HILLTOP SECURITIES INC.

Transcription

1 NEW ISSUE BOOK-ENTRY ONLY RATINGS Standard & Poor s: AA (Insured) BBB+ (Underlying) (See RATINGS herein) In the opinion of Jones Hall, A Professional Law Corporation, San Francisco, California, Bond Counsel, subject, however to certain qualifications described herein, under existing law, the interest on the Bonds is excluded from gross income for federal income tax purposes and such interest is not an item of tax preference for purposes of the federal alternative minimum tax imposed on individuals and corporations, although for the purpose of computing the alternative minimum tax imposed on certain corporations, such interest is taken into account in determining certain income and earnings, and the Bonds are qualified tax-exempt obligations within the meaning of section 265(b)(3) of the Internal Revenue Code of 1986, as amended. In the further opinion of Bond Counsel, such interest is exempt from California personal income taxes. See TAX MATTERS. Dated: Date of Delivery $4,475,000 SUCCESSOR AGENCY TO THE AUBURN URBAN DEVELOPMENT AUTHORITY 2015 TAX ALLOCATION REFUNDING BONDS (AUBURN REDEVELOPMENT PROJECT) Due: June 1, as shown on the inside cover This cover page contains certain information for general reference only. It is not intended to be a summary of all factors relating to an investment in the Bonds. Investors are advised to read the entire Official Statement to obtain information essential to the making of an informed investment decision. For a discussion of some of the risks associated with a purchase of the Bonds, see RISK FACTORS herein. The Successor Agency to the Auburn Urban Development Authority (the Successor Agency ), is issuing its 2015 Tax Allocation Refunding Bonds (Auburn Redevelopment Project) (the Bonds ). Proceeds from the sale of the Bonds will used to refund certain prior obligations issued by the Auburn Urban Development Authority relating to the Auburn Redevelopment Project, purchase a reserve surety bond for the Bonds and to pay the costs of issuing the Bonds. Interest on the Bonds will be payable on December 1 and June 1 of each year, commencing June 1, 2016 (each, an Interest Payment Date ). The Bonds will be issued in fully registered form without coupons and will be registered in the name of Cede & Co., as nominee for The Depository Trust Company, New York, New York ( DTC ). DTC will act as securities depository for the Bonds. Purchases of beneficial interests in the Bonds will be made in book-entry form only in denominations of $5,000 or any integral multiple thereof. Purchasers of such beneficial interests will not receive physical certificates representing their interests in the Bonds. Payment of principal of, interest and premium, if any, on the Bonds will be made directly to DTC or its nominee, Cede & Co., so long as DTC or Cede & Co. is the registered owner of the Bonds. Disbursement of such payments to the DTC Participants (as defined herein) is the responsibility of DTC and disbursement of such payments to the Beneficial Owners (as defined herein) is the responsibility of the DTC Participants, as more fully described herein. See THE BONDS Book-Entry-Only System herein. The Bonds will be issued under an Indenture of Trust, dated as of October 1, 2015 (the Indenture ), between the Successor Agency and Wells Fargo Bank, N.A., as trustee (the Trustee ). The Bonds are special obligations of the Successor Agency and are payable solely from and secured by a pledge of Tax Revenues (as defined herein) and moneys on deposit in the Redevelopment Property Tax Trust Fund and the Redevelopment Obligation Retirement Fund, and by a pledge of amounts in certain funds and accounts established under the Indenture, as further discussed herein. The scheduled payment of principal of and interest on the Bonds when due will be guaranteed under a municipal bond insurance policy to be issued concurrently with the delivery of the Bonds by Build America Mutual Assurance Company ( Insurer ). See BOND INSURANCE herein. The Bonds are subject to optional and mandatory sinking fund redemption prior to maturity as described herein. See THE BONDS - Optional Redemption and - Mandatory Sinking Fund Redemption herein. THE BONDS ARE NOT A DEBT OF THE CITY OF AUBURN (THE CITY ) OR THE STATE OF CALIFORNIA (THE STATE ), OR ANY OF THE STATE S POLITICAL SUBDIVISIONS (OTHER THAN THE SUCCESSOR AGENCY), AND NEITHER THE CITY NOR THE STATE, NOR ANY OF THE STATE S POLITICAL SUBDIVISIONS (OTHER THAN THE SUCCESSOR AGENCY), IS LIABLE THEREFOR. THE BONDS DO NOT CONSTITUTE AN INDEBTEDNESS WITHIN THE MEANING OF ANY CONSTITUTIONAL OR STATUTORY DEBT LIMITATION OR RESTRICTION. NEITHER THE BOARD MEMBERS OF THE SUCCESSOR AGENCY NOR ANY PERSONS RESPONSIBLE FOR THE EXECUTION OF THE BONDS IS LIABLE PERSONALLY FOR PAYMENT OF THE BONDS BY REASON OF THEIR ISSUANCE. THE SUCCESSOR AGENCY HAS NO TAXING POWER. The Bonds are offered, when, as and if issued, subject to the approval of Jones Hall, A Professional Law Corporation, San Francisco,, California, Bond Counsel, and subject to certain other conditions. Certain legal matters will be passed upon for the Successor Agency by The Weist Law Firm, Scotts Valley, California, Disclosure Counsel, and by Colantuono, Highsmith & Whatley, PC, Grass Valley, California, as Successor Agency counsel, and for the Underwriter by its counsel, Norton Rose Fulbright US LLP, Los Angeles, California. It is anticipated that the Bonds will be available for delivery through the facilities of DTC on or about October 22, Dated: October 8, HILLTOP SECURITIES INC.

2 MATURITY SCHEDULE $4,475,000 SUCCESSOR AGENCY TO THE AUBURN URBAN DEVELOPMENT AUTHORITY 2015 TAX ALLOCATION REFUNDING BONDS (AUBURN REDEVELOPMENT PROJECT) Maturity Date (June 1) Principal Amount (Base CUSIP No.: 05028W) Interest Rate Yield Price CUSIP 2016 $70, % 0.640% % AA , % 0.970% % AB , % 1.210% % AC , % 1.460% % AD , % 1.750% % AE , % 2.020% % AF , % 2.280% % AG , % 2.490% % AH , % 2.640% % AJ , % 2.770% % AK , % 2.960% % AL , % 3.120% % AM , % 3.200% % AN , % 3.310% % AP , % 3.400% % AQ , % 3.470% % AR , % 3.550% % AS , % 3.600% % AT3 $1,315, % Term Bonds maturing June 1, 2038; Yield 4.020%; Price: %; CUSIP 05028W AU0 CUSIP is a registered trademark of the American Bankers Association. CUSIP data herein is provided by CUSIP Global Services, managed by Standard & Poor s Financial Services LLC on behalf of the American Bankers Association. This data is not intended to create a database and does not serve in any way as a substitute for CUSIP Global Services. CUSIP numbers are provided for convenience of reference only. Neither the Successor Agency nor the Underwriter takes any responsibility for the accuracy of CUSIP numbers set forth herein.

3 No dealer, broker, salesperson or other person has been authorized by the Successor Agency or the Underwriter to give any information or to make any representations, other than those contained in this Official Statement, and, if given or made, such other information or representations must not be relied upon as having been authorized by any of the foregoing. The Successor Agency has undertaken to provide continuing disclosure on certain matters, including annual financial information and specific enumerated events, as more fully described herein under CONTINUING DISCLOSURE. 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 Bonds by a person in any jurisdiction in which it is unlawful for such person to make such an offer, solicitation or sale. This Official Statement is not to be construed as a contract with the purchasers of the Bonds. Statements contained in this Official Statement which involve estimates, forecasts or matters of opinion, whether or not expressly so described herein, are intended solely as such and are not to be construed as a representation of facts. The information set forth herein has been obtained from the Successor Agency and other sources believed to be reliable, but the accuracy or completeness of such information is not guaranteed by, and should not be construed as a representation by, the Underwriter. The information and expressions of opinions herein are subject to change without notice and neither delivery of the 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 Successor Agency since the date hereof. All summaries contained herein of the Indenture or other documents are made subject to the provisions of such documents and do not purport to be complete statements of any or all of such provisions. All statements made herein are made as of the date of this document by the Successor Agency except statistical information or other statements where some other date is indicated in the text. The Insurer makes no representation regarding the Bonds or the advisability of investing in the Bonds. In addition, the Insurer has not independently verified, makes no representation regarding, and does not accept any responsibility for the accuracy or completeness of this Official Statement or any information or disclosure contained herein, or omitted herefrom, other than with respect to the accuracy of the information regarding the Insurer, supplied by the Insurer and presented under the heading Bond Insurance and Appendix H - Specimen Municipal Bond Insurance Policy. The Underwriter has provided the following sentence for inclusion in this Official Statement: The Underwriter has reviewed the information in this Official Statement in accordance with its responsibilities to investors under the federal securities laws as applied to the facts and circumstances of this transaction, but the Underwriter does not guarantee the accuracy or completeness of such information. IN CONNECTION WITH THIS OFFERING, THE UNDERWRITER MAY OVERALLOT OR EFFECT TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE BONDS AT A LEVEL ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL ON THE OPEN MARKET. SUCH STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME. THE UNDERWRITER MAY OFFER AND SELL THE BONDS TO CERTAIN DEALERS AND DEALER BANKS AND BANKS ACTING AS AGENT AND OTHERS AT PRICES LOWER THAN THE PUBLIC OFFERING PRICES STATED ON THE COVER PAGE HEREOF AND SUCH PUBLIC OFFERING PRICES MAY BE CHANGED FROM TIME TO TIME BY THE UNDERWRITER. Statements contained in this Official Statement which involve estimates, forecasts or matters of opinion, whether or not expressly described herein, are intended solely as such and are not to be construed as representations of fact. Certain statements included or incorporated by reference in this Official Statement constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. Such statements are generally identifiable by the terminology used such as plan, expect, estimate, budget, project, forecast or other similar words. The achievement of certain results or other expectations contained in such forward-looking statements involves 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. The Successor Agency does not plan to issue any updates or revisions to those forwardlooking statements if or when its expectations, or events, conditions or circumstances on which such statements are based, occur.

4 SUCCESSOR AGENCY TO THE AUBURN URBAN DEVELOPMENT AUTHORITY Placer County, California AUBURN CITY COUNCIL / SUCCESSOR AGENCY BOARD Keith Nesbitt, Mayor/Chairman Bill Kirby, Vice Mayor/Vice Chairman Bridget Powers, Council Member/Board Member Matt Spokely, Council Member/Board Member Daniel Berlant, Council Member/Board Member CITY/ SUCCESSOR AGENCY STAFF Tim Rundel, City Manager/Executor Director Dylan Feik, Finance Director/Treasurer Stephanie Snyder, City Clerk/Secretary Colantuono, Highsmith & Whatley, PC, City Attorney PROFESSIONAL SERVICES Financial Advisor and Fiscal Consultant Urban Futures Inc. Orange, California Bond Counsel Jones Hall, A Professional Law Corporation San Francisco, California Disclosure Counsel The Weist Law Firm Scotts Valley, California Trustee Wells Fargo Bank, N.A. San Francisco, California Verification Agent Grant Thornton LLP Minneapolis, Minnesota

5 TABLE OF CONTENTS Page INTRODUCTION... 1 General... 1 The Successor Agency... 1 The City... 2 Purpose of Issuance... 2 The Project Area... 2 The Bonds... 2 Source of Payment for the Bonds... 3 Municipal Bond Insurance... 4 Limited Obligations... 4 Parity Debt... 5 Continuing Disclosure... 5 Professionals Involved in the Offering... 5 Further Information... 5 PLAN OF REFUNDING... 6 Redemption of the Prior Bonds... 6 Verification of Mathematical Accuracy... 6 Sources and Uses of Funds... 7 Debt Service Schedule... 8 THE BONDS... 9 General Provisions... 9 Optional Redemption... 9 Mandatory Sinking Fund Redemption... 9 Notice of Redemption; Rescission of Notice Effect of Redemption Manner of Redemption Book-Entry Only System BOND INSURANCE Bond Insurance Policy Build America Mutual Assurance Company Capitalization of BAM Additional Information Available from BAM SECURITY FOR THE BONDS Tax Revenues Tax Increment Financing Recognized Obligation Payment Schedules Recent Changes to Dissolution Act Reserve Account Issuance of Parity Debt PROPERTY TAXATION IN CALIFORNIA Constitutional Amendments Affecting Tax Revenues Implementing Legislation i

6 TABLE OF CONTENTS (continued) Page Constitutional Challenges to Property Tax System Property Tax Collection Procedures Supplemental Assessments Tax Collection Fees Rate of Collections Unitary Property Tax Business Inventory and Replacement Revenue Future Initiatives Redevelopment Plan Limitations THE SUCCESSOR AGENCY TO THE AUBURN URBAN DEVELOPMENT AUTHORITY Former Agency Establishment of Successor Agency Agency Powers and Duties THE PROJECT AREA General Historical Assessed Valuation and Tax Revenues Tax Assessment Appeals Tax Sharing Agreements; Statutory Pass-Through Payments FINANCIAL STATEMENTS COVERAGE ANALYSIS Estimated Debt Service Coverage RISK FACTORS Reduction in Taxable Value Limited Powers and Resources Risks to Real Estate Market Reduction in Inflationary Rate Development Risks Concentration of Ownership Levy and Collection of Taxes State Budget Issues Recognized Obligation Payment Schedule Future Implementation of Dissolution Act Bankruptcy and Foreclosure Effect of Assessment Appeals Estimated Revenues Assumptions and Projections Limitations on Remedies Hazardous Substances Natural Disasters Changes in the Law Economic Risk Investment Risk Additional Obligations Secondary Market ii

7 TABLE OF CONTENTS (continued) Page Financial Statements No Validation Proceeding Undertaken Loss of Tax Exemption CERTAIN LEGAL MATTERS ABSENCE OF LITIGATION TAX MATTERS FINANCIAL ADVISOR UNDERWRITING RATINGS CONTINUING DISCLOSURE MISCELLANEOUS APPENDIX A FISCAL CONSULTANT S REPORT... A-1 APPENDIX B GENERAL INFORMATION REGARDING THE CITY... B-1 APPENDIX C AUDITED FINANCIAL STATEMENTS OF THE CITY OF AUBURN FOR THE FISCAL YEAR ENDED JUNE 30, C-1 APPENDIX D SUMMARY OF CERTAIN PROVISIONS OF THE INDENTURE... D-1 APPENDIX E FORM OF CONTINUING DISCLOSURE CERTIFICATE... E-1 APPENDIX F BOOK-ENTRY ONLY SYSTEM... F-1 APPENDIX G FORM OF BOND COUNSEL OPINION... G-1 APPENDIX H SPECIMEN MUNICIPAL BOND INSURANCE POLICY... H-1 iii

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9 OFFICIAL STATEMENT $4,475,000 SUCCESSOR AGENCY TO THE AUBURN URBAN DEVELOPMENT AUTHORITY 2015 TAX ALLOCATION REFUNDING BONDS (AUBURN REDEVELOPMENT PROJECT) INTRODUCTION This introduction is not a summary of this Official Statement, but rather is only a brief description of and guide to, and is qualified in its entirety by, more complete and detailed information contained in this Official Statement, the appendices hereto and the actual documents summarized or described herein. Potential investors are encouraged to read the entire Official Statement. The offering of the Bonds to potential investors is made only by means of the entire Official Statement. Capitalized terms used and not defined in this Introduction shall have the meanings assigned to them elsewhere in this Official Statement. General This Official Statement, including the cover page, the inside front cover and appendices hereto, is being provided in connection with the issuance by the Successor Agency to the Auburn Urban Development Authority (the Successor Agency ) of the Successor Agency s $4,475, Tax Allocation Refunding Bonds (Auburn Redevelopment Project) (the Bonds ). This Official Statement contains brief descriptions of the Bonds, the Indenture (as defined herein), the Successor Agency and the Project Area (as defined herein). Such descriptions do not purport to be comprehensive or definitive. All references in this Official Statement to documents are qualified in their entirety by reference to such documents, and references to the Bonds are qualified in their entirety by reference to the form of the Bond included in the Indenture (as defined herein). Copies of the Indenture and other documents described in this Official Statement may be obtained from the Trustee (described below) at its corporate trust office in San Francisco, California. The Successor Agency The Auburn Urban Development Authority (the Former Agency ) was established pursuant to the California Community Redevelopment Law (codified in Part 1 of Division 24 of the California Health and Safety Code) (the Redevelopment Law ) and was activated by the City Council of the City of Auburn (the City ) in 1986 by an ordinance of the City Council, at which time the City Council declared itself to be the governing board of the Former Agency. In June 2011, Assembly Bill No. 26 ( AB X1 26 ) was enacted as Chapter 5, Statutes of 2011, together with a companion bill, Assembly Bill No. 27 ( AB X1 27 ). A lawsuit was brought in the California Supreme Court, California Redevelopment Association, et al. v. Matosantos, et al., 53 Cal. 4 th 231 (Cal. Dec. 29, 2011), challenging the constitutionality of AB X1 26 and AB X1 27. The California Supreme Court largely upheld AB X1 26, invalidated AB X1 27, and held that AB X1 26 may be severed from AB X1 27 and enforced independently. As a result of AB X1 26 and the decision of the California Supreme Court in the California Redevelopment Association case, as of February 1, 2012, all redevelopment agencies in the State of California (the State ) were dissolved, including the Former Agency.

10 Under the operative provisions of AB X1 26, successor agencies were created and designated as successor entities to the former redevelopment agencies to expeditiously wind down the affairs of the former redevelopment agencies. The primary provisions enacted by AB X1 26 relating to the dissolution and wind down of former redevelopment agency affairs are Parts 1.8 (commencing with Section 34161) and 1.85 (commencing with Section 34170) of Division 24 of the Health and Safety Code of the State, as amended on June 27, 2012 by Assembly Bill No ( AB 1484 ), enacted as Chapter 26, Statutes of 2012 (as amended from time to time, the Dissolution Act ). Pursuant to Section of the Dissolution Act, the City acts as the Successor Agency to the Former Agency. Subdivision (g) of Section of the Dissolution Act expressly affirms that the Successor Agency is a separate public entity from the City, that the two entities shall not merge, and that the liabilities of the Former Agency will not be transferred to the City nor will the assets of the Former Agency become assets of the City. The City The City is the county seat of Placer County, California (the County ), and is located approximately 30 miles northeast of Sacramento along Interstate 80 in the foothills of the Sierra Nevada Mountains. The City has a present estimated population of 13,330. The City was incorporated in 1860 and operates as a general law city. It maintains a council-manager form of government with the Mayor elected at-large for a two year term and Council Members elected at-large for four-year terms. See APPENDIX B - GENERAL INFORMATION REGARDING THE CITY for a more complete description of the City and the surrounding region. The Bonds are not a debt of the City in any respect. Purpose of Issuance The Bonds are being issued to (i) advance refund all of the outstanding Auburn Urban Development Authority, Auburn Redevelopment Project Area, 2008 Tax Allocation Bonds (the Prior Bonds ), initially issued in the aggregate principal amount of $4,805,000, (ii) to fund the premium for a debt service reserve surety bond for the reserve account for the Bonds, and (iii) to pay costs of issuance of the Bonds, including the premium for the Policy and the Reserve Policy (as such terms are defined below). See PLAN OF REFUNDING and ESTIMATED SOURCES AND USES OF FUNDS herein. The Project Area The Redevelopment Plan for the original project area was adopted by the City Council pursuant to Ordinance No adopted on June 2, 1987 (the Original Project Area ) and later amended three times to amend certain time limits and financial limits, and to add territory (the Amendment Area, and together with the Original Project Area, the Project Area ). The total Project Area consists of approximately 658 acres and includes the City s downtown area. The land uses within the Project Area are primarily commercial development, with pockets of residential uses. The total assessed value (including secured, unsecured and utility values) of the taxable property in the Project Area for fiscal year is approximately $237 million. See THE PROJECT AREA for further information regarding the Project Area. The Bonds The Bonds are being issued pursuant to the laws of the State, including Article 11 (commencing with Section 53580) of Chapter 3 of Part 1 of Division 2 of Title 5 of the Government Code (the Bond Law ), the Dissolution Act, and under an Indenture of Trust, dated as of October 1, 2015 (the Indenture ), between the Successor Agency and Wells Fargo Bank, N.A., as trustee (the Trustee ). 2

11 The Bonds will be issued in denominations of $5,000 each or integral multiples thereof. Interest on the Bonds is payable on each December 1 and June 1, commencing on June 1, Interest on and principal of the Bonds are payable by the Trustee to DTC which will be responsible for remitting such principal and interest to the Participants which will in turn be responsible for remitting such principal and interest to the Beneficial Owners of the Bonds. See THE BONDS Book-Entry Only System herein. Source of Payment for the Bonds Prior to the enactment of AB X1 26, the Redevelopment Law authorized the financing of redevelopment projects including low- and moderate-income housing projects through the use of tax increment revenues. This method provided that the taxable valuation of the property within a redevelopment project area on the property tax roll last equalized prior to the effective date of the ordinance which adopts the redevelopment plan becomes the base year valuation. Assuming the taxable valuation never drops below the base year level, the taxing agencies thereafter received that portion of the taxes produced by applying then current tax rates to the base year valuation, and the redevelopment agency was allocated the remaining portion produced by applying then current tax rates to the increase in valuation over the base year. Such incremental tax revenues allocated to a redevelopment agency were authorized to be pledged to the payment of redevelopment agency obligations. Tax Revenues (as defined herein) consist of a portion of such incremental tax revenues. The Dissolution Act authorizes the issuance of refunding bonds, including the Bonds, to be secured by a pledge of monies deposited from time to time in a Redevelopment Property Tax Trust Fund held by a county auditor-controller with respect to a successor agency, which are equivalent to the tax increment revenues that were formerly allocated under the Redevelopment Law to the redevelopment agency and formerly authorized under the Redevelopment Law to be used for the financing of redevelopment projects. Under the Indenture, Tax Revenues consist of the amounts deposited from time to time in the Redevelopment Property Tax Trust Fund established pursuant to and as provided in the Dissolution Act. See SECURITY FOR THE BONDS Tax Increment Financing herein for additional information. Successor agencies have no power to levy property taxes and must look specifically to the allocation of taxes as described above. See RISK FACTORS. The Dissolution Act requires the Placer County Auditor-Controller (the County Auditor- Controller ) to determine the amount of property taxes that would have been allocated to the Former Agency had the Former Agency not been dissolved pursuant to the operation of AB X1 26, using current assessed values on the last equalized roll on August 20, and to deposit that amount in the Redevelopment Property Tax Trust Fund for the Successor Agency (the RPTTF ) established and held by the County Auditor-Controller pursuant to the Dissolution Act. The Dissolution Act provides that any bonds authorized thereunder to be issued by the Successor Agency will be considered indebtedness incurred by the dissolved Former Agency, with the same legal effect as if the bonds had been issued prior to the effective date of AB X1 26, in full conformity with the applicable provision of the Redevelopment Law that existed prior to that date, and will be included in the Successor Agency s Recognized Obligation Payment Schedule (see APPENDIX D - SUMMARY OF CERTAIN PROVISIONS OF THE INDENTURE and SECURITY FOR THE BONDS Recognized Obligation Payment Schedule ). The Dissolution Act further provides that bonds authorized thereunder to be issued by the Successor Agency will be secured by a pledge of, and lien on, and will be repaid from moneys deposited from time to time in the RPTTF, and that property tax revenues pledged to any bonds authorized under 3

12 the Dissolution Act, such as the Bonds, are taxes allocated to the Successor Agency pursuant to the provisions of the Redevelopment Law and the State Constitution which provided for the allocation of tax increment revenues under the Redevelopment Law, as described in the foregoing paragraph. The Bonds will be payable from and secured by Tax Revenues as provided under the Indenture. As defined in the Indenture, the term Tax Revenues means all taxes that were eligible for allocation to the Former Agency with respect to the Project Area and are allocated to the Successor Agency pursuant to Article 6 of Chapter 6 (commencing with Section 33670) of the Redevelopment Law and Section 16 of Article XVI of the Constitution of the State, or pursuant to other applicable State laws and that are deposited in the RPTTF for transfer to the Successor Agency for deposit into the Redevelopment Obligation Retirement Fund, excluding all amounts required to be paid to taxing entities pursuant to Sections and of the Redevelopment Law or pursuant to any tax sharing agreement entered into by the Former Agency with a taxing entity, in both cases as provided in Section 34183(a)(1) of the Dissolution Act, unless such payments are subordinated to payments on the Bonds. Taxes levied on the property within the Project Area on that portion of the taxable valuation over and above the taxable valuation of the applicable base year property tax roll with respect to the various territories within the Project Area, to the extent they constitute Tax Revenues, as described herein, will be deposited in the RPTTF for transfer by the County Auditor-Controller to the Successor Agency s Redevelopment Obligation Retirement Fund on January 2 and June 1 of each year to the extent required for payments listed in the Successor Agency s Recognized Obligation Payment Schedule in accordance with the requirements of the Dissolution Act (see SECURITY FOR THE BONDS Recognized Obligation Payment Schedules ). Monies deposited by the County Auditor-Controller into the Successor Agency s Redevelopment Obligation Retirement Fund will be transferred by the Successor Agency to the Trustee for deposit in the Debt Service Fund established under the Indenture, and administered by the Trustee in accordance therewith. The Successor Agency has covenanted in the Indenture that so long as the Bonds remain outstanding, the Successor Agency will not issue any additional notes, bonds or other obligations which are secured by a pledge of the Tax Revenues on a basis which is senior to the Bonds. See SECURITY FOR THE BONDS herein. Municipal Bond Insurance Concurrently with the issuance of the Bonds, Build America Mutual Assurance Company (interchangeably, the Insurer or BAM ) will issue its Financial Guaranty Insurance Policy (the Policy ) for the Bonds. The Policy guarantees the scheduled payment of principal of and interest on the Bonds when due. A form of the Policy is included as Appendix H to this Official Statement. In order to further secure the payment of the principal of and interest on the Bonds, a Reserve Account in the Debt Service Fund is established by the Indenture. The Reserve Account will initially be funded by the purchase of a Municipal Bond Debt Service Reserve Account Policy (the Reserve Policy ) issued by the Insurer in an amount equal to the Reserve Requirement as defined in the Indenture (the Reserve Requirement ). The Reserve Policy secures all of the Bonds. The initial Reserve Requirement for the Bonds is the amount of $301, See SECURITY FOR THE BONDS Security for the Bonds Reserve Account. Limited Obligations The Bonds will not be a debt, liability or obligation of the City, the State, or any of its political subdivisions other than the Successor Agency as described in this Official Statement. None of the City, 4

13 the State nor any of its political subdivisions, other than the Successor Agency, will be liable for the Bonds. None of the members of the governing bodies or officers of the Successor Agency, the City nor any person executing the Bonds or the Indenture will be liable personally with respect to the Bonds. The obligations of the Successor Agency with respect to the Bonds will be payable solely from Tax Revenues and the funds pledged pursuant to the Indenture. The Successor Agency has no taxing power. Parity Debt The Indenture provides that the Successor Agency may issue and sell refunding bonds payable from and secured by Tax Revenues on a parity with Outstanding Bonds (the Parity Debt ) exclusively for the purpose of refunding a portion of the Outstanding Bonds, if (a) annual debt service on such refunding bonds is lower than annual debt service on the Bonds or Parity Debt being refunded over the term of the refunding bonds, and (b) the final maturity of any such refunding bonds does not exceed the final maturity of the Bonds or Parity Debt being refunded. See SECURITY FOR THE BONDS Issuance of Parity Debt herein. Continuing Disclosure In connection with the sale of the Bonds, the Successor Agency will execute and deliver a Continuing Disclosure Certificate, covenanting to prepare and file an annual report and certain other notices with the Municipal Securities Rulemaking Board. See CONTINUING DISCLOSURE and APPENDIX E FORM OF CONTINUING DISCLOSURE CERTIFICATE. Professionals Involved in the Offering Urban Futures, Inc., Orange, California, has acted as fiscal consultant to the Successor Agency (the Fiscal Consultant ) and advised the Successor Agency as to the taxable values and Tax Revenues projected to be available to pay debt service on the Bonds as referenced in this Official Statement. The report prepared by the Fiscal Consultant is referred to as the Fiscal Consultant s Report and is attached as Appendix A. Urban Futures Inc., Orange, California, has also acted as the Successor Agency s financial advisor with respect to the Bonds. The proceedings of the Successor Agency in connection with the issuance of the Bonds are subject to the approval as to their legality of Jones Hall, A Professional Law Corporation, San Francisco, Bond Counsel to the Successor Agency. Certain legal matters will be passed upon for the Successor Agency by The Weist Law Firm, Scotts Valley, California, Disclosure Counsel, and by Highsmith & Whatley, PC, Grass Valley, California, as Successor Agency counsel, and for the Underwriter by its counsel, Norton Rose Fulbright US LLP. Further Information Brief descriptions of the Bonds, certain risk factors, the Indenture, the Project Area, the Successor Agency, the City and certain other documents and information relevant to the issuance of the Bonds are included in this Official Statement. Such descriptions and information do not purport to be comprehensive or definitive. All references herein to the Bonds, the Indenture, the Redevelopment Law, the Dissolution Act, the Constitution and the laws of the State, and the proceedings of the Successor Agency, are qualified in their entirety by reference to each such document, law or to the Constitution. All capitalized terms used in this Official Statement and not otherwise defined herein have the same meanings as in the Indenture. References herein to the Bonds are qualified in their entirety by reference to the form thereof included in the Indenture. Copies of the Indenture are available for inspection at the office of the Successor Agency. 5

14 This Official Statement speaks only as of its date, and the information contained herein is subject to change. PLAN OF REFUNDING The Bonds are being issued to advance refund all outstanding Prior Bonds of the Former Agency. The Prior Bonds were originally issued in the aggregate principal amount of $4,805,000 and remain outstanding in the aggregate amount of approximately $4,145,000. The proceeds of the Prior Bonds were used to finance redevelopment activities in the Project Area. Redemption of the Prior Bonds In connection with the refunding of the Prior Bonds, proceeds of the Bonds, together with certain funds made available through the refunding of such obligations, will be deposited into an escrow fund (the Escrow Fund ) to be established by the Wells Fargo Bank, N.A. (the Escrow Agent ), pursuant to an Escrow Deposit and Trust Agreement, dated as of October 1, 2015, by and between the Successor Agency and the Escrow Agent (the Escrow Agreement ), and used for the purposes of defeasing the Prior Bonds. Amounts so deposited, of which a portion will be invested in certain federal securities, will be in an amount which will be sufficient to pay the redemption price equal to the principal amount of the Prior Bonds outstanding and accrued interest upon their optional redemption. The amounts held by the Escrow Agent in the Escrow Fund are pledged solely to the amounts due and payable by the Successor Agency under the Indenture of Trust dated as of October 1, 2008, between the Former Agency and Wells Fargo Bank, N.A., as trustee for the Prior Bonds (the Prior Indenture ). The funds deposited in the Escrow Fund will not be available for the payment of debt service with respect to the Bonds. The Prior Bonds are expected to be called for redemption on June 1, Moneys in the Escrow Fund will be held solely for the benefit of the holders of the Prior Bonds and will not serve as security nor be available for payment on the Bonds. As a result of the deposit of funds into the Escrow Fund upon the issuance of the Bonds, the Prior Bonds will be fully defeased and will no longer be secured by a pledge of the tax increment revenues of the Project Area. Verification of Mathematical Accuracy The sufficiency of the deposits in the Escrow Fund for the purposes described above will be verified by Grant Thornton LLP (the Verification Agent ). Assuming the accuracy of the Verification Agent s computations, as a result of the deposit and application of funds as provided in the Escrow Agreement, the Successor Agency s obligations under the Prior Indenture will be discharged. The Verification Agent has restricted its procedures to examining the arithmetical accuracy of certain computations and has not made any study or evaluation of the assumptions and information upon which the computations are based and, accordingly, has not expressed an opinion on the data used, the reasonableness of the assumptions, or the achievability of the forecasted outcome. 6

15 Sources and Uses of Funds The following table sets forth a summary of the estimated sources and uses of funds associated with the issuance and sale of the Bonds. Sources of Funds Par Amount of Bonds $4,475, Plus: Net Original Issue Premium 120, Other Available Funds 462, Total Sources $5,057, Uses of Funds Escrow Fund $4,776, Underwriter s Discount 42, Costs of Issuance (1) 238, Total Uses $5,057, (1) Includes rating agency fees, fees and expenses of the Financial Advisor, Bond Counsel, Disclosure Counsel, Fiscal Consultant, Successor Agency s Counsel, Trustee, Verification Agent, escrow bidding agent, bond insurance and reserve surety bond premium, printing fees and other costs of issuance. 7

16 Debt Service Schedule The following table sets forth the annualized debt service for the Bonds, assuming no prior redemption of the Bonds other than mandatory sinking fund redemption. Bond Year Ending June 1 Principal Interest Annual Debt Service 2016 $70,000 $102, $172, , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , ,000 94, , ,000 88, , ,000 82, , ,000 75, , ,000 68, , ,000 60, , ,000 52, , ,000 42, , ,000 32, , ,000 22, , ,000 11, , Total $4,475,000 $2,221, $6,696,

17 THE BONDS General Provisions The Bonds will be delivered in registered form, without coupons, in authorized denominations of $5,000 or any integral multiples thereof. Interest on the Bonds is payable semiannually on December 1 and June 1 of each year, commencing June 1, 2016 (each, an Interest Payment Date ), to the registered owner thereof as of the close of business on the fifteenth (15th) calendar day of the month preceding each Interest Payment Date, whether or not such fifteenth (15th) calendar day is a business day (each, a Record Date ). Principal of the Bonds will be payable on June 1 in each of the years and in the amounts shown on the inside cover page hereof. The principal of and premium, if any, on the Bonds is payable upon presentation and surrender of such Bonds at maturity or earlier redemption at the corporate trust office of the Trustee. The principal of, premium (if any) and interest on the Bonds is payable in lawful money of the United States of America. Payment of the interest on any Bond will be made to the person whose name appears on the bond registration books of the Trustee as the Owner thereof as of the close of business on the Record Date immediately prior to such Interest Payment Date by check mailed by first class mail to the Owner at his address as it appears on such registration books, or by wire transfer to Owners of $1,000,000 or more in aggregate principal amount of Bonds at such wire transfer address in the United States as such Owner specifies in a written notice requesting payment by wire transfer delivered to the Trustee prior to the Record Date. The Bonds will be dated the date of delivery and will bear interest (calculated on the basis of a 360-day year comprised of twelve 30-day months) from the date of delivery. Any interest not paid when due or duly provided for will cease to be payable to the registered Owner as of the Record Date immediately preceding the applicable Interest Payment Date and will be paid to the person in whose name the Bond is registered as of the close of business on a special record date for the payment of such defaulted interest to be fixed by the Trustee. The Trustee will give notice of such special record date to the Owner not less than ten (10) days prior thereto. Optional Redemption The Bonds maturing on and after June 1, 2026, are subject to redemption, at the option of the Successor Agency on any date on or after June 1, 2025, as a whole or in part, by such maturities as shall be determined by the Successor Agency, and by lot within a maturity, from any available source of funds, at a redemption price equal to the principal amount of the Bonds to be redeemed, together with accrued interest thereon to the date fixed for redemption, without premium. Mandatory Sinking Fund Redemption The Bonds maturing on June 1, 2038 shall also be subject to redemption in whole, or in part by lot, on June 1 in each of the years as set forth in the following table, from Sinking Account payments made by the Successor Agency, at a redemption price equal to the principal amount thereof to be redeemed together with accrued interest thereon to the redemption date, without premium, or in lieu thereof shall be purchased pursuant to the Indenture, in the aggregate respective principal amounts and on the respective dates as set forth in the following table; provided, however, that if some but not all of such Bonds have been optionally redeemed, the total amount of all future Sinking Account payments with respect to such Bonds shall be reduced by the aggregate principal amount of such Bonds so redeemed, to be allocated among such Sinking Account payments on a pro rata basis in integral multiples of $5,000 as 9

18 determined by the Successor Agency (written notice of which determination shall be given by the Successor Agency to the Trustee). Term Bonds Maturing on June 1, 2038 Sinking Fund Redemption Date (June 1) Notice of Redemption; Rescission of Notice Principal Amount To Be Redeemed 2034 $245, , , , (maturity) 280,000 The Trustee will mail notice of redemption to the registered owners of Bonds designated for redemption not less than thirty (30) nor more than sixty (60) days prior to the redemption date. Neither failure to receive such notice nor any defect therein will affect the validity of the proceedings for the redemption of such Bonds or the cessation of the accrual of interest thereon. The Successor Agency has the right to rescind any notice of the optional redemption of Bonds by written notice to the Trustee on or prior to the dated fixed for redemption. Any notice of optional redemption shall be cancelled and annulled if for any reason funds will not be or are not available on the date fixed for redemption for the payment in full of the Bonds then called for redemption, and such cancellation will not constitute an Event of Default. The Successor Agency and the Trustee have no liability to the Bond Owners or any other party related to or arising from such rescission of redemption. The Trustee shall mail notice of such rescission of redemption in the same manner as the notice of redemption. Effect of Redemption When notice of redemption has been given as provided above and when the amount necessary for the redemption of the Bonds called for redemption (principal, interest and premium, if any) have been duly provided, such Bonds shall cease to be entitled to any benefit under the Indenture other than the right to receive payment of the redemption price, and no interest will accrue on such Bonds called for redemption from and after the redemption date specified in such notice. Manner of Redemption Whenever provision is made in the Indenture for the redemption of less than all of the Bonds of the same series and maturity, the Trustee shall select the Bonds of such series and maturity to be redeemed by lot in any manner which the Trustee in its sole discretion deems appropriate. For purposes of such selection, the Bonds shall be comprised of separate $5,000 denominations and such separate denominations shall be treated as separate Bonds which may be separately redeemed. Book-Entry Only System The Depository Trust Company, New York, New York ( DTC ), will act as securities depository for the Bonds. The Bonds will be issued as fully-registered bonds registered in the name of Cede & Co. (DTC s partnership nominee). One fully-registered Bond will be issued for each maturity of the Bonds, 10

19 each in the aggregate principal amount of such maturity, and will be deposited with DTC. Ultimate purchasers of Bonds will not receive physical certificates representing their interest in the Bonds. Payment of the principal of, premium, if any, and interest on the Bonds will be made directly to DTC, or its nominee, Cede & Co., by the Trustee so long as DTC or Cede & Co. is the registered owner of the Bonds. Disbursement of such payments to DTC s Participants is the responsibility of DTC and disbursement of such payments to the Beneficial Owners is the responsibility of DTC s Participants and Indirect Participants. See APPENDIX F BOOK-ENTRY ONLY SYSTEM. BOND INSURANCE The following information has been furnished by the Insurer for use in this Official Statement. Such information has not been independently confirmed or verified by the Successor Agency. The Successor Agency makes no representation as to the accuracy or adequacy of such information or as to the absence of material adverse changes in such information subsequent to the date hereof. Reference is made to Appendix H for a specimen of the municipal bond insurance policy. Bond Insurance Policy Concurrently with the issuance of the Bonds, BAM will issue its Municipal Bond Insurance Policy (the Policy ) for the Bonds. The Policy guarantees the scheduled payment of principal of and interest on the Bonds when due as set forth in the form of the Policy included as an exhibit to this Official Statement. The Policy is not covered by any insurance security or guaranty fund established under New York, California, Connecticut or Florida insurance law. Build America Mutual Assurance Company BAM is a New York domiciled mutual insurance corporation. BAM provides credit enhancement products solely to issuers in the U.S. public finance markets. BAM will only insure obligations of states, political subdivisions, integral parts of states or political subdivisions or entities otherwise eligible for the exclusion of income under section 115 of the U.S. Internal Revenue Code of 1986, as amended. No member of BAM is liable for the obligations of BAM. The address of the principal executive offices of BAM is: 200 Liberty Street, 27th Floor, New York, New York 10281, its telephone number is: , and its website is located at: BAM is licensed and subject to regulation as a financial guaranty insurance corporation under the laws of the State of New York and in particular Articles 41 and 69 of the New York Insurance Law. BAM s financial strength is rated AA/Stable by Standard and Poor s Ratings Services, a Standard & Poor s Financial Services LLC business ( S&P ). An explanation of the significance of the rating and current reports may be obtained from S&P at The rating of BAM should be evaluated independently. The rating reflects the S&P s current assessment of the creditworthiness of BAM and its ability to pay claims on its policies of insurance. The above rating is not a recommendation to buy, sell or hold the Insured Bonds, and such rating is subject to revision or withdrawal at any time by S&P, including withdrawal initiated at the request of BAM in its sole discretion. Any downward revision or withdrawal of the above rating may have an adverse effect on the market price of the Insured Bonds. BAM only guarantees scheduled principal and scheduled interest 11

20 payments payable by the issuer of the Insured Bonds on the date(s) when such amounts were initially scheduled to become due and payable (subject to and in accordance with the terms of the Policy),and BAM does not guarantee the market price or liquidity of the Insured Bonds, nor does it guarantee that the rating on the Insured Bonds will not be revised or withdrawn. Capitalization of BAM BAM s total admitted assets, total liabilities, and total capital and surplus, as of June 30, 2015 and as prepared in accordance with statutory accounting practices prescribed or permitted by the New York State Department of Financial Services were $472.1 million, $31.0 million and $441.1 million, respectively. BAM is party to a first loss reinsurance treaty that provides first loss protection up to a maximum of 15% of the par amount outstanding for each policy issued by BAM, subject to certain limitations and restrictions. BAM s most recent Statutory Annual Statement, which has been filed with the New York State Insurance Department and posted on BAM s website at is incorporated herein by reference and may be obtained, without charge, upon request to BAM at its address provided above (Attention: Finance Department). Future financial statements will similarly be made available when published. BAM makes no representation regarding the Bonds or the advisability of investing in the Bonds. In addition, BAM has not independently verified, makes no representation regarding, and does not accept any responsibility for the accuracy or completeness of this Official Statement or any information or disclosure contained herein, or omitted herefrom, other than with respect to the accuracy of the information regarding BAM, supplied by BAM and presented under the heading BOND INSURANCE. Additional Information Available from BAM Credit Insights Videos. For certain BAM-insured issues, BAM produces and posts a brief Credit Insights video that provides a discussion of the obligor and some of the key factors BAM s analysts and credit committee considered when approving the credit for insurance. The Credit Insights videos are easily accessible on BAM s website at buildamerica.com/creditinsights/. Obligor Disclosure Briefs. Prior to the pricing of bonds that BAM has been selected to insure, BAM may prepare a pre-sale Obligor Disclosure Brief for those bonds. These pre-sale Obligor Disclosure Briefs provide information about the sector designation (e.g. general obligation, sales tax); a preliminary summary of financial information and key ratios; and demographic and economic data relevant to the obligor, if available. Subsequent to closing, for any offering that includes bonds insured by BAM, any pre-sale Obligor Disclosure Briefs will be updated and superseded by a final Obligor Disclosure Brief to include information about the gross par insured by CUSIP, maturity and coupon. BAM pre-sale and final Obligor Disclosure Briefs are easily accessible on BAM s website at buildamerica.com/obligor/. BAM will produce an Obligor Disclosure Brief for all bonds insured by BAM, whether or not a pre-sale Obligor Disclosure Brief has been prepared for such bonds. Disclaimers. The Obligor Disclosure Briefs and the Credit Insights videos and the information contained therein are not recommendations to purchase, hold or sell securities or to make any investment decisions. Credit-related and other analyses and statements in the Obligor Disclosure Briefs and the Credit Insights videos are statements of opinion as of the date expressed, and BAM assumes no responsibility to update the content of such material. The Obligor Disclosure Briefs and Credit Insight 12

21 videos are prepared by BAM; they have not been reviewed or approved by the issuer of or the underwriter for the Bonds, and the issuer and underwriter assume no responsibility for their content. BAM receives compensation (an insurance premium) for the insurance that it is providing with respect to the Bonds. Neither BAM nor any affiliate of BAM has purchased, or committed to purchase, any of the Bonds, whether at the initial offering or otherwise. The websites or webpages referenced herein are in no way incorporated into this Official Statement. They are cited for informational purposes only. The Agency makes no representation whatsoever as to the accuracy or completeness of any of the information on such websites. Tax Revenues SECURITY FOR THE BONDS The Dissolution Act requires the County Auditor-Controller to determine the amount of property taxes that would have been allocated to the Former Agency (pursuant to subdivision (b) of Section 16 of Article XVI of the State Constitution) had the Former Agency not been dissolved pursuant to the operation of AB X1 26, using current assessed values on the last equalized roll on August 20 of each year, and to deposit that amount in the RPTTF for the Successor Agency established and held by the County Auditor-Controller pursuant to the Dissolution Act. The Dissolution Act provides that any bonds authorized thereunder to be issued by the Successor Agency will be considered indebtedness incurred by the dissolved Former Agency, with the same legal effect as if the bonds had been issued prior to effective date of AB X1 26, in full conformity with the applicable provision of the Redevelopment Law that existed prior to that date, and will be included in the Successor Agency s Recognized Obligation Payment Schedule (see APPENDIX D - SUMMARY OF CERTAIN PROVISIONS OF THE INDENTURE and SECURITY FOR THE BONDS Recognized Obligation Payment Schedule ). The Dissolution Act further provides that bonds authorized thereunder to be issued by the Successor Agency will be secured by a pledge of, and lien on, and will be repaid from monies deposited from time to time in the RPTTF, and that property tax revenues pledged to any bonds authorized to be issued by the Successor Agency under the Dissolution Act, including the Bonds, are taxes allocated to the Successor Agency pursuant to the subdivision (b) of Section of the Redevelopment Law and Section 16 of Article XVI of the State Constitution. Pursuant to subdivision (b) of Section of the Redevelopment Law and Section 16 of Article XVI of the Constitution of the State and as provided in the Redevelopment Plan, taxes levied upon taxable property in the Project Area each year by or for the benefit of the State, any city, county, city and county, district, or other public corporation (herein sometimes collectively called taxing agencies ) after the effective date of the ordinance approving the Redevelopment Plan, or the respective effective dates of ordinances approving amendments to the Redevelopment Plan that added territory to the Project Area, as applicable, are to be divided as follows: (a) To Taxing Agencies: That portion of the taxes which would be produced by the rate upon which the tax is levied each year by or for each of the taxing agencies upon the total sum of the assessed value of the taxable property in the Project Area as shown upon the assessment roll used in connection with the taxation of such property by such taxing agency last equalized prior to the effective date of the ordinance adopting the Redevelopment Plan, or the respective effective dates of ordinances approving amendments to the Redevelopment Plan that added territory to the Project Area, as applicable (each, a base year valuation ), will be allocated 13

22 to, and when collected will be paid into, the funds of the respective taxing agencies as taxes by or for the taxing agencies on all other property are paid; and (b) To the Former Agency/Successor Agency: Except for that portion of the taxes in excess of the amount identified in (a) above which are attributable to a tax rate levied by a taxing agency for the purpose of producing revenues in an amount sufficient to make annual repayments of the principal of, and the interest on, any bonded indebtedness approved by the voters of the taxing agency on or after January 1, 1989 for the acquisition or improvement of real property, which portion shall be allocated to, and when collected shall be paid into, the fund of that taxing agency, that portion of the levied taxes each year in excess of such amount, annually allocated within the Plan Limit, when collected will be paid into a special fund of the Former Agency. Section of the Dissolution Act provides that, for purposes of Section 16 of Article XVI of the State Constitution, the RPTTF shall be deemed to be a special fund of the Successor Agency to pay the debt service on indebtedness incurred by the Former Agency or the Successor Agency to finance or refinance the redevelopment projects of the Former Agency. That portion of the levied taxes described in paragraph (b) above, less amounts deducted pursuant to Section 34183(a) of the Dissolution Act for permitted administrative costs of the County Auditor- Controller, constitute the amounts required under the Dissolution Act to be deposited by the County Auditor-Controller into the RPTTF. In addition, Section of the Dissolution Act effectively eliminates the January 1, 1989 date from paragraph (b) above. For the security of the Bonds, the Successor Agency grants a pledge of and lien on all of the Tax Revenues and all of the moneys on deposit in the RPTTF and the Redevelopment Obligation Retirement Fund. Such pledge and lien are for the equal security of the Bonds and all outstanding Parity Debt without preference or priority for series, issue, number, dated date, sale date, date of execution or date of delivery. In addition, each separate series of Bonds and Parity Debt are secured by a first pledge of and lien upon all of the moneys in the Debt Service Fund, the Interest Account, the Principal Account, the Reserve Account and the Redemption Account. Except for the Tax Revenues and such moneys, no funds of the Successor Agency are pledged to, or otherwise liable for, the payment of principal of or interest or redemption premium (if any) on the Bonds. Prior to enactment of the Dissolution Act, Section of the Redevelopment Law required that not less than twenty percent (20%) of the gross tax increment revenues be deposited in the Low and Moderate Income Housing Fund. Pursuant to the Dissolution Act, tax increment revenues generated in the Project Area are no longer required to be deposited into the Low and Moderate Income Housing Fund. Accordingly, such revenues are now available and pledged to the repayment of the Bonds and any Parity Debt. Taxes levied on the property within the Project Area on that portion of the taxable valuation over and above the taxable valuation of the applicable base year property tax roll with respect to the various territories within the Project Area, to the extent they constitute Tax Revenues, as described herein, will be deposited in the RPTTF for transfer by the County Auditor-Controller to the Successor Agency s Redevelopment Obligation Retirement Fund on January 2 and June 1 of each year to the extent required for payments listed in the Successor Agency s Recognized Obligation Payment Schedule in accordance with the requirements of the Dissolution Act (see SECURITY FOR THE BONDS Recognized Obligation Payment Schedules ). Monies deposited by the County Auditor-Controller into the Successor Agency s Redevelopment Obligation Retirement Fund will be transferred by the Successor Agency to the Trustee for deposit in the Debt Service Fund established under the Indenture and administered by the Trustee in accordance with such Indenture. 14

23 The Successor Agency has no power to levy and collect taxes, and various factors beyond its control could affect the amount of Tax Revenues available in any six-month period to pay the principal of and interest on the Bonds (see SECURITY FOR THE BONDS Tax Increment Financing and Recognized Obligation Payment Schedules and RISK FACTORS ). The Bonds are not a debt of the City, the State or any of its political subdivisions (except the Successor Agency), and none of the City, the State or any of its political subdivisions (except the Successor Agency) is liable therefor. The Bonds do not constitute an indebtedness within the meaning of any constitutional or statutory debt limitation or restriction. Tax Increment Financing Prior to the enactment of AB X1 26, the Redevelopment Law authorized the financing of redevelopment projects including low- and moderate-income housing projects through the use of tax increment revenues. This method provided that the taxable valuation of the property within a redevelopment project area on the property tax roll last equalized prior to the effective date of the ordinance which adopts the redevelopment plan becomes the base year valuation. Assuming the taxable valuation never drops below the base year level, the taxing agencies thereafter received that portion of the taxes produced by applying then current tax rates to the base year valuation, and the redevelopment agency was allocated the remaining portion produced by applying then current tax rates to the increase in valuation over the base year. Such incremental tax revenues allocated to a redevelopment agency were authorized to be pledged to the payment of agency obligations. The Dissolution Act authorizes refunding bonds, including the Bonds, to be secured by a pledge of monies deposited from time to time in RPTTF held by a county auditor-controller with respect to a successor agency, which are equivalent to the tax increment revenues that were formerly allocated under the Redevelopment Law to the redevelopment agency and formerly authorized under the Redevelopment Law to be used for the financing of redevelopment projects including low- and moderate-income housing projects, less amounts deducted pursuant to Section 34183(a) of the Dissolution Act for permitted administrative costs of the county auditor-controller. Successor agencies have no power to levy property taxes and must look specifically to the allocation of taxes as described above. See RISK FACTORS. Section and of the Redevelopment Law required mandatory tax sharing applicable to redevelopment projects adopted after January 1, 1994, or amended thereafter in certain manners specified in such statutes (the Statutory Pass-Through Amounts ). The Dissolution Act requires the County Auditor-Controller to distribute from the RPTTF amounts required to be distributed for Statutory Pass-Through Amounts to the taxing entities for each six-month period before amounts are distributed by the County Auditor-Controller from the RPTTF to the Successor Agency s Redevelopment Obligation Retirement Fund each January 2 and June 1, unless (i) pass-through payment obligations have previously been made subordinate to debt service payments for the bonded indebtedness of the Former Agency, as succeeded by the Successor Agency, (ii) the Successor Agency has reported, no later than the December 1 and May 1 preceding the January 2 or June 1 distribution date, that the total amount available to the Successor Agency from the RPTTF allocation to the Successor Agency s Redevelopment Obligation Retirement Fund, from other funds transferred from the Former Agency, and from funds that have or will become available through asset sales and all redevelopment operations is insufficient to fund the Successor Agency s enforceable obligations, pass-through payments, and the Successor Agency s administrative cost allowance for the applicable six-month period, and (iii) the State Controller has concurred with the Successor Agency that there are insufficient funds for such purposes for the applicable six-month period. See THE PROJECT AREA Tax Sharing Agreements; Statutory Pass-Through Payments herein for a discussion of the Statutory Pass-Through Payments applicable to the Successor Agency. 15

