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Home My WebLink About02-22-2012 Board Meeting Agenda Wednesday, February 22, 2012 Orange County Sanitation District 6:30 P.M. Regular Meeting of the Board Room Board of Directors 10844 Ellis Avenue Fountain Valley, CA 92708 (714)593-7130 AGENDA INVOCATION AND PLEDGE OF ALLEGIANCE: (David Shawver, City of Stanton) DECLARATION OF QUORUM: ROLL CALL: PUBLIC COMMENTS: if you wish to speak, please complete a Speaker's Form (located at the table outside of the Board Room) and give it to the Clerk of the Board. Speakers are requested to limit comments to three minutes. REPORTS: The Chair and the General Manager may present verbal reports on miscellaneous matters of general interest to the Directors. These reports are for information only and require no action by the Directors. CLAIMS: 1. Ratify payment of claims of the District, by roll call vote, as follows: Claims Paid for the Period Ending: 01/15112 01/31/12 Totals $7,996,309.01 $43,311,742,75 DIRECTORS: Pursuant to Government Code Section 84308, you are required to disclose any campaign contribution greater than $250 received in the past twelve months from any party to a contract involving OCSD. This requires that you identify the contributor by name. Further, you may not participate in the decision making process to award a contract to such party. For reference,you are directed to the Register of Warrants as to all current contractorsNendors with OCSD. For the specifics of Government Code Section 84308, please see your Director's Handbook or call the office of General Counsel. CONSENT CALENDAR: Consent Calendar Items are considered to be routine and will be enacted, by the Board of Directors, after one motion, without discussion. Any items withdrawn from the Consent Calendar for separate discussion will be considered in the regular order of business. 02122/12 OCSD Board of Directors Agenda Page 1 of 7 2. Approve minutes for the Regular Board Meeting held on January 25, 2012. 3. Approve the updated 2007 Orange County Regional Water and Wastewater Multi-Hazard Mitigation Plan. 4, A. Award a service agreement to Kaveh Engineering & Construction, Inc. for P2 78-inch Outfall Land Section Piping Repair FR-2011-500 for a total amount not to exceed $141,956; and B. Approve a contingency of $28,400 (20%). 5. Grant a non-exclusive easement to Southern California Edison, which will encompass underground facilities on the eastern portion of the Rocky Point Pump Station property, in a form approved by General Counsel. 6. A. Approve Plans and Specifications for 15 kV Upgrades at Plant No. 2, Project No. P2-108, on file at the office of the Clerk of the Board; B. Approve Addendum Nos. 1 and 2 to the plans and specifications; C. Receive and file bid tabulation and recommendation; D. Award a construction contract to Helix Electric, Inc. for 15 kV Upgrades at Plant No. 2, Project No. P2-108, for a total amount not to exceed $2,745,000 and, E. Approve a contingency of $192,150 (7.0%). 7. A. Approve Addendum No. 1 to the plans and specifications; B. Receive and file bid tabulation and recommendation; C. Award a construction contract to W. M. Lyles Company for Fall Protection Improvements at Plant Nos. 1 and 2, Project No. J-123, for a total amount not to exceed $1,810,832; and, D. Approve a contingency of $181,083 (10%). 8. Approve a negotiated agreement between the Orange County Sanitation District and the public school districts within its service area for payment of Capital Facilities Capacity Charges (CFCC). 02122112 OGSD Board of Directors Agenda Page 2 of NON-CONSENT: 9. A. Consider, receive, and file the Final Environmental Impact Report for the Ocean Outfall Land Section and Ocean Outfall Booster Pump Station (COBS) Piping Rehabilitation Project, prepared by Environmental Science Associates, dated February 2012; B. Adopt Resolution No. OCSD 12-02, certifying the Final Environmental Impact Report for implementation of the Ocean Outfall Land Section and COBS Piping Rehabilitation; making certain findings relating to environmental effects of Alternative 2 identified in the Final Environmental Impact Report; adopting a Statement of Overriding Considerations; adopting a Mitigation Monitoring and Reporting Program; and approving the Ocean Outfall Land Section and COBS Piping Rehabilitation Project (Alternative 2). STEERING COMMITTEE: 10. Approve minutes of the January 25, 2012, Steering Committee Meeting. 11. Adopt Resolution No. OCSD 12-03, Establishing the Procedure to Conduct an Annual Performance Evaluation of the General Counsel. 12. Approve out-of-country travel for one Orange County Sanitation District employee to New Zealand to engage in discussion and sharing of information on advanced odor control issues and technology at no cost to the Sanitation District for any type of travel or conference registration expenditures. 13. Seeking direction from the Board of Directors on a process and criteria for selection of OCSD representatives to the Redevelopment Agency Oversight Boards. OPERATIONS COMMITTEE: 14. Approve minutes of the February 1, 2012, Operations Committee Meeting. 15. Approve Amendment No. 2 to the Professional Consultant Services Agreement with Carollo Engineers Inc. for Phase 1 of Project No. P1-116, Primary Clarifiers 6-31 Evaluation and Optimization Study, authorizing services for an additional amount of$71,500, increasing the total amount not to exceed $385,445. 02122112 OCSD Board of Directors Agenda Page 3 of 7 16. A. Establish a budget for the Lakeview Grade Separation Project, Project No. 2-75, in the amount of$250,000; and B. Approve a Reimbursement Agreement with the Orange County Transportation Authority for the entirety of project expenditures, in a form approved by General Counsel, for an estimated amount not to exceed $250,000. ADMINISTRATION COMMITTEE: 17. Approve minutes of the February 8, 2012, Administration Committee Meeting. 18. A. Adopt Resolution No. OCSD 12-04, authorizing the execution and delivery by the Sanitation District of an Installment Purchase Agreement, a Trust Agreement, an Escrow Agreement and a Continuing Disclosure Agreement in connection with the execution and delivery of Orange County Sanitation District Wastewater Refunding Revenue Obligations, Series 2012A, authorizing the execution and delivery of such Revenue Obligations evidencing principal in an aggregate amount of not to exceed $110,000,000, approving a Notice of Intention to Sell, authorizing the distribution of an Official Notice Inviting Bids and an Official Statement in connection with the offering and sale of such Revenue Obligations and authorizing the execution of necessary documents and related actions; and, B. Recommend to the Orange County Sanitation District Financing Corporation to approve the documents supporting and authorizing the Revenue Obligations in an aggregate amount not to exceed $110,000,000. 19. Approve the budget assumptions to be used for the preparation of the FY 2012- 13 and FY 2013-14 two-year budget. Recess by Board of Directors, Orange County Sanitation District « « « « « « « « « « « « « « « « « « « « « ORANGE COUNTY SANITATION DISTRICT FINANCING CORPORATION The members of the Orange County Sanitation District Board of Directors are each being compensated $212.50 for the Board Meeting; there is no additional compensation for the Financing Corporation Meeting. CALL TO ORDER: 02122112 OCSD Board of Directors Agenda Page 4 of 7 Board of Directors, Orange County Sanitation District Financing Corporation. ROLL CALL: APPROVAL OF MINUTES: If no corrections or amendments are made, the minutes for the meeting held on October 26, 2011, will be deemed approved and be so ordered by the Chair. ACTION ITEMS: (1) Adopt Resolution No. FC-17, authorizing the execution and delivery by the corporation of an installment purchase agreement and a trust agreement in connection with the execution and delivery of Orange County Sanitation District Wastewater Refunding Revenue Obligations, Series 2012A, authorizing the execution and delivery of such revenue obligations evidencing principal in an aggregate amount of not to exceed $110,000,000 and authorizing the execution of necessary documents and related actions. (see Agenda Report for Item No. 16). Adjourn, Board of Directors, Orange County Sanitation District Financing Corporation. Reconvene, Board of Directors, Orange County Sanitation District CLOSED SESSION: During the course of conducting the business set forth on this agenda as a regular meeting of the Board, the Chair may convene the Board in closed session to consider matters of pending real estate negotiations, pending or potential litigation, or personnel matters, pursuant to Government Code Sections 54956.8, 54956.9, 54957 or 54957.6, as noted. Reports relating to (a) purchase and safe of real property, (b) matters of pending or potential litigation; (c) employment actions or negotiations with employee representatives;or which are exempt from public disclosure under the California Public Records Act, may be reviewed by the Board during a permitted closed session and are not available for public inspection. At such time as the Board takes final action on any of these subjects, the minutes will reflect all required disclosures of information. Convene in closed session. (1) CONFERENCE WITH LEGAL COUNSEL RE. ANTICIPATED LITIGATION (Government Code Section 54956.9(b)) Significant Exposure to Litigation Number of Potential Cases: 2 02122/12 OCSD Board of Directors Agenda Page 5 of 7 (a) Santa Ana Watershed Project Authority v. OCSD (contractual arbitration) (b) Claim of Kiewit Infrastructure West re. Secondary Activated Sludge Facility, Project P1-102 (2) CONFERENCE WITH LEGAL COUNSEL RE. EXISTING LITIGATION (Section 54956.9(a)) Number of Cases: 2 (a) Darrell Ennis v. Orange County Sanitation District, Orange County Superior Court Case No. 30-2011-00497640 (b) Mladen Buntich Construction Company v. Orange County Sanitation District; OCSD v. Buntich Cross-Claim, Orange County Superior Court Case No. 00491934 (3) PUBLIC EMPLOYEE PERFORMANCE EVALUATION (Government Code Section 54957(b)(1)) Number of Employees: 1 (a) General Counsel Reconvene in regular session. Consideration of action, if any, on matters considered in closed session. OTHER BUSINESS AND COMMUNICATIONS OR SUPPLEMENTAL AGENDA ITEMS, IF ANY: 02122112 OCSD Board of Directors Agenda Page 6 of 7 ADJOURNMENT: Adjourn the Board meeting until the next regular Meeting on March 28, 2012, at 6:30 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) 593-7130 at least 72 hours prior to the scheduled meeting. Requests must specify the nature of the disability and the type of accommodation requested. Acquits Posting: In accordance with the requirements of California Government Code Section 54954.2, this agenda has been pasted 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. 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. Maria E.Ayala Clerk of the Board (714)593-7130 For any questions on the agenda,Committee members may contact staff at: General Manager Jim Ruth (714)593 7110 r,!t z.;cs- ron Assistant General Manager Bob Ghirelli (714)593 7400 1 ,•, ;sc c;m Assistant General Manager Jim Herberg (714)593 7300 hrir r wm Director of Facility Support Services Nick Arhontes (714)593 7210 H,rt s.;m Director of Finance and Lorenzo Tyner (714)593 7550 Administrative Services Director of Human Resources Jeff Reed (714)593 7144 ,ee ?v ! Director of Operations&Maintenance Ed Torres 714 593 7080 end z^re 02122/12 OCSD Board of Directors Agenda Page 7 of 7 BOARD OF DIRECTORS Meeting Date To ad.of Dir. 02/22/12 AGENDA REPORT Item Number I Item Number t Orange County Sanitation District FROM: James D. Ruth, General Manager Originator: Lorenzo Tyner, Director of Finance and Administrative Services SUBJECT: PAYMENT OF CLAIMS OF THE ORANGE COUNTY SANITATION DISTRICT GENERAL MANAGER'S RECOMMENDATION Ratify Payment of Claims of the District by Roll Call Vote. CONFLICT OF INTEREST NOTIFICATION Pursuant to Government Code Section 84308, you are required to disclose any campaign contribution greater than $250 received in the past twelve months from any party to a contract involving the Orange County Sanitation District. Further, you may not participate in the decision making process to award a contract to such party. For reference, you are directed to the Register of Warrants as to all current contractors/vendors with the District. In general, you must disclose the basis of the conflict by identifying the name of the firm or individual who was the contributor. For the specifics of Government Code Section 84308, please see your Director's Handbook or call the office of General Counsel. PRIOR COMMITTEE/BOARD ACTIONS N/A ADDITIONAL INFORMATION See attached listing. ATTACHMENTS 1. Copies of Claims Paid reports from 1/01/12 — 1/15/12 and 1/16/1 2 — 1/31112. Page 1 of 1 Claims Paid From 01/01112 to 01/15/12 Vendor Warrant No. Amount Description Accounts Payable Warrants A W Chesterton 45284 S 4667,14 Repair&Maintenance Services supper Supplies Accurate Air Engineering 45140 548.85 Repair&Maintenance Services acolor 3uppllas AccuSoub erd 45285 89,20 Laboatory Services&Supplies ADS LLC 45141 1,980,00 Professional Services/Engneerng Design Services AECOM Technical Services,Inc. 45124 30,317 34 Professional Services/Engineering Design Services AECOM Technical Services,Inc. 45286 14,076,11 Professional Servless/Englneareg Design Services AECOM USA.Inc. 45125 38,725,07 Professional Senbces/Engineering Design Services Aerotek 45287 7,593,65 Professional Servingelempoary Services Ago IndustrlesDBA So-Cal Sweeping 45419 980,00 Street Sweeping Semites Alrgas Safety,Inc. 45142 4,839.38 Safety,Security,Health Equipment,Supplies,and Services Alrgas Safety,Inc 45288 1754,61 Safety,Security,Health Equipment,Suppllea,and Services Andes West 45289 785,24 Repair&Maintenance Services and/or Supplies All American Asphalt 45126 64,990 00 Repair&Maintenance Semtes andlor Supplies American Academy of Environmental Engine 45143 95,00 Books and Publications American Express TVL Related Svcs Co..Inc. 45290 94832 Purchasing Card Program at Miscellaneous Travel Expenses American General Life Insurance Co. 45291 1,38000 Life Inapparent Abi Elevator Services 45292 184.80 Miscellaneous Services Applied Industrial Technology 45293 83.61 Repair&Maintenance Services and/or Supplies ARB/PERP-Air Resources Board 45294 1725,00 Governmental Agency Fees&Charges ARI Orangewood LP 45295 841277 AR Reconchafion Net Refund AT&T 45139 22425 Telecommunications AT&T Long Distance. 45145 38,65 Telecommunications AT&T Mobility II,L.L.C. 45297 8,0(cl Telecommunications AT&T Universal Biller 45144 122.06 Tocrommusects ns AT&T Universal Biller 45296 3,245.90 Telecommunications AWWA 45146 231.00 Professional Organizations Membg)TraminglMembershlp Battery Systems, Inc. 45299 405,10 Repair&Maintenance Services andlor Supplies Bloat,Products 45147 185,32 Laboratory Services&Supplies Black&Veatch Corporation 45272 254,383.99 Professional Servires/Engesering Design Services Boswell,Robin K 45298 2,312,00 Sewer User Refund Bottomllne Technologies,Inc 45148 4,082,03 Computers.Sotivrare/Hardwere Brice Tocl&Stamping Ina 45300 17493 Repair&Maintenance Services andlor Supplies Bug Canter 45149 3,400.00 Pest Control Services Bureau Varied,Noun America,Inc. 45301 23,608 44 Industrial Hygiene Services CA.Short Company 45302 504,27 Safety,Security,Health Equipment Supplies,and Services C.S.M.FO 45163 110,00 Professional Organizatons Meefingami-sng/Membership Callfomie Dept.of Chlid Support 45303 2,021.51 Judgments Payable California Recreation Company 45150 3224,35 Boat Slip Rental-Nadeau Ocean Monitoring Vessel California Relocation Services,Inc. 45304 90,00 Miscellaneous Services Moving/Relocation Carl Wafer 45305 54277 Judgments Payable Corolla Engineers 45306 1969571 Professional Servlces/Englneaderg Design Services CASA 45307 425.00 Professional Organizations Meeting/TreminglMembershlp CDN Isotopes 45308 1660,00 Laboratory Services&Supplies Certified Laboratories 45309 218,08 Laboratory Services&Supplies Chem Search 45151 2,195.50 Repair&Maintenance Services andlor Supplies Chloe D.Bad 45269 125,00 Meating/Tralning Expense Reimbursement City of Anaheim 45310 3,966.84 Water Us. City of Fullerton 45152 19,47295 Water Use EXHIBIT A nnrzlmmm Page 1 of 8 yll Claims Paid From 01/01112 to 01/15/12 Vendor Warrant No. Amount Description City of Huntington Beach 45191 73,50 water Use City of Huntington Beech 45354 11,343.15 Water Use City of Tustin 45311 250.00 Water Use City of W.Achster 45153 47,14 Water Uae Clean Harbors Environmental Services 45154 3,656,47 Got Screenings:Hazard Waste Okpoeal CMAA 45312 1,20000 Professional Organizations MeetinglTralninglMembershlp Coast Pneumi 45155 378,09 Electrlca dElectronlc Equipment Parts&Repairs Cole EarnerInstrument Co. 45313 26222 Laboratory Services&Supplies Columbia Analytical Services 45314 450,00 Laboratory Servcee&Supplies Compressor and Engine Supply,Inc. 45156 839,66 Repair&Maintenance Services antllor Supplies Connell Chevrd.AGED 45157 573.54 Autos,Trucks&Marine Equipment,Pans,Accessories&Services Consolidated Electrical Distributors 45315 1,444,69 ElectrianDlectronlc Equipment,Pans&Repairs Consumers Pipe&Supply Co. 45158 812,84 Repair&Maintenance Services and/or Supplies Consumers Pipe&Supply Ca 45316 3,94689 Repair&Maintenance Services and/or Supplies Controlled Motion Solutions 45159 373,77 Repair&Maintenance Services and/or Supplies Converse Consultants 45317 3,520,00 Professional SerAces/Protessionel Servicas/Matenala&Geotechnical Testing Comer Bakery Cafe(CBC) 45319 164 79 Catering Services Corporate Image Maintenance,Inc. 45273 36,OU5-00 Janitor&Household Service&Supplies County of Orange Auditor Canceler 45320 1,290.00 Governmental Agency Fees&Charges Cray Order 45362 2,179,38 Judgments Payable Court Order 45369 150,00 Judgments Payable Could Order 45406 10800 Judgments Payable Court Order 45451 912,50 Judgments Payable CPS Human Resource Services 45318 517,50 Professional Organizations Memingl7mining/Membershlp CR&R. Inc. 45160 1,622.25 Waste Disposal Crane Veyor Carp- 45161 2,948-Up Repair&Maintenance Services acolor Supplies CS-AMSCO 45162 1,074.57 Rapalr&Maintenance Services andor Supplies CSUF Auxllary Services Corporation 45274 38,619,00 Profecsional Organizations MemnagareninWrAembersblp(Demographics) D.R. McNatty&Associates 45321 1,475,00 Professional Organizations ModingBmusug/Membership David A-Bihl 45454 13000 Meetinganduring Expense Relmbarsement David Geoff 45322 400,00 Laboratory Services&Supplies David's Tree Service 45323 750,00 Groundskeeping Odaze Phuong 45460 42000 Meetingnusuring Expense Reimbursement DOB Engineering,Inc 45324 3,645-00 Professional Servlcas-Advocacy Dozen Pumps&Pans,Inc. 45164 19,883.00 Repair&Maintenance Services andor Supplies Dozen Pumps&ends,Ina 45325 267,66 Repair&Maintenance Services antllor Supplies Don Grayson,PhD..Consulting 45326 7,098,53 Professional Management Consulting Services Duthie Generator Service,Inc 45275 42,633.59 Generator Supplies Eagle Protection of Calcomer 45165 375,00 Safety,Security,Health Equipment,Supplies,and Services EHS International,Inc. 45166 340.00 Professional Organizatony Meeting Braining/Membership Elite Equipment Inc. 45327 16045 Repair&Maintenance Services antllor Supplies Employee Benefits Specialist,Inc 45283 846,27740 Reimbursed Prepaid Employee Medical&Dependent Care Employee Benefit,Speclafar ,Inc. 45328 13,801.so Reimbursed Prepaid Employee Medical&Dependent Care Enchanter,Inc. 45329 3,800,00 Vassal Services-Monitoring Vessel Nerimm ENS Resources, Inc. 45167 7.500,00 Professional Services-Federal Advocacy Environmental Express,Inc 45168 3,603.23 Laboratory Services&Supplies Environmental Resource Associates 45169 694.82 Laboratory Services&Supplies Ewing Irrigation 45330 128,70 Irrigation Repair&Maintenance Services and/or Supplies Fedex Corporation 45170 47509 Freight Services m,rzlclmm EXHIBIT A Page 2 of 8 mzp n Claims Paid From 01/01112 to 01/15/12 Vendor Warrant No. Amount Description Fadex Corporation 45331 141,14 Freight Services Fargoson Wataurortcs 45171 757,87 Repair&Mainteoaooa Services baker Supplies Fisher SClentt5o 45172 2758.E Laboratory Sources&Samples Fisher Scientific 45332 6,946,12 Laboratory Services&Supplies Flat&Vertical,Inc. 45173 318,00 Repair&Maintenance Services and/or Supplies To Systems,Inc. 45127 97,878 64 Repair&Maintenance SeMoes endlor Supplies Fountain Valley AAA Auto Spa 45333 1,011,42 Autos,Trucks&Marine Equipment,Parts,Accessories&Services Franchise Tax Board 45334 921,63 Judgments Payable Franchise Tax Board 45335 60,00 Judgments Payable F..Rose Tex Board 45336 150,00 Judgments Payable Franchise Tax Board 45463 14,065.00 Judgments Payable Franklin Covey 45174 265,57 Office Supplies Fr,Electronics 45175 16,15 Computers,Sofiwere/Hardware Fuller Truck Acce,bods 45176 1,43202 Autos,Trucks&Marine EqulpmanL Pert,,Accessories&Services GA Industries LLO 45337 1,609,69 Repair&Maintenance Services and/or Supplies Gandhi Lumber Company 45177 69,46 partial Maintenance,Services&Supplies Ganahl Lumber Company 45338 10081 Facilities.Maintenance.Services&Supplies Garahow.Matthew N_ 45456 1,908.39 MarbagrTruding Expense Reimbursement Garrett Callahan Company 45178 1,44272 Chemicals,Waner/Washwder Treatment Caddo Callahan Company 45339 3,092,44 Chemicals,Water/Wastewater Treatment George Yardley Co. 45179 755,69 Repair&Maintenance Services and/or Supplies George Yardley Oo_ 45341 2,741.16 Repair&Maintenance Semloes endlor Supplies Glens Alignment&Brake Service 45180 330,00 Autos,Trucks&Marine Equipment,Parts,Accessories&Services Golden State Overnight Delivery Service 45181 102.84 Courier Services Golden State Overnight Delivery Service 45342 9270 Cuba,Services Golden State Water Company 45343 14723 Water Use Golden West Machine,Inc 45344 3394.13 Roper Maintenance Services and/or Supplies Golden West Window Service 45182 8,965,00 Facilities.Maintenance,Services&Supplies Golden West Window Service 45345 2722,00 Facilities,Maintenance,Services&Supplies Goodwill Industries of Grange County 45183 31520 FOG Outreach Distribution Services Grainger,Inc 45184 6,943,56 Repair&Maintenance Services and/or Supplies Grainger, Inc. 45346 2,62524 Repair&Maintenance Services and/or Supplies Geyber Electric Company 45185 2.704.10 EleoMcal/EJechonic Equipment Pans&Repairs Grayer Electric Company 45347 5,42662 EleetrlcallElectronle Equipment,Pans&Repairs Greenland Corporation 45348 258.17 Office Supplies GRM Information Management Services 45186 199,12 Miscelleneoue Services&Supplies GT Hall Company 45346 47070 Mechanical Parts&Supplies GTE.NET,L LC.(Verizon Online) 454" 99.99 Telecommunlcatlons Guarantee Records Management 45349 49,46 Professional Services-Document Storage&Shredding Hach Company 45350 4,76242 Laboratory Services&Supplies Hardy Diagnostics 45351 88051 Laboratory Services Supplies Hasler,Inc 45187 64.65 Postage Motor Rental FOR Engineering,Inc 45128 410,727 98 Professional Services/Engi orering Design Services Heat Technology Products 45188 9620,81 Repair&Maintenance Services andor Supplies Hill Brothers 556 7.156,10 Chemicals,Water/Wastewater Treatment Home Depot 45352 924.53 Mlscsllanker,Pans and Supplies Hope HeSdfIHAC 45353 612,12 Benefits HRWebadvisor 45189 299,00 Professional Organizations Meeting RraininglMembershlp Hub Auto Supply 45190 2,98559 Autos,Trucks&Marine Equipment,Parts,Accessories&Services m,rzlatmm EXHIBIT A Page 3 of 8 mss n Claims Paid From 01/01112 to 01/15/12 Vendor Warrant No. Amount Description Hyatt Legal Plans 45355 1,748,00 Professional Services-Legal IAEI 45192 102,00 Professional Organizatons MdetingHbouning/Membership IDE%XDIetrlbu0on, Inc 45193 2,67220 Laboratory Services B Supplles Image Apparel for easiness Inc. 45194 926,27 Uniform Logo Services Indiana Child Support Bureau 45357 290,00 Judgments Payable Industrial Distribution Group 45195 26561 Repair&Maintenance Services anchor Supplies Indica l Fabrics Corp. 45196 17,947,40 Repair&Maintenance Services and/or Supplies Industrial Threaded Prbdacte Inc 45197 2,08328 Repair&Maintenance Services and/or Supplies Information Handling Services 45356 510,35 Computer Applications&Services Inil.Union of Opdr.Else AFL CIO Laos 501 45358 5,052,02 Duds Deductions Invensys Systems,Inc. 45198 2,603.30 Electrlcalpfactronlc Equipment Parts&Repairs Invensys Systems,Inc 45359 676,48 Elamir l/Electmad Equipment,Parts&Repairs Irvine Pipe&Supply 45199 2446 Repair&Maintenance Services and/or Supplies IT Mentors 45200 5,00000 Professional Organizations MaetinglTrudog/Membership J F Shea C.Mom tion.Inc. 45133 542,626,82 Constmctlon J R Elope Construction 45201 5,498,00 Construction J.F.Shea Construction,Inc. 45137 47,177 95 Construction JL Wingert Co_-Remit to 45361 234.96 Repair&Maintenance Services and/or Supplies James L.Burror 45268 180.00 Meelingaraining Expense Reimbursement Jamison Engineering Cardamom.Inc. 45276 51286,95 Professional Services/Construction Support Services Jays Catering 45202 1,252,60 Catering Services Jays Catering 4536U 1,36573 Catering Services JCI Jones Chemicals,Inc. 552 18,821,07 Chemicals,Weta-W.seaveter Treatment JCI Jones Chemicals.Inc. 557 11,13723 Chemicals,Water/Wastev✓ater Treatment Johnstone Supply 45203 76645 Repair&Maintenance Services antllor Supplies Jon O-Bradley.Jr_ 45267 170.US MeefiagrT alning Expense Reimbursement Josceiynn M.G.Gonski 45455 420.00 MeetIn91Teduring Expense Reimbursement Kanawha Insurance Company 45363 4344,82 Voluntary Benefits-SSTD Insurance Kars Advance Materials,Inc. 45204 3,494,95 Repair&Maintenance Services and/or Supplies Kemim Water Solutions 551 204,318.61 Criminal,Water/Wastev✓eter Treatment Kamm Water Solutions 554 68,605,71 Chemicals,WeierPNasteweter Treatment Kan A S mmot0 45461 1,963.trD Meelingnbunning Expense Reimbursement Ku,dt Infrastructure West Co. 451M 258,06370 Construction Le Marble MamufaGudng Co_ 45364 1,540 29 Repair&Maintenance Services and/or Supplies Decade,Inc. 45365 1,939.50 Rapalr&Maintenance Services andor Spend Lance Solt and Lunghard 45366 14265,07 Prefescional Services-Auditing Liebert Cassidy 45367 500,00 Professional Services/Employee Relations Llllestrand and Associates 45368 340.93 Professional Services Maa Dispatch,LLE 45371 300,00 Mail Called,Service Malcolm Pamie,Inc. 45205 16,87838 Professional Services/Engineermg Design Services Malcolm Plmle,Inc. 45277 27,98260 Professional SebspeslEngineedng Design Services Marcus G-Grabedz 45457 150.00 Employee Computer Loan Program Marian M.Alter 45266 110.00 Meelingareiong Expense Reimbursement Maxis V.Yegazarian 45376 11293,00 Autos,Trucks&Marine Equipment,Parts,Acc unceed 8 Services Mass Electric Construction CO 45135 81 84500 Construction Mass Electric Cc parmaen CO 45138 59,805.00 Constmctlon MCCromater,Inc 45206 958,62 Instrument Parts&Supplies MCGladrey is Pullen LLP 45372 23,550,00 Professional Services-Financial Auditing MCMaymoCarr Supply Co. 45207 26980 Roper&Maintenance SeMeds anchor Supplies EXHIBIT m,rzlclmm Page 4 of 8 "c"A A Claims Paid From 01/01112 to 01/15/12 Vendor Warrant No. Amount Description McMasterGan Supply Co. 45373 2055,43 Repair&Maintenance Services antl/or Supplies NOR Technologies.Inc. 45374 3808,45 Repair&Maintenance Services purl Supplies Mettler-Toledo 45278 30,868.98 Computer Appncatlons&Servlcas Michael Aster Consulting 45375 2,800,00 Professional Servlces Mitl-Wesi Assocfates,Inc. 45208 16777 Repair&Maintenance Services and/or Supplies Mid-West Associates,Inc. 45376 2,324.19 Repair&Maintenance Servlces and/er Supplies MJL Consulting 45209 24,547,52 Professional Serness/Annual Contract Painting Moore Medical l nc. 45210 1,373,82 Medical Supplies Moore Medical Inc. 45377 256,09 Medical Supplies Morgan Company WIRM,Inc) 45378 527,40 Autos,Trucks&Marine Equipment,Parts,Accessories&Services MTM Recognition Command, 45379 413.93 Service Adverse National Flre Protection Apiecantion 45211 387,55 Professional Organizations Meetingamining/Membershlp National Fire Protection Association 45212 165,00 Professional Organizations Meetmgausi ing/Membership National Notary Association 45380 81332 Professional Organizations MatungOralning/Membershlp National Safety Council 45381 295,00 Professional Organizations Meetingarsong/Membershlp Neal Supply Co. 45213 2,567,50 Repair&Maintenance Services and/or Supplies Neal Supply Co. 45382 1,201 20 Repair&Maintenance Services anpOr Supplies NBwPIg 45383 21741 Repair&Maintenance Services and/or Supplies NPELRA Annual Training Conference 45214 474.00 Professional Organizations Meeting/Trslning/Membershlp NAG Engine Services.L.L.C. 45129 34,151,20 Repair&Maintenance Services and/or Supplies NRG Engine Services,LL G 45384 4,814,69 Repair&Maintenance Services and/or Supplies OCEA 45385 71175 Dues Deductible Office Depot 45215 642,35 Office Supplies OHlce Depot 45386 2,085,92 Office Supplies Olin Corporation 45216 19,64444 Chemicals,Water/Wastewater Treatment Omega Indretrol Supply,Inc. 45387 2,3im 55 Janitor&Household Service&Supplies OneSource Distributors, Inc 45388 10,413 71 ElectrlcallEle to nlc Equipment,Parts&Repairs Orange County Auto Parts 45217 193,56 Truck Supplies Orange County Sanitation Distract 45398 1,349.83 Petty Cash Expense Orange County United Way 45389 4000 Employee Contributions Orange County Water District 45130 68768,14 GAP Water OSTS Inc. 45390 280,00 Professional Organizations Meeting/Tralning/Memberchlp Oxygen Service Company 45391 1,77528 Laboratory Services&Supplies Paten Mechanical Supply 45392 924.09 Repair&Maintenance Services and/or Supplies Pacific Pens and Controls,Inc 45218 1,230.51 Roper&Maintenance Services ardor Supplies Posts Publishers 45219 246,95 Publications and Books Parker Supply Company 45220 568,81 Miscellaneous Pads and Supplies Parker Supply Company 45393 43548 Miandalaneous Pans and Supplies Perkhouse Tire,Inc. 45221 320,08 Autos,Trucks&Marine Equipment,Parts,Accessories&Services PARMA 45394 295,00 Professional Organizations Meeting'I'micag/Membershlp PC Mall Gov 45395 23,34249 Software Maintenance Agreement PCS Express,Inc. 45396 14072 Courier Servlces Peece Officers Councl of CA 45397 2,265.50 Dues Deductions.Supervisors&Professionals PL Hawn Company,Inc. 45222 2,849,35 Repair&Maintenance Services and/or Supplies Polydyne,Inc. 553 8607,56 Chemicals,WaterlWaetewater Treatment Polydyne,Inc 555 62,408.91 Chemicals,Water/Wastewater Treatment Pow6riraln Industries 45399 756,95 Repair&Maintenance SrNces and/or Supplies Prarair Distribution. Inc. 45400 127,99 Laboratory Sensors&Supplies Precision Digital Corporation 45223 78662 Repair&Maintenance Services antlter Supplies m,rzlclmm EXHIBIT A Page 5 of 8 +n mzo Claims Paid From 01/01112 to 01/15/12 Vendor Warrant No. Amount Description Prawn Products 45224 549,53 Repair&Maintenance Services and/or Supplies Primary Source Office Furnishings.Inc. 45225 883,55 Minor EcuipmenOFurnithre&Fixtures Primrose Ice Co-,Inc. 45401 105.00 Water&Ice SeMoes Procare Work Injury Center 45402 110,00 Medical Services Prudential Overall Supply 45226 1,31893 Uniforms Prudentiar Overall Supply 45403 1,34737 uniforms Public Resources Advisory Group 45404 199,75 Pmfesslonal Services/Engineerng Design Services Pump Action 45227 5,125,80 Oil Fliters Pumping Solutions,Inc. 45228 601,68 Repair&Maintenance Services and/or Supplies R S Means Compan,Inc. 45232 567,68 Books and Publicapons Radius Maps 45407 1,550.00 Radius Map&Ownership Listings Radwell promotional Inc. 45229 333,50 Repair&Maintenance Services and/or Supplies Rainbow Disposal Co. 45408 4,118,25 Waste Disposal Relrasfar 45409 3,89663 Voluntary Employee Life&Cancer Insurance RF MacDonald Co. 45405 186,03 Repair&Maintenance Sereioas and/or Supplies ROC Water and Environment 45230 1,258,97 Professional Senates Rockwell Engineering&Equipment Co. 45410 66922 Repair&Maintenance Services and/or Supplies Roth Rooter NOG#11 45231 1,275A0 Repair&Mium eoaroe Services and/or Supplies Royale Cleaners 45411 717.10 Miscellaneous Services RPM Electric Moto,. 45412 2,406,48 Repair&Maintenance Services spoor Supplies Ryan Herw Products Corp. 45413 65,02 Repair&Maintenance Services and/or Supplies Sachs Electric Company 45282 112,021 53 Professional Services/Central Generation Automation Safety Risen 45414 334.45 Repair&Maintenance Serices and/or Supplies SETAC 45415 320,00 Professional Organizations Meetir-STAonln9/Membership Shamrock Supply Ch.,Inc. 45233 1,27823 Repair&Maintenance Services and/or Supplies Shamrock Supply Co.,Inc. 45416 825.90 Repair&Maintenance Services and/or Supplies Shmum Yln 45462 125.00 Meetingaroning Expense Reimbursement Sh ashcok Sales&Engineering 45417 276,70 Repair&Maintenance Services and/or Supplies So.Car Gas Company 45418 13,550,62 pulses South Coast Air Quality Management Dist 452M 2,70376 Governmental Agency Fees&Changes Southern California Edison 45131 72,335,37 utilities Southern California Edison 45420 2,303,92 Utilities Southern California Wafer Committee 45235 85000 Professional Organizations Meetingilramng/Membership Southern Counties Lubricants 45421 2,880 75 Fuel and Lubricants Southland Envelope Company, Inc. 45422 417.91 Office Supplies Standard Automation and Control 45423 14208,76 Computer Applications&Services Stanley Steamer International,Inc. 45424 1,275,00 carrier&Household Service&Supplies Staples 45425 4,281.17 Office Supplies Summit Steel 45236 1,689,52 Repair&Maintenance Services and/or Supplies Sunset Industrial Parts 45426 3,435,55 Repair&Maintenance Services and/or Supplies Tektronix Service Solutions 45427 12506 Laboratory Services&Supplies Terra Renewal,L.L.C. 45279 5457328 Grp&Screenings Disposal TestAmenca Ontario 45428 1,396.00 Laboratory Sensors&Supplies The Co Group, Inc. 45429 1,931,53 Repair&Maintenance Services and/or Supplies The Integration Works,LL C. 45430 1 602,00 Repair&Maintenance Services and/or Supplies The Standard Insurance Company 45431 2,80826 Dlsabdity Insurance The Unlsource Corporation 45249 518,28 Paper&Office Supplies Theodore M.Maurer 45270 190,00 Msetingaraining Expense Reimbursement Theodore Robins Ford 45237 1,62620 Autos,Trucke&Marine Ehurpment Pert,,Accessories&Services m,rzlalmm EXHIBIT A Page 6 of 8 +n mzs Claims Paid From 01/01112 to 01/15/12 Vendor Warrant No. Amount Description Thermo Electron North America,L.LC. 45432 17,877,00 Laboratory Services&Supplies Thomas Cain Inc. 45280 29,200,00 Laboratory Sensors&Supplles-Automated Digestion System Thompson Industdsl Si Inc. 45238 7,300.58 Repel,&Maintenance Services acolor Supplles Thompson Industdsl Supply.Inc. 45433 3,543,45 Repair&Maintenance Services and/or Supplies Trend Construction 45239 1,600,00 Facilities,Maintenance,Services&Supplies Tlano Construction 454M 4,10000 Facilities.Maintenance,Services&Supplies Time Werner Communications 45240 5920 Telecommunications T-Mobile 45435 110,12 Telecommunications Tony S.Lee 45458 190,00 MeetinglTuvoing Expense Reimbursement Total-Western,Inc. 45241 800,00 Repair&Maintenance Services and/or Supplies Townsend Public Affairs 45436 7,500.00 Professional Services-State Legislative Advocacy T......1 45437 4,948,16 Repair&Maintenance Services and/or Supplies Th State Pump 45242 5,34Z06 Repair&Maintenance Services and/or Supplies Tropical Plaza Nursery,line. 45438 1,01260 Landscape Maintenance Services Truck&Auto Supply,Inc. 45243 447,61 Autos,Trucks&Marine Equipment,Parts,Accessories&Services ISO Enterprises.Ins. 45244 2,261,00 Professional Services/Construction Support Services True Ranch ivagan Forms 45132 157,748 76 Biosolids Management TW Telecom Helena ,Inc- 45245 3,91052 Telecommunications Two Wheels One Planet 45246 1,148.57 Autos,Trucks&Marine Equipment,Pads,Accessories&Serviche Ultra Scientific 45247 750,96 Laboratory Services&Supplies Union Bank of Coldmon. 45248 1,600,00 Annual Administrative Fee for Series 2007A Cortficates of Participation Union Bank of Callfomle 45271 2,48305 Construction,Retention Union Bank of California Escrow 45136 28,559,31 Construction,Retention United Parcel Service 45250 517,83 Freight SeMces United Parcel Service 45439 58626 Freight Services UniUSA 45251 1,03556 Miscellaneous supplies Unlver USA In. 558 10,045.96 Chemicals,Wal.aWestovuater Treatment UnNersal Flooring Systems,Inc 45252 2,052,00 Facilities.Maintenance,Services&Supplies Universal Floor,,Systems,Inc. 45440 907,00 Facilities,Maintenance,Services&Supplies US Airdondltloning Distributors,Inc. 45253 619.15 Electrical Parts&Supplies US Alrconlitloning Distributors,Inc, 45441 178,32 Electrical Paris &Supplles US Peroxide,L.L.C. 45254 19,025,15 Chemicals,Water/wastewater Treatment USA Bluebook 45255 1,03269 Laboratory Services&Supplies Vapex Products,Inc 45442 54513 Riorm aal/Electrond Equipment,Parts&Repslr, Verson California 45256 632.51 Teleccernmocathme Verizdn CXhUrnd 45443 1,711,36 Telecommunications Vedzoc Wireless 45257 761,92 Telecommunications Veme's Plumbing 45258 1,80272 Plumbing Services&Supplies Veme's Plopsy" 45445 4,038,17 Plumbing Service.&Supplies Vincent S.Look,,, 45459 190,00 Msetingarmaing Expense Reimbursement Vortex Corp. 45259 1,241 82 Repair&Maintenance SeMees antllor Supplies Vortex Corp_ 45446 664972 Repslr&Maintenance Services and/or Supaa, Voyager Fleet Systems, Inc. 45447 21,778.39 Autos,Tracks&Marine Equipment,Pads.Accessories&Services VWR Scientific Products 45266 882,25 Laboratory Services Supplies VWR Scientific Products 45448 3668J1 Laboratory Services&Supplies Water Environment Federation 45261 757.00 Professional Organizations MeetinglTralningavembersblp Waters Corporation 45262 1,645,77 Laboratory Services&Supplies Wells Fargo Bank 45265 13,58230 Construction Retention West Coast Safety Supply Co. 45449 36687 Safety,Security,Health Equipment,Supplies,and Services m,rzlclmm EXHIBIT A Page 7 of 8 ms np Claims Paid From 01/01112 to 01/15/12 Vendor Warrant No. Amount Description West Lite Supply Company,Inc. 45263 171,67 Electrical/Ehartm is Equipment,Press Repairs Woodruff Spradl'm&Simon 45281 52430,62 Processional Services-Legal Xpedx,An International Paper Fompany 45450 101.05 Mia elleneous Supplies Yele/Chase Malarial.Handling,be 45264 542,44 Elieder l/Eleoteme Equipment,&Electric Can Parts&Repairs 1-800-Confemnce(R) 45452 17532 Telecommunications 24 Hour Fire Protection,Inc. 45453 1,004 31 Repair&Maintenance 3eMces mayor Supplies Total Accounts Payable-Warrants $ 4,8 00,49975 Payroll Disbursements Employee Paychecks 48394 - 48420 $ 4,498.84 Interim Payroll-ARBA(1/03/12)' Employee Paychecks 48423 - 48474 81,979,71 Biweekly Payroll(1/11/12) Employee Paychecks 48475 - 48477 13,315,03 Interim Payroll-Reliramanta T A)5I12) Employee Payphecks 48478 - 48480 52,160.34 Interim Payroll-Ratlmmenls Payouts(1105112) Employee Paychecks 48481 - 48623 352,35659 Interim Payroll-Mandatory Payouts(1/12/12) Employee Paychecks 48624 - 48625 5,59297 Interim Payroll-Reissue Payouts(1112112) Employee Paychecks 48626 - 48627 4,23077 Interim Payroll-Termination Payouts(1112112) Employee Paychecks 48628 - 48629 3290,25 Interim Payroll-Termination Accrued Leave(1112112) Direct Deposit Statements 214710 -214852 24,305,14 Interim Payroll-ARBA(1/03/12) Direct Deposit Statements 214853 -215436 1425,14776 Biweekly Peabody(1111112) Total Payroll Disbursements $ 1,966,877.40 rohe,kosmr—rh421.4a42s peyeew pn6112;. Wire Transfer Payments OCSD Payroll Taxes&Contributions $ 1088,988,07 Biweekly Payroll T/11/12) Literary Insurance Services 11,106 32 Workers'Compensation Services(1111112) Bank of Amenrotd-loyds 118,837,,47 Series 2001 COPs Standby Purchase Agreement Commitment Fee 1103112 Total Wire Transfer Payments $ 1,218,931.86 Total Claims Paid 1101112-1115112 $ 7,996,309.01 EXHIBIT A m ".1yr , Pace 8of8 nxo Claims Paid From 1/16112 to 1131112 Vendor Warrant No. Amount Description Accounts Payable Warrants A&J sheet Metal,Inc. 45480 S 1.172.32 Repair&Maintenance Sewiees and/or Supplies A W Chestedon 45642 3,055-81 Repair&Maintenance Services and/or Supplies A.H.graphics Limited 45481 3,417,83 Printing and Publications-Brochures Absolute Standards,Inc. 45482 1,290.00 Laboratory Services&Supplies Aemiek 45483 6,271,10 Professional Serviedn'Temposery services Air Liquids America Specialty Gases LLC 45643 14000 Laboratory Services&Supplies Air Products&Chemicals,Inc. 45627 27,411,76 Chemicals WeterlWastewater Treatment Airgas Safety,Inc. 45484 13,752.95 Safety,Security,Health Equipment,Supplies,and Services Antes Safety,Inc. 45644 4334SH Safety,Security,Health Equipment,Supplies,and Services Alrgas West 45645 2,09272 Repair&Maintenance Services and/or Supplies Name Shim and Manufacturing Co. 45485 163,27 Repair&Maintenance Services and/or Supplies American Express 45486 22,815.94 Purchasing Card Program for Miscellaneous Pans and Supplies American Society of Civil Engineers 45487 255,00 Professional Organizations Meeting/Training/Membership American Society of Safety Eng. 45488 15000 Publication AMS Acoustical material Services 45489 1,039,38 Repair&Maintenance Services and/or Supplies Amtech Elevator Services 45490 1,035.60 Miscellaneous Services Analyats,Inc. 45646 4.123.10 Repair&Maintenance Sewiees and/or Supplies Applied Industrial Technology 45491 4,478-07 Repair&Maintenance Services and/or Supplies Applied Industrial Technology 45648 21,33 Repair&Maintenance Services and/or Supplies Aquatic Blosyeteme. Inc. 45492 529.00 Laboratory Sal Vices&Supplies Arizona Instmmenis,LLC. 45493 200,33 Electu allElestronic Equipment,Parts&Repairs Beach Engineering Products Inc. 45649 1,57000 Refund Permit Fee AT&T Long Distance. 45650 20,24 Telecommunications AT&T Mobility ll,L L.C. 45651 199.99 Telecommunications AT&T Universal Biller 45494 121.87 Telecommunications Austin Building and Design doe The Austin Company 45464 113,42358 Professional Services/Engineering Design Services Awards&Trophies Company 45495 94.83 Awards and Framing Services AWWA 45496 26150 Professional Organizations Meetingainning/Memberahip AWWA 45626 238,00 Professional Organizations Meedng/Training/Membership AWWA 45652 23800 Professional Organizations MeetinglTreffinglMembership Baden Baden 006'D 45653 200,00 Refund FOG Permit Sampson Corp. International 45497 7,560.60 Professional Organizations Meeting/Toodog/Membership Battery specialties 45654 828.60 Batteries,Various Bennett Bowen Lighthouse 45498 1,ill 80 Eleetrlcablectronle Equipment,Parts&Repairs Black&Veatch Corporation 45465 428,167,55 Professional Servces/Engineering Design Sri Black&Veatch Corporation 45465 80,365.73 Professional Services/Engneering Design Services BM Building News 45499 42,02 Books&Publications Brea Imperial,Inc. 45655 5,00000 Miscellaneous Services Brown&Caldwell 45466 268,794,66 Professional Sewr es/Englneereg Design Services Brown&Caldwell 45656 3,626.57 Professional Services/Engineering Design Services Burlington Safety Laboratory of CA,Inc. 45500 430.94 Safety,Security,Health Equipment,Supplies,and Services Bush&Associates,Inc- 45501 736_00 Professional Services/Surveying Services Goldner..Dept.of Child Sul 45657 2,021,51 Jutlgmm t.Payable Califomia Relocation Services,Inc. 45658 135.00 Miscellaneous Services-Movingoolocabon California Special District Association 45672 69,00 Professional Organizations Meedng/Training/Membership Callan Associates Inc. 45659 4,231 75 Investment Advice,Services Caltrol,Inc. 45629 32,213,30 Eleetrical)Electronle Equipment,Parts&Repairs Cameron Compression Systems 45660 277.14 Repair&Maintenance Services and/or Supplies EXHIBIT A nwetolmm Page l of 8 2a2012 Claims Paid From 1/16112 to 1131112 Vendor Warrant No. Amount Description Care Water 45661 54277 Judgments Payable Camllo Engineers 45467 46]00SS Professional ServeaslEngineering Design Services Case Management Society of America Inc 45662 150.00 Professional Organizations MeetinglTrai..f,di embership City of Fountain Valley 45468 43,929,32 Water Use City of Fullerton 45692 45.97 Water Use City of Garden Grove 45663 305,78 Water Use City of Huntington Beach 45537 1145 Water Use Clean Harbors Environmental Servlces 45630 32,259,24 Gat&Scr OTiftn Headed W.M.Dlspoeal Cluff Industries 45664 2,86670 Laboratory Services&Supplies Cogan,Stuart 45502 343A3 Sewer User Refund Commuter Van Conversion,Inc. 45665 4,481.01 Repair&Maintenance Services-Installation of ABTS Seat Belt Modules Compressor Components of California 45666 1,790,00 Repair&Maintenance Services and/or Supplies Connell ChevmletVGEO 45667 30.63 Autos,Trucks&Marine Equipment,Parts,Accessories&Services Construction Management Services Co. LLC 45668 3,206,16 Professional Seraced(Varsultant Secondary Activated Sludge Consumers Pipe&SupplyCc- 45503 3,29548 Repair&Maintenance Services and/or Supplies Consumers Pipe&Supply Co. 45669 1,155,34 Repair&Maintenance Services and/or Supplies Controlled Motion Solutions 45504 2,008.18 Repair&Maintenance Services and/or Supplies Coordinated Wire Rope&Rigging 45670 316.74 Repair&Maintenance Services and/or Supplies Corporate Ima9a Maintenance,Inc 45505 545-00 Janitor&Household Service&Supplies CORRPRO Companies, Inc 45631 58,261,00 Professional Services/Temporary Services Cotton Point Design,Inc No Power Design 45506 1,191.31 Eactoca dElar ronic Equipment,Parts&Repairs County of Orange Auditor Controller 45507 855,00 Governmental Agency Fees&Charges Court Order 45714 2,179.38 Judgments Payable Court Order 45718 150,00 Judgments Payable Court Order 45746 166.60 Judgments Payable Count Order 45789 91250 Judgments Payable CR&R, Inc- 45671 1,29780 Waste Disposal Culligan of Orange County 45673 60,55 Repair&Maintenance Services and/or Supplies CWEA Membership 45508 26400 Professional Organizations Mebroadering/Membership CWEA Membership 45674 632,00 Professional Organizations Meeting'ros ing/Membership CWEA Specialty Conference 45675 148900 Professional Organizations Meoung1malning/Membership David Wheeler Pest Control Inc. 45509 1,432,00 Past Control SeMces Desert Pumps&Parts,Inc. 45469 42,490.60 Repair&Maintenance Services and/or Supplies Desert Pumps&Parts,Inc. 45677 4.953.39 Repair&Maintenance Services and/or Supplies DLT&V Systems Englnoering,Inc- 45676 21200 Computer Applications&Services DMG Corporation doe Sharpe Heating 45510 1,729,39 ElectdcellElecVo e Equipment,Parts&Repairs Document Technologies Inc. 45678 1,410.82 Printing/Raprogrephica Services Don Wolf&Associates,Inc. 45511 6,629,10 Instrument Parts&Supplies Dudek&Associates,Inc. 45679 2,34497 Professional Serviees/Engineering Design Services Dukes Root Control,Inc. 45512 19,957,28 Sewer Root Control Service Dwyer Instruments, Inc. 45513 541.10 Electdcel/Electronic Equipment Parts&Repairs E911 Helpline Inc. 45685 582.e0 Professional ServeesMronoatsm Technology Eagle Protection of California 45514 275-00 Safety,Security,Health Equipment.Supplies,and Services Embee Performance LLC 45680 1,282,23 Repair&Maintenance Services and/or Supplies EMEDCO tlba TRIPOD 45515 592.98 Repair&Maintenance Services and/or Supplies Employee Benefits Specialists,Inc. 45681 13,801,80 Reimbursed Prepaid Employee Medical&Dependent Care Enchanter,Inc. 45682 4,18000 Vessel Services-Monitoring Vessol Reuss. Emerged EnJmnmental 45470 477,494,10 Bleaches Management ENS Resources,Inc. 45683 7,560.60 Professional Servlces-Federel Advocacy EXHIBIT A neetolmm Page 2 of 8 La2012 Claims Paid From 1/16112 to 1131112 Vendor Warrant No. Amount Description Environmental Resource Associates 45516 1,588.31 Laboratory Services&Supplies Environmental Water Solutions,Inc. 456M 3.461.47 Repair&Maintenance Services and/or Supplies Ewing Irrigation 45517 8551 Irrlgatlon Repair&Maintenance Services and/or Supplies Pedex Corporation 45518 22,95 Freight Services Fades Corporation 45686 151 96 Freight Services First American Coming, 45519 552,67 Software Maintenance Agreement Fisher Scientific 45687 2,44799 Laboratory Services&Supplies Roofings s USA LLC 45688 150,00 Professional Services-LAOl(Employee Relatbps FOPCO Incorporated 45689 2,299.60 Repair&Maintenance Services and/or Supplies Fountain Valley Body Works 2 45520 1.062.61 Autos,Trucks&Marine Equipment,Parts,Accessories&Services Franchise Tax Board 45690 2,45616 Judgments Payable Franklin Covey 45521 31,85 Office Supplies Franklin Covey 45691 31.85 Office Supplies Prys&Jana Botzheim 45794 1,929,30 Computer Loan Calvin Industrial Electronics 45693 1,914.82 ElectuarriElectrond Equipment,Parts&Repairs Garratt Callahan Company 45522 1,547.61 Chemicals,WaterlWastewater Treatment Garrett Callahan Company 45694 1,870.97 Chemicals,Water(vJestewvy,Treatment Gates Fiberglass Installers 45523 6.477S8 Repair&Maintenance Services and/or Supplies General Pomerania 45695 245308 Fuel and Lubricants Glens Alignment&Brake Service 45524 669,92 Autos.Trucks&Marine Equipment,Parts.Accessories&Services Gold Coast Awards,Inc. 45696 2721 Badges Golden State Overnight Delivery Service 45525 242,16 Courier Services Golden State Overnight Delivery Service 45697 5-62 Courier Services Golden West Machine, Inc. 45698 1,285,46 Repair&Maintenance Services and/or Supplies Gordan West Wlndaw Service 45526 2,390.60 Fadlial Maintenance,Services&Supplies Golden West Window Service 45699 4.195bi) Facilities.Maintenance,Servicee&Supplies Govplace 45527 2,80640 Computer Applications and Services Grainger, Inc. 45528 1,704,67 Repair&Maintenance Services and/or Supplies Grainger, Inc. 45706 1,008.43 Repair&Maintenance Services and/or Supplies Graybar Electric Company 45529 1,844.27 ElectdcallElectronic Equipment,Paris&Repairs Graybar Electric Company 45701 48551 Electricel(Electrond Equipment Parts&Repairs Great Waster,Senior,Supplies 45702 85,57 Janitor&Household Service&Supplies GTE NET,LLG Oi.br n Online) 45778 99.99 Telecommunications Guarantee Records Management 45530 52.70 Professional Services-Document Storage&Shredding Hecker Equipment Company 45703 3,13450 Autos.Trucks&Marine Equipment Pads,Accessories&Services Hach Company 45531 123,70 Laboratory Services&Supplies Handy Hose Sarvicea 45704 31528 Repair&Maintenance Services and/or Supplies Harder S.Kbublall 45621 125,00 MeminglTraining Expense Reimbursement Harrington Industrial Plastics,Inc- 45532 5,101 14 Repair&Maintenance Services and/or Supplies Hasle,Inc. 45533 64,65 Postage Meter Rental Hamel Drone 45618 275.60 Professional Organizations MeetingRraming/Membership Hewlett Packard Company 45534 7,614.96 Computers,Soft.bVHard.m Hills Boat Service, Inc- 45705 910.34 Autos.Trucks&Marine Equipment Pads,Accessories&Services Home Depot 45535 270,80 Miscellaneous Parts and Supplies Home Depot 45706 48462 Miscelleneoue Parts and Supplies Hub Auto Supply 45536 1,102,94 Autos.Trucks&Marine Equipment,Pans,Accessories&Services Indiana Child Support Bureau 45707 29000 Judgments Payable Industrial Electric Machinery LLC 45538 4,034,16 Repair&Maintenance Services and/or Supplies Industrial Solution Services, Inc. 45708 2,764.94 Chemicals,Waler(Westawaler Treatment EXHIBIT A na2tolmm Page 3 of 8 2a2012 Claims Paid From 1/16112 to 1131112 Vendor Warrant No. Amount Description Industrial Threaded Products,Inc. 45539 695.14 Repair&Maintenance Services and/or Supplies Inside EPA 45785 710.00 Books&Publications Intervene Holdings Insurance Svcs.,Inc- 45540 3,966.67 Workers'Compensation Service International Business Machines 45709 6,13521 Computer Applications&Services Intl.Union of Oder.Fee.AFL CIO Local 561 45716 4,955.02 Dua6 Deductions Lester Computer,Inc. 45711 1,414,61 NetwarkBerver/Printer Maintenance Services Pi Op Parsons 45632 485,058 00 Professional ServieeslTemporary Services Ironmen Perot&Services 45541 2,228,31 Repair&Maintenance Services and/or Supplies Irvine Ranch Water District 45712 66.36 war.,Use J R Place Construction 45640 259.53190 Construction Jamison Engineering Commodore,Inc- 45633 57,60452 Professional Services/Construction Support Services JCI Jones Chemicals,Inc. 559 36,829,03 Chemicals,Water/Wastevri Traetment JCI Jones Chemicals,Inc. 563 21,936.55 Chemicals,Water/Wastewater Treatment JG TockerAnd Son.Inc. 45542 424,27 Safety,Security,Health Equipment,Supplies,and Services Johnny J.Roche 45622 25000 MeetinglTraim,Expense Reimbursement Johnstone Supply 45713 231,61 Repair&Maintenance Services and/or Supplies loeseb Mass,A Joint Venture 45479 212,950.80 Consmation looXit/Mass,A Joint Venture 45624 18.300d5 Construction Never,T Tied 45623 250.00 Mencri-mTralning Expense Reimbursement I.Johnson Painting 45715 1,785,00 Facilities,Maintenance,Services&Supplies Lee&No,Inc. 456M 26,113.43 Professional Services/Engineering Design Services Liberty Mutual Claims 45543 2287,53 Insurance Libeny Mutual Claims 45716 9,08696 Insurance Listed Cassidy 45544 4,394,00 Professional SeMces/Employee Relations Listed Cassidy 45717 64.65 Professional Services/Employee Relations Line Hsiao 45790 111.11 Mediing/Tmining Expanse Reimbursement Loggerhead Navigation, Inc. 45545 20,24281 Computers.Sefted edl.blebor Lmeps HIW,Inc. 45546 1,612,89 Repair&Maintenance Services and/or Supplies Lucd's Gounnat Foods, Inc. 45719 191.85 Capture Services Lynn L.Redman 45791 315,00 MeatinglTraining Expense Reimbursement Magnolia Air Compressor Company Inc- 45471 69,56738 Repair&Maintenance Services and/or Supplies Malcolm Finnic.Inc. 45721 5,402,49 Professional SeMces/Engineering Design Services Mark A.Esquar 45619 255.60 MeatinglTraining Expense Reimbursement MassMUWal Michel Financial Gmup 45722 14.008.60 Executive Disability Plan Premium Matheson To Gas,Inc- 45723 940.88 Laboratory Services&Supplies Maximus Inc. 45547 6,500,00 Professional Services/Coat Allocation Plan NBC Applied Environmental Sciences 45724 3,250.00 Professional Services-Regional Ocean Monitoring Moddevn Red Man Corporation 45725 1,Nd,60 Repair&Maintenance Services and/or Supplies McMaster-Carr Supply Co. 45548 2653 Repair&Maintenance Services copper Supplies McMaster-Carr Supply Co. 45726 590,47 Repair&Maintenance Services and/or Supplies Mesa Consolidated Water Distinct 45549 151.95 war.,Use Mitl-Weet Accorda ce,ins. 45550 4.98100 Repair&Maintenance Senecas and/or Supplies Mine Safety Applembe 45727 438766 EleeMcallElectronle Equipment,Parts&Repairs MJL Consulting 45551 23,575,77 Professional Services/Annual Contract Painting Middle Haas&Hydraulic Supply 45552 74 26 Repair&Maintenance Services and/or Supplies rvbgmp as&Wismeyer Group,Inc. 45553 200,00 Professional Services-Legal Moore Medical Inc. 45728 97111 Medical Supplies MTM Recognition Corporation 45554 21617 Service Awards Mules Express OOB'D 45720 260.60 Refund FOG Permit EXHIBIT A nr"Irrom Page 4 of 8 La2e12 Claims Paid From 1/16112 to 1131112 Vendor Warrant No. Amount Description National Association of Hispanic Nurses 45729 125.60 Professional Organizations Meeting,'Fori rylvembershlp Neal Supply Go. 45555 156.24 Repair&Maintenance Services and/or Supplies Neal Supply Cc 45730 1,64513 Repair,&Maintenance Services and/or Supplies NetwomPort Inc 45556 17,509,38 Software Maintenance Agreement Nickell Metal Spray 45557 2,040.00 Repair&Maintenance Services and/or Supplies Ninyo&Moore 45731 3,292,00 Professional ServiceslGeotech&Material Testing OCB Reprographics 45628 28,083-66 Printing/Reprographics Services OCEA 45732 711,75 Dues Deductible Crop Depot 45558 3,535.56 Crop Supplies Office Depot 45733 708.05 Office Supplies OI Anages al 45559 1,852_06 Laboratory Services&Supplies Omega Industrial Supply,Inc. 45734 1,987,01 Jeniter&Household Service&Supplies OneScurce Distributors, Inc. 45566 3,138.01 ElectdcalrElar rock Equipment,Parts&Repairs OeeSource Distributors, Inc. 45735 3,325,35 ElectoeallEleetroluic Equipment,Paris&Repairs Orange County Auto Parts 45561 27768 Truck Supplies Orange County United Wey 45736 40,00 Employee Contributions Orange County Vector Control District 45737 145.38 Past Control Calandra Bahia 45563 20.00 Duplicate Payment of Penalty Charge Oxygen Service Company 45564 218-82 Laboratory Services&Supplies Oxygen Service Company 45738 1,615,32 Laboraery Services&Supplies rural Mechanical Supply 45565 590.80 Repair&Maintenance Services and/or Supplies Pacific Mechanical Supply 45740 149,12 Repair&Maintenance Services and/or Supplies Paramount Disc Manufacturing, Inc- 45739 56021 Reconciliation User Fee Refund Program Parker Supply Company 45566 58,67 Miscellaneous Paris and Supplies PC Mall Gov 45741 1,916.88 Software Maintenance Agreement Peace Officers Council of CA 45742 224250 Dues Deductions,Supervisors&Professionals Performance Pipeline Technologies 45472 41,473-81 Professional Servlces/CGT/InspeetereSesselne Cleaning Pollack,David 45743 3,172,47 Septic Tank Refund Polydyne,Inc. 560 27,481.98 Chemicals Water/Wastewater Treatment Polydyne,flux. 562 35,859.64 Chemicals,Water/Wastewater Treatment Port Supply 45567 51 74 Autos,Trucks&Marine Equipment Paris Accessories&Services Forced,Work Injury Center 45568 175,00 Medical Services Project Management Institute 45569 164.00 Professional Organizations Meeting,'For oylvembershlp Pmjeri Technical Services,Inc. 45744 3.108.0(i Professional ServiceslEngineering Design Services Propipe Professional Pipe Services 561 22,347 72 Professional Servlces/CGT/Sewerline Inspections Prudential Insurance Company of America 45473 43,413,49 Benefits Prudential Overall Supply 45576 1,31725 Uniforms Prudential Overall Supply 45745 2,750,13 Uniforms Public Safety Management Assocc(PASMA) 45571 30000 Professional Organizations MenaliglT2lninglivembershlp Raul Cuellar 45617 125,00 Professional Organizations MeetinglTralnlnotremberchlp RUB Engineering&Sales,Inc. 45572 4,950.60 ElectricallElactronic Equipment Parts&Repairs Reredo's Auto Tom Shop 45747 453.49 Autos,Trucks&Marine Equipment Parts,Accessories&Services Rockwell Engineering&Equipment Go- 45573 3,24611 Repair&Maintenance Services and/or Supplies Rockwell Engineering&Equipment Co. 45635 30,105,35 Repair&Maintenance Services and/or Supplies Ronald C.Cortez 45616 190.00 Mobing,'Fo ing Expense Reimbursement Royale Cleaners 45574 76,10 Miscellaneous Services Royale Cleaners 45748 4260 Miscellaneous Services Russele cne, Inc. 45749 2,448.86 EleetdcaVElectronle Equipment,Parts&Repairs San Dlago/Orange Fluid System Technologies,Inc. 45575 2,17748 Repair&Maintenance Services and/or Supplies EXHIBIT A fir"Iemm Page 5 of 8 2az012 Claims Paid From 1/16112 to 1131112 Vendor Warrant No. Amount Description Sancon Engineering,Inc. 45474 25,200.60 Repair&Maintenance Services and/or Supplies SARBS-CWEA 45795 100.00 Professional Organizations Meeting lTraining/Membership-California Water Envimnmar SCACMD 45751 23254 Governmental Agency Fees&Champs Scanning 6loset 564 1,754.77 Repair&Maintenance Services and/or Supplies SOP Science 45752 576.00 Laboratory Services A Supplies Seto,Name Plate 45576 2,754.95 Signage Supplies Shamrock Supply Cc.,Inc- 45577 1,561.86 Repair&Maintenance Services and/or Supplies Shamrock Supply Co.,Inc. 45753 2,424,02 Repair&Maintenance Services and/or Supplies Shureluck Sales&Engineering 45578 2,414.36 Repair&Maintenance Services and/or Supplies Shoraluck Sales&Engineering 45754 151.07 Repair&Maintenance Services and/or Supplies Siemens Technology 45579 1,66225 Air Conditioner Automation System Siemens Water Technologies Corp. 45755 1,431,74 Repair&Maintenance Services and/or Supplies Sigma-Aldrich, Inc. 45586 167.51 Laboratory Services A Supplies Sigma-Aldrich, Inc. 45580 597,87 Laboratory Services&Supplies Smith,Wendy A. 45750 243-69 Overpayment-Insurance Snap On Industrial 45581 264,80 Tools So.Out Gas Company 45582 11,74243 Utilities Southern California Edison 45636 322.947A7 Utilities Southern Counties Lubricants 45583 4,550.84 Fuel and Lubricants Southland Electrical Supply Co, Inc. 45584 142,19 Electrical Parts&Supplies Southwest Concrete 45585 472.38 Repair&Maintenance Services and/or Supplies SEES Comprep,Inc. 45586 291,90 Laboratory Services&Supplies Staples 45587 ?76812 Office Supplies Staples 45756 4,443.14 Office Supplies State Board of Equalization 45588 12928 Govemmental Agency Fees&Charges State of California 45757 900.00 Governmental Agency Fees&Charges Summit Steel 45758 83626 Repair&Maintenance Services and/or Supplies Sunset Industrial Parts 45589 548.64 Repair&Maintenance Services and/or Supplies Super Chem Corporation 45596 51720 Repair&Maintenance Services and/or Supplies Supervalue Inc. 45759 1,500,00 Refund Permitee Synagro West,Inc. 45475 596,974.66 Biosolids Management Synagro West,Inc. 45760 217,50 Biosollds Management T&C Industrial Controls, Inc. 45761 735.67 Computer Hardware&Software Tamaog Electric, Inc. 45641 159.030.00 Construction TCH Associates. Inc 45762 1,07738 Laboratory Services&Supplies Ten.Renewal,L.L.C. 45637 49,03949 Gdi&Screenings Disposal Te authro ice Ontario 45591 60.00 Laboratory Services A Supplies TestAmeroa Ontario 45763 1,472,00 Laboratory Services&Supplies The Clock Salesaod Service Co-, Inc 45594 17273 Repair&Maintenance Services snorer Supplies The Orange County Register 45562 9,616,00 Notices&Ads The mhHHomh Conference 45764 570.60 Professional Organizations Meeting/Troming/Membershlp The Trane Company 45771 50Ai Repair&Maintenance Services and/or Supplies The Walking Man,Inc 45592 2,400.00 Miscellaneous Services Thermo Electron North America L.L.G. 45765 10,00 Laboratory Services&Supplies Thompson Industrial Supply,Inc. 45593 4,073.75 Repair&Maintenance Services and/or Supplies Thompson Industrial Supply,Inc. 45766 12,605,53 Repair&Maintenance Services and/or Supplies Hard Construction 45767 8,02000 Fonfli les.Maintenance,Services&Supplies Time Warner Communications 45768 59,17 TBleoommllNoavons Tony's Lock A Safe Service&Sales 45769 725.33 Repair&Maintenance Services and/or Supplies EXHIBIT A na2lormm Page 6 of 8 2ia2012 Claims Paid From 1/16112 to 1131112 Vendor Warrant No. Amount Description Toshba Business Solutions USA Inc. 45770 631 77 Computers,So0ware/Hardware&Managed Services Trznseat 45772 4.343.73 Repair&Maintenance Services and/or Supplies Treater]Place Ngrery,Inc. 45476 26,47250 Landscape Maintenance Services Tropical Plaza Nursery,Inc. 45773 15,472,50 Landscape Maintenance Services Truck&Auto Supplg Inc. 45595 102.58 Autos,Trucks&Marine Equipment,Pads,Accessories&Services Truck&Auto Supply,Inc. 45774 46,60 Autos,Trucks&Marine Equipment,Pans,Accessories&Services Tula RawhlMagan Farms 45477 218,024 52 Biosoley Management Tyler T.Hoang 45620 190,00 Me ning)'Hurr ing Expense Reimbursement UC Regents 45596 1,560.60 Professional Organizations Meeting/Treining/Membership Underground Service Alert of So.Calif 45597 1.051.50 Professional Services-Dig Alert Notification Serviee Union Bank of California 45598 89261 Banking Services Union Bank of California 45775 315,00 Annual Administrative Fee for Series 2007A Certificates of PeNclpiamn United Parcel Service 45599 75525 Freight Services United Earned Service 45776 1,372,57 Freight Services US Equipment Co.,Inc- 45600 3,25529 Repair&Maintenance Services and/or Supplies US Peroxide,L,LC 45478 117,278,13 Chemical,WeterlWarpomer Treatment US Peroxide,L.L.C. 45638 45,26645 Chemicals,Water/Wastewater Treatment USA Mobility Wireless,Inc. 45601 455S4 Telecommunications V&A Consulting Engineers 45777 511720 Professional Services Valley Power Systems,Inc. 45602 20,439,87 Repair&Maintenance Services and/or Supplies Veme'6 Plumbing 45603 1,288.86 Plumbing Services&Supplies Veme's Plumbing 45779 6,217,17 Plumbing Services&Supplies Village Nurseries 45780 24546 Repair&Maintenance Services and/or Supplies Vortex Corp. 45604 349.30 Repair&Maintenance Services and/or Supplies Vortex Corp. 45781 726.38 Repair&Maintenance Services and/or Supplies VPPPA 45605 57E00 Professional Organizations MeetinglTrameg/Membership VWR Scientific Products 45606 808-39 Laboratory Services&Supplies VWR Scientific Products 45782 9,537,97 Laboratory Services&Supplies Wastewater Technology Trainers 45783 1,16100 Professional Organizations Memingainning/Membership Water Environment Federation 45607 310,25 Meeting Registration Water Environment Federation 457M 22000 Professional Organizations MeelinglTodninglvembershlp WateReuse Association 45786 350,00 Professional Organizations MeetinglTrelning/Membership Wane Sanitary Supply 45608 3 55 Janitor&Household Service&Supplies Weather and Wind Irommment Co. 45609 985.37 Miscellaneous Pans and Supplies Wells Fargo Bank Escrow 23518600 45615 23,661 20 Consumption,Retention Wells Fargo Bank Escrow 23861100 Known 45625 7,10625 Construction,Retention Walls Fargo Bank Eacrow23861100 Kowit 45793 9,152.50 Construction,Retention Wesco Oistribotion.Inc. 45610 753,61 Repair&Maintenance Services and/or Supplies West Coast Safety Supply Co_ 45787 81597 Safety,Security,Health Equipment,Supplies,and Services West Lit.Supply Company,Inc. 45788 59,38 Eleetdcol Electronle Equipment,Parts&Repairs Western Bluellneght/Hewel Packard 45639 43,423.30 Computers.Software/Hardware Wastem Switches&Controls.Inc. 45611 175.93 ElondcallElecrtonic Equipment Parts&Repair Westland Engineering C/O API BASCO 45647 11,608-61 Mechanical Parts&Supplies WPL Publishing 45612 246,00 Books&Publications Xerox Codici lion 45613 20,021.51 Computers,Sofiware/Hardware&Managed Services Y.J.Shoo 45792 73,00 MeetinglTraining Expense Reimbursement Zumberge,Paul 45614 19079 Septic Tank Refund Total Accounts Payable-Warrants $ 5,394,19171 EXHIBIT A na2lolmm Page 7 of 8 2a2012 Claims Paid From 1/16112 to 1131112 Vendor Warrant No. Amount Description Payroll Disbursements Employee Paychecks 48630 - 48667 5 78.(1 Biweekly Payroll(125112) Employee Paychecks 48668 1,389 27 Interim Payroll-Reissue Voided Check(1119112) Employee Paychecks 48669 - 48688 15,603,52 Interim Peymll-IIS Lump Such Eyed,Managers and Directors(1124112) Employee Paychecks 48689 - 48693 4,689.88 Interim Payroll-Rare and Vacation Payouts(1124112) Direct Deposit Statements 215437 -216007 1,420,142.36 Biweekly Payroll(1/25/12) Total Payroll Disbursements $ 1,519,837,71 Wire Transfer Payments OCSD Payroll Taxes&Contributions S 860,70743 Biweekly Payroll(1/25/12) US Bank 387,154.55 Series 20088 Refunding Certlflcates of Participation Interest Payment US Bank 7,991,669.98 Series 2009A Refunding Certificates of Participation Principal and Interest Payment Bank of AmericalMerell Lynch 34,348,77 Series 2000A&B Refunding Certificates of Participation Remarketing Fee US Bank 411,46943 Series 201 Refunding Certlflcates of Promripation Interest Payment US Bank 2,228,951,79 Series 2010A Refunding CerCfcetes of Participation Interest Payment Union Bank of California 2,704,50)60 Sefies 2003A Certificates of Participation Interest Payment Union Bank of California 2039293.30 Series 2007A Certificates of Participation Principal and Interest Payment Union Bank of California 12,605,225-67 Series 2007E Certificates of Participation Principal and Interest Payment US Bank 4,995,953,81 Series 2010C Refunding Cemficates of Participation Interest Payment Union Bank of California 2,138,438.60 Series 2011A Certificates of Participation Interest Payment Total Wire Transfer Payments $ 36 397 713,33 Total Claims Paid 1116/12-1131112 $ 43,311 742]5 EXHIBIT A na2lotmm Page 8 of 8 1/62012 BOARD OF DIRECTORS Meetloq Date To M.of Dir. 02/22/12 AGENDA REPORT Item Number Item Number Orange County Sanitation District FROM: James D. Ruth, General Manager Originator: Kenneth Hernandez, Risk Manager SUBJECT: 2007 ORANGE COUNTY REGIONAL WATER AND WASTEWATER MULTI-HAZARD MITIGATION PLAN GENERAL MANAGER'S RECOMMENDATION Approve the updated 2007 Orange County Regional Water and Wastewater Multi- Hazard Mitigation Plan. SUMMARY The 2007 Orange County Regional Water and Wastewater Multi-Hazard Mitigation Plan (Plan) was recently updated by Risk Management and Engineering staff. The Plan is required to be updated every five years. The Plan identifies risks posed by natural and man-made disasters. The purpose of the Plan is to try and eliminate or reduce damage before those disasters occur. OCSD staff collaborated with 19 participating Orange County water and wastewater utilities in updating the Plan. The updated 2007 Plan is available for review online at �� m.udoo Corr lxero •,Hazod-ClitiJ�rbon. PRIOR COMMITTEE/BOARD ACTIONS In 2007, the OCSD Board of Directors approved the Plan. ADDITIONAL INFORMATION The Plan is being presented for approval to each participating utilities' governing boards, Council, the California Emergency Management Agency, and the Federal Emergency Management Agency (FEMA). CEQA N/A BUDGEVDELEGATION OF AUTHORITY COMPLIANCE N/A DW-102 Board AR,Rev 10/04)10 ,PSPf"p 7 M,MbW,1 S ShOVV!t, tCl ,t 'IZ& 6) Page 1 of 1 BOARD OF DIRECTORS Meeeog Date To ad.of Dir. 02/22/12 AGENDA REPORT Item Number Item Number 4 Orange County Sanitation District FROM: James D. Ruth, General Manager Originator: Nick Amontes, P.E., Director of Facilities Support Services SUBJECT: P2 78-INCH OUTFALL LAND SECTION PIPING REPAIR FR-2011-500 GENERAL MANAGER'S RECOMMENDATION A. Award a service agreement to Kaveh Engineering & Construction, Inc. for P2 78-inch Outfall Land Section Piping Repair FR-2011-500 for a total amount not to exceed $141,956; and, B. Approve a contingency of $28,400 (20%). SUMMARY This repair project per plans and specifications will rehabilitate approximately 32 feet of the 78-inch diameter pipeline at Plant No. 2. This small portion of pipeline is part of the 1-mile Short Outfall System. The portion of the pipeline in need of repair is near Surge Tower No. 2 and is out of service at this time and ready for the contractor to begin work. The repairs includes both steel and concrete sections. The steel section will be sandblasted on the interior surfaces and a protective coating will be applied. The unsound inner surfaces of the concrete section will be removed, rebuilt, and recoated. OCSD Engineering Department staff determined that it is necessary to repair sections of the Short Outfall System that exhibit excessive corrosion and deterioration prior to the pipeline being placed into emergency or other service. Therefore, the repair must be completed prior to work beginning on Project No. J-112 (Outfall Land Section and GOBS Piping Rehabilitation) which involves transferring all plant effluent from the five- mile Outfall System and discharging through the one-mile Short Outfall System for a short duration. Due to the excessive levels of corrosion, concrete spelling, and disintegration of the steel and concrete surfaces a pipeline leak or spill is a potential risk. Engineer's Estimate $275,000 Lowest Responsive, Responsible Bid $141,956 High Bid $295,171 Bidder Amount of Bid Kaveh Engineering & Construction, Inc. $141,956 Sancon Engineering $228,000 Mehta Mechanical Corporation, Inc. $295,171 Page 1 of 2 PRIOR COMMITTEE/BOARD ACTIONS N/A ADDITIONAL INFORMATION The pipeline being repaired was originally constructed under J-3 (1959) and modified under J-9 (1966), J-15-1 (1986), and J-34-1 (1994). Between April and August of 2011, numerous assessments and tests were completed by the Engineering Department's corrosion assessment and management staff within the accessible portions of the Short Outfall System. In August 2012, the main plant flow will be discharging through the Short Outfall Pipeline as part of Project No. J-112 (Outfall Land Section and OOBS Piping Rehabilitation). Repairs must be completed and the facility ready for use at that time. CEQA N/A (This is a repair of existing assets) BUDGET/ DELEGATION OF AUTHORITY COMPLIANCE This request complies with authority levels of OCSD's Delegation of Authority 07-04. This item has been budgeted. (FY2011-12 Budget Line item: SP-34, Section 8, Page 113), Date of Approval Contract Amount Continpencv 1/25/12 s141,956 $28,400 (20%) Page 2 of 2 BOARD OF DIRECTORS Meetlng Date To Bd.of Dir. 02/22/12 AGENDA REPORT item Number I item N s umber Orange County Sanitation District FROM: James D. Ruth, General Manager Originator: Jim Herberg, Assistant General Manager SUBJECT: GRANT OF EASEMENT TO SOUTHERN CALIFORNIA EDISON FOR A CONDUIT ON ROCKY POINT PUMP STATION PROPERTY GENERAL MANAGER'S RECOMMENDATION Grant a nonexclusive easement to Southern California Edison, which will encompass underground facilities on the eastern portion of the Rocky Point Pump Station property, in a form approved by General Counsel. SUMMARY Southern California Edison (SCE) has requested a four-foot easement located on the Orange County Sanitation District's (OCSD) Rocky Point Pump Station property to encompass a proposed 12,000 volt underground electrical service distribution line. The easement alignment is along the entirety of the eastern property line. OCSD's contractor is in the final stages of the construction of Rocky Point Pump Station. Once complete, the majority of the eastern portion of the property will become available for other uses. OCSD has entered into a purchase option agreement with the Coast Community College District (CCCD) in 2007. The Agreement indicates that if, after OCSD has complied with the Surplus Lands Act (California Government Code Section 54220 at. seq.) the five lots east of the pump station are still available for sale, CCCD will have the option to buy the property. CCCD intends on expanding the educational facilities and programs offered at the adjacent Orange Coast College School of Sailing and Seamanship. Orange Coast College (one of three colleges that make up the CCCD) personnel have conceptually agreed to the easement alignment and restrictions per the attached letter dated January 26, 2012. All conditions for approval stated in said letter have been incorporated into the easement agreement. The beneficiary of the distribution facilities, VBAS Corporation, has agreed to pay for the easement and cost of the easement appraisal services valued at $33,300 and $3,900, respectively, for a total of$37,200. Page 1 of 2 PRIOR COMMITTEE/BOARD ACTIONS September 2007 — Executed Option to Purchase agreement with Coast Community College District. ADDITIONAL INFORMATION N/A CECA N/A BUDGET/DELEGATION OF AUTHORITY COMPLIANCE N/A ATTACHMENT Letter from Orange Coast College WS:sa:gc Page 2 of 2 The School of 7 SAILING &_SEAMANSHIP Orange Coast College 26 January 2012 Ms.Wendy Smith, P.E. Planning Division Orange County Sanitation District 10844 Ellis Ave., Fountain Valley, CA 92708-7018 RE: 100 W. Coast highway-Edison Work Order TD484650 Dear Ms. Smith: Orange Coast College has reviewed the proposed easement in conjunction with the above referenced work order from Southern California Edison with respect to its plans for the future OCC Maritime Training Center proposed for the property. While representing yet another site planning constraint to building on an already difficult site, we have no technical objections to the proposed easement as presented. However, as a further prescription to ease accommodation of this constraint in the future, we ask that OCSD consider the following conditions of approval in finalizing the easement agreement: 1. Single Purpose Easement. The easement agreement should be for a"single purpose"easement, facilitating electrical utility services only. Use of the easement by parties or utility providers other than SCE would require the written consent of the land owner. 2. As-Built Drawings. Drawings accurately locating the horizontal and vertical placement of electrical service facilities and components should be provided to the property owner upon completion of the work order. In addition to these, it is worth noting for the record that SCE has been made aware of our intent to develop the property further, and has pledged to work with us in that event regarding possible implications to existing or proposed electrical utility facilities on or near the property. They have reviewed our conceptual plans and have assured us the easement and the proposed work order facilities will not impact our development plans as they are understood today. Thank you for your assistance in this matter. Please contact me if you have any questions or icerns.d Averyector,Marine Programs Orange Coast College 1801 W. Coast Hwy - Newport Beach • CA 92663 • Ph. 949-645-9412 - Fax 949-645-1859 BOARD OF DIRECTORS Meeting Date To W.of Dir. o2/22u2 AGENDA REPORT Item item Number 6 Orange County Sanitation District FROM: James D. Ruth, General Manager Originator: Jim Herberg, Assistant General Manager CIP Project Manager: Dean Fisher SUBJECT: 15 KV UPGRADES AT PLANT NO. 2, PROJECT NO. P2-108 GENERAL MANAGER'S RECOMMENDATION A. Approve Plans and Specifications for 15 kV Upgrades at Plant No. 2, Project No. P2-108, on file at the office of the Clerk of the Board; B. Approve Addendum Nos. 1 and 2 to the plans and specifications; C. Receive and file bid tabulation and recommendation; D. Award a construction contract to Helix Electric, Inc. for 15 kV Upgrades at Plant No. 2, Project No. P2-108, for a total amount not to exceed $2,745,000 and, E. Approve a contingency of$192,150 (7.0%). SUMMARY The 15,000 volt (15 kV) distribution system at Plant No. 2 is fed from both Southern California Edison and the Orange County Sanitation District (Sanitation District) Central Generation facility. 15 kV Upgrades at Plant No. 2, Project No. P2-108, is designed to replace various medium voltage distribution systems that have either reached the end of their useful life or that present a reliability risk. The project provides for replacement of aging 15 kV cable and conduit systems, replacement of corroded pull boxes and replacement of shared pull boxes with individual pull boxes. Plans and specifications for the construction of this project were prepared by an in-house design team. The Sanitation District advertised for bids on December 8 and December 14, 2011. Ten sealed bids were received on January 18, 2012. The bids were evaluated in accordance with the Sanitation District policies and procedures. Helix Electric, Inc. was deemed the lowest responsive, responsible bidder. Staff recommends awarding a construction contract to Helix Electric, Inc. for 15 kV Upgrades at Plant No. 2, Project No. P2-108, for a total amount not to exceed $2,745,000. Summary information on the bid opening for 15 kV Upgrades at Plant No. 2, Project No. P2-108 is as follows: Project Budget $5,958,000 Construction Contract Budget $4,109,000 Engineer's Estimate $3,985,725 Lowest Responsive, Responsible Bid $2,745,000 High Bid $3,945,780 Page 1 of 2 Bidders Amount of Bid Helix Electric $2,745,000 Shimmick Construction $2,749,000 Bergelectric $2,878,000 Neal Electric $2,900,000 Mass Electric $2,975,000 Baker Electrical $3,345,000 Southern Contracting $3,401,000 Morrow-Meadows $3,415,600 Miron Electric $3,733,000 Pacific Industrial Electric $3,945,780 ADDITIONAL INFORMATION Sole Source Findings The Sanitation District has designated the following items by specific brand or trade name pursuant to Public Contract Code §3400 (b)(2) in order to match other products in use: Equipment Specification Manufacturer Model No. 1 Power Monitors 16290 Schneider ION 7550 Electric 2 Medium Voltage 16340 Cutler Hammer NIA Switchgear PRIOR COMMITTEE/BOARD ACTIONS NIA CEQA Notice of Exemption was filed on April 14, 2011. BUDGET/DELEGATION OF AUTHORITY COMPLIANCE This recommendation complies with authority levels of the Sanitation District's Delegation of Authority. This item has been budgeted and the budget is sufficient for the recommended action (Line Item: Item 77, Page A-10). Date of Approval Contract Amount Contingency 02/22/12 $2,745,000 $192,150(7.0%) JH:DF:AA:dm:gc Page 2 of 2 OPERATIONS COMMITTEE Meetnyoate Toed.oroir. 02/22/12 AGENDA REPORT Item Number Item Number 7 Orange County Sanitation District FROM: James D. Ruth, General Manager Originator: Jim Herberg, Assistant General Manager CIP Project Manager: Kathleen Millea SUBJECT: FALL PROTECTION IMPROVEMENTS AT PLANT NOS. 1 AND 2, PROJECT NO. J-123 GENERAL MANAGER'S RECOMMENDATION A. Approve Addendum No. 1 to the plans and specifications; B. Receive and file bid tabulation and recommendation; C. Award a construction contract to W. M. Lyles Company for Fall Protection Improvements at Plant Nos. 1 and 2, Project No. J-123, for a total amount not to exceed $1,810,832; and, D. Approve a contingency of$181,083 (10%). SUMMARY In June of 2010, Bickmore Risk Services & Consulting (BRS) completed a report identifying potential fall hazards at Plant Nos. 1 and 2. Fall Protection Improvements at Plant Nos. 1 and 2, Project No. J-123, was created to consolidate several smaller fall protection projects and address some of the more urgent issues identified in the BRS Report. This project includes handrail, gates, and other fall protection devices at both treatment facilities including the primary clarifiers, central generation facilities, and Steve Anderson Lift Station. The Orange County Sanitation District (Sanitation District) advertised for bids on November 30, 2011. Seven sealed bids were received on January 17, 2012. The bids were evaluated in accordance with the Sanitation District policies and procedures. W. M. Lyles Company was deemed the lowest responsive, responsible bidder. Staff recommends awarding a construction contract to W. M. Lyles Company for Fall Protection Improvements at Plant Nos. 1 and 2, Project No. J-123, for a total amount not to exceed $1,810,832. Summary information on the bid opening for Fall Protection Improvements at Plant Nos. 1 and 2, Project No. J-123, is as follows: Project Budget $3,662,000 Construction Contract Budget $2,500,000 Engineer's Estimate $2,486,698 Lowest Responsive, Responsible Bid $1,810,832 High Bid $3,997,055 Page 1 of 2 Bidder Amount of Bid W.M. Lyles Company $1,810,832 Stanek Constructors, Inc.. $2,230,000 MMC, Inc. $2,451,511 J.R. Filanc Construction Company, Inc. $2,626,000 Environmental Construction, Inc. $2,985,622 Steve P. Rados, Inc. $3,075,000 Doty Bros. Construction Company $3,997,055 PRIOR COMMITTEE/BOARD ACTIONS November 2011 - Approve plans and specifications, authorize staff to advertise Invitations for Bid, and solicit bids and approve a budget increase of $263,000, for Fall Protection Improvements at Plant Nos. 1 and 2, Project No. J-123, for a total budget of $3,662,000. February 2011 - Established a budget for Fall Protection Improvements at Plant Nos. 1 and 2, Project No. J-123. ADDITIONAL INFORMATION Several locations in the process areas of Plant Nos. 1 and 2 require fall protection systems to be improved to enhance worker safety. In some cases, no fall protection exists and needs to be installed to minimize staff exposure to potential fall hazards. Staff implements appropriate precautions to ensure worker safety when working in these areas; however, the installation of active fall protection systems would greatly enhance worker safety, reduce staff costs, and bring the areas in compliance with OSHA standards. This project incorporates fall protection improvements from several smaller projects into one larger project in order to save administrative costs and simplify installation. CEQA The project was determined to be exempt in accordance with Section 15304 (d). A Notice of Exemption filed on January 5, 2011. BUDGET/DELEGATION OF AUTHORITY COMPLIANCE This recommendation complies with authority levels of the Sanitation District's Delegation of Authority. This item has been budgeted but the budget is insufficient for the recommended action. Date of Approval Contract Amount Contingency 02/22/12 $1,810,832 $181,083(10.0%) JH:DF:SS:dm:gc Page 2 of 2 BOARD OF DIRECTORS Meeeog Date To ad.of Dir. 02/22/12 AGENDA REPORT Item Number Item Number s Orange County Sanitation District FROM: James D. Ruth, General Manager Originator: Lorenzo Tyner, Director of Finance and Administrative Services SUBJECT: CAPITAL FACILITIES CAPACITY CHARGES AGREEMENT WITH SCHOOL DISTRICTS GENERAL MANAGER'S RECOMMENDATION Approve a negotiated agreement between the Orange County Sanitation District and the public school districts within its service area for payment of Capital Facilities Capacity Charges (CFCC). SUMMARY Pursuant to California Government Code Section 54999.3, the Sanitation District and the School District have negotiated the terms under which the District will pay CFCCs to the Sanitation District. These terms are set forth in the attached Agreement. Effective July 1, 2011, the school districts shall pay CFCCs to the Sanitation District. These charges may be adjusted annually based on the ENR Index, and otherwise adjusted periodically based on updates to the Sanitation Districts Facilities Master Plan. PRIOR COMMITTEE/BOARD ACTIONS N/A ADDITIONAL INFORMATION The Sanitation District primarily collects CFCC fees through the building permit process of our member cities. Each city establishes various fees, including the Sanitation District's CFCC fee, to be paid at the time the building permit issued. All CFCC fees are then remitted to the Sanitation District on a monthly basis. However, school districts work through the State of California for approval to begin construction and do not obtain local building permits. Therefore, these school districts have not been paying the Sanitation District's CFCC fees. Staff contacted these school districts to obtain their construction schedules for the current year and four years back, and to assess them their fair share of CFCC charges owed to the Sanitation District. Page 1 of 2 However, pursuant to California Government Code Section 54999.3, the Sanitation District and the individual school districts must negotiate the terms under which the districts will pay CFCCs to the Sanitation District before charges can be assessed. Staff, the Sanitation District's Legal counsel and the school districts have completed those negotiations. Attached is the negotiated agreement. ATTACHMENTS 1. Negotiated Agreement Page 2 of 2 AGREEMENT REGARDING THE, IMPOSITION AND PAYMENT OF CAPITAL FACILITIES CAPACITY CHARGES This Agreement Regarding the Imposition and Payment of Capital Facilities Capacity Charges ("Agreement") is entered into between the Orange County Sanitation District("OCSD") and ("the District"). The Agreement is effective upon approval of the governing boards of OCSD and the District. OCSD and the District are sometimes individually referred to in this Agreement as each "Party," and collectively referred to as the"Parties." RECITALS Whereas, OCSD collects, treats, and disposes of wastewater generated within its boundaries. The District owns and operates properties within OCSD's boundaries, and discharges wastewater from these properties to the OCSD collection, treatment, and disposal system. Whereas, OCSD levies a fee on property owners known as the"Capital Facilities Capacity Charge" ("CFCC"). OCSD uses CFCC revenues to pay for the capital construction ofnew, facilities to accommodate projected growth. Property owners must pay the CFCC when they (1) newly connect to OCSD's system, or(2) expand the use of property that is already connected to OCSD's system. The requirements for payment of CFCCs are currently set forth in Ordinance No. OCSD-40. Whereas, OCSD calculates the amount of CFCCs for non-residential properties based on, inter alia, the estimated relative demand for water associated with different property uses. OCSD categorizes each non-residential property use as low demand, average demand, or high demand. Currently, the base CFCC charges for low demand uses and average demand uses are Two Hundred and Seventy Nine dollars ($279) and One Thousand Seven Hundred and Thirty Two dollars($1,734), respectively, per 1,000 square feet of a new or expanded structure. Whereas, Sections 2.11 and 2.12 of Ordinance OCSD-40 specify how CFCCs are calculated for replacement structures and remodeled structures. Under these sections CFCCs are, in effect, based on the net increase in square footage of a replacement or remodeled structure as compared with the previously existing structure. Whereas, Ordinance No. OCSD-40 currently requires OCSD to adjust the amount of CFCCs annually based on the increase in the Engineering News-Record construction cost index for Los Angeles ("ENR Index") as of December of the prior year. CFCCs are also adjusted periodically based on updates to OCSD's Facilities Master Plan. Each Master Plan identities the capital improvement projects that will be necessary over the following twenty years to meet OCSD's needs, and the estimated cost of those projects. The CFCCs are based on the cost estimates set forth in the most recent Facilities Master Plan. Whereas, pursuant to California Government Code Section 54999.3, OCSD and the District have negotiated the terns under which the District will pay CFCCs to OCSD. These terms are set forth in this Agreement. AGREEMENT NOW, THEREFORE, THE PARTIES AGREE AS FOLLOWS: 1. Low Demand Category. For purposes of calculating CFCCs, OCSD shall categorize the District's use of property that it owns within OCSD as "low demand." 