBBR3 Bank of Tokyo Mitsubishi NY Discount 1,000,000.00 1,272015 998,700.00 99.94 999,404.17 0.76% P-1/A-1 0.15
CP 0.40% 999,404.17 0.40% 0.00 0.00 F-1 0.15
0.39%Due 212512016
Chandler Asset Mane,annl-CONFIDENTIAL 44
Orange County Sanitation District Liquid Holdings Report
Accountg10282 As of 12/31/15
Purchase D.:o Cost V.:u: Mot Price Market Value %of Pod. MoodyIS&P Maturity
CUSIP Security Description Par Value/Units Book You d Book Va Mkt YTM Accrued Int. Gain/Loss Fitch Duration
COMMERCIAL PAPER
e�
21687ACA9 Rabobank Nederland NV NY Discount 1,000,000.00 11/16/2015 998,]54.17 99.93 999,252.50 0.76% P-1I A-1 0.19
CP 0.40% 999,252,50 0.40% 0.00 0.00 NR 0.19
0.39%Due 311012016
8,392,994.11 8,396,640.16 6.36% P-1/A-1 0.10
Total Commercial Paper 8,400,000.00 0.38% 8,396,640.16 0.38% 0.00 0.00 F-ta 0.10
MONEY MARKET FUND FI
261908107 Dreyfus Short-Intermediate Gov Treasury 12,950,117.86 Various 12,950,117,86 1.00 12,950,117.86 9.81 % Aaa I AAA 000
Cash Management Fd521 0.09% 12,950.119.86 009% 0.00 0.00 AAA 000
12,950,117.86 12,950,117.86 9.81 % Aaa/AAA 0.00
Total Money Market Fund Fl 12,950,117.86 0.09% 12,950,117,86 0,09% 0.00 0,00 Aaa 0.00
NEGOTIABLE CD
216MBPVO RaboBank Nederland NV NY Negotiable 11000,000.00 1212212015 999,830,00 99.98 999,841.33 0.76% Aa2/NR 0.35
CD 0,76% 999,841,33 016% 1,094.27 0,00 NR 035
0.716%Due 51612016
999,830.00 999,841.33 0.76% Aa21 NR 0.35
Total Negotiable CD 1,000,000.00 0.76% 999,841.33 0.76% 1,094.27 0.00 NR 0.35
SUPRANATIONAL
45950VCJ3 International Finance Corp Note 2,500,000.00 1212912015 2,498,750.00 99.92 2,498,017.50 1.89% Aaa I AAA 0.38
0.5%Due S/16/2016 0.63% 2,498,768.12 011% 1,562.50 (750.62) AAA 0.37
2,498,750.00 2,498,017.50 1.89% Aaa I AAA 0.38
Total Supranational 2,500,000.00 0.63% 2,498,768.12 0.71% 1,562.50 (750.62) Aaa 0.37
US CORPORATE
674599BZ7 Occidental Petroleum Note 1,100,000.00 0412012015 1,116,489,00 100.08 1,100,919.60 0.84% A2/A 0.09
2.5%Due 2/1/2016 0.55% 1,101,799,86 148% 11,458.33 (880.26) A 0.08
74005PBE3 Praxeir Note 11000,000.00 0612512015 1,001,530.00 100100 1,000,045.00 0116% A21A 0.14
0.75%Due 2/21/2016 0.51 % 1.000,330." 0.72% 2,708.33 (285.64) NR 0.14
46623EJU4 JP Morgan Chase Note 1,000,000.00 03/20/2016 1.002,380.00 100.05 1,000,456.00 0.76% A3/A- 0.16
1.125%Due 2126/2016 0.86% 1,000,394.32 0.82% 3,901 61.68 A+ 0.15
713448CE6 Pepsin Inc.Note 1,000,000.00 0711 W2015 1,001,130+00 Was 999,755.00 0.76% Al/A 0.16
0.7%Due 2R6/2016 0.51 % 1,000,286.33 0.86% 2,430.56 (531.33) A 0.15
437076AP7 Home Depot Note 1,000,000.00 0612512015 1.032,590.00 100.70 1,007,032.00 0.78% A2/A 0.17
5.4%Due 3/1/2016 0.52% 1.007,981.22 1.15% 18,000.00 (949.22) A 0.17
Chandler Asset Man,anart-CONFIDENTIAL 45
Orange County Sanitation District Liquid Holdings Report Accountg10282 A.of 12/31/15
Purchase D.:o Cost V.:u: Mid Price Market Value %of Pod. MoodyIS&P Maturity
CUSIP Security Description Par Value/Units Book Yie d Book Va Mkt YTM Accrued Ind. Gain/Loss Fitch Duration
us�ATB AL
8574TTAH6 State Street Bank Note 1,000,000.00 05/11/2015 1,019,240.00 100.35 1,003,523.00 0]]% A21A 0.18
2.875%Due 3O12016 0.50% 1,004,261.21 0.94% 9,104.17 (738.21) AA- 0.18
36962G6Z2 General Electric Capital Corp Note 1,000,000.00 0612612015 1,007,290.00 100.48 1,004,833.00 on% Al/AA+ 0.53
1.5%Due T/12/2016 0.65% 1,004,452.44 0.59% 7,041.67 380.56 NR 0.53
94974BFL9 Wells Fargo Corp Note 1,000,000.00 1212112015 1.001,890.00 100.16 1,001,580.00 0.76% A2/A 0.55
1.25%Due 7/20/2016 0.92% 1,001,798A2 0.96% 5,590.28 (218.42) AA- 0.56
06406HBX6 Bank of New York Note 1,000,000.00 1212112015 1,008,760.00 100.85 1,008,466.00 o.n% Al/A 0.58
2.3%Due 7/28I2016 0.82% 1,008,437.05 0.82% 9,775.00 28.95 AA- 0.57
084670B83 Berkshire Hathaway Note 1,000,000.00 M12612015 1,014,170.00 100.85 1,008,499.00 O.TT% Aa2/AA 0.62
2.2%Due 8/15/2016 0.71% 1.009,190.26 0.83% 8,311.11 (691.28) A+ 0.61
191216AU4 Coca We Company Note 1,000,00D00 12/21/2016 1.006,460.00 100.64 1,006,417.00 o.T % As3/AA 0.67
1.8%Due 9/1/2016 0.85% 1,006,245.24 OA3% 6,000.00 171.76 A+ OAS
02665WAB7 American Honda Finance Note 1,000,000.00 1212112015 1,001,660.00 100.08 1,000,801.00 0.76% Al/A+ 0.77
1.125%Due 10/712016 0.91% 1,001,613+89 1.02% 2,62500 (812.89) NR 0.76
24422ESD2 John Deere Capital Corp Note 1,000,000.00 12/21/2015 1.001,070.00 100.12 1,001,169.00 0.76% A2I A 0.78
1.05%Due 1011112016 0.91% 1,001,040.68 0.90% 2,333.33 128.32 NR 0.77
91159HHB9 US Bancorp Callable Note Cant 1,000,000.00 1212112015 1,009,900.00 lW.96 1,009,639.00 O.n% Al/A+ OAS
1011412016 ow% 1,009,631+53 109% 2,811.11 7.47 AA 0.86
2.2%Due 1111 512 01 6
14.224,529.00 14,153,134.60 10.79% At/A+ a."
Total US Corporate 14,100,000.00 0.73% 14,157,463.09 693% 92,095.14 (4,328.49) A+ a."
USTRFASURY -
912796GY9 US Treasury Bill 91000,000.00 1212312015 8,998,743+50 99.99 8,999,102.50 6.82% P-11A-1+ 0.06
0.18%Due 1/2112016 0.18% 8.999,102.50 0A8% 0.00 0.00 F-1+ 0.06
912796GZ6 US Treasury TBILL 10,000,000.00 12/21/2015 9,998,448.33 99.99 9,998,897.50 7.58% P-11A-1+ 0.08
0.15%Due 1128/2016 0.30% 9,998,897.50 0.30% 458.33 0.00 F-1+ 0.08
912828GP8 US Treasury Note 2,000,000.00 0912112015 2,020,006.70 100.52 2,010,390.00 1.53% Aaa/AA+ 0.42
1.75%Due W3112016 0.29% 2,011,988+14 0.50% 3,060.11 (1,598.14) AAA 0.41
912828VG2 US Treasury Note 14,000,000.00 Various 14,001,609.40 99.99 13,998,908.00 10.61 % Aea/AA+ 0.46
0.5%Due 6/15/2016 0.48% 14,001,568.35 0.52% 3,251.36 (2,6W.35) AAA 0.46
912828VLI US Treasury Note 3,000,000.00 12/1512015 2,999,541.30 100.01 3,000,234.00 2.28% Ass/AA+ 0.54
0.625%Due 711512016 0.65% 2,999,575.92 0.61% 8,661.68 658.08 AAA 0.54
Chandler Asset Management-CONFIDENTIAL 46
Orange County Sanitation District Liquid Holdings Report
("ARAccountg10282
As of 12/31/15
Purchase D.:o Cost V.:u: Mid Price Market Value %of Pod. MoodyIS&P Maturity
CUSIP Security Description Par Value/Units Book Yie d Book Va Mkt Y7M Accrued Ind. Gain/Loss Fitch Duration
US TREASURY
912828VW7 US Treasury Note 3,000,000.00 12/15/2015 3,003,760.05 100.13 3,003,750.00 2.28% Ann/AA- 0.71
0.875%Due 9/15/2016 0.71 % 3,003,540.49 0,70% 7,788.46 209.51 AAA 0.70
41,022,109.26 41,011,282.00 31.10% P-1/A-1 0.30
Total US Treasury 41,000,000.00 0.39% 41,014,662.90 0A1% 23,219.94 (3,380.90) F-1* 0.30
131,909,648.21 131,842,781.23 100.00% P-21 A-1 0.21
TOTAL PORTFOLIO 131,810,117.86 0.38% 131,851,241.24 0A1% 118,942.88 (8,460.01) F-N 0.21
TOTAL MARKET VALUE PLUS ACCRUED 131,961,724.11
Chandler Asset M.r,anneM-CONFIDENTIAL 47
OROCSD Lehman Exposure Holdings Report
Account#10284 As of 12/31/15
Purchase On:a Cost Va Mkt Price Market Value %of Pod. MoodyIS&P Maturity
CUSIP Security Description Par Value/Units Book Yin d Book V. Mkt YTM Accrued Int. Gain/Loss Fitch Duration
COMMON STOCK
SLHOPNTA4 Lehman Brothers,Inc Open Position 68,128.13 11/21/2014 68,128.13 0.42 28,184.13 16.93% NR/NR 0.00
Long Exposure 0.00% 68,128A3 0.00% 0.00 (39,3 .00) NR 0.00
Due 1M1/2015
68,120.13 20,784.13 16.93% NR/NR 0.00
Total Common Stock 68,128.13 NIA 68,128.13 0.00% 0.00 (39,344.00) NR 0.00
US CORPORATE se
525ESCI67 Lehman Brothers Note-Defaulted 600,000,00 09/19/2008 372,962,90 5.63 33,750.00 19.85% NRINR OOT
Due 112412016 0.00% 372,962.90 000% 0.00 (339,212.90) NR 000
525ESCOV6 Lehman Brothers Note-Defaulted 2,000,000,00 09/18/2008 1,207,166MI) 5.38 107,500.00 63.22% NR/NR 3383
Due 10/2212049 0.00% 1,207,166.09 0.00% 0.00 (1,099,666.09) NR 0.00
1,00,128.99 141,250.00 83.07% NR/NR 25.76
Total US Corporate 2,600,000.00 N/A 1,580,128.99 0.00% 0.00 (1,438,878.99) NR 0.00
1,648,257.12 170,034.10 100.00% NRINR 21.40
TOTAL PORTFOLIO 2,668,128.13 NIA 1,648,257.12 0.00% 0.00 (1,478,222.99) NR 0.00
TOTAL IMRKEr VALUE PLUS ACCRUED 170,030.13
Chandler Asset Management-CONFIDENTIAL 48
Rating Agency Comparisons
A summary of investment grade ratings are listed below. More complete descriptions of
Moody's and Standard & Poor's ratings are included in the following pages.
Quality/Grade Moody's Standard & Poor's Fitch
Best Quality Aaa AAA AAA
High Quality Aal AA+ AA+
Aa2 AA AA
Aa3 AA- AA-
Upper Medium Grade Al A+ A+
A2 A A
A3 A- A-
Medium Grade Baal BBB+ BBB+
Baa2 BBB BBB
Baa3 BBB- BBB1
Moody's - Investment Grade
"Aaa" - Bonds rated Aaa are judged to be of the best quality. They carry the smallest
degree of investment risk. Interest payments are protected by a large or by an
exceptionally stable margin and principal is secure. While the various protective elements
are likely to change, such changes as can be visualized are most unlikely to impair the
fundamentally strong position of such issues.
"Aa" - Bonds which are rated Aa are judged to be of high quality by all standards.
Together with the Aaa group they comprise what are generally known as high grade
bonds. They are rated lower than the best bonds because margins of protection may not
be as large as in Aaa securities or fluctuation of protective elements may be of greater
amplitude or there may be other elements present which make the long-term risks appear
somewhat larger than in Aaa securities.
"A" - Bonds which are rated A possess many favorable investment attributes and are to
be considered as upper medium grade obligations. Factors giving security to principal and
interest are considered adequate, but elements may be present which suggest a
susceptibility to impairment sometime in the future.
Mae" - Bonds which are rated Baa are considered as medium grade obligations; i.e.,
they are neither highly protected nor poorly secured. Interest payments and principal
security appear adequate for the present but certain protective elements may be lacking
or may be characteristically unreliable over any great length of time. Such bonds lack
outstanding investment characteristics and in fact have speculative characteristics as
well.
Bonds in the As, A, and Baa are also assigned "1", "2", or "S' based on the strength of
the issue within each category. Accordingly, "At" would be the strongest group of A
securities and "AY would be the weakest A securities.
Be, B, Caa, Ca, and C - Bonds that possess one of these ratings provide questionable
protection of interest and principal ("Be" indicates some speculative elements; "B"
indicates a general lack of characteristics of desirable investment; "Caa" represents a
poor standing; "Ca" represents obligations which are speculative in a high degree; and
"C" represents the lowest rated class of bonds). "Caa", "Ca" and "C" bonds may be in
default.
Standard and Poor's-investment Grade
AAA- Debt rated "AAA" has the highest rating assigned by S&P. Capacity to pay interest
and repay principal Is extremely strong.
AA - Debt rated "AA" has a very strong capacity to pay interest and repay principal and
differs from the highest rated issues only in small degree.
A - Debt rated "A" has a strong capacity to pay interest and repay principal although it is
somewhat more susceptible to the adverse effects of changes in circumstances and
economic conditions than debt in higher rated categories.
BBB - Debt rated "BBB" is regarded as having an adequate capacity to pay interest and
repay principal. Whereas it normally exhibits adequate protection parameters, adverse
economic conditions or changing circumstances are more likely to lead to a weakened
capacity to pay interest and repay principal for debt in this category than in higher rated
categories.
Standard and Poor's - Speculative Grade Retina
Debt rated "BB", "B", "CCC", "CC" and "C" is regarded as having predominantly
speculative characteristics with respect to capacity to pay interest and repay principal.
"BB" indicates the least degree of speculation and "C" the highest. While such debt will
likely have some quality and protective characteristics these are outweighed by major
uncertainties or major exposures to adverse conditions.
BB - Debt rated "BB" has less near-term vulnerability to default than other speculative
issues. However, it faces major ongoing uncertainties or exposure to adverse business,
financial, or economic conditions which could lead to inadequate capacity to meet timely
interest and principal payments. The "BB" rating category is also used for debt
subordinated to senior debt that is assigned an actual or implied "BBB" rating.
B - Debt rated "B" has a greater vulnerability to default but currently has the capacity to
meet interest payments and principal repayments. Adverse business, financial, or
economic conditions will likely impair capacity or willingness to pay interest and repay
principal. The "B" rating category is also used for debt subordinated to senior debt that is
assigned an actual or implied "BB" or "BB" rating.
CCC - Debt rated "CCC' has a currently identifiable vulnerability to default, and is
dependent upon favorable business, financial, and economic conditions to meet timely
payment of interest and repayment of principal. In the event of adverse business,
financial, or economic conditions, it is not likely to have the capacity to pay interest and
repay principal. The "CCC' rating category is also used for debt subordinated to senior
debt that is assigned an actual or implied 'B" or"B" rating.
CC - The rating "CC' typically is applied to debt subordinated to senior debt that is
assigned an actual or implied "CCC' debt rating.
C-The rating"C'typically is applied to debt subordinated to senior debt which is assigned
an actual or implied "CCC' debt rating. The "C' rating may be used to cover a situation
where a bankruptcy petition has been filed, but debt service payments are continued.
Cl -The rating "Cl" is reserved for income bonds on which no interest is being paid.
D - Debt rated "D" is in payment default. The "D" rating category is used when interest
payments or principal payments are not made on the date due even if the applicable grace
period has not expired, unless S&P believes that such payments will be made during such
grace period. The "D" rating also will be used upon the filing of a bankruptcy petition if
debt service payments are jeopardized.
Plus (+) or Minus (-) - The ratings from "AA" to "CCC' may be modified by the addition
of a plus or minus sign to show relative standing within the major rating categories.
NR-Indicates no rating has been requested,that there is insufficient information on which
to base a rating, or that S&P does not rate a particular type of obligation as a matter of
policy.
a
C�p
January 31, 2016
STAFF REPORT
Certificates of Participation (COP) Quarterly Report
for the Period Ended December 31, 2015
Summary
The District began issuing Certificates of Participation (COPS) in 1990. These COPS
were a part of our long-term financing plan that included both variable interest rate and
traditional fixed rate borrowing. Following are the current outstanding debt issues of the
District:
In May 2007, the District issued $95.18 million of fixed rate COPS, Series 2007A
refunding a portion of the Series 2003 fixed rate debt. The true interest cost for the
issue is 4.5 percent.
In December 2007, the District issued $300 million of fixed rate COPS, Series 2007B at
a true interest cost of 4.71 percent for the issue.
In September 2008, the District issued $27.8 million of fixed rate COPS, Series 2008B
refunding the Series 1993 variable rate debt. The true interest cost for the issue is 2.96
percent.
In May 2009, the District issued $200 million of fixed rate COPS, Series 2009A at a true
interest cost of4.72 percent for the issue.
In May 2010, the District issued $80.0 million of fixed rate BABs, Series 2010A at a true
interest cost of 3.68 percent for the issue.
In December 2010, the District issued $157.0 million of fixed rate BABs, Series 2010C
at a true interest cost of 4.11 percent for the issue.
In October 2011, the District issued $147.595 million of fixed rate COPS, Series 2011A
refunding a portion of the Series 2000 variable rate debt and a portion of the Series
2003 fixed rate debt. The true interest cost for the issue is 2.61 percent.
OCSD ♦ P.O.Box 8127 ♦ Fountain Valley,CA 9272B-B127 ♦ (714)962-2411
Quarterly COP Report
For the Three Months Ended December 31, 2015
Page 2 of 2
In March 2012, the District issued $100.645 million of fixed rate COPs, Series 2012A
refunding the Series 2003 fixed rate debt. The true interest cost for the issue is 3.54
percent.
In August 2012, the District issued $66.395 million of fixed rate COPS, Series 2012E
refunding the Series 2000 variable rate debt. The true interest cost for the issue is 1.50
percent.
With the issuance of Series 201213, there remains no variable interest rate COPS at the
District.
In August 2014, the District issued $85.090 million of fixed rate COPS, Series 2014A,
refunding a portion of Series 2007B debt. The true interest cost for the issue is 2.34
percent.
In October 2014, the District issued $120.850 million of fixed rate CANS, Series 201413,
refunding the Series 2013A CANS. The true interest cost for the issue is 0.41 percent.
In February 2015, the District issued $127.510 million of fixed rate COPs, Series 2015A,
refunding $152,990,000 of the Series 2007B debt. The true interest cost for the issue is
3.30 percent.
Additional Information
The graph entitled, "OCSD COP Rate History Report," shows the various fixed interest
rates of the District's twelve debt issues.
Attachments
1. Graph - OCSD COP Rate History Report
OCSD COP RATE HISTORY REPORT
DECEMBER 2015
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FY 2015-16 Second Quarter Financial Report
This Page Intentionally Left Blank
ORANGE COUNTY SANITATION DISTRICT
FINANCIAL MANAGEMENT DIVISION
10844 Ellis Avenue
Fountain Valley, California 92708-7018
714.962.2411
www.ocsewers.com
12/31/15
ADMINISTRATION COMMITTEE Meeting Dare TOBd.OfDir.
02/30/16 02/24/16
AGENDA REPORTItemNumber Item Number
Orange County Sanitation District
FROM: James D. Herberg, General Manager
Originator: Lorenzo Tyner, Director of Finance and Administrative Services
SUBJECT: WASTEWATER REFUNDING REVENUE OBLIGATIONS, SERIES 2016A
GENERAL MANAGER'S RECOMMENDATION
A. Adopt Resolution No. OCSD16-XX, authorizing the execution and delivery by the
District of an Installment Purchase Agreement, a Trust Agreement, an Escrow
Agreement and a Continuing Disclosure Agreement in connection with the
execution and delivery of Orange County Sanitation District Wastewater Refunding
Revenue Obligations, Series 2016A,authorizing the execution and delivery of such
Revenue Obligations evidencing principal in an aggregate amount of not to exceed
$163,000,000, approving a Notice of Intention to Sell, authorizing the distribution
of an Official Notice Inviting Bids and an Official Statement in connection with the
offering and sale of such Revenue Obligations and authorizing the execution of
necessary documents and related actions; and
B. That the Orange County Sanitation District Financing Corporation approve the
documents supporting and authorizing the Revenue Obligations in an aggregate
amount not to exceed $163,000,000.
SUMMARY
BACKGROUND
On May 7, 2009, the Sanitation District issued $200,000,000 of fixed rate
Certificates of Participation, Series 2009A (2009A COPs) to finance certain
improvements to the Wastewater System. With the recent drop in tax-exempt
interest rates, the 2009A COPS could be refunded and provide attractive savings
to the Sanitation District. The outstanding amount of 2009A COPS is currently
$180,235,000 of which $162,780,000 are subject to optional redemption prior to
maturity.
In February 2016, the Board authorized the General Manager to pursue a fixed
rate refunding of the callable 2009A COPs. Approval of the recommended actions
and the associated legal documents will enable staff to complete the refunding
process.
Page 1 of 5
RELEVANT STANDARDS
OCSD Debt Policy-Financial Management Policy and Procedure No. 201-3-1.
• Easy access to low cost credit.
PROBLEM
As a result of the current low interest rate environment on long term tax exempt
debt, the District has as opportunity to refund existing outstanding debt and
generate savings from existing debt obligations.
PROPOSED SOLUTION
The issuance of up to $163 million of COP Series 2009A would generate up to
$19 million in present value savings.
TIME CONCERNS
There is a window of opportunity to refund existing debt at lower interest rates that
close in the near term. The proposed refinancing schedule calls for the refinancing
to be completed in April.
RAMIFICATIONS OF NOT TAKING ACTION
Not taking action would result in a lost opportunity to save future debt service costs
as the existing debt structure has been taking in to consideration in the
development of the current ten-year cash flow forecast.
PRIOR COMMITTEE/BOARD ACTIONS
January 2016: Authorize the General Manager to issue newfixed rate Certificates
of Participation (COP), to be referred to as Wastewater Refunding
Revenue Obligations, in an amount sufficient to refund up to
$162,780,000 of COP Series 2009A.
December 2014: Adopt Resolution No. OCSD 14-19, authorizing the execution and
delivery by the District of an Installment Purchase Agreement, a
Trust Agreement, an Escrow Agreement and a Continuing
Disclosure Agreement in connection with the execution and
delivery of Orange County Sanitation District Wastewater
Refunding Revenue Obligations, Series 2015A, authorizing the
execution and delivery of such Revenue Obligations evidencing
principal in an aggregate amount of not to exceed $150,000,000,
approving a Notice of Intention to Sell, authorizing the distribution
of an Official Notice Inviting Bids and an Official Statement in
connection with the offering and sale of such Revenue Obligations
Page 2 of 5
and authorizing the execution of necessary documents and
related actions.
ADDITIONAL INFORMATION
The Sanitation District currently has 12 series of debt issuances outstanding in the par
amount of $1.13 billion. The table below lists each issuance, the outstanding amount,
and the interest rate mode.
IIII'mUlutstanding Interest Retain
Par AmounNli Mode
eries 2015A Refunding(2) $ 127,510,000 Fixed Rate
eries 2014E CANS(3) 120,850,000 Fixed Rate (two-year)
eries 2014A Refunding(2) 85,090,000 Fixed Rate
eries 2012B Refunding(4) 66,395,000 Fixed Rate
eries 2012A Refunding(5) 100,645,000 Fixed Rate
eries 2011A Refundingi4x5) 111,465,000 Fixed Rate
eries 201006) 157,000,000 Fixed Rate
eries 2010AN) 80,000,000 Fixed Rate
eries 2009A(6xa) 176,185,000 Fixed Rate
eries 2008B Refundingp) 8,815,000 Fixed Rate
eries 20076ia) 7,110,000 Fixed Rate
eries 2007A Refunding(5) 91,885,000 Fixed Rate
Total : $1,132,950,000
(1) As of February 2,2016
(2) Refunded a portion of Series 2007B
(3) Series 2014B are fixed two-year certificate of anticipation notes(CANS),that refunded a series
of previous one-year CANS,that were issued to refund the Series 2006 Daily Variable Rate
that were supported by a weak liquidity facility bank.
(4) Refunded a portion of Series 2000
(5) Refunded a portion of Sense 2003
(6) New money debt issue
(7) Sense 2008B refunded the Series 1993 Synthetic Variable-to-Fixed Rate Debt issue that was
supported by a failing insurance provider. Series 1993 along with the Series 1992 refunded
the Series 1986 and a portion of the Series B"COPs.
(8) A portion to be refunded by the proposed Series 2016A
Legal Authorization and Approvals
The Board of Directors and the Financing Corporation will each be required to adopt
separate Resolutions to complete this refunding. A Financing Corporation is required by
the structure of the Revenue Obligations and was formed in April 2000 solely to satisfy
this need. The Board of Directors of the Corporation is the same as the Board of Directors
of the Sanitation District and the Corporation meets after an adjournment of the OCSD
Board.
Page 3 of 5
The OCSD Resolution authorizes the execution and delivery of certain legal documents
and the execution and delivery of Wastewater Refunding Revenue Obligations, Series
2016A, evidencing principal in an aggregate amount of not to exceed $163,000,000 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 AND A CONTINUING DISCLOSURE AGREEMENT IN
CONNECTION WITH THE EXECUTION AND DELIVERY OF ORANGE COUNTY
SANITATION DISTRICT WASTEWATER REFUNDING REVENUE OBLIGATIONS,
SERIES 2016A, AUTHORIZING THE EXECUTION AND DELIVERY OF SUCH
REVENUE OBLIGATIONS EVIDENCING PRINCIPAL IN AN AGGREGATE AMOUNT
OF NOT TO EXCEED $163,000,000, APPROVING A NOTICE OF INTENTION TO
SELL, AUTHORIZING THE DISTRIBUTION OF AN OFFICIAL NOTICE INVITING BIDS
AND AN OFFICIAL STATEMENT IN CONNECTION WITH THE OFFERING AND SALE
OF SUCH REVENUE OBLIGATIONS AND AUTHORIZING THE EXECUTION OF
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
WASTEWATER REFUNDING REVENUE OBLIGATIONS, SERIES
2016A, AUTHORIZING THE EXECUTION AND DELIVERY OF SUCH REVENUE
OBLIGATIONS EVIDENCING PRINCIPAL IN AN AGGREGATE AMOUNT OF NOT TO
EXCEED $163,000,000 AND AUTHORIZING THE EXECUTION OF NECESSARY
DOCUMENTS AND RELATED ACTIONS."
Timeline
Since the proposed refunding is a fixed-rate debt issuance, staff is proposing to issue the
refunding through a competitive sale because it is the most expeditious way to access
the market and it is expected to provide the lowest interest cost for this given structure.
➢ Board considers legal and disclosure documents
➢ Financing Corporation considers legal and disclosure
February documents
➢ Rating Agency discussions
➢ Publish Notice of Intention to Sell
March ➢ Marketing and Sale through a Competitive Sale Process
Page 4 of 5
April ➢ Closing
➢ Begin debt administration
All costs involved with the refunding, including costs for Public Resources Advisory
Group, serving as Financial Advisor, and Norton Rose Fulbright, serving as Special
Counsel and Disclosure Counsel, will be paid from the proceeds of the new refunding
issue.
CEQA
N/A
FINANCIAL CONSIDERATIONS
N/A
ATTACHMENTS
The following attachment(s) are included in hard copy and may also be viewed on-line at the OCSDa
website(www.ocsd.com) with the complete agenda package:
Bond documents attached:
1. District Resolution
2. Corporation Resolution
3. Draft Trust Agreement
4. Draft Installment Purchase Agreement
5. Draft Escrow Agreement
6. Draft Continuing Disclosure Agreement
7. Draft Preliminary Official Statement
8. Draft Official Notice Inviting Bids
9. Draft Notice of Intention to Sell
Page 5 of 5
RESOLUTION NO. OCSD 16-
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, AND A CONTINUING DISCLOSURE AGREEMENT IN
CONNECTION WITH THE EXECUTION AND DELIVERY OF ORANGE
COUNTY SANITATION DISTRICT WASTEWATER REFUNDING
REVENUE OBLIGATIONS, SERIES 2016A, AUTHORIZING THE
EXECUTION AND DELIVERY OF SUCH REVENUE OBLIGATIONS
EVIDENCING PRINCIPAL IN AN AGGREGATE AMOUNT OF NOT TO
EXCEED $163,000,000, APPROVING A NOTICE OF INTENTION TO
SELL, AUTHORIZING THE DISTRIBUTION OF AN OFFICIAL
NOTICE INVITING BIDS AND AN OFFICIAL STATEMENT IN
CONNECTION WITH THE OFFERING AND SALE OF SUCH REVENUE
OBLIGATIONS AND AUTHORIZING THE EXECUTION OF
NECESSARY DOCUMENTS AND RELATED ACTIONS
WHEREAS, to refinance the acquisition, construction and installation of certain
improvements to its wastewater system (the `Prior Project'), the Orange County Sanitation
District (the "District') has heretofore purchased the Prior Project from the Orange County
Sanitation District Financing Corporation (the "Corporation"), and the Corporation has
heretofore sold the Prior Project to the District, for the installment payments (the "Prior
Installment Payments") made by the District pursuant to the Installment Purchase Agreement,
dated as of May 1, 2009 (the "Prior Installment Purchase Agreement'), by and between the
District and the Corporation;
WHEREAS, to provide the funds necessary to finance the Prior Project, the District
caused the execution and delivery of the Orange County Sanitation District Certificates of
Participation, Series 2009A (the "Prior Certificates"), evidencing direct, undivided fractional
interests in the Prior Installment Payments;
WHEREAS, the District desires to refinance all or a portion of the Prior Project by
paying and prepaying all or a portion of the remaining Prior Installment Payments, and the
interest thereon to the date of prepayment,thereby causing all or a portion of the remaining Prior
Certificates to be prepaid;
WHEREAS,to provide the funds necessary to pay and prepay a portion of the remaining
Prior Installment Payments,the District and the Corporation desire that the Corporation purchase
the Prior Project from the District and the District sell the Prior Project to the Corporation, and
that the District then purchase the Prior Project from the Corporation and the Corporation sell the
Prior Project to the District, for the installment payments (the "Installment Payments") to be
made by the District pursuant to an Installment Purchase Agreement by and between the District
and the Corporation (such Installment Purchase 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 "Installment Purchase Agreement');
27003633.3 11WO388
WHEREAS, the Corporation intends to assign without recourse certain of its rights
under and pursuant to the Installment Purchase Agreement to U.S. Bank National Association, as
trustee (the "Trustee"), pursuant to a Trust Agreement by and among the Trustee, the
Corporation and the District(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 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 the Orange County Sanitation
District Wastewater Refunding Revenue Obligations, Series 2016A (the "Revenue Obligations"),
evidencing direct, undivided fractional interests in the Installment Payments, and the interest
thereon;
WHEREAS, the District desires to provide for the public sale of the Revenue
Obligations;
WHEREAS, a form of the Notice of Intention to Sell to be published in connection with
the public offering and sale of the Revenue Obligations 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 form of the Official Notice Inviting Bids to be distributed in connection
with the public offering and sale of the Revenue Obligations has been prepared (such Official
Notice Inviting Bids, in the form presented to this meeting, with such changes, insertions and
omissions as we made pursuant to this Resolution, being referred to herein as the "Notice
Inviting Bids");
WHEREAS, a form of the Preliminary Official Statement to be distributed in connection
with the public offering of the Revenue Obligations 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 15c2-12"), 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 Revenue Obligations 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 a
Continuing Disclosure Agreement with the Trustee (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, to cause such requirement to be satisfied, the District desires to enter into
an Escrow Agreement with U.S. Bank National Association, as escrow agent (such Escrow
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 "Escrow Agreement');
290036333 2
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;
(f) the Continuing Disclosure Agreement; and
(g) the Escrow 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;
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 the
Installment Purchase Agreement 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 the 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$163,000,000, shall not result in a true interest cost for the Installment
Payments in excess of 4.5% and shall not result in a final Installment Payment later than
February 1,2039.
290036333 3
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 the Trust Agreement 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 Revenue Obligations evidencing principal
in an aggregate amount of not to exceed $163,000,000, payable in the years and in the amounts,
and evidencing principal of and interest on the Installment Payments as specified in the Trust
Agreement as finally executed, are hereby authorized and approved.
Section 5. The prepayment of all or a portion of the remaining principal components
of the Prior Installment Payments, and the interest components thereof to the dates of
prepayment, and the Prior Certificates evidencing interests therein, as determined by any
Authorized Officer,is hereby authorized and approved.
Section 6. 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 Notice of Intention to Sell in connection with the offering and sale
of the Revenue Obligations 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 the Notice of
Intention to Sell to be published once 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 Revenue Obligations 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 in the Notice Inviting Bids, with such changes, insertions and omissions therein as an
Authorized Officer may require or approve, such requirement or approval to be conclusively
evidenced by such publishing of the Notice of Intention to Sell.
Section 7. 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 the Notice Inviting Bids in connection with the offering and sale of the
Revenue Obligations is hereby authorized and approved. The terms and conditions of the
offering and sale of the Revenue Obligations shall be as specified in the Notice Inviting Bids.
Bids for the purchase of the Revenue Obligations shall be received at the time and place set forth
in the 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 the Revenue Obligations with
the lowest true interest cost, or to reject all bids therefor, in accordance with the terms of the
Notice Inviting Bids.
270036333 4
Section S. 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 the Preliminary Official Statement in connection with the offering and
sale of the Revenue Obligations is hereby authorized and approved. The Authorized Officers are
each hereby authorized to certify on behalf of the District that the Preliminary Official Statement
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 furnish, or cause to be furnished, to prospective bidders for the
Revenue Obligations a reasonable number of copies of the Preliminary Official Statement.
Section 9. The preparation and delivery of a final Official Statement (the "Official
Statement'), and its use in connection with the offering and sale of the Revenue Obligations, be
and the same is hereby authorized and approved. The Official Statement shall be in substantially
the form of the 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 the final Official Statement and any amendment or
supplement thereto, for and in the name of the District.
Section 10. 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 the Continuing Disclosure Agreement 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 the Continuing Disclosure Agreement by such
Authorized Officer.
Section 11. The Escrow 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
time of the District, to execute and deliver the Escrow Agreement 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 the Escrow Agreement by such Authorized Officer.
Section 12. The Authorized Officers me, 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 Revenue Obligations and the transactions contemplated by the notices, agreements and
documents referenced in this Resolution.
Section 13. All actions heretofore taken by the officers and employees of the District
with respect to the execution, delivery and sale of the Revenue Obligations, or in connection
with or related to any of the agreements or documents referenced in this Resolution, are hereby
approved,confirmed and ratified.
290036333 5
Section 14. This Resolution shall take effect immediately upon its adoption.
PASSED AND ADOPTED at a regular meeting held on , 2016.
Chair
ATTEST:
Clerk of the Board
APPROVED:
General Counsel
Orange County Sanitation District
290036333 6
STATE OF CALIFORNIA )
ss
COUNTY OF ORANGE )
I, Kelly Lore, Clerk of the Board of Directors of the Orange County Sanitation District,
do hereby certify that the foregoing Resolution No. OCSD 16- was passed and adopted at a
regular meeting of said Board on the day of , 2016, 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 day of , 2016.
Clerk of the Board of Directors
Orange County Sanitation District
290036333
RESOLUTION NO. FC-
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 WASTEWATER REFUNDING REVENUE OBLIGATIONS,
SERIES 2016A,AUTHORIZING THE EXECUTION AND DELIVERY OF
SUCH REVENUE OBLIGATIONS EVIDENCING PRINCIPAL IN AN
AGGREGATE AMOUNT OF NOT TO EXCEED $163,000,000 AND
AUTHORIZING THE EXECUTION OF NECESSARY DOCUMENTS
AND RELATED ACTIONS.
WHEREAS, to refinance the acquisition, construction and installation of certain
improvements to its wastewater system (the `Prior Project'), the Orange County Sanitation
District (the "District') has heretofore purchased the Prior Project from the Orange County
Sanitation District Financing Corporation (the "Corporation"), and the Corporation has
heretofore sold the Prior Project to the District, for the installment payments (the "Prior
Installment Payments") made by the District pursuant to the Installment Purchase Agreement,
dated as of May 1, 2009 (the "Prior Installment Purchase Agreement'), by and between the
District and the Corporation;
WHEREAS, to provide the funds necessary to refinance the Prior Project, the District
caused the execution and delivery of the Orange County Sanitation District Certificates of
Participation, Series 2009A (the "Prior Certificates"), evidencing direct, undivided fractional
interests in the related Prior Installment Payments;
WHEREAS, the District desires to refinance all or a portion of the Prior Project by
paying and prepaying all or a portion of the remaining Prior Installment Payments, and the
interest thereon to the date of prepayment,thereby causing all or a portion of the remaining Prior
Certificates to be prepaid;
WHEREAS,to provide the funds necessary to pay and prepay a portion of the remaining
Prior Installment Payments, the District and the Corporation desire that the Corporation purchase
the Prior Project from the District and the District sell the Prior Project to the Corporation, and
that the District then purchase the Prior Project from the Corporation and the Corporation sell the
Prior Project to the District, for the installment payments (the "Installment Payments") to be
made by the District pursuant to an Installment Purchase Agreement by and between the District
and the Corporation (such Installment Purchase 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 "Installment Purchase Agreement');
27003634.3 11WO388
WHEREAS, the Corporation intends to assign without recourse certain of its rights
under and pursuant to the Installment Purchase Agreement to U.S. Bank National Association, as
trustee (the "Trustee"), pursuant to a Trust Agreement by and among the Trustee, the
Corporation and the District(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 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 the Orange County Sanitation
District Wastewater Refunding Revenue Obligations, Series 2016A (the "Revenue Obligations"),
evidencing direct, undivided fractional interests in the 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;
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 officers 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
the Installment Purchase Agreement 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 the 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$163,000,000, shall not result in a true interest cost for the Installment
Payments in excess of 4.5% and shall not result in a final Installment Payment later than
February 1,2039.