24 If the requirements stated in clauses (i) through (iii) of the foregoing paragraph have been met, the Dissolution Act provides for certain modifications in the distributions otherwise calculated to be distributed for such six-month period. To provide for calculated shortages to be paid to the Successor Agency for enforceable obligations, the amount of the deficiency will first be deducted from the residual amount otherwise calculated to be distributed to the taxing entities under the Dissolution Act after payment of the Successor Agency s enforceable obligations, pass-through payments, and the Successor Agency s administrative cost allowance. If such residual amount is exhausted, the amount of the remaining deficiency will be deducted from amounts available for distribution to the Successor Agency for administrative costs for the applicable six-month period in order to fund the enforceable obligations. Finally, funds required for servicing bond debt may be deducted from the amounts to be distributed for Statutory Pass-Through Amounts, in order to be paid to the Successor Agency for enforceable obligations, but only after the amounts described in the previous two sentences have been exhausted. The Dissolution Act provides for a procedure by which the Successor Agency may make Statutory Pass- Through Amounts subordinate to the Bonds; however, with respect to the Bonds, the Successor Agency has determined to not undertake any such subordination procedures in light of the sufficiency of the projected Tax Revenues for debt service coverage. The Successor Agency cannot guarantee that this process prescribed by the Dissolution Act of administering the Tax Revenues will effectively result in adequate Tax Revenues for the payment of principal and interest on the Bonds when due. See SECURITY FOR THE BONDS Recognized Obligation Payment Schedules. Recognized Obligation Payment Schedules The Dissolution Act requires successor agencies to prepare and approve, and submit to the successor agency s oversight board and the State Department of Finance for approval, a Recognized Obligation Payment Schedule (the Recognized Obligation Payment Schedule ) pursuant to which enforceable obligations (as defined in the Dissolution Act) of the successor agency are listed, together with the source of funds to be used to pay for each enforceable obligation. As defined in the Dissolution Act, enforceable obligation includes bonds, including the required debt service, reserve set-asides, and any other payments required under the indenture or similar documents governing the issuance of the outstanding bonds of the former redevelopment agency, as well as other obligations such as loans, judgments or settlements against the former redevelopment agency, any legally binding and enforceable agreement that is not otherwise void as violating the debt limit or public policy, contracts necessary for the administration or operation of the successor agency, and amounts borrowed from the Low and Moderate Income Housing Fund. A reserve may be included on the Recognized Obligation Payment Schedule and held by the successor agency when required by the bond indenture or when the next property tax allocation will be insufficient to pay all obligations due under the provisions of the bond for the next payment due in the following six-month period (see APPENDIX D - SUMMARY OF CERTAIN PROVISIONS OF THE INDENTURE Compliance with the Redevelopment Law ). Under the Dissolution Act, the categories of sources of payments for enforceable obligations listed on a Recognized Obligation Payment Schedule are the following: (i) bond proceeds, (ii) reserve balances, (iii) administrative cost allowance from RPTTF, (iv) non-administrative RPTTF (but only to the extent no other funding source is available or when payment from property tax revenues is required by an enforceable obligation or otherwise required under the Dissolution Act), or (v) other funds (including rents, concessions, asset sale proceeds, interest earnings, and any other revenues derived from the former redevelopment agency, as approved by the oversight board). Other than amounts deposited in the RPTTF and amounts held in funds and accounts under the Indenture, the Successor Agency does not expect to have any other funds available to pay debt service on the Bonds. The Dissolution Act provides that, commencing on the date the first Recognized Obligation Payment Schedule is valid thereunder, only those payments listed in the Recognized Obligation Payment 16

25 Schedule may be made by the Successor Agency from the funds specified in the Recognized Obligation Payment Schedule. Through the period of January 1, 2016 through June 30, 2016, a Recognized Obligation Payment Schedule covering the six-month periods of January 1 through June 30 and July 1 through December 31 must be submitted twice a year by the Agency (after approval by the Oversight Board), to the County Administrative Officer, the County Auditor-Controller, the State Department of Finance, and the State Controller by 90 days before the date of the next January 2 or June 1 property tax distribution. Commencing with the Recognized Obligation Payment Schedule covering the 12-month period from July 1, 2016, to June 30, 2017, inclusive, and for each period from July 1 to June 30, inclusive, thereafter, a successor agency shall submit an oversight board-approved Recognized Obligation Payment Schedule to the DOF and to the county auditor-controller no later than February 1, 2016, and each February 1 thereafter. The DOF must make its determination of the enforceable obligations and the amounts and funding sources of the enforceable obligations no later than April 15, 2016, and each April 15 thereafter. Within five business days of the DOF s determination, a successor agency may request additional review by the DOF and an opportunity to meet and confer on disputed items, except for those items which are the subject of litigation disputing the DOF s previous or related determination. An untimely submittal of a 12-month Recognized Obligation Payment Schedule may result in a meet and confer period of less than 30 days. The DOF must notify a successor agency and the county auditorcontroller as to the outcome of its review at least 15 days before the date of the first property tax distribution for that period. See Recent Changes to Dissolution Act below. If the Successor Agency does not submit an oversight board-approved Recognized Obligation Payment Schedule by such deadlines, the City will be subject to a civil penalty equal to $10,000 per day for every day the schedule is not submitted to the State Department of Finance. Additionally, the successor agency s administrative cost allowance is reduced by 25% if the successor agency does not submit an oversight board-approved Recognized Obligation Payment Schedule within 10 days of the applicable deadline. For additional information regarding procedures under the Dissolution Act relating to late Recognized Obligation Payment Schedules and implications thereof on the Bonds, see RISK FACTORS Recognized Obligation Payment Schedule. The County Auditor-Controller may review a submitted Recognized Obligation Payment Schedule and object to the inclusion of any items that are not demonstrated to be enforceable obligations and may object to the funding source proposed for any items, provided that the County Auditor- Controller must provide notice of any such objections to the successor agency, the oversight board, and the State Department of Finance at least 60 days prior to the January 2 or June 1 date of property tax distribution, as applicable. In connection with the allocation and distribution by the County Auditor-Controller of property tax revenues deposited in the RPTTF, under the Dissolution Act the County Auditor-Controller must prepare estimates of the amounts of (i) property tax to be allocated and distributed and (ii) the amounts of pass-through payments to be made in the upcoming six-month period, and provide those estimates to the entities receiving the distributions and the State Department of Finance no later than October 1 and April 1 of each year, as applicable. With respect to the Recognized Obligation Payment Schedule for January 1, 2016 through June 30, 2016, the County Auditor-Controller must provide such estimate to the Agency by October 1, If, after receiving such estimate from the County Auditor-Controller, the successor agency determines and reports, no later than December 1 or May 1, as applicable (e.g.., by December 1, 2015 with respect to the Recognized Obligation Payment Schedule for January 1, 2016 through June 30, 2016), that the total amount available to the Successor Agency from the RPTTF allocation to the Successor Agency s Redevelopment Obligation Retirement Fund, from other funds 17

26 transferred from the Former Agency, and from funds that have or will become available through asset sales and all redevelopment operations, is insufficient to fund the payment of pass-through obligations, for successor agency enforceable obligations listed on the Recognized Obligation Payment Schedule, and for the Successor Agency s administrative cost allowance, the County Auditor-Controller must notify the State Controller and the State Department of Finance no later than 10 days from the date of the successor agency s notification. If the State Controller concurs that there are insufficient funds to pay required debt service, the Dissolution Act provides for certain adjustments to be made to the estimated distributions, as described in more detail under SECURITY FOR THE BONDS Tax Increment Financing above. Beginning January 1, 2016, successor agencies may submit a Last and Final Recognized Obligation Payment Schedule for approval at any time by the oversight board and the DOF if all of the following conditions are met: (1) the remaining debt of a successor agency is limited to administrative costs and payments pursuant to enforceable obligations with defined payment schedules including, but not limited to, debt service, loan agreements, and contracts; (2) all remaining obligations have been previously listed on a Recognized Obligation Payment Schedule and approved for payment by the DOF; and (3) the successor agency is not a party to outstanding or unresolved litigation. All Last and Final Recognized Obligation Payment Schedules approved by the DOF will become effective on the first day of the subsequent Redevelopment Property Tax Trust Fund distribution period. If the Last and Final Recognized Obligation Payment Schedule is approved less than 15 days before the date of the property tax distribution, the Last and Final Recognized Obligation Payment Schedule will not be effective until the subsequent Redevelopment Property Tax Trust Fund distribution period. Upon approval by the DOF, the Last and Final Recognized Obligation Payment Schedule will establish the maximum amount of Redevelopment Property Tax Trust Funds to be distributed to a successor agency for each remaining fiscal year until all obligations have been fully paid. Successor agencies may submit no more than two requests to the DOF to amend the approved Last and Final Recognized Obligation Payment Schedule. If a successor agency receives insufficient funds to pay for the enforceable obligations approved in the Last and Final Recognized Obligation Payment Schedule in any given period, the city, county, or city and county that created the redevelopment agency may make an interest free loan or grant funds to a successor agency for that period at the successor agency s request for the sole purpose of paying for approved items on the Last and Final Recognized Obligation Payment Schedule that would otherwise go unpaid. Additionally, at the request of the DOF, the county treasurer may make an interest free loan from the county treasury to the Redevelopment Property Tax Trust Fund of the successor agency for the purpose of paying an item approved on the Last and Final Recognized Obligation Payment Schedule in order to ensure prompt payments of successor agency debts. Any loan made for such purpose shall be repaid from the source of funds approved for payment of the underlying enforceable obligation in the Last and Final Recognized Obligation Payment Schedule once sufficient funds become available from that source. See Recent Changes to Dissolution Act below. The Dissolution Act provides that any bonds authorized thereunder to be issued by the successor agency will be considered indebtedness incurred by the dissolved Former Agency, with the same legal effect as if the bonds had been issued prior to effective date of AB X1 26, in full conformity with the applicable provision of the Redevelopment Law that existed prior to that date, and will be included in the Successor Agency s Recognized Obligation Payment Schedule. Section (f) of the Dissolution Act additionally provides that if the State Department of Finance has requested review of the Oversight Board Resolution and, after review, has approved the resolution, the scheduled payments on the Bonds shall be listed in the Recognized Obligation Payment Schedule and will not be subject to further review and approval by the State Department of Finance or the State Controller. 18

27 The Successor Agency has covenanted in the Indenture to comply with all of the requirements of the Dissolution Act and to take all actions required under the Dissolution Act to prepare and file Recognized Obligation Payment Schedules so as to enable the County Auditor-Controller to distribute from the RPTTF for deposit in the Redevelopment Obligation Retirement Fund all amounts as shall be required to enable the Successor Agency to pay timely principal of, and interest on, the Bonds and all outstanding Parity Debt coming due in such Bond Year. Without limiting the generality of the foregoing paragraph, the Successor Agency shall take all actions required under the Redevelopment Law and Dissolution Act to include in each Recognized Obligation Payment Schedule, to the maximum extent permitted: (i) all debt service due on the Bonds and any Parity Debt due in that calendar year (the Current Year Debt Service ), and (ii) any amounts required to replenish the Reserve Account (as defined herein) to the Reserve Requirement on any reserve funds established thereunder to the applicable reserve requirement thereunder. The Successor Agency shall further take all actions required under the Redevelopment Law and Dissolution Act to include in each Recognized Obligation Payment Schedule: (i) all amounts required to make any remaining payments due on the Current Year Debt Service, if any, and (ii) any amounts required to replenish the Reserve Account to the Reserve Requirement on any reserve funds established thereunder to the applicable reserve requirement thereunder. Recent Changes to Dissolution Act On September 22, 2015, the Governor signed SB 107 to be effective immediately, which, among other things, amends the Dissolution Act as follows: Annual Recognized Obligation Payment Schedule. Recognized Obligation Payment Schedules will be prepared for a 12-month fiscal year period instead of each six months. Commencing with the Recognized Obligation Payment Schedule covering the period from July 1, 2016, to June 30, 2017, inclusive, and for each period from July 1 to June 30, inclusive, thereafter, a successor agency shall submit an oversight board-approved Recognized Obligation Payment Schedule to the Department of Finance and to the county auditor-controller no later than February 1, 2016, and each February 1 thereafter. The Department of Finance must make its determination of the enforceable obligations and the amounts and funding sources of the enforceable obligations no later than April 15, 2016, and each April 15 thereafter. Within five business days of the department s determination, a successor agency may request additional review by the department and an opportunity to meet and confer on disputed items, except for those items which are the subject of litigation disputing the department s previous or related determination. An untimely submittal of a Recognized Obligation Payment Schedule may result in a meet and confer period of less than 30 days. The department shall notify the successor agency and the county auditor-controller as to the outcome of its review at least 15 days before the date of the first property tax distribution for that period. See Recognized Obligation Payment Schedules above. A successor agency would be permitted to submit one amendment to an annual Recognized Obligation Payment Schedule that was previously approved by the Department of Finance no later than October 1 of the year in which such annual Recognized Obligation Payment Schedule was submitted to the Department of Finance if its oversight board finds that a revision to an annual Recognized Obligation Payment Schedule is necessary for the payment of approved enforceable obligations during the upcoming January 1 through June 30 component of such Recognized Obligation Payment Schedule cycle. Last and Final Recognized Obligation Payment Schedule. Successor agencies may submit a Last and Final Recognized Obligation Payment Schedule beginning January 1, The Last and Final Recognized Obligation Payment Schedule process will be available only to successor agencies that are not parties to outstanding or unresolved litigation, the successor agency s remaining debt is limited to 19

28 administrative costs and enforceable obligations that have defined payment schedules and have been previously listed and approved for payment in an earlier Recognized Obligation Payment Schedule. If approved by the Department of Finance, the Last and Final Recognized Obligation Payment Schedule will be binding on all parties and the Agency will no longer need to submit a Recognized Obligation Payment Schedule to the Department of Finance or the oversight board. The applicable county auditorcontroller will remit the authorized funds to the successor agency in accordance with the approved Last and Final Recognized Obligation Payment Schedule until each remaining enforceable obligation has been fully paid. See Recognized Obligation Payment Schedules above. Redevelopment Plan Time and Fiscal Limits. The legislation provides that solely for the purpose of approved enforceable obligations, redevelopment plan time limits and tax increment caps do not apply. Limits to Administrative Costs and Administrative Allowance. For fiscal years beginning July 1, 2016 SB 107 limits successor agency s administrative allowance to 3.0% or the actual property tax distributed to the successor agency by the county auditor-controller in the preceding fiscal year for payment of approved enforceable obligations, minus the successor agency s administrative cost allowance and loan repayments made to the sponsoring jurisdiction during the preceding fiscal year. In addition to the limit on administrative allowance, SB 107 also limits the annual administrative cost to 50.0% of the total Redevelopment Property Tax Trust Fund distributed to the successor agency to pay enforceable obligations in the prior fiscal year. Findings of Completion. SB 107 allows successor agencies that enter into a written payment agreement with the Department of Finance to remit their unencumbered redevelopment agency cash assets to the county auditor-controller to receive a finding of completion. If a successor agency fails to pay or enter into such a written payment agreement by December 31, 2015, the successor agency would be prohibited from ever receiving a finding of completion from the Department of Finance. Stranded 2011 Bond Proceeds. For successor agencies with a finding of completion, SB 107 establishes a tiered process whereby they may expend a portion of stranded fiscal year 2011 bond proceeds. The unused portions of such bond proceeds are to be used to defease the outstanding bonds in accordance with current law. Highway Infrastructure Improvements. SB 107 provides that agreements entered into prior to June 28, 2011 between the former redevelopment agencies and its sponsoring entity that relate to state highway infrastructure improvements are enforceable obligations of the successor agency. Litigation Expenses. SB 107 clarifies that a sponsoring entity can loan money to a successor agency for litigation expenses associated with challenging dissolution decisions and those loaned amounts may be repaid as an enforceable obligation if the litigation is successful. The Agency does not anticipate, but cannot guarantee, that the recent amendments to the Dissolution Act will adversely affect the ability of the Agency to pay debt service on the Bonds. In addition, the Agency cannot guarantee that future changes in State law will not materially and adversely impact the Agency s ability to repay the Bonds or repay the Bonds in a timely manner. See RISK FACTORS Changes in the Law. Reserve Account Pursuant to the Indenture, a reserve account (the Reserve Account ) is established with respect to the Bonds and any Parity Debt, and will be held by the Trustee in trust for the benefit of the Successor Agency and the registered owners of the Bonds and any Parity Debt. The amount on deposit in the 20

29 Reserve Account is required to be maintained at an amount equal to the Reserve Requirement, which is defined in the Indenture to mean the lesser of (i) 125% of the average Annual Debt Service with respect to the Bonds and Parity Debt, as applicable, or (ii) Maximum Annual Debt Service with respect to the Bonds and Parity Debt, as applicable. The Indenture authorizes the Successor Agency to satisfy the Reserve Requirement by crediting to such Reserve Account moneys and/or a Qualified Reserve Account Credit Instrument meeting the requirements set forth in the Indenture. See APPENDIX D - SUMMARY OF CERTAIN PROVISIONS OF THE INDENTURE. The Reserve Requirement for the Bonds will be satisfied by a Municipal Bond Debt Service Reserve Account Policy (the Reserve Policy ) issued by Insurer on the Closing Date with respect to the Bonds. The Successor Agency will have no obligation to replace the Reserve Policy, to fund the Reserve Account with cash or to take any other action with respect to the Reserve Policy if, at any time that the Bonds are Outstanding, the ratings assigned to the Insurer are lowered or withdrawn or amounts are not available under the Reserve Policy other than in connection with a draw on the Reserve Policy. Issuance of Parity Debt The Indenture provides that the Successor Agency may issue or incur Parity Debt secured by a pledge of Tax Revenues on a parity with Outstanding Bonds exclusively for the purpose of refunding a portion of the Outstanding Bonds, if (a) annual debt service on such Parity Debt, as applicable, is lower than annual debt service on the obligations being refunded during every year they will be Outstanding, and (b) the final maturity of any such Parity Debt does not exceed the final maturity of the obligations being refunded. So long as the Bonds remain Outstanding, the Successor Agency may not issue any additional notes, bonds or other obligations which are secured by a pledge of the Tax Revenues on a basis which is senior to the Bonds. PROPERTY TAXATION IN CALIFORNIA Constitutional Amendments Affecting Tax Revenues Tax Revenues include a portion of the ad valorem taxes levied on real property within the Project Area. Article XIIIA of the California Constitution limits the amounts of ad valorem tax on real property to 1% of full cash value as determined by the county assessor. Article XIIIA defines full cash value to mean the County Assessor s valuation of real property as shown on the 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 period. Furthermore, all real property valuation may be increased to reflect the inflationary rate, as shown by the consumer price index, not to exceed 2% per year, or may be reduced in the event of declining property values caused by damage, destruction or other factors. Article XIIIA exempts from the 1% tax limitation any taxes to repay indebtedness approved by the voters prior to July 1, 1978, and any bonded indebtedness for the acquisition or improvement of real property approved on or after July 1, 1978 by two-thirds of the voters voting on the proposition approving such bonds, and requires a vote of two-thirds of the qualified electorate to impose special taxes, while totally precluding the imposition of any additional ad valorem, sales or transaction tax on real property. In addition, Article XIIIA requires the approval of two-thirds of all members of the State legislature to change any State tax law resulting in increased tax revenues. 21

30 Article XIIIB of the California Constitution limits the annual appropriations from the proceeds of taxes of the State and any city, county, school district, authority or other political subdivision of the State to the level of appropriations for the prior fiscal year, as adjusted for changes in the cost of living, population and services rendered by the governmental entity. Article XIIIB includes a requirement that if an entity s revenues in any year exceed the amount permitted to be spent, the excess would have to be returned by revising tax or fee schedules over the subsequent two years. Section of the Redevelopment Law provides that the allocation of taxes to a redevelopment agency for the purpose of paying principal of, or interest on, loans, advances or indebtedness incurred for redevelopment activity shall not be deemed the receipt by such agency of proceeds of taxes within the meaning of Article XIIIB, nor shall such portion of taxes be deemed receipt of proceeds of taxes by, or any appropriation subject to the limitation of, any other public body within the meaning or the purpose of the Constitution and laws of the State, including Section of the Redevelopment Law. Two California appellate court decisions have upheld the constitutionality of Section 33678, and in the one case in which a petition for review was filed in the California Supreme Court, such petition was denied. Implementing Legislation Legislation enacted by the California Legislature to implement Article XIIIA (Statutes of 1978, Chapter 292, as amended) provides that, notwithstanding any other law, local agencies may not levy any property tax, except to pay debt service on indebtedness approved by the voters prior to July 1, 1978, and that each county will levy the maximum tax permitted by Article XIIIA of $4.00 per $100 assessed valuation (based on the traditional practice of using 25% of full cash value as the assessed value for tax purposes). The legislation further provided that, for Fiscal Year only, the tax levied by each county was to be appropriated among all taxing agencies within the county in proportion to their average share of taxes levied in certain previous years. Effective as of the Fiscal Year, assessors in California no longer record property values in the tax rolls at the assessed value of 25% of market values. All taxable property value is shown at full market value. In conformity with this change in procedure, all taxable property value included in this Official Statement (except as noted) is shown at 100% of market value and all general tax rates reflect the $1 per $100 of taxable value. Future assessed valuation growth allowed under Article XIIIA (i.e., new construction, change of ownership, and 2% annual value growth) will be allocated on the basis of situs among the jurisdictions that serve the tax rate area within which the growth occurs. Local agencies and schools will share the growth of base revenue from the tax rate area. Each year s growth allocation becomes part of each agency s allocation in the following year. The Successor Agency is unable to predict the nature or magnitude of future revenue sources which may be provided by the State to replace lost property tax revenues. Article XIIIA effectively prohibits the levying of any other ad valorem property tax above those described above, even with the approval of the affected voters. Constitutional Challenges to Property Tax System There have been many challenges to Article XIIIA of the California Constitution. The United States Supreme Court heard the appeal in Nordlinger v. Hahn, a challenge relating to residential property. Based upon the facts presented in Nordlinger, the United States Supreme Court held that the method of property tax assessment under Article XIIIA did not violate the federal Constitution. The Successor Agency cannot predict whether there will be any future challenges to California s present system of property tax assessment and cannot evaluate the ultimate effect on the Successor Agency s receipt of Tax Revenues should a future decision hold unconstitutional the method of assessing property. 22

31 Property Tax Collection Procedures In California, property that is subject to ad valorem taxes is classified as secured or unsecured. The secured classification includes property on which any property tax levied by a county becomes a lien on that property sufficient, in the opinion of the county assessor, to secure payment of the taxes. Every tax levied by a county that becomes a lien on secured property has priority over all present and future private liens arising pursuant to State law on the secured property, regardless of the time of the creation of the other liens. A tax levied on unsecured property does not become a lien against the taxed unsecured property, but may become a lien on other property owned by the taxpayer. Secured and unsecured property are entered on separate parts of the assessment roll maintained by the county assessor. The payment of delinquent taxes with respect to property on the secured roll may be enforced only through the sale of the property securing the taxes to the State for the amount of taxes that are delinquent. Such property may thereafter be redeemed by payment of the delinquent taxes and penalties. Unsecured personal property taxes may be collected, in the absence of timely payment by the taxpayer, through (1) a civil action against the taxpayer; (2) filing a certificate of delinquency for record in the county recorder s office, in order to obtain a lien on property of the taxpayer; (3) seizure and sale of personal property, improvements or possessory interests belonging or assessed to the taxpayer; and (4) filing a certificate in the office of the county clerk specifying certain facts in order to obtain a judgment lien on certain property of the taxpayer. Except for property assessed by the State, the valuation of taxable property is determined as of January 1 each year, and equal installments of taxes levied upon secured property become delinquent on the following December 10 and April 10. Taxes on unsecured property are due February 1 and become delinquent August 31, and such taxes are levied at the prior year s secured tax rate. The valuation of State-assessed property is determined on January 1 of each year. The County has implemented the Alternative Method of Distribution of Tax Levies and Collections and of Tax Sale Proceeds (the Teeter Plan ), which allows each entity levying property taxes in the County to draw on the amount of property taxes levied rather than the amount actually collected. Therefore, the Successor Agency s tax increment revenues reflect actual levies rather than the total amount of taxes collected. Supplemental Assessments A bill enacted in 1983, SB 813 (Statutes of 1983, Chapter 498) provides for the supplemental assessment and taxation of property as of the occurrence of a change of ownership or completion of new construction. Previously, statutes enabled the assessment of such changes only as of the next tax lien date following the change, and thus delayed the realization of increased property taxes from the new assessments for up to 14 months. As enacted, Chapter 498 provides increased revenue to redevelopment agencies to the extent that supplemental assessments as a result of new construction or changes of ownership occur within the boundaries of redevelopment projects subsequent to the lien date. To the extent such supplemental assessments occur within the Project Area, Tax Revenues may increase. Tax Collection Fees SB 2557 enacted in 1990 (Statutes of 1990, Chapter 466), authorized county auditors to determine property tax administration costs proportionately attributable to local jurisdictions and to submit invoices to the jurisdictions for such costs. Subsequent legislation, SB 1559 (Statutes of 1992, Chapter 697), specifically includes redevelopment agencies among entities subject to a property tax administration charge. In addition, Sections 34182(e) and 34183(a) of the Dissolution Act allow 23

32 administrative costs of the County Auditor-Controller for the cost of administering the provisions of the Dissolution Act, as well as the foregoing SB 1559 amounts, to be deducted from property tax revenues before monies are deposited into the RPTTF. The projections of tax revenues take such administrative costs into account. Rate of Collections The County has adopted the Alternative Method of Distribution of Tax Levies and Collections and of Tax Sale Proceeds (the Teeter Plan ) with respect to secured property taxes. Consequently, secured property tax revenues in the Project Area does not reflect actual collections because the County allocates property tax revenues to the Successor Agency as if 100% of the calculated property taxes were collected without adjustment for delinquencies or redemption payments. However, the County adjusts secured property tax revenues in the Project Areas for roll corrections, such as refunds of property taxes due to successfully appealed assessments. The County could elect to terminate the Teeter Plan and, in such event, the amount of the levy of secured property tax revenue that could be allocated to the Successor Agency would depend upon the actual collections of the secured taxes within the Project Area. Substantial delinquencies in the payment of property taxes could impair the timely receipt by the Successor Agency of Tax Revenues. The County has not adopted the Teeter Plan with respect to unsecured property taxes and therefore, unsecured property tax revenues in the Project Areas reflect actual collections on a county-wide basis and roll corrections. Unitary Property Tax AB 454 (Statutes of 1987, Chapter 921) provides a revised method of reporting and allocating property tax revenues generated from most State-assessed unitary properties commencing with Fiscal Year Under AB 454, the State reports to each county auditor-controller only the county-wide unitary taxable value of each utility, without an indication of the distribution of the value among tax rate areas. AB 454 provides two formulas for auditor-controllers to use in order to determine the allocation of unitary property taxes generated by the county-wide unitary value, which are: (i) for revenue generated from the 1% tax rate, each jurisdiction is to receive up to 102% of its prior year unitary property tax increment revenue; however, if county-wide revenues generated from unitary properties are greater than 102% of prior year revenues, each jurisdiction receives a percentage share of the excess unitary revenues equal to the percentage of each jurisdiction s share of secured property taxes; (ii) for revenue generated from the application of the debt service tax rate to county-wide unitary taxable value, each jurisdiction is to receive a percentage share of revenue based on the jurisdiction s annual debt service requirements and the percentage of property taxes received by each jurisdiction from unitary property taxes. The provisions of AB 454 apply to all State-assessed property, except railroads and non-unitary properties the valuation of which will continue to be allocated to individual tax rate areas. The provisions of AB 454 do not constitute an elimination or a revision of the method of assessing utilities by the State Board of Equalization. AB 454 allows, generally, valuation growth or decline of State-assessed unitary property to be shared by all jurisdictions within a county. Business Inventory and Replacement Revenue Prior to 1979, the State reimbursed cities, counties, special districts and redevelopment agencies that portion of taxes which would have been generated by the exempted portion of business inventory value (50%). In 1979, the California Legislature enacted AB 66 (Statutes of 1979, Chapter 1150), eliminating the assessment and taxation of business inventory property and providing for replacement 24

33 revenue for local agencies, except redevelopment agencies. In 1980, the California Legislature enacted AB 1994 (Statutes of 1980, Chapter 610), providing partial replacement revenue for the loss of business inventory revenues by redevelopment agencies. In 1990, the California Legislature amended Section of the California Government Code (Chapter 449, Statutes of 1990) which precludes redevelopment agencies from pledging special subvention revenues toward the payment of debt service for bonded indebtedness incurred after July 31, 1990 (the effective date of the legislation). The State Budget reduced the State s funding for the special subvention. As enacted under AB 222 (Chapter 188, Statutes of 1991), the Budget Act eliminated subvention payments for most redevelopment projects, including the Project Area. Additionally, the State Budget implemented further cuts in funding for the State s special subvention to redevelopment agencies. As a result, these revenues are not included in the projections of estimated tax revenues. Future Initiatives Article XIIIA and Article XIIIB were adopted as measures that qualified for the ballot pursuant to California s initiative process. From time to time other initiative measures could be adopted, further affecting revenues of the Successor Agency or the Successor Agency s ability to expend revenues. The nature and impact of these measures cannot be anticipated by the Successor Agency. Redevelopment Plan Limitations AB In 1993, the California Legislature made significant changes in the Redevelopment Law by the adoption of AB 1290, Chapter 942, statutes of 1993 ( AB 1290 ). Among the changes to the Redevelopment Law accomplished by the enactment of AB 1290 was a provision that specified that the effectiveness of a redevelopment plan adopted after 1993 shall expire 30 years from the date of adoption of the Redevelopment Plan. The time limit for establishing indebtedness is 20 years from the date of adoption of the redevelopment plan and the Former Agency may repay indebtedness for a total of 45 years from the date of the adoption of the redevelopment plan. Any eminent domain proceedings undertaken by the Former Agency must be initiated within 12 years of the adoption date of the redevelopment plan. The following chart summarizes the limits in the Project Area; however, SB 107 provides that solely for the purposes of the payment of enforceable obligations, a successor agency is not subject to the limitations relating to time and number of tax dollars. See SECURITY FOR THE BONDS Recent Changes to Dissolution Act. Component Area Debt Incurrence Time Limits Plan Effectiveness Debt Repayment Cumulative Tax Increment (1) Dollar Limits Outstanding Bond Debt Original Area Eliminated June 2, 2028 June 2, 2038 $91,200,000 $70,000,000 Amendment Area July 11, 2027 July 11, 2037 July 11, 2052 No Limit (combined limit for both areas) (1) Cumulative tax increment collected to date that applies to the T.I. Cap is approximately $10.8 million. Based on projected 2% annual assessed valuation growth, the Successor Agency is not projected to reach the cumulative T.I. cap amount prior to the final maturity date of the Bonds. Based on currently proposed legislation, it is possible that cumulative tax increment limits contained in redevelopment plans may be eliminated. Source: The Successor Agency and the Fiscal Consultant. 25

34 THE SUCCESSOR AGENCY TO THE AUBURN URBAN DEVELOPMENT AUTHORITY Former Agency The City Council of the City activated the Former Agency in 1986 with the adoption of an Ordinance pursuant to the Redevelopment Law. Under that ordinance the City Council declared itself to be the governing body of the Former Agency. The City Manager served as the Former Agency s Executive Director, and many other staff members of the City also functioned as staff members of the Former Agency. However, the Former Agency was a separate public body from the City. Establishment of Successor Agency On June 29, 2011, AB X1 26 was enacted as Chapter 5, Statutes of 2011, together with a companion bill, AB X1 27. A lawsuit was brought in the California Supreme Court, California Redevelopment Association, et al. v. Matosantos, et al., 53 Cal. 4th 231 (Cal. 2011), challenging the constitutionality of AB X1 26 and AB X1 27. In its December 29, 2011 decision, the California Supreme Court largely upheld AB X1 26, invalidated AB X1 27, and held that AB X1 26 may be severed from AB X1 27 and enforced independently. As a result of AB X1 26 and the decision of the California Supreme Court in the California Redevelopment Association case, as of February 1, 2012, all redevelopment agencies in the State were dissolved, including the Former Agency. The City Council elected to become the Successor Agency for the Former Agency. The Successor Agency is governed by a five-member governing board whose members are the same as the City Council. The City Manager serves as the Executive Director of the Successor Agency, the City Attorney serves as Successor Agency General Counsel and the City Finance Director serves the same function and Treasurer for the Successor Agency. Upon the Former Agency s dissolution, all of the Former Agency s assets, properties, contracts, leases, books and records, buildings, and equipment were transferred to the control of the Successor Agency by operation of law. Agency Powers and Duties All powers of the Successor Agency are vested in its board members. Pursuant to the Dissolution Act, the Successor Agency is a separate public body from the City and succeeds to the organizational status of the Former Agency but without any legal authority to participate in redevelopment activities, except to complete any work related to an approved enforceable obligation. The Successor Agency is tasked with expeditiously winding down the affairs of the Former Agency, pursuant to the procedures and provisions of the Dissolution Act. Under the Dissolution Act, there are numerous instances where the Successor Agency s actions are subject to approval by the oversight board, as well as review by the State Department of Finance. The State has strict laws regarding public meetings (known as the Ralph M. Brown Act) which generally make all Successor Agency and oversight board meetings open to the public in a similar manner as City Council meetings. Under a State initiative enacted in 1974, public officials are required to make extensive disclosures regarding their financial interests by filing such disclosures as public records. As of the date of this Official Statement, the members of the oversight board and the Successor Agency, and Successor Agency officials are required to make such filings. 26

35 Previously, Section of the Redevelopment Law required the Former Agency to file not later than the first day of October of each year with the County Auditor of a statement of indebtedness certified by the chief fiscal officer of the Former Agency for each redevelopment plan which provides for the allocation of taxes (i.e., the Redevelopment Plan). The statement of indebtedness was required to contain the date on which the bonds were delivered, the principal amount, term, purposes and interest rate of the bonds and the outstanding balance and amount due on the bonds. Similar information was required to be given for each loan, advance or indebtedness that the Former Agency had incurred or entered into which is payable from tax increment. Section also provided that payments of tax increment revenues from the County Auditor to the Former Agency could not exceed the amounts shown on the Former Agency s statement of indebtedness. The Dissolution Act eliminates this requirement and provides that, commencing on the date the first Recognized Obligation Payment Schedule is valid thereunder, the Recognized Obligation Payment Schedule supersedes the statement of indebtedness previously required under the Redevelopment Law, and commencing from such date, the statement of indebtedness will no longer be prepared nor have any effect under the Redevelopment Law (see SECURITY FOR THE BONDS Recognized Obligation Payment Schedules ). The Successor Agency is required to continue to make payments for enforceable obligations (as defined under the Dissolution Act) and to prepare a Recognized Obligation Payment Schedule twice a year, listing the payments for enforceable obligations that the Successor Agency is expected to make for the upcoming six-month Recognized Obligation Payment Schedule period. Subdivision (e) of Section of the Dissolution Act states that that the liability of the Successor Agency, acting pursuant to the powers granted under the Dissolution Act, is limited to the extent of the total sum of property tax revenues it receives pursuant to the Dissolution Act and the value of assets transferred to it as a Successor Agency for the Former Agency. General THE PROJECT AREA The Project Area includes approximately 221 acres in the Original Area and 437 acres in the Amendment Area, for a total area of 658 acres. The Original Area includes two sub-areas. The first subarea consists of approximately 177 acres and includes both the old town and the downtown portion of the City. The old town area is generally bounded by Maple Street to the north and High Street to the south and runs along Lincoln Way, Washington Street and Sacramento Street. The downtown area runs along High Street from Pine Street to Elm Avenue. Sub-area two consists of approximately 43 acres of land along State Highway 49 north of Interstate 80. The land uses of both areas are primarily commercial development, with pockets of residential uses. The Amendment Area is also split into two sub-areas. The first area generally runs along Nevada Street from the 1-80 freeway north to the City boundary. It also encompasses certain properties along State Highway 49 that were not included in the Original Area. The second sub-area runs south along Auburn Folsom Road. The Amendment Area contains commercial, residential, and industrial uses. Shown in the table below are land uses in the Project Area, according to fiscal year secured assessed value. 27

36 TABLE 1 AUBURN REDEVELOPMENT PROJECT AREA Land Use by Secured Assessed Value Fiscal Year Land Use Category Parcels Assessed Value (1) % of Total Commercial 314 $138,552, % Single Family Residential ,629, % Multi-family Residential 79 24,378, % Industrial 25 16,763, % Vacant Commercial 50 2,678, % Vacant Governmental / Institutional/Other 133 1,729, % Governmental/Institutional/Other 76 1,622, % Recreational , % Vacant Industrial 5 200, % Agricultural 3 79, % Vacant Residential 1 71, % Vacant Agricultural 1 17, % Total 868 $216,560, % (1) Net of applicable exemptions. Source: Fiscal Consultant, with information from the Placer County Secured Property Tax Roll. The table below represents a summary of the ten largest local taxpayers by secured assessed valuation in the Project Area for Fiscal Year TABLE 2 AUBURN REDEVELOPMENT PROJECT AREA Largest Local Property Taxpayers Fiscal Year Property Owner Primary Land Use Assessed Valuation % of Total Assessed Valuation (1) Reneson Hotels Inc Commercial $7,747, % 1616 I Street Properties Commercial 3,500, % Ammm LP Commercial 3,482, % Mbdh Enterprises LLC Industrial 3,440, % Lee Cameron Multifamily Residential 3,222, % Sacramento Outing Farms Commercial 3,135, % Auburn Promenade Ltd Commercial 3,085, % Placer Title Company Commercial 2,878, % Auburn Uptown Properties LLC Commercial 2,648, % Auburn Investors LLC Commercial 2,550, % Total 10 Largest Taxpayers $35,690, % (1) Based on fiscal year secured assessed valuation of $216,560,587 Source: Fiscal Consultant, with information from the Placer County Secured Property Tax Roll. 28

37 Historical Assessed Valuation and Tax Revenues The table below set forth historical summary of the Project Area s taxable valuations for Fiscal Years through Fiscal Year TABLE 3 AUBURN REDEVELOPMENT PROJECT AREA Original Project Area and Amendment Area Historical Assessed Valuation Secured Value Unsecured Value Utility Total Taxable Value Percent Change Total Incremental Value (1) $ 227,050,399 $ 22,508,470 $ 1,501,500 $ 251,060, % $ 97,056, ,482,997 22,978,305 1,501, ,962, % 76,958, ,631,791 20,881,720 1,501, ,015, % 72,010, ,386,642 24,405,892 1,501, ,294, % 71,289, ,218,838 22,897,240 1,930, ,046, % 78,042, ,825,191 21,087,293 1,930, ,842, % 71,838, ,630,087 20,563,661 1,930, ,124, % 83,120,104 (1) The base year assessed valuation for the Original Project Area is $52,228,998; the base year assessed valuation for the Amendment Area is $101,775,146. Source: Fiscal Consultant. Fiscal Year Secured Value Original Project Area Historical Assessed Valuation Unsecured Value Utility Total Taxable Value Percent Change Total Incremental Value (1) $ 124,750,425 $ 14,025,554 $ 1,501,500 $ 140,277, % $ 88,048, ,211,543 14,663,711 1,501, ,376, % 75,147, ,874,405 12,300,223 1,501, ,676, % 69,447, ,104,841 13,320,527 1,501, ,926, % 69,697, ,762,654 11,811,237 1,930, ,504, % 74,275, ,289,307 11,231,373 1,930, ,451, % 76,222, ,825,371 10,941,116 1,930, ,696, % 82,467,989 Source: Fiscal Consultant. Fiscal Year Secured Value Amendment Area Historical Assessed Valuation Unsecured Value Utility Total Taxable Value Percent Change Total Incremental Value (1) $ 102,299,974 $ 8,482,916 - $ 110,782, % $ 9,007, ,271,454 8,314, ,586, % 1,810, ,757,386 8,581, ,338, % 2,563, ,281,801 11,085, ,367, % 1,592, ,456,184 11,086, ,542, % 3,767, ,535,884 9,855,920-97,391, % ,804,716 9,622, ,427, % 652,115 Source: Fiscal Consultant. 29

38 Tax Assessment Appeals Proposition 8 Appeals. Most of the appeals that might be filed in the Project Area would be based on Section 51 of the Revenue and Taxation Code, which requires that for each lien date the value of real property shall be the lesser of its base year value annually adjusted by the inflation factor under Article XIIIA of the State Constitution or its full cash value, taking into account reductions in value due to damage, destruction, depreciation, obsolescence, removal of property or other factors causing a decline in value. Under California law, property owners may apply for a reduction of their property tax assessment by filing a written application, in form prescribed by the State Board of Equalization, with the appropriate county board of equalization or assessment appeals board. In most cases, the appeal is filed because the applicant believes that present market conditions (such as residential home prices) cause the property to be worth less than its current assessed value. These market-driven appeals are known as Proposition 8 appeals. Any reduction in the assessment ultimately granted as a Proposition 8 appeal applies to the year for which application is made and during which the written application was filed. These reductions are often temporary and are adjusted back to their original values when market conditions improve. Once the property has regained its prior value, adjusted for inflation, it once again is subject to the annual inflationary factor growth rate allowed under Article XIIIA. The State Board of Equalization has approved this reassessment formula and such formula has been used by county assessors statewide. The reassessment formula was approved by the California of Appeal, Fourth District, in the case of County of Orange et al. v Bezaire, petition for review to the California Supreme Court denied. Reductions made under this code section may be initiated by the county assessor. No such proposition 8 reduction was announced for roll year Project Area Proposition 8 Appeals. In connection with its delivery of the Fiscal Consultant Report (a copy of which is attached to this Official Statement as Appendix A), the Fiscal Consultant researched the status of outstanding assessment appeals filed in the Project Area. Based on information obtained from the Placer County, the Fiscal Consultant compiled the following information regarding assessment appeals outstanding as of September 1, 2015, and a five year history (from January 1, 2010 through September 1, 2015) of allowed appeals, for the Project Area. TABLE 4 AUBURN REDEVELOPMENT PROJECT AREA Historical Assessment Appeals For Closed Appeals from January 1, 2010 through September 1, 2015 No. of Appeals Filed No. of Successful Appeals Assessed Value of Property Owner s Opinion of Value Total Reduction Requested Reduction Allowed Allowed Reduction as Percentage (1) 29 5 $69,749,500 $43,933,465 $25,816,035 $14,771, % (1) Equals Reduction Allowed divided by Total Reduction Requested. Source: Fiscal Consultant, based on information from Placer County. Based upon actual valuation reductions allowed by the Placer County Appeals Board for the period from January 1, 2010 through September 1, 2015, the Fiscal Consultant estimates that (as of September 1, 2015) there are 3 current appeals pending in the Project Area representing real property with a total assessed valuation of $3,614,999 (see Exhibit E of the Fiscal Consultant Report). Based on the property owner s opinion of value in the amount of $2,566,500, and based on the historical success rate of 30

39 57.22% for requested reductions, resolution of the current appeals could potentially result in a valuation reduction in the Project Area of approximately $605,647, which could then result in a reduction to Tax Revenues of approximately $5,193. The projections of Tax Revenues prepared by the Fiscal Consultant and set forth in the section of this Official Statement entitled COVERAGE ANALYSIS do not take into account reductions in assessed value related to pending appeals. See the discussion under the heading RISK FACTORS Reduction in Taxable Value and Effect of Assessment Appeals, as well as APPENDIX A FISCAL CONSULTANT S REPORT for additional information regarding assessment appeals and reductions in taxable assessment valuation. Base Year Appeals. A second type of assessment appeal is called a Base Year appeal, where the property owners challenge the original (basis) value of their property. Appeals for reduction in the base year value of an assessment, if successful, reduce the assessment for the year in which the appeal is taken and prospectively thereafter. The base year is determined by the completion date of new construction or the date of change of ownership. Any base year appeal must be made within four years of the change of ownership or new construction date. Tax Sharing Agreements; Statutory Pass-Through Payments Tax Sharing Agreements. The Successor Agency has entered into four agreements (the Tax Sharing Agreements ) for the allocation and distribution of tax increment funds. The first agreement is with the County and provides for the County to receive 62.5% of the County s share of net revenues (approximately 80% of cumulative tax increment revenues) allocated and paid to the Successor Agency. The second agreement is with the County Library District and provides for the County Library District to receive 62.5% of the County Library District s share of net revenues (approximately 80% of cumulative tax increment revenues) allocated and paid to the Successor Agency. The third agreement is with the Auburn Park District and provides for the Auburn Park District to receive 62.5% of the Auburn Park District s share of net revenues (approximately 80% of cumulative tax increment revenues) allocated and paid to the Successor Agency. The fourth agreement is with the Auburn Cemetery District and provides for the Auburn Cemetery District to receive 62.5% of the Auburn Cemetery District s share of net revenues (approximately 80% of cumulative tax increment revenues) allocated and paid to the Successor Agency. The obligations of the Successor Agency under the Tax Sharing Agreements are subordinate to the Successor Agency s obligation to pay debt service on the Bonds. Statutory Pass-Through Payments. The Project Area was amended to add territory after January 1, 1994 and is therefore subject to the Redevelopment Law as it was amended by passage of AB As amended, the Redevelopment Law required that for project areas adopted or for territory added to an existing project area after January 1, 1994, a prescribed portion of the agency s tax increment revenue must be shared with all taxing entities within the project area. This defined tax-sharing amount has three tiers. The first tier begins with the first year that the project area receives tax increment revenue and continues for the life of the project area. This first tier tax-sharing amount is 25% of the agency s gross tax increment revenue net of the housing set-aside. The second tier begins in the eleventh year after the agency first receives tax increment revenue. This second tier is 21% of the tax increment revenue, net of the housing tax revenues, that is derived from the growth in assessed value that is in excess of the assessed value of the project area in year ten. 31

40 The third tier begins in the 31st year after the agency first receives tax increment revenue. This third tier is 14% of the tax increment revenue, net of the housing tax revenues that is derived from the growth in assessed value that is in excess of the assessed value of the project area in the 30th year. These three tiers of tax sharing are calculated independent of one another and continue from their inception through the life of the project area. See APPENDIX A APPENDIX A FISCAL CONSULTANT REPORT Pass Through Payments Statutory Pass Through Payments for a discussion regarding the formula pursuant to which AB 1290 Payments are calculated. Any payments made by the Successor Agency to satisfy the Statutory Pass-Through Payments are senior to the Tax Revenues available to pay debt service on the Bonds. See COVERAGE ANALYSIS Estimated Debt Service Coverage herein. FINANCIAL STATEMENTS The Successor Agency s financial statements for the Fiscal Year ended June 30, 2014, included in Appendix E hereto, have been audited by Smith & Newell, Certified Public Accountants ( Auditor ). The Auditor has not undertaken to update its report or to take any action intended or likely to elicit information concerning the accuracy, completeness or fairness of the statements made in the Official Statement, and no opinion is expressed by the Auditor with respect to any event subsequent to the date of its report. Estimated Debt Service Coverage COVERAGE ANALYSIS The following table sets forth the estimated Tax Revenues as set forth in Appendix A, together with the estimated debt service coverage for the Bonds. 32

41 TABLE 5 ESTIMATED TAX REVENUES AND DEBT SERVICE COVERAGE RATIO Senior Pass-Through Payments (4) 33 Estimated Tax Revenues Subordinate Pass-Through Payments (5) Fiscal Year AV Growth (1) Gross Tax Revenues (2) County Admin Fees (3) 2015 Debt Service Estimated Coverage $237,124,248 $831,201 $18,286 $100,191 $712,723 $172, $218, ,866, ,626 19, , , , , ,704, ,999 20, , , , , ,638, ,340 21, , , , , ,670,912 1,026,668 22, , , , , ,804,330 1,078,002 23, , , , , ,040,417 1,130,363 24, , , , , ,381,225 1,183,771 26, , , , , ,828,850 1,238,247 27, , , , , ,385,427 1,293,813 28, , , , , ,053,135 1,350,490 29, ,402 1,015, , , ,834,198 1,408,301 30, ,524 1,047, , , ,730,882 1,467,267 32, ,128 1,080, , , ,745,499 1,527,414 33, ,224 1,114, , , ,880,409 1,588,763 34, ,821 1,148, , , ,138,018 1,651,339 36, ,931 1,184, , , ,520,778 1,715,166 37, ,563 1,219, , , ,031,194 1,780,270 39, ,728 1,256, , , ,671,817 1,846,677 40, ,436 1,293, , , ,445,254 1,914,411 42, ,698 1,331, , , ,354,159 1,983,500 43, ,525 1,370, , , ,401,242 2,053,971 45, ,929 1,409, , , ,589,267 2,125,851 46, ,921 1,450, , ,625 (1) Based on assumed 2% annual assessed valuation growth over actual FY AV. (2) Gross Tax Revenues based on 1.00% tax rate applied to incremental AV. (3) County Admin. Fees based on 2.20% of Gross Tax Revenues. (4) Includes and Statutory pass through payments. (5) Includes Agreement payments. Source: Underwriter & Fiscal Consultant.