2. Pavment of CFCCs. Effective July 1, 2011, the District shall pay CFCCs to OCSD pursuant to the requirements of Ordinance No. OCSD-40, as those requirements may be amended from time to time through successor ordinances, resolutions, and/or other documents. Without limiting the foregoing, the District acknowledges that the amount of the CFCC may be adjusted annually based on the ENR Index, and otherwise adjusted periodically based on updates to OCSD's Facilities Master Plan, all as described in the Recitals above. 3. Pro ert Leased to Others Non-Education Related Uses. The District acknowledges that Section I above does not apply to property that the District leases to another person or entity for a purpose unrelated to education. OCSD may categorize any such property as average or high demand, as appropriate, based on the policies and criteria in place when the CFCC is imposed. 4. Termination. The obligations of theParties under this Agreement shall terminate if and when OCSD should ever(1) recategorize the District's use of property that it owns as either average demand or high demand, or(2) modify the CFCC requirements such that CFCCs for replacement and remodeled structures are not, in effect, based on the net increase in square footage of a replacement or remodeled structure as compared with the previously existing structure. If the Agreement is so terminated, the District shall remain responsible for CFCCs incurred prior to termination. 5. Attorneys Fees and Costs. The Parties shall bear their own attorneys fees and costs incurred in connection with this matter, including but not limited to fees and costs incurred in connection with the Board Proceeding and the preparation of this Agreement. 6. Notices. Any notice, request, demand, consent, approval or other communication required or permitted hereunder or by law shall be deemed given or made only if in writing and deposited in the United States mail, postage prepaid and addressed to the party for whom intended, addressed as follows, or to such other address as may, from, time to time, be designated by written notice to the other Panics: To OCSD: Orange County Sanitation District 10844 Ellis Avenue Fountain Valley, CA 92708 Attention: General Manager With a copy to: Bradley R. Hogin, Esq. Woodruff, Spradlin, & Smart 555 Anton Boulevard, Suite 1200 Costa Mesa, CA 92606 2 To the District: 9. Entire Agreement. This Agreement constitutes the entire understanding between the Parties hereto with respect to the subject matter set forth herein and supersedes any and all prior or other contemporaneous understandings, correspondence, negotiations, or agreements, written or oral between them respecting the within subject matter. 8. Amendments in Writing. Any amendments to this Agreement must be in writing and signed by all of the Parties. 9.. Successors and Assigns. The terms and conditions of this Agreement shall inure to the benefit of, and be binding upon the Parties and their respective heirs, representatives, successors and assigns. 10. Interpretation. This Agreement is the result of negotiations in which each party was represented by counsel of their own selection. Each of the Parties hereby waives any provisions of law to the effect that an ambiguity in a contract or agreement should be interpreted against the Party that drafted the contract, agreement or instrument. 11. Governing Law. This Contract shall be governed by and construed according to the laws of California. 12. No Admission of Lin ility. This is a compromise settlement of disputed claims. Neitherthe execution of this Agreement nor anything contained in it is intended to be, nor shall be deemed to be, an admission by either party of any liability to anyone or an admission of the existence of facts upon which liability could be based. 13. Ownership of Claims. The Parties, and each of them, hereby warrant that they are the owners of, and the party legally entitled to settle and release, every claim referred to herein. 14. Severability. In the event any part of this Agreement should be found invalid, unenforceable, or nonbinding, the remaining portion will remain in force and fully binding. 15. Counterparts. This Agreement may be executed in one or more counterparts, each of which shall be deemed an original but all of which together shall constitute one and the same agreement APPROVED AND AGREED: ORANGE COUNTY SANITATION DISTRICT 3 Dated: By: James Ruth General Manager APPROVED AS TO FORM: By: Bradley R. Hogin, Esq. Dated: APPROVED AS TO FORM: By: District Counsel 4 BOARD OF DIRECTORS Maeeog Date To M.of Dir. 02/22/12 AGENDA REPORT Item Number Item Number 9 Orange County Sanitation District FROM: James D. Ruth, General Manager Originator: Jim Herberg, Assistant General Manager Project Manager: Rob Thompson, Engineering Manager SUBJECT: OUTFALL LAND SECTION AND OCEAN OUTFALL BOOSTER STATION PIPING REHABILITATION PROJECT GENERAL MANAGER'S RECOMMENDATION A. Consider, receive, and file the Final Environmental Impact Report for the Ocean Outfall Land Section and Ocean Outfall Booster Station (OOBS) Piping Rehabilitation Project, prepared by Environmental Science Associates, dated February 2012; and, B. Adopt Resolution No. OCSD 12-02, certifying the Final Environmental Impact Report for implementation of the Ocean Outfall Land Section and OOBS Piping Rehabilitation; making certain findings relating to environmental effects of Alternative 2 identified in the Final Environmental Impact Report; adopting a Statement of Overriding Considerations; adopting a Mitigation Monitoring and Reporting Program; and approving the Ocean Outfall Land Section and COBS Piping Rehabilitation Project (Alternative 2). SUMMARY The portion of the District's five-mile ocean outfall (Long Outfall) located on shore (Land Section) and the junction structure located adjacent to the route of the Santa Ana River (Beach Box) are experiencing corrosion and may be structurally deficient based on recent inspections and an engineering report. The engineering report recommended that the Beach Box be rehabilitated as soon as possible to avoid any potential risk of failure and spills. Treated wastewater (effluent) from the Long Outfall passes through the Beach Box enroute to discharge to the Pacific Ocean. Pursuant to the California Environmental Quality Act (CEQA), an Environmental Impact Report (EIR) has been prepared to evaluate the potentially significant environmental impacts associated with inspection, condition assessment, and rehabilitation of the Land Section of the Long Outfall System, extending from Surge Tower 2 within the Orange County Sanitation District's (Sanitation District) Treatment Plant 2 (Plant 2), to the Beach Box located on Huntington State Beach (beach), in the City of Huntington Beach. DW-102 Board AN,Rev 10/04/10 Page 1 of 5 932084,1 A rigorous process of public review was followed, including a Notice of Preparation and circulation of a Draft Environmental Impact Report (Draft EIR). More than 1600 notices were mailed to concerned public agencies and nearby residents, as well as outreach through newspapers, the Sanitation District's website, and libraries in Huntington Beach and Newport Beach. Eighteen comment letters were received mostly from public agencies. Staff recommends approval of the environmentally superior alternative and the Sanitation District's preferred alternative, Alternative 2. Alternative 2 minimizes the impact to the beach area and has no detectable impact to the beach water quality. The Beach Box may be repaired using a carbon fiber reinforcement method or by inserting stainless steel sleeves. PRIOR COMMITTEE/BOARD ACTIONS N/A ADDITIONAL INFORMATION Technical Information To inspect and repair the piping system and rehabilitate the Beach Box, the Long Outfall must be taken out of service for four to six weeks. The EIR evaluated two alternatives at an equal level of detail to accomplish this work. Under Alternative 1, a temporary bypass structure would be constructed downstream of the Beach Box. In Alternative 1, treated effluent would travel through the Land Section of the Short Outfall and then, downstream of the Beach Box, the effluent will be transferred through the temporary bypass structure back to the Long Outfall prior to ocean discharge. Alternative 1 would begin in September 2014 and conclude by March 2015 (seven months). Treated effluent would be bypassed for four to six weeks while the Beach Box and Land Section pipe are inspected and repaired. Under Alternative 2, treated effluent would be discharged through the Short Ouffall over a four to six week period, September 2012 through October 2012, during which the Beach Box inspection and rehabilitation would be conducted on the beach. The rehabilitation and maintenance work at Sanitation District's Plant 2 would occur from September 2012 through January 2013 (four months). The principal difference between Alternative 1 and 2 is that Alternative 1 would construct a bypass structure on the beach that would substantially increase environmental impacts at the beach compared to Alternative 2. In particular, as explained in the EIR, the size of construction footprint near the California Least Tern Natural Preserve and the length of time needed to construct and demobilize repair efforts during the nonbreeding season would increase the potential for adverse impacts to endangered species. In addition, construction of the bypass structure would result in a significant and unavoidable impact to visual resources because the 55-foot tall line stops (isolation valves), six-foot tall bypass structure, and dewatering tanks would be in DW-102 Board AR,Rev 10/04/10 Page 2 of 5 932084.1 place on the beach for seven months. In addition, the dewatering discharge could impact currents at the Santa Ana River mouth which, in turn, could impact beach goers at the beach and in the adjacent surf zone. Instead of constructing a temporary bypass, Alternative 2 calls for the discharge of treated effluent with enhanced disinfection to the Short Outfall for a period of four to six weeks. As explained in the EIR, the short-term use of the Short Outfall to discharge secondary treated effluent with enhanced disinfection would not significantly impact water quality, fish, or benthic organisms. Nor would the temporary discharge adversely impact public health or be likely to result in beach closures. Alternative 2 would utilize a smaller construction footprint than Alternative 1 resulting in less disruption to biological resources. To expedite the schedule, construction would be required 24-hours per day and seven days per week. Both Alternatives 1 and 2 would generate nighttime construction noise at the Beach Box, but the construction of the bypass structure would prolong the daytime construction noise by up to four months. Alternative 2 would generate noise for a shorter duration of four to six weeks because Alternative 2 does not require construction of the temporary bypass. Nonetheless, Alternative 2 would result in temporary significant and unavoidable impacts after mitigation based on nighttime construction noise at the Beach Box. The EIR concluded that Alternative 2 is the Environmentally Superior Alternative due to the additional impacts associated with constructing the bypass structure compared to the limited impacts of discharging treated effluent with enhanced disinfection to the Short Ouffall for four to six weeks. Additionally, the EIR has identified Alternative 2 as the Sanitation District's Preferred Alternative, since Alternative 1 would require a longer permitting process, complex bypass construction, increased safety risks, increased costs, and potential schedule delays which, in turn, increase the possibility of an emergency or uncontrolled system failure and potential spills. Based on the above information, staff is recommending Alternative 2, with the preferred construction method for Beach Box rehabilitation as either Option A, Carbon Fiber Reinforced Polymer Liner or Option C, Stainless Steel Pipe Insert, as the proposed Project for Board approval. EIR Process Information The Notice of Preparation (NOP) for the Ocean Outfall Land Section and COBS Piping Rehabilitation was circulated for public review August 8, 2011 through September 8, 2011. The NOP was mailed to responsible and trustee agencies, organizations, and all individuals that expressed an interest in the project. The NOP requested that interested parties respond within 30 days with written comments and concerns related to the proposed Project. A scoping meeting was held on August 25, 2011, to solicit public comments on the Project. All written and oral comments received were considered during the development of the Draft EIR. DW-102 Board AR,Rev 10/04/10 Page 3 of 5 932084.1 The Draft FIR was released for public circulation in December 2011. The 45-day public review period was December 14, 2011 through January 27, 2012. Approximately 200 compact discs containing the Draft EIR and 1600 Notice of Availability letters were mailed. The Draft EIR was also made available to the public through local libraries in Huntington Beach and Newport Beach. Additionally, the Notice of Availability, which directs the public to the Sanitation District's website for viewing of the Draft EIR, was advertised in the Orange County Register on December 16, 2011, On January 12, 2012, a public hearing was conducted to obtain additional public input on the contents and adequacy of the EIR. Nine members of the public attended. There were two oral comments from residents received at the public hearing; one from a City of Huntington Beach resident and the other from a City of Newport Beach resident. The oral comments received at the public hearing focused on potential disruption to neighbors near Treatment Plant 2 from traffic, nighttime construction noise, and potential odors. Sanitation District staff received 18 comment letters on the Draft EIR from public agencies and members of the public, and has prepared written responses to the following agencies: Native American Heritage Commission, Department of Transportation, Department of Conservation, Department of Toxic Substances Control, Department of Parks and Recreation, US Fish and Wildlife Service, City of Huntington Beach, Orange County Public Works, Department of Fish and Game, State Water Resources Control Board, City of Newport Beach, California State Lands Commission, and Department of Army. The written responses were also prepared for the following nongovernmental organizations and interested parties: Surfrider Foundation, Sea and Sage Audubon, Orange County Coastkeepers, Sempra Energy (Southern California Gas Company), Judith Gielow (Costa Mesa resident). The primary environmental concerns raised in these letters include potential impacts to aesthetics, biological resources, cultural resources, hazards, hydrology and water quality, land use, marine environment, nighttime construction noise, recreation, and traffic/circulation. Copies of each letter and staff's written responses, along with responses to oral comments made at the public hearing, are included in the Final EIR that was posted on the Board of Directors' website on February 9, 2012, The Final EIR "Response to Comments' was circulated for public review on February 10, 2012 to those agencies/individuals who commented on the Draft EIR. A public notice of the Final EIR was filed with the County of Orange on February 9, 2012 and published in the Orange County Register on February 10, 2012. As of this writing, no additional comments have been received. In the event comments are received on the Final EIR, they will be reported at the Sanitation District's Board Meeting on February 22, 2012, CEQA The EIR analyzes the potentially significant environmental impacts of the Project and recommended mitigation measures that avoid, minimize, rectify, or compensate for, the majority of the Project's potential environmental impacts. DW-102 Board AR,Rev 10/04/10 Page 4 of 5 932084.1 The FIR concludes that the Project would have unavoidable significant environmental impacts relating to nighttime construction noise at the Beach Box with both Alternatives 1 and 2. Because the Project would have significant unavoidable environmental impacts, the Board must adopt a Statement of Overriding Considerations (Attachment B), which identifies the specific benefits of the Project that override and outweigh the Project's unavoidable environmental impacts. Pursuant to CEQA, Sanitation District staff has prepared written Findings of Fact, a Statement of Overriding Considerations and a Mitigation Monitoring and Reporting Program (MMRP), which are attached as Attachment A, B, and C to the approval resolution, respectively, for Board consideration and approval. BUDGET/DELEGATION OF AUTHORITY COMPLIANCE N/A Date of Approval Contract Amount Contingency N/A N/A N/A ATTACHMENTS Exhibit A: OCSD Resolution No. 12-02 Attachment A, Findings of Fact Attachment B, Statement of Overriding Considerations Attachment C, Mitigation Monitoring and Reporting Program (MMRP) Final FIR documents may be viewed on the Sanitation District's webpage AA:sa:gc DW-102 Board AR,Rev 10/04/10 Page 5 of 5 932084.1 FINDINGS OF FACT—ATTACHMENT A ATTACHMENT A FINDINGS OF FACT I. FINAL EIR FOR THE PROJECT The Final FIR, prepared pursuant to Section 15089 of the CFQA Guidelines,consists of the Draft FIR, comment letters received on the D aft FIR,and responses to those comments. II. THE ADMINISTRATIVE RECORD CONTENTS OF THE RECORD The following information is incorporated by reference and made part of the record supporting these findings and the actions taken by the Sanitation District in certifying the Final EIR and approving the Project: L The Final EIR and all documents relied upon or incorporated by reference in the Final EIR. 2 All testimony, documentary evidence and all correspondence submitted to or delivered to the Sanitation District in connection with the meetings and public hearings at which the Draft EIR or Final EIR was considered by the Sanitation District. 3. All staff reports, memoranda,maps,slides, letters,minutes of meetings and other documents relied upon or prepared by Sanitation District staff and consultants relating to the project. ,F Any other documents specified by Public Resources Code section 21167.6(e). LOCATION OF ADMINISTRATIVE RECORD The Sanitation District is the custodian of the administrative record, including all CFQA documents and the other background documents and materials that constitute the record of the proceedings in which the Board's decision to certify the Final FIR and approve the project are based. The administrative record is located at the Sanitation District's administrative offices at 10844 Ellis Avenue, Fountain Valley,California, 92708. III. PURPOSE OF FINDINGS The Final FIR, prepared in accordance with CEQA, evaluates the significant adverse environmental impacts that could result from the Project. Section 15091 of the CEQA Guidelines requires that the public agency approving or carrying out the project shall make written findings for each significant impact identified in the FIR, accompanied by a brief explanation of the iationale for each finding. These findings include one of the following: 831798.1 FINDINGS OF FACT—ATTACHMENT A 1. Changes or alterations have been required to,or incorporated into,the project that avoid or substantially lessen the significant environmental effect as defined in the Final FIR. 2. Such changes or alterations are within the responsibility and jurisdiction of another public agency and not the agency making the finding. Such changes have been adopted by such other agency,or can and should be adopted by such other agency. 3. Specific economic, legal, social, technological, or other considerations,including provision of employment opportunities for highly trained workers,make infeasible the mitigation measures or project alternatives identified in the Final FIR. These findings accomplish the following: 1. They address the significant environmental effects identified in the EII2 for the approved project. 2. They incorporate all mitigation measures associated with these significant impacts identified in either the Draft FIR or Final EII2. 3. They explain why a significant effect is avoided or reduced by the adopted mitigation measures to a Less-than-significant level. The conclusions presented in these findings are based on the initial study,the Fiont EIR and other evidence in the record of proceedings - IV. EFFECT OF FINDINGS To the extent that these findings conclude that various proposed mitigation measures outlined in the Final FIR are feasible and have not been modified, superseded, or withdrawn, the Sanitation District hereby binds itself to implement these mitigation measures. These findings, in other words, are not merely information. The mitigation measures identified as feasible and within the Sanitation District's authority to implement for the approved project are expressed conditions of approval which the Sanitation District binds itself to upon adoption of this resolution and project approval. The Board will adopt a Mitigation Monitoring and Reporting Program (MMRP) concurrently with these findings to ensure that the all mitigation measures will be implemented. The MMRP includes applicable mitigation measures developed as part of the FIR process for the proposed Project. V. PROJECT BACKGROUND The Sanitation District currently operates two anthill pump stations at Plant 2, the Ocean Outfall Booster Station (GOBS) and the Effluent Pump Station Annex (FPSA). Approximately, 150 mgd is discharged through the Long Outfall system at Plant 2 to the Pacific Ocean ()It a regular basis, with the remaining net flow of 60 road conveyed to the Groundwater Replenishment System (GWRS)for advanced treatment and recycling. The Sanitation District's system includes two curtails. a 78-inch diameter,one-mile long outfall (Short Outfall)and a 120-inch diameter, five mile long outfall (Long Outfall). The Short Outfall and Long Outfall run parallel underground from the OOBS, under Pacific Coast Highway (PCI-I) 83'798.1 FINDINGS OF FACT—ATTACHMENT A through a Beach Box located on the Huntington State Beach out to the ocean. The Reach Box serves as an access point and interconnection for both outfalls. Both curtails lie on the ocean floor beyond the surfzone. The Short Outfall has a diffuser that begins approximately one mile from the shoreline. The Long Outfall has a one mile long diffuser that begins approximately four miles beyond the shoreline. In 2009 an engineering report revealed that the external walls on the east and west sides of the Beach Box may be experiencing severe corrosion, resulting in structural deficiency. The internal plates/bulkheads within the Beach Box require inspection and repair. The engineering report recommended that the Beach Box be rehabilitated as soon as possible to avoid any potential risk of Beach Box failure. If the Beach Box remains in its current condition, it could experience a structural failure, where effluent could leak through the plates, flow through the sand, and discharge directly into the SAR. The purpose of the proposed Project is to rehabilitate the Beach Box before structural failure occurs. PROJECT DESCRIPTION The Project includes the inspection,condition assessment,and rehabilitation of corroded elements of the land section of the existing Long Outfall System. This work would extend from Surge Tower 2 within the Sanitation District's Plant 2 to the Beach Box located on Huntington State Beach.The Sanitation District has identified five project elements as part of the rehabilitation efforts: 1) rehabilitation of Sorge Tower 2;2)inspection and rehabilitation of the land section of the Long Outfall;3) abandonment of the Long Outfall metering ports and vaults;4)replacement of the existing effluent flow meter on the Long Outfall; and 5)rehabilitation of the Beach Box. The work would be performed at Plant 2, near An Vac Station 12+05 and on Huntington State Beach. To allow, for access, proper inspection, and rehabilitation of the Beach Box, the Long Outfall must be taken out of service. Two proposed Project Alternatives were developed to isolate the work area, while continuing discharge of treated effluent to the ocean. Alternative I includes the construction of a bypass structure downstream of the Beach Box. Specifically, Alternative 1, Bypass—No Use of Short OetfaU,, would install a temporary bypass structure to convey the flow from the Short Outfall to the Long Outfall prior to ocean discharge. Construction would begin in September 2014 and would be concluded by March 2015. The second Alternative, Non-Bypass— Use of the Short Outfall, would discharge the full flow from the Sanitation District's treatment facilities through the Short Outfall while the Long Outfall system is being rehabilitated. This alternative would occur over a 4 to 6 week period while the Long Outfall is out of service. Rehabilitation efforts would begin in September 2012 and would be concluded by the end of October 2012. The FIR evaluates each Alternative at an equal level of detail. The Sanitation District has identified Alternative 2 as the recommended Project. The Board will approve Alternatve 2 with passage of this resolution. There are three options being considered for rehabilitating the Beach Box. Option A would apply a carbon fiber reinforced polymer(CFRP)liner which would be installed on the concrete walls, ceiling, and flora on the lower level of the Beach Box. Option B would remove two portions of 831798.1 FINDINGS OF FACT—ATTACHMENT A the tlooc/deck on the intermediate level of the Beach Box and sections of fiberglass pipe would be lowered into the bottom level of the Beach Box. Option Cwould insert a steel pipe into the Long Outfall to reinforce the Long Outfall at the Beach Box. Each Beach Box rehabilitation option has advantages and disadvantages regarding implementation. Each option would require closure of the Coastal Bikeway south of PCH for the dui ation of construction. In order to provide a conservative estimate of proposed Project impacts, the FIR analyzes Option B because it presents the worst case scenario as it requires demolition, includes the most construction equipment, and has a slightly larger construction footprint than Options A or C. NEED FOR PROJECT The Sanitation District's outfall facilities are over 40 years old. Over the years,the Sanitation District has conducted several studies on the condition of its outfal systems and performed necessary repairs. The Long Outfall provides an essential function for the entire service area by conveying effluent from the Sanitation District facilities to the ocean for discharge. To date,the Long Outfall system has only required minimal maintenance. However, a 2009 engineering report suggested that the steel plates on the east and west sides of the Beach Box may be experiencing severe corrosion,resulting in structural deficiency. The engineering report recommended that the Beach Box be rehabilitated as soon as possible to avoid any potential risk of Beach Box falure. The engineering report indicated that the steel plates that separate the Long Outfall and the Short Outfall compartments in the Beach Box and a second plate at the east end of the Long Outfall compartment of the Beach Box require inspection and repair. If the Beach Box remains in its current condition, it could experience a structural failure,where effluent could leak through the plates,flow through the sand, and discharge directly into the SAR. The purpose of the Project is to rehabilitate the Beach Box hotel structrua] failure occurs. The Project objectives are Summarized below: ( Rehabilitate the Beach Box as soon as possible to minimize the possibility of system failure and minimize potential spills; ( Minimize disruption to residential communities and commercial areas; ( Minimize disruption to recreational users during eonstmetion; ( Maintain compliance with the Sanitation District's National Pollutant Discharge Elimination System(NPDES)permit; ( Maintain the highest quality effluent possible during construction to minimize beach closures; ( Minimize disruption to biological resources on the beach; and ( Minimize impacts to marine environment. The Final EIR was prepared in compliance with CEQA. In accordance with CEQA Guidelines Section 15082, a Notice of Preparation (NOP)was published by the Sanitation Dish let on August 8, 2011. The NOP was circulated to local, state, and federal agencies and other interested parties for 30 days. The NOP comment period ended on September 8,2011. 831798.1 FINDINGS OF FACT—ATTACHMENT A fit accordance with CEQA Guidelines Section 15082,the Draft FIR was circulated to local, state, and federal agencies and other interested parties who wished to review and submit comments on the Draft FIR. The 45 day public review period began on December 14, 2011 and ended on January 27, 2012. A public hearing to receive public comments on the proposed Project was held on January 12, 2012 at the Sanitation District Administrative Office Building in the City of Fountain Valley. A total of 18 comment letter and 2 verbal comments were received on the Draft FIR. The Final FIR for the Outfall Land Section and OOPS Piping Rehabilitation Project consists of the Draft FIR, Response to Comments on the FIR document and Sanitation District initiated editorial refinements. VI. FINDINGS CONCERNING SIGNIFICANT UNAVOIDABLE ADVERSEIMPACTS These Findings pertain to the proposed Project which is Alternative 2 evaluated in the Draft FIR. The following impacts were identified in the Final FIR as significant and unavoidable. NOISE A. Facts I. The FIR analyzes noise impacts in Section 4.11. According to the FIR, rehabilitation activities on the Beach Box at the Huntington State Beach would result in temporary, significant and unavoidable impacts during nighttime activities. The nearest sensitive receptors are located approximately 634 feet southeast of the Beach Box, across the SAR. Construction equipment may generate a noise level of 90 dBA at a distance of 50 feet and would be attenuated to approximately 70 dBA at the nearest residences. The use of high-level noise generating equipment would be limited to a few hours during the day and would not exceed daytime standards adopted by the City of' Huntington Beach. Rehabilitation activities would be acceptable during daytime hours. However, noise levels at nighttime could result in 80 dBA at 50 feet. This would attenuate to approximately 60 dBA at the nearest residences which is above the 50 dBA nighttime noise standards for the City of Huntington Beach and the City of Newport Beach. Mitigation Measures 4.11-lb through 4.11-Id would minimize impacts of nighttime noise, but impacts would still result in a temporary, significant and unavoidable impact. 2. The FIR identifies Mitigation Measure 4.11-Ib through 4.11-d which require noise reduction measures, notices to interested parties and affected neighboring properties of project activities, and restrictions on percussive construction activities to daytime construction hours on weekdays and Saturdays. B. Findings The Board finds that: 831798.1 FINDINGS OF FACT—ATTACHMENT A I. Noise impacts during rehabilitation activities at the Beach Box would be significant and unavoidable; the mitigation measures described above are adopted and will reduce this impact, but not to a level of insignificance. 2. This impact is overridden by project benefits as set forth in the statement of overriding considerations adopted concurrently herewith. VI. FINDINGS CONCERNING SIGNIFICANT IMPACTS REDUCED TO LESS THAN SIGNIFICANT LEVELS BY MITIGATION MEASURES INCORPORATED INTO THE PROJECT These Findings pertain to the proposed Project which is Alternative 2 evaluated in the Draft FIR. The Final FIR identifies significant impacts that are reduced to a "less-than-significant' level provided that the mitigation measures identified in the Final FIR are incorporated into the project. These measures avoid, minimize, rectify, or reduce the significant environmental effects identified in the Final FIR to a Tess than significant level. AESTHETICS A. Facts: 1. The EIR discusses impacts to visual resources and public view corridors in Chapter 4.1. According to the EIR, rehabilitation activities on Plant 2 and at the Air Vac Station 12+05 would not significantly affect visual resources or public view corridors. Rehabilitation activities at the Beach Box could impact nearby scenic vistas. 2. The EIR identifies Mitigation Measure 4.1-1 which would screen nearby views from activities on the beach. Specifically, a visual screen will be installed at the Beach Box to protect nearby scenic vista views from the rehabilitation activities and equipment stationed at the Beach Box. 3. According to the FIR, rehabilitation activities at An Vac Station 12+05 and the beach could impact light-sensitive areas during nighttime construction. 4. The FIR identifies Mitigation Measures 4.1-3a which would ensure that the temporary nighttime lighting would be shielded and directed downward to avoid light spillover to Tight-sensitive areas. The FIR identifies Mitigation Measure 4.1-3b which requires that prior to the commencement of rehabilitation activities the Sanitation District shall coordinate with the City of Huntington Beach concerning nighttime activities,and would provide a nighttime lighting plan to the City for review. B. Findings The Board finds that: The recommended mitigation measures in the EIR are adopted. The mitigation measures will mitigate the Project's impacts to aesthetics to Tess than significant levels. 831798.1 FINDINGS OF FACT—ATTACHMENT A BIOLOGICAL RESOURCES A_ Facts 1. The FIR discusses impacts to biological resources in Chapter 4.3. According to the FIR, under Alternative 2, rehabilitation of the Beach Box would occur within several feet of the chain-link fence demarcating the California Least Tern Natural Preserve Area boundary and will require temporarily removing approximately 0.12 acres of habitat suitable for California least tear nesting outside of the chain link fencing. The proposed Project schedule was established to avoid implementing any rehabilitation activities during the California Least Tern nesting season. Project rehabilitation activities may impact a special status plant species, the Coast Woolly-heads. The species is not a federally or State-listed species, but is recorded by the California Native Plant Society as a species of concern. The project would grub the top six inches of sand to capture the seed bank near the Beach Box and it would then be stockpiled separately and replaced on the surface of the affected area after rehabilitation is completed. Removing the plants along with the rest of the scrub and restoring the site with the grubbed materials and collected seed would ensure that impacts to the Coast Woolly-heads would be less than significant. 2. The FIR identifies Mitigation Measures 4.3-la through 4.3-Ih which require that rehabilitation activities be confined to staked areas and upon completion of rehabilitation activities, that the construction area be returned to its pre-construction contours. Silt fencing must be installed prior to construction in all construction areas outside Plant 2. A qualified biologist will survey the construction areas outside of Plant 2 to document and map prcconstruction conditions. A qualified biologist will be present as necessary during the rehabilitation activities adjacent to the Talbert Marsh. A qualified biologist will be present as necessary during construction activities at the Huntington State Beach. All project activities adjacent to the Talbert Marsh and at Huntington State Beach will occur outside nesting season for the Belding Savannah Sparrow(March I through September I) and the California Least Tern (April I through September 1). All work areas outside Plant 2 must be restored to pre-project contours. The top t, inches of soil will be replaced on the construction area following completion of the work. B. Findings The Board finds that: The recommended mitigation measures in the FIR are adopted These mitigation measures will mitigate the Project's biological resources impacts to less than significant levels. GEOLOGY AND SOILS A. Facts 831798.1 FINDINGS OF FACT—ATTACHMENT A 1. According to Chapter 4.5 of the FIR, rehabilitation of the Beach Box requires a temporary dewatering pipeline to remove excess water from the Long Ontfall.Installation of the dewatering pipeline would not result in substantial soil erosion or the loss of topsoil because the pipeline installation would only disturb a minimal area in the vicinity of the Beach Box, and between the Beach Box and Plant 2. The Project could result in an increase in the potential for soil loss due to the implementation of staging areas. Construction related activities on the beach could result in soil disturbance, soil compaction and it sand off site. 2. The FIR identities Mitigation Measure 4.8-1a. This mitigation measure requires the development of a Stormwater Pollution Control Plan (SWPCP) prior to the initiation of any maintenance or rehabilitation activities. The SWPCP will include BMPs to control soil erosion, sedimentation and other construction-related pollutants. The BMPs will be implemented for the duration of the construction activities. B. Findings The Board finds that: The recommended mitigation measures in the FIR are adopted. This mitigation measure will mitigate the Project's geology and soils impacts to less than significant levels. HYDROLOGY A. Facts 1. Impacts related to hydrology and water quality have been analyzed in Chapter 4.8 of the FIR. According to the FIR, rehabilitation activities could result in generation of contaminants that could be discharged to the storm drain system and ultimately to the ocean. Rehabilitation activities may involve the use and handling of materials and pollutants associated with heavy machinery and equipment such as oils, fuels, and lubricants. Chemical product spills (fuels, oils, grease, etc) from the machinery involved in the construction activities could affect local surface water quality. According to the FIR rehabilitation activities could increase the risk of soil erosion. Bare soils exposed during construction activities including in staging areas could result in increased erosion and sedimentation to surface waters. 2. The FIR identifies mitigation measure 4.8-la. This mitigation requires the development of a Stormwater Pollution Control Plan (SWPCP) prior to the initiation of any maintenance or rehabilitation activities. The SWPCP will include BMPs to control soil erosion, sedimentation and other construction-related pollutants in order to minimize impacts from stormwater to local receiving water in compliance with the Sanitation District's existing stormwater management program. The BMPs will be implemented for the duration of the construction activities. B. Findings 831798.1 FINDINGS OF FACT—ATTACHMENT A The Board finds that: The recommended mitigation measure in the FIR is adopted. This measure will mitigate the Project's hydrology and water quality impacts to Tess than significant levels. MARINE ENVIRONMENT AND PUBLIC HEALTH A_ Facts 1. The FIR analyzes impacts to the marine environment in Chapter 4.10 of the FIR. Discharge to the Short Outfall could induce phytoplankton blooms. Phytoplankton blooms may occur in response to effluent discharge because the plume increases nitrogen supply in the sunlit ocean waters. Due to the shallow depth of the Short Outfalk effluent plume is expected to rise to the surface. Phytoplankton blooms can have negative impacts on water quality and other biota by suppressing light levels or dissolved oxygen in the surface waters. Negative impacts from phytoplankton blooms would be limited by the plumes patchiness,advection of the area currents,waves, weather,and the duration of the discharge. Due to the short duration of the discharge and dispersal influence of currents, the potential is low for a toxic phytoplankton bloom to exceed significance thresholds including long-tern measurable changes in species composition, reduction of endangered species populations, alteration of areas of special biological significance, or alteration of population or health of marine wildlife. 2. The FIR identified Mitigation Measure 4.10-4,which requires that the Sanitation District conduct augmented ocean monitoring before, during, and after use of the Short Outfall to detect and quantify changes to phytoplankton from baseline conditions as a result of the Project. Monitoring shall include continuous sampling of the water using water quality moorings and autonomous underwater vehicles. Weekly samples from the Newport Beach and Huntington Beach Piers will be analyzed for nutrients and phytoplankton, including the presence of harmful algal species. The monitoring results will be provided to the California Department of Public Health (CDPH) and the Orange County Health Care Agency (OCHCA) and will be posted on a publically accessible web page. If harmful algal species are detected,the Sanitation District shall coordinate a response with CDPH, National Marine Fisheries Service (NMFS), and local marine mammal rescue groups to monitor for affected animals. The Sanitation District shall develop a mitigation plan with the marine mammal stranding network to monitor and rehabilitate animals in the event that a harmful algal bloom occurs during the 4 to 6 week discharge to the Short Outfall. 3. According to the FIR, discharge through the Short Outfall for 4 to 6 weeks could affect water quality that could affect benthos, fish, shellfish, macroinvertebrates, and marine mammals. The FIR concludes that fish, birds, and marine mammals can easily move within the affected areas so the discharge nearer to shore would not create a significant change from existing conditions. 831798.1 FINDINGS OF FACT—ATTACHMENT A 4. The FIR identified Mitigation Measure 4.104, which requires that for the duration of the use of the Short Outfall. the Sanitation District shall implement augmented ocean monitoring in coordination with CDPH, OCHCA, NMFS, and local marine mammal fescue groups. 5. According to the FIR, the results of the Effluent Bacteria Reduction Demonstration Study prepared for the FIR shows that the proposed level of treatment significantly reduces fecal indicator bacteria discharged at the Short Outfall. The enhanced treatment process can achieve fecal indicator bacteria concentrations that meet the 30-day geometric mean standards at the end of pipe before being discharged into the ocean. The Jesuits of the plume modeling study shows that discharge to the Short Outfall would not result in detectable changes to water quality in the surfzone. 6. The FIR identified Mitigation Measure 4.10-6a, which requires that for the duration of the use of the Short Outfall, the Sanitation District shall implement enhanced treatment methods for effluent discharge, including full secondary and enhanced chlorination treatment. 7. The FIR identified Mitigation Measure 4.10-6b, which requires that the Sanitation District shall conduct augmented ocean monitoring before, during, and after use of the Short Cobalt to detect and quantify changes to indicator organisms and water quality from baseline conditions as a result of the Project. The ocean monitoring will ensure that surfzone water quality standards established for the protection of public health are met. 8. According to the FIR, discharge through the Short Outfall for a period of 4 to 6 weeks could adversely affect beneficial uses of the ocean defined in the California Ocean Plan. The discharge to the Short Outfall would receive secondary treatment with enhanced disinfection. Discharge to the Short Outfall is expected to result in the discharge plume rising to the surface in waters that are closer to the shore than the Long Outfall. Effluent quality coupled with dilution is expected to minimize the potential for adverse water quality impacts that could adversely affect any of the designated beneficial uses. 9. The FIR identified Mitigation Measure 4.10-6a, which requires that for the duration of the use of the Short Outfall, the Sanitation District shall implement enhanced treatment methods for effluent discharge, including full secondary and enhanced chlorination treatment. 10. The EIR identified Mitigation Measure 4.10-6b, which requires that the Sanitation District shall conduct augmented ocean monitoring before, during, and after use of the Short Outfall to detect and quantify changes to indicator organisms and water quality from baseline conditions as a result of the Project. The ocean monitoring will ensure that surfzone water quality standards established for the protection of public health are met. If water quality monitoring identities poor water quality during the short-term discharge, implementation of these measures by OCHCA and the California Department of Public Health would be protective of public health, environmental health, and designated beneficial uses. 831798.1 FINDINGS OF FACT—ATTACHMENT A B. Findings The Board finds that: The recommended mitigation measures in the FIR are adopted. These measures will mitigate the Project's impacts to the marine environment to less than significant levels. RECREATION A Facts 1. The FIR analyzes the Project's recreational impacts in Chapter 4.12 of the EIR. According to the FIR, rehabilitation activities would impact public bikeways and temporarily close a portion of the SAR Bikeway from the Air Vac Station 12+05 to the Huntington State Beach and along the Coastal Bikeway. Access to Huntington State Beach and the Coastal Bikeway south of PCH would be restricted for the 4 to 6 week rehabilitation period. Other local bikeways would accommodate the detoured bikeway users, and the detour is not expected to cause substantial physical deterioration of the bikeways. 2. The FIR identified Mitigation Measure 4.12-1, which requires that prior to the commencement of any construction activities, the Sanitation District and the construction contractor shall coordinate with the California State Parks, Orange County Parks Department, Orange County Public Works —OC Flood, Santa Aua River Unit, City of Huntington Beach, and the City of Newport Beach to prepare and implement a bicycle/pedestrian detour plan for the duration of rehabilitation. The plan shall clearly identify alternative routes, construction schedules, and signage for the detour plan and applicable closure dates. 3. The FIR identified Mitigation Measure 4.12-2, which requires that the Sanitation District return fencing, signs, access routes, bike path,parking lots, barriers, Tight poles, painting and striping to pre-eonstruction conditions following construction activities in coordination with the California State Parks and Orange County Public Works (OCFCD and OC Parks). B. Findings The Board finds that: The recommended mitigation measures in the FIR are adopted.These measures will mitigate the Project's recreational impacts to Tess than significant levels. TRAFFIC AND CIRCULATION A. Facts 831798.1 FINDINGS OF FACT-ATTACHMENT A 1. The FIR analyzes impacts to traffic and circulation in Chapter 4.13 of the FIR_ According to the FIR, activities at Air Vac Station 12+05 require a portion of the SAR Bikeway fur the Air Vac Station 12+05 to the Huntington State Beach and along the Coastal Bikeway to be temporarily closed and a bikeway detour would be in effect. 2. The FIR identified Mitigation Measure 4.12-1 (Chapter 4.12- Recreation), that would ensure that appropriate detours are established and finalized for the duration of construction activities. The Sanitation District and the construction contractor shall coordinate with the California State Parks, Orange County Parks Department, Orange County Public Works - OC Flood Santa Ana River Unit, City of Huntington Beach, and the City of Newport Beach to prepare and implement a bicycle/pedestrian detour plan for the duration of construction. The plan shall clearly identify alternative routes, construction schedules, and signage for the detour plan and applicable closure dates. B. Findings: The Board finds that: The recommended mitigation measure in the FIR is adopted. This measue will ensure the Project's impacts to traffic and circulation are reduced to less than significant levels. VIII. FINDINGS CONCERNING IDENTIFIED IMPACTS THAT WERE DETERMINED TO BE LESS THAN SIGNIFICANT WITHOUT NEEDING TO IDENTIFY MITIGATION MEASURES These Findings pertain to the proposed Project which is Alternative 2 evaluated in the Draft FIR. The Final FIR identifies impacts that are considered to be "less than significant" not requiring mitigation measures. It is hereby determined that the following environmental impacts of the Project will be less than significant. AIR QUALITY A. Facts I. Air quality impacts were analyzed in Chapter 42 of the FIR.According to the FIR, implementation of the proposed Project would not increase operational air emissions or introduce new facilities that would conflict with the Air Quality Management Plan (AQMP). Temporary emissions associated with rehabilitation and maintenance activities would be consistent with the AQMP. 2. According to the FIR, implementation of the Project would be temporary and short-term, would occur on a 24 hour, 7 day a weak schedule,and would not violate air quality standards. Emissions estimated represented the worst-case scenario in terms of daily emissions and include a maximum day of rehabilitation activities in which most of the construction equipment at all the sites would operate simultaneously. Maximum daily 831798.1 FINDINGS OF FACT—ATTACHMENT A emissions due to any potential overlap between phase activities would be below SCAQMD's thresholds and would be subject to Rule 403 dust control measures. 3. According to the FIR, the Project would not exceed SCAQMD's significance thresholds or result in a net increase of Tong-teen operational-related emissions for mobile, stationary, or area sources. As the proposed Project would comply with SCAQMD thresholds and regulations, including Rule 403,all emissions would be minimized to less than significant. 4. According to the FIR, implementation of the Project would add additional truck trips on Brookhurst Street and PCH. Activities at Plant 2 and Air Vac Station 12+05 would add approximately 50 to 60 roundtrip vehicular worker in at Plant 2 and up to 12 roundtrips at Air Vac Station 12+05. Rehabilitation activities at the Beach Box would add approximately 16 to 24 trips. These new truck trips would result in minimal and temporary emissions and would not expose sensitive receptors to substantial pollutant concentrations. 5. According to the FIR, rehabilitation activities tinder the Project would result in odorous emissions from diesel exhaust generated by construction equipment. Emissions would be temporary and highly diffused.Nearby receptors would not be affected by diesel exhaust odors associated with Project construction. At the end of project construction,all 3 sites would be returned to pre-construction conditions. No new odors would be generated. B. Findings The Board finds that: The Project's air quality impacts would be temporary, short term and have less than significant impacts to the environment.No mitigation measures are necessary. BIOLOGICAL RESOURCES A. Facts: 1. Impacts to biological resources were analyzed in Chapter 4.2 of the FIR. According to the FIR, the Project is not located within areas designated as HCP/NCCP or within the Orange County HCP/NCCP. The proposed Project would comply with local policies and ordinances including the Huntington Beach LCP. 2. According to the FIR, no wetlands are within Plant 2 boundaries. Activities occurring at Air Vac Station 12+05 would be limited to upland, non-wetland areas of the property and no coastal salt marsh habitat or upland plant species would be affected by the Project. The coastal scrub adjacent to Air Vac Station 12-05 lacks wetland hydrology and is not considered to be a State or federal wetland. Rehabilitation of the Beach Box would not 831798.1 FINDINGS OF FACT—ATTACHMENT A affect any waters of the US,would not encroach into the SAR,and would not impact wetlands or other waters. 3. According to the FIR, the Project would not interfere with wildlife movement corridors. Plant 2 is a fully developed wastewater tr eatment facility and does not have any wildlife corridor. Activities at Air Vac Station 12+05 would not preclude animals moving between the Talbert Marsh and the SAR as the work area would be confined to a small fenced area,and to a short dirt road. Activities would be short in duration and spatially discrete leaving room on sides of the access road for movement between the Talbert Marsh and the SAR Also, most species moving between the Talbert Marsh and SAR are birds and are therefore able to fly over and around the work area. Rehabilitation of the Beach Box would not interfere with wildlife movement as rehabilitation would be temporary and the California Least Tern Natural Preserve Area is entirely surrounded by dist c hed and developed lands and does not function as a wildlife corridor. B. Findings The Board finds that: The Project's biological impacts related to wetlands and wildlife movement corridors would be temporary and less than significant. No mitigation measures are necessary. CULTURAL RESOURCES A. Facts 1. Impacts to cultural and unique historical resources were analyzed in Chapter 4.4 of the EIR. According to the FIR rehabilitation activities on Plant 2, at Air Vac Station 12-05 and at the Beach Box would not require any ground disturbing activities and no impacts to cultural or unique historical resources would occur. 2. According to the EIR rehabilitation activities on Plant 2,at Air Vac Station 12+05 and at the Beach Box would not require any ground disturbing activities and no impacts to paleontological resources would occur. 3. According to the EIR rehabilitation activities oil Plant 2,at Air Vac Station 12+05 and at the Beach Box would not require any ground disturbing activities and no impacts to human remains would occur. B. Findings The Board finds that: The Project's impacts related to cultural and paleontological resources would not occur. No mitigation measures are necessary. 831798.1 FINDINGS OF FACT—ATTACHMENT A GEOLOGLY, SOILS AND SEISMICITY A. Facts 1. Impacts from geology, soils and seismicity were analyzed in Chapter 4.5 of the FIR. According to the FIR. activities at Plant 2, at the Air Vac Station 12+05 and the Beach Box would not change the existing developed conditions and would not result in an increase in the intensity of ground shaking that might be expected or the future probability of fault rupture. 2. According to the FIR,the project site is located in areas of low potential for unstable soils,no new structures would be constructed and no excavation or shoring would be employed. B. Findings The Board finds that: The Project will have a less than significant impact related to geologic events and soil conditions. No mitigation measures are necessary. GREENHOUSE GAS EMISSIONS A. Facts I. Greenhouse gas emissions were analyzed in Chapter 4.6 of the FIR. According to the FIR, the proposed Project would not add any new stationary sources of emissions. The Project would generate approximately 117 metric tons of Core over the duration of the rehabilitation activities at Plant 2, Air Vac Station 12+05 and the Beach Box.The Project would have low emissions,the construction schedule would be 4 to 6 weeks, and construction would be temporary and finite. 2. According to the FIR,the Project's temporary construction emissions are minor compared to SCAQMD's adopted and proposed GHG thresholds for operational emissions.The Project would be consistent with GHG emission plans,policies,and regulations. B. Findings The Board finds that: The Project's greenhouse gas emissions impacts would be temporary and less than significant. No mitigation measures are necessary. 831798.1 FINDINGS OF FACT—ATTACHMENT A HAZARDS AND HAZARDOUS MATERIALS A. Facts 1. Hazards and hazardous materials impacts were analyzed in Chapter 4.7 of the FIR. According to the FIR, the Project would not interfere with an emergency response plan. The SAR Bikeway would be closed for public access for approximately one week; however, this is not a designated emergency evacuation route. Construction vehicles for rehabilitation activities at the Beach Box would follow all roadway regulations and no street closures are anticipated. Rehabilitation of the Beach Box would not interfere with lifeguard services. The Short Outfall is currently used as an emergency outfall in case the Long Outfall capacity is exceeded during a wet weather event. The FIR analyzed whether a wet weather event during rehabilitation of the Beach Box,either on its own or at the same time as a Ground Water Replenishment System failure,would exceed the Short Owned's capacity. The FIR finds that the potential to exceed the Short Outfall's capacity in these circumstances is nearly zero. Further, emergency access to the beach and surfzone of Mouth Beach would be maintained during construction, as required by the State Parks. 2. According to the FIR,the Project may include the use of hazardous materials associated with construction equipment. Worker safety regulations and BMPs identified in the Sanitation District's Stormwater Onsite Management Plan would be implemented to prevent and minimize accidental release into the environment, and ensure prompt cleanup in the event of such a release. Rehabilitation activities such as abrasive blasting at Plant 2 would also comply with OSHA safety and health regulations. The Project would include enhanced disinfection treatment with the additional use of sodium bypochlorite and sodium bisullzte for the duration of the use of the Short Outtall for 4 to 6 weeks. These chemicals are routinely transported and stored at Plant 2, and the use of these chemicals would be subject to existing laws,regulations, and all Sanitation District protocols for storage and handling. The short term increase in chemical use would not increase the risk of upset or increased hazards. The Sanitation District and all service providers would be required to comply with existing and future hazardous materials laws;regulations for the transport, use, and disposal of hazards materials;safety and risk management protocols; and regulations with construction health and safety laws and regulations. B. Findings The Board finds that: The Project will have a less than significant impact related to hazards, interference with emergency response plans and use of hazardous materials.No mitigation measures are necessary. HYDROLOGY AND WATER QUALITY A Facts 831798.1 FINDINGS OF FACT—ATTACHMENT A 1. Hydrology and water quality impacts were analyzed in Chapter 4.8 of the EIR. According to the FIR, The Project would not change impervious surfaces and would not require dewatering. No impacts to groundwater recharge would occur. Rehabilitation of the Beach Box would not require groundwater dewatering, but effluent dcwatered from inside of the Long Outfall and Beach Box would be conveyed to Plant 2 via an aboveground, 12-inch pipeline. 2. According to the FIR, the Project would not alter drainage patterns as activities would occur in existing structures and no grading would be required. Upon completion of the proposed Project,all sites would be returned to their pre-construction condition. 3. According to the FIR, Project activities are located within areas susceptible to tsunamis due to proximity to the Pacific Ocean coastline. However,rehabilitation artd maintenance activities would not change or increase the existing risk of seiches, tsunamis, or mudflows as improvements would be made within existing facilities. B. Findings The Board finds that: Project activities will have a less than significant impact on groundwater supplies and drainage patterns and would not increase the risk of seiches, tsunami, or mudflow. No mitigation measures arc necessary. MARINE ENVIRONMENT AND PUBLIC HEALTH A. Facts 1. Marine environment and public health impacts were analyzed in Chapter 4.9 of the FIR. According to the FIR, the Short Outfall's plume is predicted to increase temperatures in the receiving waters by up to 0.2°C. Observations of this temperature structure made during the summer and fall 2009 near the Long Outfall found that entrained temperature variations attributable to the plume were less than 1 degree Celsius. Because plume- induced temperature changes are likely to be smaller than natural variations and constrained to the vicinity of the Short Outfall,no significant impacts on water temperature are anticipated. According to the FIR, the plume's influence on salinity is less than annual natural variability. The reduction in salinity due to the use of the Short Outfall is negligible, and the use of the Short Outfall would not result in a significant impact to salinity. 2. According to the FIR, the Project would discharge secondary effluent with enhanced disinfection and dechlorination. This effluent quality would exceed the quality of effluent currently discharged to the Long Outfall due to the enhanced disinfection and the completion of the secondary treatment facilities to be placed into operation at the end of 2012. Acute water quality degradation due to dissolved oxygen concentrations, oil and 831798.1 FINDINGS OF FACT—ATTACHMENT A grease, pH,total suspended solids,water clarity, or ammonia is not anticipated dining the 4 to 6 weeks of Short Outfall rue. The discharge would be protective of the California Ocean Plan water quality objectives and NPDF_S permit discharge requirements. 3. According to the FIR, changes to water quality due to use of the Short Outhill would remain within regulatory limits. impacts to sediment quality from deposition of solids would be limited due to the quality of effluent discharged and the short duration of the discharge. Embenthic macroinvertebrates (EMI) and benthic organisms would not be adversely affected either within or outside the ZID. According to the EIR, the Project would not change the loading rate of organic matter, metals, or trace organics discharged to the ocean as these loading rates would remain the same as currently permitted. Use of the Short Outfall for 4 to 6 weeks would not significantly affect sediment quality. Deposition of solids ham use of the Short Outfall for up to 6 weeks would not be sufficient to alter the benthic environment, or negatively impact the macro invertebrates that colonize this environment. There would be no permanent loss of benthic habitat. Assessment of benthic macroinvertebrates in seven years of sampling also indicates modest decline in community health within the zone of initial dilution. The Project is not expected to generate enough deposition to cause significant impacts to sediment quality or to benthic organisms. B. Findings The Board finds that: The Project will have a less than significant impact related to temperature and salinity in the marine environment, water quality parameters(dissolved oxygen, oil, grease, pH,total suspended solids, water clarity and ammonia),or sediment quality and benthic communities. VIBRATION A. Facts I. Vibration impacts were analyzed in Chapter 4.11 of the EIR. According to the FIR, vibrations from construction activities at the Air Vac Station 12+05 would not occur because the majority of the work would be performed below ground and within the structure. Vibrations from activities at the Beach Box would be limited because the unconsolidated sandy soils on the beach would significantly limit vibration transmission across the SAR and construction activities would not include percussive methods that would generate significant vibration. B. Findings The Board finds that: The Project would not generate significant vibration impacts on sensitive receptors. No mitigation measures are necessary. 831798.1 FINDINGS OF FACT—ATTACHMENT A TRAFFIC AND CIRCULATION A. Facts 1. Traffic and circulation impacts were analyzed in Chapter 4.13 of the EIR.According to the FIR, Alternative 2 would add a minimal amount of traffic to the existing traffic volumes on Brookhurst Street and PCH. These trips would occur for 4 to 6 weeks,would be minimal and therefore would not significantly impact the intersection of PCH and Brookhurst Street Construction-related traffic would be temporary and minimal and is not anticipated to impact the existing transportation circulation system or conflict with the Orange County Congestion Management Plan. 2. A 5,103 square foot portion of the Huntington State Beach parking lot would be used for construction parking and staging, utilizing up to 14 parking spaces. Rehabilitation work would be conducted during the off-peak season and the use of parking area for the duration of construction would not significantly reduce access to beach parking. B. Findings The Board finds that: Traffic and circulation impacts during Project activities would be temporary and have a less than significant impact. No mitigation measures at necessary. UTILITIES AND SERVICE SYSTEMS A. Facts 1. The FIR analyzes impacts to utilities and service systems in Chapter 4.14 of the FIR. According to the FIR, rehabilitation activities would temporarily increase energy consumption, but existing energy sources would be adequate to service the rehabilitation activities. Due to the temporary nature of the proposed Project, the proposed Project would not conflict with the goals and policies of the City of Huntington Beach Energy Action Plan. 2. According to the FIR, rehabilitation activities would not create a need for additional wastewater treatment or conflict with the Regional Water Quality Control Board (RWQCB) discharge permit, and will conform to all the Sanitation District's NPDES permit requirements. Discharge to the Short Outr all is permitted to accommodate high flow, wet weather events which exceed the Long Outfall's capacity. Under the Project, the quality of the effluent discharged to the Short Outfall would be superior to the existing effluent quality. 3. According to the FIR, rehabilitation and maintenance activities would not generate a significant amount of solid waste. The Project would generate approximately 46 cubic yards of debris, a minor landfill contribution. 831798.1 FINDINGS OF FACT—ATTACHMENT A 4. According to the FIR, any solid waste generated by the proposed Project would be hauled from the site, diverted and recycled, in accordance with the California Integrated Waste Management Act of 1989. The Sanitation District would also coordinate with the City of Huntington Beach, the Huntington Beach Fire Department, and the Orange County Health Care Agency's Certified Unified Program Agency to ensure proper disposal of hazardous wastes. The Project would comply with all applicable federal, state, and local regulations. B. Findings The Board finds that: The Project will have a less than significant impact on energy consumption, wastewater treatment, and landfill capacity, and would comply with applicable regulations. No mitigation measures are necessary. CUMULATIVE EFFECTS A. Facts 1. The FIR analyzes cumulative impacts in Chapter 5.0 of the FIR. The EIR analyzes the project contribution to cumulatively significant effects to aesthetics, air quality, biological resources, cultural resources, geology and soils, greenhouse gas emissions, hazards and hazardous materials, hydrology and water quality, land use and planning, marine environment, noise, recreation, traffic and circulation and utilities and service systems. The Project would result in temporary rehabilitation activities for a total of 4 months, with discharge through the Short Outfall occurring for approximately 4 to 6 weeks. Upon completion of the rehabilitation activities,the Long Outfall will be returned to service. The FIR concludes the Project would not contribute significantly to the cumulative condition of the region. B. Findings The Board finds that: The recommended Project would have less than significant effects on the cumulative environmental condition of the region. GROWTH INDUCMENT A. Facts 1. The FIR discusses growth inducing impacts in Section 6.1. According to the FIR, the Project would have no potential to directly foster population growth m to result in the construction of additional housing because the Project calls for the maintenance and rehabilitation of existing Sanitation District facilities. Project activities are not expected 831798.1 FINDINGS OF FACT—ATTACHMENT A to create substantial employment opportunities beyond the level normally available to construction workers in the area. B. Findings The Board finds that: The recommended Project would not induce growth to the project area. X. FINDINGS CONCERNING ALTERNATIVES The Final FIR evaluates two project alternatives at an equal level of detail. The proposed Project (Alternative 2) was identified as the environmentally superior alternative and the recommended Project. Alternative I would result in temporary significant and unavoidable aesthetics,noise and recreation impacts. The proposed Project would result in a temporary significant and unavoidable noise impact. The FIR provides a description of the alternative screening process conducted to identify the recommended Project. Each of the project Alternatives evaluated in the FIR were also evaluated for key implementation criteria. An Alternative Screening Analysis summarized in the FIR identities the proposed Project (Alternative 2) as the recommended Project considering the following screening criteria: permitting requirements,construetability, safety, schedule, and cost. A. NO PROJECT ALTERNATIVE Under the No Project Alternative, the Sanitation District would take no action to implement the Outfall land Section and GOBS Piping Rehabilitation project The rehabilitation of Surge Tower 2, inspection and rehabilitation of the land section of the Long Outfall, abandonment of the Long outfall metering ports and vaults, replacement of the existing effluent flow meter on the Long Outfall, and rehabilitation of the Beach Box would not occur.The existing conditions of the Long Outfall system would remain unchanged. The Board finds that this alternative is infeasible and less desirable than the proposed Project and rejects this alternative for the following reasons: I. The FIR concluded that the No Project Alternative would result in Beach Box failure, and would result in greater impacts to aesthetics, air quality and greenhouse gases, biological impacts, cultural and paleontological resources, geology, hazards and hazardous materials, hydrology and water quality, land use and planning, marine environment, noise, recreation, traffic and circulation, and utilities and service systems than the proposed Project. 2. The FIR concluded the No Project Alternative world not meet any of the Project Objectives since the failure of the Beach Box would eventually result in greater impacts to environmental resources. 831798.1 FINDINGS OF FACT—ATTACHMENT A ALTERNATIVE I Underrthis Alternative the Sanitation District would install a temporary bypass structure downstream of the Beach Box to convey the flow from the Short Outfall to the Long Outfall prior to ocean discharge. Once the Long Outfall is isolated and dewatered,five rehabilitation elements described below would be conducted over a period of 4 to 6 weeks. Alternative I would result in additional impacts not associated with the recommended Project including the following: AESTHETICS 1. The FIR concludes that Alternative I would result in temporary significant unavoidable impacts to scenic vistas due to the construction of the bypass structure on the beach for seven months. 2. Mitigation Measure 4.1-1 was identified to minimize impacts to scenic vistas, requiring the installation of visual screens, but not to a level of insignificance. 3. The FIR concludes that Alternative 1 could affect the project area with light mid glare. 4. Mitigations Measures 4.1-3a and 4.1-3b were identified to reduce impacts from light and glare to a less than significant level. BIOLOGICAL RESOURCES I. The EIR concludes that Alternative I would result in temporary impacts to 3.55 acres located inside the picket fence area of the California Least Tern Preserve. 2. Mitigation Measures 4.3-la through 43-Ih would minimize effects of the project on sensitive species and habitat used by sensitive species. 3. Mitigation Measures 43-If through 43-Ih would ensure impacts to natural communities are less than significant. 4. The EIR concludes that Alternative 1 would result in impacts to biological resources that are substantially greater than those associated with the recommended Project. CULTURAL RESOURCES 1. The EIR concludes that Alternative I could result in impacts to known or unknown cultural resources, including unique archaeological resources and historical resources. 2. Mitigation Measures 4.4-la through 4.4-lb would minimize impacts to known or unknown cultural resources, including unique archaeological resources and historical resources to less than significant levels. 3. The FIR concludes that Alternative 1 could result in impacts to paleontological resources. 831798.1 FINDINGS OF FACT—ATTACHMENT A 4. Mitigation Measure 4.4-2 would minimize impacts to paleontological resources to less than significant levels. 5. The FIR concludes that Alternative 1 could result in impacts to human remains. 6. Mitigation Measure 4.4-3 would minimize impacts to human remains to less than significant levels. GEOLOGY AND SOILS 1. The FIR concludes that Alternative I could result in impacts from exposure to seismic- related hazards. 2. Mitigation measure 4.5-1 would require the preparation of a geotechnical report that would recommend design features to ensure stability of construction excavations during an earthquake. With implementation of mitigation, the F_iR concludes that this would be a less than significant impact. 3. The FIR concludes that Alternative I could result in substantial soils erosion and/or loss of top soil. 4. Mitigation Measure 4.8-1a would ensure that BMPs are implemented to reduce the effects of soil erosion or loss of top soil. With implementation of mitigation, the FIR concludes that this would be a less than significant impact. 5. The FIR concludes that Alternative I could be located on expansive or unstable soil that could become unstable. 6. Mitigation Measure 4.5-1 would ensure the shoring systems installed for construction are designed in accordance with the recommendation set forth in the geotechnical investigation. With implementation of mitigation, the FIR concludes that this would be a less than significant impact. HAZARDS AND HAZARDOUS MATERIALS I. The FIR concludes that Alternative 1 could result in a public safety hazard based on potential discharges to the SAR. 2. Mitigation Measure 4.7-3 would reduce public safety impacts from the dewatering system in the SAR and discharge to the SAR With implementation of mitigation, the FIR concludes that this would be a less than significant impact. HYDROLOGYAND WATER QUALITY I. The FIR concludes that Alternative I could result in violations of water quality standards and increase erosion and sedimentation. 831798.1 FINDINGS OF FACT—ATTACHMENT A 2. Mitigation Measures 4.8-1a and 4.8-Ib would ensure that stormwater runoff and any activities associated with dewatering activities would not violate water quality standards or waste discharge requirements. With implementation of mitigation, the FIR concludes that this would be a less than significant impact. LAND USE AND PLANNING 1. The FIR concludes that Alternative I could result in conflicts with land use plans policies or regulations of an agency with jurisdiction over the project site. 2. Mitigation Measure 4.9-2a would ensure the Sanitation District is consistent with the jurisdictional rights of the Orange County Flood Control District. With implementation of mitigation, the FIR concludes that this would be a less than significant impact. NOISE 1. The FIR concludes that Alternative I will result in temporary, significant and unavoidable impacts to sensitive receptors due to activities at the Beach Box. 2. Mitigation Measures 4.11-1In through 4.11-1d would minimize nighttime noise, but not to a level below significance. Even with implementation of mitigation, the FIR concludes that this would be a significant and unavoidable impact similar to the recommended Project. 3. The FIR concludes that Alternative I could result in increased ambient noise levels at the beach because of the dewatering activities required in Alternative 1. 4. Mitigation Measure 4.11-1e would minimize noise from the dewatering activities. With implementation of mitigation,the FIR concludes that this would be a less than significant impact. RECREATION I. The FIR concludes that Alternative I will result in temporary, significant and unavoidable impacts due to restricted access to Huntington State Beach and the closure of the SAR Mouth Beach. 2. The EIR concludes that Alternative I could result in restricted access to the Coastal Bikeway and the SAR Bikeway. 3. Mitigation Measures 4.12-1 would minimize impacts associated with the bikeway closure and detour. With implementation of mitigation, the EIR concludes that this would be a less than significant impact. 831798.1 FINDINGS OF FACT—ATTACHMENT A OTHER CONSIDERATIONS I. The FIR provides a comparison of other"Implementation Criteria" that differentiates Alternative 1. 'these additional criteria included: Permitting Requirements, Constrtstability, Safety, Schedule,and Cost. 2. The EIR concludes that Alternative I would be substantially more difficult to obtain necessary permits,construct, and to ensure safety to workers and the public.The EIR concludes that Alternative I would require 2 years to plan and would toot be constructed until the 2014-2015 winter. The EIR concludes that Alternative I would be almost five times more expensive than the proposed Project(Alternative 2). 831798.1 FINDINGS OF FACT—ATTACHMENT A XI. ADOPTION OF MITIGATION MONITORING AND REPORTING PROGRAM Public Resources Code Section 21081.6 requires a public agency making findings required by subdivision (a) of Section 21081 to adopt a reporting and monitoring program for the changes to the Project which it has adopted or made a condition of Project approval in order to mitigate or avoid significant effects on the environment. The Board hereby adopts the Mitigation Monitoring and Reporting Program. The Board further finds that said program meets the requirements of Public Resources Code Section 21081.6 by ensuring compliance during project implementation of the mitigation measures identified in the Final FIR. The Mitigation Monitoring and Reporting Program is attached to these findings as Attachment C. 831798.1 STATEMENT OF OVERRIDING CONSIDERATIONS—ATTACHMENT B ATTACHMENT B STATEMENT OF OVERRIDING CONSIDERATIONS CEQA requires that the decision makers balance the benefits of a proposed project against its unavoidable environmental risks in determining whether to approve the project. (Public Resources Code §210S1(b); 14 CCR §§15043, 15093(a)). As documented in the EIR and explained in the Findings of Pact for the Project, the Project will potentially result in one .significant and unavoidable impact to the environment as follows: ( Noise during nighttime construction The proposed Project provides substantial benefits for the Sanitation District. Rehabilitating the Beach Box is essential to safely operating the OOBS and ocean discharge system while maintaining compliance with the ocean discharge NPDES permit. As discussed in the Draft EIR, the Project provides essential repair of infrastructure to avoid future system failures and spills at the beach that would be in violation of the NPDES permit and would endanger public health and safety.As described in the Draft EIR,the No Project Alternative would result in significant impacts to aesthetics,air quality,biological impacts,cultural and paleontological resources, geology, hazards and hazardous materials,public health and safety,hydrology and water quality, land use and planning, marine environment,noise,recreation, traffic and circulation, and utilities and service systems. implementing a carefully planned rehabilitation effort that minimizes the construction period and avoids sensitive times of year for beach access mud biological resources provides substantial avoidance of potential impacts that could occur under the No Project Alternative. In addition, as discussed in the Draft EIR, the recommended Project would avoid significant impacts to recreation and aesthetics associated with implementation ofthe bypass structure required for Alternative 1. The recommended Project presents the least number of significant, unavoidable impacts of any alternative evaluated in the Draft EIR including the No Project Alternative. This Board has balanced the Project's benefits against the Project's significant unavoidable impacts on nighttime noise. The Board finds that the Project's benefits outweigh the Project's significant unavoidable impacts, and therefore acceptable in light of the Project's benefits. The Board finds that each of the following benefits is au overriding consideration, independent of the other benefits, that warrants approval of the project notwithstanding Project's significant and unavoidable impacts: 1. Avoiding significant impacts that would result from inaction. These include impacts to aesthetics, air quality, biological impacts, cultural and paleontological resources,geology, hazards and hazardous materials, public health and safety,hydrology and water quality, 831798.1 STATEMENT OF OVERRIDING CONSIDERATIONS—ATTACHMENT B land use and planning, marine environment, noise,recreation,traffic and circulation, and utilities and service systems. 2. Avoiding Significant impacts to recreation and aesthetics associated with Alternative 1. 3. Minimizing impacts to beach biological resources. 4. Maintaining compliance with the ocean discharge NPDES permit. 