HomeMy WebLinkAbout09-12-2018 Administration Committee Agenda
09/12/2018 Administration Committee Agenda Page 1 of 3
Orange County Sanitation District
Regular Meeting of the ADMINISTRATION COMMITTEE
Wednesday, September 12, 2018 5:00 P.M. Administration Building Board Room
10844 Ellis Avenue Fountain Valley, CA (714) 593-7433
UUAGENDA
UUCALL TO ORDER:
UUPLEDGE OF ALLEGIANCE:
DECLARATION OF QUORUM: (Clerk of the Board) PUBLIC COMMENTS: If you wish to address the Committee 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. 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 Any items withdrawn from the Consent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 considered in the regular order of business. 1. APPROVAL OF MINUTES (Clerk of the Board)
RECOMMENDATION: Approve Minutes of the July 11, 2018 Administration Committee Meeting. 2. REIMBURSEMENTS TO BOARD MEMBERS AND STAFF
(Lorenzo Tyner)
RECOMMENDATION: Recommend to the Board of Directors to: Receive and file report of reimbursements to Board Members and Staff per Government Code Section 53065.5 for the period July 1, 2017 through June 30, 2018.
09/12/2018 Administration Committee Agenda Page 2 of 3
NON-CONSENT: 3. UPDATE TO THE OCSD DEBT POLICY (Lorenzo Tyner) RECOMMENDATION: Recommend to the Board of Directors to: Adopt
Resolution No. OCSD 18-XX entitled, “A Resolution of the Board of Directors of
the Orange County Sanitation District adopting a Board of Directors Debt Policy.” 4. REVENUE REFUNDING CERTIFICATE ANTICIPATION NOTES, SERIES 2018A (Lorenzo Tyner)
RECOMMENDATION: Recommend to the Board of Directors to: A. Adopt Resolution No. OCSD 18-XX entitled, “A Resolution of the Board of Directors of the Orange County Sanitation District authorizing the execution
and delivery by the Sanitation District of an Installment Purchase
Agreement, a Trust Agreement and a Continuing Disclosure Agreement in connection with the execution and delivery of Orange County Sanitation District Revenue Refunding Certificate Anticipation Notes, Series 2018A, such Notes evidencing principal in an aggregate amount of not to exceed
$109,875,000, 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 Notes and authorizing the
execution of other necessary documents and related actions”;
B. That the Orange County Sanitation District Financing Corporation approve
the documents supporting and authorizing the Notes in an aggregate amount not to exceed $109,875,000; and C. The proposed financing is structured as an approximate 32-month fixed rate
maturity that will be sold in a competitive sale.
5. UPDATES TO OCSD PERSONNEL POLICIES AND PROCEDURES (Celia Chandler)
RECOMMENDATION: Recommend to the Board of Directors to: Adopt
Resolution No. OCSD 18-XX entitled, “A Resolution of the Board of Directors of the Orange County Sanitation District approving a Board of Directors Personnel Policies and Procedures Manual providing for classification, compensation, and other terms, conditions, policies, and procedures governing employment of District
employees; and repeal Resolution No. OCSD 15-18.”
INFORMATION ITEMS:
6. ORANGE COUNTY SANITATION DISTRICT OPERATIONS & MAINTENANCE
DEPARTMENT PRESENTATION (Ed Torres)
09/12/2018 Administration Committee Agenda Page 3 of 3
DEPARTMENT HEAD REPORTS: OTHER BUSINESS AND COMMUNICATIONS OR SUPPLEMENTAL AGENDA ITEMS, IF ANY:
UUADJOURNMENT: The next Administration Committee meeting is scheduled for Wednesday,
October 10, 2018 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 a 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, MMC Clerk of the Board (714) 593-7433
32T32TUUklore@ocsd.comUU32T For any questions on the agenda, Committee members may contact staff at: General Manager James Herberg (714) 593-7300 32T32Tjherberg@ocsd.com Assistant General Manager Rob Thompson (714) 593-7310 32T32Trthompson@ocsd.com32T Assistant General Manager Lorenzo Tyner (714) 593-7550 ltyner@ocsd.com Director of Environmental Services James Colston (714) 593-7450 32T32T2T jcolston@ocsd.com Director of Human Resources Celia Chandler (714) 593-7202 32T32Tcchandler@ocsd.com32T32T
07/11/2018 Administration Committee Minutes Page 1 of 4
MINUTES OF THE ADMINISTRATION COMMITTEE
Orange County Sanitation District Wednesday, July 11, 2018 at 5:00 P.M.
A regular meeting of the Administration Committee of the Orange County Sanitation
District was called to order by Committee Chairman Wanke on July 11, 2018 at 5:02 p.m.
in the Administration Building of the Orange County Sanitation District. Committee Chairman Wanke led the Flag Salute.
A quorum was declared present as follows:
COMMITTEE MEMBERS PRESENT: Chad Wanke, Chairman Donald P. Wagner, Vice-Chairman James Ferryman
Peter Kim
Richard Murphy Steve Nagel Glenn Parker Erik Peterson
Teresa Smith
Greg Sebourn, Board Chairman David Shawver, Board Vice-Chairman
COMMITTEE MEMBERS ABSENT:
Charlie Nguyen
Sal Tinajero
STAFF PRESENT: Jim Herberg, General Manager Bob Ghirelli, Assistant General Manager Rob Thompson, Assistant General Manager
Jim Colston, Director of Environmental Services
Lorenzo Tyner, Director of Finance & Administrative Services Kelly Lore, Clerk of the Board Laura Maravilla, Human Resources Supervisor
Stephanie Barron
Jennifer Cabral Ron Coss Rhea De Guzman Al Garcia
Brad Hamilton
Lina Hsiao Mark Manzo Tiffany Nguyen Ddaze Phuong
John Swindler
OTHERS PRESENT: Brad Hogin, General Counsel Ed Soong, PRAG
Laurlinda Newell, Alliant
Karen Delaney, Alliant
PUBLIC COMMENTS:
None.
REPORTS:
General Manager Jim Herberg did not provide a report.
ITEM NO. 1
07/11/2018 Administration Committee Minutes Page 2 of 4
Clerk of the Board Kelly Lore reported late communication regarding Items No. 2(B) & No. 3(B) to amend the approval of 10% contingency instead of the 20% listed.
Director of Finance and Administrative Services Lorenzo Tyner reported that the firm
Cushman & Wakefield was selected as the Broker for the Sale of the Doig Property. CONSENT CALENDAR:
1. APPROVAL OF MINUTES (Clerk of the Board)
MOVED, SECONDED, AND DULY CARRIED TO: Approve Minutes of the June 13, 2018 Administration Committee Meeting.
AYES: Ferryman, Kim, Murphy, Nagel, Parker, Peterson, Sebourn, Shawver, T. Smith, and Wanke NOES: None
ABSTENTIONS: None ABSENT: Nguyen, Tinajero and Wagner 2. ENTERPRISE DATA STORAGE UPGRADE (Lorenzo Tyner)
MOVED, SECONDED, AND DULY CARRIED TO: Recommend to the Board of Directors to: A. Authorize a Purchase Order Contract with Nth Generation Computing for Nimble Equipment Upgrade and Support Specification Number E-2018-
953BD for a total amount not to exceed $568,127; and B. Approve a contingency of $113,625 (20%). $56,813 (10%). AYES: Ferryman, Kim, Murphy, Nagel, Parker, Peterson, Sebourn, Shawver, T. Smith, and Wanke
NOES: None
ABSTENTIONS: None ABSENT: Nguyen, Tinajero and Wagner
3. VMWARE ENTERPRISE LICENSE AGREEMENT FOR SERVER AND DESKTOP VIRTUALIZATION (Lorenzo Tyner) MOVED, SECONDED, AND DULY CARRIED TO: Recommend to the Board of
Directors to: A. Authorize a Purchase Order Contract with Nth Generation Computing for VMware Licenses and Support, Specification Number S-2018-954BD-R, for a total amount not to exceed $595,272; and
B. Approve a contingency of $119,054 (20%). $59,527 (10%).
AYES: Ferryman, Kim, Murphy, Nagel, Parker, Peterson, Sebourn, Shawver, T. Smith, and Wanke
07/11/2018 Administration Committee Minutes Page 3 of 4
NOES: None
ABSTENTIONS: None ABSENT: Nguyen, Tinajero and Wagner NON-CONSENT:
4. REVENUE REFUNDING CERTIFICATE ANTICIPATION NOTES, SERIES 2018A (Lorenzo Tyner) Mr. Tyner provided a brief explanation of the item.
MOVED, SECONDED, AND DULY CARRIED TO: Recommend to the Board of Directors to: Authorize the General Manager to issue Revenue Refunding Certificate Anticipation Notes, Series 2018A, as fixed-rate obligations maturing in February 2022, subject to market conditions, in an amount not to exceed $109,875,000 to replace the $109,875,000 Revenue Refunding Certificate
Anticipation Notes, Series 2016B maturing on December 15, 2018. AYES: Ferryman, Kim, Murphy, Nagel, Parker, Peterson, Sebourn, Shawver, T. Smith, and Wanke NOES: None
ABSTENTIONS: None ABSENT: Nguyen, Tinajero and Wagner
Director Wagner arrived at the meeting at 5:07 p.m. 5. 2019 BENEFITS INSURANCE RENEWAL (Celia Chandler)
Acting Human Resources and Risk Manager Laura Maravilla provided a brief overview of the benefits renewal including information regarding the 4.1% overall increase.
MOVED, SECONDED, AND DULY CARRIED TO: Recommend to the Board of Directors to: Approve the Orange County Sanitation District 2019 Benefits Insurance Renewal for the not-to-exceed amounts specified below:
A. WORKTERRA, formerly Employee Benefit Specialists (medical, dental, and vision plans; Health Savings Accounts [HSA]; and Employee Assistance Program [EAP]) – Not to Exceed $10,983,125; B. Life Insurance & Disability Carrier TBD* (basic life, short- and long-term
disability) – Not to Exceed $709,394; C. The Standard (EMT & Manager disability) – Not to Exceed $30,000; and D. Approve a contingency of $1,172,251 (10%).
07/11/2018 Administration Committee Minutes Page 4 of 4
*Prudential is the Sanitation District’s current carrier for life and disability insurance. However, there may be a change in carrier for the upcoming plan year, which would
result in a decrease in insurance premiums, pending renewal negotiation results. AYES: Ferryman, Kim, Murphy, Nagel, Parker, Peterson, Sebourn,
Shawver, T. Smith, Wagner, and Wanke NOES: None
ABSTENTIONS: None
ABSENT: Nguyen and Tinajero
INFORMATION ITEMS:
6. LABORATORY, MONITORING, AND COMPLIANCE DIVISION UPDATE
(Jim Colston) Director of Environmental Services Jim Colston introduced Environmental Lab and Ocean Monitoring Manager Ron Coss who provided an informational PowerPoint
Presentation on the Laboratory including the budget, employee retention,
productivity, benchmarking and recent accomplishments. Mr. Coss and Mr. Colston responded to questions from the Committee. DEPARTMENT HEAD REPORTS:
None. CLOSED SESSION:
None.
OTHER BUSINESS AND COMMUNICATIONS OR SUPPLEMENTAL AGENDA ITEMS, IF ANY:
None. ADJOURNMENT: Board Chair Sebourn declared the meeting adjourned at 5:44 p.m. to the next regularly
scheduled meeting of Wednesday, September 12, 2018 at 5:00 p.m.
Submitted by:
_____________________ Kelly A. Lore, MMC Clerk of the Board
Page1 of 1
ADMINISTRATION COMMITTEE Meeting Date 09/12/18 To Bd. of Dir. 09/26/18
AGENDA REPORT Item Number 2 Item Number
Orange County Sanitation District FROM: James D. Herberg, General Manager Originator: Lorenzo Tyner, Assistant General Manager SUBJECT: REIMBURSEMENTS TO BOARD MEMBERS AND STAFF
GENERAL MANAGER'S RECOMMENDATION Receive and file report of reimbursements to Board Members and Staff per Government Code Section 53065.5 for the period July 1, 2017 through June 30, 2018.
SUMMARY Government Code Section 53065.5 requires all Special Districts to disclose any reimbursements paid by the district within the immediately preceding fiscal year of at
least one hundred dollars ($100) or more for each individual charge for services or
product received. The individual charge includes, but is not limited to, tuition reimbursement; certificate or license reimbursement; or meals, lodging, transportation, or registration fee reimbursed to any employee or member of the governing body of the district. The disclosure requirement shall be fulfilled by including the reimbursement
information in a document published or printed at least annually by a date determined
by that district and shall be made available for public inspection. Attached is the report of these reimbursements for the fiscal year ended June 30, 2018.
RELEVANT STANDARDS
• Government Code Section 53065.5 PRIOR COMMITTEE/BOARD ACTIONS September 2017 - Annual report of reimbursements per Government Code Section 53065.5 for the period July 1, 2016 through June 30, 2017. ATTACHMENTS
The following attachment(s) are included in hard copy and may also be viewed on-line at the OCSD website (www.ocsd.com) with the complete agenda package:
• Report of reimbursements per Government Code Section 53065.5 for the period
July 1, 2017 through June 30, 2018
Public Disclosure Reports - Reimbursements by OCSD
July 1, 2017 through June 30, 2018
Div.Emp #Name Title Amount Description Site Location Duration
630 133276 Abushaban, Randa Associate Engineer 150.00 Certification Reimbursement
160 163475 Aguilar, Janine M.Principal Human Resources Analyst 1,093.56 CALPELRA Conference Monterey, CA 12/5 - 12/8/17
160 540091 Alexander, Jennifer L.Senior Plant Operator 340.00 Certification Reimbursement
250 8061 Alop, Joven E.Information Technology Analyst III 576.68 Maximo Training San Diego, CA 3/12 - 3/14/18
220 267151 Alvarez, Angela N.Principal Accountant 254.00 Membership Renewal
110 34606 Ambriz, Jose Juan Environmental Technician 845.23 Tri-State Seminar Las Vegas, NV 9/25 - 9/29/17
830 34606 Ambriz, Jose Juan Environmental Technician 180.00 Membership Renewal
160 8133 Amezcua, Gerardo Operations Supervisor 150.00 Certification Reimbursement
160 515477 Amin, Anantkumar R.Electrical Technician II 400.00 Certification Reimbursement
110 111587 Andrade, David Lead Mechanic 558.78 Tri-State Seminar Las Vegas, NV 9/25 - 9/29/17
110 448876 Andresen, Larry S.Senior Plant Operator 199.60 CWEA Conference Sacramento, CA 4/17 - 4/20/18
160 448876 Andresen, Larry S.Senior Plant Operator 150.00 Certification Reimbursement
630 3533 Angold, Miriam Principal Environmental Specialist 130.00 Certification Reimbursement
160 654047 Aponte, LeAnthony O.Senior Plant Operator 150.00 Certification Reimbursement
250 527700 Arango, Isabel C.Data Management Technician II 1,136.87 Autodesk Traning Las Vegas, NV 11/13 - 11/16/17
110 8432 Ariston, Emilio Power Plant Operator II 579.06 Tri-State Seminar Las Vegas, NV 9/25 - 9/28/17
160 8432 Ariston, Emilio Power Plant Operator II 100.00 Certification Reimbursement
830 8432 Ariston, Emilio Power Plant Operator II 815.82 Tuition Reimbursement
160 659913 Avalos-Portillo, Jessica Safety and Health Representative 150.00 Certification Reimbursement
160 659913 Avalos-Portillo, Jessica Safety and Health Representative 413.00 Certification Reimbursement
110 256196 Baker, Charles Eddie Operations Supervisor 892.65 CWEA Conference Sacramento, CA 4/17 - 4/20/18
110 630521 Barela, Gilbert G.Senior Mechanic 857.45 CWEA Conference Sacramento, CA 4/17 - 4/20/18
160 630521 Barela, Gilbert G.Senior Mechanic 100.00 Certification Reimbursement
160 630521 Barela, Gilbert G.Senior Mechanic 105.00 Certification Reimbursement
160 630521 Barela, Gilbert G.Senior Mechanic 105.00 Certification Reimbursement
160 630521 Barela, Gilbert G.Senior Mechanic 200.00 Certification Reimbursement
880 630521 Barela, Gilbert G.Senior Mechanic 3,336.12 Tuition Reimbursement
840 9030 Barrett, Michael J.Operations Supervisor 105.44 Employee Appreciation Luncheon
160 9128 Basrai, Shabbir S.Senior Engineer 116.00 Certification Reimbursement
822 7835 Bell, Robert M.Maintenance Supervisor 100.21 Employee Appreciation Luncheon
160 8002 Berdis, Michael A.Operations Supervisor 150.00 Certification Reimbursement
160 659833 Berokoff, Daniel D.Engineer 115.00 Certification Reimbursement
160 674507 Beutler, Brett L.Plant Operator 170.00 Certification Reimbursement
160 674507 Beutler, Brett L.Plant Operator 350.00 Certification Reimbursement
822 511556 Biedermann, Jason C.Mobile Crane Operator 991.56 Crane & Rigging Workshop Kansas City, MO 9/19 - 9/23/17
630 33531 Bingman, Deirdre E.Principal Environmental Specialist 532.03 CASA Symposium Sacramento, CA 11/1 - 11/2/17
230 360516 Blakeley, Gregory R.Buyer 112.68 CAPPO Conference Palm Springs, CA 1/7 - 1/8/18
160 678663 Bontems, Baylee E.Human Resources Analyst 419.75 Cornerstone Conference San Diego, CA 6/5 - 6/6/18
160 334537 Bradley Jr., Jon O.Chief Plant Operator 340.00 Certification Reimbursement
875 431708 Brandt, Robert D.Reliability Maintenance Technician 1,162.55 UltraSound Certification Miami, FL 3/4 - 3/8/18
160 431708 Brandt, Robert D.Reliability Maintenance Technician 275.00 Certification Reimbursement
630 676131 Breiter, Michelle L.Senior Environmental Specialist 753.52 CASQA Conference Sacramento, CA 9/24 - 9/27/17
160 676131 Breiter, Michelle L.Senior Environmental Specialist 190.00 Certification Reimbursement
160 9110 Brown, Jeffrey Senior Engineer 200.00 Certification Reimbursement
750 86254 Brown, Marc A.Principal Staff Analyst 150.00 Certification Reimbursement
160 530360 Buonacorsi, Curtis Lead Plant Operator 340.00 Certification Reimbursement
250 3528 Burke, Pinky E.Data Management Technician II 1,598.08 Tuition Reimbursement
160 164718 Cabral, James Maintenance Supervisor 100.00 Certification Reimbursement
140 111202 Cabral, Jennifer M.Public Affairs Supervisor 1,176.99 NACWA Conference Chicago, IL 6/5 - 6/7/18
140 111202 Cabral, Jennifer M.Public Affairs Supervisor 398.40 CASA Winter Conference Palm Springs, CA 1/24 - 1/26/18
Prepared By: L. Henshaw
8/29/2018
Public Disclosure Reports - Reimbursements by OCSD
July 1, 2017 through June 30, 2018
Div.Emp #Name Title Amount Description Site Location Duration
140 111202 Cabral, Jennifer M.Public Affairs Supervisor 847.81 CSDA Leadership Summit Reno, NV 6/23 - 7/2/18
140 111202 Cabral, Jennifer M.Public Affairs Supervisor 266.38 CASA Conference San Diego, CA 8/22 - 8/23/17
250 9187 Cady, Pongsakdi Information Technology Supervisor 812.07 Gartner Summit Conference Las Vegas, NV 12/3 - 12/6/17
230 648819 Calvo, Reed Storekeeper 2,199.00 Tuition Reimbursement
220 640542 Cardenas, Kim A.Principal Accountant 511.50 CSMFO Conference Riverside, CA 2/21 - 2/23/18
160 640542 Cardenas, Kim A.Principal Accountant 169.00 Certification Reimbursement
110 104512 Carrillo, Dindo A.Senior Environmental Specialist 1,235.79 CWEA Conference Sacramento, CA 4/18 - 4/20/18
160 662531 Casanova, Clifford E.Senior Plant Operator 150.00 Certification Reimbursement
760 79935 Cassidy, William D.Engineering Supervisor 246.00 CWEA Board Meeting La Jolla, CA 1/26 - 1/27/18
760 79935 Cassidy, William D.Engineering Supervisor 594.13 CWEA Board Meeting Oakland, CA 6/21 - 6/23/18
110 79935 Cassidy, William D.Engineering Supervisor 1,049.24 CWEA Conference Sacramento, CA 4/16 - 4/20/18
160 79935 Cassidy, William D.Engineering Supervisor 100.00 Certification Reimbursement
160 79935 Cassidy, William D.Engineering Supervisor 115.00 Certification Reimbursement
110 345148 Castro, Ernesto Lead Plant Operator 606.50 Tri-State Seminar Las Vegas, NV 9/25 - 9/28/17
160 345148 Castro, Ernesto Lead Plant Operator 150.00 Certification Reimbursement
160 666099 Chandler, Celia M.Director of Human Resources 1,356.12 CALPELRA Conference Monterey, CA 12/5 -12/10/17
160 514087 Chang, Esther H.Senior Plant Operator 340.00 Certification Reimbursement
840 514087 Chang, Esther H.Senior Plant Operator 320.84 Tuition Reimbursement
770 337308 Chappell, Richard D.Construction Inspector Supervisor 524.78 NFPA Conference Las Vegas, NV 6/11 - 6/14/18
880 665521 Childers, Michael E.Senior Mechanic 243.43 Tuition Reimbursement
630 558901 Choi, Samuel Environmental Supervisor 1,413.31 ASM Microbe Conference Atlanta, GA 6/6 - 6/11/18
630 558901 Choi, Samuel Environmental Supervisor 3,089.92 Tuition Reimbursement
160 7819 Cleveland, Donald R.Lead Mechanic 100.00 Certification Reimbursement
840 549765 Cole, Christopher H.Plant Operator 240.05 Tri-State Seminar Las Vegas, NV 9/25 - 9/28/17
160 549765 Cole, Christopher H.Plant Operator 110.00 Certification Reimbursement
160 541667 Collett, David M.Plant Operator 150.00 Certification Reimbursement
161 539321 Collins, Rodney L.Safety and Health Supervisor 1,433.36 Cority Conference Boston, MA 9/18 - 9/21/17
160 539321 Collins, Rodney L.Safety and Health Supervisor 160.00 Certification Reimbursement
160 539321 Collins, Rodney L.Safety and Health Supervisor 175.00 Certification Reimbursement
160 539321 Collins, Rodney L.Safety and Health Supervisor 200.00 Certification Reimbursement
610 7907 Colston, James E.Director of Environmental Services 129.00 NACWA Winter Conference Napa, CA 2/6 - 2/9/18
610 7907 Colston, James E.Director of Environmental Services 116.00 WEF Conference Phoenix, AZ 5/16 - 5/18/18
610 7907 Colston, James E.Director of Environmental Services 256.00 NACWA Leadership Conference St. Louis, MO 7/22 - 7/26/17
610 7907 Colston, James E.Director of Environmental Services 157.63 CASA DC Policy Forum Washington, DC 2/25 - 2/28/18
610 7907 Colston, James E.Director of Environmental Services 155.00 Lobby Days Meeting Washington, DC 4/18 - 4/20/18
160 109891 Conklin, Gary P.Senior Engineer 115.00 Certification Reimbursement
875 528841 Coronel, Robbie A.Maintenance Specialist 1,135.00 Tuition Reimbursement
160 8109 Cortez, Ronald C.Lead Plant Operator 340.00 Certification Reimbursement
630 485124 Coss, Ronald J.Environmental Laboratory and Ocean Monitoring Manager 695.35 NELAC Forum Albuquerque, NM 1/21 - 1/25/18
630 485124 Coss, Ronald J.Environmental Laboratory and Ocean Monitoring Manager 1,369.45 National Environmental Monitoring Conference Washington, DC 8/6 - 8/11/17
630 485124 Coss, Ronald J.Environmental Laboratory and Ocean Monitoring Manager 200.00 Membership Renewal
160 166123 Crafton, Ann M.Principal Staff Analyst 100.00 Certification Reimbursement
750 554548 Crider, Suzanne A.Principal Staff Analyst 1,408.02 Tableau Conference Las Vegas, NV 10/8 - 10/12/17
160 116759 Criscuolo, Keith W.Senior Plant Operator 150.00 Certification Reimbursement
760 405868 Cuellar, Raul Engineering Supervisor 298.67 NASTT Conference Palm Springs, CA 3/25 - 3/28/18
160 405868 Cuellar, Raul Engineering Supervisor 116.00 Certification Reimbursement
160 662400 Cutler, Donald W.Engineering Supervisor 200.00 Certification Reimbursement
630 644535 Daly, Geoffrey J.Environmental Specialist 197.79 Ocean Monitoring Supplies
620 673256 Daniel, Jason A.Engineer 1,295.66 NACWA Conference Providence, RI 5/14 - 5/18/18
160 673256 Daniel, Jason A.Engineer 165.00 Certification Reimbursement
Prepared By: L. Henshaw
8/29/2018
Public Disclosure Reports - Reimbursements by OCSD
July 1, 2017 through June 30, 2018
Div.Emp #Name Title Amount Description Site Location Duration
620 673256 Daniel, Jason A.Engineer 180.00 Membership Renewal
760 288075 DaSilva, Andy Engineer 320.00 Membership Renewal
760 288075 DaSilva, Andy Engineer 5,889.38 Tuition Reimbursement
160 651461 Davies, Cyril Senior Engineer 116.00 Certification Reimbursement
160 655322 Davila, Rudy Engineer 115.00 Certification Reimbursement
220 646397 de Guzman, Rhea M.Senior Accountant 900.47 CMTA Conference Oakland, CA 4/24 - 4/27/18
220 646397 De Guzman, Rhea M.Senior Accountant 776.43 Tuition Reimbursement
110 275039 Deas, Dion Maintenance Supervisor 528.31 Tri-State Seminar Las Vegas, NV 9/25 - 9/28/17
160 275039 Deas, Dion Maintenance Supervisor 210.00 Certification Reimbursement
160 176014 DeVries, Patrick Thys Senior Human Resources Analyst 767.68 Liebert Cassidy Annual Law Conference San Francisco, CA 2/25 - 2/27/18
160 323256 Dhodia, Hemal Engineer 115.00 Certification Reimbursement
630 670258 Diaz, Absalon H.Environmental Specialist 2,835.78 Tuition Reimbursement
630 96903 Diaz, Arturo Principal Environmental Specialist 1,360.09 ASM Microbe Conference Atlanta, GA 6/6 - 6/11/18
630 96903 Diaz, Arturo Principal Environmental Specialist 180.00 Membership Renewal
740 8707 Dillon, Carla D.Engineering Supervisor 120.00 Membership Renewal
620 649900 Dragan, Bryce Lead Source Control Inspector 275.00 P3S Conference 1/10/18
230 9021 Dubois, Marcus Contract and Purchasing Manager 885.29 CAPPO Conference Palm Springs, CA 1/9 - 1/12/18
630 669581 Dudek, Marta A.Environmental Specialist 2,835.80 Tuition Reimbursement
160 541632 Durieux, Shelley J.Human Resources Analyst 367.26 Cornerstone Conference San Diego, CA 6/4 - 6/6/18
160 541632 Durieux, Shelley J.Human Resources Analyst 899.64 Liebert Cassidy Annual Law Conference San Francisco, CA 2/25 - 2/27/18
160 293819 Escobar, Santiago A.Associate Engineer 275.00 Certification Reimbursement
820 2007 Esquer, Mark A.Engineering Manager 244.41 Product Demonstration South Lake Tahoe, NV 4/23 - 4/24/18
160 2007 Esquer, Mark A.Engineering Manager 100.00 Certification Reimbursement
630 122340 Farmer, Michele Principal Environmental Specialist 189.00 Membership Renewal
630 122340 Farmer, Michele Principal Environmental Specialist 210.00 Membership Renewal
160 660287 Fenton, Justin M.Engineer 116.00 Certification Reimbursement
760 660287 Fenton, Justin M.Engineer 4,636.21 Tuition Reimbursement
160 573221 Fernandez, Birger L.Engineer 115.00 Certification Reimbursement
160 573221 Fernandez, Birger L.Engineer 200.00 Certification Reimbursement
630 417172 Ferraro, Benjamin J.Senior Environmental Specialist 1,142.50 SEATAC Conference Minneapolis, MN 11/12 - 11/16/17
830 2015 Ferry, Cynthia L.Administrative Assistant 132.41 Control Center Kitchen Supplies
870 2015 Ferry, Cynthia L.Administrative Assistant 327.87 Employee Appreciation Luncheon
830 2015 Ferry, Cynthia L.Administrative Assistant 538.25 Holiday Decorations
160 2020 Fisher, Dean M.Engineering Manager 116.00 Certification Reimbursement
160 588297 Frabizio, Damein E.Senior Mechanic 130.00 Certification Reimbursement
160 588297 Frabizio, Damein E.Senior Mechanic 280.00 Certification Reimbursement
160 125364 Francis, David P.Source Control Inspector II 165.00 Certification Reimbursement
160 108644 Francis, Victoria L.Senior Engineer 200.00 Certification Reimbursement
160 675201 Freeman, Jesse M.Maintenance Specialist 180.00 Certification Reimbursement
160 675201 Freeman, Jesse M.Maintenance Specialist 280.00 Certification Reimbursement
870 675201 Freeman, Jesse M.Senior Mechanic 188.00 Tuition Reimbursement
160 336348 French, John W.Engineer 115.00 Tuition Reimbursement
110 648421 Frost, April Lead Plant Operator 606.50 Tri-State Seminar Las Vegas, NV 9/25 - 9/28/17
110 672392 Fuchs, Shannon D.Mechanic 654.01 Tri-State Seminar Las Vegas, NV 9/25 - 9/28/17
160 672392 Fuchs, Shannon D.Mechanic 180.00 Certification Reimbursement
110 408049 Gabriel, Lawrence C Plant Operator 721.79 Tri-State Seminar Las Vegas, NV 9/25 - 9/28/17
160 397301 Gadzinski, Joscelynn M.Plant Operator 340.00 Certification Reimbursement
840 397301 Gadzinski, Joscelynn M.Plant Operator 4,435.52 Tuition Reimbursement
160 275549 Gasca, Luis Electrical Technician II 185.00 Certification Reimbursement
160 568641 Gerber, Harold T.Engineering Supervisor 116.00 Certification Reimbursement
Prepared By: L. Henshaw
8/29/2018
Public Disclosure Reports - Reimbursements by OCSD
July 1, 2017 through June 30, 2018
Div.Emp #Name Title Amount Description Site Location Duration
620 568641 Gerber, Harold T.Engineering Supervisor 155.00 Membership Renewal
620 568641 Gerber, Harold T.Engineering Supervisor 180.00 Membership Renewal
110 71221 Ghirelli, Robert P.Assistant General Manager 209.31 CASA Winter Conference Palm Springs, CA 1/24 - 1/26/18
760 668772 Goldsmith, Matthew G.Construction Inspector 868.45 EduCode Training Las Vegas, NV 3/18 - 3/24/18
160 184831 Gomez, Ruben A.Senior Construction Inspector 120.00 Certification Reimbursement
870 674689 Gonzales, Jed C.Maintenance Superintendent 1,130.90 Total Productive Maintenance Training - week 1 Columbus, OH 9/10 - 9/15/17
870 674689 Gonzales, Jed C.Maintenance Superintendent 1,075.30 Total Productive Maintenance Training - week 2 Columbus, OH 10/8 - 10/13/17
870 674689 Gonzales, Jed C.Maintenance Superintendent 1,070.30 Total Productive Maintenance Training - week 3 Columbus, OH 11/5 - 11/10/17
870 674689 Gonzales, Jed C.Maintenance Superintendent 905.55 Total Productive Maintenance Training - week 4 Columbus, OH 12/3 - 12/7/17
110 3022 Gonzalez, John G.Maintenance Supervisor 675.73 Tri-State Seminar Las Vegas, NV 9/25 - 9/28/17
160 647242 Gonzalez, Lorenzo Senior Plant Operator 300.00 Certification Reimbursement
110 294491 Grande, Steve Senior Mechanic 630.17 Tri-State Seminar Las Vegas, NV 9/25 - 9/28/17
160 671277 Grant, Thomas E.Construction In Progress Project Manager 115.00 Certification Reimbursement
160 495218 Green, Scott A.Senior Plant Operator 150.00 Certification Reimbursement
160 528391 Hall, Brent M.Senior Mechanic 459.00 Certification Reimbursement
160 32441 Halverson, David P.Engineering Supervisor 116.00 Certification Reimbursement
250 614897 Hamilton, Bradley A.Principal Information Technology Analyst 394.71 VMworld Conference Las Vegas, NV 8/27 - 8/31/17
630 459971 Haney, Lisa Regulatory Specialist 436.73 CASA Winter Conference Palm Springs, CA 1/24 - 1/25/18
630 459971 Haney, Lisa Regulatory Specialist 832.72 CASQA Conference Sacramento, CA 9/24 - 9/27/17
630 459971 Haney, Lisa Regulatory Specialist 420.51 CASA Conference San Diego, CA 8/22 - 8/23/17
630 459971 Haney, Lisa Regulatory Specialist 1,183.09 NACWA Seminar Savannah, GA 11/13 - 11/17/17
160 673601 Harris, Sterling W.Senior Engineer 115.00 Certification Reimbursement
160 673601 Harris, Sterling W.Senior Engineer 115.00 Certification Reimbursement
110 11199 Haworth, Michael T.Operations Supervisor 1,205.99 WEFTEC Conference Chicago, IL 10/1 - 10/8/17
875 384497 Hawthorne, Donald A.Reliability Maintenance Technician 1,335.10 Vibration Anaylsis ISO Training San Diego, CA 1/21 - 1/26/18
160 274263 Hendy, Thomas S.Senior Plant Operator 150.00 Certification Reimbursement
110 5019 Herberg, James D.General Manager 385.31 CASA Winter Conference Palm Springs, CA 1/24 - 1/26/18
110 5019 Herberg, James D.General Manager 332.65 CASA Conference San Diego, CA 8/22 - 8/23/17
880 5022 Herrigstad, Carl A.Lead Instrumentation Technician 556.17 Employee Appreciation Luncheon
760 5023 Hetherington, Michelle R.Senior Engineer 1,924.95 WEFTEC Conference Chicago, IL 9/24 - 10/4/17
160 5023 Hetherington, Michelle R.Senior Engineer 116.00 Certification Reimbursement
160 5028 Hoang, Tyler T.Lead Plant Operator 340.00 Certification Reimbursement
220 663921 Hockensmith, Bryce K.Accountant 6,341.64 Tuition Reimbursement
770 185885 Holdman, Robert Senior Construction Inspector 668.25 Product Demonstration Minneapolis, MN 9/25 - 9/28/17
770 185885 Holdman, Robert Senior Construction Inspector 960.34 Product Demonstration North Wales, PA 10/2 - 10/6/17
160 674486 Hooks, Dereck L.Plant Operator 230.00 Certification Reimbursement
220 172486 Hsiao, Lina Accounting Supervisor 467.60 CSMFO Conference Riverside, CA 2/21 - 2/23/18
250 332013 Hsieh, Eric S.Principal Information Technology Analyst 814.71 iPACS User Group Meeting North Brunswick, NJ 10/3 - 10/6/17
160 487761 Huls, Michael R Senior Plant Operator 150.00 Certification Reimbursement
820 298273 Jaime, Aurelio Senior Mechanic 180.00 Membership Renewal
110 604015 Karaguezian, Lori Principal Staff Analyst 462.26 MMASC Conference La Jolla, CA 10/25 - 10/27/17
250 9494 Kardos, Dionne Data Management Technician II 131.02 Bluebeam eXtreme Conference Los Angeles, CA 8/14 - 8/16/17
620 9523 Kawamoto, Mark H.Engineering Supervisor 874.52 Water ReUse Conference Monterey, CA 3/25 - 3/27/18
160 9523 Kawamoto, Mark H.Engineering Supervisor 116.00 Certification Reimbursement
160 121355 Khublall, Hardat S.Construction In Progress Project Manager 115.00 Certification Reimbursement
750 121355 Khublall, Hardat S.Construction In Progress Project Manager 164.00 Membership Renewal
630 670936 Kiang, Yen-Po Senior Environmental Specialist 962.15 GCMS Training Columbia, MD 2/19 2/25/18
630 670936 Kiang, Yen-Po Senior Environmental Specialist 2,868.80 Tuition Reimbursement
770 273084 Killion, Matthew J.Principal Information Technology Analyst 228.75 ISSA Symposium Costa Mesa, CA 9/14/17
770 273084 Killion, Matthew J.Principal Information Technology Analyst 1,078.08 CiscoLive Workshop Las Vegas, NV 6/26 - 6/29/17
Prepared By: L. Henshaw
8/29/2018
Public Disclosure Reports - Reimbursements by OCSD
July 1, 2017 through June 30, 2018
Div.Emp #Name Title Amount Description Site Location Duration
770 273084 Killion, Matthew J.Principal Information Technology Analyst 1,198.73 CiscoLive Training Orlando, FL 6/10 - 6/14/18
770 273084 Killion, Matthew J.Principal Information Technology Analyst 395.25 ISSA Conference San Diego, CA 10/10 - 10/11/17
770 273084 Killion, Matthew J.Principal Information Technology Analyst 120.00 Membership Renewal
160 122201 Kim, Jin H.Engineer 220.00 Certification Reimbursement
620 110103 Kleinbergs, Mila S.Senior Engineer 275.00 P3S Conference 1/17/18
160 131983 Klinger, Laurie J.Senior Human Resources Analyst 200.00 Certification Reimbursement
120 667817 Knapp, Tina Deputy Clerk of the Board 119.32 League of California Cities New Law Seminar Newport Beach, CA 12/13 - 12/15/17
120 667817 Knapp, Tina Deputy Clerk of the Board 365.91 Master Municipal Clerk Academy San Jose, CA 2/6 - 2/12/18
160 168743 Kovac, Lilia Staff Analyst 100.00 Certification Reimbursement
760 668019 Kwiecien, Ricky Senior Construction Inspector 595.00 EduCode Training Las Vegas, NV 3/18 - 3/24/18
160 668019 Kwiecien, Ricky Senior Construction Inspector 125.00 Certification Reimbursement
760 577782 Kyi, May T.Senior Engineer 1,430.06 WEF Odors & Air Pollution Conference Portland, OR 3/25 - 3/28/18
230 563671 Lagade, Jackie M Buyer 289.08 CAPPO Conference Palm Springs, CA 1/7 - 1/12/18
740 186706 Lahlou, Michael Associate Engineer 423.22 ASCE Pipeline Conference Phoenix, AZ 8/6 - 8/9/17
160 307774 Lambertz, Marcus G.Maintenance Supervisor 150.00 Certification Reimbursement
760 89914 Lapite, Elizabeth A.Administrative Assistant 350.00 Tuition Reimbursement
160 3510 Lechner, Jesse J.Plant Operator 150.00 Certification Reimbursement
160 3516 Lee, Tony S.Chief Plant Operator 150.00 Certification Reimbursement
140 130227 Loaiza, Daisy G.Senior Staff Analyst 866.86 Government Social Media Conference Denver, CO 4/23 - 4/26/18
140 655461 Long, Rebecca Senior Public Info Specialist 127.19 CASA Conference San Diego, CA 8/24/17
140 655461 Long, Rebecca Senior Public Info Specialist 1,351.86 CASA DC Policy Forum Washington, DC 2/23 - 2/28/18
140 655461 Long, Rebecca Senior Public Info Specialist 786.97 Lobby Days Meeting Washington, DC 4/18 - 4/20/18
140 655461 Long, Rebecca Senior Public Info Specialist 112.40 State of the District Supplies
140 655461 Long, Rebecca Senior Public Info Specialist 179.00 Time Clock for GWRS Event
120 639111 Lore, Kelly A.Clerk of the Board 667.30 Clerks Association Conference Berkley, CA 4/16 - 4/19/18
840 3532 Losurdo, Linda Administrative Assistant 300.37 Installation of Shades
161 661802 Lyons, Christopher D.Safety and Health Representative 950.68 OSHA 3115 Training San Diego, CA 9/10 - 9/14/17
161 661802 Lyons, Christopher D.Safety and Health Representative 950.68 OSHA 510 Training San Diego, CA 10/29 - 11/2/17
161 661802 Lyons, Christopher D.Safety and Health Representative 1,173.31 OSHA 511 Training San Diego, CA 1/21 - 1/26/18
160 547452 Malpede, Jaime M.Source Control Supervisor 100.00 Certification Reimbursement
161 676369 Mansoor, Syed D.Safety and Health Representative 113.06 Hazardous Materials Training Ontario, CA 8/22 - 8/24/17
161 676369 Mansoor, Syed D.Safety and Health Representative 1,014.94 OSHA 2255 Training San Diego, CA 11/12 - 11/16/17
161 676369 Mansoor, Syed D.Safety and Health Representative 1,080.11 OSHA 3115 Training San Diego, CA 9/10 - 9/14/17
161 676369 Mansoor, Syed D.Safety and Health Representative 1,246.08 OSHA 510 Training San Diego, CA 1/28 - 2/1/18
161 676369 Mansoor, Syed D.Safety and Health Representative 1,359.41 OSHA 2264 Training San Lorenzo, CA 12/10 - 12/15/17
160 676369 Mansoor, Syed D.Safety and Health Representative 500.00 Certification Reimbursement
250 660666 Manzo, Mark A.Information Technology Analyst II 753.06 Nintex Training San Diego, CA 2/26 - 2/28/18
230 667121 Martin, Jennifer Buyer 356.74 CAPPO Conference Palm Springs, CA 1/8 - 1/9/18
230 667121 Martin, Jennifer Buyer 3,607.19 Tuition Reimbursement
160 2033 Martinez, Denise M.Senior Human Resources Analyst 551.48 NeoGOV Conference Las Vegas, NV 10/24 - 10/27/17
875 2040 May, Todd A.Maintenance Specialist 564.35 MUWG Conference Nashville, TN 10/30 - 11/1/17
250 678621 McCaw, Emmeline G.Information Technology Analyst III 1,412.85 LabWare Conference Las Vegas, NV 4/15 - 4/20/18
620 2049 McKinley, Lorinda Senior Environmental Specialist 150.00 MWD Water Summit Anaheim, CA 6/16/18
630 190641 McMullin, Ryan Senior Environmental Specialist 860.12 GCMS Training Columbia, MD 2/19 2/23/18
870 643241 McMurdy, Adam M.Senior Mechanic 1,834.55 Tuition Reimbursement
110 528825 Melby, Mark Operations Supervisor 1,171.77 WEFTEC Conference Chicago, IL 9/30 - 10/4/17
160 528825 Melby, Mark Operations Supervisor 150.00 Certification Reimbursement
840 528825 Melby, Mark Operations Supervisor 1,045.00 Tuition Reimbursement
630 73445 Meregillano, Tom B.Senior Regulatory Specialist 102.00 ESRI Conference San Diego, CA 7/12 - 7/13/17
250 149155 Michaels, Robert Information Technology Supervisor 164.78 Bluebeam eXtreme Conference Los Angeles, CA 8/14 - 8/16/17
Prepared By: L. Henshaw
8/29/2018
Public Disclosure Reports - Reimbursements by OCSD
July 1, 2017 through June 30, 2018
Div.Emp #Name Title Amount Description Site Location Duration
160 4049 Millea, Kathleen T.Engineering Manager 150.00 Certification Reimbursement
110 574944 Mohr, Jeffrey D.Engineering Manager 1,699.70 WEFTEC Conference Chicago, IL 9/29 - 10/4/17
160 574944 Mohr, Jeffrey D.Engineering Manager 115.00 Certification Reimbursement
750 574944 Mohr, Jeffrey D.Engineering Manager 129.00 Membership Renewal
750 574944 Mohr, Jeffrey D.Engineering Manager 312.00 Membership Renewal
160 124661 Moinuddin, Riaz K.Engineering Manager 115.00 Certification Reimbursement
160 4056 Moline, William M.Operations Supervisor 150.00 Certification Reimbursement
760 664843 Moore, Brad A.Senior Engineer 827.23 Tunneling Fundamental Training Denver, CO 9/8 - 9/24/17
760 664843 Moore, Brad A.Senior Engineer 891.49 NASTT Conference Palm Springs, CA 3/25 - 3/29/18
160 4064 Murphy, Tracey L.Power Plant Operator II 150.00 Certification Reimbursement
160 37014 Murthy, Umesh N.Engineering Supervisor 150.00 Certification Reimbursement
160 37014 Murthy, Umesh N.Engineering Supervisor 158.24 Certification Reimbursement
160 37014 Murthy, Umesh N.Engineering Supervisor 200.00 Certification Reimbursement
750 671891 Namini, Shahrzad F.Construction In Progress Project Manager 150.00 Membership Renewal
4501 Nazaroff, Adam A.Engineering Supervisor 913.68 NAGDCA Conference Milwaukee, WI 9/24 - 9/27/17
161 4501 Nazaroff, Adam A.Engineering Supervisor 115.94 Safety Lunch