27003634.3 2
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 the Trust Agreement 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 Revenue Obligations evidencing principal
in an aggregate amount of not to exceed $163,000,000, payable in the years and in the amounts,
and evidencing direct, undivided fractional interests in the Installment Payments, and the interest
thereon, as specified in the 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
execution and delivery of the Revenue Obligations 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 Revenue Obligations, 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.
27003634.3 3
PASSED AND ADOPTED at a meeting held on 2016.
President, Orange County Sanitation
District Financing Corporation
ATTEST:
Clerk of the Board, Orange County
Sanitation District Financing Corporation
APPROVED:
General Counsel, Orange County
Sanitation District Financing Corporation
27003634.3 4
STATE OF CALIFORNIA )
ss
COUNTY OF ORANGE )
I, Kelly Lore, Clerk of the Board of Directors of the Orange County Sanitation District
Financing Corporation, do hereby certify that the foregoing Resolution No. FC- was
passed and adopted at a regular meeting of said Board on the _ day of 2016, 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_day of , 2016.
Clerk of the Board of Directors
Orange County Sanitation District
Financing Corporation
27003634.3
NRF DRAFT
2/3/16
TRUST AGREEMENT
by and among
U.S. BANK NATIONAL ASSOCIATION,
as Trustee,
ORANGE COUNTY SANITATION DISTRICT
FINANCING CORPORATION
and
ORANGE COUNTY SANITATION DISTRICT
Dated as of March 1,2016
Relating to
$[Paz Amount]
Orange County Sanitation District
Wastewater Refunding Revenue Obligations
Series 2016A
27003639.4 11600388
TABLE OF CONTENTS
Page
ARTICLE I
DEFINITIONS; EQUAL SECURITY
Section1.01. Definitions........................................................................................................2
Section 1.02. Definitions in Installment Purchase Agreement..............................................9
Section1.03. Equal Security..................................................................................................9
ARTICLE II
TERMS AND CONDITIONS OF REVENUE OBLIGATIONS
Section 2.01. Preparation and Delivery of Revenue Obligations ..........................................9
Section 2.02. Denomination, Medium and Dating of Revenue Obligations .........................9
Section 2.03. Payment Dates of Revenue Obligations; Interest Computation.................... 10
Section 2.04. Form of Revenue Obligations........................................................................ 11
Section 2.05. Execution of Revenue Obligations and Replacement Certificates................ 11
Section 2.06. Transfer and Payment,Exchange or Cancellation of Revenue
Obligations..................................................................................................... 11
Section 2.07. Revenue Obligation Registration Books........................................................ 11
Section 2.08. Temporary Revenue Obligations................................................................... 12
Section 2.09. Revenue Obligations Mutilated, Lost,Destroyed or Stolen.......................... 12
Section 2.10. Book-Entry System........................................................................................ 12
ARTICLE M
PROCEEDS OF REVENUE OBLIGATIONS
Section 3.01. Delivery of Revenue Obligations................................................................... 15
Section 3.02. Deposit of Proceeds of Revenue Obligations ................................................ 15
Section 3.03. Costs of Issuance Fund.................................................................................. 15
ARTICLE IV
PREPAYMENT OF REVENUE OBLIGATIONS
Section 4.01. Optional Prepayment..................................................................................... 16
Section 4.02. Mandatory Sinking Account Prepayment...................................................... 16
Section 4.03. Selection of Revenue Obligations for Optional Prepayment......................... 16
Section 4.04. Notice of Prepayment .................................................................................... 16
Section 4.05. Partial Prepayment of Revenue Obligations.................................................. 17
Section 4.06. Effect of Prepayment..................................................................................... 18
ARTICLE V
ASSIGNMENT AND PLEDGE; FUNDS AND ACCOUNTS
Section 5.01. Assignment and Pledge.................................................................................. 18
Section 5.02. Installment Payment Fund............................................................................. 18
Section5.03. Reserved......................................................................................................... 19
Section 5.04. Investment of Moneys.................................................................................... 19
Section 5.05. Brokerage Confirmations...............................................................................20
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ARTICLE VI
COVENANTS
Section 6.01. Compliance with Trust Agreement................................................................20
Section 6.02. Compliance with Installment Purchase Agreement.......................................20
Section 6.03. Compliance with Master Agreement.............................................................20
Section 6.04. Observance of Laws and Regulations............................................................21
Section6.05. Other Liens.....................................................................................................21
Section 6.06. Prosecution and Defense of Suits ..................................................................21
Section 6.07. Accounting Records and Statements.............................................................21
Section 6.08. Tax Covenants ...............................................................................................21
Section 6.09. Continuing Disclosure ...................................................................................25
Section 6.10. Further Assurances.........................................................................................25
ARTICLE VII
DEFAULT AND LIMITATIONS OF LIABILITY
Section 7.01. Action upon Event of Default........................................................................25
Section 7.02. Other Remedies of the Trustee......................................................................26
Section7.03. Non-Waiver....................................................................................................26
Section 7.04. Remedies Not Exclusive................................................................................26
Section 7.05. Application of Amounts After Default..........................................................26
Section 7.06. Trustee May Enforce Claims Without Possession of Revenue
Obligations.....................................................................................................27
Section 7.07. Limitation on Suits.........................................................................................27
Section 7.08. No Liability by the Corporation to the Owners.............................................28
Section 7.09. No Liability by the District to the Owners.....................................................28
Section 7.10. No Liability of the Trustee to the Owners.....................................................28
ARTICLE VI I
THE TRUSTEE
Section 8.01. Employment of the Trustee; Duties...............................................................28
Section 8.02. Removal and Resignation of the Trustee.......................................................29
Section 8.03. Compensation and Indemnification of the Trustee........................................30
Section 8.04. Protection of the Trustee................................................................................30
ARTICLE IX
AMENDMENT OF OR SUPPLEMENT TO TRUST AGREEMENT
Section 9.01. Amendment or Supplement...........................................................................32
Section 9.02. Disqualified Revenue Obligations.................................................................33
Section 9.03. Endorsement or Replacement of Revenue Obligations After
Amendment or Supplement...........................................................................33
Section 9.04. Amendment by Mutual Consent....................................................................33
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ARTICLE X
DEFEASANCE
Section 10.01. Discharge of Revenue Obligations and Trust Agreement.............................34
Section10.02. Unclaimed Moneys........................................................................................35
ARTICLE XI
MISCELLANEOUS
Section 11.01. Benefits of Trust Agreement..........................................................................35
Section 11.02. Successor Deemed Included in all References to Predecessor......................36
Section 11.03. Execution of Documents by Owners.............................................................36
Section 11.04. Waiver of Personal Liability..........................................................................36
Section 11.05. Acquisition of Revenue Obligations by District............................................36
Section11.06. Content of Certificates...................................................................................36
Section 11.07. Funds and Accounts.......................................................................................37
Section 11.08. Article and Section Headings,Gender and References.................................37
Section 11.09. Partial Invalidity.............................................................................................38
Section 11.10. California Law...............................................................................................38
Section11.11. Notices...........................................................................................................38
Section 11.12. Effective Date................................................................................................39
Section 11.13. Execution in Counterparts..............................................................................39
EXHIBIT A—FORM OF REVENUE OBLIGATION
27W3639.6 111
TRUST AGREEMENT
THIS TRUST AGREEMENT (this "Trust Agreement'), dated as of March 1, 2016, is
made by and among U.S. BANK NATIONAL ASSOCIATION, 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, to refinance the acquisition, construction and installation of certain
improvements to its wastewater system (the "Prior Project'), the District has heretofore
purchased the Prior Project from the Corporation, and the Corporation has heretofore sold the
Prior Project to the District, for the installment payments (the "Prior Installment Payments")
made by the District pursuant to the Installment Purchase Agreement, dated as of May 1, 2009
(the"Prior Installment Purchase Agreement'),by and between the District and the Corporation;
WHEREAS, to provide the funds necessary to refinance the Prior Project, the District
caused the execution and delivery of the Orange County Sanitation District Certificates of
Participation, Series 2009A (the "Prior Certificates"), evidencing direct, undivided fractional
interests in the related Prior Installment Purchase Agreement and the related Prior Installment
Payments;
WHEREAS,the District desires to refinance a portion of the Prior Project(the "Project')
by prepaying a portion of the remaining Prior Installment Payments, and the interest thereon to
the date of prepayment, thereby causing a portion of the Prior Certificates to be retired;
WHEREAS, to provide the funds necessary to pay and prepay a portion of the remaining
Prior Installment Payments,the District and the Corporation desire that the Corporation purchase
the Project from the District and the District sell the Project to the Corporation, and that the
District then purchase the Project from the Corporation and the Corporation 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 the date hereof(the"Installment Purchase
Agreement');
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 Wastewater Refunding Revenue Obligations, Series 2016A (the "Revenue Obligations"),
which are certificates of participation, evidencing direct, undivided fractional interests in the
Installment Purchase Agreement and the related Installment Payments,and the interest thereon;
27003639.4
WHEREAS, a portion of the proceeds of the Revenue Obligations will be used to prepay
a portion of the Prior Installment Payments; and
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 promises 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:
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 Revenue Obligations 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:
"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
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 Revenue Obligations registered in the name of the
nominee of DTC, or any successor securities depository for the Revenue Obligations, 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.
27003639.4 2
"Cede & Co." means Cede & Co., the nominee of DTC, and any successor nominee of
DTC with respect to the Revenue Obligations.
"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 1,2017.
"Closing Date"means , 2016.
"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 Revenue
Obligations, including, but not limited to, all printing and document preparation expenses in
connection with this Trust Agreement, the Installment purchase Agreement, the Revenue
Obligations and any preliminary official statement and final official statement pertaining to the
Revenue Obligations, fees of a financial advisor, rating agency fees, market study fees, legal fees
and expenses of counsel with respect to the execution and delivery of the Revenue Obligations,
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 Revenue Obligations, 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.
"Escrow Agent"means U.S. Bank National Association and its successor or assign.
"Escrow Agreement" means the Escrow Agreement, dated as of March 1, 2016,
between the Escrow Agent and the District.
"Escrow Fund" means the escrow fund established under the Escrow Agreement and
held by the Escrow Agent.
27003639.4 3
"Event of Default" shall have the meaning set forth in Section 6.01 of the Installment
Purchase Agreement.
"Fitch" means Fitch Ratings, 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 "Fitch"
shall be deemed to refer to any other nationally recognized securities rating agency selected by
the District.
"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 that (a) are rated by Moody's
and S&P, (b) are secured by obligations specified in clause(i), (c) me tax-exempt
because they are secured by obligations specified in clause (i), and (d) have the same
ratings as the obligations specified in clause (i);
(iii) bonds, debentures or notes issued by any of the following federal
agencies: Federal Farm Credit Bank, Federal Home Loan Mortgage Corporation or
Fannie Mae; provided, that such bonds, debentures or notes shall be the senior
obligations of such agencies (including participation certificates) and have the same
ratings by Moody's and S&P as the obligations specified in clause(i); 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.
"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.
27003639.4 4
"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 1 of each year, commencing
August 1,2016.
"Letter of Representations"means the letter of the District delivered to and accepted by
the Depository on or prior to the delivery of the Revenue Obligations 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 may be 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 Revenue Obligations 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, 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 2.10 hereof.
"Opinion of Counsel"means a written opinion of Norton Rose Fulbright US LLP 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 Revenue
Obligations, means (subject to the provisions of Section 9.02 hereof) all Revenue Obligations
except (a)Revenue Obligations previously canceled by the Trustee or delivered to the Trustee
for cancellation, (b) Revenue Obligations paid or deemed to have been paid within the meaning
of Section 10.01 hereof, and (c) Revenue Obligations in lieu of or in substitution for which other
Revenue Obligations 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
Revenue Obligation 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.
27003639.4 5
"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 or"AA-"
or higher by S&P or Fitch; or which are rated "VMIG 1" or better by Moody's, "A-1"or
better by S&P, or "Fl" or better by Fitch with respect to commercial paper, or "VMIG
1,""SP-1,"or"Fl,"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 is rated at
least "Al"or"A+"by any two Rating Agencies; 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 than $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,
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,at least"Al"or"A+"by any two Rating Agencies;
(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
27003639.4 6
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-term debt obligations (or senior debt or claims paying
ability of the financial entity's guarantor) are rated, at the time of investment, at least
"Al" or "A+" by any two Rating Agencies; provided, that 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, at least "Al" or "A+" by any two Rating
Agencies;
(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, at least"Al" or
"A+" by any two Rating Agencies 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 or
Fitch, (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 which are rated at least"P-1," "A-1" or"Fl"
by any two Rating Agencies at the time of investment;
(10) Taxable government money market portfolios which are rated at least
""'Am" or "AAm-G" or "Aaa-mf' or"AAmmf by any two Rating Agencies (including
funds for which the Trustee or an affiliate provides investment advice or similar
services); and
(11) Deposits with the Local Agency Investment Fund of the State, as may
otherwise be permitted by law.
"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.
27003639.4 7
"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 Revenue Obligations becomes due and payable.
"Prior Certificates" means the District's Certificates of Participation, Series 2009A,
maturing in the years 20_through 20_, inclusive.
"Prior Trust Agreement" means the Trust Agreement, dated as of May 1, 2009, by and
among the Prior Trustee, the Corporation and the District, as amended and supplemented,
pursuant to which the Prior Certificates were executed and delivered.
"Prior Trustee" means U.S. Bank National Association, as trustee under the Prior Trust
Agreement.
"Project" has the meaning ascribed thereto in the recitals hereto.
"Bating Agency" means Fitch, Moody's or S&P.
"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.
"Revenue Obligations" means the Orange County Sanitation District Wastewater
Refunding Revenue Obligations, Series 2016A, executed and delivered by the Trustee pursuant
hereto, which are certificates of participation, evidencing direct, undivided fractional interests in
the Installment Purchase Agreement and the related Installment Payments, and the interest
thereon.
"S&P" means Standard & Poor's Ratings Services, a Standard & Poor's Financial
Services LLC business, 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.
"Term Revenue Obligations" means Revenue Obligations payable at or before their
specified maturity date or dates from Mandatory Sinking Account Payments established for that
purpose and calculated to retire such Revenue Obligations on or before their specified maturity
date or dates.
27003639.4
"Trust Agreement" means this Trust Agreement, dated as of March 1, 2016, 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 U.S. Bank National Association, 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 8.02 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.
Section 1.03. Equal Security. In consideration of the acceptance of the Revenue
Obligations 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 Revenue Obligations 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 terns 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 Revenue Obligations over any other Revenue Obligations 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 II
TERMS AND CONDITIONS OF REVENUE OBLIGATIONS
Section 2.01. Preparation and Delivery of Revenue Obligations. The Trustee is
hereby authorized, upon the Written Request of the District, to execute and deliver the Revenue
Obligations in the aggregate principal amount of $[Par Amount] 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 Revenue Obligation shall constitute the principal evidenced thereby and the
27003639.4 9
interest on such Installment Payments shall constitute the interest evidenced thereby. The
Revenue Obligations shall be numbered,with or without prefixes, as directed by the Trustee.
Section 2.02. Denomination, Medium and Datlne of Revenue Obligations. The
Revenue Obligations shall be designated "Orange County Sanitation District Wastewater
Refunding Revenue Obligations, Series 2016A" and shall be prepared in the form of fully
registered Revenue Obligations, without coupons, in Authorized Denominations and shall be
payable in lawful money of the United States of America.
The Revenue Obligations shall be dated as of the Closing Date. Each Revenue Obligation
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 Revenue Obligation
shall evidence interest from such Interest Payment Date, or unless such date of execution shall be
on or prior to July 15, 2016, in which case such Revenue Obligation shall represent interest from
the Closing Date. Notwithstanding, the foregoing, if, as shown by the records of the Trustee,
interest evidenced by the Revenue Obligations shall be in default, each Revenue Obligation 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 Revenue Obligations; Interest Computation.
(a)Method and Place of Payment. The principal evidenced by the Revenue Obligations shall
become due and payable, subject to prior prepayment, on February 1 of the years, in the
amounts, and shall evidence interest accruing at the rates per annum set forth below:
Principal Payment Date Principal Interest
(February 1) Component Rate
Except as otherwise provided in the Letter of Representations, payments of interest
evidenced by the Revenue Obligations 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 Revenue Obligations, 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 Revenue
Obligations at the Principal Office.
27003639.4 10
(b) Computation oflnterest. The interest evidenced by the Revenue Obligations 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 Revenue Obligations 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 Revenue Obligations shall be computed on the basis of a
360-day year consisting of twelve 30-day months.
Section 2.04. Form of Revenue Obligations. The Revenue Obligations 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 Revenue Obligations and Replacement Certificates. The
Revenue Obligations shall be executed by the Trustee by the manual signature of an authorized
signatory of the Trustee. The Trustee shall deliver replacement Revenue Obligations in the
manner and as contemplated by this Article. Such replacement Revenue Obligations shall be
executed as herein provided and shall be in Authorized Denominations.
Section 2.06. Transfer and Payment, Exchange or Cancellation of Revenue
Obligations. Each Revenue Obligation 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 Revenue
Obligation 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 Revenue
Obligation as the absolute owner of such Revenue Obligation for all purposes, whether or not the
principal or interest evidenced by such Revenue Obligation 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 Revenue Obligation shall be made only to such Owner, which
payments shall be valid and effectual to satisfy and discharge the liability evidenced by such
Revenue Obligation to the extent of the sum or sums so paid.
Whenever any Revenue Obligation shall be surrendered for transfer, the Trustee shall
execute and deliver a new Revenue Obligation or Revenue Obligations 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 Revenue Obligation may be exchanged at the Principal Office for Revenue
Obligations 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.
Whenever in this Trust Agreement provision is made for the cancellation by the Trustee
of any Bonds, the Trustee shall destroy such Bonds and deliver a certificate of such destruction
to the District.
27003639.4 l l
Section 2.07. Revenue Obligation Registration Books. The Trustee shall keep at its
Principal Office sufficient books for the registration and transfer of the Revenue Obligations,
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 regulations as it may prescribe, register or transfer the Revenue Obligations on
such books as hereinabove provided.
Section 2.08. Temporary Revenue Obligations. The Revenue Obligations may be
initially delivered in temporary form exchangeable for definitive Revenue Obligations when
ready for delivery, which temporary Revenue Obligations 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 Revenue Obligation shall be executed and delivered by the
Trustee upon the same conditions and terms and in substantially the same manner as definitive
Revenue Obligations. If the Trustee executes and delivers temporary Revenue Obligations, it
shall prepare and execute definitive Revenue Obligations without delay, and thereupon the
temporary Revenue Obligations may be surrendered at the Principal Office in exchange for such
definitive Revenue Obligations, and until so exchanged such temporary Revenue Obligations
shall be entitled to the same benefits hereunder as definitive Revenue Obligations executed and
delivered hereunder.
Section 2.09. Revenue Obligations Mutilated, Lost. Destroyed or Stolen. If any
Revenue Obligation shall become mutilated, the Trustee, at the expense of the Owner thereof,
shall execute and deliver a new Revenue Obligation evidencing a like principal amount and
having the same stated Principal Payment Date and number in exchange and substitution for the
Revenue Obligation so mutilated, but only upon surrender to the Trustee of the Revenue
Obligation so mutilated. Every mutilated Revenue Obligation so surrendered to the Trustee shall
be canceled by it. If any Revenue Obligation 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 Revenue Obligation 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 Revenue Obligation so lost, destroyed or
stolen. The Trustee may require payment of a sum not exceeding the actual cost of preparing
each new Revenue Obligation executed and delivered by it under this Section and of the
expenses which may be incurred by it under this Section. Any Revenue Obligation executed and
delivered under the provisions of this Section in lieu of any Revenue Obligation alleged to be
lost, destroyed or stolen shall be equally and proportionately entitled to the benefits hereof with
all other Revenue Obligations executed and delivered hereunder, and the Trustee shall not be
required to treat both the original Revenue Obligation and any replacement Revenue Obligation
as being Outstanding for the purpose of determining the amount of Revenue Obligations which
may be executed and delivered hereunder or for the purpose of determining any percentage of
Revenue Obligations Outstanding hereunder, but both the original and replacement Revenue
Obligation shall be treated as one and the same. Notwithstanding any other provision of this
Section, in lieu of executing and delivering a new Revenue Obligation for a Revenue Obligation
which has been lost, destroyed or stolen and which evidences principal that is then payable, the
27003639.4 12
Trustee may make payment of such Revenue Obligation to the Owner thereof if so instructed by
the District.
Section 2.10. Book-Entry System. (a) The Revenue Obligations shall be initially
executed and delivered as Book-Entry Certificates, and the Revenue Obligations for each stated
Principal Payment Date shall be in the form of a separate single fully registered Revenue
Obligation (which may be typewritten). Upon initial execution and delivery, the ownership of
each Revenue Obligation shall be registered in the 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, (in)the selection by the Depository and its
Participants of the beneficial interests in Book-Entry Certificates to be prepaid in the event
Revenue Obligations 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 Revenue Obligation, for
the purpose of selecting any Revenue Obligations, or portions thereof, to be prepaid, for the
purpose of giving notices of prepayment and other matters with respect to such Revenue
Obligation, for the purpose of registering transfers with respect to such Revenue Obligation, 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
Revenue Obligations 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
27003639.4 13
principal, premium, if any, and interest evidenced by the Revenue Obligations 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 Revenue Obligation evidencing principal, premium, if
any, and interest evidenced by the Revenue Obligations. 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 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) 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) If the District determines that it is in the best interests of the Beneficial Owners
that they be able to obtain certificated Revenue Obligations and that such Revenue Obligations
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 Revenue Obligations. In such event, the Trustee shall transfer and
exchange certificated Revenue Obligations 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 Revenue Obligation 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 Revenue Obligations 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 Revenue Obligations 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.
27003639.4 14
(h) Notwithstanding any other provision of this Trust Agreement to the contrary, if
DTC is the sole Owner of the Revenue Obligations, 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 Revenue Obligation and all notices with respect to such Revenue Obligation
shall be made and given, respectively, as provided in the Letter of Representations or as
otherwise instructed by the Depository.
(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 Revenue Obligations.
ARTICLE III
PROCEEDS OF REVENUE OBLIGATIONS
Section 3.01. Delivery of Revenue Obligations. The Trustee is hereby authorized to
execute the Revenue Obligations and deliver the Revenue Obligations to the original purchaser
thereof upon receipt of a Written Request of the District and upon receipt of the net proceeds of
sale thereof.
Section 3.02. Deposit of Proceeds of Revenue Obligations. The net proceeds received
by the Trustee from the sale of the Revenue Obligations in the amount of$ (which
amount includes the security deposit for the Revenue Obligations in the amount of$ on
deposit with the Trustee) shall be deposited or transferred by the Trustee as follows:
(a) the Trustee shall deposit in the Costs of Issuance Fund the amount of$ ,
and
(b) the Trustee shall transfer to the Escrow Agent for deposit in the Escrow Fund
established under the Escrow Agreement the amount of$ from the proceeds of the
Revenue Obligations, to apply, together with other available monies released from the Prior
Trust Agreement, to the payment and prepayment of a portion of the installment payments
related to the Prior Certificates as provided in the Escrow Agreement.
Following the above transfers and deposits, the Proceeds Fund shall be closed.
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
27003639.4 15
Costs of Issuance Fund to the Installment Payment Fund. Upon such transfer, the Costs of
Issuance Fund shall be closed.
ARTICLE IV
PREPAYMENT OF REVENUE OBLIGATIONS
Section 4.01. Optional Prepayment The Revenue Obligations maturing on or after
February 1, 2027 are subject to optional prepayment prior to their stated Principal Payment
Dates, on any date on or after February 1, 2026, 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 Revenue Obligations to be
prepaid, plus accrued interest evidenced thereby to the date fixed for prepayment, without
premium.
Section 4.02. Mandatory Sinkine Account Prepayment. The Term Revenue
Obligations maturing on February 1, 20 are subject to prepayment prior to their stated
maturity, in part, by lot, on each 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 Revenue
Obligations 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:
Mandatory
Sinking Account Mandatory
Payment Dates Sinking Account
(February 1) Payments
`Maturity.
Section 4.03. Selection of Revenue Obligations for Optional Prepayment. Whenever
less than all the Outstanding Revenue Obligations are to be prepaid on any one date pursuant to
Section 4.01 hereof, with respect to optional prepayment of Revenue Obligations, the Trustee
shall select the Revenue Obligations to be prepaid among Revenue Obligations with different
Principal Payment Dates as directed in a Written Request of the District. Whenever less than all
the Outstanding Revenue Obligations with the same stated Principal Payment Date are to be
prepaid on any one date pursuant to Section 4.01 hereof, the Trustee shall select the Revenue
Obligations 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 Revenue Obligations
27003639.4 16
so selected for prepayment on such date. For purposes of such selection, any Revenue Obligation
may be prepaid in part in Authorized Denominations.
Section 4.04. Notice of Prepayment. When prepayment of Revenue Obligations is
authorized pursuant to Section 4.01, the Trustee shall give notice, at the expense of the District,
of the prepayment of the Revenue Obligations. The notice of prepayment shall specify (a)the
Revenue Obligations or designated portions thereof(in the case of prepayment of the Revenue
Obligations 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 Revenue
Obligations to be prepaid, (f) the numbers of the Revenue Obligations to be prepaid in whole or
in part and, in the case of any Revenue Obligation to be prepaid in part only, the principal
evidenced by such Revenue Obligation to be prepaid, and (g)the interest rate and stated
Principal Payment Date of each Revenue Obligation 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 Revenue Obligation 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 Revenue Obligations pursuant to Section 4.01
hereof, unless at the time such notice is given the Revenue Obligations 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 Revenue Obligations 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 Revenue Obligations. If a
notice of prepayment of Revenue Obligations contains such a condition and such moneys are not
so received, the prepayment of Revenue Obligations as 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 Revenue Obligations 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 Revenue Obligations 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 Revenue
Obligations 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 Revenue Obligation is
called for prepayment may object thereto or object to the cessation of interest evidenced thereby
27003639.4 17
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 Revenue Obligations. Upon surrender of any
Revenue Obligation prepaid in part only, the Trustee shall execute and deliver to the Owner
thereof a new Revenue Obligation or Revenue Obligations evidencing the unprepaid principal
with respect to the Revenue Obligation 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 Revenue Obligations to be
prepaid are held by the Trustee, then on the prepayment date designated in such notice, the
Revenue Obligations 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
Revenue Obligations so called for prepayment shall cease to accrue, such Revenue Obligations
shall cease to be entitled to any benefit or security hereunder and the Owners of such Revenue
Obligations 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 Revenue Obligations
to be prepaid, pay such Revenue Obligations at the prepayment price thereof, and such moneys
shall be pledged to such payment. All Revenue Obligations 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
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.
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. 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 Revenue Obligations are no longer Outstanding. The Trustee shall deposit in the
Installment Payment Fund all Installment Payments, and the interest thereon, paid by the District
27003639.4 18
and received by the Trustee. The moneys in the Installment Payment Fund shall be held in trust
by the Tmstee 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 Revenue
Obligations 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 Tmstee, 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 Revenue Obligations 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 Revenue Obligations 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 Tmstee pursuant to the Installment Purchase
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 Revenue Obligations pursuant to Section 4.01 hereof. Moneys in the
Prepayment Account shall be used by the Tmstee for the purpose of paying the interest,
premium, if any, and principal evidenced by the Revenue Obligations to be prepaid
pursuant to Section 4.01 hereof.
Section 5.03. Reserved.
Section 5.04. 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 (2) 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. Absent timely written direction from the District,
27003639.4 19
the Trustee shall invest any funds held by it in Permitted Investments described in clause (10) of
the definition thereof. Permitted Investments that are registemble 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 shall be retained
therein.
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 or an affiliate 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.
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 5.05. Brokeraee Confirmations. The Trustee shall furnish the District periodic
cash transaction statements which include detail for all investment transactions effected by the
Trustee or brokers selected by the District. Upon the District's election and request, the Trustee
shall provide the District online access to such statements. The District waives the right to
receive brokerage confirmations of securities transactions effected by the Tmstee as they
occur, to the extent permitted by law. The District further understands that trade confirmations
for securities transactions effected by the Trustee will be available upon request and at no
additional cost and other trade confirmations may be obtained from the applicable broker
ARTICLE VI
COVENANTS
Section 6.01. Compliance with Trust Agreement. The Trustee will not execute or
deliver any Revenue Obligations 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,
27003639.4 20
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
terns.
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 terns.
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.
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 bereunder; 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. Accountine 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:
27003639.4 21
"Bond Counsel" means Norton Rose Fulbright US LLP or any other counsel of
recognized national standing in the field of law relating to municipal bonds, appointed and paid
by the District.
"Computation Date" has the meaning set forth in section 1.148-1(b) of the Tax
Regulations.
"Computation Period" means, initially, that period commencing on the date of the
execution and delivery of the Revenue Obligations and concluding on the initial Computation
Date and,thereafter, each period commencing on the day next following a Computation Date and
concluding on the immediately succeeding Computation Date.
"Gross Proceeds" of any issue of governmental obligations means any proceeds as
defined in section 1.148-1(b) of the Tax Regulations (referring to sales, investment and
transferred proceeds) of that issue, and any replacement proceeds as defined in section 1.148-
1(c)of the Tax Regulations, of that issue.
"Investment"has the meaning set forth in section 1.148-1(b)of the Tax Regulations.
"Nonpurpose Investment"means any investment property, as defined in section 148(b) of
the Code, in which Gross Proceeds of an issue are invested and that is not acquired to carry out
the governmental purposes of that issue.
"Opinion of Bond Counsel"means a written opinion of Norton Rose Fulbright US LLP or
any other counsel of recognized national standing in the field of law relating to municipal bonds,
appointed and paid by the District.
"Prior Issue" shall refer to the Prior Certificates (but in the case of any of the foregoing
executed and delivered for multiple purposes, only to the portion thereof allocable pursuant to
section 1.148-9(b)(4) of the Tax Regulations to other than refunding purposes).
"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.
"Tax Regulations" means the United States Treasury Regulations promulgated pursuant
to sections 103 and 141 through 150 of the Code.
"Yield" of (i) any Investment has the meaning set forth in section 1.148-5 of the Tax
Regulations and (ii) in respect of the Revenue Obligations has the meaning set forth in
section 1.148-4 of the Tax Regulations.
(a) Exclusion of Interest from Gross Income. The District will take all actions
necessary to establish and maintain the exclusion pursuant to section 103(a) of the Code of
interest on the Revenue Obligations from the gross income of the owners thereof for federal
income tax purposes, and will not use, permit the use of, or omit to use Gross Proceeds of the
27003639.4 22
Revenue Obligations or any other amounts (or any property the acquisition, construction or
improvement of which is to be refinanced directly or indirectly with Gross Proceeds) in a manner
that if made or omitted, respectively, would cause the interest on any Revenue Obligation to fail
to be excluded pursuant to section 103(a) of the Code from the gross income of the owners
thereof for federal income tax purposes. Without limiting the generality of the foregoing, unless
and until the Trustee receives a written Opinion of Bond Counsel to the effect that failure to
comply with such covenant will not adversely affect the exclusion pursuant to section 103(a) of
the Code of interest on any Revenue Obligation from the gross income of the owner thereof, the
District shall comply with this covenant and each of the specific covenants in this Section.
(b) No Private Use or Private Payments. Except as would not cause any Revenue
Obligation to become a "private activity bond" within the meaning of section 141 of the Code
and the Tax Regulations and rulings thereunder, the District shall at all times prior to the
payment and cancellation of the last of the Revenue Obligations to be retired:
(i) exclusively own, operate and possess all property the acquisition,
construction or improvement of which is to be financed or refinanced directly or
indirectly with Gross Proceeds of the Revenue Obligations and not use or permit the use
of such Gross Proceeds (including all contractual arrangements with terns different than
those applicable to the general public) or any property acquired, constructed or improved
with such Gross Proceeds or the Gross Proceeds of the Prior Issue 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 any person or entity who is treated as using Gross Proceeds of the Revenue
Obligations or of the Prior Issue, or any property the acquisition, construction or
improvement of which is to be financed or refinanced directly or indirectly with such
Gross Proceeds, other than taxes of general application within the jurisdiction of the
District or interest earned on investments acquired with such Gross Proceeds pending
application for their intended purposes.
(c) No Private Loan. Except as would not cause any Revenue Obligation to become
a"private activity bond"within the meaning of section 141 of the Code and the Tax Regulations
and rulings thereunder,the District shall not use of Gross Proceeds of the Revenue Obligations 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 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 armagement; 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. For purposes of this covenant, the District will treat any
transaction constituting a loan of Gross Proceeds of the Prior Issue as resulting in a loan of Gross
Proceeds of the Revenue Obligations.
27003639.4 23
(d) Not to Invest at Higher Yield. Except as would not cause any Revenue
Obligation 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 Revenue Obligation to be retired, directly or indirectly invest Gross
Proceeds of the Revenue Obligations in any Investment, if as a result of that investment the yield
of any Investment acquired with Gross Proceeds of the Revenue Obligations, whether then held
or previously disposed of, would materially exceed the yield of the Revenue Obligations within
the meaning of said section 148.
(e) 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 Revenue
Obligations 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 Revenue Obligation to be
"federally guaranteed" within the meaning of section 149(b) of the Code and the Tax
Regulations and rulings thereunder.
(f) 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 Revenue Obligations 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.
(g) 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 will not at any time prior
to the final cancellation of the last of the Revenue Obligations to be retired, enter into any
transaction that reduces the amount required to be paid to the United States pursuant to
section 148(f) of the Code 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
Revenue Obligations not been relevant to either party.
(b) Revenue Obligations Satisfy Section 149(a). The District represents that neither
the Prior Issue nor the Revenue Obligations are or will become "hedge bonds" within the
meaning of section 149(g) of the Code. Without limitation of the foregoing, with respect to the
Prior Issue, (i)(A) on the date of execution and delivery of that issue the District reasonably
expected (based upon its own knowledge and upon representations made by other governmental
persons upon the issuance of those obligations) that within the tbree-year period commencing on
such date no less than 85% of the spendable proceeds of that issue would be expended for the
governmental purposes thereof and (B) the District believes and represents that at no time has
more than 50% of the proceeds of that issue been invested in Nonpurpose Investments having a
substantially guaranteed yield for a period of four years or more, and with respect to the
application of Proceeds of the Revenue Obligations other than for refunding purposes, (ii)(A) the
District will not deliver the Revenue Obligations unless on the date of the issuance of the
Revenue Obligations it reasonably expects that within the three-year period commencing on such
date of issuance at least 85% of such spendable proceeds of the Revenue Obligations will be
expended for the governmental purpose of the Revenue Obligations and (B) at no time will more
than 50% of such spendable proceeds of the Revenue Obligations be invested in Nonpurpose
Investments having a substantially guaranteed yield for a period of four years or more.
27003639.4 24
(i) 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 Bond Counsel)
deems necessary or appropriate in connection with the Revenue Obligations, in the Tax
Certificate (as defined below)or similar or other appropriate certificate, form or document.
0) Tax Certificate. The District agrees to execute and deliver in connection with the
execution and delivery of the Revenue Obligations 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 Revenue Obligations 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.
Section 6.09. Continuing Disclosure. The District 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 to comply with the Continuing
Disclosure Agreement shall not be considered an Event of Default; provided, however, the
Trustee at the request of any Participating Underwriter or the Owners of at least 25% aggregate
principal amount of Outstanding Revenue Obligations and upon being indemnified to its
reasonable satisfaction, shall, or any Owner or Beneficial Owner of Revenue Obligations may
take such actions as may be necessary and appropriate to compel performance, including seeking
mandate or specific performance by court order. The Trustee is authorized and directed to
execute the acceptance and acknowledgement of the Continuing Disclosure Agreement.
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 VU
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 Revenue Obligations 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
Revenue Obligations 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
27003639.4 25
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 Revenue Obligations, the Installment Purchase Agreement or the
Master Agreement, either at law or in equity or in banlauptcy 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 7.02 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;
(b) by suit in equity to enjoin any acts or things which we 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 as 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.
27003639.4 26
Section 7.05. Aoulication 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 and
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
Revenue Obligations, in respect of which, or for the benefit of which, money has been
collected (other than Revenue Obligations 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 Revenue Obligations due and payable; and
(ii) to the payment of all amounts then due for principal evidenced by the
Revenue Obligations, in respect of which, or for the benefit of which, money has been
collected (other than Revenue Obligations 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 Revenue Obligations 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 Revenue Obligations
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 Revenue Obligation over any other Revenue Obligation, to the
persons entitled thereto without any discrimination or preference.
Section 7.06. Trustee May Enforce Claims Without Possession of Revenue
Obligations. All rights of action and claims under this Trust Agreement or the Revenue
Obligations may be prosecuted and enforced by the Trustee without the possession of any of the
Revenue Obligations 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 Revenue Obligations 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
27003639.4 27
Owners of not less than a majority of the aggregate principal evidenced by Revenue Obligations
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 (e)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 Revenue Obligations then Outstanding; it being
understood and intended that no one or more Owners of Revenue Obligations 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 Revenue Obligations,
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 Revenue Obligations.
Section 7.08. No Liability by the Corporation to the Owners. 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
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 Revenue Obligations 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 VIU
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 register, execute, deliver and transfer the Revenue
27003639.4 28
Obligations 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 case 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 Revenue Obligations at the
time Outstanding (or their attorneys duly authorized in writing), or (b)the Trustee shall cease to
be 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
27003639.4 29
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,
ipso 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
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 costs, expenses, claims and
liabilities which it may incur in the exercise and performance of its powers and duties hereunder
or any other document related to this Trust Agreement, 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
27003639.4 30
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 Revenue Obligations 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 Revenue Obligations 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 Revenue Obligations.