831798.1 MITIGATION MONITORING AND REPORTING PROGRAM - ATTACHMENT C ATTACHMENT C MITIGATION MONITORING AND REPORTING PROGRAM (ALTERNATIVE 2) MITIGATION MONITORING AND REPORTING PROGRAM—ATTACIIMENT C ORANGE COUNTY SANITATION DISTRICT MITIGATION MONITORING AND REPORTING PROGRAM FOR THE OUTFALL LAND SECTION AND OCEAN OUTFALL BOOSTER PUMP STATION PIPING PROJECT PROPOSED PROJECT(ALTERNATIVE 2) AESTHETICS Impact 4.1-1: The proposed Project would alter a scenic vista. Mitigation Measure 4.1-1: A eisual screen shall be installed along the eastern and southeastern edge of the Beach Box construction area to reduce the impact of construction activities along PCH and to residents east of the SAR in the City of Newport Beach. Implementation Procedure Monitoring And Reporting Actions Monitoring Responsibility Monitoring Schedule 1. Install a visual screen along the eastern and Photo document installation of visual screen. Sanitation District Prior to and during rehabilitation southeastern edge of the Beach Box activities, construction ere.. 2. Include mitigation measures in construction Monitor compliance with construction contract contract specifications. specifications. Impact 4.1-2: The proposed Project could substantially degrade the existing visual character or quality of the site and its surroundings. Implement Mitigation Measure 4.1-1. Impact 4.1-3: The proposed Project could create a new source of substantial light or glare which would adversely affect day or nighttime views in the area. Implement Mitigation Measure 4.1-1. Mitigation Measure 4.1-3a: All construction-related lighting associated with the rehabilitation of the Beach shall be directed downward and away from adjacent sensitive receptors,including residences,the California Least Tern Natural Preserve Area aid other sensitive wildlife areas. Lighting shall use the minimum wattage necessary to provide safety at the construction sites. 8327981 MITIGATION MONITORING AND REPORTING PROGRAM—ATTACIIMENT C Implementation Procedure Monitoring And Reporting Actions Monitoring Responsibility Monitoring Schedule 1. Include in construction contract Monitor compliance with construction contract Sanitation District Pnor to and during rehabilitation specification, specifications, activities 2. Direct construction-related lighting downward and away from sensitive receptors. 3. Coordinate with the City of Huntington Beach include copy of meeting minutes for concerning nighttime activities- administrative record. Mitigation Measure 4.1-3b: Prior to the commencement of rehabilitation activities, the Sanitation District shall coordinate with the City of Huntington Beach and the City of Newport Beach concerning nighttime lighting. Implementation Procedure Monitoring And Reporting Actions Monitoring Responsibility Monitoring Schedule 1. Coordinate with the City of Huntington Beach Monitor compliance with construction contract Sanitation District Prior to and during rehabilitation and the City of Newport Beach Beach specifications. activities 2. Identify city requirements in construction contract specifications. BIOLOGICAL RESOURCES Impact 4.3-1: The proposed project could have a substantial adverse effect, either directly or through habitat modifications,on any species identified as a candidate,sensitive, or special-status species in local or regional plans,policies, or regulations, or by the CDFG or USF WS Mitigation Measure 4.3-1a: Prior to the commencement of airy construction activities,all construction at outside Plant 2 will be staked in the field and silt fencing will be installed.No debris,supplies or soils will be placed outside of the marked areas. The installation of staking and fencing will be overseen by a qualified biologist. Mitigation Measure 4.3-1 b: All construction areas outside Plarn 2 will be surveyed by a qualified biologist prior to rehabilitation and construction activities to document and map preconstruction conditions. The qualified biologist shall use CNPS Botanical Survey Guidelines to document the pre-construction conditions. 8327981 MITIGATION MONITORING AND REPORTING PROGRAM—ATTACIIMENT C Mitigation Measure 4.3-1c A qualified biologist will be present during rehabilitation activities adjacent to Talbert Marsh to ensure that no rehabilitation and maintenance activities occur outside of the marked work areas. In order to avoid the introduction of predators, the biologist shall monitor the construction contractor to ensure that no garbage or food debris is left in the area during rehabilitation activities. Mitigation Measure 4.3-1d: A qualified biologist will be present during construction activities within Huntington State Beach to ensure that no construction activities occur outside of the marked construction area. In order to avoid the introduction of predators the biology shall monitor the construction contractor to ensure that no garbage or food debris is left in the area during rehabilitation activities. Mitigation Measure 4.3-1c In order to avoid direct and indirect impacts to nesting birds,project activities adjacent to Air Vac Station I2+05 will occur outside the typical breeding period of the Belding savannah sparrow which generally runs from March I through September 1. Project activities new the California Least Tern Natural Preserve Area will occur outside of the peak breeding season which generally runs from April I through September 1. Mitigation Measure 4.3-1f: Work areas outside Plant 2 will be restored to pre-construction contours and all fencing will be re-installed with oversight from a qualified biologist. Mitigation Measure 4.3-1g: Prior to the construction or rehabilitation activities on Huntington State Beach,a qualified biologist shall prepare a restoration plan for the Coast W ooll -Beads. The restoration plan will identify a main point of contact and responsible party at the Sanitation District or its designee. The qualified biologist will oversee the rcvcgetation of the Coast Woolly-Beads from the disturbed impact area of Huntington Stale Beach. The lop 6 inches of sand supporting vegetation in the impact area at Huntington State Beach will be grubbed and stockpiled adjacent to the construction zone. The stockpiled soil shall be covered to avoid non-native seed contamination. Following construction, the material will be re-spread over the affected area. Passive reveactation is acceptable as long as the plant cover and species composition are comparable to pre-construction conditions after three years. 'the restoration plan will include a weed abatement pi o*ram within the Project impact area implemented during the non-nesting season for California Least Tern. A qualified biologist shall monitor the reestablishment progress over the course of three years.Al the end of each year, the biologist shall prepare a progress report that describes the status of the Coast Woolly-Heads' population.The repott shall be submitted to the CDFG.If after three years_the number of Coast Woolly-Heads in the Project impact area has not reached pre-construction levels, the Sanitation District will coordinate with CDFG to provide off-site compensation or additional restoration efforts on site. 8327981 MITIGATION MONITORING AND REPORTING PROGRAM—ATTACIIMENT C Mitigation Measure 4.3-th: Coast woolly-heads seed within the temporary construction areas at Huntington State Beach will be salvaged and replanted within the temporary impact areas when work is completed as feasible and in consultation with State Parks- Implementation Procedure Monitoring And Reporting Actions Monitoring Responsibility Monitoring Schedule 1. Include In construction contract Monitor compliance with construction contract Sanitation District;Qualified Poor to and during rehabilitation specification.. specifications. Riologlst actlNGes 2. Retain a qualified biologist. Prior to and during rehabilitation activities 3. Construction areas outside Plant 2 to be Prior to and during rehabilitation staked u the field and silt fencing Installed- activities 4. Survey construction areas outside Plant 2 to Poor to and during rehabilitation document and map pre-construction activities conditions. 5. Monitoring during activities adjacent to Poor to and during rehabilitation Talbert Marsh to ensure no rehabilitation and actlNGes maintenance activieis occur within the marsh habitat 6. Monitoring during activities within Huntington Poor to and during rehabilitation State Beach to ensure no garbage is left and activities to ensure no rehabilitation and maintenance activists occur outside construction zone. ]. Top 6 inches of sand supporting vegetation Poor to and during rehabilitation to be grubbed and stockpiled adjacent to the activities construction zone and following rehabilitation re-spread over the affected area. B- Salvage and replant coast wooly-heads seed Poor to and during rehabilitation located within the temporary Impact areas at activities the Huntington State Beach in consultation with State Parks, 9. Areas outside Plant 2 to be restored to pre- Prior to and during rehabilitation construction contours and fencing reinstalled. activities Impact 4.3-2: The proposed Project could have a substantial adverse effect on any riparian habitat or sensitive natural community identified in local or regional plans, policies, regulations,or by the CDFG or USFWS. 8327981 MITIGATION MONITORING AND REPORTING PROGRAM—ATTACIIMENT C Implement Mitigation Measure 4.3-If through Mitgation Measure 4.3-1h. GEOLOGY, SOILS, AND SEICMICITY Impact4.5-2: Construction of the proposed Project could result in substantial soil erosion or the loss of topsoil Implement Mitigation Measure 4.8-1a. HYDROLOGYA,VD WATER QUALITY Impact 4.8-1: The proposed Project could violate water quality standards or waste discharge requirements or increase polluted runoff:. Mitigation Measure 4.8-1a: Under Alternative I and 2, for activities at Air Vac Station 12+05 and at the beach,a SWPCP shall be prepared prior to the initiation of any maintenance or rehabilitation activity. BMPs within the SWPCP shall control erosion, sedimentation, and other construction-related pollutants. The 13MPs shall be maintained at the site for the duration of construction.The objectives of the BMPs are to identify pollutant sources that may affect the quality of sournwater discharges and to implement measures to reduce pollutants in starmwater discharges. The SWPCP shall contain the following: ( Using structural controls such as gravel bags or fiber roles retain sediment to avoid draining toward receiving waters; ( Stabilize slopes of stockpiled sand/soil to eliminate or reduce sediment dispersal from construction site to surrounding areas and surface waters; ( Store all reserve fuel supplies only within the confines of a designated construction staging area; ( The use or storage of petroleum-powered equipment shall be accomplished in a manner to prevent the potential release of petroleum materials into receiving waters; ( Oil absorbent and spill containment materials shall be located on site when mechanical equipment is in operation within 100 feet of receiving waters. If a spill occurs, no additional work shall commence until (1) the mechanical equipment is inspected by the contractor, and the leak has been repaired, (2)the spill has been contained,and(3)all appropriate agencies have been contacted and have evaluated the impacts of the spill; ( Vehicle parking areas would be established with drip pans to prevent oil drips onto the sand; S32798 1 MITIGATION MONITORING AND REPORTING PROGRAM—ATTACIIMENT C ( If heavy—duty construction equipment is stored overnight adjacent to potential receiving water,drip pans wiII be placed beneath the machinery engine block and hydraulic systems; ( Fuel storage needed for dewatering pumps will be provided within secondary containment; ( Refueling will occur only within designated fueling zones that are equipped with secondary containment and spill cleanup equipment. Implementation Procedure Monitoring And Reporting Actions Monitoring Responsibility Monitoring Schedule 1. Include requirement of develop and Monitor compliance with construction contract Sarradon District Prior to and during rehabilitation Implement BMPs In construction contract speciflca0ene acdivbles specifications- Maintain compliance with SW PCP for PH.,to and during rehabilitation 2. Prepare and Implement SWPCP for activities administrative record, activities at Air Vac Station 12+05 and at the Huntington State Beach. MARINE ENVIRONMENT Impact 4.10-4: Discharge through the Short Outtal I for a period of up to six weeks could induce phytoplankton blooms that could be harmful to fish, shellfish, marine mammals,and via shellfish,consumption which can have impacts to human health. Mitigation Measure 4.104:The Sanitation District shall conduct augmented ocean monitoring before, during, and after use of the Short Outfall to detect and quantify changes to phytoplankton from baseline conditions as a result ofthe Project. Monitoring shall include continuous sampling of the water using water quality mornings and autonomous underwater vehicles. Weekly samples from the Newport Beach and Huntington Beach Piers will be analyzed for nutrients and phytoplankton, including the presence of harmful algal species. The monitoring results will be provided to the CDPH the Orange County Health Care Agency and will be posted on a publically accessible web page. If hat nmtul algal species are detected,the Sanitation District shall coordinate with CDPH, NMFS, and local marine mammal rescue groups to monitor ton affected animals. The Sanitation Disnict shall develop a mitigation plan with the marine mammal stranding network to monitor and rehabilitate animals in the event that a harmful algal bloom occurs during the 4 to 6 week discharge to the Short Outtall. 8327981 MITIGATION MONITORING AND REPORTING PROGRAM—ATTACIIMENT C Implementation Procedure Monitoring And Reporting Actions Monitoring Responsibility Monitoring Schedule 1. Conduct augmented ocean mo errong. Mainland and monitor compliance for Sanitation District Before,during and after use of Short administrative recent and place data on Outten pubilcolly accessible website- 2. provide results to CDPH,OCHCA and post Before,during and after use of Short reaufts an prmho lly accessible sadhate. Call 3. If harmful algal species are detected, Before,during and after use of Short coordinate with CDPH,hi and local Coupon marina mammal rescue groups to monitor for affected animals. 4. In the event of hadmaA algal reforms during Before,during and after use of Short discharge to the Short Outfall,develop a Contain mitigation plan With the marina mamal stranding network to monitor and rehabilitate animals. Impact 4.10-5: Discharge through the Short Outfall for a period of 4 to 6 weeks would not result in significant impacts to benthos,fish, shellfish, macroinverteblater, and marine mammals. Implement Mitigation Measure 4.10-4. Impact 4.10-6: Discharge through the Short Outtall for a period of 4 to 6 weeks could elevate pathogen concentrations in near shore waters used for water-contactactivities and shellfish harvesting which could adversely affect public health. Mitigation Measure 4.10-6a: For the duration of the use of the Short Outfall, the Sanitation District shall implement enhanced treatment methods for effluent discharge, including fit]] secondary and enhanced chlorination treatment. Mitigation Measure 4.10-66- The Sanitation District shall conduct augmented ocean monitoring before,during, and after use of the Short Outtall to detect and quantify changes to indicator of and water quality from baseline conditions as a result ofthe Project. The monitoring shall include the following elements: ( Real-time tracking of discharge plume with automated underwater vehicles(AU V) S32798 1 MITIGATION MONITORING AND REPORTING PROGRAM—ATTACIIMENT C ( Predictive modeling(ROMS)to provide real-time("nowcasl")and 72-hour forecast of plume movement ( Surfzone and offshore water quality sampling for FIB — Surfzone water quality sampling would be conducted 7 days/week Offshore water quality sampling would be conducted I day week — Additional surfione and offshore water quality sampling would be adaptive based on modeled and/or measured plume transport direction ( Weekly water quality sampling for nutrients and phytoplanktou at the Newport and Huntington Beach piers ( Offshore real-time water quality analysis at two water quality moorings for temperature, salinity,chlorophyll,DO, and turbidity ( Real-time surface current measurements ( Sediment sampling(up to 24 samples) The monitoring results shall be presented along with ocean conditions on a publically-accessible web page updated daily and provided to OCHCA, the RWQCB,the City of Huntington Beach,the City of Newport Beach,the USAGE, CDFG,CDPH, NMFS, the Pacific Marine Mammal Center, and State Parks.The OCHCA shall be responsible to restrict access to beaches and offshore recreational activities as necessary to protect public health based on sampling results provided by the enhanced monitoring program. CDFG shall be responsible for posting notices regarding shellfish beds and offshore fishing areas.The Sanitation District shall fund efforts to ensure these protective measures are implemented effectively as requested by OCHCA. Implementation Procedure Monitoring And Reporting Actions Monitoring Responsibility Monitoring Schedule 1. Implement enhanced treatment methods for Maintain record for administrative record Sanitation District During use of Short Ou fall for four to effluent discharge,mending full secondary six weeks and enhanced chlorination treatment. 2. Conduct augmented ocean monitoring Including real-time tracking of discharge plume with automated underwater vehicles (AUV) 3. Conduct augmented ocean monitoring including predictive modeling(ROMS)to provide real-time("nowcasr)and 72-hour 8327981 MITIGATION MONITORING AND REPORTING PROGRAM—ATTACIIMENT C Implementation Procedure Monitoring And Reporting Actions Monitoring Responsibility Monitoring Schedule forecast of plume movement 4. Conduct augmented ocean monitoring including surfzone and offshore water quality sampling for FIB&. - surfzone water quality sampling would be canducted]daw/weak: -Offshore water quality sampling would be conducted 1 day/week — Additional surfzone and offshore water quality sampling would be adaptive based on modeled and/or measured plume transport direction 5. Conduct augmented ocean monitoring Including weekly water quality sampling for nutrients and phioplanktoo at the Newport and Huntington Beach piers 6. Conduct augmented ocean mornoung Including offshore real-time water quality analysis at two water quality moohngs for temperature,salinity,chlorophyll,DO,and turbidity ]. Conduct augmented ocean monnonog Including real-time surface current measurements 8. Conduct augmented ocean monitoring including sediment sampling(up to 24) Impact 4.10-7: Discharge Through the Short Outfial l for a period of 4 to 6 weeks could adversely affect beneficial uses of the ocean defined in the California Ocean Plan. Implement Mitigation Measure 4.10-6a through Mitigation Measure 4.101 8327981 MITIGATION MONITORING AND REPORTING PROGRAM—ATTACIIMENT C NOISE Impact 4.11-1:The proposed Project could result in generated noise levels in excess of standards established in the local General Plan or noise ordinance,m applicable standards of other agencies. Mitigation Measure 4.11-Ib: For Alternatves 1 and 2, prior to and duing construction activities,the Sanitation Disnictshall require construction contractors to implement the following measures to reduce construction-related noise impacts: ( All equipment used during construction shall be muffled and maintained in good operating condition. All internal combustion engines shall be equipped with intake and exhaust mufflers that are in good condition. ( During nighttime construction, stationary construction equipment that generates excessive noise levels shall be located as far away from residences as possible. ( No sheet driving shall be conducted during nighttime construction. ( Duo ing nighttime construction, noise monitoring at the closest sensitive receptors shall be conducted.Reports of noise monitoring shall be submitted to the City of Huntington Beach and the City ofNewpo t Beach. ( A sound curtain shall be installed along the southeastern edge of the construction activities at Huntington State Beach to reduce the noise impacts of construction activities on residents to the south of PCH and the SAR. The generator shall be placed as far away from residences as possible. ( Impact tools(e.g.,jack hammers,pavement breakers,and rock drills)used for construction shall be hydraulically or electrically powered wherever possible to avoid noise associated with compressed air exhaust from pneumatically powered tools. Mitigation Measure 4.I1-1 e: For Alternatives I and 2,prior to the beginning of construction activities,the Sanitation District in coordination with the construction contractors shall contact interested parties and neighboring properties affected by the proposed Project through the following methods- ( Construction Notification:Nearby sensitive receptors affected by construction shall be notified concerning the project timing and construction schedule including nighttime work and shall be provided a contact phone number to call for questions or complaints regarding work. S32798 1 MITIGATION MONITORING AND REPORTING PROGRAM—ATTACIIMENT C Mitigation Measure 4.114d: Construction activities that require the use of percussive construction methods, such as jack hammers,shall occur only during permitted daytime construction hours between 7:00 a.m. and 6:00 p.m. on weekdays, and 9:00 a.m. and 5:00 p.m. on Saturdays. Implementation Procedure Monitoring And Reporting Actions Monitoring Responsibility Monitoring Schedule 1. Include In eontstructlon contract Monitor compliance with construction contract Sanitation Deduct Prior to rehabilitation activities spedficatlons. specifications. 2. Implement noise reducing construction Prior to and duringrehabilitatioo measures. activities 3. Provide construction notification to interested Monitor compliance with construction contract Prior to and duringre-shaditation parties and neighboring propeass, specifications. acfivdies 4. Limit use of percussive construction methods Maintain administrative record of notifications Prior to and dudngreha cluatlon during permitted daytime construction hours activities RECREATION Impact 4.12-1:The proposed Project could cause or accelerate substantial physical deterioration of an existing neighborhood,regional park, or other recreational facility. Mitigation Measure 4.12-1: Prior to the commencement of any construction activities,the Sanitation District and the construction contractor shall coordinate with California State Parks,Orange County Parks Deparrnrent,Orange County Public Works—OC Flood Santa Ana River Unit,City of Huntington Beach, and the City of Newport Beach to prepare and implement a bicycle pedestrian detour plan for the duration of construction.The plan shall identify alternative routes,construction schedules,and signiage for the detour plan and applicable closures dates clearly identified. Mitigation Measure 4.12-2:The Salutation District shall return the Project area to pre-consuuction conditions (e.g., fencing signs access routes bike path parking lots barrios,light poles painting and striping) following construction activities in coordination with the California State Parks and Orange County Public Works(OCFCD and OC Parks). 8327981 MITIGATION MONITORING AND REPORTING PROGRAM—ATTACIIMENT C Implementation Procedure Monitoring And Reporting Actions Monitoring Responsibility Monitoring Schedule 1. Coordinate with California State Parks. Mandolin record of coordination for administrative Sarpedon District Prior to rehabilitation activities County of Orange(OC Parks),Orange record County Public Works OC Flood Santa River Unit,City of Huntington Beach,and the City of Newport Beach to prepare and implement a blcycle/pedestrlan detour plan for the duration of construction. 2, Prepare final bicycle/pedestrian detour plan Monitor compliance with construction contract for inclusion In contractor specifications. specifications TRAFFIC CIRCULATION Impact 4.133: The proposed Project could conflict with adopted policies, plans,or programs regarding public transit,bicycle,or pedestrian facilities,or otherwise decrease the performance or safety of such facilities. Implement Mitigation Measure 4.12-1 8327981 RESOLUTION NO. OCSD 12-02 CERTIFYING THE FINAL ENVIRONMENTAL IMPACT REPORT FOR IMPLEMENTATION OF THE OUTFALL LAND SECTION AND OCEAN OUTTALL BOOSTER PUMP STATION PIPING REHABILITATION; MAKING CERTAIN FINDINGS RELATING TO ENVIRONMENTAL EFFECTS OF ALTERNATIVE 2IDENTIFIED IN THE FINAL ENVIRONMENTAL IMPACT REPORT; ADOPTING A STATEMENT OF OVERRIDING CONSIDERATIONS; ADOPTING A MITIGATION MONITORING AND REPORTING PROGRAM;AND APPROVING THE OUTTALL LAND SECTION AND OCEAN OUTFALL BOOSTER PUMP STATION PIPING REHABILITATION PROJECT(ALTERNATIVE 2) WHEREAS,the Board of Directors of the Orange County Sanitation District(OCSD or Sanitation District), is considering the approval of the Outfall land Section and Ocean Outfall Booster Pump Station Piping Rehabilitation, which consists of the inspection,condition assessment and rehabilitation of the ocean outfall system from Surge'fowcr 2,within the boundaries of Treatment Plant No. 2(Plant 2),across the edge of the Talbert Marsh, to the junction box (Beach Box) located at Huntington State Beach in the City of Huntington Beach (the Project);and WHEREAS,pursuant to the California Environmental Quality Act of 1970(Public Resources Code sections 21000 et seq. (CEQA), as amended, and the CEQA Guidelines (Cal. Code Regs., Title 14, sections 15000 et.seq.), Environmental Science Associates(ESA)under the direction of the Sanitation District as the lead agency for the Project,prepared a Draft Environmental Impact Report (the"Draft EIR-) for the Project that assesses the significant environmental impacts of the Project,identifies mitigation measures, and identifies alternatives to the Project; and WHEREAS,the Draft EiR analyzed in project level detail the environmental effects of two different alternatives; and WHEREAS, Alternative I would construct a temporary bypass structure downstream of the Beach Box to convey effluent from the 78-inch diameter, one-mile outfall("Short Outfall")to the 120-inch diameter, five-mile outfall ("Long Outfall")prior to discharge to the ocean enabling the Long Oulfall system to be taken out of service in year 2014,for inspection,condition assessment, and rehabilitation without discharging effluent through the Short Outfall;and WHEREAS,under Alternative 2,effluent would be discharged through the Short Outfall to the ocean for four to six weeks in order to take the Long Oulfnll system out of service for the required inspection, condition assessment and rehabilitation as soon as possible, starling in 2012; and WHEREAS, the Board of Directors of the Sanitation District(Board)is presently considering the certification of an Environmental Impact Report(EIR)purs ntin to CEQA for the 831798.1 Outfall Land Section and Ocean Cattail Booster Pump Station Piping Rehabilitation; and WHEREAS,the Sanitation Dish icthas identified Alternative 2,with implementation of construction Options A or C, evaluated in the FIR as the recommended Project; and WHEREAS, the Sanitation District has consulted with other public agencies and the general public, and provided such agencies and the public with opportunities to provide written and oral comments on the Project and the Draft FIR including a public review period of 45 days which commenced on December 14,2011 and ended on January 27, 2012; and WHEREAS,on January 12,2012, Sanitation Distict Staff held a duly-noticed public hearing to provide a further opportunity for public agencies and the general public to comment on the Draft FIR; and WHEREAS, the Sanitation District has reviewed the comments received and responded to the significant environmental concerns raised during the review and consultation process; and WHEREAS,the comments and recommendations received on the Draft FIR, either in fill] or in summary, together with the Sanitation District's responses to significant environmental concerns raised in the review and consultation process,have been included in the Final FIR; and WHEREAS,the Final FIR, including, the Draft FIR comments on the Draft FIR, Responses to Comments Received on the Draft FIR, Agency Comment Initiated Changes, Sanitation District Initiated Changes, and the Mitigation Monitoring and Reporting Program (Final FIR)has been presented to the Board for review and consideration, prior to the approval of, and commitment to,the Project. NOW,THEREFORE,the Board of Directors of Orange County Sanitation District, DOES HEREBY RESOLVE, DETERMINE, AND ORDER: Section 1. The Final FIR has been completed in compliance with CEQA and the CFQA Guidelines. Section 2. The Board has reviewed and considered the information contained in the Or FIR as revised by the Final FIR prior to approval of,or commitment to, the Project. Section 3.The Final FIR reflects the Sanitation District's independentjudgment and analysis. Section 4. The Board finds that changes or alterations have been required in,or incorporated into, the proposed Project which avoid or substantially lessen certain significant environmental effects of the Project, and adopts the Findings of Fact attached as Attachment „A Section 5. The Board will implement the mitigation measures recommended in in the Final FIR to reduce certain significant impacts of the Project to a less-than-significant level. 831798.1 Section 6. The Board adopts the Statement of Overriding Considerations attached as Attachment"B" which identities the specific benefits of the Project that outweigh the Project's significant and unavoidable impacts,which are acceptable in Tight of the Project s benefits. Section 7. The Board adopts the Mitigation Monitoring and Reporting Program (MMRP) attached as Attachment"C" to ensure that the mitigation measures identified in the Final ETR are implemented. Section 8. The Board approves the Outfall Land Section and Ocean Ourtall Booster Pump Station Piping Rehabilitation Project(Alternative 2)with construction options Option A or C. Section 9. The record of proceedings on which the Board's decision is based is located at the Sanitation District Administration Offices, 10844 Ellis Avenue, Fountain Valley,CA 92708. The custodian of record of proceedings is the Clerk of the Board ton the Sanitation District. Section 10. The Board authorizes and directs Sanitation District Staff to file the Notice of Determination and any other documents in accordance with the requirements of CF_QA and the Sanitation District's CEQA procedures. PASSED AND ADOPTED at a regular meeting held February 22, 2012 Larry R. Crandall, Chair Board of Directors ATTEST: Maria E. Ayala Clerk of the Board EDMS.003951ee071.9A 831798.1 STEERING COMMITTEE Meeeog Date To ad.of Dir. 01/25/12 02/22/12 AGENDA REPORT Item Num ber ber Item Num Nu Orange County Sanitation District FROM: James D. Ruth, General Manager Originator: Jeff Reed, Director of Human Resources SUBJECT: Annual Performance Evaluation of the General Counsel GENERAL MANAGER'S RECOMMENDATION Adopt Resolution No. OCSD 12-03, Establishing the Procedure to Conduct an Annual Performance Evaluation of the General Counsel. SUMMARY The Board wants to conduct an annual performance evaluation of the General Counsel. The Board's goals are to: ( Strengthen the relationship; ( Provide an instrument for regular evaluation; ( Consider any performance or project objectives; and, ( Provide feedback on areas of interest. The Steering Committee conducts an annual performance evaluation of the General Manager and, likewise, will do so with General Counsel. General Counsel's performance evaluation will occur at the end of the calendar year while the General Manager's performance evaluation occurs at the end of the fiscal year. The Steering Committee reports out annually to the Board on General Counsel's performance evaluation, including any associated recommendations. PRIOR COMMITTEE/BOARD ACTIONS N/A ADDITIONAL INFORMATION N/A CEQA N/A BUDGET/ DELEGATION OF AUTHORITY COMPLIANCE N/A Page 1 of 1 RESOLUTION NO. OCSD 12-03 ESTABLISHING THE PROCEDURE TO CONDUCT AN ANNUAL PERFORMANCE EVALUATION OF THE GENERAL COUNSEL WHEREAS, the Board contracts with a law firm for legal services; and, WHEREAS, the Board selects its General Counsel; and, WHEREAS, the Board is the client of General Counsel; and, WHEREAS, the General Counsel reports to the Board; and, WHEREAS, the Board supervises General Counsel; and, WHEREAS, the Board desires to conduct an annual evaluation of the General Counsel; and, WHEREAS, the Brown Act authorizes a closed session to evaluate performance of the General Counsel. NOW THEREFORE, the Board of Directors of the Orange County Sanitation District, DOES HEREBY RESOLVE, DETERMINE AND ORDER: The Steering Committee conducts an annual performance evaluation of the General Counsel and submits recommendations to the Board of Directors. PASSED AND ADOPTED at a regular meeting held this 22"d day of February 2012. Larry R. Crandall, Chair Clerk of the Board 1 STEERING COMMITTEE Meeting Date To M.of Dir. 02/22/12 02/22/12 AGENDA REPORT Item Number Item Number 12 Orange County Sanitation District FROM: James D. Ruth, General Manager Originator: Nicholas J. Arhontes, Director of Facility Support Services SUBJECT: American Public Works Association GENERAL MANAGER'S RECOMMENDATION Approve out-of-country travel for one Orange County Sanitation District employee to New Zealand to engage in discussion and sharing of information on advanced odor control issues and technology at no cost to the Sanitation District for any type of travel or conference registration expenditures. SUMMARY As a result of a national evaluation, the American Public Works Association (APWA) awarded Dr. Carla Dillon a 2-week (June/July 2012) international study fellowship through the Jennings Randolph Fund and the Global Solutions in Public Works program. The study fellowship pays $3,000 for the study tour and travel expenses to New Zealand. Any additional expenses will be paid for by the employee. New Zealand is internationally recognized as a leader in odor control technologies and one of few countries with national odor policies. This opportunity will allow Dr. Dillon to meet with members of their Regional Council and learn how they implement odor policies, regulations, and levels of service. She plans to visit Auckland's wastewater treatment plant and other facilities to study design and operation of odor treatment facilities, computer odor modeling systems, and monitoring and assessment techniques and equipment. The award will also allow Dr. Dillon to attend the INGENIUM Conference in New Zealand and present on OCSD's odor control program and patent-pending chemical treatment. The knowledge that Dr. Dillon can gain through this exchange will directly benefit OCSD's odor-related capital projects, master planning, strategic initiatives, and operational level of service. Following the study fellowship, Dr. Dillon has been asked to write a summary of her experience for the APWA Reporter magazine and present an educational session at the 2013 APWA Congress in Chicago. PRIOR COMMITTEE/BOARD ACTIONS N/A DW-102 beard AR,Rev 10/04/10 Page 1 of 2 ADDITIONAL INFORMATION In November 2011, OCSD adopted a Five-Year Strategic Plan with specific wastewater management goals pertaining to odor control. OCSD will be implementing odor control projects at Plant 1 (trickling filters) and Plant 2 (solids loading facility) by 2018. Knowledge gained through this exchange could greatly benefit these projects in particular and continue to strengthen OCSD's levels of service for odor control policies. The two-week international study fellowship is scheduled for June/July 2012. Actual itinerary is still in the planning stage by APWA. This fellowship serves to provide an opportunity for APWA members to broaden their knowledge and exchange experiences and information on trends and advances in public works, through contact with international partners. It also promotes friendship and understanding among public works staff on an international basis. With the support of OCSD's management, Dr. Dillon applied for the fellowship and submitted a public works study project proposal. OCSD is honored to be one of the recipients of this year's award. Each year, only up to four APWA members are awarded an international study fellowship. This is the first award of this kind that OCSD has received from AWPA. OCSD holds a group membership in APWA. CEQA N/A BUDGET/DELEGATION OF AUTHORITY COMPLIANCE This request complies with authority levels of the Sanitation District's Delegation of Authority and Resolution No. OCSD 07-04, which requires approval by the Board of Directors for travel outside of North America. BW-102 Board AR,Rev 10/04/10 Page 2 0!2 STEERING COMMITTEE Meeeog Date To ad.of Dir. 02/22/12 02/22/12 AGENDA REPORT umber Item Number Item N Nu Orange County Sanitation District FROM: James D. Ruth, General Manager SUBJECT: Redevelopment Agency Oversight Board GENERAL MANAGER'S RECOMMENDATION Seeking direction from the Board of Directors on a process and criteria for selection of OCSD representatives to the Redevelopment Agency Oversight Boards. SUMMARY Health and Safety Code Section 34179(a) requires that Redevelopment Agency successor agencies shall have an oversight board. One of the seven members will be one appointed by the largest special district, by property tax share, with territory in the territorial jurisdiction of the former redevelopment agency. The Orange County Auditor- Controller's Office has determined that OCSD receives the largest share of property tax within several jurisdictions. CEQA N/A BUDGET/ DELEGATION OF AUTHORITY COMPLIANCE NIA Page 1 of 1 OPERATIONS COMMITTEE Meeting Date To ad.of Dir. 02/01/12 02/22/12 AGENDA REPORT umber Item Number Item N Nu Orange County Sanitation District FROM: James D. Ruth, General Manager Originator: Jim Herberg, Assistant General Manager Project Manager: Gary Conklin SUBJECT: PRIMARY CLARIFIERS 6-31 EVALUATION AND OPTIMIZATION STUDY, PROJECT NO. P1-116 GENERAL MANAGER'S RECOMMENDATION Approve Amendment No. 2 to the Professional Consultant Services Agreement with Carollo Engineers Inc. for Phase 1 of Project No. P1-116, Primary Clarifiers 6-31 Evaluation and Optimization Study, authorizing services for an additional amount of $71,500, increasing the total amount not to exceed $385,445. SUMMARY The Project No. P1-116 study has identified improvements needed to resolve solids handling limitations, minimize operational costs, and minimize future rehabilitation costs for the Reclamation Plant No. 1 (Plant No. 1) primary treatment facilities. This Amendment will develop a conceptual design basis for a future project to modify the sludge pumping system upgrades that were recommended in the project technical memoranda. The solids content of the Orange County Sanitation District's (Sanitation District) wastewater influent continues to increase steadily driving the need for these upgrades. In addition, these upgrades are critical to support additional Plant No. 1 flows associated with the Groundwater Replenishment System (GWRS) expansion in late 2014. PRIOR COMMITTEE/BOARD ACTIONS December 2011 — General Manager authorized Amendment No. 1 to the Professional Consultant Services Agreement with Carollo Engineers Inc. for Project No. P1-116, providing for engineering services for an additional amount of$28,500, increasing the total amount not to exceed $313,945. November 2010 —Approved a Professional Consultant Services Agreement with Carollo Engineers Inc. providing engineering services for Phase 1 of Project No. P1-116, for an amount not to exceed $285,445 with a contingency of $28,545 (10%). ADDITIONAL INFORMATION The December 2011 technical memoranda for this project confirmed that the Primary Clarifiers 16-31 thick sludge pumps should be replaced with larger units. Page 1 of 2 These upgrades are needed to meet the solids handling capacity needs that will occur when the GWRS expansion is expected to be completed in 2014. The primary solids pumps are currently running continuously at maximum capacity. They were not designed for this mode of operation, and are experiencing a high rate of wear. The main cause of the problem is that the plant wastewater influent rate has decreased and the total solids have increased. Since 1998, the total influent flow rate has decreased from 255 mgd to 207 mgd, while the suspended solids loading has increased from 480,600 Ibs/day to 533,500 Ibs/day. This has resulted in a more concentrated wastewater stream. To bring enough water to Plant No. 1 to meet the current needs of the GWRS, a greater portion of the total inflow and associated solids is being routed to Plant No. 1. As a result, the Plant No. 1 primary treatment facilities are handling a far greater volume of solids than their original design anticipated. The project that will provide final design and construction of the pumping system must be expedited to meet the GWRS expansion schedule, providing this conceptual design as a part of Project No. P1-116 will expedite the schedule and improve the scope of work for the future project. The current project team will complete this work before the final design/construction project starts (Estimated start date is June 2012). CEQA N/A BUDGET/DELEGATION OF AUTHORITY COMPLIANCE This request complies with authority levels of the Sanitation District's Delegation of Authority. This item has been budgeted. (FY 2011-12 Budget Update, Line item 42, Page A-9). Project contingency funds will not be used for this amendment. Date of Approval Contract Amount Continnencv 11/17/10 $285,445 $28,545 01/11/12 $ 28,500 $-28,500 02/22/12 71,500 $383,445 $ 45 GC:sa:gc Page 2 of 2 OPERATIONS COMMITTEE Meeting Date To ad.of Dir. 02/01/12 02/22/12 AGENDA REPORT umber Item Number Item N 4 16 Nu Orange County Sanitation District FROM: James D. Ruth, General Manager Originator: Jim Herberg, Director of Engineering Project Manager: Wendy Smith SUBJECT: LAKEVIEW GRADE SEPARATION PROJECT REIMBURSEMENT AGREEMENT GENERAL MANAGER'S RECOMMENDATION A. Establish a budget for the Lakeview Grade Separation Project, Project No. 2-75, in the amount of$250,000; and B. Approve a Reimbursement Agreement with the Orange County Transportation Authority for the entirety of project expenditures, in a form approved by General Counsel, for an estimated amount not to exceed $250,000. SUMMARY In conjunction with the City of Anaheim and the City of Placentia, the Orange County Transportation Authority (OCTA) is performing the Lakeview Grade Separation Project, Project No. 2-75 (Project). The project consists of raising the grade of Lakeview Boulevard so it passes over the Burlington Northern and Santa Fe (BNSF) railroad tracks at the intersection of Orangethorpe Avenue. The location of the foundation of the bridge structure will necessitate the relocation of Orange County Sanitation District's (OCSD) facilities in Orangethorpe Avenue. OCSD's facilities consist of a 24-inch VCP pipe that conveys flow from east to west along the Orangethorpe Avenue public right of way. The project will be constructed by OCTA to OCSD standards and OCSD has the right to have an on-site inspector at the construction site to oversee the work. Project Construction is scheduled to begin in April 2013. The entirety of OCSD's pipeline is located in the City of Anaheim and City of Placentia public right of way (Orangethorpe Avenue). OCSD has the right to use the public right of way within our service boundary to construct, operate, and maintain facilities for wastewater transportation (CA Health and Safety Code Section 4759 and 4759.1); however, the right is considered a statutory franchise right and as such the principle of "prior in time, prior in right" applies. The public right of way existed before OCSD's facility; therefore, it is OCSD's responsibility to pay for the Project. Per the terms of the Reimbursement Agreement, OCSD will reimburse OCTA for the construction costs of the Project. The estimated amount of construction is $250,000. Page 1 of 2 PRIOR COMMITTEE/BOARD ACTIONS N/A ADDITIONAL INFORMATION NIA CEQA The City of Placentia is the lead agency for the project and certified the Project on November 17, 2008. A Notice of Determination was filed on November 18, 2008. BUDGET/DELEGATION OF AUTHORITY COMPLIANCE This request complies with authority levels of the Sanitation District's Delegation of Authority. This item has not been budgeted. Date of A royal Contract Amount Contin enc N/A NIA NIA WS:gc Page 2 of 2 ADMINISTRATION COMMITTEE Meeting Date To ad.of Dir. 02/08/12 02/22/12 AGENDA REPORT umber Item Number 2 is Item N Nu Orange County Sanitation District FROM: James D. Ruth, General Manager Originator: Lorenzo Tyner, Director of Finance and Administrative Services SUBJECT: Wastewater Refunding Revenue Obligations, Series 2012A GENERAL MANAGER'S RECOMMENDATION A) Adopt Resolution No. OCSD12-04, authorizing the execution and delivery by the Sanitation District of an Installment Purchase Agreement, a Trust Agreement, an Escrow Agreement and a Continuing Disclosure Agreement in connection with the execution and delivery of Orange County Sanitation District Wastewater Refunding Revenue Obligations, Series 2012A, authorizing the execution and delivery of such Revenue Obligations evidencing principal in an aggregate amount of not to exceed $110,000,000, approving a Notice of Intention to Sell, authorizing the distribution of an Official Notice Inviting Bids and an Official Statement in connection with the offering and sale of such Revenue Obligations and authorizing the execution of necessary documents and related actions; and, B) That the Orange County Sanitation District Financing Corporation approve the documents supporting and authorizing the Revenue Obligations in an aggregate amount not to exceed $110,000,000 SUMMARY Long-term tax-exempt interest rates are lower since the Sanitation District issued the Wastewater Refunding Revenue Obligations, Series 2011A last October. 2031-33 Maturities AAA MMD t%I January 1, 2011 to Present 5.50 5.00 - -- 2011 A Pricing.... ..._ 4.50 W15/2011 4.00 -. . . 350 3.00 - ... 2.50 N N M V to t0 r 0 Q, O N Date Page 1 of 5 With the decline in interest rates, the Sanitation District has the potential opportunity to refinance a portion of its outstanding debt to reduce interest costs. Under current market conditions, the remaining maturities of the COP Series 2003 that were not refunded with the Series 2011A issuance, e ual to $108.18 million, may now be advance refunded to generate approximately $j1i million in present value savings (or % of refunded par). With the recent movement in interest rates, a refunding today would produce the minimum 3.0% percentage required by the Sanitation District's debt policy. At the time of issuance of the Series 2011A, a refunding of the $108.18 million would have produced negative present value savings (cost to Sanitation District) as interest rates were higher. Since the financing is interest rate sensitive and interest rates have been very volatile, staff did not have the opportunity to bring forth this item to the January Administration Committee for approval to proceed with the refunding. However, in the interest of attempting to capture the savings from the recent rally in interest rates, staff discussed the potential refunding at the January Board meeting and informed the Board that staff was proceeding to pursue the financing. Approval of the recommended actions above will direct staff to refund all of the outstanding $108.18 million COP Series 2003 for interest cost savings utilizing the assistance of Public Resources Advisory Group (PRAG), as financial advisor, and the bond counsel firm of Fulbright & Jaworski. PRIOR COMMITTEE/BOARD ACTIONS August 24, 2011: Adopted Resolution No. OCSD 11-14, authorizing the execution and delivery by the Sanitation District of an Installment Purchase Agreement, a Trust Agreement, an Escrow Agreement and a Continuing Disclosure Agreement in connection with the execution and delivery of Orange County Sanitation District Wastewater Refunding Revenue Obligations, Series 2011A, authorizing the execution and delivery of such Revenue Obligations evidencing principal in an aggregate amount of not to exceed $305,000,000, approving a Notice of Intention to Sell, authorizing the distribution of an Official Notice Inviting Bids and an Official Statement in connection with the offering and sale of such Revenue Obligations and authorizing the execution of necessary documents and related actions. October 26, 2011: Adopted Resolution No. OCSD 11-16, 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 2011B, such Notes evidencing principal in an aggregate amount of not to exceed $155,000,000, approving a Notice of Intention to Sell, authorizing the distribution of an Official Notice Inviting Bids and an Official Statement in connection Page 2 of 5 with the offering and sale of such Notes 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 $1.34 billion. The following table lists each issuance, the outstanding amount, and the interest rate mode. Outstanding Interest Rate ParAmo. I Mode Series 2011 B121 $ 143,205,000 Fixed Rate (one-year) Series 2011A Refunding(3)(4) 147,595,000 Fixed Rate Series 2010C(s) 157,000,000 Fixed Rate Series 2010A(st 80,000,000 Fixed Rate Series 2009A(st 191,265,000 Fixed Rate Series 2008E Refundlri 26,550,000 Fixed Rate Series 2008A Refundlri 25,710,000 Fixed Rate Series 2007B(st 279,250,000 Fixed Rate Series 2007A Refunding(") 92,845,000 Fixed Rate Series 2003(st 108,180,000 Fixed Rate Series 2000 RefundingD) 91,900,000 Daily Variable Rate Total : $1,343,500,000 (1) As of February 2,2012 (2) Series 2011E areflxed one-year certificate of anticipation notes(CANS),that refunded the Series 2010E CANS,that refunded the Series 2009E CANS,that refunded the 2008C CANS that were issued to refund the Series 2006 Daily Variable Rate that were supported by weak liquidity facility bank. (3) Refunded a portion of Series 2000 COPS (4) Refunded a portion of COP Series 2003 (5) New money tlebt issue (6) Series 20086 and Series 2008A refunded the Series 1993 and Series 1992 Synthetic Variable-toPined Rate Debt Issues that were supported by a falling Insurance provider. Series 1993 and 1992 refunded the Series 1986 and a portion of the Series"B"COPs- (7) Series 2000 COPS refunded the Series A,B,and C issued between 1990 and 1992 Refunding Strategy Under current market conditions, staff is proposing to refund all $108.18 million of outstanding COP Series 2003 maturing in years 2031 through 2033 with annual coupon rates of 5.00%. Assuming no change in interest rates at the time of pricing, a refunding of the COP Series 2003 would produce approximately $M million in present value savings ( % of refunded par). The actual savings from a refunding may be higher or lower depending on the market rates at the time of issuance. Page 3 of 5 If market conditions deteriorate, staff will postpone the refunding until each of the maturities can produce a minimum of 3.0% present value savings. Staff will not issue refunding bond unless all the COP Series 2003 can be refunded and meet the minimum percentage savings target in the debt policy of the Sanitation District. 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 describe in the "Attachments" section below. A Financing Corporation is required by the structure of the Revenue Obligations and was formed in April 2000 solely to satisfy this need. The Board of Directors of the Corporation is the same as the Board of Directors of the Sanitation District and the Corporation meets after an adjournment of the OCSD Board. The OCSD Resolution authorizations the execution and delivery of certain legal documents and the execution and delivery of Wastewater Refunding Revenue Obligations, Series 2012A, evidencing principal in an aggregate amount of not to exceed $110,000,000 all as spelled out in the title as follows: "A RESOLUTION OF THE BOARD OF DIRECTORS OF THE ORANGE COUNTY SANITATION DISTRICT AUTHORIZING THE EXECUTION AND DELIVERY BY THE SANITATION DISTRICT OF AN INSTALLMENT PURCHASE AGREEMENT, A TRUST AGREEMENT, AN ESCROW AGREEMENT AND A CONTINUING DISCLOSURE AGREEMENT IN CONNECTION WITH THE EXECUTION AND DELIVERY OF ORANGE COUNTY SANITATION DISTRICT WASTEWATER REFUNDING REVENUE OBLIGATIONS, SERIES 2012A, AUTHORIZING THE EXECUTION AND DELIVERY OF SUCH REVENUE OBLIGATIONS EVIDENCING PRINCIPAL IN AN AGGREGATE AMOUNT OF NOT TO EXCEED $110,000,000, APPROVING A NOTICE OF INTENTION TO SELL, AUTHORIZING THE DISTRIBUTION OF AN OFFICIAL NOTICE INVITING BIDS AND AN OFFICIAL STATEMENT IN CONNECTION WITH THE OFFERING AND SALE OF SUCH REVENUE OBLIGATIONS AND AUTHORIZING THE EXECUTION OF NECESSARY DOCUMENTS AND RELATED ACTIONS." The Resolution of the Corporation is somewhat shorter and simpler. It authorizes three actions that are similarly enumerated in the title as follows: "A RESOLUTION OF THE BOARD OF DIRECTORS OF THE ORANGE COUNTY SANITATION DISTRICT FINANCING CORPORATION AUTHORIZING THE EXECUTION AND DELIVERY BY THE CORPORATION OF AN INSTALLMENT PURCHASE AGREEMENT AND A TRUST AGREEMENT IN CONNECTION WITH THE EXECUTION AND DELIVERY OF ORANGE COUNTY SANITATION DISTRICT WASTEWATER REFUNDING REVENUE OBLIGATIONS, SERIES 2012A, AUTHORIZING THE EXECUTION AND DELIVERY OF SUCH REVENUE OBLIGATIONS EVIDENCING PRINCIPAL IN AN AGGREGATE AMOUNT OF NOT TO EXCEED $110,000,000 AND AUTHORIZING THE EXECUTION OF NECESSARY DOCUMENTS AND RELATED ACTIONS." Page 4 of 5 Timeline Since the proposed refunding is a fixed-rate debt issuance, staff is proposing to issue the refunding through a competitive sale because it is the most expeditious way to access the market and it is expected to provide the lowest interest cost for this given structure. Board approval of legal and disclosure documents February * Financing Corporation approval of legal and disclosure documents * Rating Agency discussions March * Publish Notice of Intention to Sell * Marketing and Sale through a Competitive Sale Process 4 Closing u Be in debt administration All costs involved with the refunding, including costs for PRAG and Fulbright & Jaworski will be paid from the proceeds of the new refunding issue. CEQA N/A BUDGET/DELEGATION OF AUTHORITY COMPLIANCE N/A ATTACHMENTS Bond documents may be viewed on OCSD's webpage: http ^vw_w oc.sd uotm,ubout coardofc irecto,s,agerndanminutes asa. Following are the bond documents included on the OCSD webpage: 1. Sanitation District Resolution 2. Corporation Resolution 3. Draft Trust Agreement 4. Draft Installment Purchase Agreement 5. Draft Escrow Agreement 6. Draft Continuing Disclosure Agreement T Draft Preliminary Official Statement 8. Draft Official Notice Inviting Bids 9, Draft Notice of Intention to Sell JDR:LT:MW/jmf Page 5 of 5 RESOLUTION NO. OCSD 12-04 A RESOLUTION OF THE BOARD OF DIRECTORS OF THE, ORANGE COUNTY SANITATION DISTRICT AUTHORIZING THE EXECUTION AND DELIVERY BY THE DISTRICT OF AN INSTALLMENT PURCHASE, AGREEMENT, A TRUST AGREEMENT, AN ESCROW AGREEMENT AND A CONTINUING DISCLOSURE AGREEMENT IN CONNECTION WITH THE EXECUTION AND DELIVERY OF ORANGE COUNTY SANITATION DISTRICT WASTEWATER REFUNDING REVENUE OBLIGATIONS, SERIES 2012A, AUTHORIZING THE EXECUTION AND DELIVERY OF SUCH REVENUE OBLIGATIONS EVIDENCING PRINCIPAL IN AN AGGREGATE AMOUNT OF NOT TO EXCEED $110,000,000, APPROVING A NOTICE OF INTENTION TO SELL, AUTHORIZING THE DISTRIBUTION OF AN OFFICIAL NOTICE INVITING BIDS AND AN OFFICIAL STATEMENT IN CONNECTION WITH THE OFFERING AND SALE OF SUCH REVENUE OBLIGATIONS AND AUTHORIZING THE EXECUTION OF NECESSARY DOCUMENTS AND RELATED ACTIONS WHEREAS, to finance the acquisition, construction and installation of certain improvements to its wastewater system (the `Prior Project'), the Orange County Sanitation District (the "District') has heretofore purchased the Prior Project from the Orange County Sanitation District Financing Corporation (the "Corporation'), and the Corporation has heretofore sold the Prior Project to the District, for the installment payments (the 'Prior Installment Payments") made by the District pursuant to the Installment Purchase Agreement, dated as of July 1, 2003 (the`Prior Installment Purchase Agreement"), each by and between the District and the Corporation; WHEREAS, to provide the funds necessary to finance the Prior Project, the District caused the execution and delivery of the Orange County Sanitation District Certificates of Participation, Series 2003 (the 'Prior Certificates"), evidencing direct, undivided fractional interests in the Prior Installment Payments; WHEREAS, the District desires to refinance the Prior Project by prepaying the remaining Prior Installment Payments, and the interest thereon to the date of prepayment, thereby causing the remaining Prior Certificates to be prepaid; WHEREAS, to provide the funds necessary to prepay the remaining Prior Installment Payments, the District and the Corporation desire that the Corporation purchase the Prior Project from the District and the District sell the Prior Project to the Corporation, and that the District then purchase the Prior Project from the Corporation and the Corporation sell the Prior Project to the District, for the installment payments (the "Installment Payments") to be made by the District pursuant to an Installment Purchase Agreement by and between the District and the Corporation (such Installment Purchase Agreement, in the form presented to this meeting, with such changes, insertions and omissions as are made pursuant to this Resolution, being referred to herein as the `Installment Purchase Agreement'); 77a;4-as.; WHEREAS, the Corporation intends to assign without recourse certain of its rights under and pursuant to the Installment Purchase Agreement to Union Bank, N.A., 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 we made pursuant to this Resolution, being referred to herein as the "Trust Agreement'); WHEREAS, in consideration of such assignment mid the execution and delivery of the Trust Agreement, the Trustee intends to execute and deliver the Orange County Sanitation District Wastewater Refunding Revenue Obligations, Series 2012A (the "Revenue Obligations"), evidencing direct, undivided factional interests in the Installment Payments, and the interest thereon; WHEREAS, the finds to pay the Prior Installment Payments to be prepaid relating to the Prior Installment Purchase Agreement, and the Prior Certificates evidencing interests therein, will be applied to such purpose pursuant to an Escrow Agreement by and between the District and Union Bank, N.A., as prior trustee and escrow agent (such Escrow Agreement, in the form presented to this meeting, with such changes, insertions and omissions as are made pursuant to this Resolution, being referred to herein as the "Escrow Agreement'); WHEREAS, the District desires to provide for the public sale of the Revenue Obligations; WHEREAS, a form of the Notice of Intention to Sell to be published in connection with the public offering mid sale of the Revenue Obligations has been prepared (such Notice of Intention to Sell, in the form presented to this meeting, with such changes, insertions and omissions as are made pursuant to this Resolution, being referred to herein as the "Notice of Intention to Sell"); WHEREAS, a form of the Official Notice Inviting Bids to be distributed in connection with the public offering and sale of the Revenue Obligations has been prepared (such Official Notice Inviting Bids, in the form presented to this meeting, with such changes, insertions and omissions as 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 Revenue Obligations has been prepared (such Preliminary Official Statement in the form presented to this meeting, with such changes, insertions and omissions as we made pursuant to this Resolution, being referred to herein as the "Preliminary Official Statement'); WHEREAS, Rule I5c2-12 promulgated by the Securities and Exchange Commission under the Securities Exchange Act of 1934, as amended ("Rule I5c2-12"), requires that the underwrites thereof must have reasonably determined that the District has undertaken in a written agreement or contract for the benefit of the holders of the Revenue Obligations to provide disclosure of certain financial information and certain material events on an ongoing basis; WHEREAS, to cause such requirement to be satisfied, the District desires to enter into a Continuing Disclosure Agreement with the Trustee (such Continuing Disclosure Agreement in the form presented to this meeting, with such changes, insertions and omissions as are made pursuant to this Resolution, being referred to herein as the "Continuing Disclosure Agreement'); 776s468a 2 WHEREAS, there have been prepared and submitted to this meeting forms of. (a) the Installment Purchase Agreement; (b) the Trust Agreement; (c) the Escrow Agreement; (d) the Notice of Intention to Sell; (e) the Notice Inviting Bids; In the Preliminary Official Statement; and (g) the Continuing Disclosure Agreement; and WHEREAS, all acts, conditions and things required by the Constitution and Taws 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 propose, in the manner mid upon the terms herein provided; NOW, THEREFORE, the Board of Directors of the District DOES HEREBY RESOLVE, DETERMINE AND ORDER; Section 1. Alt of the recitals herein contained are true mid correct and the Board of Directors of the District (the `Board') so finds. Section 2. The Installment Purchase Agreement, in substantially the form submitted to this meeting and made a part hereof as though set forth herein, be and the same is hereby approved. The Chair of the Board, and such other member of the Board as the Chair may designate, the General Manager of the District, the Director of Finance and Administrative Services of the District, and such other officers of the District as the Director of Finance and Administrative Services may designate (the "Authorized Officers") are, and each of them is, hereby authorized and directed, for and in the name of the District, to execute and deliver the Installment Purchase Agreement in the fonm 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 SI 10,000,000, shall not result in a true interest cost for the Installment Payments in excess of 4.5% and shall not result in a final Installment Payment later than February t, 2033, 776s468a 3 Section 3. The Trust Agreement, in substantially the form submitted to this meeting and made a part hereof as though set forth in full herein, be and the same is hereby approved. The Authorized Officers are, and each of them is, hereby authorized and directed, for and in the name of the District, to execute and deliver the Trust Agreement in the form presented to this meeting, with such changes, insertions and omissions as the Authorized Officer executing the same may require or approve, such requirement or approval to be conclusively evidenced by the execution of the Trust Agreement by such Authorized Officer. Section 4. The execution and delivery of Revenue Obligations evidencing principal in an aggregate amount of not to exceed $110,000,000, payable in the years mid in the amounts, and evidencing principal of and interest on the Installment Payments as specified in the Trust Agreement as finally executed, are hereby authorized and approved. Section 5. The prepayment of all or a portion of the remaining principal components of the Prior Installment Payments, and the interest components thereof to the dates of prepayment, and the Prior Certificates evidencing interests therein, as determined by any Authorized Officer, is hereby authorized and approved. Section 6. The Escrow Agreement, in substantially the form submitted to this meeting mid 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 Escrow 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 Escrow Agreement by such Authorized Officer. Section 7. The form of Notice of Intention to Sell, in substantially the form submitted to this meeting and made a part hereof as though set forth in full herein, with such changes, insertions and omissions therein as may be approved by an Authorized Officer, is hereby approved, and the use of the Notice of Intention to Sell in connection with the offering and sale of the Revenue Obligations is hereby approved. The Authorized Officers are each hereby authorized and directed, for and in the name and on behalf of the District, to cause the Notice of Intention to Sell to be published once in The Bond Buyer (or in such other financial publication generally circulated throughout the State of California or reasonably expected to be disseminated among prospective bidders for the Revenue Obligations as an Authorized Officer shall approve as being in the best interests of the District) at least five days prior to the date set for the opening of bids in the Notice Inviting Bids, with such changes, insertions and omissions therein as an Authorized Officer may require or approve, such requirement or approval to be conclusively evidenced by such publishing of the Notice of Intention to Sell. Section S. The Notice Inviting Bids, in substantially the form submitted to this meeting and made a part hereof as though set forth herein, with such changes, insertions and omissions therein as may be approved by an Authorized Officer, be and the same is hereby approved, and the use of the Notice Inviting Bids in connection with the offering and sale of the Revenue Obligations is hereby authorized and approved. The terms and conditions of the offering and sale of the Revenue Obligations shall be as specified in the Notice Inviting Bids. Bids for the purchase of the Revenue Obligations shall be received at the time and place set forth 776s4-68a 4 in the Notice Inviting Bids. The Authorized Officers are each hereby authorized and directed, for and in the name and on behalf of the District, to accept the bid for the Revenue Obligations with the lowest true interest cost, or to reject all bids therefor, in accordance with the terms of the Notice Inviting Bids, Section 9. The Preliminary Official Statement, in substantially the form presented to this meeting and made a part hereof as though set forth in full herein, with such changes, insertions and omissions therein as may be approved by an Authorized Officer, is hereby approved, and the use of the Preliminary Official Statement in connection with the offering and sale of the Revenue Obligations is hereby authorized and approved. The Authorized Officers are each hereby authorized to certify on behalf of the District that the Preliminary Official Statement is deemed final as of its date, within the meaning of Rule 15c2-12 (except for the omission of certain information permitted by Rule 15c2-I2 to be omitted). The Authorized Officers are each hereby authorized and directed to furnish, or cause to be furnished, to prospective bidders for the Revenue Obligations a reasonable number of copies of the Preliminary Official Statement. Section 10. The preparation and delivery of a final Official Statement (the "Official Statement'), and its use in connection with the offering and sale of the Revenue Obligations, be and the same is hereby authorized and approved. The Official Statement shall be in substantially the form of the Preliminary Official Statement, with such changes, insertions and omissions as may be approved by an Authorized Officer, such approval to be conclusively evidenced by the execution and delivery thereof. The Authorized Officers are, and each of them is, hereby authorized and directed to execute the final Official Statement and any amendment or supplement thereto, for and in the name of the District. Section 11. 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 12. 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 Revenue Obligations and the transactions contemplated by the notices, agreements and documents referenced in this Resolution. Section 13. All actions heretofore taken by the officers and employees of the District with respect to the execution, delivery and sale of the Revenue Obligations, or in connection with or related to any of the agreements or documents referenced in this Resolution, are hereby approved, confirmed and ratified. Section 14. This Resolution shall take effect immediately upon its adoption. 776s4-68a 5 PASSED AND ADOPTED at a regular meeting held on February 22,2012 Chair ATTEST: Clerk of the Board APPROVED: General Counsel Orange County Sanitation District 776;4-68a 6 STATE OF CALIFORNIA ) ss COUNTY OF ORANGE ) 1, Maria E. Ayala, Clerk of the Board of Directors of the Orange County Sanitation District, do hereby certify that the foregoing Resolution No. OCSD 12-04 was passed and adopted at a regular meeting of said Board on the 22nd day of February, 2012, 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 22nd day of February, 2012. Clerk of the Board of Directors Orange County Sanitation District 7ras4-ass RESOLUTION NO. FC-17 A RESOLUTION OF THE BOARD OF DIRECTORS OF THE ORANGE COUNTY SANITATION DISTRICT FINANCING CORPORATION AUTHORIZING THE EXECUTION AND DELIVERY BY THE CORPORATION OF AN INSTALLMENT PURCHASE AGREEMENT AND A TRUST AGREEMENT IN CONNECTION WITH THE, EXECUTION AND DELIVERY OF ORANGE COUNTY SANITATION DISTRICT WASTEWATER REFUNDING REVENUE OBLIGATIONS, SERIES 2012A, AUTHORIZING THE EXECUTION AND DELIVERY OF SUCH REVENUE OBLIGATIONS EVIDENCING PRINCIPAL IN AN AGGREGATE AMOUNT OF NOT TO EXCEED $110,000,000 AND AUTHORIZING THE EXECUTION OF NECESSARY DOCUMENTS AND RELATED ACTIONS. WHEREAS, to finance the acquisition, construction and installation of certain improvements to its wastewater system (the "Prior Project'), the Orange County Sanitation District (the "District") has heretofore purchased the Prior Project from the Orange County Sanitation District Financing Corporation (the "Corporation'), and the Corporation has heretofore sold the Prior Project to the District, for the installment payments (the "Prior Installment Payments") made by the District pursuant to the Installment Purchase Agreement, dated as of July 1, 2003 (the "Prior Installment Purchase Agreement'), by and between the District and the Corporation; WHEREAS, to provide the funds necessary to finance the Prior Project, the District caused the execution and delivery of the Orange County Sanitation District Certificates of Participation, Series 2003 (the "Prior Certificates"), evidencing direct, undivided fractional interests in the related Prior Installment Payments; WHEREAS, the District desires to refinance the Prior Project by prepaying the remaining Prior Installment Payments, and the interest thereon to the date of prepayment, thereby causing the remaining Prior Certificates to be prepaid; WHEREAS, to provide the funds necessary to prepay the remaining Prior Installment Payments, the District and the Corporation desire that the Corporation purchase the Prior Project from the District and the District sell the Prior Project to the Corporation, and that the District then purchase the Prior Project from the Corporation and the Corporation sell the Prior Project to the District, for the installment payments (the "Installment Payments") to be made by the District pursuant to an Installment Purchase Agreement by and between the District and the Corporation (such Installment Purchase Agreement, in the form presented to this meeting, with such charges, insertions and omissions as are made pursuant to this Resolution, being referred to lierein as the "Installment Purchase Agreement'); WHEREAS, the Corporation intends to assign without recourse certain of its rights under and pursuant to the Installment Purchase Agreement to Union Bank, N.A., 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 we made pursuant to this Resolution, being referred to herein as the "Trust Agreement"); WHEREAS, in consideration of such assignment and the execution and delivery of the Trust Agreement, the Trustee intends to execute and deliver the Orange County Sanitation District Wastewater Refunding Revenue Obligations, Series 2012A (the"Revenue Obligations"), evidencing direct, undivided fractional interests in the Installment Payments, and the interest thereon; WHEREAS, there have been prepared and submitted to this meeting forms of: (a) the Installment Purchase Agreement; mid (b) the Trust Agreement; and 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 terns 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 SI 10,000,000, shall not result in a true interest cost for the Installment Payments in excess of 4.5% and shall not result in a final Installment Payment later than February I, 2033. 776;466a 2 Section 3. The Trust Agreement, in substantially the form submitted to this meeting and made a part hereof as though set forth in full herein, be and the same is hereby approved. The Authorized Officers are, and each of them is, hereby authorized and directed, for and in the name of the Corporation, to execute and deliver the Trust Agreement in the form presented to this meeting, with such changes, insertions and omissions as the Authorized Officer executing the same may require or approve, such requirement or approval to be conclusively evidenced by the execution of the Trust Agreement by such Authorized Officer. Section 4. The execution and delivery of Revenue Obligations evidencing principal in an aggregate amount of not to exceed $110,000,000, payable in the years mid in the amounts, and evidencing direct, undivided fractional interests in the Installment Payments, and the interest thereon, as specified in the Trust Agreement as finally executed, are hereby authorized and approved. Section 5. The officers and agents of the Corporation are, and each of them hereby is, authorized and directed to execute and deliver any and all documents and instruments and to do and cause to be done any and all acts and things necessary or proper for carrying out the execution and delivery of the Revenue Obligations and the transactions contemplated by the agreements or documents referenced in this Resolution. Section 6. All actions heretofore taken by the officers and agents of the Corporation with respect to the execution, delivery and sale of the Revenue Obligations, or in connection with or related to any of the agreements or documents referenced in this Resolution, are hereby approved, confirmed and ratified. Section 7. This Resolution shall take effect immediately upon its adoption. 776s4-66a 3 PASSED AND ADOPTED at a meeting held on February 22, 2012. President, Orange County Sanitation District Financing Corporation ATTEST: Clerk of the Board, Orange County Sanitation District Financing Corporation APPROVED: General Counsel, Orange County Sanitation District Financing Corporation 776s4-66a 4 STATE OF CALIFORNIA ) ss COUNTY OF ORANGE ) 1, Maria E. Ayala, Clerk of the Board of Directors of the Orange County Sanitation District Financing Corporation, do hereby certify that the foregoing Resolution No. FC-17 was passed and adopted at a regular meeting of said Board on the 22nd day of February, 2012, 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 22nd day of February, 2012, Clerk of the Board of Directors Orange County Sanitation District Financing Corporation 7ras<-aas DRAFT OF 01/27/12 TRUST AGREEMENT by and among UNION BANK,N.A., as Trustee, ORANGE COUNTY SANITATION DISTRICT FINANCING CORPORATION and ORANGE COUNTY SANITATION DISTRICT Dated as of March 1, 2012 Relating to S Orange County Sanitation District Wastewater Refunding Revenue Obligations Series 2012A rntis,isi.z TABLE OF CONTENTS Page ARTICLE I DEFINITIONS; EQUAL SECURITY Section1.01. Definitions........................................................................................................ 2 Sectiont.02 Definitions in Installment Purchase Agreement._....... ....... ....... ....... ....... ...9 Section1.03. Equal Security..................................................................................................9 ARTICLE 11 TERMS AND CONDITIONS OF REVENUE OBLIGATIONS Section 2.01. Preparation and Delivery of Revenue Obligations ...... ....... ....... ....... ....... ...9 Section 2.02. Denomination, Medium and Dating of Revenue Obligations .........................9 Section 2.03. Payment Dates ofRevenue Obligations; Interest Computation .................... 10 Section 2.04. Form of Revenue Obligations........................................................................ 1 I Section 2.05. Execution of Revenue Obligations and Replacement Certificates. The Revenue Obligations shall be executed by the Trustee by the manual signature of an authorized signatory of the Trustee....................................... 1 I Section 2.06. Transfer and Payment of Revenue Obligations; Exchange of Revenue Obligations.._......_......_......_......_......_......_......_......_......_......_......_............. 1 I. Section 2.07. Revenue Obligation Registration Books........................................................ 11 Section 2.08. Temporary Revenue Obligations................................................................... 12 Section 2.09, Revenue Obligations Mutilated, Lost, Destroyed Or Stolen .......................... 12 Section 2.10. Book-Entry System._......_......_......_......_......_......_......_......_......_......_..... 12 ARTICLE 1B PROCEEDS OF REVENUE OBLIGATIONS Section 3.01. Delivery of Revenue Obligations................................................................... 15 Section 3.02. Deposit of Proceeds of Revenue Obligations .......... 15 Section 3.03. Costs of Issuance Fund.................................................................................. 15 Section3.04. Reserved......................................................................................................... 15 ARTICLE IV PREPAYMENT OF REVENUE OBLIGATIONS Section 4.01. Optional Prepayment ......_......_......_......_......_......_......_......_......_......_..... 15 Section4.02. Reserved......................................................................................................... 16 Section 4.03. Selection of Revenue Obligations for Optional Prepayment......................... 16 Section 4.04. Notice of Prepayment ....... .............._......_......_......_. 16 Section 4.05. Partial Prepayment of Revenue Obligations.................................................. 17 Section 4.06. Effect of Prepayment ..................................................................................... 17 ARTICLE V ASSIGNMENT AND PLEDGE; FUNDS AND ACCOUNTS Section 5.01. Assignment attd Pledge.................................................................................. 17 Section 5.02. Installment Payment Fund............................................................................. 18 Section5.03. Reserved......................................................................................................... 19 77a33191 2 i TABLE OF CONTENTS (continued) Page Section 5.04. Investment of Moneys.................................................................................... 19 Section 5.05. Brokerage Confirmations..... ....... ....... ....... ....... ....... ....... ....... ....... ....... . 19 ARTICLE VI COVENANTS Section 6.01. Compliance with Trust Agreement................................................................ 20 Section 6.02 Compliance with Installment Purchase Agreement..... ....... ....... ....... ....... .20 Section 6.03. Compliance with Master Agreement.............................................................20 Section 6.04. Observance of Laws and Regulations............................................................ 20 Section6.05, Other Liens..................................................................................................... 20 Section 6.06. Prosecution and Defense of Suits ..._......_......_......_......_......_......_......_.....20 Section 6.07. Accounting Records and Statements .............................................................21 Section 6.08. Tax Covenants ............................................................................................... 21 Section 6.09. Continuing Disclosure ................................................................................... 24 Section 6.1 IF Further Assurances......_......_......_......_......_......_............... ....... ....... ....... .24 ARTICLE V1I DEFAULT AND LIMITATIONS OF LIABILITY Section 7.01. Action upon Event of Default........................................................................ 25 Section 7.02 Other Remedies of the Trustee .... ....... ....... ....... ....... ....... ....... ....... ....... .25 Section7.03. Non-Waiver.................................................................................................... 25 Section 7.04. Remedies Not Exclusive................................................................................ 26 Section 7.05. Application of Amounts After Default..........................................................26 Section 7.06. Trustee May Enforce Claims Without Possession of Revenue Obligations..................................................................................................... 27 Section 7.07. Limitation on Suits......................................................................................... 27 Section 7.08. No Liability by the Corporation to the Owners............................................. 27 Section TK No Liability by the District to the Owners........................... ....... ....... ....... .27 Section 7.10. No Liability of the Trustee to the Owners .....................................................28 ARTICLE V III THE TRUSTEE Section 8.01. Employment of the Trustee, Duties..... ....... ....... ....... ....... ....... ....... ....... .28 Section 8.02. Removal and Resignation of the Trustee.......................................................28 Section 8.03. Compensation and Indemnification ofthe Trustee........................................ 29 Section 8.04. Protection of the Trustee................................................................................ 30 ARTICLE IX AMENDMENT OF OR SUPPLEMENT TO TRUST AGREEMENT Section 9.01. Amendment or Supplement........................................................................... 31. Section 9.02, Disqualified Revenue Obligations................................................................. 32 Section 9.03. Endorsement or Replacement of Revenue Obligations After Amendment or Supplement........................................................................... 32 Section 9.04. Amendment by Mutual Consent.................................................................... 33 77a33191 2 it TABLE OF CONTENTS (continued) Page ARTICLE X DEFEASANCE Section 10.01. Discharge of Revenue Obligations and Trust Agreement.............................33 Section 10.02. Unclaimed Moneys...... ....... ....... ....... ....... ....... ....... ....... ....... ....... ....... . 34 ARTICLE XI MISCELLANEOUS Section 11.01. Benefits of Trust Agreement.......................................................................... 35 Section I1.02. Successor Deemed Included in all References to Predecessor.... ....... ....... . 35 Section 11.03. Execution of Documents by Owners ............................................................. 35 Section 11.04. Waiver of Personal Liability.......................................................................... 35 Section 1 1.05. Acquisition of Revenue Obligations by District............................................ 36 Section 11.06. Content of Certificates...._......_......_......_......_......_......_......_......_......_..... 36 Section 11.07. Funds and Accounts....................................................................................... 36 Section 11.08. Article and Section Headings, Gender and References................................. 36 Section 11.09, Partial Invalidity............................................................................................. 37 Section 11.10. California Law ..... ....... ....... ....... ....... ....... ....... ....... ....... ....... ....... ....... . 37 Section11.11. Notices ........................................................................................................... 37 Section 11.12. Et ective Date ................................................................................................ 38 Section 1 1.13. Execution in Counterparts.............................................................................. 