42 RISK FACTORS Purchase of the Bonds will constitute an investment subject to certain risks, including the risk of nonpayment of principal and interest. Before purchasing any of the Bonds, prospective investors should carefully consider, among other things, the risk factors described below. The following is not meant to be an exhaustive listing of all risks associated with the purchase of the Bonds. Moreover, the order of presentation of the risk factors does not necessarily reflect the order of their importance. Reduction in Taxable Value Tax Revenues allocated to the RPTTF are determined by the amount of incremental taxable value in the Project Area and the current rate or rates at which property in the Project Area is taxed. The reduction of taxable values of property in the Project Area caused by economic factors beyond the Successor Agency s control, such as relocation out of the Project Area by one or more major property owners, sale of property to a non-profit corporation exempt from property taxation, or the complete or partial destruction of such property caused by, among other eventualities, earthquake or other natural disaster, could cause a reduction in the Tax Revenues that provide for the repayment of and secure the Bonds. Such reduction of Tax Revenues could have an adverse effect on the Successor Agency s ability to make timely payments of principal of and interest on the Bonds. As described in greater detail under the heading PROPERTY TAXATION IN CALIFORNIA Constitutional Amendments Affecting Tax Revenues, Article XIIIA provides that the full cash value base of real property used in determining taxable value may be adjusted from year to year to reflect the inflation rate, not to exceed a two percent increase for any given year, or may be reduced to reflect a reduction in the consumer price index, comparable local data or any reduction in the event of declining property value caused by damage, destruction or other factors (as described above). Such measure is computed on a calendar year basis. Any resulting reduction in the full cash value base over the term of the Bonds could reduce Tax Revenues securing the Bonds. In addition to the other limitations on, and required application under the Dissolution Act of Tax Revenues on deposit in the RPTTF, described herein under the heading RISK FACTORS, the State electorate or Legislature could adopt a constitutional or legislative property tax reduction with the effect of reducing Tax Revenues allocated to the RPTTF and available to the Successor Agency. Although the federal and State Constitutions include clauses generally prohibiting the Legislature s impairment of contracts, there are also recognized exceptions to these prohibitions. There is no assurance that the State electorate or Legislature will not at some future time approve additional limitations that could reduce the Tax Revenues and adversely affect the source of repayment and security of the Bonds. Limited Powers and Resources The Successor Agency was created pursuant to the Dissolution Act to wind down the affairs of the Former Agency. The Successor Agency s powers are limited to those granted under the Dissolution Act. The Successor Agency does not have the power to levy property taxes nor does it have the power to participate in redevelopment activities, except as provided in the Dissolution Act. Many actions by the Successor Agency are subject to the review or approval of the oversight board and the State Department of Finance, and, in some cases, the State Controller. Prior to the Dissolution Act, former redevelopment agencies had the ability to retain funds on hand, accumulated from prior years that were available for use to cover short-term cash flow deficits. In 34

43 the event of a delay in the receipt of tax increment in any given year, the former redevelopment agency had the option to use such accumulated funds to make payments on bonds when due. Under the Dissolution Act, the Successor Agency, just like each successor agency formed under the Dissolution Act, is required to obtain prior approval from its oversight board, and the State Department of Finance, in order to pay an enforceable obligation from a source of funds that is different than the one identified on the Recognized Obligation Payment Schedule. Except for the Tax Revenues, the Successor Agency has no alternative resources available to make payments on enforceable obligations if there is a delay with respect to scheduled RPTTF disbursements or if the amount from RPTTF disbursements is not sufficient for the required payment of the enforceable obligations Risks to Real Estate Market The Successor Agency s ability to make payments on the Bonds will be dependent upon the economic strength of the Project Area. The general economy of the Project Area will be subject to all of the risks generally associated with urban real estate markets. Real estate prices and development may be adversely affected by changes in general economic conditions, fluctuations in the real estate market and interest rates, unexpected increases in development costs and by other similar factors. Further, real estate development within the Project Area could be adversely affected by limitations of infrastructure or future governmental policies, including governmental policies to restrict or control development. In addition, if there is a decline in the general economy of the Project Area, the owners of property within the Project Area may be less able or less willing to make timely payments of property taxes or may petition for reduced assessed valuation causing a delay or interruption in the receipt of Tax Revenues by the Successor Agency from the Project Area. Reduction in Inflationary Rate As described in greater detail below, Article XIIIA of the State Constitution provides that the full cash value of real property used in determining taxable value may be adjusted from year to year to reflect the inflationary rate, not to exceed a 2 percent increase for any given year, or may be reduced to reflect a reduction in the consumer price index or comparable local data. Such measure is computed on a calendar year basis. Because Article XIIIA limits inflationary assessed value adjustments to the lesser of the actual inflationary rate or 2 percent, there have been years in which the assessed values were adjusted by actual inflationary rates, which were less than 2 percent. Since Article XIIIA was approved, the annual adjustment for inflation has fallen below the 2 percent limitation several times but in Fiscal Year the inflationary value adjustment was negative for the first time at %. In Fiscal Year , the inflationary value adjustment was 0.753%, which also is below the 2 percent limitation. For Fiscal Year , the inflationary value adjustment is 2 percent, which is the maximum permissible increase under Article XIIIA. For Fiscal Year , the inflationary value adjustment is 0.454%. For Fiscal Year , the inflationary value adjustment will be 1.998%. The Successor Agency is unable to predict if any adjustments to the full cash value of real property within the Project Area, whether an increase or a reduction, will be realized in the future. The Fiscal Consultant s Report attached as Appendix A assumes an inflationary value adjustment of 2 percent. Development Risks The general economy of the Project Area will be subject to all of the risks generally associated with real estate development. Projected development within the Project Area may be subject to unexpected delays, disruptions and changes. Real estate development operations may be adversely affected by changes in general economic conditions, fluctuations in the real estate market and interest rates, unexpected increases in development costs and by other similar factors. Further, real estate development operations within the Project Area could be adversely affected by future governmental 35

44 policies, including governmental policies to restrict or control development. If projected development in the Project Area is delayed or halted, the economy of the Project Area could be affected. If such events lead to a decline in assessed values they could cause a reduction in Tax Revenues. In addition, if there is a decline in the general economy of the Project Area, the owners of property within the Project Area may be less able or less willing to make timely payments of property taxes causing a delay or stoppage of the Tax Revenues received by the Successor Agency from the Project Area. In addition, the insolvency or bankruptcy of one or more large owners of property within the Project Area could delay or impair the receipt of Tax Revenues by the Successor Agency. Concentration of Ownership The top ten largest property taxpayers in the Project Area account for 16.48% of the total local secured assessed value for Fiscal Year Concentration of ownership presents a risk in that if one or more of the largest property owners were to default on their taxes, or were to successfully appeal the tax assessments on property within the Project Area, a substantial decline in Tax Revenues could result. Secured property taxes for the ten largest assessees in the Project Area are current. Levy and Collection of Taxes The Successor Agency has no independent power to levy or collect property taxes. Any reduction in the tax rate or the implementation of any constitutional or legislative property tax decrease could reduce the Tax Revenues, and accordingly, could have an adverse impact on the security for and the ability of the Successor Agency to repay the Bonds. Likewise, delinquencies in the payment of property taxes by the owners of land in the Project Area, and the impact of bankruptcy proceedings on the ability of taxing agencies to collect property taxes, could have an adverse effect on the Successor Agency s ability to make timely payments on the Bonds in the event the County elected to terminate the Teeter Plan. Any reduction in Tax Revenues, whether for any of these reasons or any other reasons, could have an adverse effect on the Successor Agency s ability to pay the principal of and interest on the Bonds. State Budget Issues AB X1 26 and AB 1484 were enacted by the State Legislature and Governor as trailer bills necessary to implement provisions of the State s budget acts for its fiscal years and , respectively. The State budget included projected State savings estimated to aggregate $1.7 billion in associated with AB X1 27, which would have allowed redevelopment agencies to continue in operation provided their establishing cities or counties agreed to make an aggregate $1.7 billion in payments to K-12 schools. However, AB X1 27 was found in December 2011 by the California Supreme Court to violate the State Constitution, which altered this budgetary plan of the State. According to the State s Summary of the State budget, AB 1484 implements a framework to transfer cash assets previously held by redevelopment agencies to cities, counties, and special districts to fund core public services, with assets transferred to schools offsetting State general fund costs (projected savings of $1.5 billion). There can be no assurance that additional legislation will not be enacted in the future to additionally implement provisions relating to the State budget or otherwise that may affect successor agencies or Tax Revenues. The full text of each State Assembly bill cited above may be obtained from the Official California Legislative Information website maintained by the Legislative Counsel of the State of California pursuant to State law, at the following web link: 36

45 On June 19, 2015, California Governor Brown signed into law the State budget for Fiscal Year (the Budget ). The following information is drawn from the State Department of Finance s summary of the Budget. The Budget is based on revenue projections previously included in the Governor s May revision to the proposed budget for Fiscal Year For Fiscal Year , the Budget projects total State general fund revenues of $111 billion, and total State general fund expenditures of $114 billion. The Budget projects that the State will end the Fiscal Year with a $2.4 billion general fund surplus. For Fiscal Year , the Budget projects total state general fund revenues of $115 billion and total State general fund expenditures of $115, leaving the State with a projected general fund surplus for Fiscal Year of approximately $2.09 billion. Information about the State budget and State spending is available at various State maintained websites. Text of the current State budget, and other documents related to the State budget may be found at the website of the State Department of Finance, A nonpartisan analysis of the budget is posted by the Legislative Analyst s Office at In addition, various State official statements, many of which contain a summary of the current and past State budgets may be found at the website of the State Treasurer, Tthere can be no assurance that additional legislation will not be enacted in the future to additionally implement provisions relating to the State budget or otherwise that may affect successor agencies or Tax Revenues. None of the websites or webpages referenced above is in any way incorporated into this Official Statement. They are cited for informational purposes only. The Successor Agency makes no representation whatsoever as to the accuracy or completeness of any of the information on such websites. Recognized Obligation Payment Schedule The Dissolution Act provides that, commencing on the date the first Recognized Obligation Payment Schedule is valid thereunder, only those payments listed in the Recognized Obligation Payment Schedule may be made by the Successor Agency from the funds specified in the Recognized Obligation Payment Schedule. Before each six-month period, the Dissolution Act requires successor agencies to prepare and approve, and submit to the successor agency s oversight board and the State Department of Finance for approval, a Recognized Obligation Payment Schedule pursuant to which enforceable obligations (as defined in the Dissolution Act) of the successor agency are listed, together with the source of funds to be used to pay for each enforceable obligation. Tax Revenues will not be distributed from the RPTTF by the County Auditor-Controller to the Successor Agency s Redevelopment Obligation Retirement Fund without a duly approved and effective Recognized Obligation Payment Schedule received in sufficient time prior to the January 2 or June 1 distribution dates, as applicable. See SECURITY FOR THE BONDS Recognized Obligation Payment Schedules and PROPERTY TAXATION IN CALIFORNIA Property Tax Collection Procedures Recognized Obligation Payment Schedule. In the event the Successor Agency were to fail to file a Recognized Obligation Payment Schedule with respect to a six-month period, the availability of Tax Revenues to the Successor Agency could be adversely affected for such period. In the event a successor agency fails to submit to the State Department of Finance an oversight board-approved Recognized Obligation Payment Schedule complying with the provisions of the Dissolution Act within five business days of the date upon which the Recognized Obligation Payment Schedule is to be used to determine the amount of property tax allocations, the State Department of Finance may determine if any amount should be withheld by the applicable county auditor-controller for payments for enforceable obligations from distribution to taxing entities pursuant to clause (iv) in the 37

46 following paragraph, pending approval of a Recognized Obligation Payment Schedule. Upon notice provided by the State Department of Finance to the county auditor-controller of an amount to be withheld from allocations to taxing entities, the county auditor-controller must distribute to taxing entities any monies in the RPTTF in excess of the withholding amount set forth in the notice, and the county auditorcontroller must distribute withheld funds to the successor agency only in accordance with a Recognized Obligation Payment Schedule when and as approved by the State Department of Finance. Typically, under the RPTTF distribution provisions of the Dissolution Act, the County Auditor- Controller is to distribute funds for each six-month period in the following order specified in Section of the Dissolution Act: (i) first, subject to certain adjustments for subordinations to the extent permitted under the Dissolution Act (as described above under SECURITY FOR THE BONDS Tax Increment Financing ) and no later than each January 2 and June 1, to each local agency and school entity, to the extent applicable, amounts required for pass-through payments each such entity would have received under provisions of the Redevelopment Law, as those provisions read on January 1, 2011, including pursuant to the Pass-Through Agreements and Statutory Pass-Through Amounts; (ii) second, on each January 2 and June 1, to the Successor Agency for payments listed in its Recognized Obligation Payment Schedule, with debt service payments scheduled to be made for tax allocation bonds having the highest priority over payments scheduled for other debts and obligations listed on the Recognized Obligation Payment Schedule; (iii) third, on each January 2 and June 1, to the Successor Agency for the administrative cost allowance, as defined in the Dissolution Act; and (iv) fourth, on each January 2 and June 1, to taxing entities any monies remaining in the RPTTF after the payments and transfers authorized by clauses (i) through (iii), in an amount proportionate to such taxing entity s share of property tax revenues in the tax rate area in that fiscal year (without giving effect to any pass-through obligations that were established under the Redevelopment Law). If the Successor Agency does not submit an Oversight-Board approved Recognized Obligation Payment Schedule within five business days of the date upon which the Recognized Obligation Payment Schedule is to be used to determine the amount of property tax allocations and the State Department of Finance does not provide a notice to the County Auditor-Controller to withhold funds from distribution to taxing entities, amounts in the RPTTF for such six-month period would be distributed to taxing entities pursuant to clause (iv) above. See, however, SECURITY FOR THE BONDS Recognized Obligation Payment Schedules for a description of the Successor Agency s covenant regarding the submittal of the Recognized Obligation Payment Schedule. In addition, the Dissolution Act provides for certain penalties in the event the Successor Agency does not timely submit a Recognized Obligation Payment Schedule. Specifically, a Recognized Obligation Payment Schedule must be submitted by the Successor Agency, after approval by the Oversight Board, to the County Administrative Officer, the County Auditor-Controller, the State Department of Finance, and the State Controller no later than 90 days before the January 2, 2016 distribution date with respect to the six-month period of January 1, 2016 through June 30, 2016, and by February 1, 2016 with respect to the 12-month period of July 1, 2016 through June 30, 2017 and thereafter, by February 1 of each year for the 12-month periods of July 1 through June 30 of the following year. If the Successor Agency does not submit an Oversight Board approved Recognized Obligation Payment Schedule by such deadlines, the City will be subject to a civil penalty equal to $10,000 per day for every day the schedule is not submitted to the State Department of Finance. Additionally, the Successor Agency s administrative cost allowance is reduced by 25% if the Successor Agency does not submit an Oversight Board approved Recognized Obligation Payment Schedule within 10 days of the deadline. 38

47 Future Implementation of Dissolution Act Numerous lawsuits have been filed pertaining to the State Department of Finance s implementation of various provisions of the Dissolution Act. A lawsuit (the Syncora Lawsuit ) was filed by Syncora Guarantee Inc. and Syncora Capital Assurance Inc. (collectively, Syncora ) on August 12, 2012, with the Superior Court of California in the County of Sacramento, Case No Syncora is the municipal bond insurer for a number of bond insurance policies for outstanding bonds issued by former California redevelopment agencies. Syncora alleges that the Dissolution Act, and specifically the Redistribution Provisions (including California Health and Safety Code Sections 34172(d), 34174, 34177(d), 34183(a)(4), and 34188) violate the contract clauses of the United States and California Constitutions (U.S. Const. art. 1, 10, cl.1; Cal. Const. art. 1, 9) because they unconstitutionally impair the contracts among the former redevelopment agencies, bondholders and Syncora. The complaint also alleges that the Redistribution Provisions violate the Takings Clauses of the United States and California Constitutions (U.S. Const. amend. V; Cal Const. art. 1 19) because they unconstitutionally take and appropriate bondholders and Syncora s contractual right to critical security mechanisms without just compensation. The Syncora Lawsuit was brought as a petition for writ of mandate and complaint for declaratory relief, inverse condemnation, and injunctive relief. On May 29, 2013, the Court entered a ruling. The Court (1) denied Syncora any form of relief requested in the Complaint and Petition on its impairment of contracts claims, on the ground that those claims were premature, as no evidence was submitted by Syncora that any redevelopment agency bonds it insures are in default or that any redevelopment agency bonds are in default at all; and (2) held that Syncora s takings claims are not necessarily premature, that an evidentiary hearing should be conducted to address such claims, and that the parties should file status reports with the Court addressing certain issues in connection with such evidentiary hearing. On August 16, 2013, the parties filed with the Court a proposed stipulated judgment which dismisses Syncora s impairment of contract claims and takings claims without prejudice on grounds of prematurity. The stipulated judgment, as proposed by the parties, was entered on October 3, The Successor Agency cannot predict the outcome of any pending or future lawsuit with respect to the interpretation, the implementation or the validity of any provision of the Dissolution Act, including the provisions under which the Bonds are issued. The Successor Agency believes that the federal and State Constitutions clauses regarding contract impairments and takings provide protection to the bondholders of the Bonds in the event of any lawsuit concerning provisions affecting the validity and payment on bonds issued under the Dissolution Act. However, the outcome of any such lawsuit is beyond the Successor Agency s control. Bankruptcy and Foreclosure The payment of the property taxes from which Tax Revenues are derived and the ability of the County to foreclose the lien of a delinquent unpaid tax may be limited by bankruptcy, insolvency, or other laws generally affecting creditors rights or by the laws of the State relating to judicial foreclosure. The various legal opinions to be delivered concurrently with the delivery of the Bonds (including Bond Counsel s approving legal opinion) will be qualified as to the enforceability of the various legal instruments by bankruptcy, insolvency, reorganization, moratorium, or other similar laws affecting creditors rights, by the application of equitable principles and by the exercise of judicial discretion in appropriate cases. Although bankruptcy proceedings would not cause the liens to become extinguished, bankruptcy of a property owner could result in a delay in prosecuting superior court foreclosure proceedings. Such delay would increase the possibility of delinquent tax installments not being paid in full and thereby increase the likelihood of a delay or default in payment of the principal of and interest on the Bonds. 39

48 Effect of Assessment Appeals Property taxable values may be reduced as a result of Proposition 8, which reduces the assessed value of property, or of a successful appeal of the taxable value determined by the County Assessor. An appeal may result in a reduction to the County Assessor s original taxable value and a tax refund to the applicant property owner. A reduction in taxable values within the respective project area and the refund of taxes which may arise out of successful appeals by property owners will affect the amount of Tax Revenues under the Indenture. The Successor Agency has in the past experienced reductions in its Tax Revenues as a result of assessment appeals. The actual impact to tax increment is dependent upon the actual revised value of assessments resulting from values determined by the County Assessment Appeals Board or through litigation and the ultimate timing of successful appeals. For a discussion of historical assessment appeals in the Project Area and summary information regarding pending and resolved assessment appeals for the Successor Agency, see THE PROJECT AREA Assessment Appeals and APPENDIX A FISCAL CONSULTANT REPORT Assessment Appeals. Estimated Revenues In estimating that Tax Revenues will be sufficient to pay debt service on the Bonds, the Successor Agency has made certain assumptions with regard to present and future assessed valuation in the Project Area, future tax rates and percentage of taxes collected. The Successor Agency believes these assumptions to be reasonable, but there is no assurance these assumptions will be realized and to the extent that the assessed valuation and the tax rates are less than expected, the Tax Revenues available to pay debt service on the Bonds would be less than those projected and such reduced Tax Revenues may be insufficient to provide for the payment of principal of and interest on the Bonds. Assumptions and Projections To estimate the Tax Revenues available to pay debt service on the Bonds, the Fiscal Consultant has made certain assumptions with regard to present and future assessed valuation in the Project Area, future tax rates and percentage of taxes collected. The Successor Agency believes these assumptions to be reasonable, but to the extent that the assessed valuation, the tax rates or the percentage of taxes collected are less than such assumptions, the Tax Revenues available to pay debt service on the Bonds may be less than those projected. No assurance can be made that the aggregate coverage projections with respect to the Bonds will be met. 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, project, expect, anticipate, intend, believe, 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 that 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. The Successor Agency does not plan to issue any updates or revisions to those forward-looking statements if or when its expectations or events, conditions or circumstances on which such statements are based occur. Limitations on Remedies The enforceability of the rights and remedies of the Holders of the Bonds and the Trustee and the obligations incurred by the Successor Agency may be subject to the federal Bankruptcy Code and 40

49 applicable bankruptcy, insolvency, reorganization, moratorium or similar laws relating to or affecting the enforcement of creditors rights generally, now or hereafter in effect; equity principles which may limit the specific enforcement under State law of certain remedies; the exercise by the United States of America of the powers delegated to it by the federal Constitution; and the reasonable and necessary exercise, in certain exceptional situations, of the police power inherent in the sovereignty of the State and its government bodies in the interest of serving a significant and legitimate public purpose. Hazardous Substances An additional environmental condition that may result in the reduction in the assessed value of property would be the discovery of a hazardous substance that would limit the beneficial use of taxable property within the Project Area. In general, the owners and operators of property may be required by law to remedy conditions of the property relating to releases or threatened releases of hazardous substances. The owner or operator may be required to remedy a hazardous substance condition of property whether or not the owner or operator has anything to do with creating or handling the hazardous substance. The effect, therefore, should any of the property within the Project Area be affected by a hazardous substance, could be to reduce the marketability and value of the property by the costs of remedying the condition. Natural Disasters The value of the property in the Project Area in the future can be adversely affected by a variety of additional factors, particularly those which may affect infrastructure and other public improvements and private improvements on property and the continued habitability and enjoyment of such private improvements. Such additional factors include, without limitation, geologic conditions such as earthquakes, topographic conditions such as earth movements, landslides and floods and climatic conditions such as droughts. In the event that one or more of such conditions occur, such occurrence could cause damages of varying seriousness to the land and improvements and the value of property in the Project Area could be diminished in the aftermath of such events. A substantial reduction of the value of such properties and could affect the ability or willingness of the property owners to pay the property taxes. The Project Area, like most communities in California, is an area of unpredictable seismic activity, and therefore, is subject to potentially destructive earthquakes. The occurrence of severe seismic activity in the Project Area could result in substantial damage to property located in the Project Area, and could lead to successful appeals for reduction in assessed values of such property. Such a reduction could result in a decrease in Tax Revenues. California Drought Conditions. California is experiencing water shortfalls as a result of some of the driest conditions in recorded State history. On January 17, 2014, Governor Brown declared a Statewide Drought State of Emergency for California and directed State officials to take all necessary actions to prepare for water shortages. As part of his State of Emergency declaration, the Governor directed State officials to assist agricultural producers and communities that may be economically impacted by dry conditions. Following the Governor s declaration, the State Water Resources Control Board ( SWRCB ) issued a statewide notice of water shortages and potential future curtailment of water right diversions. On April 1, 2015, the Governor issued an executive order mandating certain conservation measures including a requirement that the SWRCB impose restrictions to achieve a statewide 25% reduction in urban water usage through February 28, With drought conditions persisting, on May 5, 2015, the SWRCB adopted emergency regulations requiring a 25% reduction in overall potable urban water production statewide in accordance with the Governor s April 1 Executive Order. 41

50 The Successor Agency cannot make any representation regarding the effects that the current drought has had, or, if it should continue, may have, on agricultural production or other economic activity within the boundaries of the Project Area. Wildfires. The City includes certain undeveloped hillside areas. Ground fires have occasionally broken out in such areas. The occurrence of any wildfires within the Project Area could lead to successful appeals for reduction of assessed values of such property. Such a reduction of assessed valuations could result in a reduction of Tax Revenues. Changes in the Law There can be no assurance that the California electorate will not at some future time adopt initiatives or that the Legislature will not enact legislation that will amend the Dissolution Act, the Redevelopment Law or other laws or the Constitution of the State resulting in a reduction of Tax Revenues, which could have an adverse effect on the Successor Agency s ability to pay debt service on the Bonds. Economic Risk The Successor Agency s ability to make payment on the Bonds will be partially dependent upon the economic strength of the Project Area. If there is a decline in the general economy of the Project Area, the owners of property may be less able or less willing to make timely payments of property taxes causing a delay or stoppage of Tax Revenues. Furthermore, general economic declines are likely to result in additional reductions of assessed values. In the event of decreased values, Tax Revenues may decline even if property owners make timely payment of property taxes. Investment Risk Funds held under the Indenture are required to be invested in Permitted Investments as provided under the Indenture. See APPENDIX D attached hereto for a summary of the definition of Permitted Investments. The funds and accounts of the Successor Agency, into which a portion of the proceeds of the Bonds will be deposited and into which Tax Revenues are deposited, may be invested by the Successor Agency in any investment authorized by law. All investments, including the Permitted Investments and those authorized by law from time to time for investments by municipalities, contain a certain degree of risk. Such risks include, but are not limited to, a lower rate of return than expected and loss or delayed receipt of principal. Further, the Successor Agency cannot predict the effects on the receipt of Tax Revenues if the County were to suffer significant losses in its portfolio of investments or if the County or the City were to become insolvent or declare bankruptcy. See also RISK FACTORS Bankruptcy and Foreclosure. Additional Obligations The potential for the issuance of Parity Debt could, in certain circumstances, increase the risks associated with the Successor Agency s payment of debt service on the Bonds in the event of a decrease in the Successor Agency s collection of Tax Revenues. However, Section of the Dissolution Act provides limited authority for successor agencies to issue bonds, and the Successor Agency s ability to issue Parity Debt is subject to the requirements of the Dissolution Act as in effect from time to time. For additional information, see described SECURITY FOR THE BONDS Issuance of Parity Debt. 42

51 Secondary Market There can be no guarantee that there will be a secondary market for the Bonds, or, if a secondary market exists, that the Bonds can be sold for any particular price. Occasionally, because of general market conditions or because of adverse history or economic prospects connected with a particular issue, secondary marketing practices in connection with a particular issue are suspended or terminated. Additionally, prices of issues for which a market is being made will depend upon the then prevailing circumstances. Financial Statements The Successor Agency does not maintain separate audited financial statements, but is a separate component of the City for financial reporting. The City s audited financial statements for the fiscal year ended June 30, 2014, are included as APPENDIX C to this Official Statement. The City has not requested nor did the City obtain permission from the Auditor to include the audited financial statement as an appendix to this Official Statement. Accordingly, the auditor has not performed any post audit review of the financial conditions and operations of the City. The inclusion of Successor Agency s audited financial statements is solely for convenience. The Dissolution Act expressly clarifies that the Successor Agency is a separate legal entity from the City. The assets and liabilities of the Successor Agency are not assets and liabilities of the City. As of the date of this Official Statement, the City plans to include the financial transactions of the Successor Agency as part of the City s audited financial statements for Fiscal Year and subsequent years. No Validation Proceeding Undertaken California Code of Civil Procedure Section 860 authorizes public agencies to institute a process, otherwise known as a validation proceeding, for purposes of determining the validity of a resolution or any action taken pursuant thereto. Section 860 authorizes a public agency to institute validation proceedings in cases where another statute authorizes its use. Relevant to the Bonds, California Government Code Section authorizes a local agency to bring an action to determine the validity of its bonds, warrants, contracts, obligations or evidences of indebtedness. Pursuant to Code of Civil Procedure Section 870, a final favorable judgment issued in a validation proceeding shall, notwithstanding any other provision of law, be forever binding and conclusive, as to all matters herein adjudicated or which could have been adjudicated, against all persons: The judgment shall permanently enjoin the institution by any person of any action or proceeding raising any issue as to which the judgment is binding and conclusive. The Successor Agency has not undertaken or endeavored to undertake any validation proceeding in connection with the issuance of the Bonds. The Successor Agency and Bond Counsel have relied on the provisions of AB 1484 authorizing the issuance of the Bonds and specifying the related deadline for any challenge to the Bonds to be brought. Specifically, Section (e) of the Dissolution Act provides that notwithstanding any other law, an action to challenge the issuance of bonds (such as the Bonds), the incurrence of indebtedness, the amendment of an enforceable obligation, or the execution of a financing agreement authorized under Section , must be brought within thirty (30) days after the date on which the oversight board approves the resolution of the successor agency approving the such financing. Such challenge period with respect to the Bonds and the oversight board s approval of the Successor Agency s resolution approving the issuance of the Bonds has expired. It is possible that a future lawsuit challenging the Dissolution Act or specific provisions thereof could be successful and that the mechanisms currently provided for under the Dissolution Act to provide 43

52 for distribution of Tax Revenues to the Successor Agency for payment on the Bonds could be impeded and result in a delinquency or default in the timely payment of principal of, and interest on, the Bonds. Loss of Tax Exemption As discussed under the caption TAX MATTERS, in order to maintain the exclusion from gross income for federal income tax purposes of the interest on the Bonds, the Successor Agency has covenanted in the Indenture not to take any action, or fail to take any action, if such action or failure to take such action would adversely affect the exclusion under Section 103 of the Internal Revenue Code of 1986 (the Tax Code ) of interest on the Bonds from the owners thereof for federal income tax purposes. Interest on the Bonds could become includable in gross income for purposes of federal income taxation retroactive to the date the Bonds were issued, as a result of acts or omissions of the Successor Agency in violation of the Tax Code. The Bonds are not subject to early redemption merely because an event of taxability has occurred; rather the Bonds will remain outstanding to maturity or until redeemed under the optional redemption or mandatory sinking fund redemption provisions of the Indenture. CERTAIN LEGAL MATTERS Jones Hall, A Professional Law Corporation, San Francisco, California, Bond Counsel, will render an opinion with respect to the validity of the Bonds. A copy of the form of such approving opinion is attached hereto as Appendix G. Certain legal matters will be passed upon for the Successor Agency by The Weist Law Firm, Scotts Valley, California, Disclosure Counsel, and by Colantuono, Highsmith & Whatley, PC, Grass Valley, California acting as Successor Agency counsel, and for the Underwriter by its counsel, Norton Rose Fulbright US LLP, Los Angeles, California. Payment of the fees and expenses of Bond Counsel and Disclosure Counsel is contingent upon the delivery of the Bonds. ABSENCE OF LITIGATION At the time the Bonds are delivered, the Successor Agency counsel will provide an opinion to the effect that, to the best knowledge of such counsel, there is no litigation pending or overtly threatened against the Successor Agency in any court or other tribunal of competent jurisdiction, State or federal, which seeks to enjoin or challenges the authority of the Successor Agency to participate in the transactions contemplated by this Official Statement, the Bonds or the Indenture. TAX MATTERS In the opinion of Jones Hall, A Professional Law Corporation, San Francisco, California, Bond Counsel, subject, however to the qualifications set forth below, under existing law, the interest on the Bonds is excluded from gross income for federal income tax purposes and such interest is not an item of tax preference for purposes of the federal alternative minimum tax imposed on individuals and corporations, provided, however, that, for the purpose of computing the alternative minimum tax imposed on corporations (as defined for federal income tax purposes), such interest is taken into account in determining certain income and earnings, and the Bonds are qualified tax-exempt obligations within the meaning of section 265(b)(3) of the Internal Revenue Code of 1986, as amended (the Tax Code ), such that, in the case of certain financial institutions (within the meaning of section 265(b)(5) of the Tax Code), a deduction for federal income tax purposes is allowed for 80% of that portion of such financial institution s interest expense allocable to interest payable on the Bonds. The opinions set forth in the preceding paragraph are subject to the condition that the Successor Agency comply with all requirements of the Tax Code that must be satisfied subsequent to the issuance of 44

53 the Bonds. The Successor Agency has covenanted to comply with each such requirement. Failure to comply with certain of such requirements may cause the inclusion of such interest in gross income for federal income tax purposes to be retroactive to the date of issuance of the Bonds, or may cause the Bonds to not be qualified tax-exempt obligations within the meaning of Section 265(b)(3) of the Tax Code. If the initial offering price to the public (excluding bond houses and brokers) at which a Bond is sold is less than the amount payable at maturity thereof, then such difference constitutes original issue discount for purposes of federal income taxes and State of California personal income taxes. If the initial offering price to the public (excluding bond houses and brokers) at which a Bond is sold is greater than the amount payable at maturity thereof, then such difference constitutes original issue premium for purposes of federal income taxes and State of California personal income taxes. De minimis original issue discount and original issue premium are disregarded. Under the Tax Code, original issue discount is treated as interest excluded from federal gross income and exempt from State of California personal income taxes to the extent properly allocable to each owner thereof subject to the limitations described in the first paragraph of this section. The original issue discount accrues over the term to maturity of the Bond on the basis of a constant interest rate compounded on each interest or principal payment date (with straight-line interpolations between compounding dates). The amount of original issue discount accruing during each period is added to the adjusted basis of such Bonds to determine taxable gain upon disposition (including sale, redemption, or payment on maturity) of such Bond. The Tax Code contains certain provisions relating to the accrual of original issue discount in the case of purchasers of the Bonds who purchase the Bonds after the initial offering of a substantial amount of such maturity. Owners of such Bonds should consult their own tax advisors with respect to the tax consequences of ownership of Bonds with original issue discount, including the treatment of purchasers who do not purchase in the original offering, the allowance of a deduction for any loss on a sale or other disposition, and the treatment of accrued original issue discount on such Bonds under federal individual and corporate alternative minimum taxes. Under the Tax Code, original issue premium is amortized on an annual basis over the term of the Bond (said term being the shorter of the Bond s maturity date or its call date). The amount of original issue premium amortized each year reduces the adjusted basis of the owner of the Bond for purposes of determining taxable gain or loss upon disposition. The amount of original issue premium on a Bond is amortized each year over the term to maturity of the Bond on the basis of a constant interest rate compounded on each interest or principal payment date (with straight-line interpolations between compounding dates). Amortized Bond premium is not deductible for federal income tax purposes. Owners of premium Bonds, including purchasers who do not purchase in the original offering, should consult their own tax advisors with respect to State of California personal income tax and federal income tax consequences of owning such Bonds. Current and future legislative proposals, if enacted into law, clarification of the Tax Code or court decisions may cause interest on the Bonds to be subject, directly or indirectly, to federal income taxation or to be subject to or exempted from state income taxation, or otherwise prevent beneficial owners from realizing the full current benefit of the tax status of such interest. The introduction or enactment of any such legislative proposals, clarification of the Tax Code or court decisions may also affect the market price for, or marketability of, the Bonds. Prospective purchasers of the Bonds should consult their own tax advisors regarding any pending or proposed federal or state tax legislation, regulations or litigation, as to which Bond Counsel expresses no opinion. In the further opinion of Bond Counsel, interest on the Bonds is exempt from California personal income taxes. 45

54 Owners of the Bonds should also be aware that the ownership or disposition of, or the accrual or receipt of interest on, the Bonds may have federal or state tax consequences other than as described above. Bond Counsel expresses no opinion regarding any federal or state tax consequences arising with respect to the Bonds other than as expressly described above. FINANCIAL ADVISOR The Successor Agency has retained Urban Futures Inc. (the Financial Advisor ) in connection with the issuance of the Bonds. The Financial Advisor is not obligated to undertake, and has not undertaken to make, an independent verification or assume responsibility for the accuracy, completeness, or fairness of the information contained in this Official Statement. UNDERWRITING The Underwriter has agreed to purchase the Bonds from the Successor Agency at the purchase price of $4,552, (representing the $4,475,000 principal amount of the Bonds plus net original issue premium of $120,481.45, less Underwriter s discount of $42,662.50), at the rates and yields shown on the inside cover hereof. The initial public offering prices stated on the inside cover of this Official Statement may be changed from time to time by the Underwriter. The Underwriter may offer and sell the Bonds to certain dealers and banks acting as agents and others at prices lower than said public offering prices. RATINGS The Bonds are expected to be assigned an insured rating of AA (stable outlook) by Standard & Poor s Ratings Services ( S&P ) upon the issuance of the Policy by Insurer. The Bonds have also been assigned an underlying rating of BBB+ by S&P. Credit ratings reflect the views of the rating agency and any explanation of the significance of the ratings should be obtained directly from the rating agency. There is no assurance that the ratings will not subsequently be revised or withdrawn entirely if, in the judgment of the rating agency, circumstances so warrant. Any such downward revision or withdrawal could have an adverse effect on the market price of the Bonds. The Successor Agency has no obligation to maintain any rating for the Bonds. CONTINUING DISCLOSURE Pursuant to Rule 15c2-12 of the Securities and Exchange Commission (the Rule ), the Successor Agency has undertaken for the benefit of holders of the Bonds to provide certain financial information and operating data relating to the Successor Agency by not later than 270 days after the end of the Successor Agency s fiscal year (which is currently June 30), commencing with the report for the Fiscal Year (the Annual Information ), and to provide notices of the occurrence of certain enumerated events. The Annual Information will be filed by or on behalf of the Successor Agency with the Municipal Securities Rulemaking Board (the MSRB ) in an electronic format prescribed by MSRB (currently Electronic Municipal Market Access system). Notices of enumerated events will be filed by or on behalf of the Successor Agency with the MSRB. The nature of the information to be provided in the Annual Information and the notices of certain enumerated events is set forth under the caption APPENDIX E FORM OF CONTINUING DISCLOSURE CERTIFICATE. 46

55 As of the date hereof, the Successor Agency is in compliance in all material respects with its continuing disclosure undertakings for the last five years, except as described below. A review of the Successor Agency s prior disclosure undertakings and its prior disclosure filings during the past five years indicates (i) certain audited financial statements with respect to Fiscal Years through were not timely filed (generally days to three months late), (ii) the Annual Information has been timely posted (with the exception of Annual Information for fiscal year , which was posted after the required due date), but five of the Annual Information reports were missing certain information required by the Continuing Disclosure Certificate. All listed event notices were timely filed. Further, the City (as a related entity with shared staff but not as an obligated person under the Continuing Disclosure Certificate) has existing disclosure undertakings that have been made pursuant to the Rule in connection with the issuance and execution and delivery of certain of the City s outstanding debt obligations. The City did not timely file certain audited financial statements in connection with its disclosure undertakings for those outstanding debt obligations. In addition, the City did not timely file the certain annual reports and listed event notices in connection with the City s outstanding debt obligations. Each of the annual reports, audited financial statements and event notices were subsequently filed. Accordingly, the City believes it is currently in compliance with its existing continuing disclosure undertakings. The City has retained Urban Futures, Inc. to provide continuing disclosure services to ensure compliance with the continuing disclosure undertakings of the City and its related entities, including the Successor Agency, in the future. MISCELLANEOUS The purpose of this Official Statement is to supply information to prospective buyers of the Bonds. Quotations from, and summaries and explanations of, the Indenture and other documents and statutes contained herein do not purport to be complete, and reference is made to such documents, Indenture and statutes for full and complete statements of their provisions. Unless otherwise noted, all information contained in this Official Statement pertaining to the Successor Agency, the City and the Project Area has been furnished by the Successor Agency. Any statement 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 Successor Agency and the purchasers or registered owners of any of the Bonds. The execution and delivery of this Official Statement has been duly authorized by the Successor Agency. SUCCESSOR AGENCY TO THE AUBURN URBAN DEVELOPMENT AUTHORITY By /s/ Tim Rundel Executive Director 47

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57 APPENDIX A FISCAL CONSULTANT S REPORT A-1

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59 September 9, 2015 Dylan Feik, Administrative Services Director City of Auburn 1225 Lincoln Way, Room 1 Auburn, California RE: Successor Agency to the Auburn Urban Development Authority Auburn Redevelopment Project Area Tax Increment Verification and Revenue Projections Dear Mr. Feik: Urban Futures, Inc. (UFI) is pleased to present this report of projected tax increment revenues to the Successor Agency to the Auburn Urban Development Authority (the "Agency") for the Auburn Redevelopment Project Area (the "Project Area"). The following information is included as exhibits to this report: Exhibit A: Exhibit B: Exhibit C: Exhibit D: Exhibit E: Tax Increment Projections Historical Assessed Valuations Ten Largest Taxpayers Project Area Land Uses Assessment Appeals 1

60 Projected taxable valuations and tax revenues contained in this report are based on assumptions derived from the following information: 1. Historical growth trends; 2. Trended growth in valuation as permitted by Article XIIIA of the California Constitution (Proposition 13); 3. Financial reports and information supplied or prepared by the Agency; 4. Information provided by the County of Placer, from the offices of the Auditor-Controller and Assessor; and 5. Data provided by Metroscan for property resale and assessed valuation information. The purpose of the projections is to demonstrate the availability of property tax revenues expected to be generated from the Project Area, to secure debt service requirements of the Agency for the 2015 Tax Allocation Refunding Bonds (the 2015 Bonds ). Tax revenues will be paid to the Agency pursuant to the procedures described in AB X1 26, as amended by AB 1484 (the Dissolution Act ), which include requirements that the Agency periodically file a Recognized Obligation Payment Schedule (the ROPS ) with the County and the State, and that each such ROPS be approved by the Agency s oversight board (the Oversight Board ) and by the State Department of Finance ( DOF ). Revenue projections have been estimated based on assumed 2% annual assessed valuation increases, in order to reduce the risk of overstating future tax increment revenues. Background Prior to the enactment of the Dissolution Act, the California Community Redevelopment Law (the Law ) together with Article 16, Section 16 of the California Constitution, authorized redevelopment agencies to receive that portion of property tax revenue generated by project area taxable values that are over and above the Base Year value. The Base Year value is defined as the amount of the taxable values within the project area boundaries on the last equalized tax roll prior to adoption of the project area. The amount of current year taxable value that is in excess of the Base Year value is referred to as incremental taxable value. The Dissolution Act authorizes refunding bonds, including the 2015 Bonds, to be secured by a pledge of the same revenues pledged to the bonds being refunded, and to be payable from and secured by monies deposited from time to time in the Redevelopment Property Tax Trust Fund ( RPTTF ) held by the County Auditor-Controller. Discussions of tax increment revenues in this report refer to those monies that will be deposited into the RPTTF by the County Auditor-Controller. 2

61 Redevelopment Project Area Tables 1, 2 and 3 below illustrate general information regarding the Project Area. TABLE 1: ORDINANCES SUBJECT DATE OF ADOPTION ORDINANCE NO. ACTION Auburn Redevelopment Project June 2, Extension of Eminent Domain Authority Amend certain Time and Fiscal limits in the RDA Plan 99-5 April 23, Add Territory to the Project Area June 11, Source: The Agency Adopt and approve the Redevelopment Plan Extend use of Eminent Domain Authority in Project Area Extend/eliminate certain RDA Plan Limits Adopt and approve the Amended Redevelopment Plan TABLE 2: PROJECT AREA ACREAGE Auburn Redevelopment Project Amendment Area Source: The Agency 221 acres 437 acres TABLE 3: REDEVELOPMENT PLAN LIMITATION DATES AND AMOUNTS Debt Incurrence (1) Time Limits Plan Effectiveness (1) Debt Repayment (1) Cumulative Tax Increment (2) Dollar Limits Outstanding Bond Debt Auburn Redevelopment Eliminated June 2, 2028 June 2, 2038 $91,200,000 $70,000,000 Project (combined limit Amendment Area July 11, 2027 July 11, 2037 July 11, 2052 No Limit for both areas) (1) See: Table 1 above, Ordinance No (2) Cumulative tax increment collected to date that applies to the T.I. Cap is approximately $10.8 million. Based on projected 2% annual assessed valuation growth, the Agency is not projected to reach the cumulative T.I. cap amount prior to the final maturity date of the Bonds. Based on currently proposed legislation, it is possible that cumulative tax increment limits contained in redevelopment plans may be eliminated. Source: The Agency and Urban Futures, Inc. Project Tax Rate Areas The FY tax rate area numbers used by the Placer County Tax Collector s Office to identify 3

62 tax revenue apportionment for the Project Area are summarized in the following table. TABLE 4: PROJECT TAX RATE AREA ID NUMBERS Auburn Redevelopment Project Amendment Area , Source: Placer County Tax Collector Low- and Moderate-Income Housing Set-Aside Pursuant to the Dissolution Act, the Agency is no longer required to set aside 20 percent of annual tax increment allocated to the Agency, for use in projects benefiting low- and moderate- income housing (the "Former LMI Housing Set-Aside"). Amounts equivalent to the Former LMI Housing Set-Aside amounts are included in the revenues shown in Exhibit A. Pass Through Payments Tax Sharing Agreements (HSC Section 33401): The Agency has entered into tax sharing agreements with four taxing entities in the original project area. The following tables summarize the provisions of the tax increment agreements with the affected taxing entities. Pursuant to the terms of each of the tax sharing agreements (and pursuant to Section 34183(b) of the Dissolution Law), the Agency may subordinate the payment of pass through payments to the payment of debt service on the Bonds. TABLE 5: SUMMARY OF TAX SHARING AGREEMENTS (original project area) Taxing Entity Pass Through Summary Placer County County Library District 62.5% of County share of net revenues (equivalent to 80% of t.i.) 62.5% of Library share of net revenues (equivalent to 80% of t.i.) Auburn Park District Auburn Cemetery District 62.5% of Park share of net revenues (equivalent to 80% of t.i.) 62.5% of Cemetery share of net revenues (equivalent to 80% of t.i.) 4

63 Statutory Pass Through Payments: The Agency is obligated to share tax increment revenues calculated pursuant to Health & Safety Code Section (the AB 1290 Pass Through Formula ) generated in the original project area with any affected taxing entities which do not have a Tax Sharing Agreement in place, and from revenues generated in the Amendment Area. Based on the elimination of the Debt Incurrence Deadline (see: Tables 1 and 2), the AB 1290 Pass Through Formula has an adjusted base year valuation of $125,805,620 (FY 06-07), and Year 1 of pass through payments was FY The AB 1290 Pass Through Formula will be applied as follows: Pass Through (1) Tier A (Years 1-45) 25% Tier B (Years 11-45) 21% + Tier A Tier C (Years 31-45) 14% + Tiers A & B (1) Applied to the taxing entity s share of tax increment, reduced by a pro-rata share of Agency s Former LMI Housing Set-Aside. County Administrative Charges The Placer County Tax Collector will deduct administration charges from the tax increment distributed to the Agency s RPTTF for the Project Area. For projection purposes, the County administration charges are estimated at 2.20% of gross tax increment, based on the average percentage of actual administration charges over the past two years as compared to gross tax revenues for such years. The projected administration charges have been deducted from the projected Pledged Tax Revenues (see Exhibit A). Assessment Appeals In Placer County, a property owner desiring to reduce the assessed value of such owner's property in any one year must submit an application to the Placer County Assessment Appeals Board (the "Appeals Board"). Applications for any tax year must be submitted by September 15 of such tax year. The Appeals Board, within two years of each applicant's filing date, will hold a hearing and then either reduce the assessment or confirm the assessment. There are 3 current appeals pending in the Project Area representing real property with a total assessed valuation of $3,614,999 (see: Exhibit E). Based on the property owner s opinion of value in the amount of $2,566,500, and based on the historical success rate of 57.22% for requested reductions, resolution of the current appeals could potentially result in a valuation reduction in the Project Area of approximately $605,647, which could then result in a reduction to Tax Revenues of approximately $5,193. However, the estimated Tax Revenue reduction amount from the pending appeals has not been deducted from the projection of Tax Revenues in Exhibit A, as the outcome of pending appeals cannot be predicted with certainty. *** While UFI has taken steps to assure the accuracy of the data used in the formulation of these 5

64 projections, we cannot insure that projected valuations will, in fact, be realized because actual values will most likely be affected by future events and conditions that cannot be predicted with certainty. We believe that this report provides the Successor Agency with a reasonable basis for demonstrating the available tax increment revenues generated by the Auburn Redevelopment Project Area. We are available to answer any questions that you may have regarding this information. Sincerely, URBAN FUTURES, INC. Douglas P. Anderson Managing Principal 6

65 SUCCESSOR AGENCY to the AUBURN URBAN DEVELOPMENT AUTHORITY AUBURN REDEVELOPMENT PROJECT Exhibit A TAX INCREMENT PROJECTIONS (1) (2) (3) (4) (5) (6) (7) Assessed Senior Pledged Subordinate Tax Revenues Valuation Gross Tax County Admin. Pass Through Tax Pass Through Net of Subord. FY Growth Revenues Fees Payments Revenues Payments Pass Throughs Base A.V. 154,004, ,124, ,201 18, , , , , ,866, ,626 19, , , , , ,704, ,999 20, , , , , ,638, ,340 21, , , , , ,670,912 1,026,668 22, , , , , ,804,330 1,078,002 23, , , , , ,040,417 1,130,363 24, , , , , ,381,225 1,183,771 26, , , , , ,828,850 1,238,247 27, , , , , ,385,427 1,293,813 28, , , , , ,053,135 1,350,490 29, ,402 1,015, , , ,834,198 1,408,301 30, ,524 1,047, , , ,730,882 1,467,267 32, ,128 1,080, , , ,745,499 1,527,414 33, ,224 1,114, , , ,880,409 1,588,763 34, ,821 1,148, , , ,138,018 1,651,339 36, ,931 1,184, , , ,520,778 1,715,166 37, ,563 1,219, , , ,031,194 1,780,270 39, ,728 1,256, , , ,671,817 1,846,677 40, ,436 1,293, , , ,445,254 1,914,411 42, ,698 1,331, , , ,354,159 1,983,500 43, ,525 1,370, , , ,401,242 2,053,971 45, ,929 1,409, ,009 1,014, ,589,267 2,125,851 46, ,921 1,450, ,625 1,044,536 (1) Based on assumed 2% annual assessed valuation growth over actual FY AV. (2) Gross Tax Revenues based on 1.00% tax rate applied to incremental AV. (3) County Admin. Fees based on 2.20% of Gross Tax Revenues. (4) Includes and Statutory pass through payments. (6) Includes Agreement payments.

66 Exhibit B THE SUCCESSOR AGENCY TO THE AUBURN URBAN DEVELOPMENT AUTHORITY Auburn Redevelopment Project Area Historical Taxable Assessed Values Fiscal Year Secured Value Unsecured Value Utility Total Taxable Value % Change Total Incremental Value (1) 244,520, ,050,399 22,508,470 1,501, ,060, % 97,056, ,482,997 22,978,305 1,501, ,962, % 76,958, ,631,791 20,881,720 1,501, ,015, % 72,010, ,386,642 24,405,892 1,501, ,294, % 71,289, ,218,838 22,897,240 1,930, ,046, % 78,042, ,825,191 21,087,293 1,930, ,842, % 71,838, ,630,087 20,563,661 1,930, ,124, % 83,120,104 (1) The base year assessed valuation for the Original Project Area is $52,228,998; the base year assessed valuation for the Amendment Area is $101,775,146. Source: Urban Futures, Inc. Fiscal Year Original Project Area Historical AV: Secured Value Unsecured Value Utility Total Taxable Value % Change Total Incremental Value 137,028, ,750,425 14,025,554 1,501, ,277, % 88,048, ,211,543 14,663,711 1,501, ,376, % 75,147, ,874,405 12,300,223 1,501, ,676, % 69,447, ,104,841 13,320,527 1,501, ,926, % 69,697, ,762,654 11,811,237 1,930, ,504, % 74,275, ,289,307 11,231,373 1,930, ,451, % 76,222, ,825,371 10,941,116 1,930, ,696, % 82,467,989 Fiscal Year Amendment Area Historical AV: Secured Value Unsecured Value Utility Total Taxable Value % Change Total Incremental Value 107,491, ,299,974 8,482, ,782, % 9,007, ,271,454 8,314, ,586, % 1,810, ,757,386 8,581, ,338, % 2,563, ,281,801 11,085, ,367, % 1,592, ,456,184 11,086, ,542, % 3,767, ,535,884 9,855,920-97,391, % ,804,716 9,622, ,427, % 652,115

67 Exhibit C SUCCESSOR AGENCY TO THE AUBURN URBAN DEVELOPMENT AUTHORITY Auburn Redevelopment Project Area Largest Local Secured Taxpayers/Property Owners Fiscal Year Taxable Secured Primary Percent of Property Owner Assessed Valuation Land Use Secured AV (1) 1. Reneson Hotels Inc $7,747,730 Commercial 3.58% I Street Properties 3,500,000 Commercial 1.62% 3. Ammm LP 3,482,220 Commercial 1.61% 4. Mbdh Enterprises LLC 3,440,233 Industrial 1.59% 5. Lee Cameron 3,222,092 Multifamily Residential 1.49% 6. Sacramento Outing Farms 3,135,307 Commercial 1.45% 7. Auburn Promenade Ltd 3,085,632 Commercial 1.42% 8. Placer Title Company 2,878,409 Commercial 1.33% 9. Auburn Uptown Properties LLC 2,648,594 Commercial 1.22% 10. Auburn Investors LLC 2,550,000 Commercial 1.18% Total $35,690, % (1) Based on fiscal year secured assessed valuation of $216,560,587 Source: Urban Futures, Inc. with information from the Placer County Secured Property Tax Roll.

68 Exhibit D SUCCESSOR AGENCY TO THE AUBURN URBAN DEVELOPMENT AUTHORITY Auburn Redevelopment Project Area Land Use Summary Fiscal Year Land Use Number of Parcels Secured Assessed Valuation Percent of Secured A.V. (1) Commercial 314 $138,552, % Single Family Residential ,629, % Multi-family Residential 79 24,378, % Industrial 25 16,763, % Vacant Commercial 50 2,678, % Vacant Governmental/Institutional/Other 133 1,729, % Governmental/Institutional/Other 76 1,622, % Recreational , % Vacant Industrial 5 200, % Agricultural 3 79, % Vacant Residential 1 71, % Vacant Agricultural 1 17, % Total All Secured 868 $216,560, % (1) Based on fiscal year secured assessed valuation of $216,560,587 Source: Urban Futures, Inc. with information from the Placer County Secured Property Tax Roll.

69 Successor Agency to the Auburn Urban Development Authority Auburn Redevelopment Project Area Exhibit E Historical Assessment Appeals For Appeals Reviewed January 1, September 1, 2015 Number of Appeals Filed Number of Successful Appeals Assessed Value of Property Owner's Opinion of Value Total Requested AV Reduction AV Reduction Allowed by Board Allowed Reductions as % of Requested 29 5 $69,749,500 $43,933,465 $25,816,035 $14,771, % Outstanding Assessment Appeals Roll Year Appealed Number of Appeals Filed Assessed Value of Property Owner's Opinion of Value Potential Loss of Assessed Value Historical Success Rate Potential AV Reduction (based on historical success) $3,614,999 $2,556,500 $1,058, % $605,647 Source: Urban Futures, Inc. with data obtained from Placer County.