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
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 Revenue Obligations 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 Revenue Obligations 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
27003639.4 31
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 be 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 Revenue Obligations 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 Revenue Obligations 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.
The Trustee will not be considered in breach of or in default in its obligations hereunder
or progress in respect thereto in the event of delay in the performance of such obligations due to
unforeseeable causes beyond its control and without its fault or negligence ("unavoidable
delay"), including, but not limited to, acts of God or of the public enemy or terrorists, acts of a
government, acts of the other parties, fires, floods, epidemics, quarantine restrictions, strikes,
freight embargoes, earthquakes, explosion, mob violence, riot, inability to procure or general
sabotage or rationing of labor, equipment, facilities, sources of energy,material or supplies in the
open market, litigation or arbitration involving a party or others relating to zoning or other
governmental action or inaction pertaining to any project refinanced with the proceeds of the
Revenue Obligations, malicious mischief, condemnation, and unusually severe weather or any
similar event and/or occurrences beyond the control of the Trustee.
ARTICLE IX
AMENDMENT OF OR SUPPLEMENT TO TRUST AGREEMENT
Section 9.01. Amendment or Supplement. 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 Revenue Obligations then Outstanding, exclusive of Revenue
Obligations 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 Revenue
Obligation 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 Revenue Obligation 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 Revenue Obligations 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 Revenue Obligations then Outstanding.
27003639.4 32
(a) 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; or
(iii) for any other reason, provided such amendment or supplement does not
adversely affect the rights or interests of the Owners.
Section 9.02. Disqualified Revenue Obligations. Revenue Obligations owned or held
by or for the account of the District (but excluding Revenue Obligations 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 calculation of Outstanding Revenue Obligations 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 Revenue Obligations as to which such
consent is given are disqualified as provided in this Section.
Section 9.03. Endorsement or Replacement of Revenue Obligations After
Amendment or Supplement. After the effective date of any action taken as hereinabove
provided in this Article, the Trustee may determine that the Revenue Obligations may bear a
notation by endorsement in form approved by the Trustee as to such action, and in that case upon
demand of the Owner of any Outstanding Revenue Obligation and presentation of such Revenue
Obligation for such purpose at the Principal Office a suitable notation as to such action shall be
made on such Revenue Obligation. If the Trustee shall receive an Opinion of Counsel advising
that new Revenue Obligations modified to conform to such action are necessary, modified
Revenue Obligations shall be prepared, and in that case upon demand of the Owner of any
Outstanding Revenue Obligations such new Revenue Obligations shall be exchanged at the
Principal Office without cost to each Owner for Revenue Obligations then Outstanding upon
surrender of such Outstanding Revenue Obligations.
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 Revenue Obligations
owned by such Owner,provided that due notation thereof is made on such Revenue Obligations.
27003639.4 33
ARTICLE X
DEFEASANCE
Section 10.01. Discharge of Revenue Obligations 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 Revenue Obligations 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 Revenue Obligation 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 Revenue Obligation shall have been
paid or when (i)in case said Revenue Obligation or portion thereof has been selected for
prepayment in accordance with Section 4.03 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 Revenue Obligation, 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 Revenue Obligation and due and
to become due on or prior to the prepayment date or its stated Principal Payment Date, as the
case may be, and (iii) in the event the stated Principal Payment Date of such Revenue Obligation
will not occur, and said Revenue Obligation 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 Revenue Obligation, 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 Revenue Obligation, 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 Revenue Obligation, 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 Revenue Obligation, or
portions thereof. If payment of less than all of the Revenue Obligations 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 Revenue Obligations, or portions thereof, in the manner specified in
Section 4.03 hereof for selection for prepayment of less than all of the Revenue Obligations, in
the principal amounts designated to the Trustee by the District.
27003639.4 34
(c) After the payment of all the interest, prepayment premium, if any, and principal
evidenced by all Outstanding Revenue Obligations 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 Revenue Obligations 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 District, of a nationally recognized certified public
accountant, or fimr 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 Government 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 District, to the effect that such Revenue
Obligations have been paid within the meaning and with the effect expressed in this Trust
Agreement, and all agreements and covenants of the Corporation, the District and the Trustee to
the Owners of such Revenue Obligations under this Trust Agreement have ceased, terminated
and become void and have been discharged and satisfied.
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 Revenue Obligations
which remain unclaimed for two years after the date when such interest or principal evidenced
by such Revenue Obligations 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 Revenue Obligations 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 Revenue Obligations.
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
27003639.4 35
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 Revenue Obligations 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.
Any declaration, request or other instrument in writing of the Owner of any Revenue
Obligation shall bind all future Owners of such Revenue Obligation 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 Revenue Obligations, 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. Acauisition of Revenue Obligations by District. All Revenue
Obligations 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,
27003639.4 36
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 term has been complied with, and
(d)a statement as to whether, in the opinion of the signer, such agreement, condition, covenant
or term 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 Revenue Obligations and the rights of the
Owners. The 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 Headings. 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.
27003639.4 37
Section 11.09. Partial Invalidity. If any one or more of the agreements, conditions,
covenants or terms 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 Revenue Obligations, 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 Revenue Obligations 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
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: U.S. Bank Corporate Trust Services
633 West Fifth Street, 24th Floor
Los Angeles, California 90071
Attention: Global Corporate Trust Services
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, e.g. facsimile or telecopier or e-mail (with a PDF attachment, if applicable),
upon the sender's receipt of an appropriate 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,
27003639.4 38
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.
[Remainder of page intentionally left blank.]
27003639.4 39
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
(SEAL)
Attest:
By:
Clerk of the Board of Directors
U.S. BANK NATIONAL ASSOCIATION,
as Trustee
By:
Authorized Officer
27003639.4 40
EXHIBIT A
FORM OF REVENUE OBLIGATION
No. R— •*•$•*•
Unless this Revenue Obligation is presented by an authorized representative of The
Depository Trust Company to the Trustee for registration of transfer, exchange or payment, and
any Revenue Obligation 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
WASTEWATER REFUNDING REVENUE OBLIGATION
SERIES 2016A
Such revenue obligations are certificates of participation evidencing direct,undivided fractional
interests in the Installment Purchase Agreement,dated as of March 1,2016,by and between the
Orange County Sanitation District and the Orange County Sanitation District Financing
Corporation and the related Installment Payments,and the interest thereon.
PRINCIPAL
PAYMENT DATE INTEREST RATE DATED DATE CUSIP
February 1, - 2016
REGISTERED OWNER: Cede&Co.
PRINCIPAL AMOUNT: DOLLARS
THIS IS TO CERTIFY that the Registered Owner of this Revenue Obligation (this
"Revenue Obligation"), 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 March 1, 2016 (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 U.S. Bank National Association, 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 March 1,2016 (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.
27003639.4 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 Revenue Obligation is one of the duly authorized Orange County Sanitation District
Wastewater Refunding Revenue Obligations, Series 2016A (the "Revenue Obligations")
evidencing principal in the aggregate amount of$[Par Amount], executed pursuant to the terms
of the Trust Agreement. The Revenue Obligations evidence direct, fractional undivided interests
in the Installment Payments, and the interest thereon, payable under the Installment Purchase
Agreement. The Revenue Obligations are executed and delivered to refinance certain
improvements to the wastewater collection, treatment and disposal facilities of the District (the
"Wastewater System") and 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
Obligations. 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
27003639.4 A-2
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
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 Revenue Obligations 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 Revenue Obligations. 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 Revenue Obligations, to all the provisions of which the Owner of this Revenue
Obligation,by acceptance hereof, agrees and consents.
The Registered Owner of this Revenue Obligation 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 Revenue
Obligation at the principal corporate trust office of the Trustee in St. Paul, Minnesota (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 I
and August 1 of each year, commencing on August 1, 2016 (each an "Interest Payment Date"),
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 Revenue Obligation 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 Revenue Obligation 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 Revenue Obligation 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 Revenue Obligations shall be in default, this Revenue
Obligation 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 Revenue Obligations 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 famished in writing to the Trustee by such
Owner. Payment of principal and prepayment premium, if any, evidenced by the Revenue
Obligations, on their stated principal payment dates or on prepayment in whole or in part prior
27003639.4 A-3
thereto, shall be made only upon presentation and surrender of the Revenue Obligations at the
Principal Office. All such amounts are payable in lawful money of the United States of America.
The Revenue Obligations are authorized to be executed and delivered in the form of fully
registered certificates in denominations of$5,000 or any integral multiple thereof("Autorized
Denominations").
This Revenue Obligation 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 Revenue Obligation during
the period commencing on the date five days before the date of selection of Revenue Obligations
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 Revenue Obligation 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 Revenue Obligation 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 Revenue Obligation shall be made only
to such Registered Owner, which payments shall be valid and effectual to satisfy and discharge
the liability evidenced by this Revenue Obligation to the extent of the sum or sums so paid.
The Revenue Obligations 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 Revenue Obligations
then outstanding, exclusive of Revenue Obligations 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 Revenue Obligation 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 Revenue
Obligation 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 Revenue Obligations 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 Revenue Obligations then outstanding.
27003639.4 A-4
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
written consents of any Owners,but only to the extent permitted by law and only(a)to add to the
agreements, conditions, covenants and terns required by the Corporation or the District to be
observed or performed under the Trust Agreement other agreements, conditions, covenants and
terns 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 or (c) 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
Revenue Obligation 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 Revenue Obligation.
IN WITNESS WHEREOF, this Revenue Obligation has been executed by the manual
signature of an authorized signatory of the Trustee as of the date set forth below.
Date: 20_
U.S. BANK NATIONAL ASSOCIATION,
as Trustee
By:
Authorized Officer
27003639.4 A-$
ASSIGNMENT
For value received, the undersigned do(es) hereby sell, assign and transfer unto
the within-mentioned Revenue Obligation
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 narne(s) as written on the
face of the within registered Revenue Obligation in every particular, without alteration
or enlargement or any change whatsoever.
Tax I.D. #:
Signature Guaranteed:
Now: Signatme(s)must be guaranteed by an eligible Note: The signature(s)on this Assignment must correspond
guarantor. with the name(s)as written on the face of the within Revenue
Obligation in every particular without alteration or
enlargement or any change whatsoever.
27003639.4 A-6
NRF DRAFT
2/3/16
INSTALLMENT PURCHASE AGREEMENT
by and between
ORANGE COUNTY SANITATION DISTRICT
and
ORANGE COUNTY SANITATION DISTRICT
FINANCING CORPORATION
Dated as of March 1, 2016
Relating to
$[Paz Amount]
Orange County Sanitation District
Wastewater Refunding Revenue Obligations
Series 2016A
290036384 11411481
TABLE OF CONTENTS
Page
ARTICLE I DEFINITIONS
Section 1.01. Definitions............................................................................................2
Section 1.02. Definitions in Master Agreement and Trust Agreement......................3
ARTICLE II PURCHASE OF PROJECT BY,AND SALE THEREOF TO,THE
CORPORATION; PAYMENT OF PURCHASE PRICE
Section 2.01. Acquisition of the Project....................................................................4
Section 2.02. Payment of Purchase Price...................................................................4
ARTICLE IH PURCHASE OF PROJECT BY,AND SALE THEREOF TO,THE
DISTRICT; INSTALLMENT PAYMENTS
Section 3.01. Purchase and Sale of Project................................................................4
Section 3.02. Installment Payments...........................................................................4
Section3.03. Reserved...............................................................................................6
Section 3.04. Obligation Absolute.............................................................................6
Section 3.05. Nature of Agreement............................................................................6
ARTICLE IV PREPAYMENT OF INSTALLMENT PAYMENTS
Section 4.01. Prepayment of Installment Payments...................................................7
Section4.02. Notice...................................................................................................7
Section 4.03. Discharge of Obligations.....................................................................7
ARTICLE V COVENANTS
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........................................................ 8
Section 5.04. Indemnification of Corporation........................................................... 8
Section 5.05. Further Assurances............................................................................... 8
ARTICLE VI EVENTS OF DEFAULT AND REMEDIES OF THE
CORPORATION
Section 6.01. Events of Default................................................................................. 8
Section 6.02. Remedies on Default............................................................................9
Section6.03. Non-Waiver..........................................................................................9
Section 6.04. Remedies Not Exclusive.................................................................... 10
ARTICLE VII AMENDMENTS
Section 7.01. Amendments...................................................................................... 10
ARTICLE VIII MISCELLANEOUS
Section 8.01. Liability of District Limited............................................................... 11
Section 8.02. Limitation of Rights........................................................................... 11
Section8.03. Assignment ........................................................................................ 11
Section8.04. Notices............................................................................................... 12
27W3638.6 _i_
TABLE OF CONTENTS
(continued)
Page
Section 8.05. Successor Is Deemed Included in all References to Predecessor...... 12
Section 8.06. Waiver of Personal Liability.............................................................. 12
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
27W3638.6 -11-
INSTALLMENT PURCHASE AGREEMENT
THIS INSTALLMENT PURCHASE AGREEMENT (this "Installment Purchase
Agreement'), dated as of March 1, 2016, 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, to refinance the acquisition, construction and installation of certain
improvements to its wastewater system (the `Prior Project'), the District has heretofore
purchased the Prior Project from the Corporation, and the Corporation has heretofore sold the
Prior Project to the District, for the installment payments (the `Prior Installment Payments")
made by the District pursuant to the Installment Purchase Agreement, dated as of May 1, 2009
(the`Prior Installment Purchase Agreement'),by and between the District and the Corporation;
WHEREAS, to provide the funds necessary to refinance the Prior Project, the District
caused the execution and delivery of the Orange County Sanitation District Certificates of
Participation, Series 2009A (the "Prior Certificates"), evidencing direct, undivided fractional
interests in the related Prior Installment Payments;
WHEREAS,the District desires to refinance a portion of the Prior Project(the "Project')
by prepaying a portion of the remaining Prior Installment Payments, and the interest thereon to
the dates of prepayment, thereby causing a portion of the remaining Prior Certificates to be
prepaid;
WHEREAS,to provide the funds necessary to pay and prepay a portion of the remaining
Prior Installment Payments,the District and the Corporation desire that the Corporation purchase
the Project from the District and the District sell the Project to the Corporation, and that the
District then purchase the Project from the Corporation and the Corporation sell the Project to
the District, for the installment payments (the`Installment Payments") to be made by the District
pursuant to this Installment Purchase Agreement;
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 U.S. Bank National Association,
as trustee(the"Trustee");
2900363&4
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
Wastewater Refunding Revenue Obligations, Series 2016A (the "Revenue Obligations"),
evidencing direct, undivided fractional interests in the Installment Payments, and the interest
thereon,payable hereunder;
WHEREAS, a portion of the proceeds of the Revenue Obligations will be used to prepay
a portion of the Prior Installment Payments; and
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:
ARTICLE I
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:
"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.
"Closing Date"means ,2016.
"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 Default"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.
290036384 2
"Installment Payment Dates"means each February 1, commencing February 1, 20.
"Installment Purchase Agreement" means this Installment Purchase Agreement, dated
as of March 1, 2016, 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 hereof.
"Interest Payment Date" means February 1 and August 1 of each year, commencing
August 1,2016.
"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.
"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, as described in Exhibit A
hereto.
"Revenue Obligations" means the Orange County Sanitation District Wastewater
Refunding Revenue Obligations, Series 2016A, executed and delivered by the Trustee, which are
certificates of participation, evidencing direct, undivided fractional interests in the Installment
Payments, and the interest thereon, executed and delivered under and pursuant to the Trust
Agreement.
"Trust Agreement" means the Trust Agreement, dated as of March 1, 2016, 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 U.S. Bank National Association, 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 terns 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 terns 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.
290036384 3
ARTICLE II
PURCHASE OF PROJECT BY,AND SALE THEREOF TO,THE CORPORATION;
PAYMENT OF PURCHASE PRICE
Section 2.01. Acquisition of the Protect. The District represents and warrants that it is
the sole and exclusive owner of the Project. The Corporation hereby purchases from the District,
and the District hereby sells to the Corporation, a portion of the Project equal to $[Par Amount]
as described in Exhibit A hereto in accordance with the provisions of this Installment Purchase
Agreement. All right, title and interest in and to such portion of the Project shall immediately
vest in the Corporation on the Closing Date without further action on the part of the Corporation
or the District.
Section 2.02. Payment of Purchase Price. On the Closing Date, the Corporation shall
pay to the District, as the purchase price of the applicable portion of the Project specified in
Section 2.01, the amount of$ , which amount shall be paid from the proceeds of the
Revenue Obligations.
ARTICLE IU
PURCHASE OF PROJECT BY,AND SALE THEREOF TO,THE DISTRICT;
INSTALLMENT PAYMENTS
Section 3.01. Purchase and Sale of Protect. 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 W 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 and the interest thereon shall be payable
on the Business Day immediately preceding each of the Installment Payment Dates in the
amounts and at the interest rates per annum set forth in the following schedule:
290036384 4
Interest on
Payment Installment Installment Interest
Date Payment Payment Total 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 Revenue Obligations, such amounts shall be credited
against the Installment Payment, or payment of interest thereon, as applicable, due on such date.
Section 3.03. Reserved.
290036384 5
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
Section 4.01. Prepayment of Installment Payments. (a) The Installment Payments
shall be subject to prepayment prior to their respective Installment Payment Dates as provided in
Article IV of the Trust Agreement.
(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 terms 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
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 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 to take
such prepayment into account.
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 25 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.
290036384 6
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 Revenue Obligations 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 terns 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 tern 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,
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 Revenue Obligations, 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 Revenue Obligations.
290036384 7
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
(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;
290036384 8
(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 to 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.
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 VII
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 Revenue
Obligations then Outstanding. No such amendment shall (i) extend the payment date of any
270036384 9
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 Revenue
Obligation, or(ii)reduce the percentage of Owners of the Revenue Obligations whose consent is
required to effect any such amendment or modification, without the prior written consent of the
Owners of all Revenue Obligations 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 Revenue Obligations, 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 performed 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; and
(iii) 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 Revenue Obligations.
ARTICLE VIII
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
290036384 10
herein, 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 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 bereunder), 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:
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: U.S. Bank Corporate Trust Services
633 West Fifth Street, 24th Floor
Los Angeles, California 90071
Attention: Global Corporate Trust Services
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 facsimile 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
270036384 11
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 fitles 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.
Section 8.08. Partial Invalidity. If any one or more of the agreements or covenants or
portions thereof required hereby to be 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. Governing 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.
2700363&4 12
IN WITNESS WHEREOF,the parties hereto have executed this Installment Purchase
Agreement by their officers thereunto 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
290036384 13
EXHIBIT A
DESCRIPTION OF PROJECT
The Project is consists of the acquisition, construction and installation of certain
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 Plant 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.
A portion of the Project in the amount of$ shall be sold and purchased
as described in Article II of this Installment Purchase Agreement.
290036384 A-1
NRF DRAFT
1/21/16
ESCROW AGREEMENT
by and between
ORANGE COUNTY SANITATION DISTRICT
and
U.S. NATIONAL ASSOCIATION,
as Escrow Agent and Prior Trustee
Dated as of March 1, 2016
Orange County Sanitation District
Certificates of Participation
Series 2009A
27003636.1 11600388
ESCROW AGREEMENT
THIS ESCROW AGREEMENT (this "Escrow Agreement"), dated as of March 1,
2016, 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 U.S. BANK NATIONAL ASSOCIATION, a national banking association
organized and existing under the laws of the United States of America, as escrow agent (the
"Escrow Agent") and as trustee under the Prior Trust Agreement referenced below (the "Prior
Trustee").
WITNESSETH:
WHEREAS, to finance the acquisition, construction and installation of certain
improvements to its wastewater system (the `Prior Project"), the District has heretofore
purchased the Prior Project from the Orange County Sanitation District Financing Corporation
(the "Corporation"), and the Corporation has heretofore sold the Prior Project to the District, for
the installment payments (the "Prior Installment Payments") to be made by the District pursuant
to the Installment Purchase Agreement, dated as of May 1, 2009 (the "Prior Installment Purchase
Agreement"),by and between the District and the Corporation;
WHEREAS, to provide the funds necessary to finance the Prior Project, the District
caused the execution and delivery of the Orange County Sanitation District Certificates of
Participation, Series 2009A (the `Prior Certificates"), evidencing direct, undivided fractional
interests in the related Prior Installment Payments, pursuant to the Trust Agreement, dated as of
May 1, 2009 (the "Prior Trust Agreement"), by and among the Prior Trustee, the Corporation
and the District;
WHEREAS, the District has determined to refinance a portion of the Prior Project by
paying and prepaying a portion of the remaining principal components of the Prior Installment
Payments (the "Refunded Installment Payments"), and the interest components thereof to the
date of prepayment, thereby causing to be prepaid a portion of the currently outstanding Prior
Certificates maturing on February 1 in the years 20[19] through 20[39], inclusive, in the
aggregate principal amount of$ (the "Refunded Certificates");
WHEREAS, to provide the funds necessary to pay and prepay the Refunded Installment
Payments, the District has caused to be executed and delivered the Orange County Sanitation
District Wastewater Refunding Revenue Obligations, Series 2016A (the "Revenue Obligations"),
evidencing principal in the aggregate amount of $ , pursuant to the Trust Agreement,
dated as of March 1, 2016, by and among , as trustee, the Corporation and the
District;
WHEREAS, in accordance with the Prior Trust Agreement, the prepayment of the
Refunded Installment Payments will be applied to the payment of principal and interest
evidenced by the Refunded Certificates to and including February 1, 2019 (the "Prepayment
Date") and to the prepayment of the outstanding Refunded Certificates on the Prepayment Date
at a prepayment price equal to the principal amount thereof plus accrued interest thereon,without
premium (the "Prepayment Price"),pursuant to this Escrow Agreement;
29003636A
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:
Section 1. Definitions. Unless otherwise defined herein, capitalized terns used
herein shall have the meanings ascribed to such terns in the Prior Trust Agreement.
Section 2. The Escrow Fund. (a) There is hereby established a fund (the "Escrow
Fund") to be held as an irrevocably pledged escrow by the Escrow Agent, which the Escrow
Agent shall keep separate and apart from all other funds of the District and the Escrow Agent
and to be applied solely as provided in this Escrow Agreement. Pending application as provided
in this Escrow Agreement, amounts on deposit in the Escrow Fund are hereby pledged solely to
the payment of the principal and interest evidenced by the Refunded Certificates to and including
the Prepayment Date and the payment of the Prepayment Price on the Prepayment Date, which
amounts shall be held in trust by the Escrow Agent for the Owners of the Refunded Certificates.
(b) The Prior Trustee is hereby instructed to release $ held in the Reserve
Fund established under the Prior Trust Agreement (the "Prior Reserve") for deposit in the
Escrow Fund. As reflected in the report of the nationally recognized firm of independent
certified public accountants delivered in connection herewith,upon the execution and delivery of
the Revenue Obligations, there shall be deposited in the Escrow Fund$ received from
the proceeds of the sale of the Revenue Obligations and $ from release of the Prior
Reserve for a total of$ (the"Escrow Deposit').
(c) The District has determined or caused to be determined that upon the deposit of
the Escrow Deposit pursuant to Section 2(b) hereof, $ of the moneys on deposit in the
Escrow Fund will be invested in the Government Obligations specified in Schedule I hereto
which, together with uninvested cash in the amount of $ , will be sufficient to make the
payments required by Section 4 hereof.
Section 3. Use of Moneys in Escrow Fund. (a) The Escrow Agent hereby
acknowledges deposit of the moneys described in Section 2(b) hereof and agrees to invest such
moneys credited to the Escrow Fund described in Section 2(c) in the Government Obligations
specified in Schedule I hereto.
(b) The Owners of the Refunded Certificates shall have a first and exclusive lien on
the moneys and Government Obligations credited to the Escrow Fund until such moneys and
Government Obligations are used and applied as provided in this Escrow Agreement and the
Prior Trust Agreement to pay principal and interest evidenced by the Refunded Certificates to
and including the Prepayment Date and to prepay in full then outstanding Refunded Certificates
on the Prepayment Date.
(c) The Escrow Agent shall not be held liable for investment losses resulting from
compliance with the provisions of this Escrow Agreement.
29003636.E 3
Section 4. Payment of Refunded Certificates. From the uninvested money and
proceeds of maturing Government Obligations held in the Escrow Fund, the Escrow Agent shall
apply such amounts to the payment of the principal and interest evidenced by the Refunded
Certificates to and including the Prepayment Date and to the payment of the Prepayment Price of
the Refunded Certificates on the Prepayment Date, all as set forth in Schedule II hereto. To the
extent that the amount on deposit in the Escrow Fund on the Prepayment Date is in excess of the
amount necessary to make the required payments with respect to the Refunded Certificates, such
excess shall be transferred to the Trustee for deposit in the Installment Payment Fund established
under the Prior Trust Agreement.
Section 5. Irrevocable Instructions to Mail Notices. The District hereby
irrevocably instructs the Prior Trustee to give notice within five business days of delivery of the
Revenue Obligations of defeasance of the Refunded Certificates to the Owners thereof and to
Assured Guaranty Municipal Corp., as successor to Financial Security Assurance Inc.,
substantially in the form set forth in Exhibit A hereto. The District hereby designates the
Refunded Certificates for prepayment on the Prepayment Date and hereby irrevocably instructs
the Prior Trustee, to give, in accordance with the provisions of Section_ of the Prior Trust
Agreement, notice of prepayment of such Refunded Certificates to the Owners thereof,
substantially in the form set forth in Exhibit B hereto.
Section 6. Performance of Duties: Acknowledgement with Respect to
Irrevocable Instructions. The Escrow Agent hereby agrees to perform the duties set forth
herein and agrees that the irrevocable instructions to the Escrow Agent herein provided are in a
form satisfactory to it.
Section 7. Substitution of Government Obligations. (a) Upon the written direction
of the District, subject to the conditions and limitations set forth in paragraph (c) below, the
Escrow Agent shall sell, transfer and request the redemption of or otherwise dispose of the initial
Government Obligations held in and credited to the Escrow Fund; provided that, subject to
paragraph (c) below, there are substituted therefor and delivered to the Escrow Agent other
Government Obligations as hereinafter provided.
(b) Upon the written direction of the District, subject to the conditions and limitations
set forth in paragraph (c) below, the Escrow Agent shall reinvest cash balances in the Escrow
Fund in Government Obligations; provided, that any such securities purchased pursuant to this
paragraph (b) shall mature (1) on the next Interest Payment Date for any of the Refunded
Certificates or(2) as on such other date or dates necessary to meet the requirements of Section 4
hereof, as certified by a nationally recognized firm of independent certified public accountants.
(c) The District, by this Escrow Agreement, hereby covenants and agrees that it will
not request the Escrow Agent to exercise any of the powers described in paragraph (a) or (b)
above in any manner, which if such exercise of powers had been reasonably expected on the date
of delivery of the Refunded Certificates, would cause any of the Refunded Certificates to be
arbitrage bonds within the meaning of section 103(c) of the Internal Revenue Code of 1986 (the
"Code"), and the regulations thereunder in effect on the date of such request and applicable to
obligations issued on the date of such Refunded Certificates. Any purchase of substitute
securities by the Escrow Agent shall be accomplished in accordance with paragraph (a) above to
27003636A 4
the extent such purchases are to be made with the proceeds derived from the sale, transfer,
redemption or other disposition of the Government Obligations. Such sale, transfer, redemption
or other disposition of the Government Obligations and such substitution may be effected only
by a simultaneous transaction and only if(i)a nationally recognized firm of independent certified
public accountants shall certify that (a) such substitute securities, together with the Government
Obligations and cash which will continue to be held in the Escrow Fund, will mature in such
principal amounts and earn interest in such amounts and at such times so that sufficient moneys
will be available from such maturing principal and interest to pay, as the same become due, all
principal,premium and interest payable with respect to the Refunded Certificates which have not
previously been paid, and (b) the amounts and dates of the anticipated payments by the Escrow
Agent of the principal, premium and interest payable with respect to the Refunded Certificates
will not be diminished or postponed thereby, (ii) the Escrow Agent shall have received an
opinion of nationally recognized bond counsel to the effect that the sale, transfer, redemption or
other disposition and substitution of the Government Obligations does not cause interest on
either the Revenue Obligations or the Refunded Certificates to be subject to federal income
taxation under relevant provisions of the Code and the regulations thereunder in effect on the
date of such sale, transfer, redemption or other disposition and substitution and applicable to
obligations issued on the date of execution and delivery of the Revenue Obligations.
Section 8. Escrow Agent's Authority to Make Investments. Except as expressly
provided in Sections 3 and 7 hereof, the Escrow Agent shall have no power or duty to invest any
funds held under this Escrow Agreement. The Escrow Agent shall have no power or duty to
transfer or otherwise dispose of the moneys held hereunder except as provided herein.
Section 9. Indemnity. To the extent permitted by law, the District hereby assumes
liability for, and hereby agrees to indemnify, protect, save and keep harmless the Escrow Agent
and its respective successors, assigns, agents, employees and servants, from and against any and
all liabilities, obligations, losses, damages, penalties, claims, actions, suits, costs, expenses and
disbursements (including reasonable legal fees, expenses and disbursements) of whatsoever kind
and nature which may be imposed on, incurred by, or asserted against, the Escrow Agent at any
time in any way relating to or arising out of the execution, delivery and performance of this
Escrow Agreement, the establishment hereunder of the Escrow Fund, the acceptance of the
moneys deposited therein, and any payment, transfer or other application of moneys by the
Escrow Agent in accordance with the provisions of this Escrow Agreement; provided, however,
that the District shall not be required to indemnify the Escrow Agent against the Escrow Agent's
own negligence or willful misconduct or the negligence or willful misconduct of the Escrow
Agent's respective successors, assigns, agents and employees or the material breach by the
Escrow Agent of the terms of this Escrow Agreement. In no event shall the District or the
Escrow Agent be liable to any person by reason of the transactions contemplated hereby other
than to each other as set forth in this Section. The indemnities contained in this Section shall
survive the termination of this Escrow Agreement.
Section 10. Responsibilities of Escrow Agent. The Escrow Agent makes no
representation as to the sufficiency of the funds deposited in accordance with Section 2(b) and
invested pursuant to Section 3(a) and earnings thereof, if any, to accomplish the prepayment of
the Refunded Certificates pursuant to the Prior Trust Agreement or to the validity of this Escrow
Agreement as to the District and, except as otherwise provided herein, the Escrow Agent shall
29003636A 5
incur no liability in respect thereof. The Escrow Agent shall not be liable in connection with the
performance of its duties under this Escrow Agreement except for its own negligence, willful
misconduct or default, and the duties and obligations of the Escrow Agent shall be determined by
the express provisions of this Escrow Agreement. The Escrow Agent may consult with counsel,
who may or may not be counsel to the District, and in reliance upon the written opinion of such
counsel shall have full and complete authorization and protection in respect of any action taken,
suffered or omitted by it in good faith in accordance therewith. Whenever the Escrow Agent
shall deem it necessary or desirable that a matter be proved or established prior to taking,
suffering, or omitting any action under this Escrow Agreement, such matter (except the matters
set forth herein as specifically requiring a certificate of a nationally recognized firm of
independent certified public accountants or an opinion of counsel of recognized standing in the
field of law relating to municipal bonds) may be deemed to be conclusively established by a
written certification of the District.
The Escrow Agent shall famish the District periodic cash transaction statements which
include detail for all investment transactions effected by the Escrow Agent or brokers selected by
the District. Upon the District's election, such statements will be delivered via the Escrow
Agent's online service and upon electing such service, paper statements will be provided only
upon request. The District waives the right to receive brokerage confirmations of security
transactions effected by the Escrow Agent as they occur, to the extent permitted by law. The
District further understands that trade confirmations for securities transactions effected by the
Escrow Agent will be available upon request and at no additional cost and other trade
confirmations may be obtained from the applicable broker.
The Escrow Agent undertakes to perform only such duties as are expressly set forth in
this Agreement and no implied duties, covenants or obligations shall be read into this Agreement
against the Escrow Agent.
The Escrow Agent may resign by giving written notice to the District, and upon receipt of
such notice the District shall promptly appoint a successor Escrow Agent. If the District does
not appoint a successor Escrow Agent within thirty (30) days of receipt of such notice, the
resigning Escrow Agent may petition a court of competent jurisdiction for the appointment of a
successor Escrow Agent, which court may thereupon, upon such notice as it shall deem proper,
appoint a successor Escrow Agent. Upon acceptance of appointment by a successor Escrow
Agent, the resigning Escrow Agent shall transfer all amounts held by it in the Escrow Fund to
such successor Escrow Agent and be discharged of any further obligation or responsibility
hereunder.
Section 11. Amendments. The District and the Escrow Agent may(but only with the
consent of the Owners of all of the Refunded Certificates) amend this Escrow Agreement or
enter into agreements supplemental to this Escrow Agreement.
Section 12. Term. This Escrow Agreement shall commence upon its execution and
delivery and shall terminate on the date upon which the Refunded Certificates have been paid in
accordance with this Escrow Agreement.
29003636A 6
Section 13. Comoensation. The District shall from time to time pay or cause to be
paid to the Escrow Agent the agreed upon compensation for its services to be rendered
hereunder, and reimburse the Escrow Agent for all of its reasonable advances in the exercise and
performance of its duties hereunder; provided, however, that under no circumstances shall the
Escrow Agent be entitled to any lien whatsoever on any moneys or obligations in the Escrow
Fund for the payment of fees and expenses for services rendered or expenses incurred by the
Escrow Agent under this Escrow Agreement or otherwise.
Section 14. Severability. If any one or more of the covenants or agreements provided
in this Escrow Agreement on the part of the District or the Escrow Agent to be performed should
be determined by a court of competent jurisdiction to be contrary to law, such covenants or
agreements shall be null and void and shall be deemed separate from the remaining covenants
and agreements herein contained and shall in no way affect the validity of the remaining
provisions of this Escrow Agreement.
Section 15. Counterparts. This Escrow Agreement may be executed in several
counterparts, all or any of which shall be regarded for all purposes as an original but all of which
shall constitute and be but one and the same instrument.
Section 16. Governing Law. This Escrow Agreement shall be construed under the
laws of the State of California.
29003636A 7
IN WITNESS WHEREOF, the parties hereto have executed this Escrow Agreement as
of the date first above written.
U.S. BANK NATIONAL ASSOCIATION,
as Escrow Agent and Prior Trustee
By:
Authorized Officer
ORANGE COUNTY SANITATION DISTRICT
By:
Lorenzo Tyner,Director of Finance
and Administrative Services
29003636A
SCHEDULE I
INITIAL GOVERNMENT OBLIGATIONS IN ESCROW FUND
1 pe Maturity Date Principal Amount Interest Rate
27003636.1
I-1
SCHEDULED
PAYMENT REQUIREMENTS OF THE REFUNDED CERTIFICATES
Principal
Period Endine Interest Prepaid Total
29003636A Il-I
EXHIBIT A
NOTICE OF DEFEASANCE
ORANGE COUNTY SANITATION DISTRICT
CERTIFICATES OF PARTICIPATION
SERIES 2009A
MATURING ON FEBRUARY 1 IN THE YEARS 20_THROUGH 20_, INCLUSIVE
Stated Principal CUSIP
Payment Date Interest Rate Principal Outstandine Number*
NOTICE IS HEREBY GIVEN that on March , 2016, the Orange County Sanitation
District (the "District") caused there to be deposited with U.S. Bank National Association, as
escrow agent (the "Escrow Agent"), pursuant to an Escrow Agreement, dated as of March 1,
2016, by and between the District and the Escrow Agent, proceeds of its Wastewater Refunding
Revenue Obligations, Series 2016A, together with other available monies, which will be
sufficient (i) to pay the principal and interest evidenced by the District's Certificates of
Participation, Series 2009A maturing on February 1 in the years 20 through 20 , inclusive
(the "Refunded Certificates"), to and including February 1, 2019 (the "Prepayment Date") and
(ii) to pay all of the principal evidenced by the Refunded Certificates, plus accrued interest
evidenced thereby to the Prepayment Date, without premium (the `Prepayment Price"), on the
Prepayment Date. Thus, on the Prepayment Date there will become due and payable with
respect to each of the Refunded Certificates the Prepayment Price thereof, and from and after
such Prepayment Date, the interest evidenced thereby shall cease to accrue and be payable. The
Escrow Agent is obligated to pay or cause to be paid to the Owners of the Refunded Certificates
all sums due thereon, but only from moneys deposited with the Escrow Agent as described in
this paragraph.
29003636A A-1
Dated: 12016
By: U.S. BANK NATIONAL ASSOCIATION,
as Trustee and Escrow Agent on behalf of the
Orange County Sanitation District
• Neither the District nor the Trustee/Escrow Agent shall have any responsibility for any defect in the CUSIP
numbers that appear in this defeasance notice. The CUSIP numbers have been assigned by an independent service
for convenience of reference, and neither the District nor the Trustee/Escrow Agent shall not be liable for any
inaccuracy in such number.
2900363G1 A-2
EXHIBIT B
NOTICE OF PREPAYMENT
ORANGE COUNTY SANITATION DISTRICT
CERTIFICATES OF PARTICIPATION
SERIES 2009A
MATURING ON FEBRUARY 1 IN THE YEARS 20 THROUGH 20_, INCLUSIVE
Principal Stated CUSIP
Payment Date Interest Rate Principal Outstandine Number*
NOTICE IS HEREBY GIVEN that the Orange County Sanitation District Certificates of
Participation, Series 2009A, in the maturities and principal amounts specified above (the
"Refunded Certificates") are hereby subject to prepayment on February 1, 2019 (the
"Prepayment Date") at a price equal to the principal evidenced by the Refunded Certificates,plus
accrued interest evidenced thereby to the Prepayment Date, without premium (the "Prepayment
Price"). On the Prepayment Date there will become due and payable with respect to each of the
Refunded Certificates the Prepayment Price thereof, and from and after such Prepayment Date,
the interest evidenced thereby shall cease to accrue and be payable. The Refunded Certificates
shall be surrendered at the address of U.S. Bank National Association, as Trustee, set forth
below.
[to come]
The method of presentation and delivery of a Refunded Certificate is at the option and risk of the
owner of each Refunded Certificate(the"Owner"). If mail is used, insured registered mail,
return receipt requested is suggested.
The Trustee may be obligated to withhold a percentage of the Prepayment Price from any Owner
who fails to famish the Trustee with a valid taxpayer identification number or a certification that
such Owner is not subject to backup withholding. Owners who wish to avoid the application of
these provisions should submit a completed IRS Form W-9 when presenting their Refunded
Certificates.