140 646303 Newell, Kelly C.Public Affairs Specialist 872.75 Government Social Media Conference Denver, CO 4/23 - 4/26/18
875 325956 Newsom, Adam P.Reliability Maintenance Technician 2,050.96 CAT 3 Vibration Analysis Training San Francisco, CA 11/12 - 11/18/17
4008 Nguyen, Huan-Hoang Senior Engineer 827.68 NAGDCA Conference Milwaukee, WI 9/24 - 9/27/17
160 675770 Nguyen, Paul H.Maintenance Worker 176.50 Certification Reimbursement
740 4010 Nguyen, Quynh D.Engineering Associate 320.64 ESRI Conference San Diego, CA 7/11 - 7/12/17
160 647154 Nguyen, Tiffany H.Senior Human Resources Analyst 150.00 Certification Reimbursement
160 647154 Nguyen, Tiffany H.Senior Human Resources Analyst 299.58 Snacks for Health Fair
875 4012 Nguyen, Trung T.Reliability Maintenance Technician 1,842.63 Vibration Anaylsis ISO Training Seattle, WA 6/12 - 6/16/17
160 4012 Nguyen, Trung T.Reliability Maintenance Technician 275.00 Certification Reimbursement
160 4012 Nguyen, Trung T.Reliability Maintenance Technician 326.25 Certification Reimbursement
110 672747 Ongkingco, Arthur Maintenance Supervisor 747.47 Tri-State Seminar Las Vegas, NV 9/25 - 9/28/17
250 86748 Oruganti, Jagadish Senior Information Technology Analyst 4,875.55 Tuition Reimbursement
760 679316 Oseguera, Vincent Engineer 300.00 Membership Renewal
875 280145 Oswald, Nicholas Maintenance Specialist 571.44 MUWG Conference Nashville, TN 10/30 - 11/1/17
250 662063 Paik, Sang Principal Information Technology Analyst 534.48 BlackHat Conference Las Vegas, NV 7/23 - 7/27/17
250 662063 Paik, Sang Principal Information Technology Analyst 1,337.32 Quayls Conference Las Vegas, NV 10/15 - 10/19/17
250 662063 Paik, Sang Principal Information Technology Analyst 638.37 ICS Security Summit Orlando, FL 3/18 - 3/21/18
160 662063 Paik, Sang Principal Information Technology Analyst 213.63 Certification Reimbursement
160 662063 Paik, Sang Principal Information Technology Analyst 213.63 Certification Reimbursement
160 609191 Palazuelos, Raul R.Construction Inspector 340.00 Certification Reimbursement
822 519443 Paramo, Giovanni Automotive/Heavy Equipment Assistant 6,834.00 Tuition Reimbursement
250 125233 Patel, Purvi R.Information Technology Analyst III 1,303.23 Microsoft Ignite Conference Orlando, FL 9/24 - 9/29/17
250 165315 Patel, Samir Information Technology Analyst III 327.15 Cornerstone Conference San Diego, CA 6/5 - 6/6/18
630 642521 Pavia, Paulo R.Senior Environmental Specialist 2,585.80 Tuition Reimbursement
250 268242 Pham, Duc M.Information Technology Analyst III 512.74 Site Visit & Equipment Testing Las Vegas, NV 11/13 - 11/15/17
630 3539 Phonsiri, Vanh Principal Environmental Specialist 2,637.79 Tuition Reimbursement
110 3540 Phuong, Ddaze Lead Plant Operator 3,606.02 WEFTEC Conference Chicago, IL 9/29 - 10/5/17
110 3540 Phuong, Ddaze Lead Plant Operator 2,362.40 CWEA Conference Sacramento, CA 4/16 - 4/21/18
160 3540 Phuong, Ddaze Lead Plant Operator 150.00 Certification Reimbursement
750 277093 Pilko, Victoria Construction In Progress Project Manager 200.00 Membership Renewal
160 674523 Polk, Larry K.Environmental Specialist 100.00 Certification Reimbursement
630 674523 Polk, Larry K.Environmental Specialist 180.00 Membership Renewal
620 667956 Powell, Jonathon E.Associate Engineer 422.53 ESRI Conference San Diego, CA 7/12 - 7/13/17
160 667956 Powell, Jonathon E.Associate Engineer 160.00 Certification Reimbursement
Prepared By: L. Henshaw
8/29/2018
Public Disclosure Reports - Reimbursements by OCSD
July 1, 2017 through June 30, 2018
Div.Emp #Name Title Amount Description Site Location Duration
620 667956 Powell, Jonathon E.Associate Engineer 1,207.52 Tuition Reimbursement
870 648579 Quiroz, Carlos Maintenance Manager 1,220.26 Maximo Conference Denver, CO 7/17 - 7/20/17
620 675673 Radvar, Giti Construction In Progress Project Manager 139.00 Membership Renewal
160 648069 Ramirez Jr., Javier Plant Operator 150.00 Certification Reimbursement
160 119255 Rathert, Kurt M.Plant Operator 150.00 Certification Reimbursement
760 664851 Ratto, Valerie I.Construction In Progress Project Manager 101.26 CWEA SRC Meeting La Jolla, CA 11/25/18
160 664851 Ratto, Valerie I.Construction In Progress Project Manager 116.00 Certification Reimbursement
760 664851 Ratto, Valerie I.Construction In Progress Project Manager 192.00 Membership Renewal
160 296761 Rebai, Mathew D.Senior Plant Operator 150.00 Certification Reimbursement
830 3558 Reed, Brian K.Principal Environmental Specialist 1,371.70 WEF Odors & Air Pollution Conference Portland, OR 3/25 - 3/28/18
160 3558 Reed, Brian K.Principal Environmental Specialist 176.00 Certification Reimbursement
160 3558 Reed, Brian K.Principal Environmental Specialist 180.00 Certification Reimbursement
161 257421 Rivera, George Security and Emergency Planning Specialist 2,633.66 CESA Training & Conference Yosemite, CA 10/7 - 10/12/17
630 4076 Robertson, George L.Senior Scientist 2,000.50 Oceans '17 Conference Anchorage, AK 9/17 - 9/22/17
630 667729 Robledo, Joseph P.Environmental Specialist 114.55 Tuition Reimbursement
160 149631 Rocha, Johnny J.Operations Supervisor 150.00 Certification Reimbursement
830 149631 Rocha, Johnny J.Operations Supervisor 470.52 Tuition Reimbursement
160 255775 Rocha, Milton Senior Plant Operator 255.00 Certification Reimbursement
160 255775 Rocha, Milton Senior Plant Operator 440.00 Certification Reimbursement
160 4077 Rodriguez, David Engineer 100.00 Certification Reimbursement
160 4077 Rodriguez, David Engineer 100.00 Certification Reimbursement
760 4077 Rodriguez, David Engineer 180.00 Membership Renewal
870 651807 Rosas, Henry M.Lead Electrical Technician 178.70 Food for HVAC Training
630 4511 Ruckman, Ernest S.Senior Environmental Specialist 105.00 SEATAC Conference Los Angeles, CA 4/12 - 4/13/18
110 672368 Rudnick, Taylor D.Mechanic 612.41 Tri-State Seminar Las Vegas, NV 9/25 - 9/29/17
820 129285 Ruiz, Stefanie R.Administrative Assistant 2,054.00 Tuition Reimbursement
160 109250 Sabri, Julian F.Engineering Supervisor 173.50 Certification Reimbursement
630 4085 Sakamoto, Ken A.Senior Environmental Specialist 239.03 ArcGIS Essential Training Redlands, CA 11/6 - 11/8/17
630 4085 Sakamoto, Ken A.Senior Environmental Specialist 109.35 ESRI GIS Forum Redlands, CA 11/1 - 11/2/17
630 4085 Sakamoto, Ken A.Senior Environmental Specialist 439.33 ESRI Conference San Diego, CA 7/10 - 7/12/17
630 4085 Sakamoto, Ken A.Senior Environmental Specialist 404.95 Food & Supplies for Trawl
630 4085 Sakamoto, Ken A.Senior Environmental Specialist 3,093.87 Tuition Reimbursement
250 4087 Salgado, Henry R.Principal Information Technology Analyst 672.16 Cloud Security Summit & Training San Diego, CA 2/18 - 2/20/18
875 501059 Schuler, Kevin A.Maintenance Supervisor 1,529.20 Maximo Conference Denver, CO 7/17 - 7/20/17
160 501059 Schuler, Kevin A.Maintenance Supervisor 210.00 Certification Reimbursement
110 595833 Sebourn, Gregory Board of Directors 641.80 Lobby Days Meeting Washington, DC 4/18 - 4/20/18
230 646311 Segura, Anthony Materials Control Supervisor 139.45 CAPPO Conference Palm Springs, CA 1/11 - 1/12/18
230 646311 Segura, Anthony Materials Control Supervisor 1,930.00 Tuition Reimbursement
110 156540 Shawver, David Board of Directors 954.03 CSDA Conference Monterey, CA 9/25 - 9/28/17
110 156540 Shawver, David Board of Directors 1,097.03 CASA Conference San Diego, CA 8/21 - 8/24/17
161 4103 Shelp, Curt V.Operations Supervisor 159.00 Safety Boots
160 674494 Siddiqui, Shaun A.Plant Operator 110.00 Certification Reimbursement
160 674494 Siddiqui, Shaun A.Plant Operator 110.00 Certification Reimbursement
160 130930 Smith, Duane T.Maintenance Specialist 150.00 Certification Reimbursement
110 584552 Smith, Richard A.Senior Plant Operator 711.39 Tri-State Seminar Las Vegas, NV 9/25 - 9/28/17
160 584552 Smith, Richard A.Senior Plant Operator 150.00 Certification Reimbursement
740 376981 Smith, Wendy A.Engineer 692.05 ESRI Conference San Diego, CA 7/12 - 7/13/17
620 668027 Soriano, Melissa B.Program Assistant 5,421.60 Tuition Reimbursement
160 351425 Speakman, Steven R.Senior Engineer 116.00 Certification Reimbursement
620 131422 Stacklin, Christopher A.Engineer 1,303.61 WEF Meeting Atlanta, GA 2/6 - 2/10/18
Prepared By: L. Henshaw
8/29/2018
Public Disclosure Reports - Reimbursements by OCSD
July 1, 2017 through June 30, 2018
Div.Emp #Name Title Amount Description Site Location Duration
110 131422 Stacklin, Christopher A.Engineer 2,634.79 WEFTEC Conference Chicago, IL 9/29 - 10/5/17
620 131422 Stacklin, Christopher A.Engineer 1,458.41 National Water Policy Fly-In Meeting Washington, DC 4/16 - 4/19/18
160 131422 Stacklin, Christopher A.Engineer 116.00 Certification Reimbursement
770 34711 Steiger, Frank R.Engineering Supervisor 145.00 ISSA Symposium Costa Mesa, CA 9/14/17
770 34711 Steiger, Frank R.Engineering Supervisor 120.00 Membership Renewal
250 121865 Sternin, Warren L.Information Technology Supervisor 641.35 MISAC Conference Monterey, CA 10/1 - 10/4/17
160 448892 Stewart, Ruben L.Senior Plant Operator 340.00 Certification Reimbursement
110 336276 Stokes, Don F.Maintenance Superintendent 2,580.36 WEFTEC Conference Chicago, IL 10/1 - 10/5/17
880 336276 Stokes, Don F.Maintenance Superintendent 112.46 Achievement Lunch
160 336276 Stokes, Don F.Maintenance Superintendent 205.00 Certification Reimbursement
880 336276 Stokes, Don F.Maintenance Superintendent 183.95 Employee Appreciation Luncheon
161 680659 Stone, Jereme J.Safety and Health Representative 756.05 Hazardous Waste Mgmt & Materials Training San Diego, CA 4/9 - 4/12/18
161 680659 Stone, Jereme J.Safety and Health Representative 338.10 OSHA 7115 Training San Diego, CA 3/7 - 3/8/18
110 253649 Stratmoen, Erik D.Lead Mechanic 721.71 Tri-State Seminar Las Vegas, NV 9/25 - 9/29/17
160 253649 Stratmoen, Erik D.Lead Mechanic 100.00 Certification Reimbursement
760 676254 Suchor, Glenn W.Senior Construction Inspector 1,337.20 EduCode Training Las Vegas, NV 3/18 - 3/24/18
160 93665 Sullivan, Patrick A.Senior Plant Operator 150.00 Certification Reimbursement
250 5057 Swindler, John W.Information Technology System & Operations Manager 1,235.92 SANS Network Security Conference Austin, TX 12/3 - 12/8/17
250 5057 Swindler, John W.Information Technology System & Operations Manager 252.36 CIO Forum Los Angeles, CA 5/1 - 5/2/18
250 5057 Swindler, John W.Information Technology System & Operations Manager 327.15 Cornerstone Conference San Diego, CA 6/5 - 6/6/18
160 132530 Tafolla, Brian J.Reliability Maintenance Technician 135.00 Certification Reimbursement
160 132530 Tafolla, Brian J.Reliability Maintenance Technician 275.00 Certification Reimbursement
250 639103 Tagumasi, Romeo V.Data Management Technician II 1,186.35 Autodesk Training Las Vegas, NV 11/14 - 11/16/17
630 638531 Tang, Danny Scientist 105.00 SEATAC Conference Los Angeles, CA 4/12 - 4/13/18
630 638531 Tang, Danny Scientist 1,249.16 CERF Conference Providence, RI 11/5 - 11/9/18
880 366352 Tang, Luc H.Senior Mechanic 6,250.00 Tuition Reimbursement
110 672827 Taula, Eti Maintenance Supervisor 781.04 Tri-State Seminar Las Vegas, NV 9/25 - 9/29/17
880 672827 Taula, Eti Maintenance Supervisor 157.07 Backflow Prevention Training Los Angeles, CA 1/8 - 1/12/18
110 672827 Taula, Eti Maintenance Supervisor 1,095.97 CWEA Conference Sacramento, CA 4/17 - 4/20/18
160 668810 Terrell, Brian D.Engineer 275.00 Certification Reimbursement
160 668810 Terrell, Brian D.Engineer 380.63 Certification Reimbursement
161 553158 Tetsch, Gina A.Occupational Health Nurse 802.77 Occupational Hearing Conservation Training San Diego, CA 8/8 - 8/11/17
160 553158 Tetsch, Gina A.Occupational Health Nurse 200.00 Certification Reimbursement
160 553158 Tetsch, Gina A.Occupational Health Nurse 255.00 Certification Reimbursement
750 35650 Thiede, Robert J.Principal Project Controls Analyst 129.00 Membership Renewal
160 2547 Thompson, Robert C.Assistant General Manager 116.00 Certification Reimbursement
160 295347 Tjen, Kwen T.Plant Operator 150.00 Certification Reimbursement
160 664755 Togia, Liamatua M.Mechanic 160.00 Certification Reimbursement
810 2540 Torres, Edward M.Director of Operations and Maintenance 741.04 CASA Conference San Diego, CA 8/22 - 8/24/17
160 2540 Torres, Edward M.Director of Operations and Maintenance 115.00 Certification Reimbursement
250 369203 Tran, Khanh N.Information Technology Analyst III 496.88 Site Visit & Equipment Testing Las Vegas, NV 11/13 - 11/15/17
630 2533 Tsai, Yu-Li Senior Scientist 1,117.76 NELAC Symposium Washington, DC 8/6 - 8/10/17
830 116732 Tuiasosopo-Kemper, Gary J.Operations Supervisor 1,995.00 Tuition Reimbursement
160 2526 Unsell, Bobby L.Lead Mechanic 159.00 Certification Reimbursement
230 526707 Velasco, Jesse R.Lead Storekeeper 277.00 Tuition Reimbursement
2522 Velasco, MarcoPolo Principal Staff Analyst 1,172.06 NAGDCA Conference Milwaukee, WI 9/23 - 9/27/17
822 477693 Villalobos, Ginetto Mobile Crane Operator 1,124.40 Crane & Rigging Workshop Kansas City, MO 9/19 - 9/23/17
740 2519 Vitko, Tadeo G.Engineer 1,180.77 WEF Odors & Air Pollution Conference Portland, OR 3/23 - 3/28/18
230 273447 Voss, Betty J.Senior Buyer 157.65 CAPPO Conference Palm Springs, CA 1/9 - 1/10/18
110 660041 Wanke, Chad Board of Directors 209.31 CASA Winter Conference Palm Springs, CA 1/25 - 1/26/18
Prepared By: L. Henshaw
8/29/2018
Public Disclosure Reports - Reimbursements by OCSD
July 1, 2017 through June 30, 2018
Div.Emp #Name Title Amount Description Site Location Duration
250 649918 Weedagama, Wasantha Principal Information Technology Analyst 1,267.93 Medgate User Group Conference Boston, MA 9/18 - 9/21/17
160 649918 Weedagama, Wasantha Principal Information Technology Analyst 405.00 Certification Reimbursement
250 649918 Weedagama, Wasantha Principal Information Technology Analyst 139.00 Membership Renewal
160 659825 Wheatley, Christopher R.Senior Plant Operator 300.00 Certification Reimbursement
160 569686 Whitney, Robert M.Construction Inspector 100.00 Certification Reimbursement
160 569686 Whitney, Robert M.Construction Inspector 105.00 Certification Reimbursement
160 569686 Whitney, Robert M.Construction Inspector 230.00 Certification Reimbursement
160 80215 Wilcox, Robyn A.Engineer 116.00 Certification Reimbursement
760 80215 Wilcox, Robyn A.Engineer 164.00 Membership Renewal
760 80215 Wilcox, Robyn A.Engineer 185.00 Membership Renewal
160 8862 Wong, Ken H.Operations Supervisor 150.00 Certification Reimbursement
830 8862 Wong, Ken H.Operations Supervisor 100.00 Employee Appreciation Luncheon
160 8731 Woodward, Jeff W.Operations Supervisor 150.00 Certification Reimbursement
160 584561 Wyland, Ryan M.Plant Operator 170.00 Certification Reimbursement
110 652295 Yamout, Mazen Lead Electrical Technician 795.16 Tri-State Seminar Las Vegas, NV 9/25 - 9/28/17
160 652295 Yamout, Mazen Lead Electrical Technician 180.00 Certification Reimbursement
160 351409 Yin, Shuang Senior Engineer 115.00 Certification Reimbursement
160 351409 Yin, Shuang Senior Engineer 200.00 Certification Reimbursement
822 121224 Yokoyama, Brandon K.Environmental Technician 2,385.00 Tuition Reimbursement
740 573247 Yong, Eros Engineering Supervisor 125.00 AWWA Webinar
160 573247 Yong, Eros Engineering Supervisor 200.00 Certification Reimbursement
740 573247 Yong, Eros Engineering Supervisor 130.00 Employee Appreciation Luncheon
620 8230 Zedek, Michael I.Engineer 294.06 ESRI Conference San Diego, CA 7/12 - 7/13/17
620 8230 Zedek, Michael I.Engineer 4,670.32 Tuition Reimbursement
$283,709.26
Prepared By: L. Henshaw
8/29/2018
Page 1 of 2
ADMINISTRATION COMMITTEE Meeting Date 09/12/18 To Bd. of Dir. 09/26/18
AGENDA REPORT Item Number 3 Item Number
Orange County Sanitation District FROM: James D. Herberg, General Manager Originator: Lorenzo Tyner, Assistant General Manager SUBJECT: UPDATE TO THE OCSD DEBT POLICY
GENERAL MANAGER'S RECOMMENDATION Adopt Resolution No. OCSD18-XX entitled, “A Resolution of the Board of Directors of the Orange County Sanitation District adopting a Board of Directors Debt Policy.”
BACKGROUND The Orange County Sanitation District’s (Sanitation District) Board of Directors Debt Policy sets forth the parameters for issuing debt and managing outstanding debt and
provides guidance to decision makers regarding the timing and purposes for which debt may be issued, types and amounts of permissible debt, methods of sale that may be used, and structural features that may be incorporated. The debt policy should recognize a binding commitment to full and timely repayment of all debt as an intrinsic requirement for entry into the capital markets. The goals of a debt policy are to ensure that a
government maintains a sound debt position and that credit quality is protected. The Sanitation District has approximately $110 million in Certificate Anticipation Notes (CANs) that will expire on December 15, 2018. Staff proposes that these notes be refunded. SB-1029 and Government Code Section 8855(i) require any issuer of public
debt to provide to the California Debt and Investment Advisory Commission (CDIAC) a report of any proposed debt issuances. Issuers must certify on the Report of Proposed Debt Issuance that they have adopted local debt policies concerning the use of debt and that the proposed debt issuance is consistent with those policies, specifically an updated debt policy.
Staff has reviewed and updated the attached Debt Policy to ensure compliance with the changes to California Government Code. Changes primarily include references to appropriate Government Code sections and CDIAC Guidelines. There are no material changes to the implementation of the Sanitation District Debt Policy or structure.
RELEVANT STANDARDS
• OCSD Debt Policy - Financial Management Policy and Procedure No. 201-3-1;
Restructuring debt is deemed to be desirable
• Easy access to low cost credit
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PROBLEM
The 2016B CANs are due and payable on December 15, 2018 in the amount of
$110,973,750. Changes in California Government Code require the Sanitation District
provide an updated Debt Policy
PROPOSED SOLUTION
Staff has reviewed and updated the Sanitation District’s Debt Policy.
TIMING CONCERNS
The Sanitation District must update its Debt Policy prior to completing a refinancing of the
2016B CANs.
RAMIFICATIONS OF NOT TAKING ACTION
Not taking action will result in the Sanitation District not being able to complete the
refinancing of the 2016B CANs.
PRIOR COMMITTEE/BOARD ACTIONS
July 2018 - The Board authorized the General Manager to issue Revenue Refunding
Certificate Anticipation Notes, Series 2018A, as fixed-rate obligations, maturing in
February 2022, subject to market conditions, in an amount not to exceed $109,875,000 to replace the $109,875,000 Revenue Refunding Certificate Anticipation Notes, Series 2016B maturing on December 15, 2018.
December 2016 - The Board adopted Resolution No. OCSD16-32, authorizing the
execution and delivery by the District of an Installment Purchase Agreement, a Trust Agreement and a Continuing Disclosure Agreement in connection with the Orange County Sanitation District Wastewater Refunding Revenue Obligations, Series 2017A, authorizing the execution and delivery of such Revenue Obligations evidencing principal
in an aggregate amount not to exceed $91,620,000, 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.
FINANCIAL CONSIDERATIONS
N/A
ATTACHMENTS
The following attachments(s) are included in hard copy and may also be viewed on-line at the OCSD web
site (www.ocsd.com) with the complete agenda package:
•Resolution No. OCSD 18-XX
•Exhibit A - Debt Policy (Redlined)
OCSD 18-XX-1
RESOLUTION NO. OCSD 18-XX A RESOLUTION OF THE BOARD OF DIRECTORS OF THE
ORANGE COUNTY SANITATION DISTRICT ADOPTING A BOARD OF DIRECTORS DEBT POLICY NOW, THEREFORE, the Board of Directors of Orange County Sanitation District,
DOES HEREBY RESOLVE, DETERMINE AND ORDER: Section 1: The Board of Directors Debt Policy, attached hereto as Exhibit “A”, be adopted.
Section 2: Any change in the Policies and Procedures set forth in the Board of Directors Debt Policy must be approved by the Board of Directors prior to implementation. Section 3: This Resolution shall take effect immediately upon its adoption.
PASSED AND ADOPTED at a regular meeting of the Board of Directors held September 26, 2018.
_____________________________________ Gregory C. Sebourn, PLS Board Chairman
ATTEST:
_______________________________________
Kelly A. Lore, MMC Clerk of the Board
OCSD 18-XX-2
STATE OF CALIFORNIA )
) ss
COUNTY OF ORANGE )
I, Kelly A. Lore, Clerk of the Board of Directors of the Orange County Sanitation
District, do hereby certify that the foregoing Resolution No. OCSD 18-XX was passed and adopted at a regular meeting of said Board on the 26th day of September 2018, 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 26th day of September 2018.
Kelly A. Lore, MMC Clerk of the Board of Directors Orange County Sanitation District
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FINANCIAL MANAGEMENT POLICY AND PROCEDURE Subject: Debt Policy Index: Finance Administration Number: 201-3-1
Effective Date: January 1, 2015
September 26, 2018
Prepared by: Financial Management Division
Supersedes: September 17, 2008 Approved By: Administration
CommitteeBoard of
Directors
1.0 PURPOSE:
The foundation of any well-managed debt program is a comprehensive debt policy. A debt policy sets forth the parameters for issuing debt and managing outstanding debt, and provides guidance to decision makers regarding the timing and purposes for which debt may be issued, types and amounts of permissible debt, methods of
sale that may be used and structural features that may be incorporated. The debt
policy should recognize a binding commitment to full and timely repayment of all debt as an intrinsic requirement for entry into the capital markets. The goals of Adherence a debt policy are to ensure that a government maintains a sound debt position, and that credit quality is protected, and is intended to comply with
applicable California Government Code Sections prescribed by California Debt
And Investment Advisory Commission (CDIAC) to ensure all the debt issuance is consistent with the Sanitation Sanitation District’s debt policies and all the required reports are submitted to CDIAC on time.
OBJECTIVES: Each debt issuance must accomplish the following objectives: a. Accelerate the delivery of projects. Debt financing allows the delivery of
projects on an accelerated basis;
b. Spread cost over the useful life of an asset. Debt financing allows the District to spread the cost of a project over its useful life rather than paying for it at one time;
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c. Smooth out annual cash flow. Debt financing spreads the cost of a project over a period of years, thereby smoothing out the Sanitation District’s cash
flow; d. Optimize overall financial resources. To enable existing cash to be invested at a rate higher than the cost of borrowing;
e. Refundings: It may become desirable for the District to issue bonds or other securities to refinance outstanding obligations. The reasons for refinancing include: i) To Achieve Debt Service Savings. In general, the net present
value savings generated by the refunding bonds shall be at least 3% of the refunded bond amount. ii) For Programmatic Reasons. Such as: restructuring outstanding debt, changing the type of debt instruments originally used,
retiring a bond issue, removing covenants/pledges that have become restrictive, or retiring debt prior to maturity. f. The debt policy must be viewed as an integral component of its overall financial practices and in the context of the Sanitation District’s capital-
intensive expenditure plans. The Sanitation District’s issuance of debt must be generally consistent with its planning goals, capital improvement programs and budget. The Sanitation District’s financial practices, including the issuance of debt, must be designed to assure sufficient resources to fund all of its operating and capital requirements in all foreseeable circumstances.
. Advantages of a debt policy are as follows: 1.1 enhances the quality of decisions by imposing order and discipline, and
promoting consistency and continuity in decision making; 1.2 rationalizes the decision-making process; 1.3 identifies objectives for staff to implement;
1.4 demonstrates a commitment to long-term financial planning objectives, and; 1.5 is viewed positively by the rating agencies in reviewing credit quality.;
1.6 minimize debt service and issuance costs;
1.7 ensure full and timely repayment of debt; 1.8 maintain full and complete financial disclosure and reporting and adequate
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internal controls;
1.9 ensure use of debt is consistent with the Sanitation District’s policies and the proceeds will be directed to the intended use; 1.5 2.0 ORGANIZATIONS AFFECTED:
General Manager’s Department, Financial Management Division, General Counsel, bond rating agencies, financial advisors, bond underwriters, bond counsel, and external independent auditors.
3.0 REFERENCES: 3.1 December 2015 Five-Year Strategic Plan Update 3.2 1989 “2020 Vision” Master Plan. 2017 Facilities Master Plan
3.3 Government Finance Officers Association publication “A Guide for Preparing a Debt Policy”. 3.4 “Moody’s on Municipals- An Introduction to Issuing Debt” by Moody’s
Investor Services. 3.5 Handbook for Muni-Bond Issuers by Joe Mysak, published by Bloomberg Professional Library.
4.0 POLICY: 4.1 Limitations on Indebtedness- 4.1.1 The District’sSanitation District’s debt capacity will not exceed legal
limitations, such as coverage requirements or additional bonds tests imposed by existing bond covenants. 4.1.2 Before any new debt is issued, the impact of debt service payments on total annual fixed costs will be analyzed. In accordance with
existing COP indenture agreements, Net Operating Revenues must be at least a 1.25 coverage ratio to the maximum annual debt service. 4.1.3 The District will restrict long-term borrowing of capital improvements
that provide long-term benefits to the District. 4.1.4 Proceeds from long-term debt will not be used for current on-going operations.
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4.1.5 The decision to incur new indebtedness should be integrated with the Sanitation District’s biennial Operating Budget and Capital
Improvement Program Budget. The annual debt service payment shall be included in the Operating Budget. 4.1.6 The Sanitation District will integrate its debt issuances with the goals of its Capital Improvement Program by timing the issuance of debt to
ensure that projects are available when needed. 4.1.4 4.2 Types of Debt-
4.2.1 The District may use short-term debt to cover temporary or emergency cash flow shortages. All short-term borrowing will be subject to Board approval by resolution.
4.2.2 The District may utilize Board approved intra-agency loans rather than outside debt instruments to meet short-term cash needs. Intra-agency loans will be permitted only if an analysis of the affected Revenue Areas indicates funds are available and the use of these funds will not impact current operations. The principal, along with
interest at the prevailing rate as established by the District’sSanitation District’s Treasurer, will be paid to the lending Revenue Area. 4.2.3 Commercial Paper- The District may issue short-term debt in the
form of Commercial Paper.
4.2.4 Revenue Bonds- The District may issue as special obligations various types of revenue securities including notes, warrants, interim debentures, bonds, and temporary bonds. Securities issued as
special obligations do not constitute outstanding indebtedness of the District nor do they exhaust its legal debt-incurring power. Bonding should be limited to projects with available revenue sources, whether self-generated or dedicated from other sources such as user fees. Adequate financing feasibility studies should be performed for each
revenue issue. Sufficiency of revenues should continue throughout the life of the bonds.
4.2.5 Certificates of Participation- Certificates of participation are essentially leases which are sold to the public. The lease payments
are subject to annual appropriation. Investors purchase certificates representing their participation in the lease. Often, equipment or facilities being acquired serve as collateral. These securities are most useful when other means to finance are not available under state law.
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4.2.6 Refundings- A refunding is generally the underwriting of a new bond
issue whose proceeds are used to redeem an outstanding issue.
4.2.6.1 Prior to beginning a refunding bond issue, the District will review and estimate of the savings achievable from the refunding. The District may also review a pro forma
schedule estimating the savings assuming that the refunding is done at various points in the future. Following are the conditions under which the District will consider refunding outstanding bonds:
4.2.6.1.1 Net present value savings are at least three (3) percent of the par amount of the refunded bonds. Net present value savings of less than three (3) percent of refunded bonds are acceptable when compared to savings that
could be achieved by waiting for more favorable interest rates and/or call premiums. 4.2.6.1.2 Net present value savings exceed the costs of issuing the bonds.
4.2.6.1.3 The bonds to be refunded have restrictive or outdated covenants. 4.2.6.1.4 Restructuring debt is deemed to be desirable.
4.3 Debt Structure- 4.3.1 Debt will be structured to achieve the lowest possible net overall cost to the District balanced against potential risks given market
conditions, the urgency of the capital program, and the nature and type of security to be provided. Structuring options shall also consider available opportunities related to maximizing earnings and minimizing costs while complying with all Arbitrage regulations, including the timing of issuance and current market conditions.
4.3.2 The term of District debt issues should not extend beyond the useful life of the project and generally should not extend beyond 30 years unless there are compelling factors which make it necessary to extend the term further.
4.3.3 For the issuance of new money debt, the District should consider the appropriate amount to be sold based on the overall debt- versus revenue-funding targets as part of its long-term capital plan and prior to each issuance of new money debt.
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4.3.4 New money debt issued by the District should be structured to
provide for either level principal or level debt service on an individual issuance or aggregate debt service basis. Deferring the repayment of principal should be avoided except in select instances where it will take a period of time before project revenues are sufficient to pay debt service. Ascending debt service should generally be avoided.
4.3.4.1 The District should consider target financial ratios (including debt service coverage) and future financial flexibility when determining the structure of its new money debt.
4.3.5 Variable Rate Obligations- When appropriate, the District may choose to issue variable rate obligations, or securities that pay a rate of interest that varies according to a predetermined formula or results from a periodic remarketing or auction of the securities.
4.3.5.1 The maximum level of net variable rate obligations incurred shall not exceed 150% of the level of available invested reserves. The percentage is intended to reflect the inherent relationship between taxable and tax-exempt
interest rates based on the highest marginal federal income tax rate. Such percentage should be adjusted as the highest marginal federal income tax changes. 4.4 Credit Objectives-
4.4.1 The District’sSanitation District’s goal is to maintain or improve its bond ratings. To that end, prudent financial management policies will be adhered to in all areas.
4.4.1.1 The District should monitor the District’sSanitation District’s current and projected key financial ratios (e.g., debt service coverage, debt-to-equity, net floating rate exposure, reserve level) in comparison to those of other similar municipal entities. These ratios should be updated
and compared prior to the issuance of new money debt or the restructuring of existing debt. The District will consider these ratios in its financial management policies. 4.4.2 Rating Agencies -
4.4.2.1 Full disclosure of operations will be made to the bond rating agencies. District staff, with the assistance of the financial advisors and bond counsel, will prepare the
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necessary materials for and presentation to the rating agencies.
4.4.2.2 The District will maintain a line of communications with the rating agencies (Moody’s, Standard & Poor’s, and/or Fitch), informing them of major financial events at the District as they occur. The Comprehensive Annual
Financial Report (CAFR) shall be distributed to the rating agencies after it has been accepted by the Board of Directors. 4.4.2.3 The rating agencies will be notified when the District
begins preparation for a debt issuance. After the initial contact, a formal ratings application will be prepared and sent along with the draft of the Official Statement relating to the bond sale to the rating agencies. This application and related documentation should be sent several weeks
prior to the bond sale to give the rating agencies sufficient time to perform their review.
4.4.2.4 A personal meeting with representatives of the rating agencies will be scheduled at least once every three years
or whenever a major project is initiated.
4.4.3 Credit Enhancements- are mechanisms which guarantee principal and interest payments. They include bond insurance and a line or letter of credit. A credit enhancement, while costly, will sometimes
bring a higher rating from the rating agencies and a lower interest rate on debt, thus lowering overall costs. Credit enhancements will only be used when net debt service is reduced by more than the cost of the enhancement. During the debt issuance planning, the Financial Advisor or Underwriter will advise the District which credit
enhancements if any, should be purchased.
4.4.4 Dedicated Revenue Sources- In order to ensure the most favorable credit ratings, District revenues are dedicated to debt service in the following order:
4.4.4.1 Ad valorem property tax.
4.4.4.2 Sanitary sewer service charges.
4.4.4.3 Other revenues.
4.5 Method of Sale -
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4.5.1 The District will select a method of sale that is the most appropriate in light of financial, market, transaction-specific and issuer-related
conditions, and explain the rationale for its decision.
4.5.1.1 Competitive Sales- Debt obligations are generally issued through a competitive sale. The District and its financial advisor will set the terms of the sale to encourage as many
bidders as possible. By maximizing bidding, the District seeks to obtain the lowest possible interest rates on its bonds. 4.5.1.2 Negotiated Sales- When certain conditions favorable for
a competitive sale do not exist and when a negotiated sale will provide significant benefits to the District that would not be achieved through a competitive sale, the District may elect to sell its debt obligations through a private or negotiated sale. Such determination may be made on an
issue-by-issue basis, for a series of issues, or for part or all of a specific financing program upon approval by the Administration Committee. 4.6 Methods of Selecting Consultants-
4.6.1 Financial Advisor- The District will retain an external independent financial advisor, selected through a competitive process and renewed at the discretion of the Administration Committee. The financial advisor contract will be administered by the
District’sSanitation District’s Financial Management Division. The utilization of the financial advisor for a particular bond sale will be on a case by case basis upon recommendation by the Director of Administrative Services and approval by the Administration Committee. pursuant to a financial advisory service contract.
4.6.2 Underwriters- For negotiated sales, underwriters will be required to demonstrate sufficient capitalization and experience related to the debt issuance. The selection of underwriters may be for an individual or series of financings or a specified time period.
4.6.3 Bond Counsel- The District will retain external bond counsel for all debt issues. All debt issued by the District will include a written opinion by bond counsel affirming that the District is authorized to issue the debt, stating that the District has met all state constitutional
and statutory requirements necessary for issuance, and determining the debt’s federal income tax status. Bond counsel will be selected through a competitive process administered by the District’sSanitation District’s Financial Management Division. The
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selection process will require comprehensive municipal debt experience.
4.6.4 Disclosure Counsel- The District will retain, when appropriate, Disclosure Counsel for debt issues. Disclosure Counsel will be responsible for ensuring that the official statement complies with all applicable rules regulations and guidelines. Disclosure Counsel for
a particular transaction may also serve the District as bond counsel on the same issue. Disclosure counsel will be selected through a competitive process administered by the District’sSanitation District’s Financial Management Division. The selection process will require comprehensive municipal debt experience.
4.7 Disclosure and Arbitrage Compliance-
4.7.1 The District will follow all State and federal regulations and requirements regarding bond provisions, issuance, taxation, and
disclosure.
4.7.2 The District will monitor compliance with bond covenants and adhere to federal arbitrage regulations. Any instances of noncompliance will be reported to the Administration Committee.
4.7.3 The District will maintain good communications with bond rating agencies about its financial condition and will follow a policy of full disclosure in every financial report and bond prospectus (Official Statement).