38 EXHIBIT A -FORM OF REVENUE OBLIGATION 77a33191 2 in TRUST AGREEMENT THIS TRUST AGREEMENT (this "Trust Agreement'), dated as of March 1, 2012, is made by and among UNION BANK, N.A., a national banking association organized and existing under the Taws 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 finance the acquisition, construction and installation of certain improvements to its wastewater system (the "Prior Project'), the District has heretofore purchased the Prior Project from the Corporation, and the Corporation has heretofore sold the Prior Project to the District, for the installment payments (the "Prior Installment Payments") made by the District pursuant to the Installment Purchase Agreement, dated as of July I, 2003 (the"Prior Installment Purchase Agreement"), by and between the District and the Corporation; WHEREAS, to provide the funds necessary to finance the Prior Project, the District caused the execution and delivery of the Orange County Sanitation District Certificates of Participation, Series 2003 (the "Prior Certificates"), evidencing direct, undivided fractional interests in the related Prior Installment Purchase Agreement and the related Prior Installment Payments; WHEREAS, the District desires to refinance all of the Prior Project (the "Project') by prepaying the remaining Prior Installment Payments, and the interest thereon to the dates of prepayment, thereby causing the remaining Prior Certificates to be prepaid; WHEREAS, to provide the funds necessary to prepay the remaining Prior Installment Payments, the District and the Corporation desire that the Corporation purchase the Prior Project from the District and the District sell the Prior Project to the Corporation, and that the District then purchase the Prior Project from the Corporation and the Corporation sell the Prior Project to the District, for the installment payments (the"Installment Payments") to be made by the District pursuant to the Installment Purchase Agreement, dated the date hereof(the"Installment Purchase Agreement'); WHEREAS, the Corporation proposes to assign without recourse certain of its rights under and pursuant to the Installment Purchase Agreement to the Trustee; WHEREAS, in consideration of such assignment and the execution and delivery of this Trust Agreement, the Trustee has agreed to execute and deliver Orange County Sanitation District Wastewater Refunding Revenue Obligations, Series 2012A (the"Revenue Obligations"), which are certificates of participation, evidencing direct, undivided fractional interests in the Installment Purchase Agreement and the related Installment Payments, and the interest thereon; 77W1s1z WHEREAS, a portion of the proceeds of the Revenue Obligations will be used to prepay certain of the Prior Installment Payments; and WHEREAS, all acts, conditions and things required by law to exist, to have happened and to have been performed precedent to and in connection with the execution and delivery of this Trust Agreement do exist, have happened and have been performed in regular and due time, form and manner as required by law, and the parties hereto are now duly authorized to execute and deliver this Trust Agreement; NOW, THEREFORE, in consideration of the promises and of the mutual agreements and covenants contained herein and for other good and valuable consideration, the receipt mid 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 terns defined in this Section shall for all proposes hereof and of any amendment hereof or supplement hereto and of the Revenue Obligations and of any certificate, opinion, request or other document mentioned herein or therein have the meanings defined herein, the following definitions to be equally applicable to both the singular and plural Dorms of any of the terns 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 55,000 and integral multiples thereof. "Authorized District Representative" means the General Manager of the District, the Director of Finance and Administrative Services of the District, the Controller of the District and any other Person authorized by the Director of Finance and Administrative Services of the District to act on behalf of the District under or with respect to this Trust Agreement. "Beneficial Owners" means those individuals, partnerships, corporations or other entities for which the Participants have caused the Depository to hold Book-Entry Certificates. "Book-Entry Certificates" means the Revenue Obligations registered in the name of the nominee of DTC, or any successor securities depository for the Revenue Obligations, as the Owner thereof pursuant to the terms mid 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. 77W1s1z 2 "Cede & Co." means Cede & Co., the nominee of DTC, mid any successor nominee of DTC with respect to the Revenue Obligations. "Certificate Year" means each twelve-month period beginning on February in each year and extending to the next succeeding February 1, both dates inclusive, except that the first Certificate Year shall begin on the Closing Date and end on February 1, 2013. "Closing Date" means March 2012. "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 LUC, as originally executed and as it may from time to time be amended in accordance with the terms thereof. "Corporation" means the Orange County Sanitation District Financing Corporation, a nonprofit public benefit corporation organized and existing under the laws of the State. "Costs of Issuance" means all the costs of executing and delivering the Revenue Obligations, including, but not limited to, all printing and document preparation expenses in connection with this Trust Agreement, the Installment Purchase Agreement, the Revenue Obligations mid any preliminary official statement and final official statement pertaining to the Revenue Obligations, fees of a financial advisor, rating agency fees, market study fees, legal fees and expenses of counsel with respect to the execution and delivery of the Revenue Obligations, the initial fees and expenses of the Trustee and its counsel and other fees and expenses incurred in connection with the execution and delivery of the Revenue Obligations, to the extent such fees and expenses are approved by the District. "Costs of Issuance Fund" means the fund by that name established in accordance with Section 3.03 hereof. "Depositorv" 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 Taws of the State, and any successor thereto. "DTC" means The Depository Trust Company, New York, New York and its successors. "Escrow Agent" means Union Bank, N.A., a national banking association, duly organized and existing under and by virtue of the laws of the United States of America, its successors and assigns, as escrow agent under the Escrow Agreement. "Escrow Agreement" means the Escrow Agreement, dated as of March 1, 2012, by and between the District and the Escrow Agent, providing for the defeasance and refunding of the Refunded Certificates. 77W1siz 3 "Escrow Fund" means the Escrow Fund established and held by the Escrow Agent pursuant to the Escrow Agreement. "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 unreadable 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 inveshnent: (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 fit 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; (if) 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); (ii) bonds, debentures or notes issued by any of the following federal agencies: Federal Farina Credit Bank, Federal Home Loan Mortgage Corporation or Fannie Mae; provided, that such bonds, debentures or notes shall be the senior obligations of such agencies (including participation certificates) and have the same ratings by Moody's and S&P as the obligations specified in clause(i); and (iv) bonds, debentures or notes issued by any Federal agency hereafter created by an act of Congress, the payment of the principal of and interest on which are unconditionally guaranteed by the United States of America as to the full and timely payment; provided, that, such obligations shall not include unit investment trusts or mutual fiord obligations. "Installment Payment Fund" means the fund by that name established in accordance with Section 5.02 hereof. "Installment Payments" means the Installment Payments required to be made by the District pursuant to Section 3.02 of the Installment Purchase Agreement. "Installment Purchase Agreement" means the Installment Purchase Agreement, dated as of the date hereof, by and between the District and the Corporation, as originally executed and as it may from fine 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. 77W1s1z 4 "Interest Payment Date" means February 1 and August t of each year, commencing August I, 2012. "Letter of Representations" means the letter of the District delivered to and accepted by the Depository on or prior to the delivery of the Revenue Obligations as Book-Entry Certificates setting forth the basis on which the Depository serves as depository for such Book-Entry Certificates, as originally executed or as it may be supplemented or revised or replaced by a letter to a substitute Depository. "Master Agreement" means the Master Agreement for District Obligations, dated as of August t, 2000, by and between the District and the Corporation, as originally executed and as it may from time to time be amended or supplemented in accordance with the terms thereof. "Moody's" means Moody's Investors Service, a corporation organized and existing under the laws of the State of Delaware, its successors and assigns, except that if such corporation shall no longer perform the function of a securities rating agency for any reason, the term "Moody's" shall be deemed to refer to any other nationally recognized securities rating agency selected by the District. "Nominee" means the nominee of the Depository, which may be the Depository, as determined from time to time pursuant to Section 2.10 hereof. "Opinion of Counsel" means a written opinion of Fulbright & Jaworski L.L.P. or any other counsel of recognized national standing in the field of law relating to municipal bonds, appointed and paid by the District. "Outstanding," when used as of any particular time with reference to Revenue Obligations, means (subject to the provisions of Section 9.02 hereof) all Revenue Obligations except (a) Revenue Obligations previously canceled by the Trustee or delivered to the Trustee for cancellation, (b) Revenue Obligations paid or deemed to have been paid within the meaning of Section 10.01 hereof, mid (c) Revenue Obligations in lieu of or in substitution for which other Revenue Obligations shall have been executed and delivered by the Trustee pursuant to Section 2.09 hereof. "Owner" means any Person who shall be the registered owner of any Outstanding Revenue Obligation as indicated in the registration books of the Trustee required to be maintained pursuant to Section 2.07 hereof. "Participants" means those broker-dealers, banks and other financial institutions from time to time for which the Depository holds Book-Entry Certificates as securities depository. "Participating Underwriter" has the meaning ascribed thereto in the Continuing Disclosure Agreement. 77W1s1z 5 "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) Govemment Obligations; (2) Bonds, debentures, notes, participation certificates or other evidences of indebtedness issued, or the principal of and interest on which are unconditionally guaranteed, by the Federal Intermediate Credit Bank, the Federal Home Loan Bank System, the Government National Mortgage Association or any other agency or instrumentality of or corporation wholly owned by the United States of America when such obligations are backed by the full faith and credit of the United States for the full and timely payment of principal and interest; (3) Obligations of any state of the United States or any political subdivision thereof, which at the time of investment are rated "Aa3" or higher by Moody's and "AA" or higher by S&P; or which are rated by Moody's `VMIG I" or better and by S&P "A-I+" or better with respect to commercial paper, or "VMIG 1" and "SP-I", respectively, with respect to municipal notes; (4) Bank time deposits evidenced by certificates of deposit, deposit accounts, and bankers' acceptances, issued by any bank, trust company or national banking association insured by the Federal Deposit Insurance Corporation (including the Trustee); provided that (a) such bank, trust company or national banking association be rated "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 mid that such capital stock, surplus and undivided profits shalt not be less than S 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 77W1s1z 6 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 (I) 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 mid reserve fund put agreements with any corporation, including banking or financial institutions, or agreements entered into with subsidiaries (of a parent company), provided the obligations of the subsidiary under the agreement are unconditionally guaranteed by the parent, the corporate debt of which (or senior debt or claims paying ability of the financial entity's guarantor) is rated, at the time of investment, "Aa3" or better by Moody's and "AA-" or better by S&P; (8) Guaranteed investment contracts or similar funding agreements issued by insurance companies, provided that either the long term corporate debt of such insurance company, at the time of investment, is rated, at the time of investment, `Aa3" or better by Moody's and "AA-' or better by S&P or which agreements are fully and continuously secured by a valid and perfected first priority security interest in obligations described in paragraph (t) 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 clew 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-l" by Moody's (including funds for which the Trustee or an affiliate provides investment advice or similar services); (11) Deposits with the Local Agency Investment Fund of the State, as may otherwise be permitted by law; and (12) Shares in the Franklin Adjustable U.S. Government Securities Fund or any other similar fiord having at least $1,000,000,000 in assets and invested solely in securities directly guaranteed by the U.S. government or its agencies and rated "AAAf' by S&P or a comparable rating by Moody's. "Person" means an individual, corporation, limited liability company, firm, association, partnership, trust, or other legal entity or group of entities, including a governmental entity or any agency or political subdivision thereof. 77W1s1z 7 "Prepayment Account" means the account by that name within the Installment Payment Fund established in accordance with Section 5.02 hereof. "Principal Account" means the account by that name within the Installment Payment Fund established in accordance with Section 5.02 hereof. "Principal Office" means the Trustee's principal corporate trust office in Los Angeles, California. "Principal Payment Date" means a date on which an Installment Payment evidenced by the Revenue Obligations becomes due and payable. "Project" has the meaning ascribed thereto in the recitals hereto. "Record Date" means, with respect to the interest payable on any Interest Payment Date, the 15th day of the calendar month immediately preceding such Interest Payment Date, whether or not such day is a Business Day. "Refunded Certificates" means $ in aggregate principal amount of the Prior Certificates maturing in the [year 2033]. "Revenue Obligations" means the Orange Canty Sanitation District Wastewater Refunding Revenue Obligations, Series 2012A, executed and delivered by the Trustee pursuant hereto, which are certificates of participation, evidencing direct, undivided fractional interests in the Installment Purchase Agreement and the related Installment Payments, and the interest thereon. "S&P" means Standard & Poor's Ratings Services, a division of The McGraw-Hill Companies, Inc., a corporation organized and existing under the laws of the State of New York, its successors and assigns, except that if such entity shall no longer perform the functions of a securities rating agency for any reason, the term "S&P" shall be deemed to refer to any other nationally recognized securities rating agency selected by the District. "State" means the State of California. "Trust Agreement" means this Trust Agreement, dated as of March 1, 2012, by and among the Trustee, the Corporation and the District, as originally executed and delivered and as it may from time to time be amended or supplemented in accordance with the provisions hereof. "Trustee" means Union Bank, N.A., a national banking association duly organized mid existing under the laws of the United States of America, or any other bank or trust company which may at any time be substituted in its place as provided in Section 8.02 hereof. "Written Certificate" and "Written Request' mean (a) with respect to the Corporation, a written certificate or written request, respectively, signed in the name of the Corporation by an Authorized Corporation Representative, and (b) with respect to the District, a written certificate or written request, respectively, signed in the name of the District by an Authorized District Representative. Any such certificate or request may, but need not, be combined in a single 77W1R12 8 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 Tenn which is given a different meaning under this Trust Agreement than under the Installment Purchase Agreement, as used herein it shall have the meaning given herein. Section 1.03. Equal Security. In consideration of the acceptance of the Revenue Obligations by the Owners, this Trust Agreement shall be deemed to be and shall constitute a contract between the Trustee and the Owners to secure the full and final payment of the interest and principal evidenced by the Revenue Obligations which may be executed and delivered hereunder, subject to each of the agreements, conditions, covenants and terms contained herein; and all agreements, conditions, covenants and 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 Revenue Obligations over any other Revenue Obligations by reason of the number or date thereof or the time of execution or delivery thereof or for any cause whatsoever, except as expressly provided herein or therein. ARTICLE 11 TERMS AND CONDITIONS OF REVENUE OBLIGATIONS Section 2.01. Preparation and Defivery of Revenue Obligations. The Trustee is hereby authorized, upon the Written Request of the District, to execute and deliver the Revenue Obligations in the aggregate principal amount of S , evidencing the aggregate principal amount of the Installment Payments and each evidencing a direct, fractional undivided interest in the Installment Payments, and the interest thereon. The Installment Payments- evidenced by each Revenue Obligation shall constitute the principal evidenced thereby and the interest on such Installment Payments shall constitute the interest evidenced thereby. The Revenue Obligations shall be numbered, with or without prefixes, as directed by the Trustee. Section 2.02. Denomination, Medium and Dating of Revenue Obligations. The Revenue Obligations shall be designated "Orange County Sanitation District Wastewater Refunding Revenue Obligations, Series 2012A" and shall be prepared in the form of fully registered Revenue Obligations, without coupons, in Authorized Denominations and shall be payable in lawful money of the United States of America. The Revenue Obligations shall be dated as of the Closing Date. Each Revenue Obligation shall evidence interest from the Interest Payment Date next preceding its date of execution to which interest has been paid in full, unless such date of execution shall be after a Record Date and on or prior to the following Interest Payment Date, in which case such Revenue 77W1s1z 9 Obligation shalt evidence interest from such Interest Payment Date, or unless such date of execution shall be on or prior to July 15, 2012, in which case such Revenue Obligation shall represent interest from the Closing Date. Notwithstanding, the foregoing, if, as shown by the records of the Trustee, interest evidenced by the Revenue Obligations shall be in default, each Revenue Obligation shall evidence interest from the last Interest Payment Date to which such interest has been paid in full or duly provided for. Section 2.03. Pavment Dates of Revenue Obligations; Interest Computation. (a) Method and Place of Payment. The principal evidenced by the Revenue Obligations shall become due mid payable, subject to prior prepayment, on February 1 of the years, in the amounts, and shall evidence interest accruing at the rates per annum set forth below: Principal Payment Date Principal Interest (February 1) Component Rate Except as otherwise provided in the Letter of Representations, payments of interest evidenced by the Revenue Obligations shall be made to the Owners thereof(as determined at the close of business on the Record Date next preceding the related Interest Payment Date) by check or draft of the Trustee mailed to the address of each such Owner as it appears on the registration books maintained by the Trustee pursuant to Section 2.07 hereof, or to such other address as may be famished in writing to the Trustee by each such Owner. Except as otherwise provided in the Letter of Representations, payment of principal and prepayment premium, if any, evidenced by the Revenue Obligations, on their stated Principal Payment Dates or on prepayment in whole or in part prior thereto, shall be made only upon presentation and surrender of the Revenue Obligations at the Principal Office, (b) Computation oflnterest. The interest evidenced by the Revenue Obligations shall be payable on each Interest Payment Date to and including their respective Principal Payment Dates or prepayment prior thereto, and shall represent the sum of the interest on the Installment Payments coming due on the Interest Payment Dates in each yew. The principal evidenced by the Revenue Obligations shall be payable on their respective Principal Payment Dates in each year and shall represent the Installment Payments coming due on the Principal Payment Dates in each year, Interest evidenced by the Revenue Obligations shall be computed on the basis of a 360-day year consisting of twelve 30-day months. Section 2.04. Form of Revenue Obligations. The Revenue Obligations shall be in substantially the form of Exhibit A hereto, with necessary or appropriate insertions, omissions and variations as permitted or required hereby. 77W1s1z 10 Section 2.05. Execution of Revenue Obligations and Replacement Certificates. The Revenue Obligations shall be executed by the Trustee by the manual signature of an authorized signatory of the Trustee. The Trustee shall deliver replacement Revenue Obligations in the manner and as contemplated by this Article. Such replacement Revenue Obligations shall be executed as herein provided 'mid shall be in Authorized Denominations. Section 2.06, Transfer and Pavment of Revenue Obligations; Exchan a of Revenue Obligations. Each Revenue Obligation is transferable by the Owner thereof, in person or by his attorney duly authorized in writing, at the Principal Office, on the registration books maintained by the Trustee pursuant to the provisions of Section 2.07 hereof, upon surrender of such Revenue Obligation for cancellation accompanied by delivery of a duly executed written instrument of transfer in a form acceptable to the Trustee. The Trustee may treat the Owner of any Revenue Obligation as the absolute owner of such Revenue Obligation for all purposes, whether or not the principal or interest evidenced by such Revenue Obligation shall be overdue, and the Trustee shall not be affected by any knowledge or notice to the contrary; and payment of the interest and principal evidenced by such Revenue Obligation shall be made only to such Owner, which payments shall be valid and effectual to satisfy and discharge the liability evidenced by such Revenue Obligation to the extent of the sum or sums so paid. Whenever any Revenue Obligation shall be surrendered for transfer, the Trustee shall execute and deliver a new Revenue Obligation or Revenue Obligations evidencing principal in the same aggregate amount and having the same stated Principal Payment Date. The Trustee shall require the payment by any Owner requesting such transfer of any tax or other governmental charge required to be paid with respect to such transfer. Each Revenue Obligation may be exchanged at the Principal Office for Revenue Obligations evidencing principal in a like aggregate principal amount having the same stated Principal Payment Date in such Authorized Denominations as the Owner thereof may request The Trustee shall require the payment by the Owner requesting such exchange of any tax or other governmental charge required to be paid with respect to such exchange. Section 2.07. Revenue Obligation Registration Books. The Trustee shall keep at its Principal Office sufficient books for the registration and transfer of the Revenue Obligations, which books shall be available for inspection and copying by the District at reasonable hours and under reasonable conditions; and upon presentation for such purpose the Trustee shall, under such reasonable regulations as it may prescribe, register or transfer the Revenue Obligations on such books as hereinabove provided. Section 2.08. Temporary Revenue Obligations. The Revenue Obligations may be initially delivered in temporary form exchangeable for definitive Revenue Obligations when ready for delivery, which temporary Revenue Obligations shall be printed, lithographed or typewritten, shall be of such denominations as may be determined by the Trustee, shall be in Fully registered form and shall contain such reference to any of the provisions hereof as may be appropriate. Every temporary Revenue Obligation shall be executed and delivered by the Trustee upon the same conditions and terms and in substantially the same manner as definitive Revenue Obligations. If the Trustee executes and delivers temporary Revenue Obligations, it shall prepare and execute definitive Revenue Obligations without delay, and thereupon the 77W1812 11 temporary Revenue Obligations may be surrendered at the Principal Office in exchange for such definitive Revenue Obligations, and until so exchanged such temporary Revenue Obligations shall be entitled to the same benefits hereunder as definitive Revenue Obligations executed and delivered hereunder. Section 2.09. Revenue Obligations Mutilated, Lost, Destroyed or Stolen. If any Revenue Obligation shall become mutilated, the Trustee, at the expense of the Owner thereof, shall execute and deliver a new Revenue Obligation evidencing a like principal amount and having the same stated Principal Payment Date and number in exchange and substitution for the Revenue Obligation so mutilated, but only upon surrender to the Trustee of the Revenue Obligation so mutilated. Every mutilated Revenue Obligation so surrendered to the Trustee shall be canceled by it. If any Revenue Obligation shall be lost, destroyed or stolen, evidence of such loss, destruction or theft may be submitted to the Trustee, and if such evidence is satisfactory to the Trustee and indemnity satisfactory to the Trustee shall be given, the Trustee, at the expense of the Owner thereof, shall execute and deliver a new Revenue Obligation evidencing a like principal amount and having the same stated Principal Payment Date, numbered as the Trustee shall determine, in lieu of and in substitution for the Revenue Obligation so lost, destroyed or stolen. The Trustee may require payment of a sum not exceeding the actual cost of preparing each new Revenue Obligation executed and delivered by it under this Section and of the expenses which may be incurred by it under this Section. Any Revenue Obligation executed and delivered under the provisions of this Section in lieu of any Revenue Obligation alleged to be lost, destroyed or stolen shall be equally and proportionately entitled to the benefits hereof with all other Revenue Obligations executed and delivered hereunder, and the Trustee shall not be required to treat both the original Revenue Obligation and any replacement Revenue Obligation as being Outstanding for the purpose of determining the amount of Revenue Obligations which may be executed mid delivered hereunder or for the purpose of determining ally percentage of Revenue Obligations Outstanding hereunder, but both the original and replacement Revenue Obligation shall be treated as one and the same. Notwithstanding any other provision of this Section, in lieu of executing and delivering a new Revenue Obligation for a Revenue Obligation which has been lost, destroyed or stolen and which evidences principal that is then payable, the Trustee may make payment of such Revenue Obligation to the Owner thereof if so instructed by the District. Section 2.10, Book-Entry System. (a) The Revenue Obligations shall be initially executed and delivered as Book-Entry Certificates, and the Revenue Obligations for each stated Principal Payment Date shall be in the form of a separate single fully registered Revenue Obligation (which may be typewritten). Upon initial execution and delivery, the ownership of each Revenue Obligation shall be registered in the registration books maintained by the Trustee in the name of the Nominee, as nominee of the Depository. Payment of principal or interest evidenced by any Book-Entry Certificate registered in the name of the Nominee shall be made on the applicable Interest Payment Date by wire transfer of New York clearing house or equivalent next day funds or by wire transfer of same day finds to the account of the Nominee. Such payments shall be made to the Nominee at the address which is, on the Record Date, shown for the Nominee in the registration books maintained by the Trustee. (b) With respect to Book-Entry Certificates, the District, the Corporation and the Trustee shall have no responsibility or obligation to any Participant or to any Person on behalf of 77W1siz 12 which such a Participant holds an interest in such Book-Entry Certificates. Without limiting the immediately preceding sentence, the District, the Corporation and the Trustee shall have no responsibility or obligation with respect to fit the accuracy of the records of the Depository, the Nominee or any Participant with respect to any ownership interest in Book-Entry Certificates, (if) the delivery to any Participant or any other Person, other than an Owner as shown in the registration books maintained by the Trustee, of any notice with respect to Book-Entry Certificates, including any notice of prepayment, (in) the selection by the Depository and its Participants of the beneficial interests in Book-Entry Certificates to be prepaid in the event Revenue Obligations are prepaid in part, (iv) the payment to any Participant or any other Person, other than an Owner as shown in the registration books maintained by the Trustee, of any amount with respect to principal, premium, if any, or interest evidenced by Book-Entry Certificates, or(v) any consent given or other action taken by the Depository as Owner. (c) The District, the Corporation and the Trustee may treat and consider the Person in whose name each Book-Entry Certificate is registered in the registration books maintained by the Trustee as the absolute Owner of such Book-Entry Certificate for the purpose of payment of principal, prepayment premium, if any, and interest evidenced by such Revenue Obligation, for the propose of selecting any Revenue Obligations, or portions thereof, to be prepaid, for the purpose of giving notices of prepayment and other matters with respect to such Revenue Obligation, for the purpose of registering transfers with respect to such Revenue Obligation, for the propose of obtaining any consent or other action to be taken by Owners and for all other proposes whatsoever, and the District, the Corporation and the Trustee shall not be affected by MAY notice to the contrary. (d) Reserved. (e) The Trustee shall pay all principal, premium, if any, and interest evidenced by the Revenue Obligations to the respective Owner, as shown in the registration books maintained by the Trustee, or his respective attorney duly authorized in writing, and all such payments shall be valid and effective to fully satisfy and discharge the obligations with respect to payment of principal, premium, if any, and interest evidenced by the Revenue Obligations to the extent of the sum or sums so paid. No Person other than an Owner, as shown in the registration books maintained by the Trustee, shall receive a Revenue Obligation evidencing principal, premium, if any, and interest evidenced by the Revenue Obligations. Upon delivery by the Depository to the Owners, the Trustee and the District of written notice to the effect that the Depository has determined to substitute a new nominee in place of the Nominee, and subject to the provisions herein with respect to Record Dates, the word Nominee in this Trust Agreement shall refer to such nominee of the Depository. (t) To qualify the Book-Entry Certificates for the Depository's book-entry system, the District shall execute and deliver to the Depository a Letter of Representations. The execution and delivery of a Letter of Representations shall not in any way impose upon the Corporation, the District or the Trustee any obligation whatsoever with respect to Persons having interests in such Book-Entry Certificates other than the Owners, as shown on the registration books maintained by the Trustee. Such Letter of Representations may provide the time, form, content and manner of transmission, of notices to the Depository. In addition to the execution and delivery of a Letter of Representations by the District, the District, the Corporation and the 77W1s1z 13 Trustee shall take such other actions, not inconsistent with this Trust Agreement, as are reasonably necessary to qualify Book-Entry Certificates for the Depository's book-entry program. (g) If the District determines that it is in the best interests of the Beneficial Owners that they be able to obtain certificated Revenue Obligations and that such Revenue Obligations should therefore be made available and notifies the Depository and the Trustee of such determination, the Depository will notify the Participants of the availability through the Depository of certificated Revenue Obligations. In such event, the Trustee shall transfer and exchange certificated Revenue Obligations as requested by the Depository mid any other Owners- in appropriate amounts. In the event (i) the Depository determines not to continue to act as securities depository for Book-Entry Certificates, or(it) 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, filly registered Revenue Obligation for each stated Principal Payment Date of such Book-Entry Certificates, registered in the name of such successor or substitute qualified securities depository or its nominee. If the District fails to identify another qualified securities depository to replace the Depository, then the Revenue Obligations shall no longer be restricted to being registered in the registration books maintained by the Trustee in the name of the Nominee, but shall be registered in whatever name or names the Owners transferring or exchanging such Revenue Obligations shall designate, in accordance with the provisions of Sections 2.06 and 2.09 hereof. Whenever the Depository requests the District to do so, the District will cooperate with the Depository in taking appropriate action after reasonable notice (i) to make available one or more separate certificates evidencing the Book-Entry Certificates to any Participant having Book-Entry Certificates credited to its account with the Depository, and (if) to arrange for another securities depository to maintain custody of certificates evidencing the Book-Entry Certificates. (h) Notwithstanding any other provision of this Trust Agreement to the contrary, if DTC is the sole Owner of the Revenue Obligations, so long as any Book-Entry Certificate is registered in the name of the Nominee, all payments of principal, premium, if any, and interest evidenced by such Revenue Obligation and all notices with respect to such Revenue Obligation shall be made and given, respectively, as provided in the Letter of Representations or as otherwise instructed by the Depository. G) In connection with any notice or other communication to be provided to Owners pursuant to the Trust Agreement by the District, the Corporation or the Trustee, with respect to any consent or other action to be taken by Owners, the Trustee shall establish a record date for such consent or other action and give the Depository notice of such record date not less than 15 calendar days in advance of such record date to the extent possible. Notice to the Depository shall be given only when DTC is the sole Owner of the Revenue Obligations. 77W1s1z 14 ARTICLE ill PROCEEDS OF REVENUE OBLIGATIONS Section 3.01, Delivery of Revenue Obligations. The Trustee is hereby authorized to execute the Revenue Obligations and deliver the Revenue Obligations to the original purchaser thereof upon receipt of a Written Request of the District and upon receipt of the proceeds of sale thereof. Section 3.02, Deposit of Proceeds of Revenue Obligations, The net proceeds received by the Trustee from the sale of the Revenue Obligations in the amount of S (which amount includes the security deposit for the Revenue Obligations in the amount of $ ) shall be deposited or transferred by the Trustee as follows: (a) the Trustee shall deposit in the Costs of Issuance Fund the amount of $ ; and (b) the Trustee shall transfer to the Escrow Agent for deposit in the Escrow Fund the amount of S , to defease and refund the Refunded Certificates. 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 propose for which the obligation was incurred and that such payment is a proper charge against the Costs of Issuance Fund. On the date that is six months after the Closing Date, the Trustee shall transfer any amounts then remaining in the Costs of Issuance Fund to the Installment Payment Fund. Upon such transfer, the Costs of Issuance Fund shall be closed. Section 3.04. Reserved. ARTICLE IV PREPAYMENT OF REVENUE OBLIGATIONS Section 4.01. Optional Prepavment. The Revenue Obligations are subject to optional prepayment prior to their stated Principal Payment Dates, on any date on or after 1, 2022, in whole or in part, in Authorized Denominations, from mid to the extent of prepaid Installment Payments paid pursuant to Section 4.01 of the Installment Purchase Agreement or from any other source of available funds, any such prepayment to be at a price equal to the principal evidenced by the Revenue Obligations to be prepaid, plus accrued interest evidenced thereby to the date fixed for prepayment, without premium. Section 4.02. Reserved. 77W1s1z 15 Section 4.03. Selection of Revenue Obligations for Optional Prepavment. Whenever less than all the Outstanding Revenue Obligations are to be prepaid on any one date pursuant to Section 4.01 hereof, with respect to optional prepayment of Revenue Obligations, the Trustee shall select the Revenue Obligations to be prepaid among Revenue Obligations with different Principal Payment Dates as directed in a Written Request of the District. Whenever less than all the Outstanding Revenue Obligations with the same stated Principal Payment Date are to be prepaid on any one date pursuant to Section 4.01 hereof, the Trustee shall select the Revenue Obligations with such Principal Payment Date to be prepaid as directed in a Written Request of the District, or at the discretion of the District by lot in any manner that the Trustee deems fair and appropriate, which decision shall be final and binding upon the District and the Owners. The Trustee shall promptly notify the District in writing of the numbers of the Revenue Obligations so selected for prepayment on such date. For purposes of such selection, any Revenue Obligation may be prepaid in part in Authorized Denominations. Section 4.04. Notice of Prepavment. When prepayment of Revenue Obligations is authorized pursuant to Section 4.01, the Trustee shall give notice, at the expense of the District, of the prepayment of the Revenue Obligations. The notice of prepayment shall specify (a)the Revenue Obligations or designated portions thereof(in the case of prepayment of the Revenue Obligations in part but not in whole) which are to be prepaid, (b)the date of prepayment, (c)the place or places where the prepayment will be made, including the name and address of any paying agent, (d) the prepayment price, (e) the CUSP numbers assigned to the Revenue Obligations to be prepaid, (f) the numbers of the Revenue Obligations to be prepaid in whole or in part and, in the case of any Revenue Obligation to be prepaid in part only, the principal evidenced by such Revenue Obligation to be prepaid, and (g) the interest rate and stated Principal Payrnent Date of each Revenue Obligation to be prepaid in whole or in part. Such notice of prepayment shall further state that on the specified date there shall become due and payable upon each Revenue Obligation or portion thereof being prepaid the prepayment price and that from and after such date interest evidenced thereby shall cease to accrue and be payable. With respect to any notice of prepayment of Revenue Obligations pursuant to Section 4.01 hereof, unless at the time such notice is given the Revenue Obligations to be prepaid shall be deemed to have been paid within the meaning of Section 10.01 hereof, such notice shall state that such prepayment is conditional upon receipt by the Trustee, on or prior to the date fixed for such prepayment, of moneys sufficient to pay for the prepayment price of the Revenue Obligations to be prepaid, and that if such moneys shall not have been so received said notice shall be of no force and effect and the District shall not be required to prepay such Revenue Obligations. ]f a notice of prepayment of Revenue Obligations contains such a condition and such moneys are not so received, the prepayment of Revenue Obligations as described in the conditional notice of prepayment shall not be made and the Trustee shall, within a reasonable time after the date on which such prepayment was to occur, give notice to the persons and in the manner in which the notice of prepayment was given, that such moneys were not so received and that there shall be no prepayment of Revenue Obligations pursuant to such notice of prepayment. The Trustee shall, at least 20 but not more than 60 days prior to any prepayment date, give notice of prepayment to the respective Owners of Revenue Obligations designated for prepayment by first-class mail, postage prepaid, at their addresses appearing on the registration books maintained by the Trustee as of the close of business on the day before such notice of prepayment is given. 77W1s1z 16 The actual receipt by the Owner of any notice of such prepayment shall not be a condition precedent to prepayment, and neither failure to receive such notice nor any defect therein shall affect the validity of the proceedings for the prepayment of such Revenue Obligations or the cessation of interest evidenced thereby on the date fixed for prepayment. A certificate by the Trustee that notice of prepayment has been given to Owners as herein provided shall be conclusive as against all parties, and no Owner whose Revenue Obligation is called for prepayment may object thereto or object to the cessation of interest evidenced thereby on the fixed prepayment date by any claim or showing that said Owner failed to actually receive such notice of prepayment. Section 4.05. Partial Pre a went of Revenue Obligations. Upon surrender of any Revenue Obligation prepaid in part only, the Trustee shall execute and deliver to the Owner thereof a new Revenue Obligation or Revenue Obligations evidencing the unprepaid principal with respect to the Revenue Obligation surrendered. Section 4.06. Effect of Prepayment. If notice of prepayment has been duty given as aforesaid and moneys for the payment of the prepayment price of the Revenue Obligations to be prepaid are held by the Trustee, then on the prepayment date designated in such notice, the Revenue Obligations so called for prepayment shall become payable at the prepayment price specified in such notice; and from and after the date so designated, interest evidenced by the Revenue Obligations so called for prepayment shall cease to accrue, such Revenue Obligations shall cease to be entitled to any benefit or security hereunder and the Owners of such Revenue Obligations shall have no rights in respect thereof except to receive payment of the prepayment price thereof. The Trustee shall, upon surrender for payment of any of the Revenue Obligations to be prepaid, pay such Revenue Obligations at the prepayment price thereof, and such moneys shall be pledged to such payment. All Revenue Obligations prepaid pursuant to the provisions of this Article shall be canceled by the Trustee and shall not be redelivered. ARTICLE V ASSIGNMENT AND PLEDGE; FUNDS AND ACCOUNTS Section 5.01. Assignment and Pledge. The Corporation hereby transfers, conveys and assigns to the Trustee, for the benefit of the Owners, all of the Corporation's rights, title and interest in and to the Installment Purchase Agreement (excepting its rights to indemnification thereunder), including the right to receive Installment Payments, and the interest thereon, from the District mid the right to exercise any remedies provided therein in the event of a default by the District thereunder. The Trustee hereby accepts said transfer, conveyance and assignment, solely in its capacity as Trustee, for the benefit of the Owners, subject to the provisions of this Trust Agreement, All Installment Payments, and the interest thereon, shall be paid directly by the District to the Trustee, and if received by the Corporation at any time shall be deposited by the Corporation with the Trustee immediately upon the receipt thereof. To secure the respective rights of the Owners to the payments required to be made thereto as provided herein, the Corporation and the District hereby irrevocably pledge to the Trustee, for the benefit of the Owners, all of their right, title and interest, if any, in and to all amounts on 77W1siz 17 deposit from time to time in the funds and accounts established hereunder. This pledge shall constitute a first lien on the amounts on deposit in such funds and accounts. Section 5.02. Installment Payment Fund. (a) The Trustee shall establish and maintain the Installment Payment Fund until all required Installment Payments, and the interest thereon, are paid in full pursuant to the Installment Purchase Agreement and until the first date upon which the Revenue Obligations are no longer Outstanding. The Trustee shall deposit in the Installment Payment Fund all Installment Payments, and the interest thereon, paid by the District and received by the Trustee. The moneys in the Installment Payment Fund shall be held in trust by the Trustee for the benefit of the Owners and shall be used and disbursed only for the purposes and uses herein authorized. (b) The Trustee shall transfer the amounts on deposit in the Installment Payment Fund, at the times and in the manner hereinafter provided, to the following respective accounts within the Installment Payment Fund, each of which the Trustee hereby agrees to establish and maintain until all required Installment Payments, and the interest thereon, are paid in full pursuant to the Installment Purchase Agreement and until the first date upon which the Revenue Obligations are no longer Outstanding. The moneys in each of such accounts shall be held in trust by the Trustee for the benefit of the Owners and shall be used and disbursed only for the purposes and uses herein authorized. (i) Interest Account. The Trustee, on each Interest Payment Date, shall deposit in the Interest Account that amount of moneys representing the interest on the Installment Payments coming due on such Interest Payment Date. Moneys in the Interest Account shall be used by the Trustee for the purpose of paying the interest evidenced by the Revenue Obligations when due and payable. (it) Principal Account. The Trustee, on each Principal Payment Date, shall deposit in the Principal Account that amount of moneys representing the Installment Payments coming due on such Principal Payment Date. Moneys in the Principal Account shall be used by the Trustee for the propose of paying the principal evidenced by the Revenue Obligations when due and payable. (in) 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 and any premium payable with respect thereto. The Trustee shall deposit in the Prepayment Account any other amounts made available by the District that the District, pursuant to a Written Request of the District, instructs the Trustee to apply to the prepayment of Revenue Obligations pursuant to Section 4.01 hereof. Moneys in the Prepayment Account shall be used by the Trustee for the purpose of paying the interest, premium, if any, and principal evidenced by the Revenue Obligations to be prepaid pursuant to Section 4.01 hereof. Section 5.03. Reserved. 77W1s1z 18 Section 5.04. Investment of Moneys. Except as otherwise provided herein, all moneys in any of the finds 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 fur 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 registerabte securities shalt be registered in the name of the Trustee. All interest, profits and other income received from the investment of moneys in any fund or account established pursuant to this Trust Agreement shall be retained therein. Permitted Investments acquired as an investment of moneys in any fund or account established under this Trust Agreement shall be credited to such fund or account. For the purpose of determining the amount in any fund, all Permitted Investments credited to such fund shall be valued by the Trustee at the market value thereof, such valuation to be performed not less frequently than semiannually on or before each January 15 and July t5. The Trustee or an affiliate may act as principal or agent in the making or disposing of any investment. The Trustee shall sell or present for redemption any Permitted Investment whenever it shall be necessary to provide moneys to meet any required payment, transfer, withdrawal or disbursement from the fund or account to which such Permitted Investment is credited, and the Trustee shall not be liable or responsible for any loss resulting from any investment made or sold pursuant to this Section. For purposes of investment, the Trustee may commingle moneys in any of the funds and accounts established hereunder. The Trustee is hereby authorized, in making or disposing of any investment permitted by this Section, to deal with itself (in its individual capacity) or with any one or more of its affiliates, whether or not such affiliate is acting as an agent of the Trustee or for any third Person or dealing as principal for its own account. Section 5.05. Brokera¢e 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 Trust and Custody Service and upon electing such service, paper statements will be provided only upon request. The District waives the right to receive brokerage confirmations of securities 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 77W1s1z 19 ARTICLE VI COVENANTS Section 6.01, Compliance with Trust Agreement. The Trustee will not execute or deliver any Revenue Obligations in any manner other than in accordance with the provisions hereof, and the Corporation and the District will not suffer or permit any default by them to occur hereunder, but will faithfully comply with, keep, observe and perform all the agreements, conditions, covenants and terms hereof required to be complied with, kept, observed and performed by them. Section 6.02. Compliance with Installment Purchase A reement. 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, wilt 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 wilt faithfully comply with, keep, observe and perform all the agreements, conditions, covenants and terms contained in the Master Agreement required to be complied with, kept, observed and performed by them and, together with the Trustee, will enforce the Master Agreement against the other party thereto in accordance with its terns. Section 6.04. Observance of Laws and Regulations. The Corporation and the District will faithfully comply with, keep, observe and perform all valid and lawful obligations or regulations now or hereafter imposed on them by contract, or prescribed by any law of the United States of America or of the State, or by any officer, board or commission having jurisdiction or control, as a condition of the continued enjoyment of each and every franchise, right or privilege now owned or hereafter acquired by them, including their right to exist and cant' 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 sutler 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 Ovmer upon any claim arising out of the receipt, deposit or disbursement of any of the Installment Payments, or the interest thereon, or involving the rights of the Trustee or any Owner hereunder; provided, however, that the Trustee or any Owner at its or his election may appear in and defend any such action, suit or other proceeding. Section 6.07. Accounting Records and Statements. The Trustee will keep proper accounting records in which complete and correct entries shall be made of all transactions made by the Trustee relating to the receipt, deposit and disbursement of the Installment Payments, and 77W1s1z 20 the interest thereon, and such accounting records shall be available for inspection by the Corporation and the District at reasonable hours and under reasonable conditions. The Trustee shall not be obligated to provide an accounting for any fund or account that (a) has a balance of $0.00 and (b) has not had any activity since the last reporting date. The Trustee will, upon written request, make copies of the foregoing available to any Owner (at the expense of such Owner). Section 6.08. Tax Covenants. (a) Special Definitions. When used in this Section, the following terms shall have the following meanings: "Bond Counsel" means Fulbright& Jaworski L.L.P. or any other counsel of recognized national standing in the field of law relating to municipal bonds, appointed and paid by the District 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 Revenue Obligations and concluding on the initial Computation Date and, thereafter, each period commencing on the day next following a Computation Date and concluding on the immediately succeeding Computation Date. "Gross Proceeds" of any issue of governmental obligations means any proceeds as defined in section 1.148-1(b) of the Tax Regulations (referring to sales, investment and transferred proceeds) of that issue, and any replacement proceeds as defined in section 1.148- 1(c) of the Tax Regulations, of that issue. "Investment" has the meaning set forth in section 1.148-1(b) of the Tax Regulations. "Nonputpose InvestmenF' 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 proposes of that issue. "Opinion of Bond Counsel" means a written opinion of Fulbright& Jaworski L.L.P. or any other counsel of recognized national standing in the field of law relating to municipal bonds, appointed and paid by the District and reasonably satisfactory to and approved by the Trustee. -Prior Issue" shall refer to the Refunded Certificates (but in the case of any of the foregoing executed and delivered for multiple purposes, only to the portion thereof allocable pursuant to section 1.148-9(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). "Rebate Amount"has the meaning set forth in section 1.148-1(b) of the Tax Regulations, 77W1s1z 21 "Tar Regulations" means the United States Treasury Regulations promulgated pursuant to sections 103 and 141 through 150 of the Code. "1 ield' of (i) any Investment has the meaning set froth in section 1.148-5 of the Tax Regulations and (ii) in respect of the Revenue Obligations has the meaning set forth in section 1.148-4 of the Tax Regulations. (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 Revenue Obligations from the gross income of the owners thereof for federal income tax purposes, and will not use, permit the use of, or omit to use Gross Proceeds of the Revenue Obligations or any other amounts (or any property the acquisition, construction or improvement of which is to be refinanced directly or indirectly with Gross Proceeds) in a manner that if made or omitted, respectively, would cause the interest on any Revenue Obligation to fail to be excluded pursuant to section 103(a) of the Code from the gross income of the owners thereof for federal income tax purposes. Without limiting the generality of the foregoing, unless and until the Trustee receives a written Opinion of Bond Counsel to the effect that failure to comply with such covenant will not adversely affect the exclusion pursuant to section 103(a) of the Code of interest on any Revenue Obligation from the gross income of the owner thereof, the District shall comply with this covenant and each of the specific covenants in this Section. (c) No Private Use or Private Payments. Except as would not cause any Revenue Obligation to become a "private activity bond" within the meaning of section 141 of the Code and the Tax Regulations and mlings thereunder, the District shall at all times prior to the payment and cancellation of the last of the Revenue Obligations to be retired- (i) exclusively own, operate and possess all property the acquisition, construction or improvement of which is to be financed or refinanced directly or indirectly with Gross Proceeds of the Revenue Obligations mid 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 the Prior Issue in any activity carried on by any person or entity (including the United States or any agency, department and instrumentality thereof) other than a state or local government, unless such use is solely as a member of the general public; and (ii) does not directly or indirectly impose or accept any charge or other payment by any person or entity who is treated as using Gross Proceeds of the Revenue Obligations or of the Prior Issue, or any property the acquisition, construction or improvement of which is to be financed or refinanced directly or indirectly with such Gross Proceeds, other than taxes of general application within the jurisdiction of the District or interest earned on investments acquired with such Gross Proceeds pending application for their intended purposes. (d) No Private Loan. Except as would not cause any Revenue Obligation to become a"private activity bond" within the meaning of section 141 of the Code and the Tax Regulations and ratings thereunder, the District shall not use of Gross Proceeds of the Revenue Obligations to 77W1siz 22 make or finance loans to any person or entity other than a state or local government. For purposes of the foregoing covenant, such Gross Proceeds are considered to be "loaned" to a person or entity if. (i) property acquired, constructed or improved with such Gross Proceeds is sold or leased to such person or entity in a transaction that creates a debt for federal income tax purposes; (if) 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 (in) indirect benefits of such Gross Proceeds, or burdens and benefits of ownership of any property acquired, constructed or improved with such Gross Proceeds, are otherwise transferred in a transaction that is the economic equivalent of a loan. For purposes of this covenant, the District will treat any transaction constituting a loan of Gross Proceeds of the Prior Issue as resulting in a loan of Gross Proceeds of the Revenue Obligations. (e) Not to Invest at Nigher Yield. Except as would not cause any Revenue Obligation to become an "arbitrage bond"within the meaning of section 148 of the Code and the Tax Regulations and rulings thereunder, the District will not, at any time prior to the final cancellation of the last Revenue Obligation to be retired, directly or indirectly invest Gross Proceeds of the Revenue Obligations in any Investment, if as a result of that investment the yield of any Investment acquired with Gross Proceeds of the Revenue Obligations, whether then held or previously disposed of', would materially exceed the yield of the Revenue Obligations within the meaning of said section 148. (t) Not Federally Guaranteed. Except to the extent such action or failure to act would not pursuant to section l49(b) of the Code mid the Tax Regulations and rulings- thereunder, adversely affect the exclusion pursuant to section 103(a) of interest on the Revenue Obligations from the gross income of the owners thereof for federal income tax purposes, the District will not take or omit to take any action that would cause any Revenue Obligation to be "federally guaranteed" within the meaning of section 149(b) of the Code and the Tax Regulations and rulings thereunder. (g) Information Retort. The District will timely file any information necessary to the exclusion pursuant to section 103(a) of the Code of interest on the Revenue Obligations required by section 149(e) of the Code with the Secretary of the Treasury on Form 8038-G or such other form and in such place as the Secretary of the Treasury may prescribe. (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 Revenue Obligations to be retired, enter into any transaction that reduces the amount required to be paid to the United States pursuant to section 148(I) of the Code because such transaction results in a smaller profit or a lager loss than would have resulted if the transaction had been at ann's length and had the yield on the Revenue Obligations not been relevant to either party. 0) Revenue Obligations Satisfy Section 149(g). The District represents that neither the Prior Issue nor the Revenue Obligations are or will become "hedge bonds" within the meaning of section 149(g) of the Code. Without limitation of the foregoing, with respect to the Prior Issue, (i)(A) on the date of issuance of that issue the District reasonably expected (based upon its own knowledge and upon representations made by other governmental persons upon the 77W 181 z 23 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 Revenue Obligations other than for refunding purposes, (ii)(A) the District will not deliver the Revenue Obligations unless on the date of the issuance of the Revenue Obligations it reasonably expects that within the three-year period commencing on such date of issuance at least 85% of such spendable proceeds of the Revenue Obligations will be expended for the governmental purpose of the Revenue Obligations and (B) at no time will more than 50% of such spendable proceeds of the Revenue Obligations be invested in Nonpu pose 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 Revenue Obligations, in the Tax Certificate(as defined below) 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 Revenue Obligations a Tax Certificate as to Arbitrage and the Provisions of Sections 141-150 of the Internal Revenue Code of 1986, or similar document containing additional representations and covenants pertaining to the exclusion of interest with respect to the Revenue Obligations from the gross income of the owners thereof for federal income tax purposes (the "Tax Certificate"), which representations and covenants are incorporated as though expressly set forth herein. Section 6.09. Confinuin2 Disclosure. The District wilt 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, tine Trustee at the request of any Participating Underwriter or the Owners of at least 25% aggregate principal amount of Outstanding Revenue Obligations and upon being indemnified to its reasonable satisfaction, shall, or any Owner or Beneficial Owner of' Revenue Obligations may take such actions as may be necessary and appropriate to compel performance, including seeking mandate or specific performance by court order. 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. 77W18iz 24 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 Revenue Obligations then Outstanding. In each and every case during the continuance of an Event of Default, the Trustee may and, at the direction of the Owners of not less than a majority of the aggregate principal evidenced by Revenue Obligations then Outstanding, shall, upon notice in writing to the District and the Corporation (a) exercise any of the remedies granted to the Corporation under the Installment Purchase Agreement, (b) exercise any of the remedies granted to the Trustee under the Master Agreement, and(c) take whatever action at law or in equity may appear necessary or desirable to enforce its rights pursuant to this Trust Agreement, the Installment Purchase Agreement or the Master Agreement or to protect and enforce any of the rights vested in the Trustee or the Owners by this Trust Agreement, the Revenue Obligations, the Installment Purchase Agreement or the Master Agreement, either at law or in equity or in 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. Sub)eat to the provisions of Section 7.01 hereof, the Trustee shall have the right: (a) by mandamus or other action or proceeding or suit at law or in equity to enforce its rights against the Corporation or the District or any member, director, officer or employee thereof, and to compel the Corporation or the District or any such member, director, officer or employee to perform or carry out its or his or her duties under law and the agreements and covenants required to be performed by it or him or her contained herein; (b) by suit in equity to enjoin any acts or things which we unlawful or violate the rights of the Trustee; or (e) 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. 77W1s1z 25 If any action, proceeding or suit to enforce any right or to exercise any remedy is abandoned or determined adversely to the Trustee or any Owner, then subject to any adverse determination, the Trustee,such Owner, the Corporation and the District shall be restored to their former positions, rights and remedies as if such action, proceeding or suit had not been brought or taken. Section 7.04. Remedies Not Exclusive. Subject to the provisions of Section 7.01 hereof, no remedy herein conferred upon or reserved to the Trustee is intended to be exclusive of any other remedy, and each such remedy shall be cumulative and shall be in addition to every other remedy given hereunder or now or hereafter existing in law or in equity or by statute or otherwise and may be exercised without exhausting and without regard to any other remedy conferred by any law. The assertion or employment of any right or remedy hereunder, or otherwise, shall not prevent the concurrent or subsequent assertion or employment of any other appropriate right or remedy. Section 7.05. 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 and thereafter applied: (a) to the payment of al I amounts due the Trustee under Section 8.03 hereof; (b) unless the unpaid Installment Payments, and the interest thereon, shall have become, and shall remain, immediately due and payable pursuant to the Master Agreement: 0) to the payment of all amounts than due for interest evidenced by the Revenue Obligations, in respect of which, or for the benefit of which, money has been collected (other than Revenue Obligations which have become payable prior to such Event of Default and money for the payment of which is held by the Trustee), ratably without preference or priority of any kind, according to the amounts of interest evidenced by such Revenue Obligations due and payable; and (it) to the payment of all amounts then due for principal evidenced by the Revenue Obligations, in respect of which, or for the benefit of which, money has been collected (other than Revenue Obligations which have become payable prior to such Event of Default and money for the payment of which is held by the Trustee), ratably without preference or priority of any kind, according to the amounts of principal evidenced by such Revenue Obligations due and payable. (c) if the unpaid Installment Payments, and the interest thereon, shall have become, and shall remain, immediately due and payable pursuant to the Master Agreement, to the payment of all amounts then due for principal and interest evidenced by the Revenue Obligations and, if the amount available therefor shall not be sufficient to pay in fill the whole amount so due and unpaid, then to the payment thereof ratably, without preference or priority of principal over interest, or of interest over principal, or of any installment of interest over any other installment of interest, or of any Revenue Obligation over any other Revenue Obligation, to the persons entitled thereto without any discrimination or preference. 77W1s1z 26 Section 7.06. Trustee Mav Enforce Claims Witbout Possession of Revenue Obligations. All rights of action and claims under this Trust Agreement or the Revenue Obligations may be prosecuted and enforced by the Trustee without the possession of any of the Revenue Obligations or the production thereof in any proceeding relating thereto, and any such proceeding instituted by the Trustee shalt be brought in its own name as trustee of an express trust, and any recovery of judgment shall, after provision for the payment of the reasonable compensation, expenses, disbursements and advances of the Trustee, its agents and counsel, be for the ratable benefit of the Owners of the Revenue Obligations in respect of which such judgment has been recovered. Section 7.07. Limitation on Suits. No Owner shall have any right to institute any proceeding,judicial or otherwise, with respect to this Trust Agreement, or for the appointment of a receiver or trustee, or for any other remedy hereunder, unless (a) such Owner shall have previously given written notice to the Trustee of a continuing Event of Default hereunder, (b)the Owners of not less than a majority of the aggregate principal evidenced by Revenue Obligations then Outstanding shall have made written request to the Trustee to institute proceedings in respect of such Event of Default in its own name as Trustee hereunder, (c) such Owner or Owners shall have afforded to the Trustee indemnity reasonably satisfactory to the Trustee against the costs, expenses and liabilities to be incurred in compliance with such request, (d)the Trustee for 60 days after its receipt of such notice, request and offer of indemnity shall have failed to institute any such proceedings, and (e)no direction inconsistent with such written request shalt have been given to the Trustee during such 60-day period by the Owners of a majority of the aggregate principal evidenced by Revenue Obligations then Outstanding; it being understood and intended that no one or more Owners of Revenue Obligations shall have any right in any manner whatever by virtue of, or by availing of, any provision of this Trust Agreement to affect, disturb or prejudice the rights of any other Owner of Revenue Obligations, or to obtain or seek to obtain priority or preference over any other Owner or to enforce any right under this Trust Agreement, except in the manner herein provided and for the equal and ratable benefit of all the Owners of Revenue Obligations. Section 7.08. No Liability by the Corporation to the Owners. Except as expressly provided herein, the Corporation shall not have any obligation or liability to the Owners with respect to the payment when due of the Installment Payments, and the interest thereon, by the District, or with respect to the performance by the District of the other agreements and covenants required to be performed by it contained in the Installment Purchase Agreement, the Master Agreement or herein, or with respect to the performance by the Trustee of any right or obligation required to be performed by it contained herein. Section 7.09, No Liability b v the District to the Owners. Except for the payment when due of the Installment Payments, and the interest thereon, and the performance of the other agreements and covenants required to be performed by it contained in the Installment Purchase Agreement, the Master Agreement or herein, the District shall not have any obligation or liability to the Owners with respect to this Trust Agreement or the preparation, execution, delivery or transfer of the Revenue Obligations or the disbursement of the Installment Payments, and the interest thereon, by the Trustee to the Owners, or with respect to the performance by the Trustee of any right or obligation required to be performed by it contained herein. 77W1siz 27 Section 7.10. No Liability of the Trustee to the Owners. Except as expressly provided herein, the Trustee shall not have any obligation or liability to the Owners with respect to the payment when due of the Installment Payments, and the interest thereon, by the District, or with respect to the performance by the Corporation or the District of the other agreements and covenants required to be performed by them, respectively contained in the Installment Purchase Agreement or herein. ARTICLE Vlll THE, TRUSTEE, Section 8.01. Employment of the Trustee; Duties. The Corporation and the District hereby appoint and employ the Trustee to receive, deposit and disburse the Installment Payments, and the interest thereon, to prepare, execute, deliver and transfer the Revenue Obligations and to perform the other functions contained herein, all in the ma t er provided herein and subject to the conditions and terns hereof. By executing and delivering this Trust Agreement, the Trustee accepts the appointment and employment hereinabove referred to and accepts the rights and obligations of the Trustee provided herein, subject to the conditions and terms hereof Other than when an Event of Default hereunder has occurred and is continuing, the Trustee undertakes to perform such duties and only such duties as are specifically set forth in this Trust Agreement, and no implied covenants or obligations shall be read into this Trust Agreement against the Trustee. In case an Event of Default has occurred and is continuing, the Trustee shall exercise such of the rights and powers vested in it by this Trust Agreement, and use the same degree of care and skill in their exercise, as a prudent person would exercise or use under the circumstances in the conduct of such person's own affairs. Section 8.02. Removal and Resignation of the Trustee. The Corporation and the District may, by an instrument in writing, remove the Trustee initially a party hereto and any successor thereto unless an Event of Default shall have occurred and then be continuing, and shall remove the Trustee initially a party hereto and any successor thereto if at any time (a) requested to do so by an instrument or concurrent instruments in writing signed by the Owners of a majority of the aggregate principal evidenced by the Revenue Obligations at the time Outstanding (or their attorneys duly authorized in writing), or (b)the Trustee shall cease to be eligible in accordance with the following sentence, and shall appoint a successor Trustee. The Trustee shall be a bank having trust powers or a oust 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 77W1s1z 28 the Trustee. Upon receiving such notice of resignation, the Corporation and the District shall promptly appoint a successor Trustee by an instrument in writing; provided, however, that in the event the District and the Corporation do not appoint a successor Trustee within 30 days following receipt of such notice of resignation, the resigning Trustee may, at the expense of the District, petition the appropriate court having jurisdiction to appoint a successor Trustee. Any resignation or removal of a Trustee and appointment of a successor Trustee shall become effective only upon acceptance of appointment by the successor Trustee. Any successor Trustee appointed under this Trust Agreement shall signify its acceptance of such appointment by executing and delivering to the District and the Corporation and to its predecessor Trustee a written acceptance thereof, and thereupon such successor Trustee, without any further act, deed or conveyance, shall become vested with all the moneys, estates, properties, rights, powers, trusts, duties and obligations of such predecessor Trustee, with like effect as if originally named Trustee herein; but, nevertheless, at the written request of the District or of the successor Trustee, such predecessor Trustee shall execute and deliver any and all instruments of conveyance or further assurance and do such other things as may reasonably be required for more fully and certainly vesting in and confirming to such successor Trustee all the right, title and interest of such predecessor Trustee in and to any property held by it under this Trust Agreement and shall pay over, transfer, assign and deliver to the successor Trustee any money or other property subject to the trusts and conditions herein set froth. 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 77W1s1z 29 in the performance of any of its duties hereunder or in the exercise of any of its rights or powers hereunder. The District, to the extent permitted by law, agrees to indemnify and save the Trustee, its directors, officers, employees and agents harmless against any liabilities which it may incur in the exercise and performance of its powers and duties hereunder, including but not limited to costs and expenses incurred in defending against any claim or liability, which are not due to its negligence or willful misconduct. Section 5.04, 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 Revenue Obligations pursuant to this Trust Agreement, unless such Owners shall have offered to the Trustee security or indemnity, reasonably satisfactory to the Trustee, against the reasonable costs, expenses and liabilities which might be incurred by it in compliance with such request or direction. The Trustee may consult with counsel, who may be counsel to the Corporation or the District, with regard to legal questions, and the opinion of such counsel shall be full and complete authorization and protection in respect to any action taken or suffered by it hereunder in good faith in accordance therewith. The Trustee shall not be responsible for the sufficiency of the Revenue Obligations or the Installment Purchase Agreement, or of the assignment made to it hereunder, or for statements made in the preliminary or final official statement relating to the Revenue Obligations. The Trustee shall not be required to take notice or be deemed to have notice of any default or Event of Default hereunder, except failure of any of the payments to be made to the Trustee required to be made hereunder or under the Installment Purchase Agreement, unless the Trustee shall be specifically notified in writing of such default or Event of Default by the District, the Corporation or the Owners of not less than 5% of the aggregate principal evidenced by the Revenue Obligations then Outstanding. Whenever in the administration of its rights and obligations hereunder the Trustee shall deem it necessary or desirable that a matter be proved or established prior to taking or suffering any action hereunder, such matter(unless other evidence in respect thereof be herein specifically prescribed) may be deemed to be conclusively proved and established by a Written Certificate of the District or a Written Certificate of the Corporation, and such certificate shall be full warrant to the Trustee for any action taken or suffered under the provisions hereof upon the faith thereof, but in its discretion the Trustee may, in lieu thereof, accept other evidence of such matter or may require such additional evidence as it deems reasonable. 77W1s1z 30 The Trustee may buy, sell, own, hold and deal in any of the Revenue Obligations and may join in any action which any Owner may be entitled to take with like effect as if the Trustee were not a party hereto. The Trustee, either as principal or agent, may also engage in or be interested in any financial or other transaction with the Corporation or the District, and may act as agent, depository or trustee for any committee or body of Owners or of owners of obligations of the Corporation or the District as freely as if it were not the Trustee hereunder. The Trustee may, to the extent reasonably necessary, execute any of the trusts or powers hereof and perform any rights and obligations required of it hereunder by or through agents, attorneys or receivers, and shall be entitled to advice of counsel concerning all matters of trust and its rights and obligations hereunder, and the Trustee shall not be answerable for the negligence or misconduct of any such agent, attorney or receiver selected by it with reasonable care; provided, however, that in the event of any negligence or misconduct of any such attorney, agent or receiver, the Trustee shall diligently pursue all remedies of the Trustee against such agent, attorney or receiver. The Trustee shall not be liable for any error ofjudgment 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 hosts or powers hereunder or for anything whatsoever in connection with the funds established hereunder, except only for its own willful misconduct, negligence or breach of an obligation hereunder. The Trustee may, on behalf of the Owners, intervene in any judicial proceeding to which the Corporation or the District is a party and which, in the opinion of the Trustee and its counsel, affects the Revenue Obligations or the security therefor, and shall do so if requested in writing by the Owners of at least 5% of the aggregate principal evidenced by Revenue Obligations then Outstanding, provided the Trustee shall have no duty to take such action unless it has been indemnified to its reasonable satisfaction against all risk or liability arising from such action. ARTICLE IN 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 Revenue Obligations then Outstanding, exclusive of Revenue Obligations disqualified as provided in Section 9.02 hereof, are filed with the Trustee. No such amendment or supplement shall (i) extend the stated Principal Payment Date of any Revenue Obligation or reduce the rate of interest evidenced thereby or extend the time of payment of such interest or reduce the amount of principal evidenced thereby or change the prepayment terms and provisions or the provisions regarding delivery of notice of prepayment without the prior written consent of the Owner of each Revenue Obligation so affected, (it) reduce the percentage of Owners whose consent is required for the execution of any amendment hereof or supplement hereto without the prior written consent of the Owners of all Revenue Obligations then Outstanding, (iii) modify any of the rights or obligations of the Trustee without the prior written 77W1s1z 31 consent of the Trustee, or (iv) amend this Section without the prior written consent of the Owners of all Revenue Obligations then Outstanding. (b) This Trust Agreement and the rights and obligations of the Corporation, the District, the Owners and the Trustee hereunder may also be amended or supplemented at any time by an amendment hereof or supplement hereto which shall become binding upon execution, without the written consents of any Owners, but only to the extent permitted by law and only for any one or more of the following purposes: (i) to add to the agreements, conditions, covenants and terns required by the Corporation or the District to be observed or performed herein other agreements, conditions, covenants and terns thereafter to be observed or performed by the Corporation or the District, or to surrender any right or power reserved herein to or conferred herein on the Corporation or the District; (it) to make such provisions for the purpose of curing any ambiguity or of correcting, curing or supplementing any defective provision contained herein or in regard to questions arising hereunder which the Corporation or the District may deem desirable or necessary and not inconsistent herewith; or (in) for any other reason, provided such amendment or supplement does not adversely affect the rights or interests of the Owners. Section 9.02. Disaualiiled Revenue Obligations. Revenue Obligations owned or held by or for the account of the District(but excluding Revenue Obligations held in any pension or retirement fund of the District) shall not be deemed Outstanding for the purpose of any consent or other action or any calculation of Outstanding Revenue Obligations provided in this Article, and shall not be entitled to consent to or take any other action provided in this Article, and the Trustee may adopt appropriate regulations to require each Owner, before his consent provided for herein shall be deemed effective, to reveal if the Revenue Obligations as to which such consent is given are disqualified as provided in this Section. Section 9.03. Endorsement or Replacement of Revenue Obligations After Amendment or Supplement After the effective date of any action taken as hereinabove provided in this Article, the Trustee may determine that the Revenue Obligations may bear a notation by endorsement in form approved by the Trustee as to such action, and in that case upon demand of the Owner of any Outstanding Revenue Obligation and presentation of such Revenue Obligation for such purpose at the Principal Office a suitable notation as to such action shall be made on such Revenue Obligation. If the Trustee shall receive an Opinion of Counsel advising that new Revenue Obligations modified to conform to such action are necessary, modified Revenue Obligations shall be prepared, and in that case upon demand of the Owner of any Outstanding Revenue Obligations such new Revenue Obligations shall be exchanged at the Principal Office without cost to each Owner for Revenue Obligations then Outstanding upon surrender of such Outstanding Revenue Obligations. 