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71 APPENDIX B GENERAL INFORMATION REGARDING THE CITY The following information concerning the City of Auburn and the County of Placer is presented as general background data. The Bonds are not an obligation of the City, the County, the State or any of its political subdivisions, and none of the City, the County, the State nor any of its political subdivisions is liable therefor. General Description and Background The City of Auburn (the City ) is located in Placer County (the County ) and serves as the county seat of the County. The City is geographically located approximately 30 miles Northeast of Sacramento and approximately 100 miles Southwest of Reno, Nevada. The City is nestled in the foothills of the Sierra Nevada Mountain Range at a comfortable 1,300 feet elevation. Auburn is situated on the edge of the Auburn State Recreation Area and overlooks the beautiful American River Canyon which offers an abundance of outdoor recreational activities. Auburn is less than two hours by car from Lake Tahoe to the east and San Francisco to the west. There are six incorporated cities in the County, of which four (Auburn, Lincoln, Rocklin and Roseville) have populations of 10,000 or more. Placer County is one of California s fastest growing counties and a key component of the Sacramento region s economy. The County offers many attractive features to businesses and residents including strong economic and demographic growth, a healthy business climate, developed infrastructure, and excellent quality of life. The County has benefited from expansions in its transportation infrastructure and the location of prominent businesses such as Hewlett Packard, Oracle Corporation, Ace Hardware, and PRIDE Industries. One of the County s most noted gems, the Sierra Nevada Mountains, home of the 1960 Winter Olympics at Squaw Valley, provides abundant recreational opportunities to its residents and visitors from around the world. All of these aspects have made Placer County a desirable location to live, work, and play. Topography and Climate The City and County offers a great variety of elevations and terrain. From a minimum of 40 feet above sea level in the southwestern corner of the County near Roseville, the land rises to an elevation of 9,000 feet at the summit of the Sierra Nevada Mountains, near the County s northeastern boundary. The western portion of the County, an area of rolling foothills, provides the site for several large industrial areas and a major railroad marshaling and switching yard. To the northeast, the terrain becomes more mountainous, advancing from orchard land to high elevation timberland. The eastern side of the County, particularly the area surrounding Lake Tahoe, provides a setting for high-altitude winter sports and summer recreational activities. Over much of its length, the County is bounded by the American and Bear Rivers. The climate in the lower elevations is generally characterized by warm summers and mild winters. The higher elevations experience the extremes of winter typical of such climes. In the more populated areas, monthly averages of daily extreme temperatures range from 39 degrees Fahrenheit minimum to 52 degrees Fahrenheit maximum in January, and 58 degrees Fahrenheit and 90 degrees Fahrenheit in July. The average annual rainfall is 36 inches, with an average annual snowfall of 216 inches in the Lake Tahoe area. Approximately 90% of average annual rainfall occurs in the six-month period extending from November to April. B-1

72 Population The following sets forth the City, the County and the State population estimates as of January 1 for the years 2010 to 2015: CITY OF AUBURN, PLACER COUNTY AND STATE OF CALIFORNIA Estimated Population Year (January 1) City of Auburn Placer County State of California , ,432 37,253, , ,897 37,427, , ,446 37,680, , ,339 38,030, * 13, ,678 38,357, * 13, ,454 38,714,725 Source: U.S. Census Bureau, Population Division--Annual Estimates of the Resident Population: April 1, 2010 to July 1, 2014 * State of California Department of Finance data retrieved on May 1, Commerce Total taxable sales during the calendar year 2013 in the City were reported to be $465,465,000 compared to total taxable sales of $445,963,000 reported during the calendar year The number of establishments selling merchandise subject to sales tax and the valuation of taxable transactions in the City is presented in the following table. Annual figures are not yet available for CITY OF AUBURN Taxable Transactions (dollars in thousands) Retail and Food Services Motor Vehicle and Parts Dealers 26,512 31,292 40,759 45,002 52,054 Home Furnishings and Appliance Stores 5,510 5,626 5,810 5,935 6,093 Bldg. Mat l. & Garden Equip. & Supplies 10,360 10,722 11,870 13,042 14,344 Food and Beverage Stores 16,273 15,336 14,778 15,472 14,805 Clothing and Clothing Accessories Stores 4,940 4,790 5,203 5,167 5,329 Food Services and Drinking Places 151,798 24,271 25,743 27,968 28,640 Other Retail Group 61, , , , ,210 Total Retail and Food Services 239, , , , ,474 All Other Outlets 48,068 42,918 51,294 48,832 46,991 Total All Outlets (1) 288, , , , ,465 (1) Detail may not compute to total due to rounding. Source: Taxable Sales in California, California State Board of Equalization. B-2

73 The number of establishments selling merchandise subject to sales tax and the valuation of taxable transactions within the County is presented in the following table. Total taxable sales during the calendar year 2013 in the County were reported to be $7,724,406,000, compared to total taxable sales reported during the calendar year 2012 of $7,065,597,000. The number of establishments selling merchandise subject to sales tax and the valuation of taxable transactions in the City is presented in the following table. Annual figures are not yet available for COUNTY OF PLACER Taxable Retail Sales Number of Permits and Valuation of Taxable Transactions (dollars in thousands) Retail and Food Services Motor Vehicle and Parts Dealers 1,052,348 1,114,195 1,256,174 1,425,698 1,642,161 Furniture and Home Furnishing Stores 181, , , , ,883 Electronics and Appliance Stores 223, , , , ,356 Bldg. Mat l. & Garden Equip. & Supplies 321, , , , ,970 Food and Beverage Stores 264, , , , ,606 Health and Personal Care Stores 91,267 96, , , ,994 Gasoline Stations 529, , , , ,928 Clothing and Clothing Accessories Stores 324, , , , ,319 Sporting Goods, Hobby, Book & Music Stores 176, , , , ,886 General Merchandise Stores 552, , , , ,213 Miscellaneous Store Retailers 175, , , , ,559 Nonstore Retailers 27,798 24,721 37, , ,746 Food Services and Drinking Places 532, , , , ,576 Total Retail and Food Services 4,453,186 4,678,785 5,112,781 5,613,981 6,050,198 All Other Outlets 1,343,458 1,338,757 1,455,414 1,451,616 1,674,208 Total All Outlets 5,796,644 6,017,542 6,568,195 7,065,597 7,724,406 Permits All Outlets 42,765 45,688 46,886 48,316 46,805 (1) Detail may not compute to total due to rounding. Source: Taxable Sales in California, California State Board of Equalization. Employment According to the State of California Employment Development Department, the September 2015 preliminary, estimated unemployment rates for the City, the County and the State were 3.9 percent, 7.6 percent and 6.5 percent respectively. The following table shows certain employment statistics for the City and the County for calendar years 2004 through B-3

74 CITY OF AUBURN City and County Employment Statistics Calendar Years 2004 through 2014 (1) (Annual Averages) City County State Year Labor Force Employed Unemployment Rate Unemployment Rate Unemployment Rate ,900 8, % 11.6% ,900 8, % 10.8% ,000 8, % 9.4% ,000 8, % 7.7% ,900 6, % 6.3% 7.5 (1) Not seasonally adjusted. Source: State of California, Employment Development Department. Data retrieved on May 1, Major Employers The following tables list the largest manufacturing and non-manufacturing employers within the County as of December 2014: PLACER COUNTY Top 10 Major Employers December 2014 Rank Employer Number of Employees Product/Service 1 Placer County Water Agency 194 Water Supply and Irrigation Systems 2 Pride Industries 175 Employment Placement Agencies 3 AT & T 94 Telecommunication Services 4 Auburn Journal 92 Newspaper Publishers 5 Nella Oil 84 Petroleum and Energy 6 Auburn Placer Disposal - Recology 81 Waste Collection & Disposal 7 City of Auburn 79 City Government Services 8 United States Post Office 68 Postal Services 9 Placer County (Domes Offices) 59 County Government Services 10 Miltenyi Biotech 53 R&D in Biotechnology Source: City of Auburn. Transportation The City s transportation network is an integral part of its development. Centrally located in the State, the area is the hub of several major highways. Interstate 80 runs through the City, connecting San Francisco to New York. Highway 65 runs north from I-80 to Lincoln and Marysville. Interstate 5, which is west of the City, runs north to Seattle and south to Los Angeles. B-4

75 Union Pacific Railroad bought Southern Pacific in 1996 and the J.R. Davis Yard, located in the City of Roseville, is the largest rail facility on the West Coast. Union Pacific owns and operates track in 23 states, primarily west of the Mississippi River. Amtrak provides passenger service daily to San Francisco and San Jose, and the California Zephyr connects the County to the Midwest and Chicago. Greyhound operates a station in Roseville, providing interstate destination services. Greyhound also operates throughout the County, with bus depots or regularly scheduled stops in most of the communities along major highways and roads. Sacramento International Airport is located 17 miles west of Roseville via I-80 and I-5. Served by ten major carriers and several commuter airlines, as well as air freight carriers, Metro handles passenger flights to over 140 cities with more than 130 scheduled departures per day and 4.3 million passengers annually. Auburn Municipal Airport serves charter and private aircraft for coastal, state and transcontinental flights. Executive air service is available as well. Auburn Municipal has an elevation of 1,520 feet and an east/west runway 3,100 feet in length. Lincoln Municipal Airport is located nine miles north of Roseville and offers fueling and maintenance services to private aircraft. Lincoln Municipal has an elevation of 119 feet and a 6,000 foot runway. Corporate aviation and fixed based operations from Lincoln Municipal provide daily service to the San Francisco Bay area. Several trucking companies serve the County, ranging from interstate lines to local haulers, and transporting a wide variety of goods. United Parcel Service, with a distribution center in Rocklin, offers freight transportation services as well. The Port of Sacramento is located approximately 38 miles from the City of Auburn. The Port handles ocean-going freighters via San Francisco Bay. Warehouses and conveyor systems are equipped with vacuum dust collectors, permitting rapid loading of ordinary dusty commodities without environmental pollution. A $46 million expansion project will accommodate the majority of the bulk cargo vessels, as well as general container cargo vessels. B-5

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77 APPENDIX C AUDITED FINANCIAL STATEMENTS OF THE CITY OF AUBURN FOR THE FISCAL YEAR ENDED JUNE 30, 2014 C-1

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79 CITY OF AUBURN CALIFORNIA 2014 Comprehensive Annual Financial Report Fiscal Year Ended June 30, 2014

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81 City of Auburn, California Comprehensive Annual Financial Report For the Year Ended June 30, 2014 Prepared By: Administrative Services Department Dylan Feik, Director

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83 CITY OF AUBURN Comprehensive Annual Financial Report For the Year Ended June 30, 2014 Table of Contents INTRODUCTORY SECTION Letter of Transmittal I-VI Government Finance Officer s Association Certificate of Achievement VII List of Officials Page VIII-IX Organizational Chart X FINANCIAL SECTION Independent Auditor s Report Management s Discussion and Analysis (Required Supplementary Information - Unaudited) Basic Financial Statements: Government-Wide Financial Statements: Statement of Net Position Statement of Activities Fund Financial Statements: Governmental Funds: Balance Sheet Reconciliation of the Governmental Funds Balance Sheet to the Government- Wide Statement of Net Position - Governmental Activities Statement of Revenues, Expenditures, and Changes in Fund Balances Reconciliation of the Statement of Revenues, Expenditures, and Changes in Fund Balances of Governmental Funds to the Government-Wide Statement of Activities - Governmental Activities Proprietary Funds: Statement of Net Position Statement of Revenues, Expenses, and Changes in Net Position Statement of Cash Flows Fiduciary Funds: Statement of Fiduciary Net Position Statement of Changes in Fiduciary Net Position Notes to Basic Financial Statements Required Supplementary Information (Unaudited): Schedule of Funding Progress - Other Postemployment Benefits (OPEB) Budgetary Comparison Schedule - General Fund Budgetary Comparison Schedule - Transportation Notes to Budgetary Comparison Schedule

84 CITY OF AUBURN Comprehensive Annual Financial Report For the Year Ended June 30, 2014 Table of Contents FINANCIAL SECTION (CONTINUED) Combining and Individual Fund Statements and Schedules: Nonmajor Governmental Funds: Combining Balance Sheet Combining Statement of Revenues, Expenditures, and Changes in Fund Balances Special Revenue Funds: Narrative Summary Combining Balance Sheet Combining Statement of Revenues, Expenditures, and Changes in Fund Balances Budgetary Comparison Schedules: State Gas Tax Transit Property Seizures HOME Housing Rehabilitation & First Time Homebuyer Small Business Loans Solid Waste Management Office of Traffic Safety State Law Enforcement Grant Facilities and Equipment Miscellaneous Grants Capital Projects Funds: Narrative Summary Combining Balance Sheet Combining Statement of Revenues, Expenditures, and Changes in Fund Balances Budgetary Comparison Schedule - Auburn School Park Preserve Fiduciary Funds: Narrative Summary Private Purpose Trust Funds: Combining Statement of Fiduciary Net Position Combining Statement of Changes in Fiduciary Net Position Agency Funds: Combining Statement of Assets and Liabilities Combining Statement of Changes in Assets and Liabilities Page

85 CITY OF AUBURN Comprehensive Annual Financial Report For the Year Ended June 30, 2014 Table of Contents STATISTICAL SECTION (UNAUDITED) Narrative Summary Financial Trend Information: Net Position by Component - Last Ten Fiscal Years Changes in Net Position - Last Ten Fiscal Years Fund Balances - Governmental Funds - Last Ten Fiscal Years Changes in Fund Balances - Governmental Funds - Last Ten Fiscal Years Revenue Capacity Information: Assessed Value and Estimated Actual Value of Taxable Property - Last Ten Fiscal Years Property Tax Rates - All Overlapping Governments - Last Ten Fiscal Years Principal Property Taxpayers - Current Year and Eight Years Ago Property Tax Levies and Collections - Last Ten Fiscal Years Debt Capacity Information: Ratios of Outstanding Debt by Type - Last Ten Fiscal Years Ratios of General Bonded Debt Outstanding - Last Ten Fiscal Years Direct and Overlapping Bonded Debt Computation of Legal Bonded Debt Margin Demographic and Economic Information: Demographic and Economic Statistics - Last Ten Calendar Years Principal Employers Operating Information: Full-Time and Part-Time City Government Employees - Last Ten Fiscal Years Operating Indicators - Last Ten Fiscal Years Capital Asset Statistics - Last Ten Fiscal Years Page

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87 INTRODUCTORY SECTION Letter of Transmittal Government Finance Officer s Association Certificate of Achievement City Council and Administrative Personnel Organizational Chart

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89 City of Auburn 1225 Lincoln Way, Auburn CA (530) fax (530) January 29, 2015 To the Honorable Mayor, City Council and Citizens of Auburn: THE COMPREHENSIVE ANNUAL FINANCIAL REPORT OF THE CITY OF AUBURN We are pleased to present the Comprehensive Annual Financial Report (CAFR) of the City of Auburn for the fiscal year July 1, 2013 through June 30, Although addressed to the City s governing body and its citizens, the CAFR is intended also to provide relevant financial information to creditors, investors, and other interested parties. This transmittal letter provides a summary of City of Auburn finances, services, achievements and economic prospects for readers without a technical background. Those wishing a more detailed discussion of the City s financial results should refer to Management s Discussion and Analysis (MD&A) contained in the Financial Section of the CAFR. The City of Auburn s management is solely responsible for the accuracy of the information contained in this report, the adequacy of its disclosures, and the fairness of its presentation. We believe this CAFR to be complete and reliable in all material respects. To provide a reasonable basis for making this representation, the City has established a system of internal controls designed to protect City assets from loss, to identify and record transactions accurately, and to compile the information necessary to produce financial statements in conformity with generally accepted accounting principles. The City has contracted with Smith & Newell, CPAs, a firm of Certified Public Accountants licensed to practice in the State of California, to perform the annual independent audit. The auditors expressed an opinion that the City s financial statements for fiscal year are fairly stated and in compliance with accounting principles generally accepted in the United States. This conclusion is the most favorable kind and is commonly known as an unqualified or clean opinion. The independent auditor s report is included in the Financial Section of this report. I

90 REPORTING ENTITY The City of Auburn is a general-law City incorporated under California law, first in 1860 and again on May 2, The City operates under a council-manager form of government. The City s five Council Members are elected at-large and serve overlapping four-year terms. Annually, the City s five Council Members elect the position of Mayor and Mayor Pro Tempore, who serve one-year terms in this capacity. All elections are conducted on a non-partisan basis. The City Manager is appointed by the Council and serves as the chief administrative officer of the organization. The City Manager is responsible for administration of City affairs, day-to-day operations, and implementation of Council policies. The City s fiscal year begins on July 1 and ends June 30 of the following year. The City provides a full range of municipal services including: police and fire protection; the construction and maintenance of streets and infrastructure; land use planning and zoning; building safety regulation and public inspection; and general administrative services. The City also operates the Auburn Municipal Airport and a wastewater treatment facility. The City of Auburn covers approximately 7.5 square miles on the western slope of the Sierra Nevada Range and has an estimated population of 13,660. At the crossroads of Interstate 80 and Highway 49, Auburn is the county seat of Placer County and an important retail trade center. The City of Auburn and surrounding Auburn areas have emerged as a destination point for those enjoying a variety of activities including whitewater rafting, horseback riding, and hiking to the historic ambiance of the Old Town and Downtown areas providing unique shopping and dining experiences. In 2003, the Auburn City Council passed an official measure proclaiming Auburn as the Endurance Capital of the World. Auburn is home to some of the most challenging and historic endurance events on the planet, including the Auburn International Triathlon, the Tevis Cup Ride, and the Western States 100-mile Endurance Run and many other major events and activities in the Endurance Capital of the World. This report includes all funds of the City and the Auburn Public Finance Authority which are all governmental organizations that are controlled by or dependent upon actions taken by the City Council. ECONOMIC CONDITION AND OUTLOOK Fiscal Year ended with promising, though modest signs of improvement in City revenue growth. After enduring many consecutive years of operating shortfalls in the City s General Fund during the recent economic downturn, the City realized a small surplus during Fiscal Year as a result of prudent operational and fiscal decision making. Fiscal Year General Fund budget balanced revenues and expenditures and anticipated adding an estimated $197,000 back to the City s reserves. Due to increased revenues and decreased expenditures, the General Fund realized a $453,316 II

91 surplus in Fiscal Year The City is positioning itself to improve and enhance its viability in coming years. The economic outlook for Auburn remains heavily affected by the financial stability at the State level of government. During the 2014 legislative session, Senate Bill 983 was introduced which would have had a devastating impact to the City s general fund revenue stream. While the proposed bill eventually was defeated, it left great concern for City leaders to deal with State actions that adversely affect the City s finances. As the State budget shows positive signs of recovery and increased tax revenues, the City s own budget outlook improves as well. In February 2014, the California Public Employees Retirement System, or CalPERS, Board approved new actuarial assumptions to reflect the fund s recent experience. Most notably is the change to a new 20-year mortality rate projection which applies to all CalPERS groups. This new assumption will drastically impact the City of Auburn s finances over the course of the next five years. Management will be diligent in addressing the financial burden that pensions now place on municipal budgets across the State. The City s Budget assumes continued improvement in the City s sales tax revenues as well as an anticipated rise in property tax values. Assessed property values, which directly impact the amount of property tax collected, are expected to increase by 5.5% when compared to Fiscal Year values. Sales tax is showing signs of improvement and is expected to be 3% higher than those collected in the previous year, primarily due to sustained increases in collections, a sign of the improving economy. Intergovernmental revenues are also expected to remain with the exception of a reduction in a SAFER grant. The Staffing for Adequate Fire and Emergency Response grant, or SAFER grant, ended in September Continuing improvement in City building permit revenues has also provided an additional indication of the improvement in the local economy. During 2014, the City of Auburn experienced new city leadership including a new City Council and new city management. The organization is committed to bringing new ideas and solutions to improve and enhance service delivery of existing programs while confronting the challenges of a seemingly ever-changing economic environment. To this end, the City will continue to evaluate citywide programs and services consistent with cost effectiveness and efficiency. SIGNIFICANT EVENTS AND ACCOMPLISHMENTS Highlights of activities and accomplishments for the fiscal year ended June 30, 2014 include the following: The successful construction of the Palm Avenue Sidewalk Project which added sidewalks, a bicycle lane, and medians to a high traffic intersection near a school. The project was funded largely by $900,000 grants for Safe Routes to School, Congestion Mitigation Air Quality, and City funding. III

92 Completed over $1.4m in sewer repairs to reduce infiltration and inflow (I&I) into the City s sanitary sewer system. Purchased and installed on-board cameras for the City s transit operations. The City completed an Americans with Disabilities Act (ADA) study of municipal buildings to identify enhancements and/or alterations to public facilities. The City of Auburn Police Department formed a committee of selected police and fire agencies to identify the requirements for a new regional Computer-Aided Dispatch and Records Management System (CAD-RMS) - the goals of which are to increase safety, decrease police and fire response times, reduce labor costs, streamline reporting and improve communications. Public Works: LONG-TERM FINANCIAL PLANNING AND INTIATIVES Capital Improvement Plan: The budget adopted for Fiscal Year includes more than $9.2 million appropriated for capital projects in the City s Airport, Sewer and Transportation and General funds. This amount represents more than a 300% increase over capital investments made in Fiscal Year The City is attempting to identify alternative funding sources for public infrastructure including streets and sidewalks. Community Development: Community Development Block Grant Housing Rehabilitation and First-Time Homebuyer / Economic Development Loans: The City of Auburn will continue to offer housing rehabilitation and first-time homebuyer and economic development funds made available by a state grant to prospective citizens. Community Development General Plan Update: The City of Auburn is expected to begin updating the City s General Plan consistent with State requirements. Public Safety: Consolidation: In December 2014, the City s fire chief retired which created an opportunity to consolidate management positions and retain on-the-ground public safety positions. The chief of police was appointed as the interim director of emergency services, to oversee the operations and administration of the police and fire departments. Fire Department FEMA Staffing for Adequate Fire and Emergency Response SAFER Grant: In September 2014, the City of Auburn Fire Department would no longer receive FEMA funding for 5 temporary positions. This funding, known as the SAFER grant, allowed the City to employ additional full-time firefighters. Conscious of public safety concerns regarding wildfires during 2014, the City Council retained all five positions through December 31. Beginning in January 2015, the department will retain three of the positions and may reapply for SAFER funds in the future. IV

93 Police Department CAD-EMS Upgrade: The City of Auburn Police Department is nearing completion on implementation of a regional CAD-EMS System. General Government: Administrative Services Information Technology Enhancements and Upgrades: The City of Auburn Administrative Services Department will work to implement upgrades to its technology infrastructure including an overhaul of the City website, installation of new server technology, and further upgrades to the City s existing suite of applications. Administrative Services Health and Benefits: The City of Auburn is anticipating an 8% increase to employee health premiums in Fiscal Year Over the last several years, the City has worked with labor unions to increase the employee contribution towards health care costs, resulting in a lesser financial impact to the City. Also, management remains diligent in monitoring changes to pension obligations. In Fiscal Year , the City budgeted $1,101,919 for employee pension costs, an increase of 32.7% since Fiscal Year According to CalPERS actuarial reports, the City should anticipate, and prepare for, pension increases between 20-30% over the next five years. FINANCIAL INFORMATION The City s management staff is responsible for establishing and maintaining internal controls that safeguard the assets of the government from loss, theft, or misuse and allow the compilation of adequate accounting data for the preparation of financial statements in conformity with Generally Accepted Accounting Principles (GAAP). Internal controls are designed to provide reasonable, but not absolute, assurance that these objectives are met. The concept of reasonable assurance recognizes that the cost of a control should not exceed its likely benefits and that the evaluation of costs and benefits is subject to management estimates and judgments. Budgetary Controls The City maintains budgetary controls to ensure compliance with legal provisions embodied in the annual appropriated budget approved by the City Council. Activities of the majority of the funds are included in the annual appropriated budget. Expenditure activities for certain funds are not considered during the annual budget process due to their reliance on revenues received. Budgetary control within each department is monitored at the major object level (employee salaries and benefits, services and supplies, other charges and capital assets). The level of budgetary control, at which expenditures in budgeted funds cannot legally exceed the budgeted amount, is at the departmental level. This means that the expenditures cannot legally exceed the amount appropriated by the City Council. If necessary, staff recommends budgetary changes during periodic financial status reports to the City Council. V

94 The City continues to meet its responsibility for sound financial management as demonstrated by the statements and schedules included in the financial section of this report. AWARD AND ACKNOWLEDGEMENTS The Government Finance Officers Association of the United States and Canada (GFOA) awarded a Certificate for Excellence in Financial Reporting to the City of Auburn for its comprehensive annual financial report for the fiscal year ended June 30, This award, the eighth consecutive award for the City, recognizes the City s conformance with the highest standards for preparation of state and local government financial reports. In order to be awarded a Certificate of Achievement, the government must publish an easily readable and efficiently organized comprehensive annual financial report, whose contents conform to program standards. Such report must satisfy both generally accepted accounting principles and applicable legal requirements. A Certificate of Achievement is valid for a period of one year only. We believe that our current comprehensive annual financial report continues to meet the Certificate of Achievement Program s requirement and we are submitting it to the GFOA to determine its eligibility for another certificate. The preparation of this CAFR represents the culmination of a concerted team effort by the entire staff of the Administrative Services Department. Each member of the department has our sincere appreciation for the contributions made in the preparation of this report. In addition, staff in all City departments should be recognized for their timely and positive response to the requests for detailed information necessary to prepare the annual audit. The role of Smith & Newell, CPAs should also be acknowledged as a significant contribution. Finally, we wish to express our sincere appreciation to the Mayor and City Council for providing policy direction and a firm foundation of support in planning and conducting the financial operations of the City in a responsible and progressive manner. Respectfully submitted, Tim Rundel City Manager Dylan Feik Administrative Services Director VI

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97 CITY OF AUBURN City Officials For the Year Ended June 30, 2014 Bridget Powers Mayor Keith Nesbitt Vice-Mayor Dr. Bill Kirby Matt Spokely Daniel Berlant Council Member Council Member Council Member VIII

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99 CITY TREASURER George Williams RESIDENTS OF AUBURN CITY CLERK Stephanie Snyder BOARDS & COMMISSIONS Planning Commissions Economic Development Commission Historic Design Review Commission Arts Commission Technology Commission MAYOR & CITY COUNCIL Bridget Powers, Mayor Keith Nesbitt, Mayor Pro-Tem Kevin Hanley Mike Holmes Dr. Bill Kirby AUBURN URBAN DEVELOPMENT AUTHORITY CITY ATTORNEY Michael Colantuono CITY MANAGER Tim Rundel GENERAL GOVERNMENT Administrative Services Director Dylan Feik PUBLIC SAFETY Police Chief John Ruffcorn Fire Chief Mark D Ambrogi CAPITAL MAINTENANCE Public Works Director Bernie Schroeder COMMUNITY SERVICES Community Development Director Will Wong IX

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101 City of Auburn Comprehensive Annual Financial Report 2014 Project Team Tim Rundel, City Manager Dylan Feik, Administrative Services Director Administrative Staff Mary Freitas, Senior Accounting Technician Shari Conley, Administrative Technical Analyst Special Assistance Mark D Ambrogi, Chief of Fire John Ruffcorn, Chief of Police Lisa Hoffrogge, Building Official Bernie Schroeder, Public Works Director George Williams, City Treasurer X

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103 FINANCIAL SECTION Independent Auditor s Report Management s Discussion and Analysis Basic Financial Statements Required Supplementary Information Combining and Individual Fund Statements and Schedules

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106 To the Honorable Mayor and Members of the City Council City of Auburn Auburn, California Opinions In our opinion, the financial statements referred to above present fairly, in all material respects, the respective financial position of the governmental activities, the business-type activities, each major fund, and the aggregate remaining fund information of the City as of June 30, 2014, and the respective changes in financial position and, where applicable, cash flows thereof for the year then ended in accordance with accounting principles generally accepted in the United States of America. Emphasis of Matter As described in Note 1Q to the financial statements, in 2014, the City implemented Governmental Accounting Standards Board (GASB) Statement No. 70. Our opinion is not modified with respect to this matter. Other Matters Required Supplementary Information Accounting principles generally accepted in the United States of America require that the management s discussion and analysis, Schedule of Funding Progress, and budgetary comparison information as listed in the table of contents be presented to supplement the basic financial statements. Such information, although not a part of the basic financial statements, is required by the Governmental Accounting Standards Board who considers it to be an essential part of financial reporting for placing the basic financial statements in an appropriate operational, economic, or historical context. We have applied certain limited procedures to the required supplementary information in accordance with auditing standards generally accepted in the United States of America, which consisted of inquiries of management about the methods of preparing the information and comparing the information for consistency with management s responses to our inquiries, the basic financial statements, and other knowledge we obtained during our audit of the basic financial statements. We do not express an opinion or provide any assurance on the information because the limited procedures do not provide us with sufficient evidence to express an opinion or provide any assurance. Other Information Our audit was conducted for the purpose of forming opinions on the financial statements that collectively comprise the City s basic financial statements. The introductory section, combining and individual nonmajor fund financial statements and schedules, and statistical section, are presented for purposes of additional analysis and are not a required part of the basic financial statements. The combining and individual nonmajor fund financial statements and schedules are the responsibility of management and were derived from and relate directly to the underlying accounting and other records used to prepare the basic financial statements. Such information has been subjected to the auditing procedures applied in the audit of the basic financial statements and certain additional procedures, including comparing and reconciling such information directly to the underlying accounting and other records used to prepare the basic financial statements or to the basic financial statements themselves, and other additional procedures in accordance with auditing standards generally accepted in the United States of America. In our opinion, the combining and individual nonmajor fund financial statements and schedules are fairly stated in all material respects in relation to the basic financial statements as a whole. -2-

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109 Management s Discussion and Analysis (Unaudited)

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111 Management s Discussion and Analysis CITY OF AUBURN Management Discussion and Analysis June 30, 2014 This section of the City of Auburn s (City) Comprehensive Annual Financial Report presents a discussion of the City s financial performance during the year ended June 30, Please read it in conjunction with the City s basic financial statements following this section. FINANCIAL HIGHLIGHTS The assets of the City exceeded liabilities at the close of Fiscal Year by $53,238,069 (net position) which represents an increase of 0.26%, or $138,101. Of this amount, $10,168,701 (unrestricted net position) may be used to meet ongoing obligations to citizens and creditors, and $3,882,876 is restricted for capital projects, debt service, and legally segregated taxes, grants and fees. As of June 30, 2014, the City governmental funds reported combined fund balances of $5,777,714. Approximately 41.3% of the combined fund balances, or $2,384,993, is available to meet the City s current and future needs (committed and unassigned fund balance). An annual surplus of $453,316 was realized in the City s General fund during the fiscal year. Total General fund balance as of June 30, 2014 was $3,445,663, or 35.6% of Fiscal Year expenditures. OVERVIEW OF THE FINANCIAL STATEMENTS This discussion and analysis is intended to serve as an introduction to the City s basic financial statements. The City s basic financial statements are comprised of three components: 1) Government-Wide Financial Statements; 2) Fund Financial Statements; and 3) Notes to the Basic Financial Statements. Government-Wide Financial Statements are designed to provide readers with a broad overview of City finances, in a manner similar to a private-sector business. The Statement of Net Position presents information on all City assets and liabilities, with the difference between the two reported as net position. Over time, increases or decreases in net position may serve as a useful indicator of whether the financial position of the City is improving or deteriorating. The Statement of Activities presents information showing how net position changed during the most recent fiscal year. All changes in net position are reported as soon as the underlying event giving rise to the change occurs, regardless of the timing of related cash flows. Thus, revenues and expenses are reported in this statement for some items that will result in cash flows in future fiscal periods, (e.g. uncollected taxes and earned but unused annual vacation and sick leave). Both of these government-wide financial statements distinguish functions of the City that are principally supported by taxes and intergovernmental revenues (governmental activities) from other functions that are intended to recover all or in part a portion of their costs through user fees and charges (business-type activities). The governmental activities of the City include general government, public safety, transportation, community development, and recreation. The business-type activities of the City include an airport and wastewater treatment operating facility. The government-wide financial statements can be found on pages of this report. -4-

112 CITY OF AUBURN Management Discussion and Analysis June 30, 2014 Fund Financial Statements are groupings of related accounts that are used to maintain control over resources that have been segregated for specific activities or objectives. The City, like any other state and local government, uses fund accounting to ensure and demonstrate finance-related legal compliance. All of the funds of the City can be divided into three categories: governmental funds, proprietary funds, and fiduciary funds. Governmental funds are used to account for essentially the same functions reported as governmental activities in the government-wide financial statements. However, unlike the government-wide financial statements, governmental funds financial statements focus on near-term inflows and outflows of spendable resources, as well as on balances of spendable resources available at the end of the fiscal year. Such information may be useful in evaluating a City s near-term financing requirements. The City considers revenues to be available if they are collected within 60 days after the fiscal year end. Because the focus of governmental funds is narrower than that of the government-wide financial statements, it is useful to compare the information presented for governmental funds with similar information presented for governmental activities in the government-wide financial statements. By doing so, readers may better understand the long-term impact of the government s near-term financing decisions. Both the governmental funds balance sheet and the governmental funds statement of revenues, expenditures and changes in fund balances provide a reconciliation to facilitate this comparison between governmental funds and governmental activities. Information is presented separately in the governmental funds balance sheet and in the governmental funds statement of revenues, expenditures and changes in fund balances for the General fund which is considered to be a major fund. The City maintains several individual governmental funds organized according to their type (special revenue and capital projects funds). Data from the remaining governmental funds are combined into a single, aggregated presentation. Individual fund data for each of these non-major governmental funds is provided in the form of combining statements elsewhere in the report. The governmental funds financial statements can be found on pages of this report. Proprietary funds are generally used to account for services for which the City charges customers - either outside customers, or internal units of departments within the City. Proprietary funds provide the same type of information as shown in the government-wide financial statements, only in more detail. Proprietary funds are used to report the same functions presented as business-type activities in the government-wide financial statements. The City uses proprietary funds to account for the Auburn Airport and the Wastewater Treatment Facility. The proprietary funds financial statements can be found on pages of this report. Fiduciary funds are used to account for resources held for the benefit of the City s employees and parties outside the government. The City s other employee benefit trust fund, private purpose trust and agency funds are reported under the fiduciary funds. Since the resources of these funds are not available to support the City s own programs, they are not reflected in the government-wide financial statements. The accounting used for fiduciary funds is much like that used for proprietary funds. The fiduciary funds financial statements can be found on pages of this report. -5-

113 CITY OF AUBURN Management Discussion and Analysis June 30, 2014 Notes to the Basic Financial Statements provide additional information that is essential to a full understanding of the data provided in the government-wide and fund financial statements. The notes can be found on pages of this report. Required Supplementary Information is presented for the City s General fund and major special revenue fund consisting of budgetary comparison schedules. The City adopts an annual appropriated budget to demonstrate compliance with this budget. The required supplementary information can be found on pages of this report. The combining and individual fund statements and schedules for non-major governmental funds, proprietary funds, and fiduciary funds are presented immediately following the required supplementary information. Combining and individual fund statements and schedules can be found on pages of this report. GOVERNMENT-WIDE FINANCIAL ANALYSIS This analysis focuses on the net position and changes in net position of the City as a whole. Table 1 Condensed Statement of Net Position June 30, Governmental Activities Business-Type Activities Total Assets: Current and other assets $ 11,694,972 $ 12,149,845 $ 10,220,005 $ 10,224,683 $ 21,914,977 $ 22,374,528 Capital assets 21,268,816 21,577,156 27,784,467 28,134,698 49,053,283 49,711,854 Total assets 32,963,788 33,727,001 38,004,472 38,359,381 70,968,260 72,086,382 Liabilities: Current and other liabilities 1,512,389 1,852, , ,774 1,689,299 2,194,035 Long-term liabilities 6,539,099 6,799,588 9,501,793 9,992,791 16,040,892 16,792,379 Total liabilities 8,051,488 8,651,849 9,678,703 10,334,565 17,730,191 18,986,414 Net Position: Net nvestment in capital assets 20,815,460 20,966,807 18,371,032 18,226,969 39,186,492 39,193,776 Restricted 3,323,613 3,296, , ,263 3,882,876 3,855,458 Unrestricted 773, ,150 9,395,474 9,238,584 10,168,701 10,050,734 Total net position $ 24,912,300 $ 25,075,152 $ 28,325,769 $ 28,024,816 $ 53,238,069 $ 53,099,968 Governmental Activities The City s governmental net position amounted to $24.91 million as of June 30, 2014, a decrease of approximately $162,852 over the fiscal year ended June 30, This decrease is the change in net position reflected in the governmental activities column of the Changes in Net Position. The City s net position from governmental activities as of June 30, 2014, comprised the following: Cash and investments comprised $4.75 million in the City treasury, $660,052 of which is restricted in use. Substantially all of these amounts were held in short to medium term investments in governmental securities and corporate notes, as detailed in Note 3 to the financial statements. -6-

114 CITY OF AUBURN Management Discussion and Analysis June 30, 2014 Current accounts, taxes and intergovernmental receivables comprised $1,527,545, an increase of $306,945 over the previous year. Loans receivable comprised approximately $628,859, all of which represents loans provided by the City s Community Development Block Grant Program to support small business development. A net pension asset comprised $4,624,526. Capital assets of $21.27 million, net of depreciation charges, which includes City infrastructure, buildings and improvements, equipment, land improvements and related construction in progress. Current liabilities, including accounts and interest payable, deposits and unearned revenues, comprised $1.51 million, a decrease of 18% from Fiscal Year Long-term liabilities comprised $6.54 million, or an overall decrease of 4% from the previous year due to paying down long term debt obligations. Net investment in capital assets of $20.82 million, representing the City s investment in infrastructure and other capital assets used in Governmental activities, net of amounts borrowed to finance that investment. Restricted net position totaling $3.32 million, which may be used only to construct specified capital projects, debt service, or for community development and transportation projects and public safety programs. Unrestricted net position is part of net position that can be used to finance day-to-day operations without constraints established by debt covenants or other legal requirements or restrictions. The City had $773,227 of unrestricted net position as of June 30, Business-Type Activities The City s business-type net position amounted to $28.33 million as of June 30, 2014, increasing by approximately $300,953 over the previous year. The increase in net position experienced in the business-type funds occurred primarily as a result of making debt service payments for both the Airport and Sewer operations. Capitalized assets in the Airport and Sewer funds were related to sewer rehabilitation projects, the Regional Sewer Common Pipeline, Monticello Lift Station and aeration improvements at the City s Wastewater Treatment Plant. Additionally, improvements to the Auburn Municipal Airport included a new monument sign and a new truck. The City s net position from business-type activities as of June 30, 2014, comprised the following: Cash and investments comprised $9,846,440 in the City Treasury, $1,624,918 of which is restricted in use as detailed in Note 3 to the financial statements. Current accounts, taxes and intergovernmental receivables comprised $242,266. Capital assets of $27.8 million, net of depreciation charges. -7-

115 CITY OF AUBURN Management Discussion and Analysis June 30, 2014 Current liabilities, including accounts and interest payable, and deposits, comprised $176,910, representing a 48% decrease from the previous year of $341,774. Long-term liabilities comprised $9.5 million. Net investment in capital assets of $18.38 million, representing the City s investment in infrastructure and other capital assets used in business-type activities, net of amounts borrowed to finance that investment. Restricted net position totals $559,263 and is related to a debt service reserve established for sewer revenue bonds. Unrestricted net position of approximately $9.4 million. The following table indicates the changes in net position: Table 2 Condensed Statement of Activities For the Year Ended June 30, Governmental Activities Business-Type Activities Total Program Revenues: Charges for services $ 813,641 $ 1,119,432 $ 5,890,987 $ 6,018,960 $ 6,704,628 $ 7,138,392 Operating grants and contributions 2,574,530 2,565,297 86,311 77,692 2,660,841 2,642,989 Capital grants and contributions - 2, ,468 Total program revenues 3,388,171 3,687,197 5,977,298 6,096,652 9,365,469 9,783,849 General Revenues: Property taxes 2,627,318 3,097,824 47,364 38,568 2,674,682 3,136,392 Sales and use taxes 2,957,859 2,787, ,957,859 2,787,736 Other taxes 1,752,578 1,492, ,752,578 1,492,983 Franchise taxes 632, , , ,244 Grants and contributions - unrestricted 431,011 6, ,011 6,960 Unrestricted interest and investment earnings 119,117 7,934 38,063 3, ,180 11,844 Miscellaneous 52, ,904 17,640 40,000 70, ,904 Transfers 57,454 45,801 (57,454) (45,801) - - Total general revenues 8,630,953 8,396,386 45,613 36,677 8,676,566 8,433,063 Total revenues 12,019,124 12,083,583 6,022,911 6,133,329 18,042,035 18,216,912 Program Expenses: General government 1,474,340 1,890, ,474,340 1,890,167 Public safety 6,369,373 5,421, ,369,373 5,421,554 Transportation 3,145,072 3,508, ,145,072 3,508,302 Community development 934, , , ,696 Interest on long-term debt 258, , , ,979 Airport , , , ,373 Sewer - - 5,040,454 4,108,614 5,040,454 4,108,614 Total expenses 12,181,976 11,780,698 5,721,958 4,774,987 17,903,934 16,555,685 Change in net position (162,852) 302, ,953 1,358, ,101 1,661,227 Net Position - Beginning 25,075,152 24,867,595 28,024,816 26,846,871 53,099,968 51,714,466 Prior Period Adjustment - (95,328) - (180,397) - (275,725) Net Position - Beginning, Restated 25,075,152 24,772,267 28,024,816 26,666,474 53,099,968 51,438,741 Net Position - Ending $ 24,912,300 $ 25,075,152 $ 28,325,769 $ 28,024,816 $ 53,238,069 $ 53,099,968-8-

116 CITY OF AUBURN Management Discussion and Analysis June 30, 2014 Governmental Activities Governmental activities net position decreased by $162,852 during Fiscal Year The decrease in net position can be primarily attributed to a decrease in property tax revenues experienced during the fiscal year. As Table 2 above shows, $3.39 million, or 28% of the City s Fiscal Year revenue is derived from program revenues, while $8.6 million, or 72%, is derived from general revenues such as taxes, rents, and interest. Program revenues are composed of fees and charges for service of $813,641 that include permit revenues, fees, and charges used to fund expenses incurred in providing services; and $2.57 million of operating grants and contributions which include gas tax, transportation development allocations, transportation grants, and public safety allocations and grants. General revenues are not allocable to programs but are used to pay for the net costs of governmental programs. Business-Type Activities Business-type activities net position combined to increase by $302,885 during Fiscal Year The majority of the increase in net position can be attributed to increased collections of operating revenues and repayment of debt in both the Airport and Sewer enterprise funds. Net position in the City s Airport fund increased approximately $140,383 during Fiscal Year The increase is primarily attributable to increased collections of Auburn Airport lease revenues offset by increased costs incurred for staff, materials and capital maintenance at the Airport. Net position in the City s Sewer fund increased approximately $160,570 during Fiscal Year The increase can be attributed to net operating income which includes the effects of increased collections of sewer use charges, offset by interest charges incurred for the repayment of Sewer infrastructure debt. FINANCIAL ANALYSIS OF THE CITY S FUNDS As noted earlier, the City uses fund accounting to ensure and demonstrate compliance with finance-related legal requirements. Governmental funds. The general government functions are contained in the General, Special Revenue, and Capital Project funds. The focus of the City s governmental funds is to provide information on near-term inflows, outflows, and balances of spendable resources. Such information is useful in assessing the City s financing requirements. In particular, unrestricted fund balance (committed and unassigned) may serve as a useful measure of a government s net resources available for spending at the end of the fiscal year. -9-

117 CITY OF AUBURN Management Discussion and Analysis June 30, 2014 Table 3 represents the amount of governmental fund revenue from various sources: Table 3 Revenues Classified by Source Governmental Funds For the Fiscal Years Ended June 30, Variance % Change Revenues by Source: Taxes $ 7,970,718 $ 8,008,787 $ (38,069) -0.48% Licenses and permits 334, ,012 (296,122) % Fines and forfeitures 50,287 62,369 (12,082) % Use of money and property 404, , , % Intergovernmental 3,005,541 2,574, , % Charges for services 143, ,332 9, % Other revenues 52, ,904 (274,251) % Total Revenues $ 11,961,670 $ 12,037,782 $ (76,112) -0.63% (1) Collections of taxes decreased by $38,069, primarily as a result of a decrease in tax revenue from other governmental funds. (2) Collections of licenses and permits decreased by $296,122 due primarily to a decrease in building permit and development-related revenues. (3) Collections of fines, forfeitures and penalties decreased by $12,082 due to lower collections of traffic and civil fines. (4) Collections of revenues related to the use of money and property increased by $104,464 due to increased rates of return on the City s pool of investments. (5) Collections of intergovernmental revenues increased by $430,816 due to grant revenues related to the SAFER fire staffing grant, HOME First-time Homebuyer / Housing Rehabilitation grant, and transportation-related grants. (6) Collections of charges for services increased by $9,132. (7) Collections of other revenues decreased by $274,251 primarily due to one-time revenues such as surplus property sales, sale of documents, plan check fees, etc. -10-

118 CITY OF AUBURN Management Discussion and Analysis June 30, 2014 The following table presents expenditures by function: Table 4 Expenditures by Function Governmental Funds For the Fiscal Years Ended June 30, Variance % Change Expenditures by Function General government $ 1,285,454 $ 1,755,477 $ (470,023) % Public safety 6,135,398 5,513, , % Transportation 2,142,154 2,427,123 (284,969) % Community development 934, , , % Debt Service-principal 331, , , % Interest on long-term debt 269, , % Capital outlay 1,030,225 1,301,682 (271,457) % Total Expenditures $ 12,129,151 $ 12,165,075 $ (35,924) -0.29% The $35,924 net decrease in governmental fund expenditures during the Fiscal Year can be primarily attributed to the following: A $271,457 decrease in capital outlay expenditures. -11-

119 CITY OF AUBURN Management Discussion and Analysis June 30, 2014 The General fund is the main operating fund of the City, and accounts for general operations including public safety, community development, and administration. The City experienced a slight increase in tax revenue of just less than 1%, or $73,593. The original adopted budget for the General fund was $3,189,859 (as shown in the Required Supplementary Information). Each year, the City Council approves mid-year adjustments to the budget including in Fiscal Year However, the adjustments were done on a departmental level and did not increase the budget authority for the General fund, resulting in a final budgeted fund balance of $3,189,859. At June 30, 2014, committed and unassigned fund balance of the General fund was $3.38 million, while fund balance totaled $3.45 million. Total fund balance increased by approximately $453,316 when compared to last year, primarily as a result of increased revenues from other governmental agencies related to personnel services and capital projects. The City has utilized fund balance to offset decreased revenues during the recent economic downturn and has now added increased fund balance for two consecutive years. As measures of the General fund s ability to meet operating expenditures, it is useful to note that committed and unassigned fund balance represents 34.9% of total General fund expenditures for Fiscal Year , while total fund balance represents 35.6% of the same amount. -12-

120 CITY OF AUBURN Management Discussion and Analysis June 30, 2014 General Fund Revenues by Source For the Fiscal Years Ended June 30, Variance % Change Revenues by Function Taxes and assessments $ 7,948,762 $ 7,875,169 $ 73, % Licenses and permits 303, ,038 (139,684) % Fines and forfeitures 50,287 62,369 (12,082) % Use of money and property 363, ,594 61, % Other governmental agencies 1,138, , , % Charges for services 112, ,056 7, % Other revenues 28, ,428 (200,387) % Total revenues $ 9,944,708 $ 9,613,760 $ 330, % -13-

121 CITY OF AUBURN Management Discussion and Analysis June 30, 2014 Proprietary Funds. The City has two enterprise funds - the Airport fund and the Sewer fund. The City s enterprise funds generally account for services charged to external or internal customers through fees. The following table presents the amount of revenue from various sources: Table 5 Revenues Classified by Source Proprietary Funds For the Fiscal Years Ended June 30, Variance % Change Revenues by Source: Operating revenues Charges for services $ 5,890,987 $ 6,018,960 $ (127,973) -2.13% Other operating revenues 17,640 40,000 (22,360) % Non-operating revenues Taxes 47,364 38,568 8, % Intergovernmental 86,311 77,692 8, % Interest 38,063 3,910 34, % Total Revenues $ 6,080,365 $ 6,179,130 $ (98,765) -1.60% Proprietary funds total revenues have decreased approximately $98,765 from Fiscal Year to Fiscal Year Total revenues are lower primarily due to decreased collections of sewer fees pursuant to a rate increase implemented at the beginning of Fiscal Year

122 CITY OF AUBURN Management Discussion and Analysis June 30, 2014 The following table represents expenses for the City s proprietary funds: Table 6 Expenses by Type Proprietary Funds For the Fiscal Years Ended June 30, Variance % Change Expenses by Type: Operating expenses Salaries and benefits $ 500,037 $ 468,803 $ 31, % Services and supplies 3,643,136 2,700, , % Maintenance 71, ,850 (50,638) % Depreciation 1,044,954 1,013,020 31, % Non-operating expenses Interest and amortization 462, ,625 (8,006) -1.70% Transfers 57,454 45,801 11, % Total Expenses $ 5,779,412 $ 4,820,788 $ 958, % The $958,624 net increase in business-type activity fund expenses during Fiscal Year can be primarily attributed to the following: A $31,234 increase in salaries and benefits costs which are attributed to benefit increases including health and retirement; and A $942,447 increase in services and supplies costs due to sewer service repair costs; A $50,638 decrease in maintenance expenses related to Sewer and Airport enterprise operations. -15-

123 CITY OF AUBURN Management Discussion and Analysis June 30, 2014 CAPITAL ASSETS AND DEBT ADMINISTRATION Capital Assets Capital assets for the governmental and business-type activities are presented below to illustrate changes from the prior year: Table 7 Capital Assets at End of Fiscal Year Governmental Activities Business-Type Activities Land $ - $ - $ 2,874,395 $ 2,874,395 Infrastructure 6,314,227 6,314,227 23,130,936 22,252,232 Buildings and improvements 5,261,972 5,230, Equipment 7,429,559 7,319,891 2,040,349 2,020,143 Land improvements 13,141,046 13,141, Construction in progress 1,457, ,164 11,047,397 11,251,584 Accumulated depreciation (12,335,972) (10,997,377) (11,308,610) (10,263,656) Total $ 21,268,816 $ 21,577,156 $ 27,784,467 $ 28,134,698 The City s investment in capital assets for its governmental activities as of June 30, 2014 totaled approximately $21.27 million (net of accumulated depreciation). The City s investment in capital assets for its business-type activities as of June 30, 2014 totaled approximately $27.8 million (net of accumulated depreciation). The investment in capital assets includes land, infrastructure, buildings and improvements, equipment, and construction in progress. Major capital asset events during the fiscal year ended June 30, 2014 include: $1.4 million in sewer repair projects to improve the wastewater system Purchase of a pickup truck for the Sewer Program Upgrades to the wastewater facility aeration system Investment into the Regional Sewer Common Pipeline Partial completion of the Palm Avenue Sidewalk Project Upgrades to the City s business license system Additional renovations at the Old City Hall facility Upgrades towards the Auburn Police Department CAD System More detailed information about the City s capital assets is presented in Note 4 to the financial statements. -16-

124 CITY OF AUBURN Management Discussion and Analysis June 30, 2014 Debt Administration The following schedule shows the changes in long-term debt for the fiscal year ended June 30, Table 8 Long-Term Debt Governmental Activities Business-Type Activities Pension obligation bonds $ 4,130,000 $ 4,305,000 $ - $ - Loans payable - - 1,845,752 2,178,739 Revenue bonds - - 7,567,683 7,728,990 Capital leases 453, , Compensated absences 1,524,634 1,536,857 77,955 78,508 Postemployment benefits 431, ,382 10,403 6,554 Total $ 6,539,099 $ 6,799,588 $ 9,501,793 $ 9,992,791 The City s total long-term debt for governmental activities decreased by approximately $260,489, primarily as a result of contributions to pension obligation bonds and capital leases. The City s obligations to postemployment benefits increased approximately $83,727. The City s total debt for its business-type activities decreased by approximately $490,998 primarily as a result of making payment for debt service related to the City s Wastewater Treatment Facility Upgrade revenue bonds and on loans related to prior sewer and airport projects. Additional information on the City s long-term debt is presented in Note 7 to the financial statements. GENERAL FUND BUDGETARY HIGHLIGHTS The City s budget is customarily presented to and adopted by the City Council prior to the beginning of the fiscal year that begins July 1 and ends on June 30. The City Council approved the budget in June Subsequent to the adoption of the annual budget, the budget was reviewed in March 2014 and necessary budget adjustments were approved by the City Council. The General fund budget approved in June 2013 for Fiscal Year estimated approximately $9.32 million in revenue sources and allocated $9.28 million in appropriations. During the first six months of the fiscal year, primarily as a result of anticipated decreases in intergovernmental revenues, the City anticipated little changes to the revenues and expenditures adopted in the budget. Actual collections of revenues for the fiscal year amounted to $9.94 million and actual expenditures incurred amounted to $9.69 million. At the end of the fiscal year, approximately $453,316 was added to General fund balance, leading to an ending total fund balance in the General fund of $3,445,663. ECONOMIC FACTORS AND NEXT YEAR S BUDGET The budget developed for Fiscal Year was adopted by the City Council on July 14, 2014 subsequent to the passage of a continuing resolution for Fiscal Year on June 23, The General fund budget approved by the City Council anticipates $9.57 million in revenues and $9.78 million in expenditures, with -17-

125 CITY OF AUBURN Management Discussion and Analysis June 30, 2014 approximately $206,802 of unassigned fund balance being utilized to temporarily fund 5 firefighter positions through December The City will continue to closely monitor economic activity along with actions taken by regional and state governments that may impact the City s budget. Revenue growth rates for development-related fees and property taxes are expected to remain relatively flat, while collections of sales and property taxes are expected to increase modestly in the wake of rising fuel prices and a slight recovery in the residential real estate market citywide. The Fiscal Year General fund budget also anticipates ongoing expenditures for debt service related to the purchase of a new fire truck, while at the same time mitigating the impacts of the employee cost savings plans implemented in To prevent further earmarking of fund balance, the City is expected to continue reviewing city-wide programs consistent with cost effectiveness and efficiency. All of the above information was considered in preparing the City s budget for Fiscal Year CONTACTING THE CITY S FINANCIAL MANAGEMENT This financial report is designed to provide our citizens, taxpayers, customers, and investors and creditors with a general overview of the City s finances, and to show the City s accountability for the money it receives. Questions concerning any of the information provided in this report or requests for additional financial information should be addressed to: City of Auburn Office of the Administrative Services Director 1225 Lincoln Way, Room 1 Auburn, CA , ext. 110 Or, you may visit the City s website at for contact information. -18-

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129 CITY OF AUBURN Statement of Net Position June 30, 2014 Governmental Business-Type Activities Activities Totals ASSETS Cash and investments $ 4,087,417 $ 8,221,522 $ 12,308,939 Receivables: Accounts 40,972 3,029 44,001 Interest 5,250-5,250 Taxes 901, ,218 Intergovernmental 580, , ,342 Prepaid costs 71, , ,066 Due from other agencies 21,854-21,854 Investment in JPA 72,952-72,952 Restricted cash and investments 660,052 1,624,918 2,284,970 Loans receivable 628, ,859 Net pension asset 4,624,526-4,624,526 Capital assets: Non-depreciable 1,457,984 13,921,792 15,379,776 Depreciable, net 19,810,832 13,862,675 33,673,507 Total capital assets 21,268,816 27,784,467 49,053,283 Total Assets 32,963,788 38,004,472 70,968,260 LIABILITIES Accounts payable 237, , ,545 Accrued salaries and benefits 347,692 11, ,245 Accrued interest payable 219,657 40, ,609 Deposits payable 50,072 13,925 63,997 Unearned revenue 657, ,903 Long-term liabilities: Due within one year 855, ,533 1,375,933 Due in more than one year 5,683,699 8,981,260 14,664,959 Total Liabilities 8,051,488 9,678,703 17,730,191 NET POSITION Net investment in capital assets 20,815,460 18,371,032 39,186,492 Restricted for: General government 88,719-88,719 Public safety 855, ,857 Transportation 186, ,258 Community development 847, ,059 Capital projects 1,345,720-1,345,720 Debt service - 559, ,263 Unrestricted 773,227 9,395,474 10,168,701 Total Net Position $ 24,912,300 $ 28,325,769 $ 53,238,069 The notes to the basic financial statements are an integral part of this statement. -19-

130 CITY OF AUBURN Statement of Activities For the Year Ended June 30, 2014 Program Revenues Operating Capital Charges for Grants and Grants and Functions/Programs: Expenses Services Contributions Contributions Governmental activities: General government $ 1,474,340 $ 523,315 $ - $ - Public safety 6,369,373 24, ,200 - Transportation 3,145, ,717 1,125,278 - Recreation and culture ,000 - Community development 934, ,052 - Interest on long-term debt 258, Total Governmental Activities 12,181, ,641 2,574,530 - Business-Type activities: Airport 681, ,754 86,311 - Sewer 5,040,454 5,218, Total Business-Type Activities 5,721,958 5,890,987 86,311 - Total $ 17,903,934 $ 6,704,628 $ 2,660,841 $ - General revenues: Taxes: Property taxes Sales and use taxes In-lieu taxes Franchise taxes Transient occupancy taxes Other taxes Grants and contributions - unrestricted Interest and investment earnings Miscellaneous Transfers Total General Revenues and Transfers Change in Net Position Net Position - Beginning Net Position - Ending The notes to the basic financial statements are an integral part of this statement. -20-

131 $ (951,025) $ - $ (951,025) (5,496,564) - (5,496,564) (1,754,077) - (1,754,077) 175, ,000 (508,385) - (508,385) (258,754) - (258,754) (8,793,805) - (8,793,805) - 77,561 77, , , , ,340 (8,793,805) 255,340 (8,538,465) 2,627,318 47,364 2,674,682 2,957,859-2,957,859 1,470,211-1,470, , , , ,298 56,069-56, , , ,117 38, ,180 52,653 17,640 70,293 57,454 (57,454) - 8,630,953 45,613 8,676,566 (162,852) 300, ,101 25,075,152 28,024,816 53,099,968 $ 24,912,300 $ 28,325,769 $ 53,238,069 The notes to the basic financial statements are an integral part of this statement. Net (Expense) Revenue and Changes in Net Position Business- Governmental Type Activities Activities Totals -20-

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133 Basic Financial Statements Fund Financial Statements

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135 CITY OF AUBURN Balance Sheet Governmental Funds June 30, 2014 Other General Governmental Fund Transportation Funds Totals ASSETS Cash and investments $ 1,919,156 $ - $ 2,168,261 $ 4,087,417 Receivables: Accounts 14,101-26,871 40,972 Interest 5, ,250 Taxes 901, ,218 Intergovernmental 122, , , ,105 Due from other funds 764, ,124 Prepaid costs 68,408-3,359 71,767 Investment in JPA 72, ,952 Restricted cash and investments 102, , ,052 Loans receivable , ,859 Total Assets $ 3,969,765 $ 141,315 $ 3,701,636 $ 7,812,716 LIABILITIES Accounts payable $ 142,729 $ 52,272 $ 42,064 $ 237,065 Accrued salaries and benefits 332,619-15, ,692 Deposits payable 48,754-1,318 50,072 Due to other funds - 473, , ,270 Unearned revenue - 369, , ,903 Total Liabilities 524, , ,061 2,035,002 FUND BALANCES Nonspendable 68,408-3,359 71,767 Restricted - - 3,320,954 3,320,954 Committed 2,250, ,250,000 Unassigned 1,127,255 (754,524) (237,738) 134,993 Total Fund Balances 3,445,663 (754,524) 3,086,575 5,777,714 Total Liabilities and Fund Balances $ 3,969,765 $ 141,315 $ 3,701,636 $ 7,812,716 The notes to the basic financial statements are an integral part of this statement. -21-

136 CITY OF AUBURN Reconciliation of the Governmental Funds Balance Sheet to the Government-Wide Statement of Net Position - Governmental Activities June 30, 2014 Total Fund Balance - Total Governmental Funds $ 5,777,714 Amounts reported for governmental activities in the statement of net position are different because: Capital assets used in governmental activities are not financial resources and therefore are not reported in the funds. 21,268,816 Interest payable on long-term debt does not require the use of current financial resources and therefore, is not accrued as a liability in the governmental funds balance sheets. (219,657) The net pension asset pertaining to governmental funds is not a current financial resource and therefore, is not recorded in the governmental funds balance sheets. 4,624,526 Certain liabilities are not due and payable in the current period and therefore, are not reported in the governmental funds. Pension obligation bonds payable (4,130,000) Capital leases payable (453,356) Compensated absences (1,524,634) Net OPEB obligation (431,109) Net Position of Governmental Activities $ 24,912,300 The notes to the basic financial statements are an integral part of this statement. -22-