4.7.4 Official Statements accompanying debt issues, CAFRs, and continuous disclosure statements will meet, at a minimum, the standards articulated by the Municipal Standards Rulemaking Board (MSRB), the Government Accounting Standards Board (GASB), the
National Federation of Municipal Analysts, the Securities and Exchange Commission (SEC), and Generally Accepted Accounting Principles (GAAP). The Financial Management Division will be responsible for ongoing disclosure to all Nationally Recognized Municipal Information Depositories (NRMSIRs) designated by the
SEC and for maintaining compliance with disclosure standards promulgated by state and national regulatory bodies.
4.7.4.1 Quarterly compliance reports to NRMSIRs.
4.7.4.2 Copies of CAFR and updated tables from the Official
Statement to NRMSIRs within six month of year end.
4.8 Administration and Internal Control Procedures -
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4.8.1 Expenditure of Proceeds- Whenever reasonably possible, proceeds of the Sanitation District’s debt shall be held by a third party trustee
which will release such proceeds upon written requisition signed by the Director of Administrative Service Department Administrative Services, or authorized designee. 4.8.2 Requisition of Bond Proceeds- To reimburse the District for expenditures incurred, bond proceeds requisitions will be prepared
by staff and will include summary expenditure data listing the projects funded and related dollar amounts, all totaling to the requisition amount. 4.8.3 Investment of Debt Proceeds- Proceeds raised in a debt financing
shall be invested in a manner that is consistent with the bond indenture, and pursuant to the Sanitation District’s Investment policy for investments not address by the indenture. 4.8.4 Continuing Disclosure- The District shall remain in compliance with
Securities and Exchange Commission (S.E.C.) Rule 15c2-12 by filing its annual financial statements and other financial and operating data for the benefit of its bondholders within the period required by each Continuing Disclosure Agreement.
4.8.5 Reporting and Filing Requirements- The District shall comply with the applicable reporting and filing requirements in California Government Code Section 8855. 4.8.6 Federal Tax Compliance- The District shall comply with any federal
tax requirements, including without limitation, private use tracking, arbitrage and rebate compliance. 4.7.4.2
4.05.0 DEFINITIONS: 4.1 5.1 ACCRUED INTERST- In the sale of a new issue of municipal bonds, the dollar amount, based on the stated rate or rates of interest, which has
accrued on the bonds from the dated date, or other stated date, up to but
not including the date of delivery. When a bond is purchased in the secondary market, the dollar amount, based upon the stated rate of interest, which has accrued on the bond from the most recent interest payment date, up to but not including the date of settlement. Accrued interest is paid to
the seller by the purchaser and is usually calculated on a 360-day year basis
(assumes each month has 30 days). 4.25.2 ADDITIONAL BONDS TEST- Refers to legal test found in resolution or ordinance securing bonds; governs ability to issue additional bonds having
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the same lien on pledged revenues. Usually expressed as a ratio in which historic earnings meet certain levels of future debt service coverage.
4.35.3 ADDITIONAL OBLIGATIONS TEST- Refers to legal test found in the resolution which governs an agency’s ability to issue additional obligations having the same lien on pledged revenues. The District’sSanitation District’s additional obligations test is expressed as a ratio in which historic
earnings must meet or exceed certain levels of future obligation service coverage. 4.45.4 AD VALOREM TAX- A direct tax based “according to value” of property. Counties and school districts and municipalities usually are, and special
tax districts may be, authorized by law to levy ad valorem taxes on property
other than intangible personal property. Local government bodies with taxing powers may issue bonds or short-term certificates payable from ad valorem taxation.
4.55.5 ADVANCE REFUNDING- A transaction in which new debt is issued to provide monies to pay interest on old, outstanding debt as it becomes due, and to pay the principal on the old debt either as it matures or at an earlier call date. An advance refunding occurs before the maturity or call date (more than 90 days before the maturity or call date) of the old debt, and
the proceeds of the new debt are invested until the maturity or call date of the old debt. Most advance refundings result in defeasance of debt. 4.65.6 AMORTIZATION- The process of paying the principal amount of an issue of bonds by periodic payments either directly to certificate holders or to a
sinking fund for the benefit of certificate holders. Payments are usually
calculated to include interest in addition to a partial payment of the original principal amount. 4.75.7 ARBITRAGE- Classically, the simultaneous purchase and sale of the
same or an equivalent security in order to profit from price discrepancies. The most common occurrence in the public sector involves the investment of the proceeds from the sale of tax-exempt securities in a taxable money market instrument that yields a higher rate, resulting in interest revenue in excess of interest costs.
4.85.8 ARBITRAGE REBATE REQUIREMENTS- Arbitrage profits (interest revenue in excess of interest costs) from investment bond proceeds that are invested in taxable instruments must be rebated to the U.S. Treasury Department.
4.95.9 AVERAGE COUPON- Weighted average interest cost of an issue. 4.105.10 BANK INVESTMENT CONTRACT- A separate account at a financial institution that functions like a guaranteed investment contract,
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whereby the contract is designed to provide guarantees of principal and interest on funds deposited for a specified period.
4.115.11 BASIS POINT- Yields on municipal securities are usually quoted in basis points where one basis point is equal to 1/100 of one percent. 4.125.12 BOND- Written evidence of the issuer’s obligation to repay a
specified principal amount on a date certain (maturity date), together with interest at a stated rate, or according to a formula for determining that rate. Bonds are distinguishable from notes, which mature in a much shorter period of time.
4.135.13 BOND COUNSEL- An attorney (or firm of attorneys) retained by the issuer to give a legal opinion on the legality and security of the issue and its tax exemption or taxability. Typically, bond counsel may prepare, or review and advise the issuer regarding, authorizing resolutions or ordinances, trust indentures, official statements, validation proceedings,
and litigation. 4.145.14 BONDED DEBT- The portion of an issuer’s total indebtedness as represented by outstanding bonds.
4.155.15 BOND INSURANCE- An insurance policy purchased by an issuer or an underwriter for either an entire issue or specific maturities, which guarantees the payment of principal and interest. This security provides a higher credit rating and thus a lower borrowing cost for an issuer. Bond insurance can be purchased directly by the District prior to the bond sale
(direct purchase) or at the underwriter’s option and expense (bidder’s option). 4.165.16 BOND RESOLUTION OR ORDINANCE- The document or documents representing action of the issuer authorizing the issuance and
sale of municipal bonds. Issuance of the bonds is usually approved in the authorizing resolution or ordinance, and the sale is usually authorized in a separate document known as the “sale” or “award” resolution. All of such resolutions, read together, constitute the bond resolution, which describes the nature of the obligation and the issuer’s duties to the bondholders.
4.175.17 BROKER- A person or firm, other than a bank, which acts as an intermediary by purchasing and selling securities for others rather than for its own account.
4.185.18 CALLABLE BOND- A bond which permits or requires the issuer to
redeem the obligation before the stated maturity date at a specified price, usually at or above par by giving notice of redemption in a manner specified in the bond contract.
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4.195.19 CAPITALIZED INTEREST- Interest paid on long-term obligations during the period of time required to complete and prepare an asset for its
intended use is capitalized as part of the acquisition cost of an asset. 4.205.20 CERTIFICATES OF PARTICIPATION- Obligations of a public entity based on a lease or installment sale agreement. These are not considered debt under Article 13 of the California Constitution.
4.215.21 CERTIFICATE HOLDER- The owner of a municipal certificate of participation to whom payments of principal and interest are made. Generally certificates are registered, and the owner is the person whose name is noted on the certificate register.
4.225.22 CERTIFICATE REGISTER- The listing of names and addresses of the current registered owners of the certificates, as maintained by the trustee or certificate registrar.
4.235.23 COMPETITIVE SALE- The sale of bonds through sealed bids. 4.245.24 COST OF ISSUANCE- The expenses associated with the sale of a new issue of municipal securities, including such items as underwriter’s spread, printing, legal fees, and rating costs.
4.255.25 COVENANTS- The issuer’s enforceable promise to perform or refrain from performing certain actions. With respect to municipal bonds, covenants are generally stated in the bond contract, resolution, or indenture.
4.265.26 COVERAGE- The ratio of pledged revenues available annually to pay debt service obligations, as compared to the annual debt service obligation requirement. This ratio is one indication of the margin of safety for debt service obligations.
4.275.27 CREDIT ENHANCEMENT- The availability of additional outside support designed to improve an issuer’s own credit standing. Examples include bank lines of credit or collateralized funds.
4.285.28 CURRENT REFUNDING- A refunding transaction in which the proceeds of the refunding debt are applied immediately (no more than 90 days from issuance) to redeem the debt to be refunded. This situation differs from an advance refunding, where the proceeds of the refunding bonds are placed in escrow pending the call date or maturity of the debt to
be refunded.
4.295.29 CURRENT YIELD- The ratio of the annual dollar amount of interest to the purchase price of a bond, stated as a percentage.
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4.305.30 CUSIP NUMBERS (COMMITTEE ON UNIFORM SECURITY IDENTIFICATION PROCEDURES) - Identification numbers assigned
each maturity of a bond issue, and usually printed on the face of each
individual bond in the issue. The CUSIP numbers are intended to facilitate identification and clearance of municipal securities. 4.315.31 DEBT LIMIT- The maximum amount of debt which an issuer of
municipal securities is permitted to incur under constitutional, statutory, or charter provisions. 4.325.32 DEBT PER CAPITA- Bonded debt divided by population.
4.335.33 DEBT SERVICE OBLIGATION- The amount of funds necessary to pay principal and interest, and the required contributions to an amortization sinking fund for term certificates on an outstanding obligation. Debt service obligation on certificates may be calculated on a calendar-year or on a fiscal-year basis.
4.345.34 DEBT SERVICE RESERVE FUND- A fund usually amounting to principal and interest payments for one year and used only if pledged revenues do not generate sufficient funds to satisfy the debt service requirement. The reserve fund is typically funded in whole or in part from
the proceeds of the debt issuance. The size and investment of the reserve fund are usually subject to arbitrage regulations. 4.355.35 DEBT SERVICE SCHEDULE- A table listing the annual payments necessary to meet debt service requirements over the period of time the
bonds are to be outstanding. 4.365.36 DEFAULT- Failure to make timely payment of principal and interest or to comply with other features of the indenture.
4.375.37 DEFEASANCE- Eliminating bonded indebtedness off an issuer’s books through creation of a portfolio of allowable securities sufficient to make all debt service payments on pre-refunded, outstanding bonds. 4.385.38 DIRECT DEBT- The debt that a governmental agency incurs in its
own name. 4.395.39 DISCOUNT- The amount by which par value exceeds the price paid for a security which generally represents the difference between the nominal interest rate and the actual or effective return to the investor.
4.405.40 DOUBLE-BARRELED BOND- Traditionally, a bond secured by a defined source of revenue plus the full faith and credit of the issuer. The term is occasionally, although erroneously, used to refer to bonds secured by any two sources of pledged revenue.
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4.415.41 DOWNGRADE- The lowering of a bond rating by a rating service. A
downgrade would be considered if the issuer encountered major financial difficulties or an economic decline, which may be viewed by the rating service as reducing the credit quality of the bond issue. 4.425.42 EFFECTIVE INTEREST RATE- The actual rate of interest earned by
the investor on bonds purchased, after allowing for premiums, discounts, or accrued interest over the period of the investment. 4.435.43 FEASIBILITY STUDY- A report by an independent expert on the economic need and practicality of a proposed debt program.
4.445.44 FINANCIAL ADVISOR- Performs analysis as to the appropriateness of a bond sale and, if the governing body of the agency determines that a bond sale is necessary, they then assist in its planning and preparation.
4.455.45 FLOATER- A security sold with a variable rate that changes at intervals ranging from daily to annually. 4.465.46 FULL FAITH AND CREDIT- The pledge of a government’s general taxing power to pay off its debt obligations.
4.475.47 GENERAL OBLIGATION BONDS- Bonds which are secured by the full faith and credit of the issuer. General obligation bonds are secured by a pledge of a portion of the ad valorem taxing power. Such bonds constitute debts of the issuer and require approval by election prior to
issuance. 4.485.48 GUARANTEED INVESTMENT CONTRACT (GIC)- A group annuity contract designed to provide guarantees of principal and interest on funds deposited with an insurance company for a specified period.
4.495.49 HIGH GRADE BONDS- Top-rated bonds, usually triple-A. 4.505.50 INDENTURE- Legal document describing the terms and conditions of a bond offering, the rights of the bondholder, and the obligations of the
issuer to the bondholder. The document is alternatively referred to as a
bond resolution or deed of trust. 4.515.51 INTEREST RATE SWAP- An agreement between two parties to exchange future flows of interest payments. Swap payments may be
based on actual bond payments and/or based on various market indices.
4.525.52 INVERTED YIELD CURVE- When short-term rates are higher than long-term rates.
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4.535.53 INVESTMENT GRADE- The broad credit designation given bonds which have a high probability of being paid. Such bonds, have few, if any,
speculative features and are rated by the rating agencies in one of their top
four categories, ranging from triple-A to BBB and Baa. 4.545.54 ISSUER- A state, political subdivision, agency, or authority that borrows money through the sale of bonds or notes.
4.555.55 JUNIOR LIEN BONDS- Bond with a subordinate claim against pledged revenues. 4.565.56 LETTER OF CREDIT- An agreement, usually with a commercial
bank, to guarantee demands for payment upon compliance with conditions established in the agreement. Bank letters of credit are typically used as additional sources of security and liquidity with variable rate obligations. 4.575.57 LIQUIDITY- The ability to convert assets, such as investments,
readily into cash. 4.585.58 MATURITY- The date on which the principal amount of a security is due and payable to the certificate holder.
4.595.59 NEGOTIATED SALE- The sale of a new issue of municipal securities by an issuer through an exclusive agreement with a previously selected underwriter or underwriting syndicate. A negotiated sale should be distinguished from a competitive sale, which requires public bidding by the underwriters. Primary points of negotiation for the issuer are the
interest rate and purchase price, which reflect the issuer’s cost of offering its securities in the market. 4.605.60 NET INTEREST COST (NIC) - Traditional method of calculating an issuer’s borrowing cost. NIC is derived by adding the total volume of
interest payments for the entire offering and dividing by the amount of certificates outstanding times the years they are outstanding. 4.615.61 NET PRESENT VALUE SAVINGS- Present value of gross savings discounted at the refunding bond yield to the closing date plus accrued
interest less any contribution from a reserve or debt service fund and
anticipated loss investment earnings. 4.625.62 NOTES- A written, short-term promise of the issuer to repay a specified principal amount on a certain date, together with interest at a
stated rate, or according to a formula for determining that rate, payable
from a defined source of anticipated revenue. Notes usually mature in less than five years. Notes are used to cover seasonal cash flow needs or interim financings.
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4.635.63 OFFICIAL STATEMENT (OS) - A document published by the issuer who generally discloses material information on a bond issue, including the
purpose of the bond issue, how the bonds will be repaid, and the financial,
economic, and demographic characteristics of the issuer. Investors may use this information to evaluate the credit quality of the bonds. 4.645.64 ORIGINAL ISSUE DISCOUNT (OID) - The discount from par at
which a new issue comes to market. For tax-exempt bonds, the capital gain represented by the OID is deemed tax-exempt by the IRS. 4.655.65 OVERLAPPING DEBT- The issuer’s share of the debt of other local units.
4.665.66 PAR VALUE- The principal amount of a security, which must be paid at maturity. Par value is also referred to as the face amount of a security. 4.675.67 PARITY BONDS- Separate bond issues that have the same lien
against pledged revenues. 4.685.68 PAY-AS-YOU GO BASIS- The financial policy of a municipality that finances all capital outlays from current revenues rather than from borrowing.
4.695.69 PAYING AGENT- The entity responsible for the payment of principal and interest on municipal obligations on behalf of the issuer. The paying agent is usually a bank or trust company.
4.705.70 PLEDGED REVENUES- Funds obligated for the payment of debt service and other deposits as required by the bond contract. 4.715.71 PRELIMINARY OFFICIAL STATEMENT (POS)- A preliminary version of the official statement which is used by the issuer or underwriter
to describe the proposed issue of municipal bonds prior to the determination of an interest rate and offering price. The preliminary official statement is a marketing tool used to gauge buyer’s interest in the issue and is relied upon by potential purchasers in making their investment decisions.
4.725.72 PREMIUM- The amount by which the price paid for a security exceeds par value, generally representing the difference between the nominal interest rate and the actual or effective return to the investor.
4.735.73 PRINCIPAL- The par value or face amount of a bond payable or issue of bonds payable on stated dates of maturity.
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4.745.74 PRIMARY MARKET- The market for new issues of municipal securities.
4.755.75 PRIVATE PLACEMENT- An original issue of municipal securities sold directly to an institutional or private investor by way of a negotiated sale rather than through a public offering.
4.765.76 RATE CONVENANT- A bond indenture provision requiring rate changes necessary to meet annual debt service payments. 4.775.77 RATING AGENCIES- Credit quality evaluation of an issuer’s securities made by independent rating services. The three primary rating
agencies with regard to municipal debt are Moody’s Investors Services,
Standard & Poor’s Corporation, and Fitch. 4.785.78 RATINGS- Evaluations of the credit quality of obligations usually made by independent rating services. Ratings generally measure the
probability of the timely repayment of principal and interest on municipal
obligations. The higher the credit rating, the more favorable the effect on the marketability of the security. 4.795.79 REDEMPTION- A transaction in which the issuer pays an
outstanding obligation at a specified price, usually at or above par prior to the specified maturity date. Also known as a call. 4.805.80 REFUNDING- Selling a new bond issue for redemption or defeasance of an outstanding bond issue. There are generally two
reasons for refunding: to reduce the issuer’s interest costs or to remove a
burdensome or restrictive covenant imposed by the terms of the bonds being refinanced. 4.815.81 REGISTRAR: The person or entity responsible for maintaining
records on behalf of the issuer for the purpose of noting the owners of registered obligations. The paying agent frequently performs this function. 4.825.82 REVENUE BONDS- Bonds payable from a specific source of revenue and which do not pledge the full faith and credit of the issuer.
4.835.83 SECONDARY MARKET- Market for bonds previously offered and sold. 4.845.84 SENIOR LIEN OBLIGATIONS: Obligations having a prior claim on
pledge revenues.
4.855.85 SERIAL BONDS- Bonds of an issue in which some bonds mature in each year over a period of years.
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4.865.86 SETTLEMENT- Delivery of and payment for a new issue of municipal bonds. Settlement usually occurs within 30 days after the bonds
are awarded to the underwriters, which allows for the printing of the bonds
and the completion of certain legal matters. 4.875.87 SETTLEMENT DATE- The date used in price and interest computations, usually the date of delivery.
4.885.88 SINKING FUND- A fund established in a bond indenture that contains money available to call bonds prior to maturity. 4.895.89 STANDBY BOND PURCHASE AGREEMENT- A legal agreement
with a commercial bank or trust company whereby the bank agrees to purchase demand bonds which the remarketing agent was unable to remarket to other parties and chose not to purchase for itself. 4.905.90 SUBORDINATE (JUNIOR) LIEN OBLIGATIONS- Obligations
having a subordinate claim against pledged revenues. 4.915.91 TAX-EXEMPT OBLIGATIONS- Obligations whose interest is exempt from federal income taxation pursuant to Section 103 of the Internal Revenue Code, and may or may not be exempt from state income
or personal property taxation in the jurisdiction where issued. 4.925.92 TERM BONDS- Bonds coming due in a single maturity. The issuer usually agrees to make periodic payments into a sinking fund for mandatory redemption of term bonds before maturity or for payment at
maturity. 4.935.93 TRUE INTEREST COST (TIC) - The present value borrowing cost of the issuer is reflected by taking into account the costs of issuance and underwriting. TIC is similar to NIC, but also accounts for the time value of
money. 4.945.94 TRUSTEE- A financial institution with trust powers which acts in a fiduciary capacity for the benefit of bond holders in enforcing the terms of the bond indenture agreement.
4.955.95 TRUST INDENTURE- A contract between the issuer of municipal securities and a trustee, serving for the benefit of the security holders. 4.965.96 UNDERWRITER- A dealer at a bank or brokerage house who buys
an agency’s bonds in order for the firm’s sales force to resell them to both institutional and retail investors. The underwriter may acquire the bonds either by negotiation with the issuer, or by award on the basis of competitive bidding.
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4.975.97 UNDERWRITERS COUNSEL- A lawyer involved in the transaction, who represents the securities firm buying an issuer’s bonds.
4.985.98 VARIABLE RATE OBLIGATIONS- A security whose interest rate is reset periodically by the remarketing agent according to a preset formula defined in the indenture agreement. The variable interest rate, also known as a “floater”, is determined by the remarketing agent as the level at which
all bonds trade at par. 4.995.99 YIELD CURVE- Graph displaying the term structure of interest rates by plotting the yields of all bonds of the same quality with maturities ranging from shortest to the longest available.
4.1005.100 YIELD TO MATURITY- The rate of return to the investor earned from payments of principal and interest, which is compounded semiannually and assumes that interest paid is reinvested at the same rate. Yield to maturity takes into consideration the time value of the investment.
4.1015.101 ZERO-COUPON BONDS- Bonds sold at a deep discount from par, which pay no interest and appreciate to full value at maturity. Also known as capital appreciation bonds.
Page 1 of 6
ADMINISTRATION COMMITTEE Meeting Date 09/12/18 To Bd. of Dir. 09/26/18
AGENDA REPORT Item Number 4 Item Number
Orange County Sanitation District FROM: James D. Herberg, General Manager Originator: Lorenzo Tyner, Assistant General Manager SUBJECT: REVENUE REFUNDING CERTIFICATE ANTICIPATION NOTES, SERIES
2018A GENERAL MANAGER'S RECOMMENDATION A. Adopt Resolution No. OCSD180-XX entitled, “A Resolution of the Board of Directors of the Orange County Sanitation District authorizing the execution and delivery by the Sanitation District of an Installment Purchase Agreement, a Trust Agreement and a Continuing Disclosure Agreement in connection with the execution and delivery of Orange County Sanitation District Revenue Refunding
Certificate Anticipation Notes, Series 2018A, such Notes evidencing principal in an aggregate amount of not to exceed $109,875,000, 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 Notes and authorizing the execution of other necessary documents and related actions”;
B. That the Orange County Sanitation District Financing Corporation approve the documents supporting and authorizing the Notes in an aggregate amount not to exceed $109,875,000; and
C. The proposed financing is structured as an approximate 32-month fixed rate maturity that will be sold in a competitive sale. BACKGROUND
In March 2006, the Orange County Sanitation District (Sanitation District) issued $200 million of variable rate Certificates of Participation (COP), Series 2006 (2006 COPs). Alternatively, the Sanitation District could have issued debt, at an estimated cost of 4.54%, on a fixed rate basis in 2006 (“2006 Fixed Rate”). From inception through August 2008, the average variable rate on the 2006 COPs was 2.95% or 0.22% less than
the SIFMA index (weekly market index of tax-exempt variable rate obligations). As the global financial crisis took hold in the late summer of 2008, there was a significant increase in the variable rate borrowing cost of the Sanitation District, including all municipal variable rate borrowers, as the 2006 COPs averaged 4.29% (or 1.56% above the SIFMA index) for the period between September 2008 and December 2008. The
amount of the increase in variable rate cost above the SIFMA index can be attributed to the weakened financial strength of the bank, DEPFA Bank plc, that was providing liquidity support on the 2006 COPs. Even with the increase in interest rates during this period of stress, the 4.29% average cost was still lower than the 2006 Fixed Rate of 4.54%.
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In December 2008, the Sanitation District proactively refunded the 2006 COPs with the Refunding COP Series 2008C Certificate Anticipation Notes (2008C CANs) to reduce its exposure to then higher and more volatile variable rate costs. The yield on the 2008C
CANs was 0.98% for a one-year period. The issuance of the 2008C CANs allowed the
Sanitation District to redeem the 2006 COPs at an all-in cost of less than 1.25% and avoid paying a bank rate of 4.75% which would have been effective starting a month later. Since the 2008C CANs issuance, the Sanitation District completed five additional one-year refinancing’s at yields at progressively lower yields, followed by two subsequent
two-year refinancing’s starting in 2014 in anticipation of rising short-term rates, as
summarized below: Series Principal Amount Yield All-In Cost
2009B $ 165,865,000 0.370% 0.559%
2010B 154,665,000 0.360 0.525
2011B 143,205,000 0.225 0.399 2012C 131,700,000 0.210 0.410 2013A 129,625,000 0.170 0.390
2014B 120,850,000 0.320 0.523
2016B 109,875,000 0.840 1.002
The interest rate on the currently outstanding Revenue Refunding Certificate Anticipation Notes Series 2016B (2016B CANs) was fixed for two years and the entire $109,875,000 plus interest becomes due and payable on December 15, 2018.
The purpose of the proposed financing is to refund all of the 2016B CANs to avoid the
use of the Sanitation District’s cash reserves to make repayment. The Sanitation District has used the current short-term financing strategy since 2006, generating savings of $40 million when compared to an original fixed rate transaction.
Staff recommends the continued use of the current strategy of issuing short-term
refundings. Assuming no change in interest rates, staff estimate an additional savings of $10.5 million through 2036. Applying these savings to the outstanding debt will result in a payoff of this debt issuance well in advance of the 2044 date target for paying off all existing outstanding debt.
The proposed refunding strategy does include future refundings. As with any anticipated refunding, there will be interest fluctuations that may result in higher interest rates. At the July Administration Committee, Directors asked staff to evaluate other refunding strategies, specifically long-term fixed rate debt, setting a fixed payoff date and insulating
the District from future unknown interest rate increase. Staff reviewed those options; however, long-term interest rates would have to double the current short-term rates used in the staff recommended refunding strategy. Therefore, at this time, staff continues to recommend the short-term refunding strategy over using long-term fixed rate debt.
RELEVANT STANDARDS
• Comply with OCSD Debt Policy - Financial Management Policy and Procedure No. 201-3-1; Restructuring debt is deemed to be desirable
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PROBLEM The 2016B CANs are due and payable on December 15, 2018 in the amount of
$110,973,750. The 2016B CANs were issued with a low-cost, two-year rate with the
expectation that upon maturity the issue would be refinanced. PROPOSED SOLUTION
The issuance of up to $109,875,000 of Revenue Refunding Certificate Anticipation Notes
Series 2018A (2018A CANs) would allow the Sanitation District to repay the 2016B CANs and avoid using $110 million of reserves for such purpose. TIMING CONCERNS
The Sanitation District must complete a refinancing by no later than December 15, 2018; otherwise, $110 million of reserves will be required to repay the 2016B CANs. RAMIFICATIONS OF NOT TAKING ACTION
Not taking action by December 15, 2018 would cause the Sanitation District to use its reserves to repay the 2016B CANs or cause an alternative refunding method. PRIOR COMMITTEE/BOARD ACTIONS
July 2018 - The Board authorized the General Manager to issue Revenue Refunding Certificate Anticipation Notes, Series 2018A, as fixed-rate obligations, subject to market conditions, in an amount not to exceed $109,875,000 to replace the $109,875,000 Revenue Refunding Certificate Anticipation Notes, Series 2016B maturing on December
15, 2018.
December 2016 - The Board adopted Resolution No. OCSD16-32, authorizing the execution and delivery by the District of an Installment Purchase Agreement, a Trust Agreement and a Continuing Disclosure Agreement in connection with the Orange
County Sanitation District Wastewater Refunding Revenue Obligations, Series 2017A,
authorizing the execution and delivery of such Revenue Obligations evidencing principal in an aggregate amount not to exceed $91,620,000, 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.
ADDITIONAL INFORMATION The Sanitation District currently has eleven series of debt issuances outstanding in the
par amount of $1,012,110,000. The following table lists each issuance, the outstanding
amount, and the interest rate mode.
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Outstanding Par Amount(1) Interest Rate Mode
Series 2017A Refunding $ 66,370,000 Fixed Rate
Series 2016B CANs 109,875,000 Fixed Rate (two-year)
Series 2016A Refunding 145,880,000 Fixed Rate
Series 2015A Refunding 127,510,000 Fixed Rate
Series 2014A Refunding 78,375,000 Fixed Rate
Series 2012B Refunding 66,395,000 Fixed Rate
Series 2012A Refunding 100,645,000 Fixed Rate
Series 2011A Refunding 75,370,000 Fixed Rate
Series 2010C 157,000,000 Fixed Rate
Series 2010A 80,000,000 Fixed Rate
Series 2009A Refunding 4,690,000 Fixed Rate
Total: $1,012,100,000
(1) As of September 1, 2018 Due to the fact that this 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.
All costs involved with the refunding, including costs for Public Resources Advisory Group (Municipal Advisor) and Norton Rose Fulbright US LLP (Special Counsel and Disclosure Counsel) will be paid from the proceeds of the new refunding issue.
Senate Bill 450 (Chapter 625 of the 2017-2018 Session of the California Legislature) (“SB
450”) requires that the governing body of a public body obtain prior to authorizing the issuance of bonds with a term of greater than 13 months (which includes the 2018A CANs), good faith estimates of the following information in a meeting open to the public: (a) the true interest cost of the bonds, (b) the sum of all fees and charges paid to third
parties with respect to the bonds, (c) the amount of proceeds of the bonds expected to
be received net of the fees and charges paid to third parties and any reserves or capitalized interest paid or funded with proceeds of the bonds, and (d) the sum total of all debt service payments on the bonds calculated to the final maturity of the bonds plus the fees and charges paid to third parties not paid with the proceeds of the bonds. For the
anticipated issuance of 2018A CANs, the Sanitation District’s Municipal Advisor, Public
Resources Advisory Group, estimates based on market conditions as of August 23, 2018, subject to changing market conditions which may result in the figures being higher or lower, the following:
a) true interest cost of 1.75%;
b) sum of all fees and charges paid to third parties of $512,410; c) net proceeds of $109,878,968; and d) total payments of $114,923,900
Page 5 of 6
Legal Authorization and Approvals The Board of Directors and the Financing Corporation will each be required to adopt separate Resolutions to complete this refunding. Drafts of these two Resolutions are available for review on the Sanitation District’s webpage, as described in the “Attachments” section below. A Financing Corporation is required by the structure of the Notes 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 Sanitation District Board. The Sanitation District Resolution authorizes the execution and delivery of certain legal
documents and the execution and delivery of Revenue Refunding Certificate Anticipation
Notes, Series 2018A, evidencing principal in an aggregate amount of not to exceed $109,875,000 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 SANITATION DISTRICT OF AN INSTALLMENT PURCHASE AGREEMENT, A TRUST AGREEMENT AND A CONTINUING DISCLOSURE AGREEMENT IN CONNECTION WITH THE EXECUTION AND DELIVERY OF ORANGE COUNTY SANITATION
DISTRICT REVENUE REFUNDING CERTIFICATE ANTICIPATION NOTES, SERIES
2018A, SUCH NOTES EVIDENCING PRINCIPAL IN AN AGGREGATE AMOUNT OF NOT TO EXCEED $109,875,000, 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 NOTES AND AUTHORIZING THE EXECUTION OF OTHER NECESSARY
DOCUMENTS AND RELATED ACTIONS.” The Resolution of the Corporation is somewhat shorter and simpler. It authorizes three
actions that are similarly enumerated in the title as follows:
“A RESOLUTION OF THE BOARD OF DIRECTORS OF THE ORANGE COUNTY SANITATION DISTRICT FINANCING CORPORATION AUTHORIZING THE EXECUTION AND DELIVERY BY THE CORPORATION OF AN INSTALLMENT
PURCHASE AGREEMENT AND A TRUST AGREEMENT IN CONNECTION WITH THE
EXECUTION AND DELIVERY OF ORANGE COUNTY SANITATION DISTRICT REVENUE REFUNDING CERTIFICATE ANTICIPATION NOTES, SERIES 2018A, AUTHORIZING THE EXECUTION AND DELIVERY OF SUCH NOTES EVIDENCING PRINCIPAL IN AN AGGREGATE AMOUNT OF NOT TO EXCEED $109,875,000 AND
AUTHORIZING THE EXECUTION OF OTHER NECESSARY DOCUMENTS AND
RELATED ACTIONS.” Following is a chart listing the remaining steps to be completed for the issuance of the Revenue Refunding Certificate Anticipation Notes, Series 2018A debt issuance:
September
Board approval of legal and disclosure documents
Financing Corporation approval of legal and disclosure documents
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October Receive ratings from Bond Rating Agencies
November Receive competitive bids
Closing
CEQA
N/A FINANCIAL CONSIDERATIONS
N/A ATTACHMENTS
The following attachments(s) are included in hard copy and may also be viewed on-line at the OCSD web
site (www.ocsd.com) with the complete agenda package:
• OCSD Resolution No. 18-XX
• Corporation Resolution
• Draft Trust Agreement
• Draft Installment Purchase Agreement
• Draft Preliminary Official Statement (includes Continuing Disclosure Agreement within Appendix D)
• Draft Official Notice Inviting Bids
• Draft Notice of Intention to Sell
73241406.5 1001035824 OCSD 18-XX OCSD 2018A CANs District Resolution
RESOLUTION NO. OCSD 18- XX
A RESOLUTION OF THE BOARD OF DIRECTORS OF THE ORANGE COUNTY SANITATION DISTRICT AUTHORIZING THE EXECUTION
AND DELIVERY BY THE SANITATION DISTRICT OF AN INSTALLMENT
PURCHASE AGREEMENT, A TRUST AGREEMENT AND A CONTINUING DISCLOSURE AGREEMENT IN CONNECTION WITH THE EXECUTION AND DELIVERY OF ORANGE COUNTY SANITATION DISTRICT REVENUE REFUNDING CERTIFICATE ANTICIPATION
NOTES, SERIES 2018A, SUCH NOTES EVIDENCING PRINCIPAL IN AN
AGGREGATE AMOUNT OF NOT TO EXCEED $109,875,000, 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 NOTES AND AUTHORIZING THE EXECUTION OF
OTHER NECESSARY DOCUMENTS AND RELATED ACTIONS
WHEREAS, to refinance the acquisition, construction and installation of certain improvements to its wastewater system (the “Prior Project”) the District caused the execution and delivery of $109,875,000 in aggregate principal amount of Orange
County Sanitation District Revenue Refunding Certificate Anticipation Notes,
Series 2016B, of which $109,875,000 in principal amount is currently outstanding (the “Prior Certificates”);
WHEREAS, the District desires to prepay all of the Prior Certificates by paying all of the principal component of the installment payment relating to the Prior Certificates
(the “Prior Installment Payment”), and the interest component thereof, thereby causing
all of the Prior Certificates to be paid;
WHEREAS, to provide the funds necessary to pay the Prior Installment Payment to be so paid, the District and the Orange County Sanitation District Financing Corporation (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 payment (the “Installment Payment”) to be made by the District, pursuant to a new installment purchase agreement (the “Installment Purchase Agreement”), and the Corporation and the District have agreed to
finance such payment by causing the execution and delivery of up to $109,875,000 in
aggregate principal amount of Orange County Sanitation District Revenue Refunding Certificate Anticipation Notes, Series 2018A (the “Notes”) to be repaid from the sale proceeds of future certificates of participation, other notes or obligations or lawfully available funds of the District;
73241406.5 OCSD 18-XX
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 will be instructed to execute and deliver the Notes,
evidencing direct, undivided fractional interests in the Installment Payment, and the
interest thereon;
WHEREAS, the District desires to provide for the public sale of the Notes in one or more discrete sale transactions;
WHEREAS, a form of the Notice of Intention to Sell to be published in connection
with the public offering and sale of the Notes 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 Notes has been prepared (such
Official Notice Inviting Bids, in the form presented to this meeting, with such changes, insertions and omissions as are made pursuant to this Resolution, being referred to herein as the “Notice Inviting Bids”);
WHEREAS, a form of the Preliminary Official Statement to be distributed in
connection with the public offering of the Notes 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 Notes to provide disclosure of 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 a dissemination agent to be named
therein and 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, there have been prepared and submitted to this meeting forms of:
(1) the Installment Purchase Agreement;
73241406.5 OCSD 18-XX
(2) the Trust Agreement;
(3) the Notice of Intention to Sell;
(4) the Notice Inviting Bids;
(5) the Preliminary Official Statement; and
(6) the Continuing Disclosure Agreement.
WHEREAS, all acts, conditions and things required by the Constitution and laws of the State of California to exist, to have happened and to have been performed precedent to and in connection with the consummation of the financing authorized
hereby do exist, have happened and have been performed in regular and due time,
form and manner as required by law, and the District is now duly authorized and empowered, pursuant to each and every requirement of law, to consummate such financing for the purpose, in the manner and upon the terms herein provided;
NOW, THEREFORE, the Board of Directors of the Orange County Sanitation
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 Assistant General Manager & Director of Finance and Administrative Services of the District, and such other officers of the District as the Assistant General Manager & 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 the Installment Payment in excess of $109,875,000, shall not result in a true interest cost for the Installment Payment in excess of 3.0% per annum and shall not result in an Installment Payment later than January 1, 2026.
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
73241406.5 OCSD 18-XX
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 Notes evidencing principal in an
aggregate amount of not to exceed $109,875,000, payable in the year and in the
amount, and evidencing principal of and interest on the Installment Payment as specified in the Trust Agreement as finally executed, are hereby authorized and approved.
Section 5. The payment or prepayment of the remaining principal components
of the Prior Installment Payment prior to or at maturity, and the interest components
thereof, and the payment or prepayment of the Prior Certificates evidencing interests therein, with the proceeds of the Notes 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 applicable Notice of Intention to Sell in connection with the offering and sale of a series of the Notes is hereby approved. The Authorized Officers are each hereby authorized and directed, for and in the name and on behalf of the District, to cause one or more Notices of Intention to Sell to be
published in The Bond Buyer (or in such other financial publication generally circulated
throughout the State of California or reasonably expected to be disseminated among prospective bidders for the Notes 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 one or more Notices Inviting Bids in
connection with the offering and sale of the Notes is hereby authorized and approved. The terms and conditions of the offering and sale of the Notes shall be as specified in the applicable Notice Inviting Bids. Bids for the purchase of the Notes shall be received at the time and place set forth in the applicable Notice Inviting Bids. The Authorized
Officers are each hereby authorized and directed, for and in the name and on behalf of
the District, to accept the bid for the Notes with the lowest true interest cost, or to reject all bids therefor, in accordance with the terms of the applicable Notice Inviting Bids.
Section 8. 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 Notes is hereby authorized and approved. The Authorized Officers are each hereby authorized to certify on behalf of the District
73241406.5 OCSD 18-XX
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 Notes 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 Notes, 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 Authorized Officers are, and each of them hereby is,
authorized and directed to execute and deliver any and all documents and instruments
and to do and cause to be done any and all acts and things necessary or proper for carrying out the execution and delivery of the Notes and the transactions contemplated by the notices, agreements and documents referenced in this Resolution. The Authorized Officers are further authorized and directed to execute and deliver such
additional notes as may be necessary or desirable to pay the Notes at maturity;
provided, however, that the documents executed and delivered in connection with any such notes shall be in the form approved pursuant to this Resolution in connection with the Notes.
Section 12. All actions heretofore taken by the officers and employees of the
District with respect to the execution, delivery and sale of the Notes, or in connection
with or related to any of the agreements or documents referenced in this Resolution, are hereby approved, confirmed and ratified.
Section 13. This Resolution shall take effect immediately upon its adoption.
73241406.5 OCSD 18-XX
PASSED AND ADOPTED at a regular meeting of the Orange County Sanitation District Board of Directors held on September 26, 2018.
Gregory C. Sebourn, PLS Chairman of the Board
ATTEST: Kelly A. Lore, MMC
Clerk of the Board APPROVED AS TO FORM:
Bradley R. Hogin
General Counsel Orange County Sanitation District
73241406.5 OCSD 18-XX
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 18-XX was passed
and adopted at a regular meeting of said Board on the 26th day of September, 2018, 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 26th day of September, 2018.
Kelly A. Lore, MMC Clerk of the Board of Directors Orange County Sanitation District
73241401.5 1001035824 FC-XX-XX OCSD 2018A CANs Corporation Resolution
RESOLUTION NO. FC-XX
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 REVENUE REFUNDING CERTIFICATE ANTICIPATION
NOTES, SERIES 2018A, AUTHORIZING THE EXECUTION AND
DELIVERY OF SUCH NOTES EVIDENCING PRINCIPAL IN AN AGGREGATE AMOUNT OF NOT TO EXCEED $109,875,000 AND AUTHORIZING THE EXECUTION OF OTHER 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”) caused the execution and delivery of $109,875,000 in aggregate principal amount of Orange County Sanitation District Revenue Refunding Certificate Anticipation Notes, Series 2016B, of which $109,875,000 in principal amount
is currently outstanding (the “Prior Certificates”);
WHEREAS, the District desires to prepay all of the Prior Certificates by paying all of the principal component of the installment payment relating to the Prior Certificates (the “Prior Installment Payment”), and the interest component thereof, thereby causing all of the Prior Certificates to be paid;
WHEREAS, to provide the funds necessary to pay the Prior Installment Payment
to be so paid, the District and the Orange County Sanitation District Financing Corporation (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 Payment”)
to be made by the District, pursuant to a new installment purchase agreement (the “Installment Purchase Agreement”), and the Corporation and the District have agreed to finance such payment by causing the execution and delivery of up to $109,875,000 in aggregate principal amount of Orange County Sanitation District Revenue Refunding
Certificate Anticipation Notes, Series 2018A (the “Notes”) to be repaid from future
certificates of participation, other notes or obligations or lawfully available funds of the District;
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
73241401.5 FC-XX-XX
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 will be instructed to execute and deliver the Notes,
evidencing direct, undivided fractional interests in the Installment Payment, and the
interest thereon;
WHEREAS, the Corporation desires to assist the District to provide for the public sale of the Notes;
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 $109,875,000, shall not result in a true interest cost for the
Installment Payments in excess of 3.0% per annum and shall not result in a final Installment Payment later than January 1, 2026.