77W1s1z 32 Section 9.04. Amendment by Mutual Consent. The provisions of this Article shall not prevent any Owner from accepting any amendment as to the particular Revenue Obligations owned by such Owner,provided that due notation thereof is made on such Revenue Obligations. ARTICLE X DF,FF,ASANCE Section 10.01. Discharee of Revenue Obligations and Trust Aereement. (a) If the Trustee shall pay or cause to be paid or there shall otherwise be paid (i)to the Owners of all Outstanding Revenue Obligations the interest mid principal evidenced thereby at the times and in the manner stipulated herein and therein, and (if) all other amounts due hereunder and under the Installment Purchase Agreement, then such Owners shall cease to be entitled to the pledge of and lien on the amounts on deposit in the funds and accounts established hereunder, as provided herein, and all agreements and covenants of the Corporation, the District, and the Trustee to such Owners hereunder shall thereupon cease, terminate and become void and shall be discharged and satisfied. (b) Any Outstanding Revenue Obligation shall be deemed to have been paid within the meaning and with the effect expressed in this Section when the whole amount of the principal, premium, if any, and interest evidenced by such Revenue Obligation shall have been paid or when (i) in case said Revenue Obligation or portion thereof has been selected for prepayment in accordance with Section 4.03 hereof prior to its stated Principal Payinent Date, the District shall have given to the Trustee irrevocable instructions to give, in accordance with the provisions of Section 4.03 hereof, notice of prepayment of such Revenue Obligation, or portion thereof, (it) there shall be on deposit with the Trustee, moneys, or Government Obligations, or any combination thereof, the principal of and the interest on which when due, and without any reinvestment thereof, will provide moneys which shall be sufficient to pay when due the principal, premium, if any, and interest evidenced by such Revenue Obligation and due and to become due on or prior to the prepayment date or its stated Principal Payment Date, as the case may be, and (iii) in the event the stated Principal Payment Date of such Revenue Obligation will not occur, and said Revenue Obligation is not to be prepaid, within the next succeeding 60 days, the District shall have given the Trustee irrevocable instructions to give notice, as soon as practicable in the same manner as a notice of prepayment given pursuant to Section 4.03 hereof, to the Owner of such Revenue Obligation, or portion thereof, stating that the deposit of moneys or Government Obligations required by clause (ii) of this subsection has been made with the Trustee and that said Revenue Obligation, or portion thereof, is deemed to have been paid in accordance with this Section and stating such Principal Payment Date or prepayment date tycoon which moneys are to be available for the payment of tine principal, premium, if any, and interest evidenced by said Revenue Obligation, or portion thereof. Neither the moneys nor the Government Obligations deposited with the Trustee pursuant to this Section nor principal or interest payments on any such Government Obligations shall be withdrawn or used for any purpose other than, and shall be held in trust for and pledged to, the payment of the principal, premium, if any, and interest evidenced by said Revenue Obligation, or portions thereof If payment of less than all of the Revenue Obligations is to be provided for in the manner and with the effect expressed in this Section, the Trustee or the District, as 77W1s1z 33 applicable, shall select such Revenue Obligations, or portions thereof, in the manner specified in Section 4.03 hereof for selection for prepayment of less than all of the Revenue Obligations, in the principal amounts designated to the Trustee by the District. (c) After the payinent of all the interest, prepayment premium, if any, and principal evidenced by all Outstanding Revenue Obligations and all other amounts due hereunder and under the Installment Purchase Agreement as provided in this Section, the Trustee shall execute and deliver to the Corporation and the District all such instruments as may be necessary or desirable to evidence the discharge and satisfaction of this Trust Agreement, the Trustee shall pay over or deliver to the District all moneys or securities held by it pursuant hereto which are not required for the payment of the interest, prepayment premium, if any, and principal evidenced by such Revenue Obligations and all other amounts due hereunder and under the Installment Purchase Agreement. (d) Prior to any defeasance becoming effective under this Article, the District shalt cause to be delivered (i) an executed copy of a report, addressed to the Trustee and the District, in form and in substance acceptable to the Trustee and the District, of a nationally recognized certified public accountant, or firm of such accountants, verifying that the Government Obligations and cash, if any, satisfy the requirements of clause (ii) of subsection (b) of this Section (a"Verification"), (if) 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 shalt be permitted except as contemplated by the original Verification or upon delivery of a new Verification, and (fit) a copy of an Opinion of Counsel, dated the date of such defeasance and addressed to the Trustee and the District, in form and in substance acceptable to the District, to the effect that such Revenue Obligations have been paid within the meaning and with the effect expressed in this Trust Agreement, and all agreements and covenants of the Corporation, the District and the Trustee to the Owners of such Revenue Obligations under this Trust Agreement have ceased, terminated and become void and have been discharged and satisfied. Section 10.02. Unclaimed Moneys. Any moneys held by the Trustee in bust for the payment and discharge of the interest or principal evidenced by any of the Revenue Obligations which remain unclaimed for two years after the date when such interest or principal evidenced by such Revenue Obligations have become payable, if such moneys were held by the Trustee at such date, or for two years after the date of deposit of such moneys if deposited with the Trustee after the date when the interest and principal evidenced by such Revenue Obligations have become payable, shall be repaid by the Trustee to the District as its absolute property free from oust, and the Trustee shall thereupon be released and discharged with respect thereto and the Owners shalt look only to the District for the payment of the interest and principal evidenced by such Revenue Obligations. 77W1s1z 34 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 mid functions that are presently vested in the Corporation, the District or the Trustee, or such officer, and all agreements, conditions, covenants and terms required hereby to be observed or performed by or on behalf of the Corporation, the District or the Trustee, or any officer thereof, shall bind and inure to the benefit of the respective successors thereof whether so expressed or not Section 11.03. Execution of Documents by Owners. Any declaration, request or other instrument which is permitted or required herein to be executed by Owners may be in one or more instruments of similar tenor and may be executed by Owners in person or by their attorneys appointed in writing. The fact and date of the execution by any Owner or his attorney of any declaration, request or other instrument or of any writing appointing such attorney may be proved by the certificate of any notary public or other officer authorized to take acknowledgments of deeds to be recorded in the state or territory in which he purports to act that the Person signing such declaration, request or other instrument or writing acknowledged to him the execution thereof, or by an affidavit of a witness of such execution duly sworn to before such notary public or other officer, or by such other proof as the Trustee may accept which it may deem sufficient. The ownership of any Revenue Obligations and the amount, payment date, number and date of owning the same may be proved by the registration books maintained by the Trustee pursuant to the provisions of Section 2.07 hereof. Any declaration, request or other instrument in writing of the Owner of any Revenue Obligation shall bind all future Owners of such Revenue Obligation with respect to anything done or suffered to be done by the Corporation, the District or the Trustee in good faith and in accordance therewith. Section 11.04. Waiver of Personal Liability. Notwithstanding anything contained herein to the contrary, no member, officer or employee of the District or the Corporation shall be individually or personally liable for the payment of any moneys, including without limitation, the interest or principal evidenced by the Revenue Obligations, but nothing contained herein shall relieve any member, officer or employee of the District or the Corporation from the performance 77W1a1z 35 of any official duty provided by any applicable provisions of taw, by the Installment Purchase Agreement or hereby. Section 11.05. Acquisition of Revenue Obligations by District. All Revenue Obligations acquired by the District, whether by purchase or gift or otherwise, shall be surrendered to the Trustee for cancellation. Section 11.06. Content of Certificates. Every Written Certificate of the District and every Written Certificate of the Corporation with respect to compliance with any agreement, 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 teem has been complied with. Any Written Certificate of the District and any Written Certificate of the Corporation may be based, insofar as it relates to legal matters, upon an Opinion of Counsel, unless the Person making or giving such certificate knows that the Opinion of Counsel with respect to the matters upon which each Person's certificate may be based, as aforesaid, is erroneous, or in the exercise of reasonable care should have known that the same was erroneous. Any Opinion of Counsel may be based, insofar as it relates to factual matters, upon information which is in the possession of the District or the Corporation upon a representation by an officer or officers of the District or the Corporation, as the case may be, unless the counsel executing such Opinion of Counsel knows that the representation with respect to the matters upon which such counsel's opinion may be based, as aforesaid, is erroneous, or in the exercise of reasonable care should have known that the same was erroneous. Section 11.07. Funds and Accounts. Any fund or account required to be established mid 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 shalt at all times be maintained in accordance with sound accounting practice and with due regard for the protection of the security of the Revenue Obligations and the rights of the Owners. The Trustee may establish such funds and accounts as it deems necessary to perform its obligations hereunder. Trustee may commingle any of the moneys held by it hereunder for investment purposes only; provided, however, that the Trustee shall account separately for the moneys in each fund or account established pursuant to this Trust Agreement. Section 11.08. Article and Section Fleadin s Gender and References. The singular form of any word used herein, including the terms defined in Section LOl hereof, shall include 77W1a1z 36 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 m such term or terms shall be null mid void to the extent contrary to law mid shall be deemed separable from the remaining agreements, conditions, covenants and terns hereof and shall in no way affect the validity hereof or of the Revenue Obligations, and the Owners shall retain all the benefit,protection and security afforded to them under any applicable provisions of law. The Corporation, the District and the Trustee hereby declare that they would have executed this Trust Agreement, mid each and every Article, Section, paragraph, subsection, sentence, clause and phrase hereof and would have authorized the execution and delivery of the Revenue Obligations pmsuant hereto irrespective of the fact that any one or more Articles, Sections, paragraphs, subsections, sentences, clauses or phrases hereof or the application thereof to any Person or circumstance may be held to be unconstitutional, unenforceable or invalid. Section 11.10. California Law. This Trust Agreement shall be governed by and construed in accordance with the laws of the State. Section 11.11. Notices. Any written notice, statement, demand, consent, approval, authorization, offer, designation, request or other communication to be given hereunder shall be given to the party entitled thereto at its address set forth below, or at such other address as such party may provide to the other parties in writing from time to time, namely: If to the District: Orange County Sanitation District 10844 Ellis Avenue Fountain Valley, California 92708 Attention: Director of Finance and Administrative Services If to the Corporation: Orange County Sanitation District Financing Corporation c/o Orange County Sanitation District 10844 Ellis Avenue Fountain Valley, California 92708 Attention: Treasurer If to the Trustee: Union Bank, N.A. 120 South San Pedro Street, Suite 400 Los Angeles, California 90012 Attention: Alison Braunstein 77W1s1z 37 Telephone: (213) 972-5674 Facsimile: (213) 972-5694 Each such notice, statement, demand, consent, approval, authorization, offer, designation, request or other communication hereunder shall be deemed delivered to the party to whom it is addressed (a)if personally served or delivered, upon delivery, (b) if given by electronic communication, e.g. facsimile or telecopier, 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 mid the same instrument. 77ae1812 38 IN WITNESS WHEREOF, the parties hereto have caused this Trust Agreement to be executed by their respective officers (hereunto duly authorized, all as of the day and year first written above. ORANGE COUNTY SANITATION DISTRICT FINANCING CORPORATION By: Treasurer ORANGE COUNTY SANITATION DISTRICT By: Chair of the Board of Directors (SEAL) Attest: By: Clerk of the Board of Directors UNION BANK,N.A., as Trustee By: Authorized Officer 77W1a1z 39 EXHIBIT A FORM OF REVENUE OBLIGATION No. R-. +.$ +. Unless this Revenue Obligation is presented by an authorized representative of The Depository Trust Company to the Trustee for registration of transfer, exchange or payment, and any Revenue Obligation executed and delivered is registered in the naive of Cede&Co. or such other name as requested by an authorized representative of The Depository Trust Company and any payment is made to Cede & Co., ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL inasmuch as the Registered Owner hereof, Cede&Co., has an interest herein. ORANGE COUNTY SANITATION DISTRICT WASTEWATER REFUNDING REVENUE OBLIGATIONS SERIES 2012A Such revenue obligations are certificates of participation evidencing direct,undivided fractional interests in the Installment Purchase Agreement,dated as of March 1,2012, by and between the Orange County Sanitation District and the Orange County Sanitation District Financing Corporation and the related Installment Payments,and the interest thereon. PRINCIPAL. PAYMENT DATE, INTEREST RATE DATED DATE CUSLP REGISTERED OWNER: Cede &Co. PRINCIPAL AMOUNT: DOLLARS THIS IS TO CERTIFY that the Registered Owner of this Revenue Obligation (this "Revenue Obligation"), as identified above, is the owner of a direct, fractional undivided interest in certain installment payments (`Installment Payments"), and the interest thereon,payable under and pursuant to the Installment Purchase Agreement, dated as of March 1, 2012 (the"Installment Purchase Agreement'), by and between the Orange County Sanitation District(the "District'), a county sanitation district organized and existing under the laws of the State of California, and the Orange County Sanitation District Financing Corporation (the "Corporation"), a nonprofit public benefit corporation organized and existing under the laws of the State of California. Certain of the rights of the Corporation under the Installment Purchase Agreement, including the right to receive the Installment Payments, and the interest thereon, have been assigned without recourse by the Corporation to Union Bank, N.A., a national banking association duly organized and existing under the laws of the United States of America, as trustee (the "Trustee") under the Trust Agreement, dated as of March 1,2012 (the "Trust Agreement'), by and among the Trustee, the District and the Corporation. Capitalized undefined terns used herein shall have the meanings ascribed thereto in the Trust Agreement. r>vssisi_1 A-1 The District has executed and delivered the Master Agreement for District Obligations, dated as of August I, 2000 (the "Master Agreement'), by and between the District and the Corporation, pursuant to which the District establishes and declares the conditions and terms upon which obligations such as the Installment Purchase Agreement, and the Installment Payments and the interest thereon, will be incurred and secured. This Revenue Obligation is one of the duly authorized Orange County Sanitation District Wastewater Refunding Revenue Obligations, Series2012A (the "Revenue Obligations") evidencing principal in the aggregate amount of$ , executed pursuant to the terms of the Trust Agreement. The Revenue Obligations evidence direct, fractional undivided interests in the Installment Payments, and the interest thereon, payable under the Installment Purchase Agreement. The Revenue Obligations are executed and delivered to refinance certain improvements to the wastewater collection, treatment and disposal facilities of the District (the "Wastewater System") and to pay the costs of issuance incurred in connection therewith and to pay certain other related costs. The Installment Payments, and the interest thereon, are to be paid by the District pursuant to the Installment Purchase Agreement in consideration for the purchase of certain improvements to the Wastewater System and for the other agreements and obligations undertaken by the Corporation under the Installment Purchase Agreement and the Trust Agreement. The income and revenue received by the District from the operation of the Wastewater System remaining after the payment of maintenance and operation or ownership costs of the Wastewater System (as more fully described in the Installment Purchase Agreement, the "Net Revenues") are, pursuant to the Master Agreement, pledged to the payment of the Senior Obligations and Reimbursement Obligations with respect to Senior Obligations (as such terns are defined in the Master Agreement). The Installment Purchase Agreement constitutes a Senior Obligation and, as such, shall be subject to the provisions of the Master Agreement, and shall be afforded all of the advantages, benefits, interests and security afforded Senior Obligations pursuant to the Master Agreement. The Installment Purchase Agreement is payable on a parity with the other existing Senior Obligations. The District may at any time incur Senior Obligations in addition to existing Senior Obligations and the Installment Purchase Agreement payable from Net Revenues as provided in the Master Agreement on a parity with all other Senior Obligations theretofore incurred, but only subject to the conditions and upon compliance with the procedures set forth in the Master Agreement. The District is not required to advance any moneys derived from any source of income other than Net Revenues and the other funds provided in the Installment Purchase Agreement for the payment of the Installment Payments, and the interest thereon, and other payments required to be made by it under the Installment Purchase Agreement, or for the performance of any agreements or covenants required to be performed by it contained therein. The obligation of the District to pay the Installment Payments, and the interest thereon, and other payments required to be made by it under the Installment Purchase Agreement is a special obligation of the District '>vra 1 si_1 A-2 payable, in the manner provided in the Installment Purchase Agreement, solely from such Net Revenues and other funds provided for therein, and does not constitute a debt of the District or of the State of California, or of any political subdivision thereof, in contravention of any constitutional or statutory debt limitation or restriction. Reference is hereby made to the Master Agreement, the Installment Purchase Agreement and to the Trust Agreement and any and all amendments thereof and supplements thereto for a description of the terns under which the District's obligation to pay the Installment Payments, and the interest thereon, is incurred, the Revenue Obligations are executed and delivered, the provisions with regard to the nature and extent of the Net Revenues, mid the rights of the Owners of the Revenue Obligations. All of the terms of the Master Agreement, the Installment Purchase Agreement and the Trust Agreement are hereby incorporated herein. The Trust Agreement constitutes a contract among the District, the Corporation and the Trustee for the benefit of the Owners of the Revenue Obligations, to all the provisions of which the Owner of this Revenue Obligation, by acceptance hereof, agrees and consents. The Registered Owner of this Revenue Obligation is entitled to receive, subject to the terms of the Trust Agreement and any right of prepayment as provided herein or therein, on the Principal Payment Date set forth above, upon presentation and surrender of this Revenue Obligation at the principal corporate trust office of the Trustee in Los Angeles, California (the "Principal Office"), the Principal Amount specified above, evidencing the Owner's interest in the Installment Payments coming due on the Principal Payment Date, and to receive on February I mid August 1 of each yew, commencing on August 1, 2012 (each an "Interest Payment Date"), interest accrued thereon at the Interest Rate specified above, computed on the basis of a 360-day year consisting of twelve 30-day months, until said Principal Amount is paid in fill, evidencing the Registered Owner's interest in the interest evidenced by the Installment Payments coming due on each of said dates. This Revenue Obligation shall evidence interest from the Interest Payment Date next preceding its date of execution to which interest has been paid in full, unless such date of execution shall be after the I5th day of the month next preceding an Interest Payment Date, whether or not such day is a business day (each such date, a "Record Date"), and on or prior to the following Interest Payment Date, in which case this Revenue Obligation shall evidence interest from such Interest Payment Date, or unless such date of execution shall be on or prior to the first Record Date, in which case this Revenue Obligation shall evidence interest from the Dated Date specified above. Notwithstanding the foregoing, if, as shown by the records of the Trustee, interest evidenced by the Revenue Obligations shall be in default, this Revenue Obligation shall evidence interest from the last Interest Payment Date to which interest has been paid in full or duly provided for. Payments of interest evidenced by the Revenue Obligations shall be made to the Owners thereof (as determined at the close of business on the Record Date next preceding the related Interest Payment Date) by check or draft of the Trustee mailed to the address of each such Owner as it appears on the registration books maintained by the Trustee pursuant to the Trust Agreement, or to such other address as may be furnished in writing to the Trustee by such Owner. Payment of principal and prepayment premium, if any, evidenced by the Revenue Obligations, on their stated principal payment dates or on prepayment in whole or in part prior 76331 si_1 A-3 thereto, shall be made only upon presentation and surrender of the Revenue Obligations at the Principal Office. All such amounts are payable in lawful money of the United States of America. The Revenue Obligations are authorized to be executed and delivered in the form of fully registered certificates in denominations of$5,000 or any integral multiple thereof("Authorized Denominations"). This Revenue Obligation may be transferred or exchanged by the Registered Owner hereof, in person or by his attorney duly authorized in writing, at the Principal Office, but only in the manner, subject to the limitations and upon payment of the charges provided in the Trust Agreement. The Trustee shall not be required to transfer or exchange any Revenue Obligation during the period commencing on the date five days before the date of selection of Revenue Obligations for prepayment and ending on the date of mailing of notice of such prepayment, nor shall the Trustee be required to transfer or exchange any Revenue Obligation or portion thereof selected fur prepayment from and after the date of mailing the notice of prepayment thereof. The Trustee may treat the Registered Owner hereof as the absolute owner hereof for all proposes, whether w not the principal or interest evidenced by this Revenue Obligation shall be overdue, mid the Trustee shall not be affected by any knowledge or notice to the contrary; and payment of the principal and interest evidenced by this Revenue Obligation shall be made only to such Registered Owner, which payments shall be valid and effectual to satisfy and discharge the liability evidenced by this Revenue Obligation to the extent of the soon or sums so paid. The Revenue Obligations are subject to prepayment prior to their stated Principal Payment Dates in accordance with the Trust Agreement. To the extent and in the manner permitted by the terms of the Trust Agreement, the Trust Agreement and the rights and obligations of the Corporation, the District, the Owners and the Trustee under the Trust Agreement may be amended or supplemented at any time by an amendment or supplement thereto which shall become binding when the prior written consents of the Owners of a majority of the aggregate principal evidenced by the Revenue Obligations then outstanding, exclusive of Revenue Obligations disqualified as provided wider the Trust Agreement, are tiled with the Trustee. No such supplement or amendment shall (a) extend the stated Principal Payment Date of any Revenue Obligation or reduce the rate of interest evidenced thereby or extend the time of payment of such interest or reduce the amount of principal evidenced thereby or change the prepayment terms and provisions or the provisions regarding delivery of notice of prepayment without the prior written consent of the Owner of each Revenue Obligation so affected, (b)reduce the percentage of Owners whose consent is required for the execution of any amendment of or supplement to the Trust Agreement without the prior written consent of the Owners of all Revenue Obligations then outstanding, (c) modify any of the rights or obligations of the Trustee without the prior written consent of the Trustee, or (d) amend the amendment provisions of the Trust Agreement without the prior written consent of the Owners of all Revenue Obligations then outstanding. '>vss 1 si_1 A-4 To the extent and in the manner permitted by the terms of the Trust Agreement, the Trust Agreement and the rights and obligations of the Corporation, the District, the Owners and the Trustee under the Trust Agreement may also be amended or supplemented at any time by an amendment or supplement thereto which shall become binding upon execution, without the written consents of any Owners, but only to the extent permitted by law and only(a) to add to the agreements, conditions, covenants and 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, mid which in either case shall not adversely affect the rights or interests of the Owners, (b)to make such provisions for the purpose of curing any ambiguity or of correcting, curing or supplementing any defective provision contained in the Trust Agreement or in regard to questions arising thereunder which the Corporation or the District may deem desirable or necessary and not inconsistent therewith or (c) for any other reason, provided such amendment or supplement does not adversely affect the rights or interests of the Owners. THE DISTRICT HAS CERTIFIED that all acts, conditions and things required by the statutes of the State of California and by the Trust Agreement to exist, to have happened mid to have been performed precedent to and in connection with the execution and delivery of this Revenue Obligation do exist, have happened and have been performed in regular and due time, form and manner as required by law, and that the Trustee is duly authorized to execute and deliver this Revenue Obligation. IN WITNESS WHEREOF, this Revenue Obligation has been executed by the manual signature of an authorized signatory of the Trustee as of the date set forth below. Date: March ,2012 UNION BANK, N.A., as Trustee By: Authorized Officer '>vss 1 si_> A-5 ASSIGNMENT For value received, the undersigned do(es) hereby sell, assign and transfer unto the within-mentioned Revenue Obligation and hereby irrevocably constitute(s) and appoints) 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 Revenue Obligation in every particular, without alteration or enlargement or any change whatsoever. Tax I.D. #: Signature Guaranteed: Note. Signaure(s)must be guaran[eed by an eligihle Note- The signamre(sr on this Assignment must correspond guaranto, with the namos)as written on the taco of the taithin Rccenue Ohligation in every particular wilf,out ulterntimt or enlargement or any change whatsoever. r7633181_1 A-6 DRAFT OF 01/27/12 INSTALLMENT PURCHASE AGREEMENT by and between ORANGE COUNTY SANITATION DISTRICT and ORANGE COUNTY SANITATION DISTRICT FINANCING CORPORATION Dated as of March 1,2012 Relating to Orange County Sanitation District Wastewater Refunding Revenue Obligations Series 2012A 77W-7i.; TABLE OF CONTENTS Page ARTICLE I DEFINITIONS................................................................................................. 2 Section 1.01. Definitions........ ....... ....... ....... ....... ....... ....... ....... ....... ....... ....... ...2 Section 1.02. Definitions in Master Agreement and Trust Agreement......................3 ARTICLE 11 PURCHASE OF PROJECT BY, AND SALE THEREOF TO, THE CORPORATION; PAYMENT OF PURCHASE PRICE ...............................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 PAYMENTS...................................................4 Section 3.01. Purchase and Sale of Project........ ....... ....... ....... ....... ....... ....... .......4 Section 3.02. Installment Payments__....__....__....__....__....__....__....__....__...._.4 Section3.03. Reserved............................................................................................... 5 Section 3.04, Obligation Absolute............................................................................. 6 Section 3.05. Nature of Agreement........ ....... ....... ....... ....... ....... ....... ....... ....... ... 6 ARTICLE. 1V PREPAYMENT OF INSTALLMENT PAYMENTS..................................... 6 Section 4.01. Prepayment of Installment Payments....... ....... ....... ....... ....... ....... ... 6 Section4.02. Notice................................................................................................... 6 Section 4.03. Discharge of Obligations..................................................................... 6 ARTICLE V COVENANTS ................................................................................................. 7 Section 5.01. Compliance with Master Agreement ................................................... 7 Section 5.02. Compliance with Installment Purchase Agreement.............................7 Section 5.03. Protection of Security and Rights........ ....... ....... ....... ....... ....... ....... 7 Section 5.04. Indemnification of Corporation ........................................................... 7 Section 5.05. Further Assurances............................................................................... 8 ARTICLE VI EVENTS OF DEFAULT AND REMEDIES OF THE CORPORATION............................................................................................. 8 Section 6.01. Events of Default................................................................................. 8 Section 6.02. Remedies on Default........ ....... ....... ....... ....... ....... ....... ....... ....... ... 8 Section6.03. Non-Waiver..........................................................................................9 Section 6.04. Remedies Not Exclusive...................................................................... 9 ARTICLE VII AMENDMENTS .............................................................................................9 Section 7.01. Amendments........................................................................................ 9 ARTICLE VIII MISCELLANEOUS...................................................................................... 10 Section 8.01. Liability of District Limited............................................................... 10 Section 8.02. Limitation of Rights........................................................................... 1 I Section 8.03. Assignment._......_......_......_......_......_......_......_......_......_......_..... I Section8.04. Notices ............................................................................................... 11. Section 8.05. Successor Is Deemed Included in all References to Predecessor...... 12 Section 8.06, Waiver of Personal Liability.............................................................. 12 Section 8.07. Article mid Section Headings, Gender and References .. ....... 12 776337713 _i_ TABLE OF CONTENTS (continued) Page Section 8.08, Partial Invalidity................................................................................. 12 Section 8.09. Governing Law........ ....... ....... ....... ....... ....... ....... ....... ....... ....... . 12 Section 8.10. Execution in Counteipans.................................................................. 12 EXHIBIT A DESCRIPTION OF PROJECT..._......_......_......_......_......_......_...A-1 776339913 -it- INSTALLMENT PURCHASE AGREEMENT THIS INSTALLMENT PURCHASE AGREEMENT (this "Installment Purchase Agreement'), dated as of March 1, 2012, is by and between the ORANGE COUNTY SANITATION DISTRICT, a county sanitation district organized and existing under the laws of the State of Califomia (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"). WITNESSE, TH: WHEREAS, to finance the acquisition, construction and installation of certain improvements to its wastewater system (the `Prior Project'), the District has heretofore purchased the Prior Project from the Corporation, and the Corporation has heretofore sold the Prior Project to the District, for the installment payments (the "Prior Installment Payments") made by the District pursuant to the Installment Purchase Agreement, dated as of July I, 2003 (the"Prior Installment Purchase Agreement'), by and between the District and the Corporation; WHEREAS, to provide the funds necessary to finance the Prior Project, the District caused the execution and delivery of the Orange County Sanitation District Certificates of Participation, Series 2003 (the 'Prior Certificates"), evidencing direct, undivided fractional interests in the related Prior Installment Payments; WHEREAS, the District desires to refinance the Prior Project (the `Project") by prepaying the remaining Prior Installment Payments, and the interest thereon to the dates of prepayment, thereby causing the remaining Prior Certificates to be prepaid; WHEREAS, to provide the finds necessary to prepay the remaining Prior Installment Payinents, 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, mid that the District then purchase the Prior Project from the Corporation and the Corporation sell the Prior Project to the District, for the installment payments (the"Installment Payments") to be made by tine District pursuant to this Installment Purchase Agreement; WHEREAS, pursuant to the Master Agreement for District Obligations, dated as of August 1,2000, by and between the District and the Corporation, the District has established and declared the conditions and terns upon which obligations such as this Installment Purchase Agreement, and the Installment Payments, and the interest thereon, are to be incurred and secured; WHEREAS, the Corporation proposes to assign without recourse certain of its rights under and pursuant to this Installment Purchase Agreement to Union Bank, N.A., as trustee (the "Trustee"); WHEREAS, in consideration of such assignment mid the execution and delivery of the Trust Agreement, dated as of the date hereof, by and among the Trustee, the Corporation and the 77W-71 ; District, the Trustee has agreed to execute and deliver the Orange County Sanitation District Wastewater Refunding Revenue Obligations, Series 2012A (the "Revenue Obligations"), evidencing direct, undivided fractional interests in the Installment Payments, and the interest thereon, payable hereunder; WHEREAS, a portion of the proceeds of the Revenue Obligations will be used to prepay certain of the Prior Installment Payments; and WHEREAS, all acts, conditions and things required by law to exist, to have happened and to have been performed precedent to and in connection with the execution and delivery of this Installment Purchase Agreement do exist, have happened 'mid 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 mid 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 terns defined in this Section shall for all proposes 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, mid (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 March , 2012. "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 Taws of the State, and any successor thereto. "Event of Default" means an event described in Section 6.01 hereof. "Installment Payments" means the Installment Payments required to be made by the District pursuant to Section 3.02 hereof. "Installment Payment Dates"means each February 1, commencing February 1,2013, 77eae-n 1 a 2 "Installment Purchase Agreement" means this Installment Purchase Agreement, dated as of March I, 2012, 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 I and August I of each year, commencing August t, 20t2. "Master Agreement" means the Master Agreement for District Obligations, dated as of August 1, 2000, by and between the District and the Corporation, as originally executed and as it may from time to time be amended or supplemented in accordance with the terms thereof. "Person" means an individual, corporation, Limited liability company, firm, association, partnership, trust, or other legal entity or group of entities, including a governmental entity or any agency or political subdivision thereot. "Principal Office" means the Trustee's principal corporate trust office in Los Angeles, California. "Project" means the improvements to the Wastewater System, as described in Exhibit A hereto. 'Revenue Obligations" means the Orange County Sanitation District Wastewater Refunding Revenue Obligations, Series 2012A, executed mid delivered by the Trustee, which are certificates of participation, evidencing direct, undivided fractional interests in the Installment Payments, and the interest thereon, executed and delivered under and pursuant to the Trust Agreement. "Trust Agreement" means the Trust Agreement, dated as of Much t, 2012, by and among the Trustee, the Corporation and the District, as originally executed and as it may from time to time be amended or supplemented in accordance with its terms. "Trustee" means Union Bank, N.A., a national banking association duly organized and existing under the laws of the United States of America, or any other bank or trust company which may at any time be substituted in its place as provided in the Trust Agreement. Section 1.02. Definitions in Master Agreement and Trust Agreement. Except as otherwise herein defined and unless the context otherwise requires, the terns defined in the Master Agreement or the Trust Agreement shall for all purposes hereof and of any amendment hereof or supplement hereto and of any report or other document mentioned herein have the meanings defined therein, such definitions to be equally applicable to both the singular and plural forms of any of the terns defined therein. With respect to any defined term which is given a different meaning under this Installment Purchase Agreement than under the Master Agreement or the Trust Agreement, as used herein it shall have the meaning given herein. ARTICLE 11 PURCHASE OF PROJECT BY, AND SALE THEREOF TO, THE CORPORATION; PAYMENT OF PURCHASE PRICE 77W-71 a 3 Section 2.01. Acquisition of the Proieet. 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 S , which amount shall be paid from the proceeds of the Revenue Obligations. ARTICLE HI PURCHASE OF PROJECT BY, AND SALE THEREOF TO, THE DISTRICT; INSTALLMENT PAYMENTS Section 3.01. Purchase and Sale of Project. The District hereby purchases from the Corporation, and the Corporation hereby sells to the District, the Project in accordance with the provisions of this Installment Purchase Agreement. All right, title and interest in and to the Project shall immediately vest in the District on the Closing Date without further action on the part of the District or the Corporation. Section 3.02. Installment Pavments. The District shall, subject to any rights of prepayment provided in Article 1V hereof, pay to the Corporation,solely from Net Revenues and from no other sources, the purchase price of the Project in Installment Payments, with interest thereon, as provided herein. The Installment Payments and the interest thereon shall be payable on the Business Day immediately preceding each of the Installment Payment Dates in the amounts and at the interest rates per annum set forth in the following schedule: 77eae-n 1 a 4 Install went Installment Payment Interest on Interest Payment Date Principal Installment Payment Total Rate 8'I'2012 2/1/2013 8/I/2013 2/1/2014 8/l/2014 2/1/2015 8/1/2015 2/1/2016 8/I/2016 2/1/2017 8/l/2017 2'I'2018 8/l/2018 2/1/2019 8/1/2019 2/l/2020 8/1/2020 2'1'2021 8/1/2021 2/l/2022 8/l/2022 2/l/2023 8/1/2023 2/1/2024 8/1/2024 2/I/2025 8/l/2025 2/l/2026 8'I'2026 2/1/2027 8/1/2027 21/2028 8/l/2028 2/1,a029 8'1'2029 2/1/2030 8/1/2030 2/1/2031 8/l/2031 2/1/2032 8'I'2032 2/l/2033 TOTAL 77eae-n1a 5 The Installment Payments shall accrue interest from the Closing Date, at the rates set forth above, payable on the Interest Payment Dates in each year. Such interest shall accrue on the basis of a 360-day year consisting of twelve 30-day months. Each Installment Payment, and each payment of interest thereon, shall be deposited with the Trustee, as assignee of the Corporation, no later than the Business Day next preceding the Installment Payment Date or Interest Payment Date on which such Installment Payment or payment of interest is due, in lawful money of the United States of America, in immediately available funds. If and to the extent that, on any such date, there are amounts on deposit in the Installment Payment Fund established under the Trust Agreement, or in any of the accounts therein, which amounts are not being held for the payment of specific Revenue Obligations, such amounts shall be credited against the Installment Payment, or payment of interest thereon, as applicable, due on such date. Section 3.03. Reserved. Section 3.04. Obli¢ation Absolute. The obligation of the District to make the Installment Payments, and payments of interest thereon, and other payments required to be made by it under this Article, solely from Net Revenues, is absolute and unconditional, and until such time as the Installment Payments, payments of interest thereon, and such other payments shall have been paid in full (or provision for the payment thereof shall have been made pursuant to Article IV), the District shall not discontinue or suspend any Installment Payments, or payments of interest thereon, or other payments required to be made by it hereunder when due, whether or not the Project or any part thereof is operating or operable or has been completed, or its use is suspended, interfered with, reduced or curtailed or terminated in whole or in part, mid such Installment Payments, payments of interest thereon, and other payments shall not be subject to reduction whether by offset or otherwise and shall not be conditional upon the performance or nonperfennance by any party of any agreement for any cause whatsoever. Section 3.05. Nature of Agreement This Installment Purchase Agreement constitutes a Senior Obligation and, as such, shall be subject to the provisions of the Master Agreement and shall be afforded all of the advantages, benefits, interests and security afforded Senior Obligations pursuant to the Master Agreement, ARTICLE IV PREPAYMENT OF INSTALLMENT PAYMENTS Section 4.01. PreAavment of Installment Payments. (a) The Installment Payments shall be subject to prepayment prior to their respective Installment Payment Dates as provided in Article TV of the Trust Agreement. (b) The District may prepay, from any source of available finds, all or any portion of the Installment Payinents by depositing with the Trustee moneys or securities as provided, and subject to the terms and conditions set forth, in Article X of the Trust Agreement sufficient to pay such Installment Payments, and the interest thereon, when due or to pay such Installment Payments, and the interest thereon, through a specified date on which the District has a right to prepay such Installment Payments pursuant to subsection (a) of this Section, and to prepay such 77W-71 a 6 Installment Payments on such prepayment date, at a prepayment price determined in accordance with subsection (a) ofthis Section. (c) If less than all of the Installment Payments are prepaid then, as of the date of such prepayment pursuant to subsection (a) of this Section, or the date of a deposit pursuant to subsection (b) of this Section, the schedule of Installment Payments shall be recalculated to take such prepayment into account. Section 4.02. Notice. The District shall give written notice to the Trustee specifying the date on which the prepayment will be made prior to making any prepayment pursuant to this Article, which date shall be not less than 25 nor more than 60 days from the date such notice is given to the Trustee, unless such time period shall be waived by the Trustee. Section 4.03. Discharge of Obligations. If all Installment Payments, and the interest thereon, shall be paid as and when due in accordance with the tenons hereof, or prepaid in accordance with Section 4.01 hereof, and if all Revenue Obligations shall be fully paid, or provision therefor made in accordance with Article X of the Trust Agreement, and the Trust Agreement shall be discharged by its terms, then all agreements, covenants and other obligations of the District hereunder shall thereupon cease, terminate and become void and be discharged mid satisfied. ARTICLE V COVENANTS Section 5.01. Compliance with Master Agreement. The District wilt faithfully observe and perform all the agreements, conditions, covenants and terms contained in the Master Agreement required to be observed and performed by it and will not cause, suffer or permit any default to occur thereunder. Section 5.02. Compliance with Installment Purchase Agreement The District will punctually pay the Installment Payments, and interest thereon, and other payments required to be made by it hereunder in strict conformity with the terms hereof, and will faithfully observe and perform all the agreements, conditions, covenants and terms contained herein required to be observed and performed by it, will not cause, suffer or permit any default to occur hereunder and will not terminate this Installment Purchase Agreement for any cause including, without limiting the generality of the foregoing, any acts or circumstances that may constitute failure of consideration, destruction of or damage to the Project, commercial frustration of propose, 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 farce 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. 77W-71 a 7 Section 5.03. Protection of Security and Ri¢hts. The District will preserve mid protect the security hereof and the rights of the Trustee, as assignee of the Corporation, to the Installment Payments, and interest thereon, and other payments required to be made by the District hereunder and will warrant and defend such rights against all claims and demands of all Persons. Section 5.04. Indemnification of Corporation. To the extent permitted by law, the District hereby agrees to indemnify and hold the Corporation and its members and officers harmless against any and all liabilities which might arise out of or are related to the Project, this Installment Purchase Agreement or the Revenue Obligations, and the District further agrees to defend the Corporation and its members and officers in any action arising out of or related to the Project, this Installment Purchase Agreement or the Revenue Obligations. Section 5.05. Further Assurances. The District will adopt, deliver, execute and make any and all further assurances, instruments and resolutions as may be reasonably necessary or proper to carry out the intention or to facilitate the performance hereof and for the better assuring and confirming unto the Corporation, or unto the Trustee, as assignee of the Corporation, the rights and benefits provided herein to the Corporation, or to the Trustee, as assignee of the Corporation. ARTICLE VI EVENTS OF DEFAULT AND REMEDIES OF THE CORPORATION Section 6.01. Events of Default. The following shall be Events of Default under this Installment Purchase Agreement, and "Event of Default' shall mean any one or more of the following events: (a) if default shall be made by the District in the due and punctual payment of or on account of any Senior Obligation as the same shall become due and payable; (b) if default shall be made by the District in the performance of any of the agreements or covenants required herein, in the Trust Agreement or in the Master Agreement to be performed by it (other than as specified in (a) above), and such default shall have continued for a period of 30 days after the District shall have been given notice in writing of such default by the Corporation or the Trustee; provided, however, that the party or parties giving such notice may agree in writing to a reasonable extension of such period prior to the expiration of such 30 day period and, provided further, that if the District shall proceed to take curative action which, if begun and prosecuted with due diligence, cannot be completed within such a period of 30 days, then such period shall be increased without such written extension to such extent as shall be necessary to enable the District to diligently complete such curative action and such default shall not become an Event of Default for so long as shall be necessary to diligently complete such curative action; or (c) if the District shall file a petition or answer seeking arrangement or reorganization under the federal bankruptcy laws or any other applicable law of the United States of America or any state therein, or if a court of competent jurisdiction shall approve a petition filed with or 77eae-n1a 8 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 mid 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. Section 6.03. Non-Waiver. Nothing in this Article or in any other provision hereof shall affect or impair the obligation of the District, which is absolute and unconditional, to pay the Installment Payments, and the interest thereon, to the Trustee, as assignee of the Corporation, at the respective due dates from the Net Revenues and the other funds herein committed for such payment, or shall affect or impair the right of the Trustee, as assignee of the Corporation, which is also absolute and unconditional, to institute suit to enforce such payment by virtue of the contract embodied herein. A waiver of any default or breach of duty or contract by the Trustee, as assignee of the Corporation, shall not affect any subsequent default or breach of duty or contract or impair any rights or remedies on any such subsequent default or breach of duty or contract. No delay or omission by the Trustee, as assignee of the Corporation, to exercise any right or remedy accruing upon any default or breach of duty or contract shall impair any such right or remedy or shall be construed to be a waiver of any such default or breach of duty or contract or an acquiescence therein, and every right or remedy conferred upon the Trustee, as assignee of the Corporation, by applicable law or by this Article may be enforced and exercised from time to time and as often as shall be deemed expedient by the Trustee, as assignee of the Corporation. If any action, proceeding or suit to enforce any right or exercise any remedy is abandoned or determined adversely to the Trustee, as assignee of the Corporation, the District and the Trustee, as assignee of the Corporation, shall be restored to their former positions, rights and remedies as if such action,proceeding or suit had not been brought or taken. Section 6.04. Remedies Not Exclusive. No remedy herein conferred upon or reserved to the Trustee, as assignee of the Corporation, is intended to be exclusive of any other remedy, and each such remedy shall be cumulative and shall be in addition to every other remedy given 77W-7i a 9 hereunder or now or hereafter existing in law or in equity or by statute or otherwise and may be exercised without exhausting and without regard to any other remedy conferred by law. ARTICLE VII AMENDMENTS Section 7.01. Amendments. (a) This Installment Purchase Agreement and the rights and obligations of the District, the Corporation and the Trustee, as assignee of the Corporation, may be amended or modified from time to time and at any time by a written amendment hereto executed by the District, the Corporation and the Trustee, as assignee of the Corporation, with the written consent of the Owners of a majority of the aggregate principal evidenced by Revenue Obligations then Outstanding. No such amendment shall (i) extend the payment date of any Installment Payment or reduce the amount of any Installment Payment, or the interest rate applicable thereto, without the prior written consent of the Owner of each affected Revenue Obligation, or (if) reduce the percentage of Owners of the Revenue Obligations whose consent is required to effect any such amendment or modification, without the prim written consent of the Owners of all Revenue Obligations then Outstanding. (b) This Installment Purchase Agreement mid the rights and obligations of the District, the Corporation and the Trustee, as assignee of the Corporation, may be amended or modified from fime to time and at any time by a written amendment hereto executed by the District, the Corporation and the Trustee, as assignee of the Corporation, without the written consents of any Owners of the Revenue Obligations, but only to the extent permitted by law and only for any one or more of the following purposes: (i) to add to the agreements, conditions, covenants and terms required by the District, the Corporation or the Trustee, as assignee of the Corporation, to be observed or performed herein other agreements, conditions, covenants mid 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; (if) to make such provisions for the purpose of curing any ambiguity or of correcting, curing or supplementing any detective provision contained herein or in regard to questions arising hereunder which the District, the Corporation or the Trustee, as assignee of the Corporation, may deem desirable or necessary and not inconsistent herewith; and (fit) to make such other changes herein or modifications hereto as the District, the Corporation or the Trustee, as assignee of the Corporation, may deem desirable or necessary, and which shall not materially adversely affect the interests of the Owners of the Revenue Obligations. ARTICLE Vill MISCELLANEOUS Section 8.01. Liabilitv of District Limited. Notwithstanding anything contained herein to the contrary, the District shall not be required to advance any moneys derived from any source of income other than Net Revenues and the other funds provided herein for the payment of the Installment Payments, and the interest thereon, and other payments required to be made by it hereunder, or for the performance of any agreements or covenants required to be performed by it contained herein. The District may, however, but in no event shall be obligated to, advance moneys for any such purpose so long as such moneys are derived from a source legally available for such purpose and may be legally used by the District for such purpose. The obligation of the District to pay the Installment Payments, mid the interest thereon, and other payments required to be made by it hereunder is a special obligation of the District payable, in the manner provided herein, solely from Net Revenues and other funds provided for herein, and does not constitute a debt of the District or of the State, or of any political subdivision thereof, in contravention of any constitutional or statutory debt limitation or restriction. Neither the faith and credit nor the taxing power of the District or the State, or any political subdivision thereof, is pledged to the payment of the Installment Payments, or the interest thereon, or other payments required to be made hereunder. Section 8.02. Limitation of Rights. Nothing in this Installment Purchase Agreement expressed or implied is intended or shall be construed to give to any Person other than the District, the Corporation and the Trustee, as assignee of the Corporation, any legal or equitable right, remedy or claim under or in respect of this Installment Purchase Agreement or any covenant, condition or provision therein or herein contained, and all such covenants, conditions and provisions are and shall be held to be for the sole and exclusive benefit of the District, the Corporation and the Trustee, as assignee of the Corporation. Section 8.03. Assignment The District and the Corporation hereby acknowledge the transfer, conveyance and assignment by the Corporation to the Trustee of all of the Corporation's rights, title and interest in and to this Installment Purchase Agreement (excepting its rights to indemnification hereunder), including the right to receive Installment Payments, and the interest thereon, from the District,pursuant to the Trust Agreement, Section 8.04. Notices. Any written notice, statement, demand, consent, approval, authorization, offer, designation, request or other communication to be given hereunder shall be given to the party entitled thereto at its address set forth below, or at such other address as such party may provide to the other parties in writing from time to time, namely: If to the District: Orange County Sanitation District 10844 Ellis Avenue Fountain Valley, California 92708 Attention: Director of Finance and Administrative Services If to the Corporation: Orange County Sanitation District Financing Corporation c/o Orange County Sanitation District 10844 Ellis Avenue Fountain Valley, California 92708 Attention: Treasurer If to the Trustee: Union Bank, N.A. 120 South San Pedro Street, Suite 400 Los Angeles, California 90012 Attention: Alison Braunstein Each such notice, statement, demand, consent, approval, authorization, offer, designation, request or other communication hereunder shall be deemed delivered to the party to whom it is addressed (a) if personally served or delivered, upon delivery, (b) if given by electronic communication, whether by facsimile or telecopier, upon the sender's receipt of an appropriate answerback or other written acknowledgment, (e) if given by registered or certified mail, return receipt requested, deposited with the United States mail postage prepaid, 72 hours after such notice is deposited with the United States mail, (d) if given by overnight courier, with courier charges prepaid, 24 hours after delivery to said overnight courier, or (e) if given by any other means, upon delivery at the address specified in this Section. Section 8.05. Successor Is Deemed Included in all References to Predecessor. Whenever the District or the Corporation is named or referred to herein, such reference shall be deemed to include the successor to the powers, duties mid 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 Liabilitv. No official, officer or employee of the District shall be individually or personally liable for the payment of the Installment Payments, or the interest thereon, or other payments required to be made by the District hereunder, but nothing contained herein shall relieve any official, officer or employee of the District from the performance of any official duty provided by any applicable provisions of law or hereby. Section 8.07. Article and Section Headings, Gender and References. The headings or titles of the several Articles and Sections hereof and the table of contents appended hereto shall be solely for convenience of reference and shall not affect the meaning, construction or effect hereof, and words of any gender shall be deemed and construed to include all genders. All references herein to "Articles," ..Sections" and other subsections or clauses are to the corresponding articles, sections, subsections or clauses hereof, and the words "hereby," "herein," "hereof.. ..hereto," ..herewith" and other words of similar import refer to this Installment Purchase Agreement as a whole mid not to any particular Article, Section, subdivision or clause hereof'. Section 8.08. Partial invalidity. Harry 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 retraining agreements and covenants and portions thereof and shall in no way affect the validity hereof. Section 8.09. Governi It Law. This Installment Purchase Agreement shall be construed and governed and construed in accordance with the laws of the State. 77eae-n 1 a 12 Section 8.10. Execution in Counterparts. This Installment Purchase Agreement may be executed in several counterparts, each ol'which shall be deemed an original, and all of which shall constitute but one and the same instrument. 77W-71 a 13 IN WITNESS WHEREOF, the parties hereto have executed this Installment Purchase Agreement by their officers thereunto duly authorized as of the day and year first written above. ORANGE COUNTY SANITATION DISTRICT By: Chair of the Board of Directors (SEAL) Attest: By: Clerk of the Board of Directors ORANGE COUNTY SANITATION DISTRICT FINANCING CORPORATION By: Treasurer 77W-71 a 14 EXHIBIT A DESCRIPTION OF PROJECT An allocable portion of S 108,180,000 to the following: Improvements to the Wastewater System including the District's two wastewater treatment plants, the Ocean Outfall and Back Bay Sewer, and the acquisition, construction, installation, rehabilitation or repair of the Orange Western Subtrunk Relief Sewer, the Bushard Trunk Sewer, Headworks Improvements at Plant 2; Rehab Trickling Filters at Plant 1; Solids Storage and Truck Loading Facility; Effluent Pump Station Annex; Standby Power and Reliability Modifications; Groundwater Replenishment System; Bacteria Reduction Facilities; Rehabilitate Digesters at Plant 2; Ocean Outfall Rehabilitation; Replace Back Bay Sewer; Chemical Facility Modifications at Plant 1; Replace Outfall Flow Meter; Odor Scrubber Monitoring and Control; and Replace HVAC Equipment at Plants 1 and 2, originally financed with the proceeds of the 2003 Certificates. DRAFT OF 01/27/12 ESCROW AGREEMENT by and between ORANGE COUNTY SANITATION DISTRICT and UNION BANK, N.A., as Escrow Agent and Prior Trustee Dated as of March I, 2012 Orange County Sanitation District Certificates of Participation Series 2003 77a;<-ay.; ESCROW AGREEMENT THIS ESCROW AGREEMENT (this "Escrow Agreement'), dated as of March 1, 2012, 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 UNION BANK, N.A., a national banking association organized mid existing under the laws of the United States of America, as escrow agent (the "Escrow Agent') and as trustee under the Prior Trust Agreement referenced below (the"Prior Trustee"). WITNESSETH: WHEREAS, to finance the acquisition, construction and installation of certain improvements to its wastewater system (the 'Prior Project"), the District has heretofore purchased the Prior Project from the Orange County Sanitation District Financing Corporation (the"Corporation'), and the Corporation has heretofore sold the Prior Project to the District, for the installment payments (the `Prior Installment Payments") to be made by the District pursuant to the Installment Purchase Agreement, dated as of July 1, 2003 (the "Prior Installment Purchase Agreement"), by and between the District and the Corporation; WHEREAS, to provide the funds necessary to finance the Prior Project, the District caused the execution and delivery of the Orange County Sanitation District Certificates of Participation, Series 2003 (the "Prior Certificates"), evidencing direct, undivided fractional interests in the related Prior Installment Payments, pursuant to the Trust Agreement, dated as of July I, 2003 (the"Prior Trust Agreement'), by and among the Prior Trustee, the Corporation and the District; WHEREAS, the District desires to refinance the Prior Project by prepaying all of the remaining principal components of the Prior Installment Payments (the "Refunded Installment Payments"), and the interest components thereof to the date of prepayment, thereby causing the currently outstanding Prior Certificates, which mature in the [year 2033], to be prepaid (the "Refunded Certificates"); WHEREAS, to provide the funds necessary to prepay the Refunded Installment Payments, the District has caused to be executed and delivered the Orange County Sanitation District Wastewater Refunding Revenue Obligations, Series 2012A (the"Revenue Obligations"), evidencing principal in the aggregate amount of S , pursuant to the Trust Agreement, dated as of March 1, 2012, by and among Union Bank, N.A., as trustee, the Corporation and the District; WHEREAS, the District has determined to apply a portion of the proceeds of the Revenue Obligations to prepay all of the outstanding Refunded Installment Payments; and WHEREAS, in accordance with the Prior Trust Agreement, the prepayment of the Refunded Installment Payments will be applied to the payment of principal and interest evidenced by the Refunded Certificates to and including August 1, 2013 (the "Prepayment Date") and to the prepayment of the outstanding Refunded Certificates on the Prepayment Date at a prepayment price equal to the principal amount thereof plus accrued interest thereon,without premium (the"Prepayment Price"),pursuant to this Escrow Agreement; 7ras<-0v 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 patties hereto do hereby agree as follows: Section 1. Definitions. Unless otherwise defined herein, capitalized terms used herein shall have the meanings ascribed to such terms in the Prior Trust Agreement Section 2. The Escrow Fund. (a) There is hereby established a fund (the "Escrow Fund") to be held as an irrevocably pledged escrow by the Escrow Agent, which the Escrow Agent shall keep separate and apart from all other funds of the District and the Escrow Agent and to be applied solely as provided in this Escrow Agreement. Pending application as provided in this Escrow Agreement, amounts on deposit in the Escrow Fund are hereby pledged solely to the payment of the principal and interest evidenced by the Refunded Certificates to and including the Prepayment Date and the payment of the Prepayment Price on the Prepayment Date, which amounts shall be held in trust by the Escrow Agent for the Owners of the Refunded Certificates. (b) The Prior Trustee is hereby instructed to liquidate $ of the investments held in the Reserve Fund established under Section 5.03 of the Prior Trust Agreement (the "Prior Reserve"). As reflected in the report of the nationally recognized firm of independent certified public accountants delivered in connection herewith, upon the execution and delivery of the Revenue Obligations, there shall be deposited in the Escrow Fund $ received from the proceeds of the sale of the Revenue Obligations and $ from the Prior Reserve and the subaceounts held in the Installment Payment Fund for the Refunded Certificates for a total of$ (c) The District has determined or caused to be determined that upon the deposit of moneys pursuant to Section 2(b) hereof, the moneys on deposit in the Escrow Fund will be invested in the Government Obligations specified in Schedule I hereto which, together with the uninvested cash specified in said Schedule 1 shall be sufficient to make the payments required by Section 4 hereof. Section 3. Use of Monevs in Escrow Fund. (a) The Escrow Agent hereby acknowledges deposit of the moneys described in Section 2(b) hereof and agrees to invest such moneys credited to the Escrow Fund in the Government Obligations specified in Schedule 1 hereto. (b) The Owners of the Refunded Certificates shall have a first and exclusive lien on the moneys and Government Obligations credited to the Escrow Fund until such moneys and Government Obligations are used and applied as provided in this Escrow Agreement and the Prior Trust Agreement to pay principal and interest evidenced by the Refunded Certificates to and including the Prepayment Date and to prepay in full then outstanding Refunded Certificates on the Prepayment Date. (c) The Escrow Agent shall not be held liable for investment losses resulting from compliance with the provisions of this Escrow Agreement. 7ras<09 2 Section 4. Payment of Refunded Certificates. From the uninvested money and proceeds of maturing Government Obligations held in the Escrow Fund, the Escrow Agent shall apply such amounts to the payment of the principal and interest evidenced by the Refunded Certificates to and including the Prepayment Date and to the payment of the Prepayment Pi ce of the Refunded Certificates on the Prepayment Date, all as set forth in Schedule 11 hereto. To the extent that the amount on deposit in the Escrow Fund on the Prepayment Date is in excess of the amount necessary to make the required payments with respect to the Refunded Certificates, such excess shall be transferred to the Trustee for deposit in the Installment Payment Fund established under the Prior Trust Agreement. Section 5. Irrevocable Instructions to Mail Notices. The District hereby designates the Refunded Certificates for prepayment on the Prepayment Date and hereby irrevocably instructs the Prior Trustee, to give, in accordance with the provisions of Section 4.03 of the Prior Trust Agreement, notice of prepayment of such Refunded Certificates to the Owners thereof, substantially in the form set forth in Exhibit A hereto. Section 6. Performance of Duties; Acknowledgement with Respect to Irrevocable Instructions. The Escrow Agent hereby agrees to perform the duties set forth herein and agrees that the irrevocable instructions to the Escrow Agent herein provided are in a Icon satisfactory to it. Section 7. Substitution of Government Obligations. (a) Upon the written direction of the District, subject to the conditions and limitations set forth in paragraph (c) below, the Escrow Agent shall sell, transfer and request the redemption of or otherwise dispose of the initial Government Obligations held in and credited to the Escrow Fund; provided that, subject to paragraph (c) below, there are substituted therefor and delivered to the Escrow Agent other Government Obligations as hereinafter provided. (b) Upon the written direction of the District, subject to the conditions and limitations set forth in paragraph (c) below, the Escrow Agent shall reinvest cash balances in the Escrow Fund in Govemment Obligations; provided, that any such securities purchased pursuant to this paragraph (b) shall mature (1) on the next Interest Payment Date for any of the Refunded Certificates or(2) as on such other date or dates necessary to meet the requirements of Section 4 hereof, as certitied by a nationally recognized firm of independent certified public accountants. (c) The District, by this Escrow Agreement, hereby covenants and agrees that it will not request the Escrow Agent to exercise any of the powers described in paragraph (a) or (b) above in any mariner,which if such exercise of powers had been reasonably expected on the date of delivery of the Refunded Certificates, would cause any of the Refunded Certificates to be arbitrage bonds within the meaning of section 103(c) of the Internal Revenue Code of 1986, as amended (the "Code"), and the regulations thereunder in effect on the date of such request and applicable to obligations issued on the date of such Refunded Certificates. Any purchase of substitute securities by the Escrow Agent shall be accomplished in accordance with paragraph (a) above to the extent such purchases are to be made with the proceeds derived from the sale, transfer, redemption or other disposition of the Government Obligations. Such sale, transfer, redemption or other disposition of the Government Obligations and such substitution may be effected only by a simultaneous transaction and only if (i) a nationally recognized firm of 77a;4-09 3 independent certified public accountants shall certify that (a) such substitute securities, together with the Government Obligations and cash which will continue to be held in the Escrow Fund, will mature in such principal amounts and earn interest in such amounts and at such times so that sufficient moneys will be available from such maturing principal and interest to pay, as the same become due, all principal, premium and interest payable with respect to the Refunded Certificates which have not previously been paid, and (b) the amounts and dates of the anticipated payments by the Escrow Agent of the principal, premium and interest payable with respect to the Refunded Certificates will not be diminished or postponed thereby, (if) the Escrow Agent shall have received an opinion of nationally recognized bond counsel to the effect that the sale, transfer, redemption or other disposition and substitution of the Government Obligations does not cause interest on either the Revenue Obligations or the Refunded Certificates to be subject to federal income taxation under relevant provisions of the Code and the regulations thereunder in effect on the date of such sale, transfer, redemption or other disposition and substitution and applicable to obligations issued on the date of execution and delivery of the Revenue Obligations. Section 8. Escrow Agent's Authority to Make Investments. Except as expressly provided in Sections 3 mid 7 hereof, the Escrow Agent shall have no power or duty to invest any funds held under this Escrow Agreement. The Escrow Agent shall have no power or duty to transfer or otherwise dispose of the moneys held hereunder except as provided herein. Section 9. Indemnity. To the extent permitted by law, the District hereby assumes liability for, and hereby agrees to indemnify, protect, save and keep harmless the Escrow Agent and its respective successors, assigns, agents, employees and servants, from and against any and all liabilities, obligations, losses, damages, penalties, claims, actions, suits, costs, expenses and disbursements (including reasonable legal fees, expenses and disbursements) of whatsoever kind and nature which may be imposed on, incurred by, or asserted against, the Escrow Agent at any time in any way relating to or arising out of the execution, delivery and performance of this Escrow Agreement, the establishment hereunder of the Escrow Fund, the acceptance of the moneys deposited therein, and any payment, transfer or other application of moneys by the Escrow Agent in accordance with the provisions of this Escrow Agreement; provided, however, that the District shall not be required to indemnify the Escrow Agent against the Escrow Agent's own negligence or willful misconduct or the negligence or willful misconduct of the Escrow Agent's respective successors, assigns, agents and employees or the material breach by the Escrow Agent of the terms of this Escrow Agreement. In no event shall the District or the Escrow Agent be liable to any person by reason of the transactions contemplated hereby other than to each other as set forth in this Section. The indemnities contained in this Section shall survive the termination of this Escrow Agreement. Section 10. Responsibilities of Escrow Agent. The Escrow Agent makes no representation as to the sufficiency of the funds deposited in accordance with Section 2(b) and invested pursuant to Section 3(a) and earnings thereof, if any, to accomplish the prepayment of the Refunded Certificates pursuant to the Pi lot Trust Agreement or to the validity of this Escrow Agreement as to the District and, except as otherwise provided herein, the Escrow Agent shall incur no liability in respect thereof. The Escrow Agent shall not be liable in connection with the performance of its duties under this Escrow Agreement except for its own negligence, willful misconduct or default, and the duties and obligations of the Escrow Agent shall be determined by 77as4-09 4 the express provisions of this Escrow Agreement. The Escrow Agent may consult with counsel, who may or may not be counsel to the District, and in reliance upon the written opinion of such counsel shall have full and complete authorization and protection in respect of any action taken, suffered or omitted by it in good faith in accordance therewith. Whenever the Escrow Agent shall deem it necessary or desirable that a matter be proved or established prior to taking, suffering, or omitting any action under this Escrow Agreement, such matter (except the matters set froth herein as specifically requiring a certificate of a nationally recognized firm of independent certified public accountants or an opinion of counsel of recognized standing in the field of law relating to municipal bonds) may be deemed to be conclusively established by a written certification of the District. The Escrow Agent undertakes to perform only such duties as are expressly set forth in this Agreement and no implied duties, covenants or obligations shall be read into this Agreement against the Escrow Agent. The Escrow Agent may resign by giving written notice to the District, and upon receipt of such notice the District shall promptly appoint a successor Escrow Agent. If the District does not appoint a successor Escrow Agent within thirty (30) days of receipt of such notice, the resigning Escrow Agent may petition a court of competent jurisdiction for the appointment of a successor Escrow Agent, which court may thereupon, upon such notice as it shall deem proper, appoint a successor Escrow Agent. Upon acceptance of appointment by a successor Escrow Agent, the resigning Escrow Agent shall transfer all amounts held by it in the Escrow Fund to such successor Escrow Agent and be discharged of any further obligation or responsibility hereunder. Section 11. Amendments. The District and the Escrow Agent may (but only with the consent of the Owners of all of the Refunded Certificates) amend this Escrow Agreement or enter into agreements supplemental to this Escrow Agreement. Section 12. Term. This Escrow Agreement shall commence upon its execution and delivery and shall terminate on the date upon which the Refunded Certificates have been paid in accordance with this Escrow Agreement. Section 13. Compensation. The District shall from time to time pay or cause to be paid to the Escrow Agent the agreed upon compensation for its services to be rendered hereunder, and reimburse the Escrow Agent for all of its reasonable advances in the exercise and performance of its duties hereunder; provided, however, that under no circumstances shall the Escrow Agent be entitled to any lien whatsoever on any moneys or obligations in the Escrow Fund for the payment of tees and expenses for services rendered or expenses incurred by the Escrow Agent under this Escrow Agreement or otherwise. Section 14. Severability. If any one or more of the covenants or agreements provided in this Escrow Agreement on the part of the District or the Escrow Agent to be performed should be determined by a court of competent jurisdiction to be contrary to law, such covenants or agreements shall be null and void and shall be deemed separate from the remaining covenants and agreements herein contained and shall in no way affect the validity of the remaining provisions of this Escrow Agreement. 776s469a 5 Section 15. Counterparts. This Escrow Agreement may be executed in several counterparts, all or any of which shall be regarded for all purposes as an original but all of which shall constitute and be but one and the same instrument. Section 16. Coverninu Law. This Escrow Agreement shall be construed under the laws of the State of California. 776;4-69a 6 IN WITNESS WHEREOF, the parties hereto have executed this Escrow Agreement as of the date first above written. UNION BANK, N.A., as Escrow Agent and Prior Trustee By: Authorized Officer ORANGE COUNTY SANITATION DISTRICT By: Lorenzo Tyner, Director of Finance and Administrative Services 776s4-69a 7 SCHEDULEI INITIAL GOVERNMENT OBLIGATIONS IN ESCROW FUND [See attached.] V>64]6H3 SCHEDULE It PAYMENT REQUIREMENTS OF THE REFUNDED CERTIFICATES [See attached.] 776;4-69a It-1 EXHIBIT A NOTICE OF PREPAYMENT ORANGE COUNTY SANITATION DISTRICT CERTIFICATES OF PARTICIPATION SERIES 2003 Principal Payment Date CUS1P (February 1) Interest Rate Principal Outstanding Number' NOTICE IS HEREBY GIVEN that the Orange County Sanitation District Certificates of Participation, Series 2003, in the maturities and principal amounts specified above (the "Refunded Certificates") are hereby subject to prepayment on August 1, 2013 (the "Prepayment Date") at a price equal to the principal evidenced by the Refunded Certificates, plus accrued interest evidenced thereby to the Prepayment Date, without premium (the "Prepayment Price"). On the Prepayment Date there will become due and payable with respect to each of the Refunded Certificates the Prepayment Price thereof, and from and after such Prepayment Date, the interest evidenced thereby shall cease to accme and be payable. The Refunded Certificates shall be surrendered at the address of Union Bank, N.A., as Trustee, set forth below. Dated: March , 2012 By: Union Bank,N.A., as Trustee on behalf of the Orange County Sanitation District Notice * The District and Trustee shall not be responsible for the use of the CUSIP numbers selected, nor is any representation made as to their emrecnress indicated in the notice or as printed on any certificate. They are included solely for the convenience of the Securnyholders. 776s4-a9a A-1 Fulbright&Jaworski LLP—Draft 01/27/12 CONTINUING DISCLOSURE AGREEMENT THIS CONTINUING DISCLOSURE AGREEMENT (this"Disclosure Agreement'), dated as of March 1, 2012, is by and between the ORANGE COUNTY SANITATION DISTRICT, a county sanitation district organized and existing under the Taws of the State of California (the "District'), and DIGITAL ASSURANCE CERTIFICATION LLC,as Dissemination Agent (the"Dissemivation Agent'). WITNESSETH: WHEREAS, the District has caused to be executed and delivered Orange County Sanitation District Wastewater Refunding Revenue Obligations, Series 2012A (the `Revenue Obligations"), evidencing principal in the aggregate amount of$ , pursuant to a Trust Agreement, dated as of the date hereof (the "Trust Agreement'), by and among Union Bank, N.A., as trustee (the "Trustee"), the Orange County Sanitation District Financing Corporation(the"Corporation') and the District; and WHEREAS, this Disclosure Agreement is being executed and delivered by the District and the Dissemination Agent for the benefit of the owners and beneficial owners of the Revenue Obligations and in order to assist the purchaser of the Revenue Obligations in complying with the Rule (as defined herein); NOW, THEREFORE, for and in consideration of the mutual promises and covenants hereto contained,the parties hereto agree as follows: Section L 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 I, 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 dale in each year that is eight months after the end of the Fiscal Year,which date,as oflhe date of this Disclosure Agreement, is March I. "Disclosure Representative" means the Director of Finance and Administrative Services of the Dishicl, m such other officer of 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 Flectronic Municipal Market Access system,maintained on the internet at 7 i, ,mr n:-A, my by the MSRB. 52oosiau1 "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 froth herein. "Listed Events" means any of the events listed in Section 4 hereof and any other event legally required to be reported pursuant to the Rule. "MSRB" means the Municipal Securities Rulemaking Board established pursuant to Section 1513(b)(1) of the Securities Exchange Act of 1934 or any other entity designated or authorized by the SEC to receive reports pursuant to the Rule. Until otherwise designated by the MSRB or the SEC, filings with the MSRB are to be made through EMMA. "Official Statement" means the Official Statement, dated March _, 20I2, relating to the Revenue Obligations. "Participating Underwriter" means any of the original purchasers) of the Revenue Obligations requited to comply with the Rule in connection with the offering of the Revenue Obligations. "Repository"means, until otherwise designated by the SEC,EMMA. "Rule" means Rule 15c2-12 adopted by the SEC under the Securities Exchange Act of 1934, as the same has been or may be amended from time to time. "SEC" shall mean the United States Securities and Exchange Commission. Section 2. Provision of Annual Reports. (a) The District shall provide, or shall cause the Dissemination Agent to provide. to MSRB, through EMMA, not later than 15 days prior to the Annual Report Date, an Annual Report which is consistent with the requirements of Section 3 of this Disclosure Agreement. The Annual Report must be submitted in electronic format, accompanied by such identifying information as provided by the MSRB. The Annual Report may be submitted as a single document or as separate documents comprising a package, and may include by reference other information as provided in Section 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 dale 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. 