137 CITY OF AUBURN Statement of Revenues, Expenditures, and Changes in Fund Balances Governmental Funds For the Year Ended June 30, 2014 Other General Governmental Fund Transportation Funds Totals REVENUES Taxes $ 7,948,762 $ - $ 21,956 $ 7,970,718 Licenses and permits 303,354-31, ,890 Fines and forfeitures 50, ,287 Use of money and property 363,176 1,658 39, ,117 Intergovernmental 1,138, ,159 1,536,957 3,005,541 Charges for services 112,663-30, ,464 Other revenues 28,041-24,612 52,653 Total Revenues 9,944, ,817 1,685,145 11,961,670 EXPENDITURES Current: General government 1,244,844-40,610 1,285,454 Public safety 5,961, ,711 6,135,398 Transportation 1,127, , ,615 2,142,154 Community development 694, , ,437 Debt service: Principal 331, ,993 Interest and other charges 269, ,490 Capital outlay 59, , ,807 1,030,225 Total Expenditures 9,690,355 1,076,551 1,362,245 12,129,151 Excess of Revenues Over (Under) Expenditures 254,353 (744,734) 322,900 (167,481) OTHER FINANCING SOURCES (USES) Transfers in 198, ,963 Transfers out - (9,790) (131,719) (141,509) Total Other Financing Sources (Uses) 198,963 (9,790) (131,719) 57,454 Net Change in Fund Balances 453,316 (754,524) 191,181 (110,027) Fund Balances - Beginning 2,992,347-2,895,394 5,887,741 Fund Balances - Ending $ 3,445,663 $ (754,524) $ 3,086,575 $ 5,777,714 The notes to the basic financial statements are an integral part of this statement. -23-

138 CITY OF AUBURN Reconciliation of the Statement of Revenues, Expenditures, and Changes in Fund Balances of Governmental Funds to the Government-Wide Statement of Activities - Governmental Activities For the Year Ended June 30, 2014 Net Change in Fund Balances - Total Governmental Funds $ (110,027) Amounts reported for governmental activities in the Statement of Activities are different because: Governmental funds report capital outlays as expenditures. However, in the statement of activities the cost of those assets is allocated over their estimated useful lives and reported as depreciation expense. Expenditures for capital outlay 1,030,225 Miscellaneous adjustment 30 Less: current year depreciation (1,338,595) Debt proceeds provide current financial resources to governmental funds, but issuing debt increases long-term liabilities in the statement of net position. Repayment of principal is an expenditure in the governmental funds, but the repayment reduces long-term liabilities in the statement of net position. Principal retirements 331,993 Some expenses reported in the statement of activities, do not require the use of current financial resources and therefore are not reported as expenditures in the governmental funds. Change in compensated absences payable 12,223 Change in net OPEB obligation (83,727) Change in accrued interest payable 10,736 Amortization of net pension asset (15,710) Change in Net Position of Governmental Activities $ (162,852) The notes to the basic financial statements are an integral part of this statement. -24-

139 CITY OF AUBURN Statement of Net Position Proprietary Funds June 30, 2014 Business-Type Activities Enterprise Funds Airport Sewer Totals ASSETS Current Assets: Cash and investments $ 905,204 $ 7,316,318 $ 8,221,522 Receivables: Accounts 3,029-3,029 Intergovernmental - 239, ,237 Prepaid costs - 131, ,299 Total Current Assets 908,233 7,686,854 8,595,087 Noncurrent Assets: Restricted cash and investments 14,675 1,610,243 1,624,918 Capital assets: Non-depreciable 6,671,426 7,250,366 13,921,792 Depreciable, net 4,084,681 9,777,994 13,862,675 Total Noncurrent Assets 10,770,782 18,638,603 29,409,385 Total Assets 11,679,015 26,325,457 38,004,472 LIABILITIES Current Liabilities: Accounts payable 16,523 93, ,480 Accrued salaries and benefits 1,044 10,509 11,553 Accrued interest payable 8,679 32,273 40,952 Deposits payable 13,925-13,925 Compensated absences payable - 16,102 16,102 Bonds payable - 166, ,307 Loans payable 102, , ,124 Total Current Liabilities 143, , ,443 Noncurrent Liabilities: Compensated absences payable - 61,853 61,853 Bonds payable - 7,401,376 7,401,376 Loans payable 277,627 1,230,001 1,507,628 Net OPEB obligation - 10,403 10,403 Total Noncurrent Liabilities 277,627 8,703,633 8,981,260 Total Liabilities 420,728 9,257,975 9,678,703 NET POSITION Net investment in capital assets 10,375,550 7,995,482 18,371,032 Restricted for debt service - 559, ,263 Unrestricted 882,737 8,512,737 9,395,474 Total Net Position $ 11,258,287 $ 17,067,482 $ 28,325,769 The notes to the basic financial statements are an integral part of this statement. -25-

140 CITY OF AUBURN Statement of Revenues, Expenses, and Changes in Net Position Proprietary Funds For the Year Ended June 30, 2014 Business-Type Activities Enterprise Funds Airport Sewer Totals OPERATING REVENUES Charges for services: User fees and charges $ 47,031 $ 5,218,233 $ 5,265,264 Rents and concessions 625, ,723 Other revenues - 17,640 17,640 Total Operating Revenues 672,754 5,235,873 5,908,627 OPERATING EXPENSES Salaries and benefits 100, , ,037 Services and supplies 119,292 3,523,844 3,643,136 Maintenance 71,212-71,212 Depreciation 370, ,303 1,044,954 Total Operating Expenses 661,430 4,597,909 5,259,339 Operating Income (Loss) 11, , ,288 NONOPERATING REVENUES (EXPENSES) Taxes 47,364-47,364 Intergovernmental 86,311-86,311 Interest income 22,801 15,262 38,063 Interest expense (20,074) (438,852) (458,926) Amortization - (3,693) (3,693) Total Nonoperating Revenues (Expenses) 136,402 (427,283) (290,881) Income (Loss) before Transfers 147, , ,407 Transfers out (7,343) (50,111) (57,454) Change in Net Position 140, , ,953 Total Net Position - Beginning 11,117,904 16,906,912 28,024,816 Total Net Position - Ending $ 11,258,287 $ 17,067,482 $ 28,325,769 The notes to the basic financial statements are an integral part of this statement. -26-

141 CITY OF AUBURN Statement of Cash Flows Proprietary Funds For the Year Ended June 30, 2014 Business-Type Activities Enterprise Funds Airport Sewer Totals CASH FLOWS FROM OPERATING ACTIVITIES Receipts from customers $ 670,304 $ 5,218,233 $ 5,888,537 Other receipts - 17,640 17,640 Payments to suppliers (267,744) (3,737,747) (4,005,491) Payments to employees (100,411) (396,199) (496,610) Net Cash Provided (Used) by Operating Activities 302,149 1,101,927 1,404,076 CASH FLOWS FROM NONCAPITAL FINANCING ACTIVITIES Taxes received 47,364-47,364 Noncapital grants received 86,311 (4,099) 82,212 Transfers to other funds (7,343) (50,111) (57,454) Net Cash Provided (Used) by Noncapital Financing Activities 126,332 (54,210) 72,122 CASH FLOWS FROM CAPITAL AND RELATED FINANCING ACTIVITIES Acquisition of capital assets (178,669) (516,054) (694,723) Principal paid on capital debt (97,793) (447,234) (545,027) Interest paid on capital debt (22,461) (392,225) (414,686) Net Cash Provided (Used) for Capital and Related Financing Activities (298,923) (1,355,513) (1,654,436) CASH FLOWS FROM INVESTING ACTIVITIES Interest and dividends 22,801 15,262 38,063 Net Cash Provided (Used) by Investing Activities 22,801 15,262 38,063 Net Increase (Decrease) in Cash and Cash Equivalents 152,359 (292,534) (140,175) Balances - Beginning 767,520 9,219,095 9,986,615 Balances - Ending $ 919,879 $ 8,926,561 $ 9,846,440 The notes to the basic financial statements are an integral part of this statement Continued (Page 1 of 2)

142 CITY OF AUBURN Statement of Cash Flows Proprietary Funds For the Year Ended June 30, 2014 Business-Type Activities Enterprise Funds Airport Sewer Totals RECONCILIATION OF OPERATING INCOME (LOSS) TO NET CASH PROVIDED (USED) BY OPERATING ACTIVITIES Operating income (loss) $ 11,324 $ 637,964 $ 649,288 Adjustments to reconcile operating income to net cash provided by operating activities: Depreciation 370, ,303 1,044,954 Decrease (Increase) in: Accounts receivable (2,300) - (2,300) Prepaid costs - (129,098) (129,098) Increase (Decrease) in: Accounts payable (77,240) (84,805) (162,045) Accrued salaries and benefits (136) Deposits payable (150) - (150) Compensated absences payable - (551) (551) Net OPEB obligation - 3,849 3,849 Net Cash Provided (Used) by Operating Activities $ 302,149 $ 1,101,927 $ 1,404,076 NONCASH INVESTING, CAPITAL, AND FINANCING ACTIVITIES Amortization of discounts $ - $ 50,732 $ 50,732 The notes to the basic financial statements are an integral part of this statement Continued (Page 2 of 2)

143 CITY OF AUBURN Statement of Fiduciary Net Position Fiduciary Funds June 30, 2014 Other Employee Private Benefit Purpose Agency Trust Fund Trust Funds Funds ASSETS Cash and investments $ 2,068 $ 362,337 $ 90,004 Receivables: Accounts - 1,047 7,971 Intergovernmental - - 5,050 Capital assets: Non-depreciable - 350,000 - Total Assets $ 2,068 $ 713,384 $ 103,025 LIABILITIES Accounts payable $ - $ 1,551 $ 12,942 Interest payable - 21,012 - Deposits payable (17,434) - - Due to other funds - 21,854 - Agency obligations ,083 Long-term debt: Due within one year - 86,577 - Due in more than one year - 4,066,284 - Total Liabilities (17,434) 4,197, ,025 NET POSITION Net position held in trust $ 19,502 $ (3,483,894) $ - The notes to the basic financial statements are an integral part of this statement. -29-

144 CITY OF AUBURN Statement of Changes in Fiduciary Net Position Fiduciary Funds For the Year Ended June 30, 2014 Other Employee Private Benefit Purpose Trust Fund Trust Funds ADDITIONS Property taxes $ - $ 406,259 Interest and investment income 1,757 20,525 Other contributions - 55,615 Total Additions 1, ,399 DEDUCTIONS Distributions to participants - 54,765 Program expenses of former redevelopment agency - 90,799 Interest expense - 226,455 Amortization - 3,423 Total Deductions - 375,442 Transfers in - 311,452 Transfers out - (311,452) Change in Net Position 1, ,957 Net Position - Beginning 17,745 (3,590,851) Net Position - Ending $ 19,502 $ (3,483,894) The notes to the basic financial statements are an integral part of this statement. -30-

145 Basic Financial Statements Notes to Basic Financial Statements

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147 NOTE 1: CITY OF AUBURN Notes to Basic Financial Statements For the Year Ended June 30, 2014 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES The basic financial statements of the City of Auburn (City) have been prepared in conformity with generally accepted accounting principles (GAAP) as applied to governmental agencies. The Governmental Accounting Standards Board (GASB) is the accepted standard setting body for establishing governmental accounting and financial reporting principles. The more significant of the City s accounting policies are described below. A. Reporting Entity The City of Auburn (City), California was incorporated in The City operates under the Council- Manager form of government and provides the following services: public safety (police and fire), highways and streets, health and social services, culture-recreation, public improvements, planning and zoning, and general administration services. Generally accepted accounting principles require government financial statements to include the primary government and its component units. Component units of a governmental entity are legally separate entities for which the primary government is considered to be financially accountable and for which the nature and significance of their relationship with the primary government are such that exclusion would cause the combined financial statements to be misleading. The primary government is considered to be financially accountable if it appoints a majority of an organization s governing body and is able to impose its will on that organization or there is a potential for the organization to provide specific financial benefits to or impose specific financial burdens on the primary government. Reporting for component units on the City s financial statements can be blended or discretely presented. Blended component units are, although legally separate entities, in substance part of the City s operations and, therefore, data from these units are combined with data of the primary government. Discretely presented component units, on the other hand, would be reported in a separate column in the government-wide financial statements to emphasize it is legally separate from the government. For financial reporting purposes, the City s basic financial statements include all financial activities that are controlled by or are dependent upon actions taken by the City Council. Separate financial statements for the City of Auburn Public Financing Authority are not issued. Blended Component Units City of Auburn Public Financing Authority - The Authority was formed September 8, 2008 by the execution of a Joint Powers Authority Agreement between the City of Auburn and the Auburn Urban Development Authority. The Authority is authorized to assist the City in future financings, including to borrow money for the purpose of financing the acquisition of bonds, notes, and other obligations of, or for the purpose of making loans to, the City, and/or refinance outstanding obligations of the City. The Authority is the lessor for the City s Wastewater Revenue Bonds, Series 2009 and the Auburn Urban Development Authority 2008 Tax Allocation Bonds and makes debt service payments on behalf of the City and the Successor Agency to the Auburn Urban Development Authority. The City Council is the governing body of the Authority and because its financial and operational relationship with the City is closely integrated, the Authority debt is reported as bonds payable in the sewer enterprise fund financial statements and long-term debt in the private purpose trust funds. -31-

148 NOTE 1: CITY OF AUBURN Notes to Basic Financial Statements For the Year Ended June 30, 2014 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) A. Reporting Entity (Continued) Discretely Presented Component Units There are no component units of the City which meet the criteria for discrete presentation. Joint Agencies The City is a participant in Northern California Cities Self-Insurance Fund (NCCSIF), the purpose of which is for members cities to share in the administrative costs of providing liability and workers compensation insurance. The NCCSIF is governed by a board of directors appointed by the member cities. Complete th financial information can be obtained from the Program Administrator, 600 Montgomery Street, 9 Floor, San Francisco, CA The City is not financially accountable for this organization and therefore it is not a component unit under Statement Nos. 14, 39, and 61 of the Governmental Accounting Standards Board. The City is a participant in California Joint Powers Risk Management Authority (CJPRMA), the purpose of which is to provide excess coverage for its members. The CJPRMA is governed by a board of directors representing its member cities. Complete financial information can be obtained from the claims administrator at 3201 Doolan Road, Suite 285, Livermore, California The City is not financially accountable for this organization and therefore it is not a component unit under Statement Nos. 14, 39, and 61 of the Governmental Accounting Standards Board. The City is a participant in California Transit Insurance Pool (CTIP), the purpose of which is to provide liability coverage for its members. The CTIP is composed of nearly 40 member agencies and is governed by a board of directors representing its member agencies. Complete financial information can be obtained from the Program Administrator, CalTIP, 1415 L Street, Suite 200, Sacramento, CA The City is not financially accountable for this organization and therefore it is not a component unit under Statement Nos. 14, 39, and 61 of the Governmental Accounting Standards Board. B. Basis of Presentation Government-Wide Financial Statements The statement of net position and statement of activities display information on all of the nonfiduciary activities of the City, and its blended component units. These statements include the financial activities of the overall government, except fiduciary activities. Eliminations have been made to minimize the double counting of internal activities. These statements distinguish between the governmental and business-type activities of the City. Governmental activities, which are normally supported by taxes and intergovernmental revenues, are reported separately from business-type activities, which rely to a significant extent on fees charged to external parties. -32-

149 NOTE 1: CITY OF AUBURN Notes to Basic Financial Statements For the Year Ended June 30, 2014 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) B. Basis of Presentation (Continued) Government-Wide Financial Statements (Continued) The statement of activities presents a comparison between direct expenses and program revenues for each different identifiable activity of the City s business-type activities and for each function of the City s governmental activities. Direct expenses are those that are specifically associated with a program or function and; therefore, are clearly identifiable to a particular function. Program revenues include 1) charges paid by the recipients of goods and services offered by the program, 2) operating grants and contributions, and 3) capital grants and contributions. Taxes and other items not properly included among program revenues are reported instead as general revenues. Fund Financial Statements The fund financial statements provide information about the City s funds, including fiduciary funds and blended component units. Funds are organized into three major categories: governmental, proprietary, and fiduciary. The emphasis is placed on major funds within the governmental and proprietary categories; each is displayed in a separate column. All remaining governmental and enterprise funds are separately aggregated and reported as nonmajor funds. The City reports the following major governmental funds: The General fund is used to account for all revenues and expenditures necessary to carry out basic governmental activities of the City that are not accounted for through other funds. For the City, the General fund includes such activities as general government, public safety, public ways and facilities, community development, health and sanitation, and culture-recreation services. The Transportation fund is used to account for monies received through the Transportation Development Act (TDA) Tax and Surface Transportation Program (STP) funding. The City reports the following major proprietary funds: The Airport fund is an enterprise fund established to account for the operation and maintenance of the City s general aviation airport serving recreation, commuter, limited air cargo, and public safety needs. The Sewer fund is an enterprise fund established to account for the building, operating, and maintaining of the City s sewer treatment plant and collection system. The City reports the following additional fund types: The Other Employee Benefit Trust fund accounts for the APOA Medical Savings Plan. In compliance with GASB 43, the City established this trust to account for resources held in trust for the members of an employee benefit plan. -33-

150 NOTE 1: CITY OF AUBURN Notes to Basic Financial Statements For the Year Ended June 30, 2014 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) B. Basis of Presentation (Continued) Fund Financial Statements (Continued) The Private Purpose Trust funds account for property held under other trust arrangement under which principal and income benefit individuals, private organizations, or other governments. Private purpose trust funds include the Merchant s Council, Historic Auburn, Signature Theatre Sewer District, the Southwest Specific Plan, and the Successor Agency to the Auburn Urban Development Authority. The Agency funds account for resources held by the City as a trustee or an agent for individuals, private organizations, and other governmental entities. These resources include payroll deduction and collection clearing funds and various fees collected on behalf of other agencies. C. Basis of Accounting and Measurement Focus The government-wide and proprietary fund financial statements are reported using the economic resources measurement focus and the accrual basis of accounting. Revenues are recorded when earned and expenses are recorded at the time liabilities are incurred, regardless of when the related cash flows take place. Nonexchange transactions, in which the City gives (or receives) value without directly receiving (or giving) equal value in exchange, include property and sales tax, grants, entitlements, and donations. Under the accrual basis, revenue from property taxes is recognized in the fiscal year for which the taxes are levied. Revenues from sales tax are recognized when the underlying transactions take place. Revenues from grants, entitlements, and donations are recognized in the fiscal year in which all eligibility requirements have been satisfied. Governmental funds are reported using the current financial resources measurement focus and the modified accrual basis of accounting. Under this method, revenues are recognized when measurable and available. Property and sales taxes, interest, certain state and federal grants, and charges for services are considered susceptible to accrual and are accrued when their receipt occurs within sixty days after the end of the fiscal year. Expenditures are generally recorded when a liability is incurred, as under accrual accounting. However, debt service expenditures as well as expenditures related to claims and judgments are recorded only when payment is due. General capital assets acquisitions are reported as expenditures in the various functions of the governmental funds. Proceeds of governmental long-term debt and acquisitions under capital leases are reported as other financing sources. Proprietary funds distinguish operating revenues and expenses from nonoperating items. Operating revenues and expenses generally result from providing services and producing and delivering goods in connection with a proprietary fund s principal ongoing operations. The principal operating revenues of the enterprise funds are charges to customers for sales and services. Operating expenses for enterprise funds include the cost of sales and services, administrative expenses, and depreciation of capital assets. All revenues and expenses not meeting this definition are reported as nonoperating revenues and expenses. Fiduciary funds include trust funds and agency funds. All trust funds are reported using the economic resources measurement focus and the accrual basis of accounting. Agency funds are reported using the accrual basis of accounting to recognize receivables and payables. -34-

151 NOTE 1: CITY OF AUBURN Notes to Basic Financial Statements For the Year Ended June 30, 2014 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) D. Non-Current Governmental Assets/Liabilities Non-current governmental assets and liabilities, such as capital assets and long-term liabilities, are reported in the governmental activities column in the government-wide statement of net position. E. Cash, Cash Equivalents, and Investments The City pools cash and investments of all funds except cash with fiscal agent. Each fund s share in this pool is displayed in the accompanying financial statements as cash and investments. Interest from pooled investments is allocated to the various funds based on average balances of the funds entitled to receive interest. Interest is allocated on the basis of average month end cash balance amounts for each fund as a percentage of the total balance. Investments are reported in the accompanying balance sheet at fair value which is determined using selected bases annually. Short term investments are reported at cost, which approximates fair value. Securities traded on a national or international exchange are valued at the last reported sales price at current exchange rates. Cash deposits are reported at carrying amount which reasonably estimates fair value. Managed funds not listed on an established market are reported at the estimated fair value as determined by the respective fund managers based on quoted sales prices of the underlying securities. For purposes of the accompanying Statement of Cash Flows, the City considers all highly liquid investments, including cash with fiscal agent and restricted cash and investments, with original maturity of three months or less and amounts held in the City s investment pool to be cash and cash equivalents. F. Restricted Cash and Investments Restricted assets in the governmental funds represents cash and investments held in the General fund for security deposits of $102,219 and in the Solid Waste Management fund for future postclosure costs of $557,833. Restricted assets in the proprietary funds represent cash and investments held in the Airport fund for tenant deposits of $14,675 and in the Sewer fund for debt service of $1,610,243. G. Receivables Receivables for governmental activities consist mainly of accounts, interest, taxes, and intergovernmental revenues. Management believes its receivables are fully collectible and, accordingly, no allowance for doubtful accounts is required Receivables for business-type activities consist mainly of user fees and intergovernmental revenues. Management believes its receivables are fully collectible and, accordingly, no allowance for doubtful accounts is required. -35-

152 NOTE 1: CITY OF AUBURN Notes to Basic Financial Statements For the Year Ended June 30, 2014 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) H. Other Assets Inventory Governmental fund inventories are recorded as expenditures at the time inventory is purchased rather than when consumed. Records are not maintained of inventory and supplies on hand, although these amounts are not considered material. Prepaid Items Payments made for services that will benefit periods beyond June 30, 2014, are recorded as prepaid costs in both government-wide and fund financial statements. The cost of prepaid items is recorded as expenditures/expenses when consumed rather than when purchased. I. Loans Receivable For the purpose of the governmental fund financial statements, special revenue fund expenditures relating to long-term loans receivable arising from mortgage subsidy programs are charged to operations upon funding and the loans receivable are recorded. The balance of the long-term receivable includes loans that may be forgiven if certain terms and conditions of the loans are met. The City reported $628,859 in loans receivable as of June 30, J. Capital Assets Capital assets, including public domain (infrastructure assets such as roads, bridges, water/sewer, lighting system, drainage systems, and flood control) are defined by the City as assets with a cost greater than $5,000 and a useful life of more than one year. Capital assets are recorded at historical cost or estimated historical cost if actual historical cost is unavailable. Contributed capital assets are recorded at their estimated fair market value at the date of donation. Capital assets used in operations are depreciated or amortized using the straight-line method over the assets estimated useful life in the government-wide financial statements. The range of estimated useful lives by type of asset is as follows: Depreciable Asset Estimated Lives Infrastructure 40 years Buildings and improvements 40 years Equipment 5-10 years Maintenance and repairs are charged to operations when incurred. Betterments and major improvements which significantly increase values, change capacities or extend useful lives are capitalized. Upon sale or retirement of capital assets, the cost and related accumulated depreciation are removed from the respective accounts and any resulting gain or loss is included in the results of operations. -36-

153 NOTE 1: CITY OF AUBURN Notes to Basic Financial Statements For the Year Ended June 30, 2014 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) K. Property Tax Placer County assesses properties, bills, collects, and distributes property taxes to the City. The County remits the entire amount levied and handles all delinquencies, retaining interest and penalties. Property taxes are levied on a fiscal year (July 1 - June 30). The secured property tax assessments are due on November 1 and February 1 and become delinquent after December 10 and April 10, respectively. The unsecured property tax assessments are due on August 1 and become delinquent after August 31. Property taxes become a lien on the property effective January 1 of the preceding year. The City recognizes property taxes when the individual installments are due provided they are collected within 60 days after year-end. L. Interfund Transactions Interfund transactions are reflected as either loans, services provided or used, reimbursements or transfers. Loans reported as receivables and payables are referred to as either due to/from other funds (i.e. the current portion of interfund loans) or advances to/from other funds (i.e., the noncurrent portion of interfund loans) as appropriate and are subject to elimination upon consolidation. Any residual balances outstanding between the governmental activities and the business-type activities are reported in the government-wide financial statements as internal balances. Advances between funds, as reported in the fund financial statements, are offset by a nonspendable fund balance account in applicable governmental funds to indicate that they are not in spendable form. Services provided or used, deemed to be at market or near market rates, are treated as revenues and expenditures or expenses. These services provide information on the net cost of each government function and therefore are not eliminated in the process of preparing the government-wide statement of activities. Reimbursements occur when the funds responsible for particular expenditures or expenses repay the funds that initially paid for them. Such reimbursements are reflected as expenditures or expenses in the reimbursing fund and reductions to expenditures or expenses in the reimbursed fund. All other interfund transactions are treated as transfers. Transfers between funds are netted as part of the reconciliation to the government-wide presentation. M. Unearned Revenue Under the accrual and modified accrual basis of accounting, revenue may be recognized only when it is earned. When assets are recognized in connection with a transaction before the earnings process is complete, those assets are offset by a corresponding liability for unearned revenue. -37-

154 NOTE 1: CITY OF AUBURN Notes to Basic Financial Statements For the Year Ended June 30, 2014 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) N. Compensated Absences Employees accrue vacation, sick, and compensatory time off benefits. An employee may accumulate vacation time equal to the amount that can be earned in a two-year period. Vacation pay is paid upon separation of service or retirement. Sick leave benefits may be applied to earlier retirement. Upon termination, sick leave benefits in excess of a specified maximum are paid. All vacation and sick leave is accrued when incurred in the government-wide and proprietary fund financial statements. In governmental funds, the cost of vacation and sick leave benefits is recognized when payments are made to employees. O. Deferred Outflows/Inflows of Resources In addition to assets, the statement of financial position will sometimes report a separate section for deferred outflows of resources. This separate financial statement element, deferred outflows of resources, represents a consumption of net position that applies to a future period and so will not be recognized as an outflow of resources (expense/expenditure) until then. At June 30, 2014, the City did not have any deferred outflows of resources. In addition to liabilities, the statement of financial position will sometimes report a separate section for deferred inflows of resources. This separate financial statement element, deferred inflows of resources, represents an acquisition of net position that applies to a future period and so will not be recognized as an inflow of resources (revenue) until that time. At June 30, 2014, the City did not have any deferred inflows of resources. P. Estimates The preparation of basic financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect certain reported amounts and disclosures. Accordingly, actual results could differ from those estimates. Q. Implementation of Governmental Accounting Standards Board Statements (GASB) The following Governmental Accounting Standards Board (GASB) Statement has been implemented, if applicable to the City of Auburn, in the current financial statements. Statement No. 70, Accounting and Financial Reporting for Nonexchange Financial Guarantees. This statement improves accounting and financial reporting by state and local governments that extend and receive nonexchange financial guarantees. -38-

155 CITY OF AUBURN Notes to Basic Financial Statements For the Year Ended June 30, 2014 NOTE 2: STEWARDSHIP, COMPLIANCE, AND ACCOUNTABILITY A. Deficit Fund Balance The following major governmental fund had a deficit fund balance: The Transportation fund had a fund balance deficit of $754,524, which is expected to be eliminated in future years through intergovernmental revenues. The following non-major special revenue fund had a deficit fund balance: The Office of Traffic Safety Grant fund had a fund balance deficit of $1,410, which is expected to be eliminated in the future through intergovernmental revenues. The following non-major capital projects funds had deficit fund balances: The Auburn School Park Preserve fund had a fund balance deficit of $231,651, which is expected to be eliminated in the future through intergovernmental revenues. The Hwy 49 Beautification fund had a fund balance deficit of $1,318, which is expected to be eliminated in the future through intergovernmental revenues. B. Rebatable Arbitrage The Tax Reform Act of 1986 instituted certain arbitrage restrictions with respect to the issuance of taxexempt bonds after August 31, Arbitrage regulations deal with the investment of all tax exempt bond proceeds at an interest yield greater than the interest yield paid to bondholders. Generally, all interest paid to bondholders can be retroactively rendered taxable if applicable rebates are not reported and paid to the Internal Revenue Service (IRS) at least every five years. The City does not expect to incur a liability for rebatable arbitrage at June 30, NOTE 3: CASH AND INVESTMENTS A. Financial Statement Presentation As of June 30, 2014, the City s cash and investments are reported in the financial statements as follows: Governmental activities $ 4,747,469 Business type activities 9,846,440 Fiduciary funds 454,409 Total Cash and Investments $ 15,048,

156 NOTE 3: CITY OF AUBURN Notes to Basic Financial Statements For the Year Ended June 30, 2014 CASH AND INVESTMENTS (CONTINUED) A. Financial Statement Presentation (Continued) As of June 30, 2014, the City s cash and investments consisted of the following: Cash: Cash on hand $ 250 Deposits (less outstanding checks) 5,777,980 Deposits with fiscal agents 1,949,243 Total Cash 7,727,473 Investments: In City s pool 7,320,845 B. Cash Total Investments 7,320,845 Total Cash and Investments $ 15,048,318 At year end, the carrying amount of the City s cash deposits (including amount in checking accounts, money market accounts, and deposits with fiscal agents) was $7,727,223 and the bank balance was $7,790,014. The difference between the bank balance and the carrying amount represents outstanding checks and deposits in transit. In addition the City had cash on hand of $250. Custodial Credit Risk for Deposits - Custodial credit risk for deposits is the risk that, in the event of the failure of a depository financial institution, the City will not be able to recover its deposits or collateral securities that are in the possession of an outside party. The City s investment policy requires that deposits in banks must meet the requirements of California Government Code. Under this code, deposits of more than $250,000 must be collateralized at 105 percent to 150 percent of the value of the deposit to guarantee the safety of the public funds. The first $250,000 of the City s deposits are insured by the Federal Deposit Insurance Corporation (FDIC). Deposits more than the $250,000 insured amount are collateralized. C. Investments Pursuant to Section of the Government Code, the City prepares an investment policy annually and presents it to the City Council for review and approval. -40-

157 NOTE 3: CITY OF AUBURN Notes to Basic Financial Statements For the Year Ended June 30, 2014 CASH AND INVESTMENTS (CONTINUED) C. Investments (Continued) The investment policy provides the basis for the management of a prudent, conservative investment program. Funds are invested to provide the maximum security of principal with secondary emphasis on achieving the highest return, while meeting daily cash flow needs. All investments are made in accordance with the Government Code and, in general, the investment policy is more restrictive than state law. Under the provisions of the City s investment policy the City may invest or deposit in the following: U.S. Treasury Obligations U.S. Agency Securities City or City Agency Bonds California State Bonds Local Agency Bonds (CA only) Banker s Acceptances Commercial Paper Negotiable Certificates of Deposit Time deposits, under $250,000 Time deposits, over $250,000 Repurchase Agreements Reverse Repurchase Agreements Medium Term Notes Mutual Funds/Money Market Mutual Funds Placer County Investment Pool Local Agency Investment Fund (LAIF) Interest Rate Risk - Interest rate risk is the risk of loss due to the fair value of an investment falling due to interest rates rising. Generally, the longer the maturity of an investment, the greater the sensitivity of its fair value to changes in market interest rates. To limit exposure to fair value losses resulting from increases in interest rates, the City s investment policy limits investment maturities to a term appropriate to the need for funds so as to permit the City to meet all projected obligations. Any investments that mature more than five years from the date of purchase cannot occur without prior approval of the City Council. As of June 30, 2014, the City had the following investments, all of which had a maturity of 5 years or less: Maturities Weighted Average Interest Fair Maturity Investment Type Rates 0-1 year 1-5 years Value (Years) Government Agency Securities % $ - $ 4,719,165 $ 4,719, Corporate Bonds 6.625% 22,969-22,969 ( 2.45) (1) Certificates of Deposit.55% 250, , Placer County Investment Pool Variable 2,286,214-2,286,214 - Local Agency Investment Fund (LAIF) Variable 42,497-42,497 - Total Investments $ 2,601,680 $ 4,719,165 $ 7,320,

158 NOTE 3: CITY OF AUBURN Notes to Basic Financial Statements For the Year Ended June 30, 2014 CASH AND INVESTMENTS (CONTINUED) C. Investments (Continued) Credit Risk - Credit risk is the risk that an issuer of an investment will not fulfill its obligation to the holder of the investment. This is measured by the assignment of a rating by a nationally recognized statistical rating organization. The City s investment policy sets specific parameters by type of investment to be met at the time of purchase. Presented below is the minimum rating required by (where applicable) the California Government Code or the City s investment policy, and the actual rating as of year end for each investment type. Minimum Standard Legal & Poor s Moody s % of Investment Type Rating Rating Rating Portfolio Federal Farm Credit Bank N/A AA+ Aaa 33.99% Federal Home Loan Bank N/A AA+ Aaa 6.76% Federal Home Loan Mortgage Corporation N/A AA+ Aaa 10.18% Federal National Mortgage Association N/A AA+ Aaa 13.54% Corporate bonds A WR (1) WR(1).31% Certificates of deposit N/A Unrated Unrated 3.41% Placer County Investment Pool N/A Unrated Unrated 31.23% LAIF N/A Unrated Unrated.58% Total % (1) Investment in Lehman Brothers corporate bonds. Corporation filed for bankruptcy in 2008 and rating was withdrawn. Bonds matured January 18, 2012 and are held in escrow. Custodial Credit Risk for Investments - Custodial credit risk for investments is the risk that, in the event of the failure of a depository financial institution, the City will not be able to recover its deposits or collateral securities that are in the possession of an outside party. To mitigate the custodial credit risk the City s investment policy requires that all of its managed investments shall be held in the name of the City in safekeeping by a third party bank trust department. Custodial credit risk does not apply to a local government s indirect investments in securities through use of mutual funds or government investment pools. Concentration of Credit Risk - Concentration of credit risk is the risk of loss attributed to the magnitude of the City s investment in a single issuer of securities. When investments are concentrated in one issuer, this concentration presents a heightened risk of potential loss. The City s investment policy contains limitations on the amount that can be invested in any one issuer. Investments in any one issuer (other than U.S. Treasury securities, mutual funds, and eternal investment pools) at June 30, 2014, that represent 5 percent or more of total City investments are as follows: Percentage of Investment Type Amount Invested Investments Federal Farm Credit Bank $ 2,488, % Federal Home Loan Bank 494, % Federal Home Loan Mortgage Corporation 745, % Federal National Mortgage Association 990, % -42-

159 NOTE 3: CITY OF AUBURN Notes to Basic Financial Statements For the Year Ended June 30, 2014 CASH AND INVESTMENTS (CONTINUED) D. Investment in External Investment Pools Investment in Placer County Investment Pool - The City of Auburn is a participant in the Placer County Investment Pool which is managed by the Placer County Treasurer. On a monthly basis, interest is allocated to participants based on average daily balances. The Placer County Treasury Oversight Committee oversees the Treasurer s investments and policies. Investments held in the County s investment pool are available on demand and are stated at amortized cost, which approximates fair value. The fair value of the City s position in the pool is the same as the value of the pooled shares. Investment in Local Agency Investment Fund - The City of Auburn is a voluntary participant in the Local Agency Investment Fund (LAIF) that is regulated by the California Government Code and is managed by the Treasurer of the State of California. The Local Investment Advisory Board (LAIF Board) has oversight responsibility for LAIF. The LAIF Board consists of five members as designated by State statute. Investments in LAIF are available on demand and are stated at amortized cost, which approximates fair value. The fair value of the City s position in the pool is the same as the value of the pooled shares. At June 30, 2014 the City s investment position in LAIF was $42,497. The total amount invested by all public agencies in LAIF on that day was $64,846,169,129. Of that amount, 98.14% is invested in non-derivative financial products and 1.86% in structured notes and asset-backed securities. NOTE 4: CAPITAL ASSETS Capital assets activity for the year ended June 30, 2014, was as follows: Governmental Activities Balance Adjustments/ Balance July 1, 2013 Additions Retirements June 30, 2014 Capital assets, not being depreciated: Construction in progress $ 569,164 $ 888,790 $ 30 $ 1,457,984 Total Capital Assets, Not Being Depreciated 569, , ,457,984 Capital assets, being depreciated: Infrastructure 6,314, ,314,227 Buildings and improvements 5,230, ,767-5,261,972 Equipment 7,319, ,668-7,429,559 Land improvements 13,141, ,141,046 Total Capital Assets, Being Depreciated 32,005, ,435-32,146,804 Less accumulated depreciation for: Infrastructure ( 1,713,598) ( 304,542) - ( 2,018,140) Buildings and improvements ( 2, 357, 661 ) ( 103, ) - ( 2,461,258) Equipment ( 5,264,797) ( 312,175) - ( 5,576,972) Land improvements ( 1,661,321) ( 618,281) - ( 2,279,602) Total Accumulated Depreciation ( 10,997,377) ( 1,338,595) - ( 12,335,972) Total Capital Assets, Being Depreciated, Net 21,007,992 ( 1,197,160) $ - 19,810,832 Governmental Activities Capital Assets, Net $ 21,577,156 ($ 308,370) $ 30 $ 21,268,

160 NOTE 4: CAPITAL ASSETS (CONTINUED) CITY OF AUBURN Notes to Basic Financial Statements For the Year Ended June 30, 2014 Business-Type Activities Balance Transfers/ Balance July 1, 2013 Additions Retirements June 30, 2014 Capital assets, not being depreciated: Land $ 2,874,395 $ - $ - $ 2,874,395 Construction in progress 11,251, ,379 ( 817,566) 11,047,397 Total Capital Assets, Not Being Depreciated 14,125, ,379 ( 817,566) 13,921,792 Capital assets, being depreciated: Infrastructure 22,252,232 61, ,566 23,130,936 Equipment 2,020,143 20,206-2,040,349 Total Capital Assets, Being Depreciated 24,272,375 81, ,566 25,171,285 Less accumulated depreciation for: Infrastructure ( 8,735,147) ( 937,670 ) - ( 9,672,817) Equipment ( 1,528,509) ( 107,284) - ( 1,635,793) Total Accumulated Depreciation ( 10,263,656) ( 1,044,954) - ( 11,308,610) Total Capital Assets, Being Depreciated, Net 14,008,719 ( 963,610) 817,566 13,862,675 Business-Type Activities Capital Assets, Net $ 28,134,698 ($ 350,231) $ - $ 27,784,467 Depreciation Depreciation expense was charged to governmental functions as follows: General government $ 71,440 Public safety 201,959 Transportation 1,065,196 Total Depreciation Expense Governmental Functions $ 1,338,595 Depreciation expense was charged to the business-type functions as follows: Airport $ 370,651 Sewer 674,303 Total Depreciation Expense Business-Type Functions $ 1,044,954 Construction in Progress Construction in progress for governmental activities relates primarily to work performed on Safe Routes to School, Palm Avenue sidewalk, APD CAD upgrade, and business license system. Construction in progress for business-type activities relates primarily to work performed on the airport hangar project and sewer upgrade project. -44-

161 NOTE 5: INTERFUND TRANSACTIONS CITY OF AUBURN Notes to Basic Financial Statements For the Year Ended June 30, 2014 Due To/From Other Funds During the course of operations, transactions occur between funds to account for goods received or services rendered. These receivables and payables are classified as due from or due to other funds. In addition, when funds overdraw their share of pooled cash, the receivables and payables are also classified as due from or due to other funds. The following are due to and due from balances as of June 30, 2014: Transfers Due From Due To Other Funds Other Funds General Fund $ 764,124 $ - Transportation - 473,942 Nonmajor Governmental Funds - 268,328 Private Purpose Trust Funds - 21,854 Total $ 764,124 $ 764,124 Transfers are indicative of funding for capital projects, lease payments or debt service, subsidies of various City operations, and re-allocations of special revenues. The following are the interfund transfers for fiscal year ended June 30, 2014: Transfer Transfer In Out General Fund $ 198,963 $ - Transportation - 9,790 Nonmajor Governmental Funds - 131,719 Airport - 7,343 Sewer - 50,111 Private Purpose Trust Funds 311, ,452 Total $ 510,415 $ 510,415 NOTE 6: UNEARNED REVENUE At June 30, 2014, components of unearned revenue were as follows: Unearned Transportation Local transportation fund unspent allocations $ 369,625 Nonmajor Governmental funds Local transit fund unspent allocations 288,278 Total $ 657,

162 NOTE 7: LONG-TERM LIABILITIES CITY OF AUBURN Notes to Basic Financial Statements For the Year Ended June 30, 2014 The following is a summary of changes in long-term liabilities for the year ended June 30, 2014: Amounts Balance Additions/ Retirements/ Balance Due Within Type of Indebtedness July 1, 2013 Adjustments Adjustments June 30, 2014 One Year Governmental Activities Pension obligation bonds $ 4,305,000 $ - ($ 175,000) $ 4,130,000 $ 200,000 Capital leases 610,349 - ( 156,993) 453, ,490 Compensated absences 1,536, ,093 ( 656,316) 1,524, ,910 Net OPEB obligation 347, ,979 ( 17,252) 431,109 - Total Governmental Activities $ 6,799,588 $ 745,072 ($ 1,005,561) $ 6,539,099 $ 855,400 Business-Type Activities Loans $ 2,518,837 $ - ($ 380,027) $ 2,138,810 $ 385,164 Less: Discount ( 340,098) - 47,040 ( 293,058) ( 47,040) Loans, Net 2,178,739 - ( 332,987) 1,845, ,124 Sewer revenue bonds 7,825,000 - ( 165,000) 7,660, ,000 Less: Discount ( 96,010) - 3,693 ( 92,317) ( 3,693) Sewer revenue bonds, net 7,728,990 - ( 161,307) 7,567, ,307 Compensated Absences 78,508 21,380 ( 21,933) 77,955 16,102 Net OPEB Obligation 6,554 3,849-10,403 - Total Business-Type Activities$ 9,992,791 $ 25,229 ($ 516,227) $ 9,501,793 $ 520,533 For governmental activities, the capital lease liability is liquidated by lease payments made by the departments leasing the equipment. Compensated absences are generally liquidated by the fund where the accrued liability occurred. The net OPEB obligation for the governmental activities is generally liquidated by the fund where the accrued liability occurred. For business-type activities, all debt is accounted for in the proprietary fund where the liability occurred. Individual issues of debt payable outstanding at June 30, 2014, are as follows: Governmental Activities Pension Obligation Bonds: Taxable Pension Obligation Bonds 2006 Series A-1, issued June 15, 2006, in the amount of $4,965,000 and payable in annual installments of $65,000 to $340,000, with an interest rate of 5.69% to 5.93% and maturity on June 1, The bonds were used to pay the unfunded accrued actuarial liability to the California Public Employees Retirement System. Total Pension Obligation Bonds Total Governmental Activities $ 4,130,000 4,130,000 $ 4,130,

163 NOTE 7: CITY OF AUBURN Notes to Basic Financial Statements For the Year Ended June 30, 2014 LONG-TERM LIABILITIES (CONTINUED) Individual issues of debt payable outstanding at June 30, 2014, are as follows (Continued): Business-Type Activities Loans: State Department of Transportation loan, issued August 2002 in the amount of $1,000,000 and payable in annual installments of $55,556 to $95,556, with an interest rate of 4.68% and maturity on January 24, Loan proceeds were used to finance the East Hangar project at the airport. State Department of Transportation loan, issued July 2005 in the amount of $200,000 and payable in annual installments of $9,561 to $16,955, with an interest rate of 4.78% and maturity on July 30, Loan proceeds were used to finance the installation of new fuel tanks at the airport. State Department of Water Resources loan, issued February 23, 1998 in the amount of $2,173,820 and payable in annual installments of $108,691, with an interest rate of 0.0% and maturity on January Loan proceeds were used to finance construction of the wastewater treatment plant improvement project phase 1A. State Department of Water Resources loan, issued April 21, 1999 in the amount of $2,892,368 and payable in annual installments of $173,543, with an interest rate of 0.0% and maturity on March 1, Loan proceeds were used to finance construction of the wastewater treatment plant improvement project phase 1B. Total Loans Sewer Revenue Bonds: Wastewater Revenue Bonds Series 2009, issued August 5, 2009 in the amount of $8,525,000 and payable in annual installments of $155,000 to $530,000, with an interest rate of 2.00% to 5.50% and maturity on June 1, The bonds were used to finance the acquisition and construction of wastewater treatment plant improvements. Total Sewer Revenue Bonds Total Business-Type Activities $ 337,778 42, ,455 1,214,798 2,138,810 7,660,000 7,660,000 $ 9,798,810 Following is a schedule of debt payment requirements of governmental activities and business-type activities to maturity for long-term debt, excluding compensated absences that have indefinite maturities, capital leases which are reported in Note 8, and net OPEB obligation which is reported in Note

164 NOTE 7: CITY OF AUBURN Notes to Basic Financial Statements For the Year Ended June 30, 2014 LONG-TERM LIABILITIES (CONTINUED) Governmental Activities Pens i o n Obligation Bonds Year Ended June 30 Principal Interest Total 2015 $ 200,000 $ 244,036 $ 444, , , , , , , , , , , , , ,640, ,523 2,260, ,200, ,795 1,386,795 Total $ 4,130,000 $ 1,893,577 $ 6,023,577 Business-Type Activities Loans Year Ended June 30 Principal Interest Total 2015 $ 385,164 $ 17,865 $ 403, ,299 13, , ,351 7, , ,677 3, , , , , ,085 Total $ 2,138,810 $ 41,862 $ 2,180,672 Sewer Revenue Bonds Year Ended June 30 Principal Interest Total 2015 $ 170,000 $ 387,275 $ 557, , , , , , , , , , , , , ,125,000 1,659,094 2,784, ,415, 000 1,365,313 2,780, ,830, ,800 2,789, ,380, ,000 2,787,000 Total $ 7,660,000 $ 6,260,782 $ 13,920,

165 NOTE 8: LEASES CITY OF AUBURN Notes to Basic Financial Statements For the Year Ended June 30, 2014 Capital Leases The City has entered into certain capital lease agreements under which the related equipment will become the property of the City when all terms of the lease agreements are met. Present Value of Remaining Stated Payments at Interest Rate June 30, 2014 Governmental activities 9.83% $ 453,356 Total $ 453,356 Equipment and related accumulated depreciation acquired under capital leases is as follows: Governmental Activities Cost of equipment $ 743,876 Less: accumulated depreciation ( 133,420) Net Value $ 610,456 As of June 30, 2014, capital lease annual amortization was as follows: Governmental Year Ended June 30 Activities 2015 $ 169, , , ,181 Total Requirements 475,176 Less Interest ( 21,822) Present Value of Remaining Payments $ 453,

166 NOTE 9: CITY OF AUBURN Notes to Basic Financial Statements For the Year Ended June 30, 2014 RENTAL INCOME FROM LEASES The City leases property under noncancelleable tenant operating leases. The following is a schedule of future minimum lease payments: Year Ended Governmental Business-Type June 30 Activities Activities 2015 $ 188,403 $ 665, , , , , , , , , ,015 3,189, ,237 3,102, ,070 2,727, ,552 1,724, ,063 1,406, , , , , ,307 Total Rental Income From Leases $ 5,091,319 $ 16,088,846 NOTE 10: POSTCLOSURE The City of Auburn has postclosure responsibility for one landfill site (located on the Auburn Municipal Airport). State and federal laws and regulations require that the City of Auburn place a final cover over its closed landfill and perform certain maintenance and monitoring functions at the landfill site for thirty years following its closure. Closure procedures have been performed and postclosure activity is recorded in a special revenue fund. Postclosure maintenance activities are funded by a 1.21 percent surcharge on refuse collection fees. The landfill was closed in 1984 and the City has amortized the postclosure liability over thirty years. The liability balance at June 30, 2014 was $0. The City of Auburn is required by state and federal laws and regulations to make annual contributions to finance postclosure care costs. The costs of these procedures was funded on a pay as you go basis. The City did not adopt a pledge of revenue to fund these costs. At June 30, 2014, the City was still holding bank deposits and federal securities in the amount of $557,833 for this purpose. Additionally, the City recognizes that there is a risk of future landfill gas migration or groundwater contamination, which could result in bodily injury and/or property damage liability claims against the City. Accordingly, the City has secured a third party pollution liability insurance agreement (underwritten by Illinois Union Insurance Company) to pay for any damages arising out of claims which might result from future pollution conditions that might result from the landfill site. This insurance coverage applies to groundwater contamination from leakages, but excludes remediation of landfill gas that might migrate from the closed landfill site. The aggregate coverage limit is $1,500,000 and there is a policy deductible of $100,000 for each pollution condition. -50-

167 NOTE 11: NET POSITION CITY OF AUBURN Notes to Basic Financial Statements For the Year Ended June 30, 2014 The government-wide and proprietary fund financial statements utilize a net position presentation. Net position is categorized as net investment in capital assets, restricted and unrestricted. Net investment in capital assets - Consists of capital assets including restricted capital assets, net of accumulated depreciation and reduced by the outstanding balances of any bonds, mortgages, notes or other borrowings that are attributable to the acquisition, construction or improvement of those assets. Restricted net position - Consists of net position with constraints placed on the use either by (1) external groups such as creditors, grantors, contributors or laws or regulations of other governments; or (2) law through constitutional provisions or enabling legislation. Unrestricted net position - All other net position that does not meet the definition of restricted or net investment in capital assets. Net Position Restricted by Enabling Legislation The government-wide Statement of Net Position reports $3,882,876 of restricted net position, of which $1,345,720 is restricted by enabling legislation. Net Position Flow Assumption When a government funds outlays for a particular purpose from both restricted and unrestricted resources, a flow assumption must be made about the order in which the resources are considered to be applied. When both restricted and unrestricted net position is available, it is considered that restricted resources are used first, followed by the unrestricted resources. NOTE 12: FUND BALANCES As prescribed by GASB Statement No. 54, governmental funds report fund balance in classifications based primarily on the extent to which the City is bound to honor constraints on the specific purposes for which amounts in the funds can be spent. As of June 30, 2014, fund balance for governmental funds are made up of the following: Nonspendable fund balance - amounts that cannot be spent because they are either (a) not in spendable form, or (b) legally or contractually required to be maintained intact. The not in spendable form criterion includes items that are not expected to be converted to cash, for example: inventories and prepaid amounts. Restricted fund balance - amounts with constraints placed on their use that are either (a) externally imposed by creditors, grantors, contributors, or laws or regulations of other governments; or (b) imposed by law through constitutional provisions or enabling legislation. Restrictions may effectively be changed or lifted with consent of resource providers. -51-

168 NOTE 12: FUND BALANCES (CONTINUED) CITY OF AUBURN Notes to Basic Financial Statements For the Year Ended June 30, 2014 Committed fund balance - amounts that can only be used for the specific purposes determined by formal action of the City s highest level of decision-making authority. The City Council is the highest level of decision making authority for the City that can, by adoption of an ordinance commit fund balance. Once adopted, the limitation imposed remains in place until a similar action is taken to remove or revise the limitation. The underlying action that imposed the limitation needs to occur no later than the close of the reporting period. Assigned fund balance - amounts that are constrained by the City s intent to be used for specific purposes. The intent can be established at either the highest level of decision-making, or by a body or an official designated for that purpose. Unassigned fund balance - the residual classification for the City s General fund that includes all amounts not contained in the other classifications. In other funds, the unassigned classification is used only if expenditures incurred for specific purposes exceed the amounts restricted, committed, or assigned to those purposes. The fund balances for all major and nonmajor governmental funds as of June 30, 2014, were distributed as follows: Other Governmental General Transportation Funds Total Nonspendable: Prepaid costs $ 68,408 $ - $ 3,359 $ 71,767 Subtotal 68,408-3,359 71,767 Restricted For: Property seizures ,609 81,609 Street maintenance and construction , ,899 Maidu Fire Station ,875 37,875 Solid Waste Management , ,861 Law enforcement services - - 5,524 5,524 Fire protection services ,988 87,988 Community development , ,759 Capital projects - - 1,434,439 1,434,439 Subtotal - - 3,320,954 3,320,954 Committed to: Contingencies 2,250, ,250,000 Subtotal 2,250, ,250,000 Unassigned 1,127,255 ( 754,524) ( 237,738) 134,993 Total $ 3,445,663 ($ 754,524) $ 3,086,575 $ 5,777,

169 NOTE 12: FUND BALANCES (CONTINUED) Fund Balance Flow Assumption CITY OF AUBURN Notes to Basic Financial Statements For the Year Ended June 30, 2014 When a government funds outlays for a particular purpose from both restricted and unrestricted resources (the total of committed, assigned, and unassigned fund balance), a flow assumption must be made about the order in which the resources are considered to be applied. When both restricted and unrestricted fund balance is available, it is considered that restricted fund balance is depleted before using any of the components of unrestricted fund balance. Further, when the components of unrestricted fund balance can be used for the same purpose, committed fund balance is depleted first, followed by assigned fund balance. Unassigned fund balance is applied last. Fund Balance Policy The City Council has not adopted a formal fund balance which would establish procedures for reporting fund balance classifications and establish a hierarchy for fund balance expenditures. However, the City has adopted by resolution a policy to maintain a General fund commitment for contingencies in the amount of $2,250,000. This commitment can only be expended upon approval by the City Council and is intended to meet unforeseen contingencies such as emergencies, revenue shortfall, mandates or unanticipated inflation. It is not intended for routine capital projects or general operations. NOTE 13: EMPLOYEES RETIREMENT PLAN A. Plan Description The City contributes to the California Public Employees Retirement System (PERS), a cost-sharing multiple-employer public employee defined benefit pension plan. PERS provides retirement and disability benefits, annual cost of living adjustments, and death benefits to plan members and beneficiaries. PERS acts as a common investment and administrative agent for participating public entities within the State of California. Benefit provisions and all other requirements are established by statute. Copies of PERS annual financial report may be obtained from their executive office Q Street, Lincoln Plaza East, Sacramento, CA Effective January 1, 2013, the City added retirement tiers for the Miscellaneous Plan for new employees as required under the Public Employee Pension Reform Act (PEPRA). New employees hired on or after January 1, 2013 will be subject to new, lower pension formulas, caps on pensionable income levels and new definitions of pensionable income. In addition, new employees will be required to contribute half of the total normal cost of the pension benefit unless impaired by an existing Memorandum of Understanding. -53-