73241401.5 FC-XX-XX
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 Notes evidencing principal in an
aggregate amount of not to exceed $109,875,000, payable in the year and in the amount, and evidencing direct, undivided fractional interests in the Installment Payment, and the interest thereon, as specified in the Trust Agreement as finally executed, are hereby authorized and approved.
Section 5. The Authorized Officers 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 Notes and the transactions contemplated by the agreements or documents referenced in this Resolution. The
Authorized Officers are further authorized and directed to assist the District in delivering
such additional notes as may be necessary or desirable to pay the Notes at maturity; provided, however, that the documents executed and delivered in connection with any such notes shall be in the form approved pursuant to this Resolution in connection with the Notes.
Section 6. All actions heretofore taken by the officers and agents of the
Corporation with respect to the execution, delivery and sale of the Notes, 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.
73241401.5 FC-XX-XX
PASSED AND ADOPTED at a meeting of the Orange County Sanitation District Financing Corporation held on September 26, 2018.
Gregory C. Sebourn, PLS President, Orange County Sanitation District Financing Corporation
ATTEST:
Kelly A. Lore, MMC Secretary, Orange County Sanitation District Financing Corporation
APPROVED AS TO FORM: Bradley R. Hogin
General Counsel, Orange County
Sanitation District Financing Corporation
73241401.5 FC-XX-XX
STATE OF CALIFORNIA )
) ss
COUNTY OF ORANGE )
I, Kelly Lore, Secretary of the Orange County Sanitation District Financing
Corporation, do hereby certify that the foregoing Resolution No. FC-XX was passed and
adopted at a regular meeting of said Board on the 26th day of September, 2018, 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 26th day of
September, 2018.
Kelly A. Lore, MMC Secretary, Orange County Sanitation District
Financing Corporation
DRAFT OF 09/05/18
73249923.5 1001035824 OCSD 2018A CANs
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 November 1, 2018
Relating to $_______________
Orange County Sanitation District
Revenue Refunding Certificate Anticipation Notes, Series 2018A
TABLE OF CONTENTS
Page
73249923.5 i
ARTICLE I
DEFINITIONS; EQUAL SECURITY
Section 1.01. Definitions........................................................................................................ 2 Section 1.02. Definitions in Installment Purchase Agreement .............................................. 8 Section 1.03. Equal Security .................................................................................................. 8
ARTICLE II
TERMS AND CONDITIONS OF NOTES
Section 2.01. Preparation and Delivery of Notes ................................................................... 9 Section 2.02. Denomination, Medium and Dating of Notes .................................................. 9 Section 2.03. Payment of Notes; Interest Computation ......................................................... 9
Section 2.04. Form of Notes ................................................................................................ 10
Section 2.05. Execution of Notes and Replacement Notes .................................................. 10 Section 2.06. Transfer and Payment of Notes; Exchange of Notes ..................................... 10 Section 2.07. Note Registration Books ................................................................................ 10 Section 2.08. Reserved ......................................................................................................... 10
Section 2.09. Notes Mutilated, Lost, Destroyed or Stolen................................................... 10
Section 2.10. Book-Entry System ........................................................................................ 11
ARTICLE III PROCEEDS OF NOTES
Section 3.01. Delivery of Notes ........................................................................................... 13
Section 3.02. Deposit and Transfer of Proceeds of Notes ................................................... 13
Section 3.03. Costs of Issuance Fund .................................................................................. 13
ARTICLE IV PREPAYMENT OF NOTES
Section 4.01. Optional Prepayment ..................................................................................... 14
Section 4.02. Reserved ......................................................................................................... 14
Section 4.03. Selection of Notes for Optional Prepayment ................................................. 14 Section 4.04. Notice of Prepayment .................................................................................... 14 Section 4.05. Partial Prepayment of Notes .......................................................................... 15 Section 4.06. Effect of Prepayment ..................................................................................... 15
ARTICLE V
ASSIGNMENT AND PLEDGE; FUNDS AND ACCOUNTS
Section 5.01. Assignment and Pledge .................................................................................. 15 Section 5.02. Installment Payment Fund ............................................................................. 16 Section 5.03. Investment of Moneys.................................................................................... 17
Section 5.04. Brokerage Confirmations ............................................................................... 17
TABLE OF CONTENTS (continued)
Page
73249923.5 ii
ARTICLE VI COVENANTS
Section 6.01. Compliance with Trust Agreement ................................................................ 18 Section 6.02. Compliance with Installment Purchase Agreement ....................................... 18
Section 6.03. Compliance with Master Agreement ............................................................. 18
Section 6.04. Observance of Laws and Regulations ............................................................ 18 Section 6.05. Other Liens..................................................................................................... 18 Section 6.06. Prosecution and Defense of Suits .................................................................. 18 Section 6.07. Accounting Records and Statements ............................................................. 18
Section 6.08. Tax Covenants ............................................................................................... 19
Section 6.09. Continuing Disclosure ................................................................................... 22 Section 6.10. Further Assurances......................................................................................... 22
ARTICLE VII DEFAULT AND LIMITATIONS OF LIABILITY
Section 7.01. Action upon Event of Default ........................................................................ 22
Section 7.02. Other Remedies of the Trustee ...................................................................... 23 Section 7.03. Non-Waiver.................................................................................................... 23 Section 7.04. Remedies Not Exclusive ................................................................................ 24 Section 7.05. Application of Amounts After Default .......................................................... 24
Section 7.06. Trustee May Enforce Claims Without Possession of Notes .......................... 24
Section 7.07. Limitation on Suits ......................................................................................... 25 Section 7.08. No Liability by the Corporation to the Owner ............................................... 25 Section 7.09. No Liability by the District to the Owners..................................................... 25 Section 7.10. No Liability of the Trustee to the Owners ..................................................... 25
ARTICLE VIII
THE TRUSTEE
Section 8.01. Employment of the Trustee; Duties ............................................................... 26 Section 8.02. Removal and Resignation of the Trustee ....................................................... 26 Section 8.03. Compensation and Indemnification of the Trustee ........................................ 27
Section 8.04. Protection of the Trustee ................................................................................ 28
ARTICLE IX AMENDMENT OF OR SUPPLEMENT TO TRUST AGREEMENT
Section 9.01. Amendment or Supplement ........................................................................... 29 Section 9.02. Disqualified Notes ......................................................................................... 30
Section 9.03. Endorsement or Replacement of Notes After Amendment or
Supplement .................................................................................................... 30 Section 9.04. Amendment by Mutual Consent .................................................................... 30
TABLE OF CONTENTS (continued)
Page
73249923.5 iii
ARTICLE X DEFEASANCE
Section 10.01. Discharge of Notes and Trust Agreement ...................................................... 31 Section 10.02. Unclaimed Moneys ........................................................................................ 32
ARTICLE XI
MISCELLANEOUS
Section 11.01. Benefits of Trust Agreement .......................................................................... 32 Section 11.02. Successor Deemed Included in all References to Predecessor ...................... 32 Section 11.03. Execution of Documents by Owners ............................................................. 33
Section 11.04. Waiver of Personal Liability .......................................................................... 33
Section 11.05. Acquisition of Notes by District .................................................................... 33 Section 11.06. Content of Written Certificates ...................................................................... 33 Section 11.07. Funds and Accounts ....................................................................................... 34 Section 11.08. Article and Section Headings, Gender and References ................................. 34
Section 11.09. Partial Invalidity............................................................................................. 34
Section 11.10. California Law ............................................................................................... 35 Section 11.11. Notices ........................................................................................................... 35 Section 11.12. Effective Date ................................................................................................ 35 Section 11.13. Execution in Counterparts.............................................................................. 35
EXHIBIT A – FORM OF NOTE
73249923.5
TRUST AGREEMENT
THIS TRUST AGREEMENT (this “Trust Agreement”), is dated as of November 1,
2018, 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 caused the execution
and delivery of $109,875,000 in aggregate principal amount of Orange County Sanitation
District Revenue Refunding Certificate Anticipation Notes, Series 2016B, of which $109,875,000 in principal amount is currently outstanding (the “Prior Notes”);
WHEREAS, the District desires to prepay all of the Prior Notes by paying all of the principal component of the installment payment relating to the Prior Notes (the “Prior
Installment Payment”), and the interest component thereof, thereby causing all of the Prior Notes
to be paid;
WHEREAS, to provide the funds necessary to prepay the Prior Installment Payment, 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 payment (the “Installment Payment”) to be made by the District, pursuant to a new installment purchase agreement (the “Installment Purchase Agreement”), and the Corporation and the District have agreed to finance such payment by causing the execution and delivery of $____________ in aggregate principal amount of Orange County Sanitation
District Revenue Refunding Certificate Anticipation Notes, Series 2018A (the “Notes”), which
are certificates of participation evidencing direct, fractional undivided interests in the Installment Payment and the interest thereon, to be made by the District pursuant to the 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 the Installment Purchase Agreement, and the Installment Payment, 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 the Installment Purchase Agreement to the Trustee; and
73249923.5 2
WHEREAS, all acts, conditions and things required by law to exist, to have happened and to have been performed precedent to and in connection with the execution and delivery of
this Trust Agreement do exist, have happened and have been performed in regular and due time,
form and manner as required by law, and the parties hereto are now duly authorized to execute and deliver this Trust Agreement;
NOW, THEREFORE, in consideration of the premises and of the mutual agreements and covenants contained herein and for other good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, the parties hereto do hereby agree as follows:
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 Notes 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
Assistant General Manager & Director of Finance and Administrative Services of the District, the Controller of the District and any other Person authorized by the Assistant General Manager & 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 Notes.
“Book-Entry Notes” means the Notes registered in the name of the nominee of DTC, or any successor securities depository for the Notes, as the Owner thereof pursuant to the terms and provisions of Section 2.10 hereof.
“Business Day” means a day other than (a) Saturday or Sunday, (b) a day on which
banking institutions in the city in which the Principal Office is located are authorized or required by law to be closed, and (c) a day on which the New York Stock Exchange is authorized or obligated by law or executive order to be closed.
“Cede & Co.” means Cede & Co., the nominee of DTC, and any successor nominee of
DTC with respect to the Notes.
73249923.5 3
“Closing Date” means November __, 2018.
“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 dissemination agent thereunder, 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 Notes, including, but not limited to, all printing and document preparation expenses in connection with this Trust Agreement, the Installment Purchase Agreement, the Notes and any preliminary official statement and final official statement pertaining to the Notes, rating agency fees, market study
fees, legal fees and expenses of counsel with respect to the execution and delivery of the Notes,
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 Notes, to the extent such fees and expenses are approved by the District.
“Costs of Issuance Fund” means the fund by that name established in accordance with
Section 3.03 hereof.
“Depository” means the securities depository acting as Depository pursuant to Section 2.10 hereof.
“District” means the Orange County Sanitation District, a county sanitation district organized and existing under the laws of the State, and any successor thereto.
“DTC” means The Depository Trust Company, New York, New York and its successors.
“Event of Default” shall have the meaning set forth in Section 6.01 of the Installment Purchase Agreement.
“Government Obligations” means any of the following which are noncallable by the issuer thereof except to the extent not permitted by the laws of the State as an investment for the
moneys to be invested therein at the time of investment:
(i) (a) direct general obligations of the United States of America, (b) obligations the payment of the principal of and interest on which are unconditionally guaranteed as to the full and timely payment by the United States of America or (c) any fund or other pooling arrangement whose assets consist exclusively of the obligations
listed in clause (a) or (b) of this clause (i) and which is rated at least “P-1” by Moody’s;
provided that, such obligations shall not include unit investment trusts or mutual fund obligations;
73249923.5 4
(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) are 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 Federal National Mortgage Association; 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 Payment” means the Installment Payment required to be made by the
District pursuant to Section 3.02 of the Installment Purchase Agreement.
“Installment Purchase Agreement” means the Installment Purchase Agreement, dated as of the date hereof, by and between the District and the Corporation, as originally executed and as it may from time to time be amended in accordance with the provisions thereof.
“Interest Account” means the account by that name within the Installment Payment
Fund established in accordance with Section 5.02 hereof.
“Interest Payment Date” means February 15 and August 15 of each year, commencing February 15, 2019, through and including the Maturity Date.
“Letter of Representations” means the letter of the District delivered to and accepted by the Depository on or prior to the delivery of the Notes as Book-Entry Notes setting forth the
basis on which the Depository serves as depository for such Book-Entry Notes, as originally
executed or as it may be supplemented or revised or replaced by a letter to a substitute Depository.
“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.
“Maturity Date” means August 15, 2021.
“Moody’s” means Moody’s Investors Service, a corporation organized and existing under the laws of the State of Delaware, its successors and assigns, except that if such corporation shall no longer perform the function of a securities rating agency for any reason, the
73249923.5 5
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.
“Notes” means the Orange County Sanitation District Revenue Refunding Certificates of Participation (Certificate Anticipation Notes), Series 2018A, also known as the Orange County Sanitation District Revenue Refunding Certificate Anticipation Notes, Series 2018A, executed
and delivered by the Trustee pursuant hereto.
“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 Notes, means
(subject to the provisions of Section 9.02 hereof) all Notes except (a) Notes previously canceled
by the Trustee or delivered to the Trustee for cancellation, (b) Notes paid or deemed to have been paid within the meaning of Section 10.01 hereof, and (c) Notes in lieu of or in substitution for which other Notes 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 Note
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 Notes as securities depository.
“Participating Underwriter” has the meaning ascribed thereto in the Continuing
Disclosure Agreement.
“Permitted Investments” means any of the following, except to the extent not permitted by the laws of the State as an investment for the moneys to be invested therein at the time of investment:
(1) Government Obligations;
(2) Bonds, debentures, notes, participation certificates or other evidences of indebtedness issued, or the principal of and interest on which are unconditionally guaranteed, by the Federal Intermediate Credit Bank, the Federal Home Loan Bank System, the Government National Mortgage Association or any other agency or
instrumentality of or corporation wholly owned by the United States of America when
such obligations are backed by the full faith and credit of the United States for the full and timely payment of principal and interest;
73249923.5 6
(3) Obligations of any state of the United States or any political subdivision thereof, which at the time of investment are rated “Aa3” or higher by Moody’s and
“AA-” or higher by S&P; or which are rated by Moody’s “VMIG1” or better and by S&P
“A-1+” or better with respect to commercial paper, or “VMIG1” and “SP-1,” respectively, with respect to municipal notes;
(4) Bank time deposits and bank deposit accounts evidenced by certificates of deposit, deposit accounts, bankers’ acceptances, issued by any bank, trust company or
national banking association insured by the Federal Deposit Insurance Corporation
(including the Trustee); provided that (a) such bank, trust company or national banking association be rated “Aa3” or better by Moody’s and “AA-” or better by S&P; and (b) the aggregate of such bank time deposits and bankers’ acceptances issued by any bank, trust company or banking association does not exceed at any one time 10% of the aggregate of
the capital stock, surplus and undivided profits of such bank, trust company or banking
association and that such capital stock, surplus and undivided profits shall not be less 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, “Aa3” or better by Moody’s and “AA-” or better by S&P;
(6) Repurchase agreements with maturities of not more than one year entered into with financial institutions such as banks or trust companies organized under state law
or national banks or banking associations (including the Trustee), insurance companies or
government bond dealers reporting to, trading with, and recognized as a primary dealer by, the Federal Reserve Bank of New York and a member of the Securities Investor Protection Corporation or with a dealer or parent holding company that is rated, at the time of investment, or whose long-term debt obligations (or senior debt or claims paying
ability of the financial entity’s guarantor) are rated, at the time of investment, “Aa3” or
better by Moody’s and “AA-” or better by S&P, provided such repurchase agreements are in writing, secured by obligations described in paragraphs (1) and (2) of this definition having a fair market value, exclusive of accrued interest, at least equal to the amount invested in the repurchase agreements and in which the Trustee has a perfected first lien
in, and retains possession of, such obligations free from all third party claims;
(7) Investment agreements, forward purchase agreements and reserve fund put agreements with any corporation, including banking or financial institutions, or agreements entered into with subsidiaries (of a parent company), provided the obligations of the subsidiary under the agreement are unconditionally guaranteed by the parent, the
corporate debt of which (or senior debt or claims paying ability of the financial entity’s
73249923.5 7
guarantor) is rated, at the time of investment, “Aa3” or better by Moody’s and “AA-” or better by S&P;
(8) Guaranteed investment contracts or similar funding agreements issued by
insurance companies, provided that either the long term corporate debt of such insurance company, at the time of investment, is rated, at the time of investment, “Aa3” or better by Moody’s and “AA-” or better by S&P or which agreements are fully and continuously secured by a valid and perfected first priority security interest in obligations described in
paragraph (1) or (2) of this definition, or that the following conditions are met: (a) the
market value of the collateral is maintained at levels acceptable to Moody’s and S&P, (b) the Trustee or a third party acting solely as agent for the Trustee has possession of the collateral, (c) the Trustee has a perfected first priority security interest in the collateral, (d) the collateral is free and clear of third-party liens, and (e) failure to maintain the
requisite collateral level will require the Trustee to liquidate collateral;
(9) Corporate commercial paper rated “P-1” or better by Moody’s and “A-1+” or better by S&P at the time of investment;
(10) Taxable government money market portfolios which are rated “AAAm” or “AAAm-G” by S&P and “P-1” by Moody’s (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.
“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.
“Prior Notes” has the meaning ascribed thereto in the recitals hereto.
“Prior Notes Trustee” means U.S. Bank National Association, as trustee for the Prior Notes.
“Record Date” means, with respect to the interest payable on any Interest Payment Date, the first day of the calendar month on which such Interest Payment Date falls, whether or not
such day is a Business Day.
“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
73249923.5 8
deemed to refer to any other nationally recognized securities rating agency selected by the District.
“State” means the State of California.
“Tax Certificate” means the Tax Certificate as to Arbitrage and the Provisions of
Sections 103 and 141-150 of the Internal Revenue Code of 1986, relating to the Notes, executed by the District at the time of execution and delivery of the Notes, as amended or supplemented from time to time.
“Trust Agreement” means this Trust Agreement, dated as of November 1, 2018, 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 10.02 hereof.
“Written Certificate” and “Written Request” mean (a) with respect to the Corporation, a written certificate or written request, respectively, signed in the name of the Corporation by an Authorized Corporation Representative, and (b) with respect to the District, a written certificate or written request, respectively, signed in the name of the District by an Authorized District
Representative. Any such certificate or request may, but need not, be combined in a single
instrument with any other instrument, opinion or representation, and the two or more so combined shall be read and construed as a single instrument.
Section 1.02. Definitions in Installment Purchase Agreement. Except as otherwise herein defined and unless the context otherwise requires, the terms defined in the Installment
Purchase Agreement shall for all purposes hereof and of any amendment hereof or supplement
hereto and of any report or other document mentioned herein have the meanings defined therein, such definitions to be equally applicable to both the singular and plural forms of any of the terms defined therein. With respect to any defined term which is given a different meaning under this Trust Agreement than under the Installment Purchase Agreement, as used herein it shall have the
meaning given herein.
Section 1.03. Equal Security. In consideration of the acceptance of the Notes 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 Notes which may be executed and delivered hereunder, subject to each of the
agreements, conditions, covenants and terms contained herein; and all agreements, conditions,
covenants and terms contained herein required to be observed or performed by or on behalf of the Trustee shall be for the equal and proportionate benefit, protection and security of all Owners without distinction, preference or priority as to security or otherwise of any Notes over any other Notes 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.
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ARTICLE II
TERMS AND CONDITIONS OF NOTES
Section 2.01. Preparation and Delivery of Notes. The Trustee is hereby authorized, upon the Written Request of the District, to execute and deliver the Notes in the aggregate principal amount of $____________, evidencing the aggregate principal amount of the Installment Payment and each evidencing a direct, fractional undivided interest in the Installment
Payment, and the interest thereon. The Installment Payment evidenced by the Notes shall
constitute the principal evidenced thereby and the interest on such Installment Payment shall constitute the interest evidenced thereby. The Notes shall be numbered, with or without prefixes, as directed by the Trustee.
Section 2.02. Denomination, Medium and Dating of Notes. The Notes shall be
designated as the “Orange County Sanitation District Revenue Refunding Certificate
Anticipation Notes, Series 2018A” and shall be prepared in the form of fully registered Notes, without coupons, in Authorized Denominations and shall be payable in lawful money of the United States of America. The Notes shall be dated the Closing Date. Each Note 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 Note shall evidence interest from such Interest Payment Date, or unless such date of execution shall be on or prior to January 15, 2019, in which case such Note shall represent interest from the Closing Date. Notwithstanding, the foregoing, if, as shown by the records of the Trustee, interest evidenced by the Notes shall be in
default, each Note 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 of Notes; Interest Computation.
(a) Method and Place of Payment. Except as otherwise provided in the Letter of Representations, payments of interest evidenced by the Notes 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 Notes, on the Maturity Date or on prepayment in
whole or in part prior thereto, shall be made only upon presentation and surrender of the Notes at the Principal Office. The Owner of $1,000,000 or more in aggregate principal amount of Notes may request in writing that the Trustee pay the interest thereon by wire transfer to an account in the United States, such request to be filed with the Trustee not later than the applicable Record
Date.
(b) Computation of Interest. The Notes shall bear interest at a rate of ____% per annum. The interest evidenced by the Notes shall be payable on each Interest Payment Date to and including the Maturity Date or prepayment prior thereto, and shall represent the sum of the interest on the Installment Payment coming due on the Interest Payment Dates in each year. The
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principal evidenced by the Notes shall be payable on the Maturity Date and shall represent the Installment Payment coming due on the Maturity Date. Interest evidenced by the Notes shall be
computed on the basis of a 360-day year consisting of twelve 30-day months.
Section 2.04. Form of Notes. The Notes 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 Notes and Replacement Notes. The Notes shall be
executed by the Trustee by the manual signature of an authorized signatory of the Trustee. The
Trustee shall deliver replacement Notes in the manner and as contemplated by this Article. Such replacement Notes, shall be executed as herein provided and shall be in Authorized Denominations.
Section 2.06. Transfer and Payment of Notes; Exchange of Notes. Each Note 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 Note 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 Note as the absolute owner of such Note for all purposes, whether or
not the principal or interest evidenced by such Note 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 Note shall be made only to such Owner, which payments shall be valid and effectual to satisfy and discharge the liability evidenced by such Note to the extent of the sum or sums so paid.
Whenever any Note shall be surrendered for transfer, the Trustee shall execute and
deliver a new Note or Notes evidencing principal in the same aggregate amount. 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 Note may be exchanged at the Principal Office for Notes evidencing principal in a
like aggregate principal amount in such Authorized Denominations as the Owner thereof may
request. The Trustee shall require the payment by the Owner requesting such exchange of any tax or other governmental charge required to be paid with respect to such exchange.
Section 2.07. Note Registration Books. The Trustee shall keep at its Principal Office sufficient books for the registration and transfer of the Notes, 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 Notes on such books as hereinabove provided.
Section 2.08. Reserved.
Section 2.09. Notes Mutilated, Lost, Destroyed or Stolen. If any Note shall become
mutilated, the Trustee, at the expense of the Owner thereof, shall execute and deliver a new Note
evidencing a like principal amount and number in exchange and substitution for the Note so mutilated, but only upon surrender to the Trustee of the Note so mutilated. Every mutilated Note
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so surrendered to the Trustee shall be canceled by it. If any Note 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 Note evidencing a like principal amount, numbered as the Trustee shall determine, in lieu of and in substitution for the Note so lost, destroyed or stolen. The Trustee may require payment of a sum not exceeding the actual cost of preparing each new Note executed and delivered by it under this
Section and of the expenses which may be incurred by it under this Section. Any Note executed
and delivered under the provisions of this Section in lieu of any Note alleged to be lost, destroyed or stolen shall be equally and proportionately entitled to the benefits hereof with all other Notes executed and delivered hereunder, and the Trustee shall not be required to treat both the original Note and any replacement Note as being Outstanding for the purpose of determining
the amount of Notes which may be executed and delivered hereunder or for the purpose of
determining any percentage of Notes Outstanding hereunder, but both the original and replacement Note shall be treated as one and the same. Notwithstanding any other provision of this Section, in lieu of executing and delivering a new Note for a Note which has been lost, destroyed or stolen and which evidences principal that is then payable, the Trustee may make
payment of such Note to the Owner thereof if so instructed by the District.
Whenever in this Trust Agreement provision is made for the cancellation by the Trustee of any Notes, the Trustee shall destroy such Notes and deliver a certificate of such destruction to the District.
Section 2.10. Book-Entry System. (a) The Notes shall be initially executed and
delivered as Book-Entry Notes, and the Notes shall be in the form of a separate single fully
registered Note. Upon initial execution and delivery of the Notes, the ownership of each Note 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 Note registered in the name of the Nominee shall be made on the Maturity 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 Notes, 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 Notes. 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 Notes, (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 Notes, (iii) the selection by the Depository and its Participants of the beneficial interests in Book-Entry Notes to be prepaid in the event Notes 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 or interest evidenced by Book-Entry Notes, or (v) any consent
given or other action taken by the Depository as Owner.
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(c) The District, the Corporation and the Trustee may treat and consider the Person in whose name each Book-Entry Note is registered in the registration books maintained by the
Trustee as the absolute Owner of such Book-Entry Note for the purpose of payment of principal
and interest evidenced by such Note, for the purpose of selecting any Notes, or portions thereof, to be prepaid, for the purpose of giving notices of matters with respect to such Note, for the purpose of registering transfers with respect to such Note, 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 and interest evidenced by the Notes to the respective Owner, as shown in the registration books maintained by the Trustee, or his respective attorney duly authorized in writing, and all such payments shall be valid and effective to fully
satisfy and discharge the obligations with respect to payment of principal and interest evidenced
by the Notes 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 Note evidencing principal and interest evidenced by the Notes. 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
Date, the word Nominee in this Trust Agreement shall refer to such nominee of the Depository.
(f) To qualify the Book-Entry Notes 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 Notes 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 Notes 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 Notes and that such Notes 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 Notes. In such
event, the Trustee shall transfer and exchange certificated Notes as requested by the Depository and any other Owners in appropriate amounts. If (i) the Depository determines not to continue to act as securities depository for Book-Entry Notes, 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 Note for such Book-Entry Notes, 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 Notes shall
no longer be restricted to being registered in the registration books maintained by the Trustee in
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the name of the Nominee, but shall be registered in whatever name or names the Owners transferring or exchanging such Notes 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 Notes to any Participant having Book-Entry Notes credited to its account with the Depository, and (ii) to arrange for another securities depository to maintain custody of certificates evidencing the Book-
Entry Notes.
(h) Notwithstanding any other provision of this Trust Agreement to the contrary, if DTC is the sole Owner of the Notes, so long as any Book-Entry Note is registered in the name of the Nominee, all payments of principal and interest evidenced by such Note and all notices with respect to such Note 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 Notes.
ARTICLE III PROCEEDS OF NOTES
Section 3.01. Delivery of Notes. The Trustee is hereby authorized to execute the Notes
and deliver them to the original purchaser thereof upon receipt of a Written Request of the District and on receipt of the proceeds of sale of the Notes.
Section 3.02. Deposit and Transfer of Proceeds of Notes. On the Closing Date, the Trustee shall transfer a portion of the net proceeds received by the Trustee from the sale of the
Notes in the amount of $_______________ to the Prior Notes Trustee for deposit in the
Installment Payment Fund relating to the Prior Notes and shall deposit a portion of the net proceeds received by the Trustee from the sale of the Notes in the amount of $_____________ in the Costs of Issuance Fund. The Trustee shall establish a special fund known as the Proceeds Fund to facilitate the transfer required by this Section 3.02 to the Prior Notes Trustee. The
Proceeds Fund shall be closed immediately following the transfer.
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
73249923.5 14
six months after the Closing Date, the Trustee shall transfer any amounts then remaining in the Costs of Issuance Fund to the Installment Payment Fund. Upon such transfer, the Costs of
Issuance Fund shall be closed.
ARTICLE IV PREPAYMENT OF NOTES
Section 4.01. Optional Prepayment. The Notes are subject to optional prepayment
prior the Maturity Date, on any date on or after August 1, 2021, in whole or in part, in
Authorized Denominations, from and to the extent of prepayment of the Installment Payment paid pursuant to Section 4.01 of the Installment Purchase Agreement or from any other source of available funds, any such prepayment to be at a price equal to the principal evidenced by the Notes to be prepaid, plus accrued interest evidenced thereby to the date fixed for prepayment,
without premium.
Section 4.02. Reserved.
Section 4.03. Selection of Notes for Optional Prepayment. Whenever less than all the Outstanding Notes are to be prepaid on any one date pursuant to Section 4.01 hereof, Notes 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 Notes so selected for prepayment on such date. For purposes of such selection, any Notes may be prepaid in part in Authorized Denominations.
Section 4.04. Notice of Prepayment. When prepayment of the Notes is authorized
pursuant to Section 4.01, the Trustee shall give notice, at the expense of the District, of the
prepayment of the Notes. The notice of prepayment shall specify (a) the Notes or designated portions thereof (in the case of prepayment of the Notes 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 and (e) the CUSIP
number assigned to the Notes to be prepaid. Such notice of prepayment shall further state that on
the specified date there shall become due and payable upon each Note 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 the Notes pursuant to Section 4.01 hereof, unless at the time such notice is given the Notes 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 Notes 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 Notes. If a notice of prepayment of the Notes
contains such a condition and such moneys are not so received, the prepayment of the Notes 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
73249923.5 15
not so received and that there shall be no prepayment of the Notes pursuant to such notice of prepayment.
The District shall provide written notice to the Trustee of its intention to prepay the Notes
at least twenty-five (25) days prior to any prepayment date, unless such time period shall be waived by the Trustee. The Trustee shall, at least twenty (20) but not more than sixty (60) days prior to any prepayment date, give notice of prepayment to the respective Owners of the Notes 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 Notes or the
cessation of interest evidenced thereby on the date fixed for prepayment.
A certificate or other confirmation provided 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 Note is called for prepayment may object thereto or object to the cessation of interest evidenced thereby on the fixed prepayment date by any claim or showing that such Owner failed
to actually receive such notice of prepayment.
Section 4.05. Partial Prepayment of Notes. Upon surrender of any Note prepaid in part only, the Trustee shall execute and deliver to the Owner thereof a new Note or Notes evidencing the unprepaid principal with respect to the Note 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 Notes to be prepaid are
held by the Trustee, then on the prepayment date designated in such notice, the Notes 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 Notes so called for prepayment shall cease to accrue, such Notes shall cease to be entitled to any benefit or security hereunder and the
Owners of such Notes 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 Notes to be prepaid, pay such Notes at the prepayment price thereof, and such moneys shall be pledged to such payment. All Notes 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 the Installment Payment, and the interest thereon, from the District and the right to exercise any remedies provided therein in the event of a default by
73249923.5 16
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 of the Installment Payment, 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 the required Installment Payment and all interest payments
thereon, are paid in full pursuant to the Installment Purchase Agreement and until the first date
upon which the Notes are no longer Outstanding. The Trustee shall deposit in the Installment Payment Fund the Installment Payment, and each payment of interest thereon, as and when paid by the District and received by the Trustee. The moneys in the Installment Payment Fund shall be held in trust by the Trustee for the benefit of the Owners and shall be used and disbursed only
for the purposes and uses herein authorized.
(b) The Trustee shall transfer the amounts on deposit in the Installment Payment Fund, at the times and in the manner hereinafter provided, to the following respective accounts within the Installment Payment Fund, each of which the Trustee hereby agrees to establish and maintain until the required Installment Payment, and the interest thereon, is paid in full pursuant
to the Installment Purchase Agreement and until the first date upon which the Notes are no
longer Outstanding. The moneys in each of such accounts shall be held in trust by the Trustee for the benefit of the Owners and shall be used and disbursed only for the purposes and uses herein authorized.
(i) Interest Account. The Trustee, on or before each Interest Payment Date,
shall deposit in the Interest Account that amount of moneys representing the interest on
the Installment Payment coming due on each Interest Payment Date. Moneys in the Interest Account shall be used by the Trustee for the purpose of paying the interest evidenced by the Notes when due and payable.
(ii) Principal Account. The Trustee, on or before the Maturity Date, shall
deposit in the Principal Account that amount of moneys representing the Installment
Payment coming due on such date. Moneys in the Principal Account shall be used by the Trustee for the purpose of paying the principal evidenced by the Notes when due and payable.
(iii) Prepayment Account. The Trustee, on the prepayment date specified in
the Written Request of the District filed with the Trustee at the time that any prepaid
Installment Payment is paid to the Trustee pursuant to the Installment Purchase Agreement, shall deposit in the Prepayment Account that amount of moneys representing such prepaid Installment Payment, the accrued interest thereon to the prepayment date
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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 Notes pursuant to Section 4.01 hereof. Moneys in the Prepayment Account shall be used by the Trustee for the purpose of paying the interest, premium, if any, and principal evidenced by the Notes to be prepaid pursuant to Section 4.01 hereof.
Section 5.03. 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,
the Trustee shall invest any funds held by it in Permitted Investments described in clause (10) of the definition thereof. Permitted Investments that are registerable securities shall be registered in the name of the Trustee. All interest, profits and other income received from the investment of moneys in any fund or account established pursuant to this Trust Agreement 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.
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 5.04. Brokerage 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, such statements will be delivered via the Trustee’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 Trustee 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.
73249923.5 18
ARTICLE VI
COVENANTS
Section 6.01. Compliance with Trust Agreement. The Trustee will not execute or deliver any Notes in any manner other than in accordance with the provisions hereof, and the Corporation and the District will not suffer or permit any default by them to occur hereunder, but will faithfully comply with, keep, observe and perform all the agreements, conditions, covenants
and terms hereof required to be complied with, kept, observed and performed by them.
Section 6.02. Compliance with Installment Purchase Agreement. The Corporation and the District will faithfully comply with, keep, observe and perform all the agreements, conditions, covenants and terms contained in the Installment Purchase Agreement required to be complied with, kept, observed and performed by them and, together with the Trustee, will
enforce the Installment Purchase Agreement against the other party thereto in accordance with its
terms.
Section 6.03. Compliance with Master Agreement. The Corporation and the District will faithfully comply with, keep, observe and perform all the agreements, conditions, covenants and terms contained in the Master Agreement required to be complied with, kept, observed and
performed by them and, together with the Trustee, will enforce the Master Agreement against the
other party thereto in accordance with its terms.
Section 6.04. Observance of Laws and Regulations. The Corporation and the District will faithfully comply with, keep, observe and perform all valid and lawful obligations or regulations now or hereafter imposed on them by contract, or prescribed by any law of the
United States of America or of the State, or by any officer, board or commission having
jurisdiction or control, as a condition of the continued enjoyment of each and every franchise, right or privilege now owned or hereafter acquired by them, including their right to exist and carry on their respective businesses, to the end that such franchises, rights and privileges shall be maintained and preserved and shall not become abandoned, forfeited or in any manner impaired.
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 the Installment Payment, or the
interest thereon, or involving the rights of the Trustee or any Owner hereunder; provided, however, that the Trustee or any Owner at its or his election may appear in and defend any such action, suit or other proceeding.
Section 6.07. Accounting Records and Statements. The Trustee will keep proper
accounting records in which complete and correct entries shall be made of all transactions made
by the Trustee relating to the receipt, deposit and disbursement of the Installment Payment, and the interest thereon, and such accounting records shall be available for inspection by the
73249923.5 19
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:
“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 and reasonably satisfactory to and approved by the Trustee.
“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 Notes 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 Notes (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(h)(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).
“Tax Regulations” means the United States Treasury Regulations promulgated pursuant to sections 103 and 141 through 150 of the Code.
73249923.5 20
“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 Notes has the meaning set forth in section 1.148-4 of the
Tax Regulations.
(b) 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 Notes 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 Notes 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 Note 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 Note from the gross income of the owner thereof, the District shall comply with this covenant and each of the specific covenants in this Section.
(c) No Private Use or Private Payments. Except as would not cause any Note 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 Notes 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 Notes and not use or permit the use of such Gross
Proceeds (including all contractual arrangements with terms different than those applicable to the general public) or any property acquired, constructed or improved with such Gross Proceeds or the Gross Proceeds of any 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 Notes or of any 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.
(d) No Private Loan. Except as would not cause any Note 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 Notes 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
73249923.5 21
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 arrangement; or (iii) indirect benefits of such Gross Proceeds, or
burdens and benefits of ownership of any property acquired, constructed or improved with such Gross Proceeds, are otherwise transferred in a transaction that is the economic equivalent of a loan. For purposes of this covenant, the District will treat any transaction constituting a loan of Gross Proceeds of any of the Prior Issues as resulting in a loan of Gross Proceeds of the Notes.
(e) Not to Invest at Higher Yield. Except as would not cause any Note 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 Note to be retired, directly or indirectly invest Gross Proceeds of the Notes in any Investment, if as a result of that investment the yield of any Investment acquired with Gross Proceeds of the Notes,
whether then held or previously disposed of, would materially exceed the yield of the Notes
within the meaning of said section 148.
(f) Not Federally Guaranteed. Except to the extent such action or failure to act would not, pursuant to section 149(b) of the Code and the Tax Regulations and rulings thereunder, adversely affect the exclusion pursuant to section 103(a) of interest on the Notes
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 Note to be “federally guaranteed” within the meaning of section 149(b) of the Code and the Tax Regulations and rulings thereunder.
(g) Information Report. The District will timely file any information necessary to the exclusion pursuant to section 103(a) of the Code of interest on the Notes required by section
149(e) of the Code with the Secretary of the Treasury on Form 8038-G or such other form and in
such place as the Secretary of the Treasury may prescribe.
(h) 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 Notes 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 Notes not been relevant to either party.
(i) Notes Satisfy Section 149(g). The District represents that none of the Prior Issue
or the Notes 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 issuance 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 three-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 Notes other than for refunding purposes, (ii)(A) the District will not deliver the Notes unless on the date of the
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issuance of the Notes it reasonably expects that within the three-year period commencing on such date of issuance at least 85% of such spendable proceeds of the Notes will be expended for
the governmental purpose of the Notes and (B) at no time will more than 50% of such spendable
proceeds of the Notes be invested in Nonpurpose Investments having a substantially guaranteed yield for a period of four years or more.
(j) 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 Notes, in the Tax Certificate relating to the Notes or similar or other appropriate certificate, form or document.
(k) Tax Certificate. The District agrees to execute and deliver in connection with the execution and delivery of the Notes 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 Notes 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 Notes and upon being indemnified to its reasonable satisfaction,
shall, or any Owner or Beneficial Owner of Notes 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 VII DEFAULT AND LIMITATIONS OF LIABILITY
Section 7.01. Action upon Event of Default. An Event of Default under the Installment Purchase Agreement shall constitute an Event of Default hereunder and an Event of
Default under the Master Agreement shall constitute an Event of Default hereunder. The Trustee
may give notice, as assignee of the Corporation, of an Event of Default under the Installment Purchase Agreement to the District, and shall do so if directed to do so by the Owners of not less than 5% of the aggregate principal evidenced by Notes then Outstanding. In each and every case
73249923.5 23
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 Notes then
Outstanding, shall, upon notice in writing to the District and the Corporation (a) exercise any of
the remedies granted to the Corporation under the Installment Purchase Agreement, (b) exercise any of the remedies granted to the Trustee under the Master Agreement, and (c) take whatever action at law or in equity may appear necessary or desirable to enforce its rights pursuant to this Trust Agreement, the Installment Purchase Agreement or the Master Agreement or to protect and
enforce any of the rights vested in the Trustee or the Owners by this Trust Agreement, the Notes,
the Installment Purchase Agreement or the Master Agreement, either at law or in equity or in bankruptcy or otherwise, whether for the specific enforcement of any covenant or agreement or for the enforcement of any other legal or equitable right, including any one or more of the remedies set forth in Section 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 are unlawful or violate the rights of the Trustee; or
(c) by suit in equity upon the happening of any Event of Default hereunder to require
the Corporation and the District to account as the trustee of an express trust.
Section 7.03. Non-Waiver. A waiver of any default or breach of duty or contract by the Trustee or the Owners shall not affect any subsequent default or breach of duty or contract or impair any rights or remedies on any such subsequent default or breach of duty or contract. No delay or omission by the Trustee or the Owners to exercise any right or remedy accruing upon
any default or breach of duty or contract shall impair any such right or remedy or shall be
construed to be a waiver of any such default or breach of duty or contract or an acquiescence therein, and every right or remedy conferred upon the Trustee or the Owners by law or by this Article may be enforced and exercised from time to time and as often 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.