120011902 2 fill The Dissemination Agent shall: (1) 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 (if) (if the Dissemination Agent is other than the Trustee), to the extent appropriate information is available to it, file a report with the Authority certifying that the Annual Report has been provided pursuant to this Disclosure Agreement, stating the date it was provided. Section 3. Content of Annual Reports. The District's Annual Report shall contain or incorporate by reference the following: (a) Audited financial statements prepared in accordance with generally accepted accounting principles as promulgated to apply to governmental entities from time to time by the Governmental Accounting Standards Board. If the District's audited financial statements are not available by the time the Annual Report is required to be filed pursuant to subsection(a) of Section 2 hereof,the Annual Report shall contain unaudited financial statements in a format similar to the financial statements contained in the Official Statement, and the audited financial statements shall be filed in the same manner as the Annual Report when they become available. lb) The principal evidenced by the Revenue Obligations Outstanding as of the January t next preceding the Annual Report Date and the principal amount of other Senior Obligations outstanding as of the January I next preceding the Annual Report Date. (c) A summary report showing in reasonable detail Revenues, Operating Revenues, Maintenance and Operation Costs, Net Revenues, Net Operating Revenues and debt service with respect to the Senior Obligations for the Fiscal Year ended the June 30 next preceding the Annual Report Date. id) An update, for the Fiscal Year ended the June 30 next preceding the Annual Report Date, of the information contained in the Official Statement in Table Nos. 2, 4, 6 (only with respect to information on 6 wider the headings Fiscal Year and Sewer Service Charge), 8 (not to include projections), 9, 10, 11, 12, 13, 14 and 16. (e) In addition to any of the information expressly required to be provided under subsections (a), (b), (a) and (d) of this Section, the District shall provide such further information, if any, as may be necessary to make the specifically required statements, in the light of the circumstances under which they are made,not misleading. Any or all of the items listed above may be included by specific reference to other documents, including official statements of debt issues 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 included by reference. Section 4. Reportin¢of Slgnifieant Events. (a) Pursuant to the provisions of this Section 4, the District shall give, or cause to be given, notice of the occurrence of any of the following events with respect to the Revenue Obligations, in a timely manner not more than ten(10) Business Days after the event: (1) principal and interest payment delinquencies; 120011902 3 (2) defeasances; (3) tender offers; (4) rating changes; (5) adverse tax opinions m the issuance by the Internal Revenue Service of proposed or final determinations of taxability, Notices of Proposed Issue (IRS Form 5701-TBB) or other material notices or determinations with respect to the tax- status of the Revenue Obligations; (6) unscheduled draws on the debt service reserves reflecting financial difficulties; (7) unscheduled draws on credit enhancements reflecting financial difficulties, (A) 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, m 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 cowl or governmental authority, or the entry of an order confirming a plan of reorganization, arrangement, or liquidation by a court or governmental authority having supervision or jurisdiction over substantially all of the assets or business of the District. (b) Pursuant to the provisions of this Section 4, the District shall give, or cause to be given, notice of the occurrence of any of the following events with respect to the Revenue Obligations, if material: it) 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 Revenue Obligations. 120011902 4 (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. let 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. 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 Renorting Obligation. The District's obligations under this Disclosure Agreement shall terminate upon the legal defeasance, prior redemption or payment in fill of all of the Revenue Obligations. If such termination occurs prior to the final maturity of the Revenue Obligations, the District shall give notice of such termination in the same manner as for a Listed Event under Section 4 hereof. Section 7. Dissemination Agent. The District may, from time to time, appoint or engage another Dissemination Agent to assist it in carrying out its obligations under this Disclosure Agreement, and may discharge any such Dissemination Agent, with or without appointing a successor Dissemination Agent. If at any time there is not any other designated Dissemination Agent, the Trustee shall be the Dissemination Agent; provided it shall receive written notice of such designation at the time of such designation. Notwithstanding any other provision to this Disclosure Agreement to the contrary, the District may provide any Annual Report to Beneficial Owners by means of posting such Amoral 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 Dish ict shall have no obligation render this Disclosure Agreement to update such information or include it in any man Annual Report or notice of occurrence of a Listed Event. 120011902 5 Section 10. Default. In the event of a failure of the District or the Dissemination Agent to comply with any provision of this Disclosure Agreement, the Trustee, at the written direction of any Participating Underwriter or the holders of at least 25% of the aggregate amount of principal evidenced by Outstanding Revenue Obligations and upon being indemnified to its reasonable satisfaction, shall, or any holder or beneficial owner of the Revenue Obligations may, lake such actions as may be necessary and appropriate, including seeking mandate or specific performance by court order, to cause the District, Trustee or the Dissemination Agent, as the case may be, to comply with its obligations under this Disclosure Agreement. A default under this Disclosure Agreement shall not be deemed an Event of Default under the Trust Agreement, and the sole remedy under this Disclosure Agreement in the event of any failure of the District, the Trustee or the Dissemination Agent to comply with this Disclosure Agreement shall be an action to compel performance. Section 11. Duties Immunities and Liabilities of Trustee and Dissemination Amen Article Vlll of the Trust Agreement is hereby made applicable to this Disclosure Agreement as if this Disclosure Agreement were (solely for this purpose) contained in the Trust Agreement. Neither the Trustee nor the Dissemination Agent shall be responsible for the form or content of any Annual Report or notice of Listed Event. The Dissemination Agent shall receive reasonable compensation for its services provided under this Disclosure Agreement. The Dissemination Agent (if other than the Trustee or the Trustee in its capacity as Dissemination Agent)shall have only such duties as are specifically set forth in this Disclosure Agreement, and the District agrees to indemnify and save the Dissemination Agent, its officers, directors, employees and agents, harmless against any loss, expense and liabilities which it may incur arising out of in in the exercise or performance of its powers and duties hereunder, including the costs and expenses (including attorneys fees) of defending against any claim of liability, but excluding liabilities due to the Dissemination Agents negligence or willful misconduct. The obligations of the District under this Section shall survive resignation or removal of the Dissemination Agent and payment of the Revenue Obligations. Section 12. Beneficiaries. This Disclosure Agreement shall inure solely to the benefit of the District, the Trustee, the Dissemination Agent, the Participating Underwriter and holders and beneficial owners from time to time of the Revenue Obligations, and shall create no rights in any other person or entity. Section 13. 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. 120011902 6 IN WITNESS WHEREOF, the parties hereto have executed this Disclosure Agreement as of the date first above written. ORANGE COUNTY SANITATION DISTRICT By: Lorenzo Tyner Director of Finance and Administrative Services DIGITAL ASSURANCE CERTIFICATION LLC. as Dissemination Agent By: Authorized Representative Acknowledged and Accepted: UNION BANK, N.A., as Trustee By: Authorized Officer 120011902 7 EXHIBIT A NOTICE TO MUNICIPAL SECURITIES RULEMAKING BOARD OF FAILURE TO FILE ANNUAL REPORT Name of Issuer: Orange County Sanitation District Name oflssue: Orange County Sanitation District Wastewater Refunding Revenue Obligations, Series 2012A Date of Execution and Delivery: March_2012 NOTICE IS HEREBY GIVEN that the Orange County Sanitation District(the-District")has not provided an Annual Report with respect to the above-captioned Revenue Obligations as required by Section 6.09 of the Trust Agreement, dated as of October 1, 2011, by and among Union Bank, N.A., as Trustee, the Orange County Sanitation District Financing Corporation and the District. [Tire District anticipates that the Annual Report will be filed by .] Dated: ORANGE COUNTY SANITATION DISTRICT By: cc: Trustee Dissemination Agent ;zoos so z 8 Fulbright & Jaworski L.L.P.—Draft 02/01/12 PRELIMINARY OFFICIAL STATEMENT DATED FEBRUARY , 2012 NEW ISSUE:—BOOK-ENTRY-ONLY RATINGS: S&P: _ Fitch: _ (See`RATINGS"herein.) In the opinimn of Falb,gala&Jaw..s/ri LL.P.. Los Angeles, C'ohfornia, Spec nit Counsel, under existing statwer regulations rulings and court decisions, and assuming compliance filth the mr covenrnns devadbed herein, the interest component ofearh Installment Pavment, and the allocable portion thereof distributable to respect efanv _ Revenue Obligation, is eaduded pursuant to section 103(a) of the Internal Revenue Code of 1986 from the gross income of the onwers thereof(w federal income las purpose,and is not an item of fiffewnev h r proposes or the federal ,net treatment tax. It is also the opinion of Special Connsel that under existing low interest on the Revenue Obligation., is exempt fronn personal income [noes of the Stine of California .See. however, 'TAX MAITFRS"he,eve [District logo[ $ [DAC Imgol ORANGE COUNTY SANITATION DISTRICT _ WASTEWATER REFUNDING REVENUE OBLIGATIONS SERIES 2012A Bated: Date of Delivery But: as shown on the inside cover The $ * Orange County Sanitation District Wastewater Refunding Revenue Obligations Sedes2012A (the "Revcmm Obligations") are certificates of participation that evidence direct, fractional _ undivided interests of the Owners thereof in certain installment payments(tire"Installment Payments''),and the interest Ihcrcon, to be made by the Orange County Sanitation District (the "District") pursuant to the Installment _ Purchase Agreement, dated as of March 1, 2012 (the "installment Purchase Agreement'*). by and between the District and the Orange County Sanitation District Financing Corporation the "Corpomtion"). 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 obfigatioas such as - the Installment Payments, and the interest thereon, will be incurred and secured. Insmlhnem Payments under the Installment Purchase Agreement are payable solely from Net Revenues (as more fully described in the Master Agreement, the "Net Revenues") as provided in the Installment Purchase Agreement, consisting primarily of all income and revenue received by the District from the operation or ownership of the Wastewater System of the District (the "Wastewater System') remaining after payment of Maintenance and Operation Costs, as further described in `SECURITY AND SOURCES OF PAYMENT FOR THE REVENUE OBLIGATIONS' herein. The Installment Purchase Agreement provides that the obligation of the District to pay the Installment Payments, and _ payments of interest thereon, and certain other payments required to be made in accordance with the Installment Purchase Agreement, solely from Net Revenues, is absolute and unconditional See`SECURITY AND SOURCES OF PAYMENT FOR THE REVENUE OBLIGATIONS'hincin. The proceeds of the Revenue Obligations will be used to (i)prepay all of the District"s Certificates of Participation, Series 2003, currently outstanding in the aggregate principal amount of$109,180,000 (the-Refrnrded _ Certificates'), and (n)few the costs incurred in connection with the execution and delivery of the Revenue Obligations. Sce"REFUNDINGPLAN'herein. Interest evidenced by the Revenue Obligations will be payable semiannually on February I and August 1 of each year, commencing on August 1, 2012, See "THE, REVENUE OBLIGATIONS' herein. The Revenue Obligations initially will be delivered only in book-entry form and will be registered in the name of Cede& Co-, as nominee ofThe Depository Trust Company,New York,New York("DTC"),which will act as securities depository _ for the Revenue Obligations. Individual purchases of the Revenue Obligations will be made in book-entry form Z only. Purchasers of Revenue Obligations will not receive physical certificates representing their ownership interests in the Revenue Obligations purchased. The Revenue Obligations will be delivered in denominations of$5,000 and any integral multiple thereof Payments of principal and interest evidenced by the Revenue Obligations are payable Preliminary,subject to change. 51SW493.i directly to DEC by Union Bank, N.A., 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 Revenue Obligations. See APPENDIX E—"BOOK-ENIRY SY STEM"herein. TBE'. OBLIGATION OF THE DISTRICT TO PAY THE INSTALLMENT PAYMENTS, AND THE INTEREST THEREON, AND OTHER PAYMENTS REQUIRED TO BE MADE BY IT UNDER THE INSTALLMENT PURCHASE AGREEMENT IS A SPECIAL OBLIGATION OF THE DISTRICT PAYABLE,IN THE MANNER PROVIDED IN THE INSTALLMENT PURCHASE AGREEMENT, SOLELY FROM NET REVENUES AND OTHER FUNDS PROVIDED FOR IN THE INSTALLMENT PURCHASE AGREEMENT, AND DOES NOT CONS ELUTE.A DEBT OF TIIE DISTRICT OR OF 711E STAFF OF CALIFORNIA, OR OF ANY POLITICAL SUBDIVISION THEREOF. IN CONTRAVENTION OF ANY CONSTITUTIONAL OR STATUTORY DEBT LIMITATION OR RESTRICTION. NEITHER THE FAITH AND CREDIT NOR THE TAXING POWER OF THE STATE OF CALIFORNIA, OR ANY POLITICAL SUBDIVISION THEREOF, IS PLEDGED TO THE PAYMENT OF THE INSTALLMENT PAYMENTS, OR THE INTEREST THEREON, OR OTHER PAYMENTS REQUIRED TO BE MADE UNDER THE INSTALLMENT PURCHASE AGREEMENT. SEE"SEC'URITY AND SOURCES OF PAYMENT FOR THE REVENUE OBLIGATIONS'HEREIN. This cover page contains information intended for quick reference only. It is not a summary of this issue. Investors most read the entire Official Statement to obtain information essential to making an informed investment decision. BIDS FOR THE PURCHASE OFITU BONDS RILL BF RECTIVED BY THE DISTRICT UNTIL h l 001 A.M.NEW YORKTIMEON MARCH 12012 UNLESS POSTPONED OR CANCELLED AS SE"f FORTH IN THE OFFICIAL NOTICE INVITING BIDS. The Revenue Obleaniors are offered when. as aad if e,wared arcd delivered and received by . w the Initial Pu haeer. subject to the approval of bidbright& Jmcoredi L.L.Y., Los Angeles Cahfmnra Special Counsel mtd UnClosure Counsel to dte District, and certain other conditions. Certain legal matters will be passed upon for the Disnfet and the Corporation by Waodnf/. Spradlin & Smart a Professional Corporation. Costa Meea. Cahfnr Pita. Public besaaces Adawev Group, Los Angeles, Cattfornln. has served as financial advisor to the District in connection with the e_recutiorr and deliverp ofthe Revenue Obligations. 11 is anticipared that the Revenue Obligations in definitive form will be available far deliver through the book enn'v facilities of'DTC on r,boat March_, 2012. Dated. March_,2012 55SI"93.i MATURITY SCHEDULE Principal Interest CUSIP' February I Amount Rate Yield price Base No. CUSIP is a registered trademark of the American Bankers Association, CUSIP data herein is provided by CUSIP Global Services, managed by Standard & Poor's Financial Services LLC on behalf of The American Bankers Association. This data is not intended to create a database and does not serve in anyway as a substitute for the CUSIP Services. Norte of the District,the Initial Purchaser or the Financial Advisor is responsible for the selection or correctness of the CUSIP numbers set forth herein. sssiaxyes [MAP] 914491s ORANGE COUNTY SANITATION DISTRICT Board of Directors Larry Crandall (Chair) Fountain Valley Troy Edgar—(Vice Chair)—Los Alamitos (fail Eastman Anaheim Jon Dumitni Orange Don Schweitzer— Brea Scott Nelson — Placentia Fred Smith Buena Park Sal Tivajero Santa Ana Prakash Narain Cypress Michael Levitt Seal Bea,h Sharon Quirk-Silva— Fullerton David Shawver—Stanton Bill DaltonGarden Grove John Nielsen—Dusan Joe Carchio— Huntington Beach Brad Reese— Villa Pat k Jeffrey Lalloway— Irvine John Anderson — Lin ba Linda Tom Beamish La Habra James M. Ferryman Costa Mesa San anj District Mark Waldman—La Palma John Withers —Irvine Ranch Water Diso let Steven Rosansky— Newport Beach Joy L. Neugebauer—Midwac City Saaitari District Janet Nguyen Member of the Orange Coun{o Board at superrisms Executive Manaeement of the District James D. Ruth, General Manager Robert P. Ghirelli, D.Env.,A.vvisamt General Manager James Ilerberg,Assistma General Manager and Director of Engineering Lorenzo Tyner, Director of Finance and Administrative Services Ed Tones, Director of Operations and Maintenance Nick Arhontes,Director of Facilities Support Services Jeff Reed, Director of Human Resources Special Services Special Counsel and Disclosure Counsel Fulbright&Jaworski L.L.P. Los Angeles, California District General Counsel Bradley R. Ilogin Woodruff, Spradlin& Smart, a Professional Corporation Costa Mesa, California Financial Advisor Public Resources Advisory Group Los Angeles, California Trustee Verification Agent Union Bank, N.A. Causey Demgen &Moore Inc. Los Angeles, California Denver, Colorado siaxses This Official Statement does not constitute an offer to sell or the solicitation of an offer to buy nor shall there be any sale of the Revenue Obligations by any person in any jurisdiction in which it is Unlawful for such person to make such an offer, solicitation or sale. The information set forth herein has been provided by the Orange County Sanitation District (the "District') and other sources that are believed by the District to be reliable. No dealer, broker, salesperson or other person has been authorized to give any information or to make any representations other than those contained in this Official Statement. If given or made,such other information or representations must not be relied upon as having been authorized by the District,the Corporation or the Initial Purchaser in connection with any reoffering. This Official Statement is not to be construed as a contract with the purchasers of the Revenue Obligations. Statements contained in this Official Statement which involve estimates, projections, forecasts or matters of opinion, whether or not expressly so described herein, are intended solely as such and are not to be construed as representations of facts. The information and expressions of opinion herein are subject to change without notice and neither delivery of this Official Statement nor any sale made hereunder shall, under any circumstances, create any implication that there has been no change in the affairs of the District or the Corporation since the date hereof. This Official Statement is submitted with respect to the sale of the Revenue Obligations referred to herein and may not be reproduced or used, in whole or in part, for any other purpose, unless authorized in writing by the District. All summaries of the documents and laws are made subject to the provisions thereof and do not putpmY to be complete statements of any or all such provisions. Preparation of this Official Statement and its distribution have been duly authorized and approved by the District and the Corporation. In connection with the offering of the Revenue Obligations, the Initial Purchaser in connection with any reoffering may over-allot or effect transactions which stabilize or maintain the market price of the Revenue Obligations at a level above that which might otherwise prevail in the open market. Such stabilizing, if commenced, may be discontinued at any lime. The Initial Purchaser in connection with any reoffering may offer and sell the Revenue Obligations to certain dealers, institutional investors and others at prices lower than the public offering prices stated on the inside cover page hereof and such public offering prices may be changed from time to time by the Initial Purchaser. Certain statements included or incorporated by reference in this Official Statement constitute forward-looking statements. Such statements 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. tiR14193.5 TABLE OF CONTENTS Pace INTRODUCTION ......................................................................................................................... I General............................................................................................................................... I TheDistrict........................................................................................................................2 Security and Sources of Payment for the Revenue Obligations......._......_......_......_....... 2 Continuing Disclosure ....................................................................................................... 3 Miscellaneous .................................................................................................................... 3 REFUNDING PLAN.....................................................................................................................4 ESTIMATED SOURCES AND USES OF FUNDS..... ....... ....... ....... ....... ....... ....... ....... .......4 THE REVENUE OBLIGATIONS................................................................................................ 5 General............................................................................................................................... 5 Prepayment Provisions....................................................................................................... 5 SECURITY AND SOURCES OF PAYMENT FOR THE REVENUE OBLIGATIONS............ 7 InstallmentPayments......................................................................................................... 7 Available Funds of the District.......................................................................................... 8 NetRevenues..................................................................................................................... 8 Rate Stabilization AccounL....... ....... ....... ....... ....... ....... ....... ....... ....... ....... ....... .......9 Allocation of Revenues.................................................................................................... 10 RateCovenant.................................................................................................................. 10 Limitations on Issuance of Additional Obligations......................................................... I I Insurance........ ....... ....... ....... ....... ....... ....... ....... ....... ....... ....... ....... ....... ....... .......- 13 Allocation ofInstallment Payments................................................................................. 13 THEDISTRICT......... ....... ....... ....... ....... ....... ....... ....... ....... ....... ....... ....... ....... ....... .......- 15 Background...................................................................................................................... 15 Services.......... ....... ....... ....... ....... ....... ....... ....... ....... ....... ....... ....... ....... ....... .......- 17 ServiceArea..................................................................................................................... 17 Employees........................................................................................................................ 18 RetirementPlan................................................................................................................ 19 Other Post-Employment Benefits...... ....... ....... ....... ....... ....... ....... ....... ....... ....... ..... 21 RiskManagement............................................................................................................ 21 ExistingFacilities............................................................................................................. 21 Permits, Licenses and Other Regulations ........................................................................ 22 2009 Facilities Master Plan and Capital Improvement Program.._......_......_......_......_. 24 Groundwater Replenishment System............................................................................... 26 Preferred Level of Treatment........................................................................................... 26 BiosolidsManagement..................................................................................................... 27 UrbanRunoff..... ....... ....... ....... ....... ....... ....... ....... ....... ....... ....... ....... ....... ....... ..... 27 Integrated Emergency Response Program....................................................................... 28 Five-Year Strategic Planning........................................................................................... 29 4 9 14491,5 TABLE OF CONTENTS (continued) Paee DISTRICT REVENUES.............................................................................................................. 30 Sewer Service Charges ....._......_......_......_......_......_......_......_......_......_......_............. 30 AdditionalRevenues........................................................................................................ 32 Wastewater Treatment History........................................................................................ 34 Customers ........................................................................................................................ 34 Assessed Valuation........ ....... ....... ....... ....... ....... ....... ....... ....... ....... ....... ....... ....... . 35 Tax Levies and Delinquencies......................................................................................... 37 BudgetaryProcess............................................................................................................ 37 Reserves........................................................................................................................... 38 Summary of Operating Data....._......_......_......_......_......_......_......_......_......_......_.....40 Projected Operating Data.................................................................................................42 Management's Discussion and Analysis of Operating Data............................................ 44 Investment of District Funds............................................................................................45 FINANCIAL OBLIGATIONS.................................................................................................... 45 ExistingIndebtedness......._......_......_......_......_......_......_......_......_......_......_......_.....45 Variable Rate Obligations................................................................................................ 46 AnticipatedFinancings ....................................................................................................46 Direct and Overlapping Bonded Debt.... ....... ....... ....... ....... ....... ....... ....... ....... ....... .46 THE. CORPORATION ................................................................................................................47 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 PropositionIA....... ....... ....... ....... ....... ....... ....... ....... ....... ....... ....... ....... ....... ....... .49 Article XIIIC and Article XIIID of the Califomia Constitution...................................... 49 Other Initiative Measures................................................................................................. 51. LEGAL MATTERS..................................................................................................................... 52 FINANCIAL ADVISOR ... ....... ....... ....... ....... ....... ....... ....... ....... ....... ....... ....... ....... ....... . 52 ABSENCE OF LITIGATION ..................................................................................................... 52 FINANCIAL STATEMENTS..................................................................................................... 52 TAXMATTERS.......................................................................................................................... 53 VERIFICATION OF MATHEMATICAL COMPUTATIONS..._......_......_......_......_......_..... 55 CONTINUING DISCLOSURE................................................................................................... 55 RATINGS .................................................................................................................................... 56 PURCHASE AND REOFFERING ............................................................................................. 56 MISCELLANEOUS .......... ....... ....... ....... ....... ....... ....... ....... ....... ....... ....... ....... ....... .......- 56 55914493.5 Il TABLE OF CONTENTS (continued) Paee APPENDIX — COMPREHENSIVE ANNUAL FINANCIAL REPORT OF THE ORANGE COUNTY SANITATION DISTRICT FOR FISCAL YEAR ENDED JUNE30, 201 I.-.._......_......_......_......_......_......_......_......_......_......_......_....A-( APPENDIX B — THE COUNTY OF ORANGE— ECONOMIC AND DEMOGRAPHIC INFORMATION ...............................................................................................B-I APPENDIX C — SUMMARY OF PRINCIPAL LEGAL DOCUMENTS C-1 APPENDIX D — FORM OF CONTINUING DISCLOSURE AGREEMENT..... ...... ...... ...... D-I APPENDIX F, _. BOOK-ENTRY SYSTEM................................................................................. F-1 APPENDIX F — FORM OF APPROVING OPINION OF SPECIAL COUNSEL F-I 55914493.5 OFFICIAL STATEMENT ORANGE COUNTY SANITATION DISTRICT WASTEWATER REFUNDING REVENUE OBLIGATIONS SERIES 2012A INTRODUCTION This introduction contains onto a brie] summary of certain of the terms at the Revenue Obligations being offered and a brief description of the Official Statement. All statements contained in this lnlroduction are qualified in their entirety ity reference to the entire Official Statement References to, and summaries of,In of the Constitution and laws of the State of Calitornia (the "State) and any,documents referred to her'eln do not pia'port to be complete and.such reterence,v 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 S - aggregate principal amount of the Orange County Sanitation District Wastewater Refunding Revenue Obligations, Series 2012A (the `Revenue Obligations"), which are certificates of participation evidencing direct, fractional undivided interests in certain installment payments (the "Installment Payments') and the interest thereon, to be made by the Orange County Sanitation District ((he "District') pursuant to the Installment Purchase Agreement, dated as of March 1, 2012 (the "Installment Purchase Agreement"), by and between the District and the Orange County Sanitation District Financing Corporation (the"Corporation"). Unless the context clearly indicates to the contrary, a reference herein to either of the Installment Purchase Agreement or the Revenue Obligations is intended to refer to the corresponding interest in the Installment purchase Agreement. Pursuant to the Master Agreement for District Obligations, dated as of August 1, 2000 (the "Master Agreement"), by and between the District and the Corporation, the District has established and declared the conditions and terms upon which obligations such as the Installment Purchase Agreement, and the Installment Payments and the interest thereon, will be incurred and secured. Installment Payments under the Installment Purchase Agreement are payable solely from Net Revenues (as defined hereinafter) as provided in the Installment Purchase Agreement, consisting primarily of all income and revenue received by the District from the operation or ownership of the Wastewater System of the District (the "Wastewater System") remaining after payment of Maintenance and Operation Costs, as further described in "SECURITY AND SOURCES OF PAYMENT FOR THE REVENUE OBLIGATIONS" herein. Preliminary,subject to change. i5R1449J.5 The Revenue Obligations are to be executed and delivered pursuant to a Trust Agreement, dated as of March I, 2012 (the "Trust Agreement"), by and among the District, the Corporation and Union Bank, N.A., as trustee(the"Trustee"). Proceeds from the sale of the Revenue Obligations will be used to (i)prepay all of the District's Certificates of Participation, Series 2003, currently outstanding in the aggregate principal amount of$108,180,000 (the "Refunded Certificates") and (it)pay the costs incurred in connection with the execution and delivery of the Revenue Obligations. See "REFUNDING PLAN" herein. The Revenue Obligations will be executed and delivered in the form of fully registered certificates of participation, dated as of the date of initial delivery thereof and will mature on February I or August I, as applicable, in each such year as set forth on the inside cover page hereof. Interest evidenced by the Revenue Obligations will be payable semiannually on February I and August I of each year, commencing on August 1, 2012. See "THE REVENUE OBLIGATIONS" herein. The Revenue Obligations initially will be delivered only in book-entry form and will be registered in the name of Cede &Co., as nominee of The Depository Trust Company, New York, New York ("DTC"),which will act as securities depository for the Revenue Obligations. The Revenue Obligations will be delivered in denominations of$5,000 and any integral multiple thereof. So long as the Revenue Obligations are in the DTC book-entry system, the interest, principal, purchase price and prepayment premiums, if any, due with respect to the Revenue Obligations will be payable by the Trustee, or its agent, to DTC or its nominee. DTC, in turn,wilt make payments pursuant to its procedures as described under APPENDIX E —"BOOK—ENTRY SYSTEM"herein. The District The District is a public agency responsible for regional wastewater collection, treatment and disposal. The District is the sixth largest wastewater discharger in the United States. The District provides service to an area with a population of approximately 2.5 million people in the northern and central portion of the County of Orurge (the "County"), in a service area of approximately 463 square miles, treating an average of 207 million gallons per day ('rag/d") of wastewater in Fiscal Year 2010-11. See"THE DISTRICT," "DISTRICT REVENUES"and"FINANCIAL OBLIGATIONS"herein. Security and Sources of Payment for the Revenue Obligations The Revenue Obligations, which are certificates of participation, evidence direct, fractional undivided interests in the Installment Payments, and the interest thereon, paid by the District pursuant to the Installment Purchase Agreement. The obligation of the District to pay the Installment Payments and the interest thereon and other payments required to be made by it under the Installment Purchase Agreement is a special obligation of the District payable, in the manner provided under the Installment Purchase Agreement, solely from Net Revenues, and other finds as provided in the Installment Purchase Agreement. Net Revenues generally consist of all intone and revenue received by the District from the operation or ownership of the Wastewater System remaining after payment of Maintenance and Operation Costs, all as further provided in the Master Agreement. The Installment Purchase Agreement constitutes a Senior Obligation and, as such, is subject to the provisions of the Master Agreement and is afforded all of the advantages, benefits, interests and security afforded Senior Obligations pursuant to the Master Agreement. The District currently has Outstanding Senior Obligations payable from Net Revenues on a parity with the Installment Payments under the Installment Purchase Agreement. See "ESTIMATED SOURCES AND USES OF FUNDS," "FINANCIAL OBLIGATIONS — Existing Indebtedness" and "THE DISTRICT"herein and APPENDIX C—"SUMMARY OF PRINCIPAL LEGAL DOCUMENTS — Master Agreement" attached hereto. The District has no Subordinate Obligations currently outstanding. 559144931 2 pursuant to the Master Agreement, the District will, to the extent permitted bylaw, 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 tees and charges will at all times be sufficient to meet the requirements of the Master Agreement. See "SECURITY AND SOURCE OF PAYMENT FOR THE REVENUE OBLIGATIONS—Rate Covenant' herein. The obligation of the District to par the Installment Payments and the interest thereon, and other payments required to be made by it under the Installment Purchase Agreement is a special obligation of the District payable, in the manner provided in the Installment Purchase Agreement, solely from Net Revenues and other funds provided for in the Installment Purchase Agreement, and does not constitute a debt of the District or of the State, or of any political subdivision thereof, in contravention of anv constitutional or statutory debt limitation or restriction. Neither the faith and credit nor the taxing power of the District or the State or any political subdivision thereof, is pledged to the payment of the Installment Payments, or the interest thereon, or other payments required to be made under the Installment Purchase Agreement. The Installment Purchase Agreement constitutes a Senior Obligation and, as such, is subject to the provisions of the Master Agreement and is afforded all of the advantages, benefits, interests and security afforded Senior Obligations pursuant to the Master Agreement. See`SECURITY AND SOURCES OF PAYMENT FOR THE REVENUE OBLIGATIONS"herein. Continuing Disclosure The District has covenanted for the benefit of holders and beneficial owners of the Revenue Obligations (a)to provide certain financial information and operating data(the"Annual Report') relating to the District and the property in the District not later than eight months after the end of the District's Fiscal Year (which currently would be March 1), commencing with the report for the 201 I-12 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 rotating to the Revenue Obligations are qualified in their entirety by reference to such documents. Copies of the Trust Agreement, the Master Agreement and the Installment Purchase Agreement are on file mid available for inspection at the corporate trust office of Union Bank, N.A., Los Angeles, California Attention: Corporate Trust, s5sru931 3 REFUNDING PLAN A portion of the net proceeds of from the sale of the Revenue Obligations, together with other available moneys, will be used to prepay all of the remaining installment payments (the "Refunded Installment Payments") to be made by the District pursuant to the Installment Purchase Agreement, dated as of July I,2003, by and between the District and the Corporation, which was executed and delivered in connection with the Refunded Certificates. The Refunded Certificates consist of the February 1, 2033 maturity, currently outstanding in the aggregate principal amount of S108,180,000. Pursuant to the terms of (he Trust Agreement, dated as of July I, 2003 (the "2003 Trust Agreement'), by and among the District, the Corporation and Union Bank, N.A., as trustee thereunder, the prepayment of the Refunded Certificates will be effected by depositing a portion of the proceeds of the Revenue Obligations, together with other available moneys, in an escrow fund (the "Escrow Fund") to be created and established under the Escrow Agreement, dated as of March 1,2012, by and between the District and Union Batik, N.A., as escrow agent thereunder. Such deposit by the District in the Escrow Fund, will be invested in Government Obligations (as defined in the 2003 Trust Agreement). The Government Obligations will be scheduled to mature in such amounts and at such times and will pay interest at such rates as to provide amounts sufficient to pay interest with respect to the applicable Refunded Installment Payments due and payable through August 1, 2013 and to pay on August 1, 2013 (the "Prepayment Date") the principal component of the Refunded Installment Payments with respect to the Refunded Certificates at a prepayment price equal to the principal amount thereof(the "Prepayment Price'), without premium. See "VERIFICATION OF MATHEMATICAL COMPUTATIONS"herein. The amounts deposited in the Escrow Fund will be held in trust solely for the Refunded Certificates and will not be available to pay the principal and interest evidenced by the Revenue Obligations or any obligations other than the Refunded Certificates. ESTIMATED SOURCES AND USES OF FUNDS The estimated sources and uses of funds and other amounts in connection with the execution and delivery of the Revenue Obligations are presented below. Sources Principal Amount of Revenue Obligations S [Premium/Discount] Amounts released from 2003 Trust Agreement relating to the Refunded Certificates Total Sources S Uses Deposit to Escrow Fund S Initial Purchaser's Discount Costs of Issuance(' Total Usesf ) S fo Costs oftssuance include,among other things, foes atoning agencies, Special Counsel and Disclosure Counsel fees and expenses,vei Iication fees and the initial fees of the TruStec. Totals may not add due to rounding. 5591r4931 4 THE REVENUE OBLIGATIONS General The Revenue Obligations will be prepared in the form of fully registered certificates of participation in denominations ofS5,000 and any integral multiple thereof. The Revenue Obligations will be dated as of the date of initial delivery thereof and will mature on February 1 or August 1, as applicable, in such years as set forth on the inside cover page hereof. Interest evidenced by the Revenue Obligations will be payable semiannually on February 1 and August I of each year, commencing on August I, 2012. The Revenue Obligations initially will be delivered only in book-entry form and will be registered in the name of Cede & Co., as nominee of The Depository Trust Company, New York, New York ("DTC"), which will act as securities depository for the Revenue Obligations. Individual purchases of the Revenue Obligations will be made in book-entry fmm only. Purchasers of Revenue Obligations will not receive physical certificates representing their ownership interests in the Revenue Obligations purchased. The interest evidenced by the Revenue Obligations shall be payable on each Interest Payment Dale to and including their respective Principal Payment Dates or prepayment prior thereto, and shall represent the sum of the interest on the Installment Payments coming due on the Interest Payment Dates in each year. The principal evidenced by the Revenue Obligations shall be payable on their respective Principal Payment Dates in each year and shall represent the Installment Payments coming due on the Principal Payment Dates in each year. Each Revenue Obligation shall evidence interest from the Interest Payment Date next preceding its date of execution to which interest has been paid in full,unless such date of execution shall be after a Record Date and on or prior to the following Interest Payment Date, in which case such Revenue Obligation shall evidence interest from such Interest Payment Date, or unless such date of execution shall be on or prior to July 15, 2012, in which ease such Revenue Obligation shall represent interest from its date of initial delivery. Notwithstanding, the foregoing, if, as shown by the records of the Trustee, interest evidenced by the Revenue Obligations shall be in default, each Revenue Obligation shall evidence interest from the last Interest Payment Date to which such interest has been paid in full or duly provided for. Interest evidenced by the Revenue Obligations shall be computed on the basis of a 360day year consisting of twelve 30day months. See APPENDIX C — "SUMMARY OF PRINCIPAL LEGAL DOCUMENTS—Trust Agreement." Payments of principal and interest evidenced by the Revenue Obligations are payable directly to DTC by Union Bank,N.A., as trustee. Upon receipt of payments of such principal and interest, DTC will in turn distribute such payments to the beneficial owners of the Revenue Obligations. So long as the Revenue Obligations are held in the DTC book-entry system, the interest, principal, purchase price and prepayment memiwns, if any, due with respect to the Revenue Obligations will be payable by the Trustee, or its agent,to DTC or its nominee. DTC,in turn,will make payments pursuant to its procedures as described under APPENDIX E—"BOOK-ENTRY SYSTEM"herein. Prepayment Provisions Optional Prepayment. The Revenue Obligations with stated Principal Payment Dates prior to February I, 20 are not subject to optional prepayment paler to their stated Principal Payment Dates. The Revenue Obligations with stated Principal Payment Dates on or after February 1, 20 are subject to optional prepayment prior to their stated Principal Payment Dates, on any date on or after February I, 2022, in whole or in part, in Authorized Denominations, from and to the extent of prepaid Installment Payments paid pursuant to the Installment Purchase Agreement or from any other source of available funds, any such prepayment to be at a price equal to the principal evidenced by the Revenue Obligations to be prepaid,plus accrued interest evidenced thereby to the date fixed for prepayment,without premium 5591k 931 5 Selection of Revenue Obligations for Prepayment. Whenever Tess than all the Outstanding Revenue Obligations are to be prepaid on any one date pursuant to provisions of the Trust Agreement with respect to optional prepayment of Revenue Obligations, the Trustee shall select the Revenue Obligations to be prepaid among Revenue Obligations with different Principal Payment Dates as directed in a Written Request of the District. Whenever Tess than all the Outstanding Revenue Obligations with the same stated Principal Payment Date are to be prepaid on any one date in accordance with the Trust Agreement, the Trustee shall select the Revenue Obligations with such Principal Payment Date to be prepaid as directed in a Written Request of the District, or at the discretion of the District by lot in any manner that the Trustee deems fair and appropriate, which decision shall be final and binding upon the District and the Owners. The Trustee shall promptly notify the District in writing of the numbers of the Revenue Obligations so selected for prepayment on such date. For purposes of such selection, any Revenue Obligation may be prepaid in pan in Authorized Denominations. Notice of Prepayment. When prepayment of Revenue Obligations is authorized pursuant to the Trust Agreement, the Trustee shall give notice, at the expense of the District, of the prepayment of the Revenue Obligations. The notice of prepayment shall specify (a)the Revenue Obligations or designated portions thereof(in the case of prepayment of the Revenue Obligations in part but not in whole)which are to be prepaid, (b) the date of prepayment, (a)the place or places where the prepayment will be made, including the name and address of any paying agent, (d) the prepayment price, (e)the CUSIP numbers assigned to the Revenue Obligations to be prepaid, (D the numbers of the Revenue Obligations to be prepaid in whole or in part and, in the case of any Revenue Obligation to be prepaid in part only, the principal evidenced by such Revenue Obligation to be prepaid, and (g)the interest rate and stated Principal Payment Date of each Revenue Obligation to be prepaid in whole or in part. Such notice of prepayment shall further state that on the specified date there shall become due and payable upon each Revenue Obligation or portion thereof being prepaid the prepayment price and that from and after such date interest evidenced thereby shall cease to accrue and be payable. With respect to any notice of optional prepayment of Revenue Obligations, unless at the time such notice is given the Revenue Obligations to be prepaid shall be deemed to have been paid within the meaning of the Trust Agreement, such notice shall state that such prepayment is conditional upon receipt by the Trustee. on or prior to the date fixed for such prepayment, of moneys sufficient to pay for the prepayment price of the Revenue Obligations to be prepaid, and that if such moneys shall not have been so received said notice shall be of no force and effect and the District shalt not be required to prepay such Revenue Obligations. In the event a notice of prepayment of Revenue Obligations contains such a condition and such moneys arc not so received, the prepayment of Revenue Obligations as described in the conditional notice of prepayment shall not be made and the Trustee shall, within a reasonable lime after the date on which such prepayment was to occur, give notice to the persons and in the manner in which the notice of prepayment was given, that such moneys were not so received and that there shall be no prepayment of Revenue Obligations Pursuant to such notice of prepayment. The Trustee shall, at least 20 but not more than 60 days prior to any prepayment date, give notice of prepayment to the respective Owners of Revenue Obligations designated for prepayment by first-class mail, postage prepaid, at their addresses appearing on the registration books maintained by the Trustee as of the close of business on the day before such notice of prepayment is given. The actual receipt by the Owner of any notice of such prepayment shall not be a condition precedent to prepayment, and neither failure to receive such notice nor any defect therein shall affect the validity of the proceedings for the prepayment of such Revenue Obligations or the cessation of interest evidenced thereby on the date fixed for prepayment. Effect of Prepayment If notice of prepayment has been duly given as aforesaid and moneys for the payment of the prepayment price of the Revenue Obligations to be prepaid are held by the Trustee, then on the prepayment date designated in such notice, the Revenue Obligations so called for prepayment shall become payable at the prepayment price specified in such notice; and from and after the date so 5591k 931 6 designated, interest evidenced by the Revenue Obligations so called for prepayment shall cease to accrue, such Revenue Obligations shall cease to be entitled to any benefit or security hereunder and the Owners of such Revenue Obligations shall have no rights in respect thereof except to receive payment of the prepayment price thereof. The Trustee shall, upon surrender for payment of any of the Revenue Obligations to be prepaid, pay such Revenue Obligations at the prepayment price thereof, and such moneys shall be pledged to such payment. SECURITY AND SOURCES OF PAYMENT FOR THE REVENUE OBLIGATIONS Installment Payments Pursuant to the Installment Purchase Agreement, the Project will be reacquired by the District from the Corporation. The District has covenanted to, subject to any rights of prepayment under the Installment Purchase Agreement, pay to the Corporation, solely from Net Revenues and from no other sources, the Purchase Price in Installment Payments, with interest thereon, as provided in the Installment Purchase Agreement. Pursuant to the Master Agreement, the District has established and declared the conditions and terms upon which obligations such as the Installment Purchase Agreement, and the Installment Payments and the interest thereon payable under the Installment Purchase Agreement, will be incurred and secured. The obligation of the District to make the Installment Payments, and payments of interest thereon, and other payments required to be made by it under the Installment Purchase Agreement, solely from Net Revenues, is absolute and unconditional,and until such time as the Installment Payments, payments of interest thereon, and such other payments shall have been paid in fall (or provision for the payment thereof shall have been made pursuant to the Installment Purchase Agreement), the District has covenanted that it will not discontinue or suspend any Installment Payments when due,whether or not the Project or any part thereof is operating or operable or has been completed, or its use is suspended- interfered with, reduced or curtailed or terminated in whole or in pan, and such Installment Payments, payments of interest thereon, and other payments shall not be subject to reduction whether offset or otherwise and shall not be conditional upon the performance or nonperformance by any party of any agreement or any cause whatsoever. The District's obligation to make Installment Payments from Net Revenues is on a parity with the District's obligation to make payments with respect to its Outstanding Senior Obligations. See "Net Revenues" below. Pinsuard to the Trust Agreement, the Corporation has assigned to the Trustee for the benefit of the Owners of the Revenue Obligations substantially all of its rights, title and interest in and to the Installment Purchase Agreement, including its right to receive Installment Payments aid the interest thereon. The District has certain Existing Senior Obligations Outstanding payable from Net Revenues on a parity with the Installment Payments under the Installment Purchase Agreement. The tern "Existing Senior Obligations" as used in this Official Statement refers to the 2000 Installment Purchase Agreement, the 2003 Installment Purchase Agreement, the 2007A Installment Purchase Agreement, the 2007B Installment Purchase Agreement, the 2008A Installment Purchase Agreement, the 2008B Installment Purchase Agreement, the 2009A Installment Purchase Agreement, the 2010A Installment Purchase Agreement, the 20I0C Installment Purchase Agreement, the 2011 A Installment Purchase Agreement and the 201 IB Installment Purchase Agreement and the term "Senior Obligations" as used in this Official Statement refers to the Existing Senior Obligations and to any additional Senior Obligations, such as the Installment Purchase Agreement, that may be made payable on a parity basis to the Installment Payments as provided in the Master Agreement. Senior Obligations, together with aiy 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 Revenue Obligations will defense the 2003 installment Purchase Agreement See "REFUNDING PLAN"herein. 5591k 931 7 The obligation of the District to pay the Installment Payments, and the interest thereon, and other payments required to be made by it under the Installment Purchase Agreement and Master Agreement, is a special obligation of the District payable, in the manner provided in the Installment Purchase Agreement, solely from Net Revenues and other funds provided for in the Installment Purchase Agreement, and does not constitute a debt of the District, the State or any political subdivision thereof, in contravention of any constitutional or statutory debt limitation or restriction. Neither the faith and credit nor the taxing power of the District, the State or any political subdivision thereof, is pledged to the payment of the Installment Payments, of the interest thereon, or other payments required to be made under the Installment Purchase Agreement. The Installment Purchase Agreement constitutes a Senior Obligation and, as such, is subject to the provisions of the Master Agreement and is afforded all of the advantages, benefits, interests and security afforded Senior Obligations pursuant to the Master Agreement. See"SECURITY AND SOURCES OF PAYMENT FOR THE REVENUE OBLIGATIONS" herein. 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, 2011, the District's Debt Service Required Reserves totaled SI42 million, of which 590.2 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." District reserve funds, excluding Debt Service Required Reserves (sec Table 13), arc referred to herein as "Available Reserver" Available Reserves at June 30, 2011 were approximately $419 million. Available Reserves at June 30, 2012 and June 30, 2013 are projected to be approximately $435 million and $496 million, respectively. Sec "DISTRICT REVENUES Reserves," " Summary of Operating Data"and'—Projected Operating Data" Net Revenues The District is obligated to make Installment Payments solely from Net Revenues as provided in the Master Agreement, which consist of Revenues remaining after payment of costs paid by the District for maintaining and operating the Wastewater System ("Maintenance and Operation Costs"). Revenues we 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 valor can taxes received during such period, payments under the Agreement Acquiring Ownership Interests, Assigning Rights and Establishing Obligations, entered into on February 13, 1986,and amendment No. I thereto dated December 10, 1986(the'"IRWD Agreement"), by and between predecessor County Sanitation District No. 14 of Orange County and the Irvinc 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 mud advances or contributions in aid of construction (which, for purposes of the Master Agreement, shall not include payments under the IRW D Agreement); 559IYr931 8 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(i) Revenues shall include Capital Facilities Capacity Charges collected during such period to the extent that such Capital Facilities Capacity Charges could be properly expended on a Capital Facilities Capacity Charge Eligible Project for which the proceeds of Subject Obligations were used or are available to be used. Any Federal Subsidy payments received by the District will constitute Revenues as defined in the Master Agreement. See "DISTRICT REVENUES Additional Revenues' herein. The District's obligation to make the Installment Payments from its Net Revenues is ou 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 Lilly 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 connacts (including financial contracts) or leases of the District authorized and executed by the District under and pursuant to applicable law, including, without limitation, installment, lease or other payments which are, in accordance with the provisions of the Master Agreement, payable from Net Revenues on a parity with the payments under the Master Agreement. The District may at any time incur-Subordinate Obligations payable on a subordinate basis to the Installment Payments as provided in the Master Agreement; provided, however, that prior to incurring such Subordinate Obligations, the District shall have determined that the incurrence thereof will not materially adversely affect the District's ability to comply with the requirements of the Master Agreement. The District may at any time incur Reimbursement Obligations with respect to Subordinate Obligations. For a description of the District's Outstanding Senior Obligations and Subordinate Obligations, see `FINANCIAL OBLIGATIONS — Existing Indebtedness" herein. There 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 amormts 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 559I4r4931 9 Revenues for any period, but such transferred amount is excluded from determining Operating Revenues for any period. Revenues will be decreased by the amounts, if any, transferred from the Revenue Account to the Rate Stabilization Account. There are presently no funds in the Rate Stabilization Account. Allocation of Revenues To carry out and effectuate the pledge of Net Revenues under the Master Agreement as described above, the District agrees and covenants that all Operating Revenues received by the District will be deposited when and as received in the Revenue Account. Additionally, amounts may, from time to time as the District deems necessary or appropriate, be transferred from the Rate Stabilization Account and deposited in the Revenue Account, as described above 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 Revenue Obligations are not secured by any Reserve Fund); (3) Subordinate Obligation Payment Account; (4) Subordinate Obligation Reserve Funds; and (5) Rate Stabilization Account. Amounts required or permitted to be deposited or transferred as described in items 2, 3, 4 and 5 above, shall not be so deposited or transferred unless the District shall have determined that there will be sufficient Net Revenues available to make the required deposits or transfers on the dates on which such deposits or transfers arc 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 I, 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 Pmsuaut 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 tees 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 ton each Fiscal Year. Such budget will set forth in reasonable detail 559144931 10 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 beat least sufficient to satisfy the requirements of the Master Agreement. On or before September I of each Fiscal Year, the District will file with the Trustee a copy of the adopted budget for such Fiscal Year. See APPENDIX C `SUMMARY OF PRINCIPAL LEGAL DOCUMENTS Master Agreement' for additional information. 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$482 million as indicated in the District's ten-year cash flow forecast for fiscal years 2011-12 through 2020-21. 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 (S) 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 5591Yr931 11 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 poject to be funded or any system to be acquired from the proceeds of such Senior Obligations; or (it) 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 ofsuch 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 (I ) 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 "Relater) 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 (it)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 m refinanced 5591u931 12 Obligations, or debt service on the Related Bonds of such Obligations, is not disregarded pursuant to clause (L) of the definition of Assumed Debt Service). See APPENDIX C — "SUMMARY OF PRINCIPAL LEGAL DOCUMENTS Master Agreement' attached hereto for additional information. The District may at any time incur Reimbursement Obligations with respect to Senior Obligations. Subordinate Obligations. The District may at any time incur Subordinate Obligations upon satisfaction of the conditions provided in the Master Agreement. See APPENDIX C— "SUMMARY OF PRINCIPAL LEGAL DOCUMENTS Master Agreement'herein for a description of such conditions. There are currently no Subordinate Obligations outstanding. Insurance The District will procure and maintain or cause to be procured and maintained casualty insurance on the Wastewater System with responsible insurers, or provide self insurance(which may be provided in the form of risk-sharing pools), in such amounts and against such risks (including accident to or destruction of the Wastewater System) as are usually covered in connection with facilities similar to the Wastewater System. The District will procure and maintain such other insurance which it will deem advisable or necessary to protect its interests and the interests of the Corporation. See "TNE DISTRICT Risk Management' and APPENDIX C "SUMMARY OF PRINCIPAL LEGAL DOCUMENTS Master Agreement' herein. Allocation of Installment Payments Set forth in Table I are the principal and interest payments on the Revenue Obligations. Also set forth are the payments due on Existing Senior Obligations,excluding the Refunded Certificates. [Remainder of page intentionally tell blank] 5591Y4931 13 ]'able I Estimated Installment Payments Relating to the Revenue Obligations and Existing Senior Obligations of the District Fiscal Year installment Payments Other Ending Relating to Revenue Obligations Senior Oblivations(r) June 3o Principal Interest Principal Interest(�) Total 2012131 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 2031 2032 2033 2034 2035 2036 2037 2038 2039 2040 2041 2042 2043 2044 Total trr Aeliminary, subject to change. The District intends to refinance its Revenue Refunding Certificate Anticipotlon Notes. Series 2011 B('201 I Notes')on or before their meurity on November 9,2012, Assumes principal is omonized from 2022 through 2036 and ao interest cote of 3% per anmuv. See "FINANCIAL OBLIGATIONS — 12euart and Anticipated Financings"herciu Exehtdee principal and interest of the Refunded Certificates `-' Aesames a per annum interest rate of 3'P for all variable rate obligations- See"FINANCIAL OBLIGATIONS—Fristing Indebtedness' and APPENDIX A - "COMPREHENSIVE ANNUAL FINANCIAL REPORT OF THE ORANGE COUNTY SANITATION DISTRICT FOR FISCAL YEAR FNDFD JUNF 30,2011"herein. ro Exdtdes payments due prior to HO,ue,2.2012, 5591k 931 14 THE DISTRICT Background The Orange County Sanitation District is a public agency responsible for regional wastewater collection, treatment and disposal. The District is the sixth largest wastewater discharger in the United Slates. The District provides service to an area with a population of more than 2.5 million people in the northern and central portion of the County by treating an average of 207 mg/d of wastewater in Fiscal Year 2010-1 I. The District serves approximately 81% of the County population in approximately 463 square miles,or approximately 60%of the County's area. The service area which comprises the District was originally formed in 1954 pursuant to the County Sanitation District Act, as amended, Section 4700 et seq. of the Health and Safety Code of the Stale. 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 theitant construction,ownership, and operation of the prior districts'joint facilities. In April 1998, at the request of the District's Board of Directors (the "Board of Directors"), the Board of Supervisors of the County of Orange (the "County Board") passed Resolution No. 98-140 approving the consolidation of the then existing time special districts into a new, single sanitation district, to be known as the Orange County Sanitation District. This action was designed to simplify governance structures, reduce the size of the Board of Directors, ease administrative processes, streamline decision- making and consolidate accounting and auditing processes. The consolidation was effective on July 1, 1998. Pursuant to the Resolution and Government Code Section 57500, the prior districts transferred aid assigned all of their powers, rights, duties, obligations, functions and properties to the District, and the District assumed all obligations of the prior districts which were several and not joint including, without limitation, their obligations to repay the then outstanding certificates of participation. See "FINANCIAL OBLIGATIONS - Existing Indebtedness"herein. The boundaries of the nine predecessor special districts were initially used by the District to delineate separate revenue areas (the '*Revenue Areas") for budgeting and accounting purposes and in order to facilitate the imposition of fees and charges imposed by the District. See"DISTRICT REVENUES- Sewer Service Charges"herein. The District is managed by the Board of Directors, whose members are appointed by 25 member cities and agencies which are serviced by the District. The District is responsible for construction and maintenance of a major portion of the wastewater collection, treatment and disposal facilities within its boundaries. Revenue Area No. 7 is responsible for approximately 171 miles of local sewers in its service area, whereas local sanitary districts, water districts and cities are responsible for local sewers in the remainder of the District's service area. 5591u93s 15 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 21 cities, unincorporated areas of the County and three special districts, including mayms of cities, members of city councils, directors of independent special districts and one member from the County Board. 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 the majority of the Board of Directors. The District has a general manager, 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 staffof approximately 637 under the direction of its General Manager, James D. Ruth. .James D. Ruth is the District's General Manager, and has served in that capacity since December 2005. Prior to that fime, from January2003 to October 2004, Mr. Ruth served as Chief Executive Officer for the County of Orange. Mr. Ruth had previously provided 22 years of service to the City of Anaheim as parks and recreation director, deputy city manager, assistant city manager and chief executive officer, a post he held for I I years. Robert P. Ghirelli, D.Bnv. is an Assistant General Manager of the District, and has served in that capacity since July 2006. Mr. Ghirelli previously served as Director of Technical Services for the District since his joining the District in 1998. Prior to joining the District, Mr.Ghirelli served fi rjust over a year as managing principal of the Los Angeles office of a national environmental consulting firm, and served 20 years in supervisory positions with the State Water Resources Control Board and Regional Water Quality Control Boards, including 13 years serving as Executive Officer of the California Regional Water Quality Control Board,Los Angeles/Venlma Region. James fferberg, P.E. is an Assistant General Manager of the District and has served in this capacity since February 2011, He also retains the position of Director of Engineering, and has served in that capacity since November 2006. Prior to becoming Director of Engineering, he was the District's Director of Operations and Maintenance. Mr. Herberg has over 20 years of experience in water and wastewater including project management, construction management, design, strategic planning, and operations&maintenance. Lorenzo Tuner is the District's Director of Finance and Administrative Services. In September2005, Mr. Tyner joined the District with approximately 20 years of public finance aid 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 Northrop. Ed To, 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 approximately 25 years of public and private sector experience in protecting public health and the environment. 5591Yr931 16 Nick Arhontes, P_F.. is the District's Director of Facilities Support Services and has served the District since 1988. Mr. Arhmves has over 30 years of experience managing various engineered systems in the private and public sectors regionally,nationally, and internationally. Jeff'Reed is the District's Director of Human Resources. He has worked for the District since 1987. Mr. Reed serves as the District's Employee Relations Officer, administering to employer-employee relations between the District and its local public employee organizations. [n addition to human resources, Mr. Reed has served the Dist, ct in leadership roles in both safety and operations. 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 boundarics. The District currently serves an approximately 463 square-mile area including 23 of the County's 33 cities and various unincorporated areas of the County. The District serves a population of more than 2.5 million residents. 5591Y1931 17 Set forth in Table 2 below are estimated populations of cities and unincorporated areas served by the District as of January 1,2011. 'Fable 2 Estimated Populations of Cities and Unincorporated Areas Served by the Orange County Sanitation District As of January 1,2011 City, Population Anaheim 341,034 Brea 40,065 Buena Park 80,868 Costa Mesa 110,146 Cypress 47,907 Fountain Valley 55,423 Fullerton 135,574 Garden Grove 171,327 Huntington Beach 190,377 bvine 219,156 La Habra 60,432 la Palma 15,596 Los Alamitos 11,474 Newport Beach 85,376 Orange 136,995 Placentia 50,665 Santa Ana 325,228 Seal Beach 24,215 Stanton 38,317 Tustin 75,781 Villa Park 5,823 Westminster 89,937 Yorba Linda 64 855 Cities Subtotal 2.376,571 Unincorporated Areas (estimated) 81 000 Total 2,457,571. Sources: State of California Department of Finance, Demographic Research Unit for city population data, Orange County Sanitation District fm population ofunincomorated areas. Employees As of February 1, 2012, the District had 591 represented and non-represented employees. Most of the District's 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 Peace Officers Counsel of California representing the Supervisor Group and the Professional Group supervisory and professional employees since 1991. Total represented employees as of February 1,2012 numbered 551 as follows: 94 were represented by the OCEA, 207 were represented by Local 501 and 250 were represented by the Supervisor and Professional Groups. The Supervisor and Professional Groups agreements with the District were renegotiated in 2011 and expire on .June 30, 2013. The OCEA and Local 501 agreements with the District were renegotiated in 2011 and expire on .June 30, 2014. The 5591k 93.1 18 District has historically enjoyed a good working relationship with its employee organizations and has experienced no work stoppages by represented personnel since the early 1990s. Retirement Plan The District participates fit the Orange Comity 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 District full-time employees, except the General Manager, 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 or H member. 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 Orange County Employees Association ("OCEA") employees hired on or after August I, 2011. Under Plan B, final average salary is based on highest consecutive thirty-six months. Plan G applies to employees hired on or before September 21, 1979. Under Plan G, final average salary is based on the highest consecutive twelve months. Plan H applies to employees hired on or after September 21, 1979 and prior to the eligibility dates for Plan B. Under Plan H, final average salary is based on the highest consecutive thirty-six months. Effective July I, 2005, employees retiring at age 55 or older receive 2.5°%, of their final compensation for every year of service. The District entered into a memorandum of understanding with all represented groups that (effective on October 1, 2010 for the Supervisor and Professional Group and unreprescmtcd employees, effective on July I, 2011 for the Local 501 Group, and effective on August 1, 2011 for the OCEA Group) reduced the benefit formula for new employees. Employees hired into the groups after the respective effective dates are subject to a benefit formula of 1.667% at age 57.5 under Plan B for every year of service. "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 and H 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 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 is required to make periodic contributions to OCERS in amounts that are estimated to remain a constant percentage of covered employees' compensation such that, when combined with covered employees' contributions, they will fully provide for all covered employees' benefits by the time they retire. 559144931 19 Set forth in Table 13 below is a current comparison of OURS costs for Fiscal Years 2006-07 through 2010-11 and projected costs for Fiscal Years 201 1-12 and 2012-13. 'Fable 3 Orange County Sanitation District Comparison of OCERS Costs for Fiscal Years 2006-07 through 2010-11 and Projected Costs for Fiscal Years 2011-12 and 2012-13 Fiscal Year Rate0) Cost(v 2006-07 IM8% $ 9,848,854 2007-08 2055 11,011,693 2008-09 21J4 12,193,601 2009-10 21.50 13,029,795 2010-11 24.20 14,176,989 2011-12131 25.68 16,346,155 2012-1313) 27A7 17AS5,548 M Required contribution as a percent of covered payroll. Includes amortization of Unfunded Actuarial Accrued Liability. m Amounts represent employer contributions made or to be made by the Disnict- t't Projected. Source: Orange County Sanitation District, For Fiscal Years 2006-07 through 2010-1 I, the District's required contribution was equal to the contribution that the District actually made. As noted, the required contribution set forth above includes amortization of Unfunded Actuarial Accrued Liability ("UAAL"L For the Fiscal Year ended June 30, 2011, total payroll costs of employees covered by OCERS was $58,582,598. As of the December 31, 2010 valuation, OCERS has an aggregate UAAL ratio of 69.79%,for a total UAAL ofS3.75 billion. 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 after qualifying public service of ten years. 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 S248,410 in ARBA benefits during Fiscal Year 2010-11. Effective August t, 20t1, ARBA benefits are no longer available to new OCEA Group employees of the District. For more information regarding OCERS and the District's retirement plan as of June 30, 2011, see Note 6 to the Comprehensive Annual Financial Report of the Orange County Sanitation District for Fiscal Year Ended June 30, 2011 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:/Avu w_oeers.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. 559IY4935 20 Other Post-Employment Benefits In June 2004. Governmental Accounting Standards Board ("GASB") issued Statement No.45, which requires state and local governmental employers to Pond the actuarially determined annual required contribution ("ARC") for its post-employment benefits other than pension benefits (known as other post- employment benefits or "OPEB") or record the entire amount of the unfunded liability of its OPEB in its financial statements. OPEB includes healthcare and life insurance expenses and related liabilities, and an annual required contribution to fund such liabilities. The District adopted Statement No. 45 for the fiscal year beginning July 1, 2007, as required of a GASB "Phase I Agency." According to the District's actuary, Demsey Filliger Associates (the "Actuary'), the unfunded OPEB liability as of July 1, 2009 is approximately $8.8 million. The ARC is $819,692 for Fiscal Year 2010-11. Calculation of the ARC is based on the present value of benefits accruing in the current year,a 30-year amortization of the unfunded OPEB liability and an assumed rate of return on investments in the retiree fund of 5% per aunum. The District does not believe that its OPBB liability will have a material impact on its operational results. Risk Management As of the date hereof, the District has in force basic all risk property and casualty insurance, including theft, fire, flood, terrorism and boiler and machinery losses at its plants and pump stations. The District is self-insured for portions of workers' compensation,property damage and general liability. The self-insurance portion of workers' compensation is $750,000 per person per occurrence with outside excess insurance coverage to the statutory limit. The self-insured portion for property damage covering fire and other disasters is $250,000 per occurrence with outside excess insurance coverage to $1 billion. The self-insured portion for property damage covering flood is S100,000 per occurrence with outside excess insurance coverage to S300 million. The District is self-insured for all property damage train the perils of earthquakes. See "DISTRICT REVENUES — Reserves" The District also maintains outside comprehensive boiler and machinery insurance, including business interruption insurance, with a $100 million limit with deductibles ranging from $25,000 to S350,000. The District is self-insured for general liability coverage up to $250,000 per occurrence(except that employment practice liability is$500,000), with excess general liability coverage up to S30 million. During the past five fiscal years there have been no settlements in excess of covered amounts. Claims against the District are processed by outside claim administrators. The District believes that there are no unrecorded claims as of December 31, 2011 that would materially affect the financial position of the District. For more information regarding the District's insurance coverage as of June 30, 2011, see Note I to the Comprehensive Annual Financial Report of the Orange County Sanitation District for Fiscal Yea' Ended June 30, 2011 set forth in Appendix A. Existing Facilities The District's Wastewater System presently consists of two wastewater treatment plants, an influent metering and diversion structure, 15 off-plant pump Stations, various interplant pipelines and connections, and the ocean ourfall facilities. The Districts Wastewater System includes approximately 403 miles of sewers within I I trunk sewer systems, 176 miles of local sewers located within a portion of Revenue Area No. 7, two treatment plants, two discharge outfalls and two emergency weir outlets. The existing it plants have a rated primary treatment capacity of 372 mg/d, including standby capacity. Treatment Plant No. 1 ("Plant No. 1")is located in the City of Fountain Valley, about four miles from the coast, adjacent to the Santa Ana River. Secondary treatment capabilities are provided by a trickling filter plant and a conventional air activated sludge plant- Up to 105 mgld of secondary treated 5591k 931 21 effluent is conveyed to an Orange County Water District (the"OCW D") plant 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 pule oxygen activated sludge plant. The District employs several phases in the treatment of wastewater. The first phase, preliminary treatment, removes debris such as eggshells, sand and other non-biodegiadable items. See also"Preferred Level of Treatment" and 'Biosolids Management" below. In the next phase, primary treatment, wastewater is pumped to large settling basins. The liquids are separated from the remaining solids which settle or float as the wastewater passes through large settling basins called clarifiers. The settled solids are sent to solids treatment facilities. Substantially all of the wastewater received by the District is seat to secondary treatment for further processing because of the recent completion of the secondary expansion at Treatment Plant No. 2. During secondary treatment, the wastewater is treated with naturally occurring bacteria to remove most of the remaining dissolved and suspended microscopic organic solids. The ueated 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 current and future treatment capacities. Table 4 Wastewater System Treatment Capacities (mg)d) 2010-11 Existing Primary Existing Secondary Total Planned Actual Treatment Treatment Secondary Flows Capacity Capacitvtlr Capaci is,21 Plant No. 1 99 204 122 182 Plant No. 2 108 168 150 150 Aggregate Treatment 207 372 272 332 M The existing secondary capacity is being expanded to meet secondary teaurent standards by December 2012. ar 'the District's "Planned Total Capacity" is based on the 2009 Facilities Master Plan for planned capacity by 2020, which estimated the District's requirements to meet future expected primary and secondary capacity demands. Source: Orange County Sanitation District, The Disnict also has the capability to divert a portion of the influent flow from Plant No. I to Plant No. 2 through interplant connections. A portion of the flow destined for Plant No. 2 can also be diverted to Plant No. I. Another interplant facility allows gas generated during solids treatment to be transported between Plant No. I 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, Public Law 92-500 (the "Clean Water Act")- the California Environmental Quality Act of 1970, as amended ("CEQA") and the Federal Clean Air Act. The regulatory requirements ale primarily 5591kr931 22 administered by the United States Environmental Protection Agency (the `EPA"), the California Air Resources Board, the Santa Ana Regional Water Quality Control Board C'RWQCB-), and the South Coast Air Quality Management District ("AQMD"). Regulations of these agencies deal primarily with the quality of effluent which may be discharged from the treatment plants and an quality emissions. The Clean Water Act directs the EPA to monitor and to regulate the discharge of pollution into navigable waterways and to enforce the requirements that all wastewater treatment plants in the nation provide full secondary treatment for sewage. In 1977, Congress amended the Clean Water Act to allow waivers of secondary treatment standards for certain ocean dischargers if they can demonstrate, to the satisfaction of the EPA that significant adverse environmental impacts would not occur. The District emTently has all applicable permits and licenses necessary to operate its facilities. The District has discharged treated wastewater into the Pacific Ocean under a permit issued by the EPA and the RWQCB. The discharge permit included a waiver under the 301(h) provisions of the Clean Water Act, allowing for less than fill 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 Disaict's policy to treat all wastewater discharges into the ocean to secondary treatment standards thereby providing for continued public safety, marine ecosystem protection, and water reclamation opportunities. To implement this policy, District staff was directed to immediately proceed with the planning, design, and implementation of treatment methods that will allow the District to meet Clean Water Act secondary treatment standards with the expressed purposes of eliminating the need for the permit waiver received under Section301(h). The District currently estimates that it will complete these improvements by December 2012 at a total capital improvement cost of 5623.1 million. In the interim, the District operates the plants to maximize available secondary treatment and to reduce effluent biochemical oxygen demand and suspended solid discharges below currently allowed limits. Following the determination by the Board of Directors on 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 mid the RWQCB in December 2002. The NPDES Permit is separate and apart from the permit waiver received under Section 301(h), and once awarded would negate the need for a waiver. Achieving secondary treatment standards was originally projected to take nine years to complete, with completion expected in December 2012. Because ocean discharge permits are issued for only five years, and the EPA has no authority to waive the discharge limit requirements or grant a longer permit (except in accordance with Section301(h)), the District decided to voluntarily seek a consent decree concurrently with the issuance of the new ocean discharge permit. This negotiated consent decree(the"Consent Decree") approves the schedule and decrees that no penalties will be imposed for discharges that exceed the secondary treatment limits dining the period of construction. The Consent Decree was signed by the District, the EPA and the RWQCB and filed with the U.S. District Court on November 15, 2004. The Consent Decree contains seven construction milestones and interim effluent limitations. The District is in compliance with the Consent Decree and has successfully completed five of the seven milestones within the specified deadlines required by the Consent Decree- The District expects to complete all seven milestones ahead of schedule, prior to December 31, 2012. The District is also subject to the requirements of the Federal Clean An Act which mandates attainment with national ambient an quality standards for criteria pollutants (ozone, particulate matter (PM10), carbon monoxide, lead, nitrogen dioxide, and sulfur dioxide). Criteria air pollutants cause 559141931 23 adverse effects on human health and environment. AQMD is the local air pollution control agency charged with implementing the Federal Clean Air Act. In addition to criteria pollutants. AQMD also implements numerous federal and state requirements related to the toxic air pollutants which can cause cancer or other severe localized health effects. The State's An Toxic Hot Spots Act, for example, requires facilities to conduct health risk assessments and notify the neighboring communities if the health risk exceeds the regulatory thresholds. Pursuant to AQMD's requirements, the District must obtain permits before sewage treatment improvement projects can be constructed and operated. Such permits are project specific and may contain conditions that govern design criteria, operating parameters, and emissions standards. Most of the District's treatment facilities are enclosed in order to capture and treat emissions to meet regulatory emissions standards and to minimize odor impact to the neighboring communities. The District's treatment plants are also subject to the requirements of Title V of the Federal Clean An Act amendments. The Title V permit is a single air quality permit for a facility that consolidates and replaces all of the air permits for individual pieces of equipment previously issued by the local air quality district. The permit contains all of the applicable local, state, and federal requirements, including periodic self-certification of compliance and mandatory self-reporting of permit deviation. All Title V permit related reporting and documents submitted to the AQMD must be signed by the highest District official — in this case the General Manager. The Title V program also demands facilities to organize and conduct extensive training of the staff involved, including the field operation and maintenance staff. Another Title V important feature is a possibility of the public active participation and intervention in the cases of potential emission limits and monitoring violations. The Disnict 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 both it plants in January 2009. 