Dated: 20
29003636A B-1
By: U.S. Bank National Association,
as Trustee and Escrow Agent on behalf of the
Orange County Sanitation District
* Neither the District nor the Trustee/Escrow Agent shall have any responsibility for any defect in the CUSIP
numbers that appear in this prepayment notice. The CUSIP numbers have been assigned by an independent service
for convenience of reference, and neither the District nor the Trustee/Escrow Agent shall not be liable for any
inaccuracy in such number.
29003636.t B-2
CONTINUING DISCLOSURE AGREEMENT
THIS CONTINUING DISCLOSURE AGREEMENT (this "Disclosure Agreement'),dated as
of March 1, 2016, 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 the Orange County Sanitation
District Wastewater Refunding Revenue Obligations, Series 2016A (the `Revenue Obligations"),
evidencing principal in the aggregate amount of$ ,pursuant to a Trust Agreement,dated as
of the date hereof(the"Trust Agreement"),by and among U.S. Bank National Association,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 Revenue Obligations and
in order to assist the purchaser of the Revenue Obligations 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
Fiscal Year,which date,as of the date of this Disclosure Agreement,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.
"EMMA" shall mean Electronic Municipal Market Access system, maintained on the internet
at http://emma.msrb.org by the MSRB.
"Fiscal Year" shall mean the period beginning on July 1 of each year and ending on the next
succeeding June 30, or any twelve-month or fifty-two week period hereafter selected by the District,with
notice of such selection or change in fiscal year to be provided as set forth herein.
1
"Listed Events" means any of the events listed in Section 4 hereof and any other event legally
required to be reported pursuant to the Rule.
"MSRB" means the Municipal Securities Rulemaking Board established pursuant to
Section 15B(b)(1) of the Securities Exchange Act of 1934 or any other entity designated or authorized by
the SEC to receive reports pursuant to the Rule. Until otherwise designated by the MSRB or the SEC,
filings with the MSRB are to be made through EMMA.
"Official Statement" means the Official Statement, dated March _, 2016, relating to the
Revenue Obligations.
"Participating Underwriter" means any of the original purchasers of the Revenue Obligations
required to comply with the Rule in connection with the offering of the Revenue Obligations.
"Repository"means,until otherwise designated by the SEC,EMMA.
"Rule" means Rule 15c2-12 adopted by the SEC under the Securities Exchange Act of 1934, as
the same has been or may be amended from time to time.
"SEC" shall mean the United States Securities and Exchange Commission.
Section 2. Provision of Annual Reports.
(a) The District shall provide, or shall cause the Dissemination Agent to provide, to MSRB,
through EMMA, not later than 15 days prior to the Annual Report Date, an Annual Report which is
consistent with the requirements of Section 3 of this Disclosure Agreement The Annual Report must be
submitted in electronic Format, accompanied by such identifying information as provided by the MSRB.
The Annual Report may be submitted as a single document or as separate documents comprising a
package, and may include by reference other information as provided in Section 3 of this Disclosure
Agreement. Not later than 15 Business Days prior to such date, the District shall provide the Annual
Report to the Dissemination Agent. If the Fiscal Year changes for the District, the District shall give
notice of such change in the manner provided under Section 4(e)hereof.
(b) If by 15 Business Days prior to the date specified in subsection(a) for providing the
Annual Report to the MSRB, through EMMA, the Dissemination Agent has not received a copy of the
Annual Report the Dissemination Agent shall contact the District to determine if the District is in
compliance with subsection(a). The District shall provide a written certification with each Annual
Report furnished to the Dissemination Agent to the effect that such Annual Report constitutes the Annual
Report required to be famished by it hereunder. The Dissemination Agent may conclusively rely upon
such certification of the District and shall have no duty or obligation to review such Annual Report.
(c) If the Dissemination Agent is unable to verify that an Annual Report has been provided
to the MSRB by the date required in subsection(a), the Dissemination Agent shall send a notice to the
MSRB in substantially the form attached as Exhibit A.
(d) The Dissemination Agent shall:
(i) determine the electronic filing address of, and then-current procedures For
submitting Annual Reports to, the MSRB each year prior to the date for
providing the Annual Report; and
2
(ii) (if the Dissemination Agent is other than the Trustee), to the extent appropriate
information is available to it, file a report with the Authority certifying that the
Annual Report has been provided pursuant to this Disclosure Agreement, stating
the date 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 Bond. If the District's audited financial statements are not available by the
Annual Report Date,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 principal evidenced by the Revenue Obligations Outstanding as of the June 30 next
preceding the Annual Report Date and the principal amount of other Senior Obligations outstanding as of
the June 30 next preceding the Annual Report Date.
(c) Updated information (not to include projections), for the Fiscal Year ended the June 30
next preceding the Annual Report Date, comparable to 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), 8,9, 10, 11, 12, 13, 14 and 16.
(d) In addition to any of the information expressly required to be provided under subsections
(a), (b) and (c) 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 with respect to which the District is an"obligated person" (as
defined by the Rule), which are available to the public on EMMA or filed with the SEC. The District
shall clearly identify each such document to be included by reference.
Section 4. Reportine of Sienificant Events.
(a) Pursuant to the provisions of this Section 4, the District shall give, or cause to be given,
notice of the occurrence of any of the following events with respect to the Revenue Obligations, in a
timely manner not more than ten(10)Business Days after the event:
(1) principal and interest payment delinquencies;
(2) defeasances;
(3) tender offers;
(4) rating changes;
(5) adverse tax opinions or the issuance by the Internal Revenue Service of proposed
or final determinations of taxability, Notices of Proposed Issue (IRS Form 5701-
3
TER)or other material notices or determinations with respect to the tax-status of
the Revenue Obligations;
(6) unscheduled draws on the debt service reserves reflecting financial difficulties;
(7) unscheduled draws on credit enhancements reflecting financial difficulties;
(8) substitution of credit or liquidity providers or their failure to perform; or
(9) bankruptcy,insolvency,receivership or similar proceedings.
For these purposes,any event described in the immediately preceding paragraph(9)is considered to occur
when any of the following occur: the appointment of a receiver, fiscal agent, or similar officer for the
District in a proceeding under the United States Bankruptcy Code or in any other proceeding under state
or federal law in which a court or governmental authority has assumed jurisdiction over substantially all
of the assets or business of the District, or if such jurisdiction has been assumed by leaving the existing
governing body and officials or officers in possession but subject to the supervision and orders of a court
or governmental authority, or the entry of an order confirming a plan of reorganization, arrangement, or
liquidation by a court or governmental authority having supervision or jurisdiction over substantially all
of the assets or business of the District.
(b) Pursuant to the provisions of this Section 4, the District shall give, or cause to be given,
notice of the occurrence of any of the following events with respect to the Revenue Obligations, if
material:
(1) mergers, consolidations, acquisitions, the sale of all or substantially all of the
assets of the obligated persons or their termination;
(2) appointment of a successor or additional Trustee or the change of the time of a
Trustee;
(3) nonpayment related defaults;
(4) modifications to the rights of Owners;
(5) a notices of prepayment or
(6) release, substitution or sale of property securing repayment of the Revenue
Obligations.
(c) Whenever the District obtains knowledge of the occurrence of a Listed Event, described
in subsection(b)of this Section 4,the District shall as soon as possible determine if such event would be
material under applicable federal securities law.
(d) If the District determines that knowledge of the occurrence of a Listed Event described in
subsection(b) of this Section 4 would be material under applicable federal securities law, the District
shall promptly notify the Dissemination Agent in writing and instruct the Dissemination Agent to report
the occurrence to the Repository in a timely manner not more than ten(10)Business Days after the event.
(e) 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 MSRB.
4
Section 5. Filings with the MSRB. All information, operating data, financial statements,
notices and other documents provided to the MSRB in accordance with this Disclosure Agreement shall
be provided in an electronic format prescribed by the MSRB and shall be accompanied by identifying
information as prescribed by the MSRB.
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 Revenue Obligations. If such termination occurs prior to the final maturity of the Revenue
Obligations, the District shall give notice of such termination in the same manner as for a Listed Event
under 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, if the Trustee
agrees to act, shall be the Dissemination Agent; provided it shall receive written notice of such
designation at the time of such designation. Notwithstanding any other provision to this Disclosure
Agreement to the contrary,the District may provide any Annual Report to Beneficial Owners by means of
posting such Annual Report on an intemet site that provides open access to Beneficial Owners.
Section 8. Amendment: Waiver. Notwithstanding any other provision of this Disclosure
Agreement, the District may amend this Disclosure Agreement, provided no amendment increasing or
affecting the obligations or duties of the Dissemination Agent shall be made without the consent of such
party, and any provision of this Disclosure Agreement may be waived if such amendment or waiver is
supported by an opinion of counsel expert in federal securities laws acceptable to the District and the
Dissemination Agent to the effect that such amendment or waiver would not, in and of itself, cause the
undertakings herein to violate the Rule if such amendment or waiver had been effective on the date hereof
but taking into account any subsequent change in or official interpretation of the Rule.
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, at the written direction of any
Participating Underwriter or the holders of at least 25% of the aggregate amount of principal evidenced
by Outstanding Revenue Obligations and upon being indemnified to its reasonable satisfaction, shall, or
any holder or beneficial owner of the Revenue Obligations 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.
5
Section 11. Duties. Immunities and Liabilities of Trustee and Dissemination Agent.
Article Vill 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 attorney's 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 Revenue Obligations.
Section 12. Beneficiaries. This Disclosure Agreement shall more 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 Revenue Obligations, 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.
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:
U.S.BANK NATIONAL ASSOCIATION,
as Trustee
By:
Authorized Officer
7
EXHIBIT A
NOTICE TO MUNICIPAL SECURITIES RULEMAKING BOARD OF FAILURE
TO FILE ANNUAL REPORT
Name of Obligor: Orange County Sanitation District
Name of Issue: Orange County Sanitation District
Wastewater Refunding Revenue Obligations, Series 2016A
Date of Execution and Delivery: , 2016
NOTICE IS HEREBY GIVEN that the Orange County Sanitation District(the"District")has not
provided an Annual Report with respect to the above-captioned Revenue Obligations as required by
Section 6.09 of the Trust Agreement, dated as of March 1, 2016, by and among U.S. Bank National
Association, as Trustee, the Orange County Sanitation District Financing Corporation and the District.
[The District anticipates that the Annual Report will be filed by j
Dated: , 20 ORANGE COUNTY SANITATION DISTRICT
By
Title:
cc: Trustee
Dissemination Agent
A-1
DRAFT OF
02/03/16
PRELIMINARY OFFICIAL STATEMENT DATED FEBRUARY_,2016
NEW ISSUE—BOOK-ENTRY-ONLY RATINGS:
y 3 S&P: "
Fitch:
(See"RATINGS"herein.)
O �
In the opinion of Norton Rose Fu@right US LLP, Los Angeles, California, Special Counsel, under existing
Estatutes, regulations, ratings and court decisions, and assuming compliance Nance with the tax covenants described herein,:= gu
o m the interest component of each Installment Payment, and the allocable portion thereof distributable in respect ofany
t" a Revenue Obligation, is excluded pursuant to section 103(a) of the Internal Revenue Code of 1986 from the gross
o income ofthe owners thereoffor federal income tar purposes and is not an item oftax preference for purposes of the
n$ federal alternative minimum tax. It is also the opinion of Special Counsel that under existing law the interest
.9 la component of each Installment Payment, and the allocable portion thereof distributable in respect of any Revenue
6 Obligation, is exempt from personal income taxer of the State of California. See, however, "TAX MATTERS"
.�3 herein.
E.5
g c )District Logo] $ IDAC Logo]
ORANGE COUNTY SANITATION DISTRICT
WASTEWATER REFUNDING REVENUE OBLIGATIONS
.� SERIES 2016A
T
Dated: Date of Delivery Due: as shown on the inside cover
The $ ' Orange County Sanitation District Wastewater Refunding Revenue Obligations,
Series 2016A (the `Revenue Obligations") are certificates of participation that evidence direct, fractional
undivided interests of the Owners thereof in certain 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 March 1, 2016 (the "Installment Purchase Agreement"), by and between the
as°z
District and the Orange County Sanitation District Financing Corporation (the "Corporation"). Pursuant to the
E_ 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
2 the Installment Payments, and the interest thereon, will be incurred and seemed. Installment Payments under the
Id Z 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 Purchase Agreement, consisting primarily of all
u 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 REVENUE OBLIGATIONS"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 accordance with the Installment
Purchase Agreement, solely from Net Revenues,is absolute and unconditional. See"SECURITY AND SOURCES
. 2 OF PAYMENT FOR THE REVENUE OBLIGATIONS"herein.
a .
o�
The proceeds of the Revenue Obligations will be used to(i)prepay a portion of the District's Certificates of
y
wParticipation, Series 2009A, currently outstanding in the aggregate principal amount of$176,185,000, and (ii)pay
o the costs incurred in connection with the execution and delivery of the Revenue Obligations. See "REFUNDING
9
c PLAN'herein.
Interest evidenced by the Revenue Obligations will be payable semiannually on February l and August 1 of
g= each year, commencing on August 1, 2016. See `THE REVENUE OBLIGATIONS" herein. The Revenue
Obligations initially will be delivered only in book-entry form and will be registered in the name of Cede&Co., as
E 5 nominee of The Depository Trust Company,New York,New York("DTC"),which will set as securities depository
m for the Revenue Obligations. Individual purchases of the Revenue Obligations will be made in book-entry form
only. Purchasers of Revenue Obligations will not receive physical certificates representing their ownership interests
k s in the Revenue Obligations purchased. The Revenue Obligations will be delivered in denominations of$5,000 and
�,.t any integral multiple thereof. Payments of principal and interest evidenced by the Revenue Obligations are payable
c
0
'E � `Preliminary,subject to change.
�Is
27002232.5 11600388
directly to DTC by U.S. Bank National Association, as trustee(the"Trustee"). Upon receipt of payments of such
principal and interest, DTC will in tum distribute such payments to the beneficial owners of the Revenue
Obligations. See APPENDIX E—"BOOK-ENTRY SYSTEM"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 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 REVENUE OBLIGATIONS"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 REVENUE OBLIGATIONS WILL BE RECEIVED BY THE DISTRICT
UNTIL 10:45 A.M.NEW YORK TIME ON MARCH_,2016 UNLESS POSTPONED OR CANCELLED AS
SET FORTH IN THE OFFICIAL NOTICE INVITING BIDS.
The Revenue Obligations are offered when, as and if executed and delivered and received by
, as the Initial Purchaser, subject to the approval of Norton Rose Fulbright US LLP, Los
Angeles, California, Special Counsel and Disclosure Counsel to the District, and certain other conditions. Certain
legal matters will be passed upon for the District and the Corporation by Woodruff Spradlin & Stuart, a
Professional Corporation, Costa Mesa, California. Public Resources Advisory Group, Los Angeles, California, has
served as financial advisor to the District in connection with the execution and delivery of the Revenue Obligations.
It is anticipated that the Revenue Obligations in definitive form will be available far delivery through the book-entry
facilities of DTC on or about March , 2016.
Dated: March ,2016
2]002232.5
MATURITY SCHEDULE*
Maturity Date Principal Interest CUSIPt
(February 1) Amount* Rate Yield Price (Base No.68428T)
Term Revenue Obligations maturing on February 1,_,Price_%,CUSIP:
Preliminary,subject to change.
t CUSIP is a registered trademark of the American Bankers Association. CUSIP data herein is provided by CUSIP
Global Services, managed by Standard & Poor's Financial Services LLC on behalf of The American Bankers
Association. This data is not intended to create a database and does not serve in any way as a substitute for the
CUSIP Services. None of the District, the Initial Purchaser or the Financial Advisor is responsible for the
selection or correctness of the CUSIP numbers set forth herein.
2]002232.5
[INSERT MAP[
2]0022325
ORANGE COUNTY SANITATION DISTRICT
Board of Directors
John Nielsen (Chair) Tustin
Greg Seboum—(Vice Chair)—Fullerton
Lucille KringAnaheim Teresa Smith—Orange
Glenn Parker—Brea Chad Wanke—Placentia
Fred Smith—Buena Park Sal Tinajem—Santa Ana
Mariellen YarcCypress Ellery DeatonSeal Beach
Steve Nagel—Fountain Valley David Shmvver—Stanton
Steve Jones—Garden Grove Greg Mills— Villa Park
Jim Katapodis Huntington Beach James M. Ferryman Costa Mesa Sanitary District
Steven Choi—Irvine John Withers—Irvine Ranch Water District
Tom BeamishLa Habra Joy Neugebauer Midway City Sanitary District
Peter Kim La Palma Robert Kiley Yorba Linda Water District
Richard Murphy—Los Alamitos Lisa Bartlett— Member of the Orange County
Keith Curry Newport Beach Board of Supervisors
Executive Manaeement of the District
James Herberg, General Manager
Robert P. Ghirelli,D.Env.,Assistant General Manager
Lorenzo Tyner,Director of Finance and Administrative Services
Ed Torres,Director of Operations and Maintenance
Nick Arhontes,Director offacilities Support Services
Robert Thompson,Director of Engineering
Celia Chandler,Director of Human Resources
Special Services
Special Counsel and Disclosure Counsel
Norton Rose Fulbright US LLP
Los Angeles,California
District General Counsel
Bradley R.Begin
Woodruff, Spmdlin& Smart,a Professional Corporation
Costa Mesa,California
Financial Advisor
Public Resources Advisory Group
Los Angeles,California
Trustee Verification Agent
U.S. Bank National Association
Los Angeles,California
2]002232.5
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 Revenue Obligations 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 Orange County Sanitation District (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 Revenue
Obligations. 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 Revenue Obligations
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 Revenue Obligations, the Initial Purchaser in connection
with any reoffering may over-allot or effect transactions which stabilize or maintain the market price of
the Revenue Obligations 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 Revenue Obligations 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 we 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 future results, performance or achievements expressed or implied by
such forward-looking statements.
2]002232.5
TABLE OF CONTENTS
Page
INTRODUCTION.......................................................................................................................................I
General............................................................................................................................................I
TheDistrict.....................................................................................................................................2
Security and Sources of Payment for the Revenue Obligations.....................................................2
ContinuingDisclosure....................................................................................................................3
Miscellaneous.................................................................................................................................3
REFUNDINGPLAN...................................................................................................................................4
ESTIMATED SOURCES AND USES OF FUNDS ...................................................................................5
THE REVENUE OBLIGATIONS..............................................................................................................5
General............................................................................................................................................5
Prepayment Provisions....................................................................................................................6
SECURITY AND SOURCES OF PAYMENT FOR THE REVENUE OBLIGATIONS..........................8
InstallmentPayments......................................................................................................................8
AvailableFunds of the District.......................................................................................................9
NetRevenues..................................................................................................................................9
Rate Stabilization Account...........................................................................................................11
Allocation of Revenues.................................................................................................................11
RateCovenant...............................................................................................................................12
Limitations on Issuance of Additional Obligations......................................................................12
Insurance.......................................................................................................................................14
Allocation of Installment Payments..............................................................................................14
THEDISTRICT.........................................................................................................................................16
Background...................................................................................................................................16
Organization and Administration..................................................................................................17
Services.........................................................................................................................................18
ServiceArea..................................................................................................................................18
Employees.....................................................................................................................................19
RetirementPlan.............................................................................................................................20
Other Post-Employment Benefits.................................................................................................22
RiskManagement.........................................................................................................................22
ExistingFacilities.........................................................................................................................23
Permits,Licenses and Other Regulations.....................................................................................24
District Planning and Capital Improvement Program...................................................................25
Groundwater Replenishment System............................................................................................26
Preferred Level of Treatment........................................................................................................27
BiosolidsManagement..................................................................................................................27
UrbanRunoff................................................................................................................................28
Integrated Emergency Response Program....................................................................................29
Five-Year Strategic Planning........................................................................................................30
DISTRICT REVENUES............................................................................................................................31
SewerService Charges.................................................................................................................31
AdditionalRevenues.....................................................................................................................34
27002232.5 -i-
TABLE OF CONTENTS
(continued)
Page
WastewaterTreatment History.....................................................................................................36
Customers.....................................................................................................................................36
AssessedValuation.......................................................................................................................38
BudgetaryProcess.........................................................................................................................40
Reserves........................................................................................................................................41
Summaryof Operating Data.........................................................................................................42
Forecasted Operating Data............................................................................................................44
Management's Discussion and Analysis of Operating Data.........................................................46
Investmentof District Funds.........................................................................................................47
FINANCIAL OBLIGATIONS..................................................................................................................47
ExistingIndebtedness...................................................................................................................47
AnticipatedFinancings.................................................................................................................48
Direct and Overlapping Bonded Debt...........................................................................................48
THECORPORATION..............................................................................................................................48
LIMITATIONS ON TAXES AND REVENUES......................................................................................49
Article XIIIA of the California Constitution.................................................................................49
Legislation Implementing Article XHIA......................................................................................49
Article XIIH3 of the California Constitution.................................................................................50
Proposition IA and Proposition 22...............................................................................................51
Article XIIIC and Article XHID of the California Constitution...................................................52
Other Initiative Measures..............................................................................................................54
LEGALMATTERS...................................................................................................................................54
FINANCIAL ADVISOR...........................................................................................................................54
ABSENCE OF LITIGATION...................................................................................................................54
FINANCIAL STATEMENTS...................................................................................................................55
TAXMATTERS........................................................................................................................................55
TaxExemption..............................................................................................................................55
Tax Accounting Treatment of Bond Premium and Original Issue Discount................................57
Other Tax Consequences..............................................................................................................58
VERIFICATION OF MATHEMATICAL COMPUTATIONS................................................................58
CONTINUING DISCLOSURE.................................................................................................................59
RATINGS..................................................................................................................................................59
PURCHASE AND REOFFERING...........................................................................................................59
MISCELLANEOUS..................................................................................................................................60
APPENDIX A — COMPREHENSIVE ANNUAL FINANCIAL REPORT OF THE
ORANGE COUNTY SANITATION DISTRICT FOR THE YEAR ENDED
JUNE30,2015........................................................................................................A-1
APPENDIX B — THE COUNTY OF ORANGE—ECONOMIC AND DEMOGRAPHIC
INFORMATION....................................................................................................B-1
APPENDIX C — SUMMARY OF PRINCIPAL LEGAL DOCUMENTS........................................C-1
27002232.5 -ii -
TABLE OF CONTENTS
(continued)
Page
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
-iii-
OFFICIAL STATEMENT
ORANGE COUNTY SANITATION DISTRICT
WASTEWATER REFUNDING REVENUE OBLIGATIONS
SERIES 2016A
INTRODUCTION
This introduction contains only a brief summary of certain of the terms of the Revenue
Obligations being offered and a brief description of the Official Statement. All statements contained in
this introduction are qualified 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 capitalized 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 OFPRINCIPAL 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 $ * aggregate principal amount of the
Orange County Sanitation District Wastewater Refunding Revenue Obligations, Series 2016A (the
"Revenue Obligations"), which are certificates of participation evidencing direct, fractional
undivided interests in certain 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 March 1,2016(the"Installment Purchase Agreement"),by and between
the District and the Orange County Sanitation District Financing Corporation(the"Corporation"). Unless
the context clearly indicates to the contrary, a reference herein to either of the Installment Purchase
Agreement or the Revenue Obligations is intended to refer to the corresponding interest in the Installment
Purchase Agreement 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 REVENUE
OBLIGATIONS"herein.
Preliminary,subject to change.
2]002232.5
The Revenue Obligations are to be executed and delivered pursuant to a Trust Agreement, dated
as of March 1, 2016 (the "Trust Agreement'),by and among the District,the Corporation and U.S. Bank
National Association, as trustee (the "Trustee"). Proceeds from the sale of the Revenue Obligations will
be used to (i)prepay a portion of the District's Certificates of Participation, Series 2009A, currently
outstanding in the aggregate principal amount of $176,185,000, and (it)pay the costs incurred in
connection with the execution and delivery of the Revenue Obligations. See "REFUNDING PLAN"
herein.
The Revenue Obligations will be executed and delivered in the form of fully registered
certificates of participation, dated as of the date of initial delivery thereof and will mature on February 1
in each such year as set forth on the inside cover page hereof. Interest evidenced by the Revenue
Obligations will be payable semiannually on February 1 and August 1 of each year, commencing on
August 1, 2016. See"THE REVENUE OBLIGATIONS"herein. The Revenue Obligations 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 Revenue Obligations. The Revenue Obligations will be delivered in denominations of$5,000 and
any integral multiple thereof. So long as the Revenue Obligations are in the DTC book-entry system,the
interest, principal, purchase price and prepayment premiums, if any, due with respect to the Revenue
Obligations 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 approximately 2.5 million people in the northern and
central portion of the County of Orange (the "County"), in a service area of approximately 479 square
miles, treating an average of 190 million gallons per day("mg/d")of wastewater in Fiscal Year 2014-15.
See"THE DISTRICT,""DISTRICT REVENUES"and"FINANCIAL OBLIGATIONS"herein.
Security and Sources of Payment for the Revenue Obligations
The Revenue Obligations, which me certificates of participation, 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 "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.
27002232.5 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 REVENUE OBLIGATIONS—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 REVENUE OBLIGATIONS"herein.
Continuing Disclosure
The District bas covenanted for the benefit of holders and beneficial owners of the Revenue
Obligations (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 2015-16 Fiscal
Year, and (b)to provide notices of the occurrence of certain enumerated events. The specific nature of
the information to be contained in the Annual Report or the notices of enumerated 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, the Continuing Disclosure Agreement and any other agreements relating to the Revenue
Obligations are qualified in their entirety by reference to such documents. Copies of the Trust
Agreement, the Master Agreement and the Installment Purchase Agreement are on file and available for
inspection at the corporate trust office of U.S. Bank National Association, Los Angeles, California
Attention: Corporate Trust.
27002232.5 3
REFUNDING PLAN
A portion of the net proceeds of sale of the Revenue Obligations, together with other available
moneys, will be used to prepay and retire a portion of the installment payments (the "Refunded
Installment Payments")to be made by the District pursuant to an Installment Purchase Agreement, dated
as of May 1, 2009 (the "2009A Installment Purchase Agreement"), by and between the District and the
Corporation. Contemporaneous with the execution and delivery of the 2009A Installment Purchase
Agreement, the District caused the execution and delivery of its Certificates of Participation, Series
2009A (the "2009A Certificates") evidencing direct, fractional undivided interests in certain installment
payments (the "2009A Installment Payments") and the interest thereon, to be made by the District
pursuant to the 2009A Installment Purchase Agreement. The 2009A Certificates were executed and
delivered on May 7, 2009 in the aggregate principal amount of$200,000,000, of which $176,185,000 is
currently outstanding. Pursuant to the terms of the Trust Agreement, dated as May 1, 2009 (the "2009A
Trust Agreement"), by and among the District, the Corporation and U.S. Bank National Association, as
trustee thereunder, the prepayment of the 2009A Installment Payments (the "Refunded Installment
Payments"),and prepayment of the 2009A Certificates maturing on February 1 in the years 2020* through
2039*, inclusive, in the aggregate principal amount of$162,780,000' in respect thereof(the "Refunded
2009A Certificates"),will be effected by depositing a portion of the proceeds of the Revenue Obligations,
together with other available moneys, in an escrow fund (the "Escrow Fund") to be created and
established under the Escrow Agreement,dated as of March 1,2016,by and between the District and U.S.
Bank National Association,as escrow agent thereunder.
Refunded 2009A Certificates
Principal CUSIP
Maturity Date* Amount Number**
(February 1) Outstanding (68428P)
2020 $ 4,925,000 EJO
2021 5,170,000 EK7
2022 5,425,000 EL5
2023 5,700,000 EM3
2024 5,985,000 ENl
2025 6,285,000 EP6
2026 6,595,000 EQ4
2027 6,925,000 ER2
2028 7,275,000 ESO
2029 7,635,000 ET8
2030 8,020,000 EU5
2035 46,525,000 EV3
2039 46,315,000 EWl
'Preliminary,subject to change.
** CUSIP numbers herein are provided by Standard&Poor's CUSIP Service Bureau and are for the convenience of
reference only. The District does not assume any responsibility for the accuracy of such numbers. CUSIP® is a
registered trademark of the American Bankers Association. Copyright C 1999-2009 Standard&Poor's,a Division
of The McGraw-Hill Companies,Inc. All rights reserved.
27002232.5 4
The District will cause the Escrow Fund deposit to be invested in Government Obligations (as
defined in the 2009A Trust Agreement). The Government Obligations will pay principal and interest
sufficient to pay the Refunded Installment Payments and interest thereon and to make scheduled
distributions thereof with respect to the Refunded 2009A Certificates due and payable through February
1, 2019, and on February 1,2019 to prepay without premium the unpaid Refunded Installment Payments,
and through distribution of such prepayment to prepay the Refunded 2009A Certificates,all in accordance
with the terms of the 2009A Installment Purchase Agreement, the 2009A Trust Agreement and the
Refunded 2009A Certificates. See "VERIFICATION OF MATHEMATICAL COMPUTATIONS"
herein. The amounts deposited in the Escrow Fund will be held in trust solely for the Refunded 2009A
Certificates and will not be available to pay the principal and interest evidenced by the Revenue
Obligations or any obligations other than the Refunded 2009A Certificates.
ESTIMATED SOURCES AND USES OF FUNDS
The estimated sources and uses of funds in connection with the execution and delivery of the
Revenue Obligations are presented below.
Sources
Principal Amount of Revenue Obligations $
Premium or Discount
Refunded 2009A Certificates Reserve Release
Total Sources $
Uses
Deposit to Escrow Fund $
Initial Purchaser's Discount
Costs of lssuanceO
Total Uses $
(p Costs of Issuance include, among other things,fees and expenses of rating agencies,verification agent, Special
Counsel and Disclosure Counsel,and the initial fees of the Trustee.
THE REVENUE OBLIGATIONS
General
The Revenue Obligations will be prepared in the form of fully registered certificates of
participation in denominations of$5,000 and any integral multiple thereof. The Revenue Obligations will
be dated as of the date of initial delivery thereof and will mature on February 1 in such years as set forth
on the inside cover page hereof. Interest evidenced by the Revenue Obligations will be payable
semiannually on February 1 and August 1 of each year, commencing on August 1, 2016. The Revenue
Obligations 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 Revenue Obligations. Individual purchases of the Revenue Obligations will
be made in book-entry form only. Purchasers of Revenue Obligations will not receive physical
certificates representing their ownership interests in the Revenue Obligations purchased.
The interest evidenced by the Revenue Obligations 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 Revenue Obligations shall be payable on their respective
27002232.5 5
Principal Payment Dates in each year and shall represent the Installment Payments coming due on the
Principal Payment Dates in each year. Each Revenue Obligation 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 Revenue Obligation shall evidence interest from such Interest Payment Date, or unless such
date of execution shall be on or prior to July 15, 2016, in which case such Revenue Obligation 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 Revenue Obligations shall be in default, each Revenue
Obligation 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 Revenue Obligations shall be computed on the
basis of a 360-day 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 Revenue Obligations axe payable directly to
DTC by U.S. Bank National Association, as trustee. Upon receipt of payments of such principal and
interest, DTC will in turn distribute such payments to the beneficial owners of the Revenue Obligations.
So long as the Revenue Obligations are held in the DTC book-entry system, the interest, principal,
purchase price and prepayment premiums, if any, due with respect to the Revenue Obligations 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'
Optional Prepayment. The Revenue Obligations maturing on or after February 1, 2027` are
subject to optional prepayment prior to their stated Principal Payment Dates, on any date on or after
February 1, 2026% 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 Revenue
Obligations to be prepaid, plus accrued interest evidenced thereby to the date fixed for prepayment,
without premium.
Mandatory Sinking Account Prepayment. The Revenue Obligations maturing on February 1,
20—(the "Term Revenue Obligations") are subject to prepayment prior to their stated maturity, in part,
by lot, on each 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 Revenue Obligations 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:
Mandatory
Sinking Account Mandatory
Payment Dates Sinking Account
(February 1) Payments
Maturity.
Preliminary,subject to change.
27002232.5 6
Selection of Revenue Obligations for Prepayment Whenever less than all the Outstanding
Revenue Obligations are to be prepaid on any one date pursuant to provisions of the Trust Agreement
with respect to optional prepayment of Revenue Obligations, the Trustee shall select the Revenue
Obligations to be prepaid among Revenue Obligations with different Principal Payment Dates as directed
in a Written Request of the District. Whenever less than all the Outstanding Revenue Obligations 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 Revenue Obligations 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
Revenue Obligations so selected for prepayment on such date. For purposes of such selection, any
Revenue Obligation may be prepaid in part in Authorized Denominations.
Notice of Prepayment When prepayment of Revenue Obligations is authorized pursuant to the
Trust Agreement, the Trustee shall give notice, at the expense of the District, of the prepayment of the
Revenue Obligations. The notice of prepayment shall specify(a) the Revenue Obligations or designated
portions thereof(in the case of prepayment of the Revenue Obligations 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 time and address of any paying agent, (d)the prepayment price, (e)the CUSIP numbers
assigned to the Revenue Obligations to be prepaid, (1)the numbers of the Revenue Obligations to be
prepaid in whole or in part and, in the case of any Revenue Obligation to be prepaid in part only, the
principal evidenced by such Revenue Obligation to be prepaid, and (g)the interest rate and stated
Principal Payment Date of each Revenue Obligation 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
Revenue Obligation 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 Revenue Obligations, unless at the time such notice is given the Revenue
Obligations 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 Revenue
Obligations 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 Revenue Obligations. In the
event a notice of prepayment of Revenue Obligations contains such a condition and such moneys are not
so received, the prepayment of Revenue Obligations as 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 Revenue Obligations
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 Revenue Obligations 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 Revenue Obligations or the cessation of interest
evidenced thereby on the date fixed for prepayment.
Effect of Prepayment I£notice of prepayment has been duly given as aforesaid and moneys for
the payment of the prepayment price of the Revenue Obligations to be prepaid are held by the Trustee,
27002232.5 7
then on the prepayment date designated in such notice,the Revenue Obligations 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 Revenue Obligations so called for prepayment shall cease to accrue,
such Revenue Obligations shall cease to be entitled to any benefit or security hereunder and the Owners
of such Revenue Obligations 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 Revenue
Obligations to be prepaid, pay such Revenue Obligations at the prepayment price thereof, and such
moneys shall be pledged to such payment.
SECURITY AND SOURCES OF PAYMENT FOR THE REVENUE OBLIGATIONS
Installment Payments
Pursuant to the Installment Purchase Agreement, the Project will be reacquired by the District
from the Corporation. The District has covenanted to, subject to any 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 seemed. 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 Revenue Obligations substantially all of its
rights, title and interest in and to 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 Installment Purchase Agreements
relating to the District's currently Outstanding Senior Obligations, as set forth on Table 16 under the
caption "FINANCIAL OBLIGATIONS—Existing Indebtedness"herein. The term"Senior Obligations"
as used in this Official Statement refers to the Existing Senior Obligations and to 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 incurred 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.
27002232.5 8
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 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,the State or 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, 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 pursuam to the Master
Agreement. See "SECURITY AND SOURCES OF PAYMENT FOR THE REVENUE
OBLIGATIONS"herein.
Available Funds of the District
As Senior Obligations under the Master Agreement, the Installment Payments are payable from
and secured by a pledge of Net Revenues. Should Net Revenues prove insufficient, the Installment
Purchase Agreement further provides that the Installment Payments are payable from any other lawfully
available funds of the District. The primary lawfully available funds of the District are its reserve funds,
other than trustee-held amounts required to be in any Obligation Reserve Fund securing certain of the
District's Senior Obligations, as described in the Master Agreement. At June 30, 2015, the District's
Debt Service Required Reserves totaled $129.0 million, of which $33.0 million were trustee-held
amounts in Obligation Reserve Funds as required under the Master Agreement. See APPENDIX C —
"SUMMARY OF PRINCIPAL LEGAL DOCUMENTS —Master Agreement" attached hereto. District
reserve funds are maintained in accordance with the District's reserve policy. See "DISTRICT
REVENUES — Reserves." Available reserves at June 30, 2014 were approximately $713.7 million
(consisting of$673 million in cash and investments and$40.7 million due from the Orange County Flood
Control District) and available reserves at June 30, 2015 were approximately $588.0 million (consisting
of$556.9 million in cash and investments and $31.1 million due from the Orange County Flood Control
District). See "DISTRICT REVENUES — Reserves," "— Summary of Operating Data" and "—
Projected Operating Data."
Net Revenues
The District is obligated to make Installment Payments from, among other things, 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. 1 thereto dated December 10, 1986
(the "IRWD Agreement"), by and between predecessor County Sanitation District No. 14 of Orange
County and the Irvine Ranch Water District (the "IRWD") 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
27002232.5 9
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 Senior Obligations were used or we
available to be used. Any Federal Subsidy payments received by the District will constitute Revenues as
defined in the Master Agreement. See"DISTRICT REVENUES—Additional Revenues"herein.
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, 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 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, issued,executed 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, including, without limitation, installment,
lease or other payments 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 as provided in the Master Agreement; provided, however, that prior to incurring
such Subordinate Obligations, the District shall 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 me 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.
27002232.5 10
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
as the District deems necessary or appropriate, be transferred from the Rate Stabilization Account and
deposited in the Revenue Account,as described above order'—Rate Stabilization Account'above. 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 (the Revenue Obligations are not secured by any
Reserve Fund);
(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 we 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 fonds may be legally applied. For additional information, see APPENDIX C —
"SUMMARY OF PRINCIPAL LEGAL DOCUMENTS—Master Agreement."
27002232.5 11
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 Yew 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 1 of each Fiscal Yen, 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.
The District has an established reserve policy with eight separate reserve fund categories. Over
the next ten years,the yew ending reserve total for each yew is projected not to fall below$500 million as
indicated in the District's ten-year cash flow forecast for Fiscal Years 2015-16 through 2024-25. At its
election,the District may use unrestricted reserves to help satisfy the rate covenant described above. See
"DISTRICT REVENUES—Reserves"herein.
Limitations on Issuance 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
27002232.5 12
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 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, 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
(ii) 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 yen 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 District is not
required to comply with the provisions described above in paragraph(2) if the Senior Obligations being
incurred are Short-Term Obligations excluded from the calculation of Assumed Debt Service pursuant to
27002232.5 13
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 District is not required to comply with the
provisions described in paragraph (2) above for such portion of Senior Obligations incurred for the
purpose of providing funds to refund or refinance Senior Obligations if (i)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 (ii)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.