73249923.5 24
Section 7.04. Remedies Not Exclusive. Subject to the provisions of Section 7.01 hereof, no remedy herein conferred upon or reserved to the Trustee is intended to be exclusive of
any other remedy, and each such remedy shall be cumulative and shall be in addition to every
other remedy given hereunder or now or hereafter existing in law or in equity or by statute or otherwise and may be exercised without exhausting and without regard to any other remedy conferred by any law. The assertion or employment of any right or remedy hereunder, or otherwise, shall not prevent the concurrent or subsequent assertion or employment of any other
appropriate right or remedy.
Section 7.05. Application of Amounts After Default. All damages or other payments received by the Trustee for the enforcement of any rights and powers of the Trustee under this Article shall be deposited into the Installment Payment Fund and as soon as practicable thereafter applied:
(a) to the payment of all amounts due the Trustee under Section 8.03 hereof;
(b) unless the unpaid Installment Payment, 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 Notes, in respect of which, or for the benefit of which, money has been collected (other
than Notes 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 Notes due and payable; and
(ii) to the payment of all amounts then due for principal evidenced by the Notes, in respect of which, or for the benefit of which, money has been collected (other
than Notes 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 Notes due and payable.
(c) if the unpaid Installment Payment, 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 Notes 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 Note over any other Note, to the persons entitled thereto without any
discrimination or preference.
Section 7.06. Trustee May Enforce Claims Without Possession of Notes. All rights of action and claims under this Trust Agreement or the Notes may be prosecuted and enforced by the Trustee without the possession of any of the Notes 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
73249923.5 25
Trustee, its agents and counsel, be for the ratable benefit of the Owners of the Notes in respect of which such judgment has been recovered.
Section 7.07. Limitation on Suits. No Owner shall have any right to institute any
proceeding, judicial or otherwise, with respect to this Trust Agreement, or for the appointment of a receiver or trustee, or for any other remedy hereunder, unless (a) such Owner shall have previously given written notice to the Trustee of a continuing Event of Default hereunder, (b) the Owners of not less than a majority of the aggregate principal evidenced by Notes 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 Notes then Outstanding; it being understood and intended that no one or more Owners of Notes 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 Notes, 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 Notes.
Section 7.08. No Liability by the Corporation to the Owner. Except as expressly provided herein, the Corporation shall not have any obligation or liability to the Owners with
respect to the payment when due of the Installment Payment, 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 Payment, 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 Notes or the disbursement of the Installment Payment, 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 Payment, 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.
73249923.5 26
ARTICLE VIII
THE TRUSTEE
Section 8.01. Employment of the Trustee; Duties. The Corporation and the District hereby appoint and employ the Trustee to receive, deposit and disburse the Installment Payment, and the interest thereon, to prepare, execute, deliver and transfer the Notes 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 Notes 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 paragraph, 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
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appointed under this Trust Agreement shall signify its acceptance of such appointment by executing and delivering to the District and the Corporation and to its predecessor Trustee a
written acceptance thereof, and thereupon such successor Trustee, without any further act, deed
or conveyance, shall become vested with all the moneys, estates, properties, rights, powers, trusts, duties and obligations of such predecessor Trustee, with like effect as if originally named Trustee herein; but, nevertheless, at the written request of the District or of the successor Trustee, such predecessor Trustee shall execute and deliver any and all instruments of conveyance or
further assurance and do such other things as may reasonably be required for more fully and
certainly vesting in and confirming to such successor Trustee all the right, title and interest of such predecessor Trustee in and to any property held by it under this Trust Agreement and shall pay over, transfer, assign and deliver to the successor Trustee any money or other property subject to the trusts and conditions herein set forth.
Any corporation, association or agency into which the Trustee may be converted or
merged, or with which it may be consolidated, or to which it may sell or transfer its corporate trust business and assets as a whole or substantially as a whole, or any corporation or association resulting from any such conversion, sale, merger, consolidation or transfer to which it is a party, provided that such entity meets the combined capital and surplus requirements of this Section,
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 liabilities which it may incur in the exercise and performance of its powers and duties hereunder, including but not limited to
73249923.5 28
costs and expenses incurred in defending against any claim or liability, which are not due to its negligence or willful misconduct.
Section 8.04. Protection of the Trustee. The Trustee shall be protected and shall incur
no liability in acting or proceeding in good faith upon any affidavit, bond, certificate, consent, notice, request, requisition, resolution, statement, waiver or other paper or document which it shall in good faith believe to be genuine and to have been adopted, executed or delivered by the proper party or pursuant to any of the provisions hereof, and the Trustee shall be under no duty
to make any investigation or inquiry as to any statements contained or matters referred to in any
such instrument, but may accept and rely upon the same as conclusive evidence of the truth and accuracy of such statements. The Trustee shall be under no obligation to exercise any of the rights or powers vested in it by this Trust Agreement at the request or direction of any of the Owners of the Notes 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 Notes 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 Notes.
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 Notes 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 Notes 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.
73249923.5 29
The Trustee may, to the extent reasonably necessary, execute any of the trusts or powers hereof and perform any rights and obligations required of it hereunder by or through agents,
attorneys or receivers, and shall be entitled to advice of counsel concerning all matters of trust
and its rights and obligations hereunder, and the Trustee shall not be answerable for the negligence or misconduct of any such agent, attorney or receiver selected by it with reasonable care; provided, however, that in the event of any negligence or misconduct of any such attorney, agent or receiver, the Trustee shall diligently pursue all remedies of the Trustee against such
agent, attorney or receiver. The Trustee shall not be liable for any error of judgment made by it
in good faith unless it shall be proved that the Trustee was negligent in ascertaining the pertinent facts.
The Trustee shall not 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 Notes 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 Notes 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.
ARTICLE IX AMENDMENT OF OR SUPPLEMENT TO TRUST AGREEMENT
Section 9.01. Amendment or Supplement. (a) This Trust Agreement and the rights
and obligations of the Corporation, the District, the Owners and the Trustee hereunder may be amended or supplemented at any time by an amendment hereof or supplement hereto which shall become binding when the prior written consents of the Owners of a majority of the aggregate principal evidenced by the Notes then Outstanding, exclusive of Notes disqualified as provided
in Section 9.02 hereof, are filed with the Trustee. No such amendment or supplement shall
(i) extend the stated Maturity Date of any Note 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, (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
Notes 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 Notes then Outstanding.
(b) This Trust Agreement and the rights and obligations of the Corporation, the District, the Owners and the Trustee hereunder may also be amended or supplemented at any
time by an amendment hereof or supplement hereto which shall become binding upon execution,
without the written consents of any Owners, but only to the extent permitted by law and only for any one or more of the following purposes:
73249923.5 30
(i) to add to the agreements, conditions, covenants and terms required by the Corporation or the District to be observed or performed herein other agreements,
conditions, covenants and terms thereafter to be observed or performed by the
Corporation or the District, or to surrender any right or power reserved herein to or conferred herein on the Corporation or the District;
(ii) to make such provisions for the purpose of curing any ambiguity or of correcting, curing or supplementing any defective provision contained herein or in regard
to questions arising hereunder which the Corporation or the District may deem desirable
or necessary and not inconsistent herewith;
(iii) to make such additions, deletions or modifications as may be necessary or appropriate to assure the exclusion from gross income for federal income tax purposes of interest evidenced by the Notes; or
(iv) for any other reason, provided such amendment or supplement does not
adversely affect the rights or interests of the Owners.
Section 9.02. Disqualified Notes. Notes owned or held by or for the account of the District (but excluding Notes 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 Notes 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 Notes as to which such consent is given are disqualified as provided in this Section.
Section 9.03. Endorsement or Replacement of Notes After Amendment or
Supplement. After the effective date of any action taken as hereinabove provided in this
Article, the Trustee may determine that the Notes 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 Note and presentation of such Note for such purpose at the Principal Office a suitable notation as to such action shall be made on such Note. If the Trustee shall receive an
Opinion of Counsel advising that new Notes modified to conform to such action are necessary,
modified Notes shall be prepared, and in that case upon demand of the Owner of any Outstanding Notes such new Notes shall be exchanged at the Principal Office without cost to each Owner for Notes then Outstanding upon surrender of such Outstanding Notes.
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 Notes owned by such
Owner, provided that due notation thereof is made on such Notes.
73249923.5 31
ARTICLE X
DEFEASANCE
Section 10.01. Discharge of Notes 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 Notes 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 Note 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 Note shall have been paid or when (i) in case said Note or portion thereof has been selected for prepayment in accordance with Section 4.03 hereof prior to the Maturity 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 Note, 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 Note and due and to become due on or prior to the prepayment date or the Maturity Date, as the case may be, and (iii) in the event
the Maturity Date will not occur, and said Note 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 Note, 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 Note, or portion thereof, is deemed to have been paid in accordance with
this Section and stating the Maturity 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 Note, 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 and interest evidenced by said Note, or portions thereof. If payment of less than all of the Notes 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 Notes, or portions thereof in
the principal amounts designated to the Trustee by the District.
(c) After the payment of all the interest and principal evidenced by all Outstanding Notes 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
73249923.5 32
securities held by it pursuant hereto which are not required for the payment of the interest and principal evidenced by such Notes and all other amounts due hereunder and under the
Installment Purchase Agreement.
(d) Prior to any defeasance becoming effective under this Article, the District shall cause to be delivered (i) an executed copy of a report, addressed to the Trustee and the District, in form and in substance acceptable to the Trustee and the District, of a nationally recognized certified public accountant, or firm of such accountants, verifying that the Government
Obligations and cash, if any, satisfy the requirements of 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 Notes 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
Notes 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 Notes which remain unclaimed for two years after the date when such interest or principal evidenced by such Notes
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 Notes 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 Notes.
ARTICLE XI MISCELLANEOUS
Section 11.01. Benefits of Trust Agreement. Nothing contained herein, expressed or
implied, is intended to give to any Person other than the Corporation, the District, the Trustee
and the Owners any claim, remedy or right under or pursuant hereto, and any agreement, condition, covenant or term required herein to be observed or performed by or on behalf of the Corporation or the District shall be for the sole and exclusive benefit of the Trustee and the Owners.
Section 11.02. Successor Deemed Included in all References to Predecessor.
Whenever the Corporation, the District or the Trustee, or any officer thereof, is named or referred to herein, such reference shall be deemed to include the successor to the powers, duties and functions that are presently vested in the Corporation, the District or the Trustee, or such officer, and all agreements, conditions, covenants and terms required hereby to be observed or
73249923.5 33
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 Notes 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 Note shall
bind all future Owners of such Note 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 Notes, but nothing contained herein shall relieve any member, officer or employee of the District or the Corporation from the performance of any official duty provided by any applicable provisions of law, by the Installment Purchase Agreement or hereby.
Section 11.05. Acquisition of Notes by District. All Notes acquired by the District,
whether by purchase or gift or otherwise, shall be surrendered to the Trustee for cancellation.
Section 11.06. Content of Written Certificates. Every Written Certificate of the District and every Written Certificate of the Corporation with respect to compliance with any agreement, condition, covenant or term contained herein shall include (a) a statement that the
Person making or giving such certificate has read such agreement, condition, covenant or term
and the definitions herein relating thereto, (b) a brief statement as to the nature and scope of the examination or investigation upon which the statements contained in such certificate are based, (c) a statement that, in the opinion of the signer, the signer has made or caused to be made such examination or investigation as is necessary to enable the signer to express an informed opinion
as to whether or not such agreement, condition, covenant or 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.
73249923.5 34
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 Notes 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.
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 Notes, 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 Notes pursuant hereto irrespective of the fact that any one or
73249923.5 35
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: Assistant General Manager & 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 National Association 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, telecopier or email (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, 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.
73249923.5 36
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
(S E A L)
Attest:
By: ______________________________
Clerk of the Board of Directors
U.S. BANK NATIONAL ASSOCIATION, as Trustee
By:
Authorized Officer
73249923.5 A-1
EXHIBIT A
FORM OF NOTE
No. R–1 $_______
Unless this Note is presented by an authorized representative of The Depository Trust Company to the Trustee for registration of transfer, exchange or payment, and any Note 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
REVENUE REFUNDING CERTIFICATE OF PARTICIPATION, SERIES 2018A (CERTIFICATE ANTICIPATION NOTE)
DATED DATE INTEREST RATE MATURITY DATE CUSIP
November __, 2018 ___% August 15, 2021
REGISTERED OWNER: CEDE & CO.
PRINCIPAL AMOUNT:
THIS IS TO CERTIFY that the Registered Owner of this Orange County Sanitation District Revenue Refunding Certificate of Participation, Series 2018A (Certificate Anticipation Note) (this “Note”), as identified above, is the owner of a direct, fractional undivided interest in an installment payment (the “Installment Payment”), and the interest thereon, payable under and pursuant to the Installment Purchase Agreement, dated as of November 1, 2018 (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 Payment, 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 November 1, 2018 (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.
73249923.5 A-2
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 Payment and the interest thereon, will be incurred and secured.
This Note is one of the duly authorized Orange County Sanitation District Revenue Refunding Certificates of Participation, Series 2018A (Certificate Anticipation Notes)
evidencing principal in the aggregate amount of $____________, executed and delivered
pursuant to the terms of the Trust Agreement. The Notes evidence direct, fractional undivided interests in the Installment Payment, and the interest thereon, payable under the Installment Purchase Agreement. The Notes 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.
The Installment Payment, 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 Notes evidence direct, fractional undivided interests in the Installment Payment, and
the interest thereon, paid by the District pursuant to the Installment Purchase Agreement. The obligation of the District to pay the Installment Payment 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, from Net Revenues, and other lawfully available funds of the District, 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, shall
be subject to the provisions of the Master Agreement, and shall be afforded all of the advantages, benefits, interests and security afforded Senior Obligations pursuant to the Master Agreement. The Installment Purchase Agreement is payable on a parity with the other existing Senior Obligation. The District may at any time incur Senior Obligations in addition to existing Senior
Obligations and the Installment Purchase Agreement payable from Net Revenues as provided in
the Master Agreement on a parity with all other Senior Obligations theretofore incurred, but only subject to the conditions and upon compliance with the procedures set forth in the Master Agreement.
The obligation of the District to pay the Installment Payment 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, from Net Revenues and other lawfully available funds of the District, as provided 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
73249923.5 A-3
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 Payment,
or the interest thereon, or other payments required to be made under the Installment Purchase
Agreement.
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 Payment,
and the interest thereon, is incurred, the Notes are executed and delivered, the provisions with
regard to the nature and extent of the Net Revenues and other lawfully available funds of the District, and the rights of the Owners of the Notes. 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 Notes, to all the provisions of which the Owner of this Note,
by acceptance hereof, agrees and consents.
The Registered Owner of this Note is entitled to receive, subject to the terms of the Trust Agreement on the Maturity Date set forth above, upon presentation and surrender of this Note at the principal corporate trust office of the Trustee (the “Principal Office”), the Principal Amount
specified above, evidencing the Owner’s interest in the Installment Payment coming due on the
Maturity Date, and to receive on each 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, evidencing the Registered Owner’s interest in the interest evidenced by the Installment Payment coming due on such date.
Payments of interest evidenced by the Notes shall be made on each Interest Payment Date
to the Owners thereof (as determined at the close of business on the Record Date next preceding such Interest Payment Date or any other date fixed for payment) by check or draft of the Trustee mailed to the address of each such Owner as it appears on the registration books maintained by the Trustee pursuant to the Trust Agreement, or to such other address as may be furnished in
writing to the Trustee by such Owner. Payment of principal evidenced by the Notes, on the
Maturity Date, shall be made only upon presentation and surrender of the Notes at the Principal Office. All such amounts are payable in lawful money of the United States of America.
The Notes are authorized to be executed and delivered in the form of fully registered notes in denominations of $5,000 or any integral multiple thereof.
This Note 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 may treat the Registered Owner hereof as the absolute owner hereof for all purposes, whether or not the principal or interest evidenced by this Note 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 Note shall be made only to such Registered Owner, which payments shall be valid and effectual to satisfy and discharge the liability evidenced by this Note to the extent of the sum or sums so paid.
73249923.5 A-4
The Notes are subject to prepayment prior to the Maturity Date as set forth in 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 Notes then outstanding,
exclusive of Notes disqualified as provided under the Trust Agreement, are filed with the
Trustee. No such supplement or amendment shall (a) extend the stated Maturity Date 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, (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 Notes 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 Notes then outstanding.
To the extent and in the manner permitted by the terms of the Trust Agreement, the Trust
Agreement and the rights and obligations of the Corporation, the District, the Owners and the
Trustee under the Trust Agreement may also be amended or supplemented at any time by an amendment or supplement thereto which shall become binding upon execution, without the written consents of any Owners, but only to the extent permitted by law and only (a) to add to the agreements, conditions, covenants and terms required by the Corporation or the District to be
observed or performed under the Trust Agreement other agreements, conditions, covenants and
terms thereafter to be observed or performed by the Corporation or the District, or to surrender any right or power reserved therein to or conferred therein on the Corporation or the District, and which in either case shall not adversely affect the rights or interests of the Owners, (b) to make such provisions for the purpose of curing any ambiguity or of correcting, curing or
supplementing any defective provision contained in the Trust Agreement or in regard to
questions arising thereunder which the Corporation or the District may deem desirable or necessary and not inconsistent therewith, (c) to make such additions, deletions or modifications as may be necessary or appropriate to assure the exclusion from gross income for federal income tax purposes of interest evidenced by the Notes or (d) for any other reason, provided such
amendment or supplement does not adversely affect the rights or interests of the Owners.
THE DISTRICT HAS CERTIFIED that all acts, conditions and things required by the statutes of the State of California and by the Trust Agreement to exist, to have happened and to have been performed precedent to and in connection with the execution and delivery of this Note 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 Note.
73249923.5 A-5
IN WITNESS WHEREOF, this Note has been executed by the manual signature of an authorized signatory of the Trustee as of the date set forth below.
Date: November __, 2018
U.S. BANK NATIONAL ASSOCIATION, as Trustee
By: Authorized Officer
73249923.5 A-6
ASSIGNMENT
For value received, the undersigned do(es) hereby sell, assign and transfer unto
_____________________________________________ the within-mentioned Note and hereby
irrevocably constitute(s) and ________________________________________________ appoint(s) _____________________________________________ attorney, to transfer the same on the books of the Trustee with full power of substitution in the premises.
Dated: __________________
Note: The signature(s) on this Assignment must correspond with the name(s) as written on the face of the within registered Note in every particular, without alteration or enlargement or any change whatsoever.
Tax I.D. #: _____________________
Signature Guaranteed: _______________________
Note: Signature(s) must be guaranteed by an eligible guarantor. Note: The signature(s) on this Assignment must correspond with the name(s) as written on the face of the within Note in every particular without alteration or enlargement or any change whatsoever.
DRAFT OF 09/05/18
73253054.4 1001035824 OCSD 2018A CANs
INSTALLMENT PURCHASE AGREEMENT
by and between
ORANGE COUNTY SANITATION DISTRICT
and
ORANGE COUNTY SANITATION DISTRICT FINANCING CORPORATION
Dated as of November 1, 2018
Relating to
$_____________
Orange County Sanitation District
Revenue Refunding Certificate Anticipation Notes, Series 2018A
TABLE OF CONTENTS
Page
73253054.4 -i-
ARTICLE I DEFINITIONS ................................................................................................. 2
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 ........................................................................ 4
Section 2.01. Acquisition of the Project .................................................................... 4 Section 2.02. Payment of Purchase Price................................................................... 4
ARTICLE III PURCHASE OF PROJECT BY, AND SALE THEREOF TO, THE
DISTRICT; INSTALLMENT PAYMENT ..................................................... 4
Section 3.01. Purchase and Sale of Project ................................................................ 4 Section 3.02. Installment Payment............................................................................. 4 Section 3.03. Reserved ............................................................................................... 4 Section 3.04. Obligation Absolute ............................................................................. 5
Section 3.05. Nature of Agreement............................................................................ 5
ARTICLE IV PREPAYMENT OF INSTALLMENT PAYMENT; DISCHARGE .............. 5
Section 4.01. Prepayment of Installment Payment .................................................... 5 Section 4.02. Notice ................................................................................................... 5 Section 4.03. Discharge of Obligations ..................................................................... 5
ARTICLE V COVENANTS ................................................................................................. 6
Section 5.01. Compliance with Master Agreement ................................................... 6 Section 5.02. Compliance with Installment Purchase Agreement ............................. 6 Section 5.03. Protection of Security and Rights ........................................................ 6 Section 5.04. Indemnification of Corporation ........................................................... 6
Section 5.05. Further Assurances............................................................................... 6
ARTICLE VI EVENTS OF DEFAULT AND REMEDIES OF THE CORPORATION ............................................................................................. 7
Section 6.01. Events of Default ................................................................................. 7 Section 6.02. Remedies on Default ............................................................................ 7
Section 6.03. Non-Waiver.......................................................................................... 8
Section 6.04. Remedies Not Exclusive ...................................................................... 8
ARTICLE VII AMENDMENTS ............................................................................................. 8
Section 7.01. Amendments ........................................................................................ 8
ARTICLE VIII MISCELLANEOUS ........................................................................................ 9
Section 8.01. Liability of District Limited ................................................................. 9
Section 8.02. Limitation of Rights ........................................................................... 10 Section 8.03. Assignment ........................................................................................ 10 Section 8.04. Notices ............................................................................................... 10
TABLE OF CONTENTS (continued)
Page
73253054.4 -ii-
Section 8.05. Successor Is Deemed Included in all References to Predecessor ...... 11 Section 8.06. Waiver of Personal Liability .............................................................. 11 Section 8.07. Article and Section Headings, Gender and References ..................... 11
Section 8.08. Partial Invalidity................................................................................. 11
Section 8.09. Governing Law .................................................................................. 11 Section 8.10. Execution in Counterparts.................................................................. 11 EXHIBIT A - DESCRIPTION OF PROJECT .......................................................................... A-1
73253054.4
INSTALLMENT PURCHASE AGREEMENT
THIS INSTALLMENT PURCHASE AGREEMENT (this “Installment Purchase
Agreement”), dated as of November 1, 2018, 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”).
W I T N E S S E T H:
WHEREAS, to finance the acquisition, construction and installation of certain improvements to its wastewater system (the “Prior Project”) the District caused the execution and delivery of $109,875,000 in aggregate principal amount of Orange County Sanitation
District Revenue Refunding Certificates Anticipation Notes, Series 2016B, of which
$109,875,000 in principal amount is currently outstanding (the “Prior Notes”);
WHEREAS, the District desires to prepay all of the Prior Notes by paying at the first Optional Prepayment date all of the principal component of the installment payment relating to the Prior Notes (the “Prior Installment Payment”), and the interest thereon;
WHEREAS, to provide the funds necessary to prepay the Prior Installment Payment and
the interest thereon to be so paid, 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 payment (the “Installment
Payment”) to be made by the District, pursuant to a new installment purchase agreement (the
“Installment Purchase Agreement”),and the Corporation and the District have agreed to finance such prepayment by causing the execution and delivery of $______________ in aggregate principal amount of Orange County Sanitation District Revenue Refunding Certificate Anticipation Notes, Series 2018A (the “Notes”), which are certificates of participation
evidencing direct, fractional undivided interests in the Installment Payment and the interest
thereon, to be made by the District pursuant to the 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 Payment, 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”);
73253054.4 2
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 Notes, evidencing direct, undivided
fractional interests in the Installment Payment, and the interest thereon, payable hereunder;
WHEREAS, a portion of the proceeds of the Notes, together with other available funds, will be used to prepay the Prior Installment Payment; 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 November __, 2018.
“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 Payment” means the Installment Payment required to be made by the District pursuant to Section 3.02 hereof.
“Installment Payment Date” means August 15, 2021.
73253054.4 3
“Installment Purchase Agreement” means this Installment Purchase Agreement, dated as of November 1, 2018, 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 15 and August 15 of each year, commencing February 15, 2019, through and including the Installment Payment Date.
“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.
“Notes” means the Orange County Sanitation District Revenue Refunding Certificates of Participation (Certificate Anticipation Notes), Series 2018A, also known as the Orange County Sanitation District Revenue Refunding Certificate Anticipation Notes, Series 2018A, executed
and delivered by the Trustee pursuant to the Trust Agreement.
“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.
“Trust Agreement” means the Trust Agreement, dated as of November 1, 2018, 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 terms defined in the
Master Agreement or the Trust Agreement shall for all purposes hereof and of any amendment hereof or supplement hereto and of any report or other document mentioned herein have the meanings defined therein, such definitions to be equally applicable to both the singular and plural forms of any of the terms defined therein. With respect to any defined term which is given
a different meaning under this Installment Purchase Agreement than under the Master
Agreement or the Trust Agreement, as used herein it shall have the meaning given herein.
73253054.4 4
ARTICLE II
PURCHASE OF PROJECT BY, AND SALE THEREOF TO, THE CORPORATION; PAYMENT
Section 2.01. Acquisition of the Project. 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, 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 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 Project, the amount of $____________, which
amount shall be paid from the net proceeds of the Notes.
ARTICLE III PURCHASE OF PROJECT BY, AND SALE THEREOF TO, THE DISTRICT;
INSTALLMENT PAYMENT
Section 3.01. Purchase and Sale of Project. The District hereby purchases from the Corporation, and the Corporation hereby sells to the District, the Project in accordance with the provisions of this Installment Purchase Agreement. All right, title and interest in and to the Project shall immediately vest in the District on the Closing Date without further action on the
part of the District or the Corporation.
Section 3.02. Installment Payment. The District shall pay to the Corporation, from Net Revenues and other lawfully available funds of the District, the purchase price of the Project in a single Installment Payment, with interest thereon, as provided herein. The Installment Payment shall be in the aggregate principal amount of $_____________, and shall be payable on
or before the Installment Payment Date.
The Installment Payment shall accrue interest from the Closing Date, at the rate of ____% per annum, payable on the Interest Payment Dates. Such interest shall accrue on the basis of a 360-day year consisting of twelve 30-day months. The Installment Payment, and the payment of interest thereon, shall be deposited with the Trustee, as assignee of the Corporation,
no later than 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 Notes, such
amounts shall be credited against the Installment Payment, or payment of interest thereon, as
applicable, due on such date.
Section 3.03. Reserved.
73253054.4 5
Section 3.04. Obligation Absolute. The obligation of the District to make the Installment Payment, and payments of interest thereon, and other payments required to be made
by it under this Article, from Net Revenues and other lawfully available funds of the District, is
absolute and unconditional, and until such time as the Installment Payment, 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 Payment, 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 Payment, 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 PAYMENT; DISCHARGE
Section 4.01. Prepayment of Installment Payment. (a) The Installment Payment shall be subject to prepayment prior to the Installment Payment Date 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 Payment 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 the Installment Payment, and the interest thereon, when due or to pay the Installment
Payment, and the interest thereon, through a specified date on which the District has a right to
prepay such Installment Payment pursuant to subsection (a) of this Section, and to prepay the Installment Payment on such prepayment date, at a prepayment price determined in accordance with subsection (a) of this Section.
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 days from the date such notice is given to the Trustee, unless such time period shall be waived by the Trustee.
Section 4.03. Discharge of Obligations. If the Installment Payment, 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 Notes 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.
73253054.4 6
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 Payment, and interest thereon, and other payments required to be made by it hereunder in strict conformity with the terms hereof, and will faithfully observe and perform all the agreements, conditions, covenants and terms contained herein required to be observed and performed by it, will not cause, suffer or permit any default to occur hereunder and
will not terminate this Installment Purchase Agreement for any cause including, without limiting
the generality of the foregoing, any acts or circumstances that may constitute failure of consideration, destruction of or damage to the Project, commercial frustration of purpose, any change in the tax or other laws of the United States of America or of the State or any political subdivision of either or any failure of the Corporation to observe or perform any agreement,
condition, covenant or term contained herein required to be observed and performed by it,
whether express or implied, or any duty, liability or obligation arising out of or connected herewith or the insolvency, or deemed insolvency, or bankruptcy or liquidation of the Corporation or any force majeure, including acts of God, tempest, storm, earthquake, war, 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 Payment, 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 Notes, 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 Notes.
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.
73253054.4 7
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;
(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.
73253054.4 8
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 Payment, 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 Notes
then Outstanding. No such amendment shall (i) extend the payment date of any Installment Payment or reduce the amount of any Installment Payment, or the interest rate applicable thereto, without the prior written consent of the Owner of each affected Note, or (ii) reduce the percentage of Owners of the Notes whose consent is required to effect any such amendment or
modification, without the prior written consent of the Owners of all Notes 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
73253054.4 9
District, the Corporation and the Trustee, as assignee of the Corporation, without the written consents of any Owners of the Notes, 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;
(iii) to make such additions, deletions or modifications as may be necessary or appropriate to assure the exclusion from gross income for federal income tax purposes of interest on the Installment Payment; and
(iv) to make such other changes herein or modifications hereto as the District,
the Corporation or the Trustee, as assignee of the Corporation, may deem desirable or necessary, and which shall not materially adversely affect the interests of the Owners of the Notes.
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 Payment, 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 Payment, 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, from Net Revenues and other funds provided for 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 Payment, or the interest thereon, or other payments required to be made hereunder.
73253054.4 10
Section 8.02. Limitation of Rights. Nothing in this Installment Purchase Agreement expressed or implied is intended or shall be construed to give to any Person other than the
District, the Corporation and the Trustee, as assignee of the Corporation, any legal or equitable
right, remedy or claim under or in respect of this Installment Purchase Agreement or any covenant, condition or provision therein or herein contained, and all such covenants, conditions and provisions are and shall be held to be for the sole and exclusive benefit of the District, the Corporation and the Trustee, as assignee of the Corporation.
Section 8.03. Assignment. The District and the Corporation hereby acknowledge the
transfer, conveyance and assignment by the Corporation to the Trustee of all of the Corporation’s rights, title and interest in and to this Installment Purchase Agreement (excepting its rights to indemnification hereunder), including the right to receive Installment Payment, 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: Assistant General Manager & 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 National Association
633 West Fifth Street, 24th Floor
Los Angeles, California 90071 Attention: Corporate Trust
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, telecopier or email (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,
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.
73253054.4 11
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 Payment, or
the interest thereon, or other payments required to be made by the District hereunder, but nothing contained herein shall relieve any official, officer or employee of the District from the performance of any official duty provided by any applicable provisions of law or hereby.
Section 8.07. Article and Section Headings, Gender and References. The headings
or titles of the several Articles and Sections hereof and the table of contents appended hereto
shall be solely for convenience of reference and shall not affect the meaning, construction or effect hereof, and words of any gender shall be deemed and construed to include all genders. All references herein to “Articles,” “Sections” and other subsections or clauses are to the corresponding articles, sections, subsections or clauses hereof; and the words “hereby,” “herein,”
“hereof,” “hereto,” “herewith” and other words of similar import refer to this Installment
Purchase Agreement as a whole and not to any particular Article, Section, subdivision or clause hereof.
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.
73253054.4 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
(S E A L) Attest:
By: Clerk of the Board of Directors
ORANGE COUNTY SANITATION DISTRICT FINANCING CORPORATION
By: Treasurer
73253054.4 A-1
EXHIBIT A
DESCRIPTION OF PROJECT
The Project includes in general the acquisition, construction and installation of certain
improvements to the wastewater collection, treatment and disposal facilities of the District and in particular including, without limitation, the financing of improvements to the Wastewater System including particularly, but without limitation, the District's collection system, two wastewater treatment plants, and Ocean Outfall, and further as follows: the acquisition,
construction, installation, rehabilitation, replacement, or repair of the North County Yard,
Bushard Trunk Sewer, Gisler-Redhill Trunk Sewer, Magnolia Trunk Sewer, Bay Bridget Pump Station, Bitter Point Pump Station, Ellis Avenue Pumps Station, Rocky Point Pump Station, Headworks at Plant 2, Primary Clarifiers at Plant 1, Primary Treatment System at Plant 2 Secondary Treatment System at Plant 1, Activated Sludge at Plant 1, Trickling Filters at Plant 1
and 2; Sludge Digester at Plant 1, Sludge Dewatering at Plant 1 and 2, Truck Wash and
Dewatering Beds at Plant 1, Primary sludge Feed System at Plant 2, Digester at Plant 2, Effluent Pump Station Annex, Groundwater Replenishment System, and Odor Control Facilities.
DRAFT OF 09/05/18
24724112.5
PRELIMINARY OFFICIAL STATEMENT DATED OCTOBER ___, 2018 NEW ISSUE—BOOK-ENTRY-ONLY RATINGS: Moody’s: “___” Fitch: “___/___” (See “RATINGS” herein.)
In the opinion of Norton Rose Fulbright US LLP, Los Angeles, California, Special Counsel, under existing statutes, regulations, rulings and court decisions, and assuming compliance with the tax covenants described herein, the interest component of each Installment Payment, and the allocable portion thereof distributable in respect of any Note, is excluded pursuant to section 103(a) of the Internal Revenue Code of 1986 from the gross income of the owners thereof for federal income tax purposes. In the further opinion of Special Counsel, the interest component of each Installment Payment, and the allocable portion thereof distributable in respect of any Note, is not an item of tax preference for purposes of the federal alternative minimum tax. It is also the opinion of Special Counsel that under existing law the interest component of each Installment Payment, and the allocable portion thereof distributable in respect of any Note is exempt from personal income taxes of the State of California. See, “TAX MATTERS” herein.
[District Logo] $__________∗ ORANGE COUNTY SANITATION DISTRICT REVENUE REFUNDING CERTIFICATE ANTICIPATION NOTES SERIES 2018A
[DAC Logo]
Dated: Date of Delivery Maturity Date: August 15, 2021
Interest Rate: ____% Price: ____%† Yield: ___%† CUSIP No. 68428P ___
The $________* Orange County Sanitation District Revenue Refunding Certificate Anticipation Notes, Series 2018A (the “Notes”) evidence direct, fractional undivided interests of the Owners thereof in an installment payment (the “Installment Payment”), and the interest thereon, to be made by the Orange County Sanitation District (the “District”) pursuant to the Installment Purchase Agreement, dated as of November 1, 2018 (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 Payment and the interest thereon, will be incurred and secured. The Installment Payment under the Installment Purchase Agreement is payable from (i) Net Revenues (as more fully described in the Master Agreement, the “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, and (ii) other lawfully available funds of the District, as further described in “SECURITY AND SOURCES OF PAYMENT FOR THE NOTES” herein.
The Notes will mature on August 15, 2021 (the “Maturity Date”). The District expects the principal of the Notes to be paid from proceeds of the sale, on or prior to the Maturity Date, of a future series of certificates of participation, notes or other obligations of the District. The sale and delivery of a future series of certificates of participation, notes or other obligations of the District will depend on market conditions, certain approvals by the District and the Corporation and other factors. See “SECURITY AND SOURCES OF PAYMENT FOR THE NOTES” herein.
The Notes are subject to prepayment prior to their maturity. See “THE NOTES – Prepayment Provisions” herein.
The proceeds of the Notes, together with other amounts, will be used to (i) prepay all of the Orange County Sanitation District Revenue Refunding Certificate Anticipation Notes, Series 2016B, currently outstanding in the aggregate principal amount of $109,875,000, and (ii) pay the costs incurred in connection with the execution and delivery of the Notes. See “PLAN OF FINANCE” herein.
Interest evidenced by the Notes will accrue from the date of their initial delivery and will be payable on each February 15 and August 15, commencing February 15, 2019, through and including the Maturity Date. See “THE NOTES” herein. The Notes 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 Notes. Individual purchases of the Notes will be made in book-entry form only. Purchasers of Notes will not receive physical certificates representing their ownership interests in the Notes purchased. The Notes will be delivered in denominations of $5,000 and any integral multiple thereof. Payments of principal and interest evidenced by the Notes are payable 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 turn distribute such payments to the beneficial owners of the Notes. See APPENDIX E — “BOOK-ENTRY SYSTEM” herein.
THE OBLIGATION OF THE DISTRICT TO PAY THE INSTALLMENT PAYMENT, 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, FROM NET REVENUES AND OTHER LAWFULLY AVAILABLE FUNDS OF THE DISTRICT, AS PROVIDED 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 PAYMENT, OR THE INTEREST THEREON, OR OTHER PAYMENTS REQUIRED TO BE MADE UNDER THE INSTALLMENT PURCHASE AGREEMENT. SEE “SECURITY AND SOURCES OF PAYMENT FOR THE NOTES” 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 NOTES WILL BE RECEIVED BY THE DISTRICT UNTIL ____ A.M. NEW YORK TIME ON NOVEMBER __, 2018 UNLESS POSTPONED OR CANCELLED AS SET FORTH IN THE OFFICIAL NOTICE INVITING BIDS.
∗ Preliminary, subject to change. † Priced to the first prepayment date of August 1, 2021.
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24724112.5
The Notes are offered when, as and if executed and delivered 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 & Smart, a Professional Corporation, Costa Mesa, California. Public Resources Advisory Group, Los Angeles, California, has served as Municipal Advisor to the District in connection with the execution and delivery of the Notes. It is anticipated that the Notes in definitive form will be available for delivery through the book-entry facilities of DTC on or about November __, 2018.
Dated: November ___, 2018
24724112.5
24724112.5
ORANGE COUNTY SANITATION DISTRICT Board of Directors
Gregory C. Sebourn — (Chair) — Fullerton David Shawver — (Vice Chair) — Stanton
Denise Barnes — Anaheim Teresa Smith — Orange Glenn Parker — Brea Chad Wanke — Placentia
Fred Smith — Buena Park Allan Bernstein — Tustin Mariellen Yarc — Cypress Sal Tinajero — Santa Ana Steve Nagel — Fountain Valley Ellery Deaton — Seal Beach Steve Jones — Garden Grove Robert Collacott — Villa Park Erik Peterson — Huntington Beach James M. Ferryman — Costa Mesa Sanitary District Donald P. Wagner — Irvine John Withers — Irvine Ranch Water District Tim Shaw — La Habra Charlie Nguyen — Midway City Sanitary District Peter Kim — La Palma Phil Hawkins — Yorba Linda Water District Richard Murphy — Los Alamitos Michelle Steel — Member of the Orange County Scott Peotter — Newport Beach Board of Supervisors Executive Management of the District
James Herberg, General Manager Robert Thompson, Assistant General Manager & Director of Engineering
Lorenzo Tyner, Assistant General Manager & Director of Finance and Administrative Services Ed Torres, Director of Operations and Maintenance James Colston, Director of Environmental Services
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. Hogin Woodruff, Spradlin & Smart, a Professional Corporation Costa Mesa, California
Municipal Advisor Public Resources Advisory Group Los Angeles, California
Trustee U.S. Bank National Association
Los Angeles, California
24724112.5
No dealer, salesman or any other person has been authorized by the Orange County Sanitation District (the “District”) or ___________ (the “Initial Purchaser”) to give any information or to make any representations, other than those contained in this Official Statement, and, if given or made, such other information or representations must not be relied upon as having been authorized by the District or the Initial
Purchaser.
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 Notes by any person in any jurisdiction in which it is unlawful for such person to make such an offer, solicitation or sale. The information set forth herein has been provided by the District and other sources that are believed by the District to be reliable. No dealer, broker, salesperson or other person has been authorized to give any information or to make any representations other than those contained in this Official Statement. If given or made, such other information or representations must not be relied upon as having been authorized by the District, the Corporation or the Initial Purchaser in connection with any reoffering.
This Official Statement is not to be construed as a contract with the purchasers of the Notes. 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 Notes 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 Notes, the Initial Purchaser in connection with any reoffering may over-allot or effect transactions which stabilize or maintain the market price of the Notes 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 Notes to certain dealers, institutional investors and others at prices lower than the public offering prices stated on the cover
page hereof and such public offering prices may be changed from time to time by the Initial Purchaser.
Certain statements included or incorporated by reference in this Official Statement constitute forward-looking statements. Such statements are generally identifiable by the terminology used such as “plan,” “expect,” “estimate,” “budget” or other similar words. The achievement of certain results or other expectations contained in such forward-looking statements involve known and unknown risks, uncertainties and other factors which may cause actual results, performance or achievements described to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements.
CUSIP is a registered trademark of the American Bankers Association. CUSIP data on the cover hereof and 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. The District, the Municipal Advisor and the Initial Purchaser are not responsible for the selection or correctness of the CUSIP numbers set forth on the cover hereof or herein.