2009 Facilities Master Plan and Capital Improvement Program The District's 2009 Facilities Master Plan(the'*Master Plan") was completed and adopter{by the Board of Directors in December 2009 and has been updated from time to time. The Master Plan updated the planning processes set forth in the 1989 Master Plan, the 1999 Strategic Plan, and the 2002 Interim Strategic Plan Update. The Master Plan also incorporates and implements the levels of services defined by the District's Board of Directors that are included in the District's 2009 Five-Year Strategic Plan. The result is a plan that integrates research, facilities planning, water conservation and reclamation, sludge reuse, other wastewater programs and financial planning into a single unified approach. A key component of the Master Plan was the updating of flow projections and the collection system hydraulic modeling. A capital improvement program was developed to implement the required sewer capacity and rehabilitation improvements through the year 2030. The District also annually reviews and validates its current Capital Improvement Program ("( IP')- The District expects to meet future demands on the Wastewater System through the CIP. This program has been developed to satisfy anticipated regulatory requirements, increased population, anticipated rehabilitations and replacements, additional treatment requirements, conservation, energy and other resource savings considerations, odor control improvements, and air quality protection needs. Through Fiscal Year 2030-31, the District's current CIP is scheduled to accomplish: • Major rehabilitation of the existing headworks, primary treatment, secondary treatment, anthill pumping, and solids handling facilities at both treatment plants; • Replace and rehabilitate nine of the District's outlying pumping stations, and 26 trunk sewer improvement projects; • Reduce hence Tine odor to Levels that do not generate odor complaints;and 5591Y1931 24 • Achieve full secondary treatment standards. The 2011 CIP validation study resulted in revisions to the CIP. The CIP currently consists of 145 individual capital projects through Fiscal Year 2030-31 with remaining outlays of 51.8 billion. Over the next five years, the CIP contemplates average annual capital expenditures of 5180 million. Implementation of full secondary treatment standards is scheduled to be completed on or before December 31,2012. Set tenth in Table 5 below is a summary of total estimated capital costs for the CIP for Fiscal Years 2011-12 through 2030-31. Table 5 Capital Improvement Program—Estimated Capital Costs Fiscal Years 2011-12 through 2030-31 Project Cost Collection System Capacity S 164.128.000 Collection System Repair,Rehabilitation, Replacement 335,590,000 Treatment Plant Capacity 227,253,000 Additional Secondary Treatment 141,163.000 Improved Treatment 156,503,000 Treatment Plant Repair, Rehabilitation, Replacement 646,871,000 Support Facilities 143 815 000 Total Validated Capital Improvement Program S1,815,323,000 Source- 2011-12 Budget Update,Orange County Sanitation District. The CIP included budgeted expenditures of 5129.2 million in Fiscal Year 2011-12. The largest cash outlay plumed for plant facilities in Fiscal Year 2011-12 is $16.6 million for the Digester Rehabilitation at Reclamation Plant No. I (total project cost is expected to be 555.5 million). Commissioning of Reclamation Plant No. 1 using wastewater is scheduled from February through June 2012, with final completion of the project anticipated in July 2012. The CIP'v largest collection system project for Fiscal Year 2011-12 is 59.7 million for the rehabilitation of Magnolia Trunk Sewer,which is now substantially complete. Groundwater Replenishment System The District has taken a multi-jurisdictional appwach 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 C'GWRS"f In March 2001, the District entered into an agreement with the OCWD to design and construct Phase I of the GWRS. The capital cost of this Phase was shared equally (50% shares) by each agency. The GWRS is a joint effort by the two agencies to provide reclaimed water for replenishment of the Orange County Groundwater Basin and to augment the seawater intrusion barrier. Phase I of the GWRS became operational in January of 2008 with an expected water production of 72,000 acre-feet per year once all secondary treatment facilities are online. In 2010,GWRS produced approximately 68,000 acre-feet. The Phase II expansion started construction in November 2011 to add approximately 33,000 acre-feet per year. The District expects the Phase II expansion to be completed in the fall of 2014. The Phase II expansion and all future phases will be funded solely by OCWD and OCSD has committed 168,000 acre-feet per year of secondary effluent to these future expanded operations. The District and OCWD amended the 2001 agreement in 2010 to dedicate the water supply from the District to OCWD for these future phases; however, no capital funding is anticipated or dedicated fiem the Dishict for these future expansion phases. 5591k 931 25 OCWD and the District have agreed to share equally in the cost of the Joint GWRS Mierofiltration Backwash Redirection Project which will increase the quantity of water delivered during the night when the flows are low. This project will save the District operational costs in the form of reduced primary treatment chemical usage. The District's total estimated budget for this project is $1,31 1,000. Preferred Level of Treatment In July 2002, the Board of Directors approved a change ham the existing level of treatment, a blend of 50% advanced primary and 50% secondary treated wastewater, to full secondary treatment standards. The reasoning behind the decision to move to full secondary standards included (1) the possibility (no matter how remote) that bacteria from the ocean outfall may at times reach the shoreline, (2) upgraded treatment will aid additional water reclamation with the OCWD, and (3) the clearly stated public preference for upgrading wastewater treatment at the time. In an effort to eliminate most bacteria from being released from the ocean outfall, in 2002 the District began to use chlorine bleach to disinfect the effluent and then apply sodium bisulfate to remove remaining chlorine prior to releasing the treated wastewater to the ocean. The District continues to take measures to limit the chlorine residual to a very low level prior to release. This mode of disinfection is expected to continue while the District studies, designs and constructs permanent facilities, and considers alternate disinfection technologies. Beginning in Fiscal Year 2006-07, the addition of disinfection treatment required an annual outlay ranging from $5.3 million to 57.2 million for additional chemicals from the operating budget of the District. Following the determination by the Board of Directors in July 2002 to implement full secondary standards, staff prepared the Secondary Treatment NPDES Permit Application that was required to be submitted to the regional office of EPA and the RWQCB in December 2002. An NPDES permit has been issued to the District and the District is currently operating tinder the Consent Decree. See "THE DISTRICT—Permits,Licenses and Other Regulations.- The District estimates that the two remaining secondary treatment capacity projects will be completed by December 31, 2012 at a total cost of approximately $12.1 million. In the interim, the District will operate the plants to maximize available secondary treatment and to reduce effluent biochemical oxygen demand and suspended solid discharges below those currently allowed limits. Biosolids Management The District produces digested and dewatercd Biosolids for beneficial use. By 2013,the District's bu solids production is anticipated to peak at approximately 788 wet tons per day ("tpd') when new secondary treatment processes are fully operational, and then is projected to decline to approximately 710 tpd by 2017 when the IRWD's solids processing facilities and the District's centrifuges commence operations. The Fiscal Year 20I1-12 budget is $18.5 million. 5591vt931 26 The District has a diversified biosolids management portfolio: Contract Contractor Location Product (tons per day and term) 250 tpd— I0 years with two S na o Kern County, CA and La Com osl five-year renewals, expires y Paz County,AZ p 7/l/2024 Conversion to a 225 tpd-25 years with a one FnerTech City of Rialto renewable coal five-year option to renew, San Bernardino County,CA substitute expires 12'1/2038 Dateland and Yuma - 175-225 tpd—One(I I year Tole Ranch Counties, AL Land application expires 12,31/2012 The District's contractors provide back-up biosolids management options in Arizona that include land application recycling and landfill disposal. Together, these options have the capacity to manage more than ten times the District's daily biosolids production to ensure sustainable, consistent, and reliable operations. The District's Long-Range Biosolids Management Plan ("LRBMP") was approved by the Board in December 2003. The goal of the LRBMP was to develop a sustainable, reliable,and economical program for long-range biosolids management providing environmentally sound practices that meet the stringent federal, state, and local regulatory requirements. As a result of the LRBMP recommendations, Synagro's existing biosolids management contract was amended in April 2004, committing 250 tons per day of biosolids to be composted at Synagro's South Kern Compost Manufacturing Facility, which started operations in late 2006. In May 2006, the District entered into a contract with FnerTech Environmental, Inc. to convert 225 tons of biosolids per day to a renewable fuel at Eneffech's proposed facility in Rialto,California(the "Rialto Slurry-Carb facility'). The FnerTech solution is a new, patented heat treatment process that reduces the energy needs to dry the biosolids in a conventional dryer, which creates the fuel pellets. The renewable fuel pellets, called eFuel, are sold to cement manufacturers that use the pellets as fuel to heat their kilns, with the residual ash from the fuel combustion becoming part of the cement product, resulting in no residual waste byproducts. EnerTech started commissioning in October 2008 and is scheduled to complete the commissioning of the Rialto Slurry-Caib facility by March 13, 2012. If the project is not successful, the District expects to enter into a replacement contract that will dispose of such biosolids at a lower cost. Under the 2011 Strategic Plan update, District staff is working with Orange County Waste & Recycling to negotiate a contract to allow for the use of local landfills for biosolids management. Finalizing this contract is the final step towards managing up to 12% of the District's annual biosolids production locally. Urban Runoff The Board of Directors, recognizing that the beaches of the County were being affected by pollution carried by urban runoff, adopted Resolution No. OCSD 00-04 on April 26, 2000, agreeing to temporarily accept dry weather urban mnoff into the Wastewater System. A subsequent revision to this initial policy, OCSD 00-22 adopted September 27, 2000, added an aggregate 10 million gallons per day ("MGD") capacity limit for the urban runoff flows. In addition, the resolution declares that the District will initially waive fees mud charges associated with authorized discharges of dry weather urban runoff to the Wastewater System until the total volume of all runoff discharges exceeds 4 NICE, calculated on a monthly average, or until the District modifies this provision of its policy. Resolution No. OCSD 01-07 5591u931 27 was adopted March 28, 2001 to clarify the District's indemnification liability In ,tune 2002, legislation was enacted to formally allow the District's charter to include the treatment of urban runofTflows. There are a total of 19 active urban runoff diversion structures, four owned and operated by the County, I owned and operated by the City of Huntington Beach, one owned and operated by the City of Newport Beach, two owned and operated by the IRWD, and one owned and operated by The Irvine Company. From July 1, 2010 through June 30, 2011, the District received a daily average urban runoff flow ranging between 0.334 and 3.31 MGD with a cumulative total of 555 million gallons for this period. The daily urban runoff volume remained at less than half of the 4 MUD fee threshold for ten months out of the twelve month period. At the existing operations and maintenance cost of$1,31179 per million gallons(2010-11 rate),the cost to the District for treating these flows was 5727,501. The District's Environmental Compliance Division administers the Dry Weather Urban Runoff Program through the issuance of a discharge permit for each of the diversion structures. The permit functions as a control mechanism to establish discharge limits, constituent monitoring, and flow metering requirements, as well as provide requirements that specifically prohibit storm runoff and authorizes discharge only during periods of dry weather. In addition, the District conducts quarterly sampling and analysis of the urban runoff discharges to ensure discharge limit compliance for the various regulated constituents. The Dry Weather Urban Runoff Program's effectiveness is measured by improvements in the quality of recreational waters of the County as manifested by a decline in beach advisories mid closures. The most recent report on beach quality by Orange County Health Agency, 2009 Annual Oecan, Harbor, &Bay Water Quality Report details the total number of Beach Mile Days that were posted due to AB 411 standards violations between April I and October 31. Although 2010 posted the highest number of Rain Advisory Days due to elevated levels of bacteria in local waters, the total number of Beach Mile Days posted in 2010 was still the lowest total on record [(87.6)] for the 10-year period from 2001-2010. In addition, the total number of Beach Mile Days posted has declined in the County for five consecutive years. Since inception of the program, the areas directly benefitting from the urban runoff diversions, Huntington State Beach and Huntington City Beach, have had significant reductions in Beach Posting Days and Beach Mile Days, with the exception of a spike at Huntington State in 2007. Though there are numerous variables impacting water quality at any given instant, the dry weather diversion appears to have contributed positively to the overall downward trend in beach closures at these locations. As a consequence, the Dry Weather Urban Runoff Program appears to have benefitted the beach going public as well as all the clean environment stakeholders of the County. Integrated Emergency Response Program In recognition of the potential damage which could occur in the event of a major earthquake, flood, or other disaster, the District implemented an Integrated Emergency Response Program (the "IERP") in 1979. The IERP is a two-volume plan which contains policies, plans and procedures preparing for, and responding to. emergencies. The District also analyzed disaster preparedness issues and policies within the Master Plan, and within a 1994 document titled Fault Rupture Hazard Investigation—Wastewater Treatment Plant No. 2. 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 at However, the Master Plan stated that damage from such a major 5591k 931 28 earthquake on the San Andreas fault would be extensive. Also, the Master Plan indicated that an M 7.0 earthquake on the Newport-Inglewood fault within five miles of the District's sewerage facilities could cause major destruction to those facilities. The disaster preparedness plan in the Master Plan indicated that it would not be economically feasible to upgrade all of the existing sanitary sewerage facilities to survive an earthquake of this magnitude along the Newport-Inglewood fault. The IERP outlines the policies and employee actions to be taken before, during and after an earthquake, earthquake response guidelines and damage assessment procedures. The Master Plan analyzed the vulnerability of the sanitary sewerage facilities and operations of the District and planned a risk reduction program wherein the vulnerability of'many of the District's sanitary sewerage facilities to an earthquake could be reduced by recommended retrofit construction measures. The Master Plan also recommended that designs of existing major structures which were constructed prior to development of current seismic design standards be reviewed and the structures strengthened,if necessary. Since the Master Plan mud 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 1999. The Army Corps of Engineers' "All-River Plan has mitigated any future flooding of the Santa Ana River system and potential threats to the District's Wastewater System. Also, both Plant No. I and Plant No.2 are built to federal standards. The disaster preparedness plan in the Strategic Plan investigates the damage potential posed by coastal flooding, tsunamis (large ocean waves generated by seismic activity) and windstorms. No assurance can be given that any such events would not have a material adverse impact on the Wastewater System. The Strategic Plan also makes recommendations regarding fire protection of the Wastewater System. Most of the structures at Plant No. I 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 Strategic Plan and the SERP can be reviewed at the District's office. Five-Year Strategic Planning In November 2007, the Board of Directors adopted a new comprehensive strategic plan to steer the District's efforts and engage the organization to envision service levels and operational needs for the next live years. The Strategic Plan has been updated annually to continue looking at a five-year horizon (each, a "Five-Year Plan"). Since 2007, approximately 72% percent of the strategic goals have been completed. The November 2010 update to the Strategic Plan focused on internal operations for economy and efficiency. The General Manager's Office initiated an effort, known as the "Beyond 2012 Strategic Planning Framework," to guide all future planning and more tightly integrate our priorities, strategic planning and budget implementation. Working with the executive team of the District, the General Manager solicited input from District managers then held a workshop with the Board of Directors in October 2010. At this workshop the Board of Director members discussed and deliberated changes and additions to the plan. The 2010 Strategic Plan Update that derived from this process continues an aggressive effort by the District to meet the sanitation, health, and safety needs of its more than 2.5 million customers while protecting the environment- As a result of the discussion at the October 2010 workshop, one new goal was added to the Strategic Plan, "Full-Cost Recovery," which is a 55914,1931 29 comprehensive review of the Sanitation District's urban runoff diversion program to ensure a fair share recovery of costs for services. 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 Districts 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. The Board of Directors establishes the annual sanitary sewer service charges by ordinance. The sanitary sewer service charge ordinances are adopted by a two-thuds vote of the Board of Directors as required wider law after conducting a noticed public hearing in compliance with Proposition 218. See "LIMITATIONS ON TAXES AND REVENUES - Article XI11C and Article XIHD of the California Constitution." In May 2002, the Board of Directors adopted District Ordinance No. OCSD 18 (the "2002 Ordinance') which became effective on July 1, 2002. The 2002 Ordinance included a single family residential ("SFR") rate increase, the underlying basis for all sanitary sewer service charges including sanitary sewer rates for multi-family residential units as well as most commercial and industrial properties, of 5950 per year, or 9,4%, to $87.50 per year. in June2003, the Board of Directors authorized a Proposition 218 notice on proposed"not to exceed"rate increases for each year over the next five yeas. The District collects Sewer Service Charges from properly 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 tees and charges to satisfy certain coverage requirements as further described under "SECURITY AND SOURCES OF PAYMENT FOR THE NOTES—Rate Covenant"herein. Residential and Commercial Server Service Charges. Pursuant to the 2002 Ordinance, 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 2002 Ordinance considered increases in the amount of the annual charges of approximately 20% per year for each of the then following live years. In May20057 the Board of Directors adopted Ordinance No. OCSD-26 increasing the Fiscal Year 2005-06 single family residential rate, the underlying basis for all sewer service charges, by 31%, from $115.00 to SI51.00 for all 5591vie3s 30 ratepayers, except those located in Revenue Area No. 14. In June 2007, the Board of Directors adopted Ordinance No. OC'SD-32 increasing the Fiscal Year2007-08 single family residential rate by 9.8%. On February 27, 2008, the Board of Directors approved increases in its sanitary sewer service charges too all single family and multi-family residential units, and for all commercial properties. The Board increased the single family residential rate, which is the basis for all of the District's sewer service charges, by 10.41Y. for Fiscal Year 2008-09, 10.0% for Fiscal Year 2009-10, 10.4% for Fiscal Year 2010- 11, 9.4%for Fiscal Year 2011-12 and 10.1% for Fiscal Year 2012-13. Set forth in Table 6 below is a five-year comparison of the Sewer Service Charge rate for single family residences. Table 6 Annual Sewer Service Charges Single Family Residence Rate Five Year Rate Schedule Fiscal Years 2008-09 through 2012-13 Sewer Service Percent Fiscal Year Charge Increase 2008-09 $201,00 10.4% 2009-10 221.00 10.0 2010-1 1 244.00 124 2011-12 267.00 94 2012-13 294.00 10.1 Source: Orange County Sanitation District. Set forth in Table 7 below are the total average annual Sewer Service Charges too single family residences ("SFR') within the District, together with comparable total average amoral charges for wastewater service within the jurisdictions of certain other cities and districts within the State as of the dates indicated. The District's projected SFR rate of 5294 in Fiscal Year 2012-13 remains below the average annual sewer rate of $406 according to a Fiscal Year 2007-08 survey of 726 agencies encompassing all 58 counties in California conducted by the State Water Resouices Control Board. 559144e3s 31 ]'able 7 Comparison of Total Sewer Service Charges For Single family Residences As of July 1,2011 (Sacramento as of October 1,2011) Average Dry Annual Weather Sewer Flow Service Treatment Collection Property Tax Entity tmgld)t3r Charge to I lr'tt3r Resuonsitilitvt3r Income(3) City of San Diego 168 $608 2 Yes No City of Los Angeles 428 360 4 Yes No East Bay MUD 80 288 4 No Yes Sacramento 140 264 3 No Yes Orange County 221 267 2 No Yes Sanitation District Los Angeles County 497 143 4 No Yes Sourcetained from respective entities listed. Treatment Level Categories: "I--Primary treatment. '2"-Advanced primary or primary with some secondary treatment. "Y'-Secondary treatment. eiary n scco ary or vecon ary wrtr somC mmary trcabncm. "5"-Tertiary treatment. 0, Source: Wastewater User Charge Survey Report by the California Slate Water Resources Control Board, Industrial Server Service Charges. The District charges industrial Sewer Service Charges to customers discharging high-strength or high-volume wastes into the sewer systems. Customers subject to industrial Sewer Service Charges are billed directly by the District. The fee charged to each customer is based on the customer's sewage volume, the concentration of suspended solids and biochemical oxygen demand. Pursuant to the 2002 Ordinance, rates for each component factor were revised for certain industrial users in order to be consistent with the rates charged to residential users. Total industrial Sewer Service Charges in Fiscal Year 2010-1 I were approximately $10.1 million. Industrial Sewer Service Charges we applied to both operating and capital funds. The Sewer Service Charge increases described above are necessary to meet the District's cash flow needs arising from the addition of disinfection treatment and other operating requirements. As discussed under the caption "THE DISTRICT - 2009 Facilities Master Plan and Capital Improvement Program;' the 2011 CIP Validation Study developed the capital improvement program to ensure secondary treatment standards are met as quickly as possible while providing for increased flows and rehabilitation and refurbishment of existing facilities. As projected through Fiscal Year 2030-31, the cash flow needs of the CIP total approximately 51.8 billion. Over the next five years the CIP contemplates average annual capital expenditures of$180 million. 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 560.6 million in Fiscal Year 2006-07,$65.2 million in Fiscal Year 2007-08, $66.4 million in Fiscal Year 2008- 09, 564.8 million in Fiscal Year 2009-10 and$64.3million in Fiscal Year 2010-1 L In Fiscal Years 2003- 559ute3s 32 04 and 2004-05 the State implemented a two-year 40% secured property tax shift away from independent special districts due to the fiscal crisis occurring at that time. During the 2004-05 State Budget process, the State Legislature and the Governor enacted Senate Bill 1096 and Assembly Bill 2115, effectively shifting an additional $1.3 billion in local property tax revenues from counties, cities,special districts and redevelopment agencies to schools and community colleges. See "LIMITATIONS ON TAXES AND REVENUES—Proposition IA." Total assessed valuations increased in the 2005-06 Fiscal Year by 10.3% over the 2004-05 Fiscal Year, and the bill value of these increases was received on all non-secured property lax distributions. The District received its full allotment of property tax revenues (no State property tax shift)beginning in Fiscal Year 2006-07. See Table 14 below. The District currently projects its property tax receipts to remain approximately level through Fiscal Year 2012-13. The apportionment of the ad valorem tax is made pursuant to a revenue program adopted by the District in April 1979 to comply with EPA and RWQCB mandates, legal and contractual requirements and Board of Director's policy. Capital Facilities Capacity Charges. Capital Facilities Capacity Charges (commonly referred to as connection fees) are one-time fees with two components, paid at the time property is developed and connected to the Wastewater System. The fees are imposed by the District pursuant to Section 5471 of the California Health and Safety Code and are levied to pay a portion of the District's capital costs and for access to capacity in the Wastewater System. The District currently has Capital Facilities Capacity Charges of S3,341 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 me 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, sec Table 14 and Table 15 below. Pursuant to an agreement with the IRWD, the BOND 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 oJ'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, SA W PA has purchased aid paid for 30 mg/d of maximum regulated flow capacity rights in the District's Santa Ana River Interceptor and 17 nig/d of monthly average flow capacity in the District's wastewater treatment plants_ Projected revenues from SAWPA range from $6.3 million to S7.2 million over the next four 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 Certificates") and the District's Revenue Obligations, Series 2010C (the '"2010C 5591k 931 33 Certificates"), issued as "Build America Bonds," the District will 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 Certificates and the 2010C Certificates will constitute Revenues as defined in the Master Agreement. In its financial reports, the District accounts for subsidy payments received in connection with the 2010A Certificates and the 2010C Certificates as a reduction in interest expense with respect to such obligations. Wastewater Treatment History The wastewater flows for Fiscal Year 2006-07 through Fiscal Year 2010-11 were 229 mg/d, 221 mg/d, 211 mg/d, t96 ing d and 207 mg/d, respectively. The highest flow rate experienced was during El Nino storm periods. Peak flows of 500 mg/d were recorded in December 1997 and February 1998. There were no sewer failures or overflows during these events. Customers The historical number of customers served by the District for the Fiscal Years 2006-07 through 2010-1 l and the projected number of customers served by the District for the Fiscal Years 2011-12 through 2015-16, identified in Equivalent Dwelling Units ("EDUs"), are set forth in Table 8 and Table 9 below. As discussed below, sewer service charges are based on the expected amount of wastewater flow for a single family dwelling. This base amount is considered the "equivalent dwelling unit" Set forth in Table 8 below are the EDUs that equate to total Sewer Service Charge levies, while the EDUs set forth in Table 9 equate to total sewer service charge collections. Table 8 Historical and Projected Equivalent Dwelling Units Fiscal Years2006-07 through 2015-16 Historical Projected Fiscal Year EDUS°i fiscal Year EDUs 2006-07 907,986 2011-12 926,990°t 2007-08 911,033 2012-13 929,401°1 2008-09 921,782 2013-14 931,910r't 2009-10 930,164 2014-15 934,519t" 2010-11 924,622 2015-16 937,229t" 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. rd' EDUs projected in current budget as of June 2011. EDU growth during the projection period is estimated at approximately 2.6%to 2.9%per annum. Source: Orange County Sanitation District. 559144e31 34 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 2006-07 through 2010-11 ($in Millions) Residential/Commercial Industrial Number of Percentage Percentage Equivalent of Sewer ofSewer Single- Service Number of Service Family Total Charge Customer Total Charge Fiscal Year Dwellings Revenue Revenues Accounts Revenue Revenues 2006-07 867,035 $143.8 91% 531 $13.4 9% 2007-08 975,739 159A 93 520 12.1 7 2008-09 882,747 177.4 95 515 9.9 5 2009-10 975,442 193.5 95 487 10.8 5 2010-11 874,130 213.3 95 479 10.1 5 Source: Orange County Sanitation Disnict. Set forth in Table 10 below are the ten largest principal sewer service customers of the District for the Fiscal Year ended June 30,2011. Table 10 Largest Principal Sewer Service Customers of the District for the Fiscal Year Ended June 30,2011 Sewer Service User Charges Kimbeily-Clark Worldwide,lire. $ 1,533,243 MCP Foods, Inc. 1,036,648 Alstyle Apparel-A&G tire. 909,188 Stremicks Heritage Foods, Ll-C 756,778 House Foods America Corp. 589,739 Pepsi-Cola Bottling Group 440,707 Jaen Semiconductor 344.671 Dean Foods Co. of CA Inc. 316,641 Schreiber Foods Inc. 299,157 Pulmuone Wildwood, inc. 293,669 Total $6,519,441 Source: Orange County Sanitation District, 5591k 931 35 Assessed Valuation The assessed valuation of property in the County is established by the County Assessor, except for public utility property which is assessed by the State Board of Equalization. Due to changes in assessment required under State Constitution Article XIIIA, the County assessment roll no longer purports to be proportional to market value. See "LIMITATIONS ON TAXES AND REVENUES" herein. Generally, property can be reappraised to market value only upon a change in ownership or completion of new constmction. The assessed value of property that has not incurred a change of ownership or new construction must be adjusted annually to reflect inflation at a rate not to exceed 2% per year based on the State consumer price index. In the event of declining property value caused by substantial damage, destruction, economic or other factors, the assessed value must be reduced temporarily to reflect market value. For the definition of full cash value and more information on property tax limitations and adjusunents,see"LIMITATIONS ON TAXES AND REVENUES"herein. The County Assessor determines and enrolls a value for each parcel of taxable real property in the County every year. The value review may result in a reduction in value. Taxpayers in the County also may appeal the determination ofthe County Assessor with respect to the assessed value of their property. Set forth in Table I I below is a five-year history of assessed valuations in the District since Fiscal Year 2007-08. Table 11 Assessed Valuations of Property in the District Fiscal Years 2007-08 through 2011-12 ($in Billions) Fiscal Year Value "o Change 2007-OS $292.7 8.14% 2008-09 307.6 5.08 2009-10 305.2 (09 ) 2010-11 304.3 (0.27) 2011-12 308.7 1.43 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 seemed roll are due in two installments, on November I and February I. The District currently participates in the County Teeter Plan under which the District receives amorally 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 fall amount of secured property taxes levied each year on its behalf and, for so tong 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 apportiomirent. In recent 559144e31 36 years, the County has experienced delinquencies of Sewer Service Charges in the District of approximately 2%. Set forth in Table 12 below is a five-year history of the Districts 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 2007-05 through 2011-12 (in Thousands) Total Tax and Sewer Fiscal Year Service Charge Levv 2007-08 $228,622 2008-09 254,092 2009-10 272,050 2010-11 292,646 2011-12 315.186 Souroe: Orange County Auditor-Controller's Office. 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 properly tax bill. See "DISTRICT REVLNUES Sewer Service Charges" and "— Additional Revenues." The District receives tax revenues burn the County in eight allocations, with the largest receipts in December and April. The District operates on a Fiscal Year beginning each July L 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 too 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 m 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 559144e31 37 be appropriated if it is determined to be in the best interest of the District. Directors may also appropriate reserves in case of emergencies or unusual circumstances. Reserves The District has an established reserve policy with eight separate categories for its reserve funds. Collectively, these individual reserve requirements total over $482 million for each year of the current ten-year cash Dow forecast. to 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 percent. Reserve levels are calculated in accordance with the District's reserve policy. Set forth in Table 13 below are the actual reserves at June 30, 2009, .tune 30, 2010 and June 30, 2011 and the District's projected reserves at June 30, 2012,for each fund. Table 13 Cash Reserves June 30,2009 through 2011 Projected June 30,2012 (In Millions) Actual Projected 2009 2010 2011 2012 (June 30) (June 30) (June 30 (June 30) Cash Flow Requirements Reserve— Operating I spouses S 73 $ 78 S 75 S 76 Certificates of Participation payments 84 92 97 92 Operating Contingencies Reserve 15 15 15 15 Capital Improvement program Reserve 116 86 118 89 Catastrophe and Self Insurance 58 57 57 57 Capital Replacement and Refurbishment 55 56 57 59 Debt Service Acquired Reserve,"' 133 129 142 138 Overlapping Reserve Adjustment - (40) - (40) "Total $534 $47,3. $561 $486 "Debt—Service ervice Required Reserves' constitute all amounts held in Obligation Reserve Funds, together with additional amounts held by the District that may be used for the payment of debt service on District obligations in accordance with the District's reserve policy. As of June 30, 2011, $142 million of Debt Service Required Reserves were held in Obligation Reserve Funds,of which S90.7 million is restricted by covenant for the specific obligations for which such Obligation Rcscrvc Funds were established. Source: Orange County Sanitation District. The District has the following reserves: ( 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 ycar- 559w4e31 38 ( 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 Pogram Reserve was established to fund amoral 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 this fund is maintained at a level to fund the District's non-reimbursed costs which are estimated to be S57 million. ( The Capital Replacement and Refurbishment Reserve was established to provide 30% of the funding to replace or refurbish the current collection, treatment and disposal facilities. The current replacement value of these facilities is estimated to be approximately $6.26 billion. The initial reserve level for this fiord was established at $50 million and is augmented by interest earnings and a portion of the annual Sewer Service Charges. ( Debt Service Required Reserves include trustee-held amounts in any Obligation Reserve Fund and additional amounts held by the District for the payment of debt service in accordance with the District's reserve policy. The District's current policy is to maintain reserves (including trustee-held reserves) for debt service in the amount of 10% of the principal amount of the District's outstanding debt obligations. ( The Rate Stabilization Reserve accumulates all available funds which exceed the targets for all other reserves. The Rate Stabilization Reserve is a separate find from the Rate Stabilization Account established under the Trust Agreement. There is currently no established target for this reserve and, because the reserves of all other funds have not been exceeded, the reserve level for this reserve find is zero for Fiscal Year2011-12. Summary of Operating Data Set forth in Table 14 below is a summary of historic operating results for the District for Fiscal Years 2006-07 through Fiscal Year 2010-I1. The information presented in the summary should be read in conjunction with the financial statements and notes. See APPENDIX A — -COMPREHENSIVE ANNUAL FINANCIAL REPORT OF THE ORANGE COUNTY SANITATION DISTRICT FOR FISCAL YEAR ENDED JUNE 30, 201 I ssaiatess 39 Table 14 Summary of Historical District Revenues and Expenses and Other Financial Information For Fiscal Years 2006-07 through 2010-11 ($in Millions) Audited 2006-07 2007-08 2008-09 2009-10 2010-11 Revenues: Residential&Commercial Sewer Service Charges") Regional S143.8 S159,4 S177.4 S193.5 $213.3 Local - - 5.6 5.6 5.7 Industrial Sewer Service Charges 13A 12.1 9.9 10.8 10.1 Revenue Area No. 14 Fees 52 7 I 10.3 122 I L7 Ad Valorem Taxes 60.6 652 66.4 64.9 643 Interest Earnings 22.2 20.2 14.8 19.2 10.1 Other Revenues 8.3 6.9 5.8 12.5 5.8 Total Revenues $2535 $270.9 $290.2 $316.6 WI Operations and Maintenance Expenses'2) 112.2 1319 164.614) 138.1 138.9 Net Revenues $141=3 5132_0 $125-(, 5178-5 $182.1 Debt Serroicc S 48,8 $ 42 8 S 57.6 $ 77.3. $ 83.6 Coverage Ratios 2.90x 3.25x 2.18x 2.31x 2.18x CIP Outlay $287 S S259,4 S290.1 S251.1 $1 U Ending Reserves "r $293.0 $425.0 $40I 0 $344.0 $419.0 °r Net of rebates, if any, to commercial users. Local sewer service fees were not established until Fiscal Year 2008-09. tzt Excludes depreciation and amortization expenses- "' Excludes debt service resin es in accordance with the Dist,ict's Debt Service Required Reserves Policy. e) During the fiscal year ended June 30,2009, independent agreed-upon procedures were conducted on Revenue Area 14 to substantiate the IRWD's owner equity interest in the District, As a result, a one-time other operating expense of S29 million was charged to the Consolidated Revenue Area for the year ended June 30. 2009. Source: Orange County Sanitation District. 5591kt931 40 Projected Operating Data Set forth in Table 15 below are projected operating results for the District for Fiscal Years 2011-12 through 2015-16. These projections assume the number of projects and scheduled build out set forth in the 2011 CIP Validation Study, and reflect Board-approved annual rate increases over the next two years of 9.4%, and 10.1%, respectively. The following three years thereafter are projected at 7.0% for each year. Principal expenditure components of these projections are derived from the 2011 CIP Validation Study. which identified 176 individual capital projects through Fiscal Year 2030-31 with remaining outlays of$1.8 billion. Much of the construction is scheduled during the next five years, with average annual expenditures of $IRO million. The District's CIP cash flow budget for Fiscal Year 2010-11 was $179.6 million. The District's CIP cash flow budget for Fiscal Year 2011-12 is S129.2. This CIP budget finances joint works treatment and disposal system improvement projects, and collection system improvement projects. The preparation of such projections was based upon certain assumptions and certain forecasts with respect to conditions that may occur in the future. While the District believes that these assumptions and forecasts are reasonable for the purposes of the projected selected operating data, it makes no representation that they will in fact occur. To the extent that actual future conditions differ from those assumed herein,the data will vary. [Remainder of page intentionally left blank.] 5591k 931 41 Table 15 Summary of Projected District Revenues and Expenses and Other Financial Information for Fiscal Years 2011-12 through 2015-16 ($ in Millions)"' 2011-12 2012-13 2013-14 2014-15 2015-16 Revenues Residential &Commercial Sewer Service Charges $248.5 $276.9 S299.5 $321.0 $344.2 Industrial Sewer Service Charges 11.4 12.5 13A 14.4 15.4 I RW D Assessments 139 14.6 15.6 15.4 16.2 SAWPA Assessments 4.4 4.5 4.6 4.7 4.9 Ad Valorem Taxes 63.4 63.4 665 69.9 73.4 Interest Earnings 11.7 12.0 15.2 17.1 16.1 Other Revenues 1.3 1.7 L7 1.7 1.8 'total Revenues $354.6 $385.6 $416.5 $444.2 $472.0 Add: Build America Bonds Federal Subsidy 5A 5A 5.1 5.1 5.1 Operations and Maintenance Expenses (152.5) (169.5) (179.0) (189.4) (202.0) Net Revenues t0 $207.2 $221.2 $242.6 $259.9 $275.1 Debt Service $ 92.2 $ 96.1 $113.8 $100.6 $100.5 Build America Bonds Federal Subsidy 5A 5.1 5.1 5.1 5.1 Gross Debt Service $ .973 $(OI..2 Stiff $1057 $105.6 Coverage Ratioso' 2,.13x 219.x 204x 246x 2,61.x CIP Outlays $1292 $169.0 $212,3 $173.4 $214.3 Debt Proceeds $ $120.0 $ $ $ Ending Reserves Izr $573.4 $643.4 $585.2 $572 2 $514 8 Calculated in acsurdonce with the Master Agreement and the Installment Purchase Agreement. Fxdudes debt sen'ice resen'es in accordancewah the District's Debt Service Required Reserve Policy. t't Assumptions, a) Aanual growth in equivalent dwelling units is projected to uero awv 0.25°o over the nexi five vears. to The Rcsidcnnal not Commercial Scwcr Service Charge and the Industrial Sews, Scrzice('hnrgcs arc forecasts are based on the total projected equivalent dwelling units,and the actual board approved annual rate increases oval the next two years of9.4%,and 10.1%,respectively. The following tltaeyearsthereanerireprojecte(I at Tuso breach yea, c) the Capital Facillt a.v Capacity Clwrge roracea is baae<l on the rand pmjuteA equivalent dwelling units along with a sn"I project onvol increase in the"he. d) Raceme Aran M, 14 Fees arc dedvcd based on the projected canuibution of sewage Fowe to the District from the IRWD. c) Ad Vnbrcm Taxes arc projected to recaun level through Fiscal Year 201243,with v%annual increases thereafter. 0 Interest earnings are projected to average 2.5%of annual cash balances. g) Operating and Maintenance Fxpenses ire fbreczsted with a base increase of 7.0%per vast with adjustments fin known periodic outlays that do not occurannuully_ h) Annual CIP Outlays are based on the cash now projections deeeloped fi an the Cn'Validation Study. Source' Orange County Sanitation Distic. Management's Discussion and Analysis of Operating Data The District's Fiscal Year 2011-12 total operating, capital improvement, debt service, and other financing requirement budget is $405.8 million, an 11.6 percent decrease over the prior year budget of S459.0 million. The decrease in the Fiscal Year 2011-12 budget is primarily due to the timing of the construction schedules on the implementation of the overall 20-year SI.8 billion CIP. The District's 5591Yr931 42 Fiscal Years 2011-12 budgets include $129.2 million in capital improvement outlays as the District moves towards reaching secondary treatment standards by the target date of December 31, 2012, as specified by the Board of Directors' July 2002 resolution and in keeping with the terms and conditions of its ocean discharge permit and related Consent Decree. The Fiscal Year 2011-12 operations budget for the collection, treatment, and disposal of wastewater is $154.7 million, a $2.2 million or 1.4 percent increase over the prior year budget of$152.5 million. Although individual expense categories will increase or decrease slightly, the overall increase to the operating budget is primarily attributable to an increase in personnel costs which will increase $2.7 million, or 2.8 percent as a result of existing employee contract agreements as staffing has been reduced by 4 full -time equivalent("FTE")positions in Fiscal Year 2011-12 to an authorized staffing level of 637 FTE positions. Contractual services have been budgeted at an increase of$1.5 million, or 6.4 percent, due primarily to a 50.75 million, 4.5 percent increase iu solids removal. Biosolids production is estimated to increase at both plants by 8.3 percent in Fiscal Year 2011-12 to 297,000 wet tons due to increases in secondary treatment as new secondary treatment processes become operational. Operating materials and supplies are being proposed to decrease Sl.6 million, or 6.5 percent, over the prior year due primarily to the increases in chemical coagulants, odor control, and disinfection being less than anticipated. Utility costs were increased by $0.4 million, or 4.3 percent over the prior year, primarily due to the increased usage of electricity as secondary treatment facilities continue to become operational. In preparation for the Fiscal Year 2010-12 budget, a strategic planning workshop was held by the Board of Directors to review the capital program to deliver the level of services desired by the Board. These levels of services and associated capital projects are included in the District's Five-Year Strategic Plan. In addition, District staff reviewed each ongoing CIP project to ensure that the scope of the project remains appropriate, and that the cost estimates have been accurately updated. The Fiscal Year 201 I-12 CIP cash flow budget was approved at $129.2 million. The Fiscal Year 2010-12 CIP includes three projects totaling 5627 million over the life of the CIP to upgrade the District's treatment plants to meet secondary treatment standards. This CIP also includes the 23 recommended projects identified iu the 2009 Facilities Master Plan (the "Master Plan"). The result was the addition of 5169.3 million to the overall CIP through the year 2030. Over this period, the CIP is expected to accomplish: ( Rehabilitation of the existing headworks, primary treatment, secondary treatment, outfall pumping,and solids handling facilities at both treatment plants; ( Replacement and rehabilitation of nine of the Districts outlying pumping stations, and rehabilitation and upgrade of 29 trunk sewer improvement projects; ( Optimization of the production of"power" and"biosolids"at each of the treatment plants; ( Reclamation of up to 150 mg/d of the District's effluent;and ( Secondary treatment standards by December 2012. The 2009 CIP Validation Study reaffirmed the need for buffer rate increases in future years. Based on the results of the CIP Validation Study and the Five-Year Plan, the Board of Directors adopted Ordinance No. OCSD-35, increasing the sanitary sewer service charges by approximately 10 percent each year for a five-year period beginning in Fiscal Year 2008-09. These rate increases were approved by a vote of two-thirds of the members of the Board of Directors and are not subject to reaffirmation in any of the future fiscal years covered by this five-year period. This action increased the single family residence user rate, the basis for all sewer user fee rates, from 5221 to S244 in Fiscal Year 2010-11, and to 5267 in Fiscal year 2011-12. See"DISTRICT REVENUES—Sewer Service Charges." 5591Y1931 43 Investment of District Funds State statutes authorize the District to invest in obligations of the United States Government, state and local governmental agencies, negotiable certificates of deposits, bankers acceptances, commercial paper, reverse repurchase agreements and a variety of other investment instruments which are allowable under California Government Code Section 53600 et seq. All District funds, except for Obligation Reserve Funds controlled by a bank trustee pursuant to the provisions of Fxisting Senior Obligations, are managed by an external money manager, Pacific Investment Management Company ("PIMCO"). Mellon Trust ("Mellon Trust') serves as the District's independent custodian bank for its investment program. Callan Associates ("Callan") serves as the Distict's independent advisor. As of December 31, 2011, the District's externally managed fund consisted of a short-term investment portfolio of$54.7 million with an average maturity of I10 days, and a long-term investment portfolio of 5390.5 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 I10% 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 Revenue Obligations. The table below describes the District's outstanding parity certificates of participation as of February 2, 2012. 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. 5591k 931 44 Table 16 Outstanding Senior Obligations As of February 2,2012 Original Principal Issue Outstanding Final Amount Date Balance Maturity 2000 Certificates $ 218,600,000 09,31/00 S 91,900,000 08/01/30 2003 Certificates 290,000,000 08/26'03 108,180,00011' 02,01/33 2007A Certificates 95,180,000 05/22/07 92,845,000 02'01,30 2007B Certificates 300,000,000 12/20/07 279,250,000 02/01'37 2008A Certificates 77,165,000 05/29/08 25,710,000 08/01/13 2008B Certificates 27,800,000 09/11/09 26,550,000 08/01/16 2009A Certificates 200,000.000 05'07/09 191,265,000 02/01/39 2010A Certificates 80,000,000 05/18'10 80,000,000 02,01/40 2010C Certificates 157M00,000 11/29/10 157,000,000 0201,44 2011 A Certificates 147,595,000 10/03/11 147.595.000 02/01/26 2011B Certificates 143205000 11/10/11 143205000"' 11/09/12" Total Senior Obligations $1,726,545,000 $1,343,504000 ' ' Includes the Refunded(;e,lifcates. See'REFUNDING PLAN" horein_ ' The Distort expects to refund the 201 B Certificates (referenced herein as the 2011 Notes) with Senior Obligations amortizing over stator of approximately 24 years. In connection with the execution and delivery of the above-referenced outstanding certificates of participation, the Disuict entered into certain installment purchase agreements. or equivalent documents, providing for the payment of installment payments or similar payments. Variable Rate Obligations In August 2000, the District caused the execution and delivery of the Orange County Sanitation District Refunding Certificates of Participation, Series 2000-A (the "2000-A Certificates") and the Orange County Sanitation District Refunding Certificates of Participation, Series 2000-B (the 6'2000-B Certificates" and, together with the 2000-A Certificates, the "2000 Certificates') in the original aggregate principal amount of S218,600,000, of which $91,900.000 is currently outstanding. The payment of the purchase price of tendered 2000 Certificates is supported by a Standby Certificate Purchase Agreement, dated as of August I, 2010 (the "Standby Agreement"), by and between the District and Lloyds TSB Bank plc, acting through its New York Branch. The Standby Agreement currently expires on August 24, 2011 Anticipated Financings From time to time the District expects to incur other obligations to finance portions of the CIP. In Fiscal Year 2012-13, the District expects to incur further Additional Senior Obligations in an aggregate principal amount of approximately S120 million for the purpose of funding the capital improvement program. The Dish ct may also refinance outstanding obligations from time to time. [TO BE REVISED] Direct and Overlapping Bonded Debt The aggregate direct and overlapping bonded debt of the District as of June 30, 2011 is set forth on page 54 of Appendix B. 5591Yr931 45 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 propose 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 m convenient for, or incidental to the proposes for which it was formed. The Corporation is a separate legal entity from the District. It is governed by a twenty-five member Board of Directors. The Corporation has no employees. All staff work is performed by employees of the District. The members of the Corporation's Board of Directors are the Board of Directors of the District. The District's Director of Finance and Administrative Services and other District employees are available to provide staff support to the Corporation. The Corporation has not entered into any material financing arrangements other than those referred to in this Official Statement. Further information concerning the Corporation may be obtained from the Orange County Sanitation District office at 10844 Ellis Avenue, Fountain Valley, California, 92708-7018. LIMITATIONS ON TAXES AND REVENUES Article XIIIA of the California Constitution On June 6, 1978, California voters approved Proposition 13 ("Proposition 13"), which added Article XIIIA to the State Constitution ("Article XIIIA"). Article XIIIA, as amended,limits the amount of any ad valorem tax on real property to one percent of the full cash value thereof, except that additional ad valorem taxes may be levied to pay debt service on (i)indebtedness approved by the voters prior to July 1, 1978, (it)(as a result of an amendment to Article XIIIA approved by State voters on June 3, 1986) on bonded indebtedness for the acquisition or improvement of real property which has been approved on or after July 1, 1978 by two-third of the voters on such indebtedness, and (iii) bonded indebtedness incurred by a school district or community college district for the construction, reconstruction, rehabilitation or replacement of school facilities or the acquisition or lease of real property for school facilities, approved by 55% of the voters of the district, but only if certain accountability measures are included in the proposition. Article XIIIA defines full cash value to mean "the county assessor's valuation of real property as shown on the 1975-76 tax bill under "full cash value," or thereafter, the appraised value of real property when purchased, newly constructed, or a change in ownership has occurred after the 1975 assessment." The full cash value maybe 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 5591k 931 46 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 flour 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 1991-82 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 S 100 assessed value. All taxable property is now shown at full market value on the tax rolls. Consequently, the tax rate is expressed as S I per 5100 of taxable value. All taxable property value included in this Official Statement is shown at 100% of market value (unless noted differently) and all lax rates reflect the $1 per 5100 of taxable value. Article XIIIB of the California Constitution An initiative to amend the State Constitution entitled"Limitation of Government Appropriations" was approved on September 6, 1979, thereby adding Article 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 I, 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 fee,, 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, aid 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 oil nonresidential property. Either test is likely to be greater than the change in the cost of living index, which was used prior to proposition I 11. Change in population is to be measured either within the jurisdiction of the District or the County as a whole. 5591Y4931 47 As amended by Proposition 11 I, 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 tee schedules over the subsequent two years. As originally enacted in 1979, the District's appropriations limit was based on 1979-79 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 I I I had been in effect. The District does not anticipate that any such appropriations limitations will impair its ability to make Installment Payments as requited by the Installment Purchase Agreement. Proposition I Proposition 1A ('Proposition 1A"), proposed by the Legislature in connection with the 2004-05 Budget Act mud approved by the voters in November 2004, restricts Stale 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 IA provides that the State may not reduce any local sales tax Late, 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 1 A generally prohibits the State from shifting to schools or community colleges any share of property tax revenues allocated to local governments for any fiscal year, as set forth under the laws in effect as of November 3, 2004. Any change in the allocation of property tax revenues among local governments within a county must be approved by two-thirds of both houses of the Legislature. Proposition IA provides, however, that beginning in Fiscal Year 2008-09, the State may shift to schools and community colleges up to 8%of local government property tax revenues,which amount must be repaid, with interest, within three years, if the Governor proclaims that the said is needed due to a severe state financial hardship, the shift is approved by two-thirds of both houses and certain ()that 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 mid property tax revenues among local governments within a county. For Fiscal Year 2009-10, approximately $5 million of the District's property tax revenues were diverted to the Slate as a result of a Proposition IA suspension. The District participated in a Proposition IA Securitization Program (the "Program") sponsored by the California Statewide Communities Development Authority. The Program allowed the District to exchange its anticipated State property tax receivable for an equal amount of cash. Proposition IA also provides that if the State reduces the vehicle license tee ('-VLF") rate currently in effect, 0.65% of vehicle value, the State must provide local governments with equal replacement revenues. Further, Proposition IA 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 X111C and Article XIIID of the California Constitution Proposition 218, a State ballot initiative known as the "Right to Vote on faxes Act," was approved by the voters on November 5, 1996. 'the initiative added Articles XIIIC and XIIID to the California Constitution, creating additional requirements for the imposition by most local governments of `general taxes,""special taxes," "assessments;"fees,"and"charges." Proposition 219 became effective, pursuant to its terms, as of November 6, 1996, although compliance with some of its provisions was 5591Yr93.1 48 defer ed until July 1, 1997, and certain of its provisions purport to apply to any tax imposed for general governmental purposes (re., "general taxes") imposed, extended or increased on or after January I, 1995 and prior to November 6. 1996. Article XIIID imposes substantive and procedural requirements on the imposition, extension or increase of any "lee" 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 CalAth 409 (2004) ("Richmoarl"), and Bighorn- Desert Vien Water Agenev 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 mid 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 arc 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,mud 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 I, 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 aid charges. This extension of the initiative power is not limited by the terns of Article XIIIC to fees, faxes, assessment fees and charges imposed after November0, 1496 and absent other authority could result in retroactive reduction in any existing taxes, assessments, fees or charges- In Bighorn, the Court concluded that under Article XIIIC local voters by initiative may reduce a public agency's water rates and delivery charges. The Court noted, however, that it was not holding that the authorized initiative power is free of all limitations, stating that it was not determining whether the electorate's initiative power is subject to the public agency's statutory obligation to set water service charges at a level that will '-pay the operating expenses of the agency, . . . provide for repairs and 5591Y4931 49 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 fiord for the payment of the principal of such debt as it may become due." The District implemented a five-year plan beginning in Fiscal Year 2002-03 which included a rate increase of SZ50 per year, or 9.4%, for all ratepayers to S8750 per year. In May 2003, the Board of Directors approved a 15% rate increase per year, for each year, over the then following five years. upon 2/3 vote of the Board of Directors after conducting a noticed public hearing in compliance with Article XIIID. The Board of Directors considered this increase necessary to provide needed capital improvements,to cover additional treatment and disinfection costs, and to minimize rate increases over an extended period of time. On .July 2, 2003. the Board of Directors adopted Ordinance No. OCSD-20 increasing sanitary sewer service charges for all single family and multi-family residential units as well as most commercial and industrial properties. The Ordinance was adopted by a 2/3 vote of the Board of Directors as required under law after conducting a noticed public bearing in compliance with all laws. The Ordinance increases the amount of the annual charges by approximately 15% per year for each of the following five years, commencing with Fiscal Year 2003-04, thereby raising the single family residence user rate from the then current S87.50 to$100.00,$115.00, $132.00,$152.00, and$175.00 annually. The Ordinance discounted by 5%the annual increases which were the subject of the required protest hearings on the fee increase as described above. After the completion of the CIP Validation Study for Fiscal Year 2005-06 that increased its ten year CIP cash flow projects to $2.2 billion, or an average of$220 million per year, the Board of Directors adopted Ordinance No. OCSD-26 increasing the Fiscal Year 2005-06 single family residential rate 31%, from $115 to$151 for such year. In May 2006, the Board of Directors adopted Ordinance No. OCSD-30B increasing the Fiscal Year 2006-07 single family residential rate 9.800%, from S151.00 to$165.80 for such year, except those located in Revenue Area 14. These increases represented the increase permitted under the protest hearings on the fee increase which was held in 2003. In June 2007, the Bound of Directors adopted Ordinance No. OCSD-32 increasing the Fiscal Year 2007- 08 single family residential rate by 9.8%. In February 2008, after a noticed public hearing, the Board of Directors adopted Ordinance No. OCSD-35, which provides for annual increases in the single funily residential rate of 10.4%, 10.0%, 10 4%, 9.4% and 10.1 % respectively, for Fiscal Years 2009-09 through 2012-13. Pursuant to the Master Agreement, the District will, to the extent permitted by taw, 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 tees and charges will at all times be sufficient to meet the requirements of the Master Agreement. In the event that service charges are determined to be subject to Article XIIID, and proposed increased service charges cannot be imposed as a result of a majority protest, such circumstances may adversely effect the ability of the District to generate revenues in the amounts required by the Master Agreement, and to make Installment Payments as provided in the Installment Purchase Agreement. No assurance may be given that Articles XIBC and XIIID will not have a material adverse impact on Net Revenues. Other Initiative Measures Articles XHIA, XIIIB, XHIC and XIIID were adopted prusuam to California's constitutional initiative process. From time to time other initiative measures could be adopted by California voters, placing additional limitations or the ability of the District to increase revenues. 5591ate3s 50 LEGAL MATTERS The validity of the Revenue Obligations and certain other legal matters are subject to the approving opinion of Fulbright& Jaworski L.L.F., Los Angeles, California, Special Counsel to the District. A complete copy of the proposed form of Special Counsel opinion is attached as Appendix F hereto. Special Counsel, in its capacity as Special Counsel to the District,undertakes no responsibility for the accuracy, completeness or fairness of this Official Statement. Certain legal matters will be passed on for the District and the Corporation by Woodruff, Spradlin & Smart, a Professional Corporation, Costa Mesa, California, and for the District by Fulbright&Jaworski L.L.P.,Disclosure Counsel to the District. FINANCIAL ADVISOR The District has retained Public Resources Advisory Group as financial advisor (the "Financial Advisor") in connection with the execution and delivery of the Revenue Obligations. The Financial Advisor has not been engaged, nor have they undertaken, to audit, authenticate or otherwise verify the information set forth in the Official Statement, or any other related information available to the District, with respect to accuracy and completeness of disclosure of such information. The Financial Advisor has reviewed this Official Statement but makes no guaranty, warranty or other representation respecting accuracy and completeness of the information contained in this Official Statement. ABSENCE OF LITIGATION There is no action, suit, proceeding, inquiry or investigation, at law or in equity, before or by any court, regulatory agency, public board or body, pending or, to the best knowledge of the District, threatened against the District affecting the existence of the District or the titles of its directors or officers to their offices or seeking to restrain or to enjoin the sale or delivery of the Revenue Obligations, the application of the proceeds thereof in accordance with the Trust Agreement, or in any way contesting or affecting the validity or enforceability of the Revenue Obligations, the Trust Agreement, the Master Agreement, the Installment Purchase Agreement or any action of the District contemplated by any of said documents, or in any way contesting the completeness or accuracy of this Official Statement, or contesting the powers of the District or its authority with respect to the Revenue Obligations or any action 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 cowl, regulatory agency, public board or body pending or, to the best knowledge of the District, threatened against the District contesting or affecting the ability of the District to collect amounts from which Installment Payments are payable, or which would have a material adverse effect on the District's ability to make Installment Payments. FINANCIAL STATEMENTS The basic financial statements of the District included in Appendix A to this Official Statement have been audited by McGladrey & Pullen, LLP, independent certified public accountants. See APPENDIX A--COMPREHENSIVE ANNUAL FINANCIAL REPORT OF THE ORANGE.COUNTY SANITATION DISTRICT FOR FISCAL YEAR ENDED JUNF_ 30, 2011" herein. The District has received the Government Finance Officer's Association Certificate of Achievement for "Excellence in Financial Reporting" for 17 consecutive years. The audited financial statements, including the footnotes thereto, should be reviewed in their entirety. McGladrey & Pullen, LLP, the District's independent auditor, has not been engaged to perform, and has not performed, since the date of its report included in Appendix A, any procedures on the financial statements addressed in that report. McGladrey & Pullen, LLP also has not performed any procedures relating to this official statement. 5591vte3s 51 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 Revenue Obligations for the interest component of each Installment Payment(the"Interest Component"), and the allocable portion thereof distributable in respect of each Revenue Obligation (the"Certificate Interest Distribution"), to be and remain excluded pursuant to section 103(a) of the Code from the gross income of the owners thereof for federal income tax purposes. Noncompliance with such requirements could cause such amounts to be included in gross income for federal income tax purposes retroactive to the date of delivery of the Installment Purchase Agreement and the Revenue Obligations. The District and the Corporation have covenanted to maintain the exclusion of the interest on the Revenue Obligations from the gross income of the owners thereof for federal income tax purposes. In rendering its opinions with respect to the Revenue Obligations as described below, Special Counsel will rely upon representations and covenants of the District and the Corporation (including such covenant noted above) made in connection with the execution and delivery of the Revenue Obligations, and will assume that all such representations are true and correct and that the District and the Corporation will comply with all such covenants. In the opinion of Fulbright & Jaworski L.L.P., Los Angeles, California, Special Counsel, under existing Statutes, regulations, rulings and court decisions, the Interest Component allocable to and the Certificate Interest Distributions in respect of a Revenue Obligation is exempt from personal income taxes of the State of California and, assuming compliance with the aforementioned covenant, the Interest Component allocable to and the Certificate Interest Distributions in respect of a Revenue Obligation is 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, wider existing statutes, regulations, rulings and court decisions, the Revenue Obligations are not"spoeitied private activity bonds" within the meaning of section 57(a)(5) of the Code and, therefore, the Interest Component allocable to and the Certificate Interest Distributions in respect of a Revenue Obligation 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 the Interest Component allocable to and the Certificate Interest Distributions in respect of a Revenue Obligation owned by a corporation may affect the computation of the alternative minimum taxable income A corporation's alternative minimum taxable income is the basis on which the alternative minimum tax imposed by section 55 of Code will be computed. To the extent that a purchaser of a Revenue Obligation acquires that Revenue Obligation at a price in excess of its -stated redemption price at maturity" (within the meaning of section 1273(a)(2) of the Code), such excess will constitute"bond premium" under the Code. Section 171 of the Code, and the Treasury Regulations promulgated thereunder, provide generally that bond premium on a tax-exempt obligation must be amortized over the remaining term of the obligation (or a shorter period in the case of certain callable obligations); the amount of premium so amortized will reduce the owner's basis in such obligation for federal income tax purposes,but such amortized premium will not be deductible for federal income tax purposes. Such reduction in basis will increase the amount of any gain (or decrease the amount of any loss) to be recognized for federal income tax pmposes upon a sale or other taxable disposition of the obligation. The amount of premium that is amortizable each year by a purchaser is determined by using such purchaser's yield to maturity. The rate and timing of the amortization of the bond premium and the corresponding basis reduction may result in au owner realizing a taxable gain when its Revenue Obligation is sold or disposed of for an amount equal to or in some circumstances even less than the original cost of the Revenue Obligation to the owner. Purchasers of Revenue Obligations at a price that includes bond premium should consult their own tax advisors with respect to the computation and treatment of such bond premium,including, but not limited to, the calculation of gain or loss upon the sale,redemption or other disposition of the Revenue Obligation. The excess, if any, of the stated redemption price at maturity of Revenue Obligations of a maturity over the initial offering price to the public of the Revenue Obligations of that maturity is 5591s4e31 52 ..original issue discount." Original issue discount scenting on a Revenue Obligation is treated as interest excluded from the gross income of the owner thereof for federal income tax purposes and is exempt from California personal income tax to the same extent as would be stated interest on that Revenue Obligation. Original issue discount on any Revenue Obligation purchased at such initial offering price and pursuant to such initial offering will accrue on a semiannual basis over the term of the Revenue Obligation on the basis of a constant yield method and, within each semiannual period, will accrue on a ratable daily basis. The amount of original issue discount on such a Revenue Obligation accruing during each period is added to the adjusted basis of such Revenue Obligation to determine taxable gain upon disposition (including sale, redemption or payment on maturity) of such Revenue Obligation. The Code includes certain provisions relating to the accrual of original issue discount in the case of purchasers of Revenue Obligation who purchase such Revenue Obligation other than at the initial offering price and pursuant to the initial offering. Purchasers of Revenue Obligation of a maturity having original issue discount should consult their own tax advisors with respect to the tax consequences of ownership of Revenue Obligation with original issue discount. Rusuant to the Trust Agreement and in the Tax Certificate Pertaining to Arbitrage and Other Hollers under Sections 103 and 141-150 of the bnternal Revenue Code of 1986, to be delivered by the District and the Corporation in connection with the issuance of the Revenue Obligations, 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 Revenue Obligations from the gross income of the owners thereof for federal income tax purposes. In reaching its opinions described above, Special Counsel will assume the accuracy of such representations and the present and fixture compliance by the District and the Corporation with such covenants. Further, except as slated above, Special Counsel will express no opinion as to any federal or state tax consequences of the receipt of interest ()it, or the ownership or disposition of,the Revenue Obligations. 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 Revenue Obligations may affect the tax status of the Interest Component or the Certificate Interest Distributions. No assurance can be given that future legislation, if enacted into law, will not contain provisions that could directly or indirectly reduce the benefit of the exemption of such amounts from personal income taxation by the State of California or of the exclusion of the interest on the Revenue Obligations from the gross income of the owners thereof for federal income tax purposes. Furthermore, Special Counsel will express no opinion as to any federal, state or local tax law consequences with respect to the Installment Purchase Agreement, the Revenue Obligations, the Interest Component or Certificate Interest Distributions, if any action is taken with respect to the Installment Purchase Agreement, the Revenue Obligations or the proceeds thereof, or the Trust Agreement predicated or permitted upon the advice or approval of other counsel. Although Special Counsel is of the opinion that Interest Component and Certificate Interest Distributions in respect of a Revenue Obligation 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 Revenue Obligations. The nature and extent of these other tax consequences will depend upon the owner's other items of income or deduction. Without limiting the generality of the foregoing,prospective purchasers of the Revenue Obligations should be aware that (i) section 265 of the Code denies a deduction for interest on indebtedness incurred or continued to purchase or carry the Revenue Obligations and the Code contains additional limitations on interest deductions applicable to financial institutions that own tax-exempt obligations (such as the Revenue Obligations), (it) with respect to insurance companies subject to the In imposed by section 831 of the Code, section 832(b)(5)(Buj reduces the deduction for loss reserves by 15% of the sum of certain items, including Interest Component and Certificate Interest Distributions in respect of the Revenue Obligations, (in) Interest Component and Certificate Interest Distributions accrued in respect of Revenue Obligations owned by certain foreign corporations doing business in the United States could be subject to a branch profits tax imposed by section 884 of the Code. 5591Y4931 53 Irv) passive investment income, including Interest Component and Certificate Interest Distributions accrued in respect of Revenue Obligations, may be subject to federal income taxation wider section 1375 of the Code for Subchapter S corporations that have Subchapter C earnings and profits at the close of the taxable year if greater than 25% of the gross receipts of such Subchapter S corporation is passive investment income, (v) section 86 of the Code requires recipients of certain Social Security and certain Railroad Retirement benefits to take into account, in determining the taxability of such benefits, Interest Distributions and Certificate Interest Distributions accrued in respect of Revenue Obligations owned by such recipients for federal income tax purposes, and (vi) under section 32(i) of the Code, receipt of investment income, including Interest Component and Certificate Interest Distributions accrued in respect of Revenue Obligations, may disqualify the recipient thereof from obtaining the earned income credit. Special Counsel has expressed no opinion regarding any such other tax consequences. 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 cowl 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 Revenue Obligations 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 Cenificatc Interest Distributions accrued in respect of Revenue Obligations" the District may have different or conflicting interest from the owners. Public awareness of any future audit of the Revenue Obligations could adversely affect the value and liquidity of the Revenue Obligations during the pendency of the audit, regardless of its ultimate outcome. Existing law may change to reduce or eliminate the benefit to bondholders of the exclusion of interest on the Interest Component and Certificate Interest Distributions accrued in respect of Revenue Obligations from gross income for federal income tax purposes. Any proposed legislation or administrative action, whether or not taken, could also affect the value and marketability of the Revenue Obligations. Prospective purchasers of the Revenue Obligations should consult with their own tax advisors with respect to any proposed or future changes in tax law. A copy of the form of opinion of Special Counsel to be delivered at the closing of the Revenue Obligations is included in Appendix F. VERIFICATION OF MATHEMATICAL COMPUTATIONS Causcy Dcmgcn & Moore Inc., certified public accountants (the "Verification Agent"). will deliver a report stating that the firm has verified (i) the accuracy of mathematical computations concerning the adequacy of the cash and Government Obligations initiatly deposited in the Escrow Fund to pay the principal and interest due with respect to the Refunded Certificates to and including the Prepayment Date, and to pay on the Prepayment Date the Prepayment Price thereof and (id certain mathematical computations supporting the conclusion that the Revenue Obligations are not "arbitrage bonds' under the Code, which will be used in part by Special Counsel in concluding that the Interest Payments and Certificate Interest Distributions are excluded from gross income for federal income tax purposes under present law, including applicable provisions of the Code, existing court rulings, regulations and Internal Revenue Service rulings. The report of the Verification Agent will include the statement that the scope of its engagement was limited to verifying the mathematical accuracy of the computations contained in such schedules provided to it and that the Verification Agent has no obligation to update its report because of events occurring, or data or information coming to its attention, after the date of its report. 