The District may at any time incur Reimbursement Obligations with respect to Senior Obligations.
Subordinate Obligations. 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.
There are currently no Subordinate Obligations outstanding.
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.
Allocation of Installment Payments
Set forth in Table 1 are the principal and interest payments on the Revenue Obligations. Also set
forth are the payments due on Existing Senior Obligations,including the Refunded 2009A Certificates.
27002232.5 14
Table 1
Payments Relating to the Revenue Obligations
and Existing Senior Obligations of the District
As of February 2,2016
Fiscal Year Installment Payments Other
Ending Relating to Revenue Obligations Senior Oblieationsl1ll21
June 30 Principal Interest Principal Interest Total
2016 - $ 2,417,000 $ 2,417,000
2017 $ 35,575,000 53,305,102 88,880,102
2018 32,415,000 52,220,019 84,635,019
2019 31,940,000 51,126,019 83,066,019
2020 33,535,000 49,531,869 83,066,869
2021 35,210,000 47,858,069 83,068,069
2022 35,735,000 46,139,569 81,874,569
2023 37,365,000 44,499,979 81,864,979
2024 38,940,000 42,928,029 81,868,029
2025 40,710,000 41,153,559 81,863,559
2026 42,300,000 39,572,141 81,872,141
2027 44,575,000 37,639,841 82,214,841
2028 50,710,000 35,659,666 86,369,666
2029 52,985,000 33,381,541 86,366,541
2030 55,370,000 30,998,666 86,368,666
2031 57,840,000 28,530,591 86,370,591
2032 63,720,000 26,310,569 90,030,569
2033 78,775,000 23,358,936 102,133,936
2034 54,910,000 19,775,556 74,685,556
2035 57,400,000 17,033,832 74,433,832
2036 60,020,000 14,165,660 74,185,660
2037 52,625,000 11,164,364 63,789,364
2038 34,290,000 8,325,855 42,615,855
2039 35,920,000 6,395,648 42,315,648
2040 24,575,000 4,375,150 28,950,150
2041 20,805,000 2,912,640 23,717,640
2042 12,430,000 1,581,120 14,011,120
2043 9,795,000 785,600 10,580,600
2044 2,480,000 158,720 2,638,720
Total 1.132950.000 $773305305 1.906255305
f1 The District intends to refinance its Revenue Refunding Certificate Anticipation Notes, Series 2014B ("2014B
Certificates") on or before their maturity on November 15, 2016. Assumes principal is amortized from 2022
through 2036 and an interest rate of 3% per arr um. See "FINANCIAL OBLIGATIONS — Recent and
Anticipated Financings"herein.
(3) Includes payments with respect to the Refunded 2009A Certificates,a portion of which are to be refunded with
the proceeds of the Revenue Obligations. See"REFUNDING PLAN'herein.
27002232.5 15
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 approximately 2.5 million people in
the northern and central portion of the County by treating an average of 190 mg/d of wastewater in Fiscal
Year 2014-15. The District serves approximately 81% of the County population in approximately 479
square miles,or approximately 60%of the County's area.
The service area which comprises the District was originally formed in 1954 pursuant to the
County Sanitation District Act, as amended, Section 4700 et 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 1920s 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 Board of Directors of the District (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 Resolution No. 98-140 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.
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 25 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 170 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.
27002232.5 16
Organization 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 25-member Board of Directors is composed of representatives from 20 cities, four special
districts and a member representing the County. 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 Vice Chair of the Board of Directors are elected every year by
a majority of the Board of Directors, and serve at the pleasure of a majority of the Board of Directors.
The District has a general manager, outside general counsel, and administrative and operating
staff, with offices located at Reclamation Plant No. 1 in Fountain Valley, California. The District
currently employs an administrative and operating staff of approximately 600 under the direction of its
General Manager,James Heiberg.
James Herberg, P.E. is the General Manager of the District and has served in this capacity since
April 2013. During his 20 years with the District,he has held the positions of Assistant General Manager,
Director of Engineering, and Director of Operations and Maintenance. Mr. Herberg has more than 27
years of experience in the water and wastewater industries, including six years at the Orange County
Water District with whom the District has partnered on the Groundwater Replenishment System project.
Robert P. Ghirelli, D.Env. is the Assistant General Manager of the District,and has served in that
capacity since July 2006. Dr. Ghirelli previously served as Director of Technical Services for the District
since his joining the District in 1998. Prior to joining the District, Dr. Ghirelli served for just over a year
as managing principal of the Los Angeles office of a national environmental consulting firm, and served
20 years in supervisory positions with the State Water Resources Control Board and Regional Water
Quality Control Boards, including 13 years serving as Executive Officer of the California Regional Water
Quality Control Board,Los Angeles/Ventura Region.
Lorenzo Tyner is the District's Director of Finance and Administrative Services. In September
2005, Mr. Tyner joined the District with more than 20 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 with private sector
companies IBM Global Services and TRW Space and Defense.
Ed Torres is the District's Director of Operations and Maintenance for the District. He has
served the District since 1991. Prior to joining the District, Mr. Torres served in a professional capacity
for the California State University System and TRW Electronics and Defense Sector. Mr. Torres has
more than 25 years of public and private sector experience in protecting public health and the
environment.
Nick Arhontes, P.E. is the District's Director of Facilities Support Services and has served the
District since 1988. Mr. Arhontes has more than 30 years of experience managing various engineered
systems in the private and public sectors regionally,nationally, and internationally.
27002232.5 17
Robert Thompson,P.E. is the District's Director of Engineering. He has worked for the District
since 1995. Mr. Thompson has served has served as manager in several departments with OCSD,
including Information Technology, Operations and Maintenance,and Engineering. He has had a lead role
in creating and maintaining engineering,programming,tagging and asset standards for the District.
Celia Chandler is the District's Director of Human Resources. In October 2015, Ms. Chandler
joined the District with more than 20 years of experience in all aspects of Human Resources in both
public and private sector organizations, most recently serving as the Director of Academic Labor
Relations for the California State University system. Ms. Chandler previously worked in large
government organizations including the City of Corona,the City of Murrieta and the County of Riverside,
and with private sector company Stone&Webster Engineering Services Company.
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"THE 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 work is performed 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 479
square-mile area including 23 of the County's 34 cities and various unincorporated areas of the County.
The District serves a population of approximately 2.5 million residents.
27002232.5 18
Set forth in Table 2 below is the estimated populations of cities and unincorporated areas served
by the District as of January 1,2015.
Table 2
Estimated Populations of Cities and Unincorporated Areas
Served by the Orange County Sanitation District
As of January 1,2015
Ci�t v Population
Anaheim 351,433
Brea 43,328
Buena Park 82,767
Costa Mesa 113,455
Cypress 49,184
Fountain Valley 57,021
Fullerton 141,042
Garden Grove 174,774
Huntington Beach 198,389
Irvine 250,384
La Habra 62,079
La Palma 15,965
Los Alamitos 11,779
Newport Beach 87,249
Orange 140,094
Placentia 52,427
Santa Ana 335,264
Seal Beach 24,684
Stanton 39,219
Tustin 79,601
Villa Park 5,960
Westminster 92,106
Yorba Linda 67,719
Cities Subtotal(') 2,475,923
Unincorporated Areas(estimated)(2) 72,822
Total .52 4R_745
0) Demographic Research Unit,State of California Department of Finance.
(2) Center for Demographic Research,California State University,Fullerton.
Employees
As of June 30, 2015, the District had a total of 587 employees. The majority of District
employees are represented by recognized employee organizations, which include the following: the
Orange County Employees Association("OCEA"),representing administrative/clerical,technical services
and engineering employees since 1979, the International Union of Operating Engineers — Local 501
("Local 501"), representing operations and maintenance employees since October 1985, and the
Supervisory and Professional Management Croup ("SPMT"), representing employees within the
Supervisor Group and Professional Group since 1991. The total number of represented employees as of
June 30, 2015 was 542, and is broken down as follows: 100 employees represented by OCEA, 189
employees represented by Local 501, and 253 employees represented by the SPMT. The District recently
27002232.5 19
negotiated labor contracts with all bargaining units, reaching final agreement in 2015. All labor contracts
are set to expire on June 30, 2016. The District is currently engaged in negotiations with all of its
employee organizations. Historically, the District has experienced positive and collaborative working
relationships with each organization and has not endured any work stoppages since the early 1980s.
Retirement Plan
The District participates in the Orange County Employees 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 full-time and part-time District employees participate in OCERS. Contributions are based on
an OCERS actuarial-determined rate structure and age at time of employment; contributions are deducted
on a pre-tax basis. Most employees do not pay into Social Security with the exception of 1.45% of gross
income, which is paid into the Medicare portion of Social Security. 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 Plan B, G, H or U member. Plan U applies to all full-time and part-time
employees hired on or after January 1, 2013. Plan B applies to supervisor and professional employees
hired on or after October 1, 2010, Local 501 employees hired on or after July 1, 2011 and OCEA
employees hired on or after August 1, 2011. Plan G applies to employees hired before September 21,
1979. Plan H applies to employees hired on or after September 21, 1979 and prior to the eligibility dates
for Plan B or Plan U. Plan G and H provide 2.5% of final compensation per year of service at age 55.
Plan B provides 1.667% of final compensation per year of service at age 57.5,and Plan U provides 2%at
62. "Final compensation"is the highest consecutive 12 months of compensation for Plan G members and
the highest consecutive 36 months of compensation divided by three for Plan B, H, and U members.
Benefits fully vest under the OCERS retirement plan upon reaching five years of service. Employees
who retire at or after age 50 with ten or more years of service are eligible to receive an annual retirement
allowance, but at a reduced benefit for those employees retiring prior to age 62 for Plan U members, 57.5
for Plan B members, or prior to age 55 for Plan G and H members. 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 contributes a portion of the employee's contribution to OCERS for members of Plans G and H
based on a percentage of the covered employee's base salary. Members of Plans U and B do not receive
any contributions toward employee contribution to OCERS. As of the December 31, 2014 valuation,
OCERS had an aggregate Unfunded Actuarial Accrued Liability("UAAL")of$5.29 billion, and a funded
ratio of 69.42%.
27002232.5 20
Set forth in Table 3 below is a current comparison of the District's required contributions to
OCERS for Fiscal Years 2010-11 through 2014-15 and projected required contributions for Fiscal Year
2015-16.
Table 3
Orange County Sanitation District
District Required Contributions to OCERS for Fiscal Years 2010-11 through 2014-15 and
Projected Required Contributions for Fiscal Year 2015-16
District
Required
Fiscal YearRate(') Contributions
2010-11 24.04% $14,370,158
2011-12 26.10 15,767,050
2012-13 27.35 16,363,917
2013-14 31.09 18,920,212
2014-15 28.06 17,201,569
2015-16i21 22.20 14,045,400
r'I Required contribution as a percent of covered payroll. Includes amortization of Unfunded Actuarial Accrued
Liability. Combined rate for all Plans.
(z) Projected.
Source: Orange County Sanitation District.
For Fiscal Years 2010-11 through 2014-15, the District's required contribution was equal to the
contribution that the District actually made, except for Fiscal Year 2014-15,when the District contributed
an additional $125 million to OCERS to pay down the District's net pension liability. On September 3,
2015, the District again made an additional contribution to OCERS, in the amount of$50 million. The
District's net pension liability was approximately$194 million as of July 1, 2014 and approximately$57
million as of July 1, 2015. For the Fiscal Year ended June 30, 2015, total payroll costs of District
employees covered by OCERS was$61,295,869.
The District's retirement program includes Additional Retiree Benefit Account ("ARBA')
benefits. ARBA benefits provide a monthly payment to retirees towards the premium costs of health
insurance for the retiree and eligible dependents. The retiree is not required to use this amount for health
insurance premium or to remain on the OCERS medical plan. Benefits vest upon retirement. The District
pays 100%of the cost for the ARBA plan and utilizes a pay-as-you-go method for funding the plan. The
District paid $500,640 in AR13A benefits during Fiscal Year 2014-15. As of August 1, 2011, AR13A
benefits are no longer available to new OCEA Group employees of the District.
For more information regarding OCERS and the District's retirement plan as of June 30, 2015,
see Note 5 and 6 to the Comprehensive Annual Financial Report of the Orange County Sanitation District
for the Year Ended June 30, 2015 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://www.ocers.org. The information on such website is not incorporated herein by such reference or
otherwise. The District cannot predict whether the OCERS investment portfolio will experience
additional losses in the future; however, any future losses could result in material increases in the
District's required contributions.
27002232.5 21
Other Post-Employment Benefits
In June 2004, Governmental Accounting Standards Board ("GASB") issued Statement No. 45,
which requires state and local governmental employers to fund the actuarially determined annual required
contribution ("ARC")for its post-employment benefits other than pension benefits (known as other post-
employment benefits or"OPEB") or record the entire amount of the unfunded liability of its OPEB in its
financial statements. OPEB includes healthcare and life insurance expenses and related liabilities, and an
annual required contribution to fund such liabilities. The District adopted Statement No. 45 for the fiscal
year beginning July 1, 2007, as required of a GASB "Phase 1 Agency." According to the District's
actuary, Demsey Filliger Associates (the "Actuary"), the unfunded OPEB liability as of July 1, 2013 is
approximately $11.6 million. The ARC was determined to be $900,035 for Fiscal Year 2013-14 and
$755,078 for each of Fiscal Years 2014-15 and 2015-16, the period covered by the last actuarial
valuation. 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 4%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 at its plants and pump stations. The
District is self-insured for portions of workers' compensation,property damage and general liability. The
self-insurance portion of workers' compensation is $750,000 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 $250,000 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 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 $500,000 per occurrence, with
excess general liability coverage up to $40 million. In addition, the District relies on a combination of
self-insurance and District reserves for all property damage from the perils of seismic activity as well as
the expectation that some disaster relief funds may be available from the Federal Emergency Management
Agency("FEMA") to address any resulting damage. See "DISTRICT REVENUES —Reserves" and "—
Integrated Emergency Response Program." There is no assurance that, in the event of a significant
seismic event, a combination of self-insurance, District reserves or FEMA assistance would be available
or sufficient for the repair or replacement of the affected property.
During the past five fiscal years there have been no settlements in excess of covered amounts.
Claims against the District are processed by outside claim administrators. The District believes that there
are no unrecorded claims as of June 30, 2015 that would materially affect the financial position of the
District.
For more information regarding the District's insurance coverage as of June 30, 2015, see Note 1
to the Comprehensive Annual Financial Report of the Orange County Sanitation District for Year Ended
June 30,2015 set forth in Appendix A.
27002232.5 22
Existing Facilities
The Wastewater System presently consists of two wastewater treatment plants, an influent
metering and diversion structure, 15 off-plant pump stations,various interplant pipelines and connections,
and the ocean outfall facilities. The District's Wastewater System includes approximately 403 miles of
sewers within 11 trunk sewer systems, 170 miles of local sewers located within a portion of 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. 1") 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 two conventional air activated sludge plants. Up to 105 mg/d of secondary
treated effluent is conveyed to a plant owned by the Orange County Water District (the "OCWD") for
tertiary treatment prior to reclamation and groundwater recharge. See "Groundwater Replenishment
System"below.
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 and a Solids Contact Trickling Filter 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,
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. All of the wastewater received by the District is sent to secondary
treatment for further processing. During secondary treatment, the wastewater is treated with naturally
occurring bacteria 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.
Set forth in Table 4 below are the treatment plants' approximate treatment capacities.
Table 4
Wastewater System Treatment Capacities
(mg/d)
2014-15 Primary Secondary
Actual Flows Treatment Capacity Treatment Capacity
Plant No. 1 98 204 182
Plant No. 2 92 168 150
Aggregate Treatment 120 372 332
Source: Orange County Sanitation District.
The District also has the capability to divert a portion of the influent flow from Plant No. 1 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
27002232.5 23
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 District is subject to laws, rules and permits issued by federal, state, regional and local
regulatory bodies. The Wastewater System is subject to regulations imposed by the 1972 Clean Water
Act,as amended(the"Clean Water Act"),the California Environmental Quality Act of 1970, as amended
("CEQA")and the Federal Clean Air Act. The regulatory requirements are primarily administered by the
United States Environmental Protection Agency (the "EPA"), the California Air Resources Board, the
Santa Ana Regional Water Quality Control Board (`RWQCB"), and the South Coast Air Quality
Management District ("AQMD"). Regulations of these agencies deal primarily with the quality of
effluent which may be discharged from the treatment plants and air quality emissions. 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.
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 Section 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 permit was re-issued on May
6, 1998 and expired on June 8,2003.
On July 17, 2002, the Board of Directors adopted 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, District staff was directed to immediately proceed with the
planning, design, and implementation of treatment methods that will allow the District to meet Clean
Water Act secondary treatment standards with the expressed purposes of eliminating the need for the
permit waiver received under Section 301(h). The District completed these improvements on time by
December 2012 at a total capital improvement cost of$537.8 million.
Following the 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 was approved by the EPA and became effective on
October 31, 2004, and is subject to renewal every five years. The District's current NPDES permit
became effective on July 20, 2012 and will expire on July 19, 2017. Federal regulations require
pemuttees to apply for a new application at least 180 days prior to the current permit expiration date.
District staff has begun the process of preparing a permit application in advance of the 2017 permit
expiration date.
The District is also subject to the requirements of the Federal Clean Air Act which mandates
attainment with national ambient air quality standards for criteria pollutants (ozone, particulate matter,
carbon monoxide,lead,nitrogen dioxide,and sulfur dioxide). Criteria air pollutants cause adverse effects
on human health and environment. AQMD is the local air pollution control agency charged with
27002232.5 24
implementing the Federal Clean Air Act. In addition to criteria pollutants, AQMD also implements
numerous federal and State requirements related to the toxic air pollutants which can cause cancer or
other severe localized health effects. For example,the State's Air Toxic Hot Spots Act requires facilities
to conduct health risk assessments and notify the neighboring communities if the health risk exceeds the
regulatory thresholds.
Pursuant to AQMD's requirements, the District must obtain permits before sewage treatment
improvement projects can be constructed and operated. Such permits are project-specific and may
contain conditions that govern design criteria,operating parameters, and emissions standards. Most of the
District's treatment facilities are enclosed in order to capture and treat emissions to meet regulatory
emissions standards and to minimize odor impact to the neighboring communities. The District's
treatment plants are also subject to the requirements of Title V of the Federal Clean Air Act amendments.
The Title V permit is a single air quality permit for a facility that consolidates and replaces all of the air
permits for individual pieces of equipment previously issued by the local air quality district. The permit
contains all of the applicable local, state, and federal requirements, including periodic self-certification of
compliance and mandatory self-reporting of permit deviation.
All Title V permit-related reporting and documents submitted to the AQMD must be signed by
the highest District official — in this case, the General Manager. The Title V program also demands
facilities to organize and conduct extensive training of the staff involved,including the field operation and
maintenance staff. Another Title V important feature is a possibility of the public active participation and
intervention in the cases of potential emission limits and monitoring violations. The District Title V
permits did not receive any negative public responses or comments during the required public review
period. The District received initial Title V permits for the treatment plants in January 2009. Title V
permits are issued for a five-year period. Title V permits for both plants were issued on April 16, 2014.
They will expire on April 16,2019.
District Planning and Capital Improvement Program
In November 2007, the Board of Directors adopted a new comprehensive strategic plan to
consider the District's service levels and operational needs for the next five years. This comprehensive
strategic plan has been updated annually to continue looking at a five-year horizon (each, a `Strategic
Plan"). See"THE DISTRICT—Five-Yew Strategic Planning."
In December 2009, the Board of Directors adopted a Facilities Master Plan (the "Master Plan").
The Master Plan updated the planning processes set forth in the 1989 Master Plan,the 1999 Strategic Plan
and the 2002 Interim Strategic Plan Update. The Master Plan also incorporates and implements the levels
of services defined by the Board of Directors that are included in the 2009 Strategic Plan. The result is a
plan that integrates research, facilities planning, water conservation and reclamation, sludge reuse, other
wastewater programs and financial planning into a single unified approach. Key components of the
Master Plan include updated flow projections and collection system hydraulic modeling.
The District expects to satisfy required sewer capacity and rehabilitation improvements for the
Wastewater System through its Capital Improvement Program ("CIP"). The District annually reviews
and validates its CIP. The CIP was developed to satisfy anticipated regulatory requirements, increased
population, anticipated rehabilitations and replacements, additional treatment requirements, conservation,
energy and other resource savings considerations, odor control improvements, and air quality protection
needs. Through Fiscal Year 2031-32,the current 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;
27002232.5 25
• Replacement and rehabilitation of nine of the District's outlying pumping stations and 27
trunk sewer improvement projects;and
• Reduction of fence line odor to levels that minimize odor complaints.
The 2015 CIP Validation Study resulted in revisions to the CIP. The CIP currently consists of 85
large capital projects through Fiscal Year 2031-32 with remaining outlays of$ approximately 2.1 billion.
Over the next five years, the District contemplates average annual capital expenditures of$164.5 million
based on the 2015 CIP Validation Study,without taking into account CIP savings and deferrals. Set forth
in Table 5 below is a summary of total estimated capital costs for the CIP for Fiscal Years 2015-16
through 2031-32.
Table 5
Capital Improvement Program—Estimated Capital Costs
Fiscal Years 2015-16 through 2031-32
Project Cost
Collection System Capacity $ 277,900,000
Collection System Repair,Rehabilitation,Replacement 365,600,000
Treatment Plant Capacity 53,500,000
Additional Secondary Treatment 76,700,000
Improved Treatment 146,700,000
Treatment Plant Repair,Rehabilitation, Replacement 1,090,500,000
Support Facilities 41,900.000
Total Validated Capital Improvement Program 2.052.R00.000
Source: 2015-I6 CIP Validation Study,Orange County Sanitation District.
The CIP originally included budgeted expenditures of$181.9 million in Fiscal Year 2015-16.
After factoring in CIP savings and deferrals, such budgeted expenditures were reduced by$6.9 million to
$175.0 million. There are currently [37] projects in the construction phase with proposed capital outlay
spending in 2015-16. [The two most significant projects in the construction phase are the Sludge
Dewatering and Odor Control at Plant 1 and the Newport Force Main Rehabilitation with projected Fiscal
Year 2015-16 expenditures of$ million and$ million,respectively.][update]
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 (the "GWRS"). In March 2001, the District entered into an
agreement with the OCWD to design and construct Phase I of the GWRS. The capital cost of this Phase
was shared 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. Phase I of the GWRS became operational in January of 2008. In 2015, the
GWRS produced approximately 92,300 acre-feet. The Phase II expansion broke ground in January 2012
to add approximately 33,000 acre-feet per year and was completed in June 2015, resulting in purifying
100 percent of the treated wastewater from the District's Fountain Valley-based Plant No. 1. In April
2015, the District and the OCWD approved a $2 million joint study to explore the possibility of using
flows from the District's Plant No. 2, which may require additional infrastructure and treatment. The
Phase R expansion and all future phases are funded solely by the OCWD. The District has committed
27002232.5 26
168,000 acre-feet per year of secondary effluent to these future expanded operations; however, no capital
funding is anticipated or dedicated from the District for such expansion.
The OCWD and the District have agreed to share equally in the cost of the Joint GWRS
Microfiltration Backwash Redirection Project which will increase the quantity of water available during
the early morning hours when the flows are low. This project will save the District operational costs in
the form of reduced primary treatment chemical usage.
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 50% secondary treated wastewater, to full secondary treatment
standards. The District completed all of the necessary expansion projects to support full secondary
treatment by December 2012. On July 20, 2012, the District received a new NPDES permit, which
reflects the full secondary treatment requirements. The new NPDES permit will expire on July 19, 2017.
See"THE DISTRICT—Permits,Licenses and Other Regulations."
Biosolids Management
Through the treatment of wastewater,the District recovers and treats nutrient-rich, organic matter
(solids) to produce biosolids. Consistent with EPA's regulations and the regulations in place at the end-
use sites, the District's biosolids are recycled through composting, fertilizing non-food farm fields (land
application), and disposed in a landfill for methane gas recovery. The District's goal is to ensure our
biosolids management strategies align with existing market conditions and continue a sustainable,reliable
and economical biosolids management program that provides environmentally-sound practices and meets
federal, State and local regulatory requirements.
The District's biosolids averaged about 756 tons per day("tpd") in Fiscal Year 2014-15,with an
annual average cost per ton of$62.38 for managing at offsite locations, as described in the table below.
Prices have remained stable with some decreasing due to the District's interim-term contracts as well as
diesel prices remaining low. The biosolids management costs totaled about $17.2 million last fiscal year,
which was about 94%of the$18.3 million budgeted. Costs and biosolids production in Fiscal Year 2015-
16 are anticipated to remain stable with a budget of$17.4 million, which is a reduction of 5% in the
allocated budget over last fiscal year.
The District's biosolids tonnage will begin trending down as new solids facilities complete
construction and come online to reduce biosolids costs. Plant No. 1 centrifuges are currently under
construction and by Spring 2017 are anticipated to create drier solids which will reduce hauling costs.
Irvine Ranch Water District is constructing solids processing facilities and will stop sending their solids to
the District in 2017. Plant No.2 centrifuges will begin operating by early 2019.
27002232.5 27
Biosolids Management Contracts
Current tons
Contract per day Average
(Minimum tons managed cost per ton
Contractor Location Product per day and term) (approximate) (July 2014)
Synagro Kern County,CA Compost 250 tpd—Expires 12/27/16 250 tpd $75.10
Synagro La Paz County,AZ Compost 0 tpd—Expires 12/27/16 70 tpd $61.51
Tole Roach Yuma Cowry,AZ Land 0 tpd—10 years plus one 350 tpd $54.50
application five-year renewal;first
renewal 1/l/18
Orange Orange County,CA Local 0 tpd—8 years plus one to- 70 tpd Facility:$41.19
County Landfill year renewal;first renewal Hauling:out for
Waste& 6/30/I8 bid
Recycling
Inland Rancho Cucamonga, Compost 0 tpd—1 year plus up to 35 tpd Facility:$56.00
Empire CA three renewals;first Hauling:out for
Regional renewal 5/31/16 bid
Composting
Facility
The District's contractors provide back-up biosolids management capacity in California and
Arizona that include compost, land application, lime stabilization before land application and landfill.
Together, these options have the additional available capacity to manage more than ten times the
District's daily biosolids production to ensure sustainable,consistent and reliable operations.
In Fiscal Year 2014-15, the District signed an agreement with Inland Empire Composting
Authority to deliver two trucks per day to their Inland Empire Regional Compost Facility. The hauling
contract for this facility and the landfill is currently out for bid.
The District has started work on a contract to replace the expiring Synagro compost contract, as
well as the Biosolids Master Plan, which includes evaluating onsite and offsite management options in
order to make recommendations for the Capital Improvement Plan and potentially longer-term
management options for the future.
In 2003,the District was certified by the National Biosolids Partnership for its biosolids program.
The District's biosolids program has continued to develop under this certification over the last decade. In
late 2015, the District decided to transition its biosolids management system to an internal standard, as
outside certification is not required for the District's biosolids program. The District's internal standard is
intended to maintain sound practices while allowing the District to streamline areas to increase efficiency
and redirect staff resources.
Urban Runoff
Recognizing that County beaches were being affected by pollution carried by urban runoff, the
Board of Directors adopted a number of resolutions agreeing to accept dry weather urban runoff into the
sewer system. In June 2002, Assembly Bill 1892 amended the District's charter to formally allow the
diversion and management of dry weather urban runoff flows. Resolution No. 01-07, adopted March 28,
27002232.5 28
2001, declared that the District will initially waive fees and charges associated with authorized discharges
of dry weather urban runoff to the sewer system until the total volume of all runoff discharges exceeds
four million gallons per day ("mg/d") calculated on a monthly average. For the first 12 years of the
Urban Runoff Program, the average monthly flow averages remained less than the four mg/d threshold,
thus avoiding user fee costs being assessed to the diversion permittees. In 2012, the District received a
number of diversion proposals to deal with bacteria and selenium loading to the upper Newport Bay. The
discharge from the additional proposed diversions combined with the existing diversion flows would
eventually exceed the £our mg/d fee threshold. On June 12, 2013, the Board of Directors adopted
Resolution No. 13-09 expanding the waiver of fees or charges on the treatment of dry weather urban
runoff from four mg/d to ten mg/d. According to the Board of Directors, the change was necessary not
only to protect the County's coastal resources, but also to provide an economic benefit to the local
economy by helping to keep the County's beaches open.
The Dry Weather Urban Runoff Program is administered by the District's Environmental
Compliance Division, which issues a discharge permit for each of the diversion structures. The permit
functions as a control mechanism that specifically prohibits storm runoff and authorizes discharge only
during periods of dry weather. The permit also establishes specific discharge limits, constituent
monitoring, and flow metering requirements. In addition, the District conducts quarterly sampling and
analysis of the urban runoff discharges to ensure discharge limit compliance with the various regulated
constituents.
There are currently 19 active urban runoff diversion structures, three owned and operated by the
County of Orange, 11 owned and operated by the City of Huntington Beach,two owned and operated by
the City of Newport Beach, two owned and operated by the IRWD, and one owned and operated by PH
Finance (present owner of the Pelican Point Resort). In 2015, the City of Newport Beach added their
second diversion on Big Canyon Creek, an upper Newport Bay tributary. IRWD is currently constructing
a pipeline to divert the Peters Canyon Wash, the biggest contributor of selenium in the San Diego Creek
watershed in dry weather. The diversion of the Peters Canyon Wash is expected to be completed in 2016.
The City of Santa Ana is proposing three additional urban runoff diversions to deal with bacteria and
selenium loading to the Newport Back Bay Watershed: the Delhi, Santa Fe and Lane flood control
channels. The total flow for the proposed urban runoff diversions could result in an additional 3 mg/d of
urban runoff discharge to the sewer.
Since 1999, the District has treated a total of 8.3 billion gallons of dry-weather urban runoff that
would otherwise have been discharged into the ocean with no treatment. During Fiscal Year 2014-15,the
daily average urban runoff flow ranged between 0.70 and 1.48 mg/d with a cumulative total diversion of
408 million gallons for this period. At the existing operations and maintenance cost of$1,697 per million
gallons (the Fiscal Year 2014-15 rate), the District's cost for treating the urban runoff discharge for this
period is estimated at$692,036.
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 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 report titled Fault Rupture Hazard Investigation—
Wastewater Treatment Plant No.2 (the"1994 Report").
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
27002232.5 29
system and an M 7.0 earthquake on the 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, may 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 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 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.
The Amy 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. 1 and
Plant No.2 me built to federal standards.
The IERP takes into account the damage potential posed by coastal flooding, tsunamis (large
ocean waves generated by seismic activity) and windstorms. No assurance can be given that any such
events would not have a material adverse impact on the Wastewater System.
The Strategic Plan and IERP makes recommendations regarding fire protection of the Wastewater
System. 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 information
regarding emergency response policies, the disaster preparedness plan described in the IERP can be
reviewed at the District's office.
Five-Year Strategic Planning
The District maintains an annual Strategic Plan to address service levels and operational needs
over a five-year horizon. The Strategic Plan envisions an organizational culture that adheres to the
District's core values and makes efficient and effective use of all available resources. Through a new
Vision Statement, the District is committed to focusing efforts on customer service, protecting public
health and the environment, fiscal responsibility, communications, partnering with others, and creating
the best possible workforce.
Through planning workshops,individual interviews with members of the Board of Directors, and
employee and management focus groups,the following eight strategic goals were identified:
27002232.5 30
1. Odor Control—Completion of the Odor Control Master Plan.
2. Future Biosolids Management Options — Study biosolids management options including
third party contracts and onsite capital facilities.
3. Energy Efficiency— Continue to research new energy efficiency and energy conversion
technologies.
4. Disinfection of Ocean Discharge — Develop an implementation plan that includes the
technical, financial and societal factors associated with cessation of disinfection of the ocean discharge.
5. Local Sewer Transfers—Complete the transfer of 174 miles of local sewers serving parts
of the City of Tustin and unincorporated areas north of the City of Tustin and local sewer transfers in the
City of Santa Ana.
6. Legislative Advocacy and Public Outreach—Develop a unified legislative advocacy and
public outreach program.
7. Future Water Recycling — Determine partnerships, needs, strategies, benefits and costs
associated with recycling of Plant No. 2 effluent water.
8. Workforce Planning and Workforce Development—This initiative is ongoing and part of
a comprehensive workforce planning and development effort to ensure that the District has the right
people with the right skills and abilities,in the right place,at the right time.
Since the adoption of the 2013 Strategic Plan, the District made strides to improve technical
operations, biosolids management, odor control, and regulatory compliance. This resulted in the
completion of two of the eight strategic goals: Disinfection of Ocean Discharge and Legislative
Advocacy and Public Outreach. Under the latest Strategic Plan update of November 2015, the District
continues to work towards accomplishing the remaining six strategic goals.
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 we established by the District's Board of Directors and me 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 23 and to
provide for gradual rate increases in seven of the nine Revenue Areas. 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
27002232.5 31
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."
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 IRWD which
directly collects fees from customers through a monthly billing procedure in Revenue Area No. 14.
The District currently participates in the County's Teeter Plan under which the District receives
annually 100% of the secured property tax levies to which it otherwise is entitled, regardless of whether
the County has actually collected the levies.
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 REVENUE OBLIGATIONS—Rate Covenant"herein.
Residential and Commercial Sewer Service Charges. In December 2012,the Board of Directors
authorized a Proposition 218 notice on proposed rate increases for each year over the next five years.
Pursuant to the adoption of Ordinance No. OCSD-41 on March 27, 2013, the District established
residential Sewer Service Charges, except within Revenue Area No. 14,based on the cost of services and
facilities provided to each customer of the District. The noticed public hearing held in connection with
the adoption of this ordinance considered an increase in the single family residential rate, the underlying
rate for all of the District's sewer service charges, of 4.8% for Fiscal Year 2013-14 and thereafter by an
average annual increase of 2.4%for each Fiscal Year through Fiscal Year 2017-18. These increases were
approved by the Board through the adoption of Ordinance No. OCSD41. Following the first two years
of this rate plan,however,District staff recommended and the Board of Directors approved a reduction of
the rate increase for the last three years of the plan, lowering the average of these increases from 2.4%to
1.6%.
27002232.5 32
Set forth in Table 6 below is a comparison of the Sewer Service Charge rate for single family
residences("SFRs")for the fiscal years shown.
Table 6
Annual Sewer Service Charges
Single Family Residence Rate
Fiscal Years 2009-10 through 2017-18
Fiscal Sewer Service Percentage
Year Char¢e Chanee
2009-10 $221 -
2010-11 244 10.4%
2011-12 267 9.4
2012-13 294 10.1
2013-14 308 4.8
2014-15 316 2.6
2015-16 322 1.9
2016-17 327 1.6
2017-18 331 1.2
Source: Orange County Sanitation District.
Set forth in Table 7 below are the total average annual Sewer Service Charges for SFRs within
the District, together with comparable total average annual charges for wastewater service within the
jurisdictions of certain other cities and districts within the State as of July 1, 2015. The District's
approved SFR rate of$322 for Fiscal Year 2015-16 remains below the average annual sewer rate of 5475
according to a Fiscal Yew 2014-15 survey of 482 agencies encompassing all 58 counties in California
conducted by the State Water Resources Control Board.
27002232.5 33
Table 7
Comparison of Total Sewer Service Charges
For Single Family Residences
As of duly 1, 2015
Average Dry Annual
Weather Sewer
Flow Service Treatment Collection Property Tax
Enti LmjZ dlt'I Charaeol Levellrlt3l Responsibility l'I Incomet'3
City of San Diego 168 $573 2 Yes No
City of Los Angeles 428 464 4 Yes No
East Bay MUD 80 355 4 No Yes
County of Sacramento 140 384 3 No Yes
Orange County
Sanitation District 221 322 3 No Yes
County of Los Angeles 497 155 4 No Yes
(D Source: Information obtained from respective entities listed.
(2) Treatment Level Categories:
"I"—Primary treatment.
"2"—Advanced primary or primary with some secondary treatment.
"3"—Secondary treatment.
"4"—Advanced secondary or secondary with some tertiary treatment.
"5"—Tertiary treatment.
1'l Source: 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. Total industrial Sewer Service Charges in Fiscal Year 2014-15 were approximately $14.2
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
projected through Fiscal Year 2031-32, the cash flow needs of the CIP total approximately $2.1 billion.
Over the next five years the District contemplates average annual capital expenditures of$164.5 million.
In addition, over the next five years the District contemplates expenditures of$106 million, or an annual
average of $21 million, to finance projects currently unknown or unidentified as forecasted by the
District's Asset Management Program(the"Asset Management Program').
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.
Property 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 $64.3
million in Fiscal Yew 2010-11, $67.9 million in Fiscal Year 2011-12, $79.2 million in Fiscal Yew
2012-13, $74.9 million in Fiscal Year 2013-14 and $79.8 million in Fiscal Year 2014-15. The District
currently estimates that its property tax receipts will increase by approximately 5.0% each year from
27002232.5 34
Fiscal Year 2015-16 through Fiscal Year 2019-20. The apportionment of the ad valorem tax is made
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 Director's policy.
Capital Facilities Capacity Charges. Capital Facilities Capacity Charges (commonly referred to
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 California 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. The District currently has Capital Facilities Capacity
Charges of $3,588 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
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 bas 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 only 1970s. 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 maximum regulated flow capacity rights in the District's Santa Ana
River Interceptor and 17 mg/d of monthly average flow capacity in the District's wastewater treatment
plants. Projected revenues from SAWPA range from$2.5 million to$3.0 million over the next five years.
Additional treatment plant capacity can be purchased in increments at the District's current replacement
cost.
Federal Subsidy Payments. In connection with the District's Revenue Obligations,Series 2010A
(the "2010A Revenue Obligations") and the District's Revenue Obligations, Series 2010C (the "2010C
Revenue Obligations"), issued as "Build America Bonds," the District is scheduled to receive certain
federal subsidy payments of approximately $5.1 million annually through 2031 and lesser amounts
thereafter until 2044. Subsidy payments with respect to the 2010A Revenue Obligations and the 2010C
Revenue Obligations constitute Revenues as defined in the Master Agreement. In its financial reports,the
District accounts for subsidy payments received in connection with the 2010A Revenue Obligations and
the 2010C Revenue Obligations as a reduction in interest expense with respect to such obligations.