TABLE OF CONTENTS Page
24724112.5 i
INTRODUCTION ....................................................................................................................................... 1
General ............................................................................................................................................ 1 The District ..................................................................................................................................... 2 Security and Sources of Payment for the Notes .............................................................................. 2 Continuing Disclosure .................................................................................................................... 3 Miscellaneous ................................................................................................................................. 3
PLAN OF FINANCE ................................................................................................................................... 4
ESTIMATED SOURCES AND USES OF FUNDS ................................................................................... 4
THE NOTES ................................................................................................................................................ 5
General ............................................................................................................................................ 5 Prepayment Provisions.................................................................................................................... 5
SECURITY AND SOURCES OF PAYMENT FOR THE NOTES ............................................................ 6
Sale Proceeds of Future Obligations ............................................................................................... 6 Installment Payment........................................................................................................................ 7
Available Funds of the District ....................................................................................................... 8 Net Revenues .................................................................................................................................. 8 Rate Stabilization Account ............................................................................................................. 9
Allocation of Revenues ................................................................................................................. 10 Rate Covenant ............................................................................................................................... 10 Limitations on Issuance of Additional Obligations ...................................................................... 11 Insurance ....................................................................................................................................... 13 Allocation of Installment Payment ............................................................................................... 14
THE DISTRICT ......................................................................................................................................... 15
Background ................................................................................................................................... 15 Organization and Administration .................................................................................................. 16 Services ......................................................................................................................................... 17 Service Area .................................................................................................................................. 17 Employees ..................................................................................................................................... 18
Retirement Plan ............................................................................................................................. 19 Other Post-Employment Benefits ................................................................................................. 21 Risk Management ......................................................................................................................... 21
Existing Facilities ......................................................................................................................... 21 Permits, Licenses and Other Regulations ..................................................................................... 22 District Planning and Capital Improvement Program ................................................................... 24
Groundwater Replenishment System ............................................................................................ 25 Biosolids Management.................................................................................................................. 26 Urban Runoff ................................................................................................................................ 27 Integrated Emergency Response Program .................................................................................... 28 Five-Year Strategic Planning ........................................................................................................ 29
DISTRICT REVENUES ............................................................................................................................ 30
Sewer Service Charges ................................................................................................................. 30 Additional Revenues ..................................................................................................................... 32 Wastewater Treatment History ..................................................................................................... 34 Customers ..................................................................................................................................... 34
TABLE OF CONTENTS (continued) Page
24724112.5 ii
Assessed Valuation ....................................................................................................................... 36 Tax Levies and Delinquencies ...................................................................................................... 37 Budgetary Process ......................................................................................................................... 38 Reserves ........................................................................................................................................ 39 Summary of Operating Data ......................................................................................................... 40 Forecasted Operating Data ............................................................................................................ 42 Management’s Discussion and Analysis of Operating Data ......................................................... 44 Investment of District Funds ......................................................................................................... 45
FINANCIAL OBLIGATIONS .................................................................................................................. 45
Existing Indebtedness ................................................................................................................... 45
Anticipated Financings ................................................................................................................. 46 Direct and Overlapping Bonded Debt ........................................................................................... 46
THE CORPORATION .............................................................................................................................. 46
LIMITATIONS ON TAXES AND REVENUES ...................................................................................... 47
Article XIIIA of the California Constitution ................................................................................. 47 Legislation Implementing Article XIIIA ...................................................................................... 47
Article XIIIB of the California Constitution ................................................................................. 48 Proposition 1A and Proposition 22 ............................................................................................... 49 Article XIIIC and Article XIIID of the California Constitution ................................................... 49
Other Initiative Measures .............................................................................................................. 52
LEGAL MATTERS ................................................................................................................................... 52
MUNICIPAL ADVISOR ........................................................................................................................... 52
ABSENCE OF LITIGATION ................................................................................................................... 52
FINANCIAL STATEMENTS ................................................................................................................... 52
TAX MATTERS ........................................................................................................................................ 53
CONTINUING DISCLOSURE ................................................................................................................. 55
RATINGS .................................................................................................................................................. 55
PURCHASE AND REOFFERING ........................................................................................................... 55
MISCELLANEOUS .................................................................................................................................. 56
APPENDIX A – COMPREHENSIVE ANNUAL FINANCIAL REPORT OF THE ORANGE COUNTY SANITATION DISTRICT FOR FISCAL YEAR ENDED JUNE 30, 2017 ........................................................................................... A-1
APPENDIX B – THE COUNTY OF ORANGE – ECONOMIC AND DEMOGRAPHIC INFORMATION ...................................................................................................... B-1 APPENDIX C – SUMMARY OF PRINCIPAL LEGAL DOCUMENTS .......................................... C-1
APPENDIX D – FORM OF CONTINUING DISCLOSURE AGREEMENT ................................... D-1 APPENDIX E – BOOK-ENTRY SYSTEM ....................................................................................... E-1 APPENDIX F – FORM OF APPROVING OPINION OF SPECIAL COUNSEL .............................. F-1
24724112.5
OFFICIAL STATEMENT
$________* ORANGE COUNTY SANITATION DISTRICT REVENUE REFUNDING CERTIFICATE ANTICIPATION NOTES SERIES 2018A
INTRODUCTION
This introduction contains only a brief summary of certain of the terms of the Notes 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 OF PRINCIPAL LEGAL DOCUMENTS – Definitions” herein.
General
This Official Statement, including the cover page and all appendices hereto, provides certain information concerning the sale and delivery of $__________* aggregate principal amount of the Orange County Sanitation District Revenue Refunding Certificate Anticipation Notes, Series 2018A (the “Notes”), which are certificates of participation evidencing direct, fractional undivided interests in an installment payment (the “Installment Payment”) and the interest thereon, to be made by the Orange County Sanitation District (the “District”) pursuant to the Installment Purchase Agreement, dated as of November 1, 2018 (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 Notes 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 Payment
and the interest thereon, will be incurred and secured. The Installment Payment under the Installment Purchase Agreement is payable from (i) 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, and (ii) other lawfully available funds of the District, as further described in “SECURITY AND SOURCES OF PAYMENT FOR THE NOTES”
herein.
The Notes are to be executed and delivered pursuant to a Trust Agreement, dated as of November 1, 2018 (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 Notes will be used to (i) prepay all of the Orange County Sanitation District Revenue Refunding Certificate Anticipation Notes, Series 2016B, currently outstanding in the aggregate principal amount of $109,875,000 (the “Prior Notes”), and (ii) pay the costs incurred in connection with the execution and delivery of the Notes. See “PLAN OF FINANCE” herein.
* Preliminary, subject to change.
24724112.5 2
The Notes are subject to prepayment prior to their maturity. See “THE NOTES – Prepayment
Provisions” herein.
The Notes will be executed and delivered in the form of fully registered certificates, dated as of the date of initial delivery thereof and will mature on August 15, 2021 (the “Maturity Date”). Interest evidenced by the Notes will be payable on each February 15 and August 15, commencing February 15, 2019, through and including the Maturity Date (each, an “Interest Payment Date”). See “THE NOTES” herein. The Notes 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 Notes. The Notes will be delivered in denominations of $5,000 and
any integral multiple thereof. So long as the Notes are in the DTC book-entry system, the interest and principal due with respect to the Notes 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 2.6 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 185 million gallons per day (“mg/d”) of wastewater in Fiscal Year 2017-18. See “THE DISTRICT,” “DISTRICT REVENUES” and “FINANCIAL OBLIGATIONS” herein.
Security and Sources of Payment for the Notes
The Notes, which are certificates of participation, evidence direct, fractional undivided interests in the Installment Payment, and the interest thereon, paid by the District pursuant to the Installment Purchase Agreement. The obligation of the District to pay the Installment Payment 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, from Net Revenues, and other lawfully available funds of the District, 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 expects the principal of the Notes to be paid from proceeds of the sale, on or prior to the Maturity Date, of a future series of certificates of participation, notes or other obligations of the District. The sale and delivery of a future series of certificates of participation, notes or other obligations of the District will depend on market conditions, certain approvals by the District and the Corporation and other factors. See “SECURITY AND SOURCES OF PAYMENT FOR THE NOTES — Sale Proceeds of
Future Obligations.”
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 Payment under the Installment Purchase Agreement. See “FINANCIAL OBLIGATIONS – Existing Indebtedness” and “THE DISTRICT” herein and APPENDIX C – “SUMMARY OF PRINCIPAL LEGAL
24724112.5 3
DOCUMENTS – Master Agreement” attached hereto. The District has no Subordinate Obligations
currently outstanding.
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 NOTES – Rate Covenant” herein.
The obligation of the District to pay the Installment Payment 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, from Net Revenues and other lawfully available funds of the District, as 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 Payment, 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 NOTES” herein.
Continuing Disclosure
The District has covenanted for the benefit of holders and beneficial owners of the Notes (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 2017-18 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 Notes 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.
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PLAN OF FINANCE
A portion of the net proceeds from the sale of the Notes, together with other available moneys, will be used to prepay on November 29, 2018 (the “Prepayment Date”) the installment payment (the “Funded Installment Payment”) to be made by the District in connection with the Prior Notes. Under the terms of the Trust Agreement, dated as of October 1, 2016 (the “Prior Trust Agreement”), pursuant to which the Prior Notes were executed and delivered, the payment of the Prior Notes will be effected by depositing a portion of the proceeds of the Notes into the Installment Payment Fund established under the Prior Trust Agreement (the “Payment Fund”). Such moneys will be in an amount sufficient to provide for the payment of the interest on the Funded Installment Payment through and including the Prepayment
Date and to provide for the payment of the principal represented by the Funded Installment Payment. In accordance with the Prior Trust Agreement, the Funded Installment Payment will be applied to the payment of interest with respect to the outstanding Prior Notes and to the payment of the principal of the
outstanding Prior Notes on the Prepayment Date.
The amounts deposited in the Payment Fund will be held in trust solely for the Prior Notes and will not be available to pay the principal and interest evidenced by the Notes or any obligations other than
the Prior Notes.
ESTIMATED SOURCES AND USES OF FUNDS
The estimated sources and uses of funds and other amounts in connection with the delivery of the
Notes are presented below.
Sources Principal Amount of Notes $ Premium District Contribution Total Sources $
Uses Prepayment of Prior Notes $
Costs of Issuance(1) Total Uses $
____________________ (1) Costs of Issuance include, among other things, the Initial Purchaser’s discount, fees of rating agencies, Special Counsel and Disclosure Counsel fees and expenses and the initial fees of the Trustee.
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THE NOTES
General
The Notes will be prepared in the form of fully registered certificates in Authorized Denominations of $5,000 and any integral multiple thereof. The Notes will be dated the date of initial delivery thereof and will mature on August 15, 2021 (the “Maturity Date”). Interest evidenced by the Notes will accrue from their date of initial delivery and will be payable semiannually on each February 15 and August 15, commencing February 15, 2019, through and including the Maturity Date (each, an “Interest Payment Date”). Each Note 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 Note shall evidence interest from such Interest Payment Date, or unless such date of execution shall be on or prior to January 15, 2019, in which case such Note 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 Notes shall be in default, each Note 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 Notes 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.”
The Notes 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 Notes. Individual purchases of the Notes will be made in book-entry form only. Purchasers of Notes will not receive physical certificates representing their ownership interests in the Notes purchased. Payments of principal and interest evidenced by the Notes are 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 Notes. So long as the Notes are held in the DTC book-entry system, the interest and principal due with respect to the Notes 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 Notes are subject to optional prepayment prior to the Maturity Date, on any date on or after August 1, 2021*, in whole or in part, in Authorized Denominations, from and to the extent of prepayment of the Installment Payment 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 Notes to be prepaid, plus accrued interest evidenced thereby to the date fixed for prepayment, without premium.
Selection of Notes for Prepayment. Whenever less than all the Outstanding Notes are to be prepaid on any one date in accordance with the Trust Agreement, the Trustee shall select the Notes 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 Notes so selected for prepayment on such date. For purposes of such selection, any Note may be prepaid in part in
Authorized Denominations.
Notice of Prepayment. When prepayment of Notes is authorized pursuant to the Trust Agreement, the Trustee shall give notice, at the expense of the District, of the prepayment of the Notes.
* Preliminary, subject to change.
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The notice of prepayment shall specify (a) the Notes or designated portions thereof (in the case of prepayment of the Notes 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 and (e) the CUSIP numbers assigned to the Notes to be prepaid. Such notice of prepayment shall further state that on the specified date there shall become due and payable upon each Note 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 Notes, unless at the time such notice is given the Notes 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 Notes 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 Notes. If a notice of prepayment of Notes contains such a condition and such moneys are not so received, the prepayment of Notes 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 Notes 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 Notes 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 Notes or the cessation of interest evidenced thereby on the date fixed for prepayment.
Effect of Prepayment. If notice of prepayment has been duly given as aforesaid and moneys for the payment of the prepayment price of the Notes to be prepaid are held by the Trustee, then on the prepayment date designated in such notice, the Notes 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 Notes so called for prepayment shall cease to accrue, such Notes shall cease to be entitled to any benefit or security hereunder and the Owners of such Notes 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 Notes to be prepaid, pay such Notes at the prepayment price thereof, and such moneys shall be pledged to such payment.
SECURITY AND SOURCES OF PAYMENT FOR THE NOTES
Sale Proceeds of Future Obligations
The District expects the principal of the Notes to be paid from proceeds of the sale, on or prior to the Maturity Date, of a future series of certificates of participation, notes or other obligations of the District, that will amortize over a term of approximately 17 years (the “Future Obligations”).
The issuance of the Future Obligations will require future authorizations by the governing boards of the District and the Corporation, as well as the preparation of suitable legal and disclosure documents for the issue. The District is currently unaware of any material impediment to obtaining such
authorizations and documents. In addition, the issuance and sale of the Future Obligations will be contingent on the District’s ability to access the municipal capital markets, which will depend on the District’s creditworthiness and market conditions during the weeks immediately preceding the Maturity
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Date. The District is unable to predict such matters with certainty and therefore cannot guarantee that the
Future Obligations will be successfully issued and sold.
Installment Payment
The Notes evidence direct, fractional undivided interests in the Installment Payment, and the interest thereon, paid by the District pursuant to the Installment Purchase Agreement. The obligation of the District to pay the Installment Payment 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, from Net Revenues and other lawfully available funds of the District, 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. See “DISTRICT REVENUES” herein.
Pursuant to the Master Agreement, the District has established and declared the conditions and terms upon which obligations such as the Installment Purchase Agreement, and the Installment Payment and the interest thereon payable under the Installment Purchase Agreement, will be incurred and secured. The obligation of the District to make the Installment Payment, and payments of interest thereon, and other payments required to be made by it under the Installment Purchase Agreement, from Net Revenues, and other lawfully available funds of the District, is absolute and unconditional, and until such time as the Installment Payment, 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 the Installment Payment 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 Payment, 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 the Installment
Payment 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 Notes substantially all of its
rights, title and interest in and to the Installment Purchase Agreement, including its right to receive the Installment Payment and the interest thereon.
The District has certain Existing Senior Obligations Outstanding payable from Net Revenues on a parity with the Installment Payment 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 Payment 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.
The obligation of the District to pay the Installment Payment, 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, from Net Revenues and other lawfully available funds of the District, as provided for in the
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Installment Purchase Agreement, and does not constitute a debt of the District, the State or of any political subdivision thereof, in contravention of any constitutional or statutory debt limitation or restriction. Neither the faith and credit nor the taxing power of the District, the State or any political subdivision thereof, is pledged to the payment of the Installment Payment, 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 NOTES” 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, 2018, the District’s Debt Service Required Reserves totaled $100 million, of which approximately $5 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, 2018 were approximately $680 million. See “DISTRICT REVENUES — Reserves,” “— Summary of Operating Data” and “— Projected Operating Data.”
Net Revenues
The District is obligated to make the Installment Payment 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 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
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Senior Obligations were used or are 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 Payment 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 Payment 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 are currently
no Subordinate Obligations or Reimbursement Obligations with respect to Subordinate Obligations outstanding.
The District may, in connection with the incurrence of Subordinate Obligations, pledge Net Revenues to the payment of Subordinate Obligations and Reimbursement Obligations with respect to Subordinate Obligations; provided, however, that such pledge, and any lien created thereby, shall be junior and subordinate to the pledge of, and lien on, Net Revenues for the payment of Senior Obligations
and Reimbursement Obligations with respect to Senior Obligations.
Rate Stabilization Account
To avoid fluctuations in its fees and charges of the Wastewater System, from time to time the District may deposit in the Rate Stabilization Account from Net Revenues such amounts as the District deems necessary or appropriate. From time to time, the District may also transfer moneys from the Rate Stabilization Account to the Revenue Account to be used by the District, first to pay all Maintenance and Operations Costs as and when the same shall be due and payable. In addition, any such amount transferred from the Rate Stabilization Account to the Revenue Account by the District is included as
Revenues for any period, but such transferred amount is excluded from determining Operating Revenues for any period. Revenues will be decreased by the amounts, if any, transferred from the Revenue Account to the Rate Stabilization Account. There are presently no funds in the Rate Stabilization Account.
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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 under “— 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 Notes 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 are required to be made as described above. So long as the District has determined that Net Revenues will be sufficient to make all of the deposits or transfers required to be made pursuant to items 1, 2, 3, 4 and 5 above, on the dates on which such deposits or transfers are required to be made, Net Revenues on deposit in the Revenue Account may from time to time be used for any purpose for which the District funds may be legally applied. For additional information, see APPENDIX C — “SUMMARY OF PRINCIPAL LEGAL DOCUMENTS — Master Agreement.”
Rate Covenant
Pursuant to the Master Agreement, the District will, to the extent permitted by law, fix, prescribe and collect fees and charges for the services of the Wastewater System which will be at least sufficient to
yield during each Fiscal Year (a) Net Revenues equal to 125% of Debt Service on Senior Obligations for such Fiscal Year and (b) Net Operating Revenues equal to 100% of Debt Service on all Obligations for such Fiscal Year. The District may make adjustments from time to time in such fees and charges and may make such classification thereof as it deems necessary, but will not reduce the fees and charges then in effect unless the Revenues and Net Revenues from such reduced fees and charges will at all times be sufficient to meet the requirements of the Master Agreement.
In addition, the District has covenanted in the Master Agreement to prepare and adopt an annual budget for the Wastewater System for each Fiscal Year. Such budget will set forth in reasonable detail the Revenues anticipated to be derived in such Fiscal Year and the expenditures anticipated to be paid or provided for therefrom in such Fiscal Year, including, without limitation, the amounts required to pay or provide for the payment of the Obligations during such Fiscal Year, the amounts required to pay or provide for the payment of Maintenance and Operations Costs during such Fiscal Year and the amounts required to pay or provide for the payment of all other claims or obligations required to be paid from Revenues in such Fiscal Year, and will show that Revenues and Net Revenues will be at least sufficient to
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satisfy the requirements of the Master Agreement. On or before September 1 of each Fiscal Year, the District will file with the Trustee a copy of the adopted budget for such Fiscal Year. See APPENDIX C — “SUMMARY OF PRINCIPAL LEGAL DOCUMENTS — Master Agreement” for additional information.
The District has an established reserve policy with eight separate reserve fund categories. Over the next ten years, the year ending reserve total for each year is projected not to fall below $475 million as indicated in the District’s ten-year cash flow forecast for fiscal years 2018-19 through 2027-28. 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 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
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(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 year following completion of any project to be funded or any system to be acquired from the proceeds of such Senior Obligations. For purposes of preparing the certificate or certificates described above, the Consultant may rely upon financial statements prepared by the District that have not been subject to audit by an independent certified public accountant if audited financial statements for the period are not available.
See, also “FINANCIAL OBLIGATIONS – Existing Indebtedness” herein. The 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
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.
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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. The District currently has 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.
[Remainder of page intentionally left blank.]
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Allocation of Installment Payment
Set forth in Table 1 below is the estimated Installment Payment with respect to the Notes. Also set forth are the payments due on Other Senior Obligations, excluding the Prior Notes. The District ultimately expects the Notes to be paid with obligations that will amortize over a term of approximately
17 years, but there is no guarantee that such refinancing will occur.
Table 1 Estimated Installment Payment and Outstanding Existing Senior Obligations of the District (As of October 1, 2018) Fiscal Year Ending June 30
Installment Payment Relating to Notes Other Senior Obligation Payments(1) Total Principal Interest Principal Interest
2019 $141,530,000 $23,894,096 $165,424,096 2020 32,730,000 44,007,941 76,737,941
2021 30,430,000 42,371,441 72,801,441 2022 28,405,000 40,849,941 69,254,941 2023 29,805,000 39,444,691 69,249,691 2024 31,140,000 38,114,841 69,254,841
2025 32,655,000 36,590,441 69,245,441 2026 33,985,000 35,267,791 69,252,791
2027 31,850,000 33,602,941 65,452,941 2028 37,595,000 32,010,441 69,605,441 2029 39,470,000 30,130,691 69,600,691 2030 41,445,000 28,157,191 69,602,191
2031 48,510,000 26,084,941 74,594,941 2032 54,100,000 24,161,819 78,261,819
2033 68,845,000 21,516,586 90,361,586 2034 44,660,000 18,249,806 62,909,806 2035 46,830,000 15,835,282 62,665,282 2036 49,105,000 13,304,810 62,409,810
2037 51,485,000 10,652,664 62,137,664 2038 32,995,000 7,972,605 40,967,605
2039 34,455,000 6,212,648 40,667,648 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 $1,012,110,000 $578,246,837 $1,590,356,837
_______________________ (1) Includes debt service on the Prior Notes.
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THE DISTRICT
Background
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 a public agency responsible for construction and maintenance of a major portion of the wastewater collection, treatment and disposal facilities within its boundaries and is the sixth largest wastewater discharger in the United States of America. The District provides service to an area with a population of approximately 2.6 million people in the northern and central portion of the County by treating an average of 185 million mg/d of wastewater in Fiscal Year 2017-18. The District serves approximately 81% of the County population in
approximately 479 square miles, or approximately 60% of the County’s area. Local sanitary districts, water districts and cities are responsible for local sewers in the District’s service area. The District reuses more than 50% of the total wastewater flow that it receives.
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.
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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 Herberg.
James Herberg, P.E. is the General Manager of the District and has served in this capacity since April 2013. During his more than 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 29 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 Thompson, P.E. is the Assistant General Manager & District’s Director of Engineering. He has worked for the District since 1995. Mr. Thompson has served as manager in several departments with the District, 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.
Lorenzo Tyner is the District’s Assistant General Manager & 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 29 years of public and private sector experience in protecting public health and the environment.
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.
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James Colston, J.D. is the District’s Director of Environmental Services. He has served in this position since May 2016 and he has worked for the District since 1989, serving as the Environmental Compliance & Regulatory Affairs Manager, Environmental Supervisor, Legal & Regulatory Affairs Liaison and in other prior positions. Mr. Colston has the lead role overseeing the District’s Environmental Laboratory, Ocean Monitoring Program and Vessel, Pretreatment Program, and Environmental Compliance Program including Clean Water Act and Clean Air Act permits.
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 2.6 million residents.
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Set forth in Table 2 below is the estimated populations of cities and unincorporated areas served
by the District as of January 1, 2018.
Table 2 Estimated Populations of Cities and Unincorporated Areas Served by the Orange County Sanitation District As of January 1, 2018
City Population Anaheim 357,084
Brea 44,890 Buena Park 83,995 Costa Mesa 115,296
Cypress 49,978 Fountain Valley 56,920 Fullerton 144,214
Garden Grove 176,896 Huntington Beach 202,648 Irvine 276,176 La Habra 62,850 La Palma 15,948 Los Alamitos 11,863 Newport Beach 87,182 Orange 141,952 Placentia 52,755 Santa Ana 338,247 Seal Beach 25,984
Stanton 39,470 Tustin 82,344 Villa Park 5,951
Westminster 94,476 Yorba Linda 69,121 Cities Subtotal(1) 2,536,240
Unincorporated Areas (estimated)(2) 73,179 Total 2,609,419 ____________________ (1) Demographic Research Unit, State of California Department of Finance.
(2) Center for Demographic Research, California State University, Fullerton.
Employees
As of July 17, 2018, the District had a total of 600 employees. The majority of the 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 Group (“SPMT/AFSCME”), representing employees within the Supervisor Group and Professional Group since 1991. The total number of represented employees as of July 17, 2018 was 566, and is broken down as follows: 100 employees represented by OCEA, 199 employees represented by Local 501, and 267 employees represented by SPMT/AFSCME. In October 2016, the District reached final agreement with all bargaining units on the current set of labor contracts
that will expire on June 30, 2019. Historically, the District has experienced positive and collaborative
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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 2.5% at 67. “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 67 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, 2017 valuation, OCERS had an aggregate Unfunded Actuarial Accrued Liability (“UAAL”) of $5.4 billion, and a funded ratio of 72.30%.
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Set forth in Table 3 below is a current comparison of the District’s required contributions to OCERS for Fiscal Years 2012-13 through 2016-17 and estimated actual contributions for Fiscal Year 2017-18.
Table 3 Orange County Sanitation District District Required Contributions to OCERS for Fiscal Years 2012-13 through 2016-17 and Projected Required Contributions for Fiscal Year 2017-18
Fiscal Year Rate(1) District Required Contributions
2012-13 27.35% $16,363,917 2013-14 31.09 18,920,212
2014-15 29.33 17,201,569 2015-16 20.44 12,222,849
2016-17 12.85 7,709,734
2017-18(2) 12.07 7,525,655
____________________ (1) Required contribution as a percent of covered payroll. Includes amortization of Unfunded Actuarial Accrued Liability. Combined rate for all Plans. (2) Estimated actual. Source: Orange County Sanitation District.
As of December 31, 2017, the date of the most recent actuarial valuation completed by OCERS, the District’s past UAAL was $0. The balance in the District’s UAAL Deferred Account as of December 31, 2017 before any transfer was $38.9 million. As of December 31, 2017, a transfer of $24.0 million was required from this account to pay off the District’s UAAL. The balance in the District’s UAAL Deferred Account as of December 31, 2017 after the transfer is $14.9 million. For the Fiscal Year ended June 30, 2018, total payroll costs of District employees covered by OCERS was $62,341,796.
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 $728,450 in ARBA benefits during Fiscal Year 2017-18.
For more information regarding OCERS and the District’s retirement plan as of June 30, 2017, see Note 5 and 6 to the Comprehensive Annual Financial Report of the Orange County Sanitation District
for the Year Ended June 30, 2017 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.
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Other Post-Employment Benefits
In June 2015, Governmental Accounting Standards Board (“GASB”) issued Statement No. 75, which requires state and local governmental employers to recognize a liability as the employees earn benefits by providing services for its post-employment benefits other than pension benefits (known as other post-employment benefits or “OPEB”) and to recognize total OPEB liability if the OPEB is not administered through a trust that meets the specified criteria. Changes to OPEB liability are recognized immediately as OPEB expenses or deferred outflows/inflows of resources. The statement replaces the requirements of Statement No. 45. The District adopted Statement No. 75 for the fiscal year beginning July 1, 2017, as required of GASB. According to the District’s actuary, Demsey Filliger & Associates
(the “Actuary”), the unfunded OPEB liability as of July 1, 2017 was approximately $6.4 million. 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 $1,000,000 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 has limited earthquake insurance partially covering several key structures; beyond that, 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 primarily processed by outside claim administrators or the District’s General Counsel. The District believes that there are no unrecorded claims as of June 30, 2018 that would materially affect the financial position of the District.
For more information regarding the District’s insurance coverage as of June 30, 2017, see Note 1 to the Comprehensive Annual Financial Report of the Orange County Sanitation District for the Year Ended June 30, 2017 set forth in Appendix A.
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 396 miles of sewers within 11 trunk sewer systems, two treatment plants, two discharge outfalls and two emergency
weir outlets. The existing treatment plants have a rated primary treatment capacity of 376 mg/d, including standby capacity.
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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 130 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 “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) As of June 30, 2018
2017-18
Actual Flows
Primary Treatment
Capacity
Secondary Treatment
Capacity Plant No. 1 121 208 182
Plant No. 2 64 168 150 Aggregate Treatment 185 376 332
____________________
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 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. Regulatory requirements to conform with these laws 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
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the South Coast Air Quality Management District (“AQMD”). These agencies regulate the standards of quality of water or air that can be discharged or emitted from the treatment plants and their processes. The Clean Water Act directs the EPA to monitor and regulate the discharge of pollutants into the waters of the United States, including a requirement that all wastewater treatment plants provide primary and secondary treatment. In 1977 Congress amended the Clean Water Act to allow modification (so-called “waivers”) of secondary treatment standards for certain ocean dischargers, if they could demonstrate to the satisfaction of the EPA that no adverse environmental impacts would occur. The District currently has all applicable permits and licenses necessary to operate its facilities.
Since the passage of the Clean Water Act 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 modification 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, the District’s 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 modification received under Section 301(h). The District completed these improvements ahead of schedule in 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 was scheduled to expire on July 19, 2017. Federal regulations require
permittees to apply for a new application at least 180 days prior to the current permit expiration date. The District submitted a renewal application in December 2016. At this time the EPA is reviewing District’s permit application, and District operates under an administrative extension of the permit until this application has been fully reviewed and acted upon by the regulators. District staff has been in frequent contact with the federal and state regulators regarding the permit renewal process, and delays in the renewal have been due to resources in the regulators’ offices, not as a result of issues with the permit application. The District expects its NPDES permit to be renewed in 2019. Prior to such renewal, the prior NPDES permit remains valid.
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). Air pollutants cause adverse effects on human health and environment. The AQMD is the local air pollution control agency charged with implementing the Federal Clean Air Act. In addition to mandated criteria pollutants, the 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
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conditions that govern design criteria, operating parameters, and emissions standards. Most of the District’s treatment facilities are enclosed to capture and treat emissions to ensure regulatory emissions standards are met 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 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 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 re-issued on April 16, 2014. Both permits will expire on April 16, 2019. The District’s staff are currently in the process of preparing the permit renewal applications for both Title V permits, and it is anticipated that timely renewal
applications will be submitted before the 180-day deadline ahead of the expiration of the current permits.
District Planning
The Board of Directors has adopted a comprehensive strategic plan regarding the District’s service levels and operational needs (the “Strategic Plan”). The Strategic Plan is updated annually to continue reviewing a five-year horizon (each, a “Five-Year Strategic Plan”). See “THE DISTRICT — Five-Year Strategic Planning.” In December 2017, the Board of Directors adopted a Facilities Master Plan (the “Master Plan”) for the District. The Master Plan also incorporates and implements the levels of services defined by the Board of Directors that are included in the Strategic Plan.
Capital Improvement Program
The Master Plan identified a phased 20-year program of capital improvement projects (“CIP”) that will allow the District to maintain reliability and accommodate future growth, as well as meet future
regulatory requirements, level of service goals, and strategic initiatives. With this phased 20-year program as a starting point, the Asset Management Program within the Planning Division continues assessing the condition of the District’s existing assets and systems to ensure that they can provide the necessary level
of service. The District expects to accomplish the following under the CIP over the next 20 years:
• Major rehabilitation or replacement of facilities and components used in all stages of the treatment process - preliminary, primary, secondary, and solids treatment, outfall
pumping and discharge system, and central generation at both treatment plants;
• Implementation of the recommendations of the Biosolids Master Plan to address seismic risks, to produce higher quality biosolids and accept food waste;
• Relocation of the District headquarters complex;
• Upgrade of the Supervisory Control and Data Acquisition (“SCADA”) system and network at Plant No. 2, replacement of the process control systems, uninterruptible power supply (“UPS”) system, and electrical power distribution system at both treatment plants;
• Replacement or rehabilitation of plant-wide infrastructures, such as buried process
piping, tunnels and junction structures;
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• Replacement or rehabilitation of District’s outlying pumping stations, including the abandonment and/or demolition of two pump stations;
• Rehabilitation of approximately 40 miles of trunk sewer; • Reduction of fence line odor to levels that minimize odor complaints; and
• Safety improvements at both treatment plants.
The CIP is reviewed, validated and updated annually to ensure that the project scopes of work and cost estimates are up-to-date. Through the budget validation process, each project’s schedule, staff
resources, total project costs, cash flow and risks are assessed to confirm the budgetary requirements. The most recent CIP validation effort (the “2018 CIP Validation Study”) resulted in revisions to the CIP. The CIP currently consists of 68 individual capital projects, five programs such as the Planning Studies
Program and Small Construction Program, and budget for capital equipment purchases with a total CIP budget authority of $4.01 billion. Set forth in Table 5 below is a summary of total CIP outlays, net of savings and deferrals, over the next ten years. Of this ten-year $2.7 billion CIP program, $192 million of CIP outlays is budgeted in Fiscal Year 2018-19. Also budgeted in a separate contra line item are anticipated offsetting CIP savings and deferrals of $17 million, thereby reducing the net budgeted outlays to $175 million for Fiscal Year 2018-19.
Table 5 Net Capital Improvement Program Outlays Fiscal Years 2018-19 through 2027-28 Project Cost Rehabilitation and Replacement $1,836,400,000 Additional Capacity 245,700,000 Regulatory 32,400,000
Strategic Initiatives 314,700,000 Future Rehabilitation and Replacement 374,900,000 CIP Savings and Deferrals (134,700,000)
Total Validated Capital Improvement Program $2,669,400,000
____________________ Source: 2018 CIP Validation Study, Orange County Sanitation District. 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 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. The GWRS became operational in January of 2008 producing 70 mgd of highly purified water. The Initial Expansion of the GWRS broke ground in January 2012 to add approximately 30 mgd of production capacity and was completed in June 2015, resulting in purifying 100% of the treated
wastewater from the District’s Fountain Valley-based Plant No. 1. The Initial Expansion of the GWRS was funded solely by the OCWD. In 2016, the District and the OCWD completed a $2 million joint study to explore the Final Expansion of the GWRS which would increase GWRS capacity by an additional 30
MGD. The study identified an implementation plan to convey secondary effluent from the District’s Plant No. 2 in Huntington Beach using new and existing infrastructure to support the GWRS Final
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Expansion. The GWRS Final Expansion will be funded solely by the OCWD. The District currently has two active projects supporting the GWRS Final Expansion. The costs of these projects will be reimbursed by the OCWD. The Final Expansion of the GWRS is expected to be online in 2023.
Biosolids Management
Through the treatment of wastewater, the District recovers and treats nutrient-rich, organic matter (solids) to produce biosolids. Consistent with the United States Environmental Protection Agency’s (the “EPA”) 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 780 tons per day (“tpd”) in Fiscal Year 2017-18, with a total expenditure of 100% of the $15.9 million budgeted, at an annual average cost per ton of $55.82 for hauling and management at offsite locations, as described in the following table. Actual costs increased from $53.46 in July 2017 to $57.31 in June 2018 (7.2% increase) due to an almost 40% increase in fuel, including a new California diesel tax, along with contract renewal price increases of up to $2.50 per ton. Biosolids costs in Fiscal Year 2018-19 are anticipated to remain stable with a slight budget increase to $16.2 million to cover ongoing fuel increases. The District’s biosolids tonnage will begin trending down in Fiscal Year 2019-20 as new solids facilities complete construction and reduce biosolids hauling and management costs. Plant No. 1 thickening and dewatering centrifuges and Plant No. 2 centrifuge facilities are currently under construction, and it is anticipated that by mid-2019 these facilities will be creating drier solids, which means less water to haul and fewer trucks needed. The Irvine Ranch Water District (the “IRWD”) is constructing solids processing facilities, and the agency anticipates it will stop sending solids to the District by the end of 2019. Currently IRWD accounts for 5-10% of all biosolids managed at the Sanitation.
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Biosolids Management Contracts
Contractor Location Product Contract Term
Current tons
per day
managed
(approximate)
Estimated
cost per ton
(June 2018)
Synagro Nursery
Products
San Bernardino County,
CA
Compost Expires 12/26/21;
optional five-year
renewal on 12/26/21
280 tpd $51.43
Liberty Compost
Kern County, CA
Compost
Expires 12/15/21;
optional five-year
renewal on 12/15/21
135 tpd
$58.57
Inland Empire Regional
Composting Facility
(hauled by Denali Water
Solutions)
Rancho Cucamonga, CA
Compost
Renewed 7/1/18;
expires 7/1/19
40 tpd
$74.31
Tule Ranch, AgTech
Yuma County, AZ
Land
application
Renewed 11/1/17;
expires 10/31/22
325 tpd
$60.12
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. The District’s biosolids management contracts do not guarantee biosolids tonnage and are typically interim-
term contracts with one five-year renewal option, for a maximum contract term of 10 years.
In May 2017, the District completed the Biosolids Master Plan that included an evaluation of existing solids handling facilities, assessment of solids treatment alternatives, recommendations for future
capital facilities’ improvements, identification of alternatives biosolids products that meet sustainable and beneficial reuse markets, and plans for a high-strength organic (food waste slurry) co-digestion facility. This Plan will serve as the District’s solids roadmap through construction of new Plant No. 2 facilities
over the next 15 years.
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, 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 four 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
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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 Resource Protection 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. 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 21 active urban runoff diversion structures; three owned and operated by the
County of Orange, 11 owned and operated by the City of Huntington Beach, three owned and operated by the City of Newport Beach, three owned and operated by the IRWD, and one owned and operated by PH Finance (present owner of the Pelican Point Resort). The Mid Big Canyon Diversion in the City of
Newport Beach became the most recent addition to the urban runoff program with its completion in 2017. To control bacteria loading to the Lower Newport Bay, the City of Newport Beach is currently in the design stage on a fourth diversion in an area known as the Arches. The City of Santa Ana is in construction of the Delhi Channel Diversion, scheduled for completion in early 2019. Built to control bacteria and selenium loading, as well as to divert debris from the Upper Newport Bay, this diversion is projected to contribute an additional 2.0 mg/d of urban runoff. Since the Delhi Channel Diversion will be tributary to the District’s Plant No. 1, the diversion will contribute to the flow delivered to the Orange County Water District’s Ground Water Replenishment System. The District continues to work with the Orange County Public Works Department to prioritize existing and proposed diversion projects to ensure
that the District’s limited capacity is effectively utilized to improve coastal water quality.
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 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
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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 Army Corps of Engineers’ “All-River Plan” has mitigated any future flooding of the Santa Ana River system and potential threats to the District’s Wastewater System. Also, both Plant No. 1 and
Plant No. 2 are built to federal standards.
The IERP takes into account the damage potential posed by coastal flooding, tornadoes, 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 District’s High Flow Emergency Response Plan is included as a section in the IERP. This plan is based on a color code system from blue to yellow to orange to red and then purple that identifies specific actions to be taken by staff in response to expected and actual increasing flow coming into the District’s treatment plants and collection sewers. The District believes that wastewater collection, treatment and disposal systems typically undertaken in anticipation of normal wet weather should be able to withstand, for example, an “expected/average” El Nino event without significant disruption. While no assurances can be given, the District believes that the likelihood of a system failure is low due to the operational readiness of all of its equipment and the District’s high level of equipment redundancy.
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 a 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. 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.
Eight strategic goals were identified through planning workshops, individual interviews with members of the Board of Directors, and employee and management focus groups. The following eight strategic goals were adopted in 2013:
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.
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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.
The five-year Strategic Plan is updated biennially. The December 2017 Strategic Plan Update reflected that seven of the strategic goals had been completed and strides had been made towards
accomplishing the remaining goal. The strategic goals completed were:
1. Disinfection of Ocean Discharge – Develop an implementation plan including the technical, financial and societal factors associated with cessation of disinfection of the ocean discharge.
2. Legislative Advocacy and Public Outreach – Develop a unified legislative advocacy and public outreach program.
3. Odor Control – Completion of the Odor Control Master Plan.
4. Future Biosolids Management Options – Study biosolids management options including 3rd party contracts and onsite capital facilities.
5. Energy Efficiency – Continue to research new energy efficiency and energy conversion
technologies.
6. Local Sewer Transfers – Complete the transfer of 174 miles of local sewers serving parts of Tustin and unincorporated areas north of Tustin and local sewer transfers in the City of Santa Ana.
7. Future Water Recycling – Determine partnerships, needs, strategies, benefits and costs associated with recycling of Plant No. 2 effluent water.
DISTRICT REVENUES
Sewer Service Charges
General. The District has the power to establish fees and charges for services of the Wastewater
System. Such fees and charges are established by the District’s Board of Directors and are not subject to review or approval by any other agencies. In Fiscal Year 1997-98, a Rate Advisory Committee (the “RAC”) was established comprised of representatives from industrial, commercial and residential users. The goal of the RAC was to examine the then current rate structure and, if needed, develop recommendations for change. The RAC analyzed the District’s rate structure to determine whether its then current sewer service user fees (now known as “Sewer Service Charges”) were equitable among residential and industrial customers. This review resulted in a proposal to expand the number of non-residential user categories from one to 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.
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The Board of Directors establishes the annual sanitary sewer service charges by ordinance. The sanitary sewer service charge ordinances are adopted by a two-thirds vote of the Board of Directors as required under law after conducting a noticed public hearing in compliance with Proposition 218. See “LIMITATIONS ON TAXES AND REVENUES – Article XIIIC and Article XIIID of the California
Constitution.”
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 2017, 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-49 on March 28, 2018, 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 1.2% for Fiscal Year 2018-19 through Fiscal Year 2022-23. These increases were approved by the Board through the adoption of Ordinance No. OCSD-49. 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 2013-14 through 2022-23
Fiscal Year Sewer Service Charge Percentage Change
2013-14 $308 - 2014-15 316 2.6 2015-16 322 1.9 2016-17 327 1.6 2017-18 331 1.2 2018-19 335 1.2 2019-20 339 1.2 2020-21 343 1.2 2021-22 347 1.2 2022-23 351 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, 2017. The District’s
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approved SFR rate of $335 for Fiscal Year 2018-19 remains below the average annual sewer rate of $529 according to a Fiscal Year 2016-17 survey of 591 agencies encompassing all 58 counties in California conducted by the State Water Resources Control Board.
Table 7 Comparison of Total Sewer Service Charges For Single-Family Residences As of July 1, 2017
Entity
Average Dry Weather
Flow (mg/d) (3)
Annual Sewer
Service Charge(1) Treatment Level(2)(3) Collection Responsibility(3) Property Tax Income(3)
City of San Diego 140 $573 4 Yes No
City of Los Angeles 332 527 4 Yes No Sacramento 99 432 4 No Yes East Bay MUD 53 390 4 No Yes
Orange County Sanitation District(4) 182 331 3 Yes Yes Los Angeles County N/A 163 4 No Yes
_________________________ (1) Source: Information obtained from respective entities listed. (2) Treatment Level Categories: “1” – 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. (3) Source: Wastewater User Charge Survey Report by the California State Water Resources Control Board. (4) The District’s Annual Sewer Service Charge for Fiscal Year 2018-19 is $335. 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 2017-18 were approximately $13.7 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.