170 CITY OF AUBURN Notes to Basic Financial Statements For the Year Ended June 30, 2014 NOTE 13: EMPLOYEES RETIREMENT PLAN (CONTINUED) B. Funding Policy For active plan members preceding PEPRA, Miscellaneous Plan members pay 7 percent of their annual covered salary while Safety Plan members pay 9 percent of their annual covered salary. Auburn Employee Association members pay 6.27 percent of their annual covered salary. For active plan members included in PEPRA, Miscellaneous Plan members pay 6.25 percent of their annual covered salary while Safety Plan members pay percent of their annual covered salary. The City is required to contribute the actuarially determined remaining amounts necessary to fund the benefits for its members. The City has committed to contribute a portion of the required employee contribution in addition to their own required contributions. The contribution requirements of the plan members are established by State statute and the employer contribution rate is established by PERS. Both the Miscellaneous and Safety Plans include a cost sharing agreement which determines whether a portion of the members contribution is paid by the City or whether a portion of the employers contribution is paid by the member. Results of the cost sharing agreements are as follows: Member Share City Share T o tal Member City Member City Member City M iscellaneous Classic 7.000% 0.000% 0.000% % 7.000% % Auburn Employee Association 6.270% 0.730% 0.000% % 6.270% % PEPRA No MOU 6.250% 0.000% 0.000% 6.250% 6.250% 6.250% Safety Police Classic First Tier 9.000% 0.000% 0.000% % 9.000% % Classic Second Tier 9.000% 0.000% 0.000% % 9.000% % Safety Fire Classic First Tier 9.000% 0.000% 0.000% % 9.000% % Classic Second Tier 9.000% 0.000% 0.000% % 9.000% % PEPRA No MOU % 0.000% 0.000% % % % The City s contributions for the years ending June 30, 2014, 2013, and 2012 were $267,473, $283,743, and $269,673 for the Miscellaneous plans and $773,040, $750,204, and $676,909 for the Safety plans, which equaled the required contributions each year. The City s annual pension cost and prepaid pension asset, computed in accordance with GASB 27, Accounting for Pensions by State and Local Governmental Employers, for the year ended June 30, 2014, were as follows: Annual required contribution $ 1,063,681 Less: Interest on pension asset ( 351,233) Plus: Amortization of pension asset 262,814 Net pension cost 975,262 Actual contributions made 959,552 Increase (decrease) in pension asset ( 15,710) Net pension asset, beginning 4,640,236 Net pension asset, ending $ 4,624,

171 CITY OF AUBURN Notes to Basic Financial Statements For the Year Ended June 30, 2014 NOTE 13: EMPLOYEES RETIREMENT PLAN (CONTINUED) B. Funding Policy (Continued) The following table shows the City s annual pension cost and the percentage contributed for the fiscal year and each of the two preceding fiscal years: Fiscal Year Annual Percentage of Net Pension Ended Pension Cost Contributions APC Contributed Asset June 30, 2012 $ 908,101 $ 946, % $ 4,530,973 June 30, ,684 1,033, % 4,640,236 June 30, , ,552 98% 4,624,526 NOTE 14: OTHER POSTEMPLOYMENT BENEFITS (OPEB) A. Plan Description The City of Auburn Retiree Healthcare Plan (Plan) is a single-employer defined benefit healthcare plan administered by the City. The Plan provides healthcare insurance benefits to eligible retirees. Benefit provisions are established and may be amended by the City. The Retiree Healthcare Plan does not issue a publicly available financial report. The City provides retiree medical benefits through California Public Employees Retirement System healthcare program. The City contributes the Public Employees Medical and Hospital Care Act (PEMHCA) minimum required employer contribution ($115 per month in 2013) towards the retiree monthly premium for eligible retirees participating in PEMHCA. B. Funding Policy The contribution requirements of the plan members and the City are established and may be amended by the City. The City is not pre-funding the plan. The annual required contribution (ARC) is an amount actuarially determined in accordance with the parameters of GASB Statement 45 - Accounting and Financial Reporting by Employers for Postemployment Benefits Other than Pensions. The City elected to calculate the ARC and related information using the alternative measurement method permitted by GASB Statement No. 45 for employers in plans with fewer than one hundred total plan members. The City s ARC represents a level of funding that, if paid on an ongoing basis, is projected to cover the normal cost each year and amortize the unfunded actuarial liability over a period of 30 years. The fiscal year 2013/14 ARC is $112,266. For 2013/14, the City contributed $17,252 to the Plan as the amount of healthcare insurance benefits reimbursed to eligible employees. -55-

172 CITY OF AUBURN Notes to Basic Financial Statements For the Year Ended June 30, 2014 NOTE 14: OTHER POSTEMPLOYMENT BENEFITS (OPEB) (CONTINUED) C. Annual OPEB Cost and Net OPEB Obligation The following table shows the components of the City s annual OPEB cost for the year, the amount actually contributed to the plan, and the City s net OPEB obligation. Annual required contribution $ 112,266 Interest on net OPEB Obligation 10,618 Adjustment to Annual Required Contribution ( 18,056) Annual OPEB Cost 104,828 Contributions Made ( 17,252) Increase (decrease) in Net OPEB Obligation 87,576 Net OPEB Obligation Beginning 353,936 Net OPEB Obligation Ending $ 441,512 The City s annual OPEB cost, the percentage of annual OPEB cost contributed to the plan, and the net OPEB obligation for the current and prior two years are as follows: Fiscal Year Annual Percentage of Annual Net OPEB Ended OPEB Cost OPEB Cost Contributed Obligation June 30, 2012 $ 98, % $ 257,305 June 30, , % 353,936 June 30, , % 441,512 D. Funded Status and Funding Progress As of June 30, 2013, the most recent actuarial valuation date, the plan was 0.0 percent funded. The actuarial accrued liability was $951,268 and the actuarial value of assets was $0, resulting in an unfunded actuarial accrued liability (UAAL) of $951,268. The covered payroll (annual payroll of employees covered by the plan) was $5,374,311, and the ratio of the UAAL to the covered payroll was 17.7 percent. Actuarial valuations of an ongoing plan involve estimates of the value of the reported amounts and assumptions about the probability of occurrence of events far into the future. Examples include assumptions about future employment, mortality, and the healthcare cost trend. Amounts determined regarding the funded status of the plan and the Annual Required Contributions of the City are subject to continual revision as actual results are compared with past expectations and new estimates are made about the future. The Schedule of Funding Progress, presented as required supplementary information following the notes to the financial statements, presents multi-year trend information (as it becomes available) that shows whether the actuarial value of plan assets is increasing or decreasing over time relative to the actuarial accrued liabilities for benefits. E. Actuarial Methods and Assumptions Projections of benefits for financial reporting purposes are based on the substantive plan (the plan as understood by the employer and plan members) and include the types of benefits provided at the time of each valuation and the historical pattern of sharing of benefit costs between the employer and plan members to that point. The actuarial methods and assumptions used include techniques that are designed to reduce the effects of short-term volatility in actuarial accrued liabilities and the actuarial value of assets, consistent with the long-term perspective of the calculations. -56-

173 CITY OF AUBURN Notes to Basic Financial Statements For the Year Ended June 30, 2014 NOTE 14: OTHER POSTEMPLOYMENT BENEFITS (OPEB) (CONTINUED) E. Actuarial Methods and Assumptions (Continued) The following simplifying assumptions were made: Retirement age for active employees - Based on the historical retirement age for the covered group, active plan members were assumed to retire at age 50, or at the first subsequent year in which the member would qualify for benefits. Marital status - Marital status of members at the calculation date was assumed to continue throughout retirement. Mortality - Life expectancies were based on mortality tables from the Centers for Disease Control and Prevention website and then averaged for the City as a whole. Turnover - Non-group specific age based turnover data from GASB Statement 45 were used as the basis for assigning active members a probability of remaining employed until the assumed retirement age and for developing an expected future working lifetime assumption for purposes of allocating to periods the present value of total benefits to be paid. Healthcare cost trend rate - The expected rate of increase in healthcare insurance premiums was based on projects provided by CalPERS. A rate of 2.68 percent for 2014 decreased to 2.5 percent annually thereafter was used. Health insurance premiums projected PEMHCA minimum required employer contribution amounts of $115 per month for retirees were used as the basis for calculation of the present value of total benefits to be paid. Inflation rate - The expected long-term inflation assumption of 2.5 percent was based on historical trends in United States inflation. Payroll growth rate - The expected long-term payroll growth rate was assumed to equal the rate of inflation. Based on the historical and expected returns of the City s long-term investment portfolio, a discount rate of 3 percent was used. In addition, a simplified version of the entry age actuarial cost method was used. The unfunded actuarial accrued liability is being amortized as a level percentage of projected payrolls on an open basis. The remaining amortization period at June 30, 2014 was twenty-six years. NOTE 15: RISK MANAGEMENT The City is exposed to various risks of loss related to torts; theft of, damage to and destruction of assets; errors and omissions; injuries to employees; and natural disaster. There is no claims liability to be reported based on the requirements of Governmental Accounting Standards Board Statement No. 10, which requires that a liability for claims be reported if information prior to the issuance of the financial statements indicates that it is probable that a liability has been incurred at the date of the financial statements and the amount for the loss can be reasonably estimated. -57-

174 CITY OF AUBURN Notes to Basic Financial Statements For the Year Ended June 30, 2014 NOTE 15: RISK MANAGEMENT (CONTINUED) There were no significant reductions in insurance coverage from prior years and there have been no settlements exceeding the insurance coverage for each of the past three fiscal years. The City is a member of Northern California Cities Self-Insurance Fund (NCCSIF), a joint powers agency which provides the City with a shared risk layer of coverage above the self-insured retention amount for liability and workers compensation. The City pays an annual premium to NCCSIF for its insurance coverage. General Liability Coverage: Annual deposits are paid by member cities and are adjusted retrospectively to cover costs. Each member city, including Auburn, self-insures for the first $50,000 of each loss. Participating cities share in loss occurrences in excess of $50,000 up to a maximum of $500,000. Premiums accrue based on the ultimate cost of the experience of the group of Cities. Coverage in excess of $500,000 is provided through the California Joint Powers Insurance Risk Management Authority, a joint powers authority organized to provide excess coverage for its members. Workers Compensation Coverage: Annual deposits are paid by member cities and are adjusted retrospectively to cover costs. The City self-insured for the first $100,000 of each loss and has purchased excess coverage with limits of $5,000,000 per occurrence. NCCSIF is a joint powers agency organized in accordance with Article 1, Chapter 5, Division 7, Title 1 of the California Government Fund Programs. The purpose is to create a common pool of funds to be used to meet obligations of the parties to provide workers compensation benefits for their employees and to provide excess liability insurance. The Authority provides claims processing administrative services, risk management services, and actuarial studies. It is governed by a member from each city. The City of Auburn council members do not have significant oversight responsibility, since they evenly share all factors of responsibility with the other cities. However, ultimate liability for payment of claims and insurance premiums resides with member cities. The Authority is empowered to make supplemental assessments as needed to eliminate deficit positions of member cities. If the JPA becomes insolvent, the City is responsible only to the extent of any deficiency in its equity balance. Upon termination of the JPA agreement, all property of the Authority will vest in the respective parties which theretofore transferred, conveyed or leased said property to the Authority. Any surplus of funds will be returned to the parties in proportion to actual balances of each equity. The Authority establishes claims liabilities based on estimates of the ultimate cost of claims (including future claims settlement expenses) that have been reported but not settled, plus estimates of claims that have been incurred but not reported. Because actual claims costs depend on various factors, the claims liabilities are recomputed periodically using a variety of actuarial and statistical techniques to produce current estimates that reflect recent settlements, claim frequency, and other economic and social factors. A provision of inflation is implicit in the calculation of estimated future claims costs. Adjustments to claims liabilities are charged or credited to expense in the periods in which they are made. -58-

175 CITY OF AUBURN Notes to Basic Financial Statements For the Year Ended June 30, 2014 NOTE 15: RISK MANAGEMENT (CONTINUED) The participants as of June 30, 2014 were as follows: Anderson Auburn Colusa Corning Dixon Elk Grove Folsom Galt Gridley Ione Jackson Lincoln Marysville Nevada City Oroville Paradise Placerville Red Bluff Rio Vista Rocklin Willows Yuba City The City s equity investment in the NCCSIF of $72,952 is recorded in the General fund as Investment in JPA. The net change in equity is shown as an income or expenditure item in the General fund. NOTE 16: OTHER INFORMATION A. Commitments and Contingencies At June 30, 2014, the City had construction contracts outstanding of approximately $3,633,840 for the Palm Avenue sidewalk project, APD CAD upgrade, Old City Hall renovation, Nevada Street Bicycle project, Airport East End Hangar project, and Sewer Oxidation Ditch. Amounts received or receivable from grant agencies are subject to audit and adjustment by grantor agencies. Any disallowed claims, including amounts already collected, may constitute a liability of the appreciable funds. The amount, if any, of expenditures which may be disallowed by the grantor cannot be determined at this time although the government expects such amounts, if any, to be immaterial. B. Successor Agency Trust for Assets of Former Redevelopment Agency In accordance with Assembly Bill 1X26 and Assembly Bill 1434, all redevelopment agencies in the State of California were dissolved and ceased to operate as legal entities as of February 1, The activity of the Successor Agency Trust for Assets of Former Redevelopment Agency (Successor Agency) is recorded in a private purpose trust. The following is a summary of changes in long-term liabilities for the year ended June 30, 2014: Amounts Balance Additions/ Balance Due Within Type of Indebtedness July 1, 2013 Adjustments Retirements June 30, 2014 One Year Tax allocation bonds $ 4,320,000 $ - ($ 85,000) $ 4,235,000 $ 90,000 Less: Discount ( 85,562) - 3,423 ( 82,139) ( 3,423) Tax allocation bonds, net 4,234,438 - ( 81,577) 4,152,861 86,577 Total $ 4,234,438 $ - ($ 81,577) $ 4,152,861 $ 86,

176 CITY OF AUBURN Notes to Basic Financial Statements For the Year Ended June 30, 2014 NOTE 16: OTHER INFORMATION (CONTINUED) B. Successor Agency Trust for Assets of Former Redevelopment Agency (Continued) Individual issues of debt payable outstanding at June 30, 2014, are as follows: Tax Allocation Bonds: Auburn Urban Development Authority 2008 Tax Allocation Bonds, issued October 7, 2008 in the amount of $4,805,000 and payable in annual installments of $75,000 to $315,000, with an interest rate of 3.00% to 6.00% and maturity on June 1, The bonds were used to finance redevelopment activities. Total Tax Allocation Bonds $ 4,235,000 $ 4,235,000 Following is a schedule of debt payment requirements to maturity for long-term debt: Tax Allocation Bonds Year Ended June 30 Principal Interest Total 2015 $ 90,000 $ 248,530 $ 338, , , , , , , , , , , , , ,000 1,054,740 1,684, , ,400 1,682, ,120, ,600 1,678, ,165, ,700 1,344,700 Total $ 4,235,000 $ 3,834,243 $ 8,069,243 C. Subsequent Events Management has evaluated events subsequent to June 30, 2014 through January 26, 2015, the date on which the financial statements were available for issuance. Management has determined no subsequent events requiring disclosure have occurred. -60-

177 Required Supplementary Information (Unaudited)

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179 CITY OF AUBURN Required Supplementary Information For the Year Ended June 30, 2014 SCHEDULE OF FUNDING PROGRESS - OTHER POSTEMPLOYMENT BENEFITS (OPEB) The Schedule of Funding Progress - Other Postemployment Benefits provides a consolidated snapshot of the City s ability to meet current and future liabilities with the plan assets. Of particular interest to most is the funded status ratio. This ratio conveys a plan s level of assets to liabilities, an important indicator to determine the financial health of the OPEB plan. The closer the plan is to a 100% funded status, the better position it will be in to meet all of its future liabilities. The table below shows a three year analysis of the actuarial value of assets as a percentage of the actuarial accrued liability and the unfunded actuarial accrued liability as a percentage of the annual covered payroll as of June 30, 2013 for the City Other Postemployment Benefit Plan. Entry Age UAAL as a Actuarial Actuarial Actuarial Unfunded % of Valuation Value of Accrued AAL Funded Covered Covered Date Assets Liability (UAAL) Ratio Payroll Payroll June 30, 2011 $ - $ 822,507 $ 822, % $ 5,351, % June 30, , , % 5,574, % June 30, , , % 5,374, % -61-

180 CITY OF AUBURN Required Supplementary Information Budgetary Comparison Schedule General Fund For the Year Ended June 30, 2014 Actual Variance With Amounts Final Budget Original Final (Budgetary Positive Budget Budget Basis) (Negative) REVENUES Taxes and assessments $ 7,864,365 $ 7,864,365 $ 7,948,762 $ 84,397 Licenses and permits 293, , ,354 9,754 Fines and forfeitures 72,500 72,500 50,287 (22,213) Use of money and property 325, , ,176 38,176 Other governmental agencies 673, ,500 1,138, ,925 Charges for services 95,590 95, ,663 17,073 Other revenues 2,500 10,000 28,041 18,041 Total Revenues 9,326,555 9,326,555 9,944, ,153 EXPENDITURES Current: General government: City council 70,021 70,021 81,711 (11,690) City manager 143, , ,333 (83,861) City clerk 86,718 86,718 93,237 (6,519) Administrative services 386, , ,208 16,213 City attorney 150, , ,786 (20,786) Information technology 121, , ,954 (25,954) Insurance programs 303, , , ,592 Support for community programs 90,204 90,204 31,907 58,297 Total General Government 1,351,136 1,351,136 1,244, ,292 Public Safety: Police 3,358,700 3,358,700 3,611,405 (252,705) Fire 2,185,972 2,185,972 2,350,282 (164,310) Total Public Safety 5,544,672 5,544,672 5,961,687 (417,015) Transportation: Administration and engineering 115, , ,845 (45,737) Building maintenance 249, , ,440 (14,140) Construction and maintenance 414, , ,069 (47,520) Yard and shop 213, , ,186 4,319 Stormwater management 24,500 24,500 32,295 (7,795) Total Transportation 1,016,962 1,016,962 1,127,835 (110,873) Community development: Administration 429, , ,969 (51,584) Building inspections 213, , ,966 (617) Total Community Development 642, , ,935 (52,201) -62- Continued (Page 1 of 2)

181 CITY OF AUBURN Required Supplementary Information Budgetary Comparison Schedule General Fund For the Year Ended June 30, 2014 Actual Variance With Amounts Final Budget Original Final (Budgetary Positive Budget Budget Basis) (Negative) EXPENDITURES Nondepartmental: Debt service 523, , ,483 (78,141) Capital outlay 206, ,000 59, ,429 Total Nondeparmental 729, , ,054 68,288 Total Expenditures 9,284,846 9,284,846 9,690,355 (405,509) Excess of Revenues Over (Under) Expenditures 41,709 41, , ,644 OTHER FINANCING SOURCES (USES) Transfers in 155, , ,963 43,160 Total Other Financing Sources (Uses) 155, , ,963 43,160 Net Change in Fund Balance 197, , , ,804 Fund Balance - Beginning 2,992,347 2,992,347 2,992,347 - Fund Balance - Ending $ 3,189,859 $ 3,189,859 $ 3,445,663 $ 255, Continued (Page 2 of 2)

182 CITY OF AUBURN Required Supplementary Information Budgetary Comparison Schedule Transportation - Major Special Revenue Fund For the Year Ended June 30, 2014 Actual Variance With Amounts Final Budget Original Final (Budgetary Positive Budget Budget Basis) (Negative) REVENUES Use of money and property $ 2,000 $ 2,000 $ 1,658 $ (342) Intergovernmental 1,609,897 1,278, ,159 (948,350) Total Revenues 1,611,897 1,280, ,817 (948,692) EXPENDITURES Current: Transportation 73,750 73, ,704 (160,954) Capital outlay 1,802,572 1,802, , ,725 Total Expenditures 1,876,322 1,876,322 1,076, ,771 Excess of Revenues Over (Under) Expenditures (264,425) (595,813) (744,734) (148,921) OTHER FINANCING SOURCES (USES) Transfers in - 331,388 - (331,388) Transfers out - - (9,790) (9,790) Total Other Financing Sources (Uses) - 331,388 (9,790) (341,178) Net Change in Fund Balance (264,425) (264,425) (754,524) (490,099) Fund Balance - Beginning Fund Balance - Ending $ (264,425) $ (264,425) $ (754,524) $ (490,099) -64-

183 BUDGETARY BASIS OF ACCOUNTING CITY OF AUBURN Required Supplementary Information Notes to Budgetary Comparison Schedule For the Year Ended June 30, 2014 Formal budgetary integration is employed as a management control device during the year for the General Fund, Special Revenue funds, Capital Project funds, Debt Service funds and Enterprise funds and is controlled at the department level for the City. Budgets are adopted on a basis consistent with generally accepted accounting principles (GAAP). The following procedures are performed by the City in establishing the budgetary data reflected in the financial statements: (1) The City Manager and City Administrative Services Director submits to the City Council a recommended operating budget for the fiscal year commencing the following July 1. The operating budget includes recommended expenditures and the means of financing them. (2) Public hearings, when required, are conducted at City Hall to obtain taxpayer comments. (3) Prior to July 1 (when possible), the budget is legally enacted through passage of a formal resolution. (4) Any revisions which alter the total expenditures of any fund must be approved by the City Council. Budgeted amounts are as originally adopted or as subsequently revised by the City Council. All unused appropriations for budgeted amounts lapse at the end of the year. Annual appropriated budgets are not adopted for certain funds established to meet or satisfy a specific purpose. For the fiscal year ended June 30, 2014, the following funds were considered established for a specific purpose and did not have annual appropriated budgets: Maidu Fire Station Hwy 49 Beautification Project Fund The City does not use encumbrance accounting under which purchase orders, contracts, and other commitments for the expenditure of monies are recorded in order to reserve that portion of the applicable appropriation. -65-

184 CITY OF AUBURN Required Supplementary Information Notes to Budgetary Comparison Schedule For the Year Ended June 30, 2014 BUDGETARY EXPENDITURES IN EXCESS OF APPROPRIATIONS The following General fund departments had an excess of expenditures over appropriations at the legal level of budgetary control as follows: Excess of Expenditures Over Fund Department Appropriations General fund City council $ 11,690 City manager 83,861 City clerk 6,519 City attorney 20,786 Information technology 25,954 Police 252,705 Fire 164,310 Administration and engineering 45,737 Building maintenance 14,140 Construction and maintenance 47,520 Stormwater management 7,795 Administration 51,584 Building inspections 617 Debt service 78,

185 Combining and Individual Fund Statements and Schedules

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187 Nonmajor Governmental Funds

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189 CITY OF AUBURN Combining Balance Sheet Nonmajor Governmental Funds June 30, 2014 Special Capital Revenue Projects Funds Funds Totals ASSETS Cash and investments $ 822,541 $ 1,345,720 $ 2,168,261 Receivables: Accounts 26,871-26,871 Intergovernmental 316, ,453 Prepaid costs 3,359-3,359 Restricted cash and investments 557, ,833 Loans receivable 628, ,859 Total Assets $ 2,355,916 $ 1,345,720 $ 3,701,636 LIABILITIES Accounts payable $ 42,064 $ - $ 42,064 Accrued salaries and benefits 15,073-15,073 Deposits payable - 1,318 1,318 Due to other funds 36, , ,328 Unearned revenue 288, ,278 Total Liabilities 382, , ,061 FUND BALANCES Nonspendable 3,359-3,359 Restricted 1,975,234 1,345,720 3,320,954 Unassigned (4,769) (232,969) (237,738) Total Fund Balances 1,973,824 1,112,751 3,086,575 Total Liabilities and Fund Balances $ 2,355,916 $ 1,345,720 $ 3,701,

190 CITY OF AUBURN Combining Statement of Revenues, Expenditures, and Changes in Fund Balances Nonmajor Governmental Funds For the Year Ended June 30, 2014 Special Capital Revenue Projects Funds Funds Totals REVENUES Taxes $ 21,956 $ - $ 21,956 Licenses and permits 31, ,536 Use of money and property 13,145 26,138 39,283 Intergovernmental 1,361, ,000 1,536,957 Charges for services 30, ,801 Other revenues 24,612-24,612 Total Revenues 1,483, ,432 1,685,145 EXPENDITURES Current: General government 40,610-40,610 Public safety 173, ,711 Transportation 775,258 4, ,615 Community development 239, ,502 Capital outlay 128, ,807 Total Expenditures 1,357,888 4,357 1,362,245 Excess of Revenues Over (Under) Expenditures 125, , ,900 OTHER FINANCING SOURCES (USES) Transfers out (131,719) - (131,719) Total Other Financing Sources (Uses) (131,719) - (131,719) Net Change in Fund Balances (5,894) 197, ,181 Fund Balances - Beginning 1,979, ,676 2,895,394 Fund Balances - Ending $ 1,973,824 $ 1,112,751 $ 3,086,

191 Nonmajor Governmental Funds Special Revenue Funds

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193 CITY OF AUBURN Nonmajor Special Revenue Funds Special Revenue Funds are used to account for and report the proceeds of specific revenues that are restricted or committed to expenditure for specific purposes other than debt service or capital projects. Nonmajor special revenue funds used by the City are listed below: State Gas Tax Fund The State Gas Tax fund accounts for gas tax revenue allocations from the State. Funds received are restricted to expenditures for street maintenance, traffic safety, and construction. Transit Fund The Transit fund is used to account for all revenues and expenditures necessary to provide public transit services and to construct and maintain transit related facilities and infrastructure. Property Seizures Fund This fund accounts for cash and assets seized as a result of law enforcement activities. Generally, such funds are held on deposit until expiration of the required holding period and/or funds are provided to appropriate parties. Maidu Fire Station Fund This fund accounts for development impact fees received for the maintenance and upkeep of the Maidu Fire Station. The Fire Department periodically appropriates these funds towards upkeep of the station and for the purchase of new equipment. HOME Housing Rehabilitation & First Time Homebuyer Fund The HOME Housing Rehabilitation and First Time Homebuyer (Community Development Block Grant Fund) is used to account for monies received from the State and Federal governments and loaned by the City to individuals buying a home for the first time and/or engaging in applicable home rehabilitation activities. Funds, when repaid, are provided to new individuals qualifying for loans. Small Business Loans (Community Development Block Grant) Fund The Small Business Loans (Community Development Block Grant) Fund is used to account for monies received from the State and Federal governments and loaned by the City to individuals and businesses to encourage small business growth. Funds, when repaid, are provided to new businesses. Solid Waste Management Fund The Solid Waste Management Funds are used to account for recycling programs funded by State grants and program expenditures related to the City s closed landfill located at the Auburn Municipal Airport. Office of Traffic Safety Grant Fund The Office of Traffic Safety (OTS) Grant fund is used to account for OTS grant funds received and the corresponding eligible expenditures as authorized by the grants. -69-

194 State Law Enforcement Personnel Grant Fund CITY OF AUBURN Nonmajor Special Revenue Funds The State Law Enforcement Personnel Grant Fund accounts for grant revenues received from the State which must be wholly spent for Law Enforcement personnel. These funds reimburse the General fund for approximately 2.0 FTE Police Officers. Facilities and Equipment Plan Fund The Facilities and Equipment Plan Fund accounts for revenues received through mitigation fees assessed on construction of new residential units and renovation of commercial and industrial spaces. Revenues received are used to fund recurring capital outlay as it relates to the purchase of equipment for citywide departments. Miscellaneous Grant Funds These funds account for grant revenues received for public safety (i.e. FEMA/Law Enforcement) activities. Generally, these funds must be used for specific law enforcement and fire activities. -70-

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196 CITY OF AUBURN Combining Balance Sheet Nonmajor Special Revenue Funds June 30, 2014 HOME Housing Maidu Rehabilitation State Property Fire & First Time Gas Tax Transit Seizures Station Homebuyer ASSETS Cash and investments $ 95,277 $ 150,368 $ 60,653 $ 37,875 $ 16,561 Receivables: Accounts , Intergovernmental 105, , Prepaid costs - 3, Restricted cash and investments Loans receivable ,455 Total Assets $ 201,036 $ 308,405 $ 81,609 $ 37,875 $ 317,016 LIABILITIES Accounts payable $ 15,137 $ 5,054 $ - $ - $ 4,500 Accrued salaries and benefits - 15, Due to other funds 3, Unearned revenue - 288, Total Liabilities 18, , ,070 FUND BALANCES Nonspendable - 3, Restricted 182,899-81,609 37, ,946 Unrestricted - (3,359) Total Fund Balances 182,899-81,609 37, ,946 Total Liabilities and Fund Balances $ 201,036 $ 308,405 $ 81,609 $ 37,875 $ 317,

197 Office of State Small Solid Traffic Law Facilities Business Waste Safety Enforcement and Miscellaneous Loans Management Grant Grant Equipment Grants Totals $ 207,409 $ 34,536 $ - $ 31,715 $ 100,159 $ 87,988 $ 822, , ,871-50,492-5, , , , , , ,859 $ 535,813 $ 642,861 $ 5,915 $ 37,239 $ 100,159 $ 87,988 $ 2,355,916 $ - $ - $ 5,933 $ - $ 11,440 $ - $ 42, , ,392 31, , , ,325 31,715 11, , , , ,861-5,524 88,719 87,988 1,975, (1,410) (4,769) 535, ,861 (1,410) 5,524 88,719 87,988 1,973,824 $ 535,813 $ 642,861 $ 5,915 $ 37,239 $ 100,159 $ 87,988 $ 2,355,

198 CITY OF AUBURN Combining Statement of Revenues, Expenditures, and Changes in Fund Balances Nonmajor Special Revenue Funds For the Year Ended June 30, 2014 HOME Housing Maidu Rehabilitation State Property Fire & First Time Gas Tax Transit Seizures Station Homebuyer REVENUES Taxes $ - $ - $ - $ - $ - Licenses and permits Use of money and property (39) 3, (319) Intergovernmental 434, , ,058 Charges for services - 30, Other revenues , Total Revenues 434, ,694 24, ,739 EXPENDITURES Current: General government , Public safety Transportation 372, , Community development ,679 Capital outlay 12,629 27,660 17, Total Expenditures 384, ,584 35,781-52,679 Excess of Revenues Over (Under) Expenditures 49,823 20,110 (11,309) - 152,060 OTHER FINANCING SOURCES (USES) Transfers out (9,790) (20,110) Total Other Financing Sources (Uses) (9,790) (20,110) Net Change in Fund Balance 40,033 - (11,309) - 152,060 Fund Balances - Beginning 142,866-92,918 37, ,886 Fund Balances - Ending $ 182,899 $ - $ 81,609 $ 37,875 $ 311,

199 Office of State Small Solid Traffic Law Facilities Business Waste Safety Enforcement and Miscellaneous Loans Management Grant Grant Equipment Grants Totals $ - $ 21,956 $ - $ - $ - $ - $ 21, ,270-31,270 5, (1) - 3,129-13, ,293 5,000 18, ,000-17,217 1,361, , , ,927 27,911 18, ,000 34,399 17,217 1,483, ,870-11,127-40, , , , , , , ,108-62, , , ,363 19,978-73,369 13,348 1,357,888 (15,896) (132,452) (1,410) 100,000 (38,970) 3, , (94,476) (7,343) - (131,719) (94,476) (7,343) - (131,719) (15,896) (132,452) (1,410) 5,524 (46,313) 3,869 (5,894) 551, , ,032 84,119 1,979,718 $ 535,813 $ 642,861 $ (1,410) $ 5,524 $ 88,719 $ 87,988 $ 1,973,

200 CITY OF AUBURN Budgetary Comparison Schedule State Gas Tax - Nonmajor Special Revenue Fund For the Year Ended June 30, 2014 Actual Variance With Amounts Final Budget Original Final (Budgetary Positive Budget Budget Basis) (Negative) REVENUES Use of money and property $ 1,000 $ 1,000 $ (39) $ (1,039) Intergovernmental 396, , ,825 37,925 Total Revenues 397, , ,786 36,886 EXPENDITURES Current: Transportation 332, , ,334 (39,834) Capital outlay 117, ,790 12, ,161 Total Expenditures 450, , ,963 65,327 Excess of Revenues Over (Under) Expenditures (52,390) (52,390) 49, ,213 OTHER FINANCING SOURCES (USES) Transfers out - - (9,790) (9,790) Total Other Financing Sources (Uses) - - (9,790) (9,790) Net Change in Fund Balance (52,390) (52,390) 40,033 92,423 Fund Balance - Beginning 142, , ,866 - Fund Balance - Ending $ 90,476 $ 90,476 $ 182,899 $ 92,

201 CITY OF AUBURN Budgetary Comparison Schedule Transit - Nonmajor Special Revenue Fund For the Year Ended June 30, 2014 Actual Variance With Amounts Final Budget Original Final (Budgetary Positive Budget Budget Basis) (Negative) REVENUES Use of money and property $ - $ - $ 3,786 $ 3,786 Intergovernmental 492, , ,995 (108,107) Charges for services 32,000-30,773 30,773 Other revenues Total Revenues 524, , ,694 (73,408) EXPENDITURES Current: Transportation 370, , ,924 (32,279) Debt service 24,000 24,000-24,000 Capital outlay 109, ,500 27,660 81,840 Total Expenditures 504, , ,584 73,561 Excess of Revenues Over (Under) Expenditures 19,957 19,957 20, OTHER FINANCING SOURCES (USES) Transfers out - - (20,110) (20,110) Total Other Financing Sources (Uses) - - (20,110) (20,110) Net Change in Fund Balance 19,957 19,957 - (19,957) Fund Balance - Beginning Fund Balance - Ending $ 19,957 $ 19,957 $ - $ (19,957) -74-

202 CITY OF AUBURN Budgetary Comparison Schedule Property Seizures - Nonmajor Special Revenue Fund For the Year Ended June 30, 2014 Actual Variance With Amounts Final Budget Original Final (Budgetary Positive Budget Budget Basis) (Negative) REVENUES Other revenues $ - $ - $ 24,472 $ 24,472 Total Revenues ,472 24,472 EXPENDITURES Current: General government ,613 (18,613) Capital outlay 20,000 20,000 17,168 2,832 Total Expenditures 20,000 20,000 35,781 (15,781) Net Change in Fund Balance (20,000) (20,000) (11,309) 8,691 Fund Balance - Beginning 92,918 92,918 92,918 - Fund Balance - Ending $ 72,918 $ 72,918 $ 81,609 $ 8,

203 CITY OF AUBURN Budgetary Comparison Schedule HOME Housing Rehabilitation & First Time Homebuyer - Nonmajor Special Revenue Fund For the Year Ended June 30, 2014 Actual Variance With Amounts Final Budget Original Final (Budgetary Positive Budget Budget Basis) (Negative) REVENUES Use of money and property $ - $ - $ (319) $ (319) Intergovernmental 197, , ,058 7,901 Total Revenues 197, , ,739 7,582 EXPENDITURES Current: Community development 205, ,000 52, ,321 Total Expenditures 205, ,000 52, ,321 Net Change in Fund Balance (7,843) (7,843) 152, ,903 Fund Balance - Beginning 159, , ,886 - Fund Balance - Ending $ 152,043 $ 152,043 $ 311,946 $ 159,

204 CITY OF AUBURN Budgetary Comparison Schedule Small Business Loans - Nonmajor Special Revenue Fund For the Year Ended June 30, 2014 Actual Variance With Amounts Final Budget Original Final (Budgetary Positive Budget Budget Basis) (Negative) REVENUES Use of money and property $ 1,000 $ 1,000 $ 5,634 $ 4,634 Intergovernmental , ,293 Other revenues 64,000 64,000 - (64,000) Total Revenues 65,000 65, , ,927 EXPENDITURES Current: Community development 210, , ,823 23,177 Total Expenditures 210, , ,823 23,177 Net Change in Fund Balance (145,000) (145,000) (15,896) 129,104 Fund Balance - Beginning 551, , ,709 - Fund Balance - Ending $ 406,709 $ 406,709 $ 535,813 $ 129,

205 CITY OF AUBURN Budgetary Comparison Schedule Solid Waste Management - Nonmajor Special Revenue Fund For the Year Ended June 30, 2014 Actual Variance With Amounts Final Budget Original Final (Budgetary Positive Budget Budget Basis) (Negative) REVENUES Taxes $ 133,000 $ 133,000 $ 21,956 $ (111,044) Use of money and property 6,000 6, (5,045) Intergovernmental 5,000 5,000 5,000 - Total Revenues 144, ,000 27,911 (116,089) EXPENDITURES Current: Public safety 161, , , Total Expenditures 161, , , Net Changes in Fund Balance (17,000) (17,000) (132,452) (115,452) Fund Balance - Beginning 775, , ,313 - Fund Balance - Ending $ 758,313 $ 758,313 $ 642,861 $ (115,452) -78-

206 CITY OF AUBURN Budgetary Comparison Schedule Office of Traffic Safety - Nonmajor Special Revenue Fund For the Year Ended June 30, 2014 Actual Variance With Amounts Final Budget Original Final (Budgetary Positive Budget Budget Basis) (Negative) REVENUES Use of money and property $ - $ - $ (1) $ (1) Intergovernmental 40,000 40,000 18,569 (21,431) Total Revenues 40,000 40,000 18,568 (21,432) EXPENDITURES Current: General government 40,000 40,000 10,870 29,130 Capital outlay - - 9,108 (9,108) Total Expenditures 40,000 40,000 19,978 20,022 Net Changes in Fund Balance - - (1,410) (1,410) Fund Balance - Beginning Fund Balance - Ending $ - $ - $ (1,410) $ (1,410) -79-

207 CITY OF AUBURN Budgetary Comparison Schedule State Law Enforcement Grant - Nonmajor Special Revenue Fund For the Year Ended June 30, 2014 Actual Variance With Amounts Final Budget Original Final (Budgetary Positive Budget Budget Basis) (Negative) REVENUES Intergovernmental $ 100,000 $ 100,000 $ 100,000 $ - Total Revenues 100, , ,000 - EXPENDITURES Current: Public safety Total Expenditures Excess of Revenues Over (Under) Expenditures 100, , ,000 - OTHER FINANCING SOURCES (USES) Transfers out - (100,000) (94,476) 5,524 Total Other Financing Sources (Uses) - (100,000) (94,476) 5,524 Net Changes in Fund Balance 100,000-5,524 5,524 Fund Balance - Beginning Fund Balance - Ending $ 100,000 $ - $ 5,524 $ 5,

208 CITY OF AUBURN Budgetary Comparison Schedule Facilities and Equipment - Nonmajor Special Revenue Fund For the Year Ended June 30, 2014 Actual Variance With Amounts Final Budget Original Final (Budgetary Positive Budget Budget Basis) (Negative) REVENUES Licenses and permits $ 15,000 $ 15,000 $ 31,270 $ 16,270 Use of money and property 1,000 1,000 3,129 2,129 Total Revenues 16,000 16,000 34,399 18,399 EXPENDITURES Current: General government ,127 (10,877) Debt service 7,342 7,342-7,342 Capital outlay 95,833 95,833 62,242 33,591 Total Expenditures 103, ,425 73,369 30,056 Excess of Revenues Over (Under) Expenditures (87,425) (87,425) (38,970) 48,455 OTHER FINANCING SOURCES (USES) Transfers out - - (7,343) (7,343) Total Other Financing Sources (Uses) - - (7,343) (7,343) Net Changes in Fund Balance (87,425) (87,425) (46,313) 41,112 Fund Balance - Beginning 135, , ,032 - Fund Balance - Ending $ 47,607 $ 47,607 $ 88,719 $ 41,

209 CITY OF AUBURN Budgetary Comparison Schedule Miscellaneous Grants - Nonmajor Special Revenue Fund For the Year Ended June 30, 2014 Actual Variance With Amounts Final Budget Original Final (Budgetary Positive Budget Budget Basis) (Negative) REVENUES Intergovernmental $ - $ - $ 17,217 $ 17,217 Total Revenues ,217 17,217 EXPENDITURES Current: Public safety - 13,348 (13,348) Capital outlay 25,000 25,000-25,000 Total Expenditures 25,000 25,000 13,348 11,652 Net Change in Fund Balance (25,000) (25,000) 3,869 28,869 Fund Balance - Beginning 84,119 84,119 84,119 - Fund Balance - Ending $ 59,119 $ 59,119 $ 87,988 $ 28,

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211 Nonmajor Governmental Funds Capital Projects Funds

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213 CITY OF AUBURN Nonmajor Capital Projects Funds The Capital Projects Funds are used to account for financial resources that are restricted, committed or assigned to expenditure for capital outlay. Nonmajor capital projects funds used by the City are listed below: Auburn School Park Preserve Fund The Auburn School Park Preserve Fund (ASPP) is used to account for the capital costs of restoring a park using a variety of funding sources. In FY , a $1.5 million loan was provided to the ASPP fund from the City s General fund as an advance payment to the Army Corp of Engineers for related project costs (the Army Corp of Engineers managed the construction of the Park). Highway 49 Beautification Plan Fund The Highway 49 Beautification Plan fund accounts for project costs specifically related to Highway 49. These funds may be used for eligible projects along the Highway 49 corridor. Project Fund The Project fund accounts for traffic mitigation fees collected for numerous project areas citywide. Funds collected for each project area may only be used for traffic mitigation projects within boundaries defined by each fee area resolution. -83-

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215 CITY OF AUBURN Combining Balance Sheet Nonmajor Capital Projects Funds June 30, 2014 Auburn School Park Hwy 49 Project Preserve Beautification Fund Totals ASSETS Cash and investments $ - $ - $ 1,345,720 $ 1,345,720 Total Assets $ - $ - $ 1,345,720 $ 1,345,720 LIABILITIES Deposits payable $ - $ 1,318 $ - $ 1,318 Due to other funds 231, ,651 Total Liabilities 231,651 1, ,969 FUND BALANCES Restricted - - 1,345,720 1,345,720 Unassigned (231,651) (1,318) - (232,969) Total Fund Balances (231,651) (1,318) 1,345,720 1,112,751 Total Liabilities and Fund Balances $ - $ - $ 1,345,720 $ 1,345,

216 CITY OF AUBURN Combining Statement of Revenues, Expenditures, and Changes in Fund Balances Nonmajor Capital Projects Funds For the Year Ended June 30, 2014 Auburn School Park Hwy 49 Project Preserve Beautification Fund Totals REVENUES Licenses and permits $ - $ - $ 266 $ 266 Use of money and property (10,220) - 36,358 26,138 Intergovernmental 175, ,000 Charges for services Total Revenues 164,780-36, ,432 EXPENDITURES Current: Transportation - - 4,357 4,357 Total Expenditures - - 4,357 4,357 Net Change in Fund Balance 164,780-32, ,075 Fund Balances - Beginning (396,431) (1,318) 1,313, ,676 Fund Balances - Ending $ (231,651) $ (1,318) $ 1,345,720 $ 1,112,

217 CITY OF AUBURN Budgetary Comparison Schedule Auburn School Park Preserve - Nonmajor Capital Projects Fund For the Year Ended June 30, 2014 Actual Variance With Amounts Final Budget Original Final (Budgetary Positive Budget Budget Basis) (Negative) REVENUES Use of money $ - $ - $ (10,220) $ (10,220) Intergovernmental 396, , ,000 (221,431) Total Revenues 396, , ,780 (231,651) EXPENDITURES Capital outlay Total Expenditures Net Changes in Fund Balance 396, , ,780 (231,651) Fund Balance - Beginning (396,431) (396,431) (396,431) - Fund Balance - Ending $ - $ - $ (231,651) $ (231,651) -86-

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219 Fiduciary Funds

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221 CITY OF AUBURN Fiduciary Funds The Fiduciary Funds are used to report assets held in a trustee or agency capacity for others and therefore cannot be used to support the government s own programs. Other Employee Benefit Trust Fund This fund is used to report resources held in trust for the members of an employee benefit plan. This employee benefit plan is for the City s police officers medical savings plan. Private Purpose Trust Funds These funds are used to report other trust arrangements under which principal and income benefit individuals, private organizations, or other governments. The private purpose trust funds maintained by the City include the following: Merchant s Council This fund is used to report the activity of the Merchant s Council nonprofit organization. Historic Auburn This fund is used to report the activity of the Historic Auburn nonprofit organization. Signature Theatre Sewer District This fund is used to report the activity of the Signature Theatre Sewer District. Southwest Specific Plan The fund is used to report the activity of the Southwest Specific Plan. Successor Agency to the Auburn Urban Development Authority The fund is used to report the dissolution of the Auburn Urban Development Authority. Agency Funds These funds are used to report resources held by the City in a purely custodial capacity. The agency funds maintained by the City include the following: Cable TV Access Fees This fund collects monies from cable TV access fees and remits them to the Auburn Area Access Community Television Group. Fire Safety Council This fund collects monies from grants received for fire safety purposes and uses them for like purposes. Recreation Park Development This fund collects monies for recreation and park development. Placer County Facilities Fee This fund collects monies for the Placer County Facilities Fee and remits them to the Placer County Facilities Department. Payroll Clearing - This fund collects monies from payroll and remits them to government agencies. -87-

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224 CITY OF AUBURN Combining Statement of Fiduciary Net Position Private Purpose Trust Funds June 30, 2014 Signature Theatre Southwest Merchant's Historic Sewer Specific Council Auburn District Plan ASSETS Cash and investments $ 4,546 $ 3,616 $ 115 $ 6,613 Receivables: Accounts Capital assets: Non-depreciable Total Assets $ 4,993 $ 4,216 $ 115 $ 6,613 LIABILITIES Accounts payable $ - $ - $ - $ - Interest payable Due to other funds Long-term debt: Due within one year Due in more than one year Total Liabilities NET POSITION Net position held in trust 4,993 4, ,613 Total Net Position $ 4,993 $ 4,216 $ 115 $ 6,

225 Successor Agency to the Auburn Total Urban Development Authority Private Debt Purpose Service Housing Projects Trust Funds $ 347,447 $ - $ - $ 362, , , ,000 $ 347,447 $ 350,000 $ - $ 713,384 $ - $ - $ 1,551 $ 1,551 21, , ,854 21,854 86, ,577 4,066, ,066,284 4,173,873-23,405 4,197,278 (3,826,426) 350,000 (23,405) (3,483,894) $ (3,826,426) $ 350,000 $ (23,405) $ (3,483,894) -88-

226 CITY OF AUBURN Combining Statement of Changes in Fiduciary Net Position Private Purpose Trust Funds For the Year Ended June 30, 2014 Signature Theatre Southwest Merchant's Historic Sewer Specific Council Auburn District Plan ADDITIONS Property taxes $ - $ - $ - $ - Interest and investment income Other contributions 35,410 20, Total Additions 35,410 20, DEDUCTIONS Distributions to participants 35,703 19, Program expenses of former redevelopment agency Interest expense Amortization Total Deductions 35,703 19, Transfers in Transfers out Change in Net Position (293) 1, Net Position - Beginning 5,286 3, ,452 Net Position - Ending $ 4,993 $ 4,216 $ 115 $ 6,

227 Successor Agency to the Auburn Total Urban Development Authority Private Debt Purpose Service Housing Projects Trust Funds $ - $ - $ 406,259 $ 406,259 9,387-10,959 20, ,615 9, , , , ,860 90, , ,455 3, , ,817-89, , , , (311,452) (311,452) 90,022-15, ,957 (3,916,448) 350,000 (39,311) (3,590,851) $ (3,826,426) $ 350,000 $ (23,405) $ (3,483,894) -89-

228 CITY OF AUBURN Combining Statement of Assets and Liabilities Agency Funds June 30, 2014 Placer Fire Recreation County Cable TV Safety Park Facilities Access Fees Council Development Fee ASSETS Cash and investments $ - $ 51 $ 3,000 $ 19,778 Receivables: Accounts 7, Intergovernmental Total Assets $ 7,971 $ 51 $ 3,000 $ 19,778 LIABILITIES Accounts payable $ 4,958 $ - $ 425 $ 7,559 Agency obligations 3, ,575 12,219 Total Liabilities $ 7,971 $ 51 $ 3,000 $ 19,

229 Payroll Clearing Total Agency Funds $ 67,175 $ 90,004-7,971 5,050 5,050 $ 72,225 $ 103,025 $ - $ 12,942 72,225 90,083 $ 72,225 $ 103,

230 CITY OF AUBURN Combining Statement of Changes in Assets and Liabilities Agency Funds For the Year Ended June 30, 2014 CABLE TV ACCESS FEES Balance Balance July 1, 2013 Additions Deductions June 30, 2014 ASSETS Receivables: Accounts $ 7,982 $ - $ 11 $ 7,971 Total Assets $ 7,982 $ - $ 11 $ 7,971 LIABILITIES Accounts payable $ 4,958 $ - $ - $ 4,958 Agency obligations 3, ,013 Total Liabilities $ 7,982 $ - $ 11 $ 7,971 FIRE SAFETY COUNCIL ASSETS Cash and investments $ 50 $ 1 $ - $ 51 Total Assets $ 50 $ 1 $ - $ 51 LIABILITIES Agency obligations $ 50 $ 1 $ - $ 51 Total Liabilities $ 50 $ 1 $ - $ 51 RECREATION PARK DEVELOPMENT ASSETS Cash and investments $ 10,351 $ 8,156 $ 15,507 $ 3,000 Total Assets $ 10,351 $ 8,156 $ 15,507 $ 3,000 LIABILITIES Accounts payable $ 425 $ - $ - $ 425 Agency obligations 9,926 8,156 15,507 2,575 Total Liabilities $ 10,351 $ 8,156 $ 15,507 $ 3,000 PLACER COUNTY FACILITIES FEE ASSETS Cash and investments $ 14,639 $ 26,858 $ 21,719 $ 19,778 Total Assets $ 14,639 $ 26,858 $ 21,719 $ 19,778 LIABILITIES Accounts payable $ 12,361 $ - $ 4,802 $ 7,559 Agency obligations 2,278 26,858 16,917 12,219 Total Liabilities $ 14,639 $ 26,858 $ 21,719 $ 19,

231 CITY OF AUBURN Combining Statement of Changes in Assets and Liabilities Agency Funds For the Year Ended June 30, 2014 PAYROLL CLEARING Balance Balance July 1, 2013 Additions Deductions June 30, 2014 ASSETS Cash and investments $ 19,554 $ 47,621 $ - $ 67,175 Receivables: Intergovernmental 5, ,050 Total Assets $ 24,604 $ 47,621 $ - $ 72,225 LIABILITIES Accounts payable $ 6,997 $ - $ 6,997 $ - Agency obligations 17,607 54,618-72,225 Total Liabilities $ 24,604 $ 54,618 $ 6,997 $ 72,225 TOTAL AGENCY FUNDS ASSETS Cash and investments $ 44,594 $ 82,636 $ 37,226 90,004 Receivables: Accounts 7, ,971 Intergovernmental 5, ,050 Total Assets $ 57,626 $ 82,636 $ 37,237 $ 103,025 LIABILITIES Accounts payable $ 24,741 $ - $ 11,799 $ 12,942 Agency obligations 32,885 89,633 32,435 90,083 Total Liabilities $ 57,626 $ 89,633 $ 44,234 $ 103,

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233 STATISTICAL SECTION

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235 CITY OF AUBURN Statistical Section This part of the City s comprehensive annual financial report presents detailed information as a context for understanding what the information in the financial statements, note disclosures, and required supplementary information says about the City s overall financial health. Financial Trends These schedules contain trend information to help the reader understand how the City s financial performance and well-being have changed over time. Revenue Capacity These schedules contain information to help the reader assess the City s most significant local revenue source, property taxes. Debt Capacity These schedules present information to help the reader assess the affordability of the City s current levels of outstanding debt and the City s ability to issue additional debt in the future. Demographic and Economic Information These schedules offer demographic and economic indicators to help the reader understand the environment within which the City s financial activities take place and to help make comparisons over time and with other governments. Operating Information These schedules contain service and infrastructure data to help the reader understand how the City s financial information relates to the services the City provides and the activities it performs. Sources: Unless otherwise stated, the information in this section is derived from the comprehensive annual financial reports for the relevant year. -93-

236 CITY OF AUBURN Net Position by Component Last Ten Fiscal Years (full accrual basis of accounting) Fiscal Year 2004/ / / /2008 Governmental Activities Net investment in capital assets $ 11,455,672 $ 12,112,065 $ 13,711,814 $ 14,935,931 Restricted 2,472,114 3,897,934 4,662,291 3,653,807 Unrestricted 3,826,830 4,049,964 2,001,513 2,860,462 Total governmental activities net position $ 17,754,616 $ 20,059,963 $ 20,375,618 $ 21,450,200 Business-Type Activities Net investment in capital assets $ 14,150,118 $ 14,898,745 $ 16,775,408 $ 16,307,102 Restricted 41,840 41,840 13,250 - Unrestricted 5,125,958 4,566,907 3,567,844 5,089,154 Total business-type activities net position $ 19,317,916 $ 19,507,492 $ 20,356,502 $ 21,396,256 Primary Government Net investment in capital assets $ 25,605,790 $ 27,010,810 $ 30,487,222 $ 31,243,033 Restricted 2,513,954 3,939,774 4,675,541 3,653,807 Unrestricted 8,952,788 8,616,871 5,569,357 7,949,616 Total primary government net position $ 37,072,532 $ 39,567,455 $ 40,732,120 $ 42,846,

237 2008/ / / / / /2014 $ 19,336,184 $ 18,886,386 $ 17,508,894 $ 21,555,502 $ 20,966,807 $ 20,815,460 8,114,974 6,541,853 5,089,610 3,000,169 3,296,195 3,323,613 (3,166,820) (1,943,195) 214, , , ,227 $ 24,284,338 $ 23,485,044 $ 22,812,539 $ 24,867,595 $ 25,075,152 $ 24,912,300 $ 17,671,003 $ 19,008,750 $ 16,358,353 $ 17,106,731 $ 18,226,969 $ 18,371, , , , , ,263 4,871,695 4,603,714 9,075,908 9,180,877 9,238,584 9,395,474 $ 22,542,698 $ 24,171,726 $ 25,993,524 $ 26,846,871 $ 28,024,816 $ 28,325,769 $ 37,007,187 $ 37,895,136 $ 33,867,247 $ 38,662,233 $ 39,193,776 $ 39,186,492 8,114,974 7,101,115 5,648,873 3,559,432 3,855,458 3,882,876 1,704,875 2,660,519 9,289,943 9,492,801 10,050,734 10,168,701 $ 46,827,036 $ 47,656,770 $ 48,806,063 $ 51,714,466 $ 53,099,968 $ 53,238,