5591k 931 54 CONTINUING DISCLOSURE The District has covenanted for the benefit of holders and beneficial owners of the Revenue Obligations (a)to provide certain financial information and operating data(the"Annual Report") relating to the District and the property in the District not later than eight months after the end of the Distnct's Fiscal Year (which currently would be March 1), commencing with the report for the 2011-12 Fiscal Year, and(b) to provide notices of the occurrence of certain enumerated events. The Annual Report will be tiled 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 torth in the Continuing Disclosure Agreement. See APPENDIX D — "FORM OF CONTINUING DISCLOSURE AGREEMENT." These covenants have been made in order to assist the Initial Purchaser in complying with S.E.C. Rule 15c2-12 (the "Rule"). During the past five years, the District has never failed to comply in all material respects with any previous undertaking with respect to the Rule to provide annual rcports or notices of enumcrated events. RATINGS The Revenue Obligations will be rated `_" by Standard & Poor's Financial Services LUC ("S&P"), and " " by Fitch Ratings(`Fitch"). Such ratings reflect only the views of the rating agencies, and do not constitute a recommendation to buy, sell or hold the Revenue Obligations. Fxplanation of the significance of such ratings may be obtained only from the respective organizations at: Standard & Poor's Ratings Services, 55 Water Street, New York, New York 10041 and Fitch Ratings, One State Street Plaza, New York, New York 10004. There is no assurance that any such ratings will continue for any given period of time or that they will not be revised downward or withdrawn entirely by the respective rating agencies, if in the judgment of any such rating agency circumstances so warrant. Any such downward revision or withdrawal of such ratings may have an adverse effect on the market price of the Revenue Obligations. PURCHASE AND REOFFERING (the "Initial Purchaser") has purchased the Revenue Obligations from the District at a competitive sale for a purchase price of S (representing the aggregate principal amount of the Revenue Obligations, (phis/less] a [premium/discount) of $ , and less an Initial Purchaser's discount of S ). The public offering prices may be changed from time to time by the Initial Purchaser. The Initial Purchaser may offer and sell Revenue Obligations to certain dealers and others at prices Tower than the offering prices shown on the inside cover page hereof. MISCELLANEOUS Included herein are brief summaries of certain documents and reports, which summaries do not purport to be complete or definitive, and reference is made to such documents and reports for full and complete statements of the contents thereof. Any statements in this Official Statement involving matters of opinion, whether or not expressly so stated, are intended as such and not as representations of fact. This Official Statement is not to be construed as a contract or agreement between the District and the purchasers or Owners of any of the Revenue Obligations. The execution and delivery of this Official Statement has been duly authorized by the District. ORANGE COUNTY SANITATION DISTRICT 559144931 55 By: Chair of the Board of Directors 5591k931 56 APPENDIX A COMPREHENSIVE ANNUAL FINANCIAL REPORT OF THE ORANGE COUNTY SANITATION DISTRICT FOR FISCAL YEAR ENDED JUNE 30,2011 5591k 931 A-1 APPENDIX B THE COUNTY OF ORANGE-ECONOMIC AND DEMOGRAPHIC INFORMATION 5591k 93 1 B-j APPENDIX C SUMMARY OF PRINCIPAL LEGAL DOCUMENTS 5591k 93 1 C-j APPENDIX D FORM OF CONTINUING DISCLOSURE AGREEMENT 5591k 93 1 D-2 APPENDIX E, BOOK-ENTRY SYSTEM The description that follows of the procedures and recordkeeping with respect to beneficial ownership interests it, the Revenue Obligations, pavment of principal and merest evidenced by the Revenue Obligations to Participants or Beneficial Owners, confirmation and oansfer at beneficial ownership interests in the Revenue Obligations. and other Revenue Obligation-related transactions by and between OTC, Participmns and Beneficial Owners, is based on injorniation (nnixhed by DTC which the District and the Corporation each believes to be reliable, but the District and the Corporation take no responsibility tar the completeness or accuracv thereof: The Depository Trust Company—Book-Entry System The Depository Trust Company("DTC"),New York,NY, will act as securities depositary for the securities (the "Revenue Obligations'). The Revenue Obligations will be issued as fully-registered securities registered in the name of Cede &Co. (OTC's partnership nominee) or such other name as may be requested by an authorized representative of DTC. One fully-registered certificate will be issued for the Revenue Obligations in the aggregate principal amount of such issue, and will be deposited with DTC. DTC is a limited-purpose trust company organized under the New York Banking Law, a "banking organization" within the meaning of the New York Banking Law, a member of the Federal Reserve System, a "clearing corporation" within the meaning of the New York Uniform Commercial Code, and a "clearing agency" registered pursuant to the provisions of Section 19A at' 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, nest companies, clearing corporations, and certain other organizations. DTC is a wholly-owned subsidiary of The Depository Trust & Clearing Corporation ("DTCC"L 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"). DEC has a Standard&Poor's rating of`AA+." The DTC Rules applicable to its Participants are on file with the Securities and Exchange Commission. More information about DTC can be found at www.dtcc.con. The information on such webs'ite is not incorporated herein by such reference or otherwise. Purchases of Revenue Obligations under the DTC system must be made by or through Direct Participants, which will receive a credit for the Revenue Obligations on DTC's records. The ownership interest of each actual purchaser of each Revenue Obligation ("Beneficial Owner") is in turn to be recorded on the Direct and Indirect Participants' records. Beneficial Owners will not receive written confirmation from DTC of their purchase. Beneficial Owners are, however, expected to receive written confirmations providing details of the transaction, as well as periodic statements of their holdings, from the Direct or Indirect Participant through which the Beneficial Owner entered into the transaction. Transfers of ownership interests in the Revenue Obligations are to be accomplished by entries made on 559IYr935 E-I the books of Direct and Indirect Participants acting on behalf of Beneficial Owners- Beneficial Owners will not receive certificates representing their ownership interests in the Revenue Obligations, except in the event that use of the book-entry system for the Revenue Obligations is discontinued. To facilitate subsequent transfers, all Revenue Obligations deposited by Direct Participants with DTC are registered in the name of DTC's partnership nominee,Cede& Co. or such other name as may be requested by an authorized representative of DTC. The deposit of Revenue Obligations with DTC and their registration in the name of Cede &Co. or such other nominee do not effect any change in beneficial ownership. DTC has no knowledge of the actual Beneficial Owners of the Revenue Obligations; DTC's records reflect only the identity of the Direct Participants to whose accounts such Revenue Obligations are credited, which may or may not be the Beneficial Owners. The Direct and Indirect Participants will remain responsible for keeping account of their holdings on behalf of their customers. Conveyance of notices and other communications by DTC to Direct Participants, by Direct Participants to Indirect Participants, and by Direct Participants and Indirect Participants to Beneficial Owners will be governed by arrangements among them, subject to any statutory or regulatory requirements as may be in effect from time to time. Beneficial Owners of Revenue Obligations may wish to take certain steps to augment transmission to them of notices of significant events with respect to the Revenue Obligations, such as prepayments, tenders, defaults, and proposed amendments to the security documents. For example, Beneficial Owners of Revenue Obligations may wish to ascertain that the nominee holding the Revenue Obligations for their benefit has agreed to obtain and transmit notices to Beneficial Owners, in the alternative, Beneficial Owners cony wish to provide their names and addresses to the regisnar and request that copies of the notices be provided directly to them. Prepayment notices shall be sent to DTC. If less than all of the Revenue Obligations within an issue are being prepaid, DTC's practice is to determine by lot the amount of the interest of each Direct Participant in such issue to be prepaid. Neither DTC nor Cede & Co. (nor such other DTC nominee) will consent or vote with respect to the Revenue Obligations unless authorized by a Direct Participant in accordance with DTC's MMI Procedures. Under its usual procedures,DTC mails an Omnibus Proxy to the District as soon as possible after the record date. The Omnibus Proxy assigns Cede & Co.'s consenting or voting rights to those Direct Participants to whose accounts the Revenue Obligations are credited on the record date (identified in a listing attached to the Omnibus Proxy). Prepayments with respect to the Revenue Obligations will be made to Cede &Co., or such other nominee as may be requested by an authorized representative of DTC. DTC's practice is to credit Direct Participants' accounts, upon DTC's receipt of funds and corresponding detail information from the District or the Trustee on payable dale 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. 5591r4931 B-2. DTC may discontinue providing its services as securities depository with respect to the Revenue Obligations at any time by giving reasonable notice to the District or the Trustee. Under such circumstances, in the event that a successor securities depository is not obtained, Revenue Obligations are required to be printed and delivered. The District may decide to discontinue use of the system of book-entry-only transfers through DTC (or a successor securities depository). In that event, Revenue Obligations will be printed and delivered to DTC. The information in this section concerning DTC and DTC's book-entry system has been obtained from sources that the District believes to be reliable, but the District takes no responsibility for the accuracy thereof. Discontinuance of DTC Services In the event (i)DTC determines not to continue to act as scent ities depository for the Revenue Obligations, (it)DTC shall no longer act and give notice to the Trustee of such determination or (in)the District determines that it is in the best interest of the Beneficial Owners that they be able to obtain Revenue Obligations and delivers a written certificate to the Trustee to that effect, DTC services will be discontinued. If the District determines to replace DTC with another qualified securities depository, the District shall prepare or direct the preparation of a new single, separate, fully registered Revenue Obligation for each of the maturities of the Revenue Obligations, registered in the name of such successor or substitute qualified securities depository or its nominee. If the District fails to identify another qualified securities depository to replace DTC then the Revenue Obligations shall no longer be restricted to being registered in the certificate registration books in the name of Cede & Co., but shall be registered in such names as are requested in a certificate of the District, in accordance with the Trust Agrccmcttt. All Revenue Obligations may be presented for transfer by the Owner thereof, in person or by his attorney duly authorized in writing, at the Principal Office of the Trustee, on the books required to be kept by the Trustee pursuant to the provisions of the Trust Agreement, upon surrender of such Certifications for cancellation accompanied by delivery of a duty executed written instrument of transfer in a forty acceptable to the Trustee. The Trustee may treat the Owner of any Revenue Obligation as the absolute owner of such Rcvcnuc Obligation for all purposes, whether or not such Revenue Obligation shall be overdue, and the Trustee shalt not be affected by any knowledge or notice to the contrary; and payment of the interest and principal evidenced by such Revenue Obligation shall be made only to such Owner, which payments shall be valid and effectual to satisfy and discharge the liability evidenced by such Revenue Obligation to the extent of the sum or sums so paid. Whenever any Revenue Obligations shall be surrendered for transfer, the Trustee shah execute aid deliver new Revenue Obligations representing the same principal amount in Authorized Denominations. The Trustee shall require the payment of any Owner requesting such nansfcr of any tax or other governmental charge required to be paid with respect to such transfer. Revenue Obligations may be presented for exchange at the Principal Office of the Trustee for a like aggregate principal amount of Revenue Obligations of other Authorized Denominations. The Trustee shall require the payment by the Owner requesting such exchange of any tax or other governmental charge required to be paid with respect to such exchange. The Trustee shalt not be required to transfer or exchange any Revenue Obligation during the period in which the Trustee is selecting Revenue Obligations for prepayment, nor shall the Trustee be required to transfer or exchange any Revenue Obligation or portion thereof selected for prepayment from and after the date of mailing the notice of prepayment thereof. 5591kr931 B3 APPENDIX F FORM OF APPROVING OPINION OF SPECIAL COUNSEL Upon the execution and delivery of the Revenue Obligations. Fulbright& Jovorski L.L.P., Los Angeles. California, Special Counsel to the District. will render its final approving opinion with respect to the Revenue Obligations in substanoalbl thefollon,ing form: [Date of Delivery] Orange County Sanitation District 10844 Ellis Avenue Fountain Valley,California 92708-7018 Orange County Sanitation District Wastewater Refunding Revenue Obligations Series 2012A Ladies and Gentlemen: We have acted as Special Counsel in connection with the $ aggiegate principal amount of Orange County Sanitation District Wastewater Refunding Revenue Obligations, Series 2012A (the "Revenue Obligations") which are certificates of participation that evidence direct, tractional undivided interests of the Owners thereof in the installment payments (the "installment Payments"), and the interest thereon, to be made by the Orange County Sanitation District (the"District") pursuant to the Installment Purchase Agreement, dated as of March 1, 2012 (the"Installment Purchase Agreement"), by and between the District and the Orange County Sanitation District Financing Corporation (the "Corporation"). Pursuant to the Master Agreement for District Obligations, dated as of August 1, 2000 (the "Master Agreement"), by and between the District and the Corporation, the District has established conditions and terms upon which obligations such as the Installment Payments, and the interest thereon, will be incurred and secured. Installment Payments under the Installment Purchase Agreement are payable solely from Net Revenues as provided in the Installment Purchase Agreement, consisting primarily of all income and revenue received by the District from the operation or ownership of the Wastewater System of the District (the "Wastewater System") remaining after payment of Maintenance and Operation Costs. Capitalized teens used and not otherwise defined herein shall have the meanings ascribed to such terms in the Installment Purchase Agreement. The Revenue Obligations are to be executed and delivered pursuant to a Trust Agreement, dated as of March I, 2012 (the "Trust Agreement"), by and among the District, the Corporation and Union Bank, N.A., as trustee (the"Trustee'). Proceeds from the sale of the Revenue Obligations will be used to (i)prepay the District's Certificates of Participation, Series 2003 (the `Refunded Certificates") and (d)pay the costs incurred in connection with the execution and delivery of the Revenue Obligations. As Special Counsel, we have examined topics certified to us as being true and complete copies of the Master Agreement,the Trust Agreement and the Installment Purchase Agreement and the proceedings of the District in connection with the execution and delivery of the Revenue Obligations. We have also 5591kr931 F-1 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: I. The Master Agreement, the Installment Purchase Agreement and the Trust Agreement each has been duly and validly authorized,executed and delivered by the District and, assuming the Master Agreement, the Installment Purchase Agreement and the Trust Agreement each constitutes the legally valid and binding obligation of the other parties thereto, 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 Payments, and the interest thereon, and other payments required to be made by it under the Installment Purchase Agreement is a special obligation of the District payable, in the manner provided in the Installment Purchase Agreement, solely from Net Revenues and other funds provided for in the Installment Purchase Agreement lawfully available therefor. 3. Assuming due authorization, execution and delivery of the Trust Agreement and the Revenue Obligations by the Trustee, the Revenue Obligations are entitled to the benefits of the Trust Agreement. 4. Under existing statutes, regulations, rulings and court decisions, and, assuming compliance with the covenants mentioned below, the component of each payment designated as interest in the Installment Purchase Agreement (the "Interest Component"), and the alterable portion thereof distributable in respect of any Revenue Obligation (the "Certificate lrterest Disixibution"), 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 Revenue Obligations are not "specified private activity bonds" within the meaning of section 57(a)(5) of the Code and, therefore, the Interest Component and the Certificate Interest Distributions 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 the Interest Component, and the Certificate Interest Distribution, owned by a corporation may affect the computation of the alternative minimum taxable income of that corporation. A corporation's alternative minimum taxable income is the basis 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 allocable to and the Certificate Interest Distributions in respect of a Revenue Obligation, are exempt from personal income taxes of the State of California under present state law. Pursuant to the Trust Agreement and in the Tax Cetofi(aie 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 execution and delivery of the Revenue Obligations, the District and the Corporation will each make representations relevant to the determination of;and will make certain covenants regarding or affecting, the exclusion of the Interest Component and the Certificate Interest Distribution from the gross income of the owners thereof for federal income tax purposes. In reaching the opinions described in the immediately preceding paragraph, we have assumed the accuracy of such representations and the present and fixture compliance by the District and the Corporation with such covenants. 5591rco 1 F-2 Fxcept as stated in the preceding two paragraphs,we express no opinion as to any federal or state tax consequences of the ownership or disposition of the Installment Purchase Agreement or the Revenue Obligations. Furthermore, we express no opinion as to ally federal, state or local tax law consequences with respect to the Installment Purchase Agreement, Revenue Obligations, Interest Component, or Certificate interest Distributions,if any action is taken with respect to the Installment Purchase Agreement, the Master Agreement, the Trust Agreement, the Revenue Obligations, or the proceeds thereof if, 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 Revenue Obligations and the enforceability of the Reveuue Obligations,the Master Agreement,the Trust Agreement and the Installment Purchase Agreement may be subject to bankruptcy, insolvency, reorganization, moratorium mud other similar Taws affecting creditors' rights heretofore or hereafter enacted and may also be subject to the exercise of judicial discretion in appropriate cases. The enforceability of the Revenue Obligations, the Master Agreement, the Trust Agreement and the Installment Purchase Agreement is subject to the effect of general principles of equity, including, without limitation, concepts of materiality, reasonableness, good faith and fair dealing, to the possible unavailability of specific performance or injunctive relief, regardless of whether considered in a proceeding in equity or at law, and to the limitations on legal remedies against governmental entities in California. No opinion is expressed herein on the accuracy, completeness or fairness of the Official Statement or other offering material relating to the Revenue Obligations. Our opinions are based on existing law, which is subject to change. Such opinions are further based on our knowledge of facts as of the date hereof. We assume no duty to update or supplement our opinions to reflect any facts or circumstances that may hereafter come to our attention or to reflect any changes in any law that may hereafter occur or become effective. Moreover, our opinions are not a guarantee of result, rather, such opinions represent our legal judgment based upon our review of existing law that we deem relevant to such opinions and in reliance upon the representations and covenants referenced above. Respectfully submitted, 5591kr931 F-3 Fulbright & Jaworski L.L.P.—Draft 01/27/12 OFFICIAL NOTICE INVITING BIDS $ ORANGE COUNTY SANITATION DISTRICT WASTEWATER REFUNDING REVENUE OBLIGATIONS SERIES 2012A (Book-Envy-Only) NOTICE IS HEREBY GIVEN that bids will be received by the Orange County Sanitation District (the"District') for the purchase of$ * original principal amount of Orange County Sanitation District Wastewater Refunding Revenue Obligations, Series 2012A Evidencing Direct, Fractional Undivided Interests of the Owners Thereof in Installment Payments to be Made by the Orange County Sanitation District to the Orange County Sanitation District Financing Corporation (the`Revenue Obligations"). Bids for less than all of the Revenue Obligations will not be accepted. The bids will be received in the form, in the manner and up to the time specified below (unless postponed as described herein): Date: ,2012 11:00 a.m.,New York Time Electronic Bids: Electronic proposals may be submitted to ipreo LLC at www.newissuchome.i-deal.com and the Parity bid delivery system (the "Electronic Service"). The Electronic Service will act as agent of the bidder and not of the District in connection with the submission of bids and the District assumes no responsibility or liability for bids submitted through the Electronic Service. Sec "Information Regarding Electronic Proposals" herein. No facsimile, hand delivery or sealed bids will be accepted. Terms of the Revenue Obligations The Preliminary Official Statement for the Revenue Obligations, dated February , 2012, including the cover page and all appendices thereto (the "Preliminary Official Statement'), provides certain information concerning the sale and delivery of$ * aggregate principal amount of the Revenue Obligations, which are certificates of participation evidencing direct, undivided tractional interests in the Installment Payments (the "Installment Payments"), and the interest thereon, payable by the District pursuant to the Installment Purchase Agreement, dated as of March 1, 2012(the "Installment Purchase Agreement'), by and between the District and the Orange County Sanitation District Financing Corporation (the "Corporation'). Each bidder must have obtained and reviewed the Preliminary Official Statement prior to bidding for the Revenue Obligations. This Official Notice Inviting Bids contains certain information for quick reference only, is not a summary of the issue and governs only the terms of the sale of, bidding for and closing procedures with respect to the Revenue Obligations. Bidders must read the entire Preliminary Official Statement to obtain information essential to making an informed investment decision. 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 Preliminary,subject to change. 55bi61613 declared the conditions and terms upon which obligations such as the Installment Purchase Agreement, and the Installment Payments and the interest thereon, will be incurred and secured. Installment Payments under the Installment Purchase Agreement are payable solely from Net Revenues, as provided in the Master Agreement and the Installment Prrchose Agreement, consisting primarily of all income and revenue received by the District from the operation or ownership of the Wastewater System of the District (the`Wastewater System")remaining after payment of Maintenance and Operation Costs. The Issue The proceeds from the sale of the Revenue Obligations will be used to: (i) prepay all el a portion of certain outstanding certificates of participation of the District and (ii)pay costs of execution and delivery of the Revenue Obligations. The Revenue Obligations are to be executed and delivered pursuant to a Trust Agreement, dated as of March I,2012(the"Trust Agreement"), by and among the District, the Corporation and Union Bank, N.A., as trustee(the "Trustee"). Capitalized terms not defined herein shall have the same definitions as used in the Trust Agreement or the Master Agreement. Authorization On February 22, 2012, the District and the Corporation authorized the execution and delivery of the Installment Purchase Agreement,the Trust Agreement and the Revenue Obligations. Outstanding Senior Obligations The District has outstanding Senior Obligations payable on a parity with the hrstallment Payments wider the Installment Purchase Agreement. The term "Existing Senior Obligations" as used in the Preliminary Official Statement refers to the 2000 Installment Purchase Agreement, the 2003 Installment purchase Agreement, the 2007A Installment Pwchase Agreement, the 2007B Installment Purchase Agreement, the 2008A Installment Purchase Agreement, the 2008E Installment Purchase Agreement, the 2009A Installment Purchase Agreement, the 2010A Installment Purchase Agreement, the 2010C Installment Purchase Agreement, the 2011A hrstallment Purchase Agreement and the 20116 Installment Purchase Agreement. The Revenue Obligations will defease the 2003 Installment Purchase Agreement. Security and Source of Payments The Revenue Obligations are certificates of participation which evidence direct, undivided fractional interests in the Installment Payments, and the interest thereon, paid by the District pursuant to the Installment Purchase Agreement. The obligation of the District to pay the Installment Payments mid 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 hrstallment 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 Installment Payments from Net Revenues is on a parity with the District's obligation to make payments with respect to its other outstanding obligations described as Senior Obligations and all Reimbursement Obligations with respect to Senior Obligations, as provided in the Master Agreement. The Installment Purchase Agreement constitutes a Senior Obligation and is subject to the provisions of the Master Agreement and is afforded all of the advantages,benefits, interests ssstaiaa; 2 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 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 Maser Agreement. The District may at any time incur Subordinate Obligations; provided, however, that prior to incurring such Subordinate Obligations, the District will have determined that the incurrence thereof will not materially adversely affect the District's ability to comply with the requirements of the Master Agreement. The District may at any time incur Reimbursement Obligations with respect to Subordinate Obligations. Currently, there are no Subordinate Obligations outstanding. For a description of the District's outstanding Senior Obligations, see"FINANCIAL OBLIGATIONS Existing Indebtedness" in the Preliminary Official Statement. The District may, in connection with the incurrence of Subordinate Obligations, pledge Net Revenues to the payment of Subordinate Obligations and Reimbursement Obligations with respect to Subordinate Obligations; provided, however, that such pledge, and any lien created thereby, shall be junior and subordinate to the pledge of, and lien on, Net Revenues for the payment of Senior Obligations and Reimbursement Obligations with respect to Senior Obligations. Pursuant to the Master Agreement, the District is required, to the extent permitted by law, to fix, prescribe and collect fees and charges for the services and facilities of the Wastewater System which will be at least sufficient to yield during each Fiscal Year(a) Net Revenues equal to 125% of Debt Service on Senior Obligations for such Fiscal Year and (b) Net Operating Revenues equal to 100% of Debt Service on all Obligations for such Fiscal Year. The District may make adjustments from time to time in such fees and charges and may make such classification thereof as it deems necessary,but shall not reduce the fees and charges then in effect unless the Revenues and Net Revenues from such reduced fees and charges will at all times be sufficient to meet the requirements of the Master Agreement. See "SECURITY AND SOURCES OF PAYMENT FOR THE REVENUE OBLIGATIONS Rate Covenant"in the Preliminary Official Statement. Additional Obligations In addition to the Existing Senior Obligations, the District may at any time incur Obligations payable on a parity or on a subordinate basis to the payment by the District of the Installment Payments upon satisfaction of conditions provided in the Master Agreement. No Obligations payable on such a subordinate basis are currently outstanding. See "SECURITY AND SOURCES OF PAYMENT FOR THE REVENUE OBLIGATIONS — Limitations on Issuance of Additional Obligations" in the Preliminary Official Statement. 51s16161a 3 Book-F,ntry-Only The Revenue Obligations will be executed and delivered in the form of filly registered certificates payable in lawful money of the United States of America. The Revenue Obligations will be initially delivered only in book-entry form and will be registered in the name of Cede &Co., as nominee of The Depository Trust Company, New York, New York ("D'FC"), which will act as securities depository for the Revenue Obligations. Individual purchases of the Revenue Obligations will be made in book-entry form only. Purchasers of Revenue Obligations will not receive physical certificates representing their ownership interests in the Revenue Obligations purchased. The Revenue Obligations will be delivered in Authorized Denominations of S5,000 and any integral multiple thereof. Payments of principal and interest evidenced by the Revenue Obligations are payable directly to DTC by the Trustee. Upon receipt of payments of such principal and interest, DTC will in him distribute such payments to the beneficial owners of the Revenue Obligations. So long as the Revenue Obligations are in the DTC book- entry system, the interest, principal and prepayment premiums, if any, due with respect to the Revenue Obligations will be payable by the Trustee, or its agent, to DTC or its nominee. Principal and Interest Payments The Revenue Obligations will be dated as of the date of initial delivery and will evidence interest from that date(computed on the basis of a 360-day year of twelve 30-day months). Interest evidenced by the Revenue Obligations is payable semiannually on February I and August I of each year, commencing on August 1, 2012. Payment of principal and prepayment premium, if any, evidenced by the Revenue Obligations will be paid in lawful money of the United States of America upon presentation and surrender thereof at the Principal Office of the Trustee. Principal Amortization The Revenue Obligations will be executed and delivered in the original principal amount of S and will be subject to principal amortization through serial maturities on February I in the years through in the amounts set forth in the Official Bid Form. Mandatory Sinking Account Prepayment If the successful bidder designates principal amounts to be combined into one or more term maturities, each such term maturity shall be subject to mandatory sinking account payments commencing on February I of the first year which has been combined to form such term maturities and continuing on February 1 in each year thereafter until the stated maturity date of that term maturity, provided that no term maturity maturing on or after February 1, 20 may have sinking fund payments prior to February 1, 20 . Principal amounts due on or prior to February I, 20 are not eligible to be combined into term bonds. The prepayment price will be equal to the principal amount for such year set forth in the Official Bid Form, plus accrued interest evidenced thereby to the date fixed for prepayment, without premium. The amount of each such prepayment shall be reduced in the event and to the extent that Installment Payments payable on the corresponding Installment Payment Date are prepaid pursuant to provisions of the Installment purchase Agreement governing optional prepayment. Optional Prepayment The Revenue Obligations with stated Principal Payment Dates prior to February 1, 20_ are not subject to optional prepayment prior to their stated Principal Payment Dates. The Revenue Obligations with stated Principal Payment Dates on or after February 1, 20 are subject to optional prepayment prior to their stated Principal Payment Dates, on any date on or after August 1, 20_ in whole or in pan, in 51a161e1; 4 Authorized Denominations, fiom and to the extent of prepaid Installment Payments paid pursuant to the Installment Purchase Agreement or from any other source of available finds, any such prepayment to be at a price equal to the principal evidenced by the Revenue Obligations to be prepaid,plus accrued interest evidenced thereby to the date fixed ton prepayment, without premium. Selection of Revenue Obligations for Prepayment Whenever less than all the Outstanding Revenue Obligations are to be prepaid on any one date pursuant to provisions of the Trust Agreement with respect to optional prepayment of Revenue Obligations, the Trustee shall select the Revenue Obligations to be prepaid among Revenue Obligations with different Principal Payment Dates as directed in a Written Request of the District. Whenever less than all the Outstanding Revenue Obligations with the same stated Principal Payment Date are to be prepaid on any one dale pursuant to the Trust Agreement, the Trustee shall select the Revenue Obligations with such Principal Payment Date to be prepaid as directed in a Written Request of the District, or at the discretion of the District by lot in any manner that the Trustee deems flair and appropriate, which decision shall be Final and binding upon the District and the Owners.The Trustee shall promptly notify the District in writing of the numbers of the Revenue Obligations so selected for prepayment on such date. Notice of Prepayment The Trustee shall, at least 20 but not more than 60 days prior to any prepayment date, give notice of prepayment to the respective Owners of Revenue Obligations designated for prepayment by first-class mail, postage prepaid, at their addresses appearing on the registration books maintained by the Trustee as of the close of business on the day before such notice of prepayment is given. The actual receipt by the Owner of any notice of such prepayment shall not be a condition precedent to prepayment, and neither failure to receive such notice nor any defect therein shall affect the validity of the proceedings for the prepayment of such Revenue Obligations or the cessation of interest evidenced thereby on the date fixed for prepayment. Interest Rates,Reoffering Prices,Premium or Discount Bids and Certificate of Initial Purchaser Bidders must bid to purchase all and not part of the Revenue Obligations and must submit their bids on the Official Bid Form. Bidders must specify a rate of interest for each maturity of the Revenue Obligations. The rates of interest must be expressed in multiples of one-one thousandths of one percent (t%), and no interest rate can exceed 5.0% per annum. All Revenue Obligations of the same maturity must evidence interest at the same rate. The successful bidder will, within 30 minutes after being notified of the award of the Revenue Obligations, advise the District of the initial bona tide public reoffering prices of each maturity of the Revenue Obligations on the date of award. The successful biddenvill also be required to furnish to the Dist, ct a certificate ("Certificate of Tnitial Purchaser") in the form of the Certificate of Initial Purchaser attached hereto(with such modifications as may be acceptable to Special Counsel). At any time before or after delivery of the Revenue Obligations to the successful bidder, that successful bidder also may be required by the District or Special Counsel to clarity any discrepancies between the Certificate of Initial Purchaser and publicly available information relating to trades of the Revenue Obligations that might suggest that the initial sale of a substantial portion of any maturity of the Revenue Obligations to the public was at a materially higher price than the price stated ton that maturity in the Certificate of Initial Puchaser. 51s16161a 5 Bidders may bid to purchase the Revenue Obligations from the District at a discount or with a premium; however, no bid will be considered if the bid is to purchase Revenue Obligations at an aggregate price less than [108]% or more than [115]% of the aggregate principal amount of the Revenue Obligations. No bid will be accepted that contemplates the waiver of any interest or other concession by the bidder as Substitute for payment in full of the purchase price. Bids that do not conform to the terms of this section may be rejected. See"Right to Reject Bids,Waive Irregularities"below. Adjustment of Principal Amounts After Receipt of Bids The principal amounts of the Revenue Obligations set forth in the Official Bid Form reflect estimates of the District as to the likely interest rates of the winning bid and the premium or discount contained in the winning bid. After selecting the winning bid, the amortization schedule for the Revenue Obligations may be adjusted iu $5,000 increments if the District elects to do so, to reflect the actual interest rates and any discount or premium in the winning bid to properly fund the prepayment escrow and to accommodate certain other requirements or preferences of the District. Such adjustments will not change any Revenue Obligation in any year by more than 10% of the principal amount for such year. The dollar amount bid for the Revenue Obligations by the winning bidder will be adjusted to reflect any such adjustment in the applicable amortization schedule.Any such adjustment will change the total (but not the per Revenue Obligation)dollar amount of purchaser's discount and original issue discount or premium, if my, provided in such bid. Any such adjustment will be communicated to the winning bidder within 24 hours after receipt of such bid by the District.Changes in the amortization schedule made as described in this paragraph will not affect the determination of the winning bidder or give the winning bidder any right to reject the Revenue Obligations. No Insurance THE SUCCESSFUL BIDDER SHALL NOT PURCHASE MUNICIPAL BOND INSURANCE IN CONNECTION W frH THE REVENUE OBLIGATIONS. Form of Bid BIDS FOR LESS THAN ALL OF THE REVENUE, OBLIGATIONS WILL NOT BE ACCEPTED. Each bid must be on the Official Bid Form. 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 DlSnlet. 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 Financial Advisor (Public Resources Advisory Group) and Special Counsel assume no responsibility for any error contained in any electronic bid, or for the failure of any electronic bid to be transmitted or received at the official time for receipt of such bids. The official time for receipt of bids will be determined by the Disnict 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. 51s161e1a 6 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 Revenue Obligations. The District is not bound by any advice of or determination by the Electronic Service to the effect that any particular bid complies with the terms of this Official Notice Inviting Bids. All costs and expenses incurred by prospective bidders in connection with their submission of bids through the Electronic Service are the sole responsibility of such bidders and the District is not responsible for any such costs or expenses. Further information about the Electronic Service, including any fee charged, may be obtained from Imeo LLC, 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 (i) a financial surety bond ("Surety Bond") in the amount of$ (the"Bid Security Deposit') issued by an insurance company rated in one of the top two rating categories by Moody's Investors Service, Fitch Ratings or Standard & Poor's Ratings Services, without regard to any modification of the rating, and licensed to issue such a bond in the State of Califia nia, naming the District as the beneficiary and identifying the bidder whose deposit is guaranteed by the Surety Bond or(h)a wire transfer of immediately available federal funds. Surety Bonds. If the successful bidder has provided a Surety Bond, such bidder shall wire transfer to the District the amount of the Bid Security Deposit in immediately available federal funds not later than 3:00 p.m. (New York Time) on the business day next succeeding the day of acceptance of the bid, which amount shall be deposited in an escrow fund or account or a similar fund and applied to the purchase price of the Revenue Obligations at the time of delivery of the Revenue Obligations. If the District has not received such federal funds wire transfer by the time stated, the District may draw upon the Surety Bond to satisfy the successful bidder's Bid Security Deposit requirements. !fore Transfers. Any Bid Security Deposit wire transfers must be received in federal funds prior to the deadline for examination of the bids, and should be directed as follows. Union Bank, N.A. ABA 122000496 37130196431/TRUSDG Acct OCSD 2012A Acet No. 67119012 The wire transfers of unsuccessful bidders will be returned promptly on the bid date after the examination of bids. The wire transfer of the successful bidder will be retained by the District and applied to the purchase price at the time of delivery of the Revenue Obligations. The District disclaims any liability for funds sent by wipe transfer, except for any willful misconduct or feckless disregard for its duties. If after the award of the Revenue Obligations,the successful bidder fails to complete the purchase on the terms stated in its bid, unless such failure of performance shall be caused by any act or omission of 55s16161a 7 the District, the Bid Security Deposit, whether paid by federal funds wire or pursuant to the Surety Bond procedure set forth above, shall be retained by the District as stipulated liquidated damages. No interest will be paid upon any Bid Security Deposit. Official Statement The District has approved a Preliminary Official Statement for the Revenue Obligations, dated February , 2012, which the District has "deemed final' for purposes of Rule 15c2-12 promulgated by the Securities and Exchange Commission, as amended (the "Rule'), although subject to revision, amendment and completion in conformity with the Rule. The District will provide the successful bidder such reasonable number of printed copies of the final Official Statement as such bidder may reasonably request no later than seven business days after the day the Revenue Obligations are awarded. Up to 50 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 Revenue Obligations will be awarded to the highest responsible bidder not later than two hours after the time established for the receipt of bids. The highest bidder shall be the bidder submitting the best price for the Revenue Obligations, which best price shall be that resulting in the lowest true interest cost with respect to the Revenue Obligations. The true interest cost shall be computed by doubling the semi-annual interest rate (compounded semi-annually) necessary to discount the debt service payments from their respective payment dates to the dale of the Revenue Obligations and to the price bid. If two or more bidders have bid the same one interest cost, the award shall be made at the sole discretion of the District. Delivery of the Revenue Obligations is expected to occur on or about March _, 2012. The Revenue Obligations will be delivered through the facilities of DTC, New York, New York The successful bidder shall pay for the Revenue Obligations on the date of delivery in Los Angeles, California in immediately available federal funds. Any expenses of providing federal funds shall be borne by the purchaser. Payment on the delivery date shall be made in an amount equal to the price bid for the Revenue Obligations less the amount of the bid security deposit. Right to Reject Bids,Waive Irregularities The District reserves the right to reject any and all bids, and to the extent permitted by law, to waive any irregularity or informality in any bid. CUSIP Numbers It is anticipated that CUSIP numbers will be printed on the Revenue Obligations, but the District will assume no obligation for the assignment or printing of such numbers on the Revenue Obligations or for the correctness of such numbers, and neither the failure to print such numbers on any Revenue Obligation nor any error with respect thereto shall constitute cause for a failure or refusal by the purchasers thereof to accept delivery of and make payment for the Revenue Obligations. The cost for the assignment of CUSIP numbers to the Revenue Obligations will be the responsibility of the successful bidder. 55s16161; 8 California Debt and Investment Advisory Commission The successful bidder will be required to pay all fees due to the California Debt and Investment Advisory Commission ("CDIAC") under California law. CDIAC will invoice the successful bidder after the delivery of the Revenue Obligations. Legal Opinions The District will furnish to the successful bidder at the closing of the Revenue Obligations the legal opinion of Special Counsel to the effect that, in the opinion of Special Counsel, based upon all analysis of existing laws,regulations, rulings and court decisions, and assuming, among other matters,the accuracy of certain representations and compliance with certain covenants, the interest component of each Installment Payment and the allocable portion thereof distributable in respect of each Revenue Obligation is excluded from gross income for federal income tax purposes under section 103 of the Internal Revenue Code of 1986 and is not a specific preference item for purposes of the federal alternative minimum tax and is exempt from State of California personal income taxes. Special Counsel will express no opinion regarding any other lax consequences related to the ownership or disposition of;or the accrual or receipt of interest on,the Revenue Obligations. Change in Tax Exempt Status At any time before the Revenue Obligations are tendered for delivery, the successful bidder may disaffirm and withdraw its proposal if the interest on municipal securities of the same type and character as that evidenced by the Revenue Obligations (as determined by Special Counsel) shall be declared to be includable in gross income under federal income tax Taws, either by a ruling of the Internal Revenue Service or by a final decision of any federal court, or shall be declared taxable by the terms of any federal income tax law enacted subsequent to the date of this Official Notice Inviting Bids. Closing Documents The District will furnish to the successful bidder at the time of delivery of the Revenue Obligations: (1)a certificate certifying (i) that as of and at the time of delivery of the Revenue Obligations,there is no action, suit, proceeding or investigation, pending or, to the best knowledge of the District, threatened against or affecting the District, (A) which affects or seeks to prohibit, restrain or enjoin the execution and delivery of the Revenue Obligations or the Trust Agreement, (13) in any way contesting the validity of the Revenue Obligations, the Installation Purchase Agreement or the Trust Agreement or the powers of the District to enter into or perform its obligations under such documents to which it is a party or the existence of the District, or (C)wherein an unfavorable decision, ruling or finding would materially and adversely affect the District, or the validity or enforceability of the Revenue Obligations, the Installation Purchase Agreement or the Trust Agreement or the ability of the District to perform its obligations under such documents to which it is a party, in)that the Preliminary Official Statement did not on the date of sale of the Revenue Obligations and the Official Statement does not on the date of delivery contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements contained therein, in the light of the circumstances under which they were made, not misleading, and (2) a receipt of the District showing that the purchase price of the Revenue Obligations has been received by the District. Continuing Disclosure To assist the successful bidder in complying with the Rule, the District will undertake, pursuant to the Continuing Disclosure Agreement, to provide certain annual financial information, and notices of 51s16161a 9 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. Additional Information Electronic copies of the Trust Agreement, the Installment Purchase Agreement, the Master Agreement, this Official Notice Inviting Bids, the Official Bid Form, and the Preliminary Official Statement will be furnished to any potential bidder upon request made to the District's Financial Advisor at: Public Resources Advisory Group, 11500 West Olympic Boulevard, Suite 502, Los Angeles, CA 90064,310-477-8487, via e-mail at lchoi(i,pragla.com. Right to Modify or Amend The District reserves the right to modify or amend this Official Notice Inviting Bids, including but not limited to the right to adjust and change the principal amount of the Revenue Obligations being offered; provided, however, that such notifications or amendments shall be made not later than February [29], 2012. by 4:00 p.m., New York Time and communicated through Thomson Municipal News (available at http:/hvww.tm3.aom) and by facsimile transmission to any qualified bidder timely requesting such notice. Bidders are required to bid for the Revenue Obligations as so modified. Cancellation or Postponement The District reserves the right to cancel or postpone, from time to time, the date established for the receipt of bids for any reason at any time. Any such postponement will be announced by Thomson Municipal News. If fury date fixed for the receipt of bids and the sale of the Revenue Obligations is postponed, any alternative sale date will be announced via Thomson Municipal News at least 24 hours prior to such alternative sale date and will be provided by facsimile transmission to any qualified bidder timely requesting such notice. On any such alternative sale date, any bidder may submit a scaled bid for the purchase of the Revenue Obligations in conformity in all respects with the provisions of this Official Notice Inviting Bids except For the date of sale and except for the changes announced by Thomson Municipal News at the time the sale date and time are announced. Dated: February ,2012 55s16161; 10 EXHIBIT A FORM OF CERTIFICATE, OF INITIAL. PURCHASER March ,2012 Orange County Sanitation District Fountain Valley, California Fulbright R.Jam orski L.L.P. Los Angeles,California Ladies and Gentlemen: We have served as the Underwriter in connection with the execution and delivery oil behalf of the Orange County Sanitation District(the "District") of $ Orange County Sanitation District Wastewater Refunding Revenue Obligations, Series 2012A(the"Revenue Obligations'). We hereby certify that: 0) March_, 2012 was the first day on which there was a binding contract in writing for the sale or exchange of the Revenue Obligations by the District to the Underwriter, and on that day(the "Sale Date"), the Underwriter undertook pursuant to such contract to make a bona tide public offering of all of the Revenue Obligations. On the Sale Date all of each maturity of the Revenue Obligations was offered in a hona fide initial offering to the general public at the initial offering price or initial offering yield (the"Initial Offering Price") shown, for such maturity on the inside cover page of the Official Statement dated March , 2012 relating to such offering (the "Official Statement"). The Initial Offering Price for each maturity represented: (if the Underwriter's reasonable determination of a fair market value on the Sale Date of that maturity of the Revenue Obligations; and(it)the price at which the Underwriter reasonably expected to sell all the Revenue Obligations of that maturity to the general public; (ii) based upon our records and other information available to its that we believe to be correct, the first price at which a substantial portion(but in no event less than ten percent) of each maturity of the Revenue Obligations[, (except for the Revenue Obligations maturing in (the"Unsold Maturity"t] was sold by the Underwriter(or by other excluded persons) to the general public was the Initial Offering Price in respect of that maturity as described above. [For [the] [each] Unsold Maturity, on the Sale Date we reasonably expected that a substantial portion (at least ten percent) of that Unsold Maturity would be sold at the initial offering price or yield in respect of that maturity]; (in) at the time that the Underwriter agreed to purchase the Revenue Obligations, based upon then prevailing market conditions,the Underwriter had no reason to believe that the first sale of any of the Re%cure Obligations to a member of the general public would be at an initial offering price greater than or an initial offering yield less than the fair market value thereof, ssxroiaa; (iv) taking into account the aggregate amount of each maturity, and Heating the Initial Offering Price as the issue price of each Revenue Obligation of that maturity, the aggregate issue price of the Revenue Obligations is $ ; and (v) we provided the yield proof attached hereto as Exhibit A to Special Counsel; we make no legal representations regarding its sufficiency. For purposes of this Certificate, the term "excluded person'- raters to: the Underwriter; any affiliate of the Underwriter; any fund or other person that the Underwriter believed would purchase such Revenue Obligations with the intention of immediate resale; or any bond house, broker or similar person or organization acting in the capacity of an underwriter or wholesaler. Further, for purposes of this Certificate, the tern `general public" does not include bond houses, brokers, or similar persons or organizations acting in the capacity of underwriters or wholesalers. The undersigned understands that the statements made herein will be relied upon by the District in its efforts to comply with the conditions imposed by the Internal Revenue Code of 1986 (the"Code"), and will be relied upon by Special Counsel in rendering its legal opinion, concerning the exclusion from gross income for federal income tax purposes of interest with respect to the Revenue Obligations. [INITIAL PURCHASER], as Underwriter By: Title: sssiaiaaa 2 Exhibit A Yield Proof (See attached) 5IS1616, 3 OFFICIAL BID FORM S ORANGE COUNTY SANITATION DISTRICT WASTEWATER REFUNDING REVENUE OBLIGATIONS SERIES 2012A March ,2012 Orange County Sanitation District 10844 Ellis Avenue Fountain Valley, CA 92708-7018 Attn: Lorenzo Tyner Ladies and Gentlemen: We hereby offer to purchase all of the $ * aggregate principal amount of the Orange Comity Sanitation District (the "District") Wastewater Refunding Revenue Obligations, Series 2012A (the "Revenue Obligations"). more particularly described in the Official Notice Inviting Bids, dated February , 2012 (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 [108]% or more than [115]% of the aggregate principal amount of the Revenue Obligations). This offer is for Revenue Obligations evidencing interest at the rates and in the form of serial maturities or tern maturities with mandatory sinking account prepayments as set forth in the table on the following page. The bid is subject to acceptance not later than two hours after the expiration of the time established for the final receipt of bids. Our calculation of the true interest cost, computed in accordance with the instructions in the Official Notice Inviting Bids, and which is considered to be informative only and not a part of the bid, is (PLEASE CHECK ONE OF THE FOLLOWING TWO PARAGRAPHS) [ ] A surety bond has been provided to the District in the amount of $ issued by an insurance company rated in one of the top two rating categories by Moody's Investors Service, Fitch Ratings or Standard & Poor's Ratings Services, without regard to any modification of the rating, and licensed to issue such a bond in the State of California, naming the District as the beneficiary and indentifying our bidding syndicate whose deposit is guaranteed by the surety bond. [ ] With this bid we are providing the District a wire transfer in immediately available federal funds in the amount of $ to an account specified by the District or its representative, in accordance with the Official Notice Inviting Bids. We have noted that payment of the purchase price is to be made in immediately available Federal Funds at the time of delivery of the Revenue Obligations. If we are the successful bidder, we will (1) within 30 minutes after being notified of the verbal award of the Revenue Obligations, advise the District of the initial public offering prices of the Revenue Obligations; and (2) prior to delivery of the Revenue Preliminary,subject to change. 55bi61613 Obligations furnish a certificate, acceptable to Special Counsel, Fulbright& Jaworski L.L.P., as to the "issue price"of the Revenue Obligations in the form specified in the Official Notice Inviting Bids. Sinking Principal Interest Serial Account Maturity Amount' Rate Mount V Prepayment (Check one column) S We represent that we have full and complete authority to submit this bid on behalf of our bidding syndicate and the undersigned will serve as the lead manager for the group if the Revenue Obligations are awarded pursuant to this bid. We certify(or declare)under penalty of perjury under the laws of the State of California that this proposal is genuine, and not a sham or collusive, nor made in the interest of or on behalf of any person not herein named, and that the bidder has not directly or indirectly induced or solicited any other bidder to put in a sham bid or any other person, firm or corporation to retain from bidding, and that the bidder has not in any manner sought by collusion to secure for himself an advantage over any other bidder. Respectfully Submitted, Account Manager: By: Address: City: State: Telephone: Following(or attached)is a list of the members of our account on whose behalf this bid is made. " Preliminary,subject to change. 558161613 2 DRAFT OF 01/18/12 NOTICE OF INTENTION TO SELL Orange County Sanitation District Wastewater Refunding Revenue Obligations Series 2012A NOTICE IS HEREBY GIVEN that the Orange County Sanitation District (the "District") intends to receive electronic bids until 11:00 a.m., New York time, on March _, 2012, through the use of an electronic bidding service offered by Ipreo LLC; at ncrr 1" icI onu dea ,ow and the Parity bid delivery service, for the purchase of all of the Orange County Sanitation District Wastewater Refunding Revenue Obligations, Series 2012A (the "Revenue Obligations"), dated as of the date of initial delivery, and maturing on such dates as described in the related Official Notice Inviting Bids (the "Notice"). No bids will be accepted by facsimile. Bids for less than all of the Revenue Obligations will not be accepted. The District reserves the right to postpone the date established for the receipt of bids as more fully described under the paragraph"Cancellation or Postponement" in the Notice. NOTICE IS HEREBY FURTHER GIVEN that electronic copies of the Notice and the Preliminary Official Statement issued in connection with the sale of the Revenue Obligations may be obtained from the District's financial advisor, Public Resources Advisory Group, 11500 West Olympic Boulevard, Suite 502, Los Angeles, California 90064, 310-477-8487, via e-maih lchot(c(pragla.com. Orange County Sanitation District Dated:_February ,2012 Preliminary,subject to change. 55bi61682 ADMINISTRATION COMMITTEE Meeting Date To W.of Dir. 02/08/12 02/22/12 AGENDA REPORT umber item Number Item Nu Orange County Sanitation District FROM: James D. Ruth, General Manager Originator: Lorenzo Tyner, Director of Finance & Administrative Services GENERAL MANAGER'S RECOMMENDATION Approve the budget assumptions to be used for the preparation of the FY 2012-13 and FY 2013-14two-year budget. SUMMARY For the budget update process, the Administration Committee establishes the Budget Assumptions and approves the Budget Calendar. Staff will make a brief presentation at the Committee meeting. PRIOR COMMITTEE/BOARD ACTIONS None. ADDITIONAL INFORMATION Currently, there are no proposed changes to the Sanitation District Fiscal Policy. The Fiscal Policy is published in the FY 2010-11 and 2011-12 Budget document (Section 3, Pages 1-8), and is available on the Sanitation District's website. ATTACHMENTS 1. Preliminary Budget Assumptions (Page 2-6) 2. Budget Update Calendar (Pages 7-10) JR:LT:MW Page 1 FY 2012-13 & 2013-14 Preliminary Budget Assumptions Economic Assumptions ( Inflation for Orange County in FY 2012-13 is projected to be 2.9 percent based on the 2012 projected percentage change in consumer price index obtained from the December 2011 Economic and Business Review report prepared by Chapman University. A 2.9 percent inflation factor will also be used for 2013-14. Revenue Assumptions ( Year 5 of the five-year Proposed Sewer Service Fee Rate Schedule has been ratified by the Board. ( For FY 2012-13 the Sanitation District-wide rate for a single-family residence (SFR) will increase 10.1% to $294.00. ( This rate increase will not exceed the maximum amount possible for year five of the five-year schedule that was included in the last public notification. Note that each $1 increase in rates generates approximately$900,000 in annual revenue. ( Year 1 of a new five-year Proposed Sewer Service Fee Rate Schedule will be ratified by the Board. ( For FY 2013-14 the Sanitation District-wide rate for a single-family residence (SFR) is currently projected to increase 7.0% to $314.58. ( A Proposition 218 rate increase notification will be required to be mailed to all Revenue Areas except 14 regarding the new proposed rate schedule. ( The capital facilities capacity charge (CFCC)fee captures only those infrastructure costs that relate to additional capacity. Other infrastructure costs such as improved treatment, rehabilitation, refurbishment, and replacement, will be supported through userfees. Given the new Facilities Master Plan adopted in December 2009, a new rate study was completed in April 2010 to ensure that the CFCC fee methodology remains equitable and to confirm that an appropriate share of system costs would be recovered from new development. Revenues will be budgeted to reflect a decline in Equivalent Dwelling Unit (EDU) connections that have averaged 4,000 EDU's over the past ten years. ( Permit user rates for flow, Biochemical Oxygen Demand (BOD) and Total Suspended Solids (TSS)will follow the most recent Rate Study. ( Annexation fees capture both the net current assets and the equivalent property tax allocations totaling $4,235 per acre. ( Annexable property in the Sanitation District's service area sphere is minimal; consequently, no FY 2012-13 or FY 2013-14 income from annexation fees is anticipated. ( Property tax revenues are proposed to remain unchanged from FY 2011-12 in FY 2012-13 and FY 2013-14. Page 2 FY 2012-13 & 2013-14 Preliminary Budget Assumptions A 2% annual increase in Assessed Value is authorized by the state constitution and is included in the proposal noted above. An offsetting decrease is incorporated, however, due to anticipated reductions in Assessed Value to reflect recent market trends. ( Earnings on the investment of the Sanitation District's operating cash and reserves will be budgeted at 1.0% of the average cash and investment balance projected for each fiscal year. Staff has consulted with the Sanitation District's money manager PIMCO to get estimates for the next year's rate of return on investments. ( A $120 million Certificates of Participation (COP) debt issuance is scheduled for FY 2012-13 in order to assist in the funding of the $170 million and $213 million CIP outlay scheduled for FY 2012-13 and FY 2013-14, respectively. ( No additional debt issuance is scheduled for FY 2013-14. Operating Assumptions ( During FY 2012-13 dry weather urban runoff up to 4 mgd will continue to be treated at no charge. Above this threshold, there is a charge of$1,440.42 per mgd up to a maximum of 10 mgd permitted. ( In FY 2013-14 when the new rate structure is in place, charges for dry weather urban runoff will be established at a level sufficient to recover the full cost of treatment. ( Secondary treatment facilities will be operated and maintained in accordance with the Levels of Service and the Operational Plan —January 2009 Update. ( Interim short-term disinfection facilities will continue to be operated and maintained with decreased costs at P2 due to new trickling filters coming on-line. ( Operating expenses are expected to increase as a result of increases in personnel salaries, electricity, natural gas, chemicals, and biosolids management. Additional power and chemical costs are also anticipated due to the new headworks and trickling filters at P2 coming on-line. ( Average daily flow for FY 2012-13 and FY 2013-14 is projected to be 206 mgd and 208 mgd respectively. This projection reflects an expected increase of 1 percent per year based on increased economic activity and the potential for moderate rainfall. The FY 2012-13 estimate is 4 mgd above the actual for the first 5 months of the current year. The final actual flow for FY 2010-11 was 206 mgd. ( Staffing level is expected to remain flat. ( Vacant positions as of 12/31/11 will be projected and expensed at 50% of step 1 for the rest of FY 2011-12. ( A 3% vacancy factor on authorized positions will be budgeted for FY 2012-13 and FY 2013-14 (a reduction from the actual 7.8% vacancy factor in FY 2010-11). This vacancy factor accounts for time spent for recruitment and turnover. Page 3 FY 2012-13 & 2013-14 Preliminary Budget Assumptions ( The MOU for the Supervisor and Professional (SPMT)group expires June 30, 2013, A salary adjustment based on the current MOU for SPMT includes a range adjustment of 2% as of the first pay period beginning in July of FY 2012-13. Additionally, employees within the SPMT bargaining unit not already at the top step will be budgeted to receive a 5.0% step/range increase in FY 2012-13. ( The MOUs for both OCEA and Local 501 will expire June 30, 2014, Salary adjustments based on the current MOUs for OCEA and Local 501 include range adjustments of 0.5% and 0% respectively as of the first pay period beginning in July of FY 2012-13 and 2% and 2.5% respectively as of the first pay period beginning in July of FY 2013-14. Additionally, employees within the OCEA and Local 501 bargaining units not already at the top step will be budgeted to receive 5.0% step/range increases in FY 2012-13 and FY 2013-14. ( Pending the completion of the negotitation process, no salary adjustments will be included in the budget (neither for COLA nor for step increases)for periods beyond expiration of current MOUs. ( For FY 2012-13 retirement costs for employees enrolled in OCERS Plans G and H have been assessed at a rate of 30.97% of the employee's base salary and for employees enrolled in OCERS Plan B at a rate of 26.69% of the employee's base salary, up from 29.18% and 24.89% respectively in FY 2011-12. These percentages will also be assumed at this time for FY 2013-14. Interns are not enrolled in OCERS so their retirement benefits are calculated at 7.65% (FICA rate). ( Medical and dental insurances will be budgeted to increase 11% and 8% each year respectively based on preliminary renewal information. The cost for vision care insurance is expected to be unchanged. A moderate but unknown increase for life, and disability insurances will be included for both FY 2012-13 and FY 2013-14. ( The proposed operating budget will continue to reflect an emphasis on safety, technical, and management training. The proposed FY 2012-13 and FY 2013-14 budgets will include a budget for training based on recent actual costs rather than on a percentage of regular salaries and wages. ( An amount equal to half of one percent of the Operating materials and supplies budget will be a contingency for prior year re-appropriations. Since the current year's budget lapses on June 30, a contingency is needed in the succeeding budget year for goods or services ordered at the end of one budget year but not delivered until the following year. ( An amount equal to half of one percent of the Operating materials and supplies budget will be the General Manager's contingency budget. These funds will be allocated to appropriate line items during the year after requests and justifications for unanticipated needs are approved by the General Manager. ( Resource needs for strategic initiatives will be included in each fiscal year's budget. Capital Improvement Program Assumptions ( The FY 2012-13 and 2013-14 cash flow budgets are the amounts based on the most Page 4 FY 2012-13 & 2013-14 Preliminary Budget Assumptions current Validated Capital Improvement Program (CIP). ( The baseline CIP cash flow for FY 2012-13 is $170 million and for FY 2013-14 is $213 million. ( The budget will reflect any new recommendations of the CIP Ad Hoc Committee or the General Manager that are approved by the Board. ( Continual evaluation of the CIP by the Asset Management Team may result in deferral or reduction of some projects and a resultant increase in O&M repair costs for materials and services, if the net cash flow impact is a decrease. ( The FY 2012-13 and FY 2013-14 CIP budgets will increase only for critical projects not previously identified in the Strategic Plan Update. ( At the midpoint of FY 2011-12, $37.3 million, or 28.9% of the $129.2 million CIP budget, was expended. The total projected annual outlay is expected to approximate budget at year-end. ( For FY 2010-11, $135.9 million of the $175.7 million CIP projected cash flow, approximately 75.6%, was expended. Debt Financing ( The Sanitation District will issue new debt in the form of Certificates of Participation as needed to fund the CIP and to maintain reserves. ( A$120 million COP debt issuance is scheduled for FY 2012-13 in order to assist in the funding of the $170 million and $213 million CIP outlay scheduled for FY 2012-13 and FY 2013-14, respectively. ( No additional debt issuance is scheduled for FY 2013-14. ( Debt will only be used for CIP, not for operating expenses. ( Capital financing plans which include fewer future borrowings and higher user fees after FY 2013-14 will be considered. ( Borrowing is proposed only for facilities which do not add capacity and that are funded by all users for replacement, rehabilitation, and improved treatment. Reserve Assumptions ( The current reserve policy was reviewed by Public Resources Advisory Group and the Board during FY 2003-04. No changes were proposed and direction was given to continue to maintain reserve levels at a level that is adequate to offset exposure to variable rate COPS due to interest rate increases. ( The current reserve policy is summarized as follows: ► A cash flow reserve will be established to fund operations, maintenance and certificates of participation expenses for the first half of the fiscal year, prior to receipt of the first installment of the property tax allocation and sewer service Page 5 FY 2012-13 & 2013-14 Preliminary Budget Assumptions user fees which are collected as a separate line item on the property tax bill. The level of this reserve will be established as the sum of an amount equal to six months operations and maintenance expenses and the total of the annual debt (COP) service payments due in August each year. ► An operating contingency reserve will be established to provide for non- recurring expenditures that were not anticipated when the annual budget and sewer service fees were considered and adopted. The level of this reserve will be established at an amount equal to ten percent of the annual operating budget. ► A capital improvement reserve will be maintained to fund annual increments of the capital improvement program. The long-term target is for one half of the capital improvement program to be funded from borrowing and for one half to be funded from current revenues and reserves. With this program in mind, the target level of this reserve has been established at one-half of the average annual capital improvement program through the year 2020. ► Catastrophic loss, or self-insurance, reserves will be maintained for property damage including fire, flood and earthquake, for general liability and for workers' compensation. These reserves are intended to work with purchased insurance policies, FEMA disaster reimbursements and State disaster reimbursements. The potential infrastructure loss from a major earthquake, of which the Sanitation District currently has no outside insurance coverage, has been estimated to be as high as $1.3 billion. The level of this reserve has been set at $57 million should such a catastrophic event occur. This reserve amount will assist the Sanitation District with any short-term funding needs until Federal and State assistance becomes available. ► Accumulated capital funds will be set aside for certain specific, short-term capital improvements as the need and availability arise. ► A capital replacement/renewal reserve policy has been established to provide thirty percent of the funding to replace or refurbish the current collection, treatment and disposal facilities at the end of their useful economic lives. Based on the FY 2011-12 Asset Management Plan, the current replacement value of these facilities is estimated to be $3.14 billion for the collection facilities and $3.12 billion for the treatment and disposal facilities. The initial reserve level has been established at$50 million, which will be augmented by interest earnings and a small portion of the annual sewer user fee, in order to meet projected needs through the year 2030. ► Provisions of the various certificate of participation (COP) issues require debt service reserves to be under the control of the Trustee for that issue. These reserve funds are not available for the general needs of the Sanitation District and must be maintained at specified levels. The current level of required COP service reserves is projected to be $242.9 million. ► Accumulated funds exceeding the levels specified by Sanitation District policy will be maintained in a rate stabilization fund. These funds will be applied to Page 6 FY 2012-13 & 2013-14 Preliminary Budget Assumptions future years' needs in order to maintain rates or to moderate annual fluctuations. There is no established target for this reserve. Page 7 FY 2012-13 & 2013-14 Budget Calendar Tasks Responsibility EvenUDue Date PHASE I-BUDGET PREPARATION CIP —Call for Projects Issued Engineering Planning 10/25/11 CIP— Project Description/Justification Submitted to Project Requester 11/17/11 Engineering Planning (via SharePoint only) CIP —Training for FY 2012-13 CIP Business Case Jim Burror As Needed Preparation CIP — Project Business Case Preparation Project Requester 12/01/11 — 12/15/11 CIP — Research Projects: Request Sent to Research Engineering Planning 12/05/11 Technical Advisory Group (TAG) CIP— Business Cases, Life Cycle Costs Submitted to Project Requester 12/15/11 Engineering Planning Preliminary Budget Assumptions Identified Financial Planning 01/06/12 Preliminary Budget Assumptions Presented to EMT Financial Planning 01/09/12 Draft Budget Calendar Presented to EMT Financial Planning 01/09/12 Update to Strategic Initiatives Finalized MT & EMT 01/16/12 Preparation for Budget Kickoff/Training Session: Financial Planning 01/19/12 ( Salary and benefits downloaded to Excel worksheets ( Develop line item worksheets with mid-year actual expense ( Prepare/update budget instruction manual CIP—CIP Database Opened for Input Financial Planning 01/23/12 CIP- Budget Preparation Training (CIP Database) Financial Planning As Needed Budget Kickoff/ Training Session: Financial Planning 01/24/12 ( Distribute budget instruction manual update ( Conduct budget training session ( Review submission deadlines Operating Divisional Budgets: New Position/Additional Divisional Budget 02/06/12 Employee Decision Packages Due to Financial Planning Coordinators (Edith Smith, Ext. 7568) Operating Divisional Budgets: Equity Adjustment & Divisional Budget 02/06/12 Position Reclassification Decision Packages Due to Coordinators Human Resources (Richard Spencer, Ext. 7164) Operating Budget: Training Request Forms Due to Divisional Budget 02/06/12 Human Resources (Richard Spencer, Ext. 7164) Coordinators Operating Budget: Promotional Items Request Forms Divisional Budget 02/06/12 Due to Public Affairs (Michael Gold, Ext. 7529) Coordinators Page 8 FY 2012-13 & 2013-14 Budget Calendar Tasks Responsibility EvenVDue Date Capital Equipment Budget: Vehicle Capital Equipment Divisional Budget 02/06/12 Decision Packages Due to Fleet Services (Chuck Coordinators Forman, Ext. 7647) Capital Equipment Budget: Computer Capital Divisional Budget 02/06/12 Equipment Decision Packages Due to Information Coordinators Technology (Rich Castillon, Ext. 7283) Budget Assumptions Presented to Admin Committee Budget Team 02/08/12 Mid-Year Financial Report to Administration Committee Admin Services 02/08/12 Department Division Budget Packages Due to Financial Planning: Divisional Budget 02/21/12 ( Projection of current year actual operating costs Coordinators ( Proposed operating costs for 2012-13 & 2013-14 ( Operating Budget Expense Detail ( Preliminary Contractual Material & Services Form ( Capital equipment decision Packages (other than computer and vehicle decision packages which were due on 02/06/12) ( New program decision packages (Financial Planning will collate and bind these items— along with salary information -into the Preliminary Division Budget Document for use during the budget review process.) Critical Goals, Strategic Planning and Five Year Staffing EMT 02/22/12 Plan — Steering Committee Meeting Mid-Year Financial Report to Board Finance Department 02/22/12 Complete the Compilation of the Preliminary Division Financial Planning 02/24/12 Budget Document CIP— New Project Numbers Assigned Planning Division 02/24/12 CIP — Project Request with Project Information Entered CIP Budget 02/28/12 in CIP Database Completed Coordinators CIP — Completed CIP Budget Delivered to Finance CIP Budget 03/02/12 Coordinators Departmental Narrative Updates for Budget Executive EMT 04/12/12 Summary Due to Financial Planning (Cristina Stanford, Ext. 7565) PHASE II -BUDGET REVIEW CIP— New Project Presentations to Clearinghouse CIP Budget 01/12/12 (Initial Review) Coordinators Page 9 FY 2012-13 & 2013-14 Budget Calendar TASKS Responsibility Event/Due Date CIP— New Project Recommendations to EMT Engineering Planning 01/26/12 Developed —Special CIP Clearinghouse CIP— New Project Recommendations Sent to EMT— Projects Clearinghouse 02/02/12 Special CIP Clearinghouse CIP — Present New Projects to EMT CIP Budget 02/16/12 Coordinators Divisional Budgets - Distribution of Preliminary Line Item Financial Planning 02/29/12 Requested Budgets to Department Heads and Managers along with Analysis/Questions for Review CIP— EMT New Project"Go/No Go" Decisions EMT 03/01/12 Operating Budget- Budget Review Meetings with Financial Planning & 03/05/12— Finance and Department Representatives Department 03/08/12 Representatives CIP - Committee Review Operations Committee 03/07/12 Capital Equipment Budget— Requests Reviewed Projects Clearinghouse 03/08/12 Operating Budget— Recommendations to General Financial Planning 03/13/12 Manager Final Operating Budget—General Manager Review of Financial Planning, GM, 03/15/12— Budget Recommendations & Department Heads 03/20/12 Divisional Budgets— Performance Budget Documents Divisional Budget 03/16/12 Due to Financial Planning (Edith Smith), Coordinators ( Organization Charts ( Performance Results (2011-12) ( Performance Measures (2012-13 & 2013-14) CIP Schedules Through 2022 Completed Engineering 03/22/12 Divisional Budgets - Completion of Preliminary Budget Financial Planning 03/23/12 and Compilation into Departmental Budgets PHASE III -BUDGET PRESENTATION CIP- Final CIP Budget Document Preparation and Financial Planning 04/12/12 Incorporation into Final Budget Document Initial - Proposed Budget finalized Financial Planning 04/26/12 Initial - Proposed 2012-13 & 2013-14 Budget Presented Financial Planning Ops—05/02/12 to Committees Admin —05/09/12 General Manager's Budget Message Completed General Manager/ 05/02/12 Financial Planning Approval of General Manager's Budget Message General Manager 05/07/12 Final - Proposed Budget to Printer Financial Planning 05/09/12 Page 10 FY 2012-13 & 2013-14 Budget Calendar TASKS Responsibility EventlDue Date PHASE IV-BUDGET DELIBERATIONS Final Draft- Proposed 2012-13 & 2013-14 Budget Financial Planning Ops—06/06/12 Presented to Committees Admin —06/13/12 Public Hearing & Board Adoption Board of Directors 06/27/12 PHASE V-DISTRIBUTION OF BUDGET Final line item budget and equipment budgets posted in Financial Planning 07/06/12 HAntglobal PHASE VI -BUDGET DEBRIEFING Budget Debriefing E-mail Message Financial Planning 07/13/12 ( Global changes that occurred in this year's budget. ( Changes since the Departments' original submittal. ( Changes that occurred as a result of Board action. ( Results of Budget Survey. ( Overview of Budget Monitoring with Oracle (JD Edwards) One World Xe Software and review of Budget Coordinator's Responsibility. ( Overview of CIP Budget Monitoring. ( Suggestions for Budget Process Improvements. Page 11 ORANGE COUNTY SANITATION DISTRICT FINANCING CORPORATION The members of the Orange County Sanitation District Board of Directors are each being compensated $212.50 for the Board Meeting, there is no additional compensation for the Financing Corporation Meeting. A regular meeting of the Board of Directors of the Orange County Sanitation District Financing Corporation was held on October 26, 2011 at 7:06 p.m., in the Administration Building. The roll was called and the Clerk of the Board reported a quorum present as follows: ACTIVE DIRECTORS ALTERNATE DIRECTORS X Larry Crandall, Chair Steve Nagel X Troy Edgar, Vice Chair Ken Stephens X John Anderson Jim Winder X Tom Beamish Rose Espinoza x Joe Carchio Matthew Harper X Bill Dalton Andrew Do X Jon Dumitru Denis Bilodeau X James M. Ferryman Bob Colon X Michael Levitt Gordon Shanks X Jeffrey Lalloway Steven Choi X Roy Moore Ron Garcia x Prakash Narain Doug Bailey X Joy Neugebauer At Krippner X Janet Nguyen Shawn Nelson x John Nielsen Jerry Amante X Sharon Quirk-Silva Pat McKinley X Brad Reese Robert Fauteux A Steven Rosansky Nancy Gardner X David Shawver Carol Warren X Harry Sidhu Gail Eastman X Fred Smith Steve Berry X Sal Tinajero David Benavides X Constance Underhill Joseph Aguirre X Mark Waldman Steven Hwangbo X I John Withers Douglas Reinhart STAFF MEMBERS PRESENT: Jim Ruth, General Manager; Bob Ghirelli, Assistant General Manager; Jim Herberg, Assistant General Manager; Nick Arhontes, Director of Facilities Support Services; Ed Torres, Director of Operations and Maintenance; Lorenzo Tyner, Director of Finance & Administrative Services; Jeff Reed, Director of Page t of 2 Human Resources; Maria Ayala, Clerk of the Board; Lilia Kovac, Associate Clerk of the Board; Cindi Ambrose; Chris Cervellone; Norbert Gaia; Ingrid Hellebrand; Rob Thompson; Ron Wade; and Paula Zeller. OTHERS PRESENT: Brad Hogin, General Counsel; James Clark; Debbie Schmidt; and Jim Stahl. PUBLIC COMMENTS: None. APPROVAL OF MINUTES: 15, MOVED, SECONDED, AND DULY CARRIED: the Board of Directors approved the minutes for the meeting held on August 24, 2011. ACTION ITEMS: 16. A. MOVED, SECONDED, AND DULY CARRIED: Adopt Resolution No. FC- 16, 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 Anticipation Notes, Series 2011B, Authorizing the Execution and Delivery of Such Notes Evidencing Principal in an Aggregate Amount of not to Exceed $155,000,000 and Authorizing the Execution of Other Necessary Documents and Related Actions; and, (See Agenda Item No. 12) B. Approve the documents supporting and authorizing the Revenue Refunding Certificate Anticipation Notes, Series 2011B in an amount not to exceed $155,000,000. ADJOURNMENT: The Chair declared the meeting of the Orange County Sanitation District Financing Corporation adjourned at 7:08 p.m. Maria E. Ayala, Secretary Orange County Sanitation District Financing Corporation Page 2 of 2