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 $79.2 million in Fiscal Year 2012-13, $74.9 million in Fiscal Year 2013-14, $79.8 million in Fiscal Year 2014-
15, $84.4 million in Fiscal Year 2015-16 and $88.3 million in Fiscal Year 2016-17. The District currently estimates that its property tax receipts will increase by approximately 5.0% each year through Fiscal Year 2020-21. The apportionment of the ad valorem tax is pursuant to the Revenue Program adopted in April 1979 to comply with regulations of the Environmental Protection Agency, the State Water Resources Control Board and Board of Directors’ policy.
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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 $4,228 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 has entered into agreements with the Santa Ana Watershed Project Authority (“SAWPA”) whereby wastewater from Upper Santa Ana River Basin dischargers can be transported through the District’s Santa Ana River Interceptor to the District’s wastewater treatment
facilities. This program was developed in the early 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 $3.3 million to $3.8 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.
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.
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On March 1, 2013, the federal government announced the implementation of certain automatic spending cuts known as the sequester (the “Sequester”). As a result of the Sequester, federal subsidy payments for the 2010A Revenue Obligations were reduced by $67,872 (or 8.7%; second half of the year only), $112,339 (or 7.2%), $114,882 (or 7.3%), $106,098 (or 6.8%), $107,659 (or 6.9%) and $102,980 (or 6.6%) for the federal fiscal years ended September 30, 2013, 2014, 2015, 2016, 2017 and 2018, respectively; and federal subsidy payments for the 2010C Revenue Obligations were reduced by $152,807 (or 8.7%; second half of the year only) by $261,616 (or 7.2%), $256,435 (or 7.3%), $238,871 (or 6.8%), $242,384 (or 6.9%) and $231,847 (or 6.6%) for the federal fiscal years ended September 30, 2013, 2014, 2015, 2016, 2017 and 2018, respectively. The federal government has announced that the federal subsidy
payments for the federal fiscal year ended September 30, 2019 will be 6.2%.
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 2013-14 through Fiscal Year 2017-18 were 198 mg/d, 190 mg/d, 183 mg/d, 188 mg/d and 185 mg/d, respectively. The highest flow rate experienced was during El Niño 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. See “THE DISTRICT – Integrated Emergency
Response Program.”
Customers
The historical number of customers served by the District for the Fiscal Years 2013-14 through Fiscal Year 2017-18 and the projected number of customers served by the District for the Fiscal Years 2018-19 through 2022-23, identified in equivalent dwelling units (“EDUs”), are set forth in Table 8
below. As discussed below, sewer service charges are based on the expected amount of wastewater flow for a single family dwelling.
Table 8 Historical and Projected Equivalent Dwelling Units Fiscal Years 2013-14 through 2022-23
Fiscal Year Historical EDUs(1) Fiscal Year Projected EDUs 2013-14 916,812 2018-19 923,730 2014-15 934,141 2019-20 926,501 2015-16 924,944 2020-21 929,281 2016-17 932,232 2021-22 932,069 2017-18 [ ] 2022-23 934,865 ____________________ Source: Orange County Sanitation District.
(1) 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.
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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 2013-14 through 2017-18 ($ in Millions)
Residential/Commercial Industrial
Fiscal Year
Number of
Equivalent Single- Family Dwellings Total Revenue
Percentage
of Sewer Service Charge Revenues
Number of Customer Accounts Total Revenue
Percentage
of Sewer Service Charge Revenues 2013-14 869,461 $267.8 95% 489 $14.4 5% 2014-15 806,585 254.9 95 467 14.2 5 2015-16 846,358 272.5 96 450 12.6 4 2016-17 856,315 280.0 95 466 13.8 5 2017-18 867,377 287.1 94 465 17.9 6
____________________ Source: Orange County Sanitation District. The EDUs set forth in Table 9 relate to total Sewer Service Charge collections while the EDUs
set forth in Table 8 relate to total Sewer Service Charge Levies.
Set forth in Table 10 below are the ten largest principal sewer service customers of the District for the Fiscal Year ended June 30, 2018.
Table 10 Largest Principal Sewer Service Customers of the District for the Fiscal Year Ended June 30, 2018
User Sewer Service Charges House Foods America Corp. $ Kimberly-Clark Worldwide, Inc. Cargill, Inc. Pulmuone Wildwood, Inc. Stremicks Heritage Foods, LLC MCP Foods, Inc. Schreiber Foods, Inc. Ameripec Inc. Jazz Semiconductor Nor-Cal Beverage Co. Inc. (Main) ____________________
Source: Orange County Sanitation District.
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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.
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 2014-15 through 2018-19 ($ in Billions)
Fiscal Year Value Percent Change 2014-15 $350.5 6.44% 2015-16 372.2 6.19
2016-17 391.8 5.27 2017-18 416.3 6.26 2018-19
____________________ 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 secured property taxes levied each year on its behalf and, for so long as such plan remains in effect, the participating entities, such as the District, no longer experience delinquent taxes. The County’s general fund is the designated recipient of future collections of penalties and interest on all
delinquent taxes collected on behalf of participants in this alternative method of apportionment.
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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 2013-14 through 2017-18 (In Thousands)
Fiscal Year Total Property Tax and Sewer Service Charge Levy 2013-14 $356,607 2014-15 362,978 2015-16 371,502 2016-17 381,226 2017-18 386,538 ____________________ 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 year.
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.
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Reserves
The District has an established reserve policy with eight separate categories for its reserve funds. Collectively, these individual reserve requirements total over $551 million for each year of the current ten-year cash flow forecast.
Set forth in Table 13 below are the actual reserves at June 30, 2015, June 30, 2016, June 30, 2017, and unaudited reserves at June 30, 2018 for each fund.
Table 13 Cash and Investment Reserves June 30, 2015 through 2017 and Unaudited at June 30, 2018 (In Millions)
Unaudited 2015 (June 30) 2016 (June 30) 2017 (June 30) 2018 (June 30) Cash Flow Requirements Reserve: Operating Expenses $ 76 $ 73 $ 73 $ 76 Certificates of Participation Payments 86 87 87 82 Operating Contingencies Reserve 15 15 15 15 Capital Improvement Program Reserve 163 154 127 284 Catastrophe and Self Insurance 57 57 57 57 Capital Replacement and Refurbishment 62 65 65 66 Debt Service Required Reserves(1) 129 107 107 100 Rate Stabilization Reserve - - - - Total $588 $558 $531 $680
____________________ (1) “Debt Service Required Reserves” constitute all amounts designated for reserves within the District’s investment
management program, together with certain funds held directly by bond trustees. As of June 30, 2018, of the total Debt Service Required Reserves of $100 million, $5 million was held by bond trustees to meet specific covenants in the District’s bond documents.
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 year.
• 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 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
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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 $10.8 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 Fund
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 2014-15 through 2017-18.
• 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 $40 million of the accumulated total, or approximately 8%. Reserve levels are calculated in accordance with the District’s reserve policy.
Summary of Operating Data
Set forth in Table 14 below is a summary of historical audited operating results for the District for Fiscal Years 2013-14 through Fiscal Year 2016-17 and unaudited operating results for the District for the Fiscal Year 2017-18. The information presented in the summary should be read in conjunction with the financial statements and notes. See APPENDIX A — “COMPREHENSIVE ANNUAL FINANCIAL REPORT OF THE ORANGE COUNTY SANITATION DISTRICT FOR THE YEAR ENDED JUNE 30, 2017.”
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Table 14 Summary of District Historical Revenues and Expenses and Other Financial Information For Fiscal Years 2013-14 through 2016-17 and Unaudited for Fiscal Year 2017-18 ($ in Millions)
Audited Unaudited
2013-14 2014-15 2015-16 2016-17 2017-18 Revenues:
Residential & Commercial Sewer Service Charges(1) Regional $267.8 $260.5 $278.0 $281.2 $288.4 Local 5.7 5.5 5.7 1.3 (0.1) Industrial Sewer Service Charges 14.4 14.2 12.6 13.8 17.9 IRWD Assessments 23.6 28.3 26.6 36.0 9.9 SAWPA Assessments 2.3 2.7 3.2 3.3 2.7
Ad Valorem Taxes 72.8 77.6 84.4 88.3 94.2 Interest Earnings 6.1 4.8 9.2 3.1 3.2 Other Revenues 2.8 3.5 4.0 5.0 6.3 Total Revenues $395.5 $397.1 $423.7 $432.0 $422.5 Operations and Maintenance Expenses(2) $146.4 $149.2 $153.5 $150.3 $145.6
Net Revenues $249.1 $247.9 $270.2 $281.7 $276.9 Debt Service $ 92.8 $ 81.5 $ 79.7 $ 82.7 $ 75.6 UAAL Payment(3) -- $125.0 $ 50.0 $ 39.1 --
Coverage Ratios 2.68x 3.04x 3.39x 3.41x 3.66x CIP Outlay $ 87.5 $182.6 $153.4 $141.9 $121.7 Ending Reserves $713.7 $588.0 $558.2 $531.0 $680.4 _______________________ (1) Net of rebates, if any, to commercial users.
(2) Excludes depreciation and amortization expenses. (3) As of July 1, 2014, the District had an unfunded actuarial accrued pension liability in its defined pension benefit plan administered by the Orange County Employees Retirement System of $194 million. In Fiscal Year 2014-15, Fiscal Year 2015-16, and Fiscal Year 2016-17, the District paid down $125 million, $50 million, and $39
million of this liability, respectively.
Source: Orange County Sanitation District.
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Forecasted Operating Data
Set forth in Table 15 below are forecasted operating results for the District for Fiscal Years 2018-19 through 2022-23. These projections assume the number of projects and scheduled build out set forth in the 2018 CIP Validation Study, and reflects the Board-approved annual rate increase averaging 1.2% for Fiscal Year 2018-19 through and Fiscal Year 2022-23. Principal outlay components of these projections are derived from the 2018 CIP Validation Study, which identified 68 individual capital projects with a 10-year projected outlay of $4.01 billion. Much of the construction is scheduled during the next five years, with average annual capital outlays of $272.0 million. The District’s net CIP cash flow budget for Fiscal Year 2018-19 is $160.3 million, which factors in savings and deferrals. This CIP
budget finances joint works treatment and disposal system improvement projects, and collection system improvement projects. The preparation of such projections was based upon certain assumptions and certain forecasts with respect to conditions that may occur in the future. While the District believes that
these assumptions and forecasts are reasonable for the purposes of the projected selected operating data, it makes no representation that they will in fact occur. To the extent that actual future conditions differ from those assumed herein, the data will vary.
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Table 15 Summary of District Forecasted Revenues and Expenses and Other Financial Information for Fiscal Years 2018-19 through 2022-23 ($ in Millions)(2)
2018-19 2019-20 2020-21 2021-22 2022-23
Revenues: Residential & Commercial
Sewer Service Charges $294.5 $299.1 $303.7 $308.4 $313.2
Industrial Sewer Service Charges
18.3 18.5
18.8 19.0 19.2
IRWD Assessments 20.3 18.0 14.2 17.8 18.8
SAWPA Assessments 3.3 3.4 3.6 3.7 3.8
Ad Valorem Taxes 99.6 104.5 109.8 115.3 121.0
Interest Earnings
6.5 7.2
7.9 7.5 6.5
Other Revenues 6.0 4.4 6.9 19.1 20.6
Total Revenues
448.5 455.1
464.9 490.8 503.1
Build America Bonds Federal Subsidy 2.4 2.3 2.2 2.1 2.0
Operations and Maintenance Expenses (161.2) (160.2) (163.7) (173.2) (178.1)
Net Revenues(1) 289.7 297.2 303.4 319.7 327.0
Debt Service 80.5 80.0 76.0 72.5 72.5
Coverage Ratios(1) 3.6 3.7 4.0 4.4 4.5
CIP Outlays 160.3 134.1 195.3 341.4 355.7
Replacement, Refurbishment &
Rehabilitation(3) 14.3 2.9 7.2 17.3 25.8
Debt Proceeds
- -
- - -
Ending Reserves $678.6 $773.3 $808.4 $708.1 $592.8
_________________ (1) Calculated in accordance with the Master Agreement and the Installment Purchase Agreement. (2) 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, Board approved rate increases for Fiscal Years 2018-19 and 2022-23 averaging 1.2% 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 1.0% of annual cash balances. f) Operating and Maintenance Expenses are forecasted with a base increase of 4.0% per year beginning with Fiscal Year 2018-19 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 2018 CIP Validation Study, with adjustments for CIP savings and deferrals. (3) Replacement, Refurbishment & Rehabilitation are 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.
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Management’s Discussion and Analysis of Operating Data
The District’s Fiscal Year 2018-19 total operating, capital improvement, debt service, and other financing requirements budget is $422.3 million, a 9.5% increase over the prior fiscal year budget of $385.6 million. This overall increase consists of an increase in capital outlay of $26.4 million or 17.8% and an increase in operating expenses of $9.3 million or 6.1.%. The Fiscal Year 2019-20 capital outlay budget is $137.0 million, a 21.5% decrease over the Fiscal Year 2018-19 capital outlay budget. The fluctuation in capital outlay requirements is attributable to the timing of the construction schedule on the implementation of the overall combined $2.7 billion CIP over the next ten years.
The Fiscal Year 2018-19 approved budget to operate, maintain and manage the District’s sewage
collection, treatment and disposal system is $161.2 million, a decrease of 6.1%. Personnel costs have increased by $2.6 million, or 2.8%, due primarily cost of living adjustments included in the current Memorandums of Understanding for all employee bargaining units. Adding to the salaries increase is the
addition of one new full time equivalent (“FTE”) staff position bringing the authorized staffing level to 636.0 FTEs.
Contractual services and professional services were budgeted to increase $0.7 million, or 2.9% due primarily to increasing support for the Civil Assets Maintenance Program, new coating program, preventive maintenance optimization services, and engineering professional and design services.
Repairs and maintenance costs were approved to increase $5.8 million or 36.2%. Major changes from year-to-year are basically from the timing of when large facilities are scheduled for maintenance. During Fiscal Year 2018-19, two central generation engines are scheduled for overhaul at an estimated cost of $3.8 million and major rehabilitation of primary and secondary clarifiers and both plants is planned for $1.6 million. In addition, new, increased scope for electrical services in the process areas and rehabilitation of generators is planned as well as specialized lighting and HVAC services.
In preparation of the Fiscal Year 2018-20 biennium budget, District staff developed levels of service and capital projects that are included in the five-year rolling Strategic Plan of the District. See “THE DISTRICT - District Planning.” In addition, staff validated the active capital 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 2018-19 capital related cash flow budget was approved at $191.8 million. After factoring in savings and deferrals, this capital budget was reduced
by $17.3 million to $174.5 million. The 2018 CIP Validation Study includes 68 individual capital projects with 10-year outlays totaling approximately $2.7 billion.
The Master Plan includes a Wastewater Revenue Program Rate Study that determines the appropriate rates going forward to support the proposed 20-year CIP. In March 2018, following a Proposition 218 notice process, the Board approved sewer rate increases for each year over the next five years averaging approximately 1.2% per year. These increases are necessary to provide needed capital improvements, to meet additional treatment and disinfection requirements, and to minimize future rate increases. The impact of this five-year sewer fee schedule has increased the single-family residence user fee rate, the underlying rate for all sewer service user fees, an average of 1.2% a year from $335 in Fiscal Year 2018-19 to $351 in Fiscal Year 2022-23.
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, banker’s acceptances, commercial paper, reverse repurchase agreements and a variety of other investment instruments which are allowable
under California Government Code Section 53600 et seq.
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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, Chandler Asset Management. U.S. Bank National Association serves as the District’s independent custodian bank for its investment program. Callan Associates serves as the District’s independent advisor.
As of June 30, 2018, the District’s externally managed fund consisted of a short-term investment portfolio of $156.1 million with an average maturity of 55 days, and a long-term investment portfolio of $460.9 million with average maturities of 2.8 years. Investments consist of United States government securities, corporate bonds and commercial paper. The District’s portfolio contains no structured investment vehicles (“SIVs”) 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 funds in a manner which ensures the safety and preservation of capital while meeting reasonable anticipated operating expenditure needs, achieving a reasonable rate of return and conforming to all state and local statutes governing the investment of public funds. The primary objectives, in order, of the District’s investment activities are
safety, liquidity and return on investment.
FINANCIAL OBLIGATIONS
Existing Indebtedness
Currently, the District has Senior Obligations Outstanding payable on a parity with the Notes. The table below describes the District’s outstanding parity certificates of participation as of November 1, 2018. 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.
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Table 16 Outstanding Senior Obligations As of November 1, 2018
Original Principal Amount Issue Date Outstanding Balance Final Maturity 2009A Certificates $ 200,000,000 05/07/09 $ 4,690,000 02/01/19
2010A Certificates 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 75,370,000 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 78,375,000 02/01/27
2015A Revenue Obligations 127,510,000 02/12/15 127,510,000 02/01/37 2016A Revenue Obligations 145,880,000 03/30/16 145,880,000 02/01/39 2016B Certificates* 109,875,000 11/01/16 109,875,000 12/15/18 2017A Revenue Obligations 66,370,000 02/01/17 66,370,000 02/01/30 Total Senior Obligations $1,286,360,000 $1,012,110,000
___________________
* To be prepaid with the proceeds of the Notes. 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 and to prepay the Notes. 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. See “SECURITY AND SOURCES OF PAYMENT FOR THE NOTES – Sale Proceeds of Future Obligations.”
Direct and Overlapping Bonded Debt
The aggregate direct and overlapping bonded debt of the District as of June 30, 2017 is set forth on page 70 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 property and improvements on behalf of the District. Under its articles of incorporation, the Corporation has all powers conferred upon nonprofit public benefit corporations by the laws of the State, provided that it will not engage in any activity other than that which is necessary or convenient for, or incidental to the purposes for which it was formed.
The Corporation is a separate legal entity from the District. It is governed by a twenty-five member Board of Directors. The Corporation has no employees. All staff work is performed by employees of the District. The members of the Corporation’s Board of Directors are the Board of Directors of the District.
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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, (ii) (as a result of an amendment to Article XIIIA approved by State voters on June 3, 1986) on bonded indebtedness for the acquisition or improvement of real property which has been approved on or after July 1, 1978 by two-third of the voters on such indebtedness, and (iii) bonded indebtedness incurred by a school district or community college district for the construction, reconstruction, rehabilitation or replacement of school facilities or the acquisition or lease of real property for school facilities, approved by 55% of the voters of the district, but only if certain accountability measures are included in the proposition. Article XIIIA defines full cash value to mean “the county assessor’s valuation of real property as shown on the 1975-76 tax bill under “full cash value,” or thereafter, the appraised value of real property when purchased, newly constructed, or a change in ownership has occurred after the 1975 assessment.” The full cash value may be adjusted annually to reflect inflation at a rate not to exceed 2% per year or to reflect a reduction in the consumer price index or comparable data for the area under 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.
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 100% of market value (unless noted differently) and all tax rates reflect the $1 per $100 of taxable value.
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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 XIIIB 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 XIIIB 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 returned by revising tax rates or fee schedules over the subsequent two years.
“Appropriations subject to limitation” are authorizations to spend “proceeds of taxes,” which consist of tax revenues, state subventions and certain other funds, including proceeds from regulatory licenses, user charges or other fees to the extent that such proceeds exceed “the cost reasonably 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 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.
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Proposition 1A and Proposition 22
Proposition 1A (“Proposition 1A”), 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 1A 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 1A 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 1A 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 1A 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 1A 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 1A suspension. The District participated in a Proposition 1A 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 1A 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 1A requires the State to suspend State mandates affecting cities, counties and special districts, excepting mandates relating to employee rights, schools or community colleges, in any year that the State does not fully reimburse local governments for their costs to comply with such mandates.
Article XIIIC and Article XIIID of the California Constitution
Proposition 218, a State ballot initiative known as the “Right to Vote on Taxes Act,” was approved by the voters on November 5, 1996. The initiative added Articles XIIIC and XIIID to the
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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 (i.e., “general taxes”) imposed, extended or increased on or after January 1, 1995 and prior to November 6, 1996.
Article XIIID imposes substantive and procedural requirements on the imposition, extension or increase of any “fee” or “charge” subject to its provisions. A “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 Cal.4th 409 (2004) (“Richmond”), and Bighorn-
Desert View Water Agency v. Verjil, 39 Cal.4th 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 “imposed exclusively to finance the capital costs or maintenance and operations expenses for [among other things] water” are exempted from some of the provisions of Article XIIID applicable to assessments.
Article XIIIC extends the people’s initiative power to reduce or repeal existing local taxes, assessments, fees and charges. This extension of the initiative power is not limited by the terms of Article XIIIC to fees, taxes, assessment fees and charges imposed after November 6, 1996 and absent other
authority could result in retroactive reduction in any existing taxes, assessments, fees or charges. In Bighorn, the Court concluded that under Article XIIIC local voters by initiative may reduce a public agency’s water rates and delivery charges. The Court noted, however, that it was not holding that the
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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 has consistently increased rates over the years, but the magnitude of such increases has been declining. On March 28, 2018, the Board of Directors adopted Ordinance No. OCSD-49 approving single family residential rate increases for each year over the next five years, by 1.2% annually.
The single family residential rate is the basis for all of the District’s sewer service charges. 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 in compliance with Article XIIID. These increases are necessary to
provide needed capital improvements, to meet additional treatment and disinfection requirements, and to minimize future rate increases. The impact of this five-year sewer fee schedule has increased the single family residence user fee rate from $335 in Fiscal Year 2018-19 to $351 in Fiscal Year 2022-23.
For comparison, in May 2003, the Board of Directors approved a 15% single family residential rate increase per year over the then following five years. However, in May 2005, the Board of Directors approved a 31% single family residential rate increase for Fiscal Year 2005-06 after a CIP Validation Study for Fiscal Year 2005-06 increased the ten year CIP cash flow projections to $2.2 billion, or an average of $220 million per year. The Board of Directors then approved a rate increase of 9.8% annually for the following two years. In February of 2008 the Board of Directors increased the rate by 10.4%, 10.0%, 10.4%, 9.4% and 10.1%, respectively, for Fiscal Years 2008-09 through 2012-13. Pursuant to Ordinance No. OCSD-41, such rate was increased by 4.8% for Fiscal Year 2013-14 and thereafter by an average of 1.7% annually for each Fiscal Year through the Fiscal Year ended June 30, 2018.
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. 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 the Installment Payment as provided in the Installment Purchase Agreement. No assurance may be given that Articles XIIIC and XIIID will not have a material adverse impact on Net Revenues.
Other Initiative Measures
Articles XIIIA, XIIIB, XIIIC and XIIID were adopted pursuant to California’s constitutional initiative process. From time to time other initiative measures could be adopted by California voters, placing additional limitations on the ability of the District to increase revenues.
LEGAL MATTERS
The validity of the Notes and certain other legal matters are 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,
24724112.5 51
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.
MUNICIPAL ADVISOR
The District has retained Public Resources Advisory Group as an independent registered municipal advisor (the “Municipal Advisor”) in connection with the execution and delivery of the Notes. The Municipal Advisor has not been engaged, nor have they undertaken, to audit, authenticate or otherwise verify the information set forth in the Official Statement, or any other related information available to the District, with respect to accuracy and completeness of disclosure of such information.
The Municipal 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. Certain fees of the Municipal Advisor are contingent upon the execution and delivery of the
Notes.
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 Notes, 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 Notes, 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 Notes or any action of the District contemplated by any of said documents, nor, to the knowledge of the District is there any basis therefor.
There is no action, suit, proceeding, inquiry or investigation, at law or in equity, before or by any court, regulatory agency, public board or body pending or, to the best knowledge of the District,
threatened against the District contesting or affecting the ability of the District to collect amounts from which the Installment Payment is payable, or which would have a material adverse effect on the District’s ability to make the Installment Payment.
FINANCIAL STATEMENTS
The basic financial statements of the District included in Appendix A to this Official Statement have been audited by Macias Gini & O’Connell LLP, independent certified public accountants. See APPENDIX A – “COMPREHENSIVE ANNUAL FINANCIAL REPORT OF THE ORANGE COUNTY SANITATION DISTRICT FOR THE YEAR ENDED JUNE 30, 2017” 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. Macias Gini & O’Connell 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. Macias Gini & O’Connell LLP also has not performed any procedures relating to this Official Statement.
TAX MATTERS
The Internal Revenue Code of 1986 (the “Code”) imposes certain requirements that must be met subsequent to the execution and delivery of the Notes for the interest component of each Installment
Payment (the “Interest Component”), and the allocable portion thereof distributable in respect of each
24724112.5 52
Note (each a “Note Interest Distribution”), to be and remain excluded pursuant to section 103(a) of the Code from the gross income of the owners thereof from the gross income of the owner thereof for federal income tax purposes. Noncompliance with such requirements could cause such amounts to be included in gross income for federal income tax purposes retroactive to the date of delivery of the Installment
Purchase Agreement and the Notes.
In the opinion of Norton Rose Fulbright US LLP, Los Angeles, California, Special Counsel, under existing statutes, regulations, rulings and court decisions, the Interest Component of each Installment Payment and the Note Interest Distributions in respect thereof are exempt from personal income taxes of the State of California and, assuming compliance with the covenants referred to herein,
are excluded pursuant to section 103(a) of the Code from the gross income of the owners thereof for federal income tax purposes. In the further opinion of Special Counsel, under existing statutes, regulations, rulings and court decisions, the Notes are not “specified private activity bonds” within the
meaning of section 57(a)(5) of the Code and, therefore, the Interest Component allocable to and the Note Interest Distributions in respect of a Note is not 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 or of a Note Interest Distribution owned by a corporation whose taxable year began on or before December 31, 2017, may affect the computation of the alternative minimum taxable income. The corporate alternative minimum tax is repealed with respect to taxable years beginning on and after January 1, 2018. A corporation’s alternative minimum taxable income is the basis on which the alternative minimum tax imposed by section 55 of the Code will be computed.
The initial public offering price for the Notes is greater than the principal amount payable on the Notes at maturity. To the extent that a purchaser of a Note who treats the stated interest payable at maturity as qualified stated interest acquires the Note at a price greater than the aggregate amount (other than such qualified stated interest) payable on such Note, 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 non-callable tax-exempt obligation must be amortized over the
remaining term of the obligation: the amount of premium so amortized will reduce the owner’s basis in such Note for federal income tax purposes, but such amortized premium will not be deductible for federal income tax purposes. Consequently, an owner of a Note who purchased the Note with bond premium and
held the Note until paid at maturity generally will not realize tax gain or loss on such Note. 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 Note owned by such owner is sold or disposed of for an amount equal to, or in some circumstances even less than, the original cost of the Note to the owner. Purchasers should consult their own tax advisors as to the computation and treatment of such amortizable bond premium, including, but not limited to, the calculation of gain or loss upon the sale, maturity or other
disposition of a Note.
Pursuant to the Trust 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 and the Corporation in connection with the issuance of the Notes, the District and the Corporation will make representations relevant to the determination of, and will make certain covenants regarding or affecting, the exclusion of interest on the Notes from the gross income of the owners thereof for federal income tax purposes. In reaching the conclusions supporting the opinions described above, Special Counsel will assume the accuracy of such representations and the present and future compliance by the
District and the Corporation with such covenants referred to herein. Further, except as stated above, Special Counsel will express no opinion as to any federal or state tax consequences of the receipt of interest on, or the ownership or disposition of, the Notes.
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 and the Notes may affect the tax status of the Interest Component or the Note Interest Distributions. No assurance can be given that future
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legislation, if enacted into law, will not contain provisions that could directly or indirectly reduce the benefit of the exemption of such amounts from personal income taxation by the State of California or of the exclusion of the interest on the Notes from the gross income of the owners thereof for federal income tax purposes. Furthermore, Special Counsel expresses no opinion as to any federal, state or local tax law consequences with respect to the Installment Purchase Agreement, the Notes, the Interest Component or the Note Interest Distributions, if any action is taken with respect to the Installment Purchase Agreement, the Notes or the proceeds thereof, or the Trust Agreement predicated or permitted upon the advice or approval of other counsel.
Special Counsel’s opinion is not a guarantee of a result, but represents its legal judgment based
upon its review of existing statutes, regulations, published rulings and court decisions and the representations and covenants of the District and the Corporation described above. No ruling has been sought from the Internal Revenue Service (the “Service”) with respect to the matters addressed in the
opinion of Special Counsel, and Special Counsel’s opinion is not binding on the Service. The Service has an ongoing program of auditing the tax-exempt status of the interest on municipal obligations. If an audit of the Notes is commenced, under current procedures the Service is likely to treat the District as the “taxpayer,” and the owners would have no right to participate in the audit process. In responding to or defending an audit of the tax-exempt status of the Interest Component and the Note Interest Distributions accrued in respect of Notes, the District may have different or conflicting interest from the owners. Public awareness of any future audit of the Notes could adversely affect the value and liquidity of the Notes during the pendency of the audit, regardless of its ultimate outcome.
Although Special Counsel is of the opinion that the Interest Component and the Note Interest Distributions in respect of a Note are exempt from California personal income tax and excluded from the gross income of the owners 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 Notes. 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 Notes 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 Notes and the Code contains additional limitations on interest deductions applicable to financial institutions that own tax-exempt obligations (such as the Notes), (ii) with respect to insurance
companies subject to the tax imposed by section 831 of the Code, section 832(b)(5)(B)(i) reduces the deduction for loss reserves by 15% of the sum of certain items, including Interest Component and Note Interest Distributions in respect of the Notes, (iii) Interest Component and Note Interest Distributions accrued in respect of Notes 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 Note Interest Distributions accrued in respect of Notes, 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 Note Interest Distributions accrued in respect of Notes owned by such recipients for federal income tax purposes, and (vi) under section 32(i) of the Code, receipt of investment income, including Interest Component and Note Interest Distributions accrued in respect of Notes, may disqualify the recipient thereof from obtaining the earned income credit.
Special Counsel has expressed no opinion regarding any such other tax consequences.
Existing law may change to reduce or eliminate the benefit to noteholders of the exclusion of interest on the Interest Component and the Note Interest Distributions accrued in respect of the Notes
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 Notes. Prospective purchasers of the Notes should consult with their own tax advisors with respect to any proposed or future changes in
tax law.
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A copy of the form of opinion of Special Counsel to be delivered at the closing of the Notes is
included in Appendix F.
CONTINUING DISCLOSURE
The District has covenanted for the benefit of holders and beneficial owners of the Notes (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 2017-18 Fiscal Year, and (b) to provide notices of the occurrence of certain enumerated events. The Annual Report will be filed by the Trustee on behalf of the District, with the Municipal Securities Rulemaking Board. The notices of enumerated
events will be filed by the Trustee 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”).
RATINGS
The Notes will be assigned long-term ratings of “___” by Moody’s Investors Service (“Moody’s”) and “___” by Fitch Ratings (“Fitch”). The Notes will be assigned a short-term rating by Fitch of “___.” Such ratings reflect only the views of the rating agencies, and do not constitute a recommendation to buy, sell or hold the Notes. Explanation of the significance of such ratings may be obtained only from the respective rating agencies. 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 Notes.
PURCHASE AND REOFFERING
___________ (the “Initial Purchaser”) has purchased the Notes from the District at a competitive
sale for a purchase price of $___________ (representing the aggregate principal amount of the Notes, plus a premium of $__________, less an underwriter’s discount of $__________). The public offering price may be changed from time to time by the Initial Purchaser. The Initial Purchaser may offer and sell Notes
to certain dealers and others at prices lower than the offering price shown on the cover page hereof.
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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 Notes.
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
24724112.5 A-1
APPENDIX A COMPREHENSIVE ANNUAL FINANCIAL REPORT OF THE ORANGE COUNTY SANITATION DISTRICT FOR FISCAL YEAR ENDED JUNE 30, 2017
24724112.5 B-1
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(1)
Year County of Orange State of California United States
2009 2,982,788 36,961,664 307,006,550 2010 3,017,217 37,318,481 308,745,538 2011 3,051,472 37,578,616 311,800,000
2012 3,086,260 38,041,430 313,914,040 2013 3,113,370 38,332,521 316,128,839 2014 3,139,615 38,802,500 321,418,820 2015 3,165,203 39,144,818 321,442,019 2016 3,183,011 39,225,883 322,762,018 2017 3,198,869 39,500,973 326,359,076 2018 3,221,103 38,809,693 328,030,045 ____________________ (1) As of July 1 of each year, except 2010 State of California and United States data as of April 1, 2010, 2016 U.S. Census Bureau data as of January 1, 2016 and 2017 and 2018 County of Orange and State of California data as of January 1.
Source: County of Orange: California Department of Finance, Demographic Research Unit; State of California and United States: 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. Public school enrollment for the academic calendar years 2013-14 through 2017-18 is presented in Table B-2.
24724112.5 B-2
TABLE B-2 COUNTY OF ORANGE PUBLIC SCHOOL ENROLLMENT
2013-14 2014-15 2015-16 2016-17 2017-18
Total Enrollment 500,487 497,116 493,030 490,430 485,835
____________________
Source: California Department of Education, Data Quest Report. 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 2013 through 2017 by industry.
TABLE B-3 COUNTY OF ORANGE INDUSTRY EMPLOYMENT AND LABOR FORCE – ANNUAL AVERAGE
2013 2014 2015 2016 2017
Farm 2,900 2,800 2,500 2,400 2,200 Natural Resources and Mining 600 700 700 600 700 Construction 76,800 82,000 90,400 97,400 101,700 Manufacturing 158,000 158,700 156,900 157,000 158,600 Wholesale Trade 79,400 80,900 80,800 80,900 82,000 Retail Trade 145,500 148,700 151,200 152,400 153,400
Transportation, Warehousing Utilities 27,500 26,600 26,900 27,200 27,600 Information 25,000 24,200 25,500 26,400 27,300 Financial Activities 113,100 114,100 116,800 117,600 119,000 Professional and Business Services 267,300 275,800 285,400 296,900 301,700 Educational and Health Services 184,200 190,300 198,800 206,800 215,700 Leisure and Hospitality 187,800 193,500 204,000 212,000 218,200
Other Services 45,600 47,700 48,800 50,400 50,200 Government 148,700 151,900 156,200 159,600 160,500 Total (1) 1,462,400 1,498,700 1,545,200 1,602,500 1,618,800 ____________________
(1) Totals for all categories. The listed categories do not represent all employment categories. Source: California Employment Development Department.
24724112.5 B-3
Major Employers
The following table lists the major employers in the County for 2017.
TABLE B-4 COUNTY OF ORANGE MAJOR EMPLOYERS 2017
Employer Name Number of Employees Walt Disney Company 20,000 County of Orange 18,748 University of California, Irvine 17,579 St. Joseph Health System 10,047 Boeing Co. 9,961 Yum! Brands Inc. 7,200 AT&T Incorporated 6,000
California Stater University, Fullerton 5,634 Home Depot, Incorporated 5,450 Memorial health Services Inc. 4,956
Source: Orange County Business Journal, 2017 for all employers other than the County; number of County
employees provided by the County Budget Office (number of filled positions).
24724112.5 B-4
Labor Force, Employment and Unemployment
Table B-5 summarizes the annual labor force, employment and unemployment figures over the
period 2014 through 2018, for the County and the State.
TABLE B-5 COUNTY OF ORANGE AND STATE OF CALIFORNIA LABOR FORCE, EMPLOYMENT AND UNEMPLOYMENT YEARLY AVERAGE
Year and Area Labor Force Employment Unemployment Unemployment Rate 2014 Orange County 1,575,600 1,489,200 86,400 5.5
California 18,811,400 17,397,100 1,414,300 7.5
2015
Orange County 1,595,300 1,523,800 71,500 4.5
California 18,999,800 17,820,400 1,179,400 6.2
2016
Orange County 1,611,600 1,540,500 71,200 4.4
Califo
rnia
19,181,200 18,093,500 1,087,700 5.7
2017
Orange County 1,619,200 1,562,600 56,600 3.5
California 18,413,600 18,418,000 995,600 4.8
2018 Orange County 1,606,700 1,553,200 53,500 3.3
California 19,356,200 18,486,800 869,400 4.5
___________________________________
Source: California Employment Development Department.
24724112.5 B-5
Taxable Transactions
The following tables summarize the volume of taxable transactions in the County in 2012 through
2016. In 2015 the California State Board of Equalization changed the categories used for compiling taxable transactions data. Annual totals may not add due to rounding. Total taxable transactions for the County for 2016 for all outlets equaled $62,511,422. Annual figures for types of business for 2017 are
unavailable.
TABLE B-6 COUNTY OF ORANGE TAXABLE TRANSACTIONS 2012 through 2014 ($ in Thousands)
Type of Business 2012 2013 2014
Motor vehicles and parts dealers $ 6,551,466 $ 7,147,519 $ 7,765,471 Furniture and home furnishings stores 965,018 1,050,308 1,119,188
Electronics and appliance stores 2,536,415 2,488,963 2,220,818 Bldg. matrl. and garden equipment and supplies 2,351,574 2,581,968 2,662,657
Food and beverage stores 2,056,803 2,111,209 2,177,054 Health and personal care stores 948,220 983,067 1,059,761
Gas stations 5,063,762 4,706,666 4,675,051 Clothing and clothing accessories stores 3,510,757 3,764,088 3,942,629
Sporting goods, hobby, book and music stores 1,133,702 1,176,097 1,175,740 General merchandise stores 5,026,911 5,169,057 5,206,936
Miscellaneous store retailers 1,738,855 1,766,848 1,669,672 Nonstore retailers 635,707 893,254 976,238
Food services and drinking places 5,853,267 6,186,883 6,637,321 TOTAL RETAIL AND FOOD SERVICES $38,372,456 $40,025,929 $ 41,288,537
All Other Outlets 16,858,156 17,565,288 18,808,591 TOTAL ALL OUTLETS $55,230,612 $57,591,217 $460,097,128 ___________________________________ Source: California State Board of Equalization.
24724112.5 B-6
TABLE B-7 COUNTY OF ORANGE TAXABLE TRANSACTIONS 2015 and 2016 ($ in Thousands)
Type of Business 2015 2016 Motor vehicles and parts dealers $ 8,352,815 $ 8,648,763 Home Furnishings and Appliance Stores 2,295,378 3,082,463 Bldg. matrl. and garden equipment and supplies 2,870,940 2,961,129 Food and beverage stores 2,249,980 2,315,299 Gas stations 3,979,166 3,389,276 Clothing and clothing accessories stores 4,062,185 4,173,147 General merchandise stores 4,773,788 4,719,158 Food services and drinking places 7,174,652 7,561,709 Other Retail Group 5,130,425 5,318,826 TOTAL RETAIL AND FOOD SERVICES 41,589,926 42,269,771 All Other Outlets $61,358,087 $62,511,422
___________________________________
Source: California State Board of Equalization.
Building Permits
The total valuation of building permits issued in the County reached $5.6 billion in 2017. Table B-8 provides a summary of residential building permit valuations and the number of new dwelling units
authorized in the County during the period 2013 through 2017.
TABLE B-8
COUNTY OF ORANGE BUILDING PERMIT ACTIVITY 2013 through 2017
($ in Thousands)
2013 2014 2015 2016 2017
Valuation: Residential $2,596,543 $2,633,471 $2,826,803 $3,188,602 $3,151,640 Non-Residential 1,578,467 2,000,168 2,203,105 2,090,028 2,495,687 Total $4,175,010 $4,633,639 $5,029,988 $5,278,630 $5,647,327
New Housing Units:
Single Family 3,889 3,646 3,667 5,097 4,226 Multiple Family 6,564 6,990 7,230 5,197 7,908 Total 10,453 10,636 10,897 10,294 12,134
_____________________________________
Source: CHF|CIRB.
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
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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-9 summarizes the number of conventions held in the County, as well as attendance for the period 2013 through 2017.
TABLE B-9 COUNTY OF ORANGE CONVENTION ACTIVITY 2013 through 2017
Year Conventions Attendance
2013 489 1,085,643 2014 503 1,100,000 2015 181 1,016,000 2016 2017 ________________________________________________ Source: Anaheim/Orange County Visitor and Convention Bureau.
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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.
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 1 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.
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APPENDIX C SUMMARY OF PRINCIPAL LEGAL DOCUMENTS
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APPENDIX D FORM OF CONTINUING DISCLOSURE AGREEMENT
THIS CONTINUING DISCLOSURE AGREEMENT (this “Disclosure Agreement”), dated as of November 1, 2018, 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 Revenue Refunding Certificate Anticipation Notes, Series 2018A (the “Notes”), 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 Notes and in order to
assist the underwriter of the Notes in complying with the Rule (as defined herein);
NOW, THEREFORE, for and in consideration of the premises and of the mutual 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.
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“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 __________, 2018, relating to the Notes.
“Participating Underwriter” means any of the original purchaser(s) of the Notes required to comply with the Rule in connection with the offering of the Notes.
“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
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(ii) 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 Notes 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. 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 Notes, 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-TEB) or other material notices or determinations with respect to the tax status of the Notes, or other material events affecting the tax status of the Notes;
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(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 Notes, 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 name 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 Notes.