238 CITY OF AUBURN Changes in Net Position Last Ten Fiscal Years (full accrual basis of accounting) Expenses Governmental Activities: General government 2,058,232 Fiscal Year 2004/ / / /2008 $ $ 1,783,691 $ 2,325,979 $ 2,067,619 Public safety 4,745,520 5,385,966 5,916,568 5,866,706 Transportation 1,136,527 2,691,900 4,343,717 3,165,262 Community development 948,515 1,483,471 1,748,798 1,443,691 Recreation and culture - 18,308 20,654 17,586 Interest on long-term debt 48,009 50, , ,594 Total Governmental Activities Expenses 8,936,803 11,414,076 14,931,011 12,862,458 Business-Type Activities Airport 641, , , ,186 Sewer 2,276,655 2,852,847 3,132,068 3,561,773 Total Business-Type Activities Expenses 2,917,812 3,627,306 3,872,569 4,176,959 Total Primary Government Expenses $ 11,854,615 $ 15,041,382 $ 18,803,580 $ 17,039,417 Program Revenues Governmental Activities: Charges for services: General government $ 711,105 $ 1,538,236 $ 391,510 $ 797,693 Public safety 642,003 9, , ,340 Transportation 315,400 27,528 97, ,199 Community development 413, , ,663 Recreation and culture ,885 18,825 Operating grants and contributions 1,483,658 2,378,837 2,543,309 1,557,120 Capital grants and contributions 201, ,447 1,284,923 1,313,832 Total Governmental Activities Program Revenues 3,767,397 4,638,708 5,017,252 4,429,672 Business-Type Activities: Charges for services: Airport 104, ,472 14, ,139 Sewer 2,773,504 2,941,471 2,861,434 4,386,520 Operating grants and contributions ,500 26,775 Capital grants and contributions 61, ,136 1,063,925 34,824 Total Business-Type Activities Program Revenues 2,939,313 3,293,079 3,989,746 5,004,258 Total Primary Government Program Revenues $ 6,706,710 $ 7,931,787 $ 9,006,998 $ 9,433, Continued (Page 1 of 2)

239 2008/ / / / / /2014 $ 1,741,542 $ 1,735,630 $ 1,340,063 $ 1,678,027 $ 1,890,167 $ 1,474,340 6,066,740 5,503,174 5,147,639 5,139,270 5,421,554 6,369,373 2,592,016 2,926,324 3,254,955 2,766,145 3,508,302 3,145,072 1,490,980 1,326, , , , ,437 33,292 36, , , , , , ,754 12,399,844 11,804,490 11,164,117 10,614,977 11,780,698 12,181, , , , , , ,504 3,432,180 3,433,579 3,543,183 4,128,331 4,108,614 5,040,454 4,006,292 4,038,298 4,094,606 4,776,304 4,774,987 5,721,958 $ 16,406,136 $ 15,842,788 $ 15,258,723 $ 15,391,281 $ 16,555,685 $ 17,903,934 $ 749,498 $ 496,199 $ 593,738 $ 548,326 $ 810,080 $ 523, , ,660 30,726 30,093 25,249 24,609 72,560 65, , , , , , , ,563 34, ,536,633 1,154,715 1,700,882 1,115,106 2,565,297 2,574,530 2,801,230 1,257, , ,234 2,468-6,773,318 3,432,836 3,041,280 2,429,419 3,687,197 3,388, , , , , , ,754 4,334,075 4,635,541 4,635,853 4,899,585 5,388,670 5,218,233 6,350 2, ,843 1,553 77,692 86, ,907,379 5,472,716 5,771,713 5,512,696 6,096,652 5,977,298 $ 11,680,697 $ 8,905,552 $ 8,812,993 $ 7,942,115 $ 9,783,849 $ 9,365, Continued (Page 1 of 2)

240 CITY OF AUBURN Changes in Net Position Last Ten Fiscal Years (full accrual basis of accounting) Fiscal Year 2004/ / / /2008 Net (Expense)/Revenue 1 Governmental activities $ (5,169,406) $ (6,775,368) $ (9,913,759) $ (8,432,786) Business-type activities 21,501 (334,227) 117, ,299 Total Primary Government Net Expense $ (5,147,905) $ (7,109,595) $ (9,796,582) $ (7,605,487) General Revenues and Other Changes in Net Position Governmental Activities: Taxes: Property taxes $ 3,256,499 $ 3,682,204 $ 4,085,695 $ 4,195,552 Sales and use taxes 2,605,488 2,922,367 3,005,226 2,889,326 In-lieu sales taxes 686, ,145 1,376,879 1,141,045 Franchise taxes 599, , , ,702 Transient occupancy taxes 215, , , ,608 Other taxes 148, ,215 92,262 49,737 Grants and contributions - unrestricted Rents 316, , ,911 - Interest and investment earnings 153, , , ,154 Miscellaneous - 33, ,009 84,244 Transfers 135,186 (3,180) 2,214 - Extraordinary gain Total Governmental Activities 8,117,810 9,080,715 10,229,414 9,507,368 Business-Type Activities Property taxes 53,456 41,764 32,634 33,802 Rents 347, , ,851 - Interest and investment earnings (35,130) 126, , ,653 Miscellaneous Transfers (135,186) 3,180 (2,214) - Total Business-Type Activities 230, , , ,455 Total Primary Government $ 8,348,753 $ 9,583,447 $ 10,961,247 $ 9,719,823 Change in Net Position Governmental activities $ 2,948,404 $ 2,305,347 $ 315,655 $ 1,074,582 Business-type activities 252, , ,010 1,039,754 Total Primary Government $ 3,200,848 $ 2,473,852 $ 1,164,665 $ 2,114,336 1 Net expense is the difference between the expenses and program revenues of a function or program. It indicates the degree to which a function or program supports itself with its own fees and grants versus its reliance upon funding from taxes and general revenues. Numbers in parentheses are net expenses, indicating that expenses were greater than program revenues and therefore general revenues were needed to finance that function or program Continued (Page 2 of 2)

241 2008/ / / / / /2014 $ (5,626,526) $ (8,371,654) $ (8,122,837) $ (8,185,558) $ (8,093,501) $ (8,793,805) 901,087 1,434,418 1,677, ,392 1,321, ,340 $ (4,725,439) $ (6,937,236) $ (6,445,730) $ (7,449,166) $ (6,771,836) $ (8,538,465) $ 4,064,058 $ 3,816,117 $ 3,454,566 $ 3,177,351 $ 3,097,824 $ 2,627,318 2,059,504 1,903,834 2,027,383 2,316,047 2,787,736 2,957,859 1,040, , ,427 1,011,481 1,231,066 1,470, , , , , , , , , , , , ,298 25,808 27,869 42,647 37,300 52,759 56, ,677 6,717 6, , , , ,108 59,814 7, , ,737 51,712 58,905 45, ,904 52, ,422 10,452 45,801 57, ,470, ,460,919 7,572,360 7,450,332 9,969,054 8,396,386 8,630,953 36,181 30,272 26,184 26,177 38,568 47, , , ,879 79,770 3,910 38, ,050 21,460 40,000 17,640 64,800 - (12,422) (10,452) (45,801) (57,454) 245, , , ,955 36,677 45,613 $ 8,706,274 $ 7,766,970 $ 7,595,023 $ 10,086,009 $ 8,433,063 $ 8,676,566 $ 2,834,393 $ (799,294) $ (672,505) $ 1,783,496 $ 302,885 $ (162,852) 1,146,442 1,629,028 1,821, ,347 1,358, ,953 $ 3,980,835 $ 829,734 $ 1,149,293 $ 2,636,843 $ 1,661,227 $ 138, Continued (Page 2 of 2)

242 CITY OF AUBURN Fund Balances - Governmental Funds Last Ten Fiscal Years (modified accrual basis of accounting) Fiscal Year 2004/ / / /2008 General Fund Reserved $ 712,214 $ 2,364,402 $ 1,944,442 $ 1,520,684 Unreserved 4,161,059 2,865,763 2,834,572 2,608,498 Total General Fund $ 4,873,273 $ 5,230,165 $ 4,779,014 $ 4,129,182 All Other Governmental Funds Reserved $ - $ 2,338 $ - $ - Unreserved, reported in: Special revenue funds 3,571,328 4,186,295 3,132,607 3,217,606 Debt service funds 168, , , ,420 Capital projects funds 581,596 1,038,356 1,236,642 1,330,653 Total All Other Governmental Funds $ 4,321,490 $ 5,481,155 $ 4,654,758 $ 4,759,679 Fiscal Year 2010/ / / /2014 General Fund Nonspendable $ 57,911 $ 52,166 $ 63,016 $ 68,408 Committed 2,250,000 2,250,000 2,250,000 2,250,000 Unassigned 361, , ,331 1,127,255 Total General Fund $ 2,669,576 $ 2,727,688 $ 2,992,347 $ 3,445,663 All Other Governmental Funds Nonspendable $ 2,656 $ 2,794 $ 3,052 $ 3,359 Restricted 5,086,954 2,997,375 3,293,143 3,320,954 Unassigned (400,405) (401,645) (400,801) (992,262) Total All Other Governmental Funds $ 4,689,205 $ 2,598,524 $ 2,895,394 $ 2,332,051 Notes: (1) The City implemented GASB 54 for fiscal year June 30, 2011 under which fund balances are reported as nonspendable, restricted, committed, assigned and unassigned as compared to reserved and unreserved. -97-

243 2008/ /2010 $ 455,035 $ 537,481 2,958,087 2,309,992 $ 3,413,122 $ 2,847,473 $ - $ 341,455 1,693,968 5,036, ,502-1,244, ,185 $ 3,289,833 $ 6,201,

244 CITY OF AUBURN Changes in Fund Balances - Governmental Funds Last Ten Fiscal Years (modified accrual basis of accounting) Fiscal Year 2004/ / / /2008 Revenues Taxes $ 7,497,249 $ 7,933,319 $ 8,784,817 $ 8,304,456 Franchise fees 599, , , ,701 Licenses and permits 606,469 1,065, , ,863 Fines and forfeitures 134, , , ,518 Use of money and property 471, , , ,385 Intergovernemtal 1,583,310 3,063,284 3,828,232 3,095,930 Charges for services 842, , , ,297 Other revenues 25,688 33, ,009 84,244 Total Revenues 11,761,013 13,722,603 15,244,452 13,640,394 Expenditures Current: General government 1,705,245 4,500,812 2,224,760 1,777,811 Public safety 4,606,218 7,313,153 5,742,513 5,612,110 Transportation 2,100,278 2,521,915 4,368,426 3,072,594 Community development 1,062,079 1,492,402 1,737,253 1,432,675 Recreation and culture - 18,308 20,654 17,586 Capital outlay 1,345,115 1,477,368 1,802,529 1,689,495 Debt service Principal 146, , , ,158 Interest 48,009 38, , ,876 Administrative, issuance and other costs Total Expenditures 11,013,226 17,519,864 16,524,214 14,185,305 Excess of Revenues Over (Under) Expenditures 747,787 (3,797,261) (1,279,762) (544,911) Other Financial Sources (Uses) Bonds issued - 4,965, Discounts on debt issued Capital lease - 352, Transfers in 778, , , ,616 Transfers out (643,414) (227,053) (290,185) (236,616) Issuance of debt Total Other Financial Sources (Uses) 135,185 5,313,820 2,214 - Extraordinary loss Net Change in Fund Balances $ 882,972 $ 1,516,559 $ (1,277,548) $ (544,911) Debt Service as a Percentage of Noncapital Expenditures 2.24% 1.22% 4.35% 4.66% -98-

245 2008/ / / / / /2014 $ 7,541,403 $ 6,535,207 $ 7,162,454 $ 7,510,603 $ 8,008,787 $ 7,970, , , , , , , , , , , ,169 74,950 62,369 50, , , , , , ,117 5,712,125 2,386,783 2,253,448 1,463,061 2,574,725 3,005, , , , , , , ,737 51,712 58,905 45, ,904 52,653 15,233,982 10,885,021 10,464,424 9,901,261 12,037,782 11,961,670 1,606,237 1,452,089 1,194,839 1,510,220 1,755,477 1,285,454 5,702,042 5,499,427 5,119,592 5,267,512 5,513,843 6,135,398 2,096,725 1,802,750 2,445,107 1,716,030 2,427,123 2,142,154 1,494,664 1,310, , , , ,437 33,292 35, ,895,952 3,267,510 1,779,017 1,032,454 1,301,682 1,030, , , , , , , , , , , , , , ,888,683 13,819,738 12,167,337 10,717,388 12,165,075 12,129,151 (1,654,701) (2,934,717) (1,702,913) (816,127) (127,293) (167,481) 4,805, (102,677) , , , , , , ,963 (906,258) (425,902) (577,857) (124,639) (148,730) (141,509) ,021-4,702,323 47,506 12,422 10, ,822 57, (1,498,454) - - $ 3,047,622 $ (2,887,211) $ (1,690,491) $ (2,304,129) $ 561,529 $ (110,027) 8.81% 4.13% 7.22% 5.40% 5.40% 5.42% -98-

246 CITY OF AUBURN Assessed Value and Estimated Actual Value of Taxable Property Last Ten Fiscal Years Taxable Less: Assessed Direct Fiscal Year Secured Unsecured Exemptions Value Rate 2004/2005 1,205,735, ,994,566 65,101,805 1,325,628, % 2005/2006 1,349,777, ,246,947 67,494,168 1,443,530, % 2006/2007 1,524,979, ,724,477 71,295,420 1,615,408, % 2007/2008 1,629,447, ,794,104 71,837,516 1,718,404, % 2008/2009 1,662,445, ,935,634 73,740,612 1,753,640, % 2009/2010 1,614,200, ,625,189 74,621,731 1,681,203, % 2010/2011 1,509,536, ,670,495 75,716,027 1,565,491, % 2011/2012 1,465,564, ,423,642 76,467,907 1,519,519, % 2012/2013 1,463,888, ,267,793 76,537,481 1,517,619, % 2013/2014 1,528,949, ,746,684 80,893,920 1,575,802, % Note: In 1978, the voters of the State of California passed Proposition 13 which limited property taxes to a maximum rate of 1% based upon the assessed value of the property being taxed. Each year, the assessed value of property tax may be increased by an "inflation factor" (limited to a maximum increase of 2%). With few exceptions, property is only reassessed at the time that it is sold to a new owner. At that point, the new assessed value is reassessed at the purchase price of the property sold. The assessed valuation data shown above represents the only data currently available with respect to the actual market value of the taxable property and is subject to the limitations described above. Source: Auditor-Controller's Office, County of Placer -99-

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248 CITY OF AUBURN Property Tax Rates - All Overlapping Governments Last Ten Fiscal Years Fiscal Year 2004/ / / /2008 City of Auburn General purpose Property tax in lieu of vehicle license fees Debt service Placer County School Districts Special Districts Notes: (1) The above tax rates are applied per $100 of assessed valuation. (2) In 1978, California voters passed Proposition 13 which sets the property tax rate at a 1.00% fixed amount. This 1.00% is shared by all taxing agencies for which the subject property resides within. In addition to the 1.00% fixed amount, property owners are charged taxes as a percentage of assessed property values for the payment of school district bonds. Source: Auditor-Controller's Office, County of Placer -100-

249 2008/ / / / / /

250 CITY OF AUBURN Principal Property Tax Payers Current Year and Eight Years Ago Fiscal Year 2013/2014 Percent of Total City Taxable Taxable Assessed Assessed Taxpayer Value Value Reneson Hotels Inc. $ 14,284, % Auburn Creekside Buildings 12,254, % Regal Cinemas, Inc. 10,276, % UAIC Development Corporation 7,182, % Foothill Terrace Apartments Inc. 5,602, % RMP Properties LLC 4,300, % Longs Drug Stores Inc. 4,294, % Carl E. Best, Trustee 4,196, % Baltimore Ravine Investors LLC 4,110, % Auburn Town Square LLC 4,100, % $ 70,601, % Total City of Auburn assessed property valuation Fiscal Year 2013/14 $ 1,575,802,467 Fiscal Year 2005/2006 Percent of Total City Taxable Taxable Assessed Assessed Taxpayer Value Value Regal Cinemas, Inc. $ 11,118, % Reneson Hotels, Inc. 7,776, % Jewel Food Stores, Inc. 7,564, % Foothill Terrace Investors 7,530, % Auburn Town Square LLC 5,404, % Persimmon Terrace Apartments, Partnership 4,806, % Ginn Le Royce Leo Jr, Trustee 4,092, % 1616 I Street Properties 4,060, % 701 Auburn Ravine, LLC 4,009, % Esperanca Family Trust 3,912, % Congregational Church Retirement Comm 3,850, % $ 64,125, % Total City of Auburn assessed property valuation Fiscal Year 2005/06 $ 1,443,530,331 Note: Data pertaining to fiscal year 2004/2005 is not available, the latest prior year available is fiscal year 2005/06. Source: Auditor-Controller's Office, County of Placer -101-

251 CITY OF AUBURN Property Tax Levies and Collections Last Ten Fiscal Years Collections within the Fiscal Year of the Levy Total Collections to Date Taxes Levied Collections for the Percent in Subsequent Percent Fiscal Year Fiscal Year Amount of Levy Years Amount of Levy 2004/2005 3,309,955 3,309, % - 3,309, % 2005/2006 3,723,878 3,723, % - 3,723, % 2006/2007 4,118,329 4,118, % - 4,118, % 2007/2008 4,402,015 4,402, % - 4,402, % 2008/2009 4,084,946 4,084, % - 4,084, % 2009/2010 3,923,742 3,923, % - 3,923, % 2010/2011 3,726,242 3,726, % - 3,726, % 2011/2012 3,403,509 3,403, % - 3,403, % 2012/2013 3,520,802 3,520, % - 3,520, % 2013/2014 3,080,832 3,080, % - 3,080, % Source: Auditor-Controller's Office, County of Placer Administrative Services Department, City of Auburn -102-

252 CITY OF AUBURN Ratios of Outstanding Debt by Type Last Ten Fiscal Years Governmental Activities General Pension Tax Loans and Due to Obligation Obligation Allocation Notes Other Capital Fiscal Year Bonds Bonds Bonds Payable Agencies Leases Total 2004/ , , ,427 9, , / ,000 4,965,000-68,580 84, ,739 5,894, / ,000 4,900,000-56,931 58, ,046 5,574, / ,000 4,845,000-44,954 33, ,815 5,256, /2009-4,775,000 4,530,746 32,570 31,278 93,177 9,462, /2010-4,685,000 4,459,169 19,832 29,044 46,269 9,239, /2011-4,575,000 4,387,592 6,710 26,810 38,404 9,034, /2012-4,450, ,731 4,479, /2013-4,305, ,349 4,915, /2014-4,130, ,356 4,583,356 (1) See Demographic and Economic Statistics schedule for personal income and population data. (2) See Assessed Value and Estimated Actual Value of Taxable Property schedule for property value data. n/a - information is not available until the following year Source: Auditor-Controller's Office, County of Placer Administrative Services Department, City of Auburn -103-

253 Business-Type Activities Loans and Total Percentage Percentage Notes Revenue Primary of Personal of Assessed Per Payable Bonds Total Government Income (1) Value (2) Capita (1) 5,374,142-5,374,142 6,113, % 0.46% 476 5,035,206-5,035,206 10,929, % 0.76% 842 4,691,134-4,691,134 10,265, % 0.64% 783 4,341,925-4,341,925 9,598, % 0.56% 723 3,987,580-3,987,580 13,450, % 0.77% 1,001 3,628,100 8,187,914 11,816,014 21,055, % 1.25% 1,551 3,263,482 8,036,606 11,300,088 20,334, % 1.30% 1,516 2,893,728 7,885,298 10,779,026 15,258, % 1.00% 1,133 2,178,739 7,728,990 9,907,729 14,823,078 n/a 0.98% 1,102 1,845,752 7,567,683 9,413,435 13,996,791 n/a 0.89% 1,

254 CITY OF AUBURN Ratios of General Bonded Debt Outstanding Last Ten Fiscal Years General Bonded Debt Outstanding General Pension Percent of Obligation Obligation Assessed Per Fiscal Year Bonds Bonds Total Value (1) Population Capita 2004/ , , % 12, / ,000 4,965,000 5,385, % 12, / ,000 4,900,000 5,190, % 13, / ,000 4,845,000 4,995, % 13, /2009-4,775,000 4,775, % 13, /2010-4,685,000 4,685, % 13, /2011-4,575,000 4,575, % 13, /2012-4,450,000 4,450, % 13, /2013-4,305,000 4,305, % 13, /2014-4,130,000 4,130, % 13, (1) See Assessed Value and Estimated Actual Value of Taxable Property schedule for property value data. Source: Auditor-Controller's Office, County of Placer Administrative Services Department, City of Auburn -104-

255 CITY OF AUBURN Direct and Overlapping Bonded Debt As of June 30, 2014 City Assessed Valuation $ 1,575,802,467 Estimated Outstanding Share of Percent Debt Overlapping Applicable (1) June 30, 2014 Debt OVERLAPPING TAX AND ASSESSMENT DEBT: Placer Union High School District % $ 30,549,040 $ 4,475,434 Total Overlapping Tax and Assessment Debt 30,549,040 4,475,434 OVERLAPPING GENERAL FUND OBLIGATION DEBT: Placer County General Fund Obligations 2.913% $ 42,170,000 1,228,412 Placer County Office of Education Certificates of Participations 2.913% 1,815,000 52,871 Sierra Joint Community College District General Fund Obligations 2.176% 9,635, ,658 Placer Union High School District Certificates of Participation % 4,640, ,760 Auburn Union School District Certificates of Participation % 37,429,000 15,266,541 Placer Mosquito and Vector Control District COPS 2.913% 4,110, ,724 Auburn Area Recreation and Park District Certificates of Participation % 120,000 38,269 Total Overlapping General Fund Obligation Debt 99,919,000 17,595,235 OVERLAPPING TAX INCREMENT DEBT: % 7,420,000 4,320,341 Total Overlapping Debt 137,888,040 26,391,010 DIRECT GENERAL FUND OBLIGATION DEBT: City of Auburn Pension Obligations % 4,130,000 4,130,000 Capital leases % 453, ,356 Total Direct Debt 4,583,356 4,583,356 Total Combined Debt $ 142,471,396 $ 30,974,366 RATIOS TO 2013/2014 ASSESSED VALUATION: Total Overlapping Tax and Assessment Debt 1.675% RATIOS TO ADJUSTED ASSESSED VALUATION: Combined Direct Debt ($4,583,356) 0.291% Combined Total Debt 1.966% (1): The percentage of overlapping debt applicable to the City is estimated using taxable assessed property value. Applicable percentages were estimated by determining the portion of the overlapping district's assessed value that is within the boundaries of the City divided by the district's total taxable assessed value. Source: Auditor-Controller's Office, County of Placer Administrative Services Department, City of Auburn California Municipal Statistics -105-

256 CITY OF AUBURN Computation of Legal Bonded Debt Margin June 30, 2014 Secured Property Assessed Value, Net of Exempt Real Property $ 1,451,987,008 Bonded debt limit (3.75% of assessed value) (a) $ 54,449,513 Less debt subject to limit: Total pension obligation bonds at 06/30/14 (4,130,000) Total sewer revenue bonds at 06/30/14 (7,567,683) Legal debt margin $ 42,751,830 (a) California Government Code Section sets the debt limit at 15%. The Code section was enacted prior to the change in basing assessed value at full market value when it was previously 25% of market value. Thus, the limit shown as 3.75% is one-fourth the limit to account for the adjustment of showing assessed valuation at full cash value. Source: Auditor-Controller's Office, County of Placer Administrative Services Department, City of Auburn -106-

257 CITY OF AUBURN Demographic and Economic Statistics Last Ten Calendar Years Per Capita Personal Income Taxable Taxable Average Calendar Assessed Property Unemployment Year Population Total Per Capita Valuation Values Rate , ,820,883 40,067 1,430,639, , % , ,782,250 41,910 1,557,978, , % , ,992,720 44,310 1,739,635, , % , ,536,583 45,471 1,850,275, , % , ,128,824 47,657 1,999,941, , % , ,346,892 45,614 1,921,190, , % , ,637,820 47,102 1,794,952, , % , ,874,768 48,476 1,745,535, , % , ,651,000 52,629 1,517,619, , % ,660 n/a n/a 1,575,802, % n/a - information is not available until the following year Source: Auditor-Controller's Office, County of Placer Administrative Services Department, City of Auburn Employment Development Department, State of California Franchise Tax Board -107-

258 CITY OF AUBURN Principal Employers 2014 Percent Number of of Total Employer Employees Employment Placer County Water Agency % Pride Industries % AT & T % Auburn Journal % Auburn Placer Disposal - Recology % United States Post Office % City of Auburn % Placer County (Domes Offices) % Nella Oil % Miltenyi Biotech % Note: Data pertaining to principal employers for nine years ago is not readily available. Source: Auburn Area Chamber of Commerce Employment Development Department, State of California -108-

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260 CITY OF AUBURN Full-Time and Part-Time City Government Employees Last Ten Fiscal Years As of June 30, City Council City Manager's Office City Clerk's Office Finance/Administrative Services Community Development Police Department Fire Department Public Works Airport Total Full-Time Equivalent Employees Source: Administrative Services Department, City of Auburn -109-

261

262 CITY OF AUBURN Operating Indicators Last Ten Fiscal Years Fiscal Year 2004/ / / /2008 Auburn Airport: Tie-downs per year 1, ,020 1,044 Hangar rentals per year Gallons of fuel sold per year 194, , , ,992 Enviroment and Utilities Gallons of wastewater treated per year (in millions) Fire Fires per year Emergency medical calls per year 995 1,013 1,093 1,106 Hazardous materials incidents per year Non-emergency service calls per year Police 911 calls per year 2,966 2,910 2,819 2,666 Cases investigated per year 3,973 4,100 4,271 5,172 Arrests per year ,164 1,160 Building Permits Building permits issued per year New building and alteration valuation $ 45,634,211 $ 33,298,065 $ 25,330,689 $ 14,450,089 Source: City of Auburn -110-

263 2008/ / / / / /2014 1, , , , , , , ,333 1,377 1,238 1,317 1,377 1, ,325 2,541 2, ,442 5,194 4,986 5,377 4,731 2,864 2,177 2,733 1, $ 12,391,787 $ 17,084,250 $ 11,844,465 $ 10,573,919 $ 14,845,275 $ 12,993,

264 CITY OF AUBURN Capital Asset Statistics Last Ten Fiscal Years Fiscal Year 2004/ / / /2008 Auburn Airport Terminals (Airport Management Building) Runways Airport hangars Enviroment and Utilities Miles of municipal sewer mains Maximum daily capacity (gallons per day) 2,000,000 2,000,000 2,000,000 2,000,000 Fire Full-time staffed positions Volunteer stations Police Stations Vehicles and motorcycles Community Development Miles of municipal roadways Pocket park sites Source: City of Auburn -111-

265 2008/ / / / / / ,000,000 2,000,000 2,000,000 2,000,000 2,000,000 2,000,

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267 APPENDIX D SUMMARY OF CERTAIN PROVISIONS OF THE INDENTURE The following is a brief summary of certain provisions of the Indenture of Trust (the Indenture ) authorizing the Bonds that are not otherwise described in the text of this Official Statement. Such summary is not intended to be definitive, and reference is made to the actual Indenture (copies of which may be obtained from the Trustee) for the complete terms thereof. Definitions Except as otherwise defined in this summary, the terms previously defined in this Official Statement have the respective meanings previously given. In addition, the following terms have the following meanings when used in this summary: Annual Debt Service means, for each Bond Year, the sum of (a) the interest payable on the Outstanding Bonds and Parity Debt in such Bond Year, assuming that the Outstanding Serial Bonds are retired as scheduled and that the Outstanding Term Bonds are redeemed from mandatory sinking account payments as scheduled (b) the principal amount of the Outstanding Serial Bonds and Parity Debt payable by their terms in such Bond Year, and (c) the principal amount of the Outstanding Term Bonds scheduled to be paid or redeemed from mandatory sinking account payments in such Fiscal Year. Bond or Bonds means the Bonds and, if the context requires, any additional Parity Debt issued pursuant to a Supplemental Indenture pursuant to the Indenture. Bond Counsel means (a) Jones Hall, A Professional Law Corporation, or (b) any other attorney or firm of attorneys appointed by or acceptable to the Successor Agency, of nationally-recognized experience in the issuance of obligations the interest on which is excludable from gross income for federal income tax purposes under the Code. Bond Proceeds Fund means the fund by that name established and held by the Trustee pursuant to the Indenture. Bond Year means, any twelve-month period beginning on June 2 in any year and ending on the next succeeding June 1, both dates inclusive, except that the first Bond Year shall begin on the Closing Date, and end on June 1, Business Day means a day of the year on which banks in San Francisco, California, or the city where the Principal Corporate Trust Office is located are not required or permitted to be closed and on which the New York Stock Exchange is not closed. Closing Date means, with respect to the Bonds, the date on which the Bonds are delivered by the Trustee to the original purchaser thereof. Code means the Internal Revenue Code of 1986 as in effect on the date of issuance of the Bonds or (except as otherwise referenced herein) as it may be amended to apply to obligations issued on the date of issuance of the Bonds, together with applicable, temporary and final regulations promulgated, and applicable official public guidance published, under the Code. D-1

268 Continuing Disclosure Certificate means the Continuing Disclosure Certificate executed by the Successor Agency dated as of the Closing Date, as originally executed and as it may be amended from time to time in accordance with the terms thereof. Costs of Issuance means all items of expense directly or indirectly payable by or reimbursable to the Successor Agency relating to the authorization, issuance, sale and delivery of the Bonds, including but not limited to City and Successor Agency administrative staff costs, printing expenses, bond insurance and surety bond premiums, rating agency fees, filing and recording fees, initial fees and charges and first annual administrative fee of the Trustee and fees and expenses of its counsel, fees, charges and disbursements of attorneys, financial advisors, accounting firms, consultants and other professionals, fees and charges for preparation, execution and safekeeping of the Bonds and any other cost, charge or fee in connection with the original issuance of the Bonds. Costs of Issuance Fund means the account by that name established and held by the Trustee pursuant to the Indenture. County means the County of Placer, a county duly organized and existing under the Constitution and laws of the State. Debt Service Fund means the fund by that name established and held by the Trustee pursuant to the Indenture. Defeasance Obligations means (i) cash, (ii) Federal Securities and (iii) Permitted Investments listed under subsection (b) of the definition thereof excluding Permitted Investments listed under (b) (iv) and (b) (vi). Dissolution Act means Part 1.85 (commencing with Section 34170) of Division 24 of the California Health and Safety Code. Event of Default means any of the events described in the Indenture. Federal Securities means any direct, noncallable general obligations of the United States of America (including obligations issued or held in book entry form on the books of the Department of the Treasury of the United States of America and CATS and TGRS), or obligations the payment of principal of and interest on which are unconditionally guaranteed by the United States of America. Fiscal Year means any twelve-month period beginning on July 1 in any year and extending to the next succeeding June 30, both dates inclusive, or any other twelve-month period selected and designated by the Successor Agency to the Trustee in writing as its official fiscal year period. Former Agency means the Auburn Urban Development Authority, a public body corporate and politic duly organized and existing under the Law and dissolved in accordance with the Dissolution Act. Independent Accountant means any accountant or firm of such accountants duly licensed or registered or entitled to practice as such under the laws of the State, appointed by the Successor Agency, and who, or each of whom: (a) is in fact independent and not under domination of the Successor Agency; and (b) does not have any substantial interest, direct or indirect, with the Successor Agency; D-2

269 (c) is not connected with the Successor Agency as an officer or employee of the Successor Agency, but who may be regularly retained to make reports to the Successor Agency. Independent Redevelopment Consultant means any consultant or firm of such consultants appointed by the Successor Agency and who, or each of whom: (a) is judged by the Successor Agency to have experience in matters relating to the collection of Tax Revenues or otherwise with respect to the financing of redevelopment projects; (b) is in fact independent and not under domination of the Successor Agency; (c) does not have any substantial interest, direct or indirect, with the Successor Agency; and (d) is not connected with the Successor Agency as an officer or employee of the Successor Agency, but who may be regularly retained to make reports to the Successor Agency. Insurance Policy means the insurance policy issued by the Insurer guaranteeing the scheduled payment of principal of and interest on the Bonds when due. Insurer means Build America Mutual Assurance Company, or any successor thereto or assignee thereof. Interest Account means the account by that name established and held by the Trustee pursuant to the Indenture. Interest Payment Date means December 1 and June 1 of each year, commencing June 1, 2016, so long as any of the Bonds remain Outstanding under the Indenture. Law or Redevelopment Law means the Community Redevelopment Law, constituting Part 1 of Division 24 of the California Health and Safety Code, together with the Dissolution Act, and the acts amendatory thereof and supplemental thereto. Maximum Annual Debt Service means, as of the date of calculation, the largest Annual Debt Service for the current or any future Bond Year, including payments on any Parity Debt, as certified in writing by the Successor Agency to the Trustee. Notice of Insufficiency means the report described in Health and Safety Code Section 34183(b) of the Dissolution Act. Outstanding when used as of any particular time with reference to Bonds, means (subject to the provisions of the Indenture) all Bonds except: (a) Bonds theretofore canceled by the Trustee or surrendered to the Trustee for cancellation; (b) Bonds paid or deemed to have been paid within the meaning of the Indenture; and (c) Bonds in lieu of or in substitution for which other Bonds shall have been authorized, executed, issued and delivered by the Successor Agency pursuant to the Indenture. Oversight Board means the Oversight Board of the Successor Agency to the Auburn Urban Development Authority duly constituted from time to time pursuant to Section of the California Health and Safety Code. Owner or Bondowner means, with respect to any Bond, the person in whose name the ownership of such Bond shall be registered on the Registration Books. Parity Debt means any bonds payable from Tax Revenues on a parity with the Bonds as authorized by the provisions of the Indenture. D-3

270 Parity Debt Instrument means a Supplemental Indenture authorizing the issuance of any Parity Debt entered into pursuant to the Indenture. Participating Underwriter has the meaning ascribed thereto in the Continuing Disclosure Certificate. Permitted Investments means any of the following which at the time of investment are legal investments under the laws of the State for the moneys proposed to be invested therein: (a) Federal Securities; (b) bonds, debentures, notes or other evidence of indebtedness issued or guaranteed by any of the following federal agencies and provided such obligations are backed by the full faith and credit of the United States of America (stripped securities are only permitted if they have been stripped by the agency itself): (i) direct obligations or fully guaranteed certificates of beneficial ownership of the U.S. Export-Import Bank; (ii) certificates of beneficial ownership of the Farmers Home Administration; (iii) obligations of the Federal Financing Bank; (iv) debentures of the Federal Housing Administration; (v) participation certificates of the General Services Administration; (vi) guaranteed mortgage-backed bonds or guaranteed pass-through obligations of the Government National Mortgage Association; (vii) guaranteed Title XI financings of the U.S. Maritime Administration; (viii) project notes, local authority bonds, new communities debentures and U.S. public housing notes and bonds of the U.S. Department of Housing and Urban Development; (c) bonds, debentures, notes or other evidence of indebtedness issued or guaranteed by any of the following non-full faith and credit U.S. government agencies (stripped securities are only permitted if they have been stripped by the agency itself): (i) senior debt obligations of the Federal Home Loan Bank System; (ii) participation certificates and senior debt obligations of the Federal Home Loan Mortgage Corporation; (iii) mortgaged-backed securities and senior debt obligations of the Federal National Mortgage Association (excluding stripped mortgage securities which are valued greater than par on the portion of unpaid principal); (iv) senior debt obligations of the Student Loan Marketing Association; (v) obligations (but only the interest component of stripped obligations) of the Resolution Funding Corporation; and (vi) consolidated system wide bonds and notes of the Farm Credit System; (d) money market funds (including funds of the Trustee or its affiliates) registered under the Federal Investment Company Act of 1940, whose shares are registered under the Federal Securities Act of 1933, and having a rating by S&P of AAAm-G, AAAm, or AAm, including funds for which the Trustee, its affiliates or subsidiaries provide investment advisory or other management services; (e) certificates of deposit secured at all times by collateral described in (a) or (b) above, which have a maturity of one year or less, which are issued by commercial banks, including affiliates of the Trustee, savings and loan associations or mutual savings banks, and such collateral must be held by a third party, and the Trustee on behalf of the Bond Owners must have a perfected first security interest in such collateral; (f) certificates of deposit, savings accounts, deposit accounts or money market deposits (including those of the Trustee and its affiliates) which are fully insured by the Federal Deposit Insurance Corporation; D-4

271 (g) unsecured certificates of deposit, time deposits, money market deposits, demand deposits and bankers acceptances of any bank (including those of the Trustee, its parent and its affiliates) the short-term obligations of which are rated on the date of purchase A-1 or better by S&P and P-1 by Moody s. (h) investment agreements, including guaranteed investment contracts, which, are general obligations of an entity whose long term debt obligations, or claims paying ability, respectively, which are rated in one of the two highest rating categories by S&P or which are collateralized so as to be rated in one of the two highest rating categories by S&P; (i) commercial paper rated, at the time of purchase, A-1 or better by S&P; (j) bonds or notes issued by any state or municipality which are rated by S&P in one of the two highest rating categories assigned by such agencies; (k) money market funds, federal funds or bankers acceptances with a maximum term of one year of any bank which has an unsecured, uninsured and unguaranteed obligation rating of A-1 or A or better by S&P; (l) repurchase agreements for thirty (30) days or less (more than thirty (30) days which provide for the transfer of securities from a dealer bank or securities firm (seller/borrower) to the Trustee and the transfer of cash from the Trustee to the dealer bank or securities firm with an agreement that the dealer bank or securities firm will repay the cash plus a yield to the Trustee in exchange for the securities at a specified date, which satisfy the following criteria: (i) repurchase agreements must be between the Trustee and (A) a primary dealer on the Federal Reserve reporting dealer list which falls under the jurisdiction of the Securities Investors Protection Corporation and which are rated A or better by S&P, or (B) a bank rated A or better by S&P; (ii) the written repurchase agreement contract must include the following: (A) securities acceptable for transfer, which may be direct U.S. government obligations, or federal agency obligations backed by the full faith and credit of the U.S. government; (B) the term of the repurchase agreement may be up to 30 days; (C) the collateral must be delivered to the Trustee or a third party acting as agent for the Trustee simultaneous with payment (perfection by possession of certificated securities); (D) the Trustee must have a perfected first priority security interest in the collateral; (E) the collateral must be free and clear of third-party liens and, in the case of a broker which falls under the jurisdiction of the Securities Investors Protection Corporation, are not subject to a repurchase agreement or a reverse repurchase agreement; (F) failure to maintain the requisite collateral percentage, after a two day restoration period, will require the Trustee to liquidate the collateral; (G) the securities must be valued weekly, marked-to-market at current market price plus accrued interest and the value of collateral must be equal to 104% of the amount of cash transferred by the Trustee to the dealer bank or securities firm under the repurchase agreement plus accrued interest (unless the securities used as collateral are obligations of the Federal National Mortgage Association or the Federal Home Loan Mortgage Corporation, in which case the collateral must be equal to 105% of the amount of cash transferred by the Trustee to the dealer bank or securities firm under the repurchase agreement plus accrued interest). If the value of securities held as collateral falls below 104% of the value of the cash transferred by the Trustee, then additional cash and/or acceptable securities must be transferred; and D-5

272 (iii) a legal opinion must be delivered to the Trustee to the effect that the repurchase agreement meets guidelines under state law for legal investment of public funds; (m) pre-refunded municipal bonds rated AAA by S&P; and (n) the Local Agency Investment Fund of the State of California, created pursuant to Section of the California Government Code, to the extent the Trustee is authorized to deposit and withdraw from such investment directly in its own name. Project Area means the project area described in the Redevelopment Plan. Principal Account means the account by that name established and held by the Trustee pursuant to the Indenture. Principal Corporate Trust Office means such corporate trust office of the Trustee as may be designated from time to time by written notice from the Trustee to the Successor Agency. Except that with respect to presentation of Bonds for payment or for registration of transfer and exchange such term shall mean the corporate trust office of U.S. Bank National Association in St. Paul, Minnesota or such other office or agency of the Trustee at which at any particular time, its corporate trust agency or operations shall be conducted. Project Area means the project area described in the Redevelopment Plan. Qualified Reserve Account Credit Instrument means an irrevocable standby or direct-pay letter of credit, insurance policy, or surety bond issued by a commercial bank or insurance company and deposited with the Trustee, provided that all of the following requirements are met at the time of acceptance thereof by the Trustee: (a) S&P or Moody s have assigned a long-term credit rating to such bank or insurance company of A or higher; (b) such letter of credit, insurance policy or surety bond has a term of at least 12 months; (c) such letter of credit, insurance policy or surety bond has a stated amount at least equal to the portion of the Reserve Requirement with respect to which funds are proposed to be released; and (d) the Trustee is authorized pursuant to the terms of such letter of credit, insurance policy or surety bond to draw thereunder an amount equal to any deficiencies which may exist from time to time in the Interest Account or the Principal Account for the purpose of making payments required pursuant to the Indenture. Recognized Obligation Payment Schedule means the schedule by that name prepared before each fiscal period in accordance with the requirements of Section 34177(l) of the California Health and Safety Code. Redemption Account means the account by that name established and held by the Trustee pursuant to the Indenture. Redevelopment Obligation Retirement Fund means the fund established and held by the Successor Agency pursuant to Section (a) of the California Health and Safety Code. Redevelopment Plan means the Amended and Restated Redevelopment Plan for the Auburn Redevelopment Project, approved by Ordinance No enacted by the City Council of the City on June 11, 2007, together with all amendments thereof duly authorized under the Redevelopment Law. D-6

273 Redevelopment Property Tax Trust Fund means the fund established pursuant to Section (b) of the California Health and Safety Code and administered by the Placer County Auditor Controller. Registration Books means the records maintained by the Trustee pursuant to the Indenture for the registration and transfer of ownership of the Bonds. Reserve Account means the account by that name established and held by the Trustee pursuant to the Indenture). Reserve Policy means the Municipal Bond Debt Service Reserve Account Policy issued by Insurer guaranteeing payments to be applied to the payment of principal and interest on the Bonds as provided in such policy and related agreement. Reserve Requirement means, with respect to the Bonds and any Parity Debt issued as Bonds pursuant to a Supplemental Indenture, the lesser of (i) 125% of the average Annual Debt Service with respect to the Bonds and such Parity Debt, as applicable or (ii) Maximum Annual Debt Service with respect to the Bonds and such Parity Debt, as applicable; provided, that in no event shall the Successor Agency, in connection with the issuance of Parity Debt in the form of Bonds pursuant to a Supplemental Indenture be obligated to deposit an amount in the Reserve Account which is in excess of the amount permitted by the applicable provisions of the Code to be so deposited from the proceeds of tax-exempt bonds without having to restrict the yield of any investment purchased with any portion of such deposit and, in the event the amount of any such deposit into the Reserve Account is so limited, the Reserve Requirement shall, in connection with the issuance of such Parity Debt issued in the form of Bonds, be increased only by the amount of such deposit as permitted by the Code; and, provided further that the Successor Agency may meet all or a portion of the Reserve Requirement by depositing a Qualified Reserve Account Credit Instrument meeting the requirements of the Indenture. S&P means Standard & Poor s Ratings Services and its successors. Semiannual Period means (a) each six-month period beginning on January 1 of any calendar year and ending on June 30 of such calendar year, and (b) each six-month period beginning on July 1 of any calendar year and ending on December 31 of such calendar year. Serial Bonds means all Bonds other than Term Bonds. Sinking Account means the account by that name established and held by the Trustee pursuant to the Indenture. State means the State of California. Subordinate Debt means any loan, advances or indebtedness issued or incurred by the Successor Agency, which are either: (a) payable from, but not secured by a pledge of or lien upon, the Tax Revenues, including revenue bonds and other debts and obligations scheduled for payment pursuant to Section 34183(a)(2) of the Law; or (b) secured by a pledge of or lien upon the Tax Revenues which is subordinate to the pledge of and lien upon the Tax Revenues hereunder for the security of the Bonds. Successor Agency means the Successor Agency to the Auburn Urban Development Authority, a public entity duly organized and existing under the Law. D-7

274 Supplemental Indenture means any resolution, agreement or other instrument that has been duly adopted or entered into by the Successor Agency, but only if and to the extent that such Supplemental Indenture is specifically authorized under the Indenture. Tax Revenues means all taxes that were eligible for allocation to the Former Agency with respect to the Project Areas and are allocated to the Successor Agency pursuant to Article 6 of Chapter 6 (commencing with Section 33670) of the Law and Section 16 of Article XVI of the Constitution of the State, or pursuant to other applicable State laws and that are deposited in the Redevelopment Property Tax Trust Fund for transfer to the Successor Agency for deposit into the Redevelopment Obligation Retirement Fund, excluding all amounts required to be paid to taxing entities pursuant to Sections and of the Law unless such payments are subordinated to payments on the Bonds or any additional Bonds or to the payments owed under any Parity Debt Instrument pursuant to Section (e) of the Law and (c) of the Dissolution Act. Term Bonds means, collectively, (i) the Bonds maturing on June 1, 20, (ii) the Bonds maturing on June 1, 20 and (iii) any Parity Debt issued pursuant to a Supplemental Indenture and payable from amounts in the Sinking Account established pursuant to the Indenture. Trustee means Wells Fargo Bank, National Association, as trustee hereunder, or any successor thereto appointed as trustee hereunder in accordance with the provisions of the Indenture. Written Request of the Successor Agency or Written Certificate of the Successor Agency means a request or certificate, in writing signed by the Chair, the Executive Director, or the Treasurer, or the Economic Development Director/Financial Services Manager of the City on behalf of the Successor Agency, or by any other officer of the Successor Agency duly authorized by the Successor Agency for that purpose. Pledge of Tax Revenues The Bonds and any Parity Debt shall be equally secured by a pledge of, security interest in and lien on all of the Tax Revenues, including all of the Tax Revenues in the Redevelopment Obligation Retirement Fund and a first and exclusive pledge of, security interest in and lien upon all of the moneys in the Debt Service Fund, the Interest Account, the Principal Account, the Sinking Account and the Redemption Account, without preference or priority for series, issue, number, dated date, sale date, date of execution or date of delivery. The Bonds and all Parity Debt shall be additionally secured by a first and exclusive pledge of, security interest in and lien upon all of the moneys in the Reserve Account established by the Indenture. The Bonds shall be also equally secured by the pledge and lien created with respect to the Bonds by Section (g) of the Law on moneys deposited from time to time in the Redevelopment Property Tax Trust Fund. Except for the Tax Revenues and such moneys, no funds or properties of the Successor Agency shall be pledged to, or otherwise liable for, the payment of principal of or interest on the Bonds. Establishment of Funds and Accounts; Flow of Funds Costs of Issuance Fund. A separate fund to be known as the Costs of Issuance Fund, shall be established pursuant to the Indenture, which shall be held by the Trustee in trust. The moneys in the Costs of Issuance Fund shall be used and withdrawn by the Trustee from time to time to pay the Costs of Issuance upon submission of a Written Request of the Successor Agency. On the date which is three months following the Closing Date, or upon the earlier Written Request of the Successor Agency, all amounts (if any) remaining in the Costs of Issuance Fund shall be withdrawn therefrom by the Trustee D-8

275 and transferred to the Interest Account of the Debt Service Fund, and the Trustee shall close the Costs of Issuance Fund. Redevelopment Obligation Retirement Fund; Deposit of Tax Revenues. The Successor Agency has established the Redevelopment Obligation Retirement Fund pursuant to Section (a) of the Law which the Successor Agency shall continue to hold and maintain so long as any of the Bonds are Outstanding. The Successor Agency shall deposit all of the Tax Revenues received with respect to any Semiannual Period into the Redevelopment Obligation Retirement Fund promptly upon receipt thereof by the Successor Agency. All Tax Revenues received by the Successor Agency in excess of the amount required to pay debt service on the Bonds and any Parity Debt, and except as may be provided to the contrary in any of the Indenture or Parity Debt Instrument, shall be released from the pledge and lien hereunder and shall be applied in accordance with the Law, including but not limited to the payment of debt service on any Subordinate Debt. Prior to the payment in full of the principal of and interest and redemption premium (if any) on the Bonds and the payment in full of all other amounts payable hereunder and under any Supplemental Indentures, the Successor Agency shall not have any beneficial right or interest in the moneys on deposit in the Redevelopment Obligation Retirement Fund, except as may be provided in the Indenture and in any Supplemental Indenture. Debt Service Fund; Transfer of Amounts to Trustee. A separate trust fund to be known as the Debt Service Fund, shall be established pursuant to the Indenture, which shall be held by the Trustee under the Indenture in trust. The Successor Agency will transfer moneys on deposit in the Redevelopment Obligation Retirement Fund that have been deposited therein for the payment of debt service on the Bonds or for the replenishment of the Reserve Account within 10 days of the receipt thereof to the Trustee for deposit in the Debt Service Fund. The Trustee will transfer amounts on deposit in the Debt Service Fund in the following amounts, at the following times and in the following respective special accounts, which are hereby established in the Debt Service Fund, and in the following order of priority: (a) Interest Account. On or before the fourth (4th) Business Day preceding each Interest Payment Date, the Trustee will withdraw from the Debt Service Fund and deposit in the Interest Account an amount which, when added to the amount contained in the Interest Account on that date, will be equal to the aggregate amount of the interest becoming due and payable on the Outstanding Bonds and any Parity Debt on such Interest Payment Date. No such deposit need be made to the Interest Account if the amount contained therein is at least equal to the interest to become due on the next succeeding Interest Payment Date upon all of the Outstanding Bonds and any Parity Debt. All moneys in the Interest Account shall be used and withdrawn by the Trustee solely for the purpose of paying the interest on the Bonds and any Parity Debt as it shall become due and payable. (b) Principal Account. On or before the fourth (4th) Business Day preceding each June 1 on which the principal of the Bonds becomes due and payable, and at maturity, the Trustee shall withdraw from the Debt Service Fund and deposit in the Principal Account an amount which, when added to the amount then on deposit in the Principal Account, will be equal to the amount of principal coming due and payable on such date on the Bonds. No such deposit need be made to the Principal Account if the amount contained therein is at least equal to the principal to become due on the next June 1 on all of the Outstanding Bonds and any Parity Debt. All moneys in the Principal Account will be used and withdrawn by the Trustee solely for the purpose of paying the principal of the Bonds and any Parity Debt as it shall become due and payable. D-9

276 (c) Sinking Account. No later than the fourth (4th) Business Day preceding each June 1 on which any Bond becomes subject to mandatory redemption, the Trustee shall withdraw from the Debt Service Fund and deposit in the Sinking Account an amount which, when added to the amount then contained in the Sinking Account, will be equal to the aggregate principal amount of the Term Bonds required to be redeemed on such June 1. No such deposit need be made to the Sinking Account if the amount contained therein is at least equal to the Sinking Account payments to become due on the next June 1 on all of the Outstanding Bonds and any Parity Debt. All moneys on deposit in the Sinking Account shall be used and withdrawn by the Trustee for the sole purpose of paying the principal of the Term Bonds as it shall become due and payable upon redemption or purchase pursuant to the Indenture. (d) Reserve Account. In the Debt Service Fund a separate account known as the Reserve Account will be established by the Indenture, solely as security for payments payable by the Successor Agency pursuant to the Indenture and pursuant to any other Parity Debt Instrument, which shall be held by the Trustee in trust for the benefit of the Owners of the Bonds and any Parity Debt. In the event that the amount on deposit in the Reserve Account at any time becomes less than the Reserve Requirement, the Trustee shall promptly notify the Successor Agency of such fact. Upon receipt of any such notice and as promptly as is permitted by the Law, the Successor Agency shall transfer to the Trustee an amount sufficient to maintain the Reserve Requirement (including the payment of all amounts due and payable to Insurer in connection with the Reserve Policy) on deposit in the Reserve Account. The amount on deposit in the Reserve Account shall be maintained at the Reserve Requirement at all times prior to the payment of the Bonds and any Parity Debt in full. If there shall then not be sufficient Tax Revenues to transfer an amount sufficient to maintain the Reserve Requirement on deposit in the Reserve Account, the Successor Agency shall be obligated to continue making transfers as Tax Revenues become available until there is an amount sufficient to maintain the Reserve Requirement on deposit in the Reserve Account. No such transfer and deposit need be made to the Reserve Account so long as there shall be on deposit therein a sum at least equal to the Reserve Requirement. The Reserve Requirement for the 2015 Bonds will be satisfied by the Reserve Policy by the Insurer on the Closing Date with respect to the 2015 Bonds. The Successor Agency will have no obligation to replace the Reserve Policy, to fund the Reserve Account with cash or to take any other action with respect to the Reserve Policy if, at any time that the 2015 Bonds are Outstanding, the ratings assigned to the Reserve Insurer are lowered or withdrawn or amounts are not available under the Reserve Policy other than in connection with a draw on the Reserve Policy. All money in the Reserve Account shall be used and withdrawn by the Trustee solely for the purpose of making transfers pursuant any Parity Debt Instrument and under the Indenture to the Interest Account, the Principal Account and the Sinking Account, in the event of any deficiency at any time in any of such accounts or for the retirement of all the Bonds then Outstanding, except that so long as the Successor Agency is not in default hereunder or under any Parity Debt Instrument, any amount in the Reserve Account in excess of the Reserve Requirement shall be withdrawn from the Reserve Account semiannually on or before two (2) Business Days preceding each December 1 and June 1 by the Trustee and deposited in the Interest Account or be applied pro rata in accordance with any applicable provision of a Parity Debt Instrument. All amounts in the Reserve Account on the Business Day preceding the final Interest D-10