27002232.5 35
For the 2010A Revenue Obligations and the 2010C Revenue Obligations to be and remain Build
America Bonds, the District must comply with certain covenants and establish certain facts and
expectations with respect to the 2010A Revenue Obligations and the 2010C Revenue Obligations, the use
and investment of proceeds thereof and the use of property financed thereby. Thus, it is possible that the
District may not receive the federal subsidy payments due to the District's noncompliance. The federal
subsidy payments are also subject to offset against amounts that may, for unrelated reasons, be owed by
the District to any agency of the United States of America.
On March 1, 2013, the federal government announced the implementation of certain automatic
spending cuts (mown as the sequester. As a result of the sequester, federal subsidy payments for the
2010A Revenue Obligations were reduced by 8.7% (or$67,872; second half of the year only), 7.2% (or
$112,339), 7.3% (or $114,882), and 6.8% (or $53,049; first half of the year only) for the federal fiscal
years ended September 30, 2013, 2014, 2015, and 2016, respectively; and federal subsidy payments for
the 2010C Revenue Obligations were reduced by 8.7% (or $152,807; second half of the year only) by
7.2% (or $252,922), 7.3% (or $256,435), and 6.8% (or $119,435; first half of the year only) for the
federal fiscal years ended September 30, 2013, 2014, 2015, and 2016, respectively. The District is
obligated to make all payments with respect to the 2010A Revenue Obligations and the 2010C Revenue
Obligations from Revenues as defined in the Master Agreement,regardless of whether it receives the full
amount of federal subsidy payments. The District cannot predict whether future reductions in federal
subsidy payments will occur due to the sequester. However, the District does not believe that any
reduction in federal subsidy payments will have a material adverse effect on the District's ability to pay
the 2010A Revenue Obligations or the 2010C Revenue Obligations.
Wastewater Treatment History
The wastewater flows for Fiscal Year 2009-10 through Fiscal Year 2014-15 were 196 mg/d,207
mg/d, 201 mg/d,200 mg/d, 198 mg/d and 190 mg/d, respectively. The highest flow rate experienced was
during El Niiio 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. [discuss current El Nino impact]
Customers
The historical number of customers served by the District for the Fiscal Years 2010-11 through
2014-15 and the projected number of customers served by the District for the Fiscal Years 2015-16
through 2019-20, identified in Equivalent Dwelling Units ("EDUs"), are set forth in Table 8 and Table 9
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 unit" Set forth in
Table 8 below are the EDUs that equate to total Sewer Service Charge levies,while the EDUs set forth in
Table 9 equate to total sewer service charge collections.
27002232.5 36
Table 8
Historical and Projected Equivalent Dwelling Units
Fiscal Years 2010-11 through 2019-20
Historical Projected
Fiscal Year EDUso) Fiscal Year EDUs
2010-11 924,622 2015-16 936,850
2011-12 924,525 2016-17 939,567
2012-13 915,685 2017-18 942,292
2013-14 916,812 2018-19 945,024
2014-15 934,141 2019-20 947,765
(n 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 Sewer Service Charge collections
rather than levies.
Set forth in Table 9 below are 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 2010-11 through 2014-15
($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 Dwellines Revenue Revenues Accounts Revenue Revenues
2010-11 874,130 $213.3 95% 479 $10.1 5%
2011-12 869,709 232.2 96 516 9.5 4
2012-13 879,443 258.6 96 527 10.8 4
2013-14 869,461 267.8 95 489 14.4 5
2014-15 806,585 254.9 95 467 14.2 5
Source: Orange County Sanitation District.
27002232.5 37
Set forth in Table 10 below are the ten Ingest principal sewer service customers of the District
for the Fiscal Yew ended June 30,2015.
Table 10
Largest Principal Sewer Service Customers of the District
for the Fiscal Year Ended June 30,2015
Sewer
User Service Charees
House Foods America Corp. $1,055,843
Kimberly-Clark Worldwide, Inc. 1,047,510
Stremicks Heritage Foods, LLC 811,061
MCP Foods,Inc. 738,346
Pulmuone Wildwood,Inc. 571,057
Jazz Semiconductor 521,890
Ameripec Inc. 517,583
Nor-Cal Beverage Co.hie. (NCB) 461,589
Alta Dena Certified Dairy,LLC 457,496
Nor-Cal Beverage Co. Inc. (Main) 387,579
Source: Orange County Sanitation District.
Assessed Valuation
The assessed valuation of property in the County is established by the County Assessor, except
for public utility property which is assessed by the State Board of Equalization. Due to changes in
assessment required under State Constitution Article XIIIA, the County assessment roll no longer
purports to be proportional to market value. See "LIMITATIONS ON TAXES AND REVENUES"
herein. Generally,property can be reappraised upward to market value only upon a change in ownership
or completion of new construction. The assessed value of property that has not incurred a change of
ownership or new construction must be adjusted annually to reflect inflation at a rate not to exceed 2%
per year based on the State consumer price index. In the event of declining property value caused by
substantial damage, destruction, economic or other factors, the assessed value must be reduced
temporarily to reflect market value. For the definition of full cash value and more information on
property tax limitations and adjustments,see"LIMITATIONS ON TAXES AND REVENUES"herein.
The County Assessor determines and enrolls a value for each parcel of taxable real property in the
County every year. The value review may result in a reduction in value. Taxpayers in the County also
may appeal the determination of the County Assessor with respect to the assessed value of their property.
27002232.5 38
Set forth in Table 11 below is a five-year history of assessed valuations in the District for the
fiscal years shown.
Table 11
Assessed Valuations of Property in the District
Fiscal Years 2011-12 through 2015-16
($in Billions)
Fiscal Year Value Percent Chance
2011-12 $308.7 1.45%
2012-13 316.4 2.49
2013-14 329.3 4.08
2014-15 350.5 6.44
2015-16 372.2 6.19
Source: County of Orange Auditor-Controller.
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 County's Teeter Plan under which the District receives annually 100% of the secured
property tax levies and Sewer Service Charges to which it otherwise is entitled,regardless of whether the
County has actually collected the levies. This alternative method provides for funding 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 seemed 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.
27002232.5 39
Set forth in Table 12 below is 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 2011-12 through 2015-16
(In Thousands)
Total Property Tax and Sewer
Fiscal Year Service Charee Lew
2011-12 $314,077
2012-13 340,298
2013-14 356,607
2014-15 362,978
2015-16 375,927
Source: County of Orange Auditor-Controller.
Budgetary Process
The District's operating fund budget relies on revenues from Sewer Service Charges and property
taxes,both of which are collected on the property tax bill, as previously described under the captions'—
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 yen.
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.
27002232.5 40
Reserves
The District has an established reserve policy with eight separate categories for its reserve funds.
Collectively, these individual reserve requirements total over $500 million for each yew of the current
ten-year cash flow forecast.
Set forth in Table 13 below are the actual reserves at June 30, 2013, June 30, 2014 and June 30,
2015, and projected reserves at June 30,2016 for each fund.
Table 13
Cash Reserves
June 30,2013 through 2015
and Projected at June 30,2016
(In Millions)
Projected
2013 2014 2015 2016
June 30 June 30 June 30 June 30
Cash Flow Requirements Reserve:
Operating Expenses $ 76 $ 76 $ 76 $75
Certificates of Participation Payments 98 98 86 92
Operating Contingencies Reserve 15 15 15 15
Capital Improvement Program Reserve 210 275 163 173
Catastrophe and Self Insurance 57 57 57 57
Capital Replacement and Refurbishment 61 61 62 63
Debt Service Required Reserves0) 135 132 129 117
Rate Stabilization Reserve
Total $632 $]14 $588 $592
r'r "Debt Service Required Reserves" constitute all amounts held in Obligation Reserve Funds, together with
additional amounts held by the District that may be used for the payment of debt service on District obligations
in accordance with the District's reserve policy. As of June 30, 2015, $129 million of Debt Service Required
Reserves were held in Obligation Reserve Funds, of which $33.0 million is restricted by covenant for the
specific obligations for which such Obligation Reserve Funds were established.
Source: Orange County Sanitation District.
The District's reserves consist of the following components:
• 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 yen.
• The Operating Contingencies Reserve was established 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
27002232.5 41
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 Loss, 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 $6.2 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 include trustee-held amounts in any Obligation Reserve Fond
and additional amounts held by the District for the payment of debt service in accordance with the
District's reserve policy. The District's current policy is to maintain reserves (including trustee-
held reserves) for debt service in the amount of 10% of the principal amount of the District's
outstanding debt obligations.
• 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. 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 has been zero for Fiscal Years 2012-13 through 2015-16.
• In Fiscal Year 2009-10, Financial Management staff and the Board of Directors concluded that
given the nature of the likely events that may cause a withdrawal from the District's reserves and
the degree of overlap among reserve categories,the total amount reserved need not equal the sum
of each separate reserve category. As a result, the District adjusted the application of its reserve
policy, leading to a reduction of $40 million of the accumulated total, or approximately 8%.
Reserve levels are calculated in accordance with the District's reserve policy.
Summary of Operating Data
Set forth in Table 14 below is a summary of historic operating results for the District for Fiscal
Years 2010-11 through Fiscal Year 2014-15. The information presented in the summary should be read
in conjunction with the financial statements and notes. See APPENDIX A — "COMPREHENSIVE
ANNUAL FINANCIAL REPORT OF THE ORANGE COUNTY SANITATION DISTRICT FOR THE
YEAR ENDED JUNE 30,2015."
27002232.5 42
Table 14
Summary of District Historical Revenues and Expenses
and Other Financial Information
For Fiscal Years 2010-11 through 2014-15
($in Millions)
Audited
2010-11 2011-12 2012-13 2013-14 2014-15
Revenues:
Residential&Commercial
Sewer Service Charges(')
Regional $213.3 $232.2 $258.6 $267.8 $260.5
Local 5.7 5.7 5.8 5.7 5.5
Industrial Sewer Service Charges 10.1 9.5 13.5 14.4 14.2
Revenue Area No. 14 Fees 21.4 18.0 27.5 23.6 28.3
Ad Valorem Taxes 64.3 67.9 77.3 72.8 77.6
Interest Earnings 10.1 15.7 (3.6) 6.1 4.8
Other Revenues 5.7 3.6 4.6 5.1 6.2
Total Revenues $330.6 $352.6 $383.7 $395.5 $397.1
Operations and Maintenance
Expenses(') 143.4 172.30) 149.8 146.4 149.2
Net Revenues S1 R7 2 $180 3 $233 9 SUE S247.9
Debt Service $ 72, $ 65.4 S 77, $ 92.8 $$1 5
Coverage Ratios 2.59x 2.76x 3.01x 2.68x 3.04x
IJAAL Payment(°) S1250
CIP Outlay S160,Z $101.7 S 97.6 $ 87.5 5182.6
Ending Reserves S597 0 $608 0 $651.8 $713 7 S588 0
o) Net of rebates,if any,to commercial users.
(2) Excludes depreciation and amortization expenses.
(s) Includes a one-time write-down of$34.2 million for costs of feasibility studies to properly conform to generally
accepted accounting principles. These costs were previously capitalized and were being amortized over a five-
year period.
(4) As of July 1,2014,the District had an unfunded acmarial seemed pension liability in its defined pension benefit
plan administered by the Orange County Employees Retirement System of$194 million. In Fiscal Year 2014-
15,the District paid down$125 million of this liability.
Source: Orange County Sanitation District.
27002232.5 43
Forecasted Operating Data
Set forth in Table 15 below are forecasted operating results for the District for Fiscal Years
2015-16 through 2019-20. These projections assume the number of projects and scheduled build out set
forth in the 2015 CIP Validation Study, and reflect the Board-approved annual rate increases of 1.90%,
1.55% and 1.22% for Fiscal Year 2015-16, Fiscal Year 2016-17, and Fiscal Year 2017-18, respectively.
Principal expenditure components of these projections are derived from the 2015 CIP Validation Study,
which identified 85 large capital projects with a 10-year projected outlay of$1.7 billion. Much of the
construction is scheduled during the next five years, with average annual capital outlays of $164.5
million. The District's CIP cash flow budget for Fiscal Year 2015-16 is$181.9 million. This CIP budget
finances joint works treatment and disposal system improvement projects, and collection system
improvement projects. 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 representation that they will in fact occur. To the extent that actual future conditions differ
from those assumed herein,the data will vary.
[Remainder of page intentionally left blank.]
27002232.5 44
Table 15
Summary of Forecasted District Revenues and Expenses
and Other Financial Information
for Fiscal Years 2015-16 through 2019-20
($in Millions)("
2015-16 2016-17 2017-18 2018-19 2019-20
Revenues
Residential&Commercial
Sewer Service Charges(') $ 294.1 $ 299.6 $ 299.2 $ 303.8 $ 309.4
Industrial Sewer Service Charges 13.6 13.8 13.9 14.1 14.3
IRWD Assessments 13.7 8.9 4.6 5.4 6.2
SAWPA Assessments 2.7 2.8 2.9 3.0 3.1
Ad Valorem Taxes 88.5 93.0 97.6 102.5 107.6
Interest Earnings 6.1 9.0 9.7 13.7 17.1
Other Revenues 1.5 2.1 2.2 2.2 2.2
Total Revenues 420.2 429.2 430.1 444.7 459.9
Build America Bonds Federal Subsidy 5.1 5.1 5.1 5.1 5.1
Operations and Maintenance Expenses (149.3) (150.4) (151.8 1 1( 57.81 (164.1)
Net Revenues(') S 276.0 S 283 283. S 292.0 $ 2�.9
Debt Service $ 91.8 $ 96.8 $ 92.8 $ 91.3 $ 91.3
Build America Bonds Federal Subsidy 5.1 5.1 5.1 5.1 5.1
Gross Debt Service 96 h 1.9 01.9 97.9 96.4 h 96.4
Coverage Ratiosl3l 2.85x 2.7 2.89 3.03x 3.11x
CIP Outlays S 175.0 S 128.5 S 114. S 150.3 18 .2
Replacement,Refurbishment and
Rehabilitation(4) $ $ 3.7 S 20, S 31.4 $ 50.6
Ending Reserves $592 0 $620.7 $680,4 $703.8 $679.7
(D Assumptions:
a) Annual growth in equivalent dwelling units is projected to average 0.3%over the next five years.
b) The Residential, Commercial, and Industrial Sewer Service Charge forecasts are based on the total
projected equivalent dwelling units, the actual rate increase of 1.9% in Fiscal Year 2015-16, Board
approved rate increases for Fiscal Years 2016-17 and 2017-18 averaging 1.4%per year and additional rate
increases over the next two years averaging 1.4%per year.
c) Revenue Area No. 14 Fees are derived based on the projected contribution of sewage flows to the District
from the Irvine Ranch Water District.
d) Ad Valorem Taxes are projected with annual increases of 5%.
e) Interest earnings are projected to average 2.0%of annual cash balances.
I) Operating and Maintenance Expenses are forecasted with a base increase of 1.0%per year for Fiscal Years
2015-16 through 2017-18 with adjustments for known periodic outlays that do not occur annually.
g) Annual CIP Outlays are based on the cash flow projections developed from the CIP Validation Study,with
adjustments for CIP savings and deferrals.
ca) Reflects projected reduction of approximately$6 million annually in Sewer Service Charge revenues beginning
in Fiscal Year 2017-18 due to expected transfer of local sewers currently owned by the District to another
public agency.
(3) Calculated in accordance with the Master Agreement and the Installment Purchase Agreement.
(4) Replacement, Refurbishment &Rehabilitation me known future capital outlays that have been identified within
the District's Asset Management program but have not yet been developed into specific proposed projects and
included within the CIP Program.
Source: Orange County Sanitation District.
27002232.5 45
Management's Discussion and Analysis of Operating Data
The District's Fiscal Year 2015-16 total operating, capital improvement, debt service, and other
financing requirement budget is $469.7 million, a 15.3% decrease over the prior year budget of$554.4
million. This overall decrease is primarily attributable to a planned reduction of$125 million in long-
term liabilities in Fiscal Year 2014-15 and an additional planned reduction of$50 million in Fiscal Year
2015-16. These planned reductions resulted from pushing back a portion of the Fiscal Year 2013-14 CIP
program into fixture years and the receipt of unexpected one-time revenues in Fiscal Year 2013-14. The
$125 million reduction in Fiscal Year 2014-15 and the$50 million reduction in Fiscal Year 2015-16 each
consists of a pay-down of a portion of the $194 million unfunded accrued actuarial pension liability as of
July 1, 2014. Excluding these planned reductions the total approved cash flow budget for Fiscal Year
2015-16 totals S420 million, a 2% decrease over the prior year. This overall decrease consists of a
decrease in capital outlay of $11.5 million or 6.2%, an increase in debt service requirements of $5.8
million or 6.3%,and a decrease in operating expenses of$2.8 million or 1.8%.
The Fiscal Year 2015-16 approved budget to operate, maintain and manage the District's sewage
collection, treatment and disposal system is $151.9 million, a decrease of 1.8%. Personnel costs have
decreased by $4.4 million, or 4.4%, due primarily to the projected savings of$8.9 million in employee
retirement premiums as the District's employer contribution rates have dropped approximately 45.5%due
to the $125 million lump sum payment against the unfunded actuarial accrued liability in Fiscal Year
2014-15. These retirement savings were partially offset by increased salaries of$2.8 million attributable
to provisions of the existing bargaining unit agreements. As of December 31,2015,there were 51 vacant
positions, or 8.2%of the total budgeted staffing level of 624.0 full-time equivalent positions.
Operating materials and supplies are budgeted to increase by$1.4 million or 8.9% over the prior
year. Of this increase, $1.2 million or 9.4% over the prior year represents increases in chemicals used
throughout the treatment plants for enhanced settling and separation of solids, odor control and
disinfection. These increases are reflected of increases in unit cost and in the quantity being used.
Repairs and maintenance costs were approved at a decrease of $0.8 million or 6.1%. This
decrease is mostly attributable to decreases in basic repairs and maintenance costs including the
scheduling of one central generation engine overhaul totaling$893,000 in the prior year.
In preparation of the Fiscal Yew 2016-18 biennium budget, District staff will be developing for
the Board of Directors a Capital Improvement Program to deliver the levels of service included in the
District's five-year rolling Strategic Plan. These levels of service and associated capital projects are
included in the Strategic Plan, last updated in November 2015. In addition, District staff validated the
active CIP projects currently being executed to ensure that the scope of work on the active projects
remains appropriate, and that the cost estimates have been accurately updated. The Fiscal Year 2015-16
CIP cash flow budget was approved at $181.9 million. After factoring in CIP savings and deferrals, this
CIP budget was reduced by $6.9 million to $175.0 million. The 2015 validated CIP includes 85 large
capital projects with 10-year outlays totaling$1.7 billion.
The completion of the CIP Validation Study in 2013 reaffirmed the need for rate increases in
future years. Based on the results of the CIP Validation Study and the Strategic Plan, the Bond of
Directors adopted Ordinance No. OCSD-41, increasing the sanitary sewer service charges by
approximately 4.8% in Fiscal Year 2013-14, and by an average of 2.4% over the following four years.
These rate increases were approved by a vote of two-thirds of the members of the Board of Directors and
are not subject to reaffirmation in any of the future fiscal years covered by this five-year period.
Following the first two years of this rate plan, however, District staff recommended and the Board of
Directors approved a reduction of the rate increase for the last three years of the plan, lowering the
27002232.5 46
average of these increases from 2.4% to 1.6%. This action resulted in the single family residence user
rate, the basis for all sewer user fee rates, increasing from$316 in Fiscal Year 2014-15 to $322 in Fiscal
Year 2015-16. 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 et 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. Mellon Trust serves as the District's independent custodian bank for
its investment program. Callan Associates serves as the District's independent advisor.
As of December 31, 2015, the District's externally managed fund consisted of a short-term
investment portfolio of$132.0 million with an average maturity of 77 days, and a long-term investment
portfolio of$314.9 million with average maturities of 2.9 years. Investments consist of United States
government securities, corporate bonds and commercial paper. The District's portfolio contains no
structured investment vehicles("SlVs")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 government securities
equal to 110% 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 fonds 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 fonds. The primary objectives, in order, of the District's investment activities are
safety, liquidity and return on investment.
FINANCIAL OBLIGATIONS
Existing Indebtedness
Currently, the District has Senior Obligations Outstanding payable on a parity with the Revenue
Obligations. The table below describes the District's outstanding parity certificates of participation as of
February 2, 2016. The payment obligations in connection with each series of these certificates of
participation 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 general obligation bonds or subordinate bonds outstanding.
27002232.5 47
Table 16
Outstanding Senior Obligations
As of February 2,2016
Original Principal Issue Outstanding Final
Amount Date Balance Maturi
2007A Certificates $ 95,180,000 05/22/07 $ 91,885,000 02/01/30
2007B Certificates 300,000,000 12/20/07 7,110,000 02/01/17
2008B Certificates 27,800,000 09/11/08 8,815,000 08/01/16
2009A Certificates(0 200,000,000 05/07/09 176,185,000 02/01/39
2010A Revenue Obligations 80,000,000 05/18/10 80,000,000 02/01/40
2010C Revenue Obligations 157,000,000 11/29/10 157,000,000 02/01/44
2011A Revenue Obligations 147,595,000 10/03/11 111,465,000 02/01/26
2012A Revenue Obligations 100,645,000 03/22/12 100,645,000 02/01/33
2012B Revenue Obligations 66,395,000 08/16/12 66,395,000 02/01/26
2014A Revenue Obligations 85,090,000 08/07/14 85,090,000 02/01/27
2014B Certificates(') 120,850,000 10/08/14 120,850,000 11/15/16(2)
2015A Revenue Obligations 127,510.000 02/12/15 127,510.000 02/01/37
Total Senior Obligations 1.SORA65.000 1.132950.00
0) Includes the Refunded 2009A Certificates to be refunded with the proceeds of the Revenue Obligations. See
"REFUNDING PLAN"herein.
(r) The District may in the future refund the 2014B Certificates with Senior Obligations amortizing over a term of
approximately 20 years.
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.
Anticipated Financings
From time to time the District may incur other obligations to finance portions of the CIP. Over
the next five years, however, the District does not expect to issue any additional debt, other than
refunding debt. The District expects to refund outstanding obligations from time to time, such as the
2014B Certificates mentioned in Table 16 above.
Direct and Overlapping Bonded Debt
The aggregate direct and overlapping bonded debt of the District as of June 30, 2015 is set forth
on page 64 of Appendix A.
THE CORPORATION
The Corporation was organized on 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 properly 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.
27002232.5 48
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 Corporation may be obtained
from the Orange County Sanitation District office at 10844 Ellis Avenue, Fountain Valley, California,
92708-7018.
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 XIIIA"). Article XIIIA, 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,(it)(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 "full cash value," or thereafter, the
appraised value of real property when purchased, newly constructed, or a change in ownership has
occurred after the 1975 assessment." The fall 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
XIIIA. 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 their respective "situs." Any such allocation made to a local agency
continues as part of its allocation in future years.
27002232.5 49
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 full 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 1000/. 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 XIBB to the State Constitution ("Article
XIIIB"). Under Article XIIIB,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 funds) in an amount higher than the
appropriations limit. Article XIBB does not affect the appropriations of moneys that are excluded from
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 retained 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 borne 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
27002232.5 50
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 111 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 lA and Proposition 22
Proposition I ("Proposition lA"), 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 lA generally prohibits the State from shifting to schools or community
colleges any share of property tax revenues allocated to local governments for any fiscal year,as set forth
under the laws in effect as of November 3, 2004. Any change in the allocation of property tax revenues
among local governments within a county must be approved by two-thirds of both houses of the
Legislature.
Proposition IA 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 IA was generally superseded by the passage of a new initiative constitutional
amendment at the November 2010 election, known as Proposition 22 ("Proposition 22"). The effect of
Proposition 22 is to prohibit the State, even during a period of severe fiscal hardship, from delaying the
distribution of tax revenues for transportation,redevelopment, or local government projects and services.
It prevents the State from redirecting redevelopment agency property tax increment to any other local
government or from temporarily shifting property taxes from cities, counties and special districts to
schools. This is intended to, among other things, stabilize local government revenue sources by
restricting the State's control over local property taxes.
Prior to the passage of Proposition 22, the State invoked Proposition lA to divert $1.935 billion
in local property tax revenues in fiscal year 2009-10 from cities, counties,and special districts to the State
to offset State general fund spending for education and other programs. Approximately$5 million of the
District's property tax revenues were diverted to the State as a result of this Proposition lA suspension.
The District participated in a Proposition IA Securitization Program (the "Program") sponsored by the
California Statewide Communities Development Authority. The Program allowed the District to
exchange its anticipated State property tax receivable for an equal amount of cash. In addition,the State's
adopted 2009-10 budget included a $1.7 billion diversion in local property tax revenues from local
redevelopment agencies. Many California Redevelopment Association members are actively engaged in
litigation to block such diversion and recoup certain payments already made under certain legislation
passed in July 2009 that is beyond the reach of Proposition 22,known as"ABX4 26."
Proposition IA 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 lA requires the State to suspend State mandates affecting
27002232.5 51
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.
Article XIIIC and Article XIIID of the California Constitution
Proposition 218, a State ballot initiative (mown 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 terms, 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 (Le., "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 "fee" 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
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 Ca1.4th 409 (2004) (`Richmond"), and Bighorn-
Desert View Water Agency v. Verjil, 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 procedural
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
27002232.5 52
"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 XBIC 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 9.4%, for all ratepayers to$87.50 per year. In May 2003,the Board of
Directors approved a 15%rate increase per year, for each year, over the then following five years, upon
2/3 vote of the Board of Directors after conducting a noticed public hearing in compliance with Article
XBID. 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 $I65.80 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 10.4%, 10.0%, 10.4%, 9.4%and 10.1%,respectively, for Fiscal Yews 2008-09 through
2012-13. On March 27, 2013, the Board of Directors adopted Ordinance No. OCSD-41 approving
increases in its sanitary sewer service charges for all single family residences, multi-family residential
units, and all non-residential properties. The Board of Directors increased the single family residential
rate, which is the basis for all of the District's sewer service charges, by 4.8% for Fiscal Year 2013-14
and thereafter by an average of 2.4%annually for each Fiscal Year through Fiscal Year 2017-18.
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
27002232.5 53
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. If 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 affect 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 XIDC 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 Revenue Obligations and certain other legal matters me subject to the
approving opinion of Norton Rose Fulbright US LLP, 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 on
for the District and the Corporation by Woodruff, Spradlin & Smart, a Professional Corporation, Costa
Mesa, California, and for the District by Norton Rose Fulbright US LLP, Disclosure Counsel to the
District.
FINANCIAL ADVISOR
The District has retained Public Resources Advisory Group as an independent registered
municipal advisor(the"Financial Advisor")in connection with the execution and delivery of the Revenue
Obligations. The Financial Advisor bas 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 Revenue Obligations, 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 Revenue Obligations, 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 Revenue Obligations or any action
27002232.5 54
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 McGladrey LLP, independent certified public accountants. See APPENDIX A—
"COMPREHENSIVE ANNUAL FINANCIAL REPORT OF THE ORANGE COUNTY SANITATION
DISTRICT FOR THE YEAR ENDED TUNE 30, 2015" herein. The District has received the
Government Finance Officers Association Certificate of Achievement for "Excellence in Financial
Reporting" for over 20 consecutive years. The audited financial statements, including the footnotes
thereto, should be reviewed in their entirety. McGladrey LLP, the District's independent auditor, has not
been engaged to perform, and has not performed, since the date of its report included in Appendix A,any
procedures on the financial statements addressed in that report. McGladrey LLP also has not performed
any procedures relating to this Official Statement.
TAX MATTERS
Tax Exemption
The Internal Revenue Code of 1986 (the"Code")imposes certain requirements that must be met
subsequent to the execution and delivery of the Installment Purchase Agreement for the interest
component of each Installment Payment (the "Interest Component"), and the allocable portion thereof
distributable in respect of each Revenue Obligation(each a "Certificate Interest Distribution"),to be and
remain excluded pursuant to section 103(a) of the Code from the gross income of the owners thereof 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 Revenue Obligations. The District has covenanted to maintain
the exclusion of the Interest Components and the Certificate Interest Distributions from the gross income
of the owners thereof for federal income tax purposes.
Upon the execution and delivery of the Installment Purchase Agreement,Norton Rose Fulbright
US LLP, Los Angeles, California, Special Counsel, will deliver its opinion that under existing law, and
assuming compliance with the covenants referred to herein, each Interest Component, and each
Certificate Interest Distribution in respect thereof,is excluded pursuant to section 103(a)of the Code from
the gross income of the owner thereof for federal income tax purposes. 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 each Interest Component, and each Certificate Interest Distribution in respect thereof, is
exempt from personal income taxes of the State of California. Special Counsel will render its further
opinion that, under existing statutes, regulations, rulings and court decisions, the Installment Purchase
Agreement will not constitute a "specified private activity bond" within the meaning of section 57(a)(5)
of the Code and, therefore, that neither any Interest Component, nor any Certificate Interest Distribution
in respect thereof, will be treated as an item of tax preference for purposes of computing the alternative
minimum tax imposed by section 55 of the Code. Receipt or accrual of an Interest Component allocable
to, or Certificate Interest Distribution in respect of a Revenue Obligation owned by, a corporation may
27002232.5 55
affect the computation of the alternative minimum taxable income of that corporation. A corporation's
alternative minimum taxable income is the basis upon which the alternative minimum tax imposed by
section 55 of the Code is computed.
Pursuant to the Installment Purchase Agreement and in the Tax Certificate Pertaining to
Arbitrage and Other Matters under Sections 103 and 141-150 of the Internal Revenue Code of 1986, to
be delivered by the District in connection with the execution and delivery of the Installment Purchase
Agreement, and the issuance of the Revenue Obligations, the District will make representations relevant
to the determination of, and will make certain covenants regarding or affecting, the exclusion of the
Interest Component of the Installment Payments, and of each Certificate Interest Distribution in respect
thereof, from the gross income of the owners thereof for federal income tax purposes. In reaching its
opinions described above, Special Counsel will assume the accuracy of each such representation and the
present and future compliance by the District with each of its covenants.
Except as stated in this section above, Special Counsel will express no opinion as to any federal
or state tax consequence of the receipt or accrual of an Interest Component of an Installment Payment, or
of a Certificate Interest Distribution in respect thereof, or of the ownership or disposition of, a Revenue
Obligation. Furthermore, Special Counsel will express no opinion as to any federal, state or local tax law
consequences with respect to the Installment Purchase Agreement or the Revenue Obligations, or of the
Interest Components or Certificate Interest Distributions in respect thereof, if any action is taken with
respect to the Installment Purchase Agreement, or the use or investment of proceeds thereof, the Trust
Agreement or the Revenue Obligations predicated or permitted upon the advice or approval of other
counsel. Special Counsel has not undertaken to advise in the future whether any events after the date of
execution and delivery of the Installment Purchase Agreement may affect the tax status of Interest
Components or Certificate Interest Distributions or the tax consequences of the ownership of a Revenue
Obligation.
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 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
Installment Purchase Agreement and Revenue Obligations is commenced, under current procedures the
Service is likely to treat the District as the "taxpayer,"and the owners of the Revenue Obligations 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 Components and Certificate Interest Distributions, the District may have different or
conflicting interests from the owners. Public awareness of any future audit of the Installment Purchase
Agreement and Revenue Obligations could adversely affect the value and liquidity of the Revenue
Obligations during the pendency of the audit,regardless of its ultimate outcome.
Existing law may change to reduce or eliminate the benefit to bondholders of the exclusion of
interest on the Interest Components and Certificate Interest Distributions accrued in respect of Revenue
Obligations from gross income for federal income tax purposes. Any proposed legislation or
administrative action,whether or not taken, could also affect the value and marketability of the Revenue
Obligations. Prospective purchasers of the Revenue Obligations should consult with their own tax
advisors with respect to any proposed or future changes in tax law.
A copy of the proposed form of opinion of Special Counsel relating to the Revenue Obligations is
included in Appendix F.
27002232.5 56
Tax Accounting Treatment of Bond Premium and Original Issue Discount
For purposes of the following discussion, each Revenue Obligation should be treated as a debt
instrument, the scheduled payments of principal of and interest on which are the scheduled distributions
of Installment Principal and Installment Interest, respectively, to be allocated to that Revenue Obligation
in accordance with the terns of the Installment Purchase Agreement and Revenue Obligation.
To the extent that a purchaser of a debt instrument acquires that debt instrument at a price that
exceeds the aggregate amount of scheduled interest payments (other than payments of"qualified stated
interest" as defined in section 1.1273-1 of the Treasury Regulations) to be made on that debt instrument
(determined, in the case of a prepayable debt instrument, under the assumption described below) (the
"stated redemption price at maturity" of the instrument), 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 must 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 Revenue Obligation that is subject to redemption(in whole or in
part)upon a permitted optional prepayment of an Installment Payment, the detem»nation whether there is
amortizable bond premium, and the computation of the accrual of that premium, must be made under the
assumption that the Installment Payment will be prepaid on the permitted date that would minimize the
yield on the Revenue Obligation (or that the Revenue Obligation will not be prepaid prior to the stated
maturity date in respect of that Revenue Obligation 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 Revenue Obligation owned by such owner is sold or disposed
of for an meant equal to or in some circumstances even less than the original cost of the Revenue
Obligation to the owner.
The excess,if any, of the stated redemption price at maturity of a Revenue Obligation of a stated
maturity over the initial offering price to the public of the Revenue Obligations of that stated maturity set
forth on the inside cover page of this Official Statement is `original issue discount" Original issue
discount accruing in respect of a Revenue Obligation is treated for federal income tax and California
personal income tax purposes as additional interest in respect of that debt instrument and is excluded from
the gross income of the owner thereof for federal income tax purposes and exempt from the California
personal income tax to the same extent as would be stated interest on that debt instrument. Original issue
discount accruing in respect of any Revenue Obligation purchased at its initial offering price and pursuant
to such initial offering will accrue on a semiannual basis over the term to the stated maturity date in
respect of the Revenue Obligation 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
Revenue Obligation accruing during each period is added to the adjusted basis of such Revenue
Obligation to determine taxable gain upon disposition (including upon sale, prepayment or payment on
maturity) of such Revenue Obligation. The Code includes certain provisions relating to the accrual of
original issue discount in the case of a purchaser of a Revenue Obligation who purchases that Revenue
Obligation other than at the initial offering price and pursuant to the initial offering of that Revenue
Obligation.
Any person considering purchasing a Revenue Obligation at a price that includes bond premium
should consult his or her own tax advisors with respect to the amortization 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 Revenue Obligation. Any person considering purchasing a Revenue Obligation 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 Revenue Obligation,including the treatment of
27002232.5 57
a purchaser who does not purchase in the original offering and at the original offering price of that
Revenue Obligation, 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 Revenue Obligation under federal
individual and corporate alternative minimum taxes.
Other Tax Consequences
Although each Interest Component, and each Certificate Interest Distribution in respect thereof,
may be excluded pursuant to section 103(a) of the Code 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 Revenue Obligations. 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 the Revenue Obligations 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 Revenue Obligations and the Code contains additional limitations on interest
deductions applicable to financial institutions that own tax-exempt obligations (such as the Revenue
Obligations), (it)with respect to insurance companies subject to the tax imposed by section 831 of the
Code, section 832(b)(5)(13)(i)reduces the deduction for loss reserves by 15%of the sum of certain items,
including Interest Component and Certificate Interest Distributions in respect of the Revenue Obligations,
(iii)Interest Component and Certificate Interest Distributions accrued in respect of Revenue Obligations
owned by certain foreign corporations doing business in the United States 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 seemed in respect of Revenue Obligations, may be
subject to federal income taxation under section 1375 of the Code for Subchapter S corporations that have
Subchapter C earnings and profits at the close of the taxable year if greater than 25%of the gross receipts
of such Subchapter S corporation is 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, Interest Distributions and Certificate Interest Distributions
accrued in respect of Revenue Obligations owned by such recipients for federal income tax purposes, and
(vi) under section 32(i) of the Code, receipt of investment income, including Interest Components and
Certificate Interest Distributions accrued in respect of Revenue Obligations, may disqualify the recipient
thereof from obtaining the earned income credit. Special Counsel has expressed no opinion regarding any
such other tax consequences.
VERIFICATION OF MATHEMATICAL COMPUTATIONS
a firm of independent arbitrage consultants,will verify the accuracy of
(i)mathematical computations concerning the adequacy of the maturing principal amounts of and interest
earned on the Government Obligations deposited in the Escrow Fund,together with amounts held as cash
therein, to provide for payment of the prepayment prices (including seemed interest) of the Refunded
2009A Certificates on the Prepayment Date and (ii)certain mathematical computations supporting the
conclusion that the Revenue Obligations are not"arbitrage bonds"under the Code,which will be used in
part by Special Counsel in concluding that the Interest Components and Certificate Interest Distributions
accrued in respect of Revenue Obligations are excluded from gross income for federal income tax
purposes under present laws, including applicable provisions of the Code, existing court rulings,
regulations and Internal Revenue Service rulings.
The report of such independent arbitrage consultants will include the statement that the scope of
their engagement was limited to verifying the mathematical accuracy of the computations contained in
such schedules provided to them and that they have no obligation to update their report because of events
occurring,or data or information coming to their attention, subsequent to the date of their report.
27002232.5 58
CONTINUING DISCLOSURE
The District has covenamed for the benefit of holders and beneficial owners of the Revenue
Obligations (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 2015-16 Fiscal
Year, and(b)to provide notices of the occurrence of certain enumerated events. The Annual Report will
be filed by the District, or the Dissemination Agent on behalf of the District, with the Municipal
Securities Rulemaking Board. The notices of enumerated events will be filed by or on behalf of the
District with the Municipal Securities Rulemaking Board. The specific nature of the information to be
contained in the Annual Report or the notices of enumerated 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 enumerated events.
RATINGS
The Revenue Obligations will be rated " " by Standard & Poor's Financial Services LLC
("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 Revenue Obligations. Explanation of the
significance of such ratings may be obtained only from the respective organizations at: Standard &
Poor's Ratings Services, 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 Revenue Obligations.
PURCHASE AND REOFFERING
(the "Initial Purchaser') has purchased the Revenue Obligations from the
District at a competitive sale for a purchase price of$ (representing the aggregate principal
amount of the Revenue Obligations, plus a premium 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 tray offer and sell Revenue Obligations to certain dealers and others at
prices lower than the offering prices shown on the inside cover page hereof.
27002232.5 59
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 Revenue Obligations.