(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.
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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 prepayment or payment in full of all of the Notes. If such termination occurs prior to the final maturity of the Notes, 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. 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 Notes and upon being indemnified to its reasonable satisfaction, shall, or any holder or beneficial owner of the Notes may, take such actions as may be necessary and appropriate, including seeking mandate or specific performance by court order, to cause the District 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 or the Dissemination
Agent to comply with this Disclosure Agreement shall be an action to compel performance.
Section 11. Duties, Immunities and Liabilities of Trustee and Dissemination 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
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provided under this Disclosure Agreement. The Dissemination Agent and the Trustee 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 and the Trustee, their 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 or the Trustee’s respective 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 Notes.
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 Notes, 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.
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
Assistant General Manager & 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
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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 Revenue Refunding Certificate Anticipation Notes, Series 2018A (the “Notes”)
Date of Execution and Delivery: ____________, 2018
NOTICE IS HEREBY GIVEN that the Orange County Sanitation District (the “District”) has not provided an Annual Report with respect to the above-captioned Notes as required by Section 6.09 of the Trust Agreement, dated as of November 1, 2018, 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
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APPENDIX E BOOK-ENTRY SYSTEM
The description that follows of the procedures and recordkeeping with respect to beneficial ownership interests in the Notes, payment of principal and interest evidenced by the Notes to Participants
or Beneficial Owners, confirmation and transfer of beneficial ownership interests in the Notes, and other Note-related transactions by and between DTC, Participants and Beneficial Owners, is based on information furnished by DTC which the District and the Corporation each believes to be reliable, but the
District and the Corporation take no 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 “Notes”). The Notes 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 note will be issued for the Notes 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 an S&P Global Ratings 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 Notes under the DTC system must be made by or through Direct Participants, which will receive a credit for the Notes on DTC’s records. The ownership interest of each actual purchaser of each Note (“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 Notes are to be accomplished by entries made on the books of Direct and Indirect Participants acting on behalf of Beneficial Owners. Beneficial Owners will not receive certificates representing their ownership interests in the Notes, except in the event that use of the book-entry system for the Notes is discontinued.
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To facilitate subsequent transfers, all Notes 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 Notes with DTC and their registration in the name of Cede & Co. or such other nominee do not affect any change in beneficial ownership. DTC has no knowledge of the actual Beneficial Owners of the Notes; DTC’s records reflect only the identity of the Direct Participants to whose accounts such Notes 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 Notes may wish to take certain steps to augment transmission to them of notices of significant events with respect to the Notes, such as
prepayments, tenders, defaults, and proposed amendments to the security documents. For example, Beneficial Owners of Notes may wish to ascertain that the nominee holding the Notes 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 Notes 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 Notes 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 Notes are credited on the record date (identified in a listing attached to the Omnibus Proxy).
Prepayments with respect to the Notes 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 the 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 Notes at any time by giving reasonable notice to the District or the Trustee. Under such circumstances, in the event that a successor securities depository is not obtained, Notes are required to be printed and delivered.
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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, Notes 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 Notes, (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 Notes 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 Note for each of the maturities of the Notes, 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 Notes 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 Notes 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 Note as the absolute owner of such Note for all purposes, whether or not such Note 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 Note shall be made only to such Owner, which payments shall be valid and effectual to satisfy and discharge the liability evidenced by such Note to the extent of the sum or sums so paid.
Whenever any Notes shall be surrendered for transfer, the Trustee shall execute and deliver new Notes 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. Notes may be presented for exchange at the Principal Office of the
Trustee for a like aggregate principal amount of Notes 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 Note during the period in which the Trustee is selecting Notes for prepayment, nor shall the Trustee be required to transfer or exchange any Note or portion thereof selected for prepayment from and after the date of mailing the notice of prepayment thereof.
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APPENDIX F FORM OF APPROVING OPINION OF SPECIAL COUNSEL
Upon the execution and delivery of the Notes, Norton Rose Fulbright US LLP, Los Angeles, California, Special Counsel to the District, will render its final approving opinion with respect to the
Notes in substantially the following form:
[Date of Delivery]
Orange County Sanitation District 10844 Ellis Avenue Fountain Valley, California 92708-7018
$________ Orange County Sanitation District Revenue Refunding Certificate Anticipation Notes, Series 2018A
Ladies and Gentlemen:
We have acted as Special Counsel in connection with the $___________ aggregate principal amount of Orange County Sanitation District Revenue Refunding Certificate Anticipation Notes, Series
2018A (the “Notes”), which evidence direct, fractional undivided interests of the Owners thereof in the installment payment (the “Installment Payment”), and the interest thereon, to be made by the Orange County Sanitation District (the “District”) pursuant to the Installment Purchase Agreement, dated as of
November 1, 2018 (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 Payment and the interest thereon, will be incurred and secured. The Installment Payment under the Installment Purchase Agreement is payable from (i) 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, and (ii) other lawfully available funds of the District. Capitalized terms used and not otherwise defined herein shall have the meanings ascribed to such terms in the Installment Purchase Agreement.
The Notes are to be executed and delivered pursuant to a Trust Agreement, dated as of November 1, 2018 (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 Notes will be used to (i) prepay all of the Orange County Sanitation District Revenue Refunding Certificate Anticipation Notes, Series 2016B, currently outstanding in the aggregate principal amount of $109,875,000, and (ii) pay the costs incurred in connection with the execution and delivery of the Notes.
24724112.5 F-2
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 Notes. 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.
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 terms
2. The obligation of the District to pay the Installment Payment, 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, 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 Notes by the Trustee, the Notes 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 (the “Interest Component”), and the allocable portion thereof distributable in respect of any Note (each a “Note 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 each Interest Component and each Note Interest Distribution in respect thereof will not 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, or Note Interest Distribution in respect thereof, owned by a corporation whose taxable year began on or before December 31, 2017, may affect the computation of the alternative minimum taxable income of that corporation. The corporate alternative minimum tax is repealed with respect to taxable years beginning on and after January 1, 2018. A corporation’s alternative minimum taxable income is the basis on which the alternative minimum tax imposed by section 55 of the Code will be computed. We are further
of the opinion that the Interest Component of each Installment Payment and the Note Interest Distributions in respect of a Note are exempt from personal income taxes of the State of California under present state law.
Pursuant to the Trust 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 Notes, the District will make representations relevant to the determination of, and will make certain covenants regarding or affecting, the exclusion of the Interest Component and the Note Interest Distribution from the gross income of the owners thereof for federal income tax purposes. In reaching the
24724112.5 F-3
conclusions supporting 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 such 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 Agreement or the Notes. Furthermore, we express no opinion as to any federal, state or local tax law consequences with respect to the Installment Purchase Agreement, Notes, Interest Component, or Note Interest Distributions, if any action is taken with respect to the Installment Purchase Agreement, the Master Agreement, the Trust Agreement, the Notes or the proceeds thereof, permitted or predicated on the advice or approval of counsel, if such advice or approval is given by counsel other than us.
The rights of the owners of the Notes and the enforceability of the Notes, 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 Notes, 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 Notes.
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,
DRAFT OF 09/05/18
73258430.4 1001035824 (OCSD 2018A CANs)
OFFICIAL NOTICE INVITING BIDS
$_______________* ORANGE COUNTY SANITATION DISTRICT REVENUE REFUNDING CERTIFICATE ANTICIPATION NOTES, SERIES 2018A
(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 Revenue Refunding Certificate Anticipation Notes, Series 2018A (the “Notes”). Bids for less than all of the Notes 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: Thursday, November 1, 2018 10:30 a.m., New York Time
Electronic Bids: Electronic proposals may be submitted to Ipreo, 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 Notes
The Preliminary Official Statement for the Notes, dated October __, 2018, 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 Notes, which are certificates of participation evidencing direct, undivided fractional interests in the Installment Payment (the “Installment Payment”), and the interest thereon, payable by the District pursuant to the Installment Purchase Agreement, dated as of November 1, 2018 (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 Notes. 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 Notes. Bidders must read the entire Preliminary Official Statement to obtain information essential to making an informed investment
decision.
Pursuant to the Master Agreement for District Obligations, dated as of August 1, 2000 (the “Master Agreement”), by and between the District and the Corporation, the District has established and
declared the conditions and terms upon which obligations such as the Installment Purchase Agreement, and the Installment Payments and the interest thereon, will be incurred and secured. The Installment
* Preliminary, subject to change.
73258430.4 2
Payment under the Installment Purchase Agreement is 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 Notes will be used to: (i) prepay on November 29, 2018 all of the Orange County Sanitation District Revenue Refunding Certificate Anticipation Notes, Series 2016B, currently outstanding in the aggregate principal amount of $109,875,000, and (ii) pay the costs incurred in connection with the execution and delivery of the Notes. The Notes are to be executed and delivered pursuant to a Trust Agreement, dated as of November 1, 2018 (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 September 26, 2018, the District and the Corporation authorized the execution and delivery of the Installment Purchase Agreement, the Trust Agreement and the Notes.
Existing Senior Obligations
The District has outstanding Senior Obligations payable on a parity with the Installment Payment under the Installment Purchase Agreement, as described in the Preliminary Official Statement. The
proceeds from the sale of the Notes will be applied to terminate the District’s obligations under the 2016B Installment Purchase Agreement.
Security and Source of Payments
The Notes are certificates of participation which evidence direct, undivided fractional interests in the Installment Payment, and the interest thereon, paid by the District pursuant to the Installment Purchase Agreement. The obligation of the District to pay the Installment Payment 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 District’s obligation to make the Installment Payment 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 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 are expressly permitted by the Master Agreement. This
73258430.4 3
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 NOTES — Rate Covenant” in the Preliminary Official Statement.
Additional Obligations
In addition to the Senior Obligations Outstanding, 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 Payment 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 NOTES — Limitations on Issuance of Additional Obligations” in the Preliminary Official
Statement.
Book-Entry-Only
The Notes will be executed and delivered in the form of fully registered certificates payable in lawful money of the United States of America. The Notes 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 Notes. Individual purchases of the Notes will be made in book-entry form only. Purchasers of Notes will not receive physical certificates representing their ownership interests in the Notes purchased. The Notes will be
73258430.4 4
delivered in Authorized Denominations of $5,000 and any integral multiple thereof. Payments of principal and interest evidenced by the Notes 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 Notes. So long as the Notes are in the DTC book-entry system, the interest, principal and prepayment premiums, if any, due with respect to the Notes will be payable by the Trustee, or its agent, to
DTC or its nominee.
Principal and Interest Payments
The Notes will mature on August 15, 2021 (the “Maturity Date”). The Notes 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 Notes is payable semiannually on February 15 and August 15 of each year, commencing on February 15, 2019. Payment of principal of the Notes will be paid in lawful money of the United States of America upon presentation and surrender thereof at the Principal Office of the Trustee.
The District expects the principal of the Notes to be paid from proceeds of the sale, prior to the Maturity Date, of a future series of certificates of participation, notes or other obligations of the District. The sale and delivery of a future series of certificates of participation, notes or other obligations of the
District will depend on market conditions, certain approvals by the District and the Corporation and other factors. See “SECURITY AND SOURCES OF PAYMENT FOR THE NOTES” in the Preliminary Official Statement.
Optional Prepayment
The Notes are subject to optional prepayment prior to the Maturity Date on any date on or after August 1, 2021* in whole or in part, in Authorized Denominations, from and to the extent of prepayment of the Installment Payment 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 Notes to be prepaid, plus accrued interest evidenced thereby to the date fixed for prepayment, without premium.
Selection of Notes for Prepayment
Whenever less than all the Outstanding Notes are to be prepaid pursuant to provisions of the Trust Agreement with respect to optional prepayment thereof, the Trustee shall select the Notes 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 Notes 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 Notes 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. Such notice may 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 Notes to be prepaid, and that if such moneys
* Preliminary, subject to change.
73258430.4 5
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 Notes. If a notice of prepayment of the Notes contains such a condition and such
moneys are not so received, the prepayment of the Notes 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 the Notes pursuant to such notice of prepayment.
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 Notes or the cessation of interest evidenced thereby on the date fixed for prepayment.
Interest Rates, Reoffering Prices, Premium Bids, and Certificate of Initial Purchaser
Bidders must bid to purchase all and not part of the Notes and must submit their bids on the
Official Bid Form. Bidders must specify a rate of interest for the Notes, expressed in multiples of either one-eighths (1/8) or one-twentieths (1/20) of one percent (1%), and no interest rate can exceed 5% per annum.
The successful bidder will, within 30 minutes after being notified of the award of the Notes, advise the District of the initial bona fide public reoffering prices of the Notes 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 as Exhibit A (with such modifications as may be acceptable to Special Counsel). At any time before or after delivery of the Notes 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 Notes that might suggest that the initial sale of a substantial portion of the Notes 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 Notes from the District with a premium; however, no bid will be considered if the bid is to purchase Notes at an aggregate price less than 100% of the aggregate principal amount of the Notes.
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 Amount After Receipt of Bids
The principal amount of the Notes set forth in the Official Bid Form reflects an estimate of the District as to the likely interest rate of the winning bid and the premium contained in the winning bid. After selecting the winning bid, the principal amount of the Notes may be adjusted in $5,000 increments,
if the District elects to do so, to reflect the actual interest rate and any premium in the winning bid to generate a dollar amount bid of approximately $______________ while maintaining the same “per Note” purchaser’s original issue 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 principal amount of the Notes 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 Notes.
73258430.4 6
No Insurance
THE SUCCESSFUL BIDDER SHALL NOT PURCHASE MUNICIPAL BOND INSURANCE
IN CONNECTION WITH THE NOTES.
73258430.4 7
Form of Bid
BIDS FOR LESS THAN ALL OF THE NOTES WILL NOT BE ACCEPTED. Each bid must be
on the Official Bid Form. 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.
The District will make its best efforts to accommodate electronic bids; however, the District, the Municipal 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
Electronic proposals must be submitted through the Electronic Service. If any provision of this
Official Notice Inviting Bids conflicts with information provided by the Electronic Service, this Official Notice Inviting Bids shall control. The District is not responsible for the proper operation of, and shall have no liability for any delays or interruptions of or any damages caused by the Electronic Service. The District is using the Electronic Service as a communication mechanism and not as the District’s agent to conduct electronic bidding for the Notes. 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 at 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 must provide with its bid wire transfer in immediately available federal funds in the amount of $_____________ (the “Bid Security Deposit”).
Bid Security Deposit wire transfers must be received in federal funds prior to the deadline for examination of the bids. Contact the District’s Municipal Advisor, Public Resources Advisory Group, 310-477-8487 or by e-mail at lchoi@pragadvisors.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 Notes. The District disclaims any liability for funds sent by wire transfer, except for any willful misconduct or reckless disregard for its duties.
73258430.4 8
If after the award of the Notes, 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.
Official Statement
The District has approved a Preliminary Official Statement, dated October __, 2018, 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 Notes are awarded. Up to 25 copies of the final Official Statement will be furnished without cost to the successful bidder and further copies, if desired, will be made available at the successful bidder’s expense. The successful bidder shall file the final Official Statement with a nationally
recognized 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 Notes 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 Notes, which best price shall be that resulting in the lowest modified true interest cost with respect to the Notes. The modified 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 Notes, assuming that the Notes are redeemed on their first call date of August 1, 2021*, 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 Notes is expected to occur on or about November 29, 2018. The Notes will be delivered through the facilities of DTC, New York, New York. The successful bidder shall pay for the Notes on the date of delivery in Los Angeles, California in immediately available federal funds. Any expenses of providing federal funds shall be borne by the purchaser. Payment on the delivery date shall be made in an amount equal to the price bid for the Notes 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.
Establishment of Issue Price
(a) The winning bidder shall assist the District in establishing the issue price of the Notes
and shall execute and deliver to the District at Closing an “issue price” or similar certificate setting forth the reasonably expected initial offering price to the public or, if the competitive sale requirements (defined below) are not satisfied and the parties agree that the 10% test shall apply to the Notes the sales
* Preliminary, subject to change.
73258430.4 9
price or prices of the Notes, together with the supporting pricing wires or equivalent communications, substantially in the form attached hereto as Exhibit A, with such modifications as may be appropriate or
necessary, in the reasonable judgment of the winning bidder, the District and Bond Counsel. All actions to be taken by the District under this Official Notice Inviting Bids to establish the issue price of the Notes may be taken on behalf of the District by the District’s municipal advisor identified herein and any notice
or report to be provided to the District may be provided to the District’s municipal advisor.
(b) The District intends that Treasury Regulation Sections 1.148-1(f)(3)(i) and 1.148-1(f)(2)(iii) (providing a special rule for competitive sales and defining the term “competitive sale” for purposes of establishing the issue price of the Notes) will apply to the initial sale of the Notes (the “competitive sale requirements”) because:
(1) the District shall disseminate this Official Notice Inviting Bids to potential underwriters in a manner that is reasonably designed to reach potential underwriters;
(2) all bidders shall have an equal opportunity to bid;
(3) the District shall receive bids from at least three underwriters of municipal bonds who have established industry reputations for underwriting new issuances of
municipal bonds; and
(4) the District anticipates awarding the sale of the Notes to the bidder who submits a firm offer to purchase the Notes at the highest price (or lowest interest cost), as
set forth in this Official Notice Inviting Bids.
By submitting a bid for the Notes pursuant to this Official Notice Inviting Bids (i) the bid shall be considered a firm offer for the purchase of the Notes, as specified in the bid and (ii) the bidder represents and warrants to the District that the bidder has an established industry reputation for underwriting new issuances of municipal bonds.
(c) If the competitive sale requirements are not satisfied, the District will reject all bids and cancel the sale.
(d) By submitting a bid, the winning bidder shall confirm that the underwriters have offered or will offer the Notes to the public on or before the date of award at the offering price (the “initial offering price”), or at the corresponding yield, set forth in the bid submitted by the winning bidder.
CUSIP Number
The District’s Municipal Advisor, Public Resources Advisory Group, will timely apply for a CUSIP number with respect to the Notes, as required by MSRB Rule G-34. It is anticipated that a CUSIP number will be printed on the Notes, but the District will assume no obligation for the assignment or printing of such numbers on the Notes or for the correctness of such numbers, and neither the failure to print such number on any Note 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 Notes. The cost for the
assignment of CUSIP number to the Notes will be the responsibility of the successful bidder.
73258430.4 10
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 Notes.
Legal Opinions
The District will furnish to the successful bidder at the closing of the Notes, 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 the Installment Payment and the allocable portion thereof distributable in respect of each Note 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 Notes.
Closing Documents
The District will furnish to the successful bidder at the time of delivery of the Notes: (1) a
certificate certifying (i) that as of and at the time of delivery of the Notes, 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 Notes or the Trust Agreement, (B) in any way contesting the validity of the Notes, 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 Notes, 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 Notes 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 Notes 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. The District has not failed in the past five years to comply with its disclosure undertakings pursuant to S.E.C.
Rule 15c2-12 in all material respects.
Additional Information
Electronic copies of the Trust Agreement, the Installment Purchase Agreement, the Master
Agreement, this Official Notice Inviting Bids, the Official Bid Form, and the Preliminary Official Statement will be furnished to any potential bidder upon request made to the District’s Municipal Advisor
73258430.4 11
at: Public Resources Advisory Group, 11500 West Olympic Boulevard, Suite 502, Los Angeles, CA 90064, 310-477-8487, via e-mail at lchoi@pragadvisors.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 Notes 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://www.tm3.com) and by facsimile transmission to any qualified bidder timely requesting such notice. Bidders are required to bid for the Notes 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 Notes 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 bid for the purchase
of the Notes 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: October __, 2018
73258430.4 A-1
Exhibit A Form of Certificate of Initial Purchaser
[Note: If the competitive sale requirements are not satisfied, the District will reject all bids and cancel the sale.]
_________, 2018
Orange County Sanitation District 10844 Ellis Avenue Fountain Valley, CA 92708-7018
Norton Rose Fulbright US LLP 555 South Flower Street, 41st Floor Los Angeles, CA 90071
Ladies and Gentlemen:
The undersigned, on behalf of [NAME OF UNDERWRITER] (“[SHORT NAME OF UNDERWRITER]”), hereby certifies as set forth below with respect to the sale, execution and delivery
by the Orange County Sanitation District (the “District”) of its Revenue Refunding Certificate Anticipation Notes, Series 2018A (the “Notes”).
1. Reasonably Expected Initial Offering Price.
(a) As of the Sale Date, the reasonably expected initial offering price of the Notes to the Public by [SHORT NAME OF UNDERWRITER] is the price shown in Schedule A (the “Expected Offering Price”). The Expected Offering Price is the price of the Notes used by [SHORT NAME OF UNDERWRITER] in formulating its bid to purchase the Notes. Attached as Schedule B is a true and correct copy of the bid provided by [SHORT NAME OF UNDERWRITER] to purchase the Notes.
(b) [SHORT NAME OF UNDERWRITER] was not given the opportunity to review other
bids prior to submitting its bid.
(c) The bid submitted by [SHORT NAME OF UNDERWRITER] constituted a firm offer to purchase the Notes.
2. Defined Terms.
(a) Public means any person (including an individual, trust, estate, partnership, association,
company, or corporation) other than an Underwriter or a related party to an Underwriter. The term “related party” for purposes of this certificate generally means any two or more persons who have greater than 50 percent common ownership, directly or indirectly.
(b) Sale Date means the first day on which there is a binding contract in writing for the sale of the Notes. The Sale Date of the Notes is October__, 2018.
(c) Underwriter means (i) any person that agrees pursuant to a written contract with the
Issuer (or with the lead underwriter to form an underwriting syndicate) to participate in the initial sale of the Notes to the Public, and (ii) any person that agrees pursuant to a written contract directly or indirectly
73258430.4 A-2
with a person described in clause (i) of this paragraph to participate in the initial sale of the Notes to the Public (including a member of a selling group or a party to a retail distribution agreement participating in
the initial sale of the Notes to the Public).
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 the gross income for federal income tax purposes of interest with respect to the Notes.
[INITIAL PURCHASER], as Underwriter By: Title:
73258430.4 A-3
Exhibit A
Yield Proof
(See attached)
73258430.4
OFFICIAL BID FORM
$_______________* ORANGE COUNTY SANITATION DISTRICT REVENUE REFUNDING CERTIFICATE ANTICIPATION NOTES, SERIES 2018A
_________, 2018
Orange County Sanitation District 10844 Ellis Avenue Fountain Valley, CA 92708-7018 Attention: Lorenzo Tyner
Ladies and Gentlemen:
We hereby offer to purchase all of the $______________* aggregate principal amount of the Orange County Sanitation District (the “District”) Revenue Refunding Certificate Anticipation Notes, Series 2018A (the “Notes”), more particularly described in your Official Notice Inviting Bids, dated October __, 2018 (the “Official Notice Inviting Bids”), which is incorporated herein by reference, and made a part
thereof, at a purchase price of $_______________ (which purchase price is not less than 100% of the aggregate principal amount of the Notes). This offer is for Notes evidencing interest at the rate per annum of _____%.
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 modified 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 Notes. If we are the successful bidder, we will (1) within 30 minutes after being notified of the verbal award of the Notes, advise the District of the initial public offering prices of
the Notes; and (2) prior to delivery of the Notes furnish a certificate, acceptable to Special Counsel, Norton Rose Fulbright US LLP, as to the “issue price” of the Notes in the form specified in the Official Notice Inviting Bids.
We represent that we have full and complete authority to submit this bid on behalf of our bidding syndicate, that has an established industry reputation for underwriting new issuances of municipal bonds, and the undersigned will serve as the lead manager for the group if the Notes 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
* Preliminary; subject to change.
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. Further,
we did not consult with any other potential underwriter about this bid, and this bid was determined by us, independently, without regard to any other formal or informal agreement, if any, that we may have with the District (whether or not in connection with the sale and issuance of the Notes).
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.
DRAFT OF 08/17/18
73258357.3 1001035824 (OCSD 2018 CANs)
NOTICE OF INTENTION TO SELL
$_____________∗ Orange County Sanitation District Revenue Refunding Certificate Anticipation Notes Series 2018A
NOTICE IS HEREBY GIVEN that the Orange County Sanitation District (the “District”) intends to receive electronic bids until 10:30 a.m., New York time, on Thursday,
November 1, 2018,
through the use of 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 District’s Revenue
Refunding Certificate Anticipation Notes, Series 2018A (the “Notes”), dated as of the date of initial delivery, and maturing on August 15, 2021, 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 Notes 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 Notes 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@pragadvisors.com.
Orange County Sanitation District
Dated: October __, 2018
∗ Preliminary, subject to change.
Page 1 of 6
ADMINISTRATION COMMITTEE Meeting Date 09/12/18 To Bd. of Dir. 09/26/18
AGENDA REPORT Item Number 5 Item Number
Orange County Sanitation District FROM: James D. Herberg, General Manager Originator: Celia Chandler, Director of Human Resources SUBJECT: UPDATES TO OCSD PERSONNEL POLICIES AND PROCEDURES
GENERAL MANAGER'S RECOMMENDATION Adopt Resolution No. OCSD 18-XX entitled, “A Resolution of the Board of Directors of the Orange County Sanitation District approving a Board of Directors Personnel Policies
and Procedures Manual providing for classification, compensation, and other terms, conditions, policies, and procedures governing employment of District employees; and repeal Resolution No. OCSD 15-18.” BACKGROUND
The Orange County Sanitation District’s (Sanitation District) Board of Directors’ Personnel Policies and Procedures Manual (Policies) contains the terms, conditions, rules, and regulations of employment which are consolidated into one reference document. The Policies are reviewed periodically and updated as required; and the last comprehensive
update to the Policies was completed in 2012. Staff is proposing updates to the Policies as a result of local, state, and federal law changes, and changes in work practices. In accordance with Resolution No. OCSD 15-18, revisions to the Policies require Board of Directors’ approval. RELEVANT STANDARDS
• Comply with Resolution No. OCSD 15-18
• Maintain positive employer-employee relations PROBLEM
There are a total of 51 policies that require updates to align with local, state, and federal
law, and to reflect current work practices. PROPOSED SOLUTION
Staff recommends that the Board of Directors approve and adopt the policy updates by
Resolution. The proposed revisions to each of the policies are summarized in the following table. Specific revisions are noted in the attached documents.
Page 2 of 6
Policy Number / Title Reason for Revision
1.1 – Harassment and
Discrimination
Policy updated to include language that complies with federal and state
laws.
1.2 – Retaliation &
Whistleblowing
Policy updated to include language that complies with federal and state laws. Section 3.1 updated with a qualifying statement that aligns with EEOC.
1.3 – Workplace Violence
& Weapons
Policy updated to include managers as a point of contact within procedure. Clarifying language on knives and what is acceptable on OCSD property.
1.4 – Recruitment &
Selection
Policy updated to include: new definitions; clarification on the types of probation; language that complies with federal and state laws; the elimination of specific sections that will be moved into a separate HR Standard Operating Procedures document; defined types of
recruitment; changes to employment posting; advertising; applicant screening; the selection process; addition of eligibility lists; changes to employment offers; and addition of promotions.
1.5 – Outside Employment
& Professional
Associations
Policy updated to include clarifying terms within both policy and procedure.
1.6 – Nepotism Policy updated to include clarifying language within procedure.
1.7 – At-Will EMT
Employment Agreements
Policy updated to include clarifying terms within both policy and procedure, in addition to language that complies with federal and state laws.
1.8 – Business Ethics Policy updated to include clarifying language within procedure.
1.9 – Layoff Procedure Policy updated to include clarifying language within policy and procedure.
1.10 – Employee
Separation
Policy updated to include clarifying language within policy and procedure. Specifically, updated Section 7.1.4 to include banked compensatory time.
1.11 – Temporary &
Contract Workers (NEW) New policy that addresses temporary and contract workers at OCSD.
1.12 – Student Internship
Program (NEW) New policy that addresses student internships available at OCSD.
2.1 – Classification &
Compensation Policy updated to include clarifying language within procedure. Edits applied to policy definitions and the elimination of the “Z Rating”.
Page 3 of 6
Policy Number / Title Reason for Revision
2.2 – Non-Base Building
Pay
Policy updated to include clarifying language within policy and
procedure.
2.3 – Wage Garnishments Minimal edits to correct spelling and grammar.
3.1.1 – Hours of Work –
Nonexempt Employees Minimal edits to correct spelling and grammar.
3.1.2 – Hours of Work –
Exempt Employees Minimal edits to correct spelling and grammar.
3.2 – Attendance Minimal edits to correct spelling and grammar in policy, and clarifying language applied in both procedure and exceptions.
3.3 – Leave of Absence
with Pay
Policy updated to include clarifying terms within both policy and
procedure sections. Outdated language removed from policy section. Specifically, updated language in 4.2.13 to align with California Labor Code.
3.3.1 – Military Leave Policy updated to include minor grammatical changes.
3.4 – Leave of Absence
without Pay
Policy updated to include additional definitions, language that complies
with federal and state laws, as well as changes in policy. Additional information added to the policy on Workers Compensation and Protected Child-related activities. Corrected minor grammatical errors.
4.1 – Insurance Policy updated to include more clear definitions, changes in policy for qualifying events, and minor grammatical changes.
4.2 – Retirement Policy updated to include more detailed definitions and minor grammatical changes.
4.3 – Tuition
Reimbursement Policy updated to include clarifying terms within both policy and procedure sections.
4.4 – Certification
Reimbursement
Policy updated to include clarifying language within the definitions, policy, and procedure sections. Specifically, updated exceptions in Section 7.0 and provisions and conditions in Section 8.0 to align with
Policy 4.3, Tuition Reimbursement Policy.
4.5 – Professional &
Technical Memberships
and Fees
Policy updated to include clarifying language within policy and
exceptions sections. Specifically, updated section 4.3 that allows discretion as needed. Corrected minor grammatical errors.
Page 4 of 6
Policy Number / Title Reason for Revision
4.6 – Domestic Partnership Policy updated to include minor grammatical changes and specific
references to Memoranda of Understanding.
4.7 – Pro-Rata Benefits for
Part-Time Employees
Policy updated to include clarifying language within definitions, purpose and procedure and specific references to Memoranda of Understanding.
4.9 – Catastrophic Leave
Bank Donation Program Policy updated to include clarifying terms within both policy and procedure.
4.10 – Employee
Development Policy updated to include clarifying language within purpose and procedure.
4.11 – Development Pay
(NEW)
Newly created policy that outlines the definitions and guidelines
regarding the Development Pay program. Moved “Educational Degrees” Section of the policy to the “Non-Base Building Pay” policy 2.2 and added a reference to it in the related documents section.
5.1 – Rules of Conduct Policy updated to remove procedural information re: employee’s history and include clarifying information and minor grammatical changes.
5.2 – Discipline Policy updated to include clarifying information in the procedure and minor grammatical changes. Specifically, updated Section 3.3 to refer
to Section 5.9, not 5.5.
5.3 – Operator Certification
Maintenance Policy updated to remove language about quarterly reviews and include minor grammatical changes.
5.4 – Employee
Participation in Athletic and
Recreational Activities on
Off-Duty Time
Policy updated to include information on authorization forms needed,
the use of the Fitness Room at OCSD, and minor grammatical changes.
5.5 – Meal and Rest
Periods Policy updated to include minor grammatical changes.
5.6 – Travel Policy updated to include e-hailing services, the use of OCSD WiFi
hotspots, and minor grammatical changes.
5.7 – Solicitation &
Distribution Policy updated to include definitions, exceptions, and minor grammatical changes.
5.10 – Wireless/Electronic
Communications
Policy updated to include use of drones, for clarity, and minor grammatical changes. Updates within Social Media and IT Forms for
network access were also included.
Page 5 of 6
Policy Number / Title Reason for Revision
5.18 – Use of District
Property Policy updated to include exception and minor grammatical changes.
5.19 – Vehicle Usage
Policy updated to include minor grammatical changes. Clarifying language included within definitions, policy, procedure, and exceptions.
Specifically, language on the use of toll roads is included in Section 4.9.11.
5.20 – Substance Abuse Policy updated to include marijuana and minor grammatical changes.
5.21 – Smoking Policy updated to include more detailed definitions, deletion of related
documents, and minor grammatical changes.
6.1 – Appraisal of
Performance
Policy updated for clarity and to include minor grammatical changes. Specifically added Section 4.1.5 and 5.4 to align with Performance Management.
6.2 – Open
Communication Policy updated for clarity and to include minor grammatical changes.
6.3 – Privacy & HR
Records
Policy updated to include minor grammatical changes and the removal of specific references to Memoranda of Understanding in Section 8.0,
Related Documents.
6.4 – Problem Solving Policy updated to include exceptions and minor grammatical changes.
6.5 – Grievance Procedure Policy updated to include minor grammatical changes.
7.1 – Miscellaneous
Provisions Policy updated to include minor grammatical changes.
7.2 – IDEA Program Policy updated for clarity and to include minor grammatical changes. Specifically removed Section 7.3.3, there is no longer and Employee Activities Committee.
TIMING CONCERNS
The proposed revisions ensure dated language within the Policies is updated and aligns with current legal requirements. RAMIFICATIONS OF NOT TAKING ACTION
The Policies will not reflect current practice and provisions of the law.
Page 6 of 6
PRIOR COMMITTEE/BOARD ACTIONS
September 2015 - Approved Resolution OCSD No. 15-18 entitled, “A Resolution of the
Board of Directors of Orange County Sanitation District approving a Board of Directors
Personnel Policies and Procedures Manual providing for classification, compensation, and other terms, conditions, policies, and procedures governing employment of District employees; and repealing Resolution No. OCSD 98-33 and all associated amendments.”
October 2012 - Approved proposed changes to Personnel Policies, Procedures, and
Guidelines. ADDITIONAL INFORMATION
The Policies, as adopted by a Resolution of the Board of Directors, supersede any and
all prior Board Resolutions and actions that are inconsistent with these Policies, unless otherwise specified herein. The Policies do not constitute a contract of employment. To the extent the Policies are
inconsistent with any term or provision of an individual employment agreement or
Memorandum of Understanding (MOU), the term or provision of the employment agreement or MOU shall govern. The Policies intend to increase the mutual understanding of expectations and minimize
the making of personal decisions on matters of District-wide policy. CEQA N/A
FINANCIAL CONSIDERATIONS N/A
ATTACHMENT
The following attachment(s)are attached in hard copy and may also be viewed on-line at the OCSD website
(www.ocsd.com) with the complete agenda package:
• Proposed Resolution No. OCSD 18-XX
• Orange County Sanitation District Board of Directors Personnel Policies and Procedures Manual (with Proposed Revisions) [online only]
• Resolution No. OCSD 15-18 (online only)
OCSD 18-XX
RESOLUTION NO. OCSD 18-XX A RESOLUTION OF THE BOARD OF DIRECTORS OF
THE ORANGE COUNTY SANITATION DISTRICT ADOPTING A BOARD OF DIRECTORS PERSONNEL POLICIES AND PROCEDURES MANUAL PROVIDING FOR CLASSIFICATION, COMPENSATION, AND OTHER TERMS, CONDITIONS, POLICIES, AND PROCEDURES
GOVERNING EMPLOYMENT OF DISTRICT EMPLOYEES; AND REPEALING RESOLUTION NO. OCSD 15-18
NOW, THEREFORE, the Board of Directors of Orange County Sanitation District, DOES HEREBY RESOLVE, DETERMINE AND ORDER: Section 1: The Board of Directors Personnel Policies and Procedures Manual, attached hereto as Exhibit “A”, be adopted.
Section 2: Any change in the Policies and Procedures set forth in the Board of Directors Personnel Policies and Procedures Manual must be approved by the Board of Directors prior to implementation.
Section 3: This Resolution shall take effect immediately upon its adoption. Section 4: Resolution No. OCSD 15-18 is hereby repealed.
PASSED AND ADOPTED at a regular meeting of the Board of Directors held September 26, 2018.
_____________________________________ Gregory C. Sebourn, PLS Board Chairman
ATTEST: _______________________________________
Kelly A. Lore, MMC Clerk of the Board
OCSD 18-XX
STATE OF CALIFORNIA )
)
COUNTY OF ORANGE )
I, Kelly A. Lore, Clerk of the Board of Directors of the Orange County Sanitation
District, do hereby certify that the foregoing Resolution No. OCSD 18-XX was passed and adopted at a regular meeting of said Board on the 26th day of September 2018, 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 26th day of September 2018.
Kelly A. Lore, MMC Clerk of the Board of Directors Orange County Sanitation District
Page 1 of 1
ADMINISTRATION COMMITTEE Meeting Date 09/12/18 To Bd. of Dir. --
AGENDA REPORT Item Number 6 Item Number --
Orange County Sanitation District FROM: James D. Herberg, General Manager Originator: Ed Torres, Director of Operations and Maintenance SUBJECT: ORANGE COUNTY SANITATION DISTRICT OPERATIONS &
MAINTENANCE DEPARTMENT PRESENTATION GENERAL MANAGER'S RECOMMENDATION Information Only.
BACKGROUND Each month, staff provides an informational presentation on topics of interest to the Board of Directors. This month’s topic: Orange County Sanitation District O&M Department.
RELEVANT STANDARDS
• 24/7/365 treatment plant reliability
• Operate and maintain facilities to minimize impacts on surrounding communities, including odor, noise, and lighting
• Meet volume and water quality needs for the GWRS
ATTACHMENT
The following attachment(s) may be viewed on-line at the OCSD website (www.ocsd.com) with the complete agenda package:
N/A
ORANGE COUNTY SANITATION DISTRICT
COMMON ACRONYMS
ACWA Association of California
Water Agencies LAFCO Local Agency Formation
Commission RWQCB Regional Water Quality
Control Board
APWA American Public Works
Association LOS Level Of Service SARFPA Santa Ana River Flood
Protection Agency
AQMD Air Quality Management
District MGD Million Gallons Per Day SARI Santa Ana River
Interceptor
ASCE American Society of Civil Engineers MOU Memorandum of Understanding SARWQCB Santa Ana Regional Water Quality Control Board
BOD Biochemical Oxygen Demand NACWA National Association of Clean Water Agencies SAWPA Santa Ana Watershed Project Authority
CARB California Air Resources
Board NEPA National Environmental
Policy Act SCADA Supervisory Control And
Data Acquisition
CASA California Association of Sanitation Agencies NGOs Non-Governmental Organizations SCAP
Southern California
Alliance of Publicly Owned
Treatment Works
CCTV Closed Circuit Television NPDES National Pollutant Discharge
Elimination System SCAQMD South Coast Air Quality
Management District
CEQA California Environmental
Quality Act NWRI National Water Research
Institute SOCWA South Orange County
Wastewater Authority
CIP Capital Improvement
Program O & M Operations & Maintenance SRF Clean Water State
Revolving Fund
CRWQCB California Regional Water
Quality Control Board OCCOG Orange County Council of
Governments SSMP Sewer System
Management Plan
CWA Clean Water Act OCHCA Orange County Health Care Agency SSO Sanitary Sewer Overflow
CWEA California Water Environment
Association OCSD Orange County Sanitation
District SWRCB State Water Resources
Control Board
EIR Environmental Impact Report OCWD Orange County Water District TDS Total Dissolved Solids
EMT Executive Management Team OOBS Ocean Outfall Booster Station TMDL Total Maximum Daily Load
EPA US Environmental Protection
Agency OSHA Occupational Safety and
Health Administration TSS Total Suspended Solids
FOG Fats, Oils, and Grease PCSA
Professional
Consultant/Construction Services Agreement WDR Waste Discharge
Requirements
gpd gallons per day PDSA Professional Design Services
Agreement WEF Water Environment
Federation
GWRS Groundwater Replenishment
System POTW Publicly Owned Treatment
Works WERF Water Environment &
Reuse Foundation
ICS Incident Command System ppm parts per million WIFIA Water Infrastructure
Finance and Innovation Act
IERP Integrated Emergency
Response Plan PSA Professional Services
Agreement WIIN
Water Infrastructure
Improvements for the
Nation Act
JPA Joint Powers Authority RFP Request For Proposal WRDA Water Resources
Development Act
ORANGE COUNTY SANITATION DISTRICT
GLOSSARY OF TERMS
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 known 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.
BIOGAS – A gas that is produced by the action of anaerobic bacteria on organic waste matter in a digester tank that can be used
as a fuel.
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 farmland 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.
CONTAMINANTS OF POTENTIAL CONCERN (CPC) – Pharmaceuticals, hormones, and other organic wastewater contaminants.
DILUTION TO THRESHOLD (D/T) – The dilution at which the majority of people detect the odor becomes the D/T for that air sample.
GREENHOUSE GASES (GHG) – 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 SYSTEM (GWRS) – 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 per day of drinking quality water to replenish the local groundwater supply.
LEVEL OF SERVICE (LOS) – Goals to support environmental and public expectations for performance.
N-NITROSODIMETHYLAMINE (NDMA) – A N-nitrosamine 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 and Water Environment Federation, with advisory support from the US Environmental Protection Agency. NBP is committed to developing and advancing environmentally sound and sustainable biosolids management practices that go beyond regulatory compliance and promote public participation 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) – A municipal wastewater treatment plant.
SANTA ANA RIVER INTERCEPTOR (SARI) LINE – A regional brine line designed to convey 30 million gallons per day 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 runoff.
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.
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. The Orange County Sanitation District’s service area is in the Santa Ana River Watershed.