ENLOE MEDICAL CENTER. City Council ofthe City ofc*p- Mike Wiltermood, CIEOL--0U September 18,2015

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1 /10 ENLOE MEDICAL CENTER Memorandum To: From: Date: City Council ofthe City ofc*p- Mike Wiltermood, CIEOL--0U September 18,2015 Enloe Medical Center is evaluating refinancing all or a portion o f bonds issued in 2008 for the benefit of the Medical Center. By refinancing the 2008 bonds. the Medical Center anticipates reducing its interest expense by approximately $ 10 million over the life of the bonds, depending on market conditions, The Medical Center is requesting the City's help in taking advantage ofcurrently favorable market conditions and achieving these significant savings. The proceeds of the 2008 bonds were used to finance capital projects for the Medical Center and located within the City's boundaries. including [the construction of the multi-level patient tower at Enloe Medical Center - Esplanade campus, specifically the Magnolia patient tower, a four tier parking structure, together with improvements to the emergency department. We expect to refund the 2008 bonds with proceeds of tax-exempt bonds to be issued by California Statewide Communities Development Authority ("CSCDA"), a joint powers authority. The City o f Chico is a member of CSCDA. We have been advised by bond counsel that in order for the 2015 bonds to qualify as taxexempt bonds, tax laws require that a governmental unit having jurisdiction over the area in which the financed or refinanced facilities are located do two things in the following order, First, hold a public hearing after providing at least 14 days prior notice published in a newspaper of general circulation within its jurisdiction. Second, approve the refinancing by adopting a resolution. Because the facilities financed with proceeds of the 2008 bonds are located within the City, the City is a "governmental unit" that can hold the public hearing and adopt the necessary resolution. Bond counsel. Orrick, Herrington & Sutcliffe LLP ("Bond Counsel"), has coordinated with Chico Enterprise-Record for the publication of the notice of the public hearing. Bond Counsel has also prepared the draft of the resolution proposed for approval. which the City Attorney has reviewed. Although the City's approval is required before CSCDA can issue the 2015 bonds as taxexempt bonds, the 2015 bonds will not be the City's indebtedness but CSCDA's. The City will have no liability with respect to the 2015 bonds. which will be payable solely from payments made by the Medical Center. The City will not be asked to approve or execute any documents relating to the refinancing.in addition, the disclosure materials that will be used to market the 2015 bonds will not have any information regarding the City and will not include the City's name (other than in connection with the location of the facilities). The 2015 bonds will be insured under the State's Cal-Mortgage insurance program. Once the City has conducted the public hearing and adopted the resolution, it is expected that CSCDA will approve the issuance of the 2015 bonds on October 8, The financing team will then proceed with marketing the 2015 bonds. We expect that the 2015 Bonds will be issued and the proceeds received in late November Esplanade Chico, CA (530) Ourmission is to improve the quality of your life through patient-centered care..]re,17 3. /.

2 0 ORRICK, HERRINGTON & SUTCLIFFE Lip 400 CAPITOL MALL SUITE 3000 SACRAMENTO, CA ORRICK tel fax Bryan Victor (916) September 17, 2015 Via Deborah Presson City of Chico 411 Main Street Chico, CA Re: California Statewide Communities Development Authority Insured Refunding Revenue Bonds (Enloe Medical Center), Series 2015 Dear Ms. Presson: Pursuant to the request of Jon Penkower, Program Manager for Cali fornia Communities, I am sending you this letter in connection with the public hearing to be conducted, and resolution to be considered, by the City Council of the City of Chico (the "'City') for the proposed financing (the "Financing") of certain health care facilities for Enloe Medical Center (the "Borrower"). to be accomplished through the issuance of bonds by the California Statewide Communities Development Authority ("CSCDA"). Set forth below is a brief summary of the basis for CSCDA's authority to accomplish the proposed Financing. the limited nature of the liability imposed on, and the protections afforded to, the City, as well as the actions required to be undertaken by a member (i.e., the "Program Participant") of the CSCDA in order for such Financing to proceed. This Financing is structured so that neither the CSCDA nor the relevant Program Participant (e.g., the City) has pecuniary liability. Pursuant to the provisions of the Joint Powers Act, commencing with Section 6500 ofthe California Government Code (the 'Act"). a number of California cities, counties and special districts have entered into a joint exercise of powers agreement (the "Agreement' ) pursuant to which CSCDA was organized. The City is currently a Program Participant and has adopted the OHSUSA:

3 Deborah Presson September 17,2015 Page 2 required joining resolution" and a copy of the executed Agreement should be in your City Clerk's files. There are no dues or other membership requirements on the part of the City (other than to adopt the "joining resolution' and execute the Agreement). Currently, over 350 cities, counties, districts or agencies of some type are Program Participants of CSCDA. CSCDA is authorized by its Agreement to issue bonds, notes, other evidences of indebtedness or certificates of participation in leases or other agreements in order to promote economic development, including the provision and maintenance of multifamily housing or for the benefit of organizations described under Section 501(c)(3) of the Internal Revenue Code of However, under the terms of the Agreement, CSCDA may not approve the Financing unless the governing body o f the Program Participant in whose jurisdiction the project is located (or to be located) approves the project and the Financing. Furthermore, Section 147( f) of the Internal Revenue Code of 1986 requires that the proposed Financing be approved by a governmental unit having jurisdiction over the area in which the facility to be financed is located. The Financing will be treated as having been approved by a governmental unit if "the applicable elected representative' of such governmental unit approves such issue after a public hearing following reasonable public notice of such hearing. The foregoing will be deemed satisfied i f the governing body of the Program Participant (1) holds a public hearing (upon at least 14 days prior notice published in a newspaper of general circulation within its jurisdiction), and (2) adopts the TEFRA Resolution approving the financing to be undertaken through CSCDA. It is customary that Bond Counsel, together with CSCDA staff, draft the required resolution for the City Council to consider, assist with publication of the required notice of public hearing, and, upon your request, have a representative present at the public hearing to answer questions posed by the public or City Council relating to the Financing. Thereafter, pursuant to applicable state law, the bonds are issued as limited obligations of CSCDA, not of the City, payable solely out of the revenues and receipts derived from the loan made by CSCDA to the Borrower with the proceeds of the bonds. Specifically, Section 8 of the Agreement provides that "[t]he Bonds, together with the interest and premium, if any, thereon, shall not be deemed to constitute a debt of any Program Participant... or pledge of the faith and credit of the Program Participants...the Program Participants {e.g,,the City)... shall [not] be obligated to pay the principal of, premium. if any, or interest on the Bonds, or other costs incidental thereto...". The Agreement also expressly OHS USA

4 Deborah Presson September 17,2015 Page 3 provides that CSCDA is a public entity separate and apart from the Program Participants, and "[i]ts debts, liabilities and obligations do not constitute debts, liabilities or obligations of any party to [the] Agreement.' Accordingly, the Bonds proposed to be issued for the Financing will be indebtedness of CSCDA, and the City will not be asked to approve or execute any of the documents relating to the Financing. Moreover, the disclosure prepared for the Financing, used to market the Bonds, will not have any information regarding the City and will not include the City's name (other than possibly with respect to where the project is located). The documents will be made available for your review upon request. In order to further limit CSCDA's financial liability and that of its Program Participants, CSCDA requires that iii connection with the loan of bond proceeds to the Borrower, the Borrower must indemnify CSCDA and the applicable Program Participant (the City) from all losses, damages, claims, actions, liabilities, costs and expenses of any conceivable nature, kind or character relating to the Bonds and project. In this case, such indemnification will include the City. We call attention, however, to the fact that such obligation may be subject to bankruptcy, insolvency reorganization, arrangement and other laws relating to or affecting creditors' rights. to the application of equitable principles, to the exercise of judicial discretion in appropriate cases and to possible limitations on legal remedies. I hope that this letter assists you in understanding the role that the City will play in the issuance of revenue bonds through CSCDA for the Financing. Attached for your reference are drafts of (1) the TEFRA Resolution, (2) Notice of Public Hearing and (3) a suggested script to be read at the public hearing. If you have any further questions, please do not hesitate to contact me at (916) OHSUSA: [ 03

5 Deborah Presson September 17,2015 Page 4 We are prepared to arrange for the publication of the Notice of Public Hearing. Please let us know if you prefer to handle the publication yourselves. Very truly yours, /s/ Bryan Bryan Victor, Esq. CC: Kevin Woodward, Enloe Medical Center Joe Pollock, Merrill Lynch, Pierce, Fenner & Smith Incorporated Mayling Leong, Orrick Herrington & Sutcliffe LLP OHSUSA:

6 TEFRA RESOLUTION RESOLUTION OF THE CITY COUNCIL OF THE CITY OF CHICO APPROVING THE ISSUANCE OF THE CALIFORNIA STATEWIDE COMMUNITIES DEVELOPMENT AUTHORITY INSURED REFUNDING REVENUE BONDS (ENLOE MEDICAL CENTER), SERIES 2015 IN AN AGGREGATE PRINCIPAL AMOUNT NOT TO EXCEED $250,000,000 FOR THE PURPOSE OF REFINANCING THE ACQUISITION, CONSTRUCTION, IMPROVEMENT AND EQUIPPING OF THE HEALTH AND SUPPORT FACILITIES OF ENLOE MEDICAL CENTER AND CERTAIN OTHER MATTERS RELATING THERETO WHEREAS, Enloe Medical Center, a California nonprofit public benefit corporation (the '-Corporation'), has requested that the California Statewide Communities Development Authority (the "Authority") participate in the issuance of one or more series of revenue bonds in an aggregate principal amount not to exceed $250,000,000 (the "Bonds") to refinance the acquisition, construction, improvement and equipping of certain of the health and support facilities of Enloe Medical Center (the "Facilities") to be owned and operated by the Corporation (the "Project") and located within the City of Chico (the City"): and WHEREAS, pursuant to Section 147(f) of the Internal Revenue Code of 1986 (the "Code"). the issuance of the Bonds by the Authority must be approved by the City because the Facilities are located within the territorial limits of the City; and WHEREAS, the City Council of the City (the "City Council-) is the elected legislative body of the City and is one of the applicable elected representatives required to approve the issuance of the Bonds under Section 147(f) of the Code; and WHEREAS, the Authority has requested that the City Council approve the issuance of the Bonds by the Authority for the purposes of refinancing the Project in order to satisfy the public approval requirement of Section 147(f) of the Code and the requirements of Section 9 of the Amended and Restated Joint Exercise of Powers Agreement, dated as of June 1, 1988 (the "Agreement'-), among certain local agencies. including the City; WHEREAS, pursuant to Section 147(f) of the Code, the City Council has, following notice duly given, held a public hearing regarding the issuance o f the Bonds, and now desires to approve the issuance of the Bonds by the Authority; NOW, THEREFORE, BE IT RESOLVED, by the City Council of the City of Chico as follows: Section 1. The City Council hereby approves the issuance of the Bonds by the Authority for the purposes of refinancing the Project. It is the purpose and intent of the City Council that this resolution constitute approval of the issuance of the Bonds by the Authority and of the refinancing of the Project, for the purposes of (a) Section 147(f) of the Code by the OHSUSA:

7 applicable elected representative of the issuer of the Bonds and the governmental unit having jurisdiction over the area in which the Facilities are located, in accordance with said Section 147(f) and (b) Section 9 of the Agreement. Section 2. The officers of the City are hereby authorized and directed, jointly and severally, to do any and all things and to execute and deliver any and all documents which they deem necessary or advisable in order to carry out, give effect to and comply with the terms and intent of this resolution and the financing transaction approved hereby. Section 3. This resolution shall take effect immediately upon its adoption. of October, PASSED AND ADOPTED by the City Council of the City of Chico this 6th day AYES: NOES: ABSENT: [SEAL] Attest: BY: City Clerk 2 OHSUSA:

8 NOTICE OF PUBLIC HEARING Notice is hereby given that on October 6, 2015, a public hearing as required by Section 147(f) of the Internal Revenue Code (the "Code") will be held with respect to the proposed issuance by the California Statewide Communities Development Authority (the "Authority") of its revenue bonds in one or more series in an amount not to exceed $250,000,000 (the "Bonds"). The proceeds of the Bonds will be used to (1) refinance the acquisition, construction. improvement and equipping of the health and support facilities located generally at or around the following addresses: 1531 Esplanade, 251,265,277 and 560 Cohasset Road, 888 Lakeside Village Commons, 1390 E. Lassen Avenue, 340 W. East Avenue, 175 W. 5th Avenue and 130 W. 64 Avenue, each in Chico, CA (collectively, the "Project") and (2) pay certain expenses incurred in connection with the issuance of the Bonds. The facilities are owned and operated by Enloe Medical Center, a nonprofit public benefit corporation and an organization described in Section 501(c)(3) ofthe Code. The hearing will commence at 6:30 p.m. or as soon thereafter as the matter can be heard, and will be held in the [City Hall Council Chambers, 411 Main Street, Chico, California 95928]. Interested persons wishing to express their views on the issuance of the Bonds or on the nature and location of the facilities proposed to be refinanced may attend the public hearing or, prior to the time of the hearing, submit written comments. Additional information concerning the above matter may be obtained from and written comments should be addressed to [Deborah Presson City Clerk at 411 Main Street, Chico, California ] Dated: September 21,2015 OHSUSA: ]0.3