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
27002232.5 60
APPENDIX A
COMPREHENSIVE ANNUAL FINANCIAL REPORT OF THE ORANGE COUNTY
SANITATION DISTRICT FOR THE YEAR ENDED JUNE 30,2015
2]0022325
[INSERT APPENDIX B]
2]0022325
APPENDIX B
THE COUNTY OF ORANGE—ECONOMIC AND DEMOGRAPHIC INFORMATION
The County is bordered on the north by Los Angeles County, on the east by Riverside County,on
the southeast by San Diego County and on the west and southwest by the Pacific Ocean. Approximately
42 miles of ocean shoreline provide beaches,marinas and other recreational areas for use by residents and
visitors. The climate in the County is mild,with an average annual rainfall of 13 inches.
Population
The County is the third most populous county in the State and the sixth most populous in the
nation.
TABLE B-1
COUNTY OF ORANGE,STATE OF CALIFORNIA AND
UNITED STATES POPULATION GROWTH[')
State of United States
Year Orange Countv California of America
2006 2,952,610 35,979,208 298,593,212
2007 2,957,307 36,226,122 301,579,895
2008 2,988,541 35,580,371 304,374,846
2009 3,023,265 36,961,664 307,006,550
2010 3,017,089 37,318,481 308,745,538
2011 3,043,964 37,578,616 311,800,000
2012 3,090,132 38,041,430 313,914,040
2013 3,114,363 38,332,521 316,128,839
2014 3,145,515 38,802,500 321,418,820
2015 Not Available 39,144,818 321,442,019
m As of July 1 of each year,except 2010 data as of April I,2010.
Source: United States Statistics—Population Estimates Program,Population Division, U.S. Census Bureau.
Public Schools(Elementary and Secondary)
Public instruction in the County is provided by twelve elementary school districts, three high
school districts and twelve unified (combined elementary and high school) districts. For the 2014-15
academic year,the Ingest district in the County,the Santa Ana Unified School District,reported a student
enrollment of 56,815. Public school enrollment for the academic calendar years 2010-11 through
2014-15 is presented in Table B-2. Enrollment data for 2015-16 has not yet been released.
TABLE B-2
COUNTY OF ORANGE
PUBLIC SCHOOL ENROLLMENT
2010-11 2011-12 2012-13 2013-14 2014-15
Total Enrollment 502,895 502,205 501,801 500,487 497,116
Source: California Department of Education,Data Quest Report.
B-1
Colleges and Universities
The County has a number of top-rated, college-level educational institutions, including the
University of California at Irvine and California State University at Fullerton, several private colleges,
universities and law schools and four community college districts.
Employment
The following table summarizes the historical numbers of workers in the County over the period
2010 through 2014 by industry.2015 figures not yet available.
TABLE B-3
COUNTY OF ORANGE
INDUSTRY EMPLOYMENT AND LABOR FORCE-ANNUAL AVERAGE(o
2010 2011 2012 2013 2014
Farts 3,800 3,000 2,700 2,800 2,800
Natural Resources and Mining 500 500 500 600 700
Construction 67,100 70,800 71,300 82,000 82,000
Manufacturing 150,400 156,300 157,800 158,000 158,700
Wholesale Trade 77,600 77,000 76,700 79,400 81,700
Retail Trade 140,100 141,300 142,200 145,500 148,700
Transportation,Warehousing Utilities 26,700 27,400 27,700 27,500 26,600
Information 24,800 24,000 24,200 25,000 24,200
Financial Activities 103,500 107,500 108,100 113,100 114,100
Professional and Business Services 243,500 250,100 255,900 267,300 275,800
Educational and Health Services 155,500 162,300 163,400 184,200 190,300
Leisure and Hospitality 168,600 177,900 180,500 187,800 193,500
Other Services 42,200 43,700 44,300 45,600 47,700
Government 152,300 148,300 147,800 148,700 151,900
Total0) 1,357,400 1,390,000 1,403,000 1,462,400 1,498,700
(n Totals for all categories. These categories do not represent all employment categories.
Source: California Employment Development Department.
B-2
Major Employers
The following table lists the major employers in the County for 2015.
TABLE B-4
COUNTY OF ORANGE
MAJOR EMPLOYERS
2015
Number of Employees
Employer Name (Full and Part-Time)
Walt Disney Company 27,000
University of California,Irvine 22,385
County of Orange 18,135
St.Joseph Health System 12,227
Kaiser Permanente 7,000
Boeing Co. 6,890
Walmart 6,000
Memorial Care Health System 5,650
Bank of America 5,500
Target Corporation 5,400
Source: Orange County Business Journal, 2015 for all employers other than the County, number of County
employees,provided by the County Budget Office(number offilled positions).
B-3
Labor Force,Employment and Unemployment
Table B-5 summarizes the labor force, employment and unemployment figures over the period
2009 through 2014,and for December of 2015, for the County and the State. Annual figures for 2015 not
yet available.
TABLE B-5
COUNTY OF ORANGE AND STATE OF CALIFORNIA
LABOR FORCE,EMPLOYMENT AND UNEMPLOYMENT
YEARLY AVERAGE
Year and Unemployment
Area Labor Force Employment Unemployment Rate
2009
Orange 1,589,600 1,448,800 140,700 8.9%
County
Califomi 18,215,700 16,151,100 2,064,600 11.3
a
2010
Orange 1,592,500 1,441,500 151,000 9.5
County
Califomi 18,330,500 16,063,500 2,267,000 12.4
a
2011
Orange 1,596,200 1,456,800 139,400 8.7
County
Califomi 18,407,900 16,249,600 2,168,300 11.8
a
2012
Orange 1,613,600 1,491,600 122,000 7.6
County
Califomi 18,519,900 16,589,700 1,929,300 10.4
a
2013
Orange 1,610,900 1,510,600 100,400 6.2
County
Califomi 18,596,800 16,933,300 1,633,300 8.9
a
2014
Orange 1,575,600 1,489,200 86,400 5.5
County
Califomi 18,811,400 17,397,100 1,414,300 7.5
a
20151'1
B-4
Orange 1,602,100 1,537,000 65,100 4.1
County
Californi 18,934,500 17,842,900 1,091,600 5.8
a
(') As of October 2014.
Source: California Employment Development Department.
B-5
Table B-6 summarizes the accrued volume of taxable transactions in the County in 2009 through
2012. Annual figures for 2014 and 2015 are unavailable.
TABLE B-6
COUNTY OF ORANGE
TAXABLE TRANSACTIONS 2009 through 201301
(in Thousands)
Type of Business 2009 2010 2011 2012 2013
Motor vehicles and parts dealers $ 4,902,480 $ 5,244,266 $ 5,777,582 $ 6,551,466 $ 7,147,519
Furniture and home furnishings stores 850,889 869,868 909,455 965,018 1,050,308
Electronics and appliance stores 1,978,869 2,058,383 2,319,992 2,536,415 2,488,963
Bldg.maid.and garden equipment and supplies 2,039,686 2,112,467 2,267,363 2,351,574 2,581,968
Food and beverage stores 1,894,642 1,911,192 1,990,893 2,056,803 2,111,209
Health and personal care stores 784,067 824,719 894,003 948,220 983,067
Gas stations 3,383,678 3,801,651 4,826,228 5,063,762 4,706,666
Clothing and clothing accessories stores 2,742,626 2,923,680 3,164,857 3,510,757 3,764,088
Sporting goods,hobby,book and music stores 1,074,579 1,075,996 1,101,159 1,133,702 1,176,097
General merchandise stores 4,376,154 4,527,201 4,771,143 5,026,911 5,169,057
Miscellaneous store retailers 1,625,880 1,611,739 1,656,162 1,738,955 1,766,849
Nonstore retailers 484,692 481,563 459,941 635,707 893,254
Food services and drinking places 5,024,379 5,109,393 5 449,117 5,853,267 6,186,983
TOTAL RETAIL AND FOOD SERVICES $31,162,619 $32,552,107 $35,587,795 $38,372,456 $40,025,929
All Other Oudets 14 550,164 15,115,073 16 143,344 16 858,156 17,565289
TOTAL ALL OUTLETS $45,712,784 $47,667,179 $51,731,139 $55,230,612 $57,591,217
0)2014 and 2015 figures unavailable,
Source: California State Board of Equalization.
Building Permits
The total valuation of building permits issued in the County reached$4.6 billion in 2014. Table
B-9 provides a summary of residential building permit valuations and the number of new dwelling units
authorized in the County during the period 2008 through 2014. 2015 figures not yet available.
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TABLE B-9
COUNTY OF ORANGE
BUILDING PERMIT ACTIVITY
2008 through 2013
($in Thousands)
2009 2010 2011 2012 2013 2014
Valuation:
Residential $ 855,193 $1,029,407 $1,238,932 $1,554,904 $2,596,543 $2,633,471
Non-Residential 952.480 1,151.929 1,299.352 1,271,035 1,578,467 2,000,168
Total $1,807,673 $2,181,336 $2,538,284 $2,825,939 54,175,010 54,633,639
New Housing Units:
Single Family 1,376 1,553 1,890 2,438 3,889 3,646
Multiple Family 824 1.538 2 928 3 725 6,5 6990
Total 2,200 3,091 4,818 6,163 10,453 10,636
Source: Comtrocdon Indoshy Research Board; CHFI CIRB for 20I2,2013 and 2014.
Water Supply
Maintaining the County's water supply is the responsibility of the Orange County Water District
("OCWD"), manager of the County's groundwater basin, and the Municipal Water District of Orange
County ("MWDOC"), the County's largest manager of imported water. More than 60% of the County's
water is from local groundwater sources; the rest is imported. The County's natural underground
reservoir is sufficient to carry it through temporary shortfall periods, but local supplies alone cannot
sustain the present population.
Recreation and Tourism
The County is a tourist center in Southern California because of the broad spectrum of
amusement parks and leisure, recreational and entertainment activities that it offers. These tourist
attractions are complimented by the year-round mild climate.
Along the County's Pacific Coast shoreline are five state beaches and parks, five municipal
beaches and five County beaches. There are two small-craft docking facilities in Newport Harbor, a third
located at Sunset Beach and a fourth at Dana Point.
Other major recreational and amusement facilities include Disneyland, Disney's California
Adventure,Knott's Berry Farm and the Spanish Mission of San Juan Capistrano. Also located within the
County are the Anaheim Convention Center, Edison International Field of Anaheim, Honda Center,
Orange County Performing Arts Center, Verizon Wireless Amphitheater and the Art Colony at Laguna
Beach with its annual art festival.
The Anaheim Convention Center is located adjacent to Disneyland. It is situated on 53 acres and
is one of the largest convention centers on the West Coast. Table B-10 summarizes the number of
conventions held in the County, as well as attendance for the period 2008 through 2013. 2014 figures not
yet available.
B-7
TABLE B-10
COUNTY OF ORANGE
CONVENTION ACTIVITY
Year Conventions Attendance
2008 766 1,224,586
2009 584 1,292,179
2010 576 1,171,626
2011 476 973,071
2012 488 1,230,812
2013 489 1,085,643
Source.: Anahei WOrange County Visitor and Convention Bureau.
Transportation
The County has access to excellent roads,rail,air and sea transportation. The Santa Ana Freeway
(Interstate 5)provides direct access to downtown Los Angeles and connects with the San Diego Freeway
(Interstate 405) southeast of the City of Santa Ana, providing a direct link with San Diego. The Garden
Grove Freeway(State 22) and the Riverside Freeway (State 91) provide east-west transportation, linking
the San Diego Freeway, Santa Ana Freeway and the Newport Freeway(State 55). The Newport Freeway
provides access to certain beach communities.
Drivers in the County have access to two toll road systems of the Transportation Corridor
Agencies. The San Joaquin Toll Road (73)runs from Costa Mesa to San Juan Capistrano connecting to
the 405 and 5 interstate freeways. The Eastern and Foothill Toll Roads (241, 261 and 133) connect the
County to the 91 freeway in the north and the 5 freeway, City of Irvine other South County cities,as well
as Laguna Canyon Road. The Transportation Corridor Agencies are planning to extend 241 to connect to
the 5 freeway near San Clemente.
Rail freight service is provided by the Burlington Northern Santa Fe Railway and the Union
Pacific Railroad Company. Amtrak provides passenger service to San Diego to the south, Riverside and
San Bernardino Counties to the east, and Los Angeles and Santa Barbara to the north. Metro Link
provides passenger service to San Bernardino and Riverside counties to the east,the City of Oceanside to
the south and Los Angeles County to the north. Bus service is provided by Greyhound Bus Lines. The
Orange County Transportation Authority provides bus service between most cities in the County. Most
interstate common carrier truck lines operating in California serve the County.
The John Wayne Airport, owned and operated by the County, is the only commercial service
airport in the County. It is approximately thirty-five miles south of Los Angeles, between the cities of
Coast Mesa, Irvine, Newport Beach and Santa Ana. Major airlines, including Alaska, Aloha, America
West, American, Continental, Delta, Frontier, Northwest, Southwest and United fly from the airport to
major cities throughout the country. In 2010,more than 8 million passengers were served.
In 1993, the Defense Base Realignment and Closure Commission directed the closure of Marine
Corps Air Station (MCAS) El Toro ("El Toro" or "the base") effective July 1999. The County was
designated the Local Redevelopment Authority("LRA") for development of a Community Reuse Plan to
guide future development of the former MCAS El Toro. In 1994, Orange County voters narrowly
approved Measure A which zoned the property for use as an international airport. This touched off a
multi-year legal and political battle that ended when 58%of Orange County voters approved Measure W,
the Orange County Central Park and Nature Preserve Initiative, on March 5, 2002. Measure W repeals
B-8
Measure A and amends the County General Plan to prohibit aviation uses and limit future development
for the unincorporated portion of El Toro to park, open space, nature preserve and education and
compatible uses. The day after Measure W was approved, the Department of the Navy issued a press
release stating that disposal of the former Base would be accomplished by means of a public auction. The
City of Irvine responded by developing the Great Park Plan for El Toro. The City of Irvine was approved
by the Local Agency formation Commission("LAFCO")to annex to the City the property that comprises
the former MCAS El Toro. In light of the passage of Measure W,the County has discontinued all work
related to the planning or development of a commercial airport at El Toro.
Natural Disasters; Seismic Activity
Natural disasters, including floods, fires and earthquakes, have been experienced in the County.
Seismic records spanning the past half century and historic records dating from the 1700s through the
early 1900s indicate that the County is a seismically active area. The State Office of Emergency Services
indicates that significant tremors are likely to occur in several fault zones during the next 50 to 100 years,
including a tremor of 7.0 on the Richter scale within the Newport-Inglewood fault system. The chance of
a Richter 7.0 earthquake occurring is estimated to be I to 2% in any year. For this reason, local building
codes require that structures be designed to withstand the expected accelerations for the area without
collapsing or suffering severe structural damage. Maps published by the State Department of
Conservation indicate that portions of the County may be subject to the risk of earthquake-induced
landslides or liquefaction.
B-9
[INSERT APPENDIX Cl
2]0022325
APPENDIX D
FORM OF CONTINUING DISCLOSURE AGREEMENT
THIS CONTINUING DISCLOSURE AGREEMENT(this "Disclosure Agreement"), dated as
of March 1, 2016, 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 the Orange County Sanitation
District Wastewater Refunding Revenue Obligations, Series 2016A (the "Revenue Obligations"),
evidencing principal in the aggregate amount of$ pursuant to a Trust Agreement,dated as
of the date hereof(the`Trust Agreement"),by and among U.S. Bank National Association,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 Revenue Obligations and
in order to assist the purchaser of the Revenue Obligations 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
Fiscal Year,which date,as of the date of this Disclosure Agreement, 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.
"EMMA" shall mean Electronic Municipal Market Access system, maintained on the internet at
htto://emma.msrb.ore by the MSRB.
"Fiscal Year" shall mean the period beginning on July 1 of each year and ending on the next
succeeding June 30, or any twelve-month or fifty-two week period hereafter selected by the District,with
notice of such selection or change in fiscal year to be provided as set forth herein.
D-1
"Listed Events" means any of the events listed in Section 4 hereof and any other event legally
required to be reported pursuant to the Rule.
"MSRB" means the Municipal Securities Rulemaking Board established pursuant to
Section 1513(b)(1) of the Securities Exchange Act of 1934 or any other entity designated or authorized by
the SEC to receive reports pursuant to the Rule. Until otherwise designated by the MSRB or the SEC,
filings with the MSRB are to be made through EMMA.
"Official Statement" means the Official Statement, dated March , 2016, relating to the
Revenue Obligations.
"Participating Underwriter" means any of the original purchasers of the Revenue Obligations
required to comply with the Rule in connection with the offering of the Revenue Obligations.
"Repository"means,until otherwise designated by the SEC,EMMA.
"Rule" means Rule 15c2-12 adopted by the SEC under the Securities Exchange Act of 1934, as
the same has been or may be amended from time to time.
"SEC" shall mean the United States Securities and Exchange Commission.
Section 2. Provision of Annual Reports.
(a) The District shall provide, or shall cause the Dissemination Agent to provide, to MSRB,
through EMMA, not later than 15 days prior to the Annual Report Date, an Annual Report which is
consistent with the requirements of Section 3 of this Disclosure Agreement. The Annual Report must be
submitted in electronic format, accompanied by such identifying information as provided by the MSRB.
The Annual Report may be submitted as a single document or as separate documents comprising a
package, and may include by reference other information as provided in Section 3 of this Disclosure
Agreement. Not later than 15 Business Days prior to such date, the District shall provide the Annual
Report to the Dissemination Agent. If the Fiscal Year changes for the District, the District shall give
notice of such change in the manner provided under Section 4(e)hereof.
(b) If by 15 Business Days prior to the date specified in subsection(a) for providing the
Annual Report to the MSRB, through EMMA, the Dissemination Agent has not received a copy of the
Annual Report the Dissemination Agent shall contact the District to determine if the District is in
compliance with subsection(a). The District shall provide a written certification with each Annual
Report furnished to the Dissemination Agent to the effect that such Annual Report constitutes the Annual
Report required to be furnished by it hereunder. The Dissemination Agent may conclusively rely upon
such certification of the District and shall have no duty or obligation to review such Annual Report.
(c) If the Dissemination Agent is unable to verify that an Annual Report has been provided
to the MSRB by the date required in subsection(a), the Dissemination Agent shall send a notice to the
MSRB in substantially the form attached as Exhibit A.
(d) The Dissemination Agent shall:
(i) determine the electronic filing address of, and then-current procedures for
submitting Annual Reports to, the MSRB each year prior to the date for
providing the Annual Report; and
D-2
(if) (if the Dissemination Agent is other than the Trustee), to the extent appropriate
information is available to it, file a report with the Authority certifying that the
Annual Report has been provided pursuant to this Disclosure Agreement, stating
the date 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
Annual Report Date,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 principal evidenced by the Revenue Obligations Outstanding as of the June 30 next
preceding the Annual Report Date and the principal amount of other Senior Obligations outstanding as of
the June 30 next preceding the Annual Report Date.
(c) Updated information (not to include projections), for the Fiscal Year ended the June 30
next preceding the Annual Report Date, comparable to 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), 8,9, 10, 11, 12, 13, 14 and 16.
(d) In addition to any of the information expressly required to be provided under subsections
(a), (b) and (c) 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 with respect to which the District is an"obligated person" (as
defined by the Rule), which we available to the public on EMMA or filed with the SEC. The District
shall clearly identify each such document to be included by reference.
Section 4. Reporting of Significant Events.
(a) Pursuant to the provisions of this Section 4, the District shall give, or cause to be given,
notice of the occurrence of any of the following events with respect to the Revenue Obligations, in a
timely manner not more than ten(10)Business Days after the event:
(1) principal and interest payment delinquencies;
(2) defeasances;
(3) tender offers;
(4) rating changes;
(5) adverse tax opinions or the issuance by the Internal Revenue Service of proposed
or final determinations of taxability,Notices of Proposed Issue (IRS Form 5701-
D-3
TEB)or other material notices or determinations with respect to the tax-status of
the Revenue Obligations;
(6) unscheduled draws on the debt service reserves reflecting financial difficulties;
(7) unscheduled draws on credit enhancements reflecting financial difficulties;
(8) substitution of credit or liquidity providers or their failure to perform; or
(9) bankruptcy,insolvency,receivership or similar proceedings.
For these purposes, any event described in the immediately preceding paragraph(9)is considered to occur
when any of the following occur: the appointment of a receiver, fiscal agent, or similar officer for the
District in a proceeding under the United States Bankruptcy Code or in any other proceeding under state
or federal law in which a court or governmental authority has assumed jurisdiction over substantially all
of the assets or business of the District, or if such jurisdiction has been assumed by leaving the existing
governing body and officials or officers in possession but subject to the supervision and orders of a court
or governmental authority, or the entry of an order confirming a plan of reorganization, arrangement, or
liquidation by a court or governmental authority having supervision or jurisdiction over substantially all
of the assets or business of the District.
(b) Pursuant to the provisions of this Section 4, the District shall give, or cause to be given,
notice of the occurrence of any of the following events with respect to the Revenue Obligations, if
material:
(1) mergers, consolidations, acquisitions, the sale of all or substantially all of the
assets of the obligated persons or their termination;
(2) appointment of a successor or additional Trustee or the change of the time of a
Trustee;
(3) nonpayment related defaults;
(4) modifications to the rights of Owners;
(5) a notices of prepayment; or
(6) release, substitution or sale of property securing repayment of the Revenue
Obligations.
(c) Whenever the District obtains knowledge of the occurrence of a Listed Event, described
in subsection(b)of this Section 4,the District shall as soon as possible determine if such event would be
material under applicable federal securities law.
(d) If the District determines that knowledge of the occurrence of a Listed Event described in
subsection(b) of this Section 4 would be material under applicable federal securities law, the District
shall promptly notify the Dissemination Agent in writing and instruct the Dissemination Agent to report
the occurrence to the Repository in a timely manner not more than ten(10)Business Days after the event.
(e) 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 MSRB.
D-4
Section 5. Filings with the MSRB. All information, operating data, financial statements,
notices and other documents provided to the MSRB in accordance with this Disclosure Agreement shall
be provided in an electronic format prescribed by the MSRB and shall be accompanied by identifying
information as prescribed by the MSRB.
Section 6. Termination of Reuorting 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 Revenue Obligations. If such termination occurs prior to the final maturity of the Revenue
Obligations, the District shall give notice of such termination in the same manner as for a Listed Event
under 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, if the Trustee
agrees to act, shall be the Dissemination Agent; provided it shall receive written notice of such
designation at the time of such designation. Notwithstanding any other provision to this Disclosure
Agreement to the contrary,the District may provide any Annual Report to Beneficial Owners by means of
posting such Annual Report on an internet site that provides open access to Beneficial Owners.
Section 8. Amendment; Waiver. Notwithstanding any other provision of this Disclosure
Agreement, the District may amend this Disclosure Agreement, provided no amendment increasing or
affecting the obligations or duties of the Dissemination Agent shall be made without the consent of such
party, and any provision of this Disclosure Agreement may be waived if such amendment or waiver is
supported by an opinion of counsel expert in federal securities laws acceptable to the District and the
Dissemination Agent to the effect that such amendment or waiver would not, in and of itself, cause the
undertakings herein to violate the Rule if such amendment or waiver had been effective on the date hereof
but taking into account any subsequent change in or official interpretation of the Rule.
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, at the written direction of any
Participating Underwriter or the holders of at least 25% of the aggregate amount of principal evidenced
by Outstanding Revenue Obligations and upon being indemnified to its reasonable satisfaction, shall, or
any holder or beneficial owner of the Revenue Obligations 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.
D-5
Section 11. Duties. Immunities and Liabilities of Trustee and Dissemination Agent.
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 attorney's 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 Revenue Obligations.
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 Revenue Obligations, and shall create no rights in any other person or
entity.
Section 13. Counteroarts. 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.
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:
U.S.BANK NATIONAL ASSOCIATION,
as Trustee
By:
Authorized Officer
D-7
EXHIBIT A
NOTICE TO MUNICIPAL SECURITIES RULEMAKING BOARD OF FAILURE
TO FILE ANNUAL REPORT
Name of Obligor: Orange County Sanitation District
Name of Issue: Orange County Sanitation District
Wastewater Refunding Revenue Obligations, Series 2016A
Date of Execution and Delivery: , 2016
NOTICE IS HEREBY GIVEN that the Orange County Sanitation District(the"District')has not
provided an Annual Report with respect to the above-captioned Revenue Obligations as required by
Section 6.09 of the Trust Agreement, dated as of March 1, 2016, by and among U.S. Bank National
Association, as Trustee, the Orange County Sanitation District Financing Corporation and the District.
[The District anticipates that the Annual Report will be filed by .]
Dated: , 20 ORANGE COUNTY SANITATION DISTRICT
By
Title:
cc: Trustee
Dissemination Agent
27002232.5 D-g
APPENDIX E
BOOK-ENTRY SYSTEM
The description that follows of the procedures and recordkeeping with respect to beneficial
ownership interests in the Revenue Obligations, payment of principal and interest evidenced by the
Revenue Obligations to Participants or Beneficial Owners, confirmation and transfer of beneficial
ownership interests in the Revenue Obligations, and other Revenue Obligation-related transactions by
and between DTC, Participants and Beneficial Owners, is based on information furnished by OTC which
the District and the Corporation each believes to be reliable, but the District and the Corporation take no
responsibility 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 "Revenue Obligations"). The Revenue Obligations will be issued as fully-registered
securities registered in the name of Cede& Co. (DTC's partnership nominee) or such other name as may
be requested by an authorized representative of DTC. One fully-registered certificate will be issued for
the Revenue Obligations 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
post-trade settlement among Direct Participants of sales and other securities transactions in deposited
securities, through electronic computerized book-entry transfers and pledges between Direct Participants'
accounts. This eliminates the need for physical movement of securities certificates. Direct Participants
include both U.S. and non-U.S. securities brokers and dealers, banks, trust companies, clearing
corporations,and certain other organizations. DTC is a wholly-owned subsidiary of The Depository Trust
& Clearing Corporation ("DTCC"). DTCC is the holding company for DTC, National Securities
Clearing Corporation and Fixed Income Clearing Corporation, all of which are registered clearing
agencies. DTCC is owned by the users of its regulated subsidiaries. Access to the DTC system is also
available to others such as both U.S. and non-U.S. securities brokers and dealers,banks, trust companies,
and clearing corporations that clear through or maintain a custodial relationship with a Direct Participant,
either directly or indirectly("Indirect Participants"). DTC has a Standard&Poor's rating of"AA+." 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. The information on such website is not
incorporated herein by such reference or otherwise.
Purchases of Revenue Obligations under the DTC system must be made by or through Direct
Participants, which will receive a credit for the Revenue Obligations on DTC's records. The ownership
interest of each actual purchaser of each Revenue Obligation (`Beneficial Owner") is in turn to be
recorded on the Direct and Indirect Participants' records. Beneficial Owners will not receive written
confirmation from DTC of their purchase. Beneficial Owners are, however, expected to receive written
confirmations providing details of the transaction, as well as periodic statements of their holdings, from
the Direct or Indirect Participant through which the Beneficial Owner entered into the transaction.
Transfers of ownership interests in the Revenue Obligations are to be accomplished by entries made on
27002232.5 E-1
the books of Direct and Indirect Participants acting on behalf of Beneficial Owners. Beneficial Owners
will not receive certificates representing their ownership interests in the Revenue Obligations, except in
the event that use of the book-entry system for the Revenue Obligations is discontinued.
To facilitate subsequent transfers, all Revenue Obligations deposited by Direct Participants with
DTC are registered in the name of DTC's partnership nominee,Cede&Co. or such other name as may be
requested by an authorized representative of DTC. The deposit of Revenue Obligations with DTC and
their registration in the time 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 Revenue Obligations; DTC's
records reflect only the identity of the Direct Participants to whose accounts such Revenue Obligations
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 Revenue Obligations may wish
to take certain steps to augment transmission to them of notices of significant events with respect to the
Revenue Obligations, such as prepayments, tenders, defaults, and proposed amendments to the security
documents. For example, Beneficial Owners of Revenue Obligations may wish to ascertain that the
nominee holding the Revenue Obligations 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 Revenue Obligations 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 Revenue Obligations 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 Revenue Obligations are credited on the record date(identified
in a listing attached to the Omnibus Proxy).
Prepayments with respect to the Revenue Obligations 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.
DTC may discontinue providing its services as securities depository with respect to the Revenue
Obligations at any time by giving reasonable notice to the District or the Trustee. Under such
27002232.5 E-2
circumstances, in the event that a successor securities depository is not obtained,Revenue Obligations are
required to be printed and delivered.
The District may decide to discontinue use of the system of book-entry-only transfers through
DTC (or a successor securities depository). In that event, Revenue Obligations 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 Revenue
Obligations, (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
Revenue Obligations 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 Revenue
Obligation for each of the maturities of the Revenue Obligations,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 Revenue Obligations shall no longer be restricted
to being registered in the certificate registration books in the name of Cede&Co.,but shall be registered
in such names as are requested in a certificate of the District, in accordance with the Trust Agreement.
All Revenue Obligations 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 Revenue Obligation as the absolute
owner of such Revenue Obligation for all purposes, whether or not such Revenue Obligation 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 Revenue Obligation shall be made only to such Owner,
which payments shall be valid and effectual to satisfy and discharge the liability evidenced by such
Revenue Obligation to the extent of the sum or sums so paid.
Whenever any Revenue Obligations shall be surrendered for transfer, the Trustee shall execute
and deliver new Revenue Obligations 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. Revenue Obligations may
be presented for exchange at the Principal Office of the Trustee for a like aggregate principal amount of
Revenue Obligations 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 Revenue Obligation
during the period in which the Trustee is selecting Revenue Obligations for prepayment, nor shall the
Trustee be required to transfer or exchange any Revenue Obligation or portion thereof selected for
prepayment from and after the date of mailing the notice of prepayment thereof.
27002232.5 E-3
APPENDIX F
FORM OF APPROVING OPINION OF SPECIAL.COUNSEL
Upon the execution and delivery of the Revenue Obligations, Norton Rose Fulbright US LLP, Los
Angeles, California, Special Counsel to the District, will render its final approving opinion with respect
to the Revenue Obligations in substantially the following form:
[Date of Delivery]
Orange County Sanitation District
10844 Ellis Avenue
Fountain Valley,California 92708-7018
Orange County Sanitation District
Wastewater Refunding Revenue Obligations
Series 2016A
Ladies and Gentlemen:
We have acted as Special Counsel in connection with the $ aggregate principal
amount of Orange County Sanitation District Wastewater Refunding Revenue Obligations, Series 2016A
(the "Revenue Obligations') which are certificates of participation that 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 March 1, 2016 (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 Revenue Obligations me to be executed and delivered pursuant to a Trust Agreement, dated
as of March 1, 2016(the "Trust Agreement),by and among the District,the Corporation and U.S. Bank
National Association, as trustee (the "Trustee"). Proceeds from the sale of the Revenue Obligations will
be used to (i)prepay a portion of the District's outstanding Certificates of Participation, Series 2009A and
(it)pay the costs incurred in connection with the execution and delivery of the Revenue Obligations.
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 Revenue Obligations. We have also
examined such certificates of officers of the District, the Corporation and others as we have considered
necessary for the purposes of this opinion.
27002232.5 F-I
Based upon the foregoing,we are of the opinion that:
1. 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, 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 Revenue Obligations by the Trustee, the Revenue Obligations are entitled to the benefits of
the Trust Agreement.
4. Under existing statutes, regulations, rulings and court decisions, and, assuming
compliance with the covenants mentioned below, the component of each Installment Payment
designated as "Interest on Installment Payment" in Section 3.02 of the Installment Purchase
Agreement (each, an "Interest Component"), and the allocable portion thereof distributable in
respect of any Revenue Obligation (the "Certificate Interest Distribution"), is excluded pursuant
to section 103(a)of the Internal Revenue Code of 1986(the"Code")from the gross income of the
owners thereof for federal income tax purposes. We are further of the opinion that under existing
statutes, regulations, rulings and court decisions, the Installment Purchase Agreement is not a
"specified private activity bond" within the meaning of section 57(a)(5) of the Code and,
therefore, that the Interest Components and the Certificate Interest Distributions will not be
treated as items of tax preference for purposes of computing the alternative minimum tax imposed
by section 55 of the Code. Receipt or accrual of an Interest Component allocable to, or
Certificate Interest Distribution in respect of a Revenue Obligation owned by, a corporation may
affect the computation of the alternative minimum taxable income of that corporation. A
corporation's alternative minimum taxable income is the basis upon which the alternative
minimum tax imposed by section 55 of the Code is computed. We are further of the opinion that
under existing laws of the State of California the Interest Component allocable to and the
Certificate Interest Distributions in respect of a Revenue Obligation are exempt from personal
income taxes of the State of California under present state law.
Pursuant to the Installment Purchase Agreement and in the Tax Certificate Pertaining to
Arbitrage and Other Matters under Sections 103 and 141-150 of the Internal Revenue Code of
1986,to be delivered by the District in connection with the execution and delivery of the Revenue
Obligations, the District has made representations relevant to the determination of, and has
undertaken certain covenants regarding or affecting,the exclusion of the Interest Component,and
the Certificate Interest Distribution, from the gross income of the owners thereof for federal
income tax purposes. In reaching the opinions described in the immediately preceding paragraph,
we have assumed the accuracy of such representations and the present and future compliance by
the District with its covenants.
Except as stated in the second preceding paragraph, we express no opinion as to any
federal or state tax consequence of the ownership or disposition of the Installment Purchase
27002232.5 F-2
Agreement or the Revenue Obligations. Furthermore, we express no opinion as to any federal,
state or local tax law consequence with respect to the Installment Purchase Agreement or the
Revenue Obligations,or of the Interest Components or Certificate Interest Distributions in respect
thereof, if any action is taken with respect to the Installment Purchase Agreement, or the use or
investment of the proceeds thereof, the Master Agreement, the Trust Agreement, the Revenue
Obligations permitted or predicated upon the advice or approval of other counsel.
The rights of the owners of the Revenue Obligations and the enforceability of the Revenue
Obligations,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 Revenue Obligations, 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 Revenue Obligations.
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 come 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; 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,
27002232.5 F-3
NRF DRAFT
2/3/16
OFFICIAL NOTICE INVITING BIDS
$ '
ORANGE COUNTY SANITATION DISTRICT
WASTEWATER REFUNDING REVENUE OBLIGATIONS
SERIES 2016A
(Book-Entry-Only)
NOTICE IS HEREBY GIVEN that bids will be received by the Orange County Sanitation
District (the "District') for the purchase of $ ' original principal amount of Orange County
Sanitation District Wastewater Refunding Revenue Obligations, Series 2016A Evidencing Direct,
Fractional Undivided Interests of the Owners Thereof in Installment Payments to be Made by the Orange
County Sanitation District to the Orange County Sanitation District Financing Corporation(the"Revenue
Obligations"). Bids for less than all of the Revenue Obligations will not be accepted. The bids will be
received in the form, in the manner and up to the time specified below (unless postponed as described
herein):
Date: March.2016
10:45 a.m.,New York Time
Electronic Bids: Electronic proposals may be submitted to linen, at
www.newissuehome.i-deal.com and the Parity electronic bid submission
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,hand delivery or sealed bids will be accepted.
Terms of the Revenue Obligations
The Preliminary Official Statement for the Revenue Obligations, dated February . 2016,
including the cover page and all appendices thereto (the "Preliminary Official Statement"), provides
certain information concerning the sale and delivery of$ 'aggregate principal amount of the
Revenue Obligations, which are certificates of participation 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 March 1, 2016 (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 Revenue Obligations. This Official Notice Inviting Bids, including all
exhibits and attachments, 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
Revenue Obligations. Bidders must read the entire Preliminary Official Statement to obtain information
essential to making an informed investment decision.
Preliminary,subject to change.
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 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 Revenue Obligations will be used to (i)prepay and retire a
portion of the District's outstanding Certificates of Participation, Series 2009A (the"Prior Certificates"),
currently outstanding in the aggregate principal amount of$ and (ii)pay costs of execution
and delivery of the Revenue Obligations. The Revenue Obligations are to be executed and delivered
pursuant to a Trust Agreement, dated as of March 1, 2016 (the "Trust Agreement'), by and among the
District, the Corporation and U.S. Bank National Association, 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 , 2016, the District and the Corporation authorized the execution and delivery of
the Installment Purchase Agreement,the Trust Agreement and the Revenue Obligations.
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 2007A Installment Purchase Agreement, the 2007B
Installment Purchase Agreement, the 2008B Installment Purchase Agreement, the 2009A Installment
Purchase Agreement, the 2010A Installment Purchase Agreement, the 2010C Installment Purchase
Agreement, the 201 IA Installment Purchase Agreement,the 20I2A Installment Purchase Agreement, the
2012B Installment Purchase Agreement, the 2014A Installment Purchase Agreement, the 2014B
Installment Purchase Agreement and the 2015A Installment Purchase Agreement.
Security and Source of Payments
The Revenue Obligations are certificates of participation which 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 hrstalhnent 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 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, if any, with respect to Senior Obligations, as
2
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
apportioned such sums for such purposes as we 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
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. Currently, there are no Subordinate Obligations outstanding. For a description of the
District's outstanding Senior 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 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 SOURCES OF PAYMENT FOR THE REVENUE OBLIGATIONS Rate
Covenant"in the Preliminary Official Statement.
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. No Obligations payable on such a
subordinate basis are currently outstanding. See "SECURITY AND SOURCES OF PAYMENT FOR
THE REVENUE OBLIGATIONS — Limitations on Issuance of Additional Obligations" in the
Preliminary Official Statement.
3
Book-Entry-Only
The Revenue Obligations will be executed and delivered in the form of fully registered
certificates payable in lawful money of the United States of America. The Revenue Obligations 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 Revenue Obligations. Individual purchases of the Revenue Obligations will be made in
book-entry form only. Purchasers of Revenue Obligations will not receive physical certificates
representing their ownership interests in the Revenue Obligations purchased. The Revenue Obligations
will be delivered in Authorized Denominations of$5,000 and any integral multiple thereof. Payments of
principal and interest evidenced by the Revenue Obligations 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 Revenue Obligations. So long as the Revenue Obligations are in the DTC book-
entry system, the interest, principal and prepayment premiums, if any, due with respect to the Revenue
Obligations will be payable by the Trustee,or its agent,to DTC or its nominee.
Principal and Interest Payments
The Revenue Obligations 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 30-day months). Interest evidenced by
the Revenue Obligations is payable semiannually on February 1 and August 1 of each yen, commencing
on August 1, 2016. Payment of principal and prepayment premium, if any, evidenced by the Revenue
Obligations 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 Amortization
The Revenue Obligations will be executed and delivered in the original principal amount of
$ 'and will be subject to principal amortization on February 1 in the years 2020'through 2039'
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 a term maturity, 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 maturity and continuing on February 1 in each year
thereafter until the stated maturity date of that term maturity 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 Payments payable on the corresponding Installment
Payment Date are prepaid pursuant to provisions of the Installment Purchase Agreement governing
optional prepayment.
'Preliminary,subject to change.
4
Optional Prepayment
The Revenue Obligations with stated Principal Payment Dates on or after February 1, 2027' are
subject to optional prepayment prior to their stated Principal Payment Dates, on any date on or after
February 1, 2026", 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 Revenue
Obligations to be prepaid, plus accrued interest evidenced thereby to the date fixed for prepayment,
without premium.
Selection of Revenue Obligations for Prepayment
Whenever less than all the Outstanding Revenue Obligations me to be prepaid on any one date
pursuant to provisions of the Trust Agreement with respect to optional prepayment of Revenue
Obligations, the Trustee shall select the Revenue Obligations to be prepaid among Revenue Obligations
with different Principal Payment Dates as directed in a Written Request of the District. Whenever less
than all the Outstanding Revenue Obligations 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 Revenue
Obligations 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 Revenue Obligations 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 Revenue Obligations 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 Revenue Obligations or the cessation of interest evidenced thereby on the date fixed
for prepayment.
Interest Rates,Reoffering Prices,Premium or Discount Bids and Certificate of Initial Purchaser
Bidders must bid to purchase all and not part of the Revenue Obligations and must submit their
bids on the Official Bid Form. Bidders must specify a rate of interest for each maturity of the Revenue
Obligations. The rates of interest must be expressed in multiples of either one-eighth (''s) or one-
twentieth ('/zo) of one percent (1°/u), and no interest rate on Revenue Obligations maturing on or after
February 1, 20_ may be less than [5.01% per annum. All Revenue Obligations 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 Revenue
Obligations, advise the District of the initial bona fide public reoffering prices of each maturity of the
Preliminary;subject to change.
5
Revenue Obligations on the date of award. The successful bidder will also be required to furnish to the
District a certificate ("Certificate of Initial Purchaser') in the form of the Certificate of Initial Purchaser
attached hereto(with such modifications as may be acceptable to Special Counsel). At any time before or
after delivery of the Revenue Obligations to the successful bidder, that successful bidder also may be
required by the District or Special Counsel to clarify any discrepancies between the Certificate of Initial
Purchaser and publicly available information relating to trades of the Revenue Obligations that might
suggest that the initial sale of a substantial portion of any maturity of the Revenue Obligations to the
public was at a materially higher price than the price stated for that maturity in the Certificate of Initial
Purchaser.
Bidders may bid to purchase the Revenue Obligations from the District at a discount or with a
premium; however, no bid will be considered if the bid is to purchase Revenue Obligations at an
aggregate price less than [115% or more than 124%] of the aggregate principal amount of the Revenue
Obligations.
No bid will be accepted that contemplates the waiver of any interest or other concession by the
bidder as substitute for payment in full of the purchase price. Bids that do not conform to the terms of
this section may be rejected. See"Right to Reject Bids,Waive Irregularities"below.
Adjustment of Principal Amounts After Receipt of Bids
The principal amounts of the Revenue Obligations set forth in the Official Bid Form reflect
estimates of the District as to the likely interest rates of the winning bid and the premium or discount
contained in the winning bid. After selecting the winning bid,the amortization schedule for the Revenue
Obligations will be adjusted in $5,000 increments, to reflect the actual interest rates and any discount or
premium in the winning bid to properly fund the purchase price of the Prior Certificates and to
accommodate certain other requirements or preferences of the District. Such adjustments will not change
any Revenue Obligation in any year by more than 10% of the principal amount for such year. The dollar
amount bid for the Revenue Obligations by the winning bidder will be adjusted to reflect such adjustment
in the applicable amortization schedule. Any such adjustment will change the total (but not the per
Revenue Obligation) dollar amount of purchaser's discount and original issue discount or premium, if
any, provided in such bid. Any such adjustment will be communicated to the winning bidder within 24
hours after receipt of such bid by the District. Changes in the amortization schedule made as described in
this paragraph will not affect the determination of the winning bidder or give the winning bidder any right
to reject the Revenue Obligations.
No Insurance
THE SUCCESSFUL BIDDER SHALL NOT PURCHASE MUNICIPAL BOND INSURANCE
IN CONNECTION WITH THE REVENUE OBLIGATIONS.
Form of Bid
BIDS FOR LESS THAN ALL OF THE REVENUE OBLIGATIONS WILL NOT BE
ACCEPTED. Each bid must be on the Official Bid Form, submitted through the Electronic Service as
specified herein. All electronic proposals shall be deemed to incorporate the provisions of the Official
Bid Form and must be unconditional and irrevocable. 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.
6
The District will make its best efforts to accommodate 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,by submitting any bid,to be bound by its best bid.
Information Regarding Electronic Proposals
All 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 Revenue Obligations. 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, 1359 Broadway, Second
Floor, New York, NY 10018 (212-849-5023). 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 Security Deposit
Each bidder most provide with its bid a wire transfer of immediately available federal funds in the
amount of$ (the`Bid Security Deposit').
Bid Security Deposit wive transfers must be received in federal funds prior to the deadline
for examination of the bids.Contact the District's Financial Advisor,Public Resources Advisory Group,
310-477-8487 or by e-mail at IchoiApraeadvisors.com. for wire instructions.
The wire transfers of unsuccessful bidders will be returned promptly on the bid date after the
examination of bids. The wire transfer of the successful bidder will be retained by the District and
applied to the purchase price at the time of delivery of the Revenue Obligations. The District disclaims
any liability for funds sent by wire transfer,except for any willful misconduct or reckless disregard for its
duties.
If after the award of the Revenue Obligations,the successful bidder fails to complete the purchase
on the terms stated in its bid,unless such failure of performance shall be caused by any act or omission of
the District, the Bid Security Deposit shall be retained by the District as stipulated liquidated damages.
No interest will be paid upon any Bid Security Deposit.
7
Official Statement
The District has approved a Preliminary Official Statement for the Revenue Obligations, dated
February_ 2016, which the District has"deemed final"for purposes of Rule 15c2-12 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 Revenue Obligations are awarded. Up to [501
copies of the final Official Statement will be famished without cost to the successful bidder and farther
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 municipal 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 Revenue Obligations will be awarded to the highest
responsible bidder not later than two hours after the time established for the receipt of bids. The highest
bidder shall be the bidder submitting the best price for the Revenue Obligations,which best price shall be
that resulting in the lowest true interest cost with respect to the Revenue Obligations. 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 Revenue
Obligations 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 Revenue Obligations is expected to occur on or about , 2016. The Revenue
Obligations will be delivered through the facilities of DTC,New York,New York. The successful bidder
shall pay for the Revenue Obligations 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 an amount equal to the price bid for the Revenue
Obligations less the amount of the bid security 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 Revenue Obligations, but the District
will assume no obligation for the assignment or printing of such numbers on the Revenue Obligations or
for the correctness of such numbers, and neither the failure to print such numbers on any Revenue
Obligation 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 Revenue Obligations. The cost for the
assignment of CUSIP numbers to the Revenue Obligations will be the responsibility of the successful
bidder.
8
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 Revenue Obligations.
Legal Opinions
The District will famish to the successful bidder at the closing of the Revenue Obligations 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 Revenue Obligation
is excluded from gross income for federal income tax purposes under section 103 of the Internal Revenue
Code of 1986 and is not a specific preference item for purposes of the federal alternative minimum tax
and is exempt from State of California personal income taxes. 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 Revenue Obligations.
Closing Documents
The District will famish to the successful bidder at the time of delivery of the Revenue
Obligations: (1)a certificate certifying (i) that as of and at the time of delivery of the Revenue
Obligations,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 Revenue Obligations or the Trust Agreement, (13) in any way
contesting the validity of the Revenue Obligations, 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 Revenue
Obligations, 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 Revenue Obligations 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 circumstances under which they
were made, not misleading, and (2) a receipt of the District showing that the purchase price of the
Revenue Obligations 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 enumerated events. 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.
9
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 famished to any potential bidder upon request made to the District's Financial Advisor
at: Public Resources Advisory Group, 11500 West Olympic Boulevard, Suite 502, Los Angeles, CA
90064,310-477-8487,via e-mail at Ichoi@pmgadvisom.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 Revenue Obligations being
offered; provided, however, that such notifications or amendments shall be made not later than the
business day prior to the date fixed for the receipt of bids, by 4:00 p.m., New York Time and
communicated through Thomson Municipal News (available at http://w .tm3.com) and by facsimile
transmission to any qualified bidder timely requesting such notice. Bidders are required to bid for the
Revenue Obligations 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 News. If any date fixed for the receipt of bids and the sale of the Revenue Obligations is
postponed, any alternative sale date will be announced via Thomson Municipal News 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 Revenue Obligations 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 News at the time the sale date and time are announced.
Dated: February_,2016
10
EXHIBIT A
FORM OF CERTIFICATE OF INITIAL PURCHASER
2016
Orange County Sanitation District
Fountain Valley,California
Norton Rose Fulbright US LLP
Los Angeles,California
Ladies and Gentlemen:
We have served as the Underwriter in connection with the execution and delivery on behalf of the
Orange County Sanitation District (the "District") of $ Orange County Sanitation District
Wastewater Refunding Revenue Obligations, Series 2016A(the"Revenue Obligations").
We hereby certify that:
(i) , 2016 was the fast day on which there was a binding contract in writing for the
sale or exchange of the Revenue Obligations by the District to the Underwriter, and on
that day(the "Sale Date"), we undertook pursuant to such contract to make a bona fide
public offering of all of the Revenue Obligations. On the Sale Date all of each maturity
of the Revenue Obligations was offered in a bona fide initial offering to the general
public at the initial offering price or initial offering yield (the "Initial Offering Price")
shown, for such maturity on the inside cover page of the Official Statement, dated
, 2016, relating to such offering (the"Official Statement"). The Initial Offering
Price for each maturity represented: (i) our reasonable determination of a fair market
value on the Sale Date of that maturity of the Revenue Obligations; and (ii) the price at
which we reasonably expected to sell all the Revenue Obligations of that maturity to the
general public;
(ii) based upon our records and other information available to us that we believe to be
correct,the first price at which a substantial portion(but in no event less than ten percent)
of each maturity of the Revenue Obligations[, (except for the Revenue Obligations
maturing in (the "Unsold Maturity"),] was sold by the Underwriter to the
general public was the Initial Offering Price in respect of that maturity as described
above. [For [the] [each]Unsold Maturity,on the Sale Date we reasonably expected that a
substantial portion (at least ten percent) of that Unsold Maturity would be sold at the
initial offering price or yield in respect of that maturity];
(iii) at the time that we agreed to purchase the Revenue Obligations, based upon then
prevailing market conditions, we had no reason to believe that the first sale of any of the
Revenue Obligations to a member of the general public would be at an initial offering
price greater than or an initial offering yield less than the fair market value thereof;
(iv) taking into account the aggregate amount of each maturity, and treating the Initial
Offering Price as the issue price of each Revenue Obligation of that maturity, the
aggregate issue price of the Revenue Obligations is $ ; and
(v) we provided the yield proof attached hereto as Exhibit A to Special Counsel;we make no
representations regarding its legal sufficiency for any purpose.
For purposes of this Certificate, the term"general public"does not include bond houses,brokers,
or similar persons or organizations acting in the capacity of underwriters or wholesalers.
The undersigned understands that the statements made herein will be relied upon by the District
in its efforts to comply with the conditions imposed by the Internal Revenue Code of 1986 (the "Code"),
and will be relied upon by Special Counsel in rendering its legal opinion, concerning the exclusion from
gross income for federal income tax purposes of the interest component of each Installment Payment
under the Installment Purchase Agreement, dated as of Much 1, 2016,and described in more detail in the
Official Statement,and the amount thereof distributable with respect to the Revenue Obligations.
[INITIAL PURCHASER],
as Underwriter
By:
Title:
2
Exhibit A
Yield Proof
(See attached)
3
OFFICIAL BID FORM
ORANGE COUNTY SANITATION DISTRICT
WASTEWATER REFUNDING REVENUE OBLIGATIONS
SERIES 2016A
, 2016
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 $ ' aggregate principal amount of the Orange County
Sanitation District (the "District") Wastewater Refunding Revenue Obligations, Series 2016A (the
`Revenue Obligations"), more particularly described in the Official Notice Inviting Bids, dated
2016 (the "Official Notice Inviting Bids"), which is incorporated herein by reference, and made a part
thereof, at a purchase price of$ . This offer is for Revenue Obligations evidencing interest
at the rates and in the form of serial maturities or term maturities with mandatory sinking account
prepayments as set forth in the table on the following page.
The bid is subject to acceptance not later than two hours after the expiration of the time established for the
final receipt of bids.
Our calculation of the true interest cost, computed in accordance with the instructions in the Official
Notice Inviting Bids, and which is considered to be informative only and not a part of the bid, is
With this bid we are providing the District a wire transfer in immediately available federal funds in the
amount of$ to an account specified by the District or its representative, in accordance with
the Official Notice Inviting Bids.
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 Revenue Obligations. If we are the successful bidder,we will (1)within 30
minutes after being notified of the verbal award of the Revenue Obligations, advise the District of the
initial public offering prices of the Revenue Obligations; and (2) prior to delivery of the Revenue
Obligations famish a certificate,acceptable to Special Counsel,Norton Rose Fulbright US LLP,as to the
"issue price"of the Revenue Obligations in the form specified in the Official Notice Inviting Bids.
' Preliminary,subject to change.
Sinking
Maturity Principal Interest Serial Account
(February I Amount* Rate Maturity Prepayment
(Check one column)
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 Revenue Obligations 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:
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.
2
NOTICE OF INTENTION TO SELL
Orange County Sanitation District
Wastewater Refunding Revenue Obligations
Series 2016A
NOTICE IS HEREBY GIVEN that the Orange County Sanitation District(the"District')
intends to receive electronic bids until 10:45 a.m.,New York time, on
March 2016,
through the use of an electronic bidding service offered by Ipreo; at www.newissuehome.i-
deal.com and the Parity electronic bid submission system, for the purchase of all of the Orange
County Sanitation District Wastewater Refunding Revenue Obligations, Series 2016A (the
"Revenue Obligations"), 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 Revenue Obligations 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 Revenue Obligations
may be obtained from the District's financial advisor, Public Resources Advisory Group, 11500
West Olympic Boulevard, Suite 502, Los Angeles, California 90064, 310-477-8487, via e-mail:
lchoi@pmgadvisors.com.
Orange County Sanitation District
Dated: February_, 2016
` Preliminary, subject to change.
ADMINISTRATION COMMITTEE Meng Dat0 TOBE. Dir.
02/lti10/16 02/24/1Or6
AGENDA REPORT ItemNumber Item Number
B
Orange County Sanitation District
FROM: James D. Herberg, General Manager
Originator: Lorenzo Tyner, Director of Finance &Administrative Services
SUBJECT: CONSIDERATION OF BUDGET ASSUMPTIONS AND BUDGET
CALENDAR FOR PREPARATION OF THE FY 2016-17 AND FY 2017-18
BUDGET TWO-YEAR BUDGET
GENERAL MANAGER'S RECOMMENDATION
Approve the FY 2016-17 and FY 2017-18 budget assumptions and direct staff to
incorporate these parameters in the preparation of this two-year budget.
SUMMARY
BACKGROUND
The Administration Committee establishes the Budget Assumptions and approves the
Budget Calendar in the development of the District's two-year budget.
Staff will make a brief presentation at the Committee meeting.
RELEVANT STANDARDS
Produce Operations and CIP budgets every two years with annual update.
PROBLEM
Lack of approved assumptions may result in a budget that is misaligned with the
direction of the Board of Directors.
PROPOSED SOLUTION
Ensuring alignment through the presentation of the budget assumptions and
subsequent approval by the Board of Directors.
TIMING CONCERNS
The proposed two-year budget, effective July 1st of this year, will be finalized and
presented to the Board for adoption in June. Please see the attached budget calendar
that lays out the sequential steps for the completion of the proposed budget.
Page 1 of 2
RAMIFICATIONS OF NOT TAKING ACTION
Lack of approved assumptions may result in a budget that is misaligned with the
direction of the Board of Directors.
PRIOR COMMITTEE/BOARD ACTIONS
N/A
ADDITIONAL INFORMATION
Currently, there are no proposed changes to the District's Fiscal Policy. The Fiscal Policy
is published in the FY 2014-15 and 2015-16 Budget document (Section 3, Pages 1-8),
and is available on the Sanitation District's website.
CEQA
N/A
FINANCIAL CONSIDERATIONS
N/A
ATTACHMENT
The following attachment(s) may be viewed on-line at the OCSD website (AW..ocsd.coml with the
complete agenda package:
• Preliminary Budget Assumptions
• Budget Calendar
Page 2 of 2
FY 2016-17 & 2017-18 Preliminary Budget Assumptions
Economic Assumptions
• Inflation for Orange County in FY 2016-17 is projected to be 2.0 percent based on the 2016
projected percentage change in consumer price index obtained from the December 2015
Economic and Business Review report prepared by Chapman University. A 2.0 percent
inflation factor will also be used for FY 2017-18.
Revenue Assumptions
• Based upon the revised Sewer Service Fee Rate Schedule approved by the Board in
May 2015, the single-family residence (SFR) rate will increase by 1.6 percent to $327 in
FY 2016-17.
• Note that each $1 increase in the SFR rate generates approximately$900,000 per year.
• The capital facilities capacity charge (CFCC)fee captures only those infrastructure costs
that relate to additional capacity. The CFCC fee will increase for FY 2016-17 by the
increase in the Engineering-News Record construction cost index. Other infrastructure
costs such as improved treatment, rehabilitation, refurbishment, and replacement, will be
supported through user fees.
• Given the Facilities Master Plan adopted in December 2009, a rate study was completed in
January 2013 to ensure that the CFCC fee methodology remains equitable and to confirm
that an appropriate share of system costs would be recovered from new development.
• Revenues will be budgeted to reflect little growth in Equivalent Dwelling Unit(EDU)
connections that have remained flat over the past five years.
• Permit user rates for flow, Biochemical Oxygen Demand (BOD) and Total Suspended Solids
(TSS)will follow the most recent Rate Study.
• Annexation fees capture both the net current assets and the equivalent property tax
allocations totaling $4,235 per acre.
• Annexable property in the District's service area sphere is minimal; consequently, no
FY 2016-17 income from annexation fees is anticipated.
• Property tax revenues are preliminarily estimated to increase by approximately five percent
from FY 2015-16 to $92,953,000.
A two percent annual increase in Assessed Value is authorized by the state constitution and
is included in the increases noted above. The additional increase in assessed value is from
authorized increases to market value when property is sold at a higher value.
• Earnings on the investment of the District's operating cash and reserves will be budgeted at
1.0 percent of the average cash and investment balance projected for the fiscal year.
• No additional debt issuance is scheduled for FY 2016-17.
Operating Assumptions
• Operating expenses are expected to approximate the adopted FY 2015-16 budget of
$149 million.
3
FY 2016-17 & 2017-18 Preliminary Budget Assumptions
• Average daily flows are projected at 185 mgd for FY 2016-17 and FY 2017-18. This
projection reflects an expectation that increased economic activity and urban runoff will be
more than offset by effects of conservation and minimal rainfall, resulting in an overall
decrease in the average daily flow. The FY 2016-17 flow projection of 185 mgd reflects no
change from the actual for the first 5 months of the current year and is 2 mgd below the final
actual flow for FY 2014-15.
Employee/Staffing Assumptions
• Staffing level is expected to remain flat. No additional positions are anticipated. The total
FY 2015-16 authorized staffing level is 624.00 FTEs, excluding Management Discretion
positions.
• Vacant positions as of 12/31/15 are budgeted at 50 percent of step 1 for the remainder of
FY 2015-16 and at 100 percent of step 2 for FY 2016-17.
• New positions will be projected at 100 percent of step 1 for FY 2016-17.
• A 5.0 percent vacancy factor on authorized positions has been budgeted for FY 2016-17.
The actual vacancy factor for 2014-15 was 6.3 percent. This vacancy factor accounts for
time spent for recruitment and turnover.
• The Memorandums of Understanding (MOUs)for the OCEA, the Local 501, and the
Supervisor and Professional (SPMT)groups expire on June 30, 2016. Pending the
completion of the negotiation process, no salary adjustments will be included in the budget
for COLA for periods beyond the expiration of the current MOUs.
• Retirement costs for employees enrolled in OCERS Plans G and H are estimated at a rate
of 16.66 percent of the employee's base salary for FY 2016-17 and FY 2017-18, down from
24.25 percent in FY 2015-16. The rates for Plans G and H include the District's pickup of
3.5 percent of employees' required contributions. Employees enrolled in OCERS Plan B are
estimated at a rate of 11.06 percent of the employee's base salary for FY2016-17 and
FY 2017-18, down from 18.39 percent in FY 2015-16. All employees hired on or after
January 1, 2013 are enrolled in OCERS Plan U and are estimated at a rate of 9.76 percent
for FY 2016-17 and FY 2017-18, down from 17.52 percent in FY 2015-16. Interns are not
enrolled in OCERS so their retirement benefits are calculated at 6.2 percent (FICA rate).
• Other employee benefits and insurances will be budgeted to increase in FY 2016-17 and
FY 2017-18 by moderate but yet to be determined amounts.
Materials, Supplies, & Services Assumptions
• The proposed operating budget will continue to reflect an emphasis on safety, security, and
maintenance of plant assets and infrastructure.
• An amount equal to half of one percent of the Operating materials and services budget will
be a contingency for prior year re-appropriations. Since the current year's budget lapses on
June 30, a contingency is needed in the succeeding budget year for goods or services
ordered at the end of one budget year but not delivered until the following year.
• An amount equal to 0.85 percent of the Operating materials and services budget will be the
General Manager's contingency budget. These funds will be allocated to appropriate line
4
FY 2016-17 & 2017-18 Preliminary Budget Assumptions
items during the year after requests and justifications for unanticipated needs are approved
by the General Manager.
• Resource needs for strategic initiatives will be included in the budget.
Capital Improvement Program Assumptions
• The FY 2016-17 and FY 2017-18 cash flow budget, based on the most current Validated
Capital Improvement Program (CIP), is the target.
• The baseline CIP cash flow for FY 2016-17 is$128 million and for FY 2017-18 is
$115 million.
• Continual evaluation of the CIP by the Asset Management Team may result in deferral or
reduction of some projects and a resultant increase in O&M repair costs for materials and
services, if the net cash flow impact is a decrease.
• The FY 2016-17 and 2017-18 CIP budget will only increase for critical projects which were
not previously identified in the Strategic Plan Update.
• For the first five months of FY2015-16, $56.9 million of the $$175.0 million CIP budget,
approximately 32.5 percent, was expended.
Debt Financing
• The District will issue new debt in the form of Certificates of Participation (COP)as needed
to fund the CIP and to maintain reserves.
• No additional debt issuance is scheduled for FY2016-17 and FY 2017-18.
• Debt will only be used for CIP and capital expenses, not for operating expenses.
• Capital financing plans no longer include future borrowings over the next ten years as the
approved user fee schedule is considered sufficient.
• Borrowing is proposed only for facilities which do not add capacity and that are funded by all
users for replacement, rehabilitation, and improved treatment.
Reserve Assumptions
The existing reserve policy is summarized as follows:
► A cash flow reserve will be established to fund operations, maintenance and certificates
of participation expenses for the first half of the fiscal year, prior to 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 will be
established as the sum of an amount equal to six months operations and maintenance
expenses and the total of the annual debt (COP)service payments due in August each
year.
► An operating contingency reserve will be established to provide for non-recurring
expenditures that were not anticipated when the annual budget and sewer service fees
5
FY 2016-17 & 2017-18 Preliminary Budget Assumptions
were considered and adopted. The level of this reserve will be established at an amount
equal to ten percent of the annual operating budget.
► A capital improvement reserve will be maintained to fund annual increments of the
capital improvement program. The long-tens target is for one half of the capital
improvement program to be funded from borrowing and for one half to be funded from
current revenues and reserves. With this program in mind, the target level of this
reserve has been established at one-half of the average annual capital improvement
program over the next ten years.
► Catastrophic loss, or self-insurance, reserves will be maintained for property damage
including fire, flood and earthquake, for general liability and for workers'compensation.
These reserves are intended to work with purchased insurance policies, FEMA disaster
reimbursements and State disaster reimbursements. The potential infrastructure loss
from a major earthquake, of which the District currently has limited outside insurance
coverage of$25 million, has been estimated to be as high as $1.3 billion. The level of
this reserve has been set at $57 million should such a catastrophic event occur. This
reserve amount will assist the District with any short-term funding needs until Federal
and State assistance becomes available.
► Accumulated capital funds will be set aside for certain specific, short-term capital
improvements as the need and availability arise.
► A capital replacement/renewal reserve policy has been established to provide thirty
percent of the funding to replace or refurbish the current collection, treatment and
disposal facilities at the end of their useful economic lives.
Based on the FY 2011-12 Asset Management Plan, the current replacement value of
these facilities is estimated to be $3.14 billion for the collection facilities and $3.12 billion
for the treatment and disposal facilities. The initial reserve level has been established at
$50 million, which will be augmented by interest earnings and a small portion of the
annual sewer user fee, in order to meet projected needs through the year 2030.
► Provisions of the various certificates of participation (COP) issues require debt service
reserves to be under the control of the Trustee for that issue. These reserve funds are
not available for the general needs of the District and must be maintained at specified
levels. The current level of required COP service reserves is projected to be
$209.9 million.
► Accumulated funds exceeding the levels specified by District policy will be maintained in
a rate stabilization fund. These funds will be applied to future years' needs in order to
maintain rates or to moderate annual fluctuations. There is no established target for this
reserve.
6
Budget Calendar
Tasks Responsibility Event/Due Date
PHASE I-BUDGET PREPARATION
EMT Strategic Planning Workshop General Manager's 8/27/15
Office
Strategic Plan Board of Directors Workshop General Manager's 10/21/15
Office
Strategic Plan Update adopted by Board of Directors General Manager's 12/16/15
Office
Preliminary Budget Assumptions Identified Financial Planning 12/17/15
Preliminary Budget Assumptions & Draft Budget Calendar Financial 1/7/16
Presented to Managers Team (MT) Management
Capital Improvement Program (CIP)— Future Project Engineering 1/8/16
Attributes Reviewed and Updated Planning
Preparation for Budget Kickoff/Training Session: Financial Planning 1/13/16
• Salary and benefits downloaded to Excel worksheets
• Develop line item worksheets with mid-year actual
expense
• Prepare/update budget instruction manual
Preliminary Budget Assumptions & Draft Budget Calendar Financial 1/14/16
Presented to Executive Management Team (EMT) Management
Budget Kickoff/Training Session: Financial Planning 1/20/16
• Distribute budget instruction manual update
• Conduct budget training session
• Review submission deadlines
CIP— Engineering Validation Inputs Complete Engineering Project 1/22/16
Managers
CIP—New Project Numbers Assigned Engineering Project 1/29/16
Management Office
(PMO)
Operating Divisional Budgets: New Position and Change to Divisional Budget 2/4/16
Existing Position Decision Packages Due to Human Coordinators
Resources (Richard Spencer, Ext. 7164)with copies to
John Ralston
Operating Budget: Promotional Items Request Forms Due Divisional Budget 2/4/16
to Dr. Robert Ghirelli (Division 110) Coordinators
Capital Equipment Budget: Vehicle Capital Equipment Divisional Budget 2/4/16
Decision Packages Due to Fleet Services (Jim Tintle, Ext. Coordinators
7214)
7
Budget Calendar
Tasks Responsibility Event/Due Date
Capital Equipment Budget: Computer Capital Equipment Divisional Budget 2/4/16
Decision Packages Due to Information Technology(Rich Coordinators
Castillon, Ext. 7283)
Budget Assumptions Presented to Administration Financial 2110/16
Committee Management
Mid-Year Financial Report to Administration Committee Financial 2110/16
Management
Division Budget Packages Due to Financial Planning: Divisional Budget 2/18/16
• Projection of 2015-16 actual operating costs Coordinators
• Proposed operating costs for 2016-17 &2017-18
• Operating Budget Expense Detail
• Meetings, Memberships and Training Requests
• Capital Equipment Decision Packages (other than
computer and vehicle decision packages which were
due on 2/4/16)
• New program decision packages
(Financial Planning will collate and bind these items—along with
salary information-into the Preliminary Division Budget
Document for use during the budget review process.)
CIP—Non-engineering CIP project validation forms Non-engineering 2/22/16
completed & approved Project Managers
CIP— Preliminary capital equipment request estimates Financial Planning 2/22116
delivered to PMO
Mid-Year Financial Report to Board Financial 2124/16
Management
Complete the Compilation of the Preliminary Division Financial Planning 2/25/16
Budget Update Packages
CIP— Unified Preliminary CIP Budgets& Equipment Engineering PMO 3/3/16
Request Reports and Analysis Created
CIP—Validated CIP budgets delivered to IT/Finance Engineering PMO 3/10/16
Department Narrative Updates for Budget Executive EMT 4/7/16
Summary Due to Financial Planning
PHASE 11 -BUDGET REVIEW
Divisional Budgets- Distribution of Preliminary Line Item Financial Planning 2/29/16
Requested Budgets to Department Heads and Managers
along with Analysis/Questions for Review
8
Budget Calendar
Tasks Responsibility Event/Due Date
Operating Budget— Information on New Positions, Position Human Resources 3/7/16
Upgrades & Reclassifications Submitted to the General
Manager
Operating Budget— Division Budget Review Meetings with Financial Planning & 3/7/16—3/10/16
Finance and Division Representatives Division
Representatives
CIP— Review/Adjust Preliminary CIP Budget Engineering 3/7/16
Management
CIP— Preliminary Engineering/Finance Budget Review Engineering/Financi 3/10/16
Workshop al Management
Operating Budget-Completion of Preliminary Divisional Financial Planning 3/15/16
Budgets and Compilation into Departmental Budgets
Operating Budget— Recommendations to General Manager Financial Planning 3/16/16
CIP— Final Adjustments/Confirm 20 Year Cash Flow Engineering/Financi 3/17/16
Schedules/Final capital equipment requests delivered to al Management
PMO
Final Operating Budget—General Manager Review of Financial Planning, 3/17/16—3/22/16
Budget Recommendations General Manager, &
Department Heads
Capital Equipment Budget— Requests Reviewed & Financial Planning, 3/17/16—3/22/16
Approved General Manager, &
Department Heads
Divisional Budgets— Performance Budget Documents Due Divisional Budget 3/18/16
to Financial Planning (John Ralston): Coordinators
• Organization Charts
• Performance Results (2014-15)
• Performance Measures (2016-17 &2017-18)
CIP—Approve Proposed CIP Budget EMT 3/24/16
Operating Budget— Report of General Manager's Decisions Human Resources 3/25/16
on New Positions, Position Upgrades& Reclassifications
Submitted to the Financial Planning
CIP- Operations Committee Review Engineering 416116
PHASE 111 -BUDGET PRESENTATION
Operating Budget— Presentation of Preliminary Budget Financial 4/4/16
Update by Division/Department to EMT Management
9
Budget Calendar
Tasks Responsibility Event/Due Date
Operating Budget Update—Overview to Administration Financial 4/13116
Committee Management
CIP- Final CIP Budget Document Preparation and Financial Planning 4/14/16
Incorporation into Final Budget Document
CIP— Review draft of Final Budget Document pages with Financial Planning 4/14/16
Engineering Planning & PMO
Initial - Proposed Budget finalized Financial Planning 4/25/16
Initial - Proposed 2016-17 &2017-18 Budget Presented to Financial Ops—514116
Committees Management Admin—5/11/16
General Manager's Budget Message Completed General Manager/ 5/6/16
Financial
Management
Approval of General Manager's Budget Message General Manager 5/11/16
Final - Proposed Budget to Printer Financial Planning 5/18/16
PHASE IV-BUDGET DELIBERATIONS
Final Draft- Proposed 2016-17 & 2017-18 Budget Financial Ops—611116
Presented to Committees Management Admin—618/16
Public Hearing & Board Adoption Board of Directors 6/22116
PHASE V—DISTRIBUTION OF BUDGET
Final line item budget and equipment budgets posted in Financial Planning 7/8/16
H:\ntglobal
PHASE VI -BUDGET DEBRIEFING
Budget Debriefing E-mail Message Financial Planning 7/15/16
• Global changes that occurred in this year's budget.
• Changes since the Departments' original submittal.
• Changes that occurred as a result of Board action.
• Results of Budget Survey.
• Overview of Budget Monitoring with Oracle JD
Edwards EnterpriseOne Software and review of
Budget Coordinator's Responsibility.
• Overview of CIP Budget Monitoring.
• Suggestions for Budget Process Improvements.
10
ORANGE COUNTY SANITATION DISTRICT
Agenda
Terminology Glossary
Glossary of Terms and Abbreviations
AQMD Air Quality Management District
ASCE American Society of Civil Engineers
BOD Biochemical Oxygen Demand
CARB California Air Resources Board
CASA California Association of Sanitation Agencies
CCTV Closed Circuit Television
CEQA California Environmental Quality Act
CRWQCB California Regional Water Quality Control Board
CWA Clean Water Act
CWEA California Water Environment Association
EIR Environmental Impact Report
EMT Executive Management Team
EPA U.S. Environmental Protection Agency
FOG Fats, Oils, and Grease
FSSD Facilities Support Services Department
gpd Gallons per day
GWR System Groundwater Replenishment System (also called GWRS)
ICS Incident Command System
IERP Integrated Emergency Control Plan
LOS Level of Service
MGD Million gallons per day
NACWA National Association of Clean Water Agencies
NPDES National Pollutant Discharge Elimination System
NWRI National Water Research Institute
O&M Operations and Maintenance
OCCOG Orange County Council of Governments
OCHCA Orange County Health Care Agency
OCSD Orange County Sanitation District
OCWD Orange County Water District
GOBS Ocean Outfall Booster Station
OSHA Occupational Safety and Health Administration
POTW Publicly Owned Treatment Works
ppm Parts per million
RFP Request For Proposal
RWQCB Regional Water Quality Control Board
SARFPA Santa Ana River Flood Protection Agency
Glossary of Terms and Abbreviations
SARI Santa Ana River Inceptor
SARWQCB Santa Ana Regional Water Quality Control Board
SAWPA Santa Ana Watershed Project Authority
SCADA Supervisory Control and Data Acquisition system
SCAP Southern California Alliance of Publicly Owned Treatment Works
SCAQMD South Coast Air Quality Management District
SOCWA South Orange County Wastewater Authority
SSMP Sanitary Sewer Management Plan
SSO Sanitary Sewer Overflow
SWRCB State Water Resources Control Board
TDS Total Dissolved Solids
TMDL Total Maximum Daily Load
TSS Total Suspended Solids
WDR Waste Discharge Requirements
WEF Water Environment Federation
WERF Water Environment Research Foundation
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 dissolved
nutrients in the wastewater.
Benthos— The community of organisms, such as sea stars, worms and shrimp, which live on, in, or
near the seabed, also know as the benthic zone.
Biochemical Oxygen Demand (BOD)—The amount of 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.
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. coli 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.
Glossary of Terms and Abbreviations
AQMD Air Quality Management District
ASCE American Society of Civil Engineers
BOD Biochemical Oxygen Demand
CARB California Air Resources Board
CASA California Association of Sanitation Agencies
CCTV Closed Circuit Television
CEQA California Environmental Quality Act
CRWQCB California Regional Water Quality Control Board
CWA Clean Water Act
CWEA California Water Environment Association
EIR Environmental Impact Report
EMT Executive Management Team
EPA U.S. Environmental Protection Agency
FOG Fats, Oils, and Grease
FSSD Facilities Support Services Department
gpd Gallons per day
GWR System Groundwater Replenishment System (also called GWRS)
ICS Incident Command System
IERP Integrated Emergency Control Plan
LOS Level of Service
MGD Million gallons per day
NACWA National Association of Clean Water Agencies
NPDES National Pollutant Discharge Elimination System
NWRI National Water Research Institute
O&M Operations and Maintenance
OCCOG Orange County Council of Governments
OCHCA Orange County Health Care Agency
OCSD Orange County Sanitation District
OCWD Orange County Water District
GOBS Ocean Outfall Booster Station
OSHA Occupational Safety and Health Administration
PCSA Professional Consultant Services Agreement
POTW Publicly Owned Treatment Works
ppm Parts per million
PSA Professional Services Agreement
RFP Request For Proposal
Glossary of Terms and Abbreviations
RWQCB Regional Water Quality Control Board
SARFPA Santa Ana River Flood Protection Agency
SARI Santa Ana River Inceptor
SARWQCB Santa Ana Regional Water Quality Control Board
SAW PA Santa Ana Watershed Project Authority
SCADA Supervisory Control and Data Acquisition system
SCAP Southern California Alliance of Publicly Owned Treatment Works
SCAQMD South Coast Air Quality Management District
SOCWA South Orange County Wastewater Authority
SSMP Sanitary Sewer Management Plan
SSO Sanitary Sewer Overflow
SWRCB State Water Resources Control Board
TDS Total Dissolved Solids
TMDL Total Maximum Daily Load
TSS Total Suspended Solids
WDR Waste Discharge Requirements
WEF Water Environment Federation
WERF Water Environment Research Foundation
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 dissolved
nutrients in the wastewater.
Benthos — The community of organisms, such as sea stars, worms and shrimp, which live on, in, or
near the seabed, also know as the benthic zone.
Biochemical Oxygen Demand (BOD)—The amount of 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.
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. coli 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.
Glossary of Terms and Abbreviations
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.
Dilution to Threshold (D!f) - the dilution at which the majority of the people detect the odor
becomes the D(f for that air sample.
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").
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 provides 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.
NOMA- 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.
Plume-A visible or measurable concentration of discharge from a stationary source or fixed facility.
Publicly-owned Treatment Works (POTW)- Municipal wastewater treatment plant.
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.
Sludge - Untreated solid material created by the treatment of wastewater.
Total suspended solids (TSS)-The amount of solids floating and in suspension in wastewater.
Glossary of Terms and Abbreviations
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.
Urban runoff — Water from city streets and domestic properties that carry pollutants into the storm
drains, rivers, lakes, and oceans.
Wastewater—Any water that enters the sanitary sewer.
Watershed —A land area from which water drains to a particular water body. OCSD's service area is
in the Santa Ana River Watershed.