277 Payment Date shall be withdrawn from the Reserve Account and shall be transferred to the Interest Account and the Principal Account, in such order, to the extent required to make the deposits then required to be made pursuant to the Indenture or shall be applied pro rata as required by any Parity Debt Instrument, as applicable. The Successor Agency shall have the right at any time to direct the Trustee to release funds from the Reserve Account, in whole or in part, by tendering to the Trustee: (i) a Qualified Reserve Account Credit Instrument, and (ii) an opinion of Bond Counsel stating that neither the release of such funds nor the acceptance of such Qualified Reserve Account Credit Instrument will cause interest on the Bonds or any Parity Debt the interest on which is excluded from gross income of the owners thereof for federal income tax purposes to become includable in gross income for purposes of federal income taxation. Upon tender of such items to the Trustee, and upon delivery by the Successor Agency to the Trustee of written calculation of the amount permitted to be released from the Reserve Account (upon which calculation the Trustee may conclusively rely), the Trustee shall transfer such funds from the Reserve Account to the Successor Agency to be applied in accordance with the Law. The Trustee shall comply with all documentation relating to a Qualified Reserve Account Credit Instrument as shall be required to maintain such Qualified Reserve Account Credit Instrument in full force and effect and as shall be required to receive payments thereunder in the event and to the extent required to make any payment when and as required under this paragraph (d). Upon the expiration of any Qualified Reserve Account Credit Instrument, the Successor Agency shall either (i) replace such Qualified Reserve Account Credit Instrument with a new Qualified Reserve Account Credit Instrument, or (ii) deposit or cause to be deposited with the Trustee an amount of funds equal to the Reserve Requirement, to be derived from the first legally available Tax Revenues. If the Reserve Requirement is being maintained partially in cash and partially with a Qualified Reserve Account Credit Instrument, the cash shall be first used to meet any deficiency which may exist from time to time in the Interest Account or the Principal Account for the purpose of making payments required pursuant to the Indenture. If the Reserve Requirement is being maintained with two or more Qualified Reserve Account Credit Instruments, any draw to meet a deficiency which may exist from time to time in the Interest Account or the Principal Account for the purpose of making payments required pursuant to the Indenture shall be pro-rata with respect to each such instrument. The Reserve Account may be maintained in the form of one or more separate subaccounts which are established for the purpose of holding the proceeds of separate issues of the Bonds and any Parity Debt in conformity with applicable provisions of the Code to the extent directed by the Successor Agency in writing to the Trustee. Additionally, the Successor Agency may, in its discretion, combine amounts on deposit in the Reserve Account and on deposit in any reserve account relating to any (but not necessarily all) Parity Debt in order to maintain a combined reserve account for the Bonds and any (but not necessarily all) Parity Debt. (e) Redemption Account. On or before the Business Day preceding any date on which Bonds are to be redeemed pursuant to the Indenture, other than mandatory Sinking Account redemption of Term Bonds, the Trustee shall withdraw from the Debt Service Fund any amount transferred by the Successor Agency pursuant to the Indenture for deposit in the Redemption Account, such amount being the amount required to pay the principal of and premium, if any, on the Bonds to be redeemed on such date pursuant to the Indenture. All moneys in the Redemption Account shall be used and withdrawn by the Trustee solely for the purpose of paying the principal of and premium, if any, on the Bonds to be redeemed on the date set for such redemption, other than mandatory Sinking Account redemption of Term Bonds. Interest due on Bonds to be D-11

278 redeemed on the date set for redemption shall, if applicable, be paid from funds available therefor in the Interest Account. Investment of Funds Moneys in the Debt Service Fund, the Interest Account, the Principal Account, the Sinking Account, the Reserve Account and the Costs of Issuance Fund shall be invested by the Trustee in Permitted Investments as directed by the Successor Agency in the Written Request of the Successor Agency filed with the Trustee at least two (2) Business Days in advance of the making of such investments. In the absence of any such Written Request of the Successor Agency, the Trustee shall invest any such moneys in Permitted Investments described in clause (d) of the definition thereof, which by their terms mature prior to the date on which such moneys are required to be paid out hereunder. The Trustee shall be entitled to rely conclusively upon the written instructions of the Successor Agency directing investments in Permitted Investments as to the fact that each such investment is permitted by the laws of the State, and shall not be required to make further investigation with respect thereto. Moneys in the Redevelopment Obligation Retirement Fund may be invested by the Successor Agency in any obligations in which the Successor Agency is legally authorized to invest its funds. Obligations purchased as an investment of moneys in any fund shall be deemed to be part of such fund or account. All interest or gain derived from the investment of amounts in any of the funds or accounts held by the Trustee hereunder shall be deposited in the Interest Account. The Trustee may act as principal or agent in the acquisition or disposition of any investment and may impose its customary charges therefor. The Trustee shall incur no liability for losses arising from any investments made at the direction of the Successor Agency or otherwise made pursuant to the Indenture. Other Covenants of the Successor Agency Limitation on Additional Indebtedness. The Successor Agency covenants that, so long as the Bonds are Outstanding, the Successor Agency shall not issue any bonds, notes or other obligations, enter into any agreement or otherwise incur any indebtedness, which is in any case payable from all or any part of the Tax Revenues, excepting only as provided in the Indenture. The Successor Agency will not otherwise encumber, pledge or place any charge or lien upon any of the Tax Revenues or other amounts pledged to the Bonds superior or on parity to the pledge and lien herein created for the benefit of the Bonds; provided, that the Successor Agency may issue and sell refunding bonds as Parity Debt payable from Tax Revenues on a parity with Outstanding Bonds to refund a portion of the Outstanding Bonds; provided further that, with respect to any such refunding (i) annual debt service on such Parity Debt, as applicable, is lower than annual debt service on the obligations being refunded during every year the refunded obligations would otherwise be outstanding and (ii) the final maturity of any such Parity Debt does not exceed the final maturity of the obligations being refunded. Nothing herein shall prevent the Successor Agency from issuing and selling Subordinate Debt. Nothing in the Indenture prevents the Successor Agency from issuing and selling Subordinate Debt. Extension of Payment. The Successor Agency will not, directly or indirectly, extend or consent to the extension of the time for the payment of any Bond or claim for interest on any of the Bonds and will not, directly or indirectly, be a party to or approve any such arrangement by purchasing or funding the Bonds or claims for interest in any other manner. In case the maturity of any such Bond or claim for interest shall be extended or funded, whether or not with the consent of the Successor Agency, such Bond or claim for interest so extended or funded shall not be entitled, in case of default under the Indenture, to the benefits of the Indenture, except subject to the prior payment in full of the principal of all of the Bonds then Outstanding and of all claims for interest which shall not have been so extended or funded. D-12

279 Payment of Claims. The Successor Agency shall promptly pay and discharge, or cause to be paid and discharged, any and all lawful claims for labor, materials or supplies which, if unpaid, might become a lien or charge upon the properties owned by the Successor Agency or upon the Tax Revenues or other amounts pledged to the payment of the Bonds, or any part thereof, or upon any funds in the hands of the Trustee, or which might impair the security of the Bonds. Nothing contained in the Indenture shall require the Successor Agency to make any such payment so long as the Successor Agency in good faith shall contest the validity of said claims. Books and Accounts; Financial Statements. The Successor Agency shall at all times keep, or cause to be kept, proper and current books and accounts in which accurate entries are made of the financial transactions and records of the Successor Agency. Within one hundred eighty (180) days after the close of each Fiscal Year an Independent Certified Public Accountant shall prepare an audit of the financial transactions and records of the Successor Agency for such Fiscal Year. To the extent permitted by law, such audit may be included within the annual audited financial statements of the City. The Successor Agency shall furnish a copy of such financial statements to any Owner upon reasonable request of such Owner and at the expense of such Owner. The Trustee shall have no duty to review such audits. Payments of Taxes and Other Charges. The Successor Agency will pay and discharge, or cause to be paid and discharged, all taxes, service charges, assessments and other governmental charges which may be lawfully imposed upon the Successor Agency or the properties then owned by the Successor Agency in the Project Areas, or upon the revenues therefrom when the same shall become due. Nothing contained in the Indenture requires the Successor Agency to make any such payment so long as the Successor Agency in good faith shall contest the validity of said taxes, assessments or charges. The Successor Agency will duly observe and conform with all valid requirements of any governmental authority relative to the Project Areas or any part thereof. Compliance With Redevelopment Law; Recognized Obligation Payment Schedules. The Successor Agency shall comply with all of the requirements of the Law. Pursuant to Section of the Law, the Successor Agency shall take all actions required under the Law to include in the Recognized Obligation Payment Schedule for each Semiannual Period (i) debt service on the Bonds, (ii) any amount required to replenish the Reserve Account and (iii) any amount due and payable to Insurer in connection with the Insurance Policy and/or the Reserve Policy, so as to enable the Placer County Auditor-Controller to distribute from the Redevelopment Property Tax Trust Fund for deposit in the Redevelopment Obligation Retirement Fund on each January 2 and June 1, as applicable, amounts required to enable the Successor Agency to pay timely principal of, and interest on, the Bonds coming due in the applicable Semiannual Period. In order to ensure that amounts are available for the Trustee to pay debt service on all Outstanding Bonds on a timely basis, not later than February 1 of each year, commencing February 1, 2016, the Successor Agency shall submit an Oversight Board-approved Recognized Obligation Payment Schedule to the State Department of Finance and to the Placer County Auditor-Controller that shall include (i) all amounts necessary to pay debt service on all Outstanding Bonds on December 1 and June 1 of the next succeeding Bond Year, to be paid to the Successor Agency from the Redevelopment Property Tax Trust Fund for deposit in the Redevelopment Obligation Retirement Fund on June 1, and January 2 of the following calendar year, (ii) any amount required to cure any deficiency in the Reserve Account pursuant to this Indenture (including any amounts due and payable with respect to any Qualified Reserve Account Credit Instrument) and (iii) any amount due and payable to Insurer in connection with the Insurance Policy and the Reserve Policy. These actions will include, without limitation, placing on the periodic Recognized Obligation Payment Schedule the amounts to be held by the Successor Agency as a reserve until the six-month period corresponding to the next Redevelopment Property Tax Trust fund distribution date that are required to provide for the payment of principal of and interest on the Bonds. D-13

280 In addition, the Successor Agency covenants that it shall, on or before December 1 of each year, file a Notice of Insufficiency with the Placer County Auditor-Controller if the amount of Tax Revenues available to the Successor Agency from the Redevelopment Property Tax Trust Fund for transfer to the Redevelopment Obligation Retirement Fund on the upcoming January 2 is insufficient to fully fund all required amounts payable from the Redevelopment Obligation Retirement Fund during the next succeeding Semiannual Period. The Successor Agency covenants that on or before May 1 of each year, it shall file a Notice of Insufficiency with the Placer County Auditor-Controller if the amount of Tax Revenues available to the Successor Agency from the Redevelopment Property Tax Trust Fund for transfer to the Redevelopment Obligation Retirement Fund on the upcoming July 1 is insufficient to fully fund all required amounts payable from the Redevelopment Obligation Retirement Fund during the next succeeding Semiannual Period. Dissolution Act Invalid; Maintenance of Tax Revenues. In the event that the applicable property tax revenues provisions of the Dissolution Act are determined by a court in a final judicial decision to be invalid and, in place of the invalid provisions, provisions of the Law or the equivalent become applicable to the Bonds, the Successor Agency shall comply with all requirements of the Law or the equivalent to insure the allocation and payment to it of the Tax Revenues, including without limitation the timely filing of any necessary statements of indebtedness with appropriate officials of the County and, in the case of amounts payable by the State, appropriate officials of the State. Tax Covenants Relating to the Bonds. The Successor Agency shall assure that the proceeds of the Bonds are not so used as to cause the Bonds to satisfy the private business tests of section 141(b) of the Code or the private loan financing test of Section 141(c) of the Code. The Successor Agency shall not take any action or permit or suffer any action to be taken if the result of the same would be to cause any of the Bonds to be federally guaranteed within the meaning of section 149(b) of the Code. The Successor Agency shall not take, or permit or suffer to be taken by the Trustee or otherwise, any action with respect to the proceeds of the Bonds which, if such action had been reasonably expected to have been taken, or had been deliberately and intentionally taken, on the date of issuance of the Bonds, would have caused the Bonds to be arbitrage bonds within the meaning of section 148 of the Code. The Successor Agency shall take all actions necessary to assure the exclusion of interest on the Bonds from the gross income of the Owners of the Bonds to the same extent as such interest is permitted to be excluded from gross income under the Code as in effect on the date of issuance of the Bonds. The Successor Agency shall take any and all actions necessary to assure compliance with section 148(f) of the Code, relating to the rebate of excess investment earnings, if any, to the federal government, to the extent that such section is applicable to the Bonds. Continuing Disclosure. The Successor Agency covenants and agrees that it will comply with and carry out all of the provisions of the Continuing Disclosure Certificate. Notwithstanding any other provision of the Indenture, failure of the Successor Agency to comply with the Continuing Disclosure Certificate shall not be an Event of Default thereunder. However, any Participating Underwriter or any holder or beneficial owner of the Bonds may take such actions as may be necessary and appropriate, including seeking specific performance by court order, to cause the Successor Agency to comply with its obligations with respect to continuing disclosure. Amendment of Indenture The Indenture and the rights and obligations of the Successor Agency and of the Owners may be modified or amended at any time by a Supplemental Indenture which shall become binding with the consent of the Owners of a majority in aggregate principal amount of the Bonds then Outstanding are filed with the Trustee. No such modification or amendment shall (a) extend the maturity of or reduce the D-14

281 interest rate on any Bond or otherwise alter or impair the obligation of the Successor Agency to pay the principal, interest or redemption premium, (if any) at the time and place and at the rate and in the currency provided therein of any Bond without the express written consent of the Owner of such Bond or, (b) reduce the percentage of Bonds required for the written consent to any such amendment or modification. In no event shall any Supplemental Indenture modify any of the rights or obligations of the Trustee without its prior written consent. In addition, the Trustee shall be entitled to an opinion of counsel concerning the Supplemental Indenture s lack of any material adverse effect on the Owners. The Indenture and the rights and obligations of the Successor Agency and of the Owners may be modified or amended at any time by a Supplemental Indenture which shall become binding upon adoption and without the consent of any Owners, to the extent permitted by law and only for any one or more of the following purposes: (a) to add to the covenants and agreements of the Successor Agency in the Indenture contained, other covenants and agreements thereafter to be observed, or to limit or surrender any rights or powers in the Indenture reserved to or conferred upon the Successor Agency; or (b) to make such provisions for the purpose of curing any ambiguity, or of curing, correcting or supplementing any defective provision contained in the Indenture, or in any other respect whatsoever as the Successor Agency may deem necessary or desirable, provided under any circumstances that such modifications or amendments shall not, in the reasonable determination of the Successor Agency, materially adversely affect the interests of the Owners; or (c) to amend any provision of the Indenture relating to the requirements of or compliance with the Code, to any extent whatsoever but only if and to the extent such amendment will not adversely affect the exemption from federal income taxation of interest on any of the Bonds, in the opinion of Bond Counsel; or (d) to amend the Recognized Obligation Debt Service Payment Schedule set forth in Exhibit B to the Indenture to take into account the redemption of any Bond prior to its maturity; or (e) to provide for the issuance of Parity Debt pursuant to a Supplemental Indenture, as such issuance is authorized pursuant to the Indenture. Events of Default and Remedies Events of Default. The following events shall constitute Events of Default under the Indenture: (a) if default shall be made by the Successor Agency in the due and punctual payment of the principal of or interest on any Bond when and as the same shall become due and payable, whether at maturity as therein expressed, by declaration or otherwise; (b) if default shall be made by the Successor Agency in the observance of any of the covenants, agreements or conditions on its part in the Indenture or in the Bonds or any Parity Debt Instrument contained, other than a default described in the preceding clause (a), and such default shall have continued for a period of 30 days following receipt by the Successor Agency of written notice from the Trustee or any Owner of the occurrence of such default provided that if in the reasonable opinion of the Successor Agency the failure stated in the notice can be corrected, but not within such 30 day period, such failure will not constitute an event of default if corrective D-15

282 action is instituted by the Successor Agency within such 30 day period and the Successor Agency thereafter diligently and in good faith cures such failure in a reasonable period of time; or (c) If the Successor Agency files a petition seeking reorganization or arrangement under the federal bankruptcy laws or any other applicable law of the United States of America, or if a court of competent jurisdiction will approve a petition seeking reorganization under the federal bankruptcy laws or any other applicable law of the United States of America, or, if under the provisions of any other law for the relief or aid of debtors, any court of competent jurisdiction will approve a petition, seeking reorganization under the federal bankruptcy laws or any other applicable law of the United States of America, or, if under the provisions of any other law for the relief or aid of debtors, any court of competent jurisdiction will assume custody or control of the Successor Agency or of the whole or any substantial part of its property. Remedies. Upon the occurrence and during the continuance of any Event of Default, the Trustee may, or, if requested in writing by the Owners of a majority in aggregate principal amount of the Bonds then Outstanding, the Trustee shall, (a) declare the principal of the Bonds, together with the accrued interest thereon, to be due and payable immediately, and upon any such declaration the same shall become immediately due and payable, anything in the Indenture or in the Bonds to the contrary notwithstanding, and (b) the Trustee shall, subject to the provisions of the Indenture, exercise any other remedies available to the Trustee and the Bond Owners in law or at equity. Immediately upon receiving notice or actual knowledge of the occurrence of an Event of Default, the Trustee shall give notice of such Event of Default to the Successor Agency by telephone promptly confirmed in writing. Such notice shall also state whether the principal of the Bonds shall have been declared to be or have immediately become due and payable. With respect to any Event of Default described in clauses (a) or (c) above the Trustee shall, and with respect to any Event of Default described in clause (b) above the Trustee in its sole discretion may, also give such notice to the Owners by mail, which shall include the statement that interest on the Bonds shall cease to accrue from and after the date, if any, on which the Trustee shall have declared the Bonds to become due and payable pursuant to the preceding paragraph (but only to the extent that principal and any accrued, but unpaid, interest on the Bonds is actually paid on such date). The foregoing is subject to the condition that if, at any time after the principal of the Bonds shall have been so declared due and payable, and before any judgment or decree for the payment of the moneys due shall have been obtained or entered, the Successor Agency shall deposit with the Trustee a sum sufficient to pay all principal on the Bonds matured prior to such declaration and all matured installments of interest (if any) upon all the Bonds, with interest on such overdue installments of principal and interest (to the extent permitted by law), and the reasonable fees and expenses of the Trustee, (including the allocated costs and disbursements of its in-house counsel to the extent such services are not redundant with those provided by outside counsel) and any and all other defaults known to the Trustee (other than in the payment of principal of and interest on the Bonds due and payable solely by reason of such declaration) shall have been made good or cured to the satisfaction of the Trustee or provision deemed by the Trustee to be adequate shall have been made therefor, then, and in every such case, the Trustee shall promptly give written notice of the foregoing to the Owners of all Bonds then Outstanding, and the Owners of at least a majority in aggregate principal amount of the Bonds then Outstanding, by written notice to the Successor Agency and to the Trustee, may, on behalf of the Owners of all of the Bonds, rescind and annul such declaration and its consequences. However, no such rescission and annulment extends to or affects any subsequent default, or impairs or exhausts any right or power consequent thereon. D-16

283 Application of Funds Upon Acceleration. If an Event of Default has occurred and is continuing, all Tax Revenues and all sums in the funds and accounts established and held by the Trustee under the Indenture upon the date of the declaration of acceleration and all sums thereafter received by the Trustee under any of the provisions of the Indenture will be applied by the Trustee as follows and in the following order upon presentation of the several Bonds, and the stamping thereon of the payment if only partially paid, or upon the surrender thereof if fully paid: First, to the payment of the fees, costs and expenses of the Trustee in declaring such Event of Default and in exercising the rights and remedies set forth in the Indenture, including reasonable compensation to its agents, attorneys (including the allocated costs and disbursements of its in-house counsel to the extent such services are not redundant with those provided by outside counsel) and counsel and any outstanding fees, expenses of the Trustee; and Second, to the payment of the whole amount then owing and unpaid upon the Bonds for principal and interest, with interest on the overdue principal and installments of interest at the net effective rate then borne by the Outstanding Bonds (to the extent that such interest on overdue installments of principal and interest shall have been collected), and in case such moneys shall be insufficient to pay in full the whole amount so owing and unpaid upon the Bonds, then to the payment of such principal and interest without preference or priority of principal over interest, or interest over principal, or of any installment of interest over any other installment of interest, ratably to the aggregate of such principal and interest. Power of Trustee to Control Proceedings. If the Trustee, upon the happening of an Event of Default, shall have taken any action, by judicial proceedings or otherwise, pursuant to its duties under the Indenture, whether upon its own discretion or upon the request of the Owners of a majority in principal amount of the Bonds then Outstanding, it shall have full power, in the exercise of its discretion for the best interests of the Owners of the Bonds, with respect to the continuance, discontinuance, withdrawal, compromise, settlement or other disposal of such action; provided, however, that the Trustee shall not, unless there no longer continues an Event of Default, discontinue, withdraw, compromise or settle, or otherwise dispose of any litigation pending at law or in equity, if at the time there has been filed with it a written request signed by the Owners of a majority in principal amount of the Outstanding Bonds under the Indenture opposing such discontinuance, withdrawal, compromise, settlement or other disposal of such litigation. Limitation on Owners Right to Sue. No Owner of any Bond issued under the Indenture shall have the right to institute any suit, action or proceeding at law or in equity, for any remedy under the Indenture, unless (a) such Owner shall have previously given to the Trustee written notice of the occurrence of an Event of Default; (b) the Owners of a majority in aggregate principal amount of all the Bonds then Outstanding, have made written request upon the Trustee to exercise its powers under the Indenture granted or to institute such action, suit or proceeding in its own name; (c) said Owners have tendered to the Trustee indemnity reasonably acceptable to the Trustee against the costs, expenses and liabilities to be incurred in compliance with such request; and (d) the Trustee has refused or omitted to comply with such request for a period of sixty (60) days after such written request has been received by the Trustee and said tender of indemnity is made to the Trustee. Defeasance of Bonds The Successor Agency shall pay and discharge the entire indebtedness on all Bonds or any portion thereof in any one or more of the following ways: D-17

284 (i) by well and truly paying or causing to be paid the principal of and interest on all or the applicable portion of Outstanding Bonds, as and when the same become due and payable; or (ii) by irrevocably depositing with the Trustee or an escrow agent, in trust, at or before maturity, money which, together with the available amounts then on deposit in the funds and accounts established pursuant to the Indenture, is fully sufficient to pay all or a portion of Outstanding Bonds, including all principal and interest; or (iii) by irrevocably depositing with the Trustee or an escrow agent, in trust, Defeasance Obligations in such amount as an Independent Accountant shall determine will, together with the interest to accrue thereon and available moneys then on deposit of the funds and accounts established pursuant to the Indenture, be fully sufficient to pay and discharge the indebtedness on all Bonds or a portion thereof (including all principal and interest) at or before maturity; or (iv) by purchasing such Bonds prior to maturity and tendering such Bonds to the Trustee for cancellation; then, at the election of the Successor Agency, and notwithstanding that any Bonds shall not have been surrendered for payment, the pledge of the Tax Revenues and other funds provided for in the Indenture and all other obligations of the Trustee and the Successor Agency under the Indenture shall cease and terminate with respect to all Outstanding Bonds or, if applicable, with respect to that portion of the Bonds which has been paid and discharged, except only (a) the covenants of the Successor Agency under the Indenture with respect to the Code, (b) the obligation of the Trustee to transfer and exchange Bonds thereunder, (c) the obligations of the Successor Agency under the Indenture, and (d) the obligation of the Successor Agency to pay or cause to be paid to the Owners, from the amounts so deposited with the Trustee, all sums due thereon and to pay the Trustee all fees, expenses and costs of the Trustee. In the event the Successor Agency shall, pursuant to the foregoing provision, pay and discharge any portion or all of the Bonds then Outstanding, the Trustee shall be authorized to take such actions and execute and deliver to the Successor Agency all such instruments as may be necessary or desirable to evidence such discharge, including, without limitation, selection by lot of Bonds of any maturity of the Bonds that the Successor Agency has determined to pay and discharge in part. In the case of a defeasance or payment of all of the Bonds Outstanding, any funds thereafter held by the Trustee which are not required for said purpose or for payment of amounts due the Trustee pursuant to the Indenture shall be paid over to the Successor Agency for deposit in the Redevelopment Obligation Retirement Fund. So long as the Insurance Policy is in effect, the investments, if any, in a defeasance escrow for the 2015 Bonds are required to be limited to (i) cash or (ii) non-callable, direct obligations of the United States of America and securities fully and unconditionally guaranteed as to the timely payment of principal and interest by the United States of America; provided that other Defeasance Obligations may be used if Insurer approves of such Defeasance Obligations in writing. Certain Insurer Provisions The prior written consent of the Insurer is required for all amendments and supplements to the Indenture, with the exceptions noted below. a) Consent of the Insurer. Any amendments or supplements to the Indenture shall require the prior written consent of the Insurer with the exception of amendments or supplements: (i) to cure D-18

285 any ambiguity or formal defect or omissions or to correct any inconsistent provisions in the transaction documents or in any supplement thereto, or (ii) to grant or confer upon the holders of the 2015 Bonds any additional rights, remedies, powers, authority or security that may lawfully be granted to or conferred upon the holders of the 2015 Bonds, or (iii) to add to the conditions, limitations and restrictions on the issuance of bonds or other obligations under the provisions of the Indenture other conditions, limitations and restrictions thereafter to be observed, or (iv) to add to the covenants and agreements of the Successor Agency in the Indenture other covenants and agreements thereafter to be observed by the Successor Agency or to surrender any right or power therein reserved to or conferred upon the Successor Agency, or (v) to issue additional bonds in compliance with the terms of t b) Consent of the Insurer in Addition to Bondholder Consent. Any amendment, supplement, modification to the Indenture that requires the consent of holders of the 2015 Bonds or adversely affects the rights or interests of the Insurer shall be subject to the prior written consent of the Insurer. c) Notice To and Consent of the Insurer in the Event of Insolvency. To the extent the Successor Agency enters into any reorganization or liquidation plan with respect to the Successor Agency, it must be acceptable to the Insurer. In the event of any reorganization or liquidation of the Successor Agency the Insurer shall have the right to file a claim, object to and vote on behalf of all holders of the 2015 Bonds absent a continuing failure by the Insurer to make a payment under the Policy. The Successor Agency shall provide the Insurer with immediate written notice of any insolvency event that causes the Successor Agency to be unable to pay its obligations as and when they become due. In the event of a receivership or out-of-court restructuring, the Insurer shall have the right to negotiate and speak on behalf of and bind the bondholders and any agreements reached must be acceptable to the Insurer. d) Consent of the Insurer Upon Default. Anything in the Indenture to the contrary notwithstanding, upon the occurrence and continuance of a default or an event of default, monetary or nonmonetary, the Insurer shall be entitled to control and direct the enforcement of all rights and remedies granted to the holders of the 2015 Bonds or the Trustee for the benefit of the holders of the 2015 Bonds under any Security Document. No monetary or nonmonetary default or event of default may be waived without the Insurer s written consent. e) The Insurer as Owner. Upon the occurrence and continuance of a default or an event of default, the Insurer shall be deemed to be the sole and exclusive owner of the outstanding 2015 Bonds for all purposes under the Indenture, including, without limitation, for purpose of approvals, consents, exercising remedies and approving agreements relating to the 2015 Bonds. f) Consent of the Insurer for acceleration. the Insurer s prior written consent is required as a condition precedent to and in all instances of acceleration. g) Grace Period for Payment Defaults. No grace period shall be permitted for payment defaults on the 2015 Bonds. No grace period for a covenant default shall exceed 30 days without the prior written consent of the Insurer. D-19

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287 APPENDIX E FORM OF CONTINUING DISCLOSURE CERTIFICATE This Continuing Disclosure Certificate (the Disclosure Certificate ), dated as of October 22, 2015, is executed and delivered by the Successor Agency to the Auburn Urban Development Authority (the Agency ) in connection with the issuance of the $4,475, Tax Allocation Refunding Bonds (Auburn Redevelopment Project) (the Bonds ). The Bonds are being issued pursuant to provisions of an Indenture of Trust, dated as of October 1, 2015 (the Indenture ), by and between the Agency and Wells Fargo Bank, N.A. (the Trustee ). The Agency and the Dissemination Agent covenant and agree as follows: Purpose of the Disclosure Certificate. This Disclosure Certificate is being executed and delivered by the Agency for the benefit of the Beneficial Owners of the Bonds and in order to assist the Participating Underwriter in complying with Securities and Exchange Commission Rule 15c2-12(b)(5). Definitions. In addition to the definitions set forth in the Indenture, which apply to any capitalized term used in this Disclosure Certificate unless otherwise defined in this Section, the following capitalized terms shall have the following meanings: Annual Report shall mean any Annual Report provided by the Agency pursuant to, and as described in, Sections 3 and 4 of this Disclosure Certificate. Beneficial Owner shall mean any person which (a) has the power, directly or indirectly, to vote or consent with respect to, or to dispose of ownership of, any Bonds (including persons holding Bonds through nominees, depositories or other intermediaries), or (b) is treated as the owner of any Bonds for federal income tax purposes. Disclosure Representative shall mean each of the Mayor, the City Manager or the Finance Director, on behalf of the Agency, or any of their designees, or such other officer or employee as the Agency shall designate in writing to the Dissemination Agent from time to time. Dissemination Agent shall mean Urban Futures, Inc., acting in its capacity as Dissemination Agent hereunder, or any successor Dissemination Agent designated in writing by the Agency. Listed Events shall mean any of the events listed in Section 5(a) of this Disclosure Certificate. MSRB shall mean the Municipal Securities Rulemaking Board established pursuant to Section 15B(b)(1) of the Securities Exchange Act of 1934 or any other entity designated or authorized by the Securities and Exchange Commission to receive reports pursuant to the Rule. Until otherwise designated by the MSRB or the Securities and Exchange Commission, filings with the MSRB are to be made through the Electronic Municipal Marketplace Access (EMMA) website of the MSRB, currently located at E-1

288 Participating Underwriter shall mean any of the original underwriters of the Bonds required to comply with the Rule in connection with offering of the Bonds. Rule shall mean Rule 15c2-12(b)(5) adopted by the Securities and Exchange Commission under the Securities Exchange Act of 1934, as the same may be amended from time to time. State shall mean the State of California. Provision of Annual Reports. The Agency shall, or shall cause the Dissemination Agent to, not later than nine months after the end of the Agency s fiscal year (the end of the Agency s fiscal year is currently June 30), commencing with the report for the fiscal year, provide to the MSRB and the Participating Underwriter an Annual Report which is consistent with the requirements of Section 4 of this Disclosure Certificate. 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 4 of this Disclosure Certificate. Not later than fifteen (15) Business Days prior to the date specified in subsection (a) for providing the Annual Report to the MSRB, the Agency shall provide the Annual Report to the Dissemination Agent. If by such date, the Dissemination Agent has not received a copy of the Annual Report, the Dissemination Agent shall contact the Agency to determine if the Agency is in compliance with the first sentence of this subsection (b). The Agency 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 Agency and shall have no duty or obligation to review such Annual Report. 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. The Dissemination Agent shall, to the extent information is known to it, file a report with the Agency and (if the Dissemination Agent is not the Trustee) the Trustee certifying that the Annual Report has been provided pursuant to this Disclosure Certificate, stating the date it was provided. Content of Annual Reports. The Agency s Annual Report shall contain or include by reference the following: The Agency s 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 Agency s audited financial statements are not available by the time the Annual Report is required to be filed pursuant to Section 3(a), the Annual Report shall contain unaudited financial statements in a format similar to the financial statements contained in the final Official Statement, and the audited financial statements shall be filed in the same manner as the Annual Report when they become available. E-2

289 An update of the tabular information relating to the Agency and the Project Area of the kind presented in the Official Statement entitled: TABLE 1 Auburn Redevelopment Project Area; Land Use by Secured Assessed Value TABLE 2 Auburn Redevelopment Project Area; Largest Local Property Taxpayers TABLE 3 Auburn Redevelopment Project Area; Original Project Area and Amendment Area Historical Assessed Valuation Information regarding assessment appeals by largest taxpayers listed in updates to Table 2 and the estimated loss on appeal. Debt service coverage on the Bonds for the most recently completed fiscal year in substantially the form of Table 5 of the Official Statement. No projected coverage needs to be presented. A listing of the amount of each distribution from the Placer County Auditor-Controller of property tax revenues from the Redevelopment Property Tax Trust Fund received by the Agency for its enforceable obligations for the most recent Fiscal Year, as reasonably available 15 business days prior to the due date of each Annual Report. Any or all of the items listed above may be included by specific reference to other documents, including official statements of debt issues of the Agency or related public entities, which are available to the public on the MSRB s Internet Web site or filed with the Securities and Exchange Commission. Reporting of Listed Events. Pursuant to the provisions of this section, upon the occurrence of any of the following events (in each case to the extent applicable) with respect to the Bonds, the Agency shall give, or cause to be given by so notifying the Dissemination Agent in writing and instructing the Dissemination Agent to give, notice of the occurrence of such event, in each case, pursuant to Section 5(c) hereof: 1. principal or interest payment delinquencies; 2. non-payment related defaults, if material; 3. modifications to the rights of the Bond Owner, if material; 4. optional, contingent or unscheduled calls, if material, and tender offers; 5. defeasances; 6. rating changes; E-3

290 7. adverse tax opinions or the issuance by the Internal Revenue Service of proposed or final determinations of taxability, Notices of Proposed Issue (IRS Form 5701-TEB) or other material notices or determinations with respect to the tax status of the Bonds or other material events affecting the tax status of the Bonds; 8. unscheduled draws on the debt service reserves reflecting financial difficulties; 9. unscheduled draws on the credit enhancements reflecting financial difficulties; 10. substitution of the credit or liquidity providers or their failure to perform; 11. release, substitution or sale of property securing repayment of the Bonds, if material; 12. bankruptcy, insolvency, receivership or similar proceedings of the Agency, which shall occur as described below; 13. appointment of a successor or additional trustee or the change of name of a trustee, if material, or; 14. the consummation of a merger, consolidation, or acquisition involving the Agency or the sale of all or substantially all of the assets of the Agency other than in the ordinary course of business, the entry into a definitive agreement to undertake such an action or the termination of a definitive agreement relating to any such actions, other than pursuant to its terms, if material. For these purposes, any event described in item 12 of this Section 5(a) is considered to occur when any of the following occur: the appointment of a receiver, fiscal agent, or similar officer for the Agency 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 Agency, or if such jurisdiction has been assumed by leaving the existing governing body and officials or officers in possession but subject to the supervision and orders of a court or governmental authority, or the entry of an order confirming a plan of reorganization, arrangement, or liquidation by a court or governmental authority having supervision or jurisdiction over substantially all of the assets or business of the Agency. Upon receipt of notice from the Agency and instruction by the Agency to report the occurrence of any Listed Event, the Dissemination Agent shall provide notice thereof to the MSRB in accordance with Section 5(c) hereof. In the event the Dissemination Agent shall obtain actual knowledge of the occurrence of any of the Listed Events, the Dissemination Agent shall, immediately after obtaining such knowledge, contact the Disclosure Representative, inform such person of the event, and request that the Agency promptly notify the Dissemination Agent in writing whether or not to report the event pursuant to Section 5(c). For purposes of this E-4

291 Disclosure Certificate, actual knowledge of the occurrence of such Listed Event shall mean actual knowledge by the Dissemination Agent, if other than the Trustee, and if the Dissemination Agent is the Trustee, then by the officer at the corporate trust office of the Trustee with regular responsibility for the administration of matters related to the Indenture. The Dissemination Agent shall have no responsibility to determine the materiality, if applicable, of any of the Listed Events. The Agency, or the Dissemination Agent, if the Dissemination Agent has been instructed by the Agency to report the occurrence of a Listed Event, shall file a notice of such occurrence with the MSRB in a timely manner not more than ten business days after the occurrence of the event. Termination of Reporting Obligation. The Agency s obligations under this Disclosure Certificate shall terminate upon the legal defeasance, prior redemption or payment in full of all of the Bonds. If such termination occurs prior to the final maturity of the Bonds, the Agency shall give notice of such termination in the same manner as for a Listed Event under Section 5(c). Dissemination Agent. The Agency may, from time to time, appoint or engage a Dissemination Agent to assist it in carrying out its obligations under this Disclosure Certificate, and may discharge any such Dissemination Agent, with or without appointing a successor Dissemination Agent. The Dissemination Agent shall not be responsible in any manner for the content of any notice or report prepared by the Agency pursuant to this Disclosure Certificate. The initial Dissemination Agent shall be Urban Futures, Inc. The Dissemination Agent may resign by providing thirty days written notice to the Agency. The Dissemination Agent shall have no duty to prepare any information report nor shall the Dissemination Agent be responsible for filing any report not provided to it by the Agency in a timely manner and in a form suitable for filing. Amendment; Waiver. Notwithstanding any other provision of this Disclosure Certificate, the Agency and the Dissemination Agent may amend this Disclosure Certificate (and the Dissemination Agent shall agree to any amendment so requested by the Agency) provided, the Dissemination Agent shall not be obligated to enter into any such amendment that modifies or increases its duties or obligations hereunder, and any provision of this Disclosure Certificate may be waived, provided that in the opinion of nationally recognized bond counsel, such amendment or waiver is permitted by the Rule. In the event of any amendment or waiver of a provision of this Disclosure Certificate, the Agency shall describe such amendment in the next Annual Report, and shall include, as applicable, a narrative explanation of the reason for the amendment or waiver and its impact on the type (or, in the case of a change of accounting principles, on the presentation) of financial information or operating data being presented by the Agency. Additional Information. Nothing in this Disclosure Certificate shall be deemed to prevent the Agency from disseminating any other information, using the means of dissemination set forth in this Disclosure Certificate 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 Certificate. If the Agency chooses to include any information in any Annual Report or notice of occurrence of a Listed Event in addition to that E-5

292 which is specifically required by this Disclosure Certificate, the Agency shall have no obligation under this Disclosure Certificate to update such information or include it in any future Annual Report or notice of occurrence of a Listed Event. Filings with the MSRB. All financial information, operating data, financial statements, notices, and other documents provided to the MSRB in accordance with this Disclosure Certificate shall be provided in an electronic format prescribed by the MSRB and shall be accompanied by identifying information as prescribed by the MSRB. Default. In the event of a failure of the Agency or the Dissemination Agent to comply with any provision of this Disclosure Certificate, any Owner or Beneficial Owner of the Bonds may take such actions as may be necessary and appropriate, including seeking mandate or specific performance by court order, to cause the Agency or Dissemination Agent, as the case may be, to comply with its obligations under this Disclosure Certificate. A default under this Disclosure Certificate shall not be deemed an Event of Default under the Indenture, and the sole remedy under this Disclosure Certificate in the event of any failure of the Agency or the Dissemination Agent to comply with this Disclosure Certificate shall be an action to compel performance. Duties, Immunities and Liabilities of Dissemination Agent. Article VI of the Indenture pertaining to the Trustee is hereby made applicable to this Disclosure Certificate as if this Disclosure Certificate were (solely for this purpose) contained in the Indenture and the Dissemination Agent shall be entitled to the protections, limitations from liability and indemnities afforded the Trustee thereunder. The Dissemination Agent shall have only such duties as are specifically set forth in this Disclosure Certificate, and the Agency agrees to indemnify and save the Dissemination Agent, its officers, directors, employees and agents, harmless against any loss, expense and liabilities which they may incur arising out of or in the exercise or performance of its powers and duties hereunder, including the costs and expenses (including attorneys fees) of defending against any claim of liability, but excluding liabilities due to the Dissemination Agent s negligence or willful misconduct. The Dissemination Agent shall be paid compensation by the Agency for its services provided hereunder in accordance with its schedule of fees as amended from time to time and all expenses, legal fees and advances made or incurred by the Dissemination Agent in the performance of its duties hereunder. The Dissemination Agent shall have no duty or obligation to review any information provided to it hereunder and shall not be deemed to be acting in any fiduciary capacity for the Agency, the Bond Owners, or any other party. The Dissemination Agent shall not have any liability to the Bond Owners or any other party for any monetary damages or financial liability of any kind whatsoever related to or arising from this Disclosure Certificate. The obligations of the Agency under this Section shall survive resignation or removal of the Dissemination Agent and payment of the Bonds. E-6

293 Notices. Any notices or communications to or among any of the parties to this Disclosure Certificate may be given as follows: To the Agency: To the Dissemination Agent: Successor Agency to the Auburn Urban Development Authority 1225 Lincoln Way, Room 1 Auburn, CA Attn: Finance Director Urban Futures, Inc North Tustin Avenue, Suite 230 Orange, CA Attn: Public Finance Department Any person may, by written notice to the other persons listed above, designate a different address or telephone number(s) to which subsequent notices or communications should be sent. Beneficiaries. This Disclosure Certificate shall inure solely to the benefit of the Agency, the Dissemination Agent, the Participating Underwriter and Owners and Beneficial Owners from time to time of the Bonds, and shall create no rights in any other person or entity. Counterparts. This Disclosure Certificate 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. SUCCESSOR AGENCY TO THE AUBURN URBAN DEVELOPMENT AUTHORITY By E-7

294 EXHIBIT A NOTICE TO MSRB OF FAILURE TO FILE ANNUAL REPORT Name of Obligated Party: Name of Bond Issue: Successor Agency to the Auburn Urban Development Authority 2015 Tax Allocation Refunding Bonds (Auburn Redevelopment Project) Date of Issuance: October 22, 2015 NOTICE IS HEREBY GIVEN that the Agency has not provided an Annual Report with respect to the above-named Bonds as required by the Continuing Disclosure Certificate, dated as of October 22, 2015, with respect to the Bonds. [The Agency anticipates that the Annual Report will be filed by.] Dated: URBAN FUTURES, INC., as Dissemination Agent on behalf of the Agency cc: Agency E-8

295 APPENDIX F BOOK-ENTRY ONLY SYSTEM The information in this section concerning DTC and DTC s book-entry system has been obtained from sources that the Successor Agency believes to be reliable, but the Successor Agency takes no responsibility for the accuracy thereof. The Depository Trust Company ( DTC ), New York, NY, will act as securities depository for the Bonds. The Bonds will be issued as fully-registered securities registered in the name of Cede & Co. (DTC s partnership nominee) or such other name as may be requested by an authorized representative of DTC. One fully-registered certificate will be issued for each maturity of the Bonds, each in the aggregate principal amount of such maturity, and will be deposited with DTC. DTC, the world s largest securities depository, is a limited-purpose trust company organized under the New York Banking Law, a banking organization within the meaning of the New York Banking Law, a member of the Federal Reserve System, a clearing corporation within the meaning of the New York Uniform Commercial Code, and a clearing agency registered pursuant to the provisions of Section 17A of the Securities Exchange Act of DTC holds and provides asset servicing for over 3.5 million issues of U.S. and non-u.s. equity issues, corporate and municipal debt issues, and money market instruments (from over 100 countries) that DTC s participants ( Direct Participants ) deposit with DTC. DTC also facilitates the post-trade settlement among Direct Participants of sales and other securities transactions in deposited securities, through electronic computerized book-entry transfers and pledges between Direct Participants accounts. This eliminates the need for physical movement of securities certificates. Direct Participants include both U.S. and non-u.s. securities brokers and dealers, banks, trust companies, clearing corporations, and certain other organizations. DTC is a wholly-owned subsidiary of The Depository Trust & Clearing Corporation ( DTCC ). DTCC is the holding company for DTC, National Securities Clearing Corporation and Fixed Income Clearing Corporation, all of which are registered clearing agencies. DTCC is owned by the users of its regulated subsidiaries. Access to the DTC system is also available to others such as both U.S. and non-u.s. securities brokers and dealers, banks, trust companies, and clearing corporations that clear through or maintain a custodial relationship with a Direct Participant, either directly or indirectly ( Indirect Participants ). DTC has a Standard & Poor s rating of AA+. The DTC Rules applicable to its Participants are on file with the Securities and Exchange Commission. More information about DTC can be found at Purchases of Bonds under the DTC system must be made by or through Direct Participants, which will receive a credit for the Bonds on DTC s records. The ownership interest of each actual purchaser of each Bond ( 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 Bonds are to be accomplished by entries made on the books of Direct and Indirect Participants acting on behalf of Beneficial Owners. Beneficial Owners will not receive certificates representing their ownership interests in Bonds, except in the event that use of the book-entry system for the Bonds is discontinued. To facilitate subsequent transfers, all Bonds 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 Bonds with DTC and their registration in the name of Cede & Co. or such other DTC nominee do not effect any change in beneficial ownership. DTC has no knowledge of the actual Beneficial Owners of the Bonds; DTC s records reflect only the F-1

296 identity of the Direct Participants to whose accounts such Bonds 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 Bonds may wish to take certain steps to augment the transmission to them of notices of significant events with respect to the Bonds, such as redemptions, tenders, defaults, and proposed amendments to the Bond documents. For example, Beneficial Owners of Bonds may wish to ascertain that the nominee holding the Bonds for their benefit has agreed to obtain and transmit notices to Beneficial Owners. In the alternative, Beneficial Owners may wish to provide their names and addresses to the registrar and request that copies of notices be provided directly to them. Redemption notices shall be sent to DTC. If less than all of the Bonds within a maturity are being redeemed, DTC s practice is to determine by lot the amount of the interest of each Direct Participant in such maturity to be redeemed. Neither DTC nor Cede & Co. (nor any other DTC nominee) will consent or vote with respect to Bonds unless authorized by a Direct Participant in accordance with DTC s MMI Procedures. Under its usual procedures, DTC mails an Omnibus Proxy to the Successor Agency 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 Bonds are credited on the record date (identified in a listing attached to the Omnibus Proxy). Principal, premium (if any), and interest payments on the Bonds 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 Successor Agency or the Trustee, on payable date in accordance with their respective holdings shown on DTC s records. Payments by Participants to Beneficial Owners will be governed by standing instructions and customary practices, as is the case with securities held for the accounts of customers in bearer form or registered in street name, and will be the responsibility of such Participant and not of DTC, the Trustee, or the Successor Agency, subject to any statutory or regulatory requirements as may be in effect from time to time. Principal, premium (if any), and interest payments with respect to the Bonds to Cede & Co. (or such other nominee as may be requested by an authorized representative of DTC) is the responsibility of the Successor Agency or the Trustee, disbursement of such payments to Direct Participants will be the responsibility of DTC, and disbursement of such payments to the Beneficial Owners will be the responsibility of Direct and Indirect Participants. DTC may discontinue providing its services as depository with respect to the Bonds at any time by giving reasonable notice to the Successor Agency or the Trustee. Under such circumstances, in the event that a successor depository is not obtained, certificates representing the Bonds are required to be printed and delivered. The Successor Agency may decide to discontinue use of the system of book-entry-only transfers through DTC (or a successor securities depository). In that event, representing the Bonds will be printed and delivered to DTC in accordance with the provisions of the Indenture. F-2

297 APPENDIX G FORM OF BOND COUNSEL OPINION October 22, 2015 Successor Agency to the Auburn Urban Development Authority 1225 Lincoln Way Auburn, California OPINION: $4,475,000 Successor Agency to the Auburn Urban Development Authority 2015 Tax Allocation Refunding Bonds (Auburn Redevelopment Project) Members of the Successor Agency: We have acted as bond counsel in connection with the issuance by the Successor Agency to the Auburn Urban Development Authority (the Successor Agency ), of $4,475,000 Successor Agency to the Auburn Urban Development Authority 2015 Tax Allocation Refunding Bonds (Auburn Redevelopment Project) (the Bonds ), pursuant to the Community Redevelopment Law, constituting Part 1 (commencing with Section 33000) of Division 24 of the Health and Safety Code of the State of California (the Law ), Part 1.85 (commencing with Section 34170) of Division 24 of the California Health and Safety Code (the Dissolution Act ), and Article 11 (commencing with Section 53580) of Chapter 3 of Part 1 of Division 2 of Title 5 of the Government Code of the State of California (the Refunding Law ). The Bonds are being issued pursuant to an Indenture of Trust, dated as of October 1, 2015 (the Indenture ), by and between the Successor Agency and Wells Fargo Bank, National Association, as trustee (the Trustee ). We have examined the law and such certified proceedings and other papers as we deem necessary to render this opinion. As to questions of fact material to our opinion, we have relied upon representations of the Successor Agency contained in the Indenture, and in certified proceedings and other certifications of public officials furnished to us, without undertaking to verify such facts by independent investigation. Based upon the foregoing, we are of the opinion, under existing law, as follows: 1. The Successor Agency is validly existing as a public entity, with the power to enter into the Indenture, perform the agreements on its part contained therein, and issue the Bonds. 2. The Indenture has been duly approved by the Successor Agency, and constitutes a valid and binding obligation of the Successor Agency, enforceable against the Successor Agency in accordance with its terms. 3. Pursuant to the Law, the Dissolution Act and the Refunding Law, the Indenture creates a valid lien on the funds pledged by the Indenture for the security of the Bonds, subject to no prior lien granted under the Law, the Dissolution Act and the Refunding Law, except to the extent described in the Indenture. G-1

298 4. The Bonds have been duly authorized, executed and delivered by the Successor Agency, and are valid and binding special obligations of the Successor Agency, payable solely from the sources provided therefor in the Indenture. 5. The interest on the Bonds is excluded from gross income for federal income tax purposes and is not an item of tax preference for purposes of the federal alternative minimum tax imposed on individuals and corporations; although for the purpose of computing the alternative minimum tax imposed on corporations (as defined for federal income tax purposes), such interest is taken into account in determining certain income and earnings, and the Bonds are qualified tax-exempt obligations within the meaning of section 265(b)(3) of the Internal Revenue Code of 1986 (the Code ) such that, in the case of certain financial institutions (within the meaning of section 265(b)(5) of the Code), a deduction for federal income tax purposes is allowed for 80 percent of that portion of such financial institution s interest expense allocable to interest payable on the Bonds. The opinions set forth in the preceding sentence are subject to the condition that the Successor Agency comply with all requirements of the Internal Revenue Code of 1986 that must be satisfied subsequent to the issuance of the Bonds in order that interest thereon be, or continue to be, excluded from gross income for federal income tax purposes. The Successor Agency has covenanted to comply with each such requirement. Failure to comply with certain of such requirements may cause the inclusion of interest on the Bonds in gross income for federal income tax purposes to be retroactive to the date of issuance of the Bonds. We express no opinion regarding other federal tax consequences arising with respect to the ownership, sale or disposition of the Bonds, or the amount, accrual or receipt of interest on the Bonds. 6. The interest on the Bonds is exempt from personal income taxation imposed by the State of California. The rights of the owners of the Bonds, and the enforceability of the Bonds and the Indenture, may be subject to bankruptcy, insolvency, reorganization, moratorium and other similar laws affecting creditors rights heretofore or hereafter enacted, and may also be subject to the exercise of judicial discretion in appropriate cases. This opinion is given as of the date hereof, and we assume no obligation to revise or supplement this opinion to reflect any facts or circumstances that may hereafter come to our attention, or any changes in law that may hereafter occur. Our engagement with respect to this matter has terminated as of the date hereof. Respectfully submitted, A Professional Law Corporation G-2

299 APPENDIX H SPECIMEN MUNICIPAL BOND INSURANCE POLICY H-1

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301 ! MUNICIPAL BOND INSURANCE POLICY! ISSUER: [NAME OF ISSUER] Policy No: MEMBER: [NAME OF MEMBER] BONDS: $ in aggregate principal amount of [NAME OF TRANSACTION] [and maturing on] Effective Date: Risk Premium: $ Member Surplus Contribution: $ Total Insurance Payment: $ BUILD AMERICA MUTUAL ASSURANCE COMPANY ( BAM ), for consideration received, hereby UNCONDITIONALLY AND IRREVOCABLY agrees to pay to the trustee (the Trustee ) or paying agent (the Paying Agent ) for the Bonds named above (as set forth in the documentation providing for the issuance and securing of the Bonds), for the benefit of the Owners or, at the election of BAM, directly to each Owner, subject only to the terms of this Policy (which includes each endorsement hereto), that portion of the principal of and interest on the Bonds that shall become Due for Payment but shall be unpaid by reason of Nonpayment by the Issuer. On the later of the day on which such principal and interest becomes Due for Payment or the first Business Day following the Business Day on which BAM shall have received Notice of Nonpayment, BAM will disburse (but without duplication in the case of duplicate claims for the same Nonpayment) to or for the benefit of each Owner of the Bonds, the face amount of principal of and interest on the Bonds that is then Due for Payment but is then unpaid by reason of Nonpayment by the Issuer, but only upon receipt by BAM, in a form reasonably satisfactory to it, of (a) evidence of the Owner s right to receive payment of such principal or interest then Due for Payment and (b) evidence, including any appropriate instruments of assignment, that all of the Owner s rights with respect to payment of such principal or interest that is Due for Payment shall thereupon vest in BAM. A Notice of Nonpayment will be deemed received on a given Business Day if it is received prior to 1:00 p.m. (New York time) on such Business Day; otherwise, it will be deemed received on the next Business Day. If any Notice of Nonpayment received by BAM is incomplete, it shall be deemed not to have been received by BAM for purposes of the preceding sentence, and BAM shall promptly so advise the Trustee, Paying Agent or Owner, as appropriate, any of whom may submit an amended Notice of Nonpayment. Upon disbursement under this Policy in respect of a Bond and to the extent of such payment, BAM shall become the owner of such Bond, any appurtenant coupon to such Bond and right to receipt of payment of principal of or interest on such Bond and shall be fully subrogated to the rights of the Owner, including the Owner s right to receive payments under such Bond. Payment by BAM either to the Trustee or Paying Agent for the benefit of the Owners, or directly to the Owners, on account of any Nonpayment shall discharge the obligation of BAM under this Policy with respect to said Nonpayment. Except to the extent expressly modified by an endorsement hereto, the following terms shall have the meanings specified for all purposes of this Policy. Business Day means any day other than (a) a Saturday or Sunday or (b) a day on which banking institutions in the State of New York or the Insurer s Fiscal Agent (as defined herein) are authorized or required by law or executive order to remain closed. Due for Payment means (a) when referring to the principal of a Bond, payable on the stated maturity date thereof or the date on which the same shall have been duly called for mandatory sinking fund redemption and does not refer to any earlier date on which payment is due by reason of call for redemption (other than by mandatory sinking fund redemption), acceleration or other advancement of maturity (unless BAM shall elect, in its sole discretion, to pay such principal due upon such acceleration together with any accrued interest to the date of acceleration) and (b) when referring to interest on a Bond, payable on the stated date for payment of interest. Nonpayment means, in respect of a Bond, the failure of the Issuer to have provided sufficient funds to the Trustee or, if there is no Trustee, to the Paying Agent for payment in full of all principal and interest that is Due for Payment on such Bond. Nonpayment shall also include, in respect of a Bond, any payment made to an Owner by or on behalf of the Issuer of principal or interest that is Due for Payment, which payment has been recovered from such Owner pursuant to the United States Bankruptcy Code in accordance with a final, nonappealable order of a court having competent jurisdiction. Notice means delivery to BAM of a notice of claim and certificate, by certified mail, or telecopy as set forth on the attached Schedule or other acceptable electronic delivery, in a form satisfactory to BAM, from and signed by an Owner, the Trustee or the Paying Agent, which notice shall specify (a) the person or entity making the claim, (b) the Policy Number, (c) the claimed amount, (d) payment instructions and (e) the date such claimed amount becomes or became Due for Payment. Owner means, in respect of a Bond, the person or entity who, at the time of Nonpayment, is entitled under the terms of such Bond to payment thereof, except that Owner shall not include the Issuer, the Member or any other person or entity whose direct or indirect obligation constitutes the underlying security